Sales Agreement

The sales agreement calls for a purchase price of $77,500, payable to Kenneth Van Gorder in two equal payments. One half was paid on March 8, 2004 and one half is to be paid within seven days of the approval of the transfer by the California Public Utilities Commission. To evaluate whether Jay Gardner, et al. will be able to handle this long-term obligation, the Water Division examined available records of the water system, including the balance sheet, income statement, and purchase agreement. The Water Division concludes that Jay Gardner, et al. can assume this debt without incurring financial difficulty and without raising the rates of water system customers beyond what the rates ordinarily would be.