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S-4
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
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non-cash Restricted Payment shall be determined by the Board of Directors of
such Issuer or Restricted Subsidiary, as the case may be, whose resolution with
respect thereto shall be delivered to the Trustee, such determination shall be
conclusive and shall be based upon an opinion or appraisal issued by an
appraisal, accounting or investment banking firm of national standing if such
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, such Issuer or Restricted Subsidiary, as the case may be,
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "--Restricted Payments" were computed,
together with a copy of any opinion or appraisal required by the Indenture.
 
 Incurrence of Indebtedness and Issuance of Preferred Stock
 
   The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) other than Permitted Debt and the Issuers will not issue any
Disqualified Stock and will not permit any of their Restricted Subsidiaries to
issue any shares of preferred stock (other than to an Issuer or another
Restricted Subsidiary); provided, however, that the Issuers may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock
and any of the Issuers' Restricted Subsidiaries may incur Indebtedness or issue
shares of preferred stock if the Issuers' Leverage Ratio at the time of
incurrence of such Indebtedness or the issuance of such Disqualified Stock or
such preferred stock, as the case may be, after giving pro forma effect to such
incurrence or issuance and to the use of the proceeds therefrom would have been
no greater than (a) 7.0 to 1,
if such incurrence or issuance is on or prior to December 31, 2000, and (b) 6.5
to 1, if such incurrence or issuance is after December 31, 2000.
 
   The Indenture will also provide that the Issuers will not incur any
Indebtedness that is contractually subordinated in right of payment to any
other Indebtedness of the Issuers unless such Indebtedness is also
contractually subordinated in right of payment to the Notes on substantially
identical terms; provided, however, that no Indebtedness of the Issuers shall
be deemed to be contractually subordinated in right of payment to any other
Indebtedness of the Issuers solely by virtue of being unsecured.
 
   The provisions of the first paragraph of this covenant shall not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
 
     (i) the incurrence by the Issuers or their Restricted Subsidiaries of
  Indebtedness under the Credit Facility letters of credit (with letters of
  credit being deemed to have a principal amount equal to the maximum
  potential liability of the Issuers and their Restricted Subsidiaries
  thereunder) and related Guarantees under the Credit Facility; provided that
  the aggregate principal amount of all Indebtedness of the Issuers and their
  Restricted Subsidiaries outstanding under the Credit Facility after giving
  effect to such incurrence, including all Permitted Refinancing Indebtedness
  incurred to refund, refinance or replace any other Indebtedness incurred
  pursuant to this clause (i) does not exceed an amount equal to $345,888,000
  less the aggregate amount applied by the Issuers and their Restricted
  Subsidiaries to permanently reduce the availability of Indebtedness under
  the Credit Facility pursuant to the provisions described under the caption
  "--Certain Covenants--Asset Sales";
 
     (ii) the incurrence by the Issuers of the ABRY Subordinated Debt;
 
     (iii) the incurrence by the Issuers and their Restricted Subsidiaries of
  Existing Indebtedness;
 
     (iv) the incurrence by the Issuers of the Existing Michigan Indebtedness
  and the Mercom Intercompany Loan;
 
     (v) the incurrence by the Issuers of Indebtedness represented by the
  Notes and the incurrence by the Company Issuers of Indebtedness represented
  by the Senior Subordinated Notes in an aggregate principal amount of $150
  million outstanding on the date of the Indenture;
 
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