Exhibit 10.78


    

      TERM
        LOAN AND SECURITY AGREEMENT

       

      TERM
        LOAN AND SECURITY AGREEMENT
        dated as
        of 27thd
        day of
        May 2005, between 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 (“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
        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        Credit Party and shall not be dismissed or withdrawn within sixty (60) days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 3.6
        (b)
        hereof.

       

      “Commitment
        Expiration Date” shall mean December 31, 2005.

       

      “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) 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; and (viii) 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
        $1,949,090.94

       

      “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 MLC as
        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.

       

      (n)
        Customer
        Identification- USA Patriot Act Notice; OFAC and Bank Secrecy
        Act.
        MLC
        hereby notifies Customer that pursuant to the requirements of the USA Patriot
        Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the
“Act”),
        and MLC’s policies and practices, MLC is required to obtain, verify and record
        certain information and documentation that identifies each Customer, which
        information includes the name and address of each Customer and such other
        information that will allow MLC to identify each Customer in accordance with
        the
        Act. In addition, Customer shall (a) ensure that no Person who owns a
        controlling interest in or otherwise controls any Customer or any subsidiary
        of
        any Customer is or shall be listed on the Specially Designated Nationals
        and
        Blocked Person List or other similar lists maintained by the Office of Foreign
        Assets Control (“OFAC”), the Department of the Treasury or included
        in
        any
        Executive Orders, (b) not use or permit the use of the proceeds of the Loan
        to
        violate any of the foreign asset control
        regulations of OFAC or any enabling statute or Executive Order relating thereto,
        and (c) comply, and cause any of its subsidiaries to comply, with all applicable
        Bank Secrecy Act (“BSA”) laws and regulations, 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;
        (i) any
        funding after Apirl 30, 2005, MLC requires a satisfactory review of the audited
        2004 annual financial statements.

       

      (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);
        any
        funding after July 30, 2005, MLC requires a satisfactory review of the 2005
        quarterly financial statement. 

       

      (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.

       

      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.

       

      (e)  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.

       

      (f)  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.

       

      (g)  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. MLC shall, acting for this purpose
        as
        an agent of Customer, maintain at its offices a register for the recordation
        of
        the names and addresses of its participants or assignees, and the amount
        and
        terms of its participations and assignments including specifying any such
        participant's or assignee's entitlement to payments of principal and interest,
        and any payments made, with respect to each such participation or assignment.
        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 integ-ral 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.

       

      (t)   Specific
        Cross-Collateralization and Cross Default.
        The
        provisions set forth in this paragraph shall be construed as additional and
        supplemental and shall not in any way limit or negate any related provisions
        in
        the Prior Loan Documents (hereafter defined) or the current providing for
        cross
        default and cross collateralization rights for MLC. The “Collateral” as defined
        in the Prior Loan Documents shall be deemed included within Collateral as
        defined and in the Loan Documents and the Collateral shall be deemed included
        within the “Collateral” as defined in the Prior Loan Documents, and the
“Collateral” and the Collateral shall each upon an Event of Default under either
        set of loan documents serve as security for the repayment of both the Loan
        Documents and the Prior Loan Documents. Any Event of Default as defined in
        the
        applicable loan documents shall be an Event of Default under the other set
        of
        loan documents. “Prior Loan Documents” means the “Loan Documents” as defined in
        the Term Loan and Security Agreement dated May 21, 2004, Term Loan and Security
        Agreement dated July 2, 2004, Collateral Installment Note dated May 21, 2004
        and
        Collateral Installment Note dated July 2, 2004.

       

       

       

      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 

                 
        CFO                

      Title 

       

      Accepted
        at Chicago, Illinois:

       

      Merrill
        Lynch Capital,

      a
        division of Merrill Lynch Business Financial Services Inc.

      


      


      By:   
/s/
        Richard J. Pondel        

       
        Name:  Richard J. Pondel

       
        Title:    Vice President