s:\morhill\agree.2 9\8\98

. RENEWAL OF FRANCHISE.
.. Parties to the Agreement. The parties to this Agreement are:
() Grantor: The City of Morgan Hill, a municipal corporation, having its principal office at 17555 Peak Avenue, Morgan Hill, California 95037.
() Grantee: Falcon Cable Systems Company II, L.P., with ownership as set forth in Exhibit B, and having a local office in this state at 7640 Eigleberry Street, Gilroy, California 95113.
.. Representatives of the Parties and Service of Notices. The representatives of the parties who are primarily responsible for the administration of this Agreement, and to whom formal notices, demands and communications must be given, are as follows:
() The principal representative of Grantor is:
City Manager
Morgan Hill City Hall
17555 Peak Avenue
Morgan Hill, California 95037

() The principal representatives of the Grantee are:
Regional Manager
Falcon Cable TV
7640 Eigleberry Street
Gilroy, CA 95020

Vice President Regulatory Affairs
Falcon Cable
10900 Wilshire Boulevard, 15th Floor
Los Angeles, CA 90024

() Formal notices, demands and communications to be given by either party must be in writing and may be effected by personal delivery, or by first class or certified mail, return receipt requested.
() If the name of the principal representative designated to receive the notices, demands, or communications, or the address of that person, is changed, written notice must be given within thirty (30) days of that change.
.. Definitions. Unless otherwise defined, or if the use or context clearly requires a different definition, certain words, terms, and phrases and their derivations, as used in this Agreement have the meanings set forth below in Section 14 of this Agreement.
.. Conflicts. In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of Chapter 5.20 of the Code, the provisions of this Agreement will control.
.. Grant. The cable television system franchise originally granted by Ordinance No. 247 on December 4, 1968 to Grantee, is hereby renewed, subject to the terms and conditions of this Agreement and the provisions of Chapter 5.20 of the Code. This renewal extends the franchise, authority, right, and privilege to construct, reconstruct, operate, and maintain a cable television system in the "franchise service area" which is here defined as the territorial limits of the City of Morgan Hill as they exist on the effective date of this Agreement, and any additional territory that may be annexed during the term of this Agreement.
.. Right of Grantor to Issue and Renew Franchise. Grantee expressly acknowledges the right and authority of Grantor to issue and renew the franchise, and Grantee agrees it will not hereafter challenge Grantor's exercise of this right and authority in any court of competent jurisdiction, or otherwise.
.. Effective Date of Renewal. This franchise renewal will commence on the effective date of the resolution authorizing the renewal, or on the date specified in that resolution as the effective date of renewal. Prior to the effective date, Grantee must file with the City Clerk its written acceptance of the resolution renewing the franchise in the form requested by Grantor. Within twenty-five (25) days after the effective date of the resolution, Grantee must file with the City Clerk any required performance bond, security fund, and insurance policies or insurance certificates; provided, however, that if the filing of these documents does not occur within that twenty-five (25) day period, or any authorized extension of that period, Grantor may declare this franchise renewal null and void.
.. Duration. The term of the franchise renewal is ten (10) years from the effective date as specified in Section 1.7. Any further renewal of the franchise will be in accordance with then applicable law.
.. Franchise Not Exclusive. The cable television fran chise granted by this Agreement may not be construed to limit in any manner the right of Grantor, through its authorized officers and in accordance with applicable law, to grant to other individuals or entities, by franchise, permit, license, or otherwise, any rights, privileges or authority similar to or different from the rights, privileges and authority herein set forth, in the same or other streets, public ways, public places, or other property that Grantee is entitled to occupy; provided, however, that those additional grants will not operate to revoke, terminate, or materially and adversely affect any rights granted to Grantee by this Agreement.
.. Scope of the Franchise.
() Grantee is authorized and obligated to construct, reconstruct, and operate the cable television system within the public streets and rights-of-way of the City of Morgan Hill. The authority granted includes the privilege to use Grantee's cable television system in the franchise service area for the provision of both cable service and other services authorized by Grantor.
() Grantor reserves all rights it now has or subsequently acquires with respect to the authorization and regulation of non-cable services, including, but not limited to, the right to impose reasonable terms and conditions in addition to or different from those set forth in this Agreement with respect to the provision of any non-cable services, and to charge a franchise fee or other form of consideration or compensation in excess of that specified herein; provided that such terms and conditions and such franchise fee or other form of consideration or compensation must be consistent with federal and state law applicable to non-cable services.
() Grantee must provide written notice to Grantor at least thirty (30) days before commencing the offering or distribution of any non-cable services.
(d) Grantor and Grantee expressly reserve the right to seek a judicial determination as to whether any particular service offered by Grantee on its system constitutes cable service for purposes of this franchise.
. GENERAL REQUIREMENTS.
.. Governing Requirements. Grantee must comply with all provisions of this Agreement, the provisions of Chapter 5.20 of the Code, and all other applicable laws and regulations.
.. Franchise Fee.
() As compensation for the franchise granted by Grantor, and in consideration for authorization to use the streets and public ways of Grantor for the construction, reconstruction, operation, and maintenance of Grantee's cable television system, Grantee will pay to Grantor the following:
An annual franchise fee of five percent (5%) of the Annual Gross Receipts, as defined in Section 14 of this Agreement, received by Grantee from the operation of the cable television system in Grantor's franchise service area, including those revenues received by Grantee from sources other than subscribers in connection with the transmission of advertisements, the provision of programming, and the distribution of other authorized services over Grantee's system within the franchise service area.
() The franchise fee specified above in Subsection 2.2(a) must be computed and paid by Grantee to Grantor's Finance Department on an annual basis or before March 30 for the prior calendar year. This payment must be accompanied by the reports specified in Subsection 11.4 of this Agreement.
() If any franchise fee payment, or recomputed amount, is not made on or before the due date specified in Subsections 2.2(b), Grantee must pay as additional compensation, an interest charge, computed from the applicable due date, at an annual rate equal to the prevailing commercial prime interest rate in effect on the due date, plus one percent (1%).
() In addition to any late payment made in accordance with paragraph (c) above, if a payment is overdue by sixty (60) days or more, Grantee will pay to Grantor a sum of money equal to five percent (5%) of the amount due in order to defray additional costs and expenses incurred by Grantor as a consequence of that delinquent payment.
(e) Grantee shall pay the franchise fee required by this section to Grantor for the period of time that Grantee has operated the cable television system between the expiration of the former franchise agreement and the effective date of this Agreement.
.. Payment to Grantor.
() No acceptance of any payment by Grantor may be construed as an accord that the amount is in fact the correct amount, nor may acceptance of payment be construed as a release of any claim Grantor may have against Grantee for any additional sums payable under the provisions of this Agreement.
() All amounts paid are subject to independent audit and recomputation by Grantor. If, after audit, any recomputation indicates a franchise fee underpayment of more than three percent (3%), Grantee must reimburse Grantor, within twenty (20) days of written notification, for all reasonable costs and expenses incurred in connection with that audit and recomputation.
.. Insurance Requirements.
() Upon the effective date of this Agreement, Grantee, at its sole cost and expense, must obtain, and thereafter maintain for the full term of this Agreement all of the following insurance coverages:
. Types of Insurance and Minimum Limits. The coverages required below may be satisfied by any combination of primary liability and excess liability policies.
. Workers' Compensation and Employer's Liability Insurance in conformance with the laws of the State of California.
. Grantee's vehicles, including owned, non-owned (i.e., owned by Grantee's employees and used in the course and scope of employment), leased, or hired vehicles, must each be covered with Automobile Liability Insurance in the minimum amount of one million dollars ($1,000,000) combined single limit per accident for bodily injury and property damage.
. Grantee must obtain and maintain Comprehensive or Commercial General Liability Insurance coverage in the aggregate annual amount of two million dollars ($2,000,000) combined single limit, including bodily injury, personal injury, and broad form property damage. This insurance coverage must include, without limitation:
() Contractual liability coverage adequate to meet the Grantee's indemnification obligations under this Agreement; and
() a cross-liability clause.
. Grantee must obtain and maintain Slander/Libel/Defamation Liability Insurance in the aggregate amount of one million dollars ($1,000,000).
. All required Automobile Liability Insurance and Comprehensive or Commercial General Liability Insurance policies must contain the following endorsement:
"The City of Morgan Hill is added as an additional insured as respects the operations of the named insured under the cable television franchise granted by the City, and this insurance specifically covers the acts and omissions of the named insured, and its employees, agents, and subcontractors, in the performance of all work and services thereunder."
. The insurance required of Grantee under this franchise is primary, and no insurance held by Grantor may be called upon to contribute to a loss under this coverage.
. All insurance policies must provide that, in the event of material change, reduction, cancellation, or non-renewal by the insurance carrier for any reason, not less than thirty (30) days' written notice will be given to Grantor by registered or certified mail of such intent to cancel, materially change, reduce, or not renew the coverage. An authorized agent of the insurance carrier must provide to Grantor, on such schedule as is requested by Grantor, a certification that all insurance premiums have been paid and all coverages are in force. If for any reason Grantee fails to obtain or keep any of the insurance in force, Grantor may (but is not required to) obtain that insurance. In that event, Grantee must promptly reimburse Grantor its premium costs therefor, plus one and one-half percent (1-1/2%) monthly interest thereon until paid.
. All insurance must be obtained from companies that are licensed to do business in California.
6. Any deductible or self-insured retentions must be approved by Grantor. At the option of Grantor, the insurer must reduce or eliminate that deductible or self-insured retention as respects Grantor, its officers, employees and agents, or Grantee must procure a bond guaranteeing payment of losses and related investigations, claims administration, and defense expenses.
() Grantee must provide to Grantor, within twenty- five (25) days after the effective date of this Agreement, written insurance binders, statements of property coverage, certificates of insurance, or certified copies of policies evidencing the required coverage.
() Grantor reserves the right to require Grantee to increase the amount or limits of insurance coverage specified above no more often than every three (3) years during the term of the franchise. Any such increase will be determined in accordance with the procedures set forth in Subsection 2.6 of this Agreement.
.. Performance Bond and Security Fund.
() Performance Bond. Grantee must provide Grantor a performance bond guaranteeing the proper and timely completion of the reconstruction and upgrade of the cable system. The performance bond, which may be a corporate surety bond, must be in a principal sum of at least One Million Dollars ($1,000,000) and in a form approved by Grantor's City Attorney. The performance bond may be reduced by the amounts approved by Grantor based on Grantee's progress in completing the reconstruction and upgrade of the cable system, provided that Grantee is not then in material default under any construction or upgrade related provision of this Agreement. The performance bond must be filed with and approved by Grantor prior to the commencement of the reconstruction and upgrade. Subject to Grantor approval, this performance bond requirement may be satisfied by an irrevocable letter of credit in favor of Grantor and in a form approved by Grantor.
() Security Fund. Within thirty (30) days after the effective date of this Agreement, Grantee must provide to Grantor a security fund to guarantee the Grantee's performance of its obligations under this Agreement. The security fund initially must be in the sum of not less than Fifty Thousand Dollars ($50,000), which sum may be reduced to Twenty Five Thousand ($25,000) upon the satisfactory completion of the cable system reconstruction and upgrade. The security fund is subject to and must comply with the following requirements:
. Grantee must deposit into an interest- bearing bank account established or approved by Grantor, the sum required to be deposited into the security fund. This sum must be maintained on deposit throughout the term of the franchise, and all interest thereon will be payable to Grantee.
. The security fund will be available to Grantor to satisfy any and all claims, penalties, liens, fees, payments, costs, damages, or taxes due Grantor from Grantee that arise by reason of the construction, reconstruction, operation, or maintenance of the cable television system.
. Grantee may withdraw any interest accrued on the security fund at any time. However, during the existence of the security fund, Grantee may not withdraw any part of the principal amount without the prior written consent of Grantor.
. Subject to Grantor approval, these security fund requirements may be satisfied by an irrevocable letter of credit in favor of Grantor and in a form approved by Grantor.
. After notice and hearing requirements specified in Section 12 of this Agreement have been satisfied, if Grantee fails or refuses to pay to Grantor any amounts due under the terms and provisions of this Agreement, Grantor may thereafter withdraw from the security fund the amount thereof, plus accrued interest and penalties. Upon that withdrawal, Grantor must give written notice to Grantee of the amount and date of withdrawal.
. Within thirty (30) days after receipt of written notice from Grantor to Grantee that any amount has been withdrawn from the security fund by Grantor to satisfy any of Grantee's obligations specified above in subsection (2), Grantee must deposit sufficient moneys to restore the security fund to the amount required by this Agreement.
. The security fund will become the property of Grantor if the franchise is revoked for cause by reason of any violation of Grantee as specified in Section 9. Within ninety days after expiration of the term of the franchise, Grantee will be entitled to the proceeds of the security fund then on deposit; provided, however, that Grantee is not then in default of its obligations under this Agreement.
. The rights reserved to Grantor with respect to the security fund are in addition to all other rights of Grantor pursuant to this Agreement. Grantor's exercise of rights with respect to the security fund will not constitute an election of remedies or a waiver of any other rights Grantor may have under this Agreement or any applicable law.
() Adjustments. Grantor reserves the right to require Grantee to increase the principal amount of the security fund specified hereunder, no more often than every three (3) years during the term of the franchise. Any such increase will be determined in accordance with the procedures set forth in Section 2.6 of this Agreement.
.. Periodic Adjustments. If the amount of the security fund or insurance coverage required of Grantee under this Agreement is proposed to be increased at specified intervals during the term of the franchise, any such increase will be determined in accordance with the following procedures:
The increase in any amount subject to periodic adjustment under this Agreement will be determined by Grantor's Director of Finance as of the applicable anniversary date of this Agreement, based upon the Consumer Price Index for the San Francisco-Oakland-San Jose, California CPI, as published by the United States Department of Labor, Bureau of Labor Statistics, or its successor. The Director of Finance will compute the percentage difference between the CPI as it existed on the effective date of this Agreement and the CPI as it exists on the applicable anniversary date. The Director of Finance will then increase by such percentage the amount subject to periodic adjustment. The adjusted amount will be rounded off to the nearest dollar. If the Bureau of Labor Statistics revises that index or discontinues the preparation of that index, the Director of Finance must use the revised index or a comparable system for determining fluctuations in the cost of living.
. RIGHTS RESERVED TO THE GRANTOR.
.. Reservation. Grantor reserves every right it may have in relation to its power of eminent domain over Grantee's franchise and property.
.. Delegation of Powers. Any right or power in, or duty retained by or imposed upon Grantor, or any officer, employee, department, commission, or board of Grantor, may be delegated by Grantor to any officer, employee, department or board of Grantor, or to such other person or entity as Grantor may designate to act on its behalf.
.. Right of Inspection of Construction. Grantor has the right to inspect all construction, installation, or other work performed by Grantee in connection with the franchise, and to make such tests as may be necessary to ensure compliance with the terms of this Agreement, so long as that inspection and testing does not unreasonably interfere with Grantee's operations.
.. Right to Require Removal of Property. Consistent with applicable law, at the expiration of the term or any renewal term or extension for which the franchise is granted, or upon its lawful revocation, expiration, or termination, Grantor has the right to require Grantee to remove, within a reasonable period of time and at Grantee's expense, all portions of its cable system and any other property from all streets and public rights-of-way within the franchise service area.
.. Right of Intervention. Grantor has the right to intervene in any suit, proceeding, or other judicial or administrative proceeding in which Grantor has any material interest, and to which Grantee is made a party.
. SYSTEM UPGRADE AND SPECIAL SERVICES.
.. Upgrade. The fiber optic reconstruction and upgrade project that is to be undertaken and completed by Grantee is more fully described in the attached Exhibit C.
.. Outlets for Public Buildings. Upon Grantor's written request, Grantee will install and maintain, without charge, one outlet to each public facility, including public school buildings, provided that the location is within 150 feet of Grantee's cable system or is served by the institutional network required by Section 4.3 of this Agreement and the location may be served by a normal aerial installation or by existing underground conduit. Notwithstanding the foregoing, Grantor's City Hall will be provided with two outlets. Grantee will provide, without charge, basic service to all new and existing outlets at public facilities, including public school buildings, that are within one hundred and fifty (150) feet of Grantee's cable system. Upon Grantor's written request, Grantee also will install, at actual cost for labor and materials without mark-up for profit or overhead, cable and additional outlets at specified public facilities that are located more than 150 feet from Grantee's cable system, or that may require underground or other customized work. Grantor will inform Grantee of the construction of new public facilities so that cable can be installed at the time of construction in order to minimize costs. Grantor or school district representatives may request, at their expense, that Grantee install additional outlets for access to educational channels; provided, however, that such installation must not interfere with the operation of Grantee's cable system, and the quality and method of installation of those additional outlets must be approved by Grantee and must comply with all city, state and federal laws and regulations.
.. I-Net Installation. As part of the system upgrade, Grantee shall install or otherwise provide Grantor the use of four (4) fiber optic lines as an institutional network ("I-net") which shall have the capacity to transmit video, voice and data between the sites designated in Exhibit D. The channels or bandwidth specifically designated for I-Net use shall be reserved, at all times, for the sole use of Grantor and its designated public agencies and the public school district. Grantor agrees that it will use the institutional network only for noncommercial governmental or educational purposes and not for any commercial purpose, nor shall it permit any agency, public school or any user connected to the I-net to do so. Grantor shall not use, nor shall it permit the use of the institutional network by any user connected to the I-net, to provide video, voice or data transmission services to City residents in their homes, or City businesses at their places of business. Grantor shall not charge any fees for use of the I-net, nor shall it permit fees to be charged by any user of the I-net for any purpose. Grantor shall neither use nor permit the use of the institutional network in any manner that may subject Grantee to regulation by the State Public Utilities Commission as a telephone company, nor shall any use of the I-net be permitted by Grantor which may subject Grantee to any additional regulation, tax or fee of any kind, without the express written consent of Grantee. Grantor, and any public agency or other
user of the I-Net, shall be required to indemnify and hold harmless the Grantee from any and all claims, damages, liability, costs and expenses, including reasonable attorney's fees and court costs, directly and solely related to the communications or materials transmitted on the I-Net by Grantor or any public agency or other user, including but not limited to, copyright infringement, libel, slander, defamation, patent, trademark or invasion of privacy claims.

The costs for construction of the I-net, as described in Exhibit D, shall not exceed $160,000, which costs shall be borne initially by Grantee as part of its system upgrade. Provided, however, that Grantor agrees that Grantee shall be authorized to consider all I-net related costs to be "external costs" as defined by FCC rules, and Grantee shall be permitted to pass through such costs to subscribers consistent with FCC rules and regulations.

.. Emergency Alert Capability. Upon request of Grantor, Grantee must make its facilities available for use by Grantor during a disaster or public emergency. Grantee must provide the system with emergency audio override capability so as to enable law enforcement personnel and designated public officials to interrupt and cablecast emergency audio messages simultaneously on all channels in a manner consistent with FCC rules and any other applicable laws. Equipment for these purposes will be installed, at Grantee's sole expense.
.. No Offset Against Franchise Fees. In accepting this franchise, Grantee acknowledges that the commitments specified in this Section 4 are voluntarily assumed, and their costs will not be offset against any franchise fees payable by Grantee to Grantor during the term of the franchise.
.. Parental Control Devices. Grantee must provide subscribers, upon request and without charge, with a parental control device, "lockbox," or digital code which enables the subscriber to prevent the viewing of selected channels. Grantee may charge subscribers for the cost of a converter box if such box is required in order to provide the parental control device.
.. Technical Standards. The FCC Rules and Regulations, including Part 76, Subpart K (Technical Standards), and any amendments or supplements thereto, will apply to the Grantee's operations to the extent permitted by applicable law.
.. Internet and other Cable-Related Service. Following completion of its system reconstruction and upgrade, Grantee shall provide access to internet service as part of its cable system if either of the following circumstances occur:
(a) Grantee has provided internet service in any other city in the United States for more than twelve (12) months, or (b) Grantor demonstrates that ten percent (10%) of Grantor's subscribers are willing to pay an additional $20 per month for internet service as part of it cable subscription.
. SERVICES, PROGRAMMING AND CONSUMER PROTECTION STANDARDS.
.. Services and Programming.
() Grantee must provide all subscribers, and Grantor, with not less than thirty (30) days prior written notice of any proposed changes in rates and charges and any proposed reduction or augmentation of programming services, unless Grantor agrees in writing to waive this requirement.
() Grantee has the right to establish different classifications of service for residential and commercial subscribers. Grantee's charges and rate schedules must be adopted and maintained in accordance with all applicable federal and state laws and regulations.
.. Discounts for Seniors and Handicapped Persons. Grantee will offer a ten percent (10%) discount on its basic service to subscribers who qualify as seniors aged 65 or older and handicapped persons who are entitled to receive social security supplemental income benefits.
.. Leased Channel Service. Grantee must offer leased channel service at nondiscriminatory rates, on reasonable terms and conditions, and in accordance with applicable law.
.. Nondiscrimination. Grantee may not discriminate between or among subscribers within one type or class in the availability of services, at either standard or differential rates set forth in published rate schedules, except as otherwise authorized by law or by this Agreement. No charges may be made for services except as set forth in published schedules that are available for inspection at Grantee's office, quoted by Grantee on the telephone, or displayed or communicated to existing or prospective subscribers.
.. Billings. Grantee may not charge subscribers for services more than one month in advance unless an individual subscriber requests a longer period. All bills and billing statements must clearly indicate the billing period, the actual due date, and the amount of the penalty for late payment.
.. Subscriber Rates. Grantor shall have the right to regulate subscriber rates to the extent permitted by law. Grantee agrees that the rates it charges subscribers in the franchise area shall not exceed the lowest subscriber rates charged in the Cities of Gilroy, Hollister, or San Juan Bautista as adjusted to take into account any greater PEG access financial obligation in such cities. For example, if Hollister has the lowest adjusted subscriber rate of the three cities, and its PEG access financial obligation amounts to two dollars per subscriber per month, while Grantee's obligation under this franchise is one dollar per month, the monthly subscriber rate charged under this franchise shall be one dollar less than the monthly subscriber rate charged in Hollister.
.. Consumer Protection Standards. Grantee must comply with all requirements set forth in Section 5.20.060 of the Code.
Such compliance is required at all times during the reconstruction and upgrade of the cable system, unless noncompliance is specifically waived in writing by Grantor, which waiver shall be in the sole discretion of Grantor.
.. Subscriber "Bill of Rights". A subscriber "bill of rights," approved by Grantor as to form and content, must be provided by Grantee to each new subscriber and not less than once each calendar year during the term of the franchise to each existing subscriber. This "bill of rights" must include a description of the consumer protection and service standards set forth in Section 5.20.060 of the Code.
.. Tapping and Monitoring. Grantee may not tap or monitor, or permit any other person controlled by Grantee to tap or monitor, any cable, line, signal input device, or subscriber outlet or receiver, for any purpose whatsoever without the express written consent of the subscriber or a court order therefor; provided, however, that Grantee may monitor customer service calls for quality control purposes and may conduct system-wide or individually-addressed "sweeps" for the purpose of verifying system integrity, controlling return path transmission, monitoring service levels or billing-for-pay services, or checking for unauthorized connections to the cable television system.
.. Data Collection.
() Except for its own use, or in connection with the provision of cable services, or for release of data to Grantor, Grantee may not permit its system to be used for data collection purposes, nor may it otherwise collect data that would disclose commercial product or other preferences or opinions of a subscriber, unless Grantee has received the prior written consent of that subscriber.
() Grantee may not disclose or permit the release or sale of data on individual subscribers or groups of subscribers, but may disclose or permit the release or sale of aggregate data only.
.. Disclosure of Subscriber Preferences.
() Grantee may not disclose individual subscriber preferences, viewing habits, beliefs, philosophy, creeds, or religious beliefs to any third person without court approval or the prior written consent of the subscriber.
() Such prior written consent, if given, must be limited to a period of time not to exceed one year, or a term agreed upon by Grantee and the subscriber.
() Grantee may not condition the delivery or receipt of cable services to any subscriber on any such consent.
() A subscriber may revoke, without cost or penalty, any consent previously given by delivering to Grantee a written notice of revocation.
.. Disclosure of Subscriber Lists. Grantee may not disclose, or sell, or permit the disclosure or sale, of its subscriber list without the prior written consent of each subscriber on that list; provided that Grantee may use its subscriber list as necessary for the marketing of Grantee's services, the maintenance of Grantee's facilities authorized by this Agreement, and the billing of subscribers for cable services; and provided further, that consistent with applicable law, Grantor may use Grantee's subscriber list for the purpose of communicating with subscribers in connection with matters relating to the operation, management, and maintenance of the cable system.
. SUPPORT OF LOCAL CABLE USAGE.
.. Public Education and Governmental Access Channels. Under completion of the system reconstruction and upgrade, Grantee will make available to Grantor, at no cost to Grantor, four (4) channels for the exclusive use of Grantor, or its designee, for non-commercial public, educational or governmental access purposes. The four channels may be used for any one or combination of these three purposes as determined by Grantor. Use of the access channels will be under the exclusive control of Grantor and subject to such rules and regulations as the Grantor may establish. One of the four channels made available by Grantee under this section shall be channel 34.
.. Maintenance of Transmission. Grantee will maintain the existing alternate method of transmission from Grantor's production facilities to the headend of Grantee's transmission system and will ensure that adequate signal quality is maintained.
.. Financial Support for Public, Educational and Governmental Access .
() Grantee will pay to Grantor the sum of One Hundred Thirty Thousand Dollars ($130,000) for use by Grantor in developing, implementing, and maintaining the access channels, including, without limitation, capital improvements, equipment, cable-related expenses, and support. This sum will be paid by Grantee to Grantor within thirty (30) days after receipt of a budget from Grantor that describes the proposed expenditures for facilities, equipment, support, and other items necessary for the non-commercial use of the access channels.
() In addition to the one-time payment provided by Subsection 6.3(a) above, Grantee will pay to Grantor the sum of $0.40 (forty cents) per subscriber per month commencing on the first full month after the effective date of this Agreement for the support of public, educational or governmental access activities. Grantor may increase the per subscriber contribution by Grantee to $0.50 (fifty cents) per month three (3) years after the effective date of this Agreement. In addition, the per subscriber monthly rate shall be increased on an annual basis by any increase in the Consumer Price Index for San Francisco-Oakland-San Jose, California CPIU, during the preceding twelve (12) month period. Such annual payment will be made by Grantee to Grantor within thirty (30) days after receipt of a budget which describes how such payment will be used during the following year.
() Notwithstanding the provisions of subparagraphs (a) and (b) above, Grantor and Grantee agree that if new technology requires additional and unforeseen expenditures in order to use effectively the access channels, then the parties will meet and confer and negotiate in good faith additional subsidies to be paid by Grantee for the support of the access channels.
(d) Grantee shall permit subscribers to make voluntary financial contributions in support of public, educational and government access as an additional payment when the subscriber pays a monthly billing statement. The billing statement shall contain a place where the subscriber can designate that it desires to make ongoing voluntary contributions as part of its payment to Grantee. Within sixty (60) days of receiving indication from a subscriber that it desires to make ongoing contributions, Grantee will place a contribution line item on all future bills until such time as the subscriber indicates that it no longer desires to make voluntary contributions. Grantee shall remit any such contributions received from subscribers to Grantor within ninety (90) days after receipt.
Grantee will also include a billing insert two times per year providing subscribers with a direct opportunity to contribute to public, educational and government access. The insert will be developed and designed by Grantor and provided to Grantee in a format ready for reproduction. Grantee will reproduce and distribute the insert at its own expense.
.. Relocation of Access Studios. Grantee shall reconnect the public, educational or governmental access studios to the cable system up to two times each during the term of the franchise if such studios are relocated.
.. Compliance with Federal Law. In accepting this franchise, Grantee acknowledges that the commitments specified in this Section 6 are voluntarily assumed, and their costs will not be offset against any franchise fees payable by Grantee to Grantor during the term of the franchise. Such costs, however, may be included in the calculation of subscriber rates to the extent permitted by federal law.
. DESIGN AND CONSTRUCTION.
.. System Construction. The system must be constructed, rebuilt, and upgraded in accordance with the provisions of this Agreement, and as more specifically described in Exhibit C, attached hereto. The system upgrade must include, at a minimum, twenty (20) additional channels. The system reconstruction and upgrade described in Exhibit C shall be completed in accordance with the following schedule:
(a) Submission of substantially all applications for authorization, (such as utility pole attachments) necessary to begin initial construction within sixty (60) days after the effective date of this Agreement.
(b) Completion of construction of trunk and distribution plant past at least twenty-five percent (25%) of Grantor's households, not more that twelve (12) months after the effective date of this Agreement.
(c) Completion of all the construction required to complete the cable system reconstruction and upgrade as shown on the reconstruction and upgrade plans (filed with Grantor) not more than eighteen (18) months after the effective date of this Agreement. Grantor will not consider the reconstruction and upgrade as completed until Grantee certifies in writing under penalty of perjury that the reconstruction and upgrade has been completed in accordance with the construction plans and franchise requirements. The expanded programming required by this Agreement shall be provided on the upgraded system within twenty (20) months after the date of this Agreement.
(d) Grantee will provide written reconstruction and upgrade progress reports to Grantor on the form provided by Grantor on a monthly basis until completion. These reports shall identify any potential delays in complying with the construction schedule and the measures taken to avoid or mitigate such delays. The failure to meet the construction schedule specified in this subsection 7.1 shall subject Grantee to the payment of liquidated damages to Grantor as provided by Section 10 of this Agreement. However, if Grantee satisfactorily demonstrates that a reasonable extension of the construction schedule should be granted, Grantor, in its sole discretion may grant an extension if it believes that liquidated damages are not warranted.
7.2 Construction Components and Techniques. Construction components and techniques must comply with the terms of this Agreement and all applicable law.
7.3 Technical and Performance Standards. Grantee must construct, reconstruct, operate, maintain, and repair its system in a manner consistent with all applicable federal, state, and local laws and ordinances, construction standards, construction specifications, FCC technical standards, and any additional standards set forth in this Agreement. Without limiting the foregoing, the construction, reconstruction, operation, maintenance and repair of the cable system shall be in accordance with all applicable provisions of the Occupational Safety and Health Act of 1970, as amended; the National Electrical Safety Code; the National Electric Code; the National Cable Television Association Standards of Good Engineering Practices; the Obstruction Marking and Lighting Rules of the Federal Aviation Administration; the Federal Communications Commission Rules, Part 17, regarding the construction, marking and lighting of antenna structure; the Manual of Construction Procedures (Blue Book); and the California Public Utility Commission Construction requirements applicable to cable television systems.
7.4 Construction Codes. Grantee must strictly adhere to all building and zoning codes now or hereafter in force and must obtain all necessary permits. Grantee must arrange its lines, cables, and other appurtenances, on both public and private property, in such a manner as to cause no unreasonable interference with the use of that property by any person. In the event of such interference, Grantor may require the removal of Grantee's lines, cables, and appurtenances from the property in question. Grantee must give at least forty-eight (48) hours advance notice to all property owners, and to Grantor, prior to installing any above-ground or underground structures upon easements located on private property. Grantee must be a member of Underground Service Alert. Grantor will not modify its construction requirements subsequent to the completion of construction so as to require reconstruction or retrofit unless the public health and safety so requires.
7.5 Construction Default. Upon the failure, refusal or material neglect of Grantee to undertake or complete any construction, reconstruction, repair, or other necessary work as required by this Agreement, thereby creating an adverse impact upon the public health, welfare or safety, Grantor may (but is not required to) cause that work to be completed, in whole or in part, and upon so doing will submit to Grantee an itemized statement of costs. Grantee will be given no less than thirty (30) days to cure the default before Grantor exercises its right to complete the work. Grantor must, within thirty (30) days of billing, pay to Grantor the actual costs incurred.
7.6 Vacation or Abandonment. If any street, alley, public highway, or portion thereof used by Grantee is vacated by Grantor, or its use is discontinued by Grantee, then upon reasonable notice Grantee must forthwith remove its facilities therefrom unless otherwise specifically authorized. Following that removal, Grantee must restore, repair, or reconstruct the area where that removal has occurred to such condition as may be required by Grantor, but not in excess of the original condition. Upon any failure, neglect, or refusal of Grantee, after thirty (30) days' notice by Grantor, to do such work, Grantor may cause it to be done, and within thirty (30) days of billing, Grantee must pay to Grantor the actual costs incurred.
7.7 Abandonment in Place. Grantor may, upon written application by Grantee, approve the abandonment in place by Grantee of any property, under such terms and conditions as Grantor may approve. Upon Grantor-approved abandonment in place of any property, Grantee must cause to be executed, acknowledged, and delivered to Grantor such instruments as Grantor may prescribe and approve, transferring and conveying ownership of that property to Grantor.
7.8 Removal of System Facilities. If Grantee's plant is deactivated for a continuous period of thirty (30) days (except for reasons beyond Grantee's control), and without prior written notice to and approval by Grantor, then Grantee must, at Grantor's option and demand, and at the sole expense of Grantee, promptly remove from any streets or other public all property of Grantee. Grantee must promptly restore the streets or other public areas from which its property has been removed to the condition existing prior to Grantee's use thereof.
7.9. Movement of Facilities. If Grantor determines it is necessary to temporarily move or remove any of Grantee's property for a public purpose, Grantee, upon reasonable notice, must move, at the expense of Grantee, its property in order to facilitate that public purpose. No such movement shall be deemed a taking of Grantee's property. Nothing herein limits the right of Grantee to seek reimbursement from any party other than Grantor.
7.10. Undergrounding of Cable. Cables must be installed underground at Grantee's cost where substantially all existing utilities are already underground in accordance with the Grantor's adopted undergrounding policy. Previously installed aerial cable will be installed underground at Grantee's pro rata cost in concert with other utilities as those other utilities convert from aerial to underground construction.
7.11. Facility Agreements. This Agreement does not relieve Grantee of any obligations to obtain pole or conduit space from any department of Grantor, from any utility company, or from others maintaining utilities in Grantor's streets.
7.12. Repair of Streets and Public Ways. All streets and public ways, and improvements located within those streets and public ways, that are disturbed or damaged by Grantee or its contractors during the construction, reconstruction, operation, or maintenance of the cable system, must be restored at Grantee's expense, and within the time frame and limits specified by Grantor.
7.13. Erection of Poles Prohibited. Grantee may not erect any pole on or along any street or public way where there is an existing aerial utility system. If additional poles in an existing aerial route are required, Grantee must negotiate with the appropriate public utility for their installation. Any such installation requires the advance written approval of Grantor. Subject to applicable federal and state law, Grantee must negotiate the lease of pole space and facilities from the existing pole owners for all aerial construction, under mutually acceptable terms and conditions.
7.14. Reservation of Street Rights. Nothing in this Agreement precludes Grantor from constructing, repairing, or altering any public work or improvement. That work will be done, insofar as practicable, in such manner as not to unnecessarily obstruct, injure or prevent the free use and operation of any property of Grantee. However, if any property of Grantee interferes with the construction, maintenance, or repair of any public improvement, that property must be removed or replaced in such manner as may be directed by Grantor so as not to interfere with the public work or improvement, and that removal or replacement will be at the expense of Grantee.
7.15. Extension of Cable Service to Unserved Areas.
(a) In addition to the areas shown on the service area maps on file in the offices of the Department of Community Development of Grantor, Grantee shall provide service to all portions of the franchise area reaching a minimum density of twenty (20) dwelling units per linear strand mile, as measured from the nearest coaxial cable line, within twelve (12) months after the effective date of this Agreement.
(b) Grantee shall provide aerial or buried drop lines to new subdivisions within the franchise area at the request of the developer.
(c) Grantee shall extend and make cable television service available to any resident within the franchise area who requests connection at the standard connection charge if the connection to the resident would require no more than a standard one hundred and fifty (150) foot aerial drop or seventy-five (75) foot buried drop line or extension from the nearest coaxial feeder cable. With respect to requests for connection requiring an aerial or buried drop line in excess of the maximum standard distance, Grantee shall extend and make available cable television service to such residents at a connection charge not to exceed its actual costs for the distance exceeding the standard one hundred and fifty (150) feet of aerial or seventy-five (75) feet of underground cable respectively.
(d) In areas with fewer than twenty (20) residential units per proposed cable bearing strand mile Grantee shall offer a cost-sharing arrangement with residents. A dwelling unit will be counted for this purpose if its lot fronts a street. At the request of a resident desiring service, Grantee shall determine the cost of the plant extension required to provide service to the potential subscriber from the closest point on the cable system where it is technically feasible. The cost of construction shall be allocated based on the following formula:
(i) Grantee and the residents who agree to subscribe to cable service will each bear their proportionate share of construction costs. For example, if there are five (5) dwelling units per proposed cable bearing strand mile, Grantee's share will equal 5/20ths or one fourth (1/4th) of the construction cost. The remaining cost will be shared equally by each subscriber.
(ii) Should additional residents actually subscribe to cable television service in areas where subscribers have already paid a proportionate share under the extension cost sharing formula, subscribers who have previously paid a proportionate share under the extension formula shall be reimbursed pro rata for their contribution. In such case, the pro rata shares shall be recalculated and each new subscriber shall pay the new pro rata share, and all subscribers who previously paid a proportionate share shall receive pro rata refunds. In the event a subscriber has been disconnected or has moved and owes Grantee money which has not been recovered, Grantee shall have the right to first apply the refund to amounts owed Grantee and give the balance, if any to the subscriber. At such time as there are twenty (20) potential subscribers per cable bearing strand mile, the subscribers shall receive a refund of their pro rata share of construction costs. Notwithstanding the foregoing, one (1) year after the completion of an extension project, subscribers who have paid a share of line extension costs shall no longer be eligible for refunds, and the amounts paid in construction costs will be credited to the plant account of Grantee.
(iii) Where the density of residential dwelling and occupied commercial or industrial structures, adverse terrain, or other factors render extension of the system and offering of cable service impractical, technically infeasible or would create an economic hardship, Grantor may, upon petition of Grantee, either waive the extension of the system into such areas, or allow the extension and offer of service on special terms or conditions which are reasonable and fair to Grantor, Grantee and potential subscribers in such areas.
. PERFORMANCE AUDITS AND TECHNICAL DATA.
.. Audit of Performance.
() After receiving five or more complaints regarding picture quality or other technical problems that were not resolved satisfactorily within thirty (30) days of the initial complaint to Grantee during any calendar year, Grantor may require that a performance audit of the cable television system be conducted by an independent technical consultant selected and employed by Grantor to verify that the system complies with all technical standards and other specifications of this Agreement. The costs of the technical consultant shall be paid by Grantee provided that this obligation to reimburse the Grantor shall not exceed ten thousand dollars ($10,000) per year.
() Upon completion of a performance audit, the Grantor and Grantee will meet to review the performance of the cable television system. The reports required by this Agreement regarding subscriber complaints, the records of performance audits and tests, and any opinion survey reports that may be conducted by Grantor or Grantee will be used as the basis for review. In addition, any subscriber may submit complaints prior to or during the review meetings, either orally or in writing, and these will also be considered.
() Within thirty (30) days after the conclusion of the system performance review meetings, Grantor will issue findings with respect to the adequacy of system performance and the quality of service. If areas of noncompliance with applicable rules or regulations are identified, Grantor may direct Grantee to correct the areas of noncompliance within such period of time that Grantor determines to be reasonable provided that such time shall not be less that thirty (30) days.
() Participation by Grantor and Grantee in this process does not waive any rights they may have under applicable federal or state law.
() In addition to the performance audits described above, Grantor may conduct annual performance audits of the same or lesser magnitude, at its sole expense, when and if determined necessary or appropriate by Grantor.
.. System Technical Data.
() Within thirty (30) days after the effective date of this Agreement, Grantee must provide Grantor with an "as built" map which documents all of Grantee's equipment and facilities and their geographic location in the City. The map must be updated annually and whenever there are significant changes in the location of Grantee's equipment and facilities.
() Grantee must maintain in its local office a complete and up-to-date set of as-built system maps and drawings upon completion of construction or reconstruction; equipment specification and maintenance publications; and signal level diagrams for each active piece of electronic equipment in the system. As-built drawings must show all lines and installed equipment.
() Technical data will be made available to Grantor by Grantee at its local office within ten (10) days of a written request, and must include executed pole attachment agreements, details of satellite and microwave equipment, mobile radio units, heavy construction vehicles and equipment, and video and audio equipment normally used in the operation of the system. If Grantor requires use of this technical data in its own offices, it may make copies of any items at Grantor's expense.
() All technical data must be available for Grantor's inspection during normal business hours and upon reasonable notice. Upon any system failure or other operating emergency, the technical data will be made available at any time, so long as the provision of that data does not unreasonably interfere with Grantee's operations.
(e) All technical data provided by Grantee to Grantor shall be considered confidential and proprietary and shall not be provided to other persons, other than Grantor's officers, employees, contractors, consultants or attorneys, except as otherwise required by law. Grantee shall defend, indemnify and hold harmless Grantor in any action brought by a third party seeking disclosure or copies of such technical data.
.. Emergency Repair Capability. Grantee must ensure that its personnel are qualified to make repairs, that they are available at all reasonable times, and that they are supplied with keys, equipment location instructions, and technical information necessary to begin repairs upon notification of the need to maintain or restore continuous service to the system.
. REVOCATION AND FORFEITURE.
.. Revocation. Consistent with applicable law, and in addition to any rights provided elsewhere in this Agreement, Grantor reserves the right to revoke the franchise, subject to the procedural guidelines set forth in Section 12 of this Agreement if Grantee, whether willfully or negligently, repeatedly violates any material provision of this Agreement.
.. Forfeiture. Upon Grantee's failure to comply with any material term of this Agreement, Grantor may, subject to the procedural guidelines set forth in Section 12 of this Agreement, declare a forfeiture. Grantee may be required to remove its structures and property from Grantor's streets and to restore those streets to their prior condition within a reasonable specified period of time. Upon Grantee's failure to do so, Grantor may perform the work and collect all costs, including direct and indirect costs, from Grantee. At Grantor's discretion, the cost thereof may be placed as a lien upon all plant, property, or other assets of Grantee.
10. LIQUIDATED DAMAGES.
10.1. Liquidated Damages Established. Due to the difficulty of estimating the damages to Grantor resulting from Grantee's failure to comply with the provisions of the franchise, Grantor and Grantee agree to the liquidated damages specified in this section, which represents both parties best estimate of the damages resulting from the specified breach. Such liquidated damages have been established without prejudice to any other rights or remedies that Grantor may be entitled to under this Agreement, Chapter 5.20 of the Code, or any other applicable law. The following liquidated damages may be imposed by Grantor following the procedures established by Section 12 of this Agreement:
(a) For failure to meet the construction schedule provided by Section 7.1(b) or (c), $500 per day for the first sixty (60) days of noncompliance, $1,000 per day for the next sixty (60) days of noncompliance, and $2,000 a day for each day of noncompliance thereafter.
(b) For transferring the franchise without Grantor approval: Five Hundred Dollars ($500) per day for each violation for each day the violation continues;
(c) For failure to comply with requirements for public, educational and government access: Five Hundred Dollars ($500) per day for each violation for each day the violation continues;
(d) For violation of the customer service standards except for those standards that have a free service remedy:
Five Hundred Dollars ($500) per violation or per instance, depending on the violation;
(e) For all other material violations of the franchise for which actual damages may not be ascertainable: Five Hundred Dollars ($500) per day for each violation for each
day the violation continues.
10.2. Procedures. The procedure for accessing liquidated damages shall be conducted in accordance with Section 12 of this Agreement.
11. RECORDS; REPORTS; RIGHT TO INSPECT AND AUDIT; EXPERTS.
11.1 Grantee to Provide Records. All reports and records required under this Section 10 must be furnished at the sole expense of Grantee.
11.2 Records. Grantor must either maintain at its local offices, or make available at its local offices within fifteen (15) days of a written request by Grantor for inspection during normal business hours, a complete set of business records of its operations in the franchise area authorized by this Agreement. The Grantee must provide that information in such form as reasonably may be required by the Grantor, so long as that information is reasonably related to the scope of Grantor's rights under this Agreement, or Grantor's regulatory functions.
11.3 Maintenance and Inspection of Records. Grantee must maintain accurate books and records, in conformity with generally accepted accounting principles, showing all receipts, expenses, loans, payments, investments of capital, and other transactions relating to the cable television franchise. Grantor, upon reasonable notice, has the right to inspect those records and to receive copies to the extent that information is reasonably related to the scope of the Grantor's rights under this Agreement, or Grantor's regulatory functions.
11.4 Reports of Financial and Operating Activity.
() Not later than one-hundred twenty (120) days after the close of each calendar year during the term of this Agreement, Grantee must submit to Grantor the following reports:
. A financial report, certified by a designated financial officer of Grantee, for all cable system activity during the previous fiscal year, including annual gross receipts from all sources and annual gross subscriber revenues from each tier of service. The report must set out separately all gross receipts from all sources within the franchise service area, gross subscriber revenues derived from each tier of service in the franchise service area, the basis for the computation of franchise fees, and such other relevant facts as may reasonably be required by Grantor to verify the accuracy of the annual franchise fee payment.
. A summary of Grantee's activities during the previous year, including, but not limited to, subscriber totals and new services.
. A current list of Grantee's officers, directors, and other principals if there has been any change during the previous year.
. A summary of complaints received from subscribers and remedial actions taken.
11.5 Performance Tests and Compliance Reports. Not later than April 15 of each year, Grantee must provide a written report of any FCC or other performance tests required to be conducted. In addition, Grantee must provide reports of any tests and compliance procedures required by this Agreement not later than thirty (30) days after the completion of those tests and compliance procedures.
11.6 Additional Reports. Grantee must prepare and submit to Grantor in writing, at the times and in the form reasonably prescribed by Grantor, such additional reports as may reasonably be required with respect to Grantee's compliance with the provisions of this Agreement.
11.7 Communications with Regulatory Agencies. Copies of all non-routine and material communications between Grantee and the Federal Communications Commission, or any other agency having jurisdiction in respect to any matters affecting cable television operations authorized by this Agreement must be submitted promptly to Grantor following their receipt or mailing by Grantee.
11.8 Inspection of Facilities. Upon reasonable notice, and during normal business hours, Grantee must permit inspection, by any duly authorized representative of Grantor, of all franchise property and facilities of Grantee situated within the franchise service area.
11.9 Right to Audit.
(a) In addition to all other inspection rights under this Agreement, upon ten (10) days prior written notice, Grantor has the right to inspect, examine, and audit, during normal business hours, all documents pertaining to Grantee that are reasonably related to Grantor's enforcement of its rights under this Agreement; provided, however, that Grantor may not exercise this right more frequently than once in any twelve (12) month period. Those documents will be made available at Grantee's local office consistent with Section 11.2 of this Agreement. All documents pertaining to financial matters that may be the subject of an audit by Grantor, as set forth herein, must be retained by Grantee for a minimum of five (5) years following the termination of this Agreement. Access by Grantor to any documents covered by this subsection may not be denied by Grantee on grounds that those documents are alleged to contain proprietary information. However, all such documents shall be deemed confidential and proprietary and shall not be provided to other persons, other than Grantor's officers, employees, contractors, consultants or attorneys, except as otherwise required by law. Grantee shall defend, indemnify and hold harmless Grantor in any action brought by a third party seeking disclosure or copies of such documents.
() Any audit conducted by Grantor under this subsection will be conducted at the sole expense of Grantor, and Grantor will prepare a written report containing its findings, a copy of which will be mailed to Grantee; provided, however, that Grantee must reimburse Grantor for the expense of any such audit if, as the result of that audit, it is determined that there is a shortfall of more than three percent (3%) in the amount of franchise fees or other payments that have been made or will be made by Grantee to Grantor pursuant to the terms of this Agreement.
11.10 Retention of Experts. In the exercise of its rights under this Agreement, Grantor has the further right to retain technical experts and other consultants on a periodic basis for the purpose of monitoring, testing, and inspecting any construction, operation, or maintenance of the system, and all parts thereof, or to ensure compliance with and enforcement of the provisions of this Agreement. Except as otherwise specifically provided by this Agreement, Grantor will bear the cost of retaining those experts, provided that Grantee must reimburse Grantor for all expenses related to the retention of experts under either of the following circumstances:
(a) Grantee has initiated proceedings that would normally require Grantor to retain experts, such as the filing of a request for approval of a transfer or a change in control, renewal of the franchise, or the modification or amendment of this Agreement; or
(b) The reports of those experts as submitted to the Grantor reveal that the Grantee has failed to substantially comply with the terms and conditions of this Agreement.
If Grantee is required to reimburse Grantor in accordance with subsections (a) or (b), Grantor will send Grantee an itemized statement describing all charges, and Grantee must pay that amount within twenty (20) days after receipt of that itemized statement. The obligation of Grantee to reimburse Grantor under this section shall not exceed $10,000 per transfer or per modification or amendment to this Agreement or $10,000 per year in those cases where experts are retained to review noncompliance with franchise requirements, FCC regulations or other applicable laws. No cost cap shall apply to a franchise renewal.
12. ENFORCEMENT PROCEDURES.
12.1. Notice and Hearing upon Grantee's Default.
(a) Unless otherwise provided in this Agreement, prior to formal consideration by Grantor of any termination, revocation, or forfeiture of Grantee's franchise, or the imposition of any other penalty or administrative remedy available to Grantor, including liquidated damages, attributable to Grantee's failure, whether willful, negligent, or otherwise, to adhere to the terms and conditions of this Agreement, Grantor must make written demand on Grantee to correct the alleged default. Grantor and Grantee will expeditiously meet to discuss the alleged default, at which time Grantee must indicate, in writing, the period of time required to resolve the problem. Giving due consideration to Grantee's request, Grantor will, in writing, state the period of time Grantor will allow Grantee to resolve the problem which shall be reasonable taking into account the nature of the alleged default, including the urgency to resolve the matter and the potential harm to Grantor or other persons which may result. During this time period, but in no event less than ten (10) days before the final date for correction, Grantee may request additional time to correct the problem, and Grantor may grant that request if Grantor determines, in its discretion, that such additional time is necessary due to delays beyond Grantee's control. If the default continues for a period of ten (10) days following the deadline for correction, plus any extension of time, a hearing will be scheduled by Grantor with regard to franchise termination, revocation, forfeiture, or the imposition of any other penalty or remedy.
(b) The City Manager will provide written notice of the hearing to Grantee, including the grounds for the proposed action, not less than thirty (30) days before the hearing. In addition, the City Manager, as part of that written notification, will describe the procedures to be followed by Grantor to determine whether cause exists for termination, revocation, forfeiture, or the imposition of other penalties or remedies. At a minimum, those procedures will afford Grantee adequate notice and a fair opportunity for full participation, including the right to introduce evidence, to require the production of evidence, to question witnesses, and to obtain a transcript of the proceeding at Grantee's expense. Within ten (10) days after receipt of that notice, Grantee must file any written objections to those procedures. The City Manager will notify Grantee of any modification to the procedures and provide another ten (10) day objection period. Any objections not raised within these ten (10) day periods will be deemed waived. At the hearing, Grantor will hear Grantee, and any other person interested in the matter, and will determine, at that or continued hearings, an appropriate course of action for enforcement of the franchise.
12.2 Delegation. The proposed imposition of remedies, such as liquidated damages, that do not include termination of the franchise may, at Grantor's option, be determined by an officer, employee, or agency of Grantor to which it may delegate such administrative decisions, subject to due process and the criteria contained in this section, and subject to appeal to the City Council.
13. CONTINUITY OF CABLE TELEVISION SYSTEM SERVICES.
13.1. Continuity of Service. The parties acknowledge that it is the right of all subscribers to receive all services authorized by this Agreement so long as their financial and other obligations to the Grantee are honored. During Grantee's reconstruction and upgrade of the system, and upon any future sale of the system, Grantee must use due diligence and reasonable care to ensure that all subscribers receive continuous, uninterrupted service. In the event of purchase by Grantor, or a change of franchisee, Grantee will cooperate with Grantor or the new franchisee to operate the system for a temporary period in order to maintain continuity of service to all subscribers. If Grantee, through its own fault, discontinues system-wide service for seventy-two (72) continuous hours, and Grantee is in material default of this Agreement, or if the franchise is revoked by Grantor, then Grantor may, by resolution, when reasonable cause is deemed to exist, assume operation of the system for the purpose of maintaining continuity of service. Grantor's operation of the system may continue until the circumstances which, in the judgment of the Grantor, threaten the continuity of service are resolved to Grantor's satisfaction. Grantor is entitled to receive all revenues for any period during which it operates the system.
13.2. Operation and Management By Grantor.
(a) During any period when the system is being operated by Grantor pursuant to subsection 13.1 above, Grantor will attempt to minimize the disruption of operations in a manner consistent with the maintenance of continuing service to subscribers. Notwithstanding the foregoing, Grantor may, as it deems necessary, make any changes in any aspect of operations that, in Grantor's sole judgment, are required for the preservation of quality of service and its continuity. During that period, Grantor also will maintain to the best of its ability the system's records, physical plant, financial integrity, funds, and other elements normally involved in operations.
(b) Grantor may, upon assuming operation of the system, appoint a manager to act for it in conducting the system's affairs. The appointed manager will have such authority as may be delegated by Grantor and will be solely responsible to Grantor for management of the system. Grantee must reimburse Grantor for all reasonable costs, in excess of system revenues retained by Grantor, that are incurred during Grantor's operation if the franchise remains in effect during the period of Grantor's operation.
14. MISCELLANEOUS PROVISIONS
14.1. Assignment, Transfer, Sale, and Change of Control.
(a) Consummation of the following transactions related to this franchise, or involving Grantee, requires the prior written consent of Grantor's City Council expressed by resolution, which consent will not be unreasonably withheld, and then only under such conditions as may be prescribed:
(1) The sale, transfer, lease, assignment, or other disposition of the franchise, in whole or in part, whether voluntary or involuntary; provided, however, that such consent shall not be required for a transfer in trust, mortgage, or other hypothecation for the purpose of securing an indebtedness of the Grantee relating to the construction, reconstruction, operation, or maintenance of the cable television system. A transfer, assignment, or other disposition of the franchise may be made only by an instrument in writing, a duly executed copy of which must be filed in the office of the City Clerk within thirty days after the City Council's adoption of the resolution consenting to that transfer, assignment, or other disposition.
(2) Any merger, consolidation, reorganization, business combination, or other transaction under which twenty-five percent or more of the ownership interests in Grantee will be affected and control of Grantee will change or be subject to change. As used herein, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of Grantee. A duly executed copy of any written instrument evidencing the closing and consummation of any such transaction must be filed in the office of the City Clerk within thirty days after the City Council's adoption of the resolution consenting to that transaction.
(b) In determining whether it will consent to any transfer, assignment, or other disposition of the franchise, or to any transaction affecting the control of Grantee, Grantor may evaluate the financial, technical, legal and other qualifications of the proposed transferee or controlling person. Grantee must ensure that the proposed transferee or controlling person submits an application, in the form required by Grantor and by any applicable federal law, not less than ninety (90) days prior to the closing date of the proposed transaction. After considering the financial, technical, legal and other qualifications of the proposed transferee or controlling person, the City Council may by resolution authorize the proposed transaction, subject to such conditions as may be in the public interest. Grantor's consent to any such transaction may not be unreasonably denied or delayed. A public stock offering by Grantee or its parent companies shall not be considered a transfer of the franchise or a change in ownership or control requiring Grantor's approval or consent.
(c) Grantee and its proposed transferee or controlling person are jointly and severally responsible for reimbursement to Grantor of all costs and expenses reasonably incurred in processing and evaluating the application related to the proposed transaction, provided that such costs do not exceed $10,000 per transfer. These costs and expenses include, without limitation, costs of administrative reviews; financial, legal and technical evaluation of the proposed transferee; costs for consultants (including technical and legal experts); notice and publication costs; and document preparation expenses. Grantor will send Grantee an itemized statement of those costs and expenses reasonably incurred, and Grantee will pay that amount within twenty (20) days after receipt of that statement.
14.2. Force Majeure. If Grantee's performance of any of the terms, conditions, obligations, or requirements of this Agreement is prevented or impaired by any cause or event beyond its reasonable control and not reasonably foreseeable, such inability to perform will be deemed to be excused, and no penalties or sanctions will be imposed. Those causes beyond Grantee's reasonable control and not reasonably foreseeable include, but are not limited to, acts of God, civil emergencies, labor unrest, strikes, inability to obtain access to an individual's property, and inability of Grantee to secure all necessary authorizations or permits to use necessary poles or conduits so long as Grantee exercises due diligence to timely obtain those authorizations or permits.
14.3. Possessory Interest. By accepting the franchise, Grantee acknowledges notice was given to Grantee, as required by California Revenue and Taxation Code Section 107.6, that use or occupancy of any public property pursuant to the authorization set forth in this Agreement may create a possessory interest that may be subject to the payment of property taxes levied upon that interest. Grantee is solely liable for, and must pay and discharge prior to delinquency, all possessory interest taxes or other taxes levied against Grantee's right to possession, occupancy, or use of any public property in accordance with any right of possession, occupancy, or use created by this Agreement. Grantee is not barred from challenging any tax on any amounts so assessed.
14.4. Indemnification. Grantee will indemnify, defend, and hold harmless Grantor, its officers, agents and employees, from any liability, claims, damages, costs, or expenses, including reasonable attorney's fees, arising out of or attributable to the exercise or enjoyment of the franchise granted pursuant to this Agreement. Grantee, at its sole cost and expense, and upon demand of Grantor, will appear in and defend any and all suits, actions, or other legal proceedings, whether judicial, quasi-judicial, administrative, legislative or otherwise, instituted by third persons or duly constituted authorities, against or affecting Grantor, its officers, agents, or employees, and arising out of or pertaining to the exercise of rights arising under the franchise within the franchise service area, and injury to persons or damages to property proximately caused by any conduct undertaken by the Grantee, its agents, employees, or subcontractors, by reason of the franchise or by any failure to act in the manner required by the franchise.
14.5. Conflict of Interest.
The parties agree that, to their knowledge, no member of the City Council, nor any other officer or employee of Grantor, has any interest, whether contractual, non-contractual, financial or otherwise in this franchise, or in other business of the Grantee, and that if any such interest comes to the knowledge of either party at any time, a full and complete disclosure of that information will be made in writing to the other party, even if that interest would not be considered a conflict of interest under applicable laws. Grantee covenants that it has, at the time of execution of this Agreement, no interest, and that it will not acquire any interest in the future, direct or indirect, that would conflict in any manner with the performance of its obligations under this Agreement. Grantee further covenants that, in the performance of its obligations, no person having any such interest will be engaged or employed.

14.6. Resolution of Disputes.
(a) Disputes regarding the interpretation or appli cation of any provisions of this Agreement will, to the extent reasonably feasible, be resolved through good faith negotiations between the parties.
(b) If any action at law or in equity is brought to enforce or interpret any provisions of this Agreement, the prevailing party in that action is entitled to reasonable attorneys' fees, costs and necessary disbursements, in addition to any other relief that may be sought and awarded.
14.7. Amendments.
This Agreement supersedes all prior proposals, agreements and understandings between the parties and may not be modified or terminated orally, and no modification, termination or attempted waiver of any of its provisions will be binding unless in writing and signed by the party against whom the same is sought to be enforced.
14.8. Binding Upon Successors.
This Agreement is binding upon and inures to the benefit of each of the parties and to their respective transferees, successors and assigns.

14.9. Counterpart Execution.
This Agreement may be executed in multiple counterparts, each of which is deemed to be an original and all of which constitute one and the same instrument.
14.10. Applicable Law.
This Agreement and the transactions herein contemplated are to be construed in accordance with and governed by the applicable laws of the State of California and of the United States.
15. DEFINITIONS.
a. Defined Terms. For the purposes of this Agreement, the following words, terms, phrases, and their derivations have the meanings set forth below. When not inconsistent with the context, words used in the present tense include the future tense, and words in the singular number include the plural number.
"Basic Service" or "Basic Cable Service" or "Basic Service Tier" means the lowest service tier which includes the retransmission of local television broadcast signals.
"1984 Cable Act" means the Cable Communications Policy Act of 1984.
"1992 Cable Act" means the Cable Television Consumer Protection and Competition Act of 1992.
"Cable Act" means the 1984 Cable Act as amended by the 1992 Cable Act and by the Telecommunications Act of 1996.
"Cable Operator" means any person or group of persons (i) who provides cable service over a cable system; or (ii) who controls or is responsible for, through any arrangement, the management and operation of a cable system.
"Cable Service" means (i) the one-way transmission to subscribers of video programming or other programming service; and (ii) subscriber interaction, if in conjunction with subparagraph (i), which is required for the selection of or use of that video programming.
"Cable System" or "Cable Television System" or "System" means a facility, consisting of a set of closed transmission paths and associated signal generation reception and control equipment that is designed to provide cable service, including video programming, and which is provided to multiple subscribers within the community.
"Complaint" means a dispute in which a subscriber notifies Grantor or Grantee of an outage or degradation in picture quality or other technical problem in the receipt of cable service that is not corrected following the initial telephone or service call to Grantee.
"Control" or "Controlling Interest" means actual working control in whatever manner exercised, including, without limitation, working control through ownership, management, or debt instruments, as the case may be, of the cable system or the Grantee.
"Drop" means the cable and related equipment connecting the cable system's plant to equipment at the subscriber's premises.
"Educational Channel" means any channel where non-profit educational institutions are the primary designated programmers.
"FCC" means the Federal Communications Commission or its designated representatives.
"Franchise" means a written undertaking or action of Grantor that authorizes a specific person to use Grantor's streets and public ways for the purpose of installing, operating and maintaining a cable television system to provide cable service.
"Governmental Channel" means any channel where a local government agency is the primary designated programmer, and the programming is informational programming regarding government activities and services.
"Grantee" means the person to which a franchise is granted for the construction, reconstruction, operation, and maintenance of a cable system and the lawful successors, transferees, or assignees of that person.
"Grantor" means the City of Morgan Hill, acting by and through its elected governing body, or such representative as the governing body may designate to act on cable matters in its behalf.
"Gross Annual Revenue" or "Gross Annual Receipts" or "Gross Receipts" means all revenue, as determined in accordance with generally accepted accounting principles, which is received, directly or indirectly, by Grantee from or in connection with the distribution of any cable service, and any other service which may, under existing or future federal law, be included in the Cable Act definition for the purpose of calculating and collecting the maximum allowable franchise fee for operation of the system, whether or not authorized by any franchise, including, without limitation, leased or access channel revenues received, directly or indirectly, from or in connection with the distribution of any cable service. It is intended that all revenue collected by the Grantee from the provision of cable service over the system, whether or not authorized by the franchise, be included in this definition. Gross Annual Revenue also specifically includes: (i) the fair market value of any nonmonetary (i.e., barter) transactions between Grantee and any person but not less than the customary prices paid in connection with equivalent transactions; and (ii) any revenue received, as reasonably determined from time to time by the Grantor, through any means which is intended to have the effect of avoiding the payment of compensation that would otherwise be paid to the Grantor for the franchise granted. Gross Annual Revenue also includes any bad debts recovered, and all advertising revenue which is received directly or indirectly by Grantee, or any other person from or in connection with the distribution of any service over the system or the conduct of any service-related activity involving the system. Gross Annual Revenue does not include: (i) the revenue of any person to the extent that such revenue is also included in the Gross Annual Revenue of Grantee; (ii) taxes imposed by law on subscribers that Grantee is obligated to collect; and (iii) amounts that must be excluded pursuant to applicable law.
"Headend" means that central portion of the system where signals are introduced into and received from the balance of the system.
"Lease Channel" means any channel where someone other than Grantor or Grantee is sold the rights to air programming.
"Monitoring" or "Tapping" means observing or receiving a signal, where the observer is neither the sending nor receiving party and is not authorized by the sending or receiving party to observe that signal, whether the signal is observed or received by visual, electronic, or any other means.
"Pay Cable," "Pay Service," "Premium-Service" or "Pay Television" means signals for which there is a fee or charge to users over and above the charge for basic service, including any tiers of service; provided, however, the sale or lease of studio facilities, equipment, or tapes to local users are not deemed to be pay or premium services.
"Person" means any individual, corporation, partnership, proprietorship, or organization authorized to do business in the State of California.
"Plant" means the transmitting medium and related equipment that transmits signals between the headend and subscribers, including drops.
"Pole Attachment Agreement" or "Attachment Agreement" means any agreement with the Grantor, with any other governmental entity, or with any public utility relating to the Grantee's use of utility poles, ducts, or conduits.
"Program" or "Programming" means the information content of a signal and the act or process of creating such content, whether that content is intended to be pictures and sound, sound only, or any other form of information.
"Programmer" means any person who provides program material or information for transmission by means of the system.
"Property of Grantee" means all property owned or leased by Grantee within the franchise service area in the conduct of its cable system business under a franchise.
"Public Channel," "Access Channel," "Community Service Channel" or "Community Channel" means any channel for which members of the public, or any community organization, may provide nonadvertiser supported programming.
"Residential Dwelling Unit" or "Dwelling Unit" means a home, mobile home, condominium, apartment, cooperative unit, and any other individual dwelling unit.
"Service" means any kind of service or type of benefit provided by Grantee, or any group of related benefits made available to any person, that involves the use of a signal transmitted via a cable television system, whether the signal and its content constitute the entire service or comprise only a part of a service that involves other elements of any number or kind.
"Service Area" or "Franchise Service Area" means the entirety of the City of Morgan Hill.
"Service Interruption" means the loss of picture or sound on one or more cable channels.
"Service Tier" or "Tier" means a category of cable service or other services provided by a cable operator and for which a separate rate is charged by the cable operator, other than per channel or per event programming or packages of per channel or per event programming.
"Streets" means the surface of, and the space above and below, any public street, sidewalk, alley, or other public way or right-of-way of any type.
"Subscriber" means any person electing to subscribe to, for any purpose, a service provided by Grantee by means of or in connection with its cable system.
b. Terms Not Defined. Words, terms, or phrases not defined above in paragraph (a) shall first have the meaning as defined in Chapter 5.20 of the Municipal Code, and next in the Cable Act, and next the special meanings attributable to their use in any industry, business, trade, or profession where they commonly carry special meanings. If those special meanings are not common, they will be defined as set forth in commonly used and accepted dictionaries of the English language.
16.0.AUTHORITY AND EFFECTIVE DATE.
16.1. Authority.
The parties signing below represent and warrant that they have the requisite authority to bind the entities on whose behalf they are signing.
16.2. Effective Date.
This Agreement will become effective as of the date specified in Subsection 1.7. It is the intention of the parties that Grantee will first execute this Agreement and thereafter submit it to Grantor. The City Clerk will insert the effective date in all counterparts of this Agreement, attest to their execution by a duly authorized officer of Grantor, and transmit one or more fully executed counterparts to Grantee.
TO EFFECTUATE THIS AGREEMENT, each of the parties has caused this Agreement to be executed by its duly authorized
representative as of the date set forth below the authorized signature.
APPROVED AS TO FORM: CITY OF MORGAN HILL

By:
Special Counsel City Manager

Date:

ATTEST:

City Clerk

APPROVED AS TO FORM: FALCON CABLE SYSTEMS COMPANY II, L.P.


Corporate Counsel By:

Title:

Date:

By:

Title:

Date: