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SEC Filings

10-Q
AVALON CABLE OF MICHIGAN INC/ filed this Form 10-Q on 08/16/1999
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                         AVALON CABLE, LLC AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      (in thousands except per share data)

rights under Delaware law or choose to abandon these efforts and accept the
consideration payable in the Mercom merger. If these former shareholders
continue to pursue their appraisal rights and if a Delaware court were to find
that the fair value of the Mercom common shares, exclusive of any element of
value arising from our acquisition of Mercom, exceeded $12.00 per share, the
Company would have to pay the additional amount for each Mercom common share to
the appraisal subject to the appraisal proceedings together with a fair rate of
interest. The Company could be ordered by the Delaware court to pay reasonable
attorney's fees and the fees and expenses of experts for the shareholders. In
addition, the Company would have to pay their own litigation costs. The Company
has already provided for the consideration of $12.00 per Mercom common share due
under the terms of our merger with Mercom with respect to these shares but has
not provided for any additional amounts or costs. The Company can provide no
assurance as to what a Delaware court would find in any appraisal proceeding or
when this matter will be resolved. Accordingly, the Company cannot assure you
that the ultimate outcome would not have a material adverse effect on the
Company.

    The Company is subject to the provisions of the Cable Television Consumer
Protection and Competition Act of 1992, as amended, and the Telecommunications
Act of 1996. The Company has either settled challenges or accrued for
anticipated exposures related to rate regulation; however, there is no assurance
that there will not be further additional challenges to its rates.

    In the normal course of business, there are various legal proceedings
outstanding. In the opinion of management, these proceedings will not have a
material adverse effect on the financial condition or results of operations of
the Company.

6.       Pending Merger

    In May 1999, the Company signed an agreement with Charter Communications,
Inc. ("Charter Communications") under which Charter Communications agreed to
purchase Avalon Cable LLC's cable television systems and assume some of their
debt. The acquisition by Charter Communication is subject to regulatory
approvals. The Company expects to consummate this transaction in the fourth
quarter of 1999.

    This agreement, if closed, would constitute a change in control under the
Indenture pursuant to which the Senior Subordinated Notes and the Senior
Discount Notes (collectively, the "Notes") were issued. The Indenture provides
that upon the occurrence of a change of control of the Company (a "Change of
Control") each holder of the Notes has the right to require the Company to
purchase all or any part (equal to $1,000 or an integral multiple thereof) of
such holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereon (or 101% of the accreted value for the Senior Discount
Notes as of the date of purchase if prior to the full accretion date) plus
accrued and unpaid interest and Liquidated Damages (as defined in the Indenture)
thereof, if any, to the date of purchase.

    This agreement, if closed, would represent a Change of Control which, on the
closing date, constitutes an event of default under the Credit Facility giving
the lender the right to terminate the credit commitment and declare all amounts
outstanding immediately due and payable. Charter Communications has agreed to
repay all amounts due under the Credit Facility or cause all events of default
under the Credit Facility arising from the Change of Control to be waived.

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