Collateral Installment Note

COLLATERAL INSTALLMENT NOTE

July 2, 2004

$2,996,445.82

FOR VALUE RECEIVED , PAC-WEST TELECOMM, INC., a corporation organized and existing under the laws of the State of California ("Customer") hereby promises to pay to the order of MERRILL LYNCH CAPITAL, a division of MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. , a corporation organized and existing under the laws of the State of Delaware ("MLC"), in lawful money of the United States, the principal sum of Two Million Nine Hundred Ninety Six Thousand Four Hundred Forty Five Thousand and 82/100 Dollars ($2,996,445.82) or if more or less, the aggregate amount advanced by MLC to Customer pursuant to the Loan Agreement (the "Loan Amount"); together with interest on the unpaid balance of the Loan Amount, from the Closing Date until payment, at the Interest Rate, as follows:

DEFINITIONS.

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

"Bank Note" shall mean that certain Note and Warrant Purchase Agreement between Pac-West Telecomm, Inc. and Deutsche Bank AG, including whether now existing or hereafter arising: (a) any amendments, restatements, or modifications thereto, (b) any replacement note or other debt which was used to partially or fully pay off or refinance such note, and (c) any assignments thereof.

"Closing Date" shall mean the date of advance of funds hereunder.

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

"Interest Rate" shall mean a rate equal to the sum of (A) the Swap Rate plus (B) (5.00%). "Swap Rate" shall mean the three-year Swap Rate as published on Bloomberg Professional Servies screen "USSW", determined as of the closing swap rate two business days prior to the Closing Date.

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

"Note" shall mean this COLLATERAL INSTALLMENT NOTE .

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

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

Notwithstanding the foregoing for so long as the Bank Note exists (and is not retired by virtue of the Bank Note holder exercising the warrants described therein), if (a) the Bank Note, currently scheduled to mature on December 19, 2006, is not by October 19, 2006 renewed or otherwise extended to a least June 19, 2008 on substantially the same terms and conditions, or (b) a default occurs under the t ...