Franchisee shall pay to LFA a franchise fee of 5% of annual gross revenue. In accordance with Title VI of the Communications Act, the twelve-month period applicable under the franchise for the computation of the franchise fee shall be a calendar year. Such payments shall be made no later than 45 days following the end of each calendar quarter. Specifically, payments shall be due and payable on or before May 15 (for the first quarter), August 15 (for the second quarter), November 15 (for the third quarter), and February 15 (for the fourth quarter). In the event that any franchise fee payment is not made on or before the applicable dates, then interest shall be added at the rate of 6% of the amount of franchise fee revenue due to LFA. No acceptance of any payment shall be construed as an accord that the amount paid is the correct amount. Franchisee shall be allowed to submit or correct any payments that were incorrectly omitted, and shall be refunded any payments that were incorrectly submitted, in connection with the quarterly franchise fee remittances within 90 days following the close of the calendar year for which such payments were applicable.
Each franchise fee payment shall be accompanied by a brief report that provides line items of revenue sources and is verified by a financial manager of franchisee showing the basis for the computation. A sample report is attached as Exhibit C.[1]
[1]
Editor's Note: Exhibit C is included at the end of this chapter.
The parties agree that the period of limitation for recovery of any franchise fee payable hereunder shall be four years from the date on which payment by franchisee is due.
A. 
LFA may audit or conduct a franchise fee review of franchisee's books and records no more than once every three years during the term. All records reasonably necessary for any such audit shall be made available by franchisee to LFA. Franchisee shall provide copies of such records to LFA upon written request.
B. 
Each party shall bear its own costs of an audit; provided, however, that if the results of any audit indicate that franchisee underpaid the franchise fees by 5% or more, then franchisee shall pay the reasonable, documented, out-of-pocket costs of the audit up to $3,000.
C. 
If the results of an audit indicate an overpayment or underpayment of franchise fees, the parties agree that such overpayment or underpayment shall be returned to the proper party within 45 days; provided, however, that franchisee shall be required to remit underpayments to LFA together with interest at 5% of the amount correctly due from the date such underpayment would have been due.
D. 
Any entity employed by LFA that performs the audit or franchise fee review shall be a professional firm with recognized expertise in auditing franchise fees and shall not be permitted to be compensated on a success based formula e.g., payment based on an underpayment of fees, if any.
E. 
Notwithstanding the provision in § A301-59, LFA shall not be entitled to audit franchisee until LFA requires that all cable operators providing cable service in the Township comply with the material provisions of this article.
In the event that franchisee pays to any other municipality located in Montgomery County, Pennsylvania, a higher franchise fee percentage than that contained in this agreement, or pays a franchise fee on any revenue sources not included in the definition of "gross revenue" in § A301-41 of this agreement within three years of the effective date of this agreement, then such more favorable terms shall automatically be applicable to LFA and this agreement shall be amended to reflect such more favorable terms.
If cable services subject to the franchise fee required under this Article XII are provided to subscribers in conjunction with noncable services, the franchise fee shall be applied only to the value of the cable services, as reflected on the books and records of franchisee in accordance with FCC or Pennsylvania Public Utility Commission regulatory rules, regulations, standards, or orders, and generally accepted accounting principles and applicable laws and regulations.