Item 3. - Legal Proceedings
In 1993, the Federal Trade Commission ("FTC") commenced an investigation of the practices of the major record distributors with respect to advertising allowances, pricing policies and related matters. MCA received a voluntary request for information in 1993 and produced a substantial volume of documents at that time. In September 1994, MCA received a subpoena for the production of documents, stating that the FTC is investigating whether members of the prerecorded music
distributing industry may be engaging or may have engaged in any unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act and the Robinson-Patman Act by fixing prices or by limiting, or engaging in concerted activities to limit, the availability of cooperative advertising or promotional funds, allowances, services, or facilities to retailers who distribute used compact discs or advertise prices of compact discs below specified levels. No allegations of unlawful conduct have been made against MCA at this time.
On May 30, 1995, a purported class action was filed in the United States District Court for the Central District of California, entitled Digital Distribution Inc. d/b/a Compact Disc Warehouse v. CEMA Distribution, Sony Music Entertainment, Inc., Warner Elektra Atlantic Corporation, UNI Distribution Corporation, Bertelsmann Music Group, Inc. and Polygram Group Distribution, Inc., No. 95-3596 JSL. The plaintiffs brought the action on behalf of direct purchasers of compact discs alleging that defendants, including UNI Distribution Corporation, violated the federal and/or state antitrust laws and unfair competition laws by engaging in a conspiracy to fix prices of compact discs, and seek an injunction and treble damages. The defendants' motion to dismiss the amended complaint was granted and the action was dismissed, with prejudice, on January 9, 1996. Plaintiffs filed a notice of appeal on February 12, 1996. On June 13, 1996, plaintiffs filed their brief in support of the appeal. Defendants filed their opposition brief on July 26, 1996 and plaintiffs filed a reply brief on August 26, 1996.
On July 8, 1996, a purported class action was filed in the Circuit Court of Blount County, Tennessee at Maryville, entitled Robinson and Silvey v. EMI Music Distribution, Inc., Sony Music Entertainment, Inc., Warner Elektra Atlantic Corporation, UNI Distribution Corporation, Bertelsmann Music Group, Inc. and Polygram Group Distribution, Inc., No. L-10462. The action was brought on behalf of persons who, from June 26, 1992 to the present, purchased recorded music compact discs indirectly from the defendants in Tennessee, Alabama, California, Florida, Kansas, Maine, Michigan, Minnesota, Mississippi, New Mexico, North Dakota, South Dakota, West Virginia, Wisconsin and the District of Colombia, and alleges that the defendants are engaged in a conspiracy to fix the prices of compact discs, in violation of the antitrust, unfair trade practices and consumer protection statutes of each of those jurisdictions. On July 8, 1996, the Circuit Court issued an order conditionally granting class certification, subject to the defendants' right to move to decertify the class.
On July 25, 1996, UNI Distribution Corporation was served with an antitrust civil investigation demand from the Office of the Attorney General of the State of Florida that calls for the production of documents in connection with an investigation to determine whether there "is, has been or may be" a "conspiracy to fix the prices" of compact discs or conduct consisting of "unfair methods of competition" or "unfair trade practices" in the sale and marketing of compact discs.
On April 29, 1996, MCA commenced an action entitled MCA INC. v. Viacom Inc., Viacom International Inc. and Eighth Century Corporation, C.A. No. 14971, in the Court of Chancery of the State of Delaware (the "Court of Chancery") alleging breaches by Viacom Inc. ("Viacom") and affiliated entities of the USA Networks joint venture agreement between affiliates of Viacom and MCA, by reason, among others, of Viacom operating certain cable television networks in violation of the joint venture agreement and in competition with USA Networks. The action seeks, among other things, to enforce the joint venture agreement's exclusivity provision in the fields of advertiser-supported basic cable television and pay-per-view programming services. Shortly thereafter Viacom and Eighth Century Corporation, an indirect, wholly owned subsidiary of Viacom, commenced an action in the Court of Chancery entitled Viacom Inc. and Eighth Century Corporation v. The Seagram Company Ltd., MCA INC. and Universal City Studios, Inc., C.A. No. 14973, against the Corporation, MCA and Universal City Studios, Inc. The action alleges, among other things, that MCA sought to force Viacom to sell its 50 percent interest in USA Networks to MCA at an unfairly low price. The action seeks compensatory damages in an unspecified amount and a declaration that Viacom has not violated, or has been released from a claim for violating, the exclusivity provision of the USA Networks joint venture agreement. The Court of Chancery has currently scheduled the trial of both actions to commence on October 15, 1996.
The Corporation and its subsidiaries and affiliates are defendants or respondents in a number of other actions arising in the ordinary course of business.
Item 4.
Item 4. - Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5.
Item 5. - Market for Registrant's Common Equity and Related Shareholder Matters
Information as to the number of holders of record of the Corporation's common shares, the markets on which such common shares are traded, the quarterly high and low prices for such common shares on Canadian and New York stock exchanges and the quarterly dividends declared with respect thereto during the Transition Period and during fiscal years ended January 31, 1996 and 1995 is incorporated herein by reference to the Management's Discussion and Analysis section captioned "Return to Shareholders" on page 14 of the Transition Report.
Payment of dividends by the Corporation to shareholders not resident in Canada is subject under Canadian law to Canadian withholding tax. For shareholders resident in the United States, 15% of the dividends must be withheld pursuant to currently existing treaty arrangements between the United States and Canada. For shareholders resident in other countries, the withholding rate varies depending upon the existence and terms of applicable treaties between each such other country and Canada.
Item 6.
Item 6. - Selected Financial Data
Selected financial data for the Transition Period and for each of the five fiscal years ended January 31, 1996, 1995, 1994, 1993 and 1992 are incorporated herein by reference to the Financial Summary on pages 34 and 35 of the Corporation's Transition Report.
Item 7.
Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's discussion and analysis of financial condition and results of operations is incorporated herein by reference to pages 6 through 14 of the Corporation's Transition Report.
Item 8. - Financial Statements and Supplementary Data
The Consolidated Financial Statements, together with the report thereon of Price Waterhouse dated September 5, 1996, and the supplementary quarterly data are incorporated herein by reference to pages 15 through 33 of the Corporation's Transition Report.
Item 9. - Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. - Directors and Executive Officers of the Registrant
Information as to the Corporation's directors is incorporated by reference to pages 5 through 7 of the Proxy Circular for the Meeting of Shareholders to be held on October 30, 1996 (the "Proxy Circular") under the caption "Election of Directors -- Nominees for Directors".
Set forth below is certain information with respect to the Corporation's executive officers.
Title and Other Office Held Name Age Information Since ---- --- --------------- ----------- Edgar M. Bronfman 67 Chairman of the Board and 1975 Director. For more than five years prior to June 1994, he was also Chief Executive Officer.
Charles R. Bronfman 65 Co-Chairman of the Board, 1986 Chairman of the Executive Committee and Director.
Edgar Bronfman, Jr. 41 President, Chief Executive 1994 Officer and Director. From June 1989 to June 1994, he was President, Chief Operating Officer and Director.
Robert W. Matschullat 48 Vice Chairman, Chief 1995 Financial Officer and Director. From January 1, 1992 to July 1, 1995 he was Managing Director and Head of Worldwide Investment Banking for Morgan Stanley & Co., Inc. and a director of Morgan Stanley Group Inc. From February 1986 to January 1992, he was Managing Director of Morgan Stanley & Co., Inc.
Frank J. Biondi, Jr. 51 Director, Chairman and 1996 Chief Executive Officer, MCA INC. From July 1987 until January 1996, he was President, Chief Executive Officer and a director of Viacom Inc.
Title and Other Office Held Name Age Information Since ---- --- --------------- ----------- John D. Borgia 48 Executive Vice President, 1995 Human Resources. From March 1991 to April 1995, he was Senior Vice President, Human Resources & Administration, Bristol- Myers Squibb Pharmaceutical Group.
Stephen E. Herbits 54 Executive Vice President, 1989 Corporate Policy and External Affairs.
Steven J. Kalagher 53 Executive Vice President 1995 and President, The Seagram Spirits And Wine Group (a division of Joseph E. Seagram & Sons, Inc.). From May 1994 to May 1995 he was Reengineering Leader. From February 1993 to May 1995 he was also President, Seagram North America (a division of The Seagram Spirits And Wine Group). From March 1991 to January 1993 he was Executive Vice President, Staff Operations of The Seagram Spirits And Wine Group.
Ellen R. Marram 49 Executive Vice President 1993 and President, The Seagram Beverage Group (a division of Joseph E. Seagram & Sons, Inc.). From June 1988 to April 1993, she was President of Nabisco Biscuit Company, an operating unit of RJR Nabisco Holdings Corp.
Edward Falkenberg 55 Vice President and 1993 Controller. From August 1986 to January 1993, he was Controller.
Jeananne K. Hauswald 52 Vice President and 1993 Treasurer. From May 1990 to January 1993, she was Vice President, Human Resources.
Title and Other Office Held Name Age Information Since ---- --- --------------- ----------- Gabor Jellinek 61 Vice President, Production 1987 and Executive Vice President, Manufacturing, The Seagram Spirits And Wine Group (a division of Joseph E. Seagram & Sons, Inc.) since February 1991.
Arnold M. Ludwick 58 Vice President. 1982
Daniel R. Paladino 53 Vice President, Legal and 1993 Environmental Affairs. From August 1986 to February 1993, he was Vice President, Legal Affairs.
Michael C.L. Hallows 55 Secretary. 1979
Pursuant to the Corporation's By-Laws, executive officers are chosen annually by the Board of Directors and hold office until they resign, are removed or otherwise become disqualified to serve.
Item 11. - Executive Compensation
The information required hereunder is incorporated herein by reference to pages 11 through 18 of the Proxy Circular under the captions "Summary Compensation Table" through "Performance Graph".
Item 12. - Security Ownership of Certain Beneficial Owners and Management
Information required hereunder as to the ownership of the Corporation's common shares by certain beneficial owners and management is incorporated herein by reference to pages 2 through 4 of the Proxy Circular under the caption "Share Ownership".
Item 13. - Certain Relationships and Related Transactions
The information required hereunder is incorporated herein by reference to page 19 of the Proxy Circular under the captions "Human Resources Committee Interlocks and Insider Participation" and "Transactions with Directors and Others".
PART IV
Item 14. - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1&2. Financial Statements and Financial Statement Schedules
The financial statements and schedules filed as part of or incorporated by reference in this Report are listed in the accompanying Index to Financial Statements.
3. Exhibits
The exhibits filed as part of or incorporated by reference in this Report are listed in the accompanying Exhibit Index. Exhibits 10(g) through 10(cc) listed in the accompanying Exhibit Index identify management contracts or compensatory plans or arrangements.
(b) Current Reports on Form 8-K
1. A Current Report on Form 8-K dated July 24, 1996 was filed (i) to report under Item 5 the repurchase by DuPont from the Corporation of the DuPont Warrants, and (ii) to file under Item 7 a