Document:

Exhibit 10.26

                             AGREEMENT NO. 99-73(1)

                      WATER BOARD AGREEMENT NO. 01-08 W.B.

                     AMENDMENT NO. 1 TO AGREEMENT NO. 99-73

                THE NORTHEAST BAKERSFIELD WATER SUPPLY AGREEMENT

      THIS  AMENDMENT  NO. 1 TO AGREEMENT  NO. 99-73 is made and entered into on
OCT 3 2001, by and between the CITY OF  BAKERSFIELD a Charter CITY and municipal
corporation, ("CITY" herein) and, CALIFORNIA WATER SERVICE COMPANY, a California
public utility water corporation, ("CAL WATER" herein).

                                    RECITALS

      WHEREAS,  on March 31, 1999, CITY and CAL WATER entered into Agreement No.
99-73 concerning the Northeast Water Supply Project ("NEWSP" herein); and

      WHEREAS, as of March 31, 1999, certain details of the NEWSP were yet to be
determined; and

      WHEREAS, NEWSP details are currently more fully determined; and

      WHEREAS,  CAL WATER and CITY desire to establish  terms and conditions for
the Water Supply for the NEWSP and  operation and  maintenance  of certain NEWSP
facilities and secure long term use of certain facilities by each entity for the
NEWSP; and

      WHEREAS, CAL WATER and CITY desire to amend Agreement No. 99-73 to include
terms and conditions for water supply, operation and maintenance and term of use
of certain facilities.

      NOW, THEREFORE,  incorporating the foregoing recitals herein, CITY and CAL
WATER mutually agree to amend Agreement No. 99-73 as follows:

      1.    Section 1, WATER SUPPLY, is hereby amended to read as follows:

                  1. WATER SUPPLY.  CITY will make available to CAL WATER a Kern
            River  surface water supply to serve the needs of present and future
            CITY residents located in the area of Service described in Section 2
            herein. The parties anticipate CITY will make available to CAL WATER
            up to 22,400  (twenty-two  thousand four hundred) acre-feet per year
            or an average 20 million gallons per day (MGD) starting  February 1,
            2003  to  meet  the  initial  needs  of a  newly  constructed  water
            treatment plant.  CITY will provide  additional water to meet future
            demands of an expanded  Bakersfield water treatment plant consistent
            with the

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            Schedule in Exhibit "A" (as  substitute for Exhibit "B" In Agreement
            No. 99-73) attached hereto.

      2.    Section 2, AREA OF SERVICE, is hereby amended to read as follows:

            2. AREA OF SERVICE.  The area to be served with high quality treated
            water from the NEWSP shall be within the franchise service territory
            of CAL WATER's  Bakersfield  district,  whose  location is generally
            within the area south of the Kern River, within the CAL WATER Olcese
            service area to the east, south to the East Niles Community  Service
            District, and the remaining Bakersfield district service area of CAL
            WATER to the west The NEWSP  distribution area may be changed by the
            mutual  consent  of  both  parties  and  may be  adjusted  for  CITY
            annexations;  however,  CAL WATER  understands the CITY will require
            water supplied  hereunder be delivered  within CITY limits no matter
            what the specified  area  described in this  Agreement CAL WATER may
            determine how best to serve both CITY and  unincorporated  residents
            with water from various sources including its wells, the Kern County
            Water Agency  water  treatment  plant and the NEWSP,  subject to the
            constraint that the water delivered to the  unincorporated  areas is
            less than that produced and delivered from sources other than NEWSP.
            CAL  WATER  may  transfer  banked  groundwater  supplies  to CITY to
            balance  NEWSP  deliveries  to  unincorporated  areas.  Both parties
            acknowledge  the  water  acquired  hereunder  by  CAL  WATER  may be
            commingled with other waters,  as described herein, at any time with
            the resulting goal that the water quality at all times shall meet or
            exceed all Federal,  State, and local statutory and regulatory water
            quality  standards,   including,  but  not  limited  to1  California
            Department  of Health  Services  standards.  A map showing the NEWSP
            area is attached hereto as Exhibit "C" (as attached to Agreement No.
            99-73 ) and Incorporated by reference as though fully set forth.

      3. A new section,  4.4, shall be added to Agreement No. 99-73 and shall be
entitled "NEWSP Details" as set forth below.

            4.4 NEWSP Details.  The following  NEWSP details have been agreed to
      by the CITY and CAL WATER with the  understanding  that said NEWSP details
      are intended to supplement Sections 4.1 and 4.2 of this Agreement however,
      if a conflict  arises  between 4.1 and 4.2 and this section,  this section
      shall govern.  CITY holds  certain  right-of-ways  and easements  with the
      County of Kern by Agreement No.  98-224  (dated  September 23, 1998) which
      allow the construction and operation of water facilities on certain County
      properties and properties  under lease with the California  Living Museum,
      generally described as located in Section 5 of T29S/R29E, M.D.B.&M. A copy
      of said  agreement  with map is part of Agreement  No.  99-73  attached as
      Exhibit "A" to that agreement and incorporated herein by reference. A mote
      definitive description of the water facilities which have been or shall be
      constructed, operated and maintained are described as:

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                  1.    The Kern River Diversion Structure;
                  2.    Two (2) 54" diameter  intake  pipelines  connecting  the
                        diversion structure to the intake structure;
                  3.    The intake structure;
                  4.    A pumping station containing separate pumping facilities
                        for pumping water to: 1) Cal Waters NE Bakersfield water
                        treatment  plant,  2) the raw water  storage ponds which
                        are to supply  irrigation  water to Kern  County  soccer
                        fields and Hart Park,  and 3)  California  Living Museum
                        (CALM);
                  5.    Power  transfer  equipment  and metering for each of the
                        separate pumping facilities at the pump station;
                  6.    Raw water storage ponds or reservoirs;
                  7.    Access road along CAL WATER's 54" diameter  transmission
                        pipeline  from  the  pump  station  to  Alfred   Harrell
                        Highway;
                  8.    Maintenance  roads to the raw water storage ponds and on
                        top of the  berm  for the  entire  perimeter  of the raw
                        water storage ponds; and
                  9.    Other  appurtenant  facilities  that  may  be  installed
                        within the area.

                  4.4.1 CALM Entrance at Alfred Harrell Highway.  CAL WATER will
      connect a fifty-four inch (54")  underground raw water  transmission  line
      from the pump  station at the intake of the storage pond to the line going
      to the NE Bakersfield  water treatment  plant by using existing  easements
      and directly  boring and casing under Alfred  Harrell  Highway.  CAL WATER
      agrees to base its design on this understanding.

                  4.4.2  Morning  Drive  Bike  Path and  Western  Access  to the
      Treatment Plant.

                        4.4.2.1 The initial plan for the Morning Drive Bike Path
      is to construct a seven foot (7') shoulder, a twelve foot (12') wide paved
      Bike  Path,  a twelve  foot (12') wide dirt road and a four foot (4') wide
      shoulder  starting from the  centerline to the west (viewing  north).  For
      this same orientation, the ultimate plan is to construct a seven foot (7')
      shoulder,  two (2) twelve foot (12') wide paved road lanes, two (2) eleven
      foot (11') wide paved road lanes,  two (2)  fifteen  foot (15') wide paved
      road lanes, and a ten foot (10') wide landscaped area.

                        4.4.2.2  CAL  WATER  agrees to  excavate  a trench of at
      least eleven feet (11') in width to  accommodate  a fifty-four  inch (54")
      raw water transmission pipe and an eighteen inch (18") finished water pipe
      and  certain  communication  conduits.  The bottom of the  trench  will be
      covered  with slurry and the pipes will be covered  with a minimum of four
      foot (4') of compacted soil. Facing north, the water pipes will be west of
      the centerline

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      and the trench  will start on the  eastern  edge of the twelve  foot (12')
      wide dirt road.

                        4.4.2.3  CAL  WATER  will   construct  or  cause  to  be
      constructed,  through its contractor,  an approximately two foot (2') wide
      trench to  accommodate  the  subsurface  power line and conduit The trench
      would be about fifty  -four (54") deep and covered  with a minimum of four
      feet (4') of  compacted  soil. The  eastern  edge of the trench  will be a
      minimum  of three  feet (3') from the  western  edge of the trench for the
      water lines.  CAL WATER's  water  transmission  pipes will cross under the
      bike path due east of the  treatment  plant and  continue to the plant CAL
      WATER will install  underground  conduits  for power from the  sub-station
      site near the Morning Drive Bike Path to the water  treatment  site and to
      the pump  station.  PG&E will install  overhead  lines within a franchised
      corridor to an area in the vicinity of the  intersection  of the secondary
      access road to the water treatment plant and Morning Drive.

                        4.4.2.4  CITY has provided CAL WATER and PG&E with final
      grading plans for the Morning Drive area of the project CITY has completed
      the grading of Morning Drive within the project area. CAL WATER intends to
      complete  installation of its respective  water  transmission  lines along
      Morning Drive between Alfred Harrell Highway and the secondary access road
      to the treatment  plant by the end of September  2001. The CITY intends to
      finish paving the Bike path by October 30, 2001.

                  4.4.3  Paladino  Drive and  Primary  Access  Road to the Plant
                         Site.

                        4.4.3.1 The CITY agrees to grade and final pave Paladino
      Drive from the  intersection  of Paladino  Drive and Morning  Drive to the
      intersection of Cosmo Street and Paladino Drive. This  approximately  four
      thousand  six  hundred   fifty-five  foot  (4,655')   section  will  be  a
      twenty-four  foot (24') wide two (2) lane  paved road when  finished.  The
      CITY and CAL WATER  agree that CAL WATER will  reimburse  the CITY for its
      costs to finish  grade and pave the 4,655 foot  section of Paladino  Drive
      subject to the following conditions. The CITY will submit the proposed bid
      from the  Contractor  selected  by the CITY to do the finish  grading  and
      paving  work to CAL WATER for review of the bid price.  The CITY agrees to
      credit the $60,000  owed to CITY by CAL WATER for water valve  adjustments
      from past street resurfacing projects against the costs for the 4,655 foot
      section of Paladino  Drive.  The CITY agrees to credit the grading  costs,
      with prior review by CITY of such costs,  incurred by CAL WATER for Valley
      Lane from Paladino Drive to the NE Bakersfield plant site boundary against
      the paving costs for the 4655 foot section of Paladino  Drive.  Thus,  the
      final  amount  that CAL  WATER  will owe the CITY upon  completion  of the
      finish grading and paving of the 4,655 foot section of Paladino Drive will
      be the bid price minus $80,000 minus CAL WATER's  design and  construction
      costs for the grading of Valley Lane subject to the review and approval by
      the CITY. The net amount owed to CITY by CAL WATER will be paid within two
      (2) years of the filing of the Notice of Completion of the paving project.

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                        4.4.3.2  The City  agrees  to assist  in  acquiring  all
      necessary  easements  and grade for a  twenty-four  foot (24) wide two (2)
      lane paved road along Valley Lane, running from Paladino Drive to the east
      side of the CAL WATER  treatment  plant site property  line, a distance of
      approximately three thousand feet (3,000).

                        4.4.3.3  CAL  WATER  agrees  to  trench  and  install  a
      twenty-seven  inch (27') or larger finished water line from the plant site
      along the primary access road, Valley Lane, -to Paladino Drive.

                        4.4.3.4  CAL  WATER  agrees  to  trench  and  install  a
      twenty-seven   inch  (27")  or  larger   finished   water  line  from  the
      intersection  of the primary  access road and Paladino  Drive,  west along
      Paladino Drive to a tie in point with its system past Morning  Drive.  CAL
      WATER  agrees to lay a short stub out on Paladino  Drive  heading east for
      future development

                        4.4.3.5  CAL  WATER  agrees  to lay a base  and pave the
      section of Paladino  Drive from Morning  Drive to Casino Street a distance
      of  approximately  four  thousand six hundred  fifty feet (4650') and pave
      Valley Lane from Paladino Drive to the water treatment site.

                  4.4.4 Raw water Storage Ponds and Pumping  Facilities  for the
                        Storage Ponds and CALM.

                        4.4.4.1  CITY  agrees to design  and build the raw water
      storage ponds as set forth under Section 4.1 herein.  Design  drawings and
      construction plans for the storage ponds shall be ready for bid by October
      2001. Construction of the ponds is to be completed no later than March 31,
      2002,

                        4.4.4.2 Design and construction of the connection to the
      existing CITY river intake structure, pump stations and transmission lines
      shall be completed by CAL WATER for use by CAL WATER. CITY and CALM. It is
      intended  that the pumping  facilities  for  providing raw water to the NE
      Bakersfield  water treatment plant be operational on or before February l,
      2003.  CAL WATER will use its best  efforts to  complete  construction  of
      pumping  facilities for providing water to the raw water storage ponds and
      CALM so they are operational by May 1, 2002.

                        4.4.4.3 CITY agrees to construct  aggregate  base access
      roads,  as needed,  from Alfred  Harrell  Highway to the western raw water
      storage  pond where a turn out for a gravity  flow line to the Kern Soccer
      Complex and Hart Park are to be provided by CITY.

                        4.4.4.4   The  CITY  agrees  to  grade  and  provide  an
      aggregate base road on the top of the berm for the entire perimeter of the
      raw water storage  ponds for a single lane access and use for  maintenance
      vehicles.

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                        4.4.4.5  The CITY agrees to  construct a aggregate  base
      access road along the transmission pipeline on the south side of the ponds
      from the  pumping  station to the tie in point with the  pipeline  running
      under Morning Drive to allow  equipment  access for repair or  replacement
      operations.

                  4.4.5 Plans and  Specifications.  Plans and specifications for
      the  connection  to the intake  structure,  pump station and  transmission
      lines  shall be  presented  to the CITY for  review by CAL WATER  prior to
      construction.  The CITY and CAL WATER  agree to use their best  efforts to
      incorporate  mutually  agreeable  review  comments made by CITY into final
      plans and specifications.

      4. Section 31, TERM, is hereby amended to read as follows:

            31. TERM.  This Agreement  shall commence upon date of execution and
      terminate  on  December  31,  2038  unless  sooner  terminated  as  herein
      provided.  This Agreement will automatically  renew for an additional term
      of  five  (5)  years  unless  either  party  provides  written  notice  of
      termination  to the other  within one hundred  eighty  (180) days prior to
      termination  date.  During the additional  five (5) year term period,  the
      parties  shall  negotiate in good faith for further term  extensions.  The
      parties  shall  without  limitation  take  in to  account  current  market
      conditions and other relevant factors concerning water and water supplies.

      5. Two new  Sections 34 and 35 shall be added to  Agreement  No. 99-73 and
shall be entitled, "OPERATIONS AND MAINTENANCE and "COMPENSATION FOR OPERATIONS"
as set forth below:

            34.  OPERATIONS AND MAINTENANCE.  CITY hereby  authorizes and allows
      CAL WATER full and unlimited access to and use of the facilities described
      herein for the purpose of  supplying  raw water to CAL  WATER's  Northeast
      Bakersfield  water  treatment  plant and for all  operations  and  routine
      maintenance activities associated with the facilities.  CITY grants to CAL
      WATER full and  unlimited  ingress  and  egress to CITY  owned  facilities
      within the described water facilities area and CAL WATER agrees to provide
      operations  and  routine  maintenance  of the  CITY  owned  facilities  as
      described in this  Agreement.  Operations  and routine  maintenance  shall
      include but are not limited to: daily system  inspection,  meter readings,
      water quality testing as required by law, pumping flow adjustments,  trash
      and debris  removal from  diversion  inlet and pumping  station,  turn-out
      adjustments  for  irrigation,  security fence  inspections and minor fence
      repairs,  reservoir inspections,  minor reservoir levee repairs,  periodic
      road grading and, in general, to do all such acts and perform such routine
      services  as  required to operate and  maintain  the water  facilities  in
      accordance  with  accepted  industry   practices.   Should   non-scheduled
      operations,  maintenance or emergency  repairs be required,  CAL WATER and
      CITY shall confer and determine  expedient and cost  effective  methods of
      correction under appropriate statutes and

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      regulations as may apply to each party.  The CITY shall be responsible for
      one  hundred   percent   (100%)   payment  of   extraordinary   costs  for
      non-scheduled operations,  maintenance or emergency repairs for facilities
      that are 100% owned by the CITY. The CITY shall be  responsible  for fifty
      percent (50%) payment of extraordinary costs for non-scheduled operations,
      maintenance or emergency repairs for pump station facilities for which the
      CITY shares a 50% ownership. The CITY shall be responsible for twenty five
      percent (25%) payment of extraordinary costs for non-scheduled operations,
      maintenance  or emergency  repairs for pump station  facilities  for which
      CITY  shares  a 25%  ownership.  Allocation  of  costs  for  non-scheduled
      operations,  maintenance or emergency  repairs shall be in accordance with
      the  Reimbursement  Agreement No. 01 - 205 executed on Sep 5, 2001 between
      CITY and CAL WATER and attached hereto as Exhibit "5".

            35.  COMPENSATION  FOR  OPERATIONS.  To  compensate  CAL  WATER  for
      operation and maintenance of the water facilities  described herein,  CITY
      shall pay CAL WATER One Dollar  ($1.00) per acre-foot for all water pumped
      from the Kern River at the  pumping  station.  For  example,  if CAL WATER
      pumps a daily  average  of 20 MGD to the  NEWSP  treatment  plant and CITY
      pumps 11 MGD for its uses,  the  CITY's  ordinary  operating  and  routine
      maintenance  payment  to CAL WATER  would be  approximately  $34,700.  For
      ordinary  operation  and  maintenance  and repairs,  if the cost of parts,
      materials,  installation  and/or repair  services is equal to or less than
      $2,500  per  month  CAL  WATER  will  absorb  that  cost  as  part  of Its
      compensation for that month. if the repairs, the cost of parts, materials,
      installation  and/or repair  services  exceeds $2,500 per month,  the CITY
      will be  responsible  for  paying the amount in excess of $2,500 per month
      for CITY facilities. The CITY will be responsible for paying for all power
      costs  except for those for pumping  water from the wet well  structure to
      the NEWSP treatment  plant.  CAL WATER shall be responsible for paying for
      power  costs to pump water from its high lift  pumping  facilities  to the
      NEWSP  treatment  plant CAL  WATER's  compensation  Is  subject  to annual
      adjustment on the basis of the January 1999 Producer  Price Index for "All
      Commodities"  as published by the Bureau of Labor  Statistics  of the U.S.
      Department  of Labor and first  adjustment  shall  occur in January of the
      year  following  execution of this  Agreement.  CAL WATER shall  determine
      metered water  deliveries to the NEWSP treatment plant and invoice CITY on
      a monthly  basis.  CITY  shall pay within  thirty  (30) days of receipt of
      invoice for water delivered and any other incurred costs that both parties
      agree for which CAL WATER should be  compensated.  Compensation  as stated
      shall include all costs CAL WATER incurs in ordinary operating and routine
      maintenance  of CITY  owned  NEWSP  facilities.  CAL  WATER  shall  not be
      entitled  to any  additional  compensation  from  CITY  for its acts as an
      operator and agent of CITY,  other than as specified in Sections 34 and 35
      of this amendment.

      6. Except as amended  above,  all terms and  conditions  of Agreement  No.
99-73 shall continue in full force and effect.

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      IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
Agreement No. 99-73 to be executed, the day and year first-above written.

      "CITY"                                 "CAL WATER"

CITY OF BAKERSFIELD                          CALIFORNIA WATER SERVICE
                                             COMPANY

By: /s/ Harvey L. Hall                       By: /s/ Robert Guzzetta
    -------------------------                    -------------------------
    HARVEY L. HALL                               ROBERT GUZZETTA
    Mayor
                                             Title: Vice President
                                                    ----------------------

APPROVED AS TO FORM:                         By: /s/ [ILLEGIBLE]
BART J. THILTGEN                                 -------------------------
City Attorney                                Title: Corporate Secretary
                                                    ----------------------
By: /s/ Alan D. Daniel
    -------------------------
    ALAN D. DANIEL
    Deputy City Attorney

APPROVED AS TO CONTENT:
WATER RESOURCES DEPARTMENT

By: /s/ Gene Bogart
    -------------------------
    GENE BOGART
    Water Resources Manager

                        MORE SIGNATURES ON FOLLOWING PAGE

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COUNTERSIGNED:

By: /s/ Gregory J. Klimko
    -------------------------
    GREGORY J. KLIMKO
    Finance Director

ADD:dlr

Attachments: EXHIBIT "A"
             EXHIBIT "B"

S:\2001CONTRACTS\CWSCOBAmend1to99-73
August 24, 2001

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                                                                     EXHIBIT "A"

                          Proposed Plan of Delivery of
                    CITY of Bakersfield's Kern River Water to
                      California Water Service Company for
                   Northeast Bakersfield Water Treatment Plant

Introduction

CITY Kern River water  supplies vary in quantity  from year to year.  The CITY's
first and highest  priority  use of its water  supplies  is to provide  drinking
water to its customers  whether served  directly by CITY or CAL WATER Thus, CITY
and CAL WATER  plan to  develop a  specific  plan and  further  arrangements  to
address supply  deficiencies  during critically dry years.  While water supplies
available to CITY for diversion to the CAL WATER NE Bakersfield  water treatment
plant may fluctuate on an annual basis,  during  normal  hydrologic  conditions,
CITY will make every effort to meet daily treatment  plant flow  requirements as
indicated  in  the  herein  table  entitled  "DELIVERY  SCHEDULE".  The  parties
recognize  the term  "critically"  dry year is based on a number of factors  and
conditions  and  therefore  agree  to  confer  and  mutually  agree as to when a
"critically"  dry year is  occurring  or is about  to occur  and to what  extent
reductions and  restrictions in the quantity of water delivered to the treatment
plant will be made. This will include  developing a monthly and daily supply and
delivery schedule for such "critically" dry periods.

An analysis,  by CITY, of the annual water  supplies that will be made available
to CAL WATER was performed  utilizing  historical  data and review of CITY water
right yields.

Assumptions

                                      CITY:

1.)   Honor all presently existing agreements,  contracts or documents referring
      to provisions to supply Kern River water;

2.)   Best  use  its  acquired  surface  storage  reservoir  space  to  maximize
      conservation of miscellaneous water for treatment plant deliveries;

3.)   Operate its "2800 Acres"  banking and  extraction  facility to  supplement
      Kern River flows during  critically  "dry"  conditions to provide  minimum
      base flows to treatment plant;

4.)   Formulate  exchanges or trades of water  supplies in  anticipation  of any
      annual shortages of CITY miscellaneous water;

5.)   Exercise  the  provisions  of certain  contracts  for priority use of Kern
      River water within CITY boundaries and on CITY properties.

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                                   CAL WATER:

1.)   Determine a ramp up  timetable  for the  treatment  plant  initial  annual
      delivery requirement and expansion to full build-out;

2.)   Project  annual  delivery   schedule  required  to  meet  treatment  plant
      requirements including demands for maximum and minimum month & maximum and
      minimum day;

3.)   Optimize use of alternative water supply sources, both treated surface and
      groundwater resources, in years of critically dry or low flows on the Kern
      River;

4.)   Use best efforts to regulate  receiving  Kern River waters into its system
      to minimize peaks and dips in flows.

Projected Annual Delivery Schedule

The delivery  schedule is developed to quantify  projected water  deliveries for
the NEWSP under  various  hydrologic  conditions  on the Kern  River.  CITY will
attempt to delivery the water in conformance  with this Delivery  Schedule where
practical and at the ability and convenience of CITY. However,  CITY may deliver
pursuant to  "critically"  dry  provisions  as herein  described  as  conditions
warrant.

                                DELIVERY SCHEDULE

<TABLE>
<CAPTION>
=============================================================================================
            PLANT           MAXIMUM      PEAK        MINIMUM       M[NIMUM         ANNUAL
YEAR       CAPACITY          MONTH       FLOW         MONTH         FLOW           TOTAL
            (MGD)            (AF)       (CES)                       (CFS)           (AF)
=============================================================================================
<S>          <C>            <C>          <C>         <C>            <C>            <C>
2003         20             2,330         39         1,400          24             22,400

2012         40             4,670         79         2,800          47             44,800

2017         60             7,000        118         4,200          71             67,200
=============================================================================================
</TABLE>

Note: (MGD) is million gallons per day
      (AF)  is acre-feet
      (CFS) is cubic feet per second

Revised Deliveries

If CAL WATER desires to vary its delivery schedule, it may do so by submitting a
revised  schedule  to CITY no later  than  February  1 of the year for which CAL
WATER  desires  to vary  schedule.  CITY  shall  review  and advise CAL WATER of
approval of revised  schedule for that  remaining  year by March 1 of that year.
CITY will make  reasonable  efforts  to  delivery  the  water  according  to the
approved  revised  schedules.  The  inability  of CAL WATER to accept water when
tendered by CITY under  schedules  herein shall be deemed to be water  delivered
under terms of this Agreement.

S:\200CONTRACTS\NBWFPAmend1ExhA

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                                                                     EXHIBIT "B"

                              AGREEMENT NO. 01-205

                             REIMBURSEMENT AGREEMENT

      THIS REIMBURSEMENT  AGREEMENT (the Agreement") is made and entered into on
SEP 5 200l,  2001 by and between  the CITY OF  BAKERSFIELD,  a charter  CITY and
municipal  corporation,  ("CITY" herein) and CALIFORNIA WATER SERVICE COMPANY, a
California public utility water corporation ("CAL WATER" herein).

                                    RECITALS

      WHEREAS,  CAL WATER is currently in the final  phases of  engineering  and
design of CAL WATER'S Kern River Intake Pumping Station ("Pumping  Facilities"),
as described  in Section 1.3 below for the  Northeast  Bakersfield  Water Supply
Project and is prepared to begin  construction  of the Pumping  Facilities  (the
"Project").  The Project is located on the Kern River near the California Living
Museum (CALM); and

      WHEREAS,  the  consolidation  of the  Pumping  Facilities  to combine  the
capacity  requirements  of CITY and CAL WATER will have  economies  of scale and
achieve savings in construction; and

      WHEREAS,  CITY desires to have water pumping capacity built in the Pumping
Facilities for CITY use and a portion of the Pumping Facilities will be conveyed
to C1TY after  completion and a portion of such facility owned by CAL WATER will
be used in part by CITY; and

      WHEREAS,  CITY and CAL WATER have  finalized the  engineering,  design and
construction  plans to meet CITY's  requirements for the Pumping  Facilities and
are prepared to begin installation of the pumping plant; and

      WHEREAS, CITY desires CAL WATER to provide the construction  installation,
construction management and Inspection of the Pumping Facilities,  including the
portions that are to be CITY's  facilities  or are to be CAL WATER'S  facilities
which are used in part by CITY and CAL WATER has  agreed to be  responsible  for
construction of the Pumping Facilities; and

      WHEREAS,  the  construction  cost  for the  Pumping  Facilities  has  been
estimated  to  be  Four  Million  Six  Hundred  Eighty  Nine  Thousand   Dollars
($4,689,000)  and the  respective  share of  construction  costs is estimated at
Three Million Eight Hundred Nine Thousand Dollars ($3,809,000) for CAL WATER and
Eight Hundred Eighty Thousand Dollars ($880,000) for CITY; and

      WHEREAS,  the final cost for the  Pumping  Facilities  will be  determined
based on the completed Project cost; and

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      WHEREAS, CAL WATER will advertise and receive bids for construction of the
Pumping  Facilities In accordance with  provisions and procedures  acceptable to
CITY.

      NOW, THEREFORE,  incorporating the foregoing recitals herein, CITY and CAL
WATER mutually agree as follows:

      1. SCOPE OF WORK

            1.1 CAL WATER shall construct the Pumping Facilities, with the scope
of work to include all items and procedures  necessary to properly  complete the
Pumping Facilities, including without limitation the portions thereof which will
be conveyed to or used by CITY. The scope of work includes,  without limitation,
(a) furnishing all plant tools,  equipment,  materials,  supplIes,  manufactured
articles,  transportation and services, including fuel, power, potable water and
essential  communications,  and (b) the performance of all labor, work, or other
operations  required for complete  construction of the Pumping  Facilities.  All
work  shall be  performed  in  accordance  with  the  plans  and  specifications
heretofore  approved by the CITY and in  compliance  with all  applicable  laws,
codes and  regulations.  The general  location  of the Project  site is shown on
attached Exhibit "As.

            1.2 The Pumping  Facilities shall be constructed on the basis of the
price of items as listed in the Bid Schedule.

            1.3 The Project will consist of:

                  1.3.1 Mobilization Demobilization.

                  1.3.2 Clearing, grubbing and she preparation.

                  1.3.3  Excavation and grading  including the  construction  of
approximately four hundred twenty (420) linear feet of earthen embankment.

                  1.3.4 Construction of an extension of the Kern River diversion
twin intake  pipelines  consisting  of two (2)  fifty-four  inch (54")  diameter
reinforced  concrete  pipelines with  approximately two hundred ten (210) linear
feet of total pipe length.

                  1.3.5  Construction  ot a  raw  water  reservoir  inlet/outlet
pipeline  consisting of approximately three hundred seventy (370) linear feet of
forty-eight  inch (48")  diameter  cement  mortar lined and cement mortar coated
steel cylinder pipe.

                  1.3.6  Construction  of concrete river  diversion flow control
structure with a traveling  water screen and including sand  collection and pump
system,  slide gates,  with  electric  actuators,  miscellaneous  metal work and
related appurtenances.

                  1.3.7  Construction  of a low head raw  water  pumping  system
including: concrete pump sump structure;  installation of two (2) ten cubic foot
per  second  (cfs)  submersible  pump  and  motor  assemblies;  construction  of
respective discharge piping

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fittings  valves;  and  miscellaneous  metal work; and  installation  of related
mechanical, electrical, control equipment and appurtenances.

                  1.3.8 Construction of a pumping system to serve the California
Living Museum including:  concrete pump sump structure;  Installation of one (1)
100 gpm and one (1) 1750 gpm submersible pump and motor assemblies; construction
of respective discharge piping,  fittings,  valves; and miscellaneous metalwork;
and  Installation  of related  mechanical,  electrical,  control  equipment  and
appurtenances.

                  1.3.9  Construction  of a high head raw water  pumping  system
including:  construction  of eight (B)  forty-eight  inch  (48")  diameter  pump
suction  cans,  approximately  one  hundred  thirty-two  (132)  linear  feet  of
seventy-two  inch (72") diameter  suction  manifold,  approximately  two hundred
sixteen  (218)  linear  feet of  thirty  inch  (30")  diameter  suction  piping,
approximately  two hundred  forty-one (241) linear feet of fifty-four inch (54")
diameter discharge manifold,  approximately two hundred twelve (212) linear feet
of twenty inch (20"),  eighteen  inch (18"),  and fourteen  inch (14")  diameter
discharge  piping,  furnishing and installation of one (1) eight(8) cfs, two (2)
fifteen  (15) cfs and one (1) twenty (20) cfs  vertical  turbine  pump and motor
assemblies,  construction  of a three thousand eight hundred forty (3840) square
foot pump and equipment  enclosure,  and construction of all related mechanical,
electrical and control equipment

                  1.3.10  Construction  of three  (3) flow  metering  facilities
including related concrete structures, mechanical, electrical, control equipment
and appurtenances.

                  1.3.11 Construction of a twelve foot (12') by thirty-five foot
(35')  long  horizontal  steel  welded  surge  tank (air  chamber)  and  related
mechanical,  electrical  and control  equipment  including  the  furnishing  and
installation of a base mounted compressor and respective enclosure.

                  1.3.12 Site and pumping  plant  electrical  service. Note that
each of the three (3) pumping systems will have separate electrical services and
power consumption meters and will operate independent of the other pump systems.

                  1.3.13 Finished grading.

                  1.3.14 Miscellaneous she piping including fittings, valves and
respective appurtenances.

                  1.3.15 Miscellaneous site improvements including catch basins,
drain pipes, swales,  culverts,  fencing,  site gravel surface and miscellaneous
site improvements.

                  1.3.16  Finish  grading  and gravel  surfacing  of site access
road.  The gravel  surface  will be fourteen  feet (14') wide by six inches (8")
thick.

            1.4 During the construction  period, CITY may utilize all or part of
the area and facilities designated for use by CITY for the conduct of the CITY's
normal  operations and  maintenance.  CAL WATER shall cooperate with the CITY to
minimize  interference

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with the CAL WATER's  operations  and to facilitate  the CITY's  operations  and
maintenance activities.

            1.5 CAL WATER agrees to complete  the Project by a  completion  date
hereafter  approved by CITY,  which approval will not be unreasonably  withheld.
CITY  acknowledges  that the  completion  date may be extended by CAL WATER as a
result of changes in the Project normal  construction  delays encountered by CAL
WATER as owner of the  portions of the Project  that are not being  provided for
CITY, and/or delays permitted under the various  subcontracts  between CAL WATER
and its subcontractors.

      2. AWARD OF BID TO QUALIFIED  CONSTRUCTION  FIRM.  CAL WATER shall provide
CITY a copy of the bid summary for the  Project  and will  consult  with CITY in
determining   selection  of  the  firm  to  provide  construction  services  for
installation of the Pumping  Facilities,  provided that CAL WATER shall make the
final selection of the contractor.  CAL WATER shall not authorize any changes to
the construction  work on the portion of the Project which will be owned by CITY
or the estimated  construction  cost to the CITY without prior  approval of such
changes to the work and the estimated price by CITY. CITY shall not be obligated
to pay any costs for any changes to the  construction or products to be owned by
CITY without prior approval of the changes by CITY.

      3.  CONSTRUCTION  COST ESTIMATES.  CAL WATER and CAL WATER's engineer have
prepared  construction  cost estimates for the Project and, in conjunction  with
CITY, has  determined the estimated  share of the Project costs for CITY and CAL
WATER. The estimated total  construction cost is Four Million Six Hundred Eighty
Nine Thousand Dollars  ($4,689,000),  inclusive of contingencies  and inspection
services by qualified inspectors. CITY's share of this estimated Project cost is
approximately Eight Hundred Eighty Thousand Dollars ($880,000).  CAL WATER shall
not exceed CITY's  estimated cost on elements of the Project to be owned 100% by
CITY without  approval of CITY. CAL WATER shall not exceed CITY's estimated cost
on  elements  of the Project to be  available  for  partial use by CITY  without
advising  CITY of the  potential  changes  in such  elements  of the cost of the
Project and  obtaining  CITY Input on any changes which will increase CITY cost.
Notwithstanding the foregoing, CITY acknowledges that the final dollar amount of
CITY's share will be based on the actual final  construction cost of the various
elements of the Project.  Although the final usage of the pumping facilities may
be in percentages  different from the  percentages  set forth In this Agreement,
the  percentages  of usage set forth in Section 4, below,  shall govern the cost
allocation.

      4. COMPENSATION.  The compensation set forth in this section for CAL WATER
from CITY shall be the total  compensation under this Agreement  Including,  but
not limited to, all  out-of-pocket  costs and applicable  taxes.  CITY shall pay
only the  compensation  listed  unless  otherwise  agreed to in  writing  by the
parties.  CITY shall be responsible  for only its share of costs incurred by CAL
WATER for providing construction as set forth in 1. Scope of Work herein.

            4.1 Costs to be  recovered  by the CAL  WATER  from the CITY will be
based  on  one  hundred  percent  (100%)  of  the  costs  for  construction  and
installation of facilities provided solely for the CITY.  Facilities included in
this category are the extension

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of the fifty-four  inch (54") diameter pipes,  raw water reservoir  inlet/outlet
pipe, low lift pumps and related equipment, pumps and stub-outs to CALM and flow
metering system for CITY pumps.

            4.2 Costs for construction, equipment and installation of facilities
that will be jointly  shared by CITY and CAL WATER and be split on a fifty-fifty
(50/50) basis include  costs for the  inlet/outlet  box to reservoir and a sonic
meter for the fifty-four inch (54") diameter pipes.

            4.3 Costs for construction, equipment and installation of facilities
that  will  be  jointly  shared  by  CITY'  and  CAL  WATER  and be  split  on a
seventy-five/twenty-five  (75/25) basis,  with CAL WATER paying 75%, include the
open sump,  inlet/outlet  box, site earthwork and  dewatering.  traveling  water
screen,  fencing  and gates,  drainage  culverts,  metal  grating  walkways  and
handrails.

            4.4 Costs for facilities  provided solely for CAL WATER will be paid
for one hundred percent (100%) by CAL WATER Facilities included in this category
are the steel manifold  piping and pumping Inlet and discharge  piping,  valves,
air chambers,  pump building,  certain meters, high lift pumps,  pipeline to the
tie-In with the fifty-four inch (54")  transmission line and the emergency power
generation site.

            4.5 Costs incurred for inspection services by bonafide  professional
inspectors  shall be  reimbursed to CAL WATER based on the actual cost split for
the entire  Project  costs as adjusted by the split  factors as described in 4.1
through  4.4  above.  The,  estimated  CITY  share  of  these  service  costs is
approximately nineteen percent (19%) of the costs.

            4.6 Subject to adjustment  pursuant to this Agreement,  the total of
payments from CITY to CAL WATER shall not exceed Eight Hundred  Eighty  Thousand
Dollars ($880,000).

      5. PAYMENT PROCUDURE.

            5.1 CITY shall owe CAL WATER Four  Hundred  Forty  Thousand  Dollars
($440,000)  at fifty percent (50%)  completion  of the Project  construction  as
certified in writing by CAL WATER's designated Project engineer. CAL WATER shall
submit its invoice for such  amount and CITY shall pay CAL WATER  within  thirty
(30) days after receipt of the invoice.

            5.2 CITY shall pay CAL WATER the  remainder  of CITY's  share of the
Project costs pursuant to an itemized  Invoice  submitted after filing of Notice
of Completion  that clearly  establishes  and  documents  the work  performed Is
complete by or on behalf of CAL WATER, as such invoice shall be approved by CITY
in  accordance  with the terms of this  Agreement.  CITY shall pay CAL WATER the
remaining amount due from CITY within forty-five (45) days after receipt by CITY
of CAL  WATER's  itemized  invoice,  unless  CITY gives CAL WATER  notice of any
disapproved  items In the invoice  within  thirty (30) days after receipt of CAL
WATER's invoice, in which event CITY shall pay all amounts not

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disapproved.  Upon resolution of any disputed amounts,  CITY shall pay CAL WATER
the amount owing within thirty (30) days after resolution of such dispute.

      6. OWNERSHIP/TITLE OF FACILITIES

            6.1 CAL WATER shall convey to CITY title to the facilities which are
to be used  exclusively by CITY,  which facilities are listed on Exhibit "B" and
CITY shall accept title to such  facilities,  such  conveyance to be made within
five  (5)  business  days  after  acceptance  by CITY  of  those  facilities  as
installed.

            6.2  Acceptance  by CITY of the  facilities  to be  conveyed to CITY
shall be upon written notice by CITY to CAL WATER after CITY has received Notice
of  Substantial  Completion  and CITY has had a  reasonable  time to inspect and
accept the  facilities.  In no event shall CITY delay  inspection  beyond thirty
(30) days after  Notice of  Substantial  Completion.  CITY's  failure to inspect
within  thirty (30) days shall be deemed  acceptance.  Should  CITY  inspect and
reject acceptance of the facilities, CITY shall inform CAL WATER, in writing, as
to the reasons for the rejection  and CAL WATER shall have a reasonable  time to
correct the cause for the rejection.

            6.3 CAL WATER shall  warrant that upon  passage of title,  the title
shall be free and clear of any and all liens, charges and encumbrances.

            6.4 Concurrently with transfer of title of the CITY's portion of the
facilities  to CITY,  CAL WATER  shell  assign to CITY all  guarantees  from the
manufacturer  for  materials  installed  and all legal  remedies  concerning  or
related to such  portion of the  facilities.  CAL WATER shall  guarantee  CITY's
portion  of the  Project  for one (1) year from the date of  CITY's  acceptance;
provided CITY shall pursue.  through CAL WATER,  all remedies  under  guarantees
issued by the  manufacturers  of  equipment  included  in CITY's  portion of the
facilities.

            6.5 CAL WATER will retain  ownership  of all portions of the Pumping
Facility  which it does not convey to CITY.  CITY will retain  ownership  of its
share of the Pumping  Facility  which is not owned by CAL WATER.  The  foregoing
shall not  limit  CAL  WATER in  transferring  all or  portions  of the  Pumping
Facility to any entity owned or controlled  by CAL WATER or its parent  company.
CITY shall not be limited in  transferring  ownership  of any or all portions of
the Pumping Facility it owns. Neither party shall consummate any transfer of any
kind without the written consent of the other party.

      7.  MONTHLY  PROJECT  MEETINGS.  CITY may  attend and  participate  in the
monthly Project meetings for the Project. For such purpose,  CITY may review and
comment  on  the  construction  cost  estimates  and  bid  documents,  including
contracts with construction firms, engineering firms and other subcontractors to
this Project.

      8. NO WAIVER OF  DEFAULT.  The  failure  of any party to  enforce  against
another party any provision of this  Agreement  shall not constitute a waiver of
that  party's  right to enforce  such a provision  at a later time and shall not
serve to vary the terms of this Agreement.

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      9. TERMINATION FOR CAUSE.

            9.1 If at any time CAL WATER  persistently fails to address concerns
of CITY with respect to the Project that have been raised by CITY at the monthly
Project meetings,  CITY shall give CAL WATER written notice of such concerns and
the  resolution  sought by CITY.  If CAL WATER fails to resolve such concerns to
the  reasonable  satisfaction  of CITY within  thirty (30) days after receipt of
such notice (or such longer period as may be necessary to  successfully  resolve
such  concerns),  CITY may thereafter  terminate this Agreement on ten (10) days
written notice.  Written notice shall be given pursuant to the notices paragraph
of this  Agreement.  In the  event  of early  termination,  CAL  WATER  shall be
compensated only for work satisfactorily completed up to the date of termination
and delivered to and accepted by CITY.

            9.2 If CITY  fails to pay the  amounts  due to CAL  WATER  hereunder
within  fifteen (15) days after the due date  hereof,  CAL WATER may, on fifteen
(15) days written  notice  given after  expiration  of the initial  fifteen (15)
days,  and upon  failure of CITY to pay the amounts due and payable  within said
fifteen (15) days, terminate this Agreement by notice to CITY or suspend work on
the CITY facilities until payment has been made.

      10.  COMPLIANCE  WITH ALL LAWS. CAL WATER shall, at CAL WATER's sole cost,
comply with all of the requirements of Municipal, State, and Federal authorities
now in force, or which may hereafter be in force,  pertaining to this Agreement,
including,  without  limitation,  obtaining a CITY of  Bakersfield  business tax
certificate (Bakersfield Municipal Code Chapter 5.02) where required.

      11.  INDEPENDENT  CONTRACTOR;  NEGATION  OF  PARTNERSHIUP.  CITY shall not
become or be deemed a partner or joint  venturer  with CAL WATER or associate in
any  such  relationship  with CAL  WATER by  reason  of the  provisions  of this
Agreement CAL WATER shall not for any purpose be considered an agent, officer or
employee of CITY.  CAL WATER is not an agent or employee of CITY for any purpose
and Is not  entitled to any of the benefits  provided by CITY to its  employees.
CAL WATER shall at all times be deemed an independent contractor and retains the
right  to  control  or  direct  the  manner  in which  the  work on the  Pumping
Facilities is performed.

      12. EQUIPMENT.  CAL WATER will supply all equipment.  tools, materials and
supplies necessary to perform the services under this Agreement.

      13.  INSURANCE.  In addition to any other insurance or bond required under
this  Agreement,  CAL WATER shall  procure and maintain for the duration of this
Agreement  the  following  types  and  limits  of  insurance  ("basic  insurance
requirements" herein):

            13.1  Automobile  liability  insurance,  providing  coverage  on  an
occurrence  basis for bodily injury,  including  death,  of one or more persons,
property  damage and personal  Injury,  with limits of not less than One Million
Dollars ($1,000,000) per occurrence; and the policy shall:

                  13.1.1 Provide coverage for owned, non-owned and hired autos.

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                  13.1.2 Contain an additional  insured  endorsement in favor of
                         CITY and its employees.

            13.2 Broad form commercial  general  liability  Insurance.  ISO form
CG00  01 11 85 or 88,  or such  other  form  as may be  approved  by CITY In its
reasonable  discretion,  providing  coverage on an  occurrence  basis for bodily
Injury,  Including  death, of one or more persons,  property damage and personal
Injury,  with  limits  of not less than One  Million  Dollars  ($1,000,000)  per
occurrence; and the policy shall:

                  13.2.1 Provide contractual liability coverage.

                  13.2.2 Contain an additional  insured  endorsement in favor of
                         CITY and its employees.

            13.3 Worker's  compensation  insurance.  CITY acknowledges CAL WATER
has  advised  CITY that CAL WATER Is self  Insured  for the  first  $300,000  of
workers compensation  coverage and carries excess coverage over that amount CITY
hereby accepts such insurance arrangement for this Project.

            13.4 Except for  workers'  compensation,  insurance  is to be placed
with  insurers  with a Best's  rating of no less than  A:VII.  Any  deductibles,
self-insured  retentions or Insurance in lesser amounts or lack of certain types
of insurance  otherwise  required by this  Agreement,  or insurance  rated below
Best's A:VII, must be declared prior to execution of This Agreement and approved
by CITY in writing.

            13.5 All policies shall contain an  endorsement  providing CITY with
thirty (30) days written  notice of  cancellation  or material  change In policy
language or terms.

            13.6 The insurance  required hereunder shall be maintained until all
work to be conveyed to CITY is completed,  as evidenced by written acceptance by
the CITY,  and all work to be used In part by CITY pursuant to this Agreement is
satisfactorily completed.

            13.7 CAL WATER shall furnish CITY Risk Manager with a certificate of
insurance and required endorsements  evidencing the insurance required. CITY may
withdrew  its offer of contract  or cancel this  Agreement  If  certificates  of
Insurance  and  endorsements  required  have  not  been  provided  prior  to the
execution of this Agreement

            13.8 Full  compensation for all premiums which CAL WATER is required
to pay on all the  insurance  described  herein  shall be included in the prices
paid for the various  items of work to be performed  under the  Agreement and no
additional  allowance will be made therefor or for additional premiums which may
be required by extensions of the policies of insurance.

            13.9  CAL  WATER's  liability  to  CITY  under  the  indemnification
provisions  of this  Agreement  shall not in anyway be limited to or affected by
the amount of  insurance  obtained and carried by CAL WATER In  connection  with
this Agreement.

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      14. INDEMNITY By CAL WATER. CAL WATER shall  indemnify,  defend,  and hold
harmless CITY, Its officers, agents and employees against any and all liability,
claims,  actions, causes of action or demands whatsoever against them, or any of
them,  before  administrative  or  judicial  tribunals  of any  kind  whatsoever
(collectively,  "Claims"),  to the extent caused by the negligence or misconduct
of CAL WATER, CAL WATER's employees, agents, independent contractors, companies,
or  subcontractors  in the performance of, or In any way arising from, the terms
and  provisions of this  Agreement,  except as limited by California  Civil Code
section 2782. Such  indemnification  shall not apply to any claims to the extent
caused  by the  negligence  or  misconduct  of CITY,  its  officers,  employees,
subcontractors and agents.

      15. INDEMNITY BY CITY. CITY shall indemnify, defend, and hold harmless CAL
WATER, its officers,  agents,  employees and subcontractors  against any and all
Claims to the  extent  caused  by the  negligence  or  misconduct  of CITY,  its
officers,  employees,  subcontractors  and agents, in the performance of , or in
any way arising from, the terms and provisions of this Agreement  whether or not
caused in part by a party indemnified hereunder, except as limited by California
Civil Code section 2782. Such  indemnification  shall not apply to any claims to
the extent caused by the  negligence  or  misconduct  of CAL WATER,  its agents,
employees or subcontractors.

      16.  EXECUTION.  This  Agreement is effective  upon  execution.  It is the
product of negotiation and all parties are equally responsible for authorship of
this Agreement. Section 1854 of the California Civil Code shall not apply to the
Interpretation of this Agreement

      17.  NOTICES.  All notices  relative to this  Agreement  shall be given in
writing and shall be personally  served & sent by certified or  registered  mail
and be effective upon actual personal service or depositing In the United States
mail.  The  parties  shall be  addressed  as  follows,  or at any other  address
designated by notice:

                     CITY: CITY OF BAKERSFIELD
                           CITY HALL
                           1601 Truxtun Avenue
                           Bakersfield, California 93301

                CAL WATER: CALIFORN1A WATER SERVICE COMPANY
                           ATTN: Michael Rosal, Chief Engineer
                           1720 North First Street
                           San Jose, California 95112

      18.  GOVERNING  LAW. The laws of the State of  California  will govern the
validity of this Agreement,  its interpretation and performance.  Any litigation
arising  in any way  from  this  Agreement  shall  be  brought  in Kern  County,
California.

      19.  MERGER  AND  MODIFICATION.  This  Agreement  sets  forth  the  entire
agreement  between  the  parties  and  supersedes  all  other  oral  or  written
representations.

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This Agreement may be modified only in a writing approved by the CITY Counci1
and signed by all the parties.

      20. EXHIBITS. In the event of a conflict between the terms,  conditions or
specifications  set  forth In this  Agreement  and  those in  exhibits  attached
hereto,  the terms,  conditions and  specifications  set forth in this Agreement
shall  prevail.  All exhibits to which  reference Is made in this  Agreement are
deemed incorporated in this Agreement, whether or not actually attached.

      21. FURTHER ASSURANCES.  Each party shall execute and deliver such papers,
documents,  and  instruments,   and  perform  such  acts  as  are  necessary  or
appropriate,  to  implement  the terms of this  Agreement  and the intent of the
parties to this Agreement.

      22.  ASSIGNMENT.  Neither  this  Agreement,  nor any interest in it may be
assigned or  transferred  by any party without the prior written  consent of all
the parties. Any such assignment will be subject to such terms and conditions as
CITY may choose to impose.

      23. BINDING  EFFECT.  The rights and  obligations of this Agreement  shall
inure to the benefit of, and be binding upon,  the parties to this Agreement and
their heirs, administrators, executors, personal representatives, successors and
assigns, and when never then context so requires,  the masculine gender includes
the  feminine  and neuter.  and the singular  number  includes the plural.  This
Agreement may be executed In any number of counterparts,  each of which shall be
considered as an original and be effective as such.

      24.  TITLE  TO  DOCUMENTS.  All  documents,  plans,  and  drawings,  maps,
photographs,  and  other  papers,  or  copies  thereof  prepared  by  CAL  WATER
pertaining  to those  facilities  for which CITY will pay CAL WATER one  hundred
percent (100%) of the costs of engineering  and  construction  related  services
shall upon  completion  of the work become the  property of CITY.  CAL WATER may
retain  copies  of the  record  plans  and  specifications  in  connection  with
operation of the facility.

            24.1 All documents,  plans,  drawings,  maps,  photographs and other
papers or copies thereof  prepared by the CAL WATER  pertaining to the remainder
of the  facilities  for which  the CITY will pay the CAL WATER a portion  of the
costs of engineering and construction related services shall remain the property
of CAL WATER.

            24.2 CITY and CAL WATER shall have access to and shall be allowed to
copy  or  obtain  reproductions  of  all  documents,   plans,  drawings,   maps,
photographs or other papers pertaining to this Project,  whether or not owned or
controlled by CITY or CAL WATER, upon reasonable notice.

      25.  ACCOUNTING  RECORDS.  CAL WATER shall  maintain  accurate  accounting
records and other  written  documentation  pertaining  to all costs  incurred in
performance of this Agreement.  Such records and documentation  shall be kept at
CAL WATER's office during the term of this Agreement,  and for a period of three
(3) years from the date of the

                                                                       [SEAL]
                                                                        CITY
                           -- Page 10 of 12 Pages --                     OF
                                                                     BAKERSFIELD
                                                                      ORIGINAL
--------------------------------------------------------------------------------
<PAGE>

final  payment  hereunder  and  said  records  shall be made  available  to CITY
representatives upon request at any time during regular business hours.

      26. CORPORATE AUTHORITY.  Each individual signing this Agreement on behalf
of entities represent and warrant that they are,  respectively,  duly authorized
to sign on behalf of the entities and to bind the entities fully to each and all
of the obligations set forth In this Agreement.

      27. TAX NUMBERS.

      CAL WATER's Federal Tax ID Number  94-0362795
      CAL WATER is a corporation?  Yes X No____
                                   (Please check one)

      28.  NON-INTEREST.  No  officer  or  employee  of the CITY  shall hold any
interest in this Agreement (California Government Code section 1090).

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement to be
executed, the day and year first-above written.

      "CITY"                                         "CAL WATER"

CITY OF BAKERSFIELD                          CALIFORNIA WATER SERVICE COMPANY

By: /s/ Harvey L. Hall                       By: /s/ [ILLEGIBLE]
    -------------------------                    -------------------------
    HARVEY L. HALL, Mayor                    Title: Vice President Engineering +
                                                    Water Quality
                                                    ----------------------
                                             By: /s/ [ILLEGIBLE]
                                                 -------------------------
                                             Title: Corporate Secretary
                                                    ----------------------

                        MORE SIGNATURES ON FOLLOWING PAGE

APPROVED AS TO FORM:
BART J. THILTGEN
City Attorney

By: /s/ Alan D. Daniel
    -------------------------
    ALAN D. DANIEL
    Deputy City Attorney

        Insurance: [ILLEGIBLE]

                                                                       [SEAL]
                                                                        CITY
                           -- Page 11 of 12 Pages --                     OF
                                                                     BAKERSFIELD
                                                                      ORIGINAL
--------------------------------------------------------------------------------
<PAGE>

APPROVED AS TO CONTENT:
WATER RESOURCES DEPARTMENT

By: /s/ Gene Bogart
    -------------------------
    GENE BOGART
    Water Resources Manager

COUNTERSIGNED:

By: /s/ Gregory J. Klimko
    -------------------------
    GREGORY J. KLIMKO
    Finance Director

Attachments: EXHIBIT "A"
             EXHIBIT "B"

                                                                       [SEAL]
                                                                        CITY
                           -- Page 12 of 12 Pages --                     OF
                                                                     BAKERSFIELD
                                                                      ORIGINAL
--------------------------------------------------------------------------------
<PAGE>

                                    EXHIBIT B

                        Kern River Intake Pumping Station
                        Facilities to be Conveyed to CITY

                              PHASE I CONSTRUCTION

1.    Reservoir Wet Well

2.    CALM Wet Well

3.    36 lin.  feet of 35-inch  diameter  Steel Pipe from Open Sump to Reservoir
      Wet Well

4.    65 lin.  feet of  18-inch  diameter  Steel Pipe from Open Sump to CALM Wet
      Well

5.    18-inch Sonic Meter on 18-Inch diameter line

6.    Two (2) 4,500 gpm, 401w Submersible Pumps

7.    One (1) 1,750 gpm, 40 hp Submersible Pump

8.    One (1) 100 gpm, 5 hp Submersible Pump

9.    290 lin. feet of dual 54-inch diameter Intake Pipes

                                                                       [SEAL]
                                                                        CITY
                                                                         OF
                                                                     BAKERSFIELD
                                                                      ORIGINAL
--------------------------------------------------------------------------------
<PAGE>

                                   PROJECT MAP

                                                                       EXHIBIT A
--------------------------------------------------------------------------------

                                  [MAP OMITTED]

                                                                       [SEAL]
                                                                        CITY
                                                                         OF
                                                                     BAKERSFIELD
                                                                      ORIGINAL
--------------------------------------------------------------------------------EXHIBIT 10.1

                                AMENDMENT SIX TO
                               MARKETING AGREEMENT

THIS SIXTH  AMENDMENT  TO THE  MARKETING  AGREEMENT  is  effective  as indicated
herein,  by  and  between  TRANSAMERICA  LIFE  INSURANCE  AND  ANNUITY  COMPANY,
hereinafter  referred to as  "Transamerica," a North Carolina  corporation,  and
LEGACY  MARKETING  GROUP,   hereinafter  referred  to  as  "LMG,"  a  California
corporation.

WHEREAS,  Transamerica and LMG entered into a Marketing Agreement, dated May 29,
1998,  as  amended,   hereinafter   referred  to  as  the  "Agreement,"  wherein
Transamerica  and LMG agreed to jointly develop  proprietary  annuity  products,
wherein LMG would market such products on behalf of Transamerica,  utilizing its
nationwide  distribution  channels of duly licensed and  appointed  Producers in
consideration of the fees as set forth in APPENDIX B of the Agreement.

NOW,  THEREFORE,  in consideration of the foregoing recitals and mutual promises
hereinafter  contained  and other good and valuable  consideration,  the parties
hereto do agree as follows:

         1.   Appendix A, attached hereto, is restated in its entirety effective
              June 30, 2003.

         2.   Appendix B, attached hereto, is restated in its entirety effective
              June 30, 2003.

         3.   All other  provisions in the Agreement  not  specifically  amended
              above remain in effect and unchanged.

IN WITNESS HEREOF, the parties have hereto executed this Amendment No. 6.

LEGACY MARKETING GROUP

By: /s/ Don Dady
Title: VP of Marketing
Date: August 29, 2003

TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY

By: /s/ Ken Kilbane
Title: VP
Date: September 13, 2003

<PAGE>

                                   APPENDIX A
                               MARKETING AGREEMENT
                                  June 30, 2003

                              GEOGRAPHIC TERRITORY:
  All states (except New York, Hawaii and Alabama) and the District of Columbia

                                                   POLICY FORMS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PRODUCT NAME                        POLICY FORM NUMBERS*                Effective Dates              Discontinuance Dates
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                <C>                         <C>
SelectMark(R) Series
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)5 75/25                T-CTMY0298-5-75/25;                 5/29/98                      3/3/03
                                    T-PTMY0298-5-7525
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)7 75/25                T-CMY0799-7-75/25;                  10/18/99                     3/3/03
                                    T-PMY0799-7-75/25
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)10 75/25               T-CTMY0298-10-75/25;                5/29/98                      3/3/03
                                    T-PTMY0298-10-75/25
------------------------------------------------------------------------------------------------------------------------------------
SelectMark(R)  Secure Series
------------------------------------------------------------------------------------------------------------------------------------
SelectMark(R)5 Secure (formerly     T-CTMY0298-5-50/50;                 7/10/2000                    3/3/03
known as the SelectMark(R)5 50/50)  T-PTMY0298-5-50/50                  (5/29/98 for
                                                                        SelectMark(R) 5 50/50)
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)7 Secure (formerly     T-CMY0799-7-50/50;                  7/10/2000                    3/3/03
known as the SelectMark(R)7 50/50)  T-PMY0799-7-50/50                   (10/18/99 for SelectMark(R)
                                                                        7 50/50)
------------------------------------------------------------------------------------------------------------------------------------
SelectMark(R) Special Edition Series
------------------------------------------------------------------------------------------------------------------------------------
Selectmark(R)5 Special Edition      T-PSMSE-0801-5                      01/02/02                     3/3/03
                                    T-CSMSE-0801-5
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)7 Special Edition      T-CMY0799-7-100;                    10/18/99                     3/3/03
                                    T-PMY0799-7-100
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)7 Special Edition      T-CEIA-0500-7                       7/26/2000                    3/3/03
Equity Index Strategy
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)10 Special Edition     T-CTMY0298-10-50/50;                2/9/99                       3/3/03 for all states  except
(formerly known as the Select       T-PTMY0298-10-50/50                 (5/29/98 for                 Florida.
Mark(R)10 50/50)                                                         SelectMark(R)10 50/50)        9/1/03 for plan codes ARIH52
                                                                                                     &  ARIR52 in Florida**
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)10 Special Edition     T-CMY1099-10-100;                   4/6/2000                     3/3/03
with STS                            T-PMY1099-10-100
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)10 Special Edition     T-CEIA-0500-10;                     7/26/2000                    3/3/03
Equity Index Strategy               T-PEIA-0500-10
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)10 Special Edition     T-CEIA-0500-10STS;                  7/26/2000                    3/3/03
with STS and Equity Index Strategy  T-PEIA-0500-10STS
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
Selectmark(R)Special Edition Plus   T-C-SMSE-0402-10-4;                 04/30/02                     9/1/03**
4                                   T-P-SMSE-0402-10-4
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
Selectmark(R)Special Edition Plus   T-C-SMSE-0402-10-0;                 05/06/02                     3/3/03
                                    T-P-SMSE-0402-10-0
------------------------------------------------------------------------------------------------------------------------------------
SelectMark(R) Elite Series
------------------------------------------------------------------------------------------------------------------------------------
SelectMark(R)5 Elite                T-C390-0701-5;                      9/1/01                       9/1/03**
                                    T-P390-0701-5
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)7 Elite                T-C390-0701-7;                      9/1/01                       9/1/03**
                                    T-P390-0701-7
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
SelectMark(R)10 Elite               T-C390-0701-10;                     9/1/01                       9/1/03**
                                    T-P390-0701-10
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                  Page 1 of 2
<PAGE>

<TABLE>
<S>                                 <C>                                <C>                         <C>
------------------------------------------------------------------------------------------------------------------------------------
PreferMark Platinum                 T-CMY0500-9;                        7/26/2000                    7/1/03
                                    T-PMY0500-9
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
PreferMark Gold                     T-CMY0500-10;                       7/26/2000                    7/1/03
                                    T-PMY0500-10
------------------------------------------------------------------------------------------------------------------------------------
Riders
------------------------------------------------------------------------------------------------------------------------------------
Beneficiary Rider                   T-CBR-0799;                         10/18/99
                                    T-PBR-0799
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
Beneficiary Rider Plus              T-PBRII-0400;
                                    T-CBRII-0400                        7/26/2000
----------------------------------- ----------------------------------- ---------------------------- -------------------------------
</TABLE>

*    Including  all  State   required   variations   of  the  above   referenced
     products/policy form numbers

**   Transamerica  and LMG may  determine  that this date may need to be changed
     depending  on how other  product  development  efforts  progress.  Any such
     change shall be set forth in a separate written agreement or amendment.

 "Discontinuance Date"

The  discontinuance  date is the date which on or after no further  applications
will be accepted.

1.    For the products earmarked to be withdrawn effective March 3, 2003, in the
      case of 1035 exchanges and other transfers between financial institutions,
      the application and completed exchange transfer paperwork must be received
      by March 3, 2003, and the transferred  funds completed by June 6, 2003, in
      order for the policy to be issued.

2.    For the products earmarked to be withdrawn  effective July 1, 2003, in the
      case of 1035 exchanges and other transfers between financial institutions,
      the application and completed exchange transfer paperwork must be received
      by July 1, 2003,  and the  transferred  funds  completed by September  26,
      2003, in order for the policy to be issued.

"Unique Features"

The 'Unique" features contained in the policy forms that would preclude LMG from
separately  selling or marketing any products which are the same as those unique
products co-developed by LMG and Transamerica are as follows:

         The Total  Return  Crediting  Rate  Strategy  in  combination  with the
         Multiple Year Crediting Rate Strategy in a fixed annuity.

The  'Unique"  features  contained  in the  policy  forms  that  would  preclude
Transamerica  from  separately  selling or marketing any products  which are the
same as  those  unique  products  co-developed  by LMG and  Transamerica  are as
follows:

         The Total  Return  Crediting  Rate  Strategy  in  combination  with the
         Multiple Year Crediting Rate Strategy in a fixed annuity.

The features  described above as the " Total Return Crediting Rate Strategy" and
"Multiple Year Crediting Rate Strategy" are described in the policy forms listed
in this  Appendix A under the caption or headings  "Total  Return  Strategy" and
"Multiple Year Strategy."

                                  Page 2 of 2

<PAGE>

 o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC

                                   Appendix B

                               MARKETING AGREEMENT

                                  COMPENSATION

                                  June 30, 2003

  All rate changes included in this table are applicable only to applications
             received on or after such referenced effective dates.
<TABLE>
<CAPTION>
                                                                Compensation to Legacy
                                                    -----------------------------------------------------
                                                                                                  (g)
                                                                                                 LMG
                                                                                                 Trail
                                                                                                 Com.
                                                                                                 (AKA
                                                                                                 Adminis
                                                                                                 trative
                                                                                                 Trail
                                                    (a)     (b)     (c)      (d)    (e)          Fee or
                                POLICY FORM                Comm.     %                           Fune
                                 NUMBERS/          Commi- Reduces  Reduct           Mkt.  Over-  One
     PRODUCT NAME              Effective Dates     ssion   @ Age     ion    Trail  Allow  Ride   fee)        Special Rules
  ---------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                      <C>    <C>     <C>      <C>     <C>   <C>     <C>  <C>
  SelectMark(R) Series
  ---------------------------------------------------------------------------------------------------------------------------
                             T-CTMY0298-5-75/25;      o              o                o     o       o
  SelectMark(R) 5 75/25      T-PTMY0298-5-75/25
                             Effective 5/29/98               85               o
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             T-CMY0799-7-75/25;       o              o                o     o       o
  SelectMark(R)7 75/25       T-PMY0799-75/25                                  o
                             Effective 10/18/99              85
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             T-CTMY0298-10-75/25;     o              o                o     o       o
  SelectMark(R) 10 75/25     T-PTMY0298-10-75/25
                             Effective 5/29/98               85               o
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      85      o        o       o     o       o
  ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                  Page 1 of 8
<PAGE>

 o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC

<TABLE>
<CAPTION>
                                                                Compensation to Legacy
                                                    -----------------------------------------------------
                                                                                                  (g)
                                                                                                 LMG
                                                                                                 Trail
                                                                                                 Com.
                                                                                                 (AKA
                                                                                                 Adminis
                                                                                                 trative
                                                                                                 Trail
                                                    (a)     (b)     (c)      (d)    (e)          Fee or
                                POLICY FORM                Comm.     %                           Fune
                                 NUMBERS/          Commi- Reduces  Reduct           Mkt.  Over-  One
     PRODUCT NAME              Effective Dates     ssion   @ Age     ion    Trail  Allow  Ride   fee)        Special Rules
  ---------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                      <C>    <C>     <C>      <C>     <C>   <C>     <C>  <C>
  SelectMark(R) Secure Series
  ---------------------------------------------------------------------------------------------------------------------------
  SelectMark(R)5 Secure      T-CTMY0298-5-50/50;      o              o        o       o     o       o
  (formerly known as the     T-PTMY0298-5-50/50
  SelectMark(R)5 50/50)      Effective 7/10/00               85
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  SelectMark(R)7 Secure      T-CMY0799-7-50/50;       o              o        o       o     o       o
  (formerly known as the     T-PMY0799-7-50/50
  SelectMark(R)7 50/50)      Effective 7/10/00               85
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      85      o        o       o     o       o
  ---------------------------------------------------------------------------------------------------------------------------
  SelectMark(R) Special Edition Series
  ---------------------------------------------------------------------------------------------------------------------------
  SelectMark(R)5 Special     T-PSMSE-0801-5           o              o        o       o     o       o
  Edition                    T-CSMSE-0801-5
                             Effective 01/02/02              80
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  SelectMark(R)7 Special     T-CMY0799-7-100;         o              o        o       o     o       o
  Edition                    T-PMY0799-7-100
                             Effective 10/18/99              80
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  SelectMark(R)7 Special     T-CEIA-0500-7            o              o        o       o     o       o
  Edition Equity Index
  Strategy                   Effective 7/26/00               80
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  SelectMark(R)10 Special    T-CTMY0298-10-50/50;     o              o        o       o     o       o
  Edition (formerly known    T-PTMY0298-10-50/50
  as the SelectMark(R) 10
  50/50) Effective 2/9/99 80
  ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                  Page 2 of 8
<PAGE>

 o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC

<TABLE>
<CAPTION>
                                                                Compensation to Legacy
                                                    -----------------------------------------------------
                                                                                                  (g)
                                                                                                 LMG
                                                                                                 Trail
                                                                                                 Com.
                                                                                                 (AKA
                                                                                                 Adminis
                                                                                                 trative
                                                                                                 Trail
                                                    (a)     (b)     (c)      (d)    (e)          Fee or
                                POLICY FORM                Comm.     %                           Fune
                                 NUMBERS/          Commi- Reduces  Reduct           Mkt.  Over-  One
     PRODUCT NAME              Effective Dates     ssion   @ Age     ion    Trail  Allow  Ride   fee)        Special Rules
  ---------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                      <C>    <C>     <C>      <C>     <C>   <C>     <C>  <C>
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective  1/1/03        o      80      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective  6/30/03       o      80      o        o       o     o       o    For FL Plan Codes
                                                                                                         ARIH52 & ARIR52
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  SelectMark(R)10 Special    T-CMY1099-10-100;        o              o        o       o     o       o
  Edition with STS           T-PMY1099-10-100
                             Effective 4/6/00                80
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective  1/2/03        o      80      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  SelectMark(R)10 Special    T-CEIA-0500-10;          o              o        o       o     o       o
  Edition Equity Index       T-PEIA-0500-10
  Strategy                   Effective 7/26/00               80
                              --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective  1/2/03        o      80      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  SelectMark(R)10 Special    T-CEIA-0500-10STS;       o              o        o       o     o       o
  Edition with STS and       T-PEIA-0500-10STS
  Equity Index Strategy      Effective 7/26/00               80
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective  1/2/03        o      80      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------

  SelectMark(R)Special       T-C-SMSE-0402-10-0;      o              o        o       o     o       o
  Edition Plus               T-P-SMSE-0402-10-0
                             Effective 5/6/02                80
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective  1/2/03        o      80      o        o       o     o       o
  ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                  Page 3 of 8
<PAGE>

 o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC

<TABLE>
<CAPTION>
                                                                Compensation to Legacy
                                                    -----------------------------------------------------
                                                                                                  (g)
                                                                                                 LMG
                                                                                                 Trail
                                                                                                 Com.
                                                                                                 (AKA
                                                                                                 Adminis
                                                                                                 trative
                                                                                                 Trail
                                                    (a)     (b)     (c)      (d)    (e)          Fee or
                                POLICY FORM                Comm.     %                           Fune
                                 NUMBERS/          Commi- Reduces  Reduct           Mkt.  Over-  One
     PRODUCT NAME              Effective Dates     ssion   @ Age     ion    Trail  Allow  Ride   fee)        Special Rules
  ---------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                      <C>    <C>     <C>      <C>     <C>   <C>     <C>  <C>
  ---------------------------------------------------------------------------------------------------------------------------
  SelectMark(R)Special       T-C-SMSE-0402-10-4;      o              o        o       o     o       o
  Edition Plus 4             T-P-SMSE-0402-10-4
                             Effective 4/30/02               80
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      80      o        o       o     o       o
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 6/30/03        o      80      o        o       o     o       o
  ---------------------------------------------------------------------------------------------------------------------------
  SelectMark(R) Elite Series
  ---------------------------------------------------------------------------------------------------------------------------
  SelectMark(R)5 Elite       T-C390-0701-5;           o              o        o       o     o       o
                             T-P390-0701-5
                             Effective 9/1/01                85
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 6/30/03        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  SelectMark(R)7 Elite       T-C390-0701-7;           o              o        o       o     o       o
                             T-P390-0701-7
                             Effective 9/1/01                85
                            --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 6/30/03        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
   SelectMark(R)10 Elite     T-C390-0701-10;          o              o        o       o     o       o
                             T-P390-0701-10
                             Effective 9/1/01                85
                             --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 12/1/02        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
                             Effective 6/30/03        o      85      o        o       o     o       o
  ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                  Page 4 of 8
<PAGE>

 o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC

<TABLE>
<CAPTION>
                                                                Compensation to Legacy
                                                    -----------------------------------------------------
                                                                                                  (g)
                                                                                                 LMG
                                                                                                 Trail
                                                                                                 Com.
                                                                                                 (AKA
                                                                                                 Adminis
                                                                                                 trative
                                                                                                 Trail
                                                    (a)     (b)     (c)      (d)    (e)          Fee or
                                POLICY FORM                Comm.     %                           Fune
                                 NUMBERS/          Commi- Reduces  Reduct           Mkt.  Over-  One
     PRODUCT NAME              Effective Dates     ssion   @ Age     ion    Trail  Allow  Ride   fee)        Special Rules
  ---------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                      <C>    <C>     <C>      <C>     <C>   <C>     <C>  <C>
  ---------------------------------------------------------------------------------------------------------------------------
  PreferMark Series
  ---------------------------------------------------------------------------------------------------------------------------
  PreferMark Platinum        Y-CMY0500--9;            o              o        o       o     o       o    Age-mandated
                             T-PMY0500-9                                                                 commission
                                                                                                         reduction also
                             Effective 7/26/00               85                                          applies to override
                             --------------------- ------- ------ -------- -------- ----- ------ -------
                             Effective 12/1/02        o      85      o        o       o     o       o
  -------------------------- --------------------- ------- ------ -------- -------- ----- ------ ------- --------------------
  PreferMark Gold            T-CMY0500-10;            o              o        o       o     o       o    Age-mandated
                             T-PMY0500-10                                                                commission
                                                                                                         reduction also
                             Effective 7/26/00               85                                          applies to override
                             --------------------- ------- ------ -------- -------- ----- ------ -------
                             Effective 12/1/02        o      85      o        o       o     o       o
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

 o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC

     GENERAL COMPENSATION RULES

    1.   Base Commission (Column (a) above):

         Transamerica  will pay LMG on the last  business  day of the week  base
         commissions for all premiums  received in cash by LMG during that week,
         i.e., the prior Friday through Thursday,  in the specified  percentages
         indicated  in  Column  (a)  above.  Such  commissions  will  be paid by
         Transamerica to LMG by Transamerica authorizing LMG to write a check to
         itself  against  the  Transamerica  Disbursement  account for the total
         weekly commission amount.

         Additional  premiums  will  be  subject  to the  same  base  commission
         percentages noted above as the initial premium.

         In addition to the base commission  rates specified in Column (a) above
         Transamerica will pay LMG an additional commission as follows:

                 (1) o of all premiums  received on or before August 31, 2001 by
                 LMG for the  SelectMark(R)  10 Special  Edition  (for  premiums
                 received  after  October 18,  1999),  SelectMark(R)  10 Special
                 Edition  Equity Index  Strategy,  SelectMark(R)  10 STS Special
                 Edition  Equity  Index  Strategy and  SelectMark(R)  10 Special
                 Edition with STS products for  applications  received by Legacy
                 for such products on or before August 31, 2001, and in the case
                 of  1035  exchanges  and  other  transfers   between  financial
                 institutions,  the application and completed  exchange/transfer
                 paperwork  must be  received  by LMG by August 31, 2001 and the
                 cash received by November 30, 2001 for  Transamerica to pay the
                 extra o bonus.

                                  Page 5 of 8
<PAGE>

 o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC

                 (2) o of all premiums  received during the period  September 1,
                 2001 and September 30, 2001 for such products for  applications
                 received  by LMG  for  such  products.  In  the  case  of  1035
                 exchanges and other transfers between  financial  institutions,
                 the application and completed  exchange/transfer paperwork must
                 be received by LMG between  September 1 and September  30th and
                 the cash received by November 30, 2001 for  Transamerica to pay
                 the extra o bonus.

         Note: As a practical  matter,  LMG's  administrative  system will treat
         additional  deposits  on inforce  policies  in the same  manner as cash
         received on 1035  exchanges  and other  transfers  with  respect to the
         above  rules.  Transamerica  agrees  to this  treatment  on  additional
         deposits based on (1) LMG's  representation  that  additional  deposits
         will not be material  and (2) LMG's  agreement  that this  treatment on
         additional deposits will not be disclosed in any manner to producers or
         policyholders. LMG also agrees to limit disclosure of this treatment on
         additional deposits to LMG employees on a "need to know" basis.

    2.   Age  Mandated  and  Voluntary  Trail  Selection   Commission  Reduction
         (Columns (b), (c) and (d) above):

         The following  provision applies to payment of all base commissions for
         all products  subject to this  Agreement  (see below for separate rules
         for  PreferMark  Gold and  PreferMark  Platinum)  if the  issue  age is
         greater than 79 (in the case of SelectMark(R) Special Edition products)
         and 84 for other products, or voluntary trail compensation is selected.
         The o additional  commission  payable for the  SelectMark(R)  10 series
         products is considered part of the base commission.

         If the  issue  age is  greater  than 79 or 84 as  defined  in the Death
         Benefit Proceeds  provision of the applicable  policy form or voluntary
         trail  compensation  is selected,  base  commissions are reduced by the
         percentage shown in Column (c). A trail base commission is paid monthly
         beginning  in  policy  year 2.  Column  (d)  reflects  the  trail  base
         commission  percentage  on an annual  basis  (calculated  as Column (a)
         multiplied  by the  percentage in Column (c) divided by 10). This trail
         base  commission is paid monthly (the payable  amount,  calculated each
         month, is the Column (d) annual percentage divided by 12 and multiplied
         by the annuity cash value). The monthly trail base commission continues
         to be paid until  death of the  annuitant,  surrender  of the policy or
         election of a settlement option.

         With regard to PreferMark  Gold and PreferMark  Platinum,  if the issue
         age of a policy is  greater  than 84 as  defined  in the Death  Benefit
         Proceeds  provision of such policy form or voluntary trail compensation
         is selected,  the applicable base commission percentage is reduced by o
         for all premiums  received for that policy. No monthly trail commission
         is payable.

                                  Page 6 of 8
<PAGE>

  o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC

    3.   Marketing Allowance (Column (e) above):

         Transamerica  will pay to LMG a Marketing  Allowance  for all  premiums
         received by LMG in the  specified  percentages  indicated in Column (e)
         above. LMG will bill Transamerica  weekly and Transamerica will pay LMG
         such Marketing Allowance by wire transfer within five (5) business days
         of receipt of such documentation.

    4.   Override Commission (Column (f) above):

         Transamerica  will  pay to LMG an  override  commission  (on  the  last
         business day of the week) for all premiums  received by LMG during that
         week, in the specified percentages indicated in Column (f) above.

         The override  commission  percentages  in Column (f) include o which is
         paid back to  Transamerica  by LMG at the end of each  fiscal year (for
         this  purpose  each  fiscal  year  begins  on  August 1 and ends on the
         following  July 31) for the first  $100  million of  aggregate  premium
         received by LMG during that fiscal year for all  (excluding  PreferMark
         Gold and  PreferMark  Platinum)  products (net of premiums  returned to
         policyholders  under  free look  provisions  if the  aggregate  premium
         received  by LMG for the fiscal  year is less than $100  million).  LMG
         will retain the o on all premiums received in excess of $100 million in
         each fiscal year.  Notwithstanding  the foregoing,  LMG's obligation to
         pay Transamerica the  aforementioned o shall terminate upon LMG's final
         payment of o for the fiscal year ending July 31, 2001.

         With regard to PreferMark  Gold and PreferMark  Platinum,  if the issue
         age of a policy is  greater  than 84 as  defined  in the Death  Benefit
         Proceeds  provision  of  such  policy  form  the  applicable   override
         commission  percentage  is reduced by o for all  premiums  received for
         that policy.

                                  Page 7 of 8
<PAGE>

         LMG Trail Commission (Column (g) above):

              With respect to  applicable  policies,  Transamerica  will pay LMG
              trail  commission  at the  annual  rate shown in column (g) above,
              paid  monthly,  times the total Annuity Cash Value of the policies
              sold  under this  Agreement.  For the  purpose  of the  foregoing,
              Annuity Cash Value is the contract's Cash Value which reflects any
              applicable  reductions,  loans and withdrawals.  The commission is
              based on the total month end  Annuity  Cash Value and will be paid
              within six (6) business days of month end by Transamerica via wire
              transfer to an LMG bank account.

                                  Page 8 of 8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}]]