TERM LOAN AND SECURITY AGREEMENT



Term Loan and Security Agreement dated as of 21st day of
May, 2004, between Pac-West Telecomm, Inc., a corporation organized and existing
under the laws of the State of Califorinai having its principal office at 1776
W. March Lane, Stockton, CA 95207 ("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").

In consideration of the mutual covenants of the parties hereto,
Customer and MLC hereby agree as follows:

ARTICLE 1.
DEFINITIONS

Section 1.1Specific 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withdrawn within sixty (60) days after filing; or (iii) any Credit Party shall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 3.6 (b) hereof.

"Commitment Expiration Date" shall mean December 31, 2004.

"Commitment Fee" shall mean a an aggregate fee equal to
$100,000.00 which is due to MLC in connection with the Commitment Letter and the
initial funding thereunder.

"Commitment Letter" shall mean that certain commitment letter
from MLC to Customer dated May 20, 2004.

"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 3.5 hereof, 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) the
Commitment Fee shall have been paid in full; (vi) 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; (vii) 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; (viii) MLC shall have received evidence reasonably
satisfactory to it of the insurance required hereby or by any of the Loan
Documents on the Collateral; and (ix) 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 mean a 36 month term installment loan in an amount
equal to $2,400,887.18.

"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.

"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 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, 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 provides
collateral, or otherwise now or hereinafter agrees to grant MLC a security
interest in any assets as security for Customer's Obligations.

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

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.

1.3 UCC Filing. Customer hereby authorizes 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

2.1 Commitment. Subject to the terms and conditions
hereof, MLC hereby 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 disbursed on the Closing Date
either directly to the applicable third party or parties on account of the Loan
Purpose or to reimburse Customer for amounts directly expended by it; all as
directed by Customer in a Pay Proceeds Notice to be executed by Customer and
delivered to MLCas set forth in Section 2.3.

2.2 Note. The Loan will be evidenced by and repayable in
accordance with that certain 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.

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) MLC shall have received a
written request from Customer that the Loan be funded in accordance with the
terms hereof, together with a written direction from Customer as to the method
of payment and payee(s) of the proceeds of the Loan, which request and direction
shall have been received by MLC not less than two Business Days prior to any
requested funding date; (b) the Commitment Expiration Date shall not then have
occurred; and (c) each of the General Funding Conditions shall then have been
met or satisfied to the reasonable satisfaction of MLC.

2.4 Use of Loan Proceeds. The proceeds of the Loan shall
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. GENERAL
PROVISIONS

3.1 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, 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 will have valid and
perfected first liens and security interests upon all of the Collateral. Without
limiting the foregoing:

A. 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.

B. 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.

C. 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.

3.2 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 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); and

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

d. 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.

3.3 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.

h. Liquidity. The aggregate unrestricted cash and
unrestricted marketable securities owned and controlled by Customer shall at all
times exceed the lesser of (i) $5,000,000.00, or (ii) the amount of indebtedness
evidenced by the Obligations.

3.4 Collateral.

a. Pledge of Collateral. To secure
payment and performance of the Obligations, Customer hereby pledges, assigns,
transfers and sets over to MLC, and grants to MLC first liens and security
interests in and upon all of the Collateral, subject only to priorities afforded
to Permitted Liens.

b. Liens. 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 Lender'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.

3.5 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 3.4(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.



3.6 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 hereby collaterally assigns and grants 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.

3.7 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 3.7(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, 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.



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

PAC-WEST TELECOMM, INC.

By: /s/ H. Ravi Brar

Signature

H. Ravi Brar

Printed Name

Chief Financial Officer

Title

Accepted at Chicago, Illinois:

Merrill Lynch Capital,

a division of Merrill Lynch Business Financial Services
Inc.



By: /s/ Steve Coley

Name:

Title: Vice President-Group Credit
Manager