Print Page  Close Window

SEC Filings

S-4
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
Entire Document
 
<PAGE>
 
                       AVALON CABLE LLC AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 Income taxes
 
   The Company is not subject to federal and state income taxes. Accordingly,
no recognition has been given to income taxes in the accompanying financial
statements of the Company since the income or loss of the Company is to be
included in the tax returns of the Parent.
 
3. Members' Capital
 
   Avalon has authorized two classes of equity units; class A units ("Class A
Units") and class B units ("Class B Units") (collectively, the "Units"). Each
class of the Units represents a fractional part of the membership interests in
Avalon and has the rights and obligations specified in Avalon's Limited
Liability Company Agreement. Each Class B Unit is entitled to voting rights
equal to the percentage such units represents of the aggregate number of
outstanding Class B Units. The Class A Units are not entitled to voting rights.
 
   Class A Units
 
   The Class A Units are participating preferred equity interests. A preferred
return accrues annually (the Company's "Preferred Return") on the initial
purchase price (the Company's "Capital Value") of each Class A Unit at a rate
of 15, or 17% under certain circumstances, per annum. The Company cannot pay
distributions in respect of other classes of securities including distributions
made in connection with a liquidation until the Company's Capital Value and
accrued Preferred Return in respect of each Class A Unit is paid to the holders
thereof (such distributions being the Company's "Priority Distributions"). So
long as any portion of the Company's Priority Distributions remains unpaid, the
holders of a majority of the Class A Units are entitled to block certain
actions by the Company including the payment of certain distributions, the
issuance of senior or certain types of pari passu equity securities or the
entering into or amending of certain related-party agreements. In addition to
the Company's Priority Distributions, each Class A Unit is also entitled to
participate in common distributions, pro rata according to the percentage such
unit represents of the aggregate number of the Company's units then
outstanding.
 
   Class B Units
 
   The Class B Units are junior equity securities which are divided into two
identical subclasses, Class B-1 Units and Class B-2 Units. After the payment in
full of Avalon's Priority Distributions, each Class B Unit is entitled to
participate in distributions pro rata according to the percentage such unit
represents of the aggregate number of the Avalon units then outstanding.
 
                                      F-79