Los Gatos Municipal Code Art. II Grant of Franchise

(a) If the grantor shall grant to a grantee a revocable franchise to construct, operate, install, maintain, and reconstruct a cable communications system within the Town, the franchise shall constitute both a right and an obligation to provide the services of a cable communications system as required by the provisions of this chapter and any franchise agreement.

(b) Any franchise granted under the terms and conditions contained herein shall be consistent with the statutory requirements of both the state and the United States Cable Communications Policy Act of 1984 (or any subsequent act). In the event of conflict between the terms and conditions of the franchise and the terms and conditions under which the grantor can grant a franchise, this chapter and/or statutory requirements shall, without exception, control.

(c) Any franchise granted is made subject to the general ordinances then in effect or thereafter made effective. Nothing in the franchise shall be deemed to waive the requirements of the various codes and ordinances of the Town regarding permits, fees to be paid or manner of construction, except as provided in the last sentence of section 7.20.045(a).

(Code 1968, § 9.30.010; Ord. No. 1772, § 2, 12-5-88)

The grantor may grant a franchise for all or any defined portion of the Town. The service area shall be the entire territory defined in the franchise agreement, including residential, commercial, industrial and business areas thereof.

(Code 1968, § 9.30.015)

For the purpose of operating and maintaining a cable communications system in the Town, the grantee may erect, install, construct, repair, replace, reconstruct, and retain in, on, over, under, upon, across, and along the public streets and ways within the Town such wires, cables, conductors, ducts, conduits, vaults, manholes, amplifiers, appliances, pedestals, attachments, and other property and equipment as are necessary and appurtenant to the operation of the cable communications system. Prior to construction or alteration, however, the grantee shall in each case file plans with the appropriate Town agencies and utility companies, and receive written approval before proceeding.

(Code 1968, § 9.30.020)

The term of any franchise and all rights, privileges, obligations and restrictions pertaining thereto shall not exceed fifteen (15) years from the effective date of the franchise unless terminated sooner as hereinafter provided.

(Code 1968, § 9.30.025)

(a) Transfer of franchise. Any franchise granted under this chapter shall be a privilege to be held for the benefit of the public. Such franchise cannot in any way be sold, transferred, leased, assigned or disposed of, including but not limited to, by forced or voluntary sale, merger, consolidation, receivership, or other means without the prior consent of the grantor and then only under such reasonable conditions as the grantor may establish in order to ensure compliance with this chapter and the franchise agreement. No such transfer shall be approved without a system and services review under section 7.30.040, and the grantor may impose conditions on transfer based on the findings in such review. If any transfer of the franchise occurs without the prior consent of the grantor, the franchise may, at grantor's sole option, be terminated immediately. Notwithstanding the foregoing, the transfers specified in subsection (c) of this section may be made by the grantee as therein set forth.

(b) Ownership or control. The grantee shall promptly notify the grantor of and obtain the express written consent from the grantor for:

(1) Any change in or transfer of or acquisition by any other party of any ownership interest in the grantee, including changes of interest in any limited partnership interests or lower tier limited partnership interests.

(2) Sale, exchange or transfer of any system assets having a value in excess of fifty thousand dollars ($50,000.00) not in the normal course of business. All asset sales during any twelve (12) consecutive months shall be aggregated in determining the value of assets sold under this section.

(c) No consent required. No transfer, assignment or other disposition referred to in subsection (a) above shall require the consent of grantor if same is a transfer in trust, mortgage or other hypothecation, in whole or in part, to secure an indebtedness or an assignment, transfer or other disposition to any parent or wholly owned subsidiary of grantee or any corporation or partnership in which grantee has at least sixty-six and two-thirds (66⅔) percent of the outstanding stock or power or assets if such transferee expressly agrees in writing to perform all the obligations under this chapter and the franchise agreement. Any dilution below sixty-six and two-thirds (66⅔) percent shall require the consent of the Town Council as hereinabove provided.

(d) Transfer not a waiver. The consent or approval of the grantor to any transfer of the grantee shall not constitute a waiver or release of the rights of the grantor in and to the streets, and any transfer shall by its terms be expressly subordinate to the terms and conditions of this chapter.

(e) Timing of transfer. In the absence of extraordinary circumstances, the grantor shall not approve any transfer or assignment of the franchise prior to substantial completion of construction of the proposed system, or of any other provisions for extended construction or services as contained in the latest franchise agreement.

(f) Transferee to be signatory. In no event shall a transfer of ownership or control be approved without successor in interest becoming a signatory to the franchise agreement.

(g) Application fee. Any request for a transfer of ownership or control shall be accompanied by a nonrefundable transfer application fee of twenty-five thousand dollars ($25,000.00) which shall not be in lieu of any franchise fee hereunder.

(Code 1968, § 9.30.030; Ord. No. 1809, § II, 1-2-90)

If the grantee shall continue in operation and/or possession of the cable system after the franchise has expired, been terminated, or been transferred in violation of this chapter, after thirty (30) days' written notice from the grantor, the grantee shall be deemed to be holding over under the franchise and all of the revenues of the system from the date of violation shall be returned to the system subscribers on a pro rata basis. Notwithstanding the provisions of this section, in the event the grantee is required pursuant to section 7.20.050(f) to continue the operation of the system for the period therein set forth, grantee shall not be deemed to be holding over within the meaning of this section, and any revenues generated by the operation of the system shall be the property of grantee.

(Code 1968, § 9.30.035)

In accepting a franchise granted pursuant to this chapter, the grantee acknowledges that its rights thereunder are subject to the police power of the Town to adopt and enforce general ordinances necessary to the safety and welfare of the public; and it agrees to comply with all applicable general laws and ordinances enacted by the Town pursuant to such power.

(Code 1968, § 9.30.040)

(a) Annual franchise payment. Grantee shall pay to the Town five (5) percent of its gross annual revenues derived from all operations within the Town as a franchise fee. Franchise payments required hereunder shall be in lieu of any business license, occupation tax or similar levy.

(b) Acceptance by grantor. No acceptance of any payment by the grantor shall be construed as a release or as an accord and satisfaction of any claim the grantor may have for further or additional sums payable as a franchise fee under this chapter or for the performance of any other obligation of the grantee.

(c) Failure to make required payment. In the event that any franchise payment or recomputed amount is not made on or before the dates specified herein, grantee shall pay as additional compensation:

(1) An interest charge, computed from such due date, at the annual rate equal to the prevailing commercial prime interest rate in effect upon the date.

(2) A sum of money equal to five (5) percent of the amount due in order to defray those additional expenses and costs incurred by the grantor by reason of delinquent payment.

(d) When payment due. Payments due the grantor under this provision shall be computed quarterly, for the preceding quarter, as of March thirty-first, June thirtieth, September thirtieth, and December thirty-first. Each quarterly payment shall be due and payable no later than thirty (30) days after the dates listed in the previous sentence. Each payment shall be accompanied by a brief report showing the basis for the computation and such other relevant facts as may be required by the grantor, provided that any adjustment resulting from the fourth quarterly report shall be reflected in the payment next due. Grantee shall include certification with each quarterly franchise fee payment, that the payment has been calculated on all revenues received in accordance with the definition of "gross revenues" in section 7.10.020 of this Code and in accordance with any additional provisions of the franchise.

(e) Annual statement by CPA required. Grantee shall, within ninety (90) days after the expiration of each and every calendar year or portion thereof during which any franchise hereunder is in effect, file with the grantor a statement prepared by an independent, duly licensed, California certified public accountant, setting forth and certifying the accuracy of the total gross revenues received by the respective grantee hereunder for such calendar year or portion thereof.

(Code 1968, § 9.30.045; Ord. No. 1809, § III, 1-2-90)

(a) Right reserved. Except as may otherwise be provided in a franchise agreement, the grantor reserves the right to revoke any franchise granted under this chapter and rescind all rights and privileges associated with the franchise in the following circumstances, each of which shall represent a default and breach under this chapter and the franchise grant:

(1) If the grantee should default in the performance of any of its material obligations under this chapter or under such documents, contracts and other terms and provisions entered into by and between the grantor and the grantee.

(2) If the grantee should fail to provide or maintain in full force and effect, the liability and indemnification coverages or the performance bond as required herein.

(3) If the grantee should frequently violate any orders or rulings of any regulatory body having jurisdiction over the grantee relative to this franchise, unless such orders or rulings are being contested by the grantee in a court of competent jurisdiction.

(4) If the grantee's construction schedule is delayed for more than six (6) months later than the schedule contained in the franchise agreement.

(5) If the grantee becomes insolvent, unable or unwilling to pay its debts, or is adjudged a bankrupt.

(6) If the grantee fails within ten (10) days of such to notify the Town of any transfer of ownership or entity restructuring, including any change of ownership or any increased or decreased ownership of any general partner or limited partner directly or indirectly owning an interest in grantee.

(7) If grantee fails to maintain a level of subscriber complaints below three (3) percent in any calendar month, as defined in the franchise agreement.

(b) Procedure. The following procedure will be observed prior to revocation of a franchise:

(1) Provided that grantor shall have first imposed sanctions pursuant to article VI of this chapter for five (5) separate violations in any twelve-month period and thereafter grantor has determined default has occurred as specified in the subsection (a) of this section, then grantor shall make written demand that grantee do comply with any such requirement, limitation, term, condition, rule or regulation or correct any action deemed cause for revocation and shall specifically identify same to grantee. If the failure, refusal and neglect of grantee continues for a period of thirty (30) days following such written demand, the grantor may place its request for termination of the franchise upon a regular Council meeting agenda. The grantor shall cause to be served upon grantee, at least ten (10) days before such meeting, written notice of the time and place of the meeting in which the request for termination shall be heard.

(2) The Council shall hear any persons interested therein, and shall determine in the exercise of its reasonable discretion, the following:

a. Whether or not any failure, refusal or neglect by grantee was due to a cause beyond its reasonable control, as same is defined in section 7.60.020; and

b. Whether a reasonable effort has been made to obtain compliance by the use of monetary sanctions under article VI of this chapter, without success.

(3) If such failure, refusal or neglect by grantee was beyond the reasonable control of grantee, the Council shall direct the grantee to comply within such time and manner and upon such terms and conditions as are reasonable.

(4) If the Council determines that the grantee's violation was without just cause and that the imposition of sanctions has been reasonably exhausted as a remedy and the Council has no reason to believe that the violation will be cured in a timely manner, the Council may, by resolution, declare that the franchise of such grantee shall be terminated and the bond specified in section 7.40.010 forfeited.

(c) Disposition of facilities. In the event a franchise expires, is revoked, or otherwise terminated, the grantor may order the removal of the system facilities from the Town within a reasonable period of time as determined by the grantor.

(d) Restoration of property. In removing its plant, structures and equipment, the grantee shall refill, at its own expense, any excavation that shall be made by it and shall leave all public ways and places in as good condition as that prevailing prior to the grantee's removal of its equipment and appliances without affecting the electrical or telephone cable wires, or attachments. The grantor shall inspect and approve the condition of the public ways and public places; and cables, wires, attachments and poles after removal. The liability, indemnity and insurance as provided herein and the performance bond provided therein shall continue in full force and effect during the period of removal and until full compliance by the grantee within the terms and conditions of this paragraph and this chapter.

(e) Restoration by grantor, reimbursement of costs. In the event of a failure by the grantee to complete any work required by subsection (d) above or any other work required by grantor law or ordinance within the time as may be established and to the satisfaction of the grantor, the grantor may cause such work to be done and the grantee shall reimburse the grantor the cost thereof within thirty (30) days after receipt of an itemized list of such costs or the grantor may recover such costs through any security fund provided by grantee.

(f) Extended operation and continuity of service. In the event of expiration or revocation of the franchise (and where grantor has not ordered grantee to remove its facilities pursuant to subsection (c) above), grantor may require the grantee to continue to operate the system for a period of time not to exceed three (3) months from the date of such expiration or revocation, in which case the grantee's permission to use Town streets shall be extended for a like period. In furtherance of this subsection, it shall be the right of all subscribers to continue to receive all available services insofar as their financial and other obligations to the grantee are honored. Grantee shall do everything in its power to ensure that all subscribers receive continuous, uninterrupted service regardless of the circumstances, including operation of the system during transitional periods which are the subject of this subsection.

(g) Grantor's right not affected. The termination of any franchise shall in no way affect any of the rights of the grantor under the franchise or any provision of law.

(Code 1968, § 9.30.050; Ord. No. 1809, § IV, 1-2-90)

(a) The franchise herein granted shall, at the option of the grantor, cease and terminate one hundred twenty (120) days after the appointment of a receiver or receivers or trustee or trustees to take over and conduct the business of the grantee whether in a receivership, a reorganization, bankruptcy or other action or proceeding unless receivership or trusteeship shall have been vacated prior to the expiration of one hundred twenty (120) days, or unless:

(1) Such receivers or trustees shall have, within one hundred twenty (120) days after their election or appointment, fully complied with all the terms and provisions of this chapter and the franchise granted pursuant hereto, and the receivers or trustees within one hundred twenty (120) days shall have remedied all defaults under the franchise.

(2) Such receivers or trustees shall, within one hundred twenty (120) days, execute an agreement duly approved by the court having jurisdiction in the premises, whereby such receivers or trustees assume and agree to be bound by each and every term, provision and limitation of the franchise granted under this chapter.

(b) In the case of a foreclosure or other judicial sale of the plant, property and equipment of the grantee, or any part thereof, including or excluding this franchise, the grantor may serve notice of termination upon the grantee and the successful bidder at such sale, in which event the franchise herein granted and all rights and privileges of the grantee hereunder shall cease and terminate thirty (30) days after service of such notice, unless:

(1) The grantor shall have approved the transfer of this franchise, as and in the manner in this chapter provided, and

(2) Such successful bidder shall have agreed with the grantor to assume and be bound by all the terms and conditions of this chapter.

(Code 1968, § 9.30.055)