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SEC Filings

S-4/A
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4/A on 07/22/1999
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                       AVALON CABLE LLC AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands)--(Continued)
 
                                 March 31, 1999
   
shareholders of Mercom holding 535,501 shares of Mercom common stock filed a
petition for appraisal of stock in the Court of Chancery in the State of
Delaware. With respect to 209,893 of the total number of shares for which the
Company received notice, the Company received the notice of election from
beneficial holders of Mercom common shares and not from holders of record. The
Company believes that the notice with respect to the 209,893 shares did not
comply with Delaware law and is ineffective. The Company cannot predict at this
time the effect of the elections to exercise appraisal rights on the Company
since the Company does not know the extent to which these former shareholders
will continue to pursue appraisal 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 have 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 have 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. Subsequent Event
 
   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 Communications 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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