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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 OF MICHIGAN, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      (In thousands except per share data)
 
1. Description of Business
 
   Avalon Cable of Michigan, Inc. (the "Company") was formed in June 1998,
pursuant to the laws of the state of Delaware, as a wholly owned subsidiary of
Avalon Cable of Michigan Holdings, Inc. ("Michigan Holdings"). On June 3, 1998,
the Company entered into an Agreement and Plan of Merger (the "Agreement")
among the Company, Michigan Holdings and Cable Michigan, Inc. ("Cable
Michigan"), pursuant to which the Company will merge into Cable Michigan and
Cable Michigan will become a wholly owned subsidiary of Michigan Holdings (the
"Merger"). As part of the Merger, the name of Cable Michigan was changed to
Avalon Cable of Michigan, Inc.
 
   In accordance with the terms of the Agreement, each share of common stock,
par value of $1.00 per share ("common stock"), of Cable Michigan outstanding
prior to the effective time of the Merger (other than treasury stock shares
owned by Michigan Holdings or its subsidiaries, or shares as to which
dissenters' rights have been exercised) shall be converted into the right to
receive $40.50 in cash (the "Merger Consideration"), subject to certain
possible closing adjustments.
 
   In conjunction with the acquisition of Cable Michigan, the Company acquired
Cable Michigan's 62% ownership interest in Mercom, Inc. ("Mercom").
 
   On November 6, 1998, the Company completed its merger. The total
consideration paid in conjunction with the Merger, including fees and expenses
is $431,629, including repayment of all existing Cable Michigan indebtedness
and accrued interest of $135,205. The Agreement also permitted the Company to
agree to acquire the remaining shares of Mercom that it did not own.
 
   Michigan Holdings contributed $137,375 in cash to the Company, which was
used to consummate the Merger. On November 5, 1998, Michigan Holdings received
$105,000 in cash in exchange for promissory notes to lenders (the "Bridge
Agreement"). On November 6, 1998, Michigan Holdings contributed the proceeds
received from the Bridge Agreement and an additional $35,000 in cash to the
Company in exchange for 100 shares of common stock.
 
   On November 6, 1998, Avalon Cable of New England Holdings, Inc. contributed
its 100% interest in Avalon Cable of New England LLC ("Avalon New England") to
Avalon Cable LLC in exchange for a membership interest in Avalon Cable LLC.
This contribution was between entities under common control and was accounted
for similar to a pooling-of-interests. Under this pooling-of-interests method,
the results of operations for Avalon include the results of operations from the
date of inception (September 4, 1997) of Avalon New England. On that same date,
Avalon Cable LLC received $63,000 from affiliated entities, which was comprised
of (i) a $45,000 capital contribution by Avalon Investors, LLC ("Avalon
Investors") and (ii) a $18,000 promissory note from Avalon Cable Holdings LLC
("Avalon Holdings"), which was used to make a $62,800 cash contribution to
Avalon New England.
 
   The cash contribution received by Avalon New England was used to (i)
extinguish existing indebtedness of $29,600 and (ii) fund a $33,200 loan to
Avalon Holdings Finance which matures on December 31, 2001.
 
   On December 10, 1998, Avalon Cable LLC received a dividend distribution from
Avalon New England in the amount of $18,206, which was used by Avalon Cable LLC
to pay off the promissory note payable to Avalon Holdings, plus accrued
interest.
 
                                     F-130