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desiring service located within the Franchise Area without any construction charges (other than standard connection charges and drop charges as indicated in Section 5(e) (2)). E. Line Extension Requirements. 1. a. For areas within the City limits including areas annexed after the effective date of its Franchise, a Franchisee shall upon request of the City Council extend its trunk and distribution System to serve households desiring service without any construction charge (other than standard connection charges and drop charges as indicated in Section 5 (e) (2), unless the Franchisee demonstrates to the City Council's satisfaction evidenced by written decision that circumstances justify a specific charge, where: the number of potential Subscribers to be passed by such extension is equal to or greater than six potential households per quarter mile measured from any point on the System. b. In the event that the requirements set forth in the foregoing paragraph (A) are not met, the Franchisee shall on the request of the City Council extend its Cable System based upon the following cost- sharing formula. The Franchisee shall contribute an amount equal to the construction costs per mile multiplied by the length of the extension in miles, multiplied by a fraction where the numerator equals the number of potential households per quarter mile at the time of the request and the denominator equals six. Households requesting service as of the completion of construction can be required to bear the remainder of the total construction costs on a pro rata basis. The "construction costs" are defined as the actual turnkey cost to construct the entire extension including lines, materials, electronics, pole make-ready charges, and labor, but not the cost of drops except as provided below. If the Franchisee proposes to require a household requesting extension to make a contribution in aid of extension, it must (1) notify the City Council in advance; (2) send the City Council a copy of the invoice showing the amount actually charged each household requesting extension; and (3) within 30 days of completion of extension, furnish proof of the total cost of the extension and make any appropriate refunds if the total cost is less than the amounts charged in advance of construction. At the end of each calendar year, the Franchisee must calculate the amount any contributing Person would have paid based on the number of persons served at that time and pay back the difference between the amount actually collected from that Person and the amount which would then be owed. The Franchisee shall report such calculations and funds to the City Clerk by the end of January of the following year. 2. Installation of Drops. Except as federal rate regulations may otherwise require, the Franchisee shall not assess any additional cost for 32