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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT
(AMENDMENT NO. 25)
PURSUANT TO SECTION 14(D)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND
SCHEDULE 13D
(AMENDMENT NO. 26)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
PARAMOUNT COMMUNICATIONS INC.
(Name of Subject Company)
VIACOM INC.
NATIONAL AMUSEMENTS, INC.
SUMNER M. REDSTONE
BLOCKBUSTER ENTERTAINMENT CORPORATION
(Bidder)
COMMON STOCK, $1.00 PAR VALUE
(Title of Class of Securities)
699216 10 7
(CUSIP Number of Class of Securities)
PHILIPPE P. DAUMAN, ESQ.
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036
TELEPHONE: (212) 258-6000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
STEPHEN R. VOLK, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
TEL.: (212) 848-4000
ROGER S. AARON, ESQ.
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TEL.: (212) 735-3000
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Page 1 of Pages
Exhibit Index on Page
<PAGE>
This Amendment No. 25 to the Tender Offer Statement on
Schedule 14D-1 and Amendment No. 26 to Schedule 13D (the
"Statement") relates to the offer by Viacom Inc., a Delaware
corporation ("Purchaser"), to purchase shares of Common Stock,
par value $1.00 per share (the "Shares"), of Paramount
Communications Inc., a Delaware corporation (the "Company"), at a
price of $107 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in Purchaser's
Offer to Purchase dated October 25, 1993 (the "Offer to
Purchase"), a copy of which was attached as Exhibit (a)(1) to
Amendment No. 1, filed with the Securities and Exchange
Commission (the "Commission") on October 26, 1993, to the Tender
Offer Statement on Schedule 14D-1 filed with the Commission on
October 25, 1993 (the "Schedule 14D-1"), as supplemented by
the Supplement thereto dated November 8, 1993 (the "First
Supplement"), the Second Supplement thereto dated January 7,
1994 (the "Second Supplement") and the Third Supplement thereto
dated January 18, 1994 (the "Third Supplement") and in the
related Letters of Transmittal.
Capitalized terms used but not defined herein have the
meanings assigned to such terms in the Offer to Purchase, the
First Supplement, the Second Supplement, the Third Supplement
and the Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
Item 1(b) is hereby amended and supplemented by
reference to the Introduction and Section 1 of the Third
Supplement, which Introduction and Section are incorporated
herein by reference.
Item 1(c) is hereby amended and supplemented by
reference to Section 2 of the Third Supplement, which Section
is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE
SUBJECT COMPANY.
Item 3(b) is hereby amended and supplemented by
reference to Section 4 of the Third Supplement, which Section
is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 4(a) is hereby amended and supplemented by
reference to Section 3 of the Third Supplement, which Section
is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS
OF THE BIDDER.
Item 5 is hereby amended and supplemented by
reference to the Introduction and Annex I to the Third
Supplement, which Introduction and Annex are incorporated
herein by reference.
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Item 6(a) is hereby amended and supplemented by
reference to Section 7 of the Third Supplement, which Section
is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S
SECURITIES.
Item 7(a) is hereby amended and supplemented by
reference to the Introduction and Section 4 of the Third
Supplement, which Introduction and Section are incorporated
herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Item 9 is hereby amended and supplemented by
reference to Section 7 of the Third Supplement, which Section
is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
Item 10(e) is hereby amended and supplemented by
reference to Section 6 of the Third Supplement, which Section
is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
Item 11 is hereby amended and supplemented to add
the following Exhibits:
99(a)(53) Form of Third Supplement to Offer to
Purchase dated January 18, 1994
99(a)(54) Form of Revised Letter of Transmittal
99(a)(55) Form of Revised Notice of Guaranteed
Delivery
99(a)(56) Form of Revised Letter from Smith Barney
Shearson Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and
Other Nominees
99(a)(57) Form of Revised Letter from Brokers,
Dealers, Commercial Banks, Trust Companies
and Other Nominees to Clients
99(a)(58) Form of Revised Letter to Participants in
the Dividend Reinvestment Plan of the
Company
99(a)(59) Press Release issued by Purchaser on
January 18, 1993
99(a)(60) Letter, dated January 13, 1994, from the
Company's legal advisor to Purchaser and
QVC
99(a)(61) Letter, dated January 18, 1994, from
Purchaser to the Paramount Board
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
January 18, 1994
VIACOM INC.
By /s/ PHILIPPE P. DAUMAN
...................................
Philippe P. Dauman
Senior Vice President, General
Counsel and Secretary
*
...................................
Sumner M. Redstone,
Individually
NATIONAL AMUSEMENTS, INC.
By *
...................................
Sumner M. Redstone
Chairman, Chief Executive
Officer and President
*By /s/ PHILIPPE P. DAUMAN
...................................
Philippe P. Dauman
Attorney-in-Fact under Powers
of Attorney filed as Exhibit (a)(36)
to the Schedule 14D-1
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
January 18, 1994
BLOCKBUSTER ENTERTAINMENT CORPORATION
By /s/ STEVEN R. BERRARD
...................................
Steven R. Berrard
President and
Chief Operating Officer
<PAGE>
EXHIBIT INDEX
PAGE IN
SEQUENTIAL
EXHIBIT NUMBERING
NO. SYSTEM
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99(a)(53) Form of Third Supplement to Offer
to Purchase dated January 18, 1994
99(a)(54) Form of Revised Letter of
Transmittal
99(a)(55) Form of Revised Notice of
Guaranteed Delivery
99(a)(56) Form of Revised Letter from Smith
Barney Shearson Inc. to Brokers,
Dealers, Commercial Banks, Trust
Companies and Other Nominees
99(a)(57) Form of Revised Letter from Brokers,
Dealers, Commercial Banks, Trust
Companies and Other Nominees to
Clients
99(a)(58) Form of Revised Letter to Participants
in the Dividend Reinvestment Plan of
the Company
99(a)(59) Press Release issued by Purchaser on
January 18, 1993
99(a)(60) Letter, dated January 13, 1994, from
the Company's legal advisor to
Purchaser and QVC
99(a)(61) Letter, dated January 18, 1994,
from Purchaser to the Paramount Board
<PAGE>
THIRD SUPPLEMENT TO THE OFFER TO PURCHASE DATED OCTOBER 25, 1993
VIACOM INC.
HAS INCREASED THE PRICE OF ITS OFFER TO PURCHASE FOR CASH
61,657,432 SHARES OF COMMON STOCK
OF
PARAMOUNT COMMUNICATIONS INC.
TO
$107 NET PER SHARE
THE OFFER HAS BEEN EXTENDED. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 31,
1994, UNLESS THE OFFER IS FURTHER EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, 61,657,432 SHARES, OR SUCH
GREATER NUMBER OF SHARES AS EQUALS 50.1% OF THE SHARES OUTSTANDING PLUS THE
SHARES ISSUABLE UPON THE EXERCISE OF THE THEN EXERCISABLE STOCK OPTIONS AS OF
THE EXPIRATION OF THE OFFER, BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO
THE EXPIRATION OF THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS. SEE SECTION 5 OF THE SECOND SUPPLEMENT TO THE OFFER TO PURCHASE.
------------------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH STOCKHOLDER'S
SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE (THE "SHARES"), OF PARAMOUNT
COMMUNICATIONS INC. SHOULD EITHER (1) COMPLETE AND SIGN THE (YELLOW) LETTER OF
TRANSMITTAL WHICH ACCOMPANIED THE OFFER TO PURCHASE DATED OCTOBER 25, 1993 (THE
"OFFER TO PURCHASE"), THE (GREEN) LETTER OF TRANSMITTAL WHICH ACCOMPANIED THE
SUPPLEMENT TO THE OFFER TO PURCHASE DATED NOVEMBER 8, 1993 (THE "FIRST
SUPPLEMENT"), THE (ORANGE) LETTER OF TRANSMITTAL WHICH ACCOMPANIED THE SECOND
SUPPLEMENT TO THE OFFER TO PURCHASE DATED JANUARY 7, 1994 (THE "SECOND
SUPPLEMENT") OR THE REVISED (ORANGE) LETTER OF TRANSMITTAL WHICH ACCOMPANIES
THIS THIRD SUPPLEMENT TO THE OFFER TO PURCHASE (THE "THIRD SUPPLEMENT"; ALL SUCH
LETTERS OF TRANSMITTAL REFERRED TO COLLECTIVELY AS THE "LETTERS OF TRANSMITTAL")
(OR A FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTERS OF
TRANSMITTAL AND MAIL OR DELIVER ONE OF THE LETTERS OF TRANSMITTAL (OR SUCH
FACSIMILE) TOGETHER WITH THE CERTIFICATE(S) EVIDENCING TENDERED SHARES, AND ANY
OTHER REQUIRED DOCUMENTS, TO THE DEPOSITARY OR TENDER SUCH SHARES PURSUANT TO
THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 3 OF THE OFFER TO
PURCHASE OR (2) REQUEST SUCH STOCKHOLDER'S BROKER, DEALER, COMMERCIAL BANK,
TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR SUCH STOCKHOLDER.
ANY STOCKHOLDER WHOSE SHARES ARE REGISTERED IN THE NAME OF A BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF SUCH STOCKHOLDER
DESIRES TO TENDER SUCH SHARES.
A stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedure for book-entry transfer on a timely basis, may tender such Shares
by following the procedure for guaranteed delivery set forth in Section 3 of the
Offer to Purchase.
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Third Supplement. Additional copies
of the Offer to Purchase, the First Supplement, the Second Supplement, this
Third Supplement, the revised (Orange) Letter of Transmittal and the revised
(Yellow) Notice of Guaranteed Delivery may also be obtained from the Information
Agent or from brokers, dealers, commercial banks or trust companies.
------------------------
The Dealer Manager for the Offer is:
SMITH BARNEY SHEARSON INC.
January 18, 1994
<PAGE>
To the Holders of Common Stock of
PARAMOUNT COMMUNICATIONS INC.:
INTRODUCTION
The following information amends and supplements the Offer to Purchase
dated October 25, 1993 (the "Offer to Purchase"), the Supplement thereto dated
November 8, 1993 (the "First Supplement") and the Second Supplement thereto
dated January 7, 1994 (the "Second Supplement") of Viacom Inc., a Delaware
corporation ("Purchaser"). Pursuant to this Third Supplement, Purchaser is now
offering to purchase 61,657,432 shares of Common Stock, par value $1.00 per
share (the "Shares"), of Paramount Communications Inc., a Delaware corporation
(the "Company"), or such greater number of Shares as equals 50.1% of the Shares
outstanding plus the Shares issuable upon the exercise of the then exercisable
stock options as of the Expiration Date, at a price of $107 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, as amended and supplemented by the First Supplement, the
Second Supplement and this Third Supplement (together with the First Supplement
and the Second Supplement, the "Supplements"), and in the related Letters of
Transmittal (which together constitute the "Offer").
Except as otherwise set forth in this Third Supplement, the terms and
conditions previously set forth in the Offer to Purchase, the First Supplement
and the Second Supplement remain applicable in all respects to the Offer, and
this Third Supplement should be read in conjunction with the Offer to Purchase,
the First Supplement and the Second Supplement. Unless the context requires
otherwise, terms not defined herein have the meanings ascribed to them in the
Offer to Purchase, the First Supplement and the Second Supplement.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, 61,657,432 SHARES, OR
SUCH GREATER NUMBER OF SHARES AS EQUALS 50.1% OF THE SHARES OUTSTANDING PLUS THE
SHARES ISSUABLE UPON THE EXERCISE OF THE THEN EXERCISABLE STOCK OPTIONS AS OF
THE EXPIRATION DATE, BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION DATE (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS. SEE SECTION 5 OF THE SECOND SUPPLEMENT, WHICH SETS FORTH
IN FULL THE CONDITIONS OF THE OFFER.
In the event the Offer is consummated, Purchaser intends to effectuate a
second-step merger pursuant to which each Share that is issued and outstanding
prior to the effective time (the "Effective Time") of such merger (other than
Shares held in the treasury of the Company or owned by Purchaser or any direct
or indirect wholly owned subsidiary of Purchaser or of the Company and other
than Shares held by stockholders who shall have demanded and perfected appraisal
rights under Delaware Law) would be converted into the right to receive (i)
.93065 shares of Class B Common Stock, par value $.01 per share, of Purchaser
(the "Viacom Class B Common Stock"), (ii) .30408 shares of a new series of
cumulative convertible exchangeable preferred stock, par value $.01 per share,
of Purchaser (the "Viacom Merger Preferred Stock"), (iii) .93065 contingent
value rights issued by Purchaser ("CVRs") and (iv) .50 of a warrant (the "Viacom
Warrant") to purchase one share of Viacom Class B Common Stock (collectively,
the "Merger Consideration").
The Viacom Merger Preferred Stock will bear dividends at a rate of 5% per
annum, will be convertible into Viacom Class B Common Stock at a conversion
price of $70, will have a liquidation preference of $50 per share, will be
redeemable by Purchaser at declining redemption premiums after the fifth
anniversary of the Effective Time, and will be exchangeable at the option of
Purchaser into Purchaser's 5% Convertible Subordinated Debentures after the
third anniversary of the Effective Time.
As further described in Annex I to this Third Supplement, following the
maturity of the CVRs, each CVR will represent the right of the holder thereof (a
"CVR Holder") to receive the amount, if any, by which the Target Price (as
defined below) exceeds the greater of the Current Market Value (as defined
below) and $38.00 (the "Minimum Price"). The CVRs will mature on the first
anniversary of
<PAGE>
the Effective Time of the Merger (the "Maturity Date"); provided, however, that
Purchaser may, at its option, (i) extend the Maturity Date to the second
anniversary of the Effective Time (the "First Extended Maturity Date") or (ii)
extend the First Extended Maturity Date to the third anniversary of the
Effective Time (the "Second Extended Maturity Date"), in either case by
notice no later than one business day preceding the Maturity Date or the
First Extended Maturity Date, as the case may be.
"Target Price" means (a) at the Maturity Date, $48.00, (b) at the First
Extended Maturity Date, $51.00 and (c) at the Second Extended Maturity Date,
$55.00. "Current Market Value" means (i) with respect to the Maturity Date and
the First Extended Maturity Date, the median of the averages of the closing
prices on the American Stock Exchange (or such other exchange on which such
shares are then listed) of shares of Viacom Class B Common Stock during each 20
consecutive trading day period that both begins and ends in the Valuation Period
(as defined below) and (ii) with respect to the Second Extended Maturity Date,
the average of the closing prices on the American Stock Exchange (or such other
exchange on which such shares are then listed) of Viacom's Class B Common Stock
during the 20 consecutive trading days in the Valuation Period which yield the
highest such average of the closing prices for any such 20 consecutive trading
day period within the Valuation Period. "Valuation Period" means the 60 trading
day period immediately preceding (and including) the Maturity Date, the First
Extended Maturity Date or the Second Extended Maturity Date, as the case may be.
Purchaser, at its option, may pay any amount due under the terms of the
CVRs to the CVR Holders in cash or in the equivalent value (as determined by an
independent nationally recognized investment bank) of registered securities of
Purchaser, including, without limitation, common stock, preferred stock, notes
or other securities. No amount will be payable under the CVRs if the Current
Market Value equals or exceeds (i) $48.00 on the Maturity Date, (ii) $51.00 on
the first Extended Maturity Date or (iii) $55.00 on the Second Extended
Maturity Date, as the case may be.
If Purchaser subdivides (by stock split, stock dividend or otherwise) or
combines (by reverse stock split or otherwise) the number of outstanding shares
of Viacom Class B Common Stock, Purchaser shall correspondingly subdivide or
combine the CVRs and shall appropriately adjust the Target Price and the Minimum
Price. No fraction of a CVR will be issued in the Merger. In lieu thereof, a
cash payment will be made in an amount equivalent to the fair market value of
the fraction of the CVR.
Upon the consummation of a Disposition or upon the occurrence and
continuation of an Event of Default (as such terms are defined in Annex I to
this Third Supplement), CVR Holders will have the right to receive an
accelerated payment of Purchaser's obligations under the CVRs, discounted to the
date of such payment and otherwise on the terms specified in Annex I to this
Third Supplement.
The CVRs will be issued by Purchaser pursuant to a CVR Agreement that
Purchaser intends to enter into with a bank or trust company selected by
Purchaser. The CVRs will be issued in registered form, and Purchaser shall use
its reasonable best efforts to list the CVRs on the American Stock Exchange (or
such other securities exchange on which the shares of Viacom Class B Common
Stock are then listed). The CVRs are unsecured obligations of Purchaser and will
rank equally with all other unsecured obligations of Purchaser. The foregoing
summary of the terms of the CVRs is qualified in its entirety by reference to
Annex I to this Third Supplement, which provides a more detailed summary of the
terms of the CVRs.
Each Viacom Warrant will entitle the holder thereof to purchase one share
of Viacom Class B Common Stock per whole Viacom Warrant at any time prior to the
third anniversary of the Merger at a price of $60.00, payable in cash. The terms
of the Viacom Warrants will include customary anti-dilution (with respect to
stock splits, stock dividends, reverse stock splits or other similar
subdivisions or combinations of stock) and other provisions. No fraction of a
Viacom Warrant will be issued in the Merger. In lieu thereof, a cash payment
will be made in an amount equivalent to the fair market value of the fraction of
the Viacom Warrant.
2
<PAGE>
The Merger
The Offer was initially made pursuant to an Amended and Restated Agreement
and Plan of Merger dated as of October 24, 1993 (the "October 24 Merger
Agreement"), as amended on November 6, 1993 (as so amended, the "Merger
Agreement"), between Purchaser and the Company. The October 24 Merger Agreement
amended and restated in its entirety an Agreement and Plan of Merger dated as of
September 12, 1993 between Purchaser and the Company. On December 22, 1993, the
Company terminated the Merger Agreement pursuant to a notice of termination.
Also on December 22, 1993, the Company and Purchaser entered into an Exemption
Agreement (the "Exemption Agreement") which provides, among other things, that,
in the event that (1) the Company's Board of Directors intends to recommend to
the stockholders of the Company the acceptance of the Offer or (2) such number
of Shares that would satisfy the Minimum Condition shall have been validly
tendered and not withdrawn in the Offer at the Expiration Date and, as of such
Expiration Date, Purchaser has waived all conditions to the Offer (other than
the Rights Condition, the Supermajority Condition, the Section 203 Condition and
the Injunction Condition (each as defined in Section 5 of the Second Supplement)
and the Minimum Condition), then Purchaser shall promptly execute and deliver to
the Company the Form of Merger Agreement (the "Form of Merger Agreement")
annexed to the Exemption Agreement (with representations and warranties dated as
of the date of execution of such Form of Merger Agreement, unless otherwise
specified therein, and with such other changes as may be necessary to reflect
the terms of the Offer as it then exists, changes in the consideration offered
under the executed Form of Merger Agreement and changes related thereto) and the
Company will execute such Form of Merger Agreement (with representations and
warranties dated as of the date of execution of such Form of Merger Agreement,
unless otherwise specified therein) within one business day of receipt thereof.
Under the terms of the Exemption Agreement, the Company has agreed that
upon delivery by Purchaser of a Completion Certificate (as defined in the
Exemption Agreement), it will take all necessary action to amend the Rights
Agreement to make it inapplicable, except under certain circumstances, to the
Offer and to take all appropriate action so that the restrictions on business
combinations in (i) Article XI of the Company's Certificate of Incorporation and
(ii) Section 203 of the General Corporation Law of the State of Delaware
("Delaware Law") will not apply to the consummation of the Offer. See Section 4
of the Second Supplement.
The Form of Merger Agreement provides, among other things, that as soon as
practicable after the purchase of Shares pursuant to the Offer, the approval of
the Merger (as defined below) by the stockholders of Purchaser and the Company
and the satisfaction of the other conditions set forth in the Form of Merger
Agreement and described in the Second Supplement, the Company will be merged
with and into Purchaser (the "Merger") in accordance with the relevant
provisions of Delaware Law. In such event, following consummation of the Merger,
Purchaser will continue as the surviving corporation (the "Surviving
Corporation").
Alternatively, if Shearman & Sterling, counsel to Purchaser, is unable to
deliver an opinion, in form and substance reasonably satisfactory to Purchaser,
that the Merger will qualify as a reorganization under section 368(a) of the
Internal Revenue Code of 1986, as amended, Purchaser may elect to cause the
Merger to be effected by causing a wholly owned subsidiary of Purchaser to merge
with and into the Company in accordance with Delaware Law. In such event, the
separate corporate existence of such subsidiary will cease, and the Company will
continue as the Surviving Corporation as a wholly owned subsidiary of Purchaser.
Based on the terms of the Offer and the proposed terms of the Form of
Merger Agreement, it is anticipated that Shearman & Sterling will be unable to
deliver the opinion referred to in the immediately preceding paragraph, and thus
that Purchaser will elect to change the form of the Merger as described in the
foregoing paragraph. As a result, exchanges of Shares pursuant to the Offer and
the
3
<PAGE>
Merger will be taxable transactions to stockholders of the Company for Federal
income tax purposes. See Section 6 of the Second Supplement and Section 5 of
this Third Supplement.
Purchaser intends to provide in the executed Form of Merger Agreement that
at the Effective Time, in the event the Offer has already been consummated, each
Share that is issued and outstanding immediately prior to the Effective Time
(other than Shares held in the treasury of the Company or owned by Purchaser or
any direct or indirect wholly owned subsidiary of Purchaser or of the Company
and other than Shares held by stockholders who shall have demanded and perfected
appraisal rights under Delaware Law) will be converted into the right to receive
the Merger Consideration.
Based on the proposed terms of the Merger, appraisal rights will be
available to stockholders who have not voted in favor of the Merger or consented
thereto in writing and who have properly demanded in writing appraisal of the
Shares held by such stockholders in accordance with Delaware Law and who have
not withdrawn such demand or otherwise forfeited appraisal rights.
Blockbuster Merger
On January 7, 1994, Purchaser and Blockbuster Entertainment Corporation, a
Delaware corporation ("Blockbuster"), entered into an Agreement and Plan of
Merger (the "Blockbuster Merger Agreement") pursuant to which Blockbuster will
be merged with and into Purchaser (the "Blockbuster Merger"), with Purchaser as
the surviving corporation (the "Blockbuster Merger Surviving Corporation"). See
Sections 9 and 10 of the Second Supplement for certain information regarding
Blockbuster and a description of the Blockbuster Merger Agreement and Section 7
of this Third Supplement for certain additional information regarding Purchaser
and Blockbuster.
Procedures for tendering Shares are set forth in Section 3 of the Offer to
Purchase. Tendering stockholders may use either the original (Yellow) Letter of
Transmittal and the original (Blue) Notice of Guaranteed Delivery previously
circulated with the Offer to Purchase, the (Green) Letter of Transmittal and the
(Pink) Notice of Guaranteed Delivery circulated with the First Supplement, the
(Orange) Letter of Transmittal and the (Yellow) Notice of Guaranteed Delivery
circulated with the Second Supplement or the revised (Orange) Letter of
Transmittal and the revised (Yellow) Notice of Guaranteed Delivery circulated
with this Third Supplement. While the original Letter of Transmittal circulated
with the Offer to Purchase refers to the Offer to Purchase, the Letter of
Transmittal circulated with the First Supplement refers to the Offer to Purchase
and the First Supplement, and the Letter of Transmittal circulated with the
Second Supplement refers to the Offer to Purchase, the First Supplement and the
Second Supplement, stockholders using such documents to tender Shares will
nevertheless receive $107 per Share for each Share validly tendered and not
withdrawn and accepted for payment pursuant to the Offer, subject to the
conditions of the Offer. Stockholders who have previously validly tendered and
not withdrawn Shares pursuant to the Offer are not required to take any further
action in order to receive, subject to the conditions of the Offer, the
increased tender price of $107 per Share, if the Shares are accepted for payment
and paid for by Purchaser pursuant to the Offer, except as may be required by
the guaranteed delivery procedure if such procedure was utilized. See Section 1
of this Third Supplement.
THE OFFER TO PURCHASE, THE FIRST SUPPLEMENT, THE SECOND SUPPLEMENT AND THIS
THIRD SUPPLEMENT CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
1. AMENDED TERMS OF THE OFFER; EXPIRATION DATE. The Offer is being made for
61,657,432 Shares, or such greater number of Shares as equals 50.1% of the
Shares outstanding plus the Shares issuable upon the exercise of the then
exercisable stock options as of the Expiration Date. The price per Share to be
paid pursuant to the Offer has been increased from $105 per Share to $107 per
Share, net to the seller in cash. All stockholders whose Shares are validly
tendered and not withdrawn and accepted for payment pursuant to the Offer
(including Shares tendered prior to the date of this Third Supplement) will
receive the increased price.
4
<PAGE>
This Third Supplement, the revised (Orange) Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares whose names appear
on the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. PRICE RANGE OF SHARES; DIVIDENDS. The discussion set forth in Section 6
of the Offer to Purchase, Section 2 of the First Supplement and Section 2 of the
Second Supplement is hereby amended and supplemented as follows:
According to published financial sources, the Company paid a cash dividend
of $.20 per Share on January 14, 1994.
The high and low sales prices per Share on the New York Stock Exchange (the
"NYSE") as reported by the Dow Jones News Service for the current fiscal quarter
through January 17, 1994, were $83 1/2 and $73 1/2, respectively. On January 17,
1994, the last full trading day prior to the announcement of the increase in the
price per Share to be paid pursuant to the Offer, the closing price per Share as
reported on the NYSE was $78 3/4.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
3. FINANCING OF THE OFFER AND THE MERGER. The discussion set forth in
Section 9 of the Offer to Purchase, Section 3 of the First Supplement and
Section 3 of the Second Supplement is hereby amended and supplemented as
follows:
The total amount of funds required by Purchaser to consummate the Offer and
the Merger and to pay related fees and expenses is estimated to be approximately
$6.7 billion.
Purchaser has obtained $600 million of such funds from the issuance and
sale of 24 million shares of Purchaser's Series A Cumulative Convertible
Preferred Stock to Blockbuster. Purchaser has obtained $1.2 billion of such
funds from the issuance and sale of 24 million shares of Purchaser's Series B
Cumulative Convertible Preferred Stock to NYNEX Corporation ("NYNEX"). Purchaser
will obtain the remaining $4.9 billion of such funds from the Bank Facility,
from the sale of Viacom Class B Common Stock to Blockbuster pursuant to the
Blockbuster Subscription Agreement or from other sources.
4. BACKGROUND OF THE OFFER SINCE JANUARY 7, 1994; CONTACTS WITH THE
COMPANY. The discussion set forth in Section 10 of the Offer to Purchase,
Section 4 of the First Supplement and Section 4 of the Second Supplement is
hereby amended and supplemented as follows:
On January 13, 1994, the Paramount Board reaffirmed its recommendation of
the QVC Offer and its recommendation against the Offer as such offers existed on
such date. By letter to QVC's legal advisor, the Company also advised QVC that,
contrary to claims previously made by QVC, the Company had no reason to believe
that the January 7 Offer violated the Exemption Agreement and that the Company
disagrees with QVC's previous statements that QVC has the right under the terms
of the QVC Merger Agreement to terminate its offer in the event the minimum
condition of the QVC Offer is not satisfied by the then January 21 expiration
date of the QVC Offer.
By letter dated January 13, 1994, the Company's legal advisor also proposed
to Purchaser and QVC certain clarifying amendments to the Exemption Agreement
and the QVC Merger Agreement. A copy of such letter is attached as Exhibit
(a)(60) to the Schedule 14D-1 and is incorporated herein by reference.
Purchaser's legal advisor has advised the Company's legal advisor that Purchaser
has no substantive problems with the changes to the bidding procedures proposed
by the Company and that, subject to certain technical changes, Purchaser is
willing to amend the Exemption Agreement and the Form of Merger Agreement to
reflect such proposed changes, provided that corresponding changes are made to
the QVC Merger Agreement and form of exemption agreement.
5
<PAGE>
On January 18, 1994, Purchaser delivered to the Company a letter informing
the Paramount Board of the increase to the Offer and the changes to the proposed
Merger Consideration described in this Third Supplement. A copy of such letter
is attached as Exhibit (a)(62) to the Schedule 14D-1 and is incorporated herein
by reference.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The discussion set forth in
Section 5 of the Offer to Purchase and Section 6 of the Second Supplement is
hereby amended and supplemented as follows:
As discussed in the Second Supplement, it is anticipated that exchanges of
Shares pursuant to the Offer or the Merger will be taxable transactions for
Federal income tax purposes. A stockholder of the Company who exchanges Shares
for cash in the Offer or for Viacom Class B Common Stock, Viacom Merger
Preferred Stock, CVRs and Viacom Warrants in the Merger will recognize capital
gain or loss for Federal income tax purposes. A stockholder of the Company who
exchanges Shares in the Merger will include the fair market value of the CVRs
and the Viacom Warrants received, in addition to the fair market value of the
Viacom Class B Common Stock and the Viacom Merger Preferred Stock received, in
the amount realized by such stockholder for purposes of computing the amount of
capital gain or loss recognized by such stockholder. Such stockholder will have
a tax basis in the CVRs and the Viacom Warrants received equal to their
respective fair market values. The holding period of such stockholder for long
term capital gains purposes in the Viacom Class B Common Stock, the Viacom
Merger Preferred Stock, the CVRs and the Viacom Warrants received could depend,
in part, on the characterization of the CVRs for Federal income tax purposes.
6. CERTAIN LEGAL MATTERS. The discussion set forth in Section 15 of the
Offer to Purchase, Section 5 of the First Supplement and Section 8 of the Second
Supplement is hereby amended and supplemented as follows:
Seven putative class action complaints, styled Fielden v. Blockbuster
Entertainment Corp., et al., C.A. No. 13319 (filed January 10, 1994); Gardner v.
Blockbuster Entertainment Corp., et al., C.A. No. 13322 (filed January 10,
1994); Sklar v. Blockbuster Entertainment Corp., et al., C.A. No. 13325 (filed
January 10, 1994); Hammer v. Blockbuster Entertainment Corp., et al., C.A. No.
13326 (filed January 11, 1994); Gilbert v. Blockbuster Entertainment Corp., et
al., C.A. No. 13329 (filed January 11, 1994); Birghenthal and Sarnoff v.
Blockbuster Entertainment Corp., et al., C.A. No. 13333 (filed January 12,
1994); and Symon and Charles v. Blockbuster Entertainment Corp., et al., C.A.
No. 13334 (filed January 12, 1994), have been filed by alleged Blockbuster
stockholders in the Delaware Court of Chancery against Blockbuster, the members
of its board of directors, Purchaser and Sumner M. Redstone (collectively, the
"Stockholder Suits"). The Stockholder Suits allege that Blockbuster's directors
"have violated their fiduciary duties of loyalty and fair dealing by failing to
ensure the maximization of stockholder value in the sale of control of
Blockbuster, including the failure to authorize and direct that a process
designed to secure the best value available for Blockbuster stockholders be
undertaken, and by implementing measures such as the [Blockbuster Subscription
Agreement] which were designed solely to thwart or impede other competing
transactions." Among other things, the Stockholder Suits seek to (i)
preliminarily and permanently enjoin the purchase by Blockbuster of shares of
Viacom Class B Common Stock pursuant to the Blockbuster Subscription Agreement;
(ii) preliminarily and permanently enjoin the Blockbuster Merger; (iii) require
the Blockbuster directors to maximize stockholder value by exploring third party
interest; and/or (iv) recover damages from the Blockbuster directors for their
alleged breaches of fiduciary duty.
7. CERTAIN INFORMATION CONCERNING PURCHASER AND BLOCKBUSTER. The discussion
set forth in Section 8 of the Offer to Purchase and Sections 9 and 10 of the
Second Supplement is hereby amended and supplemented as follows:
Financial Information.
6
<PAGE>
VIACOM BLOCKBUSTER INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed balance sheet at
September 30, 1993 gives effect to the Blockbuster Merger as if the Blockbuster
Merger had occurred at such date, and was prepared based upon the unaudited
balance sheets of Purchaser and Blockbuster at September 30, 1993. The following
unaudited pro forma combined statements of operations for the nine months ended
September 30, 1993 and for the year ended December 31, 1992 give effect to the
Blockbuster Merger as if the Blockbuster Merger had occurred at the beginning of
the period presented and were prepared based upon the unaudited statements of
operations of Purchaser and Blockbuster for the nine months ended September 30,
1993 and the audited statements of Purchaser and Blockbuster for the year ended
December 31, 1992. These unaudited pro forma combined condensed financial
statements should be read in conjunction with the audited financial statements,
including the notes thereto, and the unaudited financial statements, including
the notes thereto, of (i) Purchaser contained in Purchaser's Annual Report on
Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A
Amendment No. 1 dated November 29, 1993, and in Purchaser's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993, respectively, in each case
filed by Purchaser with the Commission, and of (ii) Blockbuster contained in
Blockbuster's Annual Report on Form 10-K for the year ended December 31, 1992,
in Blockbuster's Current Report on Form 8-K dated October 22, 1993, and in
Blockbuster's Quarterly Report on Form 10-Q for the quarter ended September 30,
1993, respectively, in each case filed by Blockbuster with the Commission. More
comprehensive financial information is included in such reports and other
documents filed by Purchaser and Blockbuster with the Commission, and the
following financial data is qualified in its entirety by reference to such
reports and other documents, including the financial information and related
notes contained therein. Such reports and other documents may be inspected and
copies may be obtained from the offices of the Commission in the same manner as
set forth with respect to information about the Company in Section 7 of the
Offer to Purchase.
The unaudited pro forma information is not necessarily indicative of the
operating results or financial position of the combined company that would have
occurred if the Blockbuster Merger had occurred at the date indicated, nor is it
indicative of future operating results or financial position.
The pro forma adjustments are based upon available information and upon
certain assumptions set forth herein, including the notes to the unaudited pro
forma combined condensed financial statements, which Purchaser and Blockbuster
believe are reasonable under the circumstances. The pro forma adjustments
reflect the Blockbuster Merger Consideration (see Note 1). Blockbuster
historical information has been adjusted for certain proposed or completed
acquisitions. (See Blockbuster Pro Forma Information.)
The Blockbuster Merger is being accounted for by the purchase method of
accounting, and accordingly, the cost to Purchaser to acquire Blockbuster,
calculated to be approximately $8.5 billion as of January 5, 1994, will be
allocated to the assets and liabilities acquired according to their respective
fair values. The cost to Purchaser to acquire Blockbuster pursuant to the
Blockbuster Merger is subject to change based upon the market value of Viacom
Common Stock at the time of the Blockbuster Merger. A change in the fair market
value of Viacom Common Stock will result in a corresponding change in the excess
of unallocated acquisition cost over the net assets acquired and the related
amortization thereof. The valuations and other studies, which will provide the
basis for such an allocation, have not yet progressed to a stage where there is
sufficient information to make an allocation in the accompanying unaudited pro
forma combined condensed financial statements. Accordingly, the purchase
accounting adjustments made in connection with the development of the unaudited
pro forma combined condensed financial information are preliminary and have been
made solely for purposes of developing such unaudited pro forma combined
condensed financial information. For pro forma purposes, the approximate $6.5
billion excess of unallocated acquisition cost over the net assets acquired,
based on a calculation of the acquisition cost as of January 5, 1994, is being
amortized over 40 years at the rate of $163.7 million per year.
7
<PAGE>
VIACOM BLOCKBUSTER INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT SEPTEMBER 30, 1993
(IN MILLIONS)
<TABLE><CAPTION>
PRO FORMA
PRO FORMA ---------------------------------------
PURCHASER COMBINED DEBIT CREDIT COMBINED
HISTORICAL BLOCKBUSTER* ADJUSTMENTS ADJUSTMENTS COMPANY
---------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash & short term investments................... $ 63.9 $ 70.5 $ 1,800.0(1b) $ 30.0(1a $ 1,904.4
Other current assets............................ 936.9 615.0 1,551.9
---------- ------------ ------------ ------------ -----------
Total current assets.......................... 1,000.8 685.5 1,800.0 30.0 3,456.3
---------- ------------ ------------ ------------ -----------
Property and equipment, net..................... 529.9 490.7 1,020.6
Videocassette rental inventory, net............. 430.9 430.9
Intangible assets, at amortized cost............ 2,214.2 815.3 6,546.2(1a) 9,575.7
Other assets.................................... 880.7 2,076.1 1,850.0(1c) 1,106.8
---------- ------------ ------------ ------------ -----------
$ 4,625.6 $ 4,498.5 $ 8,346.2 $ 1,880.0 $ 15,590.3
---------- ------------ ------------ ------------ -----------
---------- ------------ ------------ ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities............................. $ 992.3 $ 1,826.2 $ 1,250.0(1c) $ 1,568.5
Long-term debt.................................. 2,359.1 615.3 2,974.4
Other liabilities............................... 365.5 146.9 512.4
Stockholders' Equity:
Preferred stock............................... 600.0(1c)$ 1,800.0(1b) 1,200.0
Common stock.................................. 908.7 1,910.1 6,516.2(1a) 9,335.0
---------- ------------ ------------ ------------ -----------
Total Stockholders' Equity................. 908.7 1,910.1 600.0 8,316.2 10,535.0
---------- ------------ ------------ ------------ -----------
$ 4,625.6 $ 4,498.5 $ 1,850.0 $ 8,316.2 $ 15,590.3
---------- ------------ ------------ ------------ -----------
---------- ------------ ------------ ------------ -----------
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
- ---------------
* See Blockbuster Pro Forma Combined Statements on pages 13 through 18
of this Third Supplement.
8
<PAGE>
VIACOM BLOCKBUSTER INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
PRO FORMA
PRO FORMA --------------------------------------
PURCHASER COMBINED DEBIT CREDIT COMBINED
HISTORICAL BLOCKBUSTER* ADJUSTMENTS ADJUSTMENTS COMPANY
---------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 1,474.6 $ 1,824.2 $ 3,298.8
Expenses:
Operating...................................... 643.1 1,379.3 $ 313.0(2a) 1,709.4
Selling, general and administrative............ 412.6 149.1 561.7
$ 313.0(2a)
Depreciation and amortization.................. 112.0 122.7(2b) 547.7
---------- ------------ ------------ ------------ ----------
Total expenses............................ 1,167.7 1,528.4 435.7 313.0 2,818.8
---------- ------------ ------------ ------------ ----------
Earnings from operations......................... 306.9 295.8 435.7 313.0 480.0
Other income (expense):
Interest expense............................... (117.3) (73.5) (190.8)
Interest and other investment income........... 5.9 5.9
Other items, net............................... 63.3 15.9 85.8(2c,e) (6.6)
---------- ------------ ------------ ------------ ----------
Total other income (expense).............. (54.0) (51.7) 85.8 (191.5)
---------- ------------ ------------ ------------ ----------
Earnings before income taxes..................... 252.9 244.1 521.5 313.0 288.5
Provision for income taxes....................... 106.9 92.3 12.2(2f) 187.0
Equity in loss of affiliated companies, net of
tax.............................................. (2.8) (2.8)
---------- ------------ ------------ ------------ ----------
Earnings before extraordinary items.............. 143.2 151.8 521.5 325.2 98.7
Preferred stock dividend requirements............ 67.5(2d) 22.5(2e) 45.0
---------- ------------ ------------ ------------ ----------
Earnings attributable to common stock before
extraordinary items.............................. $ 143.2 $ 151.8 $ 589.0 $347.7 $ 53.7
---------- ------------ ------------ ------------ ----------
---------- ------------ ------------ ------------ ----------
Weighted average number of common shares......... 120.5 305.0
Earnings per common share before extraordinary
items............................................ $ 1.19 $ 0.18(2g)
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
- ---------------
* See Blockbuster Pro Forma Combined Statements on pages 13 through 18
of this Third Supplement.
9
<PAGE>
VIACOM BLOCKBUSTER INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1992
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
PRO FORMA
PRO FORMA --------------------------------------
PURCHASER COMBINED DEBIT CREDIT COMBINED
HISTORICAL BLOCKBUSTER* ADJUSTMENTS ADJUSTMENTS COMPANY
---------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 1,864.7 $ 2,296.5 $ 4,161.2
Expenses:
Operating...................................... 854.0 1,806.9 $ 350.4(2a) 2,310.5
Selling, general and administrative............ 518.0 173.5 691.5
$ 350.4(2a)
Depreciation and amortization.................. 144.8 163.7(2b) 658.9
---------- ------------ ------------ ------------ ----------
Total expenses............................ 1,516.8 1,980.4 514.1 350.4 3,660.9
---------- ------------ ------------ ------------ ----------
Earnings from operations......................... 347.9 316.1 514.1 350.4 500.3
Other income (expense):
Interest expense............................... (194.1) (94.0) (288.1)
Interest and other investment income........... 9.9 9.9
Other items, net............................... 1.8 17.4 31.8(2c,e) (12.6)
---------- ------------ ------------ ------------ ----------
Total other income (expense).............. (192.3) (66.7) 31.8 (290.8)
---------- ------------ ------------ ------------ ----------
Earnings before income taxes..................... 155.6 249.4 545.9 350.4 209.5
Provision for income taxes....................... 84.8 89.5 0.9(2f) 173.4
Equity in loss of affiliated companies, net of
tax.............................................. (4.7) (4.7)
---------- ------------ ------------ ------------ ----------
Earnings before extraordinary items.............. 66.1 159.9 545.9 351.3 31.4
Preferred stock dividend requirements............ 90.0(2d) 30.0(2e) 60.0
---------- ------------ ------------ ------------ ----------
Earnings (loss) attributable to common stock
before extraordinary items....................... $ 66.1 $ 159.9 $ 635.9 $ 381.3 $ (28.6)
---------- ------------ ------------ ------------ ----------
---------- ------------ ------------ ------------ ----------
Weighted average number of common shares......... 120.2 304.7
Earnings (loss) per common share before
extraordinary items.............................. $ 0.55 $ (0.09)(2g)
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
- ---------------
* See Blockbuster Pro Forma Combined Statements on pages 13 through 18
of this Third Supplement.
10
<PAGE>
VIACOM BLOCKBUSTER INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(1) The cost to acquire Blockbuster pursuant to the Blockbuster Merger, the
financing of such cost and the determination of the unallocated excess of
acquisition cost over the net assets acquired are set forth below. Pursuant
to the Blockbuster Merger, holders of shares of Blockbuster Common Stock
will be entitled to receive, for each Blockbuster share, (a) .08 of one
share of Viacom Class A Common Stock, (b) .60615 of one share of Viacom
Class B Common Stock and (c) one variable common right (a "VCR"), which at
the January 5, 1994 market price, represents an additional .05929 of one
share of Viacom Class B Common Stock. As described in Annex A to the
Blockbuster Merger Agreement, the VCR conversion rates vary and could result
in the issuance of a maximum of 34.2 million shares of Viacom Class B Common
Stock.
<TABLE>
<S> <C>
(a) Total acquisition costs and financing:
Viacom Class A Common Stock........................................................ $ 947.9
Viacom Class B Common Stock........................................................ 6,525.6
VCRs............................................................................... 638.3
----------
Acquisition costs financed......................................................... 8,111.8
Excess value of exchange ratio over exercise price of Blockbuster stock options and
warrants......................................................................... 314.5
Blockbuster Merger costs........................................................... 30.0
----------
Total acquisition costs............................................................ 8,456.3
Blockbuster pro forma net assets as of September 30, 1993.......................... 1,910.1
----------
Excess of acquisition costs over net assets acquired............................... $ 6,546.2
----------
----------
</TABLE>
(b) Reflects the issuance of Viacom Preferred Stock to NYNEX for
$1.2 billion and Blockbuster for $600 million.
(c) Eliminates the intercompany investment by Blockbuster of $600
million of Viacom Preferred Stock and the potential $1.25 billion
investment in Viacom Class B Common Stock and related $1.25 billion
Blockbuster debt financing.
(2) Other pro forma adjustments made to the unaudited combined condensed
financial statements reflect the following:
(a) Reflects the reclassification of the historical presentation of
depreciation and amortization expense of $313.0 million for the
nine months ended September 30, 1993 and $350.4 million for the
year ended December 31, 1992, to conform the presentations of
Purchaser and Blockbuster financial statements.
(b) An increase in amortization expense of $122.7 million for the nine
months ended September 30, 1993 and $163.7 million for the year
ended December 31, 1992, resulting from an increase in intangible
assets of approximately $6.5 billion amortized over 40 years.
(c) Eliminates the effects of the sale of the Viacom Cablevision of
Wisconsin, Inc. system and other non-recurring transactions during
1993 and of the gain relating to certain aspects of the settlement
of the Time Warner antitrust lawsuit, net of 1992 legal expenses
related to such lawsuit, and the reserve for litigation related to
a summary judgment against Purchaser in a dispute with CBS Inc.
arising under the 1970 agreement associated with the spin-off of
Viacom International by CBS Inc.
(d) Reflects the 5% cumulative dividend requirement of the $1.8 million
of Viacom Preferred Stock in the amount of $67.5 million and $90
million for the nine months ended September 30, 1993 and year ended
December 31, 1992, respectively.
(e) Eliminates the 5% cumulative annual dividend requirement on the $600
million intercompany Preferred Stock investment by Blockbuster in
the amount of $22.5 million for the nine months ended September 30,
1993 and $30 million for the year ended December 31, 1992.
11
<PAGE>
(f) Reflects the income tax effects of pro forma adjustment. The
effective income tax rates on a pro forma basis are affected by
amortization of excess acquisition costs, which are not deductible
for tax purposes.
(g) Pro forma earnings (loss) per common share is calculated based on
the weighted average number of shares of Viacom Common Stock
outstanding and the number of shares of Viacom Common Stock to be
issued in exchange for Blockbuster Common Stock, as if the
transaction occurred at the beginning of each of the periods
presented. The effect of the assumed exercise of stock options and
warrants is not material. Conversion of the Viacom Preferred Stock
would have an antidilutive effect on earnings per common share and
therefore fully diluted earnings per common share is not presented.
12
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BLOCKBUSTER ENTERTAINMENT CORPORATION AND SUBSIDIARIES,
SUPER CLUB RETAIL ENTERTAINMENT CORPORATION AND SUBSIDIARIES,
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES,
SOUND WAREHOUSE, INC. AND SUBSIDIARY AND SHOW INDUSTRIES, INC.
The historical financial statements of Blockbuster include the financial
position and results of operations of WJB Video Limited Partnership and certain
of its affiliates ("WJB"), with which Blockbuster consolidated in August 1993.
This transaction has been accounted for under the pooling of interests method of
accounting and, accordingly, all of Blockbuster's historical financial data have
been restated as if the companies had operated as one entity since inception.
The following unaudited pro forma condensed consolidated balance sheet
presents the pro forma financial position of Blockbuster as of September 30,
1993 as if the acquisition of Super Club Retail Entertainment Corporation and
subsidiaries ("Super Club") had been consummated as of September 30, 1993. The
balance sheet also contains pro forma adjustments for certain significant
transactions subsequent to September 30, 1993 which transactions have either
occurred or may occur in connection with Purchaser's proposed acquisition of the
Company. These transactions include a $600,000,000 and a $1,250,000,000
investment in Purchaser, additional borrowings of $1,850,000,000 and the sale of
14,650,000 shares of Blockbuster's common stock in an underwritten public
offering and are reflected in the balance sheet as if these transactions had
been consummated as of September 30, 1993. Spelling Entertainment Group Inc. and
subsidiaries ("Spelling Entertainment"), Sound Warehouse, Inc. and subsidiary
("Sound Warehouse") and Show Industries, Inc. ("Show Industries") are included
in Blockbuster's historical balance sheet at September 30, 1993.
The following unaudited pro forma condensed consolidated statement of
operations for the nine months ended September 30, 1993 presents the pro forma
results of continuing operations of Blockbuster as if the acquisition of Super
Club and the majority of the outstanding common stock of Spelling Entertainment
as well as the significant transactions referred to above had been consummated
at the beginning of the period presented. The following unaudited pro forma
condensed consolidated statement of operations for the twelve months ended
December 31, 1992 presents the pro forma results of continuing operations of
Blockbuster as if the acquisitions of Super Club, Spelling Entertainment, Sound
Warehouse and Show Industries as well as the significant transactions referred
to above had been consummated at the beginning of the period presented. These
unaudited pro forma condensed consolidated financial statements should be read
in conjunction with the respective historical financial statements and notes
thereto of Blockbuster, Super Club, Spelling Entertainment, Sound Warehouse and
Show Industries.
Income from continuing operations per common and common equivalent share is
based on the combined weighted average number of common shares and common share
equivalents outstanding which include, where appropriate, the assumed exercise
or conversion of warrants and options. In computing income from continuing
operations per common and common equivalent share, Blockbuster utilizes the
treasury stock method. Computing income from continuing operations per share on
a fully diluted basis assumes conversion of Blockbuster's Liquid Yield Option
Notes ("LYONs") when dilutive, in which case income from continuing operations
is increased for the hypothetical elimination of interest expense, net of tax,
related to the LYONs. The increase to income from continuing operations,
assuming conversion of the LYONs, was approximately $5,770,000 and the number of
shares used to compute income from continuing operations per share on a fully
diluted basis was increased by approximately 8,306,000 shares for the twelve
months ended December 31, 1992. No such adjustment was necessary for the nine
months ended September 30, 1993 as the LYONs were converted to shares of
Blockbuster's common stock during this period.
13
<PAGE>
The unaudited pro forma condensed consolidated financial statements were
prepared utilizing the accounting policies of the respective entities as
outlined in their historical financial statements except as described in the
accompanying notes. The unaudited pro forma condensed consolidated financial
statements reflect Blockbuster's preliminary allocations of purchase prices
which will be subject to further adjustments as Blockbuster finalizes the
allocations of the purchase prices in accordance with generally accepted
accounting principles. All of the aforementioned acquisitions, excluding WJB,
were accounted for under the purchase method of accounting. The unaudited pro
forma condensed consolidated results of operations do not necessarily reflect
actual results which would have occurred if the aforementioned acquisitions had
taken place on the assumed dates, nor are they indicative of the results of
future combined operations. If either the Merger or the Blockbuster Merger were
not to occur, certain pro forma adjustments included in these unaudited pro
forma condensed consolidated financial statements would change significantly.
14
<PAGE>
BLOCKBUSTER ENTERTAINMENT CORPORATION AND SUBSIDIARIES AND
SUPER CLUB RETAIL ENTERTAINMENT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1993
(IN THOUSANDS)
<TABLE><CAPTION>
SUPER CLUB
RETAIL
ENTERTAINMENT PRO FORMA
CORPORATION AS ADJUSTMENTS
OF OCTOBER 2, ------------------------
BLOCKBUSTER 1993 COMBINED DEBIT CREDIT PRO FORMA
----------- ---------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents.............. $ 63,077 $ 7,394 $ 70,471 $ 70,471
Accounts receivable, less
allowance................ 88,460 20,528 108,988 108,988
Merchandise inventories.... 204,691 89,315 294,006 294,006
Film costs and program
rights, net.................. 156,924 156,924 156,924
Other...................... 51,694 3,423 55,117 55,117
----------- ---------------- ----------- ----------- ----------- -----------
Total Current Assets... 564,846 120,660 685,506 685,506
Videocassette rental
inventory, net............... 405,834 25,112 430,946 430,946
Property and equipment,
net.......................... 445,933 44,790 490,723 490,723
Intangible assets, net..... 784,757 105,810 890,567 $ 30,565(b) $ 105,810(a) 815,322
Investment in Viacom
Inc. ........................ 1,850,000(e) 1,850,000
Other assets............... 224,746 1,297 226,043 226,043
----------- ---------------- ----------- ----------- ----------- -----------
$ 2,426,116 $ 297,669 $ 2,723,785 $ 1,880,565 $ 105,810 $ 4,498,540
----------- ---------------- ----------- ----------- ----------- -----------
----------- ---------------- ----------- ----------- ----------- -----------
Current Liabilities:
Current portion of long-
term debt.................... $ 56,833 $ 1,029 $ 57,862 $ 1,250,000(g) $1,307,862
Accounts payable........... 193,548 58,278 251,826 251,826
Accrued liabilities........ 177,163 11,191 188,354 188,354
Accrued participation
expenses..................... 39,249 39,249 39,249
Income taxes payable....... 38,211 720 38,931 38,931
----------- ---------------- ----------- ----------- ----------- -----------
Total Current
Liabilities.................. 505,004 71,218 576,222 1,250,000 1,826,222
Long-term debt............... 438,488 89,845 528,333 $ 513,068(f,i) 600,000(g) 615,265
Other liabilities............ 71,434 311 71,745 71,745
Minority interest in
subsidiaries................. 75,207 75,207 75,207
Shareholders' Equity:
Preferred stock............ 20,852 20,852 20,852(c)
Common stock............... 22,212 174 22,386 174(c) 1,990(d,h) 24,202
Capital in excess of par
value........................ 853,967 172,033 1,026,000 172,033(c) 572,128(d,h)1,426,095
Cumulative foreign currency
translation adjustment... (37,205) (37,205) (37,205)
Retained earnings
(deficit)................ 497,009 (56,764) 440,245 56,764(c) 497,009
----------- ---------------- ----------- ----------- ----------- -----------
Total Shareholders'
Equity....................... 1,335,983 136,295 1,472,278 193,059 630,882 1,910,101
----------- ---------------- ----------- ----------- ----------- -----------
$ 2,426,116 $ 297,669 $ 2,723,785 $ 706,127 $ 2,480,882 $ 4,498,540
----------- ---------------- ----------- ----------- ----------- -----------
----------- ---------------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this statement.
15
<PAGE>
BLOCKBUSTER ENTERTAINMENT CORPORATION AND SUBSIDIARIES,
SUPER CLUB RETAIL ENTERTAINMENT CORPORATION AND SUBSIDIARIES AND
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
SUPER CLUB
RETAIL SPELLING
ENTERTAINMENT ENTERTAINMENT PRO FORMA
CORPORATION GROUP INC. ADJUSTMENTS
NINE MONTHS THREE MONTHS -------------------- PRO
BLOCKBUSTER ENDED 10/2/93 ENDED 3/31/93 COMBINED DEBIT CREDIT FORMA
--------- ------------- ------------- --------- --------- --------- ---------
Revenue:
<S> <C> <C> <C> <C> <C> <C> <C>
Rental revenue.......................... $ 931,512 $ 50,576 $ 982,088 $ 982,088
Product sales........................... 404,160 215,912 620,072 620,072
Other revenue........................... 167,635 2,873 $ 51,509 222,017 222,017
--------- ------------- ------------- --------- --------- --------- ---------
1,503,307 269,361 51,509 1,824,177 1,824,177
Operating Costs and Expenses:
Cost of product sales................... 260,426 157,050 417,476 417,476
Operating expenses...................... 836,882 100,761 38,049 975,692 $ 14,018(k,l,m)961,674
Selling, general and administrative..... 120,013 21,439 7,737 149,189 149,189
--------- ------------- ------------- --------- --------- --------- ---------
Operating Income (loss)................... 285,986 (9,889) 5,723 281,820 14,018 295,838
Interest expense.......................... (24,936) (3,925) (2,437) (31,298) $ 42,776(r) 551(q) (73,523)
Interest income........................... 5,572 99 210 5,881 5,881
Other income (expense), net............... (5,580) 992 (883) (5,471) 1,083(j)22,500(s) 15,946
--------- ------------- ------------- --------- --------- --------- ---------
Income (loss) before taxes................ 261,042 (12,723) 2,613 250,932 43,859 37,069 244,142
Provision for income taxes................ 98,691 106 1,674 100,471 8,185(t) 92,286
--------- ------------- ------------- --------- --------- --------- ---------
Income (loss) from continuing
operations................................ $ 162,351 $ (12,829) $ 939 $ 150,461 $ 43,859 $ 45,254 $ 151,856
--------- ------------- ------------- --------- --------- --------- ---------
--------- ------------- ------------- --------- --------- --------- ---------
Weighted average common and common
equivalent shares outstanding............. 212,873 235,827
Income from continuing operations per ========= =========
common and common equivalent share........ $ 0.76 $ 0.64
Weighted average common and common ========= =========
equivalent shares outstanding--assuming
full dilution............................. 214,206 237,160
Income from continuing operations per ========= ==========
common and common equivalent share--
assuming full dilution.................... $ 0.76 $ 0.64
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
16
<PAGE>
BLOCKBUSTER ENTERTAINMENT CORPORATION AND SUBSIDIARIES,
SUPER CLUB RETAIL ENTERTAINMENT CORPORATION AND SUBSIDIARIES,
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES,
SOUND WAREHOUSE, INC. AND SUBSIDIARY AND SHOW INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1992
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
SUPER CLUB SPELLING SOUND SHOW
RETAIL ENTERTAINMENT WAREHOUSE, INDUSTRIES,
ENTERTAINMENT GROUP INC. INC. INC. PRO FORMA
CORPORATION TWELVE MONTHS TEN MONTHS TEN MONTHS ADJUSTMENTS
TWELVE MONTHS ENDED ENDED ENDED ---------
BLOCKBUSTER ENDED 4/3/93 12/31/92 10/31/92 10/31/92 COMBINED DEBIT
----------- -------------- ------------- ------------- ------------- ---------- ---------
Revenue:
<S> <C> <C> <C> <C> <C> <C> <C>
Rental revenue.......... $ 969,333 $ 68,223 $ 21,213 $ 22,300 $1,081,069
Product sales........... 298,338 312,940 218,383 75,607 905,268
Television programming
revenue................... $ 258,519 258,519
Royalties and other
fees...................... 48,173 3,541 51,714
----------- -------------- ------------- ------------- ------------- ---------- ---------
1,315,844 384,704 258,519 239,596 97,907 2,296,570
Operating Costs and
Expenses:
Cost of product sales... 196,175 222,676 142,901 49,362 611,114
Operating expenses...... 763,220 133,945 216,687 77,011 45,814 1,236,677
Selling, general and
administrative............ 113,587 27,166 12,207 12,612 7,865 173,437
----------- -------------- ------------- ------------- ------------- ---------- ---------
Operating income (loss)... 242,862 917 29,625 7,072 (5,134) 275,342
Interest expense.......... (17,793) (6,690) (9,891) (10,759) (3,532) (48,665) $ 57,035(r)
Interest income........... 7,044 119 2,488 255 9,906
Other income (expense),
net....................... (893) 187 (5,120) (5,826) 6,757(j)
----------- -------------- ------------- ------------- ------------- ---------- ---------
Income (loss) before
taxes..................... 231,220 (5,467) 17,102 (3,432) (8,666) 230,757 63,792
Provision for (benefit of)
income taxes.............. 82,951 314 9,185 (287) 92,163
----------- -------------- ------------- ------------- ------------- ---------- ---------
Income (loss) from
continuing operations..... $ 148,269 $ (5,781) $ 7,917 $ (3,145) $ (8,666) $ 138,594 $ 63,792
----------- -------------- ------------- ------------- ------------- ---------- ---------
----------- -------------- ------------- ------------- ------------- ---------- ---------
Weighted average common
and common equivalent
shares outstanding........ 192,427
-----------
-----------
Income from continuing
operations per common
and common equivalent
share..................... $ 0.77
-----------
-----------
Weighted average common
and common equivalent
shares outstanding--
assuming full dilution.... 202,314
-----------
-----------
Income from continuing
operations per common
and common equivalent
share--assuming full
dilution.................. $ 0.76
-----------
-----------
<CAPTION>
PRO
CREDIT FORMA
--------- ----------
Revenue:
Rental revenue.......... $1,081,069
Product sales........... 905,268
Television programming
revenue................... 258,519
Royalties and other
fees...................... 51,714
--------- ----------
2,296,570
Operating Costs and
Expenses:
Cost of product sales... 611,114
Operating expenses...... $40,712(k-p)1,195,965
Selling, general and
administrative............ 173,437
--------- ----------
Operating income (loss)... 40,712 316,054
Interest expense.......... 11,722(q) (93,978)
Interest income........... 9,906
Other income (expense),
net....................... 30,000(s) 17,417
--------- ----------
Income (loss) before
taxes..................... 82,434 249,399
Provision for (benefit of)
income taxes.............. 2,629(t) 89,534
--------- ----------
Income (loss) from
continuing operations..... $ 85,063 $ 159,865
--------- ----------
--------- ----------
Weighted average common
and common equivalent
shares outstanding........ 225,267
----------
----------
Income from continuing
operations per common
and common equivalent
share..................... $ 0.71
----------
----------
Weighted average common
and common equivalent
shares outstanding--
assuming full dilution.... 235,154
----------
----------
Income from continuing
operations per common
and common equivalent
share--assuming full
dilution.................. $ 0.70
----------
----------
</TABLE>
The accompanying notes are an integral part of this statement.
17
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
(a) Represents an entry to eliminate the historical intangible assets of Super Club.
(b) Represents an entry to record intangible assets resulting from the preliminary allocation of the purchase
price for Super Club.
(c) Represents an entry to eliminate the prior equity balances of Super Club.
(d) Represents the recording of equity resulting from Blockbuster's issuance of its common stock to the sellers
of Super Club.
(e) Represents Blockbuster's investment in Purchaser.
(f) Represents the elimination of Super Club related party payables excluded from the purchase transaction.
(g) Represents additional debt incurred by Blockbuster which was used to fund Blockbuster's investment in
Purchaser.
(h) Represents the recording of equity resulting from the sale of 14,650,000 shares of Blockbuster's common stock
in an underwritten public offering in November 1993.
(i) Represents proceeds from Blockbuster's equity sale which were used to reduce its existing indebtedness.
(j) Represents the recording of the minority interest resulting from Blockbuster's purchase of the majority of
the outstanding common stock of Spelling Entertainment.
(k) Represents a net adjustment related to the elimination of the historical amortization of intangible assets
and the recording of amortization, on a straight-line basis, on the intangible assets resulting from the
preliminary purchase price allocations of the acquired entities. Intangible assets resulting from the
purchase of Super Club, Spelling Entertainment, Sound Warehouse and Show Industries are being amortized over
a 40 year life which approximates their useful lives.
(l) Represents reductions to programming and distribution, depreciation and occupancy expenses resulting from
preliminary purchase price allocations which reflect the fair market value of various assets and liabilities
related to Spelling Entertainment.
(m) Represents an estimate of cost savings to be realized from the consolidation of certain Super Club, Sound
Warehouse and Show Industries operational and administrative functions, including the elimination of
duplicate facilities and personnel, and management fees previously charged by related affiliates.
(n) Represents a reduction to videocassette rental inventory amortization expense due to adjustments to the
carrying value of Sound Warehouse and Show Industries' videocassette rental inventory as a result of the
preliminary purchase price allocations and the assignment of remaining useful lives.
(o) Represents a reduction to property and equipment depreciation expense resulting from adjustments to the
carrying value of Sound Warehouse and Show Industries' property and equipment as a result of preliminary
purchase price allocations and the assignment of remaining useful lives.
(p) Represents the elimination of the amortization of deferred financing costs of Sound Warehouse and Show
Industries.
(q) Represents the reduction in interest expense resulting from the revaluation of outstanding indebtedness of
Spelling Entertainment, Sound Warehouse and Show Industries by Blockbuster at current interest rates.
(r) Represents additional interest expense resulting from Blockbuster's additional borrowings used to fund its
investment in Purchaser.
(s) Represents dividend income related to a portion of Blockbuster's investment in Purchaser.
(t) Represents the incremental change in the combined entity's provision for income taxes as a result of the
pretax earnings of Super Club, Spelling Entertainment, Sound Warehouse and Show Industries and all pro forma
adjustments as described above.
</TABLE>
18
<PAGE>
Other. Steven R. Berrard, Vice Chairman, President, Chief Operating Officer
and a Director of Blockbuster, is the beneficial owner of 5,000 Shares of the
Company, all of which were acquired more than six months prior to the date of
this Third Supplement. Such Shares constitute approximately 4/1000 of one
percent of the outstanding Shares.
8. MISCELLANEOUS. Purchaser has filed with the Commission amendments to the
Schedule 14D-1 pursuant to Rule 14d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, furnishing certain additional
information with respect to the Offer, and may file further amendments thereto.
The Schedule 14D-1 and any amendments thereto, including exhibits, may be
inspected at, and copies may be obtained from, the same places and in the same
manner as set forth in Section 7 of the Offer to Purchase (except that they will
not be available at the regional offices of the Commission).
VIACOM INC.
January 18, 1994
19
<PAGE>
ANNEX I
VIACOM INC.
CONTINGENT VALUE RIGHTS ("CVRs")
<TABLE>
<S> <C>
ISSUER:............................. Viacom Inc. ("Viacom")
PAYMENT AT MATURITY:................ Following the maturity of a CVR, the holder of such CVR (the "CVR Holder")
shall have the right to receive the amount, if any, by which the Target
Price exceeds the greater of the Current Market Value and the Minimum
Price (each as defined below). The CVRs shall mature on the Maturity Date
unless otherwise extended to the First Extended Maturity Date or the
Second Extended Maturity Date, as the case may be (each as defined
below).
FORM OF PAYMENT:.................... Viacom, at its option, may pay any amount due under the terms of the CVRs
to the CVR Holders in cash or in the equivalent fair market value (as
determined by an independent nationally recognized investment bank) of
registered securities of Viacom, including, without limitation, common
stock, preferred stock, notes or other securities.
TARGET PRICE:....................... "Target Price" means (i) at the Maturity Date, $48.00, (ii) at the First
Extended Maturity Date, $51.00 and (iii) at the Second Extended Maturity
Date, $55.00. In each case, such Target Prices shall be adjusted upon the
occurrence of any event described in the Section entitled "Antidilution"
set forth below.
CURRENT MARKET VALUE:............... "Current Market Value" means (i) with respect to the Maturity Date and the
First Extended Maturity Date, the median of the averages of the closing
prices on the American Stock Exchange (or such other exchange on which
such shares are then listed) of shares of Viacom's Class B Common Stock,
par value $.01 per share (the "Class B Common Stock"), during each 20
consecutive trading day period that both begins and ends in the Valuation
Period and (ii) with respect to the Second Extended Maturity Date, the
average of the closing prices on the American Stock Exchange (or such
other exchange on which such shares are then listed) of the Class B
Common Stock during the 20 consecutive trading days in the Valuation
Period which yield the highest such average of the closing prices for any
such 20 consecutive trading day period within the Valuation Period.
"Valuation Period" means the 60 trading day period immediately preceding
(and including) the Maturity Date, the First Extended Maturity Date or
the Second Extended Maturity Date, as the case may be.
MINIMUM PRICE:...................... "Minimum Price" means $38.00, subject to adjustment upon the occurrence of
any event described in the Section entitled "Antidilution" set forth
below.
MATURITY DATE;
EXTENSIONS THEREOF:............... "Maturity Date" means the first anniversary of the effective time (the
"Effective Time") of the merger between Viacom and Paramount
Communications Inc. (the "Merger"); provided, however, that Viacom, at
its option, may (i) extend the Maturity Date to the second anniversary of
the Effective Time (the "First
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Extended Maturity Date") and (ii) extend the First Extended Maturity Date
to the third anniversary of the Effective Time (the "Second Extended
Maturity Date"). Viacom shall exercise either such option to extend by
publishing notice of such exercise in the Wall Street Journal (Eastern
Edition), or if the Wall Street Journal is not then published, such other
newspaper with general circulation in the City of New York, New York no
later than one business day preceding the Maturity Date or
First Extended Maturity Date, as the case may be.
NO INTEREST:........................ Other than in the case of interest on the Default Amount (as defined
below), no interest shall accrue on any amounts payable to the CVR
Holders pursuant to the terms of the CVRs.
DISPOSITION PAYMENT:................ Following the consummation of a Disposition (as defined below), Viacom
shall pay to each CVR Holder for each CVR held by such CVR Holder an
amount, if any, by which the Discounted Target Price (as defined below)
exceeds the greater of (a) the fair market value (as determined by an
independent nationally recognized investment banking firm) of the
consideration, if any, received by holders of Class B Common Stock for
each share of Class B Common Stock held by such holder as a result of
such Disposition and (b) the Minimum Price.
DISPOSITIONS:....................... "Disposition" means (a) a merger, consolidation or other business
combination involving Viacom as a result of which no shares of Class B
Common Stock shall remain outstanding, (b) a sale, transfer or other
disposition, in one or a series of transactions, of all or substantially
all of the assets of Viacom or (c) a reclassification of Class B Common
Stock as any other capital stock of Viacom or any other person.
ACCELERATION UPON
EVENT OF DEFAULT:................. If an Event of Default (as defined below) occurs and is continuing, either
the bank or trust company acting as the trustee (the "Trustee") or CVR
Holders holding at least 25% of the outstanding CVRs, by notice to Viacom
(and to the Trustee if given by CVR Holders), may declare the CVRs to be
due and payable, and upon any such declaration, the Default Amount shall
become due and payable and, thereafter, shall bear interest at an
interest rate of 8% per annum until payment is made to the Trustee.
"Default Amount" means the amount, if any, by which the Discounted Target
Price exceeds the Minimum Price.
DISCOUNTED TARGET PRICE:............ "Discounted Target Price" means (a) if a Disposition or an Event of Default
shall occur prior to the Maturity Date, $48.00, discounted to the
Disposition Payment Date (as defined below) or the Default Payment Date
(as defined below), as the case may be, at a per annum rate of 8%; (b) if
a Disposition or an Event of Default shall occur after the Maturity Date
but prior to the First Extended Maturity Date, $51.00 discounted to the
date of the Disposition Payment Date or Default Payment Date, as the case
may be, at a per annum rate of 8%; or (c) if a Disposition or an Event of
Default shall occur after the First Extended Maturity Date but prior to
the Second Extended Maturity Date, $55.00 discounted to the Disposition
Payment Date or Default Payment
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Date, as the case may be, at a per annum rate of 8%. In each case, the
Discounted Target Price and the Minimum Price shall be adjusted upon the
occurrence of any event described in the Section entitled "Antidilution"
set forth below. "Disposition Payment Date", with respect to a
Disposition, means the date established by Viacom for payment of the
amount due on the CVRs in respect of such Disposition, which in no event
shall be more than 30 days after the date on which such Disposition was
consummated. "Default Payment Date" means the date on which the CVRs
become due and payable upon the declaration thereof following an Event of
Default.
EVENTS OF DEFAULT:.................. "Event of Default", with respect to the CVRs, means any of the following
which shall have occurred and be continuing: (a) default in the payment
of all or any part of the amounts payable in respect of any of the CVRs
as and when the same shall become due and payable following the Maturity
Date, the First Extended Maturity Date or the Second Extended Maturity
Date, the Disposition Payment Date or otherwise; (b) material default in
the performance, or material breach, of any material covenant or warranty
of Viacom, and continuance of such material default or breach for a
period of 90 days after written notice has been given to Viacom by the
Trustee or to Viacom and the Trustee by CVR Holders holding at least 25%
of the outstanding CVRs; or (c) certain events of bankruptcy, insolvency,
reorganization or other similar events in respect of Viacom.
ANTIDILUTION:....................... If Viacom shall in any manner subdivide (by stock split, stock dividend or
otherwise) or combine (by reverse stock split or otherwise) the number of
outstanding shares of Class B Common Stock, Viacom shall correspondingly
subdivide or combine the CVRs and shall appropriately adjust the Target
Price, the Minimum Price and the Discounted Target Price.
TRADING:............................ None of Viacom, National Amusements, Inc. or any of their affiliates shall
trade in shares of Class B Common Stock during the period commencing 10
trading days before the Valuation Period and ending on the last day of the
Valuation Period, except with respect to employee benefit plans and other
incentive compensation arrangements.
NO FRACTIONAL CVRS:................. No fraction of a CVR will be issued in the Merger. In lieu thereof, a cash
payment will be made in an amount equivalent to the fair market value of
the fraction of the CVR.
CVR AGREEMENT:...................... The CVRs will be issued pursuant to a CVR Agreement between Viacom and the
Trustee. Viacom shall use its reasonable best efforts to cause the CVR
Agreement to be qualified under the Trust Indenture Act of 1939, as
amended.
REGISTRATION/LISTING:............... The CVRs will be issued in registered form, and Viacom shall use its
reasonable best efforts to list the CVRs on the American Stock Exchange
(or such other securities exchange on which the shares of Class B Common
Stock are then listed).
NATURE AND RANKING OF CVRS:......... The CVRs are unsecured obligations of Viacom and will rank equally with all
other unsecured obligations of Viacom.
</TABLE>
3
<PAGE>
Facsimiles of Letters of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Hand or
By Mail: By Facsimile: Overnight Courier:
P.O. Box 2562 (201) 222-4720 14 Wall Street,
Mail Suite 4660 or 8th Floor
Jersey City, New Jersey (201) 222-4721 Suite 4680
07303-2562 Confirm by Telephone: New York, New York 10005
(201) 222-4707
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, this Third Supplement,
the revised (Orange) Letter of Transmittal and the revised (Yellow) Notice of
Guaranteed Delivery may be obtained from the Information Agent. A stockholder
may also contact brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC. [LOGO]
Wall Street Plaza
New York, New York 10005 Bankers and Brokers call
(212) 509-6240 (collect) (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
SMITH BARNEY SHEARSON INC.
1345 Avenue of the Americas
48th Floor
New York, NY 10105
(212) 698-8455
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
PARAMOUNT COMMUNICATIONS INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 25, 1993,
THE SUPPLEMENT THERETO
DATED NOVEMBER 8, 1993,
THE SECOND SUPPLEMENT THERETO
DATED JANUARY 7, 1994
AND THE THIRD SUPPLEMENT THERETO
DATED JANUARY 18, 1994
OF
VIACOM INC.
THE OFFER IS EXTENDED. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 31,
1994, UNLESS THE OFFER IS FURTHER EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Facsimile
By Mail: Transmission: By Hand or Overnight Courier:
P.O. Box 2562 (201) 222-4720 14 Wall Street,
Suite Box 4660 or 8th Floor
Jersey City, New Jersey (201) 222-4721 Suite 4680
07303-2562 New York, New York 10005
Confirm by Telephone:
(201) 222-4707
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
While the previously circulated (Yellow), (Green) or (Orange) Letters of
Transmittal refer to the Offer to Purchase dated October 25, 1993, the
Supplement thereto dated November 8, 1993, and the Second Supplement thereto
dated January 7, 1994, stockholders making use thereof to tender their Shares
will nevertheless receive $107 per Share for each Share validly tendered and not
withdrawn and accepted for payment pursuant to the Offer, subject to the
conditions of the Offer. Stockholders who have previously validly tendered and
have not withdrawn their Shares pursuant to the Offer are not required to take
any further action to receive the increased tender price of $107 per Share.
This revised Letter of Transmittal or one of the previously circulated
(Yellow), (Green) or (Orange) Letters of Transmittal is to be completed by
stockholders either if certificates evidencing Shares (as defined below) are to
be forwarded herewith or if delivery of Shares is to be made by book-entry
transfer to the Depositary's account at The Depository Trust Company ("DTC"),
the Midwest Securities Trust Company ("MSTC") or the Philadelphia Depository
Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively,
the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer
procedure described in Section 3 of the Offer to Purchase (as defined below).
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and all
other documents required hereby to the Depositary prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase) or who cannot complete the
procedure for delivery by book-entry transfer on a timely basis and who wish to
tender their Shares must do so pursuant to the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase. See Instruction 2.
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) / / DTC / / MSTC / / PDTC
Account Number _______________________ Transaction Code Number _____________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ___________________________________________
Window Ticket No. (if any) _________________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
<PAGE>
<TABLE><CAPTION>
DESCRIPTION OF SHARES TENDERED
NAMES(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
Total Shares..................
</TABLE>
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
evidenced by each Share Certificate delivered to the Depositary are
being tendered hereby. See Instruction 4.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE INSTRUCTIONS SET FORTH
IN THIS LETTER OF TRANSMITTAL CAREFULLY
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Viacom Inc., a Delaware corporation
("Purchaser"), the above-described shares of Common Stock, par value $1.00 per
share, of Paramount Communications Inc., a Delaware corporation (the "Company")
(all shares of such Common Stock from time to time outstanding being,
collectively, the "Shares") pursuant to Purchaser's offer to purchase 61,657,432
Shares, or such greater number of Shares as equals 50.1% of the Shares
outstanding plus the Shares issuable upon the exercise of the then exercisable
stock options, as of the expiration of the Offer, at $107 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated October 25, 1993 (the "Offer to Purchase"), as amended
and supplemented by the Supplement thereto dated November 8, 1993 (the "First
Supplement"), the Second Supplement thereto dated January 7, 1994 (the "Second
Supplement") and the Third Supplement thereto dated January 18, 1994 (the "Third
Supplement"; and together with the First Supplement and the Second Supplement,
the "Supplements"), receipt of which is hereby acknowledged, and in the related
Letters of Transmittal (which together constitute the "Offer"). The undersigned
understands that Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to one or more of its affiliates, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer (including, if the
Offer is further extended or amended, the terms and conditions of such extension
or amendment), the undersigned hereby sells, assigns and transfers to, or upon
the order of, Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby and all dividends, distributions (including,
without limitation, distributions of additional Shares) and rights declared,
paid or distributed in respect of such Shares on or after October 24, 1993,
except for regular quarterly dividends on the Shares declared and payable
consistent with past practice in an aggregate amount not in excess of $.20 per
Share (collectively, "Distributions"), and irrevocably appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares and all Distributions, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver Share Certificates evidencing such Shares and all
Distributions, or transfer ownership of such Shares and all Distributions on the
account books maintained by a Book-Entry Transfer Facility, together, in either
case, with all accompanying evidences of transfer and authenticity, to or upon
the order of Purchaser, (ii) present such Shares and all Distributions for
transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares and all
Distributions, all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Frank J. Biondi, Jr. and
Philippe P. Dauman, and each of them, as the attorneys and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper and otherwise act (by written consent or otherwise) with respect to
all the Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Shares tendered hereby, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by Purchaser in accordance with the terms
of the Offer. Such acceptance for payment shall revoke all other proxies and
powers of attorney granted by the undersigned at any time with respect to such
Shares (and all Shares and other securities issued in Distributions in respect
of such Shares), and no subsequent proxy or power of attorney shall be given or
written consent executed (and if given or executed, shall not be effective) by
the undersigned with respect thereto. The undersigned understands that, in order
for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance of such Shares for payment, Purchaser must be able to exercise full
voting and other rights with respect to such Shares, including, without
limitation, voting at any meeting of the Company's stockholders then scheduled.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that the tender of the tendered Shares
complies with Rule 14e-4 under the Securities Exchange Act of 1934, as amended,
and that when such Shares are accepted for payment by Purchaser, Purchaser will
acquire good, marketable and unencumbered title thereto and to all
Distributions, free and clear of all liens, restrictions, charges and
encumbrances, and that none of such Shares and Distributions will be subject to
any adverse claim. The undersigned, upon request, shall execute and deliver all
additional documents deemed by the Depositary or Purchaser to be necessary or
desirable to complete the sale, assignment and transfer of the Shares tendered
hereby and all Distributions. In addition, the undersigned shall remit and
transfer promptly to the Depositary for the account of Purchaser all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and, pending such remittance and transfer
or appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby, or deduct from such purchase
price, the amount or value of such Distribution as determined by Purchaser in
its sole discretion.
<PAGE>
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions", please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if Purchaser does not purchase any of the Shares tendered hereby.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased or
Share Certificates evidencing Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned, or if Shares tendered
hereby and delivered by book-entry transfer which are not purchased are to be
returned by credit to an account at one of the Book-Entry Transfer Facilities
other than that designated above.
Issue / / check / / Share Certificate(s) to:
Name .........................................................................
(PLEASE PRINT)
............................................................................
Address ......................................................................
.............................................................................
(ZIP CODE)
.............................................................................
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
/ / Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:
Check appropriate box:
/ / DTC / / MSTC / / PDTC
Account Number .................................................................
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased or
Share Certificates evidencing Shares not tendered or not purchased are to be
mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered".
Mail / / check / / Share Certificates(s) to:
Name .........................................................................
(PLEASE PRINT)
.............................................................................
Address ......................................................................
.............................................................................
(ZIP CODE)
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
______________________________________________________________________________
______________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated:______________________________ , 199_
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information and see
Instruction 5.)
Name(s):______________________________________________________________________
______________________________________________________________________________
(PLEASE PRINT)
Capacity (full title):________________________________________________________
Address:______________________________________________________________________
______________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.:__________________________________________________
Taxpayer Identification or Social Security No.:_______________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. All signatures on this Letter of Transmittal
must be medallion guaranteed by a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., by a commercial bank or trust company having an office or
correspondent in the United States, or by any other "eligible guarantor
institution", as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing being referred to as an
"Eligible Institution"), unless (i) this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered hereby
and such holder(s) has (have) completed neither the box entitled "Special
Payment Instructions" nor the box entitled "Special Delivery Instructions" on
the reverse hereof or (ii) such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in Section 3 of the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or a confirmation of a book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility of all
Shares delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the reverse hereof prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase). If Share Certificates
are forwarded to the Depositary in multiple deliveries, a properly completed and
duly executed Letter of Transmittal must accompany each such delivery.
Stockholders whose Share Certificates are not immediately available, who cannot
deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described in Section 3 of the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Depositary within five New York
Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such
Notice of Guaranteed Delivery, all as described in Section 3 of the Offer to
Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. Partial Tenders (not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
<PAGE>
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
Stockholders delivering Shares tendered hereby by book-entry transfer may
request that Shares not purchased be credited to such account maintained at a
Book-Entry Transfer Facility as such stockholder may designate in the box
entitled "Special Payment Instructions" on the reverse hereof. If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.
8. Questions and Requests for Assistance or Additional Copies. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, the Supplements, this Letter
of Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
9. Substitute Form W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such stockholder. If the tendering stockholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such stockholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED, (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES
AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION
DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN), and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
Part I--Taxpayer Identification Number--
SUBSTITUTE For all accounts, enter taxpayer ________________________________
identification number in the box at right. Social Security Number
FORM W-9 (For most individuals, this is your social
security number. If you do not have a OR______________________________
DEPARTMENT OF THE number, see Obtaining a Number in the Employer Identification
TREASURY enclosed Guidelines.) Certify by signing Number
INTERNAL REVENUE and dating below.
SERVICE Note: If the account is in more than one (If awaiting TIN write
name, see the chart in the enclosed "Applied For")
Guidelines to determine which number to
give the payer.
Payer's Request for Part II--For Payees Exempt From Backup Withholding,
Taxpayer Identification see the enclosed Guidelines and complete as
Number (TIN) instructed therein.
</TABLE>
Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject
to backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
Certificate Instructions--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
SIGNATURE DATE ,199
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
The Information Agent for the Offer is:
[GEORGESON LOGO]
Wall Street Plaza
New York, New York 10005 Bankers and Brokers call
(212) 509-6240 (collect) (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
SMITH BARNEY SHEARSON INC.
1345 Avenue of the Americas
48th Floor
New York, NY 10105
(212) 698-8455
January 18, 1994
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
PARAMOUNT COMMUNICATIONS INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of Common Stock, par value $1.00 per
share (the "Shares"), of Paramount Communications Inc., a Delaware corporation
(the "Company"), are not immediately available, (ii) if Share Certificates and
all other required documents cannot be delivered to First Chicago Trust Company
of New York, as Depositary (the "Depositary"), prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase (as defined below)) or (iii) if
the procedure for delivery by book-entry transfer cannot be completed on a
timely basis. This Notice of Guaranteed Delivery may be delivered by hand or
mail or transmitted by telegram or facsimile transmission to the Depositary. See
Section 3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Facsimile
By Mail: Transmission: By Hand or Overnight Courier:
P.O. Box 2562 (201) 222-4720 14 Wall Street,
Suite Box 4660 or 8th Floor
Jersey City, New Jersey (201) 222-4721 Suite 4680
07303-2562 Confirm by Telephone: New York, New York 10005
(201) 222-4707
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above, or transmission of instructions via facsimile transmission
other than as set forth above, will not constitute a valid delivery.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to Viacom Inc., a Delaware corporation, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
October 25, 1993 (the "Offer to Purchase"), as amended and supplemented by the
Supplement thereto dated November 8, 1993 (the "First Supplement"), the Second
Supplement thereto dated January 7, 1994 (the "Second Supplement") and the Third
Supplement thereto dated January 18, 1994 (the "Third Supplement; together with
the First Supplement and the Second Supplement, the "Supplements"), and the
related Letters of Transmittal (which together constitute the "Offer"), receipt
of each of which is hereby acknowledged, the number of Shares specified below
pursuant to the guaranteed delivery procedure described in Section 3 of the
Offer to Purchase.
Number of Shares: ____________________ _______________________________
_______________________________
Signature(s) of Holder(s)
Certificate Nos. (If Available):
Dated: ____________________________, 1994
Name(s) of Holders:
_______________________________
_______________________________
Please Type or Print
Check one box if Shares will be
delivered by book-entry transfer:
_______________________________
Address
/ / The Depository Trust Company
/ / Midwest Securities Trust Company _______________________________
Zip Code
/ / Philadelphia Depository Trust Company
Account No. _________________________ _______________________________
Area Code and Telephone No.
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc. or which is a commercial bank or trust company having an office or
correspondent in the United States, guarantees to deliver to the
Depositary, at one of its addresses set forth above, Share Certificates
evidencing the Shares tendered hereby, in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company, the Midwest Securities Trust
Company or the Philadelphia Depository Trust Company, in each case with
delivery of a Letter of Transmittal (or facsimile thereof) properly
completed and duly executed, and any other required documents, all within
five New York Stock Exchange, Inc. trading days of the date hereof.
_______________________________ _______________________________
Name of Firm Authorized Signature
_______________________________ _______________________________
Address Title
_______________________________ Name:__________________________
Zip Code Please Type or Print
_______________________________ Dated:___________________, 199_
Area Code and Telephone No.
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER
OF TRANSMITTAL.
VIACOM INC.
HAS INCREASED THE PRICE OF ITS
OFFER TO PURCHASE FOR CASH
61,657,432 SHARES OF COMMON STOCK
OF
PARAMOUNT COMMUNICATIONS INC.
TO
$107 NET PER SHARE
THE OFFER HAS BEEN EXTENDED. THE OFFER, PRORATION PERIOD AND WITHDRAWAL
RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY,
JANUARY 31, 1994, UNLESS THE OFFER IS FURTHER EXTENDED.
January 18, 1994
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Viacom Inc., a Delaware corporation
("Purchaser"), to act as Dealer Manager in connection with Purchaser's offer to
purchase 61,657,432 shares of Common Stock, par value $1.00 per share (the
"Shares"), of Paramount Communications Inc., a Delaware corporation (the
"Company"), or such greater number of Shares as equals 50.1% of the Shares
outstanding plus the Shares issuable upon the exercise of the then exercisable
stock options, as of the expiration of the Offer, at a price of $107 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in Purchaser's Offer to Purchase dated October 25, 1993 (the "Offer to
Purchase"), as amended and supplemented by the Supplement thereto dated November
8, 1993 (the "First Supplement"), the Second Supplement thereto dated January 7,
1994, and the Third Supplement thereto dated January 18, 1994 (the "Third
Supplement"; and together with the First Supplement and the Second Supplement,
the "Supplements") and in the related Letters of Transmittal (which together
constitute the "Offer"). Please furnish copies of the enclosed materials to
those of your clients for whose accounts you hold Shares registered in your name
or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, 61,657,432 SHARES, OR
SUCH GREATER NUMBER OF SHARES AS EQUALS 50.1% OF THE SHARES OUTSTANDING PLUS THE
SHARES ISSUABLE UPON THE EXERCISE OF THE THEN EXERCISABLE STOCK OPTIONS, AS OF
THE EXPIRATION OF THE OFFER, BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO
THE EXPIRATION OF THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS.
Enclosed for your information and use are copies of the following
documents:
1. The Third Supplement, dated January 18, 1994;
2. The revised (Orange) Letter of Transmittal to be used by holders of
Shares in accepting the Offer and tendering Shares;
3. The revised (Yellow) Notice of Guaranteed Delivery to be used to accept
the Offer if the Shares and all other required documents are not immediately
available or cannot be delivered to First Chicago Trust Company of New York (the
"Depositary") by the Expiration Date (as defined in the Third Supplement) or if
the procedure for book-entry transfer cannot be completed by the Expiration
Date;
4. A revised letter which may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
<PAGE>
6. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER HAS
BEEN EXTENDED. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL
RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 31,
1994, UNLESS THE OFFER IS FURTHER EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates
evidencing such Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or
facsimile thereof) properly completed and duly executed and any other required
documents in accordance with the instructions contained in the Letter of
Transmittal.
Tendering shareholders may use the revised (Orange) Letter of Transmittal
provided herewith or the previously circulated (Orange), (Yellow) or (Green)
Letters of Transmittal provided with the Offer to Purchase, the First Supplement
and the Second Supplement to tender Shares. If you or your clients have
previously tendered (and not withdrawn) Shares, no further action is necessary
in order to tender such Shares.
If a holder of Shares desires to tender Shares, but cannot deliver such
holder's certificates or other required documents, or cannot comply with the
procedure for book-entry transfer, prior to the expiration of the Offer, a
tender of Shares may be effected by following the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the Information
Agent as described in the Offer) in connection with the solicitation of tenders
of Shares pursuant to the Offer. However, Purchaser will reimburse you, upon
request, for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. Purchaser will pay or
cause to be paid any stock transfer taxes payable with respect to the transfer
of Shares to it, except as otherwise provided in Instruction 6 of the revised
(Orange) Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Smith Barney Shearson Inc. or Georgeson & Company Inc. (the "Information Agent")
at their respective addresses and telephone numbers set forth on the back cover
page of the Third Supplement.
Additional copies of the enclosed material may be obtained from the
Information Agent at the address and telephone numbers set forth on the back
cover page of the Third Supplement.
Very truly yours,
SMITH BARNEY SHEARSON INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PURCHASER, THE DEALER MANAGER, THE INFORMATION
AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY
OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
VIACOM INC.
HAS INCREASED THE PRICE OF ITS
OFFER TO PURCHASE FOR CASH
61,657,432 SHARES OF COMMON STOCK
OF
PARAMOUNT COMMUNICATIONS INC.
TO
$107 NET PER SHARE
THE OFFER HAS BEEN EXTENDED. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 31, 1994,
UNLESS THE OFFER IS FURTHER EXTENDED.
To Our Clients:
Enclosed for your consideration is a Third Supplement dated January 18,
1994 (the "Third Supplement") to the Offer to Purchase dated October 25, 1993
(the "Offer to Purchase") as supplemented by the Supplement thereto dated
November 8, 1993 (the "First Supplement") and the Second Supplement thereto
dated January 7, 1994 (the "Second Supplement"; and together with the First
Supplement and the Third Supplement, the "Supplements") and the revised (Orange)
Letter of Transmittal in connection with the offer by Viacom Inc., a Delaware
corporation ("Purchaser"), to purchase 61,657,432 shares of Common Stock, par
value $1.00 per share (the "Shares"), of Paramount Communications Inc., a
Delaware corporation (the "Company"), or such greater number of Shares as equals
50.1% of the Shares outstanding plus the Shares issuable upon the exercise of
the then exercisable stock options, as of the expiration of the Offer, at a
price of $107 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, as amended and
supplemented by the Supplements, and in the related Letters of Transmittal
(which together constitute the "Offer"). We are the holder of record of Shares
held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS
THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE REVISED (ORANGE)
LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT
BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. IF YOU HAVE ALREADY
INSTRUCTED US TO TENDER YOUR SHARES PURSUANT TO THE OFFER, IT IS NOT NECESSARY
FOR YOU TO TAKE ANY FURTHER ACTION IN ORDER TO RECEIVE THE INCREASED TENDER
PRICE OF $107 PER SHARE.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $107 per Share, net to the seller in cash.
2. The Offer is being made for 61,657,432 Shares, or such greater
number of Shares as equals 50.1% of the Shares outstanding plus the Shares
issuable upon the exercise of the then exercisable stock options, as of the
expiration of the Offer. If more than 61,657,432 Shares, or such greater
number of Shares as equals 50.1% of the Shares outstanding plus the Shares
issuable upon the exercise of the then exercisable stock options, as of the
expiration of the Offer, are validly tendered prior to the Expiration Date
(as defined in the Offer to Purchase) and not withdrawn, Purchaser will,
upon the terms and subject to the conditions of the Offer, accept such
Shares for payment on a pro rata basis, with adjustments to avoid purchases
of fractional shares, based upon the number of Shares validly tendered
prior to the Expiration Date and not withdrawn.
3. The Offer has been extended. The Offer, proration period and
withdrawal rights will expire at 12:00 Midnight, New York City time, on
Monday, January 31, 1994, unless the Offer is further extended.
<PAGE>
4. The Offer is conditioned upon, among other things, 61,657,432
Shares, or such greater number of Shares as equals 50.1% of the Shares
outstanding plus the Shares issuable upon the exercise of the then
exercisable stock options, as of the expiration of the Offer, being validly
tendered and not withdrawn prior to the expiration of the Offer.
5. If the Offer is consummated, Purchaser intends to effectuate a
second-step merger pursuant to which each Share outstanding at the
effective time of such merger would be cancelled and converted into the
right to receive (i) .93065 shares of Class B Common Stock, par value $.01
per share, of Purchaser ("Viacom Class B Common Stock"), (ii) .30408 shares
of a new series of cumulative convertible exchangeable preferred stock, par
value $.01 per share, of Purchaser, (iii) .93065 contingent value rights
issued by Purchaser and (iv) .50 of a warrant to purchase one share of
Viacom Class B Common Stock, each as more fully described in the Third
Supplement.
6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
revised (Orange) Letter of Transmittal, stock transfer taxes with respect
to the purchase of Shares by Purchaser pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. Your instructions
should be forwarded to us in ample time to permit us to submit a tender on your
behalf prior to the expiration of the Offer. The Letters of Transmittal are
furnished to you for your information only and cannot be used by you to tender
Shares held by us for your account.
The Offer is made solely by the Offer to Purchase, the Supplements and the
related Letters of Transmittal and is being made to all holders of Shares.
Purchaser is not aware of any state where the making of the Offer is prohibited
by administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Smith Barney Shearson
Inc. or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
61,657,432 SHARES OF COMMON STOCK
OF
PARAMOUNT COMMUNICATIONS INC.
The undersigned acknowledge(s) receipt of your letter enclosing the
Third Supplement dated January 18, 1994 to the Offer to Purchase dated October
25, 1993 as supplemented by the Supplement thereto dated November 8, 1993, the
Second Supplement thereto dated January 7, 1994, and the revised (Orange) Letter
of Transmittal (which together constitute the "Offer") in connection with the
offer by Viacom Inc., a Delaware corporation, to purchase 61,657,432 shares of
Common Stock, par value $1.00 per share (the "Shares"), of Paramount
Communications Inc., a Delaware corporation, or such greater number of Shares as
equals 50.1% of the Shares outstanding plus the Shares issuable upon the
exercise of the then exercisable stock options, as of the expiration of the
Offer.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
NUMBER OF SHARES TO BE TENDERED: SIGN HERE
SHARES*
------------------------- -----------------------------
-----------------------------
Signature(s)
Dated:________ , 199_
-----------------------------
-----------------------------
Please type or print name(s)
-----------------------------
-----------------------------
Please type or print address
-----------------------------
Area Code and Telephone Number
-----------------------------
Taxpayer Identification or
Social Security Number
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
VIACOM INC.
HAS INCREASED THE PRICE OF ITS
OFFER TO PURCHASE FOR CASH
61,657,432 SHARES OF COMMON STOCK
OF
PARAMOUNT COMMUNICATIONS INC.
TO
$107 NET PER SHARE
THE OFFER HAS BEEN EXTENDED. THE OFFER, PRORATION PERIOD AND WITHDRAWAL
RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY,
JANUARY 31, 1994, UNLESS THE OFFER IS FURTHER EXTENDED.
January 18, 1994
To Participants in the Dividend Reinvestment Plan of Paramount Communications
Inc.:
Enclosed for your consideration is a Third Supplement dated January 18,
1994 (the "Third Supplement") to the Offer to Purchase dated October 25, 1993
(the "Offer to Purchase") as supplemented by the Supplement thereto dated
November 8, 1993 (the "First Supplement") and the Second Supplement thereto
dated January 7, 1994 (the "Second Supplement," together with the First
Supplement and the Third Supplement, the "Supplements") and a revised (Orange)
Letter of Transmittal in connection with the offer by Viacom Inc., a Delaware
corporation ("Purchaser"), to purchase 61,657,432 shares of Common Stock, par
value $1.00 per share (the "Shares"), of Paramount Communications Inc., a
Delaware corporation (the "Company"), or such greater number of Shares as equals
50.1% of the Shares outstanding plus the Shares issuable upon the exercise of
the then exercisable stock options, as of the expiration of the Offer, at a
price of $107 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, as amended and
supplemented by the Supplements, and in the related Letters of Transmittal
(which together constitute the "Offer"). Our nominee is the holder of record of
Shares held for your account as a participant in the Dividend Reinvestment Plan
of the Company (the "Plan"). A tender of such Shares can be made only by us
through our nominee as the holder of record and pursuant to your instructions.
The revised (Orange) Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Shares held in your Plan
account. If you have already instructed us to tender your Shares pursuant to the
Offer, it is not necessary for you to take any further action in order to
receive the increased tender price of $107 per Share.
We request instructions as to whether you wish to have us instruct our
nominee to tender on your behalf any or all of the Shares held in your Plan
account, upon the terms and subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $107 per Share, net to the seller in cash.
2. The Offer is being made for 61,657,432 Shares, or such greater
number of Shares as equals 50.1% of the Shares outstanding plus the Shares
issuable upon the exercise of the then exercisable stock options, as of the
expiration of the Offer. If more than 61,657,432 Shares, or such greater
number of Shares as equals 50.1% of the Shares outstanding plus the Shares
issuable upon the exercise of the then exercisable stock options, as of the
expiration of the Offer, are validly tendered prior to the Expiration Date
(as defined in the Offer to Purchase) and not withdrawn, Purchaser will,
upon the terms and subject to the conditions of the Offer, accept such
Shares for payment on a pro rata basis, with adjustments to avoid purchases
of fractional Shares, based upon the number of Shares validly tendered
prior to the Expiration Date and not withdrawn.
<PAGE>
3. The Offer has been extended. The Offer, proration period and
withdrawal rights will expire at 12:00 Midnight, New York City time, on
Monday, January 31, 1994, unless the Offer is further extended.
4. The Offer is conditioned upon, among other things, 61,657,432
Shares, or such greater number of Shares as equals 50.1% of the Shares
outstanding plus the Shares issuable upon the exercise of the then
exercisable stock options, as of the expiration of the Offer, being validly
tendered and not withdrawn prior to the expiration of the Offer.
5. If the Offer is consummated, Purchaser intends to effectuate a
second-step merger pursuant to which each Share outstanding at the
effective time of such merger would be cancelled and converted into the
right to receive (i) .93065 shares of Class B Common Stock, par value $.01
per share, of Purchaser ("Viacom Class B Common Stock"), (ii) .30408 shares
of a new series of cumulative convertible exchangeable preferred stock, par
value $.01 per share, of Purchaser, (iii) .93065 contingent value rights
issued by Purchaser and (iv) .50 of a warrant to purchase one share of
Viacom Class B Common Stock, each as more fully described in the Third
Supplement.
6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
revised (Orange) Letter of Transmittal, stock transfer taxes with respect
to the purchase of Shares by Purchaser pursuant to the Offer. The Letters
of Transmittal are furnished to you for your information only and cannot be
used by you to tender Shares held by us for your account.
If you wish to have us tender any or all of the Shares held in your Plan
account, please so instruct us by completing, executing and returning to us the
instruction form contained in this letter BY 5:00 P.M., NEW YORK CITY TIME, ON
WEDNESDAY, JANUARY 26, 1994, UNLESS THE OFFER IS FURTHER EXTENDED. An envelope
in which to return your instructions to us is enclosed. If you authorize tender
of such Shares, all such Shares will be tendered unless otherwise specified in
your instructions. Your instructions should be forwarded to us in ample time to
permit us to instruct our nominee to submit a tender on your behalf prior to the
expiration of the Offer.
The Offer is made solely by the Offer to Purchase, the Supplements and the
Letters of Transmittal and is being made to all holders of Shares. Purchaser is
not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Smith Barney Shearson
Inc. or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
Very truly yours,
CHEMICAL BANK
Plan Administrator
<PAGE>
PAYER'S NAME: CHEMICAL BANK
<TABLE>
<S> <C> <C>
Part I--Taxpayer Identification Number--
SUBSTITUTE For all accounts, enter taxpayer ________________________________
identification number in the box at right. Social Security Number
FORM W-9 (For most individuals, this is your social
security number. If you do not have a OR______________________________
DEPARTMENT OF THE number, see Obtaining a Number in the Employer Identification
TREASURY enclosed Guidelines.) Certify by signing Number
INTERNAL REVENUE and dating below.
SERVICE Note: If the account is in more than one (If awaiting TIN write
name, see the chart in the enclosed "Applied For")
Guidelines to determine which number to
give the payer.
Payer's Request for Part II--For Payees Exempt From Backup Withholding,
Taxpayer Identification see the enclosed Guidelines and complete as
Number (TIN) instructed therein.
</TABLE>
Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject
to backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
Certificate Instructions--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
SIGNATURE DATE , 199
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
61,657,432 SHARES OF COMMON STOCK
OF
PARAMOUNT COMMUNICATIONS INC.
The undersigned acknowledge(s) receipt of your letter enclosing the
Third Supplement dated January 18, 1994, to the Offer to Purchase dated October
25, 1993 as supplemented by the Supplement thereto dated November 8, 1993, the
Second Supplement thereto dated January 7, 1994, and the revised (Orange) Letter
of Transmittal (which together constitute the "Offer"), in connection with the
offer by Viacom Inc., a Delaware corporation, to purchase 61,657,432 shares of
Common Stock, par value $1.00 per share (the "Shares"), of Paramount
Communications Inc., a Delaware corporation, or such greater number of Shares as
equals 50.1% of the Shares oustanding plus the Shares issuable upon the exercise
of the then exercisable stock options, as of the expiration of the Offer. The
undersigned understand(s) that the Offer applies to Shares allocated to the
account of the undersigned in the Company's Dividend Reinvestment Plan (the
"Plan").
This will instruct you, as Dividend Reinvestment Agent, to instruct your
nominee to tender the number of Shares indicated below (or, if no number is
indicated below, all Shares) that are held for the Plan account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
NUMBER OF SHARES TO BE TENDERED: SIGN HERE
SHARES*
------------------------- -----------------------------
-----------------------------
Signature(s)
Dated:________ , 199_
-----------------------------
-----------------------------
Please type or print name(s)
-----------------------------
-----------------------------
Please type or print address
-----------------------------
Area Code and Telephone Number
-----------------------------
Taxpayer Identification or
Social Security Number
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares in your Plan
account are to be tendered.
VIACOM RAISES BID FOR PARAMOUNT TO $10.5 BILLION
-- Viacom raises cash portion of bid to $107 per share and
greatly increases the value delivered to Paramount stockholders by providing
warrants and increasing the certainty of Paramount stockholders receiving a
minimum of $48 per share of Viacom B Stock through issuance of contingent
value rights --
New York, New York, January 18, 1994 -- Viacom Inc. (ASE: VIA and VIAB) today
announced that it has substantially increased its offer for Paramount
Communications Inc. (NYSE: PCI) by increasing to $107.00 per share the amount
to be offered in its tender offer for 50.1% of the fully diluted Paramount
common shares. Viacom has also increased the certainty of a minimum value of
$48.00 per share for the Viacom Class B Common Stock to be issued in its
second-step merger by issuing contingent value rights. Viacom also added to
its bid three-year warrants to acquire approximately 30.7 million Viacom Class
B Common shares at $60.00 per share.
Viacom said that its revised bid represents an increase of more than $800
million in value over its January 7, 1994 proposal to approximately $10.5
billion. Viacom said that the combination of Paramount, Viacom and Blockbuster
is the best way to create sufficient value to justify consideration at the
level it now proposes to deliver to the Paramount stockholders and that its
offer is at the highest level that it believes would be in the interests of
not only the Paramount stockholders, but the stockholders of Blockbuster and
Viacom.
- more -
<PAGE>
-2-
Viacom stated that its revised tender offer represents an increase of more
than $120 million in cash over its previous offer and includes in excess of
$900 million more in cash more than QVC's outstanding offer of $92.00 per
share.
Viacom's offer contemplates the execution of a definitive merger agreement
with Paramount providing for the conversion of each share of Paramount that is
not acquired pursuant to its tender offer into an improved package of
securities. The consideration for the Paramount shares to be acquired in the
merger has been increased by approximately $700 million in the aggregate and
is now substantially more certain. The merger consideration would consist of
0.93065 of a share of Viacom Class B Common Stock, 0.30408 of a share of
Viacom Merger Preferred Stock, 0.93065 of a contingent value right (CVR) and
0.5 of a three-year warrant to purchase an additional share of Viacom Class B
Common Stock at $60.00 per share in exchange for each share of Paramount
common stock to be acquired in the merger.
Each CVR will represent the right, on the first anniversary of the proposed
merger, to receive the amount by which the Average Trading Value of Viacom
Class B Common Stock, in the range of $38.00 to $48.00 per share, is less than
a minimum price of $48.00 per share. Viacom will have the right, in its sole
discretion, to extend the payment and measurement dates of the CVR by one year,
in which case the minimum price will increase to $51.00 per share; and a right
to extend such dates for one further year which, if exercised, would increase
the minimum price to $55.00 per share. The Average Trading Value will be based
upon market prices during the 60 trading days ending on the last day of the
relevant period. Each warrant will represent the right to acquire, at any
time prior to the third anniversary of the merger, one share of Viacom Class B
Common Stock at an exercise price of $60.00 per share.
- more -
<PAGE>
-3-
Viacom also announced that its tender offer would expire at 12:00 midnight,
New York City time, on January 31, 1994. Viacom said that the bidding
procedures established by the Paramount Board of Directors and upon which QVC
and Viacom have agreed require QVC to extend its tender offer to the same
expiration time.
Viacom said that 2,018,944 shares had been tendered into its offer as of the
close of business on Friday, January 14, 1994, including 161,352 shares which
had been tendered pursuant to notices of guaranteed delivery.
Smith Barney Shearson Inc. is acting as financial advisor to Viacom and is
also dealer manager in connection with the Offer, and Georgeson & Co. is
acting as information agent.
Simultaneous with its announcement, Viacom delivered a letter to the Board of
Directors of Paramount. A copy of the letter is attached to this press
release.
# # #
Contact: Viacom Inc. Edelman
Raymond A. Boyce Elliot Sloane
212/258-6530 212/704-8126
<PAGE>
January 18, 1994 VIACOM
The Board of Directors
Paramount Communications Inc.
15 Columbus Circle
New York, NY 10023-7780
Ladies and Gentlemen:
I am pleased to inform you that Viacom has today substantially increased its
offer for Paramount Communications Inc. by increasing to $107.00 per share the
amount to be offered in our tender offer for 50.1% of the fully diluted
Paramount common shares, increasing the certainty of a minimum value of $48.00
per share for the Viacom Class B Common Stock to be issued in the second-step
merger by issuing contingent value rights, and adding three-year warrants to
acquire approximately 30.7 million Viacom Class B Common shares at $60.00 per
share. Viacom's revised bid represents an increase of over $800 million in
value to approximately $10.5 billion and substantially increases the certainty
of the value to be received by Paramount stockholders.
Our tender offer now represents an increase of more than $120 million in cash
over our previous offer and includes in excess of $900 million more in cash
than QVC's offer of $92.00 per share.
Viacom's offer contemplates the execution of a definitive merger agreement with
Paramount providing for the conversion of each share of Paramount that is not
acquired pursuant to its tender offer into an improved package of securities.
The consideration for the Paramount shares to be acquired in the merger has
been increased by approximately $700 million in the aggregate and is now
substantially more certain. The merger consideration would consist of 0.93065
of a share of Viacom Class B Common Stock, 0.30408 of a share of Viacom Merger
Preferred Stock, 0.93065 of a contingent value right (CVR) and 0.5 of a warrant
to purchase an additional share of Viacom Class B Common Stock in exchange for
each share of Paramount common stock to be acquired in the merger.
<PAGE>
Paramount Communications Inc.
January 18, 1994
Page 2
Each CVR will represent the right, on the first anniversary of the proposed
merger, to receive, in cash or securities, the amount by which the Average
Trading Value of Viacom Class B Common Stock is less than a minimum price of
$48.00 per share. Viacom will have the right, in its sole discretion, to
extend the payment and measurement dates of the CVR by one year, in which case
the minimum price will increase to $51.00 per share, and a further one-year
extension right which, if exercised, would increase the minimum price to
$55.00 per share. The Average Trading Value will be based upon market prices
during the 60 trading days ending on the last day of the relevant period and
is subject to a floor of $38.00 per share. Each warrant will represent the
right to acquire, at any time prior to the third anniversary of the merger,
one share of Viacom Class B Common Stock at an exercise price of $60.00 per
share.
As required by law, we have extended our tender offer to expire at 12:00
midnight, New York Time, on January 31, 1994. We assume that QVC Network, Inc.
will comply with the agreed-upon bidding procedures and extend its tender offer
to the same expiration date.
The blended value of our new offer represents substantial value to Paramount
stockholders and is significantly more certain than the blended value of QVC's
offer. In comparing the value of the securities proposed to be issued in each
bidder's second-step merger, the Paramount Board of Directors should consider
the following factors:
* We have provided you with a great deal of information demonstrating the
value that will be created by combining Paramount's assets with those of
Viacom and Blockbuster Entertainment Corporation, and by aligning with NYNEX
Corporation. Through its enhanced presence in the entertainment business,
the combined company would ensure that it benefits from evolving technology
and other trends affecting the industry. The combined company would have
strong and diversified cash flows, deep management with a proven track
record of building and managing diversified public entertainment companies,
and the financial and operational resources to pursue numerous new
opportunities to extend existing businesses and brands. In contrast, QVC
securities offer Paramount stockholders little more than an opportunity to
continue to participate as holders of a smaller stake in Paramount
itself -- diminished by QVC's anticipated asset sales. We believe that the
-------------------
combination of Paramount, Viacom and Blockbuster is the best way to create
---------------------------------------------------------------------------
sufficient value to justify consideration at the level we now propose to
------------------------------------------------------------------------
deliver to the Paramount stockholders and that our offer is at the highest
-------------------------------------------------------------------------
level that we believe would be in the interests of not only the Paramount
-------------------------------------------------------------------------
stockholders, but the stockholders of Blockbuster and Viacom.
-------------------------------------------------------------
<PAGE>
Paramount Communications Inc.
January 18, 1994
Page 3
* The value of our overall package is now significantly more certain. It
has a substantially larger cash component than the QVC offer, all of which
will be paid in the first step. The issuance of the CVRs and warrants
addresses any concern about the value of Viacom's securities offered in
its second-step merger. Although Viacom continues to believe that it is
illogical to apply unadjusted, transaction-affected market prices in lieu
of careful financial analysis (particularly where the market prices reflect
as much the market's perception of which party will be the successful bidder
as its view of fully-distributed value), Viacom has now agreed to stand
behind its view of the value of the securities to be issued by Viacom in the
merger. In contrast, QVC's offer is substantially dependent upon the value
of QVC's securities after consummation of its offer and the depth of the
market for such securities. Moreover, we have further enhanced the value
of the securities included in our proposal by adding the warrants, which
provide Paramount stockholders with additional upside potential.
We are confident that Paramount stockholders, when presented with complete
facts, will support Viacom's new offer.
We are available to meet with you or your representatives at your earliest
convenience to discuss our revised offer and proposal.
Very truly yours,
VIACOM INC.
By /s/ Sumner M. Redstone
-----------------------
Sumner M. Redstone
cc: Peter Ezersky
Lazard Freres & Co.
Joel S. Hoffman
Simpson Thacher & Bartlett
Martin Lipton
Wachtell, Lipton, Rosen & Katz
SIMPSON THACHER & BARTLETT
(A PARTNERSHIP WHICH INCLUDES PROFESSIONAL CORPORATIONS)
January 13, 1994
Stephen R. Volk, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Martin Lipton, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Gentlemen:
In order to provide greater certainty and predictability for the benefit of
Paramount, its stockholders and each of QVC and Viacom with respect to the
conclusion of the bidding process, we have prepared certain clarifying
amendments to the Merger Agreement between Paramount and QVC and the Exemption
Agreement between Viacom and Paramount. We do not propose to change the
procedures but simply to address interpretive issues by clarifying or refining
the existing obligations of the parties. The amendments we propose are as
follows:
(i) The first amendment will make it clear that a bidder is not permitted
to change its proposal to acquire Paramount after February 1. Although we
believe that the "Offer" in the context of the bidding procedures contemplates
both the terms of the tender offer and the second-step merger consideration
offered by the bidders, in the absence of this amendment, it could be asserted
that changes in the proposed second-step merger consideration offered by a
bidder could be made subsequent to February 1, 1994. We believe that this
amendment accurately reflects the spirit and good faith intention of the parties
that any bid made on February 1, 1994 represent such bidder's highest and final
bid and that a bidder should not willfully take an action to cause its offer to
extend past February 14, 1994. Moreover, as you know, the substance of this
amendment was in the bidding procedures originally proposed by Paramount. To
implement this amendment, we are also proposing a technical conforming amendment
to the time period associated with amending the terms of the consideration to be
paid pursuant to the back-end merger;
(ii) The Merger Agreement should be revised to clarify that a bidder may
not revise the consideration offered in its proposed second-step merger with
Paramount primarily to extend the expiration date of the other bidder's offer
(this point is, of course, implicit in any contractual party's obligation of
good faith and fair dealing with respect to any contract);
<PAGE>
-2-
Stephen R. Volk, Esq. January 13, 1994
Martin Lipton, Esq.
(iii) In order to further ensure that the parties abide by the spirit
of the bidding procedures, we are also proposing that a bidder can neither seek
to amend the bidding procedures nor publicly announce an intention to either
take an action which is not otherwise permitted or refrain from taking an action
which is required, under the agreement applicable to such bidder (this point is
also implicit in a contractual party's obligation of good faith and fair dealing
with respect to any contract); and
(iv) In order to further provide for an orderly process and avoid
confusion, we also propose that any revision to a bidder's tender offer or
second-step merger consideration must be on file with the Securities and
Exchange Commission no later than 5:00 p.m. on the date the offer would
otherwise expire.
A form of amendment to each of the Merger Agreement and the Exemption
Agreement with our proposed revisions is attached for your review.
We would appreciate a prompt response to our proposals. Please feel free
to call us with any questions or comments you may have.
Sincerely,
/s/ Richard I. Beattie
Richard I. Beattie
Attachment
<PAGE>
SECOND AMENDMENT
SECOND AMENDMENT (this "Amendment"), dated as of January __, 1994, to
the Agreement and Plan of Merger, dated as of December 22, 1993 (the "Merger
Agreement"), between QVC Network, Inc., a Delaware corporation ("QVC"), and
Paramount Communications Inc., a Delaware corporation ("Paramount").
WITNESSETH:
WHEREAS, QVC and Paramount have agreed to amend certain provisions of
the Merger Agreement in the manner provided below;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
SECTION 1. Defined Terms. As used in this Amendment, terms defined in
-------------
the Merger Agreement are used herein as therein defined, unless otherwise
defined herein. Unless otherwise indicated, all Section and subsection
references are to the Merger Agreement.
SECTION 2. Amendments to Section 2.1(c). Section 2.1(c) is hereby
----------------------------
amended by deleting in the first sentence of the second paragraph thereof the
words "other than a change in the terms of the Offer" and by substituting, in
their place, the phrase "outside the control of QVC." Section 2.1(c) is also
amended by (i) inserting after the words "Common Stock payable in the Offer
or" in the last sentence thereof the phrase "the second-step merger to be
completed pursuant to this Agreement upon consummation of the Offer (the
"Second-Step Merger") or" and (ii) inserting after the words "otherwise amend
the Offer" in the last sentence thereof the phrase "or the terms of the
Second-Step Merger." Section 2.1(c) is further amended by adding at the end
thereof the following sentences:
"Any amendment to the Offer or any change in the consideration
offered to the Paramount stockholders in the Second-Step Merger that results
in an extension of the Expiration Date shall be on file with the SEC by 5:00
p.m. on the date of such amendment or change. QVC agrees that if, after
February 1, 1994, it changes the consideration offered to the Paramount
stockholders in the Second-Step Merger, in such a manner as to necessitate
the filing of an amendment to the Schedule 14D-1, then QVC shall be required
to extend its Offer for a period of not less than ten business days. QVC
hereby agrees that it shall neither seek to amend the bidding procedures nor
publicly announce an intention to take an action, which is not otherwise
permitted or refrain from taking an action which is required, under the terms
of this Agreement."
SECTION 3. Miscellaneous. Except as expressly amended herein, the
-------------
Merger Agreement shall continue to be, and shall remain, in full force and
effect in accordance with its terms. This Amendment may be executed by the
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
SECTION 4. Governing Law. Except to the extent that Delaware Law is
-------------
mandatorily applicable to the Merger and the rights of the stockholders of
Paramount and QVC, this Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law.
SECTION 5. Counterparts. This Amendment may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, QVC and Paramount have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
ATTEST: QVC NETWORK, INC.
By By
------------------------------ ------------------------------
ATTEST: PARAMOUNT COMMUNICATIONS INC.
By By
------------------------------ ------------------------------
<PAGE>
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of January _, 1994, to the
Exemption Agreement, dated as of December 22, 1993 (the "Exemption Agreement"),
between Viacom Inc., a Delaware corporation ("Viacom"), and Paramount
Communications Inc., a Delaware corporation ("Paramount").
WITNESSETH:
-----------
WHEREAS, Viacom and Paramount have agreed to amend certain provisions of
the Exemption Agreement in the manner provided below;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
SECTION 1. Defined Terms. As used in this Amendment, terms defined in the
--------------
Exemption Agreement are used herein as therein defined, unless otherwise defined
herein. Unless otherwise indicated, all Section and subsection references are
to the Exemption Agreement.
SECTION 2. Amendments to Section 2.01 (a). Clause (v) of Section 2.01(a)
-------------------------------
is hereby amended by deleting the words "other than a change in the terms of the
Offer" and by substituting, in their place, the phrase "outside the control of
the Offeror." Section 2.01(a) is also amended by (i) inserting after the words
"consideration of the Offer or" in the last sentence thereof the phrase "the
second-step merger as contemplated by the form of Merger Agreement attached as
Exhibit A hereto (the "Second-Step Merger") or" and (ii) inserting after the
words "otherwise amend the Offer" in the last sentence thereof the phrase "or
the terms of the Second-Step Merger." Section 2.01(a) is further amended by
adding at the end thereof the following sentences:
"Any amendment to the Offer or any change in the consideration offered to
the Paramount stockholders in the Second-Step Merger that results in an
extension of the Expiration Date shall be on file with the Securities and
Exchange Commission by 5:00 p.m. on the date of such amendment or change. The
Offeror agrees that if, after February 1, 1994, it changes the consideration
offered to the Paramount stockholders in the Second-Step Merger, in such a
manner as to necessitate the filing of an amendment to its Tender Offer
Statement on Schedule 14D-1, then the Offeror shall be required to extend its
Offer for a period of not less than ten business days. The Offeror hereby
agrees that it shall neither seek to amend the Bidding Procedures nor publicly
announce an intention to take an action, which is not otherwise permitted or
refrain from taking an action which is required, under the terms of this
Agreement."
SECTION 3. Miscellaneous. Except as expressly amended herein, the
-------------
Exemption Agreement shall continue to be, and shall remain, in full force and
effect in accordance with its terms. This Amendment may be executed by the
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
SECTION 4. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law, except to the extent that any provisions are governed by the federal
securities laws.
SECTION 5. Counterparts. This Amendment may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Viacom and Paramount have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
ATTEST: VIACOM INC.
By By
------------------------------ ------------------------------
ATTEST: PARAMOUNT COMMUNICATIONS INC.
By By
------------------------------ ------------------------------
January 18, 1994 VIACOM
The Board of Directors
Paramount Communications Inc.
15 Columbus Circle
New York, NY 10023-7780
Ladies and Gentlemen:
I am pleased to inform you that Viacom has today substantially increased its
offer for Paramount Communications Inc. by increasing to $107.00 per share the
amount to be offered in our tender offer for 50.1% of the fully diluted
Paramount common shares, increasing the certainty of a minimum value of $48.00
per share for the Viacom Class B Common Stock to be issued in the second-step
merger by issuing contingent value rights, and adding three-year warrants to
acquire approximately 30.7 million Viacom Class B Common shares at $60.00 per
share. Viacom's revised bid represents an increase of over $800 million in
value to approximately $10.5 billion and substantially increases the certainty
of the value to be received by Paramount stockholders.
Our tender offer now represents an increase of more than $120 million in cash
over our previous offer and includes in excess of $900 million more in cash
than QVC's offer of $92.00 per share.
Viacom's offer contemplates the execution of a definitive merger agreement with
Paramount providing for the conversion of each share of Paramount that is not
acquired pursuant to its tender offer into an improved package of securities.
The consideration for the Paramount shares to be acquired in the merger has
been increased by approximately $700 million in the aggregate and is now
substantially more certain. The merger consideration would consist of 0.93065
of a share of Viacom Class B Common Stock, 0.30408 of a share of Viacom Merger
Preferred Stock, 0.93065 of a contingent value right (CVR) and 0.5 of a warrant
to purchase an additional share of Viacom Class B Common Stock in exchange for
each share of Paramount common stock to be acquired in the merger.
<PAGE>
Paramount Communications Inc.
January 18, 1994
Page 2
Each CVR will represent the right, on the first anniversary of the proposed
merger, to receive, in cash or securities, the amount by which the Average
Trading Value of Viacom Class B Common Stock is less than a minimum price of
$48.00 per share. Viacom will have the right, in its sole discretion, to
extend the payment and measurement dates of the CVR by one year, in which case
the minimum price will increase to $51.00 per share, and a further one-year
extension right which, if exercised, would increase the minimum price to
$55.00 per share. The Average Trading Value will be based upon market prices
during the 60 trading days ending on the last day of the relevant period and
is subject to a floor of $38.00 per share. Each warrant will represent the
right to acquire, at any time prior to the third anniversary of the merger,
one share of Viacom Class B Common Stock at an exercise price of $60.00 per
share.
As required by law, we have extended our tender offer to expire at 12:00
midnight, New York Time, on January 31, 1994. We assume that QVC Network, Inc.
will comply with the agreed-upon bidding procedures and extend its tender offer
to the same expiration date.
The blended value of our new offer represents substantial value to Paramount
stockholders and is significantly more certain than the blended value of QVC's
offer. In comparing the value of the securities proposed to be issued in each
bidder's second-step merger, the Paramount Board of Directors should consider
the following factors:
* We have provided you with a great deal of information demonstrating the
value that will be created by combining Paramount's assets with those of
Viacom and Blockbuster Entertainment Corporation, and by aligning with NYNEX
Corporation. Through its enhanced presence in the entertainment business,
the combined company would ensure that it benefits from evolving technology
and other trends affecting the industry. The combined company would have
strong and diversified cash flows, deep management with a proven track
record of building and managing diversified public entertainment companies,
and the financial and operational resources to pursue numerous new
opportunities to extend existing businesses and brands. In contrast, QVC
securities offer Paramount stockholders little more than an opportunity to
continue to participate as holders of a smaller stake in Paramount
itself -- diminished by QVC's anticipated asset sales. We believe that the
-------------------
combination of Paramount, Viacom and Blockbuster is the best way to create
---------------------------------------------------------------------------
sufficient value to justify consideration at the level we now propose to
------------------------------------------------------------------------
deliver to the Paramount stockholders and that our offer is at the highest
-------------------------------------------------------------------------
level that we believe would be in the interests of not only the Paramount
-------------------------------------------------------------------------
stockholders, but the stockholders of Blockbuster and Viacom.
-------------------------------------------------------------
<PAGE>
Paramount Communications Inc.
January 18, 1994
Page 3
* The value of our overall package is now significantly more certain. It
has a substantially larger cash component than the QVC offer, all of which
will be paid in the first step. The issuance of the CVRs and warrants
addresses any concern about the value of Viacom's securities offered in
its second-step merger. Although Viacom continues to believe that it is
illogical to apply unadjusted, transaction-affected market prices in lieu
of careful financial analysis (particularly where the market prices reflect
as much the market's perception of which party will be the successful bidder
as its view of fully-distributed value), Viacom has now agreed to stand
behind its view of the value of the securities to be issued by Viacom in the
merger. In contrast, QVC's offer is substantially dependent upon the value
of QVC's securities after consummation of its offer and the depth of the
market for such securities. Moreover, we have further enhanced the value
of the securities included in our proposal by adding the warrants, which
provide Paramount stockholders with additional upside potential.
We are confident that Paramount stockholders, when presented with complete
facts, will support Viacom's new offer.
We are available to meet with you or your representatives at your earliest
convenience to discuss our revised offer and proposal.
Very truly yours,
VIACOM INC.
By /s/ Sumner M. Redstone
-----------------------
Sumner M. Redstone
cc: Peter Ezersky
Lazard Freres & Co.
Joel S. Hoffman
Simpson Thacher & Bartlett
Martin Lipton
Wachtell, Lipton, Rosen & Katz
