Document:

Exhibit 10.132

    
      
        

      

    

    EXHIBIT
      10.132

    
BEFORE
      THE NEW MEXICO PUBLIC REGULATION COMMISSION

    

    
      	
              IN
                THE MATTER OF THE APPLICATION OF

            	
              )

            
	
              PUBLIC
                SERVICE COMPANY OF NEW MEXICO

            	
              )

            
	
              FOR
                APPROVAL OF A CERTIFICATE OF 

            	
              )

            
	
              PUBLIC
                CONVENIENCE AND NECESSITY FOR

            	
              )

            
	
              A
                141 MW COMBUSTION TURBINE UNIT AND

            	
              )
                Case No. 05-00275-UT

            
	
              THE
                CONVERSION OF THAT UNIT TO A 272 MW

            	
              )

            
	
              COMBINED
                CYCLE GENERATOR.

            	
              )

            
	 	
              )

            
	
              PUBLIC
                SERVICE COMPANY OF NEW MEXICO,

            	
              )

            
	 	
              )

            
	
              Applicant.

            	
              )

            
	 	
              )

            

    

    

    

    STIPULATION

     

    Public
      Service Company of New Mexico (“PNM”); the Staff of the Utility Division
      (“Staff”) of the New Mexico Public Regulation Commission (“NMPRC” or
“Commission”); the New Mexico Industrial Energy Consumers (“NMIEC”), Patricia
      Madrid, the Attorney General of the State of New Mexico (the “AG”) and the
      Coalition for Clean Affordable Energy (collectively the “Signatories”), through
      their undersigned authorized representatives, agree and stipulate as
      follows:

     

    INTRODUCTION

     

    1.  On
      July
      6, 2005, PNM filed an Application with the Commission seeking authorization
      to
      (a) operate as public utility plant the existing gas-fired combustion turbine
      located near Afton, in Dona Anna County, New Mexico (the “Afton CT”) which PNM
      is currently operating as a merchant plant; (b) convert the Afton CT to a
      gas-fired combined cycle generator (the “Afton CC”) that would expand the
      capacity of the plant and allow it to serve all jurisdictional customers on
      PNM’s system (collectively the Afton CT and Afton CC are referred 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    to
      as the
“Afton Facility”); and (c) include in rate base in PNM’s next electric rate case
      the depreciated net book value of the Afton CT and the actual cost up to $141.8
      million for the Afton CC conversion. PNM’s Application requested a total value
      for the Afton Facility of $211.6 million to be included in rates.

     

    2.  The
      Signatories have arrived at this Stipulation which they believe is fair, just
      and reasonable, and agree that the construction and operation of the Afton
      Facility, pursuant to this Stipulation, is required by the public convenience
      and necessity. In addition to the Signatories, Western Water and Power
      Production Limited; City of Albuquerque; Regents of the University of New
      Mexico; Natural Resources Defense Council; Community Action New Mexico; El
      Paso
      Electric Company; National Nuclear Security Agency; Energy, Minerals &
Natural Resources Department of the State of New Mexico; and People’s Energy
      Resources Company intervened in the proceeding and participated, from time
      to
      time, in settlement discussions.

     

    STIPULATION

     

    3.  The
      Signatories stipulate that PNM’s Application should be approved as provided
      herein and PNM should be authorized to (a) operate as a public utility the
      Afton
      CT; (b) convert the Afton CT to the Afton CC, a gas-fired combined cycle
      generator of approximately 235 MW capacity; (c) include in rate base in PNM’s
      next electric general rate case the cost of the Afton Facility as agreed to
      herein, provided the Afton Facility is in service within eighteen (18) months
      of
      the Commission’s order approving this Stipulation or December 31, 2007,
      whichever is earlier; (d) in the event the deadlines in (c) are not met, PNM
      will only be permitted to recover in rates the net book value of the Afton
      Facility in an electric general rate case subsequent to Afton Facility’s
      in-service date; and (e) receive all other approvals and authorizations as
      may
      be required under the New Mexico Public Utility Act for the issuance of a
      certificate of public convenience and necessity for the Afton Facility on the
      following terms and conditions:

     

    
      
        
        

      

      
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    4.  The
      Afton
      Facility book value for ratemaking in PNM’s 2007 rate case shall be the lower of
      the actual cost of the Afton Facility or $187.6 million.*
      In
      subsequent rate cases, this amount will be adjusted to reflect additional
      depreciation and ADIT from the in-service date of the Afton
      Facility.

     

    5.  Allocation
      of the Afton Facility costs is 50% to TNMP customers and 50% to PNM customers,
      until rates equalize in the 2010 to 2015 timeframe as specified in the
      Commission’s Final Order in NMPRC Case No. 04-00315-UT.

     

    6.  In
      future
      rate cases, PNM will work with the Signatories towards the goal of avoiding
      reinstatement of a fuel adjustment clause. To mitigate risk associated with
      gas
      cost volatility for gas-fired electric generation, the Signatories will support
      PNM’s recovery in base rates of the reasonable costs of prudently hedging its
      gas requirements and otherwise mitigating its gas cost risks. 

     

    7.  PNM
      will
      propose in its next general rate case Application interruptible rates and a
      new
      inverted block rate to absorb any residential rate increase. If it is
      demonstrated that the proposed rate increase to residential customers in that
      case is too great to place entirely in the third block, it will file a
      supporting study and propose an alternative that encourages less consumption.
      PNM will preserve the structure, but not necessarily the rates, of its
      Incremental Interruptible Power Rate for customers currently on that tariff.
      

     

    
      
        
          
            

          

           *
            The
            $187.6 million is exclusive of Accumulated Deferred Income Taxes (“ADIT”). ADIT
            will be treated for regulatory purposes consistent with past rate
            proceedings.

           

        

      

      
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    8.  PNM
      shall
      conduct a feasibility study of Algodones, Person and other load side sites
      for
      future jurisdictional generation, by the earlier of 90 days after any filing
      requesting additional jurisdictional generation or December 31, 2006.

     

    9.  Prior
      to
      the anticipated Reeves’ retirement and/or repowering, but with sufficient time
      for reasonable alternatives to be implemented, PNM will demonstrate the economic
      benefit to ratepayers of Reeves’ retirement and/or repowering.

     

    10.    
      The
      entirety of transmission costs associated with the Afton Facility shall be
      $2.9
      million per year for customers in areas served by TNMP and $3.0 million for
      PNM
      customers through December 31, 2010. In addition, PNM will not seek more than
      $2.9 million in the Afton Facility transmission costs in any TNMP rate case
      filed before December 31, 2010. After 2010, the Afton Facility transmission
      costs will be allocated 50% to customers in areas served by TNMP and 50% to
      PNM
      customers until rates are combined between the two customer groups.

     

    11.  In
      the
      future, PNM will file any applications to include merchant plant in ratebase
      at
      least 36 months prior to the date requested for inclusion in ratebase, unless
      all signatories agree otherwise.

     

    12.  Recognizing
      the importance of environmental, energy efficiency and renewable energy concerns
      to PNM’s facility planning process, in the analysis undertaken to prepare PNM’s
      2007 Electric Supply Plan to be filed on February 1, 2007 pursuant to the Case
      3137 Stipulation, PNM commits to incorporate Integrated Resource Planning
      principles including:

     

    
      	a)  	
              demand
                side management options for reducing energy and peak load,

               

            

    

    
      	b)  	
              an
                assessment of renewable energy alternatives, and

               

            

    

    
      	c)  	
              an
                environmental risk analysis.

            

    

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    In
      addition, PNM will also incorporate Integrated Resource Planning principles
      in
      its distribution and transmission planning processes.

     

    13.  By
      January 31, 2007, PNM will file at the Commission an application to initiate
      comprehensive electric energy efficiency programs, which will take into account
      the results of the electric energy efficiency potential study and the appliance
      saturation study that PNM will undertake during 2006 pursuant to the Stipulation
      in NMPRC Case No. 05-00261-UT. 

     

    14.  PNM
      will
      undertake a third-party engineering study to evaluate the potential at the
      Afton
      facility for boiler feedwater pre-heating using renewable energy generation
      facilities that could be constructed at or in reasonable proximity to the
      generation station; however, this commitment does not constitute a requirement
      that PNM would need to acquire additional land and permits solely for the
      purpose of reserving the potential for future renewable energy boiler feedwater
      pre-heating facilities. 

     

    15.  Except
      as
      specifically stated in the language of this Stipulation, the provisions of
      this
      Stipulation have no precedential effect and the Parties do not waive rights
      they
      may have in any other pending or future proceeding and will not be deemed to
      have approved, accepted, agreed to or consented to the application of any
      concept, principle, theory or method in any future proceeding.

     

    16.  A
      Final
      Order issued by the Commission approving this Stipulation will not constitute
      a
      bar to further litigation of issues raised in pleadings and testimony or any
      issues which could have been raised or any other matters which have not been
      specifically addressed by this Stipulation. In accordance with
      17 NMAC 1.2.23.4, by approving this Stipulation, the Commission is
      neither granting any approval nor creating any precedent regarding any principle
      or issue in this or any other proceeding.

     

    
      
        
        

      

      
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    17.  This
      Stipulation reflects a negotiated settlement, and if the Stipulation is not
      executed or is not adopted in its entirety by the Commission, without additions
      or deletions, the Stipulation will be void and any statement made or positions
      taken by the Parties during the course of these negotiations will not be
      admissible before any regulatory agency or court. The Stipulation contains
      the
      full intent and understanding of the entire agreement of the Parties and no
      implication should be drawn on any matter not addressed in the Stipulation.
      There are not and have not been, any representations, warranties or agreements
      other than those specifically set forth above.

     

    18.  This
      Stipulation may be executed in a number of counterparts including by telefax,
      each of which will be deemed to be an original and all of which will constitute
      one and the same agreement. 

     

    Respectfully
      submitted this 30th
      day of
      November, 2005.

    Patrick
      Ortiz

    Gary
      Boyle

    Alvarado
      Square, MS 2822

    Albuquerque,
      NM 87158-2822

    (505)
      241-2896

    (505)
      241-2368 (fax

    portiz@pnm.com

    

    WHITE,
      KOCH, KELLY & McCARTHY, P.A.

    

    

    By: /s/
      Benjamin Phillips 

    BENJAMIN
      PHILLIPS

    REBECCA
      DEMPSEY

    433
      Paseo
      de Peralta

    Santa
      Fe,
      NM 87501

    Phone:
      (505) 982-4374

    Fax:
      (505) 984-8631

    phillips@wkkm.com

    rdempsey@wkkm.com

    

    Attorneys
      for PNM

    

    
      
         

        
        

      

      
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    UTILITY
      DIVISION STAFF OF THE

    NEW
      MEXICO PUBLIC REGULATION

    COMMISSION

     

    By: /s/
      Dahl Harris  

    DAHL
      HARRIS

    Staff
      Counsel

    223
      East
      Palace

    Santa
      Fe,
      NM 87502-2013

    Phone: (505)
      827-7479

    Fax: (505)
      927-6916

    

    

    NEW
      MEXICO INDUSTRIAL ENERGY

    CONSUMERS.

     

    By: /s/
      Steve S. Michel 

    STEVEN
      S.
      MICHEL

    134A
      Martinez Street

    Santa
      Fe,
      NM 87501

    Phone: (505)
      989-1450

    Fax: (505)
      989-8731

    stevensmichel@msn.com 

    

    

    PATRICIA
      MADRID, ATTORNEY GENERAL OF THE STATE OF NEW MEXICO

     

    By: Telephonically
      approved 11/30/05 BP 

    JEFF
      TAYLOR

    Assistant
      Attorney General

    Post
      Office Drawer 1508

    Santa
      Fe,
      NM 87504-1508

    Phone: (505)
      827-6000

    Fax: (505)
      827-5826

    

    

    COALITION
      FOR CLEAN AFFORDABLE ENERGY

    

    Susan
      Innis

    Western
      Resource Advocates

    2260
      Baseline Rd., Suite 200

    Boulder,
      CO 80302

    

    
      
        
        

      

      
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    BELIN
      & SUGARMAN

     

    By: /s/
      Alletta Belin

    ALLETTA
      BELIN

    618
      Paseo
      de Peralta

    Santa
      Fe,
      New Mexico 87501

    Phone: (505)
      983-8936

    Fax: (505)
      983-0036

    belin@bs-law.com
      

    

    8THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"). NO INTEREST IN THIS NOTE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO
(i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE
ACT), OR (iii) AN EXEMPTION FROM REGISTRATION UNDER THE ACT WHERE THE HOLDER HAS
FURNISHED TO THE COMPANY AN OPINION OF ITS COUNSEL THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.

                         OCEAN WEST HOLDING CORPORATION
                        10% SUBORDINATED PROMISSORY NOTE

$300,000.00                                                  April 3, 2006

      FOR VALUE RECEIVED, the undersigned, Ocean West Holding Corporation, a
Delaware corporation ("Payor"), having its executive office and principal place
of business at 26 Executive Park, Suite 250, Irvine, CA 92614, hereby promises
to pay to Noble Securities Holding, Ltd. ("Payee"), having an address at
Chancery Court, 1st Floor, Providenciales Turks and Caicos Islands at Payee's
address (or at such other place as Payee may from time to time hereafter direct
by notice in writing to Payor), the principal sum of Three Hundred Thousand
Dollars ($300,000), in such coin or currency of the United States of America as
at the time shall be legal tender for the payment of public and private debts,
on the first to occur of the following dates: (i): July 2, 2006 (90 days after
the date of issuance) (the "Maturity Date"); (ii) the date on which the
outstanding principal amount of this Note is prepaid in full as hereinafter
permitted (the "Prepayment Date"); and (iv) any other date on which any
principal amount of, or accrued unpaid interest on, this Note is declared to be,
or becomes, due and payable pursuant to its terms prior to the Maturity Date
(the "Acceleration Date").

      This Note is being issued in connection with a bridge financing (the
"Bridge Offering") by the Company of $300,000 principal amount of 10% Promissory
Notes and 60,000 shares of Common Stock, to be offered on a "best efforts"
basis. The Bridge Offering is being made only to Investors who qualify as
"accredited investors" as such term is defined in Rule 501 of Regulation D under
the Securities Act of 1933, as amended (the "Securities Act"). Partial Bridge
Units may be sold.

          All of the proceeds of the Bridge Offering will be used by the Company
for general corporate purposes, including working capital.

      1. INTEREST AND PAYMENT.

      1.1. The principal amount of this Note outstanding from time to time shall
bear simple interest at the annual rate (the "Note Rate") of ten percent (10%)
from the date hereof through the earliest to occur of (i) the Maturity Date;
(ii) the Prepayment Date; and (iii) the Acceleration Date.

      1.2. Interest accrued on this Note shall be payable not later than, on the
earliest to occur of (i) the Maturity Date; (ii) the Prepayment Date; and (iii)
the Acceleration Date.

<PAGE>

      1.3. All payments made by the Payor on this Note shall be applied first to
the payment of accrued unpaid interest on this Note and then to the reduction of
the unpaid principal balance of this Note.

      1.4. In the event that the date for the payment of any amount payable
under this Note falls due on a Saturday, Sunday or public holiday under the laws
of the State of New York, the time for payment of such amount shall be extended
to the next succeeding business day and interest at the Note Rate shall continue
to accrue on any principal amount so effected until the payment thereof on such
extended due date.

      2. REPLACEMENT OF NOTE.

      2.1. In the event that this Note is mutilated, destroyed, lost or stolen,
Payor shall, at its sole expense, execute, register and deliver a new Note, in
exchange and substitution for this Note, if mutilated, or in lieu of and
substitution for this Note, if destroyed, lost or stolen. In the case of
destruction, loss or theft, Payee shall furnish to Payor indemnity reasonably
satisfactory to Payor, and in any such case, and in the case of mutilation,
Payee shall also furnish to Payor evidence to its reasonable satisfaction of the
mutilation, destruction, loss or theft of this Note and of the ownership
thereof. Any replacement Note so issued shall be in the same outstanding
principal amount as this Note and dated the date to which interest shall have
been paid on this Note or, if no interest shall have yet been paid, dated the
date of this Note.

      2.2. Every Note issued pursuant to the provisions of Section 2.1 above in
substitution for this Note shall constitute an additional contractual obligation
of the Payor, whether or not this Note shall be found at any time or be
enforceable by anyone.

      3. PREPAYMENT. The principal amount of this Note may be prepaid in whole
at any time, or in part from time to time, without penalty or premium, together
with unpaid interest thereon accrued through the Maturity Date. Each partial
prepayment of this Note shall first be applied to interest accrued through the
Maturity Date and then to principal.

      4. COVENANTS OF PAYOR.

      Payor covenants and agrees that, so long as this Note remains outstanding
and unpaid, in whole or in part:

      4.1. Payor will not sell, transfer or dispose of a material part of its
assets;

      4.2. Payor will not make any loan to any person who is or becomes a
shareholder or executive employee of Payor, other than for reasonable advances
for expenses in the ordinary course of business;

      4.3. Payor will promptly pay and discharge all lawful taxes, assessments
and governmental charges or levies imposed upon it, its income and profits, or
any of its property, before the same shall become in default, as well as all
lawful claims for labor, materials and supplies which, if unpaid, might become a
lien or charge upon such properties or any part thereof; provided, however, that
Payor or such subsidiary shall not be required to pay and discharge any such
tax, assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and Payor or such subsidiary,
as the case may be, shall set aside on its books adequate reserves with respect
to any such tax, assessment, charge, levy or claim so contested;

                                       2
<PAGE>

      4.4. Payor will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights and franchises
and substantially comply with all laws applicable to Payor as its counsel may
advise;

      4.5. Payor will at all times maintain, preserve, protect and keep its
property used or useful in the conduct of its business in good repair, working
order and condition (except for the effects of reasonable wear and tear in the
ordinary course of business) and will, from time to time, make all necessary and
proper repairs, renewals, replacements, betterments and improvements thereto;

      4.6. Payor will keep adequately insured, by financially sound reputable
insurers, all property of a character usually insured by similar corporations
and carry such other insurance as is usually carried by similar corporations;

      4.7. Payor will, promptly following the occurrence of an Event of Default
or of any condition or event which, with the giving of notice or the lapse of
time or both, would constitute an Event of Default, furnish a statement of
Payor's Chief Executive Officer or Chief Financial Officer to Payee setting
forth the details of such Event of Default or condition or event and the action
which Payor intends to take with respect thereto; and

      4.8. Payor will, and will cause each of its subsidiaries to, at all times
maintain books of account in which all of its financial transactions are duly
recorded in conformance with generally accepted accounting principles.

      5. EVENTS OF DEFAULT. If any of the following events (each an "Event of
Default") occurs:

      5.1. The dissolution of Payor or any vote in favor thereof by the board of
directors and shareholders of Payor; or

      5.2. Payor makes an assignment for the benefit of creditors, or files with
a court of competent jurisdiction an application for appointment of a receiver
or similar official with respect to it or any substantial part of its assets, or
Payor files a petition seeking relief under any provision of the Federal
Bankruptcy Code or any other federal or state statute now or hereafter in effect
affording relief to debtors, or any such application or petition is filed
against Payor, which application or petition is not dismissed or withdrawn
within sixty (60) days from the date of its filing; or

      5.3. Payor fails to pay the principal amount, or interest on, or any other
amount payable under, this Note as and when the same becomes due and payable; or

      5.4. Payor admits in writing its inability to pay its debts as they
mature; or

                                       3
<PAGE>

      5.5. Payor sells all or substantially all of its assets or merges or is
consolidated with or into another corporation; other than a merger with or into
a publicly traded corporation, or

      5.6. A proceeding is commenced to foreclose a security interest or lien in
any property or assets of Payor as a result of a default in the payment or
performance of any debt (in excess of $50,000 and secured by such property or
assets) of Payor or of any subsidiary of Payor; or

      5.7. A final judgment for the payment of money in excess of $50,000 is
entered against Payor by a court of competent jurisdiction, and such judgment is
not discharged (nor the discharge thereof duly provided for) in accordance with
its terms, nor a stay of execution thereof procured, within sixty (60) days
after the date such judgment is entered, and, within such period (or such longer
period during which execution of such judgment is effectively stayed), an appeal
therefrom has not been prosecuted and the execution thereof caused to be stayed
during such appeal; or

      5.8. An attachment or garnishment is levied against the assets or
properties of Payor or any subsidiary of Payor involving an amount in excess of
$50,000 and such levy is not vacated, bonded or otherwise terminated within
sixty (60) days after the date of its effectiveness; or

      5.9. Payor defaults in the due observance or performance of any covenant,
condition or agreement on the part of Payor to be observed or performed pursuant
to the terms of this Note (other than the default specified in Section 5.3
above) and such default continues uncured for a period of sixty (60) days then,
upon the occurrence of any such Event of Default and at any time thereafter, the
holder of this Note shall have the right (at such holder's option) to declare
the principal of, accrued unpaid interest on, and all other amounts payable
under this Note to be forthwith due and payable, whereupon all such amounts
shall be immediately due and payable to the holder of this Note, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived; provided, however, that in case of the occurrence of an
Event of Default under any of the sections above, such amounts shall become
immediately due and payable without any such declaration by the holder of this
Note; and in addition;

      5.10 If Payor fails to pay the principal amount, or interest on, or any
other amount payable under, this Note as and when the same becomes due and
payable, (as specified in Section 5.3 above), the Company will pay the Payee a
default interest rate of two (2%) per month on all amounts due and owing under
the Note for each month or part thereof beyond the Maturity Date, which default
interest shall be payable on demand.

      6. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the Payee may proceed to (i) protect and
enforce Payee's rights either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant, condition or agreement
contained in this Note or in any agreement or document referred to herein or in
aid of the exercise of any power granted in this Note or in any agreement or
document referred to herein, (ii) enforce the payment of this Note, or (iii)
enforce any other legal or equitable right of the holder of this Note. No right
or remedy herein or in any other agreement or instrument conferred upon the
holder of this Note is intended to be exclusive of any other right or remedy,
and each and every such right or remedy shall be cumulative and shall be in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise.

                                    4
<PAGE>

      7. UNCONDITIONAL OBLIGATION; FEES, WAIVERS, OTHER.

      7.1. The obligations to make the payments provided for in this Note are
absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.

      7.2. If, following the occurrence of an Event of Default, Payee shall seek
to enforce the collection of any amount of principal of and/or interest on this
Note, there shall be immediately due and payable from Payor, in addition to the
then unpaid principal of, and accrued unpaid interest on, this Note, all costs
and expenses incurred by Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.

      7.3. No forbearance, indulgence, delay or failure to exercise any right or
remedy with respect to this Note shall operate as a waiver or as an acquiescence
in any default, nor shall any single or partial exercise of any right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy.

      7.4. This Note may not be modified or discharged (other than by payment or
exchange) except by a writing duly executed by Payor and Payee.

      7.5. Payor hereby expressly waives demand and presentment for payment,
notice of nonpayment, notice of dishonor, protest, notice of protest, bringing
of suit, and diligence in taking any action to collect amounts called for
hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which Payee had or is existing as security for any amount called
for hereunder.

      8. SUBORDINATION. This Note is subordinated in right of payment to
Indebtedness (hereinafter defined), which includes any principal of, premium, if
any, or interest on indebtedness of Payor except Indebtedness which by its terms
is not superior in right of payment to the Notes. For the purposes of this Note,
the term "Indebtedness" shall mean all existing and future indebtedness incurred
in the ordinary course of business, including, but not limited to (1) bank and
or other institutional debt of Payor, (2) any lease, chattel mortgage, and
conditional sales financing secured by Payor's property and equipment; and (3)
any amendment, renewal, extension or refunding of any such debt. Each Noteholder
by accepting a Note agrees to the subordination and authorizes Payor to give it
effect.

      9. RESTRICTION ON TRANSFER. This Note has been acquired for investment,
and this Note has not been registered under the securities laws of the United
States of America or any state thereof. Accordingly, no interest in this Note
may be offered for sale, sold or transferred in the absence of registration and
qualification of this Note, under applicable federal and state securities laws
or an opinion of counsel of Payee reasonably satisfactory to Payor that such
registration and qualification are not required.

                                       5
<PAGE>

      10. MISCELLANEOUS.

      10.1. The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.

      10.2. All notices required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered or
sent by registered or certified mail (return receipt requested, postage
prepaid), facsimile transmission or overnight courier to the address of the
intended recipient as set forth in the preamble to this Note or at such other
address as the intended recipient shall have hereafter given to the other party
hereto pursuant to the provisions of this Note.

      10.3. This Note and the obligations of Payor and the rights of Payee shall
be governed by and construed in accordance with the substantive laws of the
State of California without giving effect to the choice of laws rules thereof.

      10.4. This Note shall bind Payor and its successors and assigns.

                                                  OCEAN WEST HOLDING CORPORATION

                                                  By:  /s/ Darryl Cohen
                                                       -------------------------
                                                       Name: Darryl Cohen
                                                       Title:CEO

                                       6

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