Company Report

(as filed with the SEC)

The Cannon Group, Incorporated ("Cannon") was incorporated in New York on October 23, 1967.

Although not a ‘fun’ read (no mention of Mafia connections or films made by Cannon) this document is a legal

filing of the profile of the business which makes it fairly accurate as the filer could be jailed should he knowingly misinform.

As we know someone was jailed (and others are still ‘on the run’) but that doesn’t really relate

 to this precise document as far as I know.

GENERAL

Pathe Communications Corporation (the "Company") is a Delaware corporation with no operating assets or sources of operating income and total liabilities exceeding $269,000,000. The Company is wholly dependent upon Credit Lyonnais Bank Nederland N.V., a Dutch banking institution ("CLBN"), for all capital needed to fund its on-going cash requirements. As used herein, the terms "Registrant" and "Pathe" refer to the Company unless the context indicates otherwise. The Company has its principal executive offices at 10 East 40th Street, New York, New York 10016, telephone (212) 545-1900.

During the first four months of fiscal year 1992, the Company was engaged in the financing, production and worldwide distribution of theatrical motion pictures and television programming, and the operation of motion picture theaters in the United Kingdom (the "U.K."), the Netherlands and Denmark. The Company's business was conducted through its principal subsidiary, Metro-Goldwyn-Mayer Inc. ("MGM"), previously known as MGM-Pathe Communications Co. ("MGM-Pathe"). However, as described below, the Company's ownership of 98.5% of the common stock of MGM, which constituted substantial- ly all of the Company's assets, was sold through a foreclosure auction due to the Company's default on its then existing indebtedness. As a result, the Company no longer had any operating assets or sources of income.

The Company's predecessor-in-interest, The Cannon Group, Incorporated ("Cannon") was incorporated in New York on October 23, 1967. Subsequently, Cannon effected a merger into the Company, which was effective under New York law on November 25, 1985. In May 1992, the Company took additional actions in Delaware to correct certain deficiencies under Delaware law with respect to such merger. In 1987, in connection with a financial restructuring of the Company, Giancarlo Parretti or certain of his affiliates became the largest stockholders of the Company, assuming control of the Company. In 1988, Florio Fiorini or certain of his affiliates acquired equity ownership in the Company. Mr. Fiorini was then elected Chairman of the Board and exercised joint control with Mr. Parretti in managing the affairs of the Company. (See Item 1 "Business--Changes in Corporate Control".)

On November 1, 1990, the Company acquired MGM/UA Communications Co. ("MGM/UA") by means of a merger (the "Merger") of a wholly-owned subsidiary of the Company into MGM/UA. MGM/UA, the surviving corporation in the Merger, became a wholly-owned subsidiary of the Company and changed its name to MGM-Pathe Communications Co. Immediately thereafter, pursuant to an agree- ment entered into in connection with the Merger, MGM-Pathe acquired all of the outstanding capital stock of Pathe Entertainment, Inc. ("PEI") and Cannon Entertainment, Inc. ("CEI"), the two principal subsidiaries of the Company, and concurrently paid off all existing indebtedness of PEI and CEI to the Company.

As a result of the restructuring described above, the Company became a holding company operating exclusively through its subsidiaries. Prior to the foreclosure on the Company's shares of MGM common stock described below, the Company's business activities consisted of two business segments, filmed entertainment and theater operations. Since such foreclosure, the Company has engaged in no ongoing business operations and cannot predict whether it will do so in the future.

CLBN has to date continued to make advances to the Company to permit the Company to satisfy its various expenditure requirements and debt payment obligations; however, there can be no assurance that CLBN will continue to make such advances. (See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources".)

As of May 5, 1992, immediately prior to the foreclosure and tender offer described below, the Company owed CLBN an aggregate amount of approxi- mately $140 million, all of which was in default and overdue and payable. Also as of such date, MGM-Pathe owed CLBN an aggregate amount of approxi- mately $568 million, which indebtedness was in default and all but approximately $145 million of which was payable on demand. At such time, CLBN had the power, in its absolute discretion, to decide whether to advance additional funds to the Company and/or to pursue various remedies available to it based upon the Company's default, which remedies included, among other things, foreclosure upon the MGM-Pathe shares, which constituted virtually all of the assets of the Company. As discussed below, CLBN foreclosed on the Company's MGM-Pathe shares and completed a tender offer for the outstanding and unencumbered shares of the Company's common stock and the then outstanding debt securities.

CHANGES IN CORPORATE CONTROL - EXTRAORDINARY EVENTS

As further described in the Form 10-K for fiscal 1991 of the Company and in Item 3 "Legal Proceedings", beginning in June 1991, the Company experienced a change in corporate control. As a result of this change, CLBN in its capacity as voting trustee of the Company's common stock acquired the power to designate all of the members of the Board of Directors of the Company.

In April, 1991, in connection with the extension of credit by CLBN to the Company, Melia International N.V., a Netherlands corporation ("Melia") and certain of Melia's stockholders and subsidiaries including the Company,
(i) guaranteed certain obligations of MGM to CLBN and (ii) pledged to CLBN all shares (including additional shares, if any, to be issued) of the Company and MGM, respectively, owned by such entities (pursuant to the "PCC Pledges" and "MGM Pledge", respectively) to secure all indebtedness owing by the Company, MGM, Melia and their affiliates to CLBN (the "Secured Obligations"), and (iii) placed all of the shares of the Company and MGM owned by such entities (including additional shares, if any, to be issued) under irrevocable voting trust agreements (the "PCC Voting Trusts" and the "MGM Voting Trust") in favor of CLBN. The shares covered by these pledge agreements and/or voting trust agreements represented approximately 89.3% of the outstanding common stock of Pathe and 98.5% of the outstanding common stock of MGM. Such voting trust agreements were initially held in escrow until CLBN broke such escrow as a result of certain actions by Mr. Parretti, the then Chairman of the Board of the Company.

Upon breaking the escrow, CLBN exercised its voting powers by written consent pursuant to the MGM Voting Trust, and subsequently pursuant to the MGM Pledges, to remove Parretti and certain other then directors of MGM. The validity of the exercise of such voting rights was confirmed by the Court of Chancery for the State of Delaware in and for Newcastle County on December 30, 1991 (all such related litigation is herein referred to as the "MGM Proceedings").

On July 8, 1991, CLBN, exercising its voting rights pursuant to the PCC Pledges, acted by written consent to remove the directors of the Company. On March 23, 1992, a final order was entered by the Delaware Chancery Court stipulating that the Directors of the Company who had not resigned had been properly removed by CLBN's actions on July 8, 1991.

On February 3, 1992, at a meeting of the newly-expanded Board of Directors of the Company, Messrs. Ladd and Stanfill were each elected Co-Chairman of the Board of Directors and Co-Chief Executive Officer of the Company, Charles R. Meeker was elected President and Treasurer of the Company and certain other new officers were elected.

During the first quarter of 1992, the Company was in default on its indebtedness to CLBN, which indebtedness was secured by, among other collat- eral, all of the Company's shares of MGM common stock. At such time, CLBN had the power, in its absolute discretion, to decide whether to advance additional funds to the Company and/or to pursue various remedies available to it based upon the Company's default, which remedies included, among other things, foreclosure upon the MGM shares, which constituted virtually all of the assets of the Company. In exercising the remedies available to it, on April 16, 1992, CLBN commenced a foreclosure action (the "Foreclosure") with respect to the 98.5% of outstanding common stock of MGM owned by the Company (the "Company's MGM Shares").

On April 16, 1992, the Board met and formed a special committee (the "Special Committee"), to review, consider and evaluate the Foreclosure and its effect on the Company and its subsidiaries and to advise and make appropriate recommendations to the Board as to the Company's response to the Foreclosure. The Special Committee retained an independent financial adviser and independent legal counsel.

In a letter dated April 17, 1992 to the Special Committee, CLBN indicated its belief that any attempt on the part of the Company or holders of the Company's equity and debt securities to forestall or delay the Foreclosure would be harmful to the interests of all parties. CLBN also expressed its willingness to negotiate with the Company with respect to certain benefits to be provided to the holders of the Company's equity and debt securities in connection with the Foreclosure, including by (i) providing credit support for a then to be determined portion of the principal and interest on (x) the then outstanding 12-3/8% Senior Subordinated Notes Due 1994 (the "12-3/8% Notes"), (y) the then outstanding 8-7/8% Convertible Senior Subordinated Debentures due April 15, 2001 (the "8-7/8% Debentures") and (z) the then outstanding 12-7/8% Senior Subordinated Debentures due April 15, 2001 (the "12-7/8% Debentures", and, collectively with the 12-3/8% Notes and the 8-7/8% Debentures, the "Company Bonds" or "Bonds") and (ii) making a tender offer for a then to be determined number, and at a then to be determined price per share, of the outstanding unencumbered shares of Company common stock.

During the weeks of April 20, 1992 and April 27, 1992, the Special Committee, the Company, CLBN, certain holders of the Company Bonds, the trustees under the indentures pursuant to which such Bonds were issued and various financial and legal advisors negotiated with respect to the type of credit support to be provided for the Company Bonds.

In these negotiations, the Company expressed a strong preference for a cash payment to the holders of its debt and equity securities. Following these negotiations between the Special Committee and representatives of CLBN, the Board of the Company met on May 1, 1992.

The three directors of the Company affiliated with CLBN withdrew from the meeting prior to the presentation of the Special Committee. The Special Committee presented a draft of the Company Agreement (as defined below) and recommended that the Board approve the form of the Company Agreement. The remaining directors unanimously approved the recommendation of the Special Committee and, in view of the fact that three directors were employees of CLBN or Credit Lyonnais and that the remaining directors were all officers of the Company and also officers and employees of MGM, the Board decided to express no opinion with respect to any offer by CLBN for securities of the Company.

By a letter dated May 1, 1992, by and between the Company and CLBN (the "Company Agreement"), the Company agreed to take no legal action to forestall or delay the Foreclosure, in consideration for which CLBN agreed to make a tender offer for up to 5,800,000 shares of the common stock of the Company, par value $0.01 (the "Shares") at $1.50 per Share, net to the Seller in cash (the "Equity Offer"), and for all of the Company Bonds, to fund certain past due interest on the Company's outstanding debt securities and to provide funding to enable the Company to satisfy its obligations with respect to interest on such debt securities, not owned by CLBN, through May 5, 1993. In connection with such offer, CLBN agreed to purchase the 12-3/8% Notes at $470 per $1,000 principal amount, the 12-7/8% Debentures at $470 per $1,000 principal amount and the 8-7/8% Debentures at $420 per $1,000 principal amount (collectively the "Debt Offers").

On May 5, 1992, CLBN and certain holders of certain Company Bonds (the "Holders") executed a Securities Purchase Agreement (the "Securities Purchase Agreement"), pursuant to which the Holders agreed to sell, and CLBN agreed to purchase, immediately following the Foreclosure, approximately $27 million in aggregate principal amount of such Company Bonds at the same price as under the Debt Offers. Additionally, the Holders agreed to tender any Company Bonds thereafter acquired by them until such time as the Debt Offers closed.

On May 1, 1992, CLBN sold and assigned $483,489,000 of the Secured Obligations (the "Assigned Obligations") to MGM Holdings Corporation ("MGM Holdings"), a Delaware corporation and a wholly-owned subsidiary of Credit Lyonnais S.A. ("Credit Lyonnais"). The sale of the Company's MGM Shares at an auction sale (the "Auction") was held as scheduled on May 7, 1992, and MGM Holdings, as the only bidder, acquired ownership of the MGM Shares. In consideration for the MGM Shares, MGM Holdings bid-in the Assigned Obligations.

Following the Foreclosure, on May 7, 1992, CLBN commenced the Equity Offer on the terms and subject to the conditions set forth in an Offer to Purchase and in the accompanying Letter of Transmittal (collectively, the "Equity Offer Documents") filed with the Securities and Exchange Commission (the "Commission") in a Schedule 13E-3 on May 7, 1992. In the Equity Offer, Shares which were subject to security interests, liens, pledges, encumbrances, mortgages, claims, hypothecations or voting trust arrangements (collectively, "Encumbrances") were not accepted for payment. Approximately 94% of the issued and outstanding shares of common stock of the Company were owned by Melia, Renta Inmobliara International B.V. ("Renta B.V."), Renta Corp. ("Renta Corp.", and collectively with Renta B.V., the "Rentas") and Comfinance S.A., and were subject to the PCC Pledge and PCC Voting Trusts. In addition, Viajes Melia S.A. ("Viajes"), an affiliate of Melia, owned approximately 0.7% of the shares of common stock of the Company, and were subject to a PCC Voting Trust in favor of CLBN. Since the Shares beneficially owned by Melia, the Rentas, Comfinance and Viajes were subject to Encumbrances in favor of CLBN, such Shares were not tendered in connection with the Equity Offer.

The 5,800,000 Shares which CLBN offered to purchase through the Equity Offer constituted approximately 97% of the maximum number of Shares outstanding on May 1, 1992 which could qualify as Shares not subject to Encumbrances ("Unencumbered Shares"), and approximately 10% of the total number of Shares outstanding as of May 1, 1992 and approximately 5% of the aggregate number of such Shares and the Additional Shares, on such date.

In conjunction with the Equity Offer, on May 8, 1992, CLBN commenced the Debt Offers to purchase all of the then outstanding Company Bonds at the purchase prices noted above, in each case net to the seller in cash upon the terms and subject to the conditions set forth in the Offer to Purchase and Consent Solicitations (the "Debt Offer Documents") relating to the respective Company Bonds. Consent Solicitations relating to the respective Company Bonds required affirmative consents (the "Consents") by the holders of at least a majority in principal amount of such Bonds outstanding under the respective Indentures to adopt certain amendments (the "Proposed Amendments") in the form of supplemental indentures to the res- pective Indentures for each of the 12-3/8% Notes, the 8-7/8% Debentures and the 12-7/8% Debentures (the "Supplemental Indentures"), as contemplated in the Debt Offer Documents. The Supplemental Indentures amended the Indentures so that (i) certain of the 12-7/8% Debentures and 8-7/8% Debentures (collectively, the "Debentures") previously acquired by the Company were to be used to satisfy any repayment obligation arising from the Company's failure to satisfy the minimum net worth covenant; (ii) any corporation into which the Company may merge or to which the Company may sell substantially all of its assets is no longer required to assume the obligations of the Company under the Indentures; (iii) any Debentures owned by CLBN will be counted in determining whether the holders of the required principal amount of Debentures have concurred in any direction, waiver or consent; and (iv) any Defaults (as defined in the Indentures) waivable under the Indentures are waived.

As described above, pursuant to the Securities Purchase Agreement, holders of approximately 66% of the aggregate outstanding principal amount of the debt securities issued under the Indenture dated as of April 15, 1986 between the Company and Chemical Trust Company of California (formerly Manufacturers Hanover Trust Company of California and herein, "Chemical Trust"), under which both 8-7/8% Debentures and certain of the 12-7/8% Debentures were then outstanding (the "8-7/8% Debenture Indenture") and holders of approximately 55% of the debt securities issued under the Indenture dated as of April 15, 1986 between the Company and Chemical Trust under which certain of the 12-7/8% Debentures were then outstanding (the "12- 7/8% Debenture Indenture") consented to the Proposed Amendments to their respective Indentures.

As a result of the Equity Offer, CLBN acquired 2,809,739 Shares of the Company. As a result of the Debt Offers, (a) $2,856,000 in aggregate principal amount of the 12-3/8% Notes, $625,000 in aggregate principal amount of the 8-7/8% Debentures and $5,898,000 in aggregate principal amount of the 12-7/8% Debentures (including $2,345,000 principal amount of those 12-7/8% Debentures previously converted from the originally issued 8-7/8% Debentures) were tendered and accepted in the Debt Offers and (b) together with the Consents received pursuant to the Securities Purchase Agreement, the total percentage of Consents received relating to the 12-3/8% Notes Indenture was 49.7%, the total percentage of Consents received relating to the 8-7/8% Debentures Indenture was 82.1% (such Consents consisting of Consents relating to both 8-7/8% Debentures and those 12-7/8% Debentures that were converted 8-7/8% Debentures and which were governed by the 8-7/8% Debenture Indenture) and the total percentage of Consents received relating to the 12-7/8% Debentures Indenture was 77.5%, in each case with respect to the total aggre- gate amount of Bonds outstanding under each respective Indenture. On May 29, 1992, as a result of the performance of the agreements in the Securities Purchase Agreement, the Company announced that it had received a sufficient number of Consents with respect to the 8-7/8% Debenture Indenture and 12-7/8% Debenture Indenture, and that Supplemental Indentures to each such Indenture had been executed.

In July, 1992, an additional $100,000 in aggregate principal amount of 12-3/8% Notes were acquired by CLBN and in connection therewith Consents were received with respect to the 12-3/8% Note Indenture so that, together with Consents received previously, the total percentage of Consents received relating to the 12-3/8% Notes was 50.3% of the total outstanding. The Company is currently arranging for the execution of the Supplemental Indenture to the 12-3/8% Note Indenture.

The effect of the Equity Offer was to cause the Shares to no longer be eligible for listing on the New York Stock Exchange (the "NYSE") and to be subject to termination of registration under the Securities and Exchange Act of 1934, as amended (the "Exchange Act").

Trading of the Company's common stock was suspended by the NYSE on July 13, 1992 pending application by the NYSE to the Commission to delist the Shares for failure to meet certain listing criteria. Such action was taken because the Company had fallen below the NYSE's continued listing criteria relating to (i) net tangible assets available to common stock together with three-year average net income and (ii) aggregate market value of publicly- held common stock. On August 28, 1992, the Commission, in response to the NYSE's application, issued an order removing the Company's common stock from listing and registration on the NYSE.

As of March 18, 1994, there were 1,485 holders of record and approximately 3,191,936 Shares were held by stockholders other than officers, directors, and members of their immediate families and concentrated holdings of 10% or more.

The Company is unable to predict at this time whether any public market will exist for the Company's remaining outstanding shares of common stock. The Company does not have any present plans that would result in the repurchase or redemption of its common stock or in the admission for trading of such stock on other exchanges or markets.

The Company's stock continues to be subject to deregistration with the Commission if the Company has less than 300 stockholders of record, in which event the Company would no longer file public reports with the Commission.

On August 5, 1992, Mr. Meeker was elected President and Treasurer of the Company. Effective October 6, 1992, Alan Ladd, Jr. and Dennis Stanfill each resigned as Co-Chairman of the Company and Rene-Claude Jouannet was elected Chairman of the Company on November 23, 1992. On November 23, 1992, Guy Etienne Dufour and Bahman Naraghi resigned as directors of the Company. Effective as of May 5, 1993, Fredric S. Newman was elected a director of the Company. Effective as of May 6, 1993, Mr. Newman was elected President, Secretary and Treasurer of the Company, Messrs. Meeker and Jouannet resigned as directors of the Company and Mr. Newman became the sole director and the sole officer of the Company.

EMPLOYEES

As of March 25, 1994, the Company had no employees.

END

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