**COLLATERAL
      INSTALLMENT NOTE**


$1,949,090.94 May
      27,
      2005




**FOR
      VALUE RECEIVED**,
      PAC-WEST TELECOMM, INC., a corporation organized and existing under the laws
      of
      the State of California (“Customer”) hereby promises to pay to the order of**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
      (“MLC”), in lawful money of the United States, the principal sum of One Million
      Nine Hundred Forty Nine Thousand Ninety dollars and 94/100 ($1,949,090.94)
      or if
      more or less, the aggregate amount advanced by MLC to Customer pursuant to
      the
      Loan Agreement (the “Loan Amount”); together with interest on the unpaid balance
      of the Loan Amount, from the Closing Date until payment, at the Interest Rate,
      as follows:





**1.**  **DEFINITIONS.**





(a)  In
      addition to terms defined elsewhere in this Note, as used herein, the following
      terms shall have the following meanings:





(i)
            “Closing Date” shall mean the date of advance of funds
                hereunder.




(ii)
            “Excess Interest”shall
                mean any amount or rate of interest (including the Default Rate and,
                to
                the extent that they may be deemed to constitute interest, any prepayment
                fees, late charges and other fees and charges) payable, charged or
                received in connection with any of the Loan Documents which exceeds
                the
                maximum amount or rate of interest permitted under applicable
                law.




(iii)
            “Interest Rate” shall mean a rate equal to the sum of (A) the Swap Rate
                plus (B) (4.50%). “Swap Rate” shall mean the three-year Swap Rate as
                published on Bloomberg Professional Servies screen “USSW”, determined as
                of the closing swap rate two business days prior to the Closing
                Date.




(iv)
            “Loan Agreement” shall mean that certain**TERM
                LOAN AND SECURITY AGREEMENT**dated
                as of the date hereof between Customer and MLC, as the same may have
                been
                or may hereafter be amended or
                supplemented.




(v)
            “Note” shall mean this**COLLATERAL
                INSTALLMENT NOTE**.




(b)  Capitalized
      terms used herein and not defined herein shall have the meaning set forth in
      the
      Loan Agreement. Without limiting the foregoing, the terms “Loan Documents”,
“Bankruptcy Event” and “Event of Default” shall have the respective meanings set
      forth in the Loan Agreement.




2.  **PAYMENT
      AND OTHER TERMS.** Customer
      shall pay the indebtedness under this Note in 36 consecutive monthly
      installments commencing on the first day of the second calendar month following
      the Closing Date and continuing on the first day of each calendar month
      thereafter until this Note shall be paid in full. Each such installment shall
      be
      in the amount which will fully amortize the Loan Amount with accrued interest
      in
      equal monthly installments over a term of 36 months (except that there shall
      be
      added to the first such installment an additional amount equal to accrued
      interest at the Interest Rate from the date of funding to the last day of the
      calendar month in which funding occurs).




Each
      payment received hereunder shall be applied *first* to any
      fees and expenses of MLC payable by Customer under the terms of the Loan
      Agreement (including, without limitation, late charges), *next* to
      accrued interest at the Interest Rate, *with
      the balance* applied
      on account of the unpaid principal hereof or in such other manner as the holder
      hereof may from time to time hereinafter determine for the allocation of such
      payments thereof. Any part of the principal hereof or interest hereon or other
      sums payable hereunder or under the Loan Agreement not paid within five (5)
      days
      of the applicable due date shall be subject to a late charge equal to the lesser
      of (i) 5% of the overdue amount, or (ii) the maximum amount permitted by law.
      All interest shall be computed on the basis of actual days elapsed over a
      360-day year.





Customer
      may not prepay this Note during the first eighteen (18) months following the
      Closing Date, except that in the event of a Corporate Transaction Event,
      Customer may prepay this Note, in whole, but not in part, during such eighteen
      (18) month period, and such prepayment shall be accompanied by a premium equal
      to four percent (4%) of the amount prepaid. Customer may for any reason
      whatsoever, prepay this Note at any time on or after such eighteen (18) month
      period following the Closing Date, in whole but not in part, upon 30 days prior
      written notice to MLC, and such prepayment shall, if made on or after the
      eighteenth (18th) month but prior to twenty-fourth (24th) month anniversary
      of
      the Closing Date, be accompanied by a premium equal to three percent (3%) of
      the
      amount prepaid, and if made any time thereafter, be accompanied by a premium
      equal to one percent (1%) of the amount so prepaid. Except as set forth above,
      there shall be no other premium, penalties or fees payable in connection with
      any prepayments of the Loans, including without limitation, any breakage,
      make-whole or similar premiums, penalties or fees. Notwithstanding anything
      contained herein to the contrary, the prepayment premiums set forth above shall
      not be payable in connection with any mandatory prepayment of the Loans,
      including, without limitation, upon the acceleration of the Loans following
      an
      Event of Default, , or upon the permanent prepayment of Customer’s obligations
      pursuant to Section 3.4(k) of the Loan Agreement. For purposes of this
      definition, (i) a “year” means the 365 or 366-day, as applicable, commencing on
      the Closing Date or any anniversary of the Closing Date and (ii) a “Corporate
      Transaction Event” means any transaction by the Company of the type described in
      Sections 3.5(k) or 3.3(g) of the Loan Agreement, and shall include the transfer
      by the Company of all or substantially all of its assets into a joint venture.




This
      Note
      is the Collateral Installment Note referred to in, and is entitled to all of
      the
      benefits of the Loan Agreement and any Loan Documents. If Customer shall fail
      to
      pay when due any installment or other sum due hereunder, and any such failure
      shall continue for more than five (5) Business Days from the due date, or if
      any
      other Event of Default shall have occurred and be continuing, then at the option
      of the holder hereof (or, upon the occurrence of any Bankruptcy Event,
      automatically, without any action on the part of the holder hereof), and in
      addition to all other rights and remedies available to such holder under the
      Loan Agreement, any Loan Documents, and otherwise, the entire Loan Amount at
      such time remaining unpaid, together with accrued interest thereon and all
      other
      sums then owing by Customer under the Loan Agreement, may be declared to be
      and
      thereby become immediately due and payable.





It
      is
      expressly understood, however, that nothing contained in the Loan Agreement,
      any
      other agreement, instrument or document executed by Customer, or otherwise,
      shall affect or impair the right, which is unconditional and absolute, of the
      holder hereof to enforce payment of all sums due under this Note at or after
      maturity, whether by acceleration or otherwise, or shall affect the obligation
      of Customer, which is also unconditional and absolute, to pay the sums payable
      under this Note in accordance with its terms. Except as otherwise expressly
      set
      forth herein or in the Loan Agreement, Customer hereby waives presentment,
      demand for payment, protest and notice of protest, notice of dishonor, notice
      of
      acceleration, notice of intent to accelerate and all other notices and
      formalities in connection with this Note.





Wherever
      possible each provision of this Note shall be interpreted in such manner as
      to
      be effective and valid under applicable law, but if any provision of this Note
      shall be prohibited by or invalid under such law, such provision shall be
      ineffective to the extent of such prohibition or invalidity without invalidating
      the remainder of such provision or the remaining provisions of this Note.
      N otwithstanding
      any provision to the contrary in this Note,
      the
      Loan Agreement or any of the Loan Documents, no
      provision of this Note,
      the
      Loan Agreement or any of the Loan Documents shall
      require the payment or permit the collection of any Excess Interest. If any
      Excess Interest is provided for, or is adjudicated as being provided for, in
      this Note,
      the
      Loan Agreement or any of the Loan
      Documents, then: (a) Customer shall not be obligated to pay any Excess Interest;
      and (b) If
      any
      Excess Interest is provided for, or is adjudicated as being provided for, in,
      then: (i) Customer shall not be obligated to pay any Excess Interest; and (ii)
      any Excess Interest that MLC may have received under any
      of
      the Loan Documents shall,
      at
      the option of MLC, be applied as a credit against the then unpaid principal
      balance of this Note, or accrued interest hereon not to exceed the maximum
      amount permitted by law or refunded to the payor thereof.




Upon
      the
      occurrence and during the continuance of any Event of Default, but without
      limiting the rights and remedies otherwise available to MLC hereunder or waiving
      such Event of Default, the interest payable by Customer hereunder shall at
      the
      option of MLC accrue and be payable at the Default Rate. The Default Rate,
      once
      implemented, shall continue to apply to the Obligations under this Note, the
      Loan Agreement or any of the Loan Documents and be payable by Customer until
      the
      date MLC gives written notice (which shall not be unreasonably delayed or
      withheld) that such Event of Default has been cured to the satisfaction of
      MLC.


This
      Note
      shall be construed in accordance with the laws of the State of Illinois and
      may
      be enforced by the holder hereof in any jurisdiction in which the Loan Agreement
      may be enforced.














**[THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]**



















**IN
      WITNESS WHEREOF** ,
      this
      Note has been executed by Customer as of the day and year first above
      written.













**PAC-WEST
      TELECOMM, INC.**




By: /s/
      H.
      Ravi Brar


Signature


H.
      Ravi Brar


Printed Name


CFO


Title