Azusa City Council
July 27, 2026

B-12.

AZUSA

CONSENT CALENDAR
TO: HONORABLE MAYOR AND MEMBERS OF THE AZUSA CITY

COUNCIL
FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES,
DATE: FEBRUARY 23, 2009
SUBJECT: WATER SUPPLY AGREEMENT WITH MILLER COORS LLC.

RECOMMENDATION
It is recommended that the Azusa Utility Board/City Council approve attached amended and restated water supply agreement with MillerCoors LLC.

BACKGROUND
The City entered into a Water Supply Agreement ("Agreement") with Miller Brewing Company in 2002, which was later assigned to Miller Breweries West, L.P. ("Miller") in for the delivery of water to Miller from the Canyon Basin by the City, at certain rates and the use by the City of Miller's water rights. The Agreement was amended on May 1, 2008, and authorized assignment of the Agreement to MillerCoors LLC. On November 26, 2008, the agreement was extended to allow parties time to discuss various issues, including the agreement term and the City's possible use of wells/pumps at Miller's Irwindale facility.

At this time, it is recommended that the Utility Board adopt the attached amended and restated agreement which will continue water supply to MillerCoors through May 31, 2013, and provide MillerCoors with options to extend the term of the agreement three times in increments of 5-years for each extended term. Supplied water is to come from MillerCoor's prescriptive pumping rights which are leased to the City pursuant to agreement terms. The City will charge MillerCoors for the supplied water and have an obligation to maintain pipeline to their Irwindale facility. MillerCoors would be required to comply with water curtailment conditions in event of emergencies and droughts.

At any time following the anniversary date of this agreement amendment, MillerCoors is obligated to meet with the City concerning the City's possible use of MillerCoors' main basin wells and pumping facilities.
apposit
040

FISCAL IMPACT
Sales to MillerCoors amounted to about $990,000 in revenue to the City's water utility last fiscal year. Adoption of this agreement amendment continues service and billings.

Prepared by:

Cary Kalscheuer, Assistant to the Director of Utilities 041
:

FISCAL IMPACT
Sales to MillerCoors amounted to about $990,000 in revenue to the City's water utility last fiscal year. Adoption of this agreement amendment continues service and billings.

Prepared by:

Cary Kalscheuer, Assistant to the Director of Utilities 042

AMENDED AND RESTATED WATER SUPPLY AGREEMENT
This Amended and Restated Water Supply Agreement ("Agreement") is made as of February 23, 2009 between MillerCoors LLC, a Delaware limited liability company ("MillerCoors"), and the City of Azusa, California, a California municipal corporation (the "City").

All capitalized terms used in this Agreement shall have the meanings given to them in Section 2.

Recitals

1.1 MillerCoors and the City are parties to the Existing Agreement which, among other things, assigned MillerCoors' Prescriptive Pumping Rights to the City from time to time ir exchange for long term access to a supply of City Water.

The Parties desire to enter into this Agreement to amend and restate (but not terminate) the Existing Agreement in its entirety to reflect updated terms agreed to by the Parties.

NOW THEREFORE, the Parties agree as follows.

Definitions
"AAA" shall mean the American Arbitration Association.
"Acre Foot" shall mean a measure of liquid volume equivalent to three hundred twenty- five thousand, eight hundred and thirty (325,830) gallons or four hundred thirty-five and six tenths (435.6) CCFs.
"Additional Water" shall mean any City Water provided by the City to the Facility during a year of the Term which exceeds the MillerCoors Water Allotment for that year. "Additional Water Rate" shall mean the rate that the City may charge to MillerCoors for the Additional Water. The Additional Water Rate shall be equal to the rate charged by the Water District to the City for such Additional Water.
"Agreement" shall mean this Amended and Restated Water Supply Agreement. "Award" shall mean an arbitrators' award made pursuant to Section 13. "Blended Water" shall mean water provided by the City to the Facility during a Water Emergency only, which may consist of a blend of water from the Upper Basin and surface water.

Blended Water shall in no event include water from the Main Basin. Blended Water shall meet or exceed all Federal, state and local drinking water regulations and standards. "California Government Code" shall mean the Government Code of the State of California.

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"California Public Contracts Code" shall mean the Public Contracts Code of the State of California.
"California Water Code" shall mean the Water Code of the State of California. "CCF" shall mean a measure of liquid volume equivalent to one hundred (100) cubic feet or seven hundred and forty-eight (748) gallons.
"City" shall mean the City of Azusa, California, a California municipal corporation. "City Council" shall mean the elected members of the City Council of the City at the applicable time referenced in the Agreement.
"City Officers" shall mean the officers of the City empowered to act for the City. "City Water" shall mean the water that the City provides to MillerCoors under this Agreement. All City Water shall meet or exceed all Federal, state and local drinking water regulations and standards. City Water shall be taken completely and solely from the Water Source and shall not be blended or mixed with water from the Main Basin or any other source, except for the provision of Blended Water during a Water Emergency in accordance with the terms of this Agreement.
"Current Term" shall mean the term of this Agreement which commenced on the expiration of Initial Term, running for a period of five (5) years, and expiring on May 31, 2013. "Event of Force Majeure" shall mean any accident, fire, explosion, casualty, epidemic. act of God, public disaster, terrorist attack, riot, earthquake, storm, tornado, landslide or act of war which is beyond the control of the City or MillerCoors and which causes an interruption or suspension of or materially hampers, interferes with or delays the performance or completion of any material obligations or duties of a Party under this Agreement (but excluding in all cases any Water Supply Curtailment Condition).
"Excess Rate" shall mean a rate for water that is in excess of three percent (3%) of the rate for a CCF during the first year of the Current Term, or during the first year of any Extended Term.
"Exhibit" shall mean an exhibit to this Agreement. Each Exhibit is incorporated into this Agreement by this reference.
"Extended Term" shall mean an extended term of this Agreement. The first Extended Term shall run for five (5) years following the end of the Current Term. The second Extendec Term shall run for five (5) years following the end of the first Extended Term. The third Extended Term shall run for five (5) years following the end of the second Extended Term. "Existing Agreement" shall mean that certain Water Supply Agreement between Miller Brewing Company and the City, dated as of February 26, 2002, as amended by Amendment No. 1 to Water Supply Agreement, dated May 1, 2008, and by a letter agreement between the Parties OHS West:260381265.8
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dated as of November 26, 2008. The rights and obligations of Miller Brewing Company under the Existing Agreement have been assigned to MillerCoors with consent of the City. "Facility" shall mean the MillerCoors brewery facility located at 15801 East First Street, Irwindale, California 91706-2089.
"Flow Rate" shall means the daily rate at which the City delivers City Water to the Facility. The Flow Rate shall be between twenty thousand (20,000) gallons and two million five hundred thousand (2,500,000) gallons per twenty-four (24) hour period. "Initial Term" shall mean the term of the Existing Agreement which commenced on the Supply Date and expired five years following the Supply Date on May 31, 2008. "Judgment" shall mean the judgment, as amended, rendered in Upper San Gabriel Valley Municipal Water District v. City of Alhambra, Superior Court of California case number 924128. "Main Basin" shall mean the Main San Gabriel Basin, which is more particularly described on Exhibit E
"Maximum Monthly Delivery" shall mean a cumulative total of two million five hundred thousand (2,500,000) gallons per twenty-four (24) hour period multiplied by the number of days in each calendar month. MillerCoors shall be subject to a penalty amount equal to fifty (50%) percent of the Permitted Rate then in effect for each gallon delivered in any calendar month in excess of the Maximum Monthly Delivery.
"MillerCoors" shall mean MillerCoors LLC, a Delaware limited liability company. "MillerCoors Lease" shall mean a lease to the City by MillerCoors of all or a portion of MillerCoors' Prescriptive Pumping Rights for a year of the Term. Each MillerCoors Lease shall be in the form attached as Exhibit B
"MillerCoors' Prescriptive Pumping Rights" shall mean MillerCoors' rights to use or pump water as determined on an annual basis by the Watermaster pursuant to the Judgment.

MillerCoors' Prescriptive Pumping Rights as reflected in the records of the Watermaster are generally described in the documents listed on Exhibit A. "MillerCoors Water Allotment" shall mean an amount of City Water equivalent to the annual amount of water that MillerCoors is entitled or authorized to use or pump pursuant to MillerCoors' Prescriptive Pumping Rights, and leased to the City under a MillerCoors Lease. "MillerCoors Wells" shall mean the two production water wells operated by MillerCoors and located at the Facility.
"Municipal Code" shall mean the Municipal Code of the City. "Parties" shall mean the City and MillerCoors, and "Party" shall mean the City or MillerCoors, as applicable.

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"Permitted Rate" shall mean the rate charged to MillerCoors for City Water determined using the formula set forth on Exhibit D.
"Person" shall mean any natural person, company, corporation, partnership, limited liability company or other entity.
"Pipeline" shall mean the water pipeline from the Water Source to the Facility constructed pursuant to the Existing Agreement. The Pipeline is dedicated solely for the purpose of providing City Water to the Facility during the Term of this Agreement. "Replacement Water" shall mean water that is obtained by and physically delivered to the City from and within the boundaries of the Water District to replenish water supplies otherwise available to the City within the Water District. Replacement Water shall not include Supplemental Water.
"Section" shall mean a section in this Agreement.
"Supplemental Water" shall mean water that is obtained by and physically delivered to the City from the Metropolitan Water District or other parties (but not the Water District or Watermaster) to replenish water supplies otherwise available to the City provided that (i) Supplemental Water shall only be purchased by the City when Water Supply Curtailment Conditions are in effect, and (ii) Replacement Water is not otherwise available. "Supplemental Water Rate" shall mean the rate charged to the City from time to time for water the City purchases from the Metropolitan Water District or other parties as Supplemental Water.
"Supply Date" shall mean June 1, 2003, which was the first day of the month following the date MillerCoors first received City Water at the Facility under the Existing Agreement. "Term" shall mean the term of this Agreement. The Term shall include the Initial Term. the Current Term and all Extended Terms.
"Termination" shall mean the termination of this Agreement pursuant to Section 7 or as otherwise provided for in this Agreement
"Unused Water Rights" shall mean the amount by which the sum of (i) the amount of City Water that is delivered to the Facility under this Agreement in any year of the Term, plus (ii) the amount of water produced by MillerCoors from the MillerCoors Wells during such year, is less than (il) the amount of water that MillerCoors is entitled or authorized to use or pump pursuant to MillerCoors' Prescriptive Pumping Rights for that same year. "Upper Basin" shall mean the Upper San Gabriel Canyon Basin. The boundaries of the Water aster are more particularly described in maps and documents held or created by the "Water District" shall mean the Upper San Gabriel Valley Municipal Water District.

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"Water Emergency" shall mean an interruption of deliveries of City Water to the Facility on account of an Event of Force Majeure, where the City fails to provide City Water to the Facility at the Flow Rate for four (4) consecutive hours. "Water Filtration Plant" shall mean the water filtration plant constructed and operated by the City and located at 1870 Ranch Road, Azusa, California 91702, which plant shall treat surface water available to the City from the San Gabriel River (which may include water sourced from the California State Water Project and the Colorado River), and which shall not treat water from any other source, including from the Main Basin.
"Watermaster" shall mean the San Gabriel Basin Watermaster established pursuant to the Judgment.
"Water Source" shall mean the reservoir located at 34"-8'-40" North / 117°- 54'- 3" West from which the City will supply City Water for the Facility. All water in the reservoir at the Water Source shall be obtained solely from (i) wells pumping from the Upper Basin or (11) the Water Filtration Plant. No water in the reservoir at the Water Source will be blended or mixed with water from any other source.
"Water Supply Curtailment Conditions" shall mean conditions or circumstances limiting or restricting the ability of the City to supply water to its customers generally or the ability of the City to deliver water to the Facility from the Water Source at the Flow Rate, including (i) laws, regulations or orders applicable to the City affecting the City's right or ability to sell or deliver water; (ii) unavailability to the City, the Water District or the Watermaster of Replacement Water or Supplemental Water; and (ill) drought conditions.

Water Deliveries

3.1 The City shall supply the Facility, throughout the Term, by means of the Pipeline and subject only to Water Emergencies and Water Supply Curtailment Conditions, City Water at the Flow Rate. The Flow Rate for each day shall be the amount of City Water that MillerCoors requires, or elects to accept, for operation of the Facility.

3.2 MillerCoors shall have and maintain the right to produce water from the MillerCoors Wells for use at the Facility (i) during the duration of any Water Emergency; (ii) during the duration of any Water Supply Curtailment Condition; (iii) at any time that water use requirements at the Facility (whether in its current configuration or as renovated or expanded) exceed the Flow Rate; and (iv) at such other times as the City and MillerCoors may agree. provided that, in the event that MillerCoors elects not to or otherwise is unable to produce water from the MillerCoors Wells under such circumstances, the limitations on the City's obligation to deliver City Water set forth in Section 9.5 shall not be affected.

3.3 At any time and from time to time following the first anniversary of the date of this Agreement, but not more frequently than once each calendar year during the Term of this Agreement, either Party may submit a written request to the other Party requesting a meeting to discuss the possibility of reaching an agreement regarding additional or revised operations of the MillerCoors Wells for the extraction, delivery and use of water from said wells. In the event such a written request is made, the Parties shall then engage in good faith negotiations regarding OHS West:260381265.8
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such a possible agreement for a period of 30 days from the date of the written request, unless said period is extended upon mutual consent of both Parties. The determination of each Party as to whether to enter into any agreement pursuant to this paragraph shall be and remain in such Party's respective sole discretion.

4. MillerCoors' Obligations

4.1 MillerCoors shall enter into a MillerCoors Lease with the City for each year of the Term. Each MillerCoors Lease shall lease to the City, for the year in question, all or a portion of MillerCoors' Prescriptive Pumping Rights equal to the amount of City Water delivered to the Facility pursuant to this Agreement during the year in question, up to the maximum amount of MillerCoors Prescriptive Pumping Rights for such year. The Parties shall cooperate to adjust any MillerCoors Lease from time to time to reflect the provisions of this Section. Each MillerCoors Lease shall be subject to all of MillerCoors' rights under this Agreement, including MillerCoors' rights of reversion upon the Termination or expiration of this Agreement. During the period that any MillerCoors Lease is effective, MillerCoors shall have and retain the right in its own name and without the consent of the City) to protect MillerCoors' interest including any reversionary interest) in MillerCoors' Prescriptive Pumping Rights by bringing suit, instituting proceedings, appearing before administrative bodies, defending suits and claims, lobbying or taking (or forbearing from taking) any other actions MillerCoors deems necessary or advisable in its sole discretion, including taking any action in relation to the decisions or actions of any third parties (including the Watermaster).

4.2 MillerCoors shall pay for City Water at the Permitted Rate, or, as applicable, the Additional Water Rate or the Supplemental Water Rate in accordance with Section 6. Any bill for City Water to MillerCoors shall be due at the close of business on the twentieth (20"") calendar day following the City's presentation of the bill to MillerCoors, in accordance with the City's rules and regulations. If the bill is not paid within the aforementioned twenty (20) calendar day period it shall be subject to a late payment penalty as provided for in the applicable City's regulations. If a bill is not paid within the twenty (20) calendar day period the City shall send a payment reminder to MillerCoors on the twenty-first (21) calendar day notifying MillerCoors of the past due status, as such reminders or notices may be provided for under the City's rules and regulations. The City shall provide to MillerCoors access to MillerCoors' water bills "on-line" and shall provide MillerCoors with a password to allow internet access to MillerCoors' bills. In addition. the City will notify MillerCoors of the day of the month on which the bill is typically sent so that MillerCoors can check both in the mail and "on-line" for such bill.

4.3 All billings by the City to MillerCoors for the City Water shall be addressed as follows:

MillerCoors
Attention: Plant Manager
15801 East First Street
rwindale, California 91706-2089
[email protected]
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The City's Obligations

5.1 The City owns and shall maintain the Pipeline at its sole cost and expense. The City has the right to depreciate the Pipeline in accordance with the standards used by the City for similar structures.

5.2 The City shall keep the Pipeline in good repair and condition in accordance with best utility practices and on the same priority as other water supply facilities of the City. The City shall keep the Pipeline operational throughout the Term of this Agreement.

5.3 The City shall assume MillerCoors' administrative duties and obligations under the Judgment and regulations of the Watermaster with respect to MillerCoors' Prescriptive Pumping Rights which are subject to a MillerCoors Lease, thereby relieving MillerCoors of such duties and obligations, including but not limited to any so-called reconciliation of water use, carryover provisions or the obligation to purchase the applicable amount of water per year from the Watermaster at the rates set by the Watermaster for MillerCoors' Prescriptive Pumping Rights covered thereby. Without limiting the foregoing, the City agrees to file or record any MillerCoors Lease with (i) the Watermaster; (ii) the Water District and (iii) with any other required or allowed state or municipal agencies at which such filing or recordation may be required or allowed by law. Notwithstanding any provision in this Agreement to the contrary. the City shall not be obligated to pay any assessments in connection with MillerCoors' Prescriptive Pumping Rights. The City agrees to promptly provide MillerCoors with any third party notices that it receives requesting such payments.

5.4 The City shall not use the Pipeline to provide water to any other customers of the City or for the City's own use and will not allow any other Person to have access to the water in or from the Pipeline during the Term.

6. Water Rates and Division of Unused Water Rights Proceeds

6.1 Subject to the remaining provisions of Section 6, the City shall charge MillerCoors for City Water delivered under this Agreement at the Permitted Rate under the billing procedures set forth in Section 4.2. The Permitted Rate shall be adjusted as of May 1, 2010, and every two years thereafter during the Term. The adjustment shall be made in accordance with the methodology set forth in the memorandum included as Exhibit D. The Permitted Rate shall be adjusted on the schedule and pursuant to the provisions of this Section

6.1 regardless of any adjustments the City otherwise may make to commercial water rates charged to customers of the City generally.

6.2 The City may charge MillerCoors for Additional Water at the Additional Water Rate and, subject to the provisions of Section 6.4, Supplemental Water at the Supplemental Water Rate, in each case under the billing procedures set forth in Section 4.2.

6.3 If MillerCoors does not use the full amount of the MillerCoors Water Allotment in any fiscal year it shall have no obligation to purchase any Unused Water Rights for the applicable fiscal year. To the extent there are any Unused Water Rights for a fiscal year under this Agreement, the City agrees that it shall use its best efforts to sell, transfer or lease such Unused Water Rights for the benefit of itself and MillerCoors. The City agrees that to the extent OHS West:260381265.8
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that it sells, transfers or leases the Unused Water Rights it shall credit MillerCoors' account with the City's water department (against sums due or to become due) in an amount equal to one-half of the total amount received for the Unused Water Rights.

6.4 The City may charge MillerCoors for Supplemental Water at the Supplemental Water Rate subject to the provisions of this Section 6.4. If the City determines that, on account of a Water Emergency or Water Supply Curtailment Conditions, and the unavailability of Replacement Water, the City is required to purchase Supplemental Water to fulfill its water sales and delivery obligations to customers of the City, the City shall promptly notify MillerCoors of (i) its intention to so purchase Supplemental Water, (ii) the amount of Supplemental Water proposed to be purchased and the price which the City will pay for Supplemental Water and (ill) the total amount of water deliveries required to be made by the City to customers and which will be supplemented by Supplemental Water. Miller shall promptly notify the City of its election to either accept Supplemental Water as a supply source, or not to accept Supplemental Water and instead to receive City Water at a reduced Flow Rate which the City is able to deliver without the use of Supplemental Water. In the event that MillerCoors elects to receive City Water which includes Supplemental Water, then MillerCoors shall pay the Supplemental Water Rate for an allocable portion of City Water delivered to MillerCoors based on the amount of Supplemental Water purchased by the City in relation to the total amount of water deliveries made by the City, but in no event shall the Supplemental Water Rate apply to deliveries to MillerCoors in excess of

1.5 million gallons per day. In the event the City determines that the Water Emergency or Water Supply Curtailment Conditions further reduce the City's ability to deliver water to customers of the City, thereby requiring the purchase and delivery of additional amounts of Supplemental Water as a supply source for MillerCoors, the Parties shall meet to discuss the impacts of the applicable Water Emergency or Water Supply Curtailment Conditions and the potential for a mutually acceptable alternative arrangement which may include the delivery of additional amounts of Supplemental Water. MillerCoors shall have no obligation to pay for any water at the Supplemental Water Rate for any day on which the City is not required to purchase Supplemental Water in order to meet the Flow Rate under this Agreement.

7. Term of Agreement; Termination

7.1 The Term of this Agreement shall include the Initial Term, the Current Term and any Extended Term, unless this Agreement is subject to earlier Termination.

MillerCoors, at its sole election, shall have the option, to be exercised by written notice to the City at any time prior to the expiration of the Current Term (or any Extended Term), to extend the Term to include up to three (3) additional Extended Terms.

7.3 If the City should seek or propose to deliver or provide City Water to MillerCoors at or above the Excess Rate, MillerCoors shall have the right to cause a Termination of this Agreement. In the event MillerCoors exercises its right of Termination, MillerCoors shall have no further obligations hereunder, including, but not limited to, the obligation to take and pay for the City Water.

7.4 Upon Termination or expiration of this Agreement, any MillerCoors Lease shall terminate and MillerCoors' Prescriptive Pumping Rights shall automatically revert and shall be OHS West:260381265.8
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reassigned to MillerCoors. Concurrently with the execution of this Agreement, the City shall execute, acknowledge and deliver to MillerCoors, the Termination of the MillerCoors Lease attached as Exhibit C. MillerCoors may file or record the Termination of the MillerCoors Lease with the Watermaster, the Water District and with any other required or allowed state or municipal agencies at which such filing or recordation may be required or allowed by law, immediately upon Termination or expiration of this Agreement.

7.5 The City shall not be liable for any damages arising under this Agreement except where the City fails or refuses to deliver City Water to the Facility and such failure is the result of intentional misconduct or discriminatory actions, events or omissions or capricious actions, events or omissions or arbitrary actions, events or omission on the part of the City (including its agents). Any or all such damages, if any, payable by the City under this Agreement may be paid by the City providing City Water to the Facility and crediting MillerCoors for such City Water at the Permitted Rate until the full amount of the damages have been paid.

7.6 Notwithstanding Section 7.5, the City acknowledges that monetary damages would be insufficient to compensate MillerCoors for a breach by the City of its obligations under this Agreement. Consequently, the City agrees that MillerCoors is entitled to specific performance of this Agreement and to injunctive relief to ensure that the City continues to perform under this Agreement and does not act in breach thereof. The City agrees that it will not assert, argue, propose or suggest in any proceeding for a preliminary injunction (including before any court, arbitration panel or administrative body) that monetary damages are sufficient to fully recompense MillerCoors for the loss of the City Water.

8. Additional Rights and Obligations of the Parties

8.1 The City will provide and maintain a meter at the Water Source that shall be used to measure the amount of the City Water provided to the Facility. MillerCoors will provide a separate meter at the Facility (which will be maintained by the City) to confirm the amount of water actually delivered to the Facility. In the event of any discrepancy between the two meters, MillerCoors and the City shall confer and endeavor to agree on any necessary adjustments.

8.2 All testing of City Water (including Blended Water) prior to delivery of the City Water to the Facility shall be the City's responsibility. All testing of the City Water (including Blended Water) after delivery to the Facility shall be the responsibility of MillerCoors. All water supplied by the City under this Agreement, including Blended Water, shall meet or exceed all treatment, clean-up, blending or other steps required to meet the foregoing standards shall be at the City's expense.

9. Water Emergencies; Water Supply Curtailment Conditions

9.1 During a Water Emergency (or during any other disruption in the flow of the City Water to the Facility that lasts for more than four (4) consecutive hours, MillerCoors may pump water from the MillerCoors Wells to meet the water supply requirements at the Facility.

During a Water Emergency (but in no event to exceed twenty (20) consecutive days) the City may, with MillerCoors' consent, provide the Facility with Blended Water (through OHS West:260381265.8
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a separate connection to the City's water system or otherwise) in place of City Water. Such Blended Water shall be provided only during a Water Emergency and only if water from the Water Source is not otherwise available. The City shall, prior to providing such Blended Water, notify MillerCoors that it will be providing such Blended Water instead of City Water, and MillerCoors may elect to accept or reject such Blended Water.

9.3 The City shall, if possible and consistent with best utility practices, remedy any interruption or disruption in the supply of City Water to the Facility on account of a Water Emergency or otherwise within twenty four (24) hours of the occurrence of such interruption or disruption. If the City is unable to remedy such interruption or disruption within twenty four (24) hours, it shall no later than twenty four (24) hours following the interruption or disruption, provide to MillerCoors an assessment of the situation, including the need for repairs and an estimated timeline for making such repairs. The parties shall work together in good faith to determine and implement a plan to restore City Water to the Facility. If notwithstanding the above (and the Parties' attempt to develop a plan to restore City Water to the Facility the City is unable or unwilling to cure an interruption or disruption in the City Water to the Facility within five (5) days of such interruption or disruption, then Miller shall have the right, but not the obligation, to provide licensed contractors (including third party contractors) to remedy any interruption or disruption in the supply of City Water to the Facility; provided however that such contractors shall act under the supervision of the City. It is acknowledged that the City is required to comply with requirements pertaining to public works construction projects. As a result, any such contractor who acts under the supervision of the City shall be required to perform my such work in accordance with the applicable requirements for public works construction projects. In the absence of mutual agreement, the proper allocation of the costs of such contractors between Miller and the City shall be determined in binding arbitration pursuant to Section 13.

9.4 If (i) a Water Emergency lasts for twenty (20) or more consecutive days, (il) all Water Emergencies occurring during the Term of this Agreement last for a total of thirty (30) or more days or (iii) the City provides Blended Water to the Facility for more than twenty (20) consecutive days, then this Agreement is subject to Termination by MillerCoors pursuant to Section 7.

9.5 During any time in which Water Supply Curtailment Conditions are in effect, the City, after consultation with MillerCoors, may limit the amount of City Water delivered to the Facility, provided that (i) any reduction in or curtailment of deliveries shall affect all commercial water customers of the City, under nondiscriminatory ordinances, orders or regulations adopted by the City which shall treat MillerCoors on an equal footing with other commercial water customers of the City; or (ii) the applicable Water Supply Curtailment Conditions affect the physical ability of the City to deliver water at the Flow Rate from the Water Source because of the impact of such Water Supply Curtailment Conditions on the Upper Basin or the Water Source. MillerCoors may pump water from the MillerCoors Wells to meet the water supply requirements at the Facility during the continuance of any Water Supply Curtailment Conditions.

The limitations on the City's obligation to deliver the City Water under this Section 9.5 shall only apply during the continuance of Water Supply Curtailment Conditions.

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10.. Events of Default

10.1 The failure by MillerCoors to comply with any of its material obligations under this Agreement within ten (10) days of receiving written notice of such default from the City shall constitute an Event of Default by Miller Coors under this Agreement.

10.2 Any of the following shall constitute an Event of Default by the City under this Agreement (provided that nothing herein shall limit the rights of MillerCoors pursuant to Section I):
(a) The failure by the City to supply City Water at the Flow Rate, if such failure is the result of intentional misconduct or discriminatory actions, events or omissions or capricious actions, events or omissions or arbitrary actions events or omission on the part of the City (including its agents), if the City fails to restore the supply of the City Water to the Facility within ten (10) business days of the interruption; and
(b) The failure by the City to comply with any of its material obligations under this Agreement within ten (10) days of receiving written notice of such default from MillerCoors (which shall include, without limitation, City Water or Blended Water failing to meet or exceed all Federal, state and local drinking water regulations and standards).

10.3 Upon the occurrence of an Event of Default, the non-defaulting Party shall have all its rights at law or in equity (including without limitation the right to specific performance or injunctive relief). Without limiting the foregoing, the non-defaulting Party shall have the right to terminate this Agreement while retaining all its rights to assert damage claims against the defaulting Party, as such damages claims are limited by this Agreement. Nothing in this Section 10 shall limit MillerCoors' rights to specific performance or injunctive relief upon the occurrence of an Event of Default or upon Termination pursuant to Section 7. All rights of the Parties may be exercised cumulatively.

11. Representations and Warranties

11.1 MillerCoors represents and warrants to the City that:
(a) It has the authority to enter into this Agreement and to perform its obligations hereunder;
(b) In entering into this Agreement, it does not breach any other material agreements to which MillerCoors is a party;
(c) It has taken all actions necessary under its charter, rules, bylaws and applicable state and local laws to obtain approval of this Agreement and to be able to fulfill its obligations under this Agreement; (d) To the extent, if any, MillerCoors is involved in a merger, acquisition or reorganization, any successor in interest to MillerCoors pursuant to such OHS West:260381265.8
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merger, acquisition or acquisition shall be fully bound under this Agreement. Notwithstanding the foregoing, if the successor in interest is not bound by this Agreement then the City shall have the right, at its election, to terminate this Agreement or to assert a default by MillerCoors (or the successor in interest) under this Agreement;
(e) MillerCoors' representations and warranties made under this Section are a material inducement to the City to enter into this Agreement, and without such representations and warranties, the City would not so enter into this Agreement. Breach of any representations and warranties herein shall constitute a failure by MillerCoors to comply with its material obligations pursuant to this Agreement.

11.2 The City represents and warrants to MillerCoors that:
(a) The City, and any other body to which the City has delegated or devolved any of the City's powers to perform the obligations provided for hereunder, have the authority to enter into this Agreement and to perform (b) In entering into this Agreement, it does not breach any other material agreements to which the City is a party;
(c) It has taken all actions necessary under its charter, rules, bylaws applicable state and local laws to obtain approval of this Agreement and to be able to fulfill its obligations under this Agreement;
(d) The City's entry into this Agreement is in full compliance with its obligations under all applicable Federal, state and local laws, including without limitation, the California Government Code, the California Water Code, the California Public Contracts Code and the Municipal Code; (e) The City has fully disclosed this Agreement and its terms to all members of the City Council and to all of the City Officers, in accordance with the City's procedures for consideration and adoption of such an agreement; (f) The City's representations and warranties made under this Section 11 are a material inducement to MillerCoors to enter into this Agreement, and without such representations and warranties, MillerCoors would not so enter into this Agreement. Breach of any of the representations and warranties herein shall constitute a failure by City to comply with its material obligations pursuant to this Agreement;
(g) The City represents and warrants that it will undertake no municipal merger, reorganization, join or participate in any regulatory or administrative body or participate in any judicial action which could or would affect MillerCoors' rights under this Agreement without giving MillerCoors at least ninety (90) days prior notice of such action.

OHS West:260381265.8
8966-1 ASS/MAA 12
Notwithstanding the City giving the aforementioned Notice, any action described in the preceding sentence shall be grounds, at the sole election of MillerCoors, to terminate this Agreement or for MillerCoors to assert a default by the City under this Agreement; and
(h) The City represents and warrants that it will take all actions (or if necessary refrain from all actions) necessary to insure that for as long as any of MillerCoors' Prescriptive Pumping Rights are leased to the City that they will stay in full force and effect and shall be transferred back to MillerCoors as set forth in this Agreement. This representation and warranty shall only apply to actions or omissions by the City and not to any actions or omissions by third parties, or other events that may impact MillerCoors' Prescriptive Pumping Rights including, by way of example only, any activities by the Watermaster. The City agrees to promptly provide MillerCoors with notice of any such act, omission or activity of which the City becomes aware.

12. Indemnity, Limitations Of Liability And Assumption Of Financial Responsibility

12.1 MillerCoors shall indemnify and hold harmless the City and its directors, officers, employees, and agents from any and all claims, damages, liabilities, losses, fines and expenses, including, without limitation, court costs and attorney's fees, in any manner arising out of (i) any breach by MillerCoors of this Agreement; and (ii) any claim of MillerCoors' employees, staff, agents, contractors, third parties, vendors or subcontractors arising from or related to or connected with this Agreement, including, without limitation, any and all bodily injury, sickness, death or disease caused or arising from any act, error or omission on the part of MillerCoors, its agents, employees or subsidiaries in fulfilling MillerCoors' obligations under this Agreement, provided that the foregoing provisions shall not apply to, and MillerCoors shall not be required to indemnify or hold harmless the City or its directors, officers, employees or agents from any claims, damages, liabilities, losses, fines or expenses arising from or related to the City's inability to produce water for its customers on account a defect in or prohibitions against use by the City of MillerCoors' Prescriptive Pumping Rights leased to the City under the terms of this Agreement.

12.2 The City shall indemnify and hold harmless MillerCoors from any and all claims, damages, liabilities, losses, fines and expenses, including, without limitation, court costs and attorney's fees, in any manner arising out of (i) any breach by the City of this Agreement and (ii) any claim of the City's employees, staff, agents, contractors, third parties, vendors or subcontractors arising from, related to or connected with this Agreement, including without limitation any and all bodily injury, sickness, death or disease caused or arising from any act, error or omission on the part of the City, its employees, staff, agents, contractors, vendors or subcontractors in fulfilling the City's obligations under this Agreement.

13. Dispute Resolution and Arbitration

13.1 The Parties agree that any dispute arising in connection with the interpretation of this Agreement or the performance of any Party under this Agreement or otherwise relating to OHS West:260381265.8
8966-1 ASS/MAA 13
this Agreement, whether arising before or after the expiration or earlier Termination of this Agreement, shall be treated in accordance with the procedures set forth in this Section 13.1 prior to the resort by any Party to arbitration or litigation in connection with such dispute. The dispute shall first be referred for resolution to the City and MillerCoors. Such procedure shall be invoked by either the City or MillerCoors presenting a Notice of Dispute identifying the issues in dispute. A telephone conference of the City's representatives) and MillerCoors' representative(s), which each shall have authority to resolve the dispute, will be held within five (5) days after the delivery of the Notice of Dispute.

13.2 In the event that the telephone conference between the two representatives described in Section 13.1 does not resolve the dispute, either Party shall refer (i) any controversy, claim or dispute arising out of or relating to this Agreement or (ii) the breach, Termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this Agreement to arbitrate, to be determined by arbitration in Los Angeles, California, before three arbitrators, in accordance with the laws of the State of California for agreements made in and to be performed in California. Each of the Parties shall name one arbitrator. The third arbitrator shall be selected by the two named arbitrators from a list of the AAA's panel of commercial arbitrators under the procedures of the AAA. The arbitration shall be administered by the AAA pursuant to its Commercial Rules and Supplementary Procedures for Large, Complex Disputes. Judgment on the Award may be entered in any court having jurisdiction thereof. Arbitration of disputes relating to this Agreement, whether arising before or after expiration of this Agreement, shall be binding, final, not appealable, enforceable and in lieu of any right to sue or seek other arbitration in any court or tribunal. Without limitation of the foregoing, the Parties may, by written stipulation, agree to an alternative form of arbitration to that governed by the AAA's Commercial Rules, provided that, in the absence of such written stipulation, the provisions of this Section 13.2 preceding this sentence shall apply.

13.3 The Parties also agree that the AAA Optional Rules for Emergency Measures of Protection shall apply to the arbitration, without prejudice to the right of either Party, consistent with this Agreement, to seek from a court any interim or provisional relief that is necessary to protect the rights or property of that Party, pending the appointment of the arbitrators. The exclusive forum for such application shall be the Los Angeles County Superior Court or the United States District Court for the Central District of California.

13.4 The provisions of Code of Civil Procedure §1283.05 as well as any amendments or revisions thereto are incorporated into this Agreement. Depositions may be taken and discovery may be obtained in any arbitration under this agreement in accordance with the said statute or any amendment thereto.

13.5 Upon the request of any Party, a mediation shall be conducted prior to the arbitration and pursuant to the Mediation Rules of the AAA.

13.6 The arbitrator shall have no authority to award punitive or other damages not measured by the prevailing Party's actual damages and may not, in any event, make any ruling, find, or award that does not conform to the terms and conditions of this Agreement. It is hereby acknowledged and agreed that as a public agency, the City is not subject to punitive damages.

OHS West:260381265.8
8966-1 ASS/MAA 14
The arbitrator shall have no authority to award any relief that a court of the State of California could not award.

13.7 The Award shall be in writing and shall specify the factual and legal bases of the Award. The Award shall provide for payment by the non-prevailing Party of all arbitration costs and fees, including the reasonable attorneys' fees of the prevailing Party.

14. Miscellaneous Provisions

14.1 The Parties are entering into this Agreement with each other based in substantial part on the unique attributes that both Parties offer, in view of both Parties' location, resources, facilities, services and methods of operation. Therefore, this Agreement may not be assigned by either Party without the prior written consent of the other Party, provided however that any legal successor in interest (through merger, acquisition or otherwise) shall succeed to and be fully bound by this Agreement.

14.2 Each Party shall be excused from failing to perform its obligations under this Agreement during the continuance of an Event of Force Majeure, provided that such Party acts diligently to remedy the cause or effects of such Event of Force Majeure, if possible. Subject to the provisions of Section 9.4, if the affected Party is unable to remedy the circumstances described immediately above within thirty (30) days then this Agreement may be terminated at the written request of the non-affected Party.

14.3 Without limiting in any way the provisions of Section 13, in the event suit is brought to enforce or interpret any part of this Agreement or the rights or obligations of any Party to this Agreement, the prevailing Party shall be entitled to recover as an element of such Party's costs of suit, reasonable attorneys' fees.

14.4 Any waiver by either Party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. Any waiver must be in writing. Failure by either Party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive such Party of the right thereafter to insist upon strict adherence to that term or any other terms of this Agreement.

14.5 The determination that any provision of this Agreement is invalid or unenforceable shall not invalidate this Agreement, and this Agreement shall be construed and performed in all respects as if such invalid or unenforceable provisions were omitted insofar as the primary purpose of this Agreement is not frustrated.

14.6 This Agreement contains the entire understanding between the Parties relating to the subject matter herein contained and supersedes all prior oral and written understandings, arrangements and agreements between the Parties relating thereto. This Agreement may not be modified except in writing signed by both Parties.

14.7 This Agreement shall be governed by and interpreted in accordance with the Federal laws of the United States of America and with the laws of the State of California.

Subject to and without limiting the effect of Section 13, the Los Angeles County Superior Court OHS West:260381265.8
8966-1 ASS/MAA 15
or the United States District Court for the Central District of California shall have exclusive and mandatory jurisdiction over any and all controversies arising from, related to or connected with this Agreement, and all Parties hereby submit to such jurisdiction, and any and all proceedings involving such a controversy shall be brought in these courts, and not elsewhere.

14.8 The City agrees that time is of the essence in the performance by the City of its obligations under this Agreement.

The terms of this Agreement have been negotiated by the Parties hereto and the language used in this Agreement shall be deemed to be the language chosen by the Parties hereto to express their mutual intent. This Agreement shall be construed without regard to any presumption or rule requiring construction against the Party causing such instrument or any portion thereof to be drafted, or in favor of the Party receiving a particular benefit under this Agreement.

14.10 All notices, demands, requests or other communications relating to this Agreement shall be in writing and shall be sent via overnight delivery through a nationally recognized overnight delivery service, or, delivered or transmitted by hand delivery or telecopy (provided that a copy is also sent at the same time via U.S. Mail), addressed as follows:

If to the City: City Clerk of the City of Azusa
213 East Foothill Blvd.

Azusa, California 91702
Telephone: (626) 812-5229
Telecopy: (626) 812-5155
With copy to: Director of Utilities
P.O. Box 9500
Azusa, CA 91702-9500
Telecopy: (620) 834-5163
(626) 334-3163
If to MillerCoors LLC
MillerCoors: Attn: General Counsel
Post Office Box 4030
Mailstop NH320
Golden, Colorado 80401
Telephone: (303) 277-3002
Telecopy: (303) 277-6517
OHS West:260381265.8
8966-1 ASS/MAA 16
With copy to: Michael A. McAndrews, Esq.

Orrick, Herrington & Sutcliffe LLP
77 South Figueroa, Suite 320
‚os Angeles, California 9001'
elephone: (213) 612-244
elecopy: (213) 612-2499
And a copy to: MillerCoors LLC
Attn: Plant Manger
15801 East First Street
Irwindale, California 91706-2089
Each Party's address may be changed by written notice to the other Party. Each notice, demand, request or other communication transmitted in the manner described above shall be deemed sufficiently given, served, sent and received for all purposes at such time as it is received by the addressee.

14.11 This Agreement shall amend and restate in its entirety, but not terminate, the Existing Agreement. This Agreement shall govern the rights and obligations of the Parties from and after the date of this Agreement, and the Existing Agreement shall govern such rights and obligations prior to the date of this Agreement.

OHS West: 260381265.8
8966-1 ASS/MAA 17
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.
"MILLERCOORS" "CITY"
•
MillerCoors LLC, a Delaware limited liability The City of Azusa, California, a California municipal corporation
By: By:_
-
Caren A. Ripley
Chief Legal Offic Its: City Manager

APPROVED AS TO FORM
By:_
City Attorney, City of Azusa
OHS West:260381265.8
8966-1 ASS/JC3 18
•.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.
"MILLERCOORS" "CITY" •
MillerCoors LLC, a Delaware limited liability The City of Azusa, California, a California company municipal corporation
By: - or Hands moh
Its: Its: City Manager

APPROVED AS TO FORM
By Sonia A Cowalha
City Attorney, City of Azusa
OHS West:260381265.8
8966-1 ASS/MAA 18

LIST OF EXHIBITS
EXHIBIT A MillerCoors' Prescriptive Pumping Rights
EXHIBIT B MillerCoors Lease
EXHIBIT C Termination of the MillerCoors Lease
EXHIBIT D Formula for Determining Permitted Rate (Exhibit A from Amendment No. 1 to Water Supply Agreement dated May 1, 2008) EXHIBIT E Main San Gabriel Basin Description (Exhibit H from Water Supply Agreement dated February 26, 2002)
OHS West:260381265.8
8966-1 ASS/MAA 19

ENHIBIT A

EXHIBIT A

MILLER'S PRESCRIPTIVE PUMPING RIGHTS
Miller's Prescriptive Pumping Rights are described in Appendix K to the Main San Gabriel Basin Watermaster Report on Final Determination of Operating Safe Yield for 2001-2002 Through 2005-2006 ("Report'). The amount of Miller's Prescriptive Pumping Rights described in Exhibit K are subject to annual adjustment based on the Safe Yield as determined by the Watermaster, and any amount of carryover as listed in Appendix Hito the Report (or to any subsequent report).
•
073452.0058 LOS ANGELES 461114 v32 23

EXHIBIT B

MILLER LEASE

TEMPORARY ASSIGNMENT OR LEASE OF WATER RIGHT
For a valuable consideration, receipt of which is hereby acknowledged, _ ("Assignor") does hereby and terminating
assign and transfer to _ The folowing water Assignes® commencing on on-
(Check the following appropriate category)
[] Production Right AF I] Integrated Production Right (consisting of acre-feet of "Prescriptive Pumping Component" and _
acre-feet of "Diversion Component")
[I Prescriptive Pumping Right _AF
AF I] Carry-over Right AF
[] Base Annual Diversion Right
adjudicated to Assignor or his predecessor in the Judgment in the case of "Upper San Gabriel Valley Municipal Water District v. City of Alhambra, et al*, Los Angeles Superior Court No. 924128.

Said assignment is made upon condition that:
(1) Assignee shall exercise said right on behalf of Assignor for the period described hereinabove and the first water produced by Assignee from the Relevant Watershed of the Main San Gabriel Basin (2) Assignee shall put all waters utilized pursuant to said transfer to reasonable beneficial use; and Assignee shall pay all Watermaster assessments on account of the water production hereby (3)
assigned or leased.

DATED:

ASSIGNEE ASSIGNOR
(Signature) Signature
Name of Designee (of Assignee) to Name of Designee (of Assignor) to receive service of Processes & receive service of Processes & Notices: Notices:

Address Address
Telephone No. of Designee: Telephone No. of Designee:

To be executed by both Assignee and Assignor and, if separately requested by Watermaster, be accompanied by a map of the service area where the water was used by Assignor and a map of the service area where the water is intended to be used by the Assignee.
(Have the appropriate individual(s) or corporate attached acknowledgments completed as part of the temporary transfer)
A TRUE COPY HEREOF MUST BE FILED WITH WATERMASTER WITHIN 15 DAYS OF EXECUTION. •
(To be accompanied by completed Exhibit "E" if Assignee is not a party to the Judgment) 073452.0058 LOS ANGELES 461114 v32 24

CORPORATE ACKNOWLEDGMENT

STATE OF CALIFORNIA

COUNTY OF LOS ANGELES SS
On this day of - 200_ _ before me, the undersigned Notary Public, personally appeared
known to me
proved to me on the basis of satisfactory evidence to be the person(s) who executed the within instrument as
on behalf of the Corporation therein named and acknowledged to me that the Corporation executed it.

WITNESS my hand and official seal.

Signature_
Name (Typed or Printed)
Notary Public in and for said
County and State
(SEAL)

CORPORATE ACKNOWLEDGMENT

STATE OF CALIFORNIA
COUNTY OF LOS ANGELES sS
On this _day of _ 200 _ before me, the undersigned Notary Public, personally appeared
known to me
proved to me on the basis of satisfactory evidence to be the person(s) who executed the within instrument as
on behalf of the Corporation therein named and acknowledged to me that the Corporation executed it. •
WITNESS my hand and official seal.

Signature_
Name (Typed or Printed)
Notary Public in and for said
County and State
(SEAL)
073452.0058 LOS ANGELES 461114 v32 25

EXHIBIT C

EXHIBIT C
Termination of Temporary Assignment or Lease of Water Right On or about _ MillerCoors LLC ("MillerCoors") assigned to the City of Azusa ("Azusa") certain prescriptive pumping righis more particularly described on the Temporary Assignment or Lease of Water Right ("Assignment") attached hereto Notice is hereby given that the Assignment is immediately terminated as of the Date of Termination set forth below and that all rights, including without limitation prescriptive pumping rights described in the Assignment have reverted to MillerCoors.

MillerCoors LLC City of Azusa
By:_ By:_
Its:_ Its:

Dated of Termination:_
OHS West:260613509.1

CORPORATE ACKNOWLEDGMENT

STATE OF CALIFORNIA

COUNTY OF LOS ANGELES
On this day of_ _ 20_, before me, the undersigned
Notary Public, personally appeared.
known to me
_ proved to me on the basis of satisfactory evidence to be the person(s) who executed the within instrument as
on behalf of the Corporation therein named and acknowledged to me that the Corporation executed it.

WITNESS my hand and official seal.

Signature
Name (Typed or Printed)
Notary Public in and for said
County and State
(SEAL)
28 073452.0058 LOS ANGELES 461114 v32

CORPORATE ACKNOWLEDGMENT

STATE OF CALIFORNIA
COUNTY OF LOS ANGELES ss
On this _day of_ , 20_, before me, the undersigned
Notary Public, personally appeared
_known to me
executed the within instrumed t an on the basis of satisfactory evidence to be the personts) on behalf of the Corporation therein named and acknowledged to me that the Corporation executed it.

WITNESS my hand and official seal.

Signature_
Name (Typed or Printed)
Notary Public in and for said
County and State
(SEAL)
073452.0058 LOS ANGELES 461114 v32 29

EXHIBIT D

EXHIBIT D
from Amendment No.1 to
Water Supply Agreement dated
May 1, 2008

EXHIBIT A

FORMULA FOR DETERMINING PERMITTED RATE
The following terms and conditions shall govern payments by Miller under the Water Supply Agreement.
• As of May 1, 2008, and continuing through June 30, 2009, a Meter Service Charge payable by Miller will equal $1,098.44 per month and a Commodity Rate payable by Miller will be $1.336 per ccf.
• The Meter Service Charge and Commodity Rate will be adjusted as of July 1, 2009 in accordance with the methodology found in the "Technical Memo: Water Rates for Miller Brewery", dated September 7, 2007 (the "Technical Memo"), attached hereto as Schedule 1, based on the City's then actual cost structure.
• Rate changes following July 1, 2009 will be determined using the methodology in the Technical Memo and such changes shall occur when and if the City adjusts commercial water rates charged to customers of the City generally.

OHS West:260431973.5
SCHEDULE 1
TECHNICAL MEMO: WATER RATES FOR MILLER BREWERY
[See attached]
OHS West:260431973.5 3
FORESIGHT CONSULTING Azusa Light & Water Rate Study
Technical Memo: Water Rates for Miller Brewery
TO: Joseph Hsu, Director of Utilities, Azusa Light & Water Cary Kalscheuer, Assistant to the Director, Azusa Light & Water FROM: Greg Clumpner, Foresight Consulting
DATE: September 7, 2007

BACKGROUND
The Azusa Light & Water (AL&W or City) recently completed a water rate study that updated water rates. for all City water customers except Miller Brewery and the Azusa Greens Golf Course, which have water rates that are established through separate contracts with the City.

Miller's water contract obligated the City to construct, own and maintain the 12-inch pipeline which is dedicated to providing Miller with water service, and obligated Miller to pay for the pipeline, pay for water delivered to Miller, and included a number of additional obligations for each party. However, the non-water rate provisions of the contract are not relevant to the scope of this analysis.

The purpose of this technical memo is to evaluate how Miller's water rates are calculated per its contract with the City. According to this contract, Miller has agreed to pay for the City water provided through the pipeline at a "Permitted Rate" which Miller and the City have agreed will be determined using the same formula and methodology used to calculate the Golf Course's water rate. That formula and methodology are described in detail in a water rate analysis pertormed by Montgomery Watson dated July 12, 1998. Therefore, this analysis consists of interpreting and applying that same methodology to Miller's water service.

RESULTS OF WATER RATE ANALYSIS
Based on the methodology Miller and the City have agreed to, the projected water rates the City of Azusa should charge the Miller Brewing Company are summarized in Table 1.

Table 1
Projected Water Rates for Miller Brewery
Current Calculated Projectod
Rate FY07-08 FY08-09 FY09-10 FY 10-11
Total Miller Charges 31,388,085 $1,403,910 $1,472,771 $1,800,872 Meter Service Charges)
Commodity Rates
The methodology used to calculate these rates is outlined in the remainder of this memo.

However, the projected rates will need to be recalculated each year based on the previous year's actual costs and water consumption using the same calculations and methodology.

Additional instructions for this process are outlined in the Appendix at the end of this memo.

FORESIGHT CONSULTING Azusa Light & Water Rate, Study

RATE ANALYSIS ASSUMPTIONS
There are several key assumptions affecting how Miller's rates should be calculated:
(1) Permitted Water Rate - Miller's contract with the City specifies:
"...Miller is prepared to pay the City the Permitted Rate for the City Water, as such Permitted Rate may be increased on an annual basis pursuant to the formula set forth in Exhibit G subject to the limitation that such increases do not cause the applicable rafe to exceed the applicable Excess Rate;"
(2) Methodology Used to Calculate the Permitted Rate - Although the Permitted Rate specified in the contract was to be defined in Exhibit G of the contract, the City and Miller have agreed to calculate the Permitted Rate using the same methodology that was used to calculate the water rate for the Azusa Greens Golf Course. That rate calculation is defined in an analysis prepared by Montgomery Watson (documented in a letter dated July 12, 1996), which presents a "Simplified Method to Determine Rates" on pages 8 and 9, and summarized in Table 6 of that analysis. (3) Simplified Method to Determine Rates - As discussed and demonstrated in Montgomery Watson's analysis, there are several ways that the "actual costs" of producing and delivering water could be calculated. However, the Simplified Method presented in their analysis produces what AL&W has indicated is considered a fair and equitable rate by both the City and Miller. That method relies on AL&W's budgeted operating cost and consumption records used in the City's recent water rate study!.

RESULTS OF THE WATER RATE ANALYSIS
Table 2 on the next page summarizes the calculation of Miller's projected water rates for the next five years. These calculations follow the "Simplified Method to Determine Rates" in Montgomery Watson's analysis. Although we will defer to Montgomery Watson's memo for a more detailed explanation of this methodology, essentially it determines Miller's relative share, or equitable allocation, of the City's fixed and yariable costs of producing water for the rest of the City's customers and sets the water rate at six percent (6%) above the "actual cost." That is, this methodology allows the City to charge a rate "...not in excess of 6 percent above the actual cost of producing and delivering irrigation water, including administration, depreciation and overhead.

Therefore, we have taken this methodology as it was originally applied to the Golf Course and adapted it to Miller's circumstances and current City data.

Tables 3 and 4 provide supporting data used in the calculations shown in Table 2. For example, Table 3 summarizes: (1) Miller's share of transmission/distribution capacity, which is Miller's capacity divided by total capacity for the rest of the City's customers, and (2) Miller's share of consumption based on actual water consumption data for the previous year (2006).

When Miller's delivery capacity and water consumption are divided by the City's totals, the resulting ratios are the percentages shown in Table 2 as "Miller's Share" that are used to calculate Miller's water rates.

Table 4 shows the calculation of the total capacity of the City's water system to deliver water based on the number of meters and the individual capacities of the various meter sizes. 1 Final Report: COS Study for Municipal Water Rates for Azusa Light & Water, April 17, 2007 2 Water Rate Analysis - Azusa Greens Goll Course, Montgomery Watson, page 1, July 12, 1996.

FORESIGHT CONSULTING Azusa Light & Water Rate Study
Table 2
Calculation of Commodity/Capacity Based Charges to Miller Brewery* Relative Projected Rate Revenue Requirements
Ratios (a) FY'07-08 FY'08-09 FY 09-10 FY 10-11 FY 11-12 Calculation of Availability and Commedity Components of Service Charges Availability (meter service) Charges 32.9% $5,068,139 $5,135,292 $5,515,534 $5,588,615 $6,002,424 Commodity Charges 671% $10,329,3Z0 S10,466,235 $11,241,207 $11,390,153 Total Service Charge Revente $12,233,537
100.0% $15,397,509 $15,601,526 $16,756,741 $16,978,768 $18,235,961 Operating Expenses $15,245,861 $16,567,598 $20,579,426 $21,208,859 Non-Operating Expensee $15,608,169
$307,950 $312,031 $335,135 $339,575 $364,719
Total Expenses) $15,553,811 $16,902,733 $20,919,002 $21,573,579 $15,920,199
Allocation of Availabllity and Commodity Expenses te Miller Availability (meter service) Charges Entire City
$5,119,586 $5,240,184 $5,563,588 $6,885,555 $7,101,011
Commodity Charges $10,434,225 $10,680,015 $11,339,145 $14,033,446 $14,472,567 Total Expenses $15,553,811 $15,920, 199 $16,902,733 $20,919,002 $21,573,579 Allocation to Miller
Miller's Share: Availability (meter service) Charges 0.331% 0.328% 0.324% 0.321% 0.317% Miller's Share: Commodity Charges 12.388% 12.240% 12.094% 11.949% 11.805% Availability (meter service) Charges $16,949 $17,165 $18,031 $22,077 $22,523 Commodity Charges $1,292,566 $1,307.278 $1,371,376 $1,676,860 $1.708,482 Total Expenses - $1,309,515
$1.324,443 $1,389,406 $1.698,936 $1,731,005
Total to be Charged to Mille% more) $1,388,085 $1,403,910 $1,472,771 $1,800,872 $1,834,865
$1.766
• Raine Rais as the unctiona cost action from Tal C Fresh race udy Final Roper 4p0, 4p0r0i, ery Wason, 7-1286. b. Rate revenue from current rates plus rate increases from Table 9, Final Report: COS Study for Municipal Water Rates, 4-17-07.. c. Franchise fee expenses from AL&W budget projections, Table 3, Final Report: COS Study for Municipal Water Rates, 4-17-07. d. Baseline Net Revenue Requirements from Table 9, Final Report: COS Study for Muricipal Water Rates, 4-17-07.

FORESIGHT CONSULTING Azusa Light & Water Rate Study
Meter Capacity Unisand Water Consumption 2006 and Projections Through 2010 Potable Meters Total Capacity Meter Size (Feb 2007) Capacity Ratio Units
Miller Capacity (12" N 1 143.33 - 143
Total City Capacity 20,372 - 43,295
Ratio of Miller Capacity to Total System Capacity (2006) 0.331% 2006 - Actual 2007 - Proleded 2008 - Profeded 2009 - Prolected 2010 - Prolected Miller's Capacity 143 143 143 143 143
Capacity - Rest of Cit 43,295 43,757 44,226 44,703 45,188 Miller's Share (b): 0.331% 0.328% 0.324% 0.321% 0.317%
Annual Water Consumption
2006- Actual 2007- Proleded 2008 - Proleced 2009- Protected 2010- Projected Miller, ccf (c) 1,039,200 1,039,200 1,039,200 1,039,200 Rest of City, ccf (d) 8,388,932 8,489.907 8.696.946 8.B03,075

11.805%
. Assumos Miller's wator usa remains constant in the future. This needs to ba updated each yoar with previous yoar's actual date I. Excludes Golf Courso and Millor water usa
Table 4
Total Meters and Capacity Units in the City of Azusa
Potable Capacity Total Capacity
Meter Size Meters (a) Ratio (b) Units
(a] [c-(a)b)
5/8" 3,136 1.00 3,136
3/4' 14,120 1.00 14,120
1,489 1.67 2,487
259 3.33 862
864 5.33 4,605
114 11.67 1,330
116 20.00 2,320
154 41.67 6,417
99 60.00 5,940
20 96.67 1,933
• 1 143.33 143
Total (2006) 20,372 43,295
a. Source of Data: City Records as of 2-20-07 (Customer Count Summary) D. From Foresight Consulting's Roport: "Cost-of-Service Study for Municipal Water Rates - AL&W," Final Report - Appendix, Table MC-2, April 17, 2007.

NEED TO UPDATE THE WATER RATE ANALYSIS
is mentioned above, the methodology used to calculate Miller's water rate relies on cost an consumption data from the preceding year. Therefore, water rates after FY'07-08 are on!! projections, not the actual rates that will be used. Consequently, rates after FY'07-08 will need to be re-calculated using the most recent "previous-year" data. These data consist of AL&W's operating and non-operating costs, and total annual consumption for Miller and all other City customers (excluding Miller and the Golf Course). We have included tables in the Appendix that highlight the data that will need to be update, as well other additional data.

Azusa Light & Water Rate Study

FORESIGHT CONSULTING

APPENDIX
Appendix Tables 1, 2 and 3 below highlight the data that will need to be updated in order to re- calculate Miller's water rate after FY'07-08. We have provided AL&W staff with an Excel spreadsheet that includes these tables in order to facilitate this recalculation process.

Appendix Tables 4 and 5 provide projections of the number of customers through 2010 by / meter size (Table 4) and the total capacity units for those projected customers (Table 5), which are used to calculate supporting data, including the ratios of Miller's share of service and commodity charges shown in Table 2 above.

Appendix Table 1
Calculation of Commodity/Capacity Based Charges to Miller Brewery® (Re-calculation Data Needed) Relativo Fr10-11 FY 11-12
Ratlos (a) Fr07-03 FY08-09
Calculation of Avallabilty and Commodity Components of Service Charges $5,068,139 $5,135,292 $5,515,534 $5,588,615 $6,002,424
Availability (meter service) Charges 32.9%

57.1% $10,329,370 $10,466,235 §11.241.207 $11,390,153 §12,233,537.

Commodity Charges $16,978,768 $18,236,961
Total Service Charge Revenua (3) 100.0% $15,397,509 $16,601,526 $16,756,741 $15,245,861 $15,608,169 $16,587,598 520,579,426 $21,208,859 Operaling Expensos $335,135 $399,575 $361,719
Non-Oparating Expenses (a) $307,950 $312,031
$15,553,811 $15,920,199 $16,902,733 $20,819,002 $21,573,579 Total Expenses (d)
Allocation of Avallability and Commodity Expenses to Miller Entro City 57,101,011
$5,119,588 $5.240,184 $5,563,588 56,885,555
Availabilty (metor service) Charges 514,033,446 $14.472.567 Commodity Charges $10,434,225 $10,680,015 $11,339,145
$15,553,811 $15,920,199 $16,902,733 $20,919,002 $21,573,579 Total Expenses
Allocation to Miler

0.331% 0.325% 0.325% 0321% 0317%
Miller's Share: Availabilty (meter sorico) Charges 11.94836 19.805% 12,388% 12.280% 12094%
Miller's Share: Commodity Charges 522,077 • $22,523
Availability (meler service) Charges $16,949 $17,165 $18,031 21,292,566 $1,307,278. $1,371,376. $1.676,860 §1.708,482 Commodity Charges $1,698,936 $1,731,005
31,309,515 $1.324.443 51,389,406
Total Expenses $1,800,872 $1,834,865
Total to be Charged to Miller (6% mora) 51,388,085 $1,403,910 $1,472,771 $1.336 $1.351 $1.417 $1.733 $1.766
Miller Water Rate (Assumes 2006 Consumpion Level
Data to be updatod
Appendix Table 2
Meter Capacity Units and Water Consumption (Rocalcuation Data Necded) Potable Meters Total Capacity* Capacity Ratio Units
1 143.33 143
Miller Capacity (12" Meter)
Total City Capacity 20,372 43,295

0.331%
Rate of Milor Capachy to Toll tam Capacity 2008-) 2007- Profected 2008 - Protocted 2009 - Prolacted 2010 - Proloctod Miller's Capacity 143 143 143 143
Capacity - Rest of City (o) 43,295 43,757 44,226 44,703 45,188 Miller's Share (b): 0.331% 0.328% 0.324% 0.321% 0.317%
Annual Water Consumption
2006 - Actual 2007 - Profected 2008 - Projecled 2009- Protected 2010 - Prolacted Miller, ccf (c) 1,039,200 1,039,200 1,039,200 1,039,200 1,039,200 Rest of City, ccf (d) 8,388,932 8,489,907 8,592,568 8,696,946 8,803,075

12.388% 12.240% 12.094% 11.949% 11.805%
Miller's Share (b):

Data to be updated

FORESIGHT CONSULTING Azusa Light & Water Rate Study
Appendix Table 3
Total Meters and Capacity Units (Re-calculation Data Needed) Potable Capacity Total Capacity
Meter Size Meters Ratio Units
la]
5/8' 3.136 1.00 3,136
3/4" 14,120 1.00 14,120
1" 1,489 1.67 2,487
11/2" 259 3.33 862
864 5.33
3" 114 11.67 1,330
4" 116 20.00 2,320
6" 154 41.67 5,970
8" 99 60.00
10' 20 96.67 1,933
12" 1 143.33 143
Total 43,295

FORESIGHT CONSULTING
Azusa Light & Water Rate Sludy
Appendix Table 4
Current and Projected AL&W Customer Accounts
Total 2006 Residential 2007 (g) 2008 (c) 2009 (g) 2010 (c) Non- Residential Non-
Meter Size Apcounts 5/8-344/a) Residential (o) Residential Residential Non- 5/8" 3,136 Residential (0) Iotal Total 5/83/45) Resid (0) Total 3,039 158 3,196 3,100 158 3,258 3,162
3/4" 14,120 13,682 710 14,392 3,321 3,225 160 3,385
1,489 13,958 713 14,669 14,235 14,952 14,520 720 15,240

1.5' 1,496 1,498 1,504 1,504 1,511
259 260 260 262 1,519 1,519
864 262 263 264 264
868 868 873 873
114 115 115 877 881 881
116 115 115 116 116 116
117 117 117 117
154 155 155 118 118 118
99 158 156 0 0. 156 157 157
10" 20 100 100 100
20 21,074 21,435 21,804
b. Assumas 5% of 5/8'-3/4" meters and all other meters are commercial. c. Assumes Rosidential growth in consumption is 2%6/year and Non-Rosidentlel is 0.5%/yoar.

Appandix Table 5
Current and Projected AL&W Customer Accounts
2007 2008 2009
Capacity Total Total Capacity Total Total Capacity 2010 Meter Size Ratio Total Total Capacity Total Total Capacity Meters Units (a) Meters Units (a) Meters Units (a)
5/8° 1.00 3,196 3,196 Meters Units (a)
3/4" 3,258 3,258 3,321 3,321

1.00 14,392 14,392 14,669
1" 1.67 1,496 14,669 14,952 14,952 15,240 15,240

1.5 2,499 1,504 2,512 1,511

3.33 260 867 262 2,524 1,519 2,537
2" 5.33 871 263 875 880
868 4,628 873 4,651 877 4,675
3" 11.67 115 1,337 4,698

20.00 115 1,344 116 1,350 116
117 2,332 117 1,357

41.67 2,343 118 2,355 118 2,367
155 6,449 156 6,482

60.00 99 5,970 156 6,514 157 6,546
10" 96.67 100 6,000 100 6,030 101 6,060
1,963 1,972
146
45,188

EXHIBIT E
from Water Supply Agreement
dated February 26,2002

EXHIBIT H

MAIN SAN GABRIEL BASIN

BOUNDARIES OF RELEVANT WATERSHED
The following described property is located in Los Angeles County, State of California:

Beginning at the Southwest corner of Section 14, Township 1 North, Range 11 West, San Bernardino Base and Meridian;
Thence Northerly along the West line of said Section 14 to the Northwest corner of the South half of said Section 14;
Thence Easterly along the North line of the South half of Section 14 to the East line of said Section 14;
West and continuing Northerly along the East line of Section 11 to the Northeast corner of said Thence Northerly along the East line of said Section 14, Township 1 North, Range 11 Section 11;
Thence Easterly along the North line of Section 12 to the Northeast corner of said Section 12;
Thence Southerly along the East line of said Section 12 and continuing Southerly along the East line of Section 13 to the Southeast corner of said Section 13, said corner being also the Southwest corner of Section 18, Township I North, Range 10 West; Thence Easterly along the South line of Sections 18, 17, 16 and 15 of said Township I North, Range 10 West to the Southwest corner of Section 14; Thence Northerly along the West line of Section 14 to the Northwest corner of the South half of Section 14;
Thence Easterly along the North line of the South half of Section 14 to the East line of said section;
Thence Northerly along the East line of said Section 14, and continuing Northerly along the West line of Section 12 of said Township 1 North, Range 10 West to the North line of said Section 12;
Thence Easterly along the North line of said Section 12, to the Northeast corner of said Section 12, said corner being also the Southwest corner of Section 6, Township 1 North, Range 9 West;
Thence Northerly along the West line of said Section 6 and continuing Northerly along West line of Sections 31 and 30, Township 2 North, Range 9 West to the Westerly prolongation of the North line of said Section 30;
32 073452.0058 LOS ANGELES 461114 v32
Thence Easterly along said Westerly prolongation of the North line of said Section 30 and continuing Easterly along the North line of Section 29 to the Northeast corner of said Section 29;
Thence Southerly along the East line of said Section 29 and continuing Southerly along the East line of Section 32, Township 2 North, Range 9 West, and Thence continuing Southerly along the East line of Section 5, Township 1 North, Range 9 West to the Southeast corner of said Section 5;
Thence Westerly along the South line of said Section 5 to the Southwest corner of said Section 5, said point being also the Northwest corner of Section 8; Thence Southerly along the West line of said Section 8 and continuing Southerly along the West line of Section 17, to the Southwest corner of said Section 17, said corner being also the Northwest corner of Section 20;
Thence Easterly along the North line of Sections 20 and 21 to the Northwest corner of Section 22, said corner being also the Southwest corner of Section 15; Thence Northerly along the West line of said Section 15 to the Northwest corner of the South half of said Section 15;
Thence Easterly along the North line of said South half of Section 15 to the Northeast corner of said South half of Section 15;
Southwest corner of Section 23;
Thence Easterly along the South line of Sections 23 and 24 to the East line of the West half of said Section 24;
Thence Northerly along said East line of the West half of Section 24 to the North line thereof;
Thence Easterly along said North line of Section 24 to the Northeast corner thereof, said point also being the Northwest corner of Section 19, Township 1 North, Range 8 West; Thence continuing Easterly along the North line of Section 19 and Section 20 of said Township 1 North, Range 8 West to the Northeast corner of said Section 20; Thence Southerly along the East line of Sections 20, 29 and 32 of said Township 1 North, Range 8 West to the Southeast corner of said Section 32; Thence Westerly along the South line of Section 32 to the Northwest corner of the East half of Section 5, Township 1 South, Range 8 West;
073452.0058 LOS ANGELES 461114 v32 33
Thence Southerly along the West line of the East half of said Section 5 to the South line of said Section S;
Thence West to the East line of the Northerly prolongation of Range 9 West; Thence South 67 degrees 30 minutes West to an intersection with the Northerly prolongation of the West line of Section 27, Township 1 South, Range 9 West; Thence Southerly along the Northerly prolongation of said West line of Section 27 and continuing Southerly along the West line of Section 27 to the Southwest corner of said Section 27, said point being also the Southeast corner of Section 28; Thence Westerly along the South line and Westerly projection of the South line of said Section 28 to the Northerly prolongation of the West line of Range 9 West; Thence Southerly along said prolongation of the West line of Range 9 West to the Westerly prolongation of the North line of Township 2 South; Thence Westerly along said Westerly prolongation of the North line of Township 2 South, a distance of 8,500 feet;
Thence South a distance of 4,500 feet;
Thence West a distance of 10,700 feet;
Thence South 29 degrees West to an intersection with the Northerly prolongation of the West line of Section 20, Township 2 South, Range 10 West; Thence Southerly along said Northerly prolongation of the West line of said Section 20 and continuing Southerly along the West line of Section 20 to the Southwest corner of said Section 20;
Thence South a distance of 2,000 feet;
Thence West a distance of two miles, more or less, to an intersection with the East line of Section 26, Township 2 South, Range 11 West;
Thence Northerly along said East line of Section 26 and continuing Northerly along the Sest line of Section 23, Township 2 South, Range 11 West lo the Northeast corner of said Thence Westerly along the North line of said Section 23 to the Northwest corner thereof, said point being also the Southeast corner of Section 15, Township 2 South, Range 11 West; Thence Northerly and Westerly along the East and North lines, respectively, of said Section 15, Township 2 South, Range 11 West, to the Northwest corner thereof; 073452.0058 LOS ANGELES 461114 v32 34
Thence continuing Westerly along the Westerly prolongation of said North line of Section 15, Township 2 South, Range 11 West to an intersection with a line parallel to and one mile East of the West line of Range 11 West;
Thence Northerly along said parallel line to an intersection with the Northerly boundary of the City of Pico Rivera as said City of Pico Rivera existed on July 17, 1970; Thence Westerly along said City boundary to an intersection with the East line of Range 12 West;
Thence Northerly along said East line of Range 12 West to the North line of Township 2 South;
Thence Northerly along said Southerly prolongation of said East line of the West half of said Section 26 to the Southeast corner of said West half; Thence Westerly along the South line of Sections 26, 27 and 28, Township 1 South, Range 12 West, to the Southeast corner of Section 29, Township 1 South, Range 12 West; Thence Northerly along the East line of said Section 29 to the Northeast corner of the South half of said Section 29;
Thence Westerly along the North line of the South half of said Section 29 to the Northwest corner thereof;
Thence Northerly along the West line of Sections 29, 20, 17 and 8, Township 1 South, Range 12 West;
Thence continuing Northerly along the Northerly prolongation of the West line of Section 8, Township 1 South, Range 12 West to an intersection with the North line of Township 1 South; Thence Easterly along said North line of Township 1 South to the Northeast corner of Section 3, Township 1 South, Range 12 West;
Thence North 64 degrees 30 minutes East to an intersection with the West line of Section 23, Township 1 North, Range 11 West;
Thence Northerly along the West line of said Section 23 to the Northwest corner thereof, aid point being the Southwest corner of Section 14, Township 1 North, Range West and saic oint being also the point of beginning
•
073452.0058 LOS ANGELES 461114 v32
Main San Gabriel Basin
Physical Description
The Main San Gabriel Basin lies in eastern Los Angeles County, California. The hydrologic basin or watershed coincides with a portion of the upper San Gabriel River watershed, and the aquifer or groundwater basin underlies most of the San Gabriel Valley.

The groundwater basin is bounded by the San Gabriel Mountains to the north, San Jose Hills to the east, Puente Hills to the south, and by a series of hills and the Raymond Fault to the west.

The watershed is drained by the San Gabriel River and Rio Hondo, a tributary of the Los Angeles River.

Principal water-bearing formations of the basin are unconsolidated and semi-consolidated sediments which range in size from coarse gravel to fine-grained sands. The major sources of natural recharge are infiltration of rainfall on the valley floor and percolation of runoff from the adjacent mountains. The basin also receives imported water and return flow from applied water. 073452.0058 LOS ANGELES 461114 v32 36