RES 1986-05 - 0000476200S
IRESOLUTION NO. 5 — 1986
RESOLUTION OF THE APPROVAL OF THE MERGER OF STORER
OD* UNICATIONS, INC., INTO A SUBSIDIARY OF SCI HOLDINGS,
INC.
WHEREAS, General Television of Minnesota, Inc. ( "Grantee ") has requested the
City of Fridley to approve the merger of a subsidiary of SCI Holdings, Inc.
( "Holdings ") into Grantee's parent corporation, Storer Communications, Inc.;
and
WHEREAS, Section 405.13 (4) of the City of Fridley Cable Communications
Franchise Ordinance ( "Franchise ") and Minnesota Statutes Section 238.083
prohibit the transfer of ownership of Grantee without prior approval of the
City of Fridley; and
WHEREAS, the City of Fridley Cable Television Ordinance Section 405.13 (4)
allows City to inquire into the qualifications of the prospective controlling
party; and
WHEREAS, the City of Fridley has retained the law firm of Herbst & Thue, Ltd.,
to assist it in a review of the legal and technical qualifications of the
Grantee after the proposed merger and the consulting firm of Don Richards
Associates, to assist the City in its review of the financial qualifications
of Grantee after the proposed transfer; and
WHEREAS, Herbst & Thue, Ltd. and Don Richards Associates, have prepared AN
ANALYSIS OF THE MERGER OF S7ORER C0MMUNICATIONS, INC., INTO A SUBSIDIARY OF
SCI HOLDINGS, INC., ( "Consultants Report ") which has been considered by the
City of Fridley; and
WHEREAS, the Consultant's Report demonstrates that the transaction does not
substantially alter the legal qualifications approved by Grantee at the time
of the franchise award or adversely affect Grantee's subscribers; and
WHEREAS, the Consultant's Report demonstrates that there will be no
significant change in the technical qualifications of Grantee adversely
affecting Grantee's subscribers; and
WHEREAS, the Consultant's Report demonstrates significant concerns regarding
the financial qualifications of Grantee after the proposed merger including,
but not limited to, the following:
1. SCI will experience losses for several years following the merger;
2. SCI will not generate sufficient cash to meet its anticipated needs
for capital expenditures, unless some assets are sold;
3. SCI will have difficulty meeting debt repayment requirements unless
some assets are sold;
4. Holdings will have difficulty earning an adequate return on its
investment in SCI, solely from operations;
Page 2 - Resolution No. 5 - 1986
007
5. SCI could have difficulty obtaining additional funds from borrowing
or other sources, should that be necessary, in light of an already
' heavy debt burden;
6. SCI could be severly limited for cash at any tine given the fact that
large variations in operating cash flow can occur as the result of
small variations in revenue growth;
7. SCI could be compelled to reduce operating expenses and /or increase
rates if faced with a cash shortage;
8. Many of SCI's cable systems may soon be for sale, as well as some of
the TV broadcasting systems;
9. Holdings primary return on its investment in SCI will need to come
from the sale and disposition of major assets of SCI.
WHEREAS, the City has conducted a public hearing that afforded reasonable
notice and a reasonable opportunity to be heard regarding the proposed
transfer and complied with all requirements of Minnesota law in considering
the proposed transfer; and
WHEREAS, the present franchise will expire on or about December 23, 1987, the
City anticipates that significant capital expenditures will be necessary to
upgrade the cable television system; and
' WHEREAS, the City finds that the Grantee may not possess the necessary
financial qualifications to make the capital improvements and maintain
adequate customer service practices; and
WHEREAS, the failure of grantee to make capital improvements to the cable
television system and maintain adequate customer service practices may
adversely affect Grantee's subscribers; and
WHEREAS, Section 405.13 (4) of the City of Fridley Cable Communications
Franchise Ordinance provides that the City may condition any transfer upon
such terms and conditions as it deems appropriate.
NOW, THEREFORE, BE IT RESC,VED by the City Council of the City of Fridley,
Minnesota as follows:
The City of Fridley hereby approves Grantee's request for approval of the
merger of Grantee's parent corporation, SCI, into a subsidiary of Holdings
subject to the prior successful completion of the following conditions on or
before January 28, 1986:
A. Ordinance Amendments. Adoption by City and acceptance by Grantee of a
Cable Communications Franchise Ordinance Amendment which include provisions
requiring the following:
1. A 400 MHz, fully activated 54 channel cable television system no later
than January 1, 1990;
2. A one -way addressable converter to each subscriber requiring a
converter no later than January 1, 1990;
3. An emergency alert override system capable of overriding the audio on
each channel no later than January 1, 1990;
1
1
1
Page 3 - Resolution No. 5 - 1986
4. Provision to each subscriber of all presently required access
channels;
Ott 3
5. Commitments of equipment in support of public, educational and
governmental access;
6. Customer Service Requirements
B. Acceptance Agreement. Grantee shall enter into an Acceptance Agreement of
all Ordinance Amendments adopted in connection with the proposed transfer.
Such Acceptance Agreement shall be of a substance, form and manner acceptable
to City.
C. Guaranty. SCI, Holdings and SCI Associates L.P. shall enter into a
Guaranty Agreement in substance, form and manner acceptable to City which
guarantees performance by them of all of Grantee's obligations under the
Franchise and the Ordinance Agreement.
D. Security. Grantee, SCI, and Holdings shall furnish a performance bond,
certificate of deposit, confession of judgment or other type of instrument
approved by City in an amount City deems to be adequate compensation for
damages resulting from Grantee's nonperformance under the Ordinance Amendment.
E. Acceptance Fee. Grantee shall provide the City an Acceptance Fee in an
amount equal to the City's actual out -of- pocket expenses, including attorney's
and consultant's fees, related to the consideration of the transfer request
and Ordinance Amendments related thereto.
F. Other Provisions. Other provisions deemed necessary or appropriate by
legal counsel to the City to assure performance of the Ordinance Amendment.
SASSED AND ADOFPED BY THE CITY ODUNCIL OF THE CITY OF FRIDLEY THIS 6TH DAY OF
JANUARY, 1986
ATTEST:
!TiMEY A. WWX A - MY CLERK
WII.LIAM J. NE MAYOR