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04-0907_COX COM, INC._Bond Cancellation (2)ISSUE DATE: FEBRUARY 18, 2003 L/C NO.: P-234822 APPLICANT: ************* DIRECT ************** COX COMMUNICATIONS ORANGE COUNTY, INC 1400 LAKE HEARN DRIVE, N.E. ATLANTA, GA 30319 CITY OF SAN JUAN CAPISTRANO AMOUNT: USD 10,000.00 32400 PASEO ADELANTO (TEN THOUSAND AND 00/100 SAN JUAN CAPISTRANO, CA 92675 UNITED STATES DOLLARS) ATTN: CITY MANAGER WE HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO.P-234822 IN YOUR FAVOR FOR THE ACCOUNT OF THE ABOVE REFERENCED APPLICANT, UP TO THE AGGREGATE AMOUNT OF EXACTLY USD10,000.00, EXPIRING AT OUR COUNTERS IN TAMPA, FLORIDA WITH OUR CLOSE OF BUSINESS ON JUNE 22, 2003, OR ANY FUTURE EXTENDED DATE AS PROVIDED HEREIN. THIS LETTER OF CREDIT IS AVAILABLE FOR PAYMENT BY PRESENTATION OF YOUR DRAFTS AT SIGHT DRAWN ON US BEARING THE CLAUSE: "DRAWN UNDER JPMORGAN CHASE BANK LETTER OF CREDIT NO.P-234822", ACCOMPANIED BY THE FOLLOWING: 1. BENEFICIARY'S STATEMENT PURPORTEDLY SIGNED BY THE "CITY MANAGER" READING AS FOLLOWS: "WE CERTIFY THAT THE AMOUNT DRAWN UNDER JPMORGAN CHASE BANK LETTER OF CREDIT NO.P-234822 IS DUE TO THE FAILURE OF COX COMMUNICATIONS ORANGE COUNTY, INC. TO COMPLY WITH THE TERMS AND CONDITIONS OF THE FRANCHISE GRANTED TO COX COMMUNICATIONS ORANGE COUNTY, INC.". 2. THE ORIGINAL LETTER OF CREDIT. SPECIAL CONDITIONS: PARTIAL DRAWINGS) ALLOWED. ALL DRAFTS MUST INDICATE THE NUMBER AND DATE OF THIS CREDIT. WE HEREBY ENGAGE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION OF DOCUMENTS TO US ON OR BEFORE THE EXPIRATION DATE OF THIS LETTER OF CREDIT. IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE YEAR FROM ITS EXPIRATION DATE, OR FROM ANY FUTURE EXPIRATION DATE, UNLESS AT LEAST SIXTY DAYS PRIOR TO ANY SUCH EXPIRATION DATE WE SHALL NOTIFY YOU BY REGISTERED/COURIER MAIL, THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT RENEWED FOR ANY SUCH ADDITIONAL PERIOD. EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS DOCUMENTARY CREDIT IS SUBJECT TO UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, 1993 REVISION, INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO.500. PLEASE DIRECT ANY CORRESPONDENCE INCLUDING DRAWING OR INQUIRY QUOTING -CONTINUED- 4 '% 0 0 P-234822- -001-L1-01- - 1 - ISSUE DATE: FEBRUARY 18, 2003 L/C NO.: P-234822 APPLICANT: ************* DIRECT ************** COX COMMUNICATIONS ORANGE COUNTY, INC 1400 LAKE HEARN DRIVE, N.E. ATLANTA, GA 30319 CITY OF SAN JUAN CAPISTRANO AMOUNT: USD 10,000.00 32400 PASEO ADELANTO (TEN THOUSAND AND 00/100 SAN JUAN CAPISTRANO, CA 92675 UNITED STATES DOLLARS) ATTN: CITY MANAGER OUR REFERENCE NUMBER TO JPMORGAN CHASE BANK, C/O JPMORGAN TREASURY SERVICES, 10420 HIGHLAND MANOR DRIVE, 4TH FLOOR, TAMPA, FLORIDA 33610, ATTENTION: STANDBY LETTER OF CREDIT DEPARTMENT. CUSTOMER INQUIRY NUMBER IS (866) 632-5101 AND CHOOSE OPTION 3. THIS LETTER OF CREDIT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. P-234822- -001-L1-01- 2 _ I% • 0 TO: CITY OF SAN JUAN CAPISTRANO 32400 PASEO ADELANTO SAN JUAN CAPISTRANO, CA 92675 ATTN: CITY MANAGER OCT 5, 2004 OUR L/C NO.: P-234822 AMENDMENT NO.: 1 APPLICANT: COX COMMUNICATIONS ORANGE COUNTY, INC 1400 LAKE HEARN DRIVE, N.E. ATLANTA, GA 30319 IN ACCORDANCE WITH INSTRUCTIONS RECEIVED, THE ABOVE REFERENCED STANDBY LETTER OF CREDIT HAS BEEN AMENDED AS FOLLOWS: RECEIVER'S REFERENCE: NONREF L/C INCREASED BY: USD162,500.00 NEW L/C AMOUNT: USD172,500.00 ALL OTHER TERMS AND CONDITIONS OF THE CREDIT REMAIN UNCHANGED. AUTHORIZED SIGNATURE 0 Christy Jakl 0 From: Douglas Dumhart Sent: Monday, April 20, 2009 4:40 PM To: Christy Jakl Subject: FW: Expiring franchise bond _ (pox{ -----Original Message ----- From: James. Leach@cox.com [mai Ito: James. Leach @cox. com] Sent: Monday, April 20, 2009 4:39 PM To: Douglas Dumhart Subject: RE: Expiring franchise bond We'll run it down. Ordinarily they'll come to us with new materials prior to cancellation. I'm on it. Thanks. Jim Leach I Vice President I Cox Communications 29947 Avenida de las Banderas I Rancho Santa Margarita, CA 192688 voice 949/546-2406 1 fax 949/546-3406 -----Original Message ----- From: Douglas Dumhart [mailto:DDumhart@sanjuancapistrano.org] Sent: Monday, April 20, 2009 3:54 PM To: Leach, Jim (CCI -Orange County) Subject: Expiring franchise bond Jim: Looks like we received notice your Bonds are being cancelled. Does Cox have a new Bonding Company? When might we see the new paperwork? Regards, Douglas. 1 0 Liberty NOTICE OF BOND MutuAlm CANCELLATION CC: COXCOM, INC. DIBA COX COMMUNICATIONS ORANGE COUNTY MARSH USA INC 41-0600 (OBLIGEE'S NAME/ADDRESS) TO: CITY OF SAN JUAN CAPISTRANO: CITY CLERK 32400 PASEO ADELANTO SAN JUAN CAPISTR CA 92675 is Liberty Mutual Surety 1001 4th Avenue Suite 1700 Seattle, WA 98154 You are hereby notified that SAFECO INSURANCE COMPANY OF AMERICA Surety upon TypeofBond: FRANCHISEBOND Bond No. 4151531- 0155 date effective 03/05/1985 (MONTH, DAY, YEAR) on behalf of (PRINCIPAL'S NAME/ADDRESS) COXCOM, INC. DBA COX COMMUNICATIONS ORANGE COUNTY C/O 1400 LAKE HEARN DRIVE ATLANTA GA 30319 desires to cancel and does hereby cancel said bond in accordance with the cancellation provisions contained therein or in applicable laws or regulations. This notice is Cj mailed to you ori0�K / O (MONTH, DAY, YEAR) and is effective O ac, 'r C+C/Yl &t-C—L -?-k S CO INSURANCE OMPANY OF AMERICA o By: (ATTORNEY- ACT) Cancellation Acknowledged: (PLEASE SIGN, PRINT NAME, TITLE, AND RETURN THE DUPLICATE OF THIS NOTICE) M (PRINT) (SIGN) Dated: (MONTH, DAY, YEAR) CANCEL REASON: PER V. MCMANUS S-1209/SA 5/03 (TITLE) IED COOPERATIVE AGREEMENT 0 This COOPERATIVE AGREEMENT is made and entered into on this 7t' day of September 2004, by and between the City of San Juan Capistrano, California (hereinafter "CITY") and CoxCom, Inc. dba Cox Communications (hereinafter "COX"). RECITALS WHEREAS, in the course of its cable television franchise renewal activities, the City conducted an ascertainment study comprising of a citizens survey and financial review; and WHEREAS, the City participated in a "Agreed Upon Procedures Review" (hereinafter "Review") conducted by Diehl, Evans, & Co., LLP, which reviewed, among other things, the franchise fees paid to the City by Cox for the calendar years 1997 through 2001 and identified certain discrepancies in such franchise fee payments to the City; and WHEREAS, the City participated in scientific Survey of Cable subscribers and non - subscribers to identify community needs and interests as they relate to cable television services (hereinafter "Survey"); and WHEREAS, City and Cox are entering into this cooperative agreement in order to resolve those franchise fee discrepancies and the other findings from the ascertainment study; and WHEREAS, City and Cox are entering the cooperative agreement in order to reimburse the City for its portion of the expense of the Survey as part of the franchise renewal process: NOW, THEREFORE, in consideration of the promises and undertakings herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties do hereby agree as follows: 1. Cox will pay the City the sum of fifty-seven thousand six hundred dollars ($57,600.00) within 30 days of the full and complete execution of this agreement. Such payment will be made by Cox to resolve any and all outstanding issues under the Franchise Agreement and the Review and not as an admission of any liability or wrongdoing on the part of Cox. Such payment shall not be deducted from any franchise fee payments owing to the City or be passed through to subscribers or itemized on a subscriber's bill. 2. Except as otherwise provided herein, the City hereby releases all known and unknown liabilities, claims, and causes of action which were or could have been asserted against Cox or its officers, directors, employees, agents, 1 SD t parents, subsidiaries and affiliated companies, with regard to events or occurrences related to the Review conducted on behalf of the City covering periods up to and including December 31, 2001. This Agreement shall bind and benefit the parties hereto and their respective heirs, beneficiaries, administrators, executors, receivers, trustees, successors and assigns. 4. This Agreement is freely and voluntarily given by each party, without any duress or coercion, and after each party has consulted with its counsel. Each party has carefully and completely read all of the terms and provisions of this Agreement. This Agreement shall be governed and construed in accordance with the laws of the State of California and exclusive venue shall be in the County of Orange whether Federal or State Court as may be appropriate. IN WITNESS WHEREOF the parties hereto certify that they have read and understand all of the terms and conditions herein and have duly authorized and caused this Agreement to be executed as of September 7, 2004. ATTEST: R. Monahan, APPROVED AS TO FORM Clerk ,Special Counsel fornia CoxCom, Inc. dba Cox Communications Leo Brennan, Vice President/Region Manager 0 AGENDA REPORT TO: Dave Adams, City Manager:�)ti • 9/7/2004 FROM: Douglas D. Dumhart, Economic Development Manager SUBJECT: Consideration of Cable Television Franchise Agreement and Cooperative Agreement — Cox Communications RECOMMENDATION: By Motion, approve the Cooperative Agreement and Franchise Agreement for Cable Television Services with Cox Communications. SUMMARY: The City's Cable Television (CATV) Franchise Agreement has been under contract negotiations for the last 3 '/z years. On November 7, 2000, the City entered into a Mutual Aid and Cooperation Agreement with several other South Orange County Cities to form a collective bargaining unit for Franchise renewal. This bargaining consortium contracts with William Marticorena of Rutan & Tucker to provide special counsel for franchise agreement negotiation. William Marticorena has represented the City of San Juan Capistrano for several years on this specialty issue. Mr. Marticorena also represents several other South Orange County cities in their franchise dealings with Cox Communications. The first step of the franchise renewal process is an Ascertainment Study. The Ascertainment Study is comprised of two components: a citizen survey and a financial audit. Using common legal counsel, auditors, and research firm the consortium updated their CAN ordinances, conducted a citizens satisfaction survey, and an agreed-upon procedures financial review of Cox CATV services. On January 7, 2003, the City adopted its updated CAN ordinance. On October 31, 2002, the citizen's satisfaction survey was completed; and on July 5, 2004, the financial audit was concluded. A Cooperative Agreement was reached to resolve matters pertaining to the financial review and a portion of the expenses associated with the franchise renewal process. Staff and legal counsel have completed a new Franchise Agreement for CATV services and are recommending its approval. Agenda Report Paae 2 BACKGROUND: Citizens' Survev September 7, 2004 Godbe Research was retained to implement a scientific survey and produce an objective, reliable measurement of resident's attitudes, behaviors and needs as they relate to cable television services. The study was prepared for the collective bargaining group of the Cities of Dana Point, Laguna Niguel, Laguna Beach, Lake Forest, Rancho Santa Margarita, San Clemente and San Juan Capistrano. Fourteen hundred residents were polled, representing approximately 200 residences in each community. The survey was conducted from September 13, 2002 to September 30, 2002. The overall synopsis is out of 10,930 households in San Juan Capistrano, 8,963 households have cable TV, representing an 82% penetration rate. Close to 80% of the cable TV subscribers surveyed were more than satisfied with cable services, and 12% were neutral. The satisfaction level and penetration rate are very high for the industry standard and the City and Cox should be happy with the results. Agreed -Upon Procedures Review Diehl, Evans and Company, LLP, prepared the financial audit of Cox Communications. The audit period covers the five-year period from January 1, 1997 through December 31, 2001. The audit revealed issues in three categories. They are: 1.) Advertising Revenues - Most cable companies utilize a separate legal entity to conduct their advertising operations. CableRep is a wholly owned subsidiary of Cox. If the advertising entity is under common ownership or control by the cable company (51% interest) the general accounting practice is to "look through" to the books of the advertising entity as to the gross revenues that should be reported for franchise tax purposes. 2.) Bundle Discount Program - Cox runs a discount program to customers that order all three services (voice, video and data). Because the franchise authorities do not regulate voice and data mediums, Cox would not share their books on these services. The City could not ascertain whether those customers who have the triple play discount are applying their discount to CATV (video) and thus lowering gross receipts for franchise fee purposes. 3.) Cable Launch Fees — These are fees the cable company receives from programming networks for launching a new network on the cable system. The cable companies book these launch fees as a reduction of operating costs associated with updating printed material and on -air programming awareness spots. No Franchising Authority has seen these contracts and thus has not been privy to the amounts or purposes of these launch fees. If they are in the form of a lump sum cash payment and not a reimbursement of actual specific 0 Agenda Report Paae 3 0 September 7, 2004 expenditures, then the cable company should allocate such amounts as gross receipts. The Cooperative Agreement and new Franchise Agreement address the audit issues. Cooperative Agreement Cox has agreed to reimburse the City its cost for the citizens' survey in the amount of $4,969.10. Cox has also agreed to pay $57,600.00 to globally address all audit issues. This amount is equal to the franchise fees due on advertising revenues for the review period. The bundle discount issue is addressed going forward with language in the new Franchise Agreement. The Launch Fees are believed to be a one-time industry phenomenon associated with the technology bubble. As discussed above, no franchising authority has seen the terms of such launch fee agreements. A more lucrative public programming grant (described below) was offered by Cox to cover issues like launch fees. The Cooperative Agreement is provided as Attachment 1. Franchise Agreement Cox is seeking a 15 -year agreement. The City has been annually renewing their contract while it continued to participate in collective negotiations for nearly 4 years. Staff sought the term to initiate from the expiration of the Original Agreement in December 2000. Cox offered to split the difference since they felt the delay of 4 years was not solely attributable to their actions. Hence, the agreed upon Franchise is a 15 - year term starting from 2002. The Franchise term is through January 1, 2017. In exchange for a 15 -year franchise, Cox was offering a Programming grant of $60.00 per subscriber. This offer is $20.00 per subscriber more than what the City of Mission Viejo and Also Viejo had recently negotiated. The programming grants are funds to be paid to the City in a lump sum up front payment and will not show up as a line item on the CATV bill. San Juan Capistrano has approximately 10,000 subscribers. The summary deal points of this agreement are as follows: Franchise Term Franchise Term of fifteen (15) years measured from 2002. New Franchise expires January 1, 2017. Public, Education, Government (PEG) Grants Initial PEG Grant of $60.00 per Basic Service Tier ("BST") Subscriber as of the Effective date. Additional Pro -rata PEG Grants payable on the Sixth Anniversary based upon subscribers secured by Cox through new construction in the City. Agenda Report Paae 4 September 7, 2004 Cox will not pass-through or line itemize PEG Grants and will not charge rates higher than those charged in other communities served off the same head end which have received lesser PEG Grants. Public. Educational and Government ("PEG") Channels Cox will provide a minimum of three (3) dedicated analog PEG Channels for exclusive municipal use. Expansion of PEG Channel capacity to a maximum of five (5) analog channels based upon Usage Triggers. Reimbursement of up $7,500 for City costs incurred in change in channel line-up. Digital conversion factor of 4:1 (if Cox goes all digital, Cities receive up to twenty (20) digital channels). PEG Channels, at City's election, viewable only in City or may be broadcast on a regional basis. City will control all PEG Channels although it may enter into agreements with educational institutions to administer and program the Education Channel. Support for Public Assess Programming Public access channel available at the discretion of the City. Cox will maintain existing level of studio and administrative support for public access programming throughout Franchise Term. Definition of Gross Revenue for the Purposes of Calculating Franchise Fees Broader definition of Gross Annual Revenue than currently exists in the Franchise. Bundled discounts to be allocated "pro rata" among Cable Service and Non - Cable Service revenues as defined by the Mission Viejo franchise. No reduction in Advertising Revenues. Liquidated Damages and other Enforcement Remedies Liquidated damages of Two Hundred Dollars ($200.00) for most franchise violations. Liquidated damages collectable against Letter of Credit, which will be provided in a minimum amount of $100,000. 0 Agenda Report September 7, 2004 Rape 5 Connections to City Facilities Four (4) cable drops provided to each existing public facility. All public facilities to receive Basic and Cable Service and residential speed cable modem service without charge. All future facilities located within five hundred (500) feet of the Cable Plant will be connected. Designated facilities such as City Hall, to be connected to "reverse path" of Cable System allowing transmission of live programming directly to subscribers via Cox's head end. System Design Hybrid Fiber Coax architecture engineered to deliver signals at forward frequencies up to and including a minimum bandwidth of 750 MHz. Cable System to provide no less than 110 analog channels. Cable System will be two way activated and provide standby power. Cable System will provide an audio -only emergency alert system on a dedicated basis so that emergency transmissions can be sent only to residents located within the City. Universal Service The Cable System will pass all residential structures, except those specifically delineated in the franchise. Most Favored Nations Clauses Subscribers within the City will be provided all services offered by Cox in its California, Arizona and Nevada Cable Systems. All Subscribers in the City will be offered the same services offered by Cox in other communities served from the same head end. To the extent that Cox enters into new franchises, renewed franchises, or franchise extensions with other cities located in Orange County or with the County of Orange itself, it will be required to extend to the City any PEG access provisions, including PEG Grants or Cable System technology to subscribers in this community. Agenda Report September 7, 2004 Page 6 The Franchise Agreement is provided as Attachment 2. At this time staff is recommending approval of the Cooperative Agreement and new Franchise Agreement for Cable Television services. COMMISSION/BOARD REVIEW & RECOMMENDATIONS: Not Applicable FINANCIAL CONSIDERATIONS: The City does not set cable television subscription rates. The Cable Television Consumer Protection and Competition Act of 1992 regulates cable television systems. The Federal Communication Commission (FCC) implements the 1992 act, and its rate provisions. The Cable operator sets rates that fall within the FCC's set rate schedule. The City does set the franchise fee. The franchise fee is 5% of gross revenues. The City receives approximately $350,000 annually in cable television franchise fees. The new franchise agreement also provides for a Public, Education, Government (PEG) Grant for the purpose of technological development and implementing non-commercial public, benefit uses of the cable system. The grant in the amount of $60.00 per basic subscriber is to be utilized for any capital or non -capital purpose. The combined franchise fee and PEG grant over the term of the franchise are valued in excess of $5M. NOTIFICATION: *William Marticorena, Rutan & Tucker *Jim Leach, Cox Communications RECOMMENDATION: By Motion, approve the Cooperative Agreement and Franchise Agreement for Cable Television Services with Cox Communications. RespectfullyVOL144-4-- A( ouglas D. Dumhart Economic Development Manager Attachment 1: Cooperative Agreement Attachment 2: Franchise Agreement 0 0 COOPERATIVE AGREEMENT This COOPERATIVE AGREEMENT is made and entered into on this 7t" day of September 2004, by and between the City of San Juan Capistrano, California (hereinafter "CITY") and CoxCom, Inc. dba Cox Communications (hereinafter "COX"). RECITALS WHEREAS, in the course of its cable television franchise renewal activities, the City conducted an ascertainment study comprising of a citizens surrey and financial review; and WHEREAS, the City participated in a "Agreed Upon Procedures Review" (hereinafter "Review") conducted by Diehl, Evans, & Co., LLP, which reviewed, among other things, the franchise fees paid to the City by Cox for the calendar years 1997 through 2001 and identified certain discrepancies in such franchise fee payments to the City; and WHEREAS, the City participated in scientific Survey of Cable subscribers and non - subscribers to identify community needs and interests as they relate to cable television services (hereinafter "Survey"); and WHEREAS, City and Cox are entering into this cooperative agreement in order to resolve those franchise fee discrepancies and the other findings from the ascertainment study; and WHEREAS, City and Cox are entering the cooperative agreement in, order to reimburse the City for its portion of the expense of the Survey as part of the franchise renewal process: NOW, THEREFORE, in consideration of the promises and undertakings herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties do hereby agree as follows: Cox will pay the City the sum of fifty-seven thousand six hundred dollars ($57,600.00) within 30 days of the full and complete execution of this agreement. Such payment will be made by Cox to resolve any and all outstanding issues under the Franchise Agreement and the Review and not as an admission of any liability or wrongdoing on the part of Cox. Such payment shall not be deducted from any franchise fee payments owing to the City or be passed through to subscribers or itemized on a subscriber's bill. 2. Except as otherwise provided herein, the City hereby releases all known and unknown liabilities, claims, and causes of action which were or could have been asserted against Cox or its officers, directors, employees, agents, ATTACHMENT parents, subsidiaries and affiliated companies, with regard to events or occurrences related to the Review conducted on behalf of the City covering periods up to and including December 31, 2001. 3. This Agreement shall bind and benefit the parties hereto and their respective heirs, beneficiaries, administrators, executors, receivers, trustees, successors and assigns. 4. This Agreement is freely and voluntarily given by each party, without any duress or coercion, and after each party has consulted with its counsel. Each party has carefully and completely read all of the terms and provisions of this Agreement. 6. This Agreement shall be governed and construed in accordance with the laws of the State of California and exclusive venue shall be in the County of Orange whether Federal or State Court as may be appropriate. IN WITNESS WHEREOF the parties hereto certify that they have read and understand all of the terms and conditions herein and have duly authorized and caused this Agreement to be executed as of September 7, 2004. ATTEST: Margaret R. Monahan, City Clerk APPROVED AS TO FORM: William �Marticorena., Special Counsel City of San Juan Capistrano, California Joe Soto, Mayor CoxCom, Inc. dba Cox Communications Leo Brennan, Vice President/Region Manager 0 0 FRANCHISE TO PROVIDE CABLE TELEVISION SERVICES BETWEEN THE CITY SAN JUAN CAPISTRANO, CALIFORNIA AND COX COMMUNICATIONS, INC. THIS AGREEMENT AND FRANCHISE (the 'Franchise") is made and entered into this 7`d day of September, 2004, by and between Cox Com, Inc., dba (hereinafter "Cox") and the City of San Juan Capistrano, California ("City"). 1. Authority This Franchise has been granted and approved pursuant to the provisions of Title 7 Chapter 2 of the Municipal Code of the City of San Juan Capistrano. This franchise is in the form of a nonexclusive franchise, contract and agreement. 2. Definitions All terms used in this Franchise Agreement shall be as defined herein and in Title 7 Chapter 2 of the San Juan Capistrano Municipal Code ("SJCMC"). The provisions of the Municipal Code and the wordings, specifications, and requirements in this Franchise Agreement shall constitute the terms of a franchise as authorized in said SJCMC in the form of an agreement to permit use of the public rights of way by City and to provide the cable television services by Cox. Where this Franchise and the aforementioned Chapter conflict, the Franchise shall prevail. A. For the purposes of this Franchise, the following words, terms, phrases, and their derivations have the meanings given herein. 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. Complaint means a dispute in which a Subscriber notes Grantee of an outage or degradation in picture quality, billing or other issue pertaining to the Subscriber's Cable Service which is not corrected during the initial telephone or service call. Control or Controlling Interest means actual working control in whatever manner exercised, including, without limitation, working control through ownership, management, debt instruments, or negative control, as the case may be, of the Cable System or a Grantee. A rebuttable presumption of the existence of Control or a Controlling Interest shall arise from the beneficial ownership, directly or indirectly, by any Person or group of Persons acting in concert (other than underwriters during the period in which they are offering securities to the public) of twenty percent (20%) or more of any Person (which Person or group of Persons is referred to as "Controlling Person"), or being a parry to a management contract. ATTACHMENT 2 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 and by each Affiliated Person from or in connection with the distribution of any Cable Service, and any other Service which may, under now or then applicable 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 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. Gross Annual Revenue also includes all advertising revenue, which is received directly or indirectly by Grantee, or any Affiliated Person from or in connection with the distribution of any Service over the System or the provision of any Service -related activity in connection with the System. Gross Annual Revenue does not include: (i) the revenue of any Person to the extent that said revenue is also included in the Gross Annual Revenue of Grantee; (ii) taxes imposed by law on Subscribers which Grantee is obligated to collect; and (iii) amounts which must be excluded pursuant to applicable law. B. Terms Not Defined — Words, terms, or phrases not defined herein shall first have the meaning as defined in the Cable Act, and then the special meanings or connotations used in any industry, business, trade, or profession where they commonly carry such special meanings. If those special meanings are not common, they will have the standard definitions as set forth in commonly used and accepted dictionaries of the English language. 3. Scope of Franchise A. Cox is authorized and obligated to construct, reconstruct, and operate the System within the public streets and rights-of-way. This authority includes the privilege to use Cox's cable television system in City. (the "System") to provide Cable Service to customers in the Service Area located in all residential dwellings, commercial structures and industrial structures. B. This Franchise Agreement solely and exclusively creates, defines, and limits the legal rights and. obligations between City and Cox and does not; in any way, obligate City to take any action, actions or refrain from taking any action, or actions, to or in relation to any third party. -2- 4. Payments Regular Percentage Franchise Fee. Cox shall pay a sum equal to five percent (5%) of Gross Annual Revenue for the quarter to City within forty-five (45) days after the close of each calendar quarter. Cox expressly acknowledges and agrees that: A. Except for the payments expressly required by this Section 4, none of the payments or contributions made by, or the services, equipment, facilities, support, resources, or other activities required to be provided or performed by Cox pursuant to this Agreement are franchise fees chargeable against the compensable payments to be paid to City by Cox pursuant to this Section 4; and B. As applicable, except for the compensation payments expressly required by this Section, each of the payments or contributions made by, or the services, equipment, facilities, support, resources, or other activities to be provided by Cox, are voluntary and are not "franchise fees" within the meaning of the Cable Act (47 U.S.C. §542.(g)(2)); and C. The compensation payments due from Cox to City pursuant to this Section shall take precedence over all other payments, contributions, services, equipment, facilities, support, resources, or other activities to be paid or supplied by Cox pursuant to this Franchise; and D. The compensation and other payments to be made pursuant to this Franchise Agreement shall not be deemed to be in the nature of a tax, and shall be in addition to any and all taxes of general applicability or other fees or charges which Cox or any Affiliated Person shall be required to pay to the City or to any state or federal agency or authority, all of which shall be separate and distinct obligations of Cox and Affiliated Persons; and E. Neither Cox nor any Affiliated Person shall have or make any claim for any deduction or other credit of all or any part of the amount of the compensation or other payments to be made pursuant to this Franchise from or against any city or other governmental taxes of general applicability (including any such tax, fee, or assessment imposed on both utilities and cable operators or their services but not including a tax, fee, or assessment which is unduly discriminatory against cable operators or cable subscribers or income taxes) or other fees or charges which Cox or any Affiliated Person is required to pay to City or other governmental agency; and F. Neither Cox nor any Affiliated Person shall apply or seek to apply all or any part of the amount of the compensation or other payments to be made pursuant to this Franchise as a deduction or other credit from or against -3- any city or other government taxes of general applicability (other than income taxes) or other fees or charges, each of which shall be deemed to be separate and distinct obligations of Cox and Affiliated Persons; and G. Neither Cox nor any Affiliated Person shall apply or seek to apply all or any part of the amount of any City or other government taxes or other fees or charges of general applicability (including any such tax, fee, or assessment imposed on both utilities and cable operators or their services) as a deduction or other credit from or against any of the compensation or other payments to be made pursuant to this Franchise, each of which shall be deemed to be separate and distinct obligations of Cox and Affiliated Persons; and H. Grantor acknowledges that, during the term of this Agreement, Grantee may offer to its subscribers, at a discounted rate, a bundled or combined package of certain cable services that are subject to the franchise fee referenced above in paragraph (a), and other services that are not subject to that fee. With regard to such bundled or combined services, the following provisions are applicable: During the term of this Agreement, if Grantee offers to individual subscribers cable services subject to the franchise fee that are bundled or combined with non -cable services that are not subject to the franchise fee, then the revenue from those bundled or combined services must be allocated on the basis of proportionality, as follows: a. The percentage that the price for all bundled services is discounted from the established retail rates for the individual services, as those rates are advertised by Grantee in its marketing materials or published rate cards, will be prorated across all services in the bundled package, subject to the adjustment referenced below in subparagraph (b). b. The revenue derived by Grantee from services that are subject to mandatory tariff rates imposed by the California Public Utilities Commission, or any similar governmental rate -setting authority, will be deducted from the aggregate revenue to determine the revenue that is subject to the franchise fee. By way of example, Grantee may offer a bundle of voice, video, and data services for a flat fee of $75, where the aggregate retail rate of those services when purchased on an individual basis would equal $100. If there is no service in that bundled package subject to a mandated tariff rate, Grantee would apply a 25 percent discount to each individual service. Thus, if the established retail rate for video service was then $50, Grantee would recognize revenue in the amount of $37.50 and would pay a franchise fee on that amount. -4- 0 0 C. Grantee will not structure the pricing of any bundled or combined services so as to intentionally or unreasonably cause a reduction in the Gross Annual Revenue against which franchise the Grantor may impose fees or other proportionately derived taxes, surcharges, or fees. d. If Grantor reasonably determines that Grantee has unlawfully, inequitably, or contrary to this paragraph (b) allocated Gross Annual Revenue between video services and non -video services in calculating franchise fee payments, then the parties will meet upon advance notice from the Grantor to discuss the allocation methodology. If the parties cannot resolve the dispute within a reasonable period of time, then the parties will submit the matter to a mutually agreeable third party for mediation. The parties will share the cost of the mediation equally. If the mediation is not successful, or if the parties cannot mutually agree upon a mediator, then either party may file an action in a court of competent jurisdiction or pursue any other remedies available under the law or this Agreement. If any franchise payment or recomputed amount is not made on or before the dates specified above in subsection 2, Grantee shall pay as additional compensation the greater of the following: a. An interest charge, computed from the applicable due date, at an annual rate equal to the prevailing commercial prime interest rate in effect upon the due date, plus three percent (3%). b. In addition to any late payment made pursuant to this section, if a payment is late by sixty (60) days or more, Grantee shall pay a sum, of money equal to five percent (5%) of the amount due in order to defray reasonable additional documented and itemized expenses and costs incurred by Grantor as a result of such delinquent payment. C. No acceptance of any payment shall be construed as a release of, or an accord, or satisfaction of, any claim that the Grantor might have for further or additional sums payable under the terms of this Ordinance, or for any other performance by Grantee of an obligation hereunder. d. Payments of compensation made by a Grantee to the Grantor pursuant to the provisions of this Ordinance are in addition to, and exclusive of, any and all authorized taxes, business license fees, and other fees, levies, or assessments now in effect or subsequently adopted in accordance with state and federal law. 5. Letter of Credit -5- A. Pursuant to Section 7-2.05(c) of the SJCMC within thirty (30) days of the Effective Date of this Franchise shall post an irrevocable standby Letter of Credit in the amount of ($17.25 per current subscriber but not less than One Hundred Thousand dollars ($100,000). The Letter of Credit provider shall have, at a minimum, a credit rating of A issued by Moody's or Standard & Poor's. The letter of credit shall incorporate wording approved by City enabling City to draw such sums from time to time as the City may find necessary to satisfy any material default of Cox or to meet any payment due City under or in connection with the SJCMC or this Franchise, upon ten (10) days' written notice to the Letter of Credit provider. The Letter of Credit shall provide in substance that, upon written notice by City of a material default or failure to make a payment due to City under or in connection with the SJCMC or this Franchise, City may draw upon the Letter of Credit without any offset, contingencies or conditions of any kind. This Letter of Credit shall provide that it may not be revoked or amended without City's prior written approval. The wording and form of the Letter of Credit and the Letter of Credit provider must be prior approved by City, and such approval shall not be unreasonably withheld. B. The Letter of Credit requirement may, in the unilateral discretion of the City, be increased by up to three times its original amount if there is an assignment, transfer, and/or change of control of the Franchise and/or the Grantee. C. The Letter of Credit required by this Section satisfies the financial security requirements of this Franchise Agreement and is in lieu of a Security Fund or Faithful Performance Bond pursuant to Section 7-2.05(b) of the SJCMC. 6. Insurance Within ten (10) days of the Effective Date of this Franchise, Cox, at its sole cost and expense, for the full term of this contract (and any extension thereof), shall obtain and maintain at minimum all of the following insurance coverage: A. Types of insurance and Minimum Limits. The coverages required herein may be satisfied by any combination of specific liability and excess liability policies. 1. Workers' Compensation and Employers Liability Insurance in conformance with the laws of the State of California (not required if Cox has no employees). 2. Cox's vehicles, including owned, non -owned (e.g., owned by Cox's employees and used in the course and scope of employment), leased or hired vehicles, shall each be covered with Automobile Liability insurance in the minimum amount of two million dollars K0 0 • ($2,000,000) combined single limit per accident for bodily injury and property damage. 3. Cox shall obtain and maintain comprehensive or commercial General Liability Insurance coverage in the aggregate annual amount of two million five hundred thousand dollars ($2,500,000) combined single limit, including bodily injury, personal injury, and broad form property damage. Such insurance coverage shall include, without limitation: a. Contractual liability coverage adequate to meet Cox's indemnification obligations under this Contract; and b. A cross -liability clause. C. Cox shall obtain and maintain Slander/Libel/Defamation Liability Insurance in the aggregate annual amount of one million dollars ($1,000,000). B. All required Automobile Liability insurance and Comprehensive or Commercial General Liability Insurance shall contain the following endorsement as a part of each policy: "The City of San Juan Capistrano is hereby added as an additional insured as respects the operations of the named insured pursuant to cable television franchise as granted by the City and said insurance shall specifically cover the acts and omissions of Cox and the acts and omissions of its employees, agents and subcontractors in the performance of work hereunder." C. Within thirty (30) days from effective date of this Franchise, Cox shall furnish proof to City that a satisfactory insurance policy for General Comprehensive, Bodily Injury Liability, Property Damage, and Slander/Libel/Defamation Liability insurance is in place. The insurance policies for vehicles shall be in effect prior to usage and the City may, from time to time, reasonably increase the required amount of said insurance so long as said increased coverage is reasonably available at reasonable prices. D. The insurance required of Cox pursuant to this Franchise shall be primary and no insurance held by City shall be called upon to contribute to a loss under this coverage. E. All insurance policies shall provide that in the event of material change, reduction, or cancellation or non -renewal by the insurance carrier for any reason, not less than thirty (30) days' notice will be given to City by registered mail of one (1) copy of a written notice of such intent to cancel, materially change, reduce or not renew the coverage. An authorized agent -7- of such insurance carrier shall provide to City, on such schedule as is requested by City, a certification that all insurance premiums have been paid and all coverage's are in force. If for any reason Cox fails to obtain or keep any of such insurance in force, City may (but shall not be required to) obtain such insurance, in which event Cox shall promptly reimburse City its premium cost therefore plus interest at the City's portfolio rate until paid. F. All insurance shall be contracted through companies licensed to do business in California. G. Any deductible or self-insured retention must be declared to and approved by City. At the option of City, insurer shall reduce or eliminate. Such deductible or self-insured retention as respects City, its officials, officers, employees and agents, or Cox shall procure a bond guaranteeing payment of losses and related investigations, claims, administration and defense expenses. 7. Defense and Satisfaction of Claims. A. Cox shall, at the sole cost and expense of Cox, upon demand by City, defend City, its officers, boards, commissions or employees, in any and all suits, actions, or other legal proceedings, whether judicial, quasi judicial, administrative, or otherwise arising out of the negligent or willful acts or omissions of Cox, its employees, subcontractors and agents. Where Cox is required to provide legal services to City under this paragraph, and chooses to utilize joint counsel, the parties shall make a good faith effort to cooperate and agree upon litigation strategy and implementation thereof. In the event that Cox's litigation strategy or choice of legal counsel create a conflict of interest, or result in inadequate representation to protect the City's interests and separate counsel is necessary for the representation of City, City may obtain separate legal counsel chosen by City at Cox's cost and expense provided, however, that if City obtains separate legal counsel as set forth above, Cox is only obligated to pay an hourly amount for legal services which does not exceed one hundred percent (100%) of the highest hourly rate that City has paid for legal services within the twenty-four (24) month period prior to obtaining legal services as provided in this paragraph. City shall submit to Cox on a regular basis statements for attorney's fees, which shall be paid to City within sixty (60) days of Cox's receipt of said statement. B. Cox shall cause to be paid and satisfied any judgment, decree, or order rendered, made, or issued against Cox, City, its officers, boards, commissions, or employees, and hold City harmless there from, arising out of Cox's negligent or willful acts or omissions in connection with the construction, operation, maintenance, or other activities in relation to Cox's cable television system including, but not limited to, damages arising out of copyright infringement, defamation, personal and property WE 0 0 liability; and antitrust liability, whether or not said damages are compensatory or punitive, provided, however, Cox shall not be required pursuant to this paragraph to hold City harmless for actions relating to programming decisions outside of Cox's control. Such indemnity shall exist and continue without reference to the amount of any bond, policy of insurance, deposit, undertaking, or other assurance; provided, however, City may not enter into any compromise or settlement which imposes any obligation on Cox without Cox's consent, which consent shall not be unreasonably withheld, and Cox shall not make or enter into any compromise or settlement of any claim, demand, causes of action, suit, or other proceedings which settlement involves anything other than the payment of money by Cox without contribution by City, without first obtaining the written consent of City, which consent shall not be unreasonably withheld. C. The indemnification provided pursuant to paragraphs 7(A) and 7(B) above shall apply to all damages and claims for damages of any kind suffered by reason of any of the aforesaid operations referred to in those paragraphs, regardless of whether or not City has prepared, supplied, or approved the plans and/or specifications for the operation or regardless of whether or not any insurance policies shall have been determined to be applicable to any of such damages or claims for damages. 8. Liquidated Damages and Other Remedies. A. Damages for Violation of Technical Standards, Customer Service Standards and Other Violations. In addition to, and without limiting the damages for delays as specified in Section 8(A) of this Franchise, City may impose any of the other liquidated damages described below for the violations and in the amounts described below: Technical Standards violations. a. If more than ten percent (10%) of the locations tested pursuant to FCC regulations fail to meet the FCC technical - standards, City may impose liquidated damages in an amount equal to two hundred dollars ($200) per day, measured from the first day non-compliance is detected. b. Cox shall be entitled to the appeal rights provided in Section 8 (13)(2) below. 2. Customer Service Violations. If Cox violates, in any material way, any of the customer service standards specified in the SJCMC or this Franchise, City may WE impose liquidated damages in the amount of two hundred dollars ($200) per violation per day, however, no liquidated damages shall be imposed until Cox has been given actual notice of said violation and failed to cure said violation within the cure period provided in this Franchise or the SJCMC. 3. Other Violations. For all violations and breaches specified in the Franchise or the SJCMC, the City may impose liquidated damages in the amount of two hundred dollars ($200) per day. No liquidated damages shall be imposed pursuant to this subsection unless. the City shall have first provided Grantee with the specific section of this Franchise Agreement, or section of the SJCMC which has been breached or violated, and has given Grantee an opportunity to cure said breach or violation pursuant to Section 8(B)(1). 4. Reduction of Damages and Letter of Credit. If City does not impose any damages on Grantee for delays in violation of technical standards, violation of customer service standards or for other violations in the four (4) year period which shall commence on the date which is sixty (60) days from the Effective Date of this Franchise, after such four (4) year period, the penalties contained in Sections 8(B)(1) and 8(B)(2) above shall be reduced to one hundred fifty dollars ($150) per day per violation, and the letter of credit contained in Section 7 above shall be reduced to seventy-five percent (75%) of the original amount thereof; provided however, that the original, penalties and the original amount of the letter of credit, as increased as allowed herein upon transfer, assignment or change of control, shall be immediately reinstated if (a) City imposes two (2) penalties on Cox in any twelve (12) month period, and/or (b) if Cox assigns, sells, leases or otherwise transfers this Franchise or control of the System. This entire paragraph shall immediately cease to have any force or effect if City imposes a penalty or penalties on Cox within the four (4) year period, which commences sixty (60) days from the Effective Date of this Franchise Agreement. B. Payment of Damages. 1. Cure In the event that City has reason to believe that Cox has failed to comply with any material provision of this Franchise or the SJCMC and therefore desires to impose damages on Cox as stipulated above and in Title 7, Chapter 2 of the SJCMC, except in the case of Section 8(A)(2) violations where the internal provisions thereof shall -10- govern, City shall notify Cox in writing of the provision or provisions which City believes may be in default as well as the applicable cure period. Cox shall, upon receipt of said Notice. a. Cure the alleged violation within the cure period provided by the SJCMC, or if no cure period is provided, within five (5) working days of said notice. In the event that Cox does not correct said violation within the applicable cure period, said liquidated damages may be imposed from the date of original violation; or b. Respond to City in writing during the cure period contesting City's assertion of violation and providing such information or documentation as may be necessary to support Cox's position and/or request an extension of the cure period. 2. Appeal and Payment. In the event Cox fails to respond to said notice of violation, or to cure the violation within the applicable cure period, or provide an explanation for failure to cure acceptable to City, City or its designee shall schedule a hearing no sooner than ten (10) days after written notice to Cox of the expiration of the cure period and the scheduling of said hearing. Cox shall be provided an opportunity to be heard at such hearing, including the right to present evidence, cross-examine witnesses, and be represented by counsel. Within thirty (30) days after said hearing, City shall determine whether or not Cox is in violation and submit written findings of facts supporting such determination. The hearing described above may be conducted, at City's selection, either before the City Council or before an administrative officer or commission selected by the City Council. In the event that said hearing is not held before the City Council, Cox shall possess the right to appeal said determination to the City Council within ten (10) days of issuance of the statement of decision and findings of fact. The City Council shall decide said appeal pursuant to a hearing at which Cox has an opportunity to be heard and the right to present evidence, examine witnesses and be represented by Counsel. Cox shall have the right to appeal the City Council's decision to a court of competent jurisdiction within ninety (90) days of -any final decision by the City Council. In the event a court orders repayment of said liquidated damages from City to Cox, interest on such amounts shall be included at the City's portfolio rate. All liquidated damages shall be due and owing thirty (30) days after the final decision by either the City Council or the hearing officer in the event of no appeal to the City Council. The aforesaid assessment may be levied directly against the letter of credit and collected by City thirty (30) days from date said damages are due and owing. Such assessment shall not constitute a waiver by City of any other right -11- 91 C. or remedy it may have under the Franchise or under applicable law including, without limitation, its right to recover from Cox such additional damages, losses, costs and expenses, including reasonable attorneys' fees, as may have been suffered or incurred by City by reason of or arising out of such breach of the Franchise. Nothing in this paragraph is intended to waive, modify or otherwise affect Cox's rights under the SJCMC, this Franchise, or any applicable law, except for the speck procedures expressly provided herein, including without limitation the right to judicial review of the legal rights and obligations of the parties with respect to each other, Cox's right to challenge the decision of City under applicable legal standards, and any issue of performance or breach by either party to this Franchise. Validity of Liquidated Damages. The parties acknowledge that it would be impractical or extremely difficult to fix actual damages in the case of Cox's default, and that the amount of damages specified above is a reasonable and complete estimate of City's damages. Cox recognizes that Cox's prompt development and offering of cable television service for which penalties can be imposed is of critical importance to City. City: (Initials) D. Sole Financial Remedy Cox: 1.1P p (Initials) No penalties will be applied pursuant to Ordinance or other similar document for the same offenses to which the liquidated damages apply. Cox Support for Development of Technology and Programming. Cox shall provide the following support for the purpose of technology development and implementing non-commercial public, benefit uses of the cable system. The provision of the support items listed herein shall be considered as binding commitments of Cox within the terms of this Franchise, and if not provided, shall subject Cox to applicable the Franchise. Cox shall provide the following support: A. Channel Capacity Requirements. Grantee Support for PEG Access: -12- remedies and penalties for violations of 1. Grantee shall designate three (3) channels for the exclusive use of the City ('PEG channels"). The PEG channels shall be under the exclusive management and editorial control of the City and shall not be shared with other cities. The City may designate a representative, such as a non-profit entity, to use and administer to said channels, with all of the attendant rights and obligations provided to the City hereunder. In the event Grantee is required by federal law or regulations to change the channel number of a PEG channel, Grantee shall provide thirty (30) days advance notice to the City and its customers. Should Grantee desire to change the channel number of a PEG channel that is in use by a PEG user within the criteria set forth in paragraph 2 of this Section for any other reason, Grantee shall provide the City with the reason for change at least ninety (90) days prior to the proposed change, advertise the change to customers on its website, in at least three (3) bill messages prior to the change, and in a television spot announcement that Grantee shall carry on its system for at least six weeks prior to the change. Grantee shall also reimburse the City for its actual costs for reprinting any materials such as program guides or other promotional materials occasioned by the change in an amount not to exceed $7,500.00 for its costs of remarketing the channel. 2. Grantee shall make available additional PEG channels designated for use exclusively by the City pursuant to the following criteria: a. The initial governmental channels must be in use and programmed with non-commercial PEG programming, of which no more than ten (10) hours can be character generated programming, during at least 80% of the weekdays for at least 80% of the time during any consecutive 6 -hour period for ten (10) consecutive weeks. b. The initial public and educational channel must be in use and programmed with non-commercial and at least 50% locally produced programming, of which no more than ten (10) hours per week can be character -generated programming during at least 80% of the weekdays for at least 80% of the time during any consecutive 6 -hour period for ten (10) consecutive weeks. C. No more than 33-1/3% of the aggregate hours utilized for PEG programming during such ten -week period can represent repeat programming. -13- d. Any additional PEG channel shall be made available within 180 days following the City's written request and verification of compliance with each of the foregoing conditions. e. Whenever such additional PEG channels but not the original three PEG channels, are programmed for less than ten (10) hours per day for six (6) days per week for a continuous period of not less than twelve (12) consecutive weeks, the City may permit the Grantee to utilize unused channel capacity on that channel under the following conditions: (i) Any request from the Grantee to use any fallow capacity designated for PEG Access must be submitted in writing to the City: (ii) The City shall approve the request from the Grantee to use fallow channel capacity if it finds that: (i) the utilization of the channel is as represented; (ii) the Grantee has not acted in violation of any of the provisions of the Franchise regarding utilization of the channel; and (iii) there are no special circumstances which would justify the denial or delay of implementation of the use of the channel. After approval, the Grantee may continue to utilize the channel for any other purposes it so chooses, consistent with the Franchise, until it is required to be designated for PEG purposes pursuant to the provisions hereof. (iii) Unless the Grantee receives written notice within one hundred and twenty (120) days that the City disapproves the Grantee's request, the City's approval shall be deemed granted. The maximum number of access channels, which may be required under this Franchise, shall be five (5), subject to the City's right to exchange channels, as set forth herein. On six months notice to Grantee, City may exchange each analog PEG channel for four (4) digitally compressed channels upon satisfaction of the following conditions: (i) Grantee provides digitally compressed channels which offer at least as many services as are available by analog channels on the system; and (ii) Digital decompression terminal devices are installed in the homes of a least 50% of Grantee's subscribers, and are used to receive Grantee's services; and -14- 0 Ll (iii) City provides six (6) months notice to Grantee. (iv) City provides written waiver of any state or federal laws pertaining to requirements for the placement of such channels. As used in this section, a "digitally compressed channel" shall mean a data stream capable of delivering video programming on a basis comparable to the delivery of other digitally compressed video programming. 3. The City shall have sole responsibility for the administration and programming of the Governmental channel(s) provided by the Grantee, including without limitation, the carriage of programming on the channel(s) to include trafficking of tapes and playback and the establishment and administration of all rules, regulations and procedures pertaining to the use and scheduling of the programming presented over the channel(s). The channel(s) shall be used for noncommercial, public, governmental or educational programming. In relation to the public access channel(s), Grantee shall continue its current practices of providing studio facilities, equipment, trafficking of tapes, playback, for public access users in a quality and quantity generally consistent with that provided over the past franchise term. B. A Grant in the amount of sixty dollars ($60.00) per Basic Service Tier subscriber ("BST') of Cox in the City as of the Effective Date ('Threshold Subscribers") to be utilized for any capital or non -capital purposes (the "Initial Grant'). Cox shall pay said Initial Grant within thirty (30) days of the Effective Date of this Agreement. C. On January 1, 2010, the City shall provide Cox with a list of residential units which have been constructed in the City subsequent to the effective date, if any, list of newly constructed units (the "Construction List"). Within thirty (30) days of receipt of the Construction List, Cox shall determine and report in writing to the City the number of newly constructed units which are BST Subscribers as of that (the "New Construction Subscriber List"). Cox shall also report to the City the number of BST Subscribers contained in the City other than those subscribers set forth on the New Construction Subscriber List (the "Continuing Subscribers"). Within ten (10) days thereafter, Cox shall pay to the City an additional grant (the "Additional Grant") equal to the number of New Construction Subscribers, less the difference between Threshold Subscribers and Continuing Subscribers times $30.00 per subscriber. D. City and Cox agree that said Initial Grant and Additional Grants are neither franchise fees nor off settable against franchise fees, irrespective of how -15- they are expended, for the purposes of the Cable Communications Policy Act of 1984, as amended. City shall waive normal permit fees, but not inspection fees, for residential dwelling units, constructed subsequent to the Effective Date in new subdivisions where Cox installs its cable television plant in otherwise open trenches along with other utilities at the time of new subdivision construction. Other than the waiver of normal permit fees as provided above, Cox will comply with all other City requirements. E. In the event any dedication to PEG Programming required by this Franchise is deemed by a legislative body, administrative body, or court of competent jurisdiction to constitute a payment which must or may be offset against the franchise fee, City hereby reserves the right, but is not required to do so, to terminate said program and/or requirement so as to provide the maximum allowable franchise fee. Cox shall not offset any charge, of any kind, against a franchise fee or other payment due City without prior written consent of City. Nothing in this Franchise is intended, and shall be so construed, to confer any third party beneficiary rights on any party(s), and no rights are created by this Agreement other than rights in City and Cox. 10. Governmental and Institutional Drop Policy; Provision of Live Local Insertion Locations. A. Drops to City Facilities. Within one hundred eighty (180) days of written notice provided by the City, Cox shall provide, without charge, up to four (4) cable drops, as determined by City, for all levels and all tiers of Cable Service per building, excluding premiums and pay-per-view, a cable modem drop, and cable modem service (residential speed of up to 3 mbs) per drop for those buildings, institutions and facilities on Exhibit A, plus those buildings, institutions and facilities which are constructed subsequent to the Effective Date of this Franchise Agreement, as designated by City in writing. Except for a City Hall, which Cox shall construct at its sole expense, drops to all buildings, institutions and facilities which are constructed subsequent to the Effective Date of this Franchise Agreement shall be limited to 250 feet from the closest point to Cox's distribution system. In the event that requested drops exceed said distance, Cox shall determine the incremental cost beyond said distance and the City shall pay such incremental costs to Cox upon completion of construction. Cox shall not impose programming or other charges for any additional outlets within said buildings. Installation and maintenance of interior wiring of said building(s) beyond the four (4) drops per building shall be the responsibility of the building owner, provided that if Cox is requested to install such wiring, it will do so within a reasonable time at its actual cost of labor and materials. -16- 0 0 B. Live Insertion Locations. Cox shall upon written notice provide live insertion points at the locations set forth on Exhibit B by way of fiber connection so that the City can insert and transmit audio, video, and digital programming from said site to Cox's head end for retransmission over one or more of the PEG Channels specified in Section 9(A) (collectively, the "Return Feeds"). The Return Feeds shall be constructed pursuant to technical standards mutually agreed upon by Cox and the City (the "Design Specifications"). The City shall possess no obligation to insert programming upon the Governmental Channel pursuant to Section 9(A)(3) until such time as the Return Feeds are constructed and activated pursuant to the Design Specifications. Within one hundred and twenty (120) days of the completion and activation of the Return Feed, any playback of local government programming or insertion of audio, data or other information on the Govemment Access channel shall be the sole responsibility of the City. 11. Services and Broad Categories of Video Programming. Cox should provide, at a minimum, the following broad categories of services and video programming: local broadcast, public affairs, satellite services, news, sports, cultural, foreign language programming, general entertainment, and children's. If any listed broad category of service or video programming shall become unavailable, or is commercially, impractical, or cannot be provided under existing FCC regulations, Cox should provide substitute programming of the same category if reasonably available. City may request Cox to cooperate with City in developing and distributing a printed PEG channel guide at City's cost. Said printed guide shall be of a reasonable weight and size and could include, but is not limited to; a printed guide distributed through the bills, via direct mail, or included in local newspaper or Cox's printed guide, all at City's cost, if any, but shall not include advertising. If City requests Cox to distribute a printed guide through the bills, Cox shall comply so long as City produces said guide at its own cost for production and insertion and provides Cox sufficient advance notice and there is room for said guide in Cox's billing envelopes, and said guide does not take the place of other inserts desired by Cox. City shall have complete responsibility for the content of any information included in said guide: The payments by City referred to in this Section shall be limited to reimbursing Cox's actual incremental cost of providing and distributing the guide. 12. Minimum System Design and Capacity Requirements. A. Channel Capacity. The cable television system shall be constructed with hybrid fiber coax ("HFC") architecture and engineered to deliver signals at forward frequencies up to and including a minimum bandwidth of seven hundred and fifty (750) megahertz (MHz) on the Residential Network. The System -17- will be engineered to allow simultaneous downstream delivery of no less than one hundred ten (110) analog video channels and shall be constructed pursuant to the specifications and routing described herein. B. Interactive Capacity and Services. The cable television system shall be two-way activated in all of the distribution plant. C. Minimum Design Criteria. In addition to the requirements of Sections 14(A) -(B) above, minimum system construction requirements shall be as follows: 1. Cox shall at all times maintain equipment capable of providing standby power for the entirety of the cable system for a minimum of two hours. 2. Emergency Override System. a. Grantee shall provide, install, activate, and maintain an emergency override system which includes audio override on all analog channels of Grantee's system and character generated message capabilities on a designated channel, receivable only within the City. City shall be able to activate, provide audio programming, and terminate such emergency audio override via dial-up or dedicated telephone control upon system upgrade. City shall use the audio override and character generated system only in emergency situations, as declared by the City Council or the City Manager when there is threat to the public welfare, health or safety. b. In addition to subsection (a) above, and in accordance with the provisions of FCC Rules and Regulations Part 11, Subpart D, Section 11.5(h)(1), and as such provisions may from time to time be amended, Licensee shall install and maintain an Emergency Alert System (EAS). As allowed by FCC Order FCC 97-338, Paragraph 33, Licensee shall transmit all national, state, and local activations of the Federal EAS, utilizing the four-part message protocol specified in FCC Rules and Regulations Part 11, Subpart B, or successor protocols. This shall include such local and state-wide situations as may be designated to be an emergency by the Local Primary (LP), the State Primary (SP) and/or other authorities identified and defined within FCC Rules and Regulations, Part 11 or the Local and State Plans provided for under those rules. sm 0 • 3. Cox shall provide subscribers, upon request, with a parental control locking device or' digital code or other means that permits inhibiting the viewing of parental designated channels. 4. All new underground trunk and distribution cables shall be in conduit. 5. Minimum Technical Standards for Forward (Downstream) and Reverse (Upstream) Directions. The minimum technical standards shall be those adopted by the FCC from time to time. To the extent that no FCC standards exist, the standards shall be those FCC technical standards in effect on the Effective Date, or, if none, those established by City. 13. Universal Service. Cox shall design, construct and maintain the cable television system in such a manner as to pass by every existing single or multiple -family dwelling unit in the City, except those dwelling units specified in Exhibit A, and shall make the system available on an identical basis to all single or multiple family dwelling units constructed during the term of this Franchise Agreement. For new construction in residential, and industrial areas, Cox shall make the system available at the, same time as. The units, residential, or otherwise, are constructed. Nothing herein shall preclude Cox from providing service to multi- family dwellings and other residential developments on a discounted bulk -billing basis. 14. System Extension Policies. Description of Service Area(s). A. The service area shall constitute the existing entirety of City plus all areas annexed thereto (the "Service Area"). B. All subscribers, residential, or otherwise, within one hundred twenty-five (125) feet from the closest public right-of-way or easement, shall be provided service for the standard installation fee. Subscribers located beyond one hundred twenty-five (125) feet from the closest public right-of- way or easement will be connected upon the payment of Cox's time and materials for that portion of the installation, which exceeds one hundred twenty-five (125) feet. 15. Provision of Service. Unless the subscriber requests otherwise, Cox shall deliver initial service within seven (7) business days after receipt of a subscriber order so long as the subscriber is within the existing Service Area. Service additions or deletions shall -19- be made within twenty-four (24) hours of a subscriber request, unless additional terminal equipment is required, in which case Cox shall make such service change within seven (7) calendar days. Cox shall provide all subscribers, prior to the initiation of cable service and thereafter, with the ability to subscribe to only Basic Service. 16. Technical Standards Testing. A. Cox's cable television system shall be periodically tested by Cox, at Cox's sole expense, at the times, and pursuant to the procedures, described in the then applicable rules and regulations of the FCC or, if no such rules and regulations exist, in the manner prescribed in rules and regulations in effect on the Effective Date. B. Reimbursement of City Expenses. City shall bear all costs associated with its attendance, either directly or through an independent consultant, in the initial testing but not retesting procedure described herein except as provided below: 1. Upon written request by the City and based on a pattern of customer complaints to the City regarding system performance, Cox shall measure and report to City the number of service complaints, which related to customer dissatisfaction with the quality of the picture excluding partial or tonal system outages. The number of said complaints over a twelve (12) month period shall be divided by twelve (12) and constitute the "base year average monthly subscriber complaints" for the purposes of this paragraph. 2. At the conclusion of said twelve (12) month period, Cox shall calculate and report to City monthly the number of subscriber complaints relating to the quality of the picture ("Monthly Subscriber Complaints"). Said information shall be provided to City within fifteen (15) working days of the last day of each calendar month. 3. So long as Monthly Subscriber Complaints, as defined herein, remain within twenty percent (20%) of the base year average monthly subscriber complaints, as defined herein, City shall bear all costs relating to its participation in the technical standards testing process defined herein. However, if, for any given two (2) consecutive months or any three (3) nonconsecutive months in any six (6) month period, said Monthly Subscriber Complaints increase more than twenty percent (20%) over the base year average Monthly Subscriber Complaints, Cox shall reimburse City for City's actual and reasonable cost of supervising and/or participating in the technical standards testing for a three (3) quarter period commencing upon the occurrence of the contingency(ies) provided herein if the unsupervised periodic testing, as defined herein, indicates that Cox's system during said period is operating in conformance with the technical performance standards provided by -20- • •. Section 17 hereof; Cox shall reimburse City for any and all costs incurred by it in monitoring Cox's technical standards testing for twelve (12) months subsequent to a determination by City that liquidated damages pursuant in Section 10(3)(1) may be imposed. 4. Grantee shall maintain a written or computerized record of subscriber complaints, including: loss of signal requiring a field visit, non -receipt of programming or services ordered, billing disputes, missed appointments, unsatisfactory performance of maintenance, malfunctioning signal traps on blocked channels, and unresolved or chronic technical problems. Said record shall indicate: a. date and time of Subscriber complaints; b. street name of complainant; C. nature of complaint; d. Grantee's action(s) to resolve complaint; and e. date(s) and time(s) actions(s) taken. Said record shall be kept at Grantee's local office for a period of two (2) years. A copy of said Subscriber complaint record shall be submitted by a Grantee to. City within ten (10) working days following receipt of a written request by City. 5. To the extent that Grantee maintains and provides Subscriber complaint information consistent with the above requirements, it shall be deemed to have maintained and provided sufficient Subscriber complaint information as required by this paragraph. 17. Equipment in Rights of Way. A. Design and construction requirements, permit and other fees, public and customers notifications, requirements for public communication, and other oversight requirements by Grantor imposed on Grantee shall be consistent to the extent legally permissible and technically feasible, with those requirements imposed upon other users of the public rights-of-way and easements within the City of San Juan Capistrano B. The Cable System shall be constructed or installed in the City only after the express written approval of the City and only at such locations and in such manner, design, and size as shall be approved by the City. In granting such approvals, the City shall exercise reasonable discretion in accordance with applicable law. Upon Grantee's written request, City staff shall meet and confer with Grantee in order to develop a process for -21- expediting City processing and approval of proposed Cable System installation of multiple "like -kind" facilities. C. The Cable System shall be placed underground or where all other utilities are located in all areas, which are subject to the provisions of the SJCMC unless otherwise approved by the City Engineer. Such approval shall not unreasonably be withheld. D. All construction or maintenance work shall be conducted in a good and workmanlike manner consistent with industry standards. Installation of new facilities shall occur, whenever practical, concurrent with the installation of subdivision public improvements. E. Upon its receipt of reasonable advance notice, not to be less than five (5) business days, the Grantee shall, at its own expense, protect, support, temporarily disconnect, relocate in the Public Way, or remove from the Public Way, any property of the Grantee when lawfully required by City by reason of traffic conditions, public safety, street abandonment, freeway and street construction, change or establishment of street grade, installation of sewers, drains, gas or water pipes, or any other type of structures or improvements by the Franchising Authority; but, the Grantee shall in all cases have the right of abandonment of its property. 18. Franchise Term The term of this franchise shall commence upon its approval by the City Council (the "Effective Date"), and shall expire on January 1, 2017. 19. Most Favored Nations Review. A. At any time and at City's request, Cox shall provide information on any Cable Services not being provided in the City which are being provided on an operational basis in systems operated by Cox, or any affiliate thereof in the States of California, Arizona and Nevada (the "Comparison Systems"). For purposes of this section, "operational basis" means that Cox has offered a Cable Service to all Subscribers in the Comparison Systems for at least six (6) months, but does not include Cable Services that are offered on a trial or test basis to a limited number of subscribers. B. If Grantee is providing Cable Services on an operational basis in any Comparison Systems, City may require Cox, and Cox shall comply, to provide said Cable Service(s) within one (1) year of the City's written request, and to upgrade its Cable System, if necessary, to provide said Cable Service. Further, City shall reasonably consider not requiring such service based upon information supplied by Cox but, after considering said information, may still require the provision of these Cable Services. -22- C. After the Effective Date of the Franchise, if Cox, or any affiliate, parent, or subsidiary thereof, enters into any renewal, franchise extension, of a franchise or a new franchise to provide cable television service to any city located within Orange County or the County of Orange itself, within thirty (30) days thereof, Cox shall provide to the City a copy of the Other Franchise. D. In the event that the City concludes that the Other Franchise contains terms, conditions or provisions regarding Public, Educational or Government access ("PEG Access") (the "PEG Access Provision", including, without limitation, the financial support thereof) or Cable System Technology (i.e., channel capacity, services offered, etc.) (hereinafter the "Technology Provision"), as originally contained therein or as modified that are more favorable than those contained in the Franchise when considering the Franchise and its requirements taken as a whole, then the City may, at its sole discretion, require Cox to provide the more favorable PEG Access Provision and the more favorable Technology Provision, or either of them; provided, however, (1) the City must notify Cox in writing of its election to require Cox to provide the more favorable provision within one hundred eighty (180) days of the City's receipt of the Other Franchise or the City shall be deemed to have irrevocably declined to impose such requirement; and (2) any requirement imposed pursuant to this paragraph of the Franchise to incorporate the more favorable PEG Access Provision and the Technology Provision, or either of them, shall also include, upon Cox's identification and request, the imposition of any and all other terms or conditions in the Other Franchise which are more favorable to Cox than those contained in the Franchise when considering the Franchise and its requirements taken as a whole (by way of example, if the Other Franchise contains a franchise fee less than the franchise fee in the Franchise or has a term longer than the term of the Franchise, then the Franchise shall be modified to include such more favorable terms to the City at the same time that the Franchise is modified to include the more favorable PEG Access Provision or the more favorable Technology Provision). E. Cox shall provide the same Cable Services to customers in the City of San Juan Capistrano as it provides to customers in communities served off the same head end as of the date of this Agreement. In the event Cox deploys new or different Cable Services as a result of a Cable System upgrade in one or more of the communities served off the same head end as of the date of this Agreement, then Cox shall deploy those new or different services within 24 months to customers in the City of San Juan Capistrano provided however Cox may request an extension for good cause and the City may or may not in its discretion consent to the extension. -23- 20. Construction Responsibility. Cox shall be responsible for the acts and omissions of its contractors, subcontractors and employees. Only authorized employees and/or agents of Cox shall apply for and be issued all necessary permits and building authorizations. Cox shall designate to City a construction manager who is an employee of Cox to be contacted regarding all cable construction issues. 21. Compliance with Construction Standards. Cox shall not construct any portion of its cable television system in City streets and rights-of-way without obtaining all necessary City building permits and paying in addition to, the franchise fee, all then applicable fees to the extent legally and practically feasible to be required of all users of the public rights-of- way and public utility easements and shall only construct said system in accordance with City standards for methods of construction in public rights-of- way. 22. Compliance with City Orders and the SJCMC. Cox shall promptly comply with all lawful City orders, resolutions and the SJCMC related to Cox's operation of the System, including all lawful rate orders. Failure to so comply shall be considered a breach of this Franchise and shall subject Cox to (1) all liquidated damages contained in this Franchise and the SJCMC, and (2) all other actions, remedies and penalties available to City as a result of such failure to comply. 23. Grantor may require, at its option, that performance audits of the System be conducted every two (2) years by an independent technical consultant selected and employed by Grantor at its sole expense to verify that the System complies with all technical standards and other specifications of the Franchise. 24. Franchise Construction This Franchise shall be construed according to the internal laws of the State of California and all federal laws of the United States. Any action brought relating thereto must be brought exclusively in the state or federal courts located in Orange County, California. 25. Notices Any notice required to be given by this Agreement shall be presumed given five (5) days after deposit in the United States mail, properly addressed by certified mail and return receipt requested, as follows: -24- 0 0 To City: City Manager City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 With a COPY to: City Attorney City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 To Cox: Cox Com, Inc. Cox Communications Orange County 29947 Avenida de las Banderas Rancho Santa Margarita, CA 92688 Attn: Vice President, Government Affairs With a COPY to: Cox. Com, Inc. Attn: Director, Government Affairs 1400 Lake Hearn Drive Atlanta, GA 30319 26. Pass -Through of Expenses Cox will not separate out, line itemize, or surcharge the cost of the Initial Grants and the Additional Grants described in Section 9. on any other cost related to this Agreement (except the franchise fee) as a line item on City customer's cable bills. Additionally,. Cox shall not impose rates and charges on subscribers, which are higher for like -kind services or of packages of services than those imposed upon subscribers in any of the cities of Mission Viejo, Laguna Hills, Tustin, Rancho Santa Margarita, and Aliso Viejo. 27. Possessory Interest By accepting this Franchise, Cox acknowledges that notice is and was hereby given to Cox pursuant to California Revenue and Taxation Code Section 107.6 that use or occupancy of any public property pursuant to the authorization herein set forth may create a possessory interest, which maybe subject to the payment of property taxes levied upon such interest. Cox shall be solely liable for, and shall pay and discharge prior to delinquency, any and all possessory interest taxes or other taxes levied against Cox's right to possession, occupancy or use of any public property pursuant to any right of possession, occupancy or use created by this Franchise. Cox shall not be barred from challenging such try on any amounts assessed pursuant thereto. -25- 28. Rates City may, without amendment of this Franchise, regulate Cox's rates, charges, and prices to the maximum extent permitted by law. 29. Local Office Cox shall maintain, in full compliance with all requirements of the SJCMC, a local office within twelve (12) miles of the City boundary. This office may be moved, relocated, or closed without City's prior written consent. 30. Force Majeure In the event Cox's performance of any of the terms, conditions, obligations or requirements of this Franchise is prevented or impaired due to any cause beyond its reasonable control and not reasonably foreseeable, such inability to perform shall be deemed to be excused, and no penalties or sanctions shall be imposed as a result thereof. Such causes beyond Cox's reasonable control and not reasonably foreseeable shall include, but not be limited to, any acts of God, civil emergencies, labor unrest, strikes, inability to obtain access to an individual's property and any inability of Cox to secure necessary permissions or permits to utilize necessary poles or conduits so long as Cox utilizes due diligence to timely obtain said permissions or permits. 31. Meet and Confer Prior to exercising any rights of audit or inspection upon Cox pursuant to Sections 7-2.12 of the SJCMC, City and Cox shall reasonably attempt to meet and confer to achieve voluntary compliance. In recognition of the obligations stated in this Agreement, the parties have executed this Agreement on the date indicated above. ATTEST; Margaret R. Monahan, City Clerk APPROVED AS TO FORM: Willi6rdWfAarticorena, Special Counsel -26- COX COMMUNICATIONS, INC. Z1::Q &,U_ Leo Brennan, VP/Regional Manager CITY OF SAN JUAN CAPISTRANO Joe Soto, Mayor 0 EXHIBIT A ➢ City Municipal Offices ➢ City Corporate Yard ➢ City Community Center ➢ Community Library ➢ Fire Stations ➢ Public Schools 9.