PLEASANTON GARBAGE FRANCHISE AGREEMENT

EXHIBIT A The annual return on equity (ROE) is defined as the difference between franchise revenue and allowable franchise expenses. Franchise expenses shall include corporate taxes calculated at prevailing California and Federal tax rates, and shall include expenses and reserves established in accordance with the provisions of Paragraph 19.2(d), (e), (f), and (g) of the Agreement. The ROE shall be determined annually covering a twelve (12) month fiscal year ending each March 31. The City and the Collector shall meet to determine the status of the landfill reserve and the set aside provisions once landfill closure has been completed. The minimum and maximum ROE limitations shall be as specified in Paragraph 19.2(e). When the annual ROE is greater than the maximum ROE limitation, the excess revenues over and above the maximum limitations shall be held in a reserve to defray future rate increases. When the resulting annual ROE is less than the minimum ROE limitation, the deficiency in revenues shall be recoverable from future timely rate increases, and/or from reserves (if any) set up to defray future rate increases. The equity base shall be the total of amounts as of the last day of the preceding fiscal year and shall include all stockholder loans, advances capital or common stock, retained earnings and net worth of Pleasanton Garbage Service and M M Land Company but excluding Tri- Valley Pumping Service. The equity base shall he reduced by the adjusted value of any unamortized covenant or franchise costs deferred as of the last day of each fiscal year. The adjusted value of these deferred costs shall be equal to the book value minus 52.5% representing the composite tax effect of Federal and California tax rates. Franchise revenue is defined as gross revenue under this Agreement reduced by a landfill reserve set aside, calculated pursuant to Exhibit A(I) attached hereto.