Pac-West Telecomm, Inc. Exhibit 10.1


    AMENDED
      AND RESTATED TERM
      LOAN AND SECURITY AGREEMENT

     

      
        

      

      
        

      

    

     

    This
      AMENDED
      AND RESTATED TERM LOAN AND SECURITY AGREEMENT
      dated as
      of the 27th
      day of
      February, 2007, is entered into by and among Pac-West Telecomm, Inc., a
      corporation organized and existing under the laws of the State of Califorina
      having its principal office at 1776 W. March Lane, Stockton, CA 95207 (and
      as of
      March 15, 2007, having its principal office at 4210 Coronado Ave., Stockton,
      CA
      95204) (“Customer”),
      and
Merrill
      Lynch Capital,
      a
      division of Merrill Lynch Business Financial Services Inc., a corporation
      organized and existing under the laws of the State of Delaware having its
      principal office at 222 North LaSalle Street, Chicago, IL 60601 (“MLC”)
      (as
      amended, restated, supplemented or otherwise modified from time to time, the
      “Loan
      Agreement”).

     

    RECITALS

     

    On
      May
      21, 2004, Customer delivered to MLC 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)
      (“May
      2004 Note”)
      which
      is secured as provided by that certain Term Loan and Security Agreement of
      even
      date between Customer and the MLC (collectively, the “May
      2004 Loan Agreement”).
      Under
      the May 2004 Loan Agreement, Customer is obligated to make monthly payments
      to
      MLC in the amount of approximately $76,046.54 per month, with the final monthly
      payment due to MLC on June 1, 2007.

     

    On
      July
      2, 2004, Customer delivered to MLC 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 and 82/100 Dollars ($2,996,445.82)
      (“July
      2004 Note”)
      which
      is secured as provided by that certain Term Loan and Security Agreement of
      even
      date between Customer and MLC (collectively, the “July
      2004 Loan Agreement”).
      Under
      the July 2004 Loan Agreement, Customer is obligated to make monthly payments
      to
      MLC in the amount of approximately $94,889.92 per month, with the final monthly
      payment due to MLC on August 1, 2007. 

     

    On
      May
      27, 2005, Customer delivered to MLC that certain Collateral Installment Note
      of
      even date in the original principal amount of One Million Nine Hundred Forty
      Nine Thousand Ninety and 94/100 Dollars ($1,949,090.94) (“May
      2005 Note”)
      which
      is secured as provided by that certain Term Loan and Security Agreement of
      even
      date between Customer and MLC (collectively, the “May
      2005 Loan Agreement”).
      Under
      the May 2005 Loan Agreement, Customer is obligated to make monthly payments
      to
      MLC in the amount of approximately $61,671.35 per month, with the final monthly
      payment due to MLC on June 1, 2008.

     

    On
      November 30, 2005, Customer delivered to MLC that certain Collateral Installment
      Note of even date in the original principal amount of Four Million Four Hundred
      Seventy Four Thousand Five Hundred Eighty Eight and 64 /100 Dollars
      ($4,474,588.64) (“November
      2005 Note”
and
      together with the May 2004 Note, the July 2004 Note and the May 2005 Note,
      the
“Original
      Notes”)
      which
      is secured as provided by that certain Term Loan and Security Agreement of
      even
      date between Customer and MLC (collectively, the “November
      2005 Loan Agreement”
and
      together with the May 2004 Loan Agreement, July 2004 Loan Agreement and May
      2005
      Loan Agreement, as each may have been amended, restated supplemented or
      otherwise modified from time to time prior hereto, the “Original
      Loan Agreements”).
      Under
      the November 2005 Loan Agreement, Customer is obligated to make monthly payments
      to MLC in the amount of approximately $142,866.14 per month, with the final
      monthly payment due to MLC on December 1, 2008.

     

    Pursuant
      to the Original Loan Agreements, MLC agreed, at the request of Customer and
      from
      time to time, to lend money, advance funds or otherwise extend credit to
      Customer so that Customer could purchase telecommunication and related
      equipment, in accordance with the terms and provisions of the Original Loan
      Agreements.

     

    Pursuant
      to that certain Agreement to Restructure dated as of November 15, 2006, between
      Customer and MLC (“Restructuring
      Agreement”)
      (i)
      upon the satisfaction of certain conditions precedent as set forth in Section
      4(b) of the Restructuring Agreement, MLC agreed to restructure the obligations
      of Customer under the Original Loan Agreements, but only subject to terms and
      conditions set forth therein and (ii) Customer agreed to pay MLC in respect
      of
      the Customer’s obligations to MLC 20% of any interest savings achieved as a
      result of the tender of more than $21.0 million in principal amount of the
      Customer’s 13.5% Senior Notes due 2009 (the “Senior
      Notes”)
      as
      part of an exchange offer the Customer intends to conduct in respect of the
      Senior Notes.

     

    In
      consideration of the mutual covenants of the parties hereto, Customer and MLC
      hereby agree to amend and restate the Original Loan Agreements, in their
      entirety, but only on the terms and conditions set forth herein as
      follows:

     

    ARTICLE
      I.  DEFINITIONS

     

    Section
      1.1    Specific
      Terms.
      In
      addition to terms defined elsewhere in this Loan Agreement, when used herein
      the
      following terms shall have the following meanings:

     

    “Applicable
      Law” shall mean all laws, judgments, decrees, ordinances and regulations and any
      other governmental rules, orders and determinations and all requirements having
      the force of law, now or hereafter enacted, made or issued, whether or not
      presently contemplated, including (without limitation) compliance with all
      requirements of zoning laws and labor laws.

     

    “Bankruptcy
      Event” shall mean any of the following: (i) a proceeding under any bankruptcy,
      reorganization, arrangement, insolvency, readjustment of debt, liquidation,
      winding up or receivership law or statute shall be commenced, filed or consented
      to by any Credit Party; or (ii) any such proceeding shall be filed against
      any
      Credit Party and shall not be dismissed or withdrawn within sixty (60) days
      after filing; or (iii) any Credit Party shall make a general assignment for
      the
      benefit of creditors; or (iv) any Credit Party shall generally fail to pay
      or
      admit in writing its inability to pay its debts as they become due; or (v)
      any
      Credit Party shall be adjudicated a bankrupt or insolvent; or (vi) any Credit
      Party shall take advantage of any other law or procedure for the relief of
      debtors or shall take any action for the purpose of or with a view towards
      effecting any of the foregoing; or (vii) a receiver, trustee, custodian, fiscal
      agent or similar official for any Credit Party or for any substantial part
      of
      any of their respective property or assets shall be sought by such Credit Party
      or appointed.

     

    “Business
      Day” shall mean any day other than a Saturday, a Sunday, and any day on which
      banking institutions located in the State of New York are authorized by law
      or
      other governmental action to close. 

     

    “Business
      Guarantor” shall mean every Guarantor that is not a natural person.

     

    “Closing
      Date” shall mean the date upon which all conditions precedent to MLC’s
      obligation to make the Loan shall have been met to the satisfaction of
      MLC.

     

    “Collateral”
      shall mean the collateral more fully described on Exhibit
      A
      attached
      hereto, howsoever arising, whether now owned or existing or hereafter acquired
      or arising, and wherever located; together with all parts thereof (including
      spare parts), all accessories, alterations and accessions thereto, all books
      and
      records (including computer records) directly related thereto, all proceeds
      thereof (including, without limitation, proceeds in the form of Accounts and
      insurance proceeds), and the additional collateral described in Section 4.4
      hereof.

     

    “Commitment
      Expiration Date” shall mean the earlier to occurr of (i) August 1, 2009 and (ii)
      any acceleration of the Obligations pursuant to Section
      4.6(a)(ii)
      below.

     

    “Credit
      Party” and “Credit Parties” shall mean, individually or collectively, the
      Customer, all Guarantors, and all Pledgors.

     

    “Default”
      shall mean either an “Event of Default” as defined in Section
      4.5
      below,
      or an event which with the giving of notice, passage of time, or both, would
      constitute such an Event of Default.

     

    “Default
      Rate” shall mean an annual interest rate equal to the lesser of: (i) two
      percentage points over the Interest Rate; or (ii) the highest interest rate
      allowed by applicable law.

     

    “Event
      of
      Loss” shall mean the occurrence whereby any tangible Collateral is damaged
      beyond repair, lost, totally destroyed or confiscated.

     

    “GAAP”
      shall mean the generally accepted accounting principles in effect in the United
      States of America from time to time.

     

    “General
      Funding Conditions” shall mean each of the following conditions to each loan or
      advance by MLC hereunder: (i) no Default or Event of Default shall have occurred
      and be continuing or would result from the making of any such loan or advance
      hereunder by MLC; (ii) there shall not have occurred and be continuing any
      material adverse change in the business, condition (financial or otherwise)
      of
      any Credit Party; (iii) all representations and warranties of all of the Credit
      Parties herein or in any of the Loan Documents shall then be true and correct
      in
      all material respects; (iv) MLC shall have received this Loan Agreement and
      all
      of the other Loan Documents, duly executed, all of which shall be in form and
      substance satisfactory to MLC; (v) MLC shall have received, as and to the extent
      applicable, copies of invoices, bills of sale, loan payoff letters and/or other
      evidence reasonably satisfactory to it that the proceeds of the Loan will
      satisfy the Loan Purpose; (vi) MLC shall have received evidence reasonably
      satisfactory to it as to the ownership of the Collateral and the perfection
      and
      priority of MLC’s liens and security interests thereon, as well as the ownership
      of and the perfection and priority of MLC’s liens and security interests on any
      other collateral for the Obligations furnished pursuant to any of the Loan
      Documents; (vii) MLC shall have received evidence reasonably satisfactory to
      it
      of the insurance required hereby or by any of the Loan Documents on the
      Collateral; (viii) MLC has received notice from Customer (attached as
Exhibit
      B
      hereto)
      requesting that MLC restructure the obligations of Customer under the Original
      Loan Agreements; (ix) except as set forth in Section
      3(b)
      of the
      Restructuring Agreement, MLC shall have received all scheduled payments due
      under the Original Loan Agreements, including, without limitation, the December
      Payment (as defined in the Restructuring Agreement); (x) MLC shall have received
      each Semi-Annual Interest Payment, if any, then due to MLC in accordance with
      Section
      5
      Restructuring Agreement; (xi) MLC shall have received evidence (attached as
      Exhibit
      C
      hereto)
      that (a) Customer 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) Customer has the
      right to request Advances (as defined in the Senior Loan Facility); (xii) MLC
      shall have been reimbursed by Customer for the reasonable documented fees and
      expenses of MLC’s counsel incurred in connection with the Restructuring
      Agreement, this Loan Agreement and any other Loan Document; (xiii) Customer
      shall have provided to MLC the same financial information as is provided or
      is
      available to Pac-West Funding Company LLC (attached as Exhibit
      D
      hereto)
      and (ivx) any additional conditions, information and/or other documents as
      reasonably requested by MLC with respect to the transactions contemplated hereby
      shall have been met to the reasonable satisfaction of MLC. 

     

    “Guarantor”
      shall mean each Person obligated under a guaranty, endorsement or other
      undertaking by which such Person guarantees or assumes responsibility in any
      capacity for the payment or performance of any of the Obligations.

     

    “Individual
      Guarantor” shall mean every Guarantor that is a natural person.

     

    “Loan”
      shall have the meaning assigned to such term in Section
      2.1
      below.


     

    “Loan
      Agreement” shall mean this agreement as titled in the initial paragraph
      hereof.

     

    “Loan
      Documents” shall mean this Loan Agreement, any note, any guaranty of any of the
      Obligations and all other security and other instruments, assignments,
      certificates, certifications and agreements of any kind relating to any of the
      Obligations, whether obtained, authorized, authenticated, executed, sent or
      received concurrently with or subsequent to this Loan Agreement, or which
      evidence the creation, guaranty or collateralization of any of the Obligations
      or the granting or perfection of liens or security interests upon any Collateral
      or any other collateral for the Obligations, including any modifications,
      amendments or restatements of the foregoing.

     

    “Loan
      Purpose” shall mean the purpose for which the proceeds of the Loan will be used;
      to wit: to purchase or finance equipment. 

     

    “Location
      of Tangible Collateral” shall mean the address of Customer where the collateral
      is located as set forth on Exhibit
      A
      hereto.

     

    “Material
      Adverse Effect” shall mean any material adverse effect on the business or
      financial condition of Customer taken as a whole as reasonably determined by
      MLC.

     

    “Note”
      shall have the meaning assigned to such term in Section
      2.2
      below.


     

    “Obligations”
      shall mean all liabilities, indebtedness and obligations of Customer to MLC,
      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 (or deemed to be made) by or on behalf of
      MLC
      under the Loan Documents, collection and other costs and expenses incurred
      by or
      on behalf of MLC, whether incurred before or after judgment, and all present
      and
      future liabilities, indebtedness and obligations of Customer under the Note
      issued pursuant hereto and this Loan Agreement (including, but not limited
      to,
      any Semi-Annual Interest Payments owing under Section
      3
      hereof),
      or any other note or evidence of indebtedness to MLC.

     

    “Permitted
      Liens” shall mean with respect to the Collateral: (i) liens for current taxes
      not yet due and payable, other non-consensual liens arising in the ordinary
      course of business for sums not due, and, if MLC’s rights to and interest in the
      Collateral would not be materially and adversely affected thereby, any such
      liens for taxes or other non-consensual liens arising in the ordinary course
      of
      business being contested in good faith by appropriate proceedings and so long
      as
      adequate reserves are maintained with respect to such liens and available to
      Customer for the payment of such taxes or other non-consensual liens; (ii)
      liens
      in favor of MLC; (iii) liens which will be discharged with the proceeds of
      the
      Loan; (iv) statutory liens of landlords, carriers, warehousemen, processors,
      mechanics, materialmen, or suppliers incurred in the ordinary course of business
      and securing amounts not yet due or declared to be due by the claimant
      thereunder; and (v) any other liens expressly permitted in writing by
      MLC.

     

    “Person”
      shall mean any natural person and any corporation, partnership (general, limited
      or otherwise), limited liability company, trust, association, joint venture,
      governmental body or agency or other entity having legal status of any
      kind.

     

    “Pledgor”
      shall mean each Person who at any time provided or provides collateral, or
      otherwise previously, now or hereinafter agrees to grant MLC a security interest
      in any assets as security for Customer’s Obligations.

     

    “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
      Customer, 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).

     

    “UCC”
      shall mean the Uniform Commercial Code of Illinois as in effect in Illinois
      from
      time to time.

     

        Section
      1.2    Other
      Terms.
      Except
      as otherwise defined herein, all terms used in this Loan Agreement which are
      defined in the UCC shall have the meanings set forth in the
      UCC
      and accounting terms not defined herein shall have the meaning ascribed to
      them
      in GAAP.

     

        Section
      1.3    UCC
      Filing.
      The
      Customer hereby acknowledges that the financing statements filed in connection
      with the Original Loan Agreements, and listed on the chart attached
      as Exhibit
      E
      hereto,
      continue to to be effective hereunder without further amendment thereof.
      Customer hereby continues to authorize MLC to file a record or records (as
      defined
      or otherwise specified under the UCC), including, without limitation, financing
      statements, in all jurisdictions and with all filing offices as MLC may
      determine, in its sole discretion,
      are necessary or advisable to perfect the security interest granted to MLC
      herein. Such financing statements may describe the Collateral in the same manner
      as described herein
      or
      may contain an indication or description of collateral that describes such
      property in any other manner as MLC may determine, in its sole discretion,
      is
      necessary, advisable or
      prudent to ensure the perfection of the security interest in the Collateral
      granted to the MLC herein.

     

    ARTICLE
      II.    THE
      LOAN

     

        Section
      2.1    Reaffirmation of
      Obligations under Original Loan Agreements.
      Customer acknowledges, agrees and reaffirms that as of the Closing Date and
      prior to giving effect
      to
      this Loan Agreement, it is indebted to MLC, in each case inclusive of accrued
      or
      accruing but unpaid interest, costs, fees and expenses (owing as of the date
      hereof) as follows
      (collectively, the “Original
      Loans”):
      

     

    $450,863.82
      in connection with the May 2004 Loan Agreement;

     

    $744,235.29
      in connection with the July 2004 Loan Agreement;

     

    $1,050,780.67
      in connection with the May 2005 Loan Agreement; and

     

    $3,159,451.08
      in connection with the November 2005 Loan Agreement.

     

    From
      and
      after the Closing Date, the Original Loans shall be governed by the terms of
      this Loan Agreement. This Loan Agreement shall constitute an amendment and
      restatement of the terms governing the Original Loans and shall not be deemed
      to
      evidence a novation, extinguishment or a repayment and reborrowing of the
      Original Loans. Such Original Loans and the Liens securing payment thereof
      shall
      be continuing in all respects.

     

    All
      references to the “Agreement” or the “Loan Agreement” in the Loan Documents
      delivered pursuant to the Original Loan Agreements shall be deemed to refer
      to
      this Loan Agreement without further amendment of such Loan Documents. The Loan
      Documents executed in connection with the Original Credit Agreement that are
      not
      amended and restated or otherwise superseded by corresponding Loan Documents
      executed and delivered in connection with this Loan Agreement shall remain
      in
      full force and effect (collectively, the “Continuing
      Loan Documents”).
      All
      references to the Original Loan Agreements (including any references to the
      schedules, subschedules, annexes or exhibits thereto) in the Continuing Loan
      Documents shall be deemed to refer to this Loan Agreement (and the applicable
      schedules, subschedules, annexes or exhibits hereto) without further amendment
      thereof. Each Credit Party hereby acknowledges and agrees that each of the
      Continuing Loan Documents to which such Credit Party is a party remains in
      full
      force and effect and hereby ratifies and reaffirms all of its respective payment
      and performance obligations, contingent or otherwise, under each of the
      Continuing Loan Documents to which it is a party and, to the extent such Credit
      Party granted Liens on or security interests in any of its properties pursuant
      to any of the Continuing Loan Documents as security for the Obligations, such
      Credit Party, as the case may be, hereby ratifies and reaffirms such grant
      of
      security and confirms and agrees that such Liens and security interests secure
      all of the Obligations and remain in full force and effect after giving effect
      to this Loan Agreement.

     

    Section 2.1  Commitment.
      Subject
      to the terms and conditions hereof, Customer and MLC hereby agree to combine
      the
      Original Loans into a single 30-month term installment loan in the aggregate
      principal amount of $5,405,330.86 (the “Loan”).
      MLC
      agrees to make the Loan to Customer for the Loan Purpose, and Customer agrees
      that all amounts borrowed shall satisfy the Loan Purpose from MLC. The entire
      proceeds of the Loan shall be deemed to have been disbursed on the Closing
      Date.

     

    Section
      2.2  Note.
      The
      Loan will be evidenced by and repayable in accordance with that certain Amended
      and Restated Collateral Installment Note made by Customer payable to the order
      of MLC and issued pursuant to this Loan Agreement (the “Note”).
      The
      Note is hereby incorporated as a part hereof as if fully set forth
      herein.

     

    Section
      2.3  Conditions
      of MLC’s Obligation.
      The
      Closing Date and MLC’s obligation to make the Loan on the Closing Date are
      subject to the prior fulfillment of each of the following conditions: (a) the
      Commitment Expiration Date shall not then have occurred and (b) each of the
      General Funding Conditions shall then have been met or satisfied to the
      reasonable satisfaction of MLC.

     

    Section
      2.4  Use
      of
      Loan Proceeds.
      The
      proceeds of the Loan shall continue to be used by Customer solely for a Loan
      Purpose, or, with the prior written consent of MLC, for other lawful business
      purposes of Customer not prohibited hereby. Customer
      agrees that under no circumstances will the proceeds of the Loan be used: (a)
      for personal, family or household purposes of any Person whatsoever, or (b)
      to
      purchase, carry or trade in securities, or repay debt incurred to purchase,
      carry or trade in securities, or (c) unless otherwise consented to in writing
      by
      MLC, to pay any amount to Merrill Lynch and Co., Inc. or any of its
      subsidiaries, other than Merrill Lynch Bank USA, Merrill Lynch Bank & Trust
      Co. or any subsidiary of either of them (including MLC and Merrill Lynch Credit
      Corporation).

     

    ARTICLE
      III.    SENIOR
      NOTES 

     

         
Section
      3.1   Senior
      Note Interest Savings.
      Customer 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 Customer 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.”

     

        
Section
      3.2   Semi-Annual
      Interest Payments.
      If
      Customer 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 Customer in connection with each Interest Payment Date (as defined in the
      Senior Notes) following consummation of the Exchange Offer, Customer shall
      make
      a payment to MLC 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
      principal payments otherwise due under the Original Loan Agreements prior to
      March 1, 2007 and after March 1, 2007, to the principal balance otherwise due
      under this Loan Agreement.

     

    ARTICLE
      IV.    GENERAL
      PROVISIONS

     

        
Section
      4.1   Representations and
      Warranties.
      Customer represents and warrants to MLC that:

     

    (a).  Organization
      and Existence.
      Customer is a corporation, duly organized and validly existing in good standing
      under the laws of its jurisdiction of incorporation; the organizational number
      assigned to Customer by such jurisdiction is C1968719; Customer is qualified
      to
      do business and in good standing in each other jurisdiction 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;
      and,
      where applicable, each Business Guarantor is duly organized, validly existing
      and in good standing under the laws of the state of its formation and is
      qualified to do business and in good standing in each other jurisdiction 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.

     

    (b).  Execution,
      Delivery and Performance.
      Each
      Credit Party has the requisite power and authority to enter into and perform
      the
      Loan Documents. The Customer holds all necessary permits, licenses, certificates
      of occupancy and other governmental authorizations and approvals required in
      order to own or operate the Customer’s business except where the failure to do
      so would have a Material Adverse Effect. The execution, delivery and performance
      by Customer of this Loan Agreement and by each of the other Credit Parties
      of
      such of the other Loan Documents to which it is a party: (i) have been duly
      authorized by all requisite corporate action by such Credit Party, (ii) do
      not
      and will not violate or conflict with any material law, order or other
      governmental requirement, or any of the agreements, instruments or documents
      which formed or govern any of the Credit Parties, and (iii) do not and will
      not
      breach or violate any of the provisions of, and will not result in a default
      by
      any of the Credit Parties under, any other material agreement, instrument or
      document to which it is a party or is subject. 

     

    (c).  Notices
      and Approvals.
      Except
      as may have been given or obtained, no notice to or consent or approval of
      any
      governmental body or authority or other third party whatsoever (including,
      without limitation, any other creditor) is required in connection with the
      execution, delivery or performance by any Credit Party of this Loan Agreement,
      the Note and the other Loan Documents to which it is a party other than where
      the failure to have been given or to have obtained such notice, consent or
      approval would not have a Material Adverse Effect.

     

    (d).  Enforceability.
      The
      Loan Documents to which any Credit Party is a party are the respective legal,
      valid and binding obligations of such Credit Party, enforceable against it
      or
      them, as the case may be, in accordance with their respective 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.

     

    (e).  Collateral.
      Except
      for the existence of, or priorities afforded to, any Permitted Liens: (i)
      Customer has good and marketable title to the Collateral, (ii) none of the
      Collateral is subject to any lien, encumbrance or security interest, other
      than
      liens, encumbrances or security interests for the benefit of MLC, and (iii)
      upon
      the filing of all Uniform Commercial Code financing statements authenticated
      or
      otherwise authorized by Customer with respect to the Collateral in the
      appropriate jurisdiction(s) and/or the completion of any other action required
      by applicable law to perfect its liens and security interests, MLC has and
      will
      continue to have valid and perfected first liens and security interests upon
      all
      of the Collateral. Without limiting the foregoing:

     

    (i).  The
      chief
      executive office and chief place of business (as such terms are used in Article
      9 of the UCC) of Customer is located at the address specified in the preamble
      hereto.

     

    (ii).  The
      tangible Collateral is and will remain tangible personal property and is not
      and
      shall not constitute real property fixtures. The tangible Collateral is
      removable from and is not essential to the premises at which the tangible
      Collateral is located. 

     

    (iii).  All
      of
      the tangible Collateral is located at the Location of Tangible Collateral.
      

     

    (f).  Financial
      Statements.
      Except
      as expressly set forth in Customer’s or any Business Guarantor’s financial
      statements, all financial statements of Customer and each Business Guarantor
      furnished to MLC have been prepared in conformity with generally accepted
      accounting principles, consistently applied, are true and correct in all
      material respects, and fairly present the financial condition of it as at such
      dates and the results of its operations for the periods then ended (subject,
      in
      the case of interim unaudited financial statements, to normal year-end
      adjustments); and since the most recent date covered by such financial
      statements, there has been no material adverse change in any such financial
      condition or operation.  

     

    (g).  Litigation;
      Compliance With All Laws.
      No
      litigation, arbitration, administrative or governmental proceedings are pending
      or, to the knowledge of Customer, threatened against any Credit Party, which
      would, materially and adversely affect (i) such Credit Party’s interest in the
      Collateral or the liens and security interests of MLC hereunder or under any
      of
      the Loan Documents, or (ii) the financial condition of such Credit Party or
      its
      continued operations. Each Credit Party is in compliance in all material
      respects with all laws, regulations, requirements and approvals applicable
      to
      such Credit Party.

     

    (h).  Tax
      Returns.
      All
      federal, state and local tax returns, reports and statements required to be
      filed by any Credit Party have been filed with the appropriate governmental
      agencies and all taxes due and payable by any Credit Party have been timely
      paid
      (except to the extent that any such failure to file or pay will not materially
      and adversely affect (i) either the liens and security interests of MLC
      hereunder or under any of the Loan Documents, (ii) the financial condition
      of
      any Credit Party, or (iii) its continued operations).

     

    (i).  Relationship
      with Merrill Lynch.
      Neither
      Customer nor any shareholder or other Person that controls Customer is (i)
      an
      executive officer or director of Merrill Lynch & Co., Inc. or any of its
      subsidiaries, or (ii) a holder of more than 10% of any class of voting
      securities of Merrill Lynch & Co., Inc. or any of its subsidiaries. For
      purposes of this representation, “control” means the power to vote 25% or more
      of any class of voting securities; the ability to control the election of a
      majority of directors; or the power to exercise a controlling influence over
      management policies.

     

    (j).  No
      Outside Broker.
      Except
      for employees of MLC, Merrill Lynch, Pierce, Fenner & Smith Financial
      Consultant (“MLPF&S”) or one of their affiliates or as described in writing
      by Customer to MLC, Customer has not in connection with the transactions
      contemplated hereby directly or indirectly engaged or dealt with, and was not
      introduced or referred to MLC by, any broker or other loan
      arranger.

     

    (k).  Environmental
      Matters.
      In
      the
      ordinary course of its business, the officers of Customer consider the effect
      of
      Environmental Laws on the business of Customer, in the course of which they
      identify and evaluate potential risks and liabilities accruing to Customer
      due
      to Environmental Laws. On the basis of this consideration, Customer has
      concluded that Environmental Laws cannot reasonably be expected to have a
      Material Adverse Effect on Customer or any Business Guarantor. Neither Customer
      nor any Business Guarantor has received any notice to the effect that its
      operations are not in material compliance with any of the requirements of
      applicable Environmental Laws or are the subject of any federal or state
      investigation evaluating whether any remedial action is needed to respond to
      a
      release of any toxic or hazardous waste or substance into the environment,
      which
      non-compliance or remedial action could reasonably be expected to have a
      Material Adverse Effect on Customer or any Business Guarantor. “Environmental
      Laws” shall mean any Federal, foreign, state or local law, rule or regulation
      pertaining to the protection of the environment, including, but not limited
      to,
      the Comprehensive Environmental Response, Compensation, and Liability Act of
      1980 (“CERCLA”) (42 U.S.C. section 9601 et seq.), the Hazardous Material
      Transportation Act (49 U.S.C. section 1801 et seq.), the Federal Water Pollution
      Control Act (33 U.S.C. section 1251 et seq.), the Resource Conservation and
      Recovery Act (42 U.S.C. section 6901 et seq.), the Clean Air Act (42 U.S.C.
      section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. section
      2601
      et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
      section 1361 et seq.), and the Occupational Safety and Health Act (19 U.S.C.
      section 651 et seq.), as these laws have been amended or supplemented, and
      any
      analogous foreign, Federal, state or local statutes, and the regulations
      promulgated pursuant thereto.

     

    (l).  Investment
      Company Act.
      Neither
      Customer nor any Business Guarantor is an “investment company” or a company
“controlled” by an “investment company”, within the meaning of the Investment
      Company Act of 1940, as amended.

     

    (m).  Public
      Utility Holding Company Act. Neither
      Customer nor any Business Guarantor is a “holding company” or a “subsidiary
      company” of a “holding company”, or an “affiliate” of a “holding company” or of
      a “subsidiary company” of a “holding company”, within the meaning of the Public
      Utility Holding Company Act of 1935, as amended.

     

    Each
      of
      the foregoing representations and warranties: (i) has been and will be relied
      upon as an inducement to MLC to make the Loan, and (ii) is continuing and shall
      be deemed remade by Customer on the Closing Date and at no other
      time.

     

        Section
      4.2    Financial and
      Other Information.
      Customer shall furnish or cause to be furnished to MLC during the term of this
      Loan Agreement all of the following:

     

     (a)  Annual
      Financial Statements.
      Within
      90 days after the close of each fiscal year of Customer, a copy of the annual
      certified financial statements of Customer and the annual certified financial
      statements of each Business Guarantor, including, in each case, in reasonable
      detail, a balance sheet and statement of retained earnings as at the close
      of
      such fiscal year and statements of profit and loss and cash flow for such fiscal
      year;

     

     (b)  Interim
      Quartlerly Financial Statements.
      Within
      60 days after the close of each fiscal quarter of Customer, a copy of the
      interim financial statements of Customer and each Business Guarantor for such
      fiscal quarter (including in reasonable detail both a balance sheet as of the
      close of such fiscal period, and statement of profit and loss for the applicable
      fiscal period); 

     

     (c)  Interim
      Monthly Financial Statements.
      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 Customer covering Customer’s operations during such period, in a
      form reasonably acceptable to MLC and certified to be true and correct to the
      best knowledge of a responsible officer of the Customer, and

     

     (d)  Other
      Information.
      Such
      other information as MLC may from time to time reasonably request relating
      to
      Customer, any Credit Party or the Collateral.

     

     (e)  General
      Agreements With Respect to Financial Information.
      Customer agrees that except as otherwise specified herein or otherwise agreed
      to
      in writing by MLC: (i) all annual financial statements required to be furnished
      by Customer to MLC hereunder will be audited by either the current independent
      accountants for Customer or other independent accountants selected by Customer
      and reasonably acceptable to MLC, and (ii) all other financial statements
      required to be furnished by Customer to MLC hereunder will be certified as
      fairly presenting the financial condition of the Customer in all material
      respects by the respective chief financial officer.

     

    Section
      4.3  Other
      Covenants.
      Customer further agrees during the term of this Loan Agreement
      that:

     

        (a).  Financial
      Records; Inspection.
      Each
      Credit Party (other than any Individual Guarantor) will: (i) maintain at its
      principal place of business complete and accurate books and records, and
      maintain all of its financial records in a manner consistent with the financial
      statements heretofore furnished to MLC, or prepared on such other basis as
      may
      be approved in writing by MLC or as required by law; and (ii) permit MLC or
      its
      duly authorized representatives, upon reasonable notice and at reasonable times,
      to inspect its properties (both real and personal), operations, books and
      records, provided that absent the occurrence and continuance of an Event of
      Default, MLC shall not conduct more than one inspection in any 12 month
      period.

     

       
      (b).  Taxes.
      Each
      Credit Party will pay when due all of its respective taxes, assessments and
      other governmental charges, howsoever designated, and all other liabilities
      and
      obligations, except to the extent that any such failure to file or pay will
      not
      materially and adversely affect either the liens and security interests of
      MLC
      hereunder or under any of the Loan Documents, the financial condition of any
      Credit Party or its continued operations.

     

        (c).  Compliance
      With Laws and Agreements.
      No
      Credit Party will violate (i) any law, regulation or other governmental
      requirement, any judgment or order of any court or governmental agency or
      authority; (ii) any agreement, instrument or document which is material to
      its
      operations or to the operation or use of any Collateral, in each case as
      contemplated by the Loan Documents; or (iii) any agreement, instrument or
      document to which it is a party or by which it is bound, if any such violation
      will materially and adversely affect either the liens and security interests
      of
      MLC hereunder or under any of the Loan Documents, the financial condition of
      any
      Credit Party, or its continued operations.

     

        (d).  No
      Use
      of Merrill Lynch Name.
      Except
      upon the prior consent of MLC, no Credit Party will directly or indirectly
      publish, disclose or otherwise use in any advertising or promotional material,
      or press release, the name, logo or any trademark of MLC, MLPF&S, Merrill
      Lynch and Co., Inc. or any of their affiliates;
      provided, however, MLC hereby consents to any filing with the SEC or similar
      regulatory body and the disclosure of the existence and terms of this
      facility.

     

        (e).  Notification
      By Customer.
      Customer shall provide MLC with prompt written notification of: (i) any Default
      or Event of Default; (ii) any Material Adverse Effect in the business, financial
      condition or operations of any Credit Party; (iii) any information which
      indicates that any financial statements of any Credit Party fail in any material
      respect to present fairly the financial condition and results of operations
      purported to be presented in such statements; (iv) any threatened or pending
      litigation involving any Credit Party which could reasonably be expected to
      have
      an Material Adverse Effect; (v) any casualty loss, attachment, lien, judicial
      process, encumbrance or claim affecting or involving any material portion of
      the
      Collateral; and (vi) any change in Customer’s outside accountants. Each
      notification by Customer pursuant hereto shall specify the event or information
      causing such notification, and, to the extent applicable, shall specify the
      steps being taken to rectify or remedy such event or information.

     

        (f).  Entity
      Organization.
      Each
      Credit Party which is an entity will (i) remain (A) validly existing and in
      good
      standing in the state of its organization and (B) qualified to do business
      and
      in good standing in each other state where the nature of its business or the
      property owned by it make such qualification necessary and the failure to do
      so
      materially adversely affects MLC’s interest in the Collateral or its ability to
      enforce the terms of the Loan Documents or exercise any remedies thereunder
      or
      under applicable law, as reasonably determined by MLC, and (ii) maintain all
      governmental permits, licenses and authorizations where the failure to do so
      would and the failure to do so materially adversely affects MLC’s interest in
      the Collateral or its ability to enforce the terms of the Loan Documents or
      exercise any remedies thereunder or under applicable law, as reasonably
      determined by MLC. Customer shall give MLC not less than 30 days prior written
      notice of any change in name (including any fictitious name) or chief executive
      office, place of business, or as applicable, the jurisdiction of organization
      or
      principal residence.

     

        (g).  Merger,
      Change in Business.
      Except
      upon the prior written consent of MLC, Customer shall not cause or permit any
      Credit Party to: (i) be a party to any merger or consolidation except where
      Customer is the surviving entity thereof, (ii) sell, transfer or lease all
      or
      any substantial part of its assets;
      (iii)
      engage in any material business substantially different from its business in
      effect as of the date of application by Customer for credit from MLC, or cease
      operating any such material business; or (iv) cause or permit any other Person
      to assume or succeed to any material business or operations of such Credit
      Party.

     

    Section 4.4  Collateral.

     

        (a)  Pledge
      of Collateral.
      To
      secure payment and performance of the Obligations, Customer previously pledged,
      assigned, transfered and set over to MLC, and granted to MLC first liens and
      security interests in and upon all of the Collateral, subject only to priorities
      afforded to Permitted Liens.

     

        (b)  Liens.
      Customer has not created or permited to exist any lien, encumbrance or security
      interest upon or with respect to any Collateral now owned or hereafter acquired
      other than Permitted Liens, and, except upon the prior written consent of MLC,
      Customer shall not create or permit to exist any lien, encumbrance or security
      interest upon or with respect to any Collateral now owned or hereafter acquired
      other than Permitted Liens.

     

        (c)  Performance
      of Obligations.
      Customer shall perform in all material respects all of its obligations owing
      on
      account of or with respect to the Collateral; it being understood that nothing
      herein, and no action or inaction by MLC, under this Loan Agreement or
      otherwise, shall be deemed an assumption by MLC of any of Customer’s said
      obligations.

     

        (d)  Sales
      and Collections.
      Customer shall not sell, transfer or otherwise dispose of any Collateral so
      long
      as there are any Obligations..

     

        (e)  Alterations
      and Maintenance.
      Except
      upon the prior written consent of MLC, Customer shall not make or permit any
      material alterations to any tangible Collateral which might materially reduce
      or
      impair its market value or utility. Customer shall at all times (i) keep the
      tangible Collateral in good condition and repair, reasonable wear and tear
      excepted, (ii) take reasonable precautions to protect the Collateral against
      loss, damage or destruction, (iii) maintain, service, test and inspect the
      Collateral (A) in accordance with manufacturer’s recommendations, and so as to
      maintain in full force and effect any maintenance warranties, (B) in compliance
      with Applicable Law and the requirements of insurance, (C) at a standard
      consistent with industry practices, and (D) in all events not less than
      Customer’s standard practices for similar equipment owned, operated or leased by
      Customer and (iv) pay or cause to be paid all obligations arising from the
      repair and maintenance of such Collateral, as well as all obligations with
      respect to any Location of Tangible Collateral (e.g., all obligations under
      any
      lease, mortgage or bailment agreement), except for any such obligations being
      contested by Customer in good faith by appropriate proceedings. Customer shall
      permit any Person designated by MLC, during normal business hours upon
      reasonable notice and at MLC’s expense to visit, inspect and survey the tangible
      Collateral, its condition, use and operation, and the records maintained in
      connection therewith. None of MLC or any of its designees shall have any duty
      to
      make any such inspection and shall not incur any liability or obligation by
      reason of not making any such inspection. The failure of any such party to
      object to any condition or procedure observed or observable in the course of
      an
      inspection hereunder shall not be deemed to waive or modify any of the terms
      of
      this Loan Agreement with respect to such condition or procedure.

     

        (f)  Location.
      Customer shall not without MLC’s prior written notification place or move any
      tangible Collateral to any location other than the Location of Tangible
      Collateral identified on Exhibit
      A.
      In no
      event shall Customer cause or permit any material tangible Collateral to be
      removed from the United States without the express prior written consent of
      MLC.
      Customer will keep its books and records at its principal office address
      specified in the first paragraph of this Loan Agreement or at such other
      location notified to MLC on not less than 30 days’ prior notice. 

     

        (g)  Insurance.
      Customer
      shall insure all of the tangible Collateral under a policy or policies of
      physical damage insurance providing that losses will be payable to MLC as its
      interests may appear pursuant to a MLC's Loss Payable Endorsement and containing
      such other provisions as may be reasonably required by MLC. Customer shall
      maintain such other insurance as may be required by law or is customarily
      maintained by companies in a similar business or otherwise reasonably required
      by MLC. All such insurance policies shall provide that MLC will receive not
      less
      than 10 days prior written notice of any cancellation, and shall otherwise
      be in
      form and amount and with an insurer or insurers selected by Customer and
      reasonably acceptable to MLC. Customer shall furnish MLC with a copy or
      certificate of each such policy or policies and, prior to any expiration or
      cancellation, each renewal or replacement thereof.

     

        (h)  Forced
      Placement.
      In the
      event that at any time the insurance required by this Section shall be reduced
      or cease to be maintained below the level required, then (without limiting
      the
      rights of MLC hereunder in respect of the Default which arises as a result
      of
      such failure) MLC may at its option after failure of Customer to do so, maintain
      the insurance required hereby in such event. Customer shall reimburse MLC upon
      demand for the cost thereof with interest thereon at a rate per annum equal
      to
      the Default Rate, but in no event shall the rate of interest exceed the maximum
      rate permitted by law.

     

        (i)  Use.
      Customer agrees that the tangible Collateral will be used by Customer solely
      in
      the conduct of its business and in a manner complying in all material respects
      with all applicable laws and any applicable insurance policies. All tangible
      Collateral shall at all times remain personal property of Customer regardless
      of
      the degree of its annexation to any real property and shall not by reason of
      any
      installation in, or affixation to, real or personal property become a part
      thereof. Unless otherwise waived by MLC, Customer shall obtain and deliver
      to
      MLC (to be recorded at Customer’s expense) from any Person having an interest in
      the property where the tangible Collateral is to be located, waivers of any
      lien, encumbrance or interest which such Person might have or hereafter obtain
      or claim with respect to the tangible Collateral.

     

        (j).  Event
      of Loss.
      Customer shall at its expense promptly repair all repairable damage to any
      tangible Collateral where such repair is economically feasible. In the event
      that there is an Event of Loss and the affected Collateral had a value prior
      to
      such Event of Loss of $100,000.00 or more, then, on or before the first to
      occur
      of (i) 90 days after the occurrence of such Event of Loss, or (ii) 10 Business
      Days after the date on which either Customer or MLC shall receive any proceeds
      of insurance on account of such Event of Loss, or any underwriter of insurance
      on such Collateral shall advise either Customer or MLC that it disclaims
      liability in respect of such Event of Loss, Customer shall, at Customer’s
      option, either replace the Collateral subject to such Event of Loss with
      comparable Collateral free of all liens other than Permitted Liens (in which
      event Customer shall be entitled to utilize the proceeds of insurance on account
      of such Event of Loss for such purpose, and may retain any excess proceeds
      of
      such insurance), or permanently prepay the Obligations by an amount equal to
      the
      actual cash value of such Collateral as determined by either the insurance
      company’s payment (plus any applicable deductible) or, in absence of insurance
      company payment, as reasonably determined by MLC; it being further understood
      that any such permanent prepayment shall cause an immediate permanent reduction
      in the Loan in the amount of such prepayment and shall not reduce the amount
      of
      any future reductions in the Loan that may be required hereunder.
      Notwithstanding the foregoing, if at the time of occurrence of such Event of
      Loss or any time thereafter prior to replacement or line reduction, as
      aforesaid, an Event of Default shall have occurred and be continuing hereunder,
      then MLC may at its sole option, exercisable at any time while such Event of
      Default shall be continuing, require Customer to or prepay the Obligations,
      as
      aforesaid. 

     

        (k).  Notice
      of Certain Events.
      Customer, upon obtaining knowledge thereof, shall give MLC immediate notice
      of
      any attachment, lien, judicial process, encumbrance or claim affecting or
      involving the Collateral, other than Permitted Liens.

     

        (l).  Indemnification.
      Customer shall indemnify, defend and save MLC harmless from and against any
      and
      all claims, liabilities, losses and reasonable costs and expenses (including,
      without limitation, reasonable attorneys’ fees and expenses) of any nature
      whatsoever which may be asserted against or incurred by MLC arising out of
      or in
      any manner occasioned by (i) the ownership, collection, possession, use or
      operation of any Collateral, or (ii) any failure by Customer to perform any
      of
      its obligations hereunder or under the other Loan Documents; excluding, however,
      from said indemnity any such claims, liabilities, etc. arising directly out
      of
      the willful wrongful act or active gross negligence of MLC as determined in
      a
      final non-appealable judgment by a court of competent jurisdiction. This
      indemnity shall survive the expiration or termination of this Loan Agreement
      as
      to all matters arising or accruing prior to such expiration or
      termination.

     

    Section 4.5  Events
      of Default.
      The
      occurrence of any of the following events shall constitute an “Event of Default”
under this Loan Agreement:

     

        (a).  Failure
      to Pay.
      Customer shall fail to pay when due any amount owing by Customer to MLC under
      the Note or this Loan Agreement, or shall fail to pay when due any other
      Obligations, and any such failure shall continue for more than five (5) Business
      Days from the due date.

     

        (b).  Failure
      to Perform.
      Any
      Credit Party shall default in the performance or observance of any covenant
      or
      agreement on its part to be performed or observed under this Loan Agreement,
      the
      Note or any of the other Loan Documents (not constituting an Event of Default
      under any other clause of this Section), and such default shall continue
      unremedied for ten (10) Business Days (i) after written notice thereof shall
      have been given by MLC to Customer, or (ii) from Customer’s receipt of any
      notice or knowledge of such default from any other source.

     

        (c).  Breach
      of Warranty.
      Any
      representation or warranty made by any Credit Party contained in this Loan
      Agreement, the Note or any of the other Loan Documents shall at any time prove
      to have been incorrect in any material respect when made.

     

        (d).  Default
      Under Other Merrill Lynch Agreement.
      A
      default or event of default by any Credit Party shall occur under the terms
      of
      any other agreement, instrument or document with or directly intended for the
      benefit of MLC, MLPF&S or any of their affiliates, and any required notice
      shall have been given and required passage of time shall have elapsed, or the
      Agreement shall be terminated for any reason.

     

        (e).  Bankruptcy
      Event.
      Any
      Bankruptcy Event shall occur.

     

        (f).  Material
      Adverse Effect.
      Any
      event shall occur which shall result in a Material Adverse Effect. 

     

        (g).  Default
      Under Other Agreements.
      Any
      event shall occur which results in any default of any material agreement
      involving any Credit Party or any agreement evidencing any indebtedness of
      any
      Credit Party of $5,000,000.00 or more the result of which default would permit
      or result in the holder of such indebtedness to declare such indebtedness due
      prior to its original maturity.

     

        (h).  Collateral
      Impairment or Lapse in Insurance Coverage.
      The
      loss, theft or destruction of any material portion of the Collateral, or any
      levy, attachment, seizure or confiscation of material portion of the Collateral
      which is not released within ten (10) Business Days; or the failure to maintain
      insurance in accordance with Section
      4.4(h).

     

        (i).  Contested
      Obligation.
      (i) Any
      of the Loan Documents shall for any reason cease to be, or are asserted by
      any
      Credit Party not to be a legal, valid and binding obligations of any Credit
      Party, enforceable in accordance with their terms; or (ii) the validity,
      perfection or priority of MLC’s first lien and security interest on any of the
      Collateral is contested by any Person; or (iii) any Credit Party shall or shall
      attempt to repudiate, revoke, contest or dispute, in whole or in part, such
      Credit Party’s obligations under any Loan Document.

     

        (j).  Judgments.
      A
      judgment shall be entered against any Credit Party in excess of $5,000,000.00
      and the judgment is not paid in full and discharged, or stayed and bonded to
      the
      satisfaction of MLC.

     

        (k).  Change
      in Control.
      (i)Customer shall enter into any transaction of merger or consolidation where
      Customer is not the surviving entity without the prior written consent of MLC;
      (ii) Customer shall cease to do business as a going concern, liquidate, or
      dissolve; (iii) Customer shall sell, transfer, or otherwise dispose of all
      or
      substantially all of its assets or property. 

     

        (l).  Dissolution.
      The
      dissolution, or the filing for dissolution of any Credit Party.

     

    Section 4.6  Remedies.

     

        (a)  Remedies
      Upon Default.
      Upon
      the occurrence and during the continuance of any Event of Default, MLC may
      at
      its sole option do any one or more or all of the following, at such time and
      in
      such order as MLC may in its sole discretion choose:

     

    (i).  Termination.
      MLC may
      without notice terminate its obligation to extend any credit to or for the
      benefit of Customer (it being understood, however, that upon the occurrence
      of
      any Bankruptcy Event all such obligations shall automatically terminate without
      any action on the part of MLC).

     

    (ii).  Acceleration.
      MLC may
      declare the principal of and interest and any premium on the Note, and all
      other
      Obligations to be forthwith due and payable, whereupon all such amounts shall
      be
      immediately due and payable, without presentment, demand for payment, protest
      and notice of protest, notice of dishonor, notice of acceleration, notice of
      intent to accelerate or other notice or formality of any kind, all of which
      are
      hereby expressly waived; provided, however, that upon the occurrence of any
      Bankruptcy Event all such principal, interest, premium and other Obligations
      shall automatically become due and payable without any action on the part of
      MLC.

     

    (iii).  Exercise
      Other Rights.
      MLC may
      exercise any or all of the remedies of a secured party under applicable law
      and
      in equity, including, but not limited to, the UCC, and any or all of its other
      rights and remedies under the Loan Documents.

     

    (iv).  Possession.
      MLC may
      require Customer to make the Collateral and the records pertaining to the
      Collateral available to MLC at a place designated by MLC which is reasonably
      convenient to Customer, or may take possession of the Collateral and the records
      pertaining to the Collateral without the use of any judicial process and without
      any prior notice to Customer.

     

    (v).  Sale.
      MLC may
      sell any or all of the Collateral at public or private sale upon such terms
      and
      conditions as MLC may reasonably deem proper, whether for cash, on credit,
      or
      for future delivery, in bulk or in lots. MLC may purchase any Collateral at
      any
      such sale free of Customer’s right of redemption, if any, which Customer
      expressly waives to the extent not prohibited by applicable law. The net
      proceeds of any such public or private sale and all other amounts actually
      collected or received by MLC pursuant hereto, after deducting all costs and
      expenses incurred at any time in the collection of the Obligations and in the
      protection, collection and sale of the Collateral, will be applied to the
      payment of the Obligations, with any remaining proceeds paid to Customer or
      whoever else may be entitled thereto, and with Customer and each Guarantor
      remaining jointly and severally liable for any amount remaining unpaid after
      such application.

     

    (vi).  Delivery
      of Cash, Checks, Etc.
      MLC may
      require Customer to forthwith upon receipt, transmit and deliver to MLC in
      the
      form received, all cash, checks, drafts and other instruments for the payment
      of
      money (properly endorsed, where required, so that such items may be collected
      by
      MLC) which may be received by Customer at any time in full or partial payment
      of
      any Collateral, and require that Customer not commingle any such items which
      may
      be so received by Customer with any other of its funds or property but instead
      hold them separate and apart and in trust for MLC until delivery is made to
      MLC.

     

    (vii).  Control
      of Collateral.
      MLC may
      otherwise take control in any lawful manner of any cash or non-cash items of
      payment or proceeds of Collateral and endorse Customer’s name on any item of
      payment on or proceeds of the Collateral.

     

        (b).  Set-Off.
      MLC
      shall have the further right upon the occurrence and during the continuance
      of
      an Event of Default to set-off, appropriate and apply toward payment of any
      of
      the Obligations, in such order of application as MLC may from time to time
      and
      at any time elect, any cash, credit, deposits, accounts, financial assets,
      investment property, securities and any other property of Customer which is
      in
      transit to or in the possession, custody or control of MLC, MLPF&S or any
      agent, bailee, or affiliate of MLC or MLPF&S. Customer previously
      collaterally assigned and granted to MLC a continuing security interest in
      all
      such property as Collateral and as additional security for the Obligations.
      Upon
      the occurrence and during the continuance of an Event of Default, MLC shall
      have
      all rights in such property available to collateral assignees and secured
      parties under all applicable laws, including, without limitation, the
      UCC. 

     

        (c).  Power
      of Attorney.
      Effective upon the occurrence and during the continuance of an Event of Default,
      Customer hereby irrevocably appoints MLC as its attorney-in-fact, with full
      power of substitution, in its place and stead and in its name or in the name
      of
      MLC, to from time to time in MLC’s sole discretion take any action and to
      execute any instrument which MLC may deem necessary or advisable to accomplish
      the purposes of this Loan Agreement and the other Loan Documents, including,
      but
      not limited to, to receive, endorse and collect all checks, drafts and other
      instruments for the payment of money made payable to Customer included in the
      Collateral. The powers of attorney granted to MLC in this Loan Agreement are
      coupled with an interest and are irrevocable until the Obligations have been
      indefeasibly paid in full and fully satisfied and all obligations of MLC under
      this Loan Agreement have been terminated.

     

        (d).  Remedies
      are Severable and Cumulative.
      All
      rights and remedies of MLC herein are severable and cumulative and in addition
      to all other rights and remedies available in the Note, the other Loan
      Documents, at law or in equity, and any one or more of such rights and remedies
      may be exercised simultaneously or successively.

     

        (e).  No
      Marshalling.
      MLC
      shall be under no duty or obligation to (i) preserve, protect or marshall the
      Collateral; (ii) preserve or protect the rights of any Credit Party or any
      other
      Person claiming an interest in the Collateral; (iii) realize upon the Collateral
      in any particular order or manner, (iv) seek repayment of any Obligations from
      any particular source; (v) proceed or not proceed against any Credit Party
      pursuant to any guaranty or security agreement or against any Credit Party
      under
      the Loan Documents, with or without also realizing on the Collateral; (vi)
      permit any substitution or exchange of all or any part of the Collateral; or
      (vii) release any part of the Collateral from the Loan Agreement or any of
      the
      other Loan Documents, whether or not such substitution or release would leave
      MLC adequately secured.

     

        (f).  Notices.
      To the
      fullest extent permitted by applicable law, Customer hereby irrevocably waives
      and releases MLC of and from any and all liabilities and penalties for failure
      of MLC to comply with any statutory or other requirement imposed upon MLC
      relating to notices of sale, holding of sale or reporting of any sale, and
      Customer waives all rights of redemption or reinstatement from any such sale.
      Any notices required under applicable law shall be reasonably and properly
      given
      to Customer if given by any of the methods provided herein at least 5 Business
      Days prior to taking action. MLC shall have the right to postpone or adjourn
      any
      sale or other disposition of Collateral at any time without giving notice of
      any
      such postponed or adjourned date. In the event MLC seeks to take possession
      of
      any or all of the Collateral by court process, Customer further irrevocably
      waives to the fullest extent permitted by law any bonds and any surety or
      security relating thereto required by any statute, court rule or otherwise
      as an
      incident to such possession, and any demand for possession prior to the
      commencement of any suit or action.

     

    Section 4.7  Miscellaneous.

     

        (a).  Non-Waiver.
      No
      failure or delay on the part of MLC in exercising any right, power or remedy
      pursuant to this Loan Agreement, the Note or any of the other Loan Documents
      shall operate as a waiver thereof, and no single or partial exercise of any
      such
      right, power or remedy shall preclude any other or further exercise thereof,
      or
      the exercise of any other right, power or remedy. Neither any waiver of any
      provision of this Loan Agreement, the Note or any of the other Loan Documents,
      nor any consent to any departure by Customer therefrom, shall be effective
      unless the same shall be in writing and signed by MLC. Any waiver of any
      provision of this Loan Agreement, the Note or any of the other Loan Documents
      and any consent to any departure by Customer from the terms of this Loan
      Agreement, the Note or any of the other Loan Documents shall be effective only
      in the specific instance and for the specific purpose for which given. Except
      as
      otherwise expressly provided herein, no notice to or demand on Customer shall
      in
      any case entitle Customer to any other or further notice or demand in similar
      or
      other circumstances.

     

        (b).  Confidentiality.
      MLC
      agrees to keep confidential any information furnished or made available to
      it by
      Customer pursuant to this Loan Agreement; provided that nothing herein shall
      prevent MLC from disclosing such information (a) to any officer, director,
      employee, agent, auditor, attorney or advisor of MLC or Merrill Lynch & Co.,
      Inc. or any of their affiliates, (b) to any other person if it is reasonably
      necessary for the administration of the credit facility provided herein, (c)
      as
      required by any law, rule, or regulation, (d) upon the order of any court or
      administrative agency, (e) upon the request or demand of any regulatory agency
      or authority, (f) that is or becomes available to the public other than as
      a
      result of a disclosure by MLC prohibited by this Loan Agreement, (g) in
      connection with any litigation to which MLC or any of its affiliates may be
      a
      party with any Credit Party, (h) in connection with the sale, assignment,
      syndication or transfer of any or all of MLC’s rights and interests under the
      Loan Documents, provided any purchaser, assignee or transferee agrees to keep
      such information confidential, and (i) to the extent necessary in connection
      with the exercise of any remedy under this Loan Agreement or the Loan
      Documents.

     

        (c).  Communications.
      Delivery of an agreement, instrument or other document may, at the discretion
      of
      MLC, be by electronic transmission. Except as required by law or otherwise
      provided herein or in a writing executed by the party to be bound, all notices
      demands, requests, accountings, listings, statements, advices or other
      communications to be given under the Loan Documents shall be in writing, and
      shall be served either personally, by deposit with a reputable overnight courier
      with charges prepaid, or by deposit in the United States mail by certified
      mail
      return receipt required. Notices may be addressed to Customer as set forth
      at
      its address shown in the preamble hereto, or to any office to which billing
      or
      account statements are sent; to MLC at its address shown in the preamble hereto,
      or at such other address designated in writing by MLC. Any such communication
      shall be deemed to have been given upon, in the case of personal delivery the
      date of delivery, one Business Day after deposit with an overnight courier
      five
      (5) Business Days after deposit in the United States by certified mail (return
      receipt required), or receipt of electronic transmission (which shall be
      presumed to be three hours after the time of transmission unless an error
      message is received by the sender), except that any notice of change of address
      shall not be effective until actually received.

     

        (d).  Fees,
      Expenses and Taxes.
      Customer shall upon demand pay or reimburse MLC for: (i) all UCC, recording
      and
      search fees and expenses incurred by MLC in connection with the verification,
      perfection or preservation of MLC’s rights hereunder or in any Collateral or any
      other collateral for the Obligations; (ii) any and all stamp, transfer,
      mortgage, intangible, document, filing, recording and other taxes and fees,
      excluding income taxes, payable or determined to be payable in connection with
      the borrowings hereunder or the execution, delivery, filing and/or recording
      of
      the Loan Documents and any other instruments or documents provided for herein
      or
      delivered or to be delivered hereunder or in connection herewith; and (iii)
      all
      reasonable fees and out-of-pocket expenses (including reasonable attorneys’ fees
      and legal expenses) incurred by MLC in connection with the preparation,
      execution, administration, collection, enforcement, protection, waiver or
      amendment of this Loan Agreement, or under any of the other Loan Documents
      and
      such other instruments or documents, and the rights and remedies of MLC
      thereunder and all other matters in connection therewith. The obligations of
      Customer under this paragraph shall survive the expiration or termination of
      this Loan Agreement and the discharge of the other Obligations.

     

        (e).  Right
      to Perform Obligations.
      If
      Customer shall fail to do any act or thing which it has covenanted to do under
      this Loan Agreement or any of the Loan Documents, or any representation or
      warranty on the part of Customer contained in this Loan Agreement or any of
      the
      Loan Documents shall be breached, MLC may, in its sole discretion, after 5
      Business Days written notice is sent to Customer (or such lesser notice,
      including no notice, as is reasonable under the circumstances), do the same
      or
      cause it to be done or remedy any such breach, and may expend its funds for
      such
      purpose. Any and all reasonable amounts so expended by MLC shall be repayable
      to
      MLC by Customer upon demand, with interest at the “Interest Rate” (as that item
      is defined in the Note) during the period from and including the date funds
      are
      so expended by MLC to the date of repayment, and all such amounts shall be
      additional Obligations. The payment or performance by MLC of any of Customer’s
      obligations hereunder shall not relieve Customer of said obligations or of
      the
      consequences of having failed to pay or perform the same, and shall not waive
      or
      be deemed a cure of any Default.

     

        (f).  Late
      Charge.
      Any
      payment required to be made by Customer pursuant to this Loan Agreement or
      any
      of the Loan Documents not paid within five (5) days of the applicable due date
      shall be subject to a late charge in an amount equal to the lesser of: (i)
      5% of
      the overdue amount, or (ii) the maximum amount permitted by applicable law.
      Such
      late charge shall be payable on demand.

     

        (g).  Further
      Assurances.
      Customer agrees to do such further acts and things and to execute and deliver
      to
      MLC such additional agreements, instruments and documents as MLC may reasonably
      require or deem advisable to effectuate the purposes of this Loan Agreement,
      the
      Note or any of the other Loan Documents, or to establish, perfect and maintain
      MLC’s security interests and liens upon the Collateral, including, but not
      limited to: (i) executing financing statements or amendments thereto when and
      as
      reasonably requested by MLC; and (ii) if in the reasonable judgment of MLC
      it is
      required by local law, causing the owners and/or mortgagees of the real property
      on which any Collateral may be located to execute and deliver to MLC waivers
      or
      subordinations reasonably satisfactory to MLC with respect to any rights in
      such
      Collateral.

     

        (h).  Binding
      Effect.
      This
      Loan Agreement, the Note and the other Loan Documents shall be binding upon,
      and
      shall inure to the benefit of MLC, Customer and their respective successors
      and
      assigns. MLC reserves the right, at any time while the Obligations remain
      outstanding, to sell, assign, syndicate or otherwise transfer or dispose of
      any
      or all of MLC’s rights and interests under the Loan Documents. MLC also reserves
      the right at any time to pool the Loan with one or more other loans originated
      by MLC or any other Person, and to securitize or offer interests in such pool
      on
      whatever terms and conditions MLC shall determine; provided all parties agree
      to
      the confidentiality restrictions herein. Subject to Section
      4.7(b),
      Customer consents to MLC releasing financial and other information regarding
      Credit Parties, the Collateral and the Loan in connection with any such sale,
      pooling, securitization or other offering. Customer shall not assign any of
      its
      rights or delegate any of its obligations under this Loan Agreement, the Note
      or
      any of the other Loan Documents without the prior written consent of MLC. Unless
      otherwise expressly agreed to in a writing signed by MLC, no such consent shall
      in any event relieve Customer of any of its obligations under this Loan
      Agreement, the Note or any of the other Loan Documents.

     

        (i).  Interpretation;
      Construction.
      (i)
      Captions and section and paragraph headings in this Loan Agreement are inserted
      only as a matter of convenience, and shall not affect the interpretation hereof;
      (ii) no provision of this Loan Agreement shall be construed against a particular
      Person or in favor of another Person merely because of which Person (or its
      representative) drafted or supplied the wording for such provision; and (iii)
      where the context requires: (a) use of the singular or plural incorporates
      the
      other, and (b) pronouns and modifiers in the masculine, feminine or neuter
      gender shall be deemed to refer to or include the other genders.

     

        (j).  Governing
      Law.
      This
      Loan Agreement, the Note and, unless otherwise expressly provided therein,
      each
      of the other Loan Documents, shall be governed in all respects by the laws
      of
      the State of Illinois, not including its conflict of law
      provisions.

     

        (k).  Severability
      of Provisions.
      Whenever possible, each provision of this Loan Agreement, the Note and the
      other
      Loan Documents shall be interpreted in such manner as to be effective and valid
      under applicable law. Any provision of this Loan Agreement, the Note or any
      of
      the other Loan Documents which is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
      of such prohibition or unenforceability without invalidating the remaining
      provisions of this Loan Agreement, the Note and the other Loan Documents or
      affecting the validity or enforceability of such provision in any other
      jurisdiction.

        

        (l).  Term.
      This
      Loan Agreement shall become effective when accepted by MLC at its office in
      Chicago, Illinois, and subject to the terms hereof, shall continue in effect
      so
      long thereafter as there shall be any moneys owing hereunder or under the Note,
      or there shall be any other Obligations outstanding. Customer hereby waives
      notice of acceptance of this Loan Agreement by MLC.

     

        (m).  Exhibits.
      The
      exhibits to this Loan Agreement are hereby incorporated and made a part hereof
      and are an integral part of this Loan Agreement.

     

        (n).  Counterparts.
      This
      Loan Agreement may be executed in one or more counterparts (which may be
      delivered by facsimile) which, when taken together, constitute one and the
      same
      agreement.

     

        (o).  Jurisdiction;
      Waiver.
      Customer acknowledges that this Loan Agreement is being accepted by MLC in
      partial consideration of MLC’s right and option, in its sole discretion, to
      enforce the Loan Documents in either the State of Illinois or in any other
      jurisdiction where Customer or any Collateral may be located. Customer
      irrevocably submits itself to jurisdiction in the State of Illinois and venue
      in
      any state or federal court in the County of Cook for such purposes, and Customer
      waives any and all rights to contest said jurisdiction and venue and the
      convenience of any such forum, and any and all rights to remove such action
      from
      state to federal court. Customer further waives any rights to commence any
      action against MLC in any jurisdiction except in the County of Cook and State
      of
      Illinois. Customer agrees that all such service of process shall be made by
      mail
      or messenger directed to it in the same manner as provided for notices to
      Customer in this Loan Agreement and that service so made shall be deemed to
      be
      completed upon the earlier of actual receipt or three (3) days after the same
      shall have been posted to Customer or Customer’s agent. Nothing contained herein
      shall affect the right of MLC to serve legal process in any other manner
      permitted by law or affect the right of MLC to bring any action or proceeding
      against Customer or its property in the courts of any other jurisdiction.
      Customer waives, to the extent permitted by law, any bond or surety or security
      upon such bond which might, but for this waiver, be required of MLC.


     

        (p).  Jury
      Waiver.
      MLC and
      Customer hereby each expressly waive any and all rights to a trial by jury
      in
      any action, proceeding or counterclaim brought by either of the parties against
      the other party with respect to any matter relating to, arising out of or in
      any
      way connected with the Loan, the Obligations, this Loan Agreement, any of the
      other Loan Documents and/or any of the transactions which are the subject matter
      of this Loan Agreement.

     

        (q).  Integration.
      This
      Loan Agreement, together with the other Loan Documents, constitutes the entire
      understanding and represents the full and final agreement between the parties
      with respect to the subject matter hereof, and may not be contradicted by
      evidence of prior written agreements or prior, contemporaneous or subsequent
      oral agreements of the parties. There are no unwritten oral agreements of the
      parties. Without limiting the foregoing, Customer acknowledges that: (i) no
      promise or commitment has been made to it by MLC, MLPF&S or any of their
      respective employees, agents or representatives to make any Loan on any terms
      other than as expressly set forth herein, or to make any other loan or otherwise
      extend any other credit to Customer or any other party; and (ii) except as
      otherwise expressly provided herein, this Loan Agreement supersedes and replaces
      any and all proposals, letters of intent and approval and commitment letters
      from MLC to Customer, none of which shall be considered a Loan Document. No
      amendment or modification of any of the Loan Documents to which Customer is
      a
      party shall be effective unless in a writing signed by both MLC and
      Customer.

     

        (r).  Survival.
      All
      representations, warranties, agreements and covenants contained in the Loan
      Documents shall survive the signing and delivery of the Loan Documents, and
      all
      of the waivers made and indemnification obligations undertaken by Customer
      shall
      survive the termination, discharge or cancellation of the Loan
      Documents.

     

        (s).  Customer’s
      Acknowledgments.
      The
      Customer acknowledges that the Customer: (i) has had ample opportunity to
      consult with counsel and such other parties as deemed advisable prior to signing
      and delivering this Loan Agreement and the other Loan Documents; (ii)
      understands the provisions of this Loan Agreement and the other Loan Documents,
      including all waivers contained therein; and (iii) signs and delivers this
      Loan
      Agreement and the other Loan Documents freely and voluntarily, without duress
      or
      coercion.

     

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    IN
      WITNESS WHEREOF,
      this
      Loan Agreement has been executed as of the day and year first above
      written.

     

    PAC-WEST
      TELECOMM, INC.

     

    By:  

    Signature    
      /s/ Michael L. Sarina

     

     

    Printed
      Name      Michael L. Sarina

     

     

    Title    
      Chief Financial Officer 

     

    Accepted
      at Chicago, Illinois:

     

    Merrill
      Lynch Capital,

    a
      division of Merrill Lynch Business Financial Services Inc.

    


    


    By:  /s/Ferris
      W. Mapes    

    Name: 
      Ferris W. Mapes

    Title: 
      Director

    


    


     


    
      
        
          [Signature
            Page to Amended and Restated Term Loan and Security
            Agreement]

          


        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



    Exhibit
      A

     

    


     

    Collateral

     

    


     

    (See
      attached)

     


    
      
        
          


          |

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



    Exhibit
      B

     

    


     

    Restructuring
      Notice

     

    (See
      attached)

     


    
      
        
          


          |

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



    Exhibit
      C

     

    


     

    Senior
      Loan Facility Notice

     

    (See
      attached)

     


    
      
        
          


          |

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



    Exhibit
      D

     

    


     

    Financial
      Information privided or available to Pac-West Funding Company LLC

     

    (See
      attached)

     

     

     


    
      
        
          


          |

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



    Exhibit
      E

     

    Financing
      Statements filed under Original Loan Agreement

     

    (See
      attached)