SEC Filing | Paramount

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 13E-3
( SEC. 240.13E-3) THEREUNDER)

(AMENDMENT NO. 1)

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PARAMOUNT COMMUNICATIONS INC.
(Name of the Issuer)

SUMNER M. REDSTONE
NATIONAL AMUSEMENTS, INC.
VIACOM INC.
PARAMOUNT COMMUNICATIONS INC.
(Name of Person(s) Filing Statement)

COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)

699216 10 7
(CUSIP Number of Class of Securities)

PHILIPPE P. DAUMAN, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL,
CHIEF ADMINISTRATIVE OFFICER AND SECRETARY
VIACOM INTERNATIONAL 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 Persons(s) Filing Statement)
with copies to:

PHILLIP L. JACKSON, ESQ.
CREIGHTON O'M. CONDON, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 848-4000

This statement is filed in connection with (check the appropriate box):

a. /X/ The filing of solicitation materials or an information statement subject to Regulation 14A
[17 CFR 240.14a-1 to 240.14b-1], Regulation 14C [17 CFR 240.14c-1 to 240.14c-101] or
Rule 13e-3(c) [ Sec. 240.13e-3(c)] under the Securities Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. / / A tender offer.
d. / / None of the above.

Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: X

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INTRODUCTION

This Amendment No. 1 to the Rule 13e-3 Transaction Statement (this
"Statement") made by Sumner M. Redstone, individually, National Amusements,
Inc., a Maryland corporation ("NAI"), Viacom Inc., a Delaware corporation
("Viacom"), and Paramount Communications Inc., a Delaware corporation (the
"Issuer"), amends and restates in its entirety the Rule 13e-3 Transaction
Statement filed by such parties with the Securities and Exchange Commission on
April 15, 1994, and relates to the filing with the Securities and Exchange
Commission on the date hereof of a preliminary Joint Proxy Statement/Prospectus
(the "Proxy Statement/Prospectus") and related soliciation materials by Viacom
and the Issuer, a copy of which is filed as Exhibit (d)(1) hereto.

The following cross reference sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location, in the Proxy
Statement/Prospectus, of the information required to be included in response to
the items of this Statement. The information in the Proxy Statement/Prospectus,
including all annexes thereto, is hereby expressly incorporated herein by
reference and the responses to each item are qualified in their entirety by the
provisions of the Proxy Statement/Prospectus.

CROSS REFERENCE SHEET

ITEM IN WHERE LOCATED IN
SCHEDULE 13E-3 PROXY STATEMENT/PROSPECTUS
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Item 1(a)........................... *
Item 1(b)........................... *
Item 1(c)........................... "Available Information"; "Summary--Comparative Stock Prices"
Item 1(d)........................... "Summary--Selected Historical Consolidated Financial Data of Paramount";
"Financial Matters After the Mergers--Common Stock Dividend Policy After
the Paramount Merger and the Mergers"
Item 1(e)........................... *
Item 1(f)........................... "Summary--Comparative Stock Prices"; "Transactions by Certain Persons in
Paramount Common Stock"
Item 2.............................. "Business"
Item 3(a)(1)........................ "Special Factors--Background of the Paramount Merger"; "The Paramount
Merger--The Offer"
Item 3(a)(2)........................ "Special Factors--Background of the Paramount Merger"; "Special
Factors--Paramount Voting Agreement"; "The Paramount Merger--The Offer";
"Certain Provisions of the Paramount Merger Agreement"
Item 3(b)........................... "Special Factors--Background of the Paramount Merger"; "Special
Factors--Paramount Voting Agreement"; "The Paramount Merger--The Offer";
"Certain Provisions of the Paramount Merger Agreement"
Item 4(a)........................... "The Meetings"; "The Paramount Merger"; "Certain Provisions of the
Paramount Merger Agreement"; "Special Factors-- Paramount Voting
Agreement"
Item 4(b)........................... "The Paramount Merger--Effect on Employee Benefit Stock Plans"
Item 5(a)-(g)....................... "Special Factors--Certain Effects of the Paramount Merger; Operations After
the Paramount Merger"; "Management Before and After the
Mergers--Management After the Mergers"; "Financial Matters After the
Mergers--Common Stock Dividend Policy After the Paramount Merger and the
Mergers"; "Financing of the Offer"
Item 6(a)........................... "The Paramount Merger--Paramount Merger Consideration"; "Financing of the
Offer"
Item 6(b)........................... "The Paramount Merger--Expenses of the Transaction"
Item 6(c)........................... "Financing of the Offer"
Item 6(d)........................... *
Item 7(a)........................... "Special Factors--Background of the Paramount Merger"; "Special
Factors--Reasons for the Paramount Merger; Recommendations of the Board
of Directors; Fairness of the Transaction"; "Special Factors--Purpose and
Structure of the Paramount Merger"
Item 7(b)........................... "Special Factors--Background of the Paramount Merger"
Item 7(c)........................... "Special Factors--Background of the Paramount Merger"; "Special
Factors--Reasons for the Paramount Merger; Recommendations of the Board
of Directors; Fairness of the Transaction"; "Special Factors--Purpose and
Structure of the Paramount Merger"
Item 7(d)........................... "Special Factors--Background of the Paramount Merger"; "Special
Factors--Certain Effects of the Paramount Merger; Operations After the
Paramount Merger"; "Special Factors-- Certain Federal Income Tax
Consequences"; "The Paramount Merger--Paramount Merger Consideration";
"Financial Matters After the Mergers" "Special Factors--Interests of
Certain Persons in the Paramount Merger"

ITEM IN WHERE LOCATED IN
SCHEDULE 13E-3 PROXY STATEMENT/PROSPECTUS
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Item 8(a)........................... "Special Factors--Background of the Paramount Merger"; "Special
Factors--Reasons for the Paramount Merger; Recommendations of the Board
of Directors; Fairness of the Transaction"
Item 8(b)........................... "Special Factors--Background of the Paramount Merger"; "Special
Factors--Reasons for the Paramount Merger; Recommendations of the Board
of Directors; Fairness of the Transaction"; "Special Factors--Purpose and
Structure of the Paramount Merger"; "Special Factors--Opinions of the
Financial Advisors"
Item 8(c)........................... *
Item 8(d)........................... *
Item 8(e)........................... "Special Factors--Reasons for the Paramount Merger; Recommendations of the
Board of Directors; Fairness of the Transaction"
Item 8(f)........................... "Special Factors--Background of the Paramount Merger"; "Special
Factors--Reasons for the Paramount Merger; Recommendations of the Board
of Directors; Fairness of the Transaction"
Item 9(a-c)......................... "Special Factors--Background of the Paramount Merger"; "Special
Factors--Opinions of the Financial Advisors"
Item 10(a).......................... "Security Ownership of Certain Beneficial Owners and Management"
Item 10(b).......................... "Transactions by Certain Persons in Paramount Common Stock"
Item 11............................. "Special Factors--Paramount Voting Agreement"; "Other Matters--Regulatory
Approvals Required"; "The Paramount Merger"; "Certain Provisions of the
Paramount Merger Agreement"
Item 12(a).......................... "Special Factors--Reasons for the Paramount Merger; Recommendations of the
Board of Directors; Fairness of the Transaction"
Item 12(b).......................... "Special Factors--Reasons for the Paramount Merger; Recommendations of the
Board of Directors; Fairness of the Transaction"
Item 13(a).......................... "The Meetings--Appraisal Rights"; "Dissenting Stockholders' Rights of
Appraisal"
Item 13(b).......................... *
Item 13(c).......................... "The Paramount Merger--Stock Exchange Listing"
Item 14(a)(1)....................... "Selected Financial Data of Paramount"
Item 14(a)(2)....................... "Selected Financial Data of Paramount"
Item 14(a)(3)....................... "Selected Financial Data of Paramount"
Item 14(a)(4)....................... "Selected Financial Data of Paramount"
Item 14(b).......................... *
Item 15(a).......................... "The Meetings--Solicitation of Proxies"; "Special Factors-- Opinions of
Financial Advisors"; "Management Before and After the Mergers"
Item 15(b).......................... "The Meetings--Solicitation of Proxies"; "Special Factors-- Opinions of
Financial Advisors"; "Management Before and After the Mergers"
Item 16............................. *
Item 17............................. *

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* Not applicable, or the answer thereto is in the negative.

ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION

(a) This Statement relates to a class of equity securities of the Issuer. The Issuer's principal
executive offices are located at 15 Columbus Circle, New York, New York 10023-7780.
(b) This Statement relates to the Common Stock, par value $1.00 per share (the "Common Stock"), of
the Issuer. As of May 23, 1994, there were 122,792,910 shares of Common Stock issued and
outstanding, of which 61,135,478 were not owned by Viacom. As of March 31, 1994, there were
approximately 24,687 holders of Common Stock of record.
(c) The information concerning the principal market in which the shares of Common Stock are traded
and certain high and low closing prices for such shares in such principal market set forth
under the captions "Available Information" and "Summary--Comparative Stock Prices" of the
Proxy Statement/Prospectus is incorporated herein by reference.
(d) The relevant information set forth under the captions "Summary--Selected Historical
Consolidated Financial Data of Paramount" and "Financial Matters After the Mergers--Common
Stock Dividend Policy After the Paramount Merger and the Mergers" of the Proxy
Statement/Prospectus is incorporated herein by reference.
(e) Not applicable.
(f) The relevant information set forth under the captions "Summary--Comparative Stock Prices" and
"Transactions by Certain Persons in Paramount Common Stock" of the Proxy Statement/Prospectus
is incorporated herein by reference.

ITEM 2. IDENTITY AND BACKGROUND

(a)-(d) and (g) This Statement is being filed by Sumner M. Redstone, National Amusements, Inc., a Maryland
corporation, Viacom Inc., a Delaware corporation, and the Issuer. Sumner M. Redstone's, NAI's
and Viacom's principal executive offices are located at 200 Elm Street, Dedham, Massachusetts
02026. As of April 1, 1994, approximately 85.2% of the Class A Common Stock of Viacom and
51.7% of the Class B Common Stock of Viacom was owned by NAI. Sumner M. Redstone is the
controlling stockholder of NAI.
NAI is a closely held corporation that owns and operates approximately 850 movie screens in
the United States and the United Kingdom.
The relevant information set forth under the caption "Business" of the Proxy
Statement/Prospectus is incorporated herein by reference.
The name, citizenship, business address and present principal occupation of Sumner M. Redstone
and each of the directors and executive officers of NAI, Viacom and the Issuer are set forth
in Schedule I hereto.
(e) and (f) During the last five years, none of Sumner M. Redstone, NAI, Viacom or the Issuer (or to the
best knowledge of Sumner M. Redstone, NAI, Viacom or the Issuer, any of the persons named on
Schedule I hereto) (i) have been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) have been party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of such proceeding
have been or are subject to a judgment, decree or final order enjoining further violations of,
or prohibiting activities subject to, federal or state securities laws or finding any
violation of such laws.

ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS

(a)(1) The relevant information set forth under the captions "Special Factors--Background of the
Paramount Merger" and "The Paramount Merger--The Offer" of the Proxy Statement/Prospectus is
incorporated herein by reference.
(a)(2) and (b) The relevant information set forth under the captions "Special Factors--Background of the
Paramount Merger," "Special Factors--Paramount Voting Agreement," "The Paramount Merger--The
Offer" and "Certain Provisions of the Paramount Merger Agreement" of the Proxy
Statement/Prospectus is incorporated herein by reference.

ITEM 4. TERMS OF THE TRANSACTION

(a) The relevant information set forth under the captions "The Meetings," "The Paramount Merger,"
"Certain Provisions of the Paramount Merger Agreement" and "Special Factors--Paramount Voting
Agreement" of the Proxy Statement/Prospectus is incorporated herein by reference.
(b) The relevant information set forth under the caption "The Paramount Merger-- Effect on
Employee Benefit Stock Plans" of the Proxy Statement/Prospectus is incorporated herein by
reference.

ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE

(a)-(g) The relevant information set forth under the captions "Special Factors--Certain Effects of the
Paramount Merger; Operations After the Paramount Merger," "Management Before and After the
Mergers--Management After the Mergers" and "Financial Matters After the Mergers--Common Stock
Dividend Policy After the Paramount Merger and the Mergers" and "Financing of the Offer" of
the Proxy Statement/Prospectus is incorporated herein by reference.

ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION

(a) The relevant information set forth under the captions "The Paramount Merger-- Paramount Merger
Consideration" and "Financing of the Offer" of the Proxy Statement/Prospectus is incorporated
herein by reference.
(b) The relevant information set forth under the caption "The Paramount Merger-- Expenses of the
Transaction" of the Proxy Statement/Prospectus is incorporated herein by reference.
(c) The relevant information set forth under the caption "Financing of the Offer" of the Proxy
Statement/Prospectus is incorporated herein by reference.
(d) Not applicable.

ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS

(a) and (c) The relevant information set forth under the captions "Special Factors--Background of the
Paramount Merger," "Special Factors--Reasons for the Paramount Merger; Recommendations of the
Board of Directors; Fairness of the Transaction" and "Special Factors--Purpose and Structure
of the Paramount Merger" of the Proxy Statement/Prospectus is incorporated herein by
reference.
(b) The relevant information set forth under the caption "Special Factors--Background of the
Paramount Merger" of the Proxy Statement/Prospectus is incorporated herein by reference.

(d) The relevant information set forth under the captions "Special Factors--Background of the
Paramount Merger," "Special Factors--Certain Effects of the Paramount Merger; Operations After
the Paramount Merger," "Special Factors--Certain Federal Income Tax Consequences," "The
Paramount Merger--Paramount Merger Consideration," "Financial Matters After the Mergers" and
"Special Factors-- Interests of Certain Persons in the Paramount Merger" of the Proxy State-
ment/Prospectus is incorporated herein by reference.

ITEM 8. FAIRNESS OF THE TRANSACTION

(a) The relevant information set forth under the captions "Special Factors--Background of the
Paramount Merger" and "Special Factors--Reasons for the Paramount Merger; Recommendations of
the Board of Directors; Fairness of the Transaction" of the Proxy Statement/Prospectus is
incorporated herein by reference.
(b) The relevant information set forth under the captions "Special Factors--Background of the
Paramount Merger," "Special Factors--Reasons for the Paramount Merger; Recommendations of the
Board of Directors; Fairness of the Transaction," "Special Factors--Purpose and Structure of
the Paramount Merger" and "Special Factors-- Opinions of Financial Advisors" of the Proxy
Statement/Prospectus is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
(e) The relevant information set forth under the caption "Special Factors--Reasons for the
Paramount Merger; Recommendations of the Board of Directors; Fairness of the Transaction" of
the Proxy Statement/Prospectus is incorporated herein by reference.
(f) The relevant information set forth under the captions "Special Factors--Background of the
Paramount Merger" and "Special Factors--Reasons for the Paramount Merger; Recommendations of
the Board of Directors; Fairness of the Transaction" of the Proxy Statement/Prospectus is
incorporated herein by reference.

ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS

(a)-(c) The relevant information set forth under the captions "Special Factors--Background of the
Paramount Merger" and "Special Factors--Opinions of Financial Advisors" of the Proxy
Statement/Prospectus and in Exhibits (b)(1), (b)(2), (b)(3), (b)(4) and (b)(5) to this
Statement is incorporated herein by reference.

ITEM 10. INTEREST IN SECURITIES OF THE ISSUER

(a) The relevant information set forth under the caption "Security Ownership of Certain Beneficial
Owners and Management" of the Proxy Statement/Prospectus is incorporated herein by reference.
(b) The relevant information set forth under the caption "Transactions By Certain Persons in
Paramount Common Stock" of the Proxy Statement/Prospectus is incorporated herein by reference.

ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES

The relevant information set forth under the captions "Special Factors--Paramount Voting
Agreement," "Other Matters--Regulatory Approvals Required," "The Paramount Merger" and
"Certain Provisions of the Paramount Merger Agreement" of the Proxy Statement/Prospectus and
in Exhibits (c)(1) and (c)(2) of this Statement is incorporated herein by reference.

ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION

(a) and (b) The relevant information set forth under the caption "Special Factors--Reasons for the
Paramount Merger; Recommendations of the Board of Directors; Fairness of the Transaction" is
incorporated herein by reference.

ITEM 13. OTHER PROVISIONS OF THE TRANSACTION

(a) The relevant information set forth under the captions "The Meetings--Appraisal Rights" and
"Dissenting Stockholders' Rights of Appraisal" is incorporated herein by reference.
(b) Not applicable.
(c) The relevant information set forth under the caption "The Paramount Merger-- Stock Exchange
Listing" is incorporated herein by reference.

ITEM 14. FINANCIAL INFORMATION

(a) The relevant information set forth under the caption "Selected Financial Data of Paramount" is
incorporated herein by reference and, pursuant to Instruction D to Schedule 13E-3, the
following are incorporated herein by reference (i) the "Financial Statements and Supplemental
Data" from the Issuer's Transition Report on Form 10-K for the six-month period ended April
30, 1993, as amended by Form 10-K/A Amendment No. 1 dated September 28, 1993, as further
amended by Form 10-K/A Amendment No. 2 dated September 30, 1993 and as further amended by Form
10-K/A Amendment No. 3 dated March 21, 1994 (copies of which are filed as Exhibit (g)(1) to
this Statement), (ii) Part I. "Financial Information," Item 1. "Financial Statements" from the
Issuer's Quarterly Report on Form 10-Q for the quarter ended July 31, 1993 (a copy of which is
filed as Exhibit (g)(2) to this Statement), (iii) Part I. "Financial Information," Item 1.
"Financial Statements" from the Issuer's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1993 (a copy of which is filed as Exhibit (g)(3) to this Statement) and (iv) Part
I. "Financial Information," Item 1. "Financial Statements" from the Issuer's Quarterly Report
on Form 10-Q for the quarter ended January 31, 1994 (a copy of which is filed as Exhibit
(g)(4) to this Statement).
(b) Not applicable.

ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED

(a) and (b) The relevant information set forth under the captions "The Meetings--Solicitation of Proxies,"
"Special Factors--Opinions of Financial Advisors" and "Management Before and After the
Mergers" is incorporated herein by reference.

ITEM 16. ADDITIONAL INFORMATION

The information set forth in the Proxy Statement/Prospectus is incorporated herein by
reference in its entirety.

ITEM 17. MATERIAL TO BE FILED AS EXHIBITS

(a) Not applicable.
(b)(1) Opinion of Smith Barney Shearson Inc. ("Smith Barney"), dated February 1, 1994 (which is
attached as Annex III to the Proxy Statement/Prospectus filed as Exhibit (d)(1) hereto).
(b)(2) A report by Smith Barney to the Board of Directors of Viacom, dated February 1994, on certain
financial analyses.
(b)(3) Opinion of Lazard Freres & Co. ("Lazard Freres") dated February 4, 1994 (which is attached as
Annex IV to the Proxy Statement/Prospectus filed as Exhibit (d)(1) hereto).
(b)(4) A report by Lazard Freres to the Board of Directors of the Issuer, dated February 4, 1994, on
certain financial analyses.
(b)(5) Letter, dated February 14, 1994, from Lazard Freres to Mr. Donald Oresman of the Issuer.
**(c)(1) Amended and Restated Agreement and Plan of Merger dated as of February 4, 1994, as further
amended as of May 26, 1994, among Viacom, Viacom Sub Inc., a wholly owned subsidiary of Viacom,
and the Issuer (which is attached as Annex I to the Proxy Statement/Prospectus filed as
Exhibit (d)(1) hereto).
(c)(2) Voting Agreement dated as of January 21, 1994 between NAI and the Issuer (which is attached as
Annex II to the Proxy Statement/Prospectus filed as Exhibit (d)(1) hereto).
(d)(1) Joint Proxy Statement/Prospectus of Viacom and the Issuer for the Special Meetings of
Stockholders of Viacom and the Issuer and the Annual Meeting of Stockholders of Viacom.
(d)(2) Form of Proxies.
(e)(1) Statement of appraisal rights set forth under the caption "Dissenting Stockholders' Rights of
Appraisal" in, and Annex V to, the Proxy Statement/Prospectus filed as Exhibit (d)(1) hereto.
(f) Not applicable.
(g)(1) "Financial Statements and Supplemental Data" from the Issuer's Transition Report on Form 10-K
for the six-month period ended April 30, 1993, as amended by Form 10-K/A Amendment No. 1 dated
September 28, 1993, as further amended by Form 10-K/A Amendment No. 2 dated September 30, 1993
and as further amended by Form 10-K/A Amendment No. 3 dated March 21, 1994.
(g)(2) Part I. "Financial Information," Item 1. "Financial Statements" from the Issuer's Quarterly
Report on Form 10-Q for the quarter ended July 31, 1993.
(g)(3) Part I. "Financial Information," Item 1. "Financial Statements" from the Issuer's Quarterly
Report on Form 10-Q for the quarter ended October 31, 1993.
(g)(4) Part I "Financial Information," Item 1. "Financial Statements" from the Issuer's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1994.
*(h)(1) Powers of Attorney.

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* Previously filed.
** Does not include the May 26, 1994 Amendment which is not yet executed.

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.

May 25, 1994

VIACOM INC.

By: /s/ PHILIPPE P. DAUMAN
--------------------------------
Name: Philippe P. Dauman
Title: Executive Vice President,
General Counsel, Chief
Administrative Officer
and Secretary

SUMNER M. REDSTONE

. *
-----------------------------------
Sumner M. Redstone, Individually

NATIONAL AMUSEMENTS, INC.

By:
*
--------------------------------
Name: Sumner M. Redstone
Title: Chairman, President and
Chief Executive Officer

PARAMOUNT COMMUNICATIONS INC.

By: /s/ PHILIPPE P. DAUMAN
--------------------------------
Name: Philippe P. Dauman
Title: Executive Vice President,
General Counsel, Chief
Administrative Officer
and Secretary

*By /s/ PHILIPPE P. DAUMAN
-----------------------------------
Philippe P. Dauman
Attorney-in-Fact under Powers
of Attorney filed as Exhibit (h)(1)
to this Statement

SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS OF VIACOM

The following table sets forth the name, current business address and
present principal occupation or employment, and material occupations, positions,
offices or employments and business addresses thereof for the past five years of
each director and executive officer of Viacom. Unless otherwise indicated, the
current business address of each person is 1515 Broadway, New York, New York
10036. Each such person is a citizen of the United States of America. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to employment with Viacom. Directors are indicated by an asterisk.

PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND CURRENT BUSINESS ADDRESS; MATERIAL POSITIONS HELD
NAME DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
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Sumner M. Redstone*.......................... Chairman and Director of Viacom and Viacom International since
1987; Chairman of Paramount since April 1994; Director of
Paramount since March 1994; Director of Viacom since 1986;
Chairman of NAI since 1986, 200 Elm Street, Dedham, MA;
President, Chief Executive Officer of NAI since 1967; Executive
Committee member of National Association of Theatre Owners;
Director of the Kennedy Presidential Library Foundation since
1984; Member of faculty at Boston University Law School since
1982.
Frank J. Biondi, Jr.*........................ President, Chief Executive Officer and Director of Viacom and
Viacom International since 1987; President, Chief Executive
Officer and Director of Paramount since March 1994. Recently
named Director of Maybelline, Inc.
Raymond A. Boyce............................. Senior Vice President, Corporate Relations of Viacom and Viacom
International since 1988.
Vaughn A. Clarke............................. Vice President, Treasurer of Viacom and Viacom International since
April 1993; Assistant Treasurer until April 1993 at Gannett Co.,
Inc., 1100 Wilson Blvd., Arlington, VA.
Philippe P. Dauman*.......................... Executive Vice President, General Counsel, Chief Administrative
Officer and Secretary of Viacom, Viacom International and
Paramount since March 1994; Senior Vice President, General
Counsel and Secretary of Viacom and Viacom International from
February 1993 to March 1994; Director of Viacom and Viacom
International since 1987; Director of Paramount since March
1994; Director of NAI since April 1992; Partner at Shearman &
Sterling until February 1993, 599 Lexington Avenue, New York,
NY.

I-1

Thomas E. Dooley............................. Executive Vice President, Finance, Corporate Development and
Communications of Viacom, Viacom International and Paramount
since March 1994; Senior Vice President, Corporate Development
of Viacom and Viacom International from July 1992 to March 1994;
President, Interactive Television of Viacom International from
August 1993 to March 1994; Vice President, Finance of Viacom and
Viacom International since December 1990; Vice President,
Treasurer of Viacom and Viacom International from 1987 to July
1992.
Michael D. Fricklas.......................... Senior Vice President, Deputy General Counsel of Viacom and Viacom
International since March 1994; Senior Vice President, Deputy
General Counsel of Paramount since April 1994; Vice President,
Deputy General Counsel of Viacom and Viacom International from
June 1993 to March 1994; Vice President, General Counsel and
Secretary of Minorco (U.S.A.) Inc. from 1990 to 1993, Minorco
(U.S.A.) Inc., 5251 DTC Parkway, Suite 700, Englewood, Colorado
80111; Associate at Shearman & Sterling until 1990.
John W. Goddard.............................. Senior Vice President of Viacom since 1987; Senior Vice President
of Viacom International and President, Chief Executive Officer
of Viacom Cable Television since 1983.
Edward D. Horowitz........................... Senior Vice President, Technology of Viacom and Viacom
International and Chairman, Chief Executive Officer of New Media
and Interactive Television since March 1994; Senior Vice
President of Viacom and Viacom International since 1989;
Chairman, Chief Executive Officer of Viacom Broadcasting from
July 1992 to March 1994; Senior Vice President, Technology and
Operations at HBO until 1989, 1100 Sixth Avenue, New York, NY.
Kevin C. Lavan............................... Vice President of Viacom and Viacom International since May 1989;
Controller, Chief Accounting Officer of Viacom and Viacom
International since 1987; Senior Vice President, Chief Financial
Officer of Viacom Pictures from 1991 to 1992.
Henry Leingang............................... Senior Vice President, Chief Information Officer of Viacom and
Viacom International since May 1993; Vice President, Chief
Information Officer of Viacom and Viacom International since
1990. Vice President, Information Services of the Trian Group
(formerly Triangle Industries) until 1990, 900 Third Avenue, New
York, NY.

I-2

William A. Roskin............................ Senior Vice President, Human Resources and Administration of
Viacom and Viacom International since July 1992; Vice President,
Human Resources and Administration of Viacom and Viacom
International from 1988 to July 1992.
George S. Smith, Jr. ........................ Senior Vice President, Chief Financial Officer of Viacom and
Viacom International since 1987; Senior Vice President, Chief
Financial Officer of Paramount since April 1994.
Mark M. Weinstein............................ Senior Vice President, Government Affairs of Viacom and Viacom
International since February 1993; Senior Vice President,
General Counsel and Secretary of Viacom and Viacom International
from 1987 to February 1993.
George S. Abrams*............................ Director of Viacom and Viacom International since 1987; Director
of Paramount since March 1994; Director of NAI since April 1992;
Attorney associated with Winer & Abrams for more than the past
10 years, 1 Court Street, Boston, MA.
William C. Ferguson*......................... Director of Viacom and Viacom International since 1993; Director
of Paramount since March 1994; Chairman of the Board and Chief
Executive Officer of NYNEX since 1989, 1113 Westchester Avenue,
White Plains, New York; Vice Chairman of the Board of NYNEX from
1987 to 1989; President and Chief Executive Officer at NYNEX
during 1989; Director of NYNEX since 1987.
H. Wayne Huizenga*........................... Director of Viacom and Viacom International since October 1993;
Director of Paramount since March 1994; Director, Chairman and
Chief Executive Officer of Blockbuster since 1987, One
Blockbuster Plaza, Fort Lauderdale, Florida; President of
Blockbuster from 1987 to 1988.
Ken Miller*.................................. Director of Viacom and Viacom International since 1987; Director
of Paramount since March 1994; President and Chief Executive
Officer of The Lodestar Group since 1988, 110 E. 59th Street,
New York, NY; Vice Chairman of Merrill Lynch Capital Markets
during 1987, World Financial Center, North Tower, New York, NY
10281; a Managing Director of Merrill Lynch Capital Markets
until 1987.
Brent D. Redstone*........................... Director of Viacom and Viacom International since 1991; Director
of Paramount since March 1994; Director of NAI since April 1992;
Assistant District Attorney for Suffolk County, MA until 1991,
New Courthouse, Pemberton Square, Boston, MA 02108. Mr. Redstone
is the son of Sumner Redstone.

I-3

Frederic V. Salerno*......................... Director of Viacom and Viacom International since 1994; Director
of Paramount since March 1994; Vice Chairman, Finance and
Business Development of NYNEX since March 1994, 1113 Westchester
Avenue, White Plains, NY; Director of NYNEX since 1991; Vice
Chairman of the Board of NYNEX since 1991; President and Chief
Executive Officer of New York Telephone from 1987 to 1991;
Director of The Bear Stearns Companies Inc. and Avnet, Inc.
William Schwartz*............................ Director of Viacom and Viacom International since 1987; Director
of Paramount since 1994; Vice President for Academic Affairs at
Yeshiva University since 1992, 500 W. 185th Street, New York, NY
10033; University Professor of Law at Yeshiva University and
Cardozo School of Law since 1991; Counsel to Cadwalader,
Wickersham & Taft since 1988, 100 Maiden Lane, New York, NY;
Dean of Boston University School of Law until 1988; Professor of
Law at Boston University until 1991, 765 Commonwealth Ave.,
Boston, MA 02215; Director of the Feder Center for Estate
Planning at Boston University School of Law from 1988 to 1991.

I-4

DIRECTORS AND EXECUTIVE OFFICERS OF NATIONAL AMUSEMENTS, INC.

The following table sets forth the name, current business address and
present principal occupation or employment, and material occupations, positions,
offices or employments and business addresses thereof for the past five years of
each director and executive officer of National Amusements, Inc. Unless
otherwise indicated, the current business address of each person is 200 Elm
Street, Dedham, MA 02026. Each such person is a citizen of the United States of
America. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with National Amusements, Inc. Directors
are indicated by an asterisk.

PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND CURRENT BUSINESS ADDRESS; MATERIAL POSITIONS HELD
NAME DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ----------------------------------------------- -----------------------------------------------------------------

Sumner M. Redstone*............................ Chairman and Director of Viacom and Viacom International since
June 1987; Chairman of Paramount since April 1994; Director of
Paramount since March 1994; Director of Viacom since 1986;
Chairman of NAI since 1986; President, Chief Executive Officer
of NAI since July 1967; Executive Committee member of National
Association of Theatre Owners; Director of the Kennedy
Presidential Library Foundation since 1984; Member of faculty
at Boston University Law School since 1982.
Phyllis Redstone*.............................. Director of NAI since April 1992. Mrs. Redstone is the wife of
Sumner Redstone.
Brent D. Redstone*............................. Director of Viacom and Viacom International since 1991; Director
of Paramount since March 1994; Director of NAI since April
1992; Assistant District Attorney for Suffolk County, MA until
1991. Mr. Redstone is the son of Sumner Redstone.
Shari E. Redstone*............................. Director of NAI since April 1992. Ms. Redstone is the daughter of
Sumner Redstone.
George S. Abrams*.............................. Director of Viacom and Viacom International since 1987; Director
of Paramount since March 1994; Director of NAI since April
1992; Attorney associated with Winer & Abrams for more than the
past 10 years, 1 Court Street, Boston, MA.
David R. Andelman*............................. Director of NAI since April 1992; Partner at Lourie & Cutler for
more than the past 10 years, 60 State Street, Boston, MA.
Philippe P. Dauman*............................ Executive Vice President, General Counsel, Chief Administrative
Officer and Secretary of Viacom, Viacom International and
Paramount since March 1994; Senior Vice President, General
Counsel and Secretary of Viacom and Viacom International from
February 1993 to March 1994; Director of Viacom and Viacom
International since 1987; Director of Paramount since March
1994; Director of NAI since April 1992; Partner at Shearman &
Sterling until February 1993, 599 Lexington Avenue, New York,
NY.
Ira A. Korff*.................................. Director, Executive Vice President and Chief Operating Officer of
NAI since 1986; President of National Amusements, Ltd. and
Managing Director of National Amusements (U.K.) Ltd. since
1987.
Jerome Magner.................................. Senior Vice President--Finance of NAI since 1988; Treasurer of
NAI since 1986.

I-5

CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF PARAMOUNT

The following table sets forth the name, current business address and
present principal occupation or employment, and material occupations, positions,
offices or employments and business addresses thereof for the past five years of
each director and executive officer of Paramount. Unless otherwise indicated,
the current business address of each person is 1515 Broadway, New York, NY
10036. Unless otherwise indicated each such person is a citizen of the United
States of America. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with Paramount. Directors are
indicated by an asterisk.

Sumner M. Redstone*.......................... Chairman and Director of Viacom and Viacom International since
1987; Chairman of Paramount since April 1994; Director of
Paramount since March 1994; Director of Viacom since 1986;
Chairman of NAI since 1986, 200 Elm Street, Dedham, MA;
President, Chief Executive Officer of NAI since 1967; Executive
Committee member of National Association of Theatre Owners;
Director of the Kennedy Presidential Library Foundation since
1984; Member of faculty at Boston University Law School since
1982.
George S. Abrams*............................ Director of Viacom and Viacom International since 1987; Director
of Paramount since March 1994; Director of NAI since April 1992;
Attorney associated with Winer & Abrams for more than the past
10 years, 1 Court Street, Boston, MA.
Frank J. Biondi, Jr.*........................ President, Chief Executive Officer and Director of Viacom and
Viacom International since 1987; President, Chief Executive
Officer and Director of Paramount since March 1994. Recently
named Director of Maybelline, Inc.
Philippe P. Dauman*.......................... Executive Vice President, General Counsel, Chief Administrative
Officer and Secretary of Viacom, Viacom International and
Paramount since March 1994; Senior Vice President, General
Counsel and Secretary of Viacom and Viacom International from
February 1993 to March 1994; Director of Viacom and Viacom
International since 1987; Director of Paramount since March
1994; Director of NAI since April 1992; Partner at Shearman &
Sterling until February 1993, 599 Lexington Avenue, New York,
NY.

I-6

Martin S. Davis*............................. Chairman of Paramount from 1983 to April 1994; Chief Executive
Officer of Paramount from 1983 to March 1994; Director of
Paramount since 1967; Member of the Board of Trustees of
Montefiore Medical Center; Chairman of the Board of Trustees of
New York City Chapter of National Multiple Sclerosis Society;
Member of FCC's Advisory Committee on Advanced Television
Service. The current business address of Mr. Davis is 15
Columbus Circle, New York, New York.
Thomas E. Dooley............................. Executive Vice President, Finance, Corporate Development and
Communications of Viacom, Viacom International and Paramount
since March 1994; Senior Vice President, Corporate Development
of Viacom and Viacom International from July 1992 to March 1994;
President, Interactive Television of Viacom International from
August 1993 to March 1994; Vice President, Finance of Viacom and
Viacom International from December 1990 to July 1992; Vice
President, Treasurer of Viacom and Viacom International from
1987 to July 1992.
William C. Ferguson*......................... Director of Viacom and Viacom International since 1993; Director
of Paramount since March 1994; Chairman of the Board and Chief
Executive Officer of NYNEX since 1989, 1113 Westchester Avenue,
White Plains, New York; Vice Chairman of the Board of NYNEX from
1987 to 1989; President and Chief Executive Officer during 1989;
Director of NYNEX since 1987.
Irving R. Fischer*........................... Director of Paramount since 1984; Chairman and Chief Executive
Officer of HRH Construction Corporation since 1981, 909 Third
Avenue, New York, New York; Vice Chairman of New York City
Chapter of National Multiple Sclerosis Society; Member of New
York City Holocaust Memorial Commission; Adjunct Professor at
Columbia University.
Michael D. Fricklas.......................... Senior Vice President, Deputy General Counsel of Viacom and Viacom
International since March 1994; Senior Vice President, Deputy
General Counsel of Paramount since April 1994; Vice President,
Deputy General Counsel of Viacom and Viacom International from
July 1993 to March 1994; Vice President, General Counsel and
Secretary of Minorco (U.S.A.) Inc. from 1990 to 1993; Associate
at Shearman & Sterling until 1990.
Robert C. Greenberg.......................... Senior Vice President, Human Resources of Paramount since 1993;
Principal at the consulting firm of Towers Perrin until 1993,
245 Park Avenue, New York, New York. The current business
address of Mr. Greenberg is 15 Columbus Circle, New York, New
York.

I-7

Rudolph L. Hertlein.......................... Senior Vice President and Controller of Paramount since 1993;
Senior Vice President, Internal Audit and Special Projects of
Paramount in 1992; Vice President, Internal Audit and Special
Projects of Paramount until 1992. The current business address
of Mr. Hertlein is 15 Columbus Circle, New York, New York.
H. Wayne Huizenga*........................... Director of Viacom and Viacom International since October 1993;
Director of Paramount since March 1994; Director, Chairman and
Chief Executive Officer of Blockbuster since 1987, One
Blockbuster Plaza, Fort Lauderdale, Florida; President of
Blockbuster from 1987 to 1988.
Lawrence E. Levinson......................... Senior Vice President, Government Relations of Paramount. The
current business address of Mr. Levinson is 15 Columbus Circle,
New York, New York.
Ken Miller*.................................. Director of Viacom and Viacom International since 1987; Director
of Paramount since March 1994; President and Chief Executive
Officer of The Lodestar Group since 1988, 110 E. 59th Street,
New York, NY; Vice Chairman of Merrill Lynch Capital Markets
during 1987; a Managing Director of Merrill Lynch Capital
Markets until 1987.
Ronald L. Nelson*............................ Director of Paramount since 1992; Executive Vice President and
Chief Financial Officer of Paramount from 1990 to March 1994;
Senior Vice President and Chief Financial Officer from 1987 to
1990; Member of CFO Advisory Board of New York Chapter of
Financial Executives Institute. The current business address of
Mr. Nelson is 15 Columbus Circle, New York, New York.
Donald Oresman*.............................. Director of Paramount since 1976; Executive Vice President and
General Counsel of Paramount from 1983 to March 1994; Chief
Administrative Officer of Paramount from 1987 to March 1994;
Director of North American Watch Corporation; Trustee of the New
York Landmarks Conservancy; Councilor of the American
Antiquarian Society. The current business address of Mr. Oresman
is 15 Columbus Circle, New York, New York.
James A. Pattison*........................... Director of Paramount since 1988; Chairman and Chief Executive
Officer of The Jim Pattison Group since 1961, 1055 West Hastings
Street, Vancouver, British Columbia, Canada; Officer of the
Order of Canada since 1986; Director of the Toronto-Dominion
Bank and Canadian Pacific LTD. Mr. Pattison is a Canadian
citizen.

I-8

Brent D. Redstone*........................... Director of Viacom and Viacom International since 1991; Director
of Paramount since March 1994; Director of NAI since April 1992;
Assistant District Attorney for Suffolk County, MA until 1991.
Mr. Redstone is the son of Sumner Redstone.
Frederic V. Salerno*......................... Director of Viacom and Viacom International since 1994; Director
of Paramount since March 1994; Vice Chairman, Finance and
Business Development of NYNEX since March 1994, 1113 Westchester
Avenue, White Plains, New York; Director of NYNEX since 1991;
Vice Chairman of the Board of NYNEX since 1991; President and
Chief Executive Officer of New York Telephone from 1987 to 1991;
Director of Bear Stearns Companies Inc. and Avnet, Inc.
William Schwartz*............................ Director of Viacom and Viacom International since 1987; Director
of Paramount since March 1994; Vice President for Academic
Affairs at Yeshiva University since 1992, 2495 Amsterdam Avenue,
Belfer Hall, New York, New York; University Professor of Law at
Yeshiva University and Cardozo School of Law since 1991; Counsel
to Cadwalader, Wickersham & Taft since 1988, 100 Maiden Lane,
New York, N.Y.; Dean of Boston University School of Law until
1988; Professor of law at Boston University until 1991; Director
of the Feder Center for Estate Planning at Boston University
School of Law from 1988 to 1991.
George S. Smith, Jr. ........................ Senior Vice President, Chief Financial Officer of Viacom and
Viacom International since 1987; Senior Vice President, Chief
Financial Officer of Paramount since April 1994.

I-9

INDEX TO EXHIBITS

EXHIBIT DESCRIPTION
- -------------------- ----------------------------------------------------------------------------------------------

(b)(1) Opinion of Smith Barney Shearson, dated February 1, 1994 (which is attached as Annex III to
the Proxy Statement/Prospectus filed as Exhibit (d)(1) hereto).
(b)(2) A report by Smith Barney to the Board of Directors of Viacom, dated February 1994, on certain
financial analyses.
(b)(3) Opinion of Lazard Freres dated February 4, 1994 (which is attached as Annex IV to the Proxy
Statement/Prospectus filed as Exhibit (d)(1) hereto).
(b)(4) A report by Lazard Freres to the Board of Directors of the Issuer, dated February 4, 1994, on
certain financial analyses.
(b)(5) Letter, dated February 14, 1994, from Lazard Freres to Mr. Donald Oresman of the Issuer.
**(c)(1) Amended and Restated Agreement and Plan of Merger dated as of February 4, 1994, as
further amended as of May 26, 1994, among Viacom, Viacom Sub Inc., a wholly owned subsidiary
of Viacom, and the Issuer (which is attached as Annex I to the Proxy Statement/Prospectus filed
as Exhibit (d)(1) hereto).
(c)(2) Voting Agreement dated as of January 21, 1994 between NAI and the Issuer (which is attached as
Annex II to the Proxy Statement/Prospectus filed as Exhibit (d)(1) hereto).
(d)(1) Joint Proxy Statement/Prospectus of Viacom and the Issuer for the Special Meetings of
Stockholders of Viacom and the Issuer and the Annual Meeting of Stockholders of Viacom.
(d)(2) Form of Proxies.
(e)(1) Statement of appraisal rights set forth under the caption "Dissenting Stockholders' Rights of
Appraisal" in, and Annex V to, the Proxy Statement/Prospectus filed as Exhibit (d)(1) hereto.
(g)(1) "Financial Statements and Supplemental Data" from the Issuer's Transition Report on Form 10-K
for the six-month period ended April 30, 1993, as amended by Form 10-K/A Amendment No. 1 dated
September 28, 1993, as further amended by Form 10-K/A Amendment No. 2 dated September 30, 1993
and as further amended by Form 10-K/A Amendment No. 3 dated March 21, 1994.
(g)(2) Part I. "Financial Information," Item 1. "Financial Statements" from the Issuer's Quarterly
Report on Form 10-Q for the quarter ended July 31, 1993.
(g)(3) Part I. "Financial Information," Item 1. "Financial Statements" from the Issuer's Quarterly
Report on Form 10-Q for the quarter ended October 31, 1993.
(g)(4) Part I "Financial Information," Item 1. "Financial Statements" from the Issuer's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1994.
*(h)(1) Powers of Attorney.

- ---------------

* Previously filed.
** Does not include the May 26, 1994 Amendment which is not yet executed.









CONFIDENTIAL                                                     Project Voltage


Table of Contents

                                                                           Tab
                                                                           ---


Transaction Overview   . . . . . . . . . . . . . . . . . . . . . . . . . .   1


Merger Debentures  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2

Valuation          . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3


Pro Forma Impact - No CVR Liability    . . . . . . . . . . . . . . . . . .   4


Pro Forma Impact - CVR Liability   . . . . . . . . . . . . . . . . . . . .   5











February, 1994                        SMITH BARNEY SHEARSON INC.



CONFIDENTIAL                                                     Project Voltage

Table Of Contents



Exhibits
- --------


Merger Analysis - No CVR Liability   . . . . . . . . . . . . . . . . . . .   6
       - Voltage/Patriot/Tackle
       - Voltage/Patriot

Merger Analysis - CVR Liability  . . . . . . . . . . . . . . . . . . . . .   7
       - Voltage/Patriot/Tackle
       - Voltage/Patriot

Merger Analysis - QVC/Patriot  . . . . . . . . . . . . . . . . . . . . . .   8











February, 1994                       SMITH BARNEY SHEARSON INC.



                                TAB 1



CONFIDENTIAL                                                  Project Voltage

Proposed Revisions - Overview




                             
  .    Front end:               No change

  .    Back end:              . Split CEPS into straight preferred and warrant
                                -        5% perpetual preferred with rate increase to 10% in year 10
                                -        $70 strike price 5 year warrant (.30 per PCI share in back-end)
                                -        Exchangeable into debentures
                                         -  Preferred may be used at face to redeem debentures

                              . Replace straight preferred with 8% 12 year subordinated debt
                                -        Only if Tackle transaction is consummated
                                -        Non call 5 years (103% in year 5, 102% in Year 6, 101% in year 7, 100% in year 8)

                              . Increase subordinated debt exchange ratio (a.)
                                -        Changed from .30408 to .35 (b.)
                                -        Approximately $140 million increase

                              . Decrease the floor on CVR in year 1 and 2
                                -        Year 1:  from $38 to $36
                                -        Year 2:  from $38 to $37
                                -        Year 3:  unchanged


(a.)  Actual debenture denominations will be $1,000 per debenture
(b.)  If Blockbuster is not consummated, straight preferred also will
      have .35 exchange ratio






February, 1994                      SMITH BARNEY SHEARSON INC.           Page 1



CONFIDENTIAL                                                Project Voltage

Proposed Transaction - Overview






                                        
Transaction           -     Step 1:           Voltage will tender for 61.6 million (50.1% of the outstanding)
                                              PCI shares @ $107.00/share


                      -     Step 2:           Patriot will be merged into Voltage
                                              -  Remaining 61.4 million (49.9%) Patriot shares receive Voltage securities
                                                 -  Voltage Class B Common Stock
                                                 -  Preferred Stock (if Tackle merger not consummated)
                                                 -  Subordinated Debt (if Tackle merger consummated)
                                                 -  Contingent Value Rights ("CVRs")
                                                 -  Warrants to purchase Voltage Class B Common Stock







February, 1994                      SMITH BARNEY SHEARSON INC.           Page 2



CONFIDENTIAL                                                   Project Voltage

Per Share Consideration - Face Value

 
                                            Current Offer
                                            -------------
                                 Per Share                             Back End
                 Current       --------------     Front End        -----------------
Security          Price  a.    Ratio    Value       Value          Ratio       Value
- --------         ----------    -----    -----    -----------       -----       -----
                                                           
Cash               -----      0.501    $53.61     $107.00          -----      -----
Class A          $39.500      0.000      0.00       -----        0.00000      $0.00
Class B           35.250      0.464     16.37       -----        0.93065      32.81
CEPS              50.000 b.   0.152      7.59       -----        0.30408      15.20
Warrant -  $60     5.000 c.   0.250      1.25       -----        0.50000       2.50
CVR               10.000 c.   0.464      4.64       -----        0.93065       9.31
                                       ------     -------                    ------

                                       $83.46     $107.00                    $59.82
                                       ======     =======                    ======


                                             Proposed Offer
                                             --------------
                                 Per Share                             Back End
                 Current       --------------     Front End        -----------------
Security          Price  a.    Ratio    Value       Value          Ratio       Value
- --------         ----------    -----    -----    -----------       -----       -----
                                                           
Cash                -----      0.501    $53.61     $107.00          -----      -----
Class A           $39.500      0.000      0.00       -----        0.00000      $0.00
Class B            35.250      0.464     16.37       -----        0.93065      32.81
Sub. Debt  d.      50.000 b,e. 0.175      8.73       -----        0.35000      17.50
Warrant - $60       5.000 c.   0.250      1.25       -----        0.50000       2.50
Warrant - $70       5.000 c.   0.150      0.75       -----        0.30000       1.50
CVR                12.000 c.   0.464      5.57       -----        0.93065      11.17
                                        ------     -------                    ------

                                        $86.28     $107.00                    $65.48
                                        ======     =======                    ======


a.  As of January 31, 1994.
b.  Amount equals face value of security.
c.  Amount equals full theoretical value of security.
d.  Assumes Tackle transaction is consummated.
e.  For illustrative purposes only.  Actual face value will be $1,000 per
    debenture.







February, 1994                      SMITH BARNEY SHEARSON INC.           Page 3



CONFIDENTIAL                                                     Project Voltage

Per Share Consideration - Trading Value

 
                                            Current Offer
                                            -------------
                                 Per Share                             Back End
                 Current       --------------     Front End        -----------------
Security          Price  a.    Ratio    Value       Value          Ratio       Value
- --------         ----------    -----    -----    -----------       -----       -----
                                                           
Cash                -----      0.501   $53.61       $107.00         -----      -----
Class A           $39.500      0.000     0.00         -----       0.00000      $0.00
Class B            35.250      0.464    16.37         -----       0.93065      32.81
CEPS               40.000 b.   0.152     6.07         -----       0.30408      12.16
Warrant - $60       4.000 b.   0.250     1.00         -----       0.50000       2.00
CVR                 7.000 b.   0.464     3.25         -----       0.93065       6.51
                                       ------       -------                   ------

                                       $80.30       $107.00                   $53.48
                                       ======       =======                   ======


                                             Proposed Offer
                                             --------------
                                 Per Share                             Back End
                 Current       --------------     Front End        -----------------
Security          Price  a.    Ratio    Value       Value          Ratio       Value
- --------         ----------    -----    -----    -----------       -----       -----
                                                           
Cash                -----      0.501   $53.61       $107.00         -----      -----
Class A           $39.500      0.000     0.00         -----       0.00000      $0.00
Class B            35.250      0.464    16.37         -----       0.93065      32.81
Sub. Debt          50.000 b.   0.175     8.73         -----       0.35000      17.50
Warrant - $60       4.000 b.   0.250     1.00         -----       0.50000       2.00
Warrant - $70       5.000 b.   0.150     0.75         -----       0.30000       1.50
CVR                 8.000 b.   0.464     3.71         -----       0.93065       7.45
                                       ------       -------                   ------

                                       $84.17 c.    $107.00                   $61.26
                                       ======       =======                   ======


a.  As of January 31, 1994.
b.  Amount equals face value of security.
c.  If Tackle transaction is not consummated, value is reduced to $81.52 as
    preferred stock is assumed to trade at 75% of face value.







February, 1994                      SMITH BARNEY SHEARSON INC.           Page 4



CONFIDENTIAL                                                     Project Voltage

Aggregate Consideration - Face Value (a.)


               Current                       Option        Total
Security      Price (b.)    Securities     Shares (c.)     Shares      Value
- --------     -----------    ----------     -----------     ------      -----

Cash             -----         -----         -----          -----     $6,592

Class A         $39.50          0.0           0.0             0.0          0

Class B          35.25         57.1           0.0            57.1      2,013

Sub. Debt (d.)   50.00         21.5           0.0            21.5      1,074

Warrants - $60    5.00 (e.)    30.7           0.0            30.7        153

Warrants - $70    5.00 (e.)    18.4           0.0            18.4         92

CVR (e.)         12.00         57.1           0.0            57.1        685
                                                                     -------
                                                                     $10,609
             Less Option Proceeds (e.)                                    80
                                                                     -------
                                                                    $ 10,529
                                                                    ========


(a.) 123.0 mm Paramount shares outstanding; 2.0mm Paramount options excercisable
     (assumed excercised prior to merger).
(b.) As of January 31,1994.
(c.) Figures assume all non-excercisable options are cancelled.
(d.) For illustrative purposes only.  Actual face value will be $1,000 per
     debenture.
(e.) Estimated.







February, 1994                      SMITH BARNEY SHEARSON INC.           Page 5



CONFIDENTIAL                                                     Project Voltage

Aggregate Consideration - Trading Value (a.)


                    Current                       Option        Total
Security           Price (b.)    Securities     Shares (c.)     Shares    Value
- --------          -----------    ----------     -----------     ------    -----

Cash                  -----        -----           -----         -----    $6,592

Class A              $39.50          0.0             0.0           0.0         0

Class B               35.25         57.1             0.0          57.1     2,013

Sub. Debt (d.)        50.00         21.5             0.0          21.5     1,074

Warrants - $60 (d.)    4.00         30.7             0.0          30.7       123

Warrants - $70 (d.)    5.00         18.4             0.0          18.4        92

CVR (d.)               8.00         57.1             0.0          57.1       457
                                                                         -------

                                                                         $10,351
                        Less Option Proceeds (e.)                             80
                                                                         -------
                                                                        $ 10,271
                                                                        ========


(a.) 123.0 mm Paramount shares outstanding; 2.0mm Paramount options excercisable
     (assumed excercised prior to merger).
(b.) As of January 31,1994.
(c.) Figures assume all non-excercisable options are cancelled.
(d.) Amount equals estimated trading value of security.
(e.) Estimated.







February, 1994                      SMITH BARNEY SHEARSON INC.           Page 6



CONFIDENTIAL                                                     Project Voltage


Financing

   -          Cash Required to Purchase Shares:        $6.592 billion

   -          Sources of Financing:


               Source                 Amount ($ mm)               Status
           ---------------         -------------------    ---------------------

           Blockbuster

              - Preferred                 $600             Funded

              - Common                   1,250             Committed


           NYNEX                         1,200             Funded

           Bank Syndicate                3,542 (a.)        Committed






(a.) Does not assume utilization of balance sheet cash.







February, 1994                      SMITH BARNEY SHEARSON INC.           Page 7



                                TAB 2



CONFIDENTIAL                                                     Project Voltage

Merger Debentures


I.  Summary Terms

     - Interest - 8% per annum

     - Maturity - 12 years

     - Non call 5 years

     - Exchangeable to 5% straight preferred stock if Tackle transaction
       not consummated (a.)

     - Subordinated



II.  Advantages

     - Lower after tax cost equivalent than preferred for the first three years

     - Takes advantage of leverage capability if Tackle transaction is
       consummated

     - Merger debentures estimated to trade at par value versus 20% discount for
       current CEPS


(a.) Adjust coupon in year 10 from 5.0% to 10.0%.



February, 1994                      SMITH BARNEY SHEARSON INC.           Page 8




                                TAB 3




CONFIDENTIAL                                                                                                         Project Voltage
____________________________________________________________________________________________________________________________________

Public Market Valuation
(Dollars expressed in millions, except per share)
                                                             Public Market               Public         
                                                   1994E     Trading EBITDA          Market Trading
                                                  EBITDA     Multiple Range            Value Range        Acquisition Premium (30%)
                                                  ------     -------------           ----------------     -------------------------
                                                                                              
  Entertainment
  Theatrical                                      $125.0     12.0 x - 15.0 x         $1,500 -  $1,875           1,950         2,438
  Television                                        60.0     11.0   - 14.0              660       840             858         1,092
  Stations and Networks
    TV Stations                                     65.0      8.0   - 10.0              520 -     650             676           845
    Networks (50%) - Sci Fi                          0.0       NM   -   NM               50 -      75              65            98
    Networks (50%) - USA                            50.0     15.0   - 18.0              750 -     900             975         1,170
    MSG                                             24.0       NM   -   NM              400 -     600             520           780
    Theatres                                        45.0      8.0   - 10.0              360 -     450             468           585
    Theme Parks and others                          90.0      7.0   -  9.0              630 -     810             819         1,053
                                                  ------     -------------           ----------------     -------------------------
      Total Entertainment                         $459.0      10.6  - 13.5           $4,870 -  $6,200          $6,331        $8,060

  Publishing
    Educational                                   $154.0       9.0  - 11.0           $1,386 -  $1,694          $1,802        $2,202
    Business, Technical & Professional              25.0       8.0  - 10.0              200 -     250             260           325
    Consumer                                        36.0      10.0  - 12.0              360 -     432             468           562
    International                                   33.0      10.0  - 12.0              330 -     396             429           515
    MacMillan                                       30.0      12.0  - 14.0              360 -     420             468           546
                                                  ------     -------------           ----------------     -------------------------
      Total Publishing                            $278.0       9.5  - 11.5           $2,636 -  $3,192          $3,427        $4,150

    Corporate Expenses                            ($76.4       5.0  -  7.0            ($382 -   ($535           ($382         ($535
      ENTERPRISE VALUE                            $660.6      10.8 x- 13.4 x         $7,124 -  $8,857          $9,376       $11,675
                                                  -------                            ----------------------------------------------
                                                  -------     
       Add:  Cash and proceeds from options                                             526 -     526             526   -       526
       Less:  Total debt                                                              1,014 -   1,014           1,014   -     1,014
       PARTIOT EQUITY VALUE                                                          $6,636 -  $8,369          $8,888       $11,187
                                                                                     -----------------------------------------------
       Fully diluted shares outstanding                                               123.0 -   123.0           123.0   -    $123.0
       PATRIOT EQUITY VALUE / SHARE                                                  $53.13 -  $67.01          $72.26   -    $90.95
                                                                                     -----------------------------------------------
       Current share price                                                          $79.625 - $79.625         $79.625   -   $79.625
       PREMIUM (DISCOUNT) TO MARKET                                                  -33.3% -  -15.8%           -9.3%         14.2%
                                                                                     -----------------------------------------------
____________________________________________________________________________________________________________________________________

February 1994                                        SMITH BARNEY SHEARSON INC.                                          Page 9



CONFIDENTIAL                                                                                                         Project Voltage
____________________________________________________________________________________________________________________________________

Precedent Private Market Valuation
(Dollars expressed in millions, except per share)
                                                                   Private Market
                                                    1994E              EBITDA                         Private Market
                                                    EBITDA           Multiple Range                    Value Range
                                                  ----------     --------------------               --------------------
                                                                                           
  Entertainment
  Theatrical                                         $125.0        16.0 x  -   18.0 x                   $2,000  - $2,250
  Television                                           60.0        14.0    -   16.0                        840  -    960
  Stations and Networks
    TV Stations                                        65.0        10.0    -   12.0                        650  -    780
    Networks (50%) - Sci Fi                             0.0          NM    -     NM                         50  -     75
    Networks (50%) - USA                               50.0        16.0    -   20.0                        800  -  1,000
    MSG                                                24.0          NM    -     NM                        700  -  1,000
   Theatres                                            45.0        10.0    -   12.0                        450  -    540
   Theme Parks and others                              90.0         8.0    -   10.0                        720  -    900
                                                  ----------     --------------------               --------------------
     Total Entertainment                             $459.0        13.5    -   16.4                     $6,210  - $7,505


  Publishing
    Educational                                      $154.0        11.0    -   13.0                     $1,694  - $2,002
    Business, Technical & Professional                 25.0        10.0    -   13.0                        250  -    325
    Consumer                                           36.0        12.0    -   14.0                        432  -    504
    International                                      33.0        12.0    -   14.0                        396  -    462
    MacMillan                                          30.0        18.4    -   23.3                        552  -    700
                                                  ----------     --------------------               --------------------
      Total Publishing                               $278.0        12.0    -   14.4                     $3,324  - $3,993

  Corporate Expenses                                 ($76.4         5.0    -    7.0                     ($382   -  ($535

    ENTERPRISE VALUE                                 $660.6        13.9 x -    16.6 x                   $9,152  -$10,963
                                                  ----------                                        --------------------
                                                  ---------- 

      Add:  Cash and proceeds from options                                                                 526  -    526
      Less:  Total debt                                                                                  1,014  -  1,014
      PARTIOT EQUITY VALUE                                                                              $8,664  -$10,475
                                                                                                    --------------------
        Fully diluted shares outstanding                                                                 123.0  -  123.0

        PATRIOT EQUITY VALUE / SHARE                                                                    $69.37  - $83.87
         Current share price                                                                           $79.625  -$79.625
       PREMIUM (DISCOUNT) TO MARKET                                                                     -12.9%  -   5.3%


____________________________________________________________________________________________________________________________________

February 1994                                        SMITH BARNEY SHEARSON INC.                                      Page 10


CONFIDENTIAL                                                     Project Voltage
________________________________________________________________________________
Discounted Cash Flow Analysis - Patriot
(Dollars in millions, except per share data)




Discount                            Terminal Multiple of EBITDA
                                ------------------------------------    
 Rate                                14.0 x    15.0 x    16.0 x
- --------
  10.0%                            $79.57    $84.55    $89.53


  11.0%                             76.31     81.08     85.85


  12.0%                             73.22     77.79     82.35    

________________________________________________________________________________

February 1994                     SMITH BARNEY SHEARSON INC.          Page 11



                                TAB 4



CONFIDENTIAL                                                     Project Voltage

Pro Forma Summary

 
                                              Current Offer - Without        Voltage/Patriot/Block         Voltage/Patriot
                                                     CVR Payout                Without CVR Payout          Without CVR Payout
                                              --------------------------- ---------------------------  ---------------------------
                                                        Bl. Per                     Bl. Per                      Bl. Per
                                               Ratios    Share  Aggregate Ratios     Share  Aggregate   Ratios    Share  Aggregate
                                              -------   ------- --------- -------   ------- ---------  -------   ------- ---------
                                                                                              
Cash on front-end - $107                         --     $53.61   $6,592      --     $53.61   $6,592       --     $53.61   $6,592
Class B                                       0.93065    16.37    2,013   0.93065    16.37    2,013    0.93065    16.37    2,013
Preferred (Conv. - Current, Straight - New)   0.30408     6.07      933      --      --         --     0.35000     6.55    1,074
CVR ($36/37/38-48/51/55) $8 value             0.93065     3.25      400   0.93065     3.71      456    0.93065     3.71      456
Warrant ($60 strike price) $4 value           0.50000     1.00      123   0.50000     1.00       92    0.50000     1.00       92
Warrant ($70 strike price) $5 value              --       0.00        0   0.35000     0.75      123    0.35000     0.75      123
Subdebt                                          --       0.00        0   0.35000     8.73    1,074       --        --       --
                                                        ------  -------             ------  -------              ------  -------
  Total blended value                                   $80.29  $10,061             $84.17  $10,350              $81.98  $10,350
                                                        ======  =======             ======  =======              ======  =======

Pro forma stock price (b.)                           Summary Results            Summary Results             Summary Results
                                                     ---------------            ---------------             ---------------
1994 e                                                    $55.69                     $55.31                      $58.58
1995 e                                                     73.13                      72.74                       70.42
1996 e                                                     90.86                      90.26                       81.71
Cash flow per share
1994 e                                                     $3.17                      $3.15                       $3.21
1995 e                                                      3.98                       3.98                        3.74
1996 e                                                      4.80                       4.78                        4.27
Debt/EBITDA
1993 e                                                      5.56 x                     6.29 x                      6.53 x
1994 e                                                      3.51                       4.00                        4.44
1995 e                                                      2.59                       3.00                        3.81
1996 e                                                      1.79                       2.14                        3.18
EBITDA/Interest & preferred
1993 e                                                      2.47 x                     2.32 x                      2.09 x
1994 e                                                      3.90                       3.65                        2.76
1995 e                                                      4.91                       4.57                        3.15
1996 e                                                      6.21                       5.76                        3.60



(a.)  Under three-way scenario only
(b.)  Assumes 14x forward EBITDA multiple







February 1994                      SMITH BARNEY SHEARSON INC.           Page 12



                                TAB 5



CONFIDENTIAL                                                     Project Voltage

Pro Forma Summary

 
                                               Current Offer - With $10   Voltage/Patriot/Tackle-With    Voltage/Patriot - With
                                                 per share CVR Payout       $12 per share CVR Payout     $12 per share CVR Payout
                                              --------------------------- ---------------------------  ---------------------------
                                                        Bl. Per                     Bl. Per                      Bl. Per
                                               Ratios    Share  Aggregate Ratios     Share  Aggregate   Ratios    Share  Aggregate
                                              -------   ------- --------- -------   ------- ---------  -------   ------- ---------
                                                                                              
Cash on front-end - $107                         --     $53.61   $6,592      --     $53.61   $6,592       --     $53.61   $6,592
Class B                                       0.93065    16.37    2,013   0.93065    16.37    2,013    0.93065    16.37    2,013
Preferred (Conv. - Current, Straight - New)   0.30408     6.07      933      --        --       --     0.35000     6.55    1,074
CVR ($38-48/51/55) $7 value                   0.93065     3.25      400   0.93065     3.71      456    0.93065     3.71      456
Warrant ($60 strike price) $4 value           0.50000     1.00      123   0.50000     1.00       92    0.50000     1.00       92
Warrant ($70 strike price) $5 value              --       0.00        0   0.35000     0.75      123    0.35000     0.75      123
Subdebt                                          --       0.00        0   0.35000     8.73    1,074       --        --       --
                                                        ------  -------             ------  -------              ------  -------
  Total blended value                                   $80.30  $10,061             $84.17  $10,350              $81.98  $10,350
                                                        ======  =======             ======  =======              ======  =======

Pro forma stock price (b.)                           Summary Results            Summary Results             Summary Results
                                                     ---------------            ---------------             ---------------
1994 e                                                    $54.19                     $53.50                      $54.95
1995 e                                                     71.77                      71.13                       67.26
1996 e                                                     89.43                      88.57                       79.01
Cash flow per share
1994 e                                                     $3.17                      $3.15                       $3.21
1995 e                                                      3.92                       3.90                        3.61
1996 e                                                      4.74                       4.70                        4.15
Debt/EBITDA
1993 e                                                      5.56 x                     6.76 x                      6.53 x
1994 e                                                      3.51                       4.31                        4.44
1995 e                                                      2.82                       3.27                        4.26
1996 e                                                      1.99                       2.39                        3.60
EBITDA/Interest & preferred
1993 e                                                      2.47 x                     2.32 x                      2.09 x
1994 e                                                      3.90                       3.65                        2.76
1995 e                                                      4.52                       4.18                        2.85
1996 e                                                      5.68                       5.21                        3.24



(a.)  Under three-way scenario only
(b.)  Assumes 14x forward EBITDA multiple







February 1994                      SMITH BARNEY SHEARSON INC.           Page 13



CONFIDENTIAL                                                     Project Voltage

Pro Forma Summary

 
                                               Current Offer - With $10   Voltage/Patriot/Tackle-With    Voltage/Patriot - With
                                                 per share CVR Payout       $7 per share CVR Payout      $7 per share CVR Payout
                                              --------------------------- ---------------------------  ---------------------------
                                                        Bl. Per                     Bl. Per                      Bl. Per
                                               Ratios    Share  Aggregate Ratios     Share  Aggregate   Ratios    Share  Aggregate
                                              -------   ------- --------- -------   ------- ---------  -------   ------- ---------
                                                                                              
Cash on front-end - $107                         --     $53.61   $6,592      --     $53.61   $6,592       --     $53.61   $6,592
Class B                                       0.93065    16.37    2,013   0.93065    16.37    2,013    0.93065    16.37    2,013
Preferred (Conv. - Current, Straight - New)   0.30408     6.07      933      --        --      --      0.35000     6.55    1,074
CVR ($38-48/51/55) $7 value                   0.93065     3.25      400   0.93065     3.71      456    0.93065     3.71      456
Warrant ($60 strike price) $4 value           0.50000     1.00      123   0.50000     1.00       92    0.50000     1.00       92
Warrant ($70 strike price) $5 value              --       0.00        0   0.35000     0.75      123    0.35000     0.75      123
Subdebt                                          --       0.00        0   0.35000     8.73    1,074       --        --       --
                                                        ------  -------             ------  -------              ------  -------
  Total blended value                                   $80.30  $10,061             $84.17  $10,350              $81.98  $10,350
                                                        ======  =======             ======  =======              ======  =======

Pro forma stock price (b.)                           Summary Results            Summary Results             Summary Results
                                                     ---------------            ---------------             ---------------
1994 e                                                    $54.19                     $54.25                      $56.47
1995 e                                                     71.77                      71.80                       68.62
1996 e                                                     89.43                      89.27                       80.14
Cash flow per share
1994 e                                                     $3.17                      $3.15                       $3.21
1995 e                                                      3.92                       3.93                        3.67
1996 e                                                      4.74                       4.73                        4.20
Debt/EBITDA
1993 e                                                      5.56 x                     6.56 x                      6.92 x
1994 e                                                      3.51                       4.18                        4.72
1995 e                                                      2.82                       3.16                        4.08
1996 e                                                      1.99                       2.29                        3.43
EBITDA/Interest & preferred
1993 e                                                      2.47 x                     2.32 x                      2.09 x
1994 e                                                      3.90                       3.65                        2.76
1995 e                                                      4.52                       4.33                        2.97
1996 e                                                      5.68                       5.42                        3.38



(a.)  Under three-way scenario only
(b.)  Assumes 14x forward EBITDA multiple







February 1994                      SMITH BARNEY SHEARSON INC.           Page 14








                                          EXHIBIT - TAB 6











                                  VOLTAGE / PATRIOT / TACKLE



CONFIDENTIAL                                                                       Viacom/Tackle/Patriot            Project Voltage

Transaction Structure and Summary Assumptions                         MERGER WITH TACKLE?                   Yes      1
                                                                                                                 
(Dollars expressed in millions, except per share)                     Two-Tier Acquisition Structure          %        No. of Shares
Shares Issued in Merger     Class A   0.00000                         Percent of Patriot shares tendered    50.1%         61.6  
                            Class B   0.46439                         Back-end percentage                   49.9%         61.4  
                                                                                                            -----         ----
 Total Patriot Shares Outstanding, 
  Including Options                   123.0                                                                100.0%        123.0  
 Shares Issued to Patriot   Class A     0.0                         Purchase Price Per Share
                            Class B    57.1                           Current Stock Price - Patriot       $79.63
                                       ----
 Total common shares issued to Patriot 57.1                           Current Stock Price - Voltage                     Tackle
                                       ====
Uses of Funds                     $               %                      Class A                          $39.50        $27.63
   Purchase Price of Equity     $10,351         99.0%                    Class B                           35.25
   Refinancing of Existing Debt       0          0.0%                   Exchange Ratio
   Transaction Costs                100          1.0%                    Class A                           0.000
     Total Uses of Funds        $10,451        100.0%                    Class B - Common stock            0.464
Sources of Funds                                                        Consideration to Patriot 
                                                                            Shareholders                      $             %
                                                                                                          ------        -------
   Voltage Common Equity         $3,263         31.2%                    Class A                           $0.00           0.0%
    (incl. Tackle bridge)
   Straight preferred to                                                 Class B                           16.37          19.4%
     Patriot shareholders             0          0.0%                                                     ------        -------
   Convertible Debt to                                                        Total                        16.37          19.4%
     Patriot Shareholders             0          0.0%
   Convertible Capped Preferred                                          Straight preferred                 0.00           0.0%
     to Patriot Shareholders          0          0.0%
   Patriot excess cash                0          0.0%                    Tackle stock                       0.00           0.0%
   Additional financing               0          0.0%                    Cash Distribution Per Share       53.61          63.7%
     Senior Financing             3,562         34.1%                    CVR                                3.72           4.4%
     Subordinated Financing                                              Warrant                            1.75           2.1%
      and Subdebt to PCI          1,074         10.3%
   CVR                              457          4.4%                    Subdebt to Patriot                 8.73          10.4%
                                                                                                                        -------
   Warrant                          215          2.1%                      Total Purchase Price Per Shar   84.17          89.6%
   Convertible Preferred -                                               Premium to Current Market          5.7%        =======
                                                                                                          ======
     Strategic Investors          1,800         17.2%
   Paramount excerise of options     80          0.8%                    Purchase Price of Equity
                                -------        ------
     Total Sources of Funds     $10,451        100.0%                     Cash Distribution Per Share                   $53.61
                                =======        ======
Front end cash per share                          $107                    Stock Consideration Per Share-common           16.37
Second-Tier Exchange Ratio Analysis                                       Stock Consideration Per Share-convertible       0.00
   Target purchase price         $84.17                                   Total Shares Outstanding                       123.0
   Cash Component                $53.61                                   Aggregate Purchase Price - Cash               $6,592
   Class A exchange ratio -                                               Aggregate Purchase Price - Common Stock        2,013
    full deal                   0.00000
   Class B exchange ratio -                                               Aggregate Purchase Price - Straight Preferred      0
    full deal                   0.46439
   Straight preferred stock                   Per Share                   Aggregate Purchase Price - CVR                   457
    consideration - full deal     $0.00      Consideration
Implied back-end exchange ratio                                           Aggregate Purchase Price - Warrants              215
  Class A exchange ratio         0.00000          $0.00                   Aggregate Purchase Price - Subordinated debt    1074
  Class B exchange ratio         0.93065          32.81                   Aggregate Purchase Price - PIK Convertible Debt    0
  Tackle converted Class B stock 0.00000           0.00                   Aggregate Purchase Price - PIK Convertible Pref.   0
  Straight preferred stock ratio 0.00000           0.00                   Aggregate Purchase Price - PIK Straight Pref.      0
                                                                                                                       -------
  Sub. Debt Ratio                0.08715           4.36                    Total                                       $10,351
                                                                                                                       =======
  CVR                 0.00000    0.93065           7.45
  Warrants            0.30000    0.50000           3.50
Total Back-End Value                             $48.11


February 1994                 SMITH BARNEY SHEARSON INC.        Page 1




                                                                                   
CONFIDENTIAL                                                                       Viacom/Tackle/Patriot        Project Voltage
                                                                                                 
Summary Assumptions - Continued                                 Interest Rates
(Dollars expressed in millions, except per share)                Senior Term                               5.0%
Convertible Preferred - Strategic Investors                      Senior Notes (Existing Facilities)        4.0%
 Conversion price - Strategic Investors                  $70.00  Conv. Subordinated to Patriot             5.0% Subdebt 7 year  7.9%
 Implied fully-diluted shares issued (Class B)             25.7  Reinvestment Rate                         3.0% Subdebt 10 year 8.1%
Warrant strike price - Patriot                $70.00     $60.00  Convertible Preferred - Patriot           5.0%
Number of warrants issued                      18.41      30.68  Straight Preferred - Patriot              5.0%
Warrant proceeds, total                                  $3,129  Subordinated Debt - Patriot               8.0%
Preferred to Patriot:  Straight=0, Convertible=1              0  Convertible Preferred-Strategic investors 5.0%
Sub. debt to Patriot: Straight=0, Convertible=1               0  Convertible Capped Preferred - Patriot    6.5%
Convertible Preferred - Patriot
   Per Share Amount of Convertible Preferred              $0.00  Patriot/Viacom with Tackle as Equity Partner Only? No    0
   Current Class B stock price                            35.25  PIK Convertible Preferred issued to Tackle
   Liquidation value                                       4.00  Aggregate                                $0
   Total Patriot Shares Outstanding, Excl. Options        123.0  Conversion price, premium            $44.06   25.0%
         Purchase Price - Convertible Preferred              $0  Implied fully diluted shares (Class B)  0.0
   Conversion Price - Patriot                            $70.00  Dividend rate                         9.00%
   Total Convertible Shares Issued to Patriot               0.0
       Implied fully diluted shares (Class B)               0.0    Per share purchase price  Ratio       Price     Consideration
                                                                   Class A                   0.08000     $39.50       $3.16
TACKLE TRANSACTION SUMMARY                                         Class B(b.)               0.66544      35.25       23.46
                                                                                                                    -------
Sources and uses of funds                                                Total                                       $26.62
Uses of funds                                                      Current share price                               $27.63
  Purchase price of equity                               $6,584    Premium                                            -3.6%
  Transaction costs                                         100    Share Analysis
                                                         ------
    Total                                                $6,684    BV number of shares, excluding options 247.4   18.6 Total options
                                                         ======
                                                                   Implied number of shares issued to BV
Source of funds                                                               Class A                      19.8
   Voltage common equity                                 $6,584               Class B                     164.6
                                                                                                         ------
   Cash                                                     100    Total shares issued to BV              184.4
                                                         ------                                          ======
    Total                                                $6,684    Cash Infusion Analysis                        Class A   Class B
                                                         ======
                                                                   Aggregate cash from Tackle             $1,250        $0  $1,250
Goodwill Created                                                   Per share                                        $60.00  $55.00
  Purchase price of equity                               $6,584    Premium to market                                  51.9%   56.0%
  BV equity                                               2,415       Total shares                                     0.0    22.7
                                                         ------
      Goodwill                                           $4,169                                     Without Patriot With Patriot
                                                         ======
                                                                  "Temporary ownership"                  #       %      #       %
  Years of goodwill amortization                           40.0   Fully diluted voting shares            53.4    0.0%   53.4   0.0%
  Goodwill amortization                                  $104.2   Fully diluted economic shares(a.)     159.8   16.9%  229.8  13.6%
  Transaction cost amortization                            10.0   Mr. V ownership fully diluted voting   45.6   85.3%   45.6  85.3%
  Amortization of transaction costs                        10.0   Mr. V ownership fully diluted economic 92.1   57.6%   92.1  40.1%


(a.) "Without Patriot" includes $600 mm and $300 mm and "With Patriot" 
     includes $1.2 billion and $600 mm for Nynex and Blockbuster, respectively.
(b.  Could adjust pursuant to terms based upon the VCR.  Additional shares 
     issued if Class B share price falls between $36 and $40 by:  
     ($40 - share price)/$44.50).
Conversely, would decrease if share price rises to between $48 and $52 by:
(share price - $48)/$44.50.  Period begins from closing to 12 months thereafter.

February 1994                  SMITH BARNEY SHEARSON INC.       Page 2




CONFIDENTIAL                                                                       Viacom/Tackle/Patriot         Project Voltage

Summary Pro Forma Impact of Merger Transaction to Voltage
(Dollars expressed in millions, except per share)                          Patriot         Tackle                 Pro Forma
                                                                       --------------  ---------------  ----------------------------
                                              Voltage Stand Alone      Stand  At Deal  Stand   At Deal        % Increase/ (Decrease)
 Public Market Trading Impact                 Pre-Conv. Post-Con(1)    Alone   Price    Alone   Price   Total   Pre-Conv. Post-Conv.
                                             ---------  ----------     -----   ------  ------  -------  ----- ------------ ---------
                                                                                                      
   Market Capitalization (2)                   4,608     4,608         $9,941 $10,450  $7,347  $7,079  $13,205     186.6%    186.6%
   Adjusted Market Capitalization (3)          6,957     6,957         10,509  11,018   7,447   7,179   23,384     236.1%    236.1%
   Adjusted Market Capitalization/1993E EBITDA  12.4 x    12.4 x         24.7 x  25.9 x  16.3 x  15.8 x   15.9 x    28.0%     28.0% 
   Adjusted Market Capitalization/1994E EBITDA  11.6      11.6           16.3    17.1    11.4    11.0     10.7      -8.0%     -8.0%
   Market Capitalization/1993 Cash Flow (9)     13.8      13.8           22.7    23.8    24.8    23.9     18.7      35.6%     35.6%
   Market Capitalization/1994 Cash Flow (9)     13.5      14.3           20.9    22.0    15.8    15.2     11.3     -15.8%    -20.8%
 Operating Performance/Size
   1994E Revenue                              $2,227    $2,227         $5,225  $5,225  $3,319  $3,319  $10,771     383.7%    383.7%
   1994E EBITDA (4)                              600       600            645     645     653     653    2,192     265.4%    265.4%
   1994E Net Income (4)                          161       141            318     318     357     357      438     172.2%    211.4%
   1994E Cash Flow (4)                           342       322            480     480     465     465    1,164     240.2%    261.6%
 Leverage Impact
   EBITDA/Net Interest             LTM           3.5 x     5.0 x          5.5 x   5.5 x    NM      NM      2.6 x   -27.7%    -48.7%
                                  1993           3.6       5.1            6.3     6.3      NM      NM      2.7     -24.9%    -46.7%
                                  1994 (4)       4.3       6.4            9.2     9.2      NM      NM      4.0      -6.1%    -36.5%
   EBITDA/Net Interest & Pref.    1993           3.6       3.6            6.3     6.3      NM      NM      2.3     -36.0%    -36.0%
                                  1994 (4)       4.3       4.3            9.8     9.8      NM      NM      3.6     -15.5%    -15.5%
   Debt/EBITDA (8)                 LTM           4.6       2.9            1.2     1.2     1.5     1.5      6.1      31.7%    112.1%
                                  1993           4.2       2.6            2.4     2.4     1.1     1.1      6.3      48.7%    139.2%
                                  1994           3.7       2.3            1.5     1.5     0.8     0.8      4.0       7.5%     77.3%
   Debt & Preferred/EBITDA (8)    1993           4.2       4.2            2.4     2.4     1.1     1.1      7.1      67.7%     67.7%
                                  1994 (4),(5)   3.7       3.8            1.5     1.5     0.8     0.8      4.5      22.2%     21.1%
   Total Debt/Capitalization                   71.9%      44.7%          18.5%   18.5%   41.9%   41.9%    46.1%    -35.9%      3.2%
   12/31/93E Total Debt                       $2,373    $1,473         $1,014  $1,014    $490    $490   $9,763     311.4%    562.9%
 Dilution (1)1993E E.P.S.(5)-fully diluted     $1.35     $1.11          $2.38   $2.38   $0.91   $0.91    $0.16     -87.8%    -85.2%
   1994E E.P.S. - fully diluted                 1.32      1.15           2.55    2.55    1.34    1.34     1.19     -10.3%      2.7%
   1995E E.P.S. - fully diluted                 1.75      1.58           2.79     2.79   1.71    1.71     1.88       7.2%     18.8%
   1993E Cash flow per share-fully diluted      2.78      2.54           3.63     3.63   1.11    1.11     1.92     -31.0%    -24.5%
   1994E Cash flow per share-fully diluted      2.81      2.65           3.91     3.91   1.75    1.75     3.15      12.2%     19.2%
   1995E Cash flow per share-fully diluted      3.44      3.27           4.20     4.20   2.28    2.28     3.98      15.6%     21.6%
   1993E EBITDA                                 $560      $560           $425     $425   $456    $456     $438     -21.9%    -21.9%
   1994E EBITDA                                  600       600            645      645    653     653      652       8.7%      8.7%
   1995E EBITDA                                  695       695            696      696    836     836      785      13.0%     13.0%
(1) The Post-Convert. figures relate to the issuance of $900 convertible preferred to strategic investors
(2) Market capitalization defined as share price multiplied by shares outstanding.
(3) Adjusted  market capitalization equals market capitalization plus total  debt less  cash and equivalent.
(4) Figures include projected synergies.                                           
(5) Management ownership includes all options.                            
(6) Convertible preferred ownership stand-alone as if transaction does not occur.
(7) Figure provided to demonstrate trailing  dilution. Patriot figures adjusted for December year end.
(8) Pro  forma multiples  - 65%  of balance  sheet cash  is backed-out  of the  debt figure
(9)  Patriot '93 and '94 stand alone cash flow:  $438 and $475


February 1994                 SMITH BARNEY SHEARSON INC.         Page 3







CONFIDENTIAL                       Viacom/Tackle/Patriot        Project Voltage
Debt Covenant Analysis
(Dollars expressed in millions, except per share)
                                                           W/ McM
                                                           ------
   LTM EBITDA
       Paramount (Incl. McMillan)                             560
       Voltage                                                560
       Tackle                                                 328
                                                           ------

   Total                                                    1,448
   Existing debt
       Patriot                                              1,014
       Viacom                                               2,606
       Tackle (including equity bridge)                     1,740
                                                           ------
   Total existing debt                                      5,360

   Plus:  cash paid to Paramount shareholders               6,592
   Plus:  transaction costs                                   200
   Plus:  Subordinated debt to Paramount shareholders         503
   Less:  convertible preferred from strategic investors   (1,800)
   Less:  debt repayment                                        0
   Less: Option proceeds, use of Tackle cash                 (180)
   Less: Tackle bridge                                     (1,250)
                                                           ------
   Gross debt                                               9,425
   Cash
       Patriot                                                446
       Viacom                                                  48
       Tackle                                                 390
                                                           ------
   Total                                                      884

   65% of total cash                                          575
   Net debt, with 65% total cash                            8,850
   Convertible preferred                                    1,200
   Net debt and conv. pfd., with 65% total cash            10,050

   Gross interest expense                                    $565
   Preferred dividends (convertible and/or straight)
       Strategic investors                                     60
      Patriot                                                   0
                                                           ------
        Total convertible preferred dividends                  60
   DEBT/EBITDA, w/ 65% total cash                            6.11 x
   DEBT & PREFERRED/EBITDA, w/ 65% total cash                6.94
   EBITDA/Net interest                                       2.56
   EBITDA/Net interest + preferred dividends                 2.32

February 1994                SMITH BARNEY SHEARSON INC.         Page 4



                                                                                                                 
CONFIDENTIAL                                                                        Viacom/Tackle/Patriot           Project Voltage

Ownership Summary                                                            Voltage Stand-Alone
                                                                           -----------------------
(Dollars expressed in millions, except per share)                      Pre-Convertible       Post-Convertible        Pro Forma
                                                                       ---------------       ----------------        ---------
                                                                                                        
VOLTAGE   Total Voltage Shareholders Ownership                           Shares  Percentage  Shares  Percentage   Shares  Percentage
                                                                         ------  ----------  ------  ----------   ------  ----------
           Primary                                                       120.5    100.0%     120.5    100.0%      120.5      33.3%  
           Fully diluted                                                 124.3    100.0%     124.3     90.6%      124.3      27.9%
           Total Voltage Shareholders Voting 
            Primary                                                       53.4    100.0%      53.4    100.0%       53.4      73.0%
            Fully diluted                                                 53.4    100.0%      53.4    100.0%       53.4      71.5%

           Management ownership - Primary
            Voting                                                        45.6     85.3%      45.6     85.3%       45.6      62.3%
            Economic                                                      95.9     77.2%      95.9     77.2%       95.9      26.5%

           Management ownership - Fully diluted
            Voting                                                        45.6     85.3%      45.6     85.3%       45.6      61.0%
            Economic                                                      99.7     80.2%      99.7     72.7%       99.7      22.4%

           Mr. Voltage ownership - Fully diluted
            Voting                                                        45.6      85.3%     45.6     85.3%       45.6      61.0%
            Economic                                                      92.1      74.1%     92.1     67.2%       92.1      20.7%

STRATEGIC  Nynex Convertible Preferred @ $600 mm stand alone and $1200 mm pro forma
INVESTORS   Voting                                                         0.0       0.0%      0.0      0.0%        0.0       0.0%
            Fully diluted                                                  0.0       0.0%      8.6      6.2%       17.1       3.8%

           Blockbuster Convertible Preferred @ $0 mm stand alone and $0 mm pro forma
            Voting                                                         0.0       0.0%      0.0      0.0%        0.0       0.0%
            Fully diluted                                                  0.0       0.0%      4.3      3.1%        0.0       0.0%

           New strategic investment  holder - either common or convertible holders
            Voting                                                         0.0       0.0%      0.0      0.0%        0.0       0.0%
            Economic                                                       0.0       0.0%      0.0      0.0%        0.0       0.0%

TACKLE AS  Tackle ownership - Primary
MERGER      Voting                                                         0.0       0.0%      0.0      0.0%        19.8     27.0%
PARTNER     Economic                                                       0.0       0.0%      0.0      0.0%       184.4     50.9%

          Tackle ownership - Fully diluted (excludes convert. preferred)
           Voting                                                          0.0       0.0%      0.0      0.0%        21.3     28.5%
           Economic                                                        0.0       0.0%      0.0      0.0%       198.3     44.5%



      TACKLE FULLY DILUTED SHARES

Non-employee options               $26.50           4.0
Employee options                    12.92          14.6
Exchange ratio                  CL A              0.080
                                CL B              0.665

Implied options                 CL A                1.5
                                CL B               12.4
Calculation of dilutive options:
 Option proceeds                                   $294
 Current share price                             $27.63
Implied dilutive options - pre trans.               8.0
Post-transaction dilutive options:                  5.9

   Onwership Analysis Continued on Next Page


February 1994                           SMITH BARNEY SHEARSON INC.                                    Page 5



                                                                                                                 
CONFIDENTIAL                                                                        Viacom/Tackle/Patriot           Project Voltage

Ownership Analysis - Continued                                               Voltage Stand-Alone
                                                                            ----------------------
(Dollars expressed in millions, except per share)                      Pre-Convertible       Post-Convertible        Pro Forma
                                                                       ---------------       ----------------        ---------
                                                                                                        
                                                                        Shares  Percentage  Shares  Percentage   Shares   Percentage
                                                                        ------  ----------  ------  ----------   ------   ----------
PATRIOT      Patriot management - fully diluted
              Voting                                                       0.0         0.0%    0.0        0.0%      0.0     0.0%
              Economic                                                     0.0         0.0%    0.0        0.0%      0.0     0.0%
             Patriot convertible preferred and subdebt, including Convertible Capped Preferred
              Voting                                                       0.0         0.0%    0.0        0.0%      0.0     0.0%
              Fully diluted                                                0.0         0.0%    0.0        0.0%      0.0     0.0%

             Patriot warrants
              Voting                                                       0.0         0.0%    0.0        0.0%      0.0     0.0%
              Fully diluted                                                0.0         0.0%    0.0        0.0%     49.1    11.0%

             Patriot shareholders voting, includes management
              Primary                                                      0.0         0.0%    0.0        0.0%      0.0     0.0%
              Fully diluted                                                0.0         0.0%    0.0        0.0%      0.0     0.0%

             Total Patriot shareholders economic, including convertible preferred holders, excluding warrants
              Primary                                                      0.0         0.0%    0.0        0.0%     57.1     15.8%
              Fully diluted                                                0.0         0.0%    0.0        0.0%     57.1     12.8%

             Total pro forma primary shares - economic                   120.5       100.0%  120.5      100.0%    362.0    100.0%
             Total pro forma fully diluted shares - economic             124.3       100.0%  137.1      100.0%    445.9    100.0%
             Total pro forma primary shares - voting                      53.4       100.0%   53.4      100.0%     73.2    100.0%
             Total pro forma fully diluted shares - voting                53.4       100.0%   53.4      100.0%     74.7    100.0%

February 1994                          SMITH BARNEY SHEARSON INC.                                                   Page 6







CONFIDENTIAL                                                                       Viacom/Tackle/Patriot        Project Voltage
Implied Pro Forma Stock Price - Viacom
(Dollars expressed in millions, except per share)

                                                                              Projected
                                   -------------------------------------------------------------------------------------------------
                                     1993     1994     1995     1996     1997     1998     1999     2000    2001     2002     2003
                                   -------------------------------------------------------------------------------------------------
                                                                                            
 Total EBITDA pro forma             $1,471   $2,192   $2,640   $3,108   $3,519   $3,929   $4,394   $4,923  $5,524    6,209    6,989
 Synergies included in EBITDA            0      234      350      456      544      600      663      735     817      911     1018
 Capitalization adjustments
 Total debt                          9,763    9,281    8,434    7,173    5,639    3,893    2,288    2,138   2,138    1,692    1,516
 Convertible preferred               1,200    1,200    1,200    1,200    1,200   1,200     1,200    1,200   1,200    1,200    1,200
 Less:  warrant proceeds 
      (total)                       (3,129)  (3,129)  (3,129)  (3,129)  (3,129) (3,129)   (3,129)  (3,129) (3,129)  (3,129)  (3,129)
 Less:  cash                          (784)    (784)    (784)    (784)    (784)   (784)     (784)    (784)   (784)    (784)    (784)
                                   -------------------------------------------------------------------------------------------------
  Total capitalization 
     adjustments                     7,049    6,568    5,721    4,460    2,925   1,179      (426)    (576)   (576)  (1,022)   1,198)
 Total shares outstanding - 
     primary                         362.0    362.0    362.0    362.0    362.0   362.0     362.0    362.0   362.0    362.0    362.0
 Total shares outstanding - 
     fully diluted                   445.9    445.9    445.9    445.9    445.9   445.9     445.9    445.9   445.9    445.9    445.9

 Implied stock price - 
     post transaction         10.0x $11.93   $32.21   $46.22   $61.72   $75.06  $88.16   $102.19  $114.39 $127.87  $144.23  $162.11
                              11.0   15.80    37.98    53.17    69.30    82.95   96.97    112.05   125.43  140.26   158.15   177.79
                              11.6   18.13    41.45    57.34    73.53    87.68  102.25    117.96   132.05  147.69   166.50   187.19
                              12.0   19.68    43.76    60.11    76.32    90.84  105.78    121.90   136.47  152.65   172.07   193.46
                              12.9   23.16    48.95    65.90    82.59    97.94  113.71    130.77   146.40  163.80   184.61   207.57
                              13.0   23.55    49.53    66.55    83.29    98.73  114.59    131.76   147.51  165.04   186.00   209.14
                              13.4   25.10    51.84    69.12    86.08   101.89  118.11    135.70   151.92  169.99   191.57   215.41
                              14.0   27.42    55.31    72.74    90.26   106.63  123.40    141.61   158.55  177.43   199.92   224.81
                              15.0   31.30    61.00    78.66    97.23   114.52  132.21    151.46   169.59  189.82   213.85   240.48
                              15.1   31.68    61.53    79.26    97.93   115.31  133.09    152.45   170.69  191.06   215.24   242.05
                              15.5   33.23    63.67    81.62   100.72   118.46  136.62    156.39   175.11  196.01   220.81   248.32
                              16.0   35.17    66.34    84.58   104.20   122.41  141.02    161.32   180.63  202.21   227.77   256.16
 Blended A&B Exchange Ratio          0.464 x  0.464 x  0.464 x  0.464 x  0.464 x 0.464 x   0.464 x  0.464 x 0.464 x  0.464 x  0.464x
 Payment per share, excl. common    $67.34   $67.34   $67.34   $67.34   $67.34  $67.34    $67.34   $67.34  $67.34   $67.34   $67.34
 Implied valuation per share - 
     Paramount                10.0x $72.88   $82.29   $88.80   $96.00  $102.19 $108.28   $114.79  $120.46 $126.72  $134.31  $142.62
                              11.0   74.67    84.98    92.03    99.52   105.86  112.37    119.37   125.58  132.47   140.78   149.90
                              11.6   75.75    86.58    93.97   101.49   108.06  114.82    122.12   128.66  135.93   144.66   154.27
                              12.0   76.47    87.66    95.25   102.78   109.52  116.46    123.95   130.71  138.23   147.25   157.18
                              12.9   78.09    90.07    97.94   105.69   112.82  120.14    128.07   135.33  143.40   153.07   163.73
                              13.0   78.27    90.34    98.24   106.02   113.19  120.55    128.52   135.84  143.98   153.71   164.46
                              13.4   78.99    91.41    99.44   107.31   114.65  122.19    130.35   137.89  146.28   156.30   167.37
                              14.0   80.07    93.02   101.12   109.25   116.85  124.64    133.10   140.97  149.73   160.18   171.74
                              15.0   81.87    95.66   103.87   112.49   120.52  128.74    137.68   146.09  155.49   166.65   179.02
                              15.1   82.05    95.91   104.14   112.81   120.88  129.14    138.13   146.60  156.06   167.29   179.74
                              15.5   82.77    96.91   105.24   114.11   122.35  130.78    139.96   148.66  158.36   169.88   182.66
                              16.0   83.67    98.15   106.62   155.73   124.18  132.83    142.25   151.22  161.24   173.11   186.29

February 1994                                          SMITH BARNEY SHEARSON INC.                                     Page 7





CONFIDENTIAL                                    Viacom/Tackle/Patriot          Project Voltage

Summary of Refinancing of Existing Debt and New Borrowings
(Dollars expressed in millions, except per share)
                                                                   Existing
                                                                     Debt         Amount         New
   Voltage                                                       (12/31/93E)    Refinanced    Borrowings     Pro Forma
                                                                                                      
     Notes Payable to Banks                                        $1,923            $0         $3,562         $5,485
     11.8% Senior Subordinated Notes Due 1998                           0             0              0              0
     9.125% Senior Subordinated Notes Due 1999                        150             0              0            150
     8.75% Senior Subordinated Reset Notes Due 2001                   100             0              0            100
     10.25% Senior Subordinated Notes Due 2001                        200             0              0            200
     5.75% Convertible Subordinated Debentures Due 2001                 0             0              0              0
     Current Maturities                                                 0             0              0              0
                                                                   ------        ------         ------         ------
   Total Viacom                                                     2,373             0          3,562          5,935

   Tackle                                                           1,740             0              0          1,740
                                                                   ------        ------         ------         ------
       Total                                                       $4,113            $0         $3,562         $7,675
   Patriot
     8.5% Notes Due 1996 (1)                                           $0            $0             $0             $0
     5.875% Notes Due 2000                                            150             0              0            150
     7.5% Debentures Due 2023                                         150             0              0            150
     7.5% Notes Due 2002                                              246             0              0            246
     8.25% Senior Debentures Due 2022                                 247             0              0            247
     7% Subordinated Debentures Due 2003                              176             0              0            176
     Other Notes, 8.22% (1)                                             4             0              0              4
     Capital Leases (1)                                                41             0              0             41
     Current Maturities                                                 0             0              0              0
                                                                   ------        ------         ------         ------
                                                                   $1,014            $0             $0         $1,014

   New Borrowings
   (Excluding Voltage borrowing on existing credit facilities)

   Convertible PIK debt - Patriot                                      $0                           $0             $0
   Sub. debt to Patriot                                                --            --         $1,074         $1,074
   Other                                                               --            --              0              0
                                                                   ------        ------         ------         ------
   TOTAL                                                           $5,127            $0         $4,636         $9,763
                                                                   ======        ======         ======         ======


   (1) Estimated.

February 1994                 SMITH BARNEY SHEARSON INC.              Page 8



CONFIDENTIAL                                                                       Viacom/Tackle/Patriot        Project Voltage
1993E and 1994E Pro Forma Combined Income Statement Comparison
(Dollars expressed in millions, except per share)

                                                  1993 Stand-Alone     Proforma     1994 Stand-Alone       Proforma
                                                Pre-Conv.  Post-Conv.    1993     Pre-Conv.   Post-Conv.     1994
                                                                                          
   Revenue           Voltage                      $2,008     $2,008      $2,008     $2,227       $2,227      $2,227
                     Patriot (1)                       -          -       4,691          -            -       5,225
                     Tackle                            -          -       2,317                               3,319
                                                  ------      ------     ------     ------       ------      ------
                       Total                       2,008      2,008       9,016      2,227        2,227      10,771

   EBITDA            Voltage                         560        560         560        600          600         600
                     Patriot (1)                       -          -         425          -            -         645
                     Tackle                            -          -         456          -            -         653
                     McM                               -          -          30          -            -          60
                     Patriot Synergies (2)             -          -           0          -            -         134
                     BV synergies                      -          -           0          -            -         100
                                                  ------     ------      ------     ------       ------      ------
                       Total                         560        560       1,471        600          600       2,192

                   Depreciation and Amortization
                     Voltage                         172        172         172        181          181         181
                     Patriot                           -          -         145          -            -         162
                     Tackle                            -          -          54                                 108
                     Transaction Goodwill (3)          -          -         275          -            -         275
                                                  ------     ------      ------     ------       ------      ------
                       Total                         172        172         647        181          181         727
                   EBIT                              388        388         824        419          419       1,466

                   Net Interest Expense (2)          155        110         541        139           94         541
                   Other Expense (Income)            (62)       (62)        (95)        (1)          (1)        (34)
                                                  ------     ------      ------     ------       ------      ------
                     Pre Tax Income                  295        340         377        281          326         959
                   Taxes (2)                         127        155         250        126          147         467
                   Preferred dividends                 0         45          60          0           45          60
                   Equity in Earnings of 
                     Affiliated Companies             (7)        (7)         (7)         6            6           6
                                                  ------     ------      ------     ------       ------      ------
                       Net Income                   $162       $134         $61       $161         $141        $438
                                                  ======     ======      ======     ======       ======      ======
                   Leverage Ratios
                   EBITDA/Net Interest Expense      3.62x      5.10x       2.72x      4.31x        6.38x       4.05x
                   EBITDA/Net interest plus 
                     preferred                      3.62       3.62        2.45       4.31         4.31        3.65
                   EBITDA/Senior and subordinated   3.62       5.10        2.60       3.69         5.10        3.88
                   EBITDA/Senior, subordinated 
                     and pref.                      3.62       3.62        2.35       3.69         3.69        3.51
                   Debt/EBITDA                      4.24x      2.63x       6.29x      3.72x        2.26x       4.00x
                   Debt + Preferred/EBITDA          4.24       1.75        7.11       3.72         1.90        4.55


   (1) Patriot adjusted for a December year end.
   (2) See attached pages for detailed calculations. 1993 figure includes pro 
       forma interest expense on $0.00 cash payment to Patriot shareholders.
   (3) Amortization period:     40years   Figure includes capitalized 
       transaction costs which are amortized over ten years.
   (4) Includes early redemption expense on Voltage debt in years 1995 and 1997.

February   1994          SMITH BARNEY SHEARSON INC.                    Page 9



CONFIDENTIAL                       Viacom/Tackle/Patriot                       Project Voltage

Pro Forma Combined Income Statement
(Dollars expressed in millions, except per share)

                                                                       Proforma
                                     -----------------------------------------------------------------------------
   Revenue                            1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                     -----   -----   -----   -----   -----   ------  ------  ------- ------  -------
                                                                            
                     Voltage          $2,227  $2,541  $2,857  $3,079  $3,383  $3,711  $4,085  $4,514  $5,005  $5,569
                     Patriot (1)       5,225   5,573   5,946   6,344   6,770   7,227   7,715   8,238   8,799   9,399
                     Tackle            3,319   3,979   4,806   5,609   6,450   7,418   8,531   9,810  11,282  12,974
                                      ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
                       Total          10,771  12,093  13,609  15,032  16,604  18,355  20,331  22,562  25,085  27,942

   EBITDA            Voltage             600     695     814     921   1,033   1,162   1,310   1,480   1,675   1,899
                     Patriot (1)         645     696     750     809     871     938   1,010   1,087   1,170   1,260
                     Tackle (5)          653     836   1,021   1,175   1,352   1,554   1,788   2,056   2,364   2,719
                     McM                  60      63      66      69      73      77      80      84      89      93
                     Patriot  
                       synergies (2)     134     150     171     216     223     229     236     243     251     259
                     Tackle synergies    100     200     285     328     377     434     499     574     660     759
                                      ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
                       Total           2,192   2,640   3,108   3,519   3,929   4,394   4,923   5,524   6,209   6,989

   D & A             Voltage             181     205     229     246     269     294     323     355     393     436
                     Patriot             162     172     184     196     209     223     238     254     271     289
                     Tackle              108     153     186     166     190     219     252     290     333     383
                     Goodwill (3)        275     275     275     275     275     275     275     275     275     275
                                      ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
                       Total             727     806     874     883     945   1,012   1,088   1,175   1,273   1,384
                                      ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
   EBIT                                1,466   1,834   2,233   2,636   2,984   3,382   3,834   4,349   4,936   5,605


   Net Interest Expense (2)              541     517     480     408     339     238     144      69     (13)   (131)
   Other Expense (Income) (3)            (34)    (42)    (51)    (64)    (74)    (85)    (97)   (112)   (128)   (147)
                                      ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
     Pre Tax Income                      959   1,359   1,805   2,292   2,719   3,229   3,787   4,392   5,077   5,883

   Taxes (2)                             467     621     790     977   1,142   1,340   1,557   1,792   2,058   2,373
   Preferred dividends                    60      60      60      60      60      60      60      60      60      60
   Equity  - Affiliated Companies          6      16      27      37      48      48      48      48      48      48
                                      ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
       Net Income                       $438    $693    $981  $1,292  $1,564  $1,876  $2,218  $2,588  $3,006  $3,498
                                      ======  ======  ======  ======  ======  ======  ======  ======  ======  ======
   Leverage Ratios
   EBITDA/Net Interest Expense          4.05x   5.10x   6.47x   8.62x  11.59x  18.47x  34.12x     NMx     NMx     NMx
   EBITDA/Net interest + pref.          3.65    4.57    5.76    7.52    9.85   14.75   24.10   42.88   131.01     NM
   EBITDA/Senior and sub.               3.88    4.88    6.17    8.15   10.84   16.81   27.16   32.04    36.01  52.36
   EBITDA/Senior, sub., & pref.         3.51    4.39    5.51    7.16    9.30   13.67   20.41   42.88   131.01     NM
   Debt/EBITDA                          4.00x   3.00x   2.14x   1.46x   0.86x   0.40x   0.33x   0.29x    0.19x  0.14x
   Debt + Preferred/EBITDA              4.55    3.46    2.53    1.80    1.17    0.68    0.57    0.51     0.38   0.32


   (1) Patriot adjusted for a December year end.
   (2) See attached pages for detailed calculations. 1993 figure includes pro 
       forma interest expense on $53.61 cash payment to Patriot shareholders.
   (3) Amortization period:  40 years   Figure includes capitalized transaction 
       costs which are amortized over ten years.  Tackle also included.
   (4) Includes early redemption expense on Voltage debt in years 1995 and 1997.
   (5)  Internal projections through 1997.  10% growth thereafter

February   1994             SMITH BARNEY SHEARSON INC.                  Page 10




CONFIDENTIAL                                    Viacom/Tackle/Patriot                    Project Voltage

1993E and 1994E Pro Forma E.P.S. Dilution Comparison
(Dollars expressed in millions, except per share)

                                                    1993 Stand-Alone     Proforma     1994 Stand-Alone     Proforma
                                                   Pre-Conv.  Post-Conv.    1993     Pre-Conv.  Post-Conv.    1994
                                                                                           
   Primary E.P.S.
   Stand alone net income                            $162        $134      $162       $161       $141        $438

   Pro forma net income                                 -           -        61          -          -         438
   Plus: after tax cost of debt redemption              -           -         0          -          -           0
                                                   ------      ------    ------     ------     ------      ------
     Adjusted net income                              162         134        61        161        141         438

   Primary shares                                   120.5       120.5     369.1      121.7      121.7       369.1

   Primary E.P.S.                                   $1.35       $1.11     $0.16      $1.32      $1.15       $1.19

   Accretion / (dilution) - Primary E.P.S.          -87.8%      -85.2%        -      -10.3%       2.7%          -

   Fully-Diluted E.P.S.
   Pro forma adjusted net income                     $162        $134       $61       $161       $141        $438
   Plus preferred dividends                             0          45        60          0         45          60
   Plus after tax cost of convertible debt              0           0         0          0          0           0
                                                   ------      ------    ------     ------     ------      ------
      Adjusted net income                             162         179       121        161        186         498

   Primary shares                                   120.5       120.5     369.1      121.7      121.7       369.1
   Plus net warrants under treasury method (a.)         0           0         0          0          0           0
   Plus convertible pref. and sub. shares               0        12.9      17.1          0       12.9        17.1
                                                   ------      ------    ------     ------     ------      ------
       Adjusted shares                              120.5       133.4     386.3      121.7      134.6       386.3
   Implied E.P.S.                                   $1.35       $1.34     $0.31      $1.32      $1.38       $1.29
       Dilutive ?                                      No          No        No         No         No          No
   Implied fully-diluted E.P.S.                     $1.35       $1.11     $0.16      $1.32      $1.15       $1.19

   Accretion/(dilution) to proforma E.P.S.          -87.8%      -85.2%        -      -10.3%       2.7%          -





(a.)  Assumes pro forma stock price at 14x multiple

February  1994     SMITH BARNEY SHEARSON INC.                          Page 11



CONFIDENTIAL                                    Viacom/Tackle/Patriot                Project Voltage

E.P.S. Dilution Analysis
(Dollars expressed in millions, except per share)
                                                                          Proforma
                                      1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                      ----------------------------------------------------------------------------
                                                                                 
   Primary E.P.S.
   Stand alone net income - 
     (pre strategic convert.)          $161    $213    $285    $353    $422    $490    $569    $660    $765    $885
   Pro forma net income                 438     693     981   1,292   1,564   1,876   2,218   2,588   3,006   3,498
   Plus: after tax cost of debt 
     redemption                           0       1       0       2       0       0       0       0       0       0

                                     ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
     Adjusted net income                438     694     981   1,294   1,564   1,876   2,218   2,588   3,006   3,498

   V Stand-alone shares outstanding   121.7   121.7   121.7   121.7   121.7   121.7   121.7   121.7   121.7   121.7
   Plus shares issued to Patriot       57.1    57.1    57.1    57.1    57.1    57.1    57.1    57.1    57.1    57.1
   Plus shares issued to Tackle       184.4   184.4   184.4   184.4   184.4   184.4   184.4   184.4   184.4   184.4
   Plus dilutive Patriot securities 
     (latest 10-Q)                      0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0
   Plus dilutive Tackle securities 
     (latest 10-Q)                      5.9     5.9     5.9     5.9     5.9     5.9     5.9     5.9     5.9     5.9
   Plus shares issued to common 
     equity holder                      0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0
   Plus shares converted from 
     Convertible Capped Preferred       0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0     0.0
                                     ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
        Pro forma shares 
          outstanding - primary       369.1   369.1   369.1   369.1   369.1   369.1   369.1   369.1   369.1   369.1
   V stand-alone E.P.S.               $1.32   $1.75   $2.34   $2.90   $3.47   $4.03   $4.68   $5.42   $6.28   $7.28
   Pro forma E.P.S.                   $1.19   $1.88   $2.66   $3.51   $4.24   $5.08   $6.01   $7.01   $8.14   $9.48
   Accretion / (dilution) - 
     Primary E.P.S.                   -10.3%    7.2%   13.4%   20.9%   22.2%   26.2%   28.5%   29.2%   29.6%   30.3%
   Fully-Diluted E.P.S.
   Pro forma adjusted net income        438     694     981   1,294   1,564   1,876   2,218   2,588   3,006   3,498
   Plus preferred dividends              60      60      60      60      60      60      60      60      60      60
   Plus after tax cost of 
     convertible debt                     0       0       0       0       0       0       0       0       0       0
                                     ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
      Adjusted net income               498     754   1,041   1,354   1,624   1,936   2,278   2,648   3,066   3,558

   Pro forma primary shares           369.1   369.1   369.1   369.1   369.1   369.1   369.1   369.1   369.1   369.1
   Plus net warrants under 
     treasury method (a.)               0.0     6.1    14.4    19.7    23.7    27.0    29.4    31.5    33.4    35.2
   Plus convertible pref. shares       17.1    17.1    17.1    17.1    17.1    17.1    17.1    17.1    17.1    17.1
                                     ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
       Adjusted shares                386.3   392.4   400.7   406.0   410.0   413.3   415.6   417.7   419.7   421.5
   Implied E.P.S.                     $1.29   $1.92   $2.60   $3.34   $3.96   $4.69   $5.48   $6.34   $7.30   $8.44
       Dilutive ?                        No      No     Yes     Yes     Yes     Yes     Yes     Yes      Yes    Yes
   Implied fully-diluted E.P.S.       $1.19   $1.88   $2.60   $3.34   $3.96   $4.69   $5.48   $6.34   $7.30   $8.44
   Stand-alone fully-diluted 
     shares outstanding               121.7   121.7   121.7   121.7   121.7   121.7   121.7   121.7   121.7   121.7
   V stand-alone fully-diluted E.P.S. 
     - (pre strategic convert.)       $1.32   $1.75   $2.34   $2.90   $3.47   $4.03   $4.68   $5.42   $6.28   $7.28
   Accretion/(Dilution) - 
     Fully-diluted E.P.S.            -10.3%     7.2%   10.9%   15.1%   14.3%   16.3%   17.2%   16.9%   16.2%   16.0%
   V stand-alone net income - 
     with preferred                   $141     $193    $264    $331    $400    $466    $543    $632    $735    $853
   V stand-alone fully-diluted E.P.S.
     - (post strategic 
     convert.)(b.)                   $1.15    $1.58   $2.17   $2.72   $3.28   $3.83   $4.46   $5.19   $6.04   $7.01
   Accretion/(Dilution) - 
     Fully-diluted E.P.S.              2.7%    18.8%   19.6%   22.5%   20.6%   22.3%   22.8%   22.0%   21.0%   20.4%


(a.) Assumes pro forma stock price at 14x multiple
(b.) The Post-Convert. figures relate to the issuance of $900 convertible 
     preferred to strategic investors

February  1994     SMITH BARNEY SHEARSON INC.                          Page 12



CONFIDENTIAL                                    Viacom/Tackle/Patriot               Project Voltage

1993E and 1994E Pro Forma Cash Flow Dilution Comparison
(Dollars expressed in millions, except per share)
                                           1993 Stand-Alone             Proforma        1994 Stand-Alone           Proforma
                                         Pre-Conv.   Post-Conv.           1993        Pre-Conv.  Post-Conv.          1994
                                                                                                 
   Primary Cash Flow Per Share           
   Cash flow                                  $335         $306            $707            $342        $322          $1,164
   Primary C.F.P.S.                          $2.78        $2.54           $1.92           $2.81       $2.65           $3.15

   Accretion/(Dilution) C.F.P.S. - primary   -31.0%       -24.5%              -            12.2%       19.2%

   Fully-diluted Cash Flow Per Share
   Cash flow excluding preferred dividends    $335         $351             $767           $342        $322          $1,224
   Primary shares plus convert. pref. shares 120.5        133.4            386.3          121.7       134.6             386
   Implied cash flow per share               $2.78        $2.63            $1.99          $2.81       $2.39           $3.17
      Dilutive?                                 No           No               No             No         Yes              No
   Implied fully-diluted cash flow per share $2.78        $2.54            $1.92          $2.81       $2.65           $3.15

   Accretion/(dilution) to proforma cash 
     flow                                    -31.0%       -24.5%              -            12.2%       19.2%              -


                                                                            Proforma
                                      1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                      ----------------------------------------------------------------------------
                                                                                
   Primary Cash Flow Per Share
   Voltage stand-alone cash flow  - 
     (pre strategic convert.)         $342     $419     $515    $599   $691   $785   $892    $1,016  $1,158   $1,321
   Pro forma cash flow               1,164    1,500    1,856   2,178  2,509  2,888  3,306     3,762   4,279    4,882
   Voltage stand-alone C.F.P.S.      $2.81    $3.44    $4.23   $4.92  $5.68  $6.45  $7.33     $8.34   $9.51   $10.86
   Voltage pro forma C.F.P.S.         3.15     4.06     5.03    5.90   6.80   7.82   8.96     10.19   11.59    13.23
   Accretion/(Dilution) C.F.P.S. - 
     primary                          12.2%    18.1%    18.9%   19.8%  19.6%  21.4%  22.2%     22.1%   21.9%   21.8%

   Fully-diluted Cash Flow Per Share
   Pro forma cash flow excluding 
     pref. dividends and after tax 
     cost of pref.debt             $1,224     $1,560  $1,916  $2,238 $2,569 $2,948 $3,366    $3,822  $4,339   $4,942
   Primary shares plus convert. 
     pref. shares                   386.3      392.4   400.7   406.0  410.0  413.3  415.6     417.7   419.7    421.5
   Implied cash flow per share      $3.17      $3.98   $4.78   $5.51  $6.26  $7.13  $8.10     $9.15  $10.34   $11.73
      Dilutive?                        No        Yes     Yes     Yes    Yes    Yes    Yes       Yes     Yes      Yes
   Implied fully-diluted cash 
     flow per share                 $3.15      $3.98   $4.78   $5.51  $6.26  $7.13  $8.10     $9.15  $10.34   $11.73

   Stand-alone cash flow per 
     share - (pre strategic 
     convert.)                       $2.81     $3.44   $4.23   $4.92  $5.68  $6.45  $7.33     $8.34   $9.51   $10.86
   Accretion/(Dilution) C.F.P.S. 
     fully-diluted                    12.2%     15.6%   13.0%   12.0%  10.3%  10.6%  10.5%      9.7%    8.7%    8.0%
   Stand-alone net income - 
     (post strategic convert.)        $322      $398    $494    $578   $669   $761   $866      $988  $1,128   $1,289
   Stand-alone cash flow per share - 
     (post strategic convert.)       $2.65     $3.27   $4.00   $4.63  $5.31  $5.99  $6.77     $7.67   $8.71    $9.91
   Accretion/(Dilution) C.F.P.S. 
     fully-diluted                    19.2%     21.6%   19.4%   19.1%  18.0%  19.1%  19.6%     19.2%   18.6%   18.3%



February 1994     SMITH BARNEY SHEARSON INC.                          Page 13



CONFIDENTIAL                                  Viacom/Tackle/Patriot                      Project Voltage

EBITDA and Synergy Analysis
(Dollars expressed in millions, except per share)
                              Proforma                                    Proforma
                              1993    1994    1995     1996    1997     1998     1999     2000    2001     2002     2003
                              ------------------------------------------------------------------------------------------
                                                                                   
   EBITDA
   Voltage                     $560    $600    $695    $814    $921   $1,033   $1,162   $1,310   $1,480   $1,675   $1,899
   Patriot                      425     645     696     750     809      871      938     1010     1087     1170     1260
   Tackle                       456     653     836    1021    1175     1352     1554     1788     2056     2364     2719
   Synergies                      0     234     350     456     544      600      663      735      817      911     1018
                             ------  ------  ------  ------  ------   ------   ------   ------   ------   ------   ------
       Total                  1,471   2,192   2,640   3,108   3,519    3,929    4,394    4,923    5,524    6,209    6,989

   Voltage % of combined adj. 
     market capitalization     29.7%   29.7%   29.7%   29.7%   29.7%    29.7%    29.7%    29.7%    29.7%    29.7%    29.7%
   Implied pro forma EBITDA 
     ownership value            438     652     785     924   1,047    1,169    1,307    1,464    1,643    1,847    2,079
   Stand alone EBITDA           560     600     695     814     921    1,033    1,162    1,310    1,480    1,675    1,899

   Percent increase/
     (decrease)               -21.9%    8.7%   13.0%   13.6%   13.7%    13.2%    12.5%    11.8%    11.1%   10.3%      9.5%


   Synergy Analysis
   Cash flow per share stand 
     alone - post convert     $2.54   $2.65   $3.27   $4.00   $4.63    $5.31    $5.99    $6.77   $7.67    $8.71    $9.91
   Cash flow per share 
     pro forma                 1.92    3.15    3.98    4.78    5.51     6.26     7.13     8.10    9.15    10.34    11.73
     Implied difference per 
       share                  $0.62  ($0.51) ($0.71) ($0.78) ($0.88)  ($0.96)  ($1.15)  ($1.33) ($1.48)  ($1.62)  ($1.81)
   Pro forma shares 
     outstanding              369.1   369.1   392.4   400.7   406.0    410.0    413.3    415.6   417.7    419.7    421.5

     Implied after tax cash 
       flow to breakeven        230    (188)   (277)   (311)   (359)    (392)    (474)    (552)   (617)    (681)    (764)

   Implied cash flow to 
      breakeven - pre tax       373    (302)   (447)   (502)   (580)    (635)    (767)    (895) (1,001)  (1,106)  (1,242)
   Estimated synergies            0     134     150     171     216      223      229      236     243      251      259

     Implied total synergies 
       needed for cash flow 
       breakeven                373    (168)   (297)   (330)   (364)    (412)    (538)    (659)   (758)    (856)    (984)



(a.)  Based on adjusted market value divided by market value

February  1994      SMITH BARNEY SHEARSON INC.                        Page 14




CONFIDENTIAL                                    Viacom/Tackle/Patriot                    Project Voltage

Income Tax Calculation and Pro Forma Combined Cash Flow Statement
(Dollars expressed in millions, except per share)         
                                   Proforma                             Proforma
                                   1993    1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                  -------------------------------------------------------------------------------------
                                                                                   
   Income Tax Calculation
   Stand Alone Pre Tax Income
     Patriot                       $456    $490    $536    $586    $640    $700    $764    $835    $912    $996  $1,088
     Voltage                        295     281     359     462     564     669     791     932   1,094   1,281   1,496
     Tackle                         383     560     715     889   1,094   1,258   1,447   1,664   1,913   2,200   2,530
   Stand Alone Tax Rate
     Patriot                       35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%
     Voltage                       45.5%   45.0%   45.0%   44.0%   44.0%   44.0%   44.0%   44.0%   44.0%   44.0%   44.0%
      Tackle                       36.8%   36.8%   36.8%   36.8%   36.8%   36.8%   36.8%   36.8%   36.8%   36.8%   36.8%

   Weighted Pro Forma Combined 
     Tax Rate                      38.3%   37.9%   38.0%   38.0%   38.1%   38.2%   38.2%   38.3%   38.4%   38.5%   38.5%

   Pro Forma Combined Pre Tax 
     Income                        $377    $959  $1,359  $1,805  $2,292  $2,719  $3,229  $3,787  $4,392  $5,077  $5,883
   Plus: Transaction Goodwill 
     Amortization                   275     275     275     275     275     275     275     275     275     275     275
                                 ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
     Adjusted Pre Tax Income       $653  $1,234  $1,634  $2,080  $2,567  $2,994  $3,504  $4,063  $4,667  $5,352  $6,159

     Implied Income Tax - GAAP     $250    $467    $621    $790    $977  $1,142  $1,340  $1,557  $1,792  $2,058  $2,373


   Pro Forma Cash Flow Statement
   Sources of Funds
     Net Income                            $438    $693    $981  $1,292  $1,564  $1,876  $2,218  $2,588  $3,006  $3,498
     Depreciation and amortization          727     806     874     883     945   1,012   1,088   1,175   1,273   1,384
     PIK dividends and/or PIK interest 
       expense                                0       0       0       0       0       0       0       0       0       0
     Cash margin on Showtime movies (1)      32      32      32      32      32      32      32      32      32      32
     Deferred taxes and other                28     (63)      7      (0)    (22)    (22)    (29)    (37)    (47)    (58)
                                         ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
       Total Sources                      1,224   1,468   1,894   2,207   2,519   2,898   3,309   3,757   4,263   4,855

   Uses of Funds
     Capital expenditures                  $552   $371     $400    $416    $463    $516    $576    $644    $721    $809
     Common dividends                         0       0       0       0       0       0       0       0       0       0
     Change in working capital               80      99      70     114     127     139     153     168     185     205
     Other and capitalization of 
       pre-publication costs                110     151     163     142     182     192     210     230     253     279
                                         ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
       Total Uses                           743     621     633     672     772     846     938   1,042   1,160   1,293
                                         ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
   Total Cash Flow Before Debt Service     $481    $847  $1,261  $1,534  $1,746  $2,052  $2,371  $2,715  $3,104  $3,562

   Term Debt Service Requirement              0    (100)      0    (150)      0       0    (150)      0    (446)   (176)
                                         ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
     Cash Flow Available for Repayment 
       of Revolver                         $481    $747  $1,261  $1,384  $1,746  $2,052  $2,221  $2,715  $2,658  $3,386

   Cash Flow Used for Repayment of 
     Revolver                              $481    $747  $1,261  $1,384  $1,746  $1,605      $0      $0      $0      $0

     Cash flow accumulated                   $0      $0      $0      $0      $0    $447  $2,221  $2,715  $2,658  $3,386



   (1) Tax effected difference between operating and cash flow margin on 
       Patriot movies which are shown on Showtime.

February  1994     SMITH BARNEY SHEARSON INC.                         Page 15




CONFIDENTIAL                                    Viacom/Tackle/Patriot                    Project Voltage

Debt Amortization Schedule
(Dollars expressed in millions, except per share)
                                   Proforma                             Proforma
                                   1993    1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                  -------------------------------------------------------------------------------------
                                                                                   

   Voltage
     11.8% Senior Subordinated 
       Notes Due 1998               $0      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
     9.125% Senior Subordinated 
       Notes Due 1999              150     150     150     150       0       0       0       0       0       0       0
     8.75% Senior Subordinated 
       Reset Notes Due 2001        100     100       0       0       0       0       0       0       0       0       0
     10.25% Senior Subordinated 
       Notes Due 2001              200     200     200     200     200     200     200     200     200       0       0
     5.75% Convertible Subordinated 
       Debentures Due 2001           0       0       0       0       0       0       0       0       0       0       0
     Current Maturities              0       0       0       0       0       0       0       0       0       0       0
                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
       Total                      $450    $450    $350    $350    $200    $200    $200    $200    $200      $0      $0

   Patriot  
     8.5% Notes Due 1996 (1)        $0      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
     7.5% Notes Due 2002           246     246     246     246     246     246     246     246     246       0       0
     8.25% Senior Debentures 
       Due 2022                    247     247     247     247     247     247     247     247     247     247     247
     5.875% Notes Due 2000         150     150     150     150     150     150     150       0       0       0       0
     7.5% Debentures Due 2023      150     150     150     150     150     150     150     150     150     150     150
     7% Subordinated Debentures 
       Due 2003                    176     176     176     176     176     176     176     176      176    176       0
     Other Notes, 8.22% (1)          4       4       4       4       4       4       4       4        4      4       4
     Capital Leases (1)             41      41      41      41      41      41      41      41      41      41      41
     Current Maturities              0       0       0       0       0       0       0       0       0       0       0
                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
                                 1,014   1,014   1,014   1,014   1,014   1,014   1,014     864     864     618     442
   Notes Payable to Banks       $7,225  $6,743  $5,996  $4,735  $3,351  $1,605      $0      $0      $0      $0      $0

   New Borrowings
   Sub. debt to Patriot         $1,074  $1,074  $1,074  $1,074  $1,074  $1,074  $1,074  $1,074  $1,074  $1,074  $1,074
   Other                             0       0       0       0       0       0       0       0       0       0       0
   PIK Convertible debt - 
     Patriot                         0       0       0       0       0       0       0       0       0       0       0
      Plus:  PIK interest expense    0       0       0       0       0       0       0       0       0       0       0
                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
   Ending - Convertible debt - 
     Patriot                         0       0       0       0       0       0       0       0       0       0       0

   Cumulative Cash Balance        $784    $784    $784    $784    $784    $784  $1,231  $3,453  $6,168  $8,825  $12,211
     TOTAL DEBT                 $9,763  $9,281  $8,434  $7,173  $5,639  $3,893  $2,288  $2,138  $2,138  $1,692   $1,516
     NET DEBT                   $8,979  $8,497  $7,650  $6,389  $4,855  $3,108  $1,057 ($1,315)($4,030)($7,133)($10,695)
   Convertible preferred 
     - Patriot                       0       0       0       0       0       0       0       0       0       0       0
   Preferred - Patriot               0       0       0       0       0       0       0       0       0       0       0
   Convertible preferred - 
     strategic investors         1,200   1,200   1,200   1,200   1,200   1,200   1,200   1,200   1,200   1,200   1,200
   Convertible Capped Preferred      0       0       0       0       0       0       0       0       0       0       0
   Perpetual preferred               0       0       0       0       0       0       0       0       0       0       0
   PIK Convertible preferred         0       0       0       0       0       0       0       0       0       0       0
     Plus:  dividends                0       0       0       0       0       0       0       0       0       0       0
                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
   Ending balance                    0       0       0       0       0       0       0       0       0       0       0
   PIK Straight preferred            0       0       0       0       0       0       0       0       0       0       0
     Plus:  dividends                0       0       0       0       0       0       0       0       0       0       0
                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
   Ending balance                    0       0       0       0       0       0       0       0       0       0       0
   TOTAL DEBT AND PREFERRED    $10,963 $10,481  $9,634   $8,373  $6,839  $5,093 $3,488  $3,338   $3,338 $2,892  $2,716




February  ,1994               SMITH BARNEY SHEARSON INC.                Page 16




CONFIDENTIAL                                         Viacom/Tackle/Patriot               Project Voltage

Pro Forma Interest Expense
(Dollars expressed in millions, except per share)
                                                                                    Proforma
                                                   1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                                                                            
   Voltage
     11.8% Senior Subordinated Notes Due 1998     $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
     9.125% Senior Subordinated Notes Due 1999    14      14      14      14      14       0       0       0       0       0
     8.75% Senior Subordinated Reset Notes 
       Due 2001                                    9        9      9       0       0       0       0       0       0       0
     10.25% Senior Subordinated Notes Due 2001    21       21     21      21      21      21      21      21      21       0
     5.75% Convertible Subordinated Debentures 
       Due 2001                                    0        0      0       0       0       0       0       0       0       0
     Current Maturities                            0        0      0       0       0       0       0       0       0       0
                                               -----    -----  -----   -----   -----   -----   -----   -----   -----   -----
       Total                                     $43      $43    $43     $34     $34     $21     $21     $21     $21      $0

   Patriot  
     8.5% Notes Due 1996 (1)                      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
     7.5% Notes Due 2002                          18      18      18      18      18      18      18      18      18       0
     5.875% Notes Due 2000                         9       9       9       9       9       9       9       0       0       0
     7.5% Debentures Due 2023                     11      11      11      11      11      11      11      11      11      11
     8.25% Senior Debentures Due 2022             20      20      20      20      20      20      20      20      20      20
     7% Subordinated Debentures Due 2003          12      12      12      12      12      12      12      12      12      12
     Other Notes, 8.22% (1)                        0       0       0       0       0       0       0       0       0       0
     Capital Leases (1)                            3       3       3       3       3       3       3       3       3       3
     Current Maturities                            0       0       0       0       0       0       0       0       0       0
                                               -----    -----  -----   -----   -----   -----   -----   -----   -----   -----
                                                 $75      $75    $75     $75     $75     $75     $75     $66     $66     $48

   Notes Payable to Banks                        361      337    300     237     168      80       0       0       0       0

   New Borrowings
   Sub. debt to Patriot                           86       86     86      86      86      86      86      86      86       86
   Other                                           0       0       0       0       0       0       0       0       0       0
   Subordinated debt                               0       0       0       0       0       0       0       0       0       0
   Investment Income                             (24)    (24)    (24)    (24)    (24)    (24)    (37)   (104)   (185)   (265)
                                               -----    -----  -----   -----   -----   -----   -----   -----   -----   -----
     TOTAL INTEREST EXPENSE (INCOME)            $541     $517   $480    $408    $339    $238    $144     $69    ($13)  ($131)
                                               =====    =====  =====   =====   =====   =====   =====   =====   =====   =====

   Total dividend calculation
   Convertible preferred - Patriot                 0       0       0       0       0       0       0       0       0       0
   Preferred - Patriot                             0       0       0       0       0       0       0       0       0       0
   Convertible preferred - Strategic investors    60      60      60      60      60      60      60      60      60      60
   Perpetual preferred                             0       0       0       0       0       0       0       0       0       0
   Convertible capped preferred                    0       0       0       0       0       0       0       0       0       0
   PIK convertible preferred                       0       0       0       0       0       0       0       0       0       0
   PIK straight preferred                          0       0       0       0       0       0       0       0       0       0
                                               -----    -----  -----   -----   -----   -----   -----   -----   -----   -----
       Total dividends                            60      60      60      60      60      60      60      60      60      60
      TOTAL INTEREST EXPENSE AND DIVIDENDS      $601    $577    $540    $468    $399    $298    $204    $129     $47    ($71)
      TOTAL CASH INTEREST EXPENSE AND DIVIDENDS  601     577     540     468     399     298     204     129      47     (71)



February  1994 SMITH BARNEY SHEARSON INC.                           Page 17







CONFIDENTIAL                                         Viacom/Tackle/Patriot               Project Voltage

Pro Forma Balance Sheet
(Dollars expressed in millions, except per sh     Patriot                                                 Tackle
                                                           Adj.    Patriot      Voltage                        Tackle
Assets                      Voltage    Patriot    McM     Patriot    Merger     Pro forma            Tackle     Merger    PRO 
Current Assets            (12/31/93E (10/31/93E Adjmts (10/31/93E   Adjmts.    Pre  Tackle        (12/31/93E   Adjmts.   FORMA
                                                                                               
 Cash and equivalents          $48        $998  ($552)     $446       $0          $494                $390      (100)    $784
 Receivables                   402       1,055            1,055        0         1,458                 131              1,589
 Inventory                     295         625              625        0           920                 296              1,216
 Prepaid expenses               97         213              213        0           309                 180                489
 Other                          14         369              369        0           384                  71                455
                            ------      ------           ------   ------       -------              ------    ------  -------
  Total                        857       3,260            2,708        0         3,565               1,068      (100)   4,533
 PP&E                          894       1,519            1,519        0         2,413                  NA                 NA
 Less: A/D                    (374)       (389)            (389)       0          (763)                 NA                 NA
                            ------      ------           ------   ------       -------              ------    ------  -------
  Net PP&E                     520       1,130            1,130        0         1,650                 903              2,553

 Net assets of McM               0           0    552       552        0           552                                    552
 Goodwill                    2,110       1,460            1,460    6,044         9,613                 815     4,169   14,598
 Investments in affiliates      52         229              229        0           281               1,850    (1,850)     281
 Other                         851       1,463            1,463      100         2,414                 323       100    2,837
                            ------      ------           ------   ------       -------              ------    ------  -------
  Total Assets              $4,391      $7,542           $7,542   $6,144       $18,076              $4,959    $2,319  $25,354
                            ======      ======           ======   ======       =======              ======    ======  =======
Liabilities and Equity
Current Liabilities
  Current maturities            $0          $0               $0       $0            $0                  $0                 $0
  Accounts payable              77         155              155        0           232                 509                741
  Accrued expenses             429       1,198            1,198        0         1,627                  99              1,726
  Other                        471         139              139        0           610                   0                610
                            ------      ------           ------   ------       -------              ------            -------
   Total                       977       1,492            1,492        0         2,469                 608              3,077
Long term debt               2,373       1,014            1,014    3,562         6,949               1,740              8,689
Sub. debt to Paramount           0           0                0    1,074         1,074                   0         0    1,074
Other long term liabilities    116         786              786        0           902                 196              1,098
Convertible debt - Patriot       0           0                0        0             0                   0                  0
Convertible preferred-Patriot    0           0                0        0             0                   0         0        0
Straight Preferred - Patriot     0           0                0        0             0                   0         0        0
PIK Convertible debt - Patriot   0           0                0        0             0                   0                  0
PIK Convertible preferred - 
 Patriot                         0           0                0        0             0                   0                  0
PIK Straight preferred Patriot   0           0                0        0             0                   0                  0

New finacing

PIK Convertible preferred        0           0                0        0             0                   0                  0
Convertible Capped Preferred - 
 Strategic                       0           0                0        0             0                   0                  0
Convertible preferred - 
 Strategic investors             0           0                0    1,800         1,800                   0      (600)   1,200
Perpetual preferred - 
 Strategic investors             0           0                0        0             0                   0                  0
Common equity                  925       4,250            4,250     (292)        4,883               2,415     2,919   10,217
                            ------      ------           ------   ------       -------              ------    ------  -------
 Total Liabilities and 
  Equity                    $4,391      $7,542           $7,542   $6,144       $18,076              $4,959    $2,319  $25,355
                            ======      ======           ======   ======       =======              ======    ======  =======


February  1994                      SMITH BARNEY SHEARSON INC.         Page 18








                                  VOLTAGE / PATRIOT


 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                Project Voltage

Transaction Structure and Summary Assumptions                         MERGER WITH TACKLE?                   No      0
(Dollars expressed in millions, except per share)                     Two-Tier Acquisition Structure          %        No. of Shares
                                                                                                             ---       -------------
                                                                                                          
Shares Issued in Merger     Class A   0.00000                         Percent of Patriot shares tendered     50.1%         61.6
                            Class B   0.46439                         Back-end percentage                    49.9%         61.4  
 Total Patriot Shares Outstanding,                                                                           -----         ----
  Including Options                     123.0                                                               100.0%        123.0  
 Shares Issued to Patriot     Class A     0.0                         Purchase Price Per Share
                              Class B    57.1                           Current Stock Price - Patriot        $79.63
                                         ----
 Total common shares issued to Patriot   57.1                           Current Stock Price - Voltage                       Tackle
                                         ====
Uses of Funds                           $         %                      Class A                             $39.50       $27.63
                                      -------  ------
   Purchase Price of Equity           $10,351   99.0%                    Class B                              35.25
   Refinancing of Existing Debt             0    0.0%                   Exchange Ratio
   Transaction Costs                      100    1.0%                    Class A                              0.000
                                      -------  ------
     Total Uses of Funds              $10,451  100.0%                    Class B - Common stock               0.464
                                      =======  ======
Sources of Funds                                                        Consideration to Patriot Shareholders   $             %
                                                                                                              -----          ----
   Voltage Common Equity               $3,263   31.2%                    Class A                              $0.00          0.0%
    (incl. Tackle bridge)
   Straight preferred to                1,074   10.3%                    Class B                              16.37         20.0%
     Patriot shareholders                                                                                     -----         -----
   Convertible Debt to                      0    0.0%                         Total                           16.37         20.0%
     Patriot Shareholders
   Convertible Capped Preferred             
     to Patriot Shareholders                0    0.0%                    Straight preferred                    6.55          8.0%
   Patriot excess cash                      0    0.0%                    Tackle stock                          0.00          0.0%
   Additional financing                     0    0.0%                    Cash Distribution Per Share          53.61         65.4%
     Senior Financing                   3,562   34.1%                    CVR                                   3.72          4.5%
     Subordinated Financing
      and Subdebt to PCI                    0    0.0%                    Warrant                               1.75          2.1%
   CVR                                    457    4.4%                    Subdebt to Patriot                    0.00          0.0%
                                                                                                                           ------
   Warrant                                215    2.1%                      Total Purchase Price Per Share     81.99        100.0%
   Convertible Preferred -                                                                                                 ======
     Strategic Investors                1,800   17.2%                    Premium to Current Market              3.0%
                                                                                                                ====
   Paramount exercise of options           80    0.8%                    Purchase Price of Equity
                                      -------  ------
     Total Sources of Funds           $10,451  100.0%                     Cash Distribution Per Share         $53.61
                                      =======  ======
Front end cash per share                        $107                    Stock Consideration Per Share-common   16.37
Second-Tier Exchange Ratio Analysis                                     Stock Consideration Per
                                                                          Share-convertible                     6.55
   Target purchase price               $81.99                             Total Shares Outstanding             123.0
   Cash Component                      $53.61                             Aggregate Purchase Price - Cash     $6,592
   Class A exchange ratio -
    full deal                          0.00000                            Aggregate Purchase Price -
                                                                            Common Stock                       2,013
   Class B exchange ratio -                                               Aggregate Purchase Price - 
    full deal                          0.46439                              Straight Preferred                 1,074
   Straight preferred stock              $6.55       Per Share            Aggregate Purchase Price - CVR         457
    consideration - full deal                      Consideration
Implied back-end exchange ratio                    -------------          Aggregate Purchase Price - Warrants    215
  Class A exchange ratio               0.00000    $0.00                   Aggregate Purchase Price - 
                                                                            Subordinated debt                      0
  Class B exchange ratio               0.93065    32.81                   Aggregate Purchase Price - 
                                                                            PIK Convertible Debt                   0
  Tackle converted Class B stock       0.00000     0.00                   Aggregate Purchase Price - 
                                                                            PIK Convertible Pref.                  0
  Straight preferred stock ratio       0.35000    13.13                   Aggregate Purchase Price -
                                                                            PIK Straight Pref.                     0
                                                                                                             -------
  Sub. Debt Ratio                      0.00000     0.00                    Total                             $10,351
                                                                                                             =======
  CVR                       0.00000    0.93065     7.45
  Warrants                  0.30000    0.50000     3.50
Total Back-End Value                             $56.88



February 1994                  SMITH BARNEY SHEARSON INC.             Page 1



 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                Project Voltage

Summary Assumptions - Continued                                 Interest Rates
                                                                                                        
(Dollars expressed in millions, except per share)                Senior Term                               5.0%
Convertible Preferred - Strategic Investors                      Senior Notes (Existing Facilities)        4.0%
 Conversion price - Strategic Investors                  $70.00  Conv. Subordinated to Patriot             5.0% Subdebt 7 year  7.9%
 Implied fully-diluted shares issued (Class B)             25.7  Reinvestment Rate                         3.0% Subdebt 10 year 8.1%
Warrant strike price - Patriot                $70.00     $60.00  Convertible Preferred - Patriot           5.0%
Number of warrants issued                      18.41      30.68  Straight Preferred - Patriot              5.0%
Warrant proceeds, total                                  $3,129  Subordinated Debt - Patriot               8.0%
Preferred to Patriot:  Straight=0, Convertible=1              0  Convertible Preferred-Strategic investors 5.0%
Sub. debt to Patriot: Straight=0, Convertible=1               0  Convertible Capped Preferred - Patriot    6.5%
Convertible Preferred - Patriot
   Per Share Amount of Convertible Preferred              $6.55  Patriot/Viacom with Tackle as Equity Partner Only? No    0
   Current Class B stock price                            35.25  PIK Convertible Preferred issued to Tackle
   Liquidation value                                       4.00  Aggregate                           $0
   Total Patriot Shares Outstanding, Excl. Options        123.0  Conversion price, premium       $44.06   25.0%
         Purchase Price - Convertible Preferred          $1,074   Implied fully diluted shares
                                                                     (Class B)                      0.0
   Conversion Price - Patriot                            $70.00  Dividend rate                    9.00%
   Total Convertible Shares Issued to Patriot               0.0
       Implied fully diluted shares (Class B)               0.0    Per share purchase
                                                                      price           Ratio       Price     Consideration
                                                                                     -------     ------     -------------
                                                                   Class A           0.08000     $39.50       $3.16
TACKLE TRANSACTION SUMMARY                                         Class B(b.)       0.66544      35.25       23.46
                                                                                                             ------
Sources and uses of funds                                                Total                               $26.62
Uses of funds                                                      Current share price                       $27.63
  Purchase price of equity                               $6,584    Premium                                    -3.6%
  Transaction costs                                         100    Share Analysis
                                                         ------
    Total                                                $6,684    BV number of shares, 
                                                         ======       excluding options            247.4       18.6 Total options
                                                                   Implied number of shares
                                                                      issued to BV
Source of funds                                                               Class A               19.8
   Voltage common equity                                 $6,584               Class B              164.6
                                                                                                   -----
   Cash                                                     100    Total shares issued to BV       184.4
                                                         ------                                    =====
    Total                                                $6,684    Cash Infusion Analysis                    Class A     Class B
                                                         ======                                              ------      -------
                                                                   Aggregate cash from Tackle      $1,250        $0      $1,250
Goodwill Created                                                   Per share                                 $60.00      $55.00
  Purchase price of equity                               $6,584    Premium to market                          51.9%       56.0%
                                                                                                              -----       -----
  BV equity                                               2,415       Total shares                              0.0       22.7
                                                         ------
      Goodwill                                           $4,169                                     Without Patriot   With Patriot
                                                         ======   "Temporary ownership"               #       %      #       %
  Years of goodwill amortization                           40.0   Fully diluted voting shares         53.4    0.0%   53.4   0.0%
  Goodwill amortization                                  $104.2   Fully diluted economic shares(a.)  159.8   16.9%  229.8  13.6%
  Transaction cost amortization                            10.0   Mr. V ownership fully 
                                                                     diluted voting                   45.6   85.3%   45.6  85.3%
  Amortization of transaction costs                        10.0   Mr. V ownership fully
                                                                     diluted economic                 92.1   57.6%   92.1  40.1%
(a.) "Without Patriot" includes $600 mm and $300 mm and "With Patriot"
     includes $1.2 billion and $600 mm for Nynex and Blockbuster, respectively.
(b.) Could adjust pursuant to terms based upon the VCR.  Additional shares 
     issued if Class B share price falls between $36 and $40 by:  
     ($40 - share price)/$44.50).
Conversely, would decrease if share price rises to between $48 and $52 by:
(share price - $48)/$44.50.  Period begins from closing to 12 months thereafter.



February 1994                  SMITH BARNEY SHEARSON INC.             Page 2




 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                Project Voltage

Summary Pro Forma Impact of Merger Transaction to Voltage
(Dollars expressed in millions, except per share)                 Patriot            Tackle                  Pro Forma
                                                               ---------------   ---------------      -----------------------
                                   Voltage Stand Alone         Stand   At Deal   Stand   At Deal      % Increase / (Decrease)
                                   -------------------                                                -----------------------
 Public Market Trading Impact    Pre-Conv.  Post-Con.(1)       Alone   Price     Alone    Price     Total Pre-Conv.   Post-Conv.
                                 ---------  -------------      -----   -----     -----    -----     ---------------   ----------
                                                                                           
Market Capitalization (2)          $4,608     $4,608           $9,941  $10,178   $7,347   $7,079     $7,871   70.8%       70.8%
Adjusted Market Capitalization (3)  6,957      6,957           10,509   10,746    7,447    7,179     17,200  147.2%      147.2%
Adjusted Market Capitalization/
  1993E EBITDA                       12.4 x     12.4 x          24.7 x    25.3 x  16.3 x   15.8 x    16.9 x  36.4%       36.4%
Adjusted Market Capitalization/
  1994E EBITDA                       11.6       11.6            16.3      16.7    11.4     11.0      12.0     3.1%        3.1%
Market Capitalization/
  1993 Cash Flow (9)                 13.8       13.8            22.7      23.2    24.8     23.9      19.7    43.0%       43.0%
Market Capitalization/
  1994 Cash Flow (9)                 13.5       14.3            20.9      21.4    15.8     15.2      12.2    -9.7%      -15.1%
   Operating Performance/Size
                1994E Revenue      $2,227     $2,227          $5,225  $  5,225  $3,319   $3,319    $7,452   234.6%      234.6%
                1994E EBITDA (4)      600        600             645       645     653      653     1,439   139.9%      139.9%
                1994E Net Income (4)  161        141             318       318     357      357       144   -10.7%        2.1%
                1994E Cash Flow (4)   342        322             480       480     465      465       648    89.2%      101.1%
   Leverage Impact
   EBITDA/Net Interest   LTM          3.5 x      5.0 x           5.5 x     5.5 x    NM       NM       2.9 x -19.4%      -42.9%
                        1993          3.6        5.1             6.3       6.3      NM       NM       2.7   -25.6%      -47.2%
                        1994 (4)      4.3        6.4             9.2       9.2      NM       NM       3.8   -11.6%      -40.2%
EBITDA/Net Interest
  & Pref.               1993          3.6        3.6             6.3       6.3      NM       NM       2.1   -42.2%      -42.2%
                        1994 (4)      4.3        4.3             9.8       9.8      NM       NM       2.8   -36.0%      -36.0%
Debt/EBITDA (8)          LTM          4.6        2.9             1.2       1.2     1.5      1.5       5.6    20.9%       94.8%
                        1993          4.2        2.6             2.4       2.4     1.1      1.1       6.5    54.3%      148.3%
                        1994          3.7        2.3             1.5       1.5     0.8      0.8       4.4    19.2%       96.7%
Debt & Preferred/
   EBITDA (8)           1993          4.2        4.2             2.4       2.4     1.1      1.1       9.4   120.9%      120.9%
                        1994 (4),(5)  3.7        3.8             1.5       1.5     0.8      0.8       6.4    72.9%       71.3%
   Total Debt/Capitalization        71.9%      44.7%           18.5%     18.5%   41.9%    41.9%     47.3%   -34.3%        5.8%
   12/31/93E Total Debt            $2,373     $1,473          $1,014    $1,014    $490     $490    $6,949   192.9%      371.8%
   Dilution (1)1993E E.P.S.
    (5) - fully diluted             $1.35      $1.11           $2.38     $2.38   $0.91    $0.91    ($0.39) -129.0%     -135.2%
     1994E E.P.S. - fully diluted    1.32       1.15            2.55      2.55    1.34     1.34      0.71   -46.1%      -38.3%
     1995E E.P.S. - fully diluted    1.75       1.58            2.79      2.79    1.71     1.71      1.18   -32.7%      -25.4%
     1993E Cash flow per share 
                  - fully diluted    2.78       2.54            3.63      3.63    1.11     1.11      1.98   -28.6%      -21.8%
     1994E Cash flow per share 
                  - fully diluted    2.81       2.65            3.91      3.91    1.75     1.75      3.21    14.3%       21.5%
     1995E Cash flow per share 
                  - fully diluted    3.44       3.27            4.20      4.20    2.28     2.28      3.74     8.6%       14.3%
     1993E EBITDA                    $560       $560            $425      $425    $456     $456      $411   -26.7%      -26.7%
     1994E EBITDA                     600        600             645       645     653      653       582    -3.0%       -3.0%
     1995E EBITDA                     695        695             696       696     836      836       649    -6.6%       -6.6%


(1) The Post-Convert. figures relate to the issuance of $900 convertible preferred to strategic investors.
(2) Market capitalization defined as share price multiplied by shares outstanding.
(3) Adjusted market capitalization equals market capitalization plus total debt less cash and equivalent.
(4) Figures include projected synergies.
(5) Management ownership includes all options.
(6) Convertible preferred ownership stand-alone as if transaction does not occur.
(7) Figure provided to demonstrate trailing dilution. Patriot figures adjusted for December year end.
(8) Pro forma multiples  - 65% of balance sheet cash is backed-out of the debt
    figure
(9) Patriot '93 and '94 stand alone cash flow:  $438 and $475



February 1994                  SMITH BARNEY SHEARSON INC.             Page 3





CONFIDENTIAL                       Without CVR Payout        Project Voltage
                                   Viacom/Patriot


Debt Covenant Analysis
(Dollars expressed in millions, except per share)
                                                           W/ McM
                                                           ------
   LTM EBITDA
       Patriot (Incl. McMillan)                             560
       Voltage                                              560
       Tackle                                                 0
                                                          -----
   Total                                                  1,120
   Existing debt
       Patriot                                            1,014
       Viacom                                             2,606
        Tackle (including equity bridge)                      0
                                                          -----
   Total existing debt                                    3,620

   Plus:  cash paid to Paramount shareholders             6,592
   Plus:  transaction costs                                 100
   Plus:  Subordinated debt to Paramount shareholders      (571)
   Less:  convertible preferred from strategic investors (1,800)
   Less:  debt repayment                                      0
   Less:  Option proceeds, use of Tackle cash               (80)
   Less:  Tackle bridge                                  (1,250)
                                                         -------
   Gross debt                                             6,611
   Cash
       Patriot                                              446
       Viacom                                                48
       Tackle                                                 0
                                                          -----
   Total                                                    494

   65% of total cash                                        321
   Net debt, with 65% total cash                          6,290
   Convertible preferred                                  2,874
   Net debt and conv. pfd., with 65% total cash           9,164

   Gross interest expense                                  $392
   Preferred dividends (convertible and/or straight)
       Strategic investors                                   90
      Patriot                                                54
        Total convertible preferred dividends               144
   DEBT/EBITDA, w/ 65% total cash                          5.62 x
   DEBT & PREFERRED/EBITDA, w/ 65% total cash              8.18
   EBITDA/Net interest                                     2.86
   EBITDA/Net interest + preferred dividends               2.09


February 1994                  SMITH BARNEY SHEARSON INC.             Page 4



 
                                                                           Without CVR Payout
CONFIDENTIAL                                                               Viacom/Patriot
                                                                                                         Project Voltage
Ownership Summary                                                         Voltage Stand-Alone
(Dollars expressed in millions, except per share)         Pre-Convertible      Post-Convertible    Pro Forma
Voltage         Total Voltage Shareholders Ownership      Shares   Percentage  Shares  Percentage  Shares  Percentage
                                                                                      
                   Primary                                 120.5     100.0%     120.5     100.0%    120.5     60.2%
                   Fully diluted                           124.3     100.0%     124.3      90.6%    124.3     44.6%

                Total Voltage Shareholders Voting
                   Primary                                  53.4     100.0%      53.4     100.0%     53.4    100.0%
                   Fully diluted                            53.4     100.0%      53.4     100.0%     53.4    100.0%

                Management ownership - Primary
                   Voting                                   45.6      85.3%      45.6      85.3%     45.6     85.3%
                   Economic                                 95.9      77.2%      95.9      77.2%     95.9     47.9%
                Management ownership - Fully diluted
                   Voting                                   45.6      85.3%      45.6      85.3%     45.6     85.3%
                   Economic                                 99.7      80.2%      99.7      72.7%     99.7     35.7%

                Mr. Voltage ownership - Fully diluted
                   Voting                                   45.6      85.3%      45.6      85.3%     45.6     85.3%
                   Economic                                 92.1      74.1%      92.1      67.2%     92.1     33.0%
STRATEGIC       Nynex Convertible Preferred @ $600 mm stand alone and $1200 mm pro forma
INVESTORS          Voting                                    0.0       0.0%       0.0       0.0%      0.0      0.0%
                   Fully diluted                             0.0       0.0%       8.6       6.2%     17.1      6.1%
                Blockbuster Convertible Preferred @ $300 mm stand alone and $600 mm pro forma
                   Voting                                    0.0       0.0%       0.0       0.0%      0.0      0.0%
                   Fully diluted                             0.0       0.0%       4.3       3.1%      8.6      3.1%

                New strategic investment  holder - either common or convertible holders
                   Voting                                    0.0       0.0%       0.0       0.0%      0.0      0.0%
                   Economic                                  0.0       0.0%       0.0       0.0%      0.0      0.0%
TACKLE AS       Tackle ownership - Primary
MERGING            Voting                                    0.0       0.0%       0.0       0.0%      0.0      0.0%
PARTNER            Economic                                  0.0       0.0%       0.0       0.0%     22.7     11.3%

                Tackle ownership - Fully diluted (excludes convert. preferred)
                   Voting                                    0.0       0.0%       0.0       0.0%      0.0      0.0%
                   Economic                                  0.0       0.0%       0.0       0.0%     22.7      8.1%

         T A C K L E FULLY DILUTED SHARES

Non-employee options            $26.50            4.0
Employee options                 12.92           14.6

Exchange ratio                 CL A             0.080
                               CL B             0.665
Implied options                CL A               1.5
                               CL B              12.4

Calculation   of
dilutive options:
Option proceeds                                  $294
Current share price                            $27.63
Implied dilutive options - pre trans              8.0
Post-transaction dilutive options:                5.9


   Onwership Analysis Continued on Next Page



February 1994                  SMITH BARNEY SHEARSON INC.             Page 5


 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot            Project Voltage


Ownership Analysis - Continued
(Dollars expressed in millions, except per share)



                                                                  Voltage Stand-Alone
                                                          Pre-Convertible      Post-Convertible    Pro Forma
                                                          Shares   Percentage  Shares  Percentage  Shares  Percentage
                                                                                      

PATRIOT       Patriot management - fully diluted
                   Voting                                   0.0       0.0%       0.0      0.0%       0.0       0.0%
                   Economic                                 0.0       0.0%       0.0      0.0%       0.0       0.0%
                Patriot convertible preferred and subdebt, 
                 including Convertible Capped Preferred
                   Voting                                   0.0       0.0%       0.0      0.0%       0.0       0.0%
                   Fully diluted                            0.0       0.0%       0.0      0.0%       0.0       0.0%

                Patriot warrants
                   Voting                                   0.0       0.0%       0.0      0.0%       0.0       0.0%
                   Fully diluted                            0.0       0.0%       0.0      0.0%      49.1      17.6%

                Patriot shareholders voting, includes management
                   Primary                                  0.0       0.0%       0.0      0.0%       0.0       0.0%
                   Fully diluted                            0.0       0.0%       0.0      0.0%       0.0       0.0%

                Total Patriot shareholders economic, including 
                 convertible preferred holders, excluding warrants
                   Primary                                  0.0       0.0%       0.0      0.0%      57.1      28.5%
                   Fully diluted                            0.0       0.0%       0.0      0.0%      57.1      20.5%

       Total pro forma primary shares - economic          120.5     100.0%     120.5    100.0%     200.4     100.0%
       Total pro forma fully diluted shares - economic    124.3     100.0%     137.1    100.0%     278.9     100.0%
       Total pro forma primary shares - voting             53.4     100.0%      53.4    100.0%      53.4     100.0%
       Total pro forma fully diluted shares - voting       53.4     100.0%      53.4    100.0%      53.4     100.0%



February 1994                  SMITH BARNEY SHEARSON INC.             Page 6







 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot             Project Voltage
Implied Pro Forma Stock Price - Viacom
(Dollars expressed in millions, except per share)                        Projected
                                                                                  
                                   1993    1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                   ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
Total EBITDA pro forma             $1,015  $1,439  $1,604  $1,802  $2,016  $2,200  $2,406  $2,636  $2,894  $3,184   $3,511
Synergies included in EBITDA            0     134     150     171     216     223     229     236     243     251      259
Capitalization adjustments
   Total debt                       6,949   6,710   6,440   6,057   5,474   4,842   4,094   3,239   2,262   1,152      442
Convertible preferred               2,874   2,874   2,874   2,874   2,874   2,874   2,874   2,874   2,874   2,874    2,874
Less:  warrant proceeds (total)    (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129)  (3,129)
Less:  cash                          (494)   (494)   (494)   (494)   (494)   (494)   (494)   (494)   (494)   (494)    (494)
  Total capitalization adjustments  6,199   5,961   5,691   5,307   4,724   4,092   3,344   2,489   1,512     402     (308)
  Total shares outstanding-primary  200.4   200.4   200.4   200.4   200.4   200.4   200.4   200.4   200.4   200.4    200.4
  Total shares outstanding
    -fully diluted                  278.9   278.9   278.9   278.9   278.9   278.9   278.9   278.9   278.9   278.9    278.9

   Implied stock price 
    - post transaction    10.0 x    $4.35  $28.09  $38.26  $50.75   $64.44 $74.49   84.56  95.89 $108.65  $123.03  $137.28
                          11.0       9.73   35.71   46.75   60.25    72.85  82.38   93.18 105.34  119.02   134.45   149.86
                          11.6      12.95   40.29   51.85   65.18    77.19  87.11   98.36 111.01  125.25   141.30   157.42
                          12.0      15.10   43.34   55.25   68.46    80.08  90.26  101.80 114.79  129.40   145.86   162.45
                          12.9      19.94   50.20   62.49   74.61    86.58  97.36  109.57 123.29  138.74   156.14   173.78
                          13.0      20.48   50.96   63.22   75.25    87.31  98.15  110.43 124.24  139.78   157.28   175.04
                          13.4      22.63   54.01   66.15   77.84    90.20 101.30  113.88 128.02  143.93   161.85   180.07
                          14.0      25.86   58.58   70.42   81.71    94.53 106.03  119.05 133.69  150.15   168.70   187.62
                          15.0      31.23   65.34   76.17   88.17   101.76 113.92  127.68 143.14  160.53   180.11   200.21
                          15.1      31.77   66.00   76.75   88.82   102.48 114.71  128.54 144.08  161.57   181.25   201.47
                          15.5      33.92   68.62   79.05   91.40   105.37 117.86  131.99 147.86  165.72   185.82   206.51
                          16.0      36.61   71.49   81.92   94.63   108.99 121.81  136.30 152.59  170.91   191.53   212.80
 
Blended A&B Exchange Ratio           0.464x 0.464x  0.464x  0.464x  0.464x 0.464x  0.464x 0.464x  0.464x  0.464x    0.464x
Payment per share, excl. common     $65.15 $65.15  $65.15  $65.15  $65.15 $65.15  $65.15 $65.15  $65.15  $65.15    $65.15

Implied valuation per 
  share - Paramount       10.0 x   $67.17  $78.20  $82.92  $88.72  $95.08  $99.75 $104.42 109.68 $115.61  $122.29  $128.90
                          11.0      69.67   81.74   86.87   93.14   98.99  103.41  108.43 114.07  120.43   127.59   134.75
                          11.6      71.17   83.86   89.23   95.42  101.00  105.61  110.83 116.70  123.32   130.77   138.26
                          12.0      72.17   85.28   90.81   96.95  102.34  107.07  112.43 118.46  125.25   132.89   140.59
                          12.9      74.42   88.47   94.18   99.80  105.36  110.37  116.04 122.41  129.58   137.66   145.86
                          13.0      74.66   88.82   94.51  100.10  105.70  110.73  116.44 122.85  130.07   138.19   146.44
                          13.4      75.66   90.24   95.87  101.30  107.04  112.20  118.04 124.60  131.99   140.31   148.78
                          14.0      77.16   92.36   97.86  103.10  109.05  114.40  120.44 127.24  134.88   143.50   152.29
                          15.0      79.66   95.50  100.53  106.10  112.41  118.06  124.45 131.63  139.70   148.80   158.13
                          15.1      79.91   95.80  100.79  106.40  112.75  118.42  124.85 132.06  140.18   149.33   158.72
                          15.5      80.91   97.02  101.86  107.60  114.09  119.89  126.45 133.82  142.11   151.45   161.05
                          16.0      82.16   98.35  103.20  109.10  115.77  121.72  128.45 136.01  144.52   154.10   163.98



February 1994                  SMITH BARNEY SHEARSON INC.             Page 7




 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot               Project Voltage

Summary of Refinancing of Existing Debt and New Borrowings
(Dollars expressed in millions, except per share)

                                                     Existing
                                                        Debt         Amount        New
 Voltage                                            (12/31/93E)    Refinanced   Borrowings   Pro Forma
                                                                                 
   Notes Payable to Banks                            $1,923            $0         $3,562      $5,485
   11.8% Senior Subordinated Notes Due 1998               0             0              0           0
   9.125% Senior Subordinated Notes Due 1999            150             0              0         150
   8.75% Senior Subordinated Reset Notes Due 2001       100             0              0         100
   10.25% Senior Subordinated Notes Due 2001            200             0              0         200
   5.75% Convertible Subordinated Debentures Due 2001     0             0              0           0
   Current Maturities                                     0             0              0           0
   Total Viacom                                       2,373             0          3,562       5,935

   Tackle                                                 0             0              0           0
      Total                                          $2,373            $0         $3,562      $5,935

   Patriot
     8.5% Notes Due 1996 (1)                             $0            $0             $0          $0
     5.875% Notes Due 2000                              150             0              0         150
     7.5% Debentures Due 2023                           150             0              0         150
     7.5% Notes Due 2002                                246             0              0         246
     8.25% Senior Debentures Due 2022                   247             0              0         247
     7% Subordinated Debentures Due 2003                176             0              0         176
     Other Notes, 8.22% (1)                               4             0              0           4
     Capital Leases (1)                                  41             0              0          41
     Current Maturities                                   0             0              0           0
                                                     $1,014            $0             $0      $1,014

   New Borrowings
   (Excluding Voltage borrowing on existing credit facilities)

   Convertible PIK debt - Patriot                        $0                           $0          $0
   Sub. debt to Patriot                                  --            --             $0          $0
   Other                                                 --            --              0           0


   TOTAL                                             $3,387            $0         $3,562      $6,949




   (1) Estimated.

February 1994                  SMITH BARNEY SHEARSON INC.             Page 8





 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                Project Voltage

1993E and 1994E Pro Forma Combined Income Statement Comparison
(Dollars expressed in millions, except per share)

                                                  1993 Stand-Alone       Proforma        1994 Stand-Alone      Proforma
                                              Pre-Conv.    Post-Conv.      1993        Pre-Conv.   Post-Conv.    1994
                                                                                           
Revenue           Voltage                       $2,008       $2,008       $2,008        $2,227       $2,227     $2,227
                  Patriot (1)                        -            -        4,691             -            -      5,225
                  Tackle                             -            -            0                                     0
                   Total                         2,008        2,008        6,699         2,227        2,227      7,452

EBITDA            Voltage                          560          560          560           600          600        600
                  Patriot (1)                        -            -          425             -            -        645
                  Tackle                             -            -            0             -            -          0
                  McM                                -            -           30             -            -         60
                  Paramount Synergies (2)            -            -            0             -            -        134
                  BV synergies                       -            -            0             -            -          0
                    Total                          560          560        1,015           600          600      1,439

                   Depreciation and Amortization
                     Voltage                       172          172          172           181          181        181
                     Patriot                         -            -          145             -            -        162
                     Tackle                          -            -            0                                     0
                     Transaction Goodwill (3)        -            -          161             -           -         161
                       Total                       172          172          478           181         181         504
                   EBIT                            388          388          537           419         419         935

                   Net Interest Expense (2)        155          110          377           139          94         377
                   Other Expense (Income)          (62)         (62)         (62)           (1)         (1)         (1)
                     Pre Tax Income                295          340          221           281         326         559
                   Taxes (2)                       127          155          150           126         147         278
                   Preferred dividends               0           45          144             0          45         144
                   Equity in Earnings of
                     Affiliated Companies           (7)          (7)          (7)            6           6           6
                       Net Income                 $162         $134         ($79)         $161        $141        $144

                   Leverage Ratios
                   EBITDA/Net Interest Expense    3.62 x       5.10 x       2.69 x        4.31 x      6.38 x      3.82 x
                   EBITDA/Net interest plus
                       preferred                  3.62         3.62         1.95          4.31        4.31        2.76
                   EBITDA/Senior and subordinated 3.62         5.10         2.59          3.90        5.51        3.67
                   EBITDA/Senior, subordinated 
                       and pref.                  3.62         3.62         1.89          3.90        3.90        2.69
                   Debt/EBITDA                    4.24 x       2.63 x       6.53 x        3.72 x      2.26 x      4.44 x
                   Debt + Preferred/EBITDA        4.24         1.75         9.36          3.72        1.90        6.44
   (1) Patriot adjusted for a December year end.
   (2) See attached pages for detailed calculations. 1993 figure includes pro forma interest expense on $0.00 cash 
       payment to Patriot shareholders.
   (3) Amortization period:     40 years   Figure includes capitalized transaction costs which are amortized over
       ten years.
   (4) Includes early redemption expense on Voltage debt in years 1995 and 1997.


February 1994                  SMITH BARNEY SHEARSON INC.             Page 9




 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                 Project Voltage

Pro Forma Combined Income Statement
(Dollars expressed in millions, except per share)

                                                                               Proforma
                                  ------------------------------------------------------------------------------------------------
Revenue                                     1994     1995     1996     1997     1998     1999     2000     2001     2002      2003
                                  ------------------------------------------------------------------------------------------------
                                                                                              
           Voltage                        $2,227   $2,541   $2,857   $3,079   $3,383   $3,711   $4,085   $4,514   $5,005    $5,569
           Patriot (1)                     5,225    5,573    5,946    6,344    6,770    7,227    7,715    8,238    8,799     9,399
           Tackle                              0        0        0        0        0        0        0        0        0         0
           Total                           7,452    8,114    8,803    9,423   10,154   10,937   11,800   12,752   13,804    14,968

EBITDA     Voltage                           600      695      814      921    1,033    1,162    1,310    1,480    1,675     1,899
           Patriot (1)                       645      696      750      809      871      938    1,010    1,087    1,170     1,260
           Tackle (5)                          0        0        0        0        0        0        0        0        0         0
           McM                                60       63       66       69       73       77       80       84       89        93
           Paramount synergies (2)           134      150      171      216      223      229      236      243      251       259
           Block synergies                     0        0        0        0        0        0        0        0        0         0
             Total                         1,439    1,604    1,802    2,016    2,200    2,406    2,636    2,894    3,184     3,511

D & A      Voltage                           181      205      229      246      269      294      323      355      393       436
           Patriot                           162      172      184      196      209      223      238      254      271       289
           Tackle                              0        0        0        0        0        0        0        0        0         0
           Goodwill (3)                      161      161      161      161      161      161      161      161      161       161
             Total                           504      539      574      604      640      679      722      771      825       886
 EBIT                                        935    1,065    1,227    1,412    1,560    1,727    1,914    2,123    2,359     2,624
        
   Net Interest Expense (2)                  377      365      357      329      307      262      224      180      132        59
   Other Expense (Income) (3)                 (1)      (1)      (1)      (1)      (1)      (1)      (1)      (1)      (1)       (1)
     Pre Tax Income                          559      702      872    1,085    1,254    1,466    1,691    1,945    2,229     2,566
   Taxes (2)                                 278      337      403      488      558      644      736      840      958     1,097
   Preferred dividends                       144      144      144      144      144      144      144      144      144       144
   Equity  - Affiliated Companies              6       16       27       37       48       48       48       48       48        48
     Net Income                             $144     $237     $352     $489     $600     $726     $858   $1,008   $1,175    $1,374

   Leverage Ratios
   EBITDA/Net Interest Expense               3.82 x  4.39 x   5.05 x   6.13 x   7.16 x   9.18 x  11.74 x  16.04 x  24.20 x   59.08 x
   EBITDA/Net interest + pref.               2.76    3.15     3.60     4.27     4.88     5.93     7.16     8.93    11.57     17.28 
   EBITDA/Senior and sub.                    3.67    4.22     4.85     5.87     6.83     8.69    11.01    14.82 x  21.75 x   47.28 
   EBITDA/Senior, sub., & pref.              2.69    3.06     3.50     4.14     4.72     5.72     6.88     8.93    11.57     17.28 
   Debt/EBITDA                               4.44 x  3.81 x   3.18 x   2.56 x   2.06 x   1.57 x   1.11 x   0.67 x   0.26 x    0.03 x
   Debt + Preferred/EBITDA                   6.44    5.61     4.78     3.98     3.36     2.76     2.20     1.66     1.16      0.85  


   (1) Patriot adjusted for a December year end.
   (2) See attached pages for detailed calculations. 1993 figure includes pro forma interest expense on $53.61 cash payment
       to Patriot shareholders.
   (3) Amortization period:     40 years   Figure includes capitalized transaction costs which are amortized over ten years.
       Tackle also included.
   (4) Includes early redemption expense on Voltage debt in years 1995 and 1997.(5)  Internal projections through 1997.  10% 
       growth thereafter


February 1994                  SMITH BARNEY SHEARSON INC.             Page 10


 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                  Project Voltage

1993E and 1994E Pro Forma E.P.S. Dilution Comparison
(Dollars expressed in millions, except per share)

                                                 1993 Stand-Alone        Proforma      1994 Stand-Alone      Proforma
                                                Pre-Conv. Post-Conv.       1993       Pre-Conv. Post-Conv.    1994
                                                                                           
Primary E.P.S.
Stand alone net income                             $162       $134         $162        $161     $141            144
Pro forma net income                                  -          -          (79)          -        -            144
Plus: after tax cost of debt redemption               -          -            0           -        -              0
  Adjusted net income                               162        134          (79)        161      141            144

Primary shares                                      120      120.5        201.5       121.7    121.7          201.5
Primary E.P.S.                                     $1.35     $1.11        ($0.39)      $1.32   $1.15          $0.71
Accretion / (dilution) - Primary E.P.S.           -129.0%   -135.2%            -       -46.1%  -38.3%

Fully-Diluted E.P.S.
Pro forma adjusted net income                       $162      $134         ($79)        $161     $141           $144
Plus preferred dividends                               0        45           90            0       45             90
Plus after tax cost of convertible debt                0         0            0            0        0              0
Adjusted net income                                  162       179           11          161      186            234

Primary shares                                     120.5     120.5        201.5        121.7    121.7           201.5
Plus net warrants under treasury method (a.)           0         0            0            0        0               0
Plus convertible pref. and sub. shares                 0      12.9         25.7            0     12.9            25.7
   Adjusted shares                                 120.5     133.4        227.3        121.7    134.6           227.3
Implied E.P.S.                                     $1.35     $1.34        $0.05        $1.32    $1.38           $1.03
   Dilutive ?                                         No        No           No           No      No               No
Implied fully-diluted E.P.S.                       $1.35      $1.11      ($0.39)       $1.32    $1.15           $0.71
 Accretion/(dilution) to proforma E.P.S.          -129.0%    -135.2%                   -46.1%   -38.3%




(a.)  Assumes pro forma stock price at 14x multiple

February 1994                  SMITH BARNEY SHEARSON INC.             Page 11



 
CONFIDENTIAL                                                                       Without CVR Payout
                                                                                   Viacom/Patriot              Project Voltage

E.P.S. Dilution Analysis
(Dollars expressed in millions, except per share)

                                                                               Proforma
                                  ------------------------------------------------------------------------------------------------
                                            1994     1995     1996     1997     1998     1999     2000     2001     2002      2003
                                  ------------------------------------------------------------------------------------------------
                                                                                             
Primary E.P.S.
Stand alone net income -
 (pre strategic convert.)                   $161     $213     $285     $353     $422     $490     $569     $660     $765     $885
 Pro forma net income                        144      237      352      489      600      726      858     1,008   1,175    1,374
Plus: after tax cost of debt redemption        0        1        0        2        0        0        0         0       0        0
  Adjusted net income                        144      238      352      492      600      726      858     1,008   1,175    1,374

V Stand-alone shares outstanding           121.7    121.7    121.7    121.7    121.7    121.7    121.7     121.7   121.7    121.7
Plus shares issued to Patriot               57.1     57.1     57.1     57.1     57.1     57.1     57.1      57.1    57.1     57.1
Plus shares issued to Tackle                22.7     22.7     22.7     22.7     22.7     22.7     22.7      22.7    22.7     22.7
Plus dilutive Patriot securities
  (latest 10-Q)                              0.0      0.0      0.0      0.0      0.0      0.0      0.0       0.0     0.0      0.0
Plus dilutive Tackle securities
 (latest 10-Q)                               0.0      0.0      0.0      0.0      0.0      0.0      0.0       0.0     0.0      0.0
Plus shares issued to common equity holder   0.0      0.0      0.0      0.0      0.0      0.0      0.0       0.0     0.0      0.0
Plus shares converted from Convertible
  Capped Preferred                           0.0      0.0      0.0      0.0      0.0      0.0      0.0       0.0     0.0      0.0
  Pro forma shares outstanding
    - primary                              201.5    201.5    201.5    201.5    201.5    201.5    201.5     201.5   201.5    201.5

V stand-alone E.P.S.                       $1.32    $1.75    $2.34    $2.90    $3.47    $4.03    $4.68     $5.42   $6.28    $7.28
Pro forma E.P.S.                           $0.71    $1.18    $1.75    $2.44    $2.98    $3.60    $4.26     $5.00   $5.83    $6.82
Accretion / (dilution) - Primary E.P.S.   -46.1%   -32.7%   -25.4%   -15.8%   -14.1%   -10.6%    -8.9%     -7.8%   -7.2%    -6.3%

Fully-Diluted E.P.S.
Pro forma adjusted net income                144      238      352      492      600      726      858     1,008   1,175    1,374
Plus preferred dividends                      90       90       90       90       90       90       90        90      90       90
Plus after tax cost of convertible debt        0        0        0        0        0        0        0         0       0        0
 Adjusted net income                         234      328      442      582      690      816      948     1,098   1,265    1,464
Pro forma primary shares                   201.5    201.5    201.5    201.5    201.5    201.5    201.5     201.5   201.5    201.5
Plus net warrants under treasury 
  method (a.)                                0.0      4.6     10.8     16.0     19.6     22.8     25.7      28.2    30.5     32.4
Plus convertible pref. shares               25.7     25.7     25.7     25.7     25.7     25.7     25.7      25.7    25.7     25.7
  Adjusted shares                          227.3    231.9    238.0    243.2    246.8    250.1    252.9     255.5   257.8    259.7
Implied E.P.S.                             $1.03    $1.41    $1.86    $2.39    $2.80    $3.26    $3.75     $4.30   $4.91    $5.64
 Dilutive ?                                  No        No       No     Yes       Yes      Yes     Yes       Yes     Yes      Yes
Implied fully-diluted E.P.S.               $0.71    $1.18    $1.75    $2.39    $2.80    $3.26    $3.75     $4.30   $4.91    $5.64
Stand-alone fully-diluted shares
    outstanding                            121.7    121.7    121.7    121.7    121.7    121.7    121.7     121.7   121.7    121.7
V stand-alone fully-diluted E.P.S. 
  - (pre strategic convert.)               $1.32    $1.75    $2.34    $2.90    $3.47    $4.03    $4.68     $5.42   $6.28    $7.28
Accretion/(Dilution) - 
  Fully-diluted E.P.S.                    -46.1%   -32.7%   -25.4%   -17.5%   -19.3%   -19.0%   -19.8%    -20.8%  -21.9%   -22.5%
V stand-alone net income - with preferred   $141     $193     $264     $331     $400     $466     $543      $632    $735     $853
V stand-alone fully-diluted E.P.S. -
 (post strategic convert.) (b.)            $1.15    $1.58    $2.17    $2.72    $3.28    $3.83    $4.46     $5.19   $6.04    $7.01
Accretion/(Dilution) -
  Fully-diluted E.P.S.                    -38.3%   -25.4%   -19.5%   -12.1%   -14.9%   -14.8%   -16.0%    -17.3%  -18.7%   -19.6%

(a.)  Assumes pro forma stock price at 14x multiple
(b.) The Post-Convert. figures relate to the issuance of $900 convertible preferred to strategic investors


February 1994                  SMITH BARNEY SHEARSON INC.             Page 12



 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                  Project Voltage

1993E and 1994E Pro Forma Cash Flow Dilution Comparison
(Dollars expressed in millions, except per share)

                                                 1993 Stand-Alone        Proforma      1994 Stand-Alone      Proforma
Primary Cash Flow Per Share                     Pre-Conv. Post-Conv.       1993       Pre-Conv. Post-Conv.    1994
                                                                                         
   Cash flow                                     $335      $306           $400        $342      $322         $648
Primary C.F.P.S.                                $2.78     $2.54          $1.98       $2.81     $2.65        $3.21
 Accretion/(Dilution) C.F.P.S. - primary       -28.6%    -21.8%              -       14.3%     21.5%

Fully-diluted Cash Flow Per Share
Cash flow excluding preferred dividends          $335      $351           $490        $342      $322         $738
Primary shares plus convert. pref. shares       120.5     133.4          227.3       121.7     134.6          227
 Implied cash flow per share                    $2.78     $2.63          $2.16       $2.81     $2.39        $3.25
      Dilutive?                                    No        No             No          No       Yes           No
Implied fully-diluted cash flow per share       $2.78     $2.54          $1.98       $2.81     $2.65        $3.21

 Accretion/(dilution) to proforma cash flow    -28.6%    -21.8%             -        14.3%     21.5%            -


 

                                                                               Proforma
                                  -----------------------------------------------------------------------------------------------
                                            1994     1995     1996     1997     1998     1999     2000     2001     2002     2003
                                  -----------------------------------------------------------------------------------------------
                                                                                             
Primary Cash Flow Per Share
Voltage stand-alone cash flow  -
 (pre strategic convert.)                   $342     $419    $515      $599      $691      $785    $892    $1,016   $1,158  $1,321
Pro forma cash flow                          648      777     927     1,095     1,240     1,405   1,581     1,779    2,001   2,260
Voltage stand-alone C.F.P.S.               $2.81    $3.44   $4.23     $4.92     $5.68     $6.45   $7.33     $8.34    $9.51  $10.86
Voltage pro forma C.F.P.S.                  3.21     3.85    4.60      5.44      6.15      6.97   $7.84      8.83     9.93   11.21
Accretion/(Dilution) C.F.P.S. - primary    14.3%    12.0%    8.7%     10.4%      8.3%      8.1%    7.0%      5.8%     4.4%    3.3%

Fully-diluted Cash Flow Per Share
Pro forma cash flow excluding pref. 
 dividends and after tax cost of pref.debt  $738     $867  $1,017    $1,185    $1,330    $1,495  $1,671    $1,869   $2,091  $2,350
Primary shares plus convert. pref. shares  227.3    231.9   238.0     243.2     246.8     250.1   252.9     255.5    257.8   259.7
Implied cash flow per share                $3.25    $3.74   $4.27     $4.87     $5.39     $5.98   $6.61     $7.31    $8.11   $9.05
      Dilutive?                              No       Yes     Yes       Yes      Yes       Yes      Yes       Yes      Yes     Yes
Implied fully-diluted cash flow per share  $3.21    $3.74   $4.27     $4.87     $5.39     $5.98   $6.61     $7.31    $8.11   $9.05

Stand-alone cash flow per share -
  (pre strategic convert.)                 $2.81    $3.44   $4.23     $4.92     $5.68     $6.45   $7.33     $8.34    $9.51  $10.86
Accretion/(Dilution) C.F.P.S.
  fully-diluted                            14.3%     8.6%    1.0%     -1.0%     -5.1%     -7.3%   -9.9%    -12.3%   -14.7%  -16.6%
Stand-alone net income -
 (post strategic convert.)                  $322     $398    $494      $578      $669      $761    $866      $988   $1,128  $1,289
Stand-alone cash flow per share -
  (post strategic convert.)                $2.65    $3.27   $4.00     $4.63     $5.31     $5.99   $6.77     $7.67    $8.71   $9.91
Accretion/(Dilution) C.F.P.S.
   fully-diluted                           21.5%    14.3%    6.7%      5.3%      1.5%     -0.2%   -2.5%     -4.7%    -6.9%   -8.7%


February 1994                  SMITH BARNEY SHEARSON INC.             Page 13



 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                  Project Voltage

EBITDA and Synergy Analysis
(Dollars expressed in millions, except per share)
                                  Proforma                                      Proforma
                                  ----------------------------------------------------------------------------------------
                                     1993    1994    1995    1996    1997    1998    1999    2000    2001    2002     2003
                                  ----------------------------------------------------------------------------------------
                                                                                   
 EBITDA
 Voltage                           $560      $600    $695    $814    $921    $1,033  $1,162  $1,310  $1,480  $1,675 $1,899
 Patriot                            425       645     696     750     809       871     938   1,010   1,087   1,170  1,260
 Tackle                               0         0       0       0       0         0       0       0       0       0      0
 Synergies                            0       134     150     171     216       223     229     236     243     251    259
    Total                         1,015     1,439   1,604   1,802   2,016     2,200   2,406   2,636   2,894   3,184  3,511
 Voltage % of combined adj.
  market capitalization           40.4%     40.4%   40.4%   40.4%   40.4%     40.4%   40.4%   40.4%   40.4%   40.4%  40.4%
 Implied pro forma EBITDA
   ownership value                  411       582     649     729     815       890     973   1,066   1,171   1,288  1,420
  Stand alone EBITDA                560       600     695     814     921     1,033   1,162   1,310   1,480   1,675  1,899
 Percent increase/(decrease)     -26.7%     -3.0%   -6.6%  -10.5%  -11.5%    -13.9%  -16.3%  -18.6%  -20.9%  -23.1% -25.2%


 Synergy Analysis
 Cash flow per share stand alone
  - post convert                  $2.54     $2.65   $3.27   $4.00   $4.63     $5.31   $5.99   $6.77   $7.67   $8.71  $9.91
 Cash flow per share pro forma     1.98      3.21    3.74    4.27    4.87      5.39    5.98    6.61    7.31    8.11   9.05
   Implied difference per share   $0.55    ($0.57) ($0.47) ($0.27) ($0.25)   ($0.08)  $0.01   $0.17   $0.36   $0.61  $0.86
 Pro forma shares outstanding     201.5     201.5   231.9   238.0   243.2     246.8   250.1   252.9   255.5   257.8  259.7
   Implied after tax cash flow
     to breakeven                   112      (114)   (108)    (64)    (60)      (20)      3      42      92     156    224

 Implied cash flow to breakeven -
   pre tax                          184      (187)   (178)   (104)    (99)      (33)      4      70     153     260    375
 Estimated synergies                  0       134     150     171     216       223     229     236     243     251    259
 Implied total synergies needed for
   cash flow breakeven              184       (52)    (28)     67     117       190     233     306     396     511    634




(a.)  Based on adjusted market value divided by market value

February 1994                  SMITH BARNEY SHEARSON INC.             Page 14


 
                                                                                   Without CVR Payout
CONFIDENTIAL                                                                       Viacom/Patriot                  Project Voltage

Income Tax Calculation and Pro Forma Combined Cash Flow Statement
(Dollars expressed in millions, except per share)

                                  Proforma                                      Proforma
                                  ----------------------------------------------------------------------------------------
                                     1993    1994    1995    1996    1997    1998    1999    2000    2001    2002     2003
                                  ----------------------------------------------------------------------------------------
                                                                                  
Income Tax Calculation
Stand Alone Pre Tax Income
  Patriot                           $456      $490    $536    $586    $640    $700    $764    $835    $912    $996   $1,088
  Voltage                            295       281     359     462     564     669     791     932   1,094   1,281    1,496
  Tackle                               0         0       0       0       0       0       0       0       0       0        0
Stand Alone Tax Rate
  Patriot                          35.0%     35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%    35.0%
  Voltage                          45.5%     45.0%   45.0%   44.0%   44.0%   44.0%   44.0%   44.0%   44.0%   44.0%    44.0%
  Tackle                            0.0%      0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%     0.0%

Weighted Pro Forma Combined Tax
  Rate                             39.1%     38.6%   39.0%   39.0%   39.2%   39.4%   39.6%   39.7%   39.9%   40.1%    40.2%

Pro Forma Combined Pre Tax Income   $221      $559    $702    $872  $1,085  $1,254  $1,466  $1,691  $1,945  $2,229   $2,566
Plus: Transaction Goodwill
  Amortization                       161       161     161     161     161     161     161     161     161     161      161
Adjusted Pre Tax Income             $382      $720    $863  $1,033  $1,246  $1,415  $1,627  $1,852  $2,106  $2,390   $2,728

Implied Income Tax - GAAP           $150      $278    $337    $403    $488    $558    $644    $736    $840    $958   $1,097

Pro Forma Cash Flow Statement
Sources of Funds
  Net Income                                  $144    $237    $352    $489    $600    $726    $858  $1,008  $1,175   $1,374
  Depreciation and amortization                504     539     574     604     640     679     722     771     825      886
  PIK dividends and/or PIK interest expense      0       0       0       0       0       0       0       0       0        0
  Cash margin on Showtime movies (1)            31      31      31      31      31      31      31      31      31       31
  Deferred taxes and other                     (59)    (90)    (88)    (53)    (79)    (85)    (99)   (114)   (132)    (153)
    Total Sources                              620     718     870   1,071   1,192   1,351   1,513   1,696   1,899    2,138

Uses of Funds
  Capital expenditures                        $200    $220    $242    $263    $287    $313    $343    $376    $413     $455
  Common dividends                               0       0       0       0       0       0       0       0       0        0
  Change in working capital                     71      77      81      83      91      98     105     114     123      133
  Other and capitalization of pre-publication
    costs                                      110     151     163     142     182     192     210     230     253      279
      Total Uses                               381     448     486     488     560     603     658     720     789      867
Total Cash Flow Before Debt Service           $239    $270    $384    $583    $632    $748    $856    $976  $1,110   $1,271

Term Debt Service Requirement                    0    (100)      0    (150)      0       0    (150)      0    (446)    (176)
  Cash Flow Available for Repayment of
    Revolver                                  $239    $170    $384    $433    $632    $748    $706    $976    $664   $1,094

Cash Flow Used for Repayment of Revolver      $239    $170    $384    $433    $632    $748    $706    $976    $664     $534

  Cash flow accumulated                         $0      $0      $0      $0      $0     ($0)     $0      $0      $0     $561


   (1) Tax effected difference between operating and cash flow margin on Patriot movies which are shown on Showtime.



February 1994                  SMITH BARNEY SHEARSON INC.             Page 15



                                                  Without CVR Payout
CONFIDENTIAL                                      Viacom/Patriot                          Project Voltage

Debt Amortization Schedule
(Dollars expressed in millions, except per share)         
                                     Proforma                                    Proforma
                                       1993    1994    1995    1996    1997    1998   1999    2000    2001    2002    2003
                                                                                       
   Voltage
     11.8% Senior Subordinated Notes 
       Due 1998                         $0      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
     9.125% Senior Subordinated Notes 
       Due 1999                        150     150     150     150       0       0       0       0       0       0       0
     8.75% Senior Subordinated Reset 
       Notes Due 2001                  100     100       0       0       0       0       0       0       0       0       0
     10.25% Senior Subordinated Notes 
       Due 2001                        200     200     200     200     200     200     200     200     200       0       0
     5.75% Convertible Subordinated 
       Debentures Due 2001               0       0       0       0       0       0       0       0       0       0       0
     Current Maturities                  0       0       0       0       0       0       0       0       0       0       0
                                    ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
       Total                          $450    $450    $350    $350    $200    $200    $200    $200    $200      $0      $0

   Patriot
     8.5% Notes Due 1996 (1)            $0      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
     7.5% Notes Due 2002               246     246     246     246     246     246     246     246     246       0       0
     8.25% Senior Debentures Due 2022  247     247     247     247     247     247     247     247     247     247     247
     5.875% Notes Due 2000             150     150     150     150     150     150     150       0       0       0       0
     7.5% Debentures Due 2023          150     150     150     150     150     150     150     150     150     150     150
     7% Subordinated Debentures 
       Due 2003                        176     176     176     176     176     176     176     176     176     176       0
     Other Notes, 8.22% (1)              4       4       4       4       4       4       4       4       4       4       4
     Capital Leases (1)                 41      41      41      41      41      41      41      41      41      41      41
     Current Maturities                  0       0       0       0       0       0       0       0       0       0       0
                                    ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
                                     1,014   1,014   1,014   1,014   1,014   1,014   1,014     864     864     618     442
   Notes Payable to Banks           $5,485  $5,246  $5,076  $4,693  $4,260  $3,628  $2,880  $2,174  $1,198    $534      $0

   New Borrowings
   Sub. debt to Patriot                 $0      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
   Other                                 0       0       0       0       0       0       0       0       0       0       0
   PIK Convertible debt - Patriot        0       0       0       0       0       0       0       0       0       0       0
      Plus:  PIK interest expense        0       0       0       0       0       0       0       0       0       0       0
                                    ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
   Ending - Convertible debt - 
     Patriot                             0       0       0       0       0       0       0       0       0       0       0
   Cumulative Cash Balance            $494    $494    $494    $494    $494    $494    $494    $494    $494    $494  $1,055

     TOTAL DEBT                     $6,949  $6,710  $6,440  $6,057  $5,474  $4,842  $4,094  $3,239  $2,262  $1,152    $442
     NET DEBT                       $6,455  $6,216  $5,946  $5,563  $4,980  $4,348  $3,600  $2,744  $1,768    $658   ($613)
   Convertible preferred - Patriot       0       0       0       0       0       0       0       0       0       0       0
   Preferred - Patriot               1,074   1,074   1,074   1,074   1,074   1,074   1,074   1,074   1,074   1,074   1,074
   Convertible preferred - strategic 
     investors                       1,800   1,800   1,800   1,800   1,800   1,800   1,800   1,800   1,800   1,800   1,800
   Convertible Capped Preferred          0       0       0       0       0       0       0       0       0       0       0
   Perpetual preferred                   0       0       0       0       0       0       0       0       0       0       0
   PIK Convertible preferred             0       0       0       0       0       0       0       0       0       0       0
     Plus:  dividends                    0       0       0       0       0       0       0       0       0       0       0
                                    ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
   Ending balance                        0       0       0       0       0       0       0       0       0       0       0
   PIK Straight preferred                0       0       0       0       0       0       0       0       0       0       0
     Plus:  dividends                    0       0       0       0       0       0       0       0       0       0       0
                                    ------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
   Ending balance                        0       0       0       0       0       0       0       0       0       0       0
   TOTAL DEBT AND PREFERRED         $9,823  $9,584  $9,314  $8,931  $8,348  $7,716  $6,968  $6,112  $5,136  $4,026  $3,316



February 1994             SMITH BARNEY SHEARSON INC.                  Page 16




                                                  Without CVR Payout
CONFIDENTIAL                                      Viacom/Patriot                          Project Voltage

Pro Forma Interest Expense
(Dollars expressed in millions, except per share)
                                                                                     Proforma
                                                   1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                                                                            
     Voltage
     11.8% Senior Subordinated Notes Due 1998       $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
     9.125% Senior Subordinated Notes Due 1999      14      14      14      14      14       0       0       0       0       0
     8.75% Senior Subordinated Reset Notes 
       Due 2001                                      9       9       9       0       0       0       0       0       0       0
     10.25% Senior Subordinated Notes Due 2001      21      21      21      21      21      21      21      21      21       0
     5.75% Convertible Subordinated Debentures 
       Due 2001                                      0       0       0       0       0       0       0       0       0       0
     Current Maturities                              0       0       0       0       0       0       0       0       0       0
                                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
       Total                                       $43     $43     $43     $34     $34     $21     $21     $21     $21      $0
     Patriot
     8.5% Notes Due 1996 (1)                        $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
     7.5% Notes Due 2002                            18      18      18      18      18      18      18      18      18       0
     5.875% Notes Due 2000                           9       9       9       9       9       9       9       0       0       0
     7.5% Debentures Due 2023                       11      11      11      11      11      11      11      11      11      11
     8.25% Senior Debentures Due 2022               20      20      20      20      20      20      20      20      20      20
     7% Subordinated Debentures Due 2003            12      12      12      12      12      12      12      12      12      12
     Other Notes, 8.22% (1)                          0       0       0       0       0       0       0       0       0       0
     Capital Leases (1)                              3       3       3       3       3       3       3       3       3       3
     Current Maturities                              0       0       0       0       0       0       0       0       0       0
                                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
                                                   $75     $75     $75     $75     $75      $75    $75     $66     $66     $48

   Notes Payable to Banks                          274     262     254     235     213     181     144     109      60      27
   New Borrowings
   Sub. debt to Patriot                              0       0       0       0       0       0       0       0       0       0
   Other                                             0       0       0       0       0       0       0       0       0       0
   Subordinated debt                                 0       0       0       0       0       0       0       0       0       0
   Investment Income                               (15)    (15)    (15)    (15)    (15)    (15)    (15)    (15)    (15)    (15)
                                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
     TOTAL INTEREST EXPENSE (INCOME)              $377    $365    $357    $329    $307    $262    $224    $180    $132     $59

   Total dividend calculation
   Convertible preferred - Patriot                   0       0       0       0       0       0       0       0       0       0
   Preferred - Patriot                              54      54      54      54      54      54      54      54      54      54
   Convertible preferred - Strategic investors      90      90      90      90      90      90      90      90      90      90
   Perpetual preferred                               0       0       0       0       0       0       0       0       0       0
   Convertible capped preferred                      0       0       0       0       0       0       0       0       0       0
   PIK convertible preferred                         0       0       0       0       0       0       0       0       0       0
   PIK straight preferred                            0       0       0       0       0       0       0       0       0       0
                                                ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
       Total dividends                             144     144     144     144     144     144     144     144     144     144
      TOTAL INTEREST EXPENSE AND DIVIDENDS        $521    $509    $500    $473    $451    $406    $368    $324    $275    $203
       TOTAL CASH INTEREST EXPENSE AND DIVIDENDS   521     509     500     473     451     406     368     324     275     203




February 1994     SMITH BARNEY SHEARSON INC.                          Page 17



                                                       Without CVR Payout
CONFIDENTIAL                                           Viacom/Patriot                     Project Voltage

Pro Forma Balance Sheet
(Dollars expressed in millions, except per sh
                                                 Patriot                                                 Tackle
   
                                                                Adj.       Patriot     Voltage               Tackle
                            Voltage      Patriot       McM     Patriot     Merger     Pro Forma     Tackle    Merger        PRO
                           (12/31/93E    (10/31/93E   Adjmts  (10/31/93E   Adjmts.    Pre Tackle  (12/31/93E  Adjmts.      FORMA
                                                                                              
   Assets
   Current Assets
     Cash and equivalents      $48          $998      ($552)      $446        $0        $494         $390      ($100)       $494
     Receivables               402         1,055                 1,055         0       1,458          131                  1,458
     Inventory                 295           625                   625         0         920          296                    920
     Prepaid expenses           97           213                   213         0         309          180                    309
     Other                      14           369                   369         0         384           71                    384
                            ------        ------               -------     ------     ------       ------     ------      ------
       Total                   857         3,260                 2,708         0       3,565        1,068       (100)      3,565
   PP&E                        894         1,519                 1,519         0       2,413           NA                     NA
   Less: A/D                  (374)         (389)                 (389)        0        (763)          NA                     NA
                            ------        ------               -------     ------     ------       ------                 ------
     Net PP&E                 520          1,130                 1,130         0       1,650          903                  1,650

   Net assets of McM            0              0        552        552         0         552                                 552
   Goodwill                 2,110          1,460                 1,460     6,044       9,613          815        4,169     9,613
   Investments in affiliates   52            229                   229         0         281        1,850       (1,850)      281
   Other                      851          1,463                 1,463       100       2,414          323          100     2,414
                            ------        ------               -------    ------     -------       ------       ------   -------
     Total Assets           $4,391        $7,542                $7,542    $6,144     $18,076       $4,959       $2,319   $18,076
                            ======        ======               =======    ======     =======       ======       ======   =======

   Liabilities and Equity
   Current Liabilities
     Current maturities         $0            $0                    $0         $0        $0           $0                     $0
     Accounts payable           77           155                   155          0       232          509                    232
     Accrued expenses          429         1,198                 1,198          0     1,627           99                  1,627
     Other                     471           139                   139          0       610            0                    610
                            ------        ------               -------     ------    ------       ------                 ------
       Total                   977         1,492                 1,492          0     2,469          608                  2,469
   Long term debt            2,373         1,014                 1,014      3,562     6,949        1,740                  6,949
   Sub. debt to Patriot          0             0                     0          0         0            0            0         0
   Other long term 
     liabilities               116           786                   786          0       902          196                    902
   Convertible debt - Patriot    0             0                     0          0         0            0                      0
   Convertible preferred - 
     Patriot                     0             0                     0          0         0            0            0         0
   Straight Preferred - 
     Patriot                     0             0                     0      1,074     1,074            0            0     1,074
   PIK Convertible debt - 
     Patriot                     0             0                     0          0         0            0                      0
   PIK Convertible preferred - 
     Patriot                     0             0                     0          0         0            0                      0
   PIK Straight preferred - 
     Patriot                     0             0                     0          0         0            0                      0
New finacing
   PIK Convertible preferred     0             0                     0          0         0            0                      0
   Convertible Capped Preferred 
     - Strategic investors       0             0                     0          0         0            0                      0
   Convertible preferred 
     - Strategic investors       0             0                     0      1,800     1,800            0         (600)    1,800
   Perpetual preferred - 
     Strategic investors         0             0                     0          0         0            0                      0
   Common equity               925         4,250                 4,250       (292)    4,883        2,415        2,919         0
                            ------        ------               -------     ------    ------       ------       ------    ------
     Total Liabilities 
       and Equity           $4,391        $7,542                $7,542     $6,144   $18,076       $4,959       $2,319   $18,076
                            ======        ======               =======     ======    ======       ======       ======    ======



February 1994     SMITH BARNEY SHEARSON INC.                            Page 18


                  TAB 7





VOLTAGE/PATRIOT/TACKLE




                                       With $12 per share CVR Payout
CONFIDENTIAL                              Viacom/Tackle/Patriot                                  Project Voltage
                                                                                                         
Transaction Structure and Summary Assumptions                         MERGER WITH TACKLE?                        Yes         1
(Dollars expressed in millions, except per share)                     Two-Tier Acquisition Structure            %      No. of Shares
                                                                                                             ------    -------------
Shares Issued in Merger                      Class A   0.00000        Percent of Patriot shares tendered      50.1%        61.6
                                             Class B   0.46439        Back-end percentage                     49.9%        61.4
   Total Paramount Shares Outstanding, Including Options 123.0                                               ------      ------
                                                                                                             100.0%       123.0
   Shares Issued to Patriot                  Class A       0.0        Purchase Price Per Share
                                             Class B      57.1          Current Stock Price - Patriot       $79.63
                                                         -----          Current Stock Price - Voltage                     Tackle
       Total common shares issued to Patriot              57.1            Class A                           $39.50       $27.63
                                                         =====            Class B                            35.25
Uses of Funds                                     $        %            Exchange Ratio
                                                -------  -----
   Purchase Price of Equity                     $10,579  99.1%            Class A                            0.000
   Refinancing of Existing Debt                       0   0.0%            Class B - Common stock             0.464
   Transaction Costs                                100   0.9%          Consideration to Patriot Shareholders  $         %
                                                ------- ------                                                -----      -------
     Total Uses of Funds                        $10,679 100.0%
                                                ======= ======
Sources of Funds                                                          Class A                            $0.00          0.0%
   Voltage Common Equity (incl. Tackle bridge)   $3,263  30.6%            Class B                            16.37         19.4%
   Straight preferred to Patriot shareholders         0   0.0%                                               ------      ------
   Convertible Debt to Patriot Shareholders           0   0.0%                            Total              16.37         19.4%
   Convertible Capped Preferred to Patriot                                Straight preferred                  0.00          0.0%
     Shareholders                                     0   0.0%            Tackle stock                        0.00          0.0%
   Patriot excess cash                                0   0.0%            Cash Distribution Per Share        53.61         63.7%
   Additional financing                               0   0.0%            CVR                                 0.00          0.0%
     Senior Financing                             3,562  33.4%            Warrant                             1.75          2.1%
     Subordinated Financing and Subdebt to PCI    1,759  16.5%            Subdebt to Patriot                 12.45         14.8%
   CVR                                                0   0.0%                                              ------        ------
   Warrant                                          215   2.0%              Total Purchase Price Per Share   84.17         85.2%
   Convertible Preferred - Strategic Investors    1,800  16.9%        Premium to Current Market                5.7%       ======
   Paramount excerise of options                    80    0.7%                                               ======
                                                ------ ------         Purchase Price of Equity
       Total Sources of Funds                $10,679    100.0%          Cash Distribution Per Share                        $53.61
Front end cash per share                                 $107           Stock Consideration Per Share - common              16.37
Second-Tier Exchange Ratio Analysis                                     Stock Consideration Per Share - convertible          0.00
   Target purchase price                      $84.17                    Total Shares Outstanding                            123.0
   Cash Component                             $53.61                    Aggregate Purchase Price - Cash                    $6,592
   Class A exchange ratio - full deal        0.00000                    Aggregate Purchase Price - Common Stock             2,013
   Class B exchange ratio - full deal        0.46439                    Aggregate Purchase Price - Straight Preferred           0
   Straight preferred stock                               Per Share     Aggregate Purchase Price - CVR                          0
     consideration - full deal                 $0.00     Consideration  Aggregate Purchase Price - Warrants                   215
Implied back-end exchange ratio                          -------------  Aggregate Purchase Price - Subordinated debt        1,759
   Class A exchange ratio                    0.00000      $0.00         Aggregate Purchase Price - PIK Convertible Debt         0
   Class B exchange ratio                    0.93065      32.81         Aggregate Purchase Price - PIK Convertible Pref.        0
   Tackle converted Class B stock            0.00000       0.00         Aggregate Purchase Price - PIK Straight Pref.           0
   Straight preferred stock ratio            0.00000       0.00                                                            ------
   Sub. Debt Ratio                           0.49900      24.95           Total                                           $10,579
   CVR                          0.00000      0.00000       0.00
   Warrants                     0.30000      0.50000       3.50
Total Back-End Value                                     $61.26



February 1994                SMITH BARNEY SHEARSON INC.         Page 1



                               With $12 per share CVR Payout
CONFIDENTIAL                      Viacom/Tackle/Patriot                                            Project Voltage
                                                                                                    
Summary Assumptions - Continued                             Interest Rates
(Dollars expressed in millions, except per share)             Senior Term                                 5.0%
Convertible Preferred - Strategic Investors                   Senior Notes (Existing Facilities)          4.0%
   Conversion price - Strategic Investors       $70.00        Conv. Subordinated to Patriot               5.0% Subdebt 7 year  7.9%
   Implied fully-diluted shares issued (Class B)  25.7        Reinvestment Rate                           3.0% Subdebt 10 year 8.1%
Warrant strike price - Patriot     $70.00       $60.00        Convertible Preferred - Patriot             5.0%
Number of warrants issued           18.41        30.68        Straight Preferred - Patriot                5.0%
Warrant proceeds, total                         $3,129        Subordinated Debt - Patriot                 8.0%
Preferred to Patriot:  Straight=0, Convertible=1     0        Convertible Preferred - Strategic investors 5.0%
Sub. debt to Patriot: Straight=0, Convertible=1      0        Convertible Capped Preferred - Patriot      6.5%
Convertible Preferred - Patriot
   Per Share Amount of Convertible Preferred     $0.00      Patriot/Viacom with Tackle as Equity Partner Only?    No    0
   Current Class B stock price                   35.25      PIK Convertible Preferred issued to Tackle
   Liquidation value                              4.00      Aggregate                                      $0
   Total Patriot Shares Outstanding, 
      Excl. Options                              123.0      Conversion price, premium   $44.06       25.0%
         Purchase Price - Convertible Preferred     $0      Implied fully diluted shares (Class B)    0.0
   Conversion Price - Patriot                   $70.00      Dividend rate                            9.00%
   Total Convertible Shares Issued to Patriot      0.0
       Implied fully diluted shares (Class B)      0.0        Per share purchase price  Ratio          Price   Consideration
                                                                                        -----          -----   -------------
                                                                  Class A               0.08000       $39.50        $3.16
Tackle TRANSACTION SUMMARY                                        Class B (b.)          0.66544        35.25        23.46
Sources and uses of funds                                                                                           -----
                                                               Total                                               $26.62
Uses of funds                                                     Current share price                              $27.63
   Purchase price of equity                     $6,584            Premium                                            -3.6%
   Transaction costs                               100      Share Analysis
                                                 -----
       Total                                    $6,684      BV number of shares, excluding options   247.4    18.6   Total options
                                                            Implied number of shares issued to BV
Source of funds                                                    Class A                           19.8
   Voltage common equity                        $6,584             Class B                          164.6
   Cash                                            100                                              -----
                                                 -----      Total shares issued to BV               184.4
       Total                                    $6,684        
                                                 =====      Cash Infusion Analysis                         Class A      Class B
                                                                                                           -------      -------
                                                            Aggregate cash from Tackle      $1,250             $0        $1,250
Goodwill Created                                            Per share                                      $60.00        $55.00
   Purchase price of equity                     $6,584      Premium to market                                51.9%         56.0%
   BV equity                                     2,415                                                     ------        ------
                                                 -----      Total shares                                      0.0          22.7
     Goodwill                                   $4,169                                                                 
                                                 =====                                             Without Patriot    With Patriot
                                                                                                   ---------------    ------------
                                                            "Temporary ownership"                   #          %        #      %
                                                                                                    ----     ----     ----    ----
   Years of goodwill amortization                40.0       Fully diluted voting shares             53.4     0.0%     53.4    0.0%
   Goodwill amortization                       $104.2       Fully diluted economic shares(a.)      159.8    16.9%    229.8   13.6%
   Transaction cost amortization                 10.0       Mr. V ownership fully diluted voting    45.6    85.3%     45.6   85.3%
   Amortization of transaction costs             10.0       Mr. V ownership fully diluted economic  92.1    57.6%     92.1   40.1%



(a.)  "Without Patriot" includes $600 mm and $300 mm and "With Patriot" 
      includes $1.2 billion and $600 mm for Nynex and Blockbuster, respectively.
(b.)  Could adjust pursuant to terms based upon the VCR.  Additional shares 
      issued if Class B share price falls between $36 and $40 by:  
      ($40 - share price)/$44.50).
Conversely, would decrease if share price rises to between $48 and $52 by:
(share price - $48)/$44.50.  Period begins from closing to 12 months thereafter.

February 1994                SMITH BARNEY SHEARSON INC.        Page 2





                                                          With $12 per share CVR Payout
CONFIDENTIAL                                                        Viacom/Tackle/Patriot                    Project Voltage

Summary Pro Forma Impact of Merger Transaction to Voltage
(Dollars expressed in millions, except per share)                    Patriot         Tackle                      Pro Forma
                                                                 ---------------  --------------       ----------------------------
                                          Voltage Stand Alone     Stand  At Deal  Stand  At Deal              % Increase/(Decrease)
                                          -------------------                                                 ---------------------
 Public Market Trading Impact             Pre-Conv. Post-Con(1)  Alone   Price   Alone   Price         Total     Pre-Conv.Post-Conv.
                                          -------------------    -----   -----   -----   -----         -----     ------------------
                                                                                                  
 Market Capitalization (2)                 $4,608    $4,608       $9,941 $10,740   $7,347  $7,079        $13,205    186.6%   186.6%
 Adjusted Market Capitalization (3)         6,957     6,957       10,509  11,308    7,447   7,179         24,069    246.0%   246.0%
 Adjusted Market Capitalization/1993E 
   EBITDA                                    12.4 x    12.4 x       24.7 x  26.6 x   16.3 x  15.8 x         16.4 x   31.7%    31.7%
 Adjusted Market Capitalization/1994E 
   EBITDA                                    11.6      11.6         16.3    17.5     11.4    11.0           11.0     -5.3%    -5.3%
 Market Capitalization/1993 Cash Flow (9)    13.8      13.8         22.7    24.5     24.8    23.9           18.7     35.6%    35.6%
 Market Capitalization/1994 Cash Flow (9)    13.5      14.3         20.9    22.6     15.8    15.2           11.3    -15.8%   -20.8%
 Operating Performance/Size
 1994E Revenue                             $2,227    $2,227       $5,225  $5,225   $3,319  $3,319        $10,771    383.7%   383.7%
 1994E EBITDA (4)                             600       600          645     645      653     653          2,192    265.4%   265.4%
 1994E Net Income (4)                         161       141          318     318      357     357            431    167.8%   206.3%
 1994E Cash Flow (4)                          342       322          480     480      465     465          1,164    240.2%   261.6%
 Leverage Impact
 EBITDA/Net Interest            LTM           3.5 x     5.0 x        5.5 x   5.5 x     NM      NM            2.6 x  -27.7%   -48.7%
                               1993           3.6       5.1          6.3     6.3       NM      NM            2.7    -24.9%   -46.7%
                               1994 (4)       4.3       6.4          9.2     9.2       NM      NM            4.0     -6.1%   -36.5%
 EBITDA/Net Interest & Pref.   1993           3.6       3.6          6.3     6.3       NM      NM            2.3    -36.0%   -36.0%
                               1994 (4)       4.3       4.3          9.8     9.8       NM      NM            3.6    -15.5%   -15.5%
 Debt/EBITDA (8)                LTM           4.6       2.9          1.2     1.2      1.5     1.5            6.6     41.8%   128.5%
                               1993           4.2       2.6          2.4     2.4      1.1     1.1            6.8     59.7%   156.9%
                               1994           3.7       2.3          1.5     1.5      0.8     0.8            4.3     15.9%    91.1%
 Debt & Preferred/EBITDA (8)   1993           4.2       4.2          2.4     2.4      1.1     1.1            7.6     78.7%    78.7%
                               1994 (4), (5)  3.7       3.8          1.5     1.5      0.8     0.8            4.9     30.6%    29.4%
 Total Debt/Capitalization                   71.9%     44.7%        18.5%   18.5%    41.9%   41.9%          48.7%   -32.3%     9.0%
 12/31/93E Total Debt                      $2,373    $1,473       $1,014  $1,014     $490    $490        $10,448    340.3%   609.4%

Dilution(1) 1993E E.P.S. (5) - fully diluted $1.35    $1.11        $2.38   $2.38    $0.91   $0.91          $0.14    -89.3%   -86.9%
          1994E E.P.S. - fully diluted        1.32     1.15         2.55    2.55     1.34    1.34           1.17    -11.7%     1.0%
          1995E E.P.S. - fully diluted        1.75     1.58         2.79    2.79     1.71    1.71           1.77      0.9%    11.8%
          1993E Cash flow per share - 
            fully diluted                     2.78     2.54         3.63    3.63     1.11    1.11           1.92    -31.0%   -24.5%
          1994E Cash flow per share - 
            fully diluted                     2.81     2.65         3.91    3.91     1.75    1.75           3.15     12.2%    19.2%
          1995E Cash flow per share - 
            fully diluted                     3.44     3.27         4.20    4.20     2.28    2.28           3.90     13.3%    19.2%

          1993E EBITDA                        $560     $560         $425    $425     $456    $456           $425    -24.1%   -24.1%
          1994E EBITDA                         600      600          645     645      653     653            634      5.6%     5.6%
          1995E EBITDA                         695      695          696     696      836     836            763      9.8%     9.8%




(1) The Post-Convert. figures relate to the issuance of $900 convertible 
    preferred to strategic investors
(2) Market capitalization defined as share price multiplied by shares 
    outstanding.
(3) Adjusted market capitalization equals market capitalization plus total 
    debt less cash equivalent
(4) Figures include projected synergies.                                 
(5) Management ownership includes all options.             
(6) Convertible preferred ownership stand-alone as if transaction does no occur.
(7) Figure provided to demonstrate trailing dilution. Patriot figures adjusted
    for December year end.
(8) Pro forma multiples - 65% of balance sheet cash is backed-out of the 
    debt figure.
(9) Patriot '93 and '94 stand alone cash flow:  $438 and $475.

February 1994                SMITH BARNEY SHEARSON INC.        Page 3



                    With $12 per share CVR Payout
CONFIDENTIAL           Viacom/Tackle/Patriot                    Project Voltage

Debt Covenant Analysis
(Dollars expressed in millions, except per share)
                                                
                                                        W/ McM
                                                        ------
 LTM EBITDA
     Patriot (Incl. McMillan)                              560
     Voltage                                               560
      Tackle                                               328
                                                       -------
 Total                                                   1,448
 Existing debt
     Patriot                                             1,014
     Viacom                                              2,606
      Tackle (including equity bridge)                   1,740
                                                       -------
 Total existing debt                                     5,360

 Plus:  cash paid to Paramount shareholders              6,592
 Plus:  transaction costs                                  200
 Plus:  Subordinated debt to Paramount shareholders      1,188
 Less:  convertible preferred from strategic investors  (1,800)
 Less:  debt repayment                                       0
 Less:  Option proceeds, use of Tackle cash                (180)
 Less:  Tackle bridge                                    (1,250)
                                                        -------
 Gross debt                                              10,110
 Cash
   Patriot                                                  446
   Viacom                                                    48
   Tackle                                                   390
                                                        -------
 Total                                                      884

 65% of total cash                                          575
 Net debt, with 65% total cash                            9,535
 Convertible preferred                                    1,200
 Net debt and conv. pfd., with 65% total cash            10,735


 Gross interest expense                                    $565
 Preferred dividends (convertible and/or straight)
     Strategic investors                                     60
    Paramount                                                 0
                                                        -------
      Total convertible preferred dividends                  60
 DEBT/EBITDA, w/ 65% total cash                            6.59 x
 DEBT & PREFERRED/EBITDA, w/ 65% total cash                7.42
 EBITDA/Net interest                                       2.56
 EBITDA/Net interest + preferred dividends                 2.32

February 1994                SMITH BARNEY SHEARSON INC.        Page 4





                                     With $12 per share CVR Payout
CONFIDENTIAL                            Viacom/Tackle/Patriot                      Project Voltage

Ownership Summary                                               Viacom Stand-Alone
(Dollars expressed in millions, except per share)          Pre-Convertible      Post-Convertible        Pro Forma
                                                           ---------------      ----------------      ------------------
Voltage    Total Voltage Shareholders Ownership            Shares Percentage    Shares  Percentage    Shares  Percentage
                                                           ------ ----------    ------  ----------    ------  ----------
                                                                                           
                   Primary                                 120.5   100.0%       120.5   100.0%        120.5    33.3%
                   Fully diluted                           124.3   100.0%       124.3    90.6%        124.3    27.9%
           Total Voltage Shareholders Voting
                   Primary                                  53.4   100.0%        53.4   100.0%         53.4    73.0%
                   Fully diluted                            53.4   100.0%        53.4   100.0%         53.4    71.5%
           Management ownership - Primary
                   Voting                                   45.6    85.3%        45.6    85.3%         45.6    62.3%
                   Economic                                 95.9    77.2%        95.9    77.2%         95.9    26.5%
           Management ownership - Fully diluted
                   Voting                                   45.6    85.3%        45.6    85.3%         45.6    61.0%
                   Economic                                 99.7    80.2%        99.7    72.7%         99.7    22.4%
           Mr. Voltage ownership - Fully diluted
                   Voting                                   45.6    85.3%        45.6    85.3%         45.6    61.0%
                   Economic                                 92.1    74.1%        92.1    67.2%         92.1    20.7%

STRATEGIC  Nynex Convertible Preferred @ $600 mm stand alone and $1200 mm pro forma
INVESTORS          Voting                                    0.0     0.0%         0.0     0.0%          0.0     0.0%
                   Fully diluted                             0.0     0.0%         8.6     6.2%         17.1     3.8%

           Blockbuster Convertible Preferred @ $0 mm stand alone and $0 mm pro forma
                   Voting                                    0.0     0.0%         0.0     0.0%          0.0     0.0%
                   Fully diluted                             0.0     0.0%         4.3     3.1%          0.0     0.0%
           New strategic investment  holder - either common or convertible holders
                   Voting                                    0.0     0.0%         0.0     0.0%          0.0     0.0%
                   Economic                                  0.0     0.0%         0.0     0.0%          0.0     0.0%
TACKLE AS        Tackle ownership - Primary
MERGER             Voting                                    0.0     0.0%         0.0     0.0%         19.8    27.0%
PARTNER            Economic                                  0.0     0.0%         0.0     0.0%        184.4    50.9%
                Tackle ownership - Fully diluted (excludes convert. preferred) 
                   Voting                                    0.0     0.0%         0.0     0.0%         21.3    28.5%
                   Economic                                  0.0     0.0%         0.0     0.0%        198.3    44.5%


    TACKLE FULLY DILUTED SHARES

Non-employee options      $26.50    4.0
Employee options           12.92   14.6

Exchange Ratio             CL A   0.080
                           CL B   0.665

Implied options            CL A     1.5
                           CL B    12.4

Calculation of dilutive options:
  Option proceeds                      $294
  Current share price                $27.63
Implied dilutive options - pre trans    8.0
Post-transaction dilutive options:      5.9

   Ownership Analysis Continued on Next Page


February 1994                SMITH BARNEY SHEARSON INC.        Page 5


                                     With $12 per share CVR Payout


CONFIDENTIAL                            Viacom/Tackle/Patriot                      Project Voltage

Ownership Analysis - Continued                                 Voltage Stand-Alone
(Dollars expressed in millions, except per share)          Pre-Convertible      Post-Convertible          Pro Forma
                                                           ---------------      ----------------     ------------------
                                                          Shares Percentage    Shares  Percentage    Shares  Percentage
                                                          ------ ----------    ------  ----------    ------  ----------
                                                                                            
Patriot         Patriot management - fully diluted
                   Voting                                    0.0     0.0%         0.0     0.0%          0.0     0.0%
                   Economic                                  0.0     0.0%         0.0     0.0%          0.0     0.0%
                Patriot convertible preferred and subdebt, including Convertible Capped Preferred
                   Voting                                    0.0     0.0%         0.0     0.0%          0.0     0.0%
                   Fuly diluted                              0.0     0.0%         0.0     0.0%          0.0     0.0%
                Patriot warrants
                   Voting                                    0.0     0.0%         0.0     0.0%          0.0     0.0%
                   Fully diluted                             0.0     0.0%         0.0     0.0%         49.1    11.0%
                Patriot shareholders voting, includes management
                   Primary                                   0.0     0.0%         0.0     0.0%          0.0     0.0%
                   Fully diluted                             0.0     0.0%         0.0     0.0%          0.0     0.0%

                Total Patriot shareholders economic, including convertible preferred holders, excluding warrants
                   Primary                                   0.0     0.0%         0.0     0.0%         57.1    15.8%
                   Fully diluted                             0.0     0.0%         0.0     0.0%         57.1    12.8%


                Total pro forma primary shares - economic  120.5   100.0%       120.5   100.0%        362.0   100.0%
                Total pro forma fully diluted shares - 
                  economic                                 124.3   100.0%       137.1   100.0%        445.9   100.0%
                Total pro forma primary shares - voting     53.4   100.0%        53.4   100.0%         73.2   100.0%
                Total pro forma fully diluted shares - 
                  voting                                    53.4   100.0%        53.4   100.0%         74.7   100.0%


February 1994                SMITH BARNEY SHEARSON INC.         Page 6





                                                    With $12 per share CVR Payout
CONFIDENTIAL                                           Viacom/Tackle/Patriot                          Project Voltage
Implied Pro Forma Stock Price - Viacom
(Dollars expressed in millions, except per share)                                               Projected
                                             ------------------------------------------------------------------------------------
                                             1993    1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                             ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
                                                                                           
   Total EBITDA pro forma                   $1,471  $2,192  $2,640  $3,108  $3,519  $3,929  $4,394  $4,923  $5,524  $6,209  $6,989
   Synergies included in EBITDA                  0     234     350     456     544     600     663     735     817     911   1,018
   Capitalization adjustments
   Total debt                               10,448   9,967   9,154   7,928   6,430   4,720   2,973   2,823   2,823   2,377   2,201
   Convertible preferred                     1,200   1,200   1,200   1,200   1,200   1,200   1,200   1,200   1,200   1,200   1,200
   Less:  warrant proceeds (total)          (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129) (3,129)
   Less:  cash                                (784)   (784)   (784)   (784)   (784)   (784)   (784)   (784)   (784)   (784)   (784)
                                             -----   -----   -----   -----   -----   -----   -----   -----   -----   -----   -----
       Total capitalization adjustments      7,734   7,253   6,440   5,214   3,716   2,007     260     110     110    (336)   (513)

   Total shares outstanding - primary        362.0   362.0   362.0   362.0   362.0   362.0    362.0  362.0   362.0   362.0    362.0
   Total shares outstanding - fully diluted  445.9   445.9   445.9   445.9   445.9   445.9   445.9   445.9   445.9   445.9   445.9

   Implied stock price - 
     post transaction               10.0 x  $10.12  $30.40  $44.32  $59.88  $73.28  $86.30 $100.65 $112.85 $126.34 $142.69 $160.58
                                    11.0     14.00   36.18   51.28   67.46   81.17   95.11  110.51  123.89  138.72  156.61  176.25
                                    11.6     16.32   39.64   55.45   71.84   85.91  100.40  116.42  130.51  146.16  164.97  185.66
                                    12.0     17.87   41.95   58.23   74.63   89.07  103.92  120.36  134.93  151.11  170.54  191.93
                                    12.9     21.36   47.15   64.15   80.90   96.17  111.85  129.23  144.87  162.26  183.07  206.03
                                    13.0     21.74   47.73   64.80   81.60   96.96  112.73  130.22  145.97  163.50  184.46  207.60
                                    13.4     23.29   50.04   67.37   84.39  100.12  116.26  134.16  150.39  168.46  190.03  213.87
                                    14.0     25.62   53.50   71.13   88.57  104.85  121.55  140.07  157.01  175.89  198.39  223.27
                                    15.0     29.49   59.28   77.05   95.54  112.74  130.36  149.93  168.05  188.28  212.31  238.95
                                    15.1     29.88   59.85   77.64   96.24  113.53  131.24  150.91  169.15  189.52  213.70  240.51
                                    15.5     31.43   62.00   80.01   99.02  116.69  134.76  154.85  173.57  194.47  219.27  246.78
                                    16.0     33.37   64.67   82.97  102.51  120.64  139.17  159.78  179.09  200.67  226.23  254.62

   Blended A&B Exchange Ratio               0.464x  0.464x  0.464x  0.464x  0.464x  0.464x  0.464x  0.464x  0.464x  0.464x  0.464x
   Payment per share, excl. common          $69.66  $69.66  $69.66  $69.66  $69.66  $69.66  $69.66  $69.66  $69.66  $69.66  $69.66

   Implied valuation per share - 
     Paramount                      10.0x   $74.36  $83.78  $90.24  $97.46 $103.69 $109.74 $116.40 $122.07 $128.33 $135.92 $144.23
                                    11.0     76.16   86.46   93.47  100.99  107.36  113.83  120.98  127.19  134.08  142.39  151.51
                                    11.6     77.24   88.07   95.41  103.02  109.56  116.28  123.72  130.27  137.53  146.27  155.88
                                    12.0     77.96   89.14   96.70  104.32  111.02  117.92  125.56  132.32  139.83  148.86  158.79
                                    12.9     79.58   91.55   99.45  107.23  114.32  121.60  129.67  136.93  145.01  154.68  165.34
                                    13.0     79.76   91.82   99.75  107.55  114.69  122.01  130.13  137.45  145.59  155.32  166.07
                                    13.4     80.48   92.90  100.94  108.85  116.15  123.65  131.96  139.50  147.89  157.91  168.98
                                    14.0     81.56   94.50  102.69  110.79  118.35  126.10  134.71  142.57  151.34  161.79  173.35
                                    15.0     83.35   97.19  105.44  114.03  122.02  130.20  139.28  147.70  157.09  168.25  180.62
                                    15.1     83.53   97.45  105.72  114.35  122.38  130.60  139.74  148.21  157.67  168.90  181.35
                                    15.5     84.25   98.45  106.82  115.64  123.85  132.24  141.57  150.26  159.97  171.49  184.26
                                    16.0     85.15   99.69  108.19  117.26  125.68  134.29  143.86  152.83  162.85  174.72  187.90



February 1994                SMITH BARNEY SHEARSON INC.         Page 7



                                                  With $12 per share CVR Payout
CONFIDENTIAL                                          Viacom/Tackle/Patriot                            Project Voltage

Summary of Refinancing of Existing Debt and New Borrowings
(Dollars expressed in millions, except per share)                        Existing
                                                                           Debt            Amount         New
   Voltage                                                              (12/31/93E)      Refinanced     Borrowings      Pro Forma
                                                                        --------------   ----------     ----------      ---------  
                                                                                                           
     Notes Payable to Banks                                               $1,923             $0         $3,562           $5,485
     11.8% Senior Subordinated Notes Due 1998                                  0              0              0                0
     9.125% Senior Subordinated Notes Due 1999                               150              0              0              150
     8.75% Senior Subordinated Reset Notes Due 2001                          100              0              0              100
     10.25% Senior Subordinated Notes Due 2001                               200              0              0              200
     5.75% Convertible Subordinated Debentures Due 2001                        0              0              0                0
     Current Maturities                                                        0              0              0                0
                                                                          ------         ------         ------           ------
   Total Viacom                                                            2,373              0          3,562            5,935

   Block                                                                   1,740              0              0            1,740
                                                                          ------         ------         ------           ------
       Total                                                              $4,113             $0         $3,562           $7,675
   Patriot
     8.5% Notes Due 1996 (1)                                                  $0             $0             $0               $0
     5.875% Notes Due 2000                                                   150              0              0              150
     7.5% Debentures Due 2023                                                150              0              0              150
     7.5% Notes Due 2002                                                     246              0              0              246
     8.25% Senior Debentures Due 2022                                        247              0              0              247
     7% Subordinated Debentures Due 2003                                     176              0              0              176
     Other Notes, 8.22% (1)                                                    4              0              0                4
     Capital Leases (1)                                                       41              0              0               41
     Current Maturities                                                        0              0              0                0
                                                                          ------         ------         ------           ------
                                                                           1,014              0              0            1,014

   New Borrowings
   (Excluding Voltage borrowing on existing credit facilities)

   Convertible PIK debt - Patriot                                           $0                            $0               $0
   Sub. debt to Patriot                                                     --             --         $1,759           $1,759
   Other                                                                      --             --              0                0
                                                                          ------         ------         ------           ------
   TOTAL                                                                  $5,127             $0         $5,321          $10,448




   (1) Estimated.

February 1994                SMITH BARNEY SHEARSON INC.         Page 8



                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                                    Project Voltage
1993E and 1994E Pro Forma Combined Income Statement Comparison
(Dollars expressed in millions, except per share)

                                 1993 Stand-Alone        Proforma      1994 Stand-Alone      Proforma
                               ---------------------                 --------------------
                               Pre-Conv.  Post-Conv.       1993      Pre-Conv.  Post-Conv.     1994
                               ---------  ----------       ----      ---------  ----------    -------
                                                                          
   Revenue      Voltage           $2,008      $2,008        $2,008      $2,227     $2,227      $2,227
                Patriot(1)             -           -         4,691           -          -       5,225
                Tackle                 -           -         2,317                              3,319
                                  ------      ------        ------      ------     ------      ------
                  Total            2,008       2,008         9,016       2,227      2,227      10,771

   EBITDA       Voltage              560         560           560         600        600         600
                Patriot(1)             -           -           425           -          -         645
                Tackle                 -           -           456           -          -         653
                McM                    -           -            30           -          -          60
                Patriot 
                  Synergies(2)         -           -             0           -          -         134
                BV synergies           -           -             0           -          -         100
                                  ------      ------        ------      ------     ------      ------
                  Total              560         560         1,471         600        600       2,192

              Depreciation and Amortization
                Voltage              172         172           172         181        181         181
                Patriot                -           -           145           -          -         162
                Tackle                 -           -            54                                108
                Transaction 
                  Goodwill(3)          -           -           282           -          -         282
                                  ------      ------        ------      ------     ------      ------
                  Total              172         172           654         181        181         734
              EBIT                   388         388           817         419        419       1,459

              Net Interest 
                Expense (2)          155         110           541         139         94         541
              Other Expense 
                (Income)             (62)        (62)          (95)         (1)        (1)        (34)
                                  ------      ------        ------      ------     ------      ------
                Pre Tax Income       295         340           370         281        326         952
              Taxes (2)              127         155           250         126        147         467
              Preferred dividends      0          45            60           0         45          60
              Equity in Earnings 
                of Affiliated 
                Companies             (7)         (7)           (7)          6          6           6
                                  ------      ------        ------      ------     ------      ------
                  Net Income        $162        $134           $53        $161       $141        $431
                                  ======      ======        ======      ======     ======      ======
              Leverage Ratios
              EBITDA/Net Interest 
                Expense            3.62x       5.10x         2.72x       4.31x      6.38x       4.05x
              EBITDA/Net interest 
                plus preferred     3.62        3.62          2.45        4.31       4.31        3.65
              EBITDA/Senior and 
                subordinated       3.62        5.10          2.60        3.69       5.10        3.88
              EBITDA/Senior, 
                subordinated and 
                pref.              3.62        3.62          2.35        3.69       3.69        3.51
              Debt/EBITDA          4.24x       2.63x         6.76x       3.72x      2.26x       4.31x
              Debt + Preferred
                /EBITDA            4.24        1.75          7.57        3.72       1.90        4.86


(1) Paramount adjusted for a December year end.
(2) See attached pages for detailed calculations. 1993 figure includes pro forma
    interest expense on $0.00 cash payment to Patriot shareholders.
(3) Amortization period:     40 years   Figure includes capitalized transaction 
    costs which are amortized over ten years.
(4) Includes early redemption expense on Voltage debt in years 1995 and 1997.

February 1994                SMITH BARNEY SHEARSON INC.         Page 9



                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                          Project Voltage

Pro Forma Combined Income Statement
(Dollars expressed in millions, except per share)
                                                                       Proforma
                                                                                                
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
  Revenue                               1994     1995     1996      1997      1998      1999      2000      2001      2002      2003
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
                    Voltage           $2,227   $2,541   $2,857    $3,079    $3,383    $3,711    $4,085    $4,514    $5,005    $5,569
                    Patriot (1)        5,225    5,573    5,946     6,344     6,770     7,227     7,715     8,238     8,799     9,399
                    Tackle             3,319    3,979    4,806     5,609     6,450     7,418     8,531     9,810    11,282    12,974
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
                      Total           10,771   12,093   13,609    15,032    16,604    18,355    20,331    22,562    25,085    27,942

  EBITDA            Voltage              600      695      814       921     1,033     1,162     1,310     1,480     1,675     1,899
                    Patriot (1)          645      696      750       809       871       938     1,010     1,087     1,170     1,260
                    Tackle (5)           653      836    1,021     1,175     1,352     1,554     1,788     2,056     2,364     2,719
                    McM                   60       63       66        69        73        77        80        84        89        93
                    Patriot 
                      synergies (2)      134      150      171       216       223       229       236       243       251       259
                    Tackle synergies     100      200      285       328       377       434       499       574       660       759
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
                      Total            2,192    2,640    3,108     3,519     3,929     4,394     4,923     5,524     6,209     6,989

  D & A             Voltage              181      205      229       246       269       294       323       355       393       436
                    Patriot              162      172      184       196       209       223       238       254       271       289
                    Tackle               108      153      186       166       190       219       252       290       333       383
                    Goodwill (3)         282      282      282       282       282       282       282       282       282       282
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
                      Total              734      813      881       891       952     1,019     1,095     1,182     1,280     1,391
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
  EBIT                                 1,459    1,827    2,226     2,629     2,977     3,375     3,827     4,342     4,929     5,598

  Net Interest Expense (2)               541      572      536       466       399       300       205       130        50      (68)
  Other Expense (Income) (3)             (34)     (42)     (51)      (64)      (74)      (85)      (97)     (112)     (128)    (147)
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
    Pre Tax Income                       952    1,297    1,741     2,227     2,652     3,160     3,720     4,324     5,007     5,813
  Taxes (2)                              467      601      768       955     1,120     1,316     1,534     1,768     2,034     2,348
  Preferred dividends                     60       60       60        60        60        60        60        60        60        60
  Equity  - Affiliated Companies           6       16       27        37        48        48        48        48        48        48
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
      Net Income                        $431     $652     $939    $1,249    $1,520    $1,831    $2,174    $2,543    $2,960    $3,452
                                      ======   ======   ======    ======    ======    ======    ======    ======    ======   =======

  Leverage Ratios
  EBITDA/Net Interest Expense           4.05 x   4.61 x   5.79 x   7.54 x     9.85 x   14.65 x   24.07 x      NM x      NM x    NM x
  EBITDA/Net interest + pref.           3.65     4.18     5.21     6.68       8.56     12.21     18.61     29.04     56.51      NM  
  EBITDA/Senior and sub.                3.88     4.43     5.55     7.18       9.30     13.59     20.85     24.31 x   27.32 x 37.12  
  EBITDA/Senior, sub., & pref.          3.51     4.03     5.01     6.40       8.14     11.46     16.63     29.04     56.51      NM  
  Debt/EBITDA                           4.31 x   3.27 x   2.39 x   1.68 x     1.07 x    0.56 x    0.47 x    0.42 x    0.30 x  0.24 x
  Debt + Preferred/EBITDA               4.86     3.73     2.77     2.02       1.38      0.83      0.71      0.64      0.49    0.41  

   (1) Patriot adjusted for a December year end.
   (2) See attached pages for detailed calculations. 1993 figure includes pro 
       forma interest expense on $53.61 cash payment to Patriot shareholders.
   (3) Amortization period:     40 years   Figure includes capitalized 
       transaction costs which are amortized over ten years.  Tackle also 
       included.
   (4) Includes early redemption expense on Voltage debt in years 1995 and 1997.
   (5) Internal projections through 1997.  10% growth thereafter

February 1994                SMITH BARNEY SHEARSON INC.         Page 10


                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                          Project Voltage

1993E and 1994E Pro Forma E.P.S. Dilution Comparison
(Dollars expressed in millions, except per share)

                                  1993 Stand-Alone                          Proforma        1994 Stand-Alone           Proforma
                                  ----------------                                          ----------------                   
                                Pre-Conv.    Post-Conv.                      1993         Pre-Conv.    Post-Conv.       1994
                                ---------    ----------                     --------      ---------    ----------      --------
                                                                                                     
   Primary E.P.S.
   Stand alone net income           $162         $134                           $162          $161          $141            431

   Pro forma net income                -            -                             53             -             -            431
   Plus: after tax cost 
     of debt redemption                -            -                              0             -             -              0
                                ---------    ----------                     --------      ---------    ----------      --------
     Adjusted net income             162          134                             53           161           141            431

   Primary shares                  120.5        120.5                          369.1         121.7         121.7          369.1

   Primary E.P.S.                  $1.35        $1.11                          $0.14         $1.32         $1.15          $1.17

- -------------------------------------------------------------------------------------------------------------------------------
   Accretion / (dilution)
     - Primary E.P.S.             -89.3%       -86.9%                              -        -11.7%          1.0%              -
- -------------------------------------------------------------------------------------------------------------------------------

   Fully-Diluted E.P.S.
   Pro forma adjusted
     net income                     $162         $134                            $53          $161          $141           $431
   Plus preferred dividends            0           45                             60             0            45             60
   Plus after tax cost 
     of convertible debt               0            0                              0             0             0              0
                                ---------    ----------                     --------      ---------    ----------      --------
      Adjusted net income            162          179                            113           161           186            491


   Primary shares                  120.5        120.5                          369.1         121.7         121.7          369.1
   Plus net warrants under
     treasury method (a.)              0            0                              0             0             0              0
   Plus convertible pref. 
     and sub. shares                   0         12.9                           17.1             0          12.9           17.1
                                ---------    ----------                     --------      ---------    ----------      --------
       Adjusted shares             120.5        133.4                          386.3         121.7         134.6          386.3
   Implied E.P.S.                  $1.35        $1.34                          $0.29         $1.32         $1.38          $1.27
       Dilutive ?               No           No                             No            No           No              No
   Implied fully-diluted
     E.P.S.                        $1.35        $1.11                          $0.14         $1.32         $1.15          $1.17

- -------------------------------------------------------------------------------------------------------------------------------
   Accretion / (dilution)
     - to pro forma E.P.S.        -89.3%       -86.9%                                       -11.7%          1.0%              -
- -------------------------------------------------------------------------------------------------------------------------------










(a.)  Assumes pro forma stock price at 14x multiple

February 1994                SMITH BARNEY SHEARSON INC.         Page 11


                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                          Project Voltage

E.P.S. Dilution Analysis
(Dollars expressed in millions, except per share)
                                                                        Proforma
                                --------------------------------------------------------------------------------------------------
                                  1994      1995      1996      1997      1998      1999      2000      2001      2002      2003
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
                                                                                               
   Primary E.P.S.
   Stand alone net 
     income - (pre
     strategic convert.)           $161      $213      $285      $353      $422      $490      $569      $660      $765      $885

   Pro forma net income             431       652       939     1,249     1,520     1,831     2,174     2,543     2,960     3,452
   Plus: after tax cost
     of debt redemption               0         1         0         2         0         0         0         0         0         0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
    Adjusted net income             431       653       939     1,251     1,520     1,831     2,174     2,543     2,960     3,452

   V Stand-alone shares
     outstanding                  121.7     121.7     121.7     121.7     121.7     121.7     121.7     121.7     121.7     121.7
   Plus shares issued 
     to Patriot                    57.1      57.1      57.1      57.1      57.1      57.1      57.1      57.1      57.1      57.1
   Plus shares issued 
     to Tackle                    184.4     184.4     184.4     184.4     184.4     184.4     184.4     184.4     184.4     184.4
   Plus dilutive Patriot
     securities (latest 10-Q)       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0
   Plus dilutive Tackle
     securities (latest 10-Q)       5.9       5.9       5.9       5.9       5.9       5.9       5.9       5.9       5.9       5.9
   Plus shares issued to
     common equity holder           0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0
   Plus shares converted
     from Convertible Capped
     Preferred                      0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
       Pro forma shares
         outstanding
         - primary                369.1     369.1     369.1     369.1     369.1     369.1     369.1     369.1     369.1     369.1

   V stand-alone E.P.S.           $1.32     $1.75     $2.34     $2.90     $3.47     $4.03     $4.68     $5.42     $6.28     $7.28
   Pro forma E.P.S.               $1.17     $1.77     $2.54     $3.39     $4.12     $4.96     $5.89     $6.89     $8.02     $9.35
   Accretion / (dilution)
     - Primary E.P.S.            -11.7%      0.9%      8.5%     16.9%     18.8%     23.1%     25.9%     27.0%     27.6%     28.5%

   Fully-Diluted E.P.S.
   Pro forma adjusted
     net income                     431       653       939     1,251     1,520     1,831     2,174     2,543     2,960     3,452
   Plus preferred dividends          60        60        60        60        60        60        60        60        60        60
   Plus after tax cost of
     convertible debt                 0         0         0         0         0         0         0         0         0         0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
       Adjusted net income          491       713       999     1,311     1,580     1,891     2,234     2,603     3,020     3,512
   Pro forma primary shares       369.1     369.1     369.1     369.1     369.1     369.1     369.1     369.1     369.1     369.1
   Plus net warrants under
     treasury method (a.)           0.0       5.1      13.8      19.2      23.3      26.7      29.2      31.3      33.3      35.1
   Plus convertible pref.
     shares                        17.1      17.1      17.1      17.1      17.1      17.1      17.1      17.1      17.1      17.1
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
       Adjusted shares            386.3     391.4     400.0     405.5     409.6     413.0     415.4     417.6     419.6     421.4
   Implied E.P.S.                 $1.27     $1.82     $2.50     $3.23     $3.86     $4.58     $5.38     $6.23     $7.20     $8.34
       Dilutive ?               No        No        Yes       Yes       Yes       Yes       Yes       Yes       Yes       Yes
   Implied fully-diluted
     E.P.S.                       $1.17     $1.77     $2.50     $3.23     $3.86     $4.58     $5.38     $6.23     $7.20     $8.34

   Stand-alone fully-diluted
     shares outstanding           121.7     121.7     121.7     121.7     121.7     121.7     121.7     121.7     121.7     121.7
   V stand-alone fully-diluted
     E.P.S. - (pre strategic
     convert.)                    $1.32     $1.75     $2.34     $2.90     $3.47     $4.03     $4.68     $5.42     $6.28     $7.28
- ---------------------------------------------------------------------------------------------------------------------------------
   Accretion/(Dilution)
     - Fully-diluted E.P.S.      -11.7%      0.9%      6.5%     11.5%     11.3%     13.6%     15.0%     14.9%     14.5%     14.6%
- ---------------------------------------------------------------------------------------------------------------------------------

   V stand-alone net income
     - with preferred              $141      $193      $264      $331      $400      $466      $543      $632      $735      $853
   V stand-alone
     fully-diluted E.P.S.
     - (post strategic
     convert.) (b.)               $1.15     $1.58     $2.17     $2.72     $3.28     $3.83     $4.46     $5.19     $6.04     $7.01
- ---------------------------------------------------------------------------------------------------------------------------------
   Accretion/(Dilution)
     - Fully-diluted E.P.S.        1.0%     11.8%     15.0%     18.8%     17.4%     19.5%     20.4%     20.0%     19.2%     18.9%
- ---------------------------------------------------------------------------------------------------------------------------------

(a.)  Assumes pro forma stock price at 14x multiple  
(b.)  The Post-Convert. figures relate to the issuance of $900 convertible 
      preferred to strategic investors

February 1994                SMITH BARNEY SHEARSON INC.         Page 12


                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                          Project Voltage

1993E and 1994E Pro Forma Cash Flow Dilution Comparison
(Dollars expressed in millions, except per share)

                                  1993 Stand-Alone                          Proforma        1994 Stand-Alone           Proforma
   Primary Cash Flow              ----------------                                          ----------------                   
     Per Share                  Pre-Conv.    Post-Conv.                      1993         Pre-Conv.    Post-Conv.       1994
                                ---------    ----------                     --------      ---------    ----------      --------
                                                                                                     
   Cash flow                        $335         $306                          $707           $342         $322          $1,164

   Primary C.F.P.S.                $2.78        $2.54                         $1.92          $2.81        $2.65           $3.15

- -------------------------------------------------------------------------------------------------------------------------------
   Accretion / (Dilution)
     - C.F.P.S. - primary         -31.0%       -24.5%                             -          12.2%        19.2%
- -------------------------------------------------------------------------------------------------------------------------------

   Fully-Diluted Cash
     Flow Per Share
   Cash flow excluding
     preferred dividends            $335         $351                          $767           $342         $322          $1,224
   Primary shares plus
     convert. pref. shares         120.5        133.4                         386.3          121.7        134.6             386
   Implied cash flow
     per share                     $2.78        $2.63                         $1.99          $2.81        $2.39           $3.17
       Dilutive?                No           No                             No            No           Yes             No
   Implied fully-diluted
     cash flow per share           $2.78        $2.54                         $1.92          $2.81        $2.65           $3.15

- -------------------------------------------------------------------------------------------------------------------------------
   Accretion / (dilution)
     to proforma cash flow        -31.0%       -24.5%                             -          12.2%        19.2%               -
- -------------------------------------------------------------------------------------------------------------------------------


                                                                        Proforma
                                --------------------------------------------------------------------------------------------------
                                                                                               
                                  1994      1995      1996      1997      1998      1999      2000      2001      2002      2003
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------

   Primary Cash Flow
     Per Share
   Voltage stand-alone
     cash flow  - (pre
     strategic convert.)           $342      $419      $515      $599      $691      $785      $892     $1,016    $1,158    $1,321
   Pro forma cash flow            1,164     1,466     1,821     2,142     2,472     2,850     3,269      3,725     4,240     4,843
   Voltage stand-alone
     C.F.P.S.                     $2.81     $3.44     $4.23     $4.92     $5.68     $6.45     $7.33      $8.34     $9.51    $10.86
   Voltage pro forma C.F.P.S.      3.15      3.97      4.93      5.80      6.70      7.72      8.86      10.09     11.49     13.12
   Accretion/(Dilution)
     C.F.P.S. - primary           12.2%     15.4%     16.6%     17.9%     17.9%     19.7%     20.8%      20.9%     20.8%     20.8%

   Fully-diluted Cash Flow Per Share

   Pro forma cash flow
     excluding pref. dividends
     and after tax cost of
     pref.debt                   $1,224    $1,526    $1,881    $2,202    $2,532    $2,910    $3,329     $3,785    $4,300    $4,903

   Primary shares plus
     convert. pref. shares        386.3     391.4     400.0     405.5     409.6     413.0     415.4      417.6     419.6     421.4
   Implied cash flow per share    $3.17     $3.90     $4.70     $5.43     $6.18     $7.05     $8.01      $9.06    $10.25    $11.64
       Dilutive?                No        Yes       Yes       Yes       Yes       Yes       Yes       Yes       Yes       Yes
   Implied fully-diluted
     cash flow per share          $3.15     $3.90     $4.70     $5.43     $6.18     $7.05     $8.01      $9.06    $10.25    $11.64
   Stand-alone cash flow
     per share - (pre
     strategic convert.)          $2.81     $3.44     $4.23     $4.92     $5.68     $6.45     $7.33      $8.34     $9.51    $10.86
- ----------------------------------------------------------------------------------------------------------------------------------
   Accretion/(Dilution)
     C.F.P.S. fully-diluted       12.2%     13.3%     11.2%     10.3%      8.8%      9.3%      9.3%       8.6%      7.7%      7.2%
- ----------------------------------------------------------------------------------------------------------------------------------

   Stand-alone net income
      (post strategic convert.)    $322      $398      $494      $578      $669      $761      $866       $988    $1,128    $1,289
   Stand-alone cash flow
     per share - (post
     strategic convert.)          $2.65     $3.27     $4.00     $4.63     $5.31     $5.99     $6.77      $7.67     $8.71     $9.91
- ----------------------------------------------------------------------------------------------------------------------------------
   Accretion/(Dilution)
     C.F.P.S. fully-diluted       19.2%     19.2%     17.4%     17.3%     16.4%     17.7%     18.3       18.1%     17.6%     17.4%
- ----------------------------------------------------------------------------------------------------------------------------------

February 1994                SMITH BARNEY SHEARSON INC.         Page 13


                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                          Project Voltage

EBITDA and Synergy Analysis
(Dollars expressed in millions, except per share)

                      Proforma                                          Proforma
                                --------------------------------------------------------------------------------------------------
                                                                                            
                        1993      1994      1995      1996      1997      1998      1999      2000      2001      2002      2003
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
   EBITDA
   Voltage                $560      $600      $695      $814      $921     $1,033    $1,162    $1,310    $1,480    $1,675    $1,899
   Patriot                 425       645       696       750       809        871       938      1010      1087      1170      1260
   Tackle                  456       653       836      1021      1175       1352      1554      1788      2056      2364      2719
   Synergies                 0       234       350       456       544        600       663       735       817       911      1018
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
       Total             1,471     2,192     2,640     3,108     3,519      3,929     4,394     4,923     5,524     6,209     6,989


   Voltage % of
     combined adj.
     market
     capitalization       28.9%     28.9%     28.9%     28.9%     28.9%      28.9%     28.9%     28.9%     28.9%     28.9%     28.9%
   Implied pro forma
     EBITDA ownership
     value                 425       634       763       898     1,017      1,136     1,270     1,423     1,597     1,794     2,020

   Stand alone EBITDA      560       600       695       814       921      1,033     1,162     1,310     1,480     1,675     1,899

- ----------------------------------------------------------------------------------------------------------------------------------
   Percent
     increase/
     (decrease)          -24.1%      5.6%      9.8%     10.3%     10.4%       9.9%      9.3%      8.6%      7.9%      7.1%      6.4%
- ----------------------------------------------------------------------------------------------------------------------------------





   Synergy Analysis
   Cash flow per
     share stand
     alone - post
     convert             $2.54     $2.65     $3.27     $4.00     $4.63     $5.31     $5.99     $6.77      $7.67     $8.71     $9.91
   Cash flow per
     share pro forma      1.92      3.15      3.90      4.70      5.43      6.18      7.05      8.01       9.06     10.25     11.64
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
       Implied
       difference
       per share         $0.62    ($0.51)   ($0.63)   ($0.70)   ($0.80)   ($0.87)   ($1.06)   ($1.24)   ($1.39)   ($1.53)   ($1.72)
   Pro forma shares
     outstanding         369.1     369.1     391.4     400.0     405.5     409.6     413.0     415.4     417.6     419.6     421.4
       Implied after
       tax cash flow
       to breakeven        230      (188)     (246)     (279)     (325)     (357)     (437)     (516)     (580)     (643)     (726)

   Implied cash flow
     to breakeven
     - pre tax             373      (302)     (397)     (450)     (525)     (578)     (707)     (837)     (941)   (1,045)   (1,180)
   Estimated synergies       0       134       150       171       216       223       229       236       243       251       259


- ----------------------------------------------------------------------------------------------------------------------------------
     Implied total
       synergies
       needed for
       cash flow
       breakeven           373      (168)     (247)     (278)     (309)     (355)     (478)     (601)     (698)     (795)     (922)
- ----------------------------------------------------------------------------------------------------------------------------------







(a.)  Based on adjusted market value divided by market value


February 1994                SMITH BARNEY SHEARSON INC.         Page 14


                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                          Project Voltage


Income Tax Calculation and Pro Forma Combined Cash Flow Statement
(Dollars expressed in millions, except per share)
                      Proforma                                          Proforma
                                --------------------------------------------------------------------------------------------------
                                                                                            
                        1993      1994      1995      1996      1997      1998      1999      2000      2001      2002      2003
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------

Income Tax
  Calculation
Stand Alone Pre
  Tax Income
    Patriot              $456      $490      $536      $586      $640      $700      $764     $835      $912      $996    $1,088
    Voltage               295       281       359       462       564       669       791      932     1,094     1,281     1,496
    Tackle                383       560       715       889     1,094     1,258     1,447    1,664     1,913     2,200     2,530
Stand Alone
  Tax Rate
    Patriot              35.0%     35.0%     35.0%     35.0%     35.0%     35.0%     35.0%    35.0%     35.0%     35.0%     35.0%
    Voltage              45.5%     45.0%     45.0%     44.0%     44.0%     44.0%     44.0%    44.0%     44.0%     44.0%     44.0%
    Tackle               36.8%     36.8%     36.8%     36.8%     36.8%     36.8%     36.8%    36.8%     36.8%     36.8%     36.8%

Weighted Pro Forma
  Combined Tax Rate      38.3%     37.9%     38.0%     38.0%     38.1%     38.2%     38.2%    38.3%     38.4%     38.5%     38.5%

Pro Forma Combined
  Pre Tax Income         $370      $952    $1,297    $1,741    $2,227    $2,652    $3,160   $3,720    $4,324    $5,007    $5,813
Plus: Transaction
  Goodwill
  Amortization            282       282       282       282       282       282       282      282       282       282       282
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
    Adjusted Pre
      Tax Income         $653    $1,234    $1,579    $2,024    $2,509    $2,934    $3,442   $4,002    $4,606    $5,290    $6,095
    Implied Income
      Tax - GAAP         $250      $467      $601      $768      $955    $1,120    $1,316   $1,534    $1,768    $2,034    $2,348

Pro Forma Cash
  Flow Statement
Sources of Funds
    Net Income                     $431      $652      $939    $1,249    $1,520    $1,831   $2,174    $2,543    $2,960    $3,452
    Depreciation
      and amortization              734       813       881       891       952     1,019    1,095     1,182     1,280     1,391
    PIK dividends
      and/or PIK
      interest expense                0         0         0         0         0         0        0         0         0         0
    Cash margin
      on Showtime
      movies (1)                     32        32        32        32        32        32       32        32        32        32
    Deferred taxes
      and other                      28       (63)        7        (0)      (22)      (22)     (29)      (37)      (47)      (58)
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
        Total Sources             1,224     1,434     1,859     2,170     2,481     2,860    3,272     3,719     4,225     4,816

Uses of Funds
  Capital expenditures             $552      $371      $400      $416      $463      $516     $576      $644      $721      $809
  Common dividends                    0         0         0         0         0         0        0         0         0         0
  Change in working
    capital                          80        99        70       114       127       139      153       168       185       205
  Other and
    capitalization
    of pre-publication
    costs                           110       151       163       142       182       192      210       230       253       279
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
      Total Uses                    743       621       633       672       772       846      938     1,042     1,160     1,293
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
Total Cash Flow
  Before Debt Service              $481      $813    $1,226    $1,498    $1,709    $2,014    $2,334    $2,677    $3,065    $3,523

Term Debt Service Requirement         0      (100)        0     (150)         0         0    (150)          0      (446)     (176)
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
  Cash Flow Available for
    Repayment of Revolver          $481      $713    $1,226   $1,348     $1,709    $2,014  $2,184      $2,677    $2,619    $3,347

Cash Flow Used for
  Repayment of Revolver            $481      $713    $1,226   $1,348     $1,709    $1,747      $0          $0        $0        $0

  Cash flow accumulated              $0        $0        $0       $0         $0      $267  $2,184      $2,677    $2,619    $3,347


(1) Tax effected difference between operating and cash flow margin on 
    Patriot movies which are shown on Showtime.

February 1994              SMITH BARNEY SHEARSON INC.           Page 15


                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                          Project Voltage

Debt Amortization Schedule
(Dollars expressed in millions, except per share)
                      Proforma                                          Proforma
                                --------------------------------------------------------------------------------------------------
                                                                                            
                        1993      1994      1995      1996      1997      1998      1999      2000      2001      2002      2003
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------

  Voltage
    11.8% Senior         
      Subordinated
      Notes Due 1998       $0        $0        $0        $0        $0        $0        $0        $0        $0        $0        $0
    9.125% Senior
      Subordinated
      Notes Due 1999      150       150       150       150         0         0         0         0         0         0         0
    8.75% Senior
      Subordinated
      Reset Notes
      Due 2001            100       100         0         0         0         0         0         0         0         0         0
    10.25% Senior
      Subordinated
      Notes Due 2001      200       200       200       200       200       200       200       200       200         0         0
    5.75% Convertible
      Subordinated
      Debentures Due
      2001                  0         0         0         0         0         0         0         0         0         0         0
     Current
       Maturities           0         0         0         0         0         0         0         0         0         0         0
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
         Total           $450      $450      $350      $350      $200      $200      $200      $200      $200        $0        $0

   Patriot
     8.5% Notes
       Due 1996 (1)        $0        $0        $0        $0        $0        $0        $0        $0        $0        $0        $0
     7.5% Notes
       Due 2002           246       246       246       246       246       246       246       246       246         0         0
     8.25% Senior
       Debentures
       Due 2022           247       247       247       247       247       247       247       247       247       247       247
     5.875% Notes
       Due 2000           150       150       150       150       150       150       150         0         0         0         0
     7.5% Debentures
       Due 2023           150       150       150       150       150       150       150       150       150       150       150
     7% Subordinated
       Debentures
       Due 2003           176       176       176       176       176       176       176       176       176       176         0
     Other Notes,
       8.22% (1)            4         4         4         4         4         4         4         4         4         4         4
     Capital
       Leases (1)          41        41        41        41        41        41        41        41        41        41        41
     Current
       Maturities           0         0         0         0         0         0         0         0         0         0         0
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
                        1,014     1,014     1,014     1,014     1,014     1,014     1,014       864       864       618       442

  Notes Payable
    to Banks           $7,225    $6,743    $6,030    $4,804    $3,456    $1,747        $0        $0        $0        $0        $0

  New Borrowings
  Sub. debt to
    Patriot            $1,759    $1,759    $1,759    $1,759    $1,759    $1,759    $1,759    $1,759    $1,759    $1,759    $1,759
  Other                     0         0         0         0         0         0         0         0         0         0         0
  PIK Convertible
    debt - Patriot          0         0         0         0         0         0         0         0         0         0         0
      Plus:  PIK
        interest
        expense             0         0         0         0         0         0         0         0         0         0         0
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
  Ending -
    Convertible
    debt - Patriot          0         0         0         0         0         0         0         0         0         0         0
  Cumulative Cash
    Balance              $784      $784      $784      $784      $784      $784    $1,051    $3,235    $5,912    $8,531   $11,878
- ----------------------------------------------------------------------------------------------------------------------------------
      TOTAL DEBT      $10,448    $9,967    $9,154    $7,928    $6,430    $4,720    $2,973    $2,823    $2,823    $2,377    $2,201
      NET DEBT         $9,664    $9,182    $8,369    $7,143    $5,645    $3,936    $1,922     ($412)  ($3,089)  ($6,154)  ($9,677)
- ----------------------------------------------------------------------------------------------------------------------------------
  Convertible
    preferred -
    Patriot               0         0         0         0         0         0         0         0         0         0         0
  Preferred -
    Patriot               0         0         0         0         0         0         0         0         0         0         0
  Convertible
    preferred -
    strategic
    investors           1,200     1,200     1,200     1,200     1,200     1,200     1,200     1,200     1,200     1,200     1,200
  Convertible
    Capped
    Preferred               0         0         0         0         0         0         0         0         0         0         0
  Perpetual
    preferred               0         0         0         0         0         0         0         0         0         0         0
  PIK Convertible
    preferred               0         0         0         0         0         0         0         0         0         0         0
      Plus:
        dividends           0         0         0         0         0         0         0         0         0         0         0
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
  Ending balance            0         0         0         0         0         0         0         0         0         0         0
  PIK Straight
    preferred               0         0         0         0         0         0         0         0         0         0         0
      Plus:
        dividends           0         0         0         0         0         0         0         0         0         0         0
                      --------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
  Ending balance            0         0         0         0         0         0         0         0         0         0         0
- ----------------------------------------------------------------------------------------------------------------------------------
  TOTAL DEBT
    AND
    PREFERRED         $11,648   $11,167   $10,354    $9,128    $7,630    $5,920    $4,173    $4,023    $4,023    $3,577    $3,401
- ----------------------------------------------------------------------------------------------------------------------------------

February 1994                SMITH BARNEY SHEARSON INC.         Page 16




                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                          Project Voltage

Pro Forma Interest Expense
(Dollars expressed in millions, except per share)
                                                                        Proforma
                                --------------------------------------------------------------------------------------------------
                                                                                               
                                  1994      1995      1996      1997      1998      1999      2000      2001      2002      2003
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
  Voltage
    11.8% Senior
      Subordinated
      Notes Due 1998                 $0        $0        $0        $0        $0        $0        $0        $0        $0        $0
    9.125% Senior
      Subordinated
      Notes Due 1999                 14        14        14        14        14         0         0         0         0         0
    8.75% Senior
      Subordinated
      Reset Notes
      Due 2001                        9         9         0         0         0         0         0         0         0         0
    10.25% Senior
      Subordinated
      Notes Due 2001                 21        21        21        21        21        21        21        21        21         0
    5.75% Convertible
      Subordinated
      Debentures Due
      2001                            0         0         0         0         0         0         0         0         0         0
     Current
       Maturities                     0         0         0         0         0         0         0         0         0         0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
         Total                      $43       $43       $34       $34       $34       $21       $21       $21       $21        $0

   Patriot
     8.5% Notes
       Due 1996 (1)                  $0        $0        $0        $0        $0        $0        $0        $0        $0        $0
     7.5% Notes
       Due 2002                      18        18        18        18        18        18        18        18        18         0
     5.875% Notes
       Due 2000                       9         9         9         9         9         9         9         0         0         0
     7.5% Debentures
       Due 2023                      11        11        11        11        11        11        11        11        11        11
     8.25% Senior
       Debentures
       Due 2022                      20        20        20        20        20        20        20        20        20        20
     7% Subordinated
       Debentures
       Due 2003                      12        12        12        12        12        12        12        12        12        12
     Other Notes,
       8.22% (1)                      0         0         0         0         0         0         0         0         0         0
     Capital
       Leases (1)                     3         3         3         3         3         3         3         3         3         3
     Current
       Maturities                     0         0         0         0         0         0         0         0         0         0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
                                    $75       $75       $75       $75       $75       $75       $75       $66       $66       $48

  Notes Payable
    to Banks                        361       337       302       240       173        87         0         0         0         0

  New Borrowings
  Sub. debt to
    Paramount                        86       141       141       141       141       141       141       141       141       141
  Other                               0         0         0         0         0         0         0         0         0         0

  Subordinated
    debt                              0         0         0         0         0         0         0         0         0         0

  Investment
    Income                          (24)      (24)      (24)      (24)      (24)      (24)      (32)      (97)     (177)     (256)
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
      TOTAL
        INTEREST
        EXPENSE
        (INCOME)                   $541      $572      $536      $466      $399      $300      $205      $130       $50      ($68)
                                ========  ========  ========  ========  ========  ========  ========  ========  ========  ========
    TOTAL
      DIVIDEND
      CALCULATION

  Convertible
    preferred -
    Patriot                         0         0         0         0         0         0         0         0         0         0
  Preferred -
    Patriot                         0         0         0         0         0         0         0         0         0         0
  Convertible
    preferred -
    Strategic
    investors                        60        60        60        60        60        60        60        60        60        60
  Perpetual
    preferred                         0         0         0         0         0         0         0         0         0         0
  Convertible
    capped
    preferred                         0         0         0         0         0         0         0         0         0         0
  PIK convertible
    preferred                         0         0         0         0         0         0         0         0         0         0
  PIK straight
    preferred                         0         0         0         0         0         0         0         0         0         0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
      Total
        dividends                    60        60        60        60        60        60        60        60        60        60
      TOTAL
        INTEREST
        EXPENSE
        AND
        DIVIDENDS                  $601      $632      $596      $526      $459      $360      $265      $190      $110       ($8)
      TOTAL CASH
        INTEREST
        EXPENSE
        AND
        DIVIDENS                    601       632       596       526       459       360       265       190       110        (8)


February 1994                SMITH BARNEY SHEARSON INC.         Page 17


                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Tackle/Patriot                            Project Voltage

Pro Forma Balance Sheet
(Dollars expressed in millions, except per sh
                                                     Patriot                                              Tackle
                          --------------------------------------------------------------          ----------------------
                                                            Adj.     Patriot    Voltage                           Tackle
  Assets                   Viacom       Patriot    McM     Patriot    Merger   Pro forma            Tackle        Merger       PRO
  Current Assets          (12/31/93E  (10/31/93E  Adjmts (10/31/93E   Adjmts. Pre Tackle          (12/31/93E      Adjmts.     FORMA
                          ----------  ----------- ------ ----------- --------  ---------          -----------     -------     -----
                                                                                                 
    Cash and
      equivalents            $48        $998      (552)    $446          $0      $494                $390         (100)        $784
    Receivables              402       1,055              1,055           0     1,458                 131                     1,589
    Inventory                295         625                625           0       920                 296                     1,216
    Prepaid expenses          97         213                213           0       309                 180                       489
    Other                     14         369                369           0       384                  71                       455
                          ------      ------             ------      ------     -----             -------         -----       -----
      Total                  857       3,260              2,708           0     3,565               1,068         (100)       4,533
  PP&E                       894       1,519              1,519           0     2,413                  NA                        NA
  Less: A/D                 (374)       (389)              (389)          0      (763)                 NA                        NA
                          ------      ------             ------      ------     -----             -------                     -----
    Net PP&E                 520       1,130              1,130           0     1,650                 903                     2,553

  Net assets of McM            0           0       552      552           0       552                                           552
  Goodwill                 2,110       1,460              1,460       6,329     9,899                 815         4,169       14,883
  Investments in
    affiliates                52         229                229           0       281               1,850        (1,850)         281
  Other                      851       1,463              1,463         100     2,414                 323           100        2,837
                          ------      ------             ------      ------   -------             -------        ------     -------
    Total Assets          $4,391      $7,542             $7,542      $6,429   $18,362              $4,959        $2,319      $25,640
                          ======      ======             ======      ======   =======             =======        =======     =======

  Liabilities and
    Equity
  Current Liabilities
    Current maturities        $0          $0                 $0          $0        $0                   0                        $0
    Accounts payable          77         155                155           0       232                 509                       741
    Accrued expenses         429       1,198              1,198           0     1,627                  99                     1,726
    Other                    471         139                139           0       610                   0                       610
                          ------      ------             ------      ------   -------             -------                   -------
      Total                  977       1,492              1,492           0     2,469                 608                     3,077
    Long term debt         2,373       1,014              1,014       3,562     6,949               1,740                     8,689
    Sub. debt
      to Patriot               0           0                  0       1,759     1,759                   0            0        1,759
    Other long
      term
      liabilities            116         786                786           0       902                 196                     1,098
    Convertible debt
      - Patriot                0           0                  0           0         0                   0                         0
    Convertible
      preferred
      - Patriot                0           0                  0           0         0                   0            0            0
    Straight
      Preferred
      - Patriot                0           0                  0           0         0                   0            0            0
    PIK Convertible
      debt - Patriot           0           0                  0           0         0                   0                         0
    PIK Convertible
      preferred
      - Patriot                0           0                  0           0         0                   0                         0
    PIK Straight
      preferred
      - Patriot                0           0                  0           0         0                   0                         0
New finacing
    PIK Convertible
      preferred                0           0                  0           0         0                   0                         0
    Convertible Capped
      Preferred
      - Strategic
      i                        0           0                  0           0         0                   0                         0
    Convertible
      preferred
      - Strategic
      investors                0           0                  0       1,800     1,800                   0         (600)       1,200
    Perpetual
      preferred
      - Strategic
      investors                0           0                  0           0         0                   0                         0
   Common equity             925       4,250              4,250        (692)    4,483               2,415        2,919        9,817
                          ------      ------             ------      ------   -------             -------        ------     -------
     Total
       Liabilities
       and Equity         $4,391      $7,542             $7,542      $6,429   $18,362              $4,959       $2,319      $25,640
                          ======      ======             ======      ======   =======             =======       =======     =======


February 1994                SMITH BARNEY SHEARSON INC.         Page 18




VOLTAGE/PATRIOT



                                      With $12 per share CVR Payout
CONFIDENTIAL                    Viacom/Patriot                 Project Voltage

                                                             
Transaction Structure and Summary Assumptions                   MERGER WITH TACKLE?                      No       0
(Dollars expressed in millions, except per share)               Two-Tier Acquisition Structure                %      No. of Shares
Shares Issued in Merger  Class A              0.00000           Percent of Patriot shares tendered          50.1%         61.6
                         Class B              0.46439           Back-end percentage                         49.9%         61.4
   Total Patriot Shares Outstanding,                                                                       -----         -----
     Including Options                          123.0                                                      100.0%        123.0
   Shares Issued to Patriot     Class A           0.0           Purchase Price Per Share
                                Class B          57.1             Current Stock Price - Patriot           $79.63
                                               ------
       Total common shares issued to Patriot     57.1             Current Stock Price - Voltage                         Tackle
                                               =======
Uses of Funds                                    $        %         Class A                               $39.50        $27.63
   Purchase Price of Equity                   $10,579   99.1%       Class B                                35.25
   Refinancing of Existing Debt                     0    0.0%     Exchange Ratio
   Transaction Costs                              100    0.9%       Class A                                0.000
                                              -------  ------
     Total Uses of Funds                      $10,679  100.0%       Class B - Common stock                 0.464
Sources of Funds                              =======  =====      Consideration to Patriot Shareholders       $            %
                                                                                                           ------        ------    
  Voltage Common Equity (incl. Tackle bridge)  $3,263   30.6%       Class A                                 $0.00         0.0%
   Straight preferred to Patriot shareholders    1,074  10.1%       Class B                                 16.37        20.0%
                                                                                                           ------       ------
   Convertible Debt to Patriot Shareholders          0   0.0%         Total                                 16.37        20.0%
   Convertible Capped Preferred to Patriot
     Shareholders                                   0    0.0%     Straight preferred                         6.55         8.0%
   Patriot excess cash                              0    0.0%     Tackle  stock                              0.00         0.0%
   Additional financing                             0    0.0%     Cash Distribution Per Share               53.61        65.4%
     Senior Financing                           3,562   33.4%     CVR                                        0.00         0.0%
     Subordinated Financing and Subdebt to PCI    685    6.4%     Warrant                                    1.75         2.1%
   CVR                                              0    0.0%     Subdebt to Patriot                         3.70         4.5%
   Warrant                                        215    2.0%       Total Purchase Price Per Share          81.98        95.5%
   Convertible Preferred - Strategic Investors  1,800   16.9%     Premium to Current Market                  3.0%
   Paramount excerise of options                   80    0.7%     Purchase Price of Equity                 ======
                                                -----   -----
       Total Sources of Funds                 $10,679  100.0%       Cash Distribution Per Share            $53.61
                                              =======  =====
Front end cash per share                                $107        Stock Consideration Per Share - common  16.37
                                                                    Stock Consideration Per Share -
Second-Tier Exchange Ratio Analysis                                   convertible                            6.55
   Target purchase price                       $81.98               Total Shares Outstanding                123.0
   Cash Component                              $53.61               Aggregate Purchase Price - Cash        $6,592
   Class A exchange ratio - full deal         0.00000               Aggregate Purchase Price - Common Stock 2,013
   Class B exchange ratio - full deal         0.46439               Aggregate Purchase Price - Straight
   Straight preferred stock consideration -                           Preferred                             1,074
     full deal                                  $6.55 Per Share     Aggregate Purchase Price - CVR              0
Implied back-end exchange ratio                      Consideration  Aggregate Purchase Price - Warrants       215
   Class A exchange ratio                     0.00000  $0.00        Aggregate Purchase Price - Subordinated
                                                                      debt                                    685
   Class B exchange ratio                     0.93065  32.81        Aggregate Purchase Price - PIK
                                                                      Convertible Debt                          0
   Tackle converted Class B stock             0.00000   0.00        Aggregate Purchase Price - PIK
                                                                      Convertible Pref.                         0
   Straight preferred stock ratio             0.35000  13.13        Aggregate Purchase Price - PIK Straight
                                                                      Pref.                                     0
                                                                                                          -------
   Sub. Debt Ratio                            0.36840  18.42            Total                             $10,579
   CVR                               0.00000  0.00000   0.00  0.9218                                      =======
   Warrants                          0.30000  0.50000   3.50   18.42
Total Back-End Value                                  $67.85




February 1994                SMITH BARNEY SHEARSON INC.         Page 1



                         With $12 per share CVR Payout
CONFIDENTIAL                    Viacom/Patriot                 Project Voltage

                                                         
Summary Assumptions - Continued                             Interest Rates
(Dollars expressed in millions, except per share)             Senior Term                                  5.0%
Convertible Preferred - Strategic Investors                   Senior Notes (Existing Facilities)           4.0%
   Conversion price - Strategic Investors          $70.00    Conv. Subordinated to Patriot                 5.0% Subdebt 7 year  7.9%
   Implied fully-diluted shares issued (Class B)     25.7    Reinvestment Rate                             3.0% Subdebt 10 year 8.1%
Warrant strike price - Patriot            $70.00   $60.00    Convertible Preferred - Patriot               5.0%
Number of warrants issued                  18.41    30.68    Straight Preferred - Patriot                  5.0%
Warrant proceeds, total                            $3,129    Subordinated Debt - Patriot                   8.0%
Preferred to Patriot:    Straight=0, Convertible=1      0    Convertible Preferred - Strategic investors   5.0%
Sub. debt to Patriot:   Straight=0, Convertible=1       0    Convertible Capped Preferred - Patriot        6.5%
Convertible Preferred - Patriot  
   Per Share Amount of Convertible Preferred        $6.55  Patriot/Viacom with Tackle as Equity Partner Only?    No    0
   Current Class B stock price                      35.25  PIK Convertible Preferred issued to Tackle
   Liquidation value                                 4.00  Aggregate                                    $0
   Total Patriot Shares Outstanding, Excl. Options  123.0  Conversion price, premium                 $44.06   25.0%
         Purchase Price - Convertible Preferred    $1,074   Implied fully diluted shares (Class B)      0.0
   Conversion Price - Patriot                      $70.00   Dividend rate                              9.00%
   Total Convertible Shares Issued to Patriot         0.0
       Implied fully diluted shares (Class B)         0.0     Per share purchase price    Ratio     Price      Consideration
                                                              Class A                    0.08000    $39.50         $3.16
TACKLE TRANSACTION SUMMARY                                    Class B (b.)               0.66544     35.25         23.46
Sources and uses of funds                                       Total                                             $26.62
Uses of funds                                                 Current share price                                 $27.63
   Purchase price of equity                $6,584             Premium                                              -3.6%
   Transaction costs                          100             Share Analysis
       Total                                6,684             BV number of shares, excluding options   247.4  18.6 Total options
                                           ======             Implied number of shares issued to BV
Source of funds                                                 Class A                                 19.8
   Voltage common equity                   $6,584               Class B                                164.6
                                                                                                       -----
   Cash                                       100             Total shares issued to BV                184.4
                                                                                                       =====
       Total                               $6,684             Cash Infusion Analysis                          Class A      Class B
                                           ======             Aggregate cash from Tackle          $1,250            $0       $1,250
Goodwill Created                                              Per share                                         $60.00       $55.00
   Purchase price of equity                $6,584             Premium to market                                   51.9%        56.0%
                                                                                                                -------     --------
   BV equity                                2,415               Total shares                                       0.0         22.7
          Goodwill                         $4,169                                                   Without Patriot With Patriot
                                                                                                    --------------- ------------
                                           ======             "Temporary ownership"                     #       %         #     %
                                                                                                     -----    -----    -----  -----
   Years of goodwill amortization            40.0             Fully diluted voting shares             53.4     0.0%     53.4   0.0%
   Goodwill amortization                   $104.2             Fully diluted economic shares (a.)     159.8    16.9%    229.8  13.6%
   Transaction cost amortization             10.0             Mr. V ownership fully diluted voting    45.6    85.3%     45.6  85.3%
   Amortization of transaction costs         10.0             Mr. V ownership fully diluted economic  92.1    57.6%     92.1  40.1%




(a.)  "Without Patriot" includes $600 mm and $300 mm and "With Patriot"
includes $1.2 billion and $600 mm for Nynex and Blockbuster, respectively.
(b.)  Could adjust pursuant to terms based upon the VCR.  Additional shares
issued if Class B share price falls between $36 and $40 by:
($40 - share price)/$44.50). Conversely, would decrease if share price rises to
between $48 and $52 by:  (share price - $48)/$44.50.  Period begins from closing
to 12 months thereafter.


February 1994                SMITH BARNEY SHEARSON INC.               Page 2




                         With $12 per share CVR Payout
CONFIDENTIAL                      Viacom/Patriot                          Project Voltage


Summary Pro Forma Impact of Merger Transaction to Voltage


(Dollars expressed in millions, except per share)                        Patriot       Tackle          Pro Forma
                                                                         -------       ------          ---------         
                                             Voltage Stand Alone      Stand  At Deal   Stand  At Deal          % Increase/(Decrease)
                                             -------------------                                               ---------------------
Public Market Trading Impact                 Pre-Conv.  Post-Con.(1)  Alone   Price    Alone   Price    Total  Pre-Conv.  Post-Conv.
                                             ---------  ---------     -----                    -----    -----  ---------  ----------
                                                                                              
  Market Capitalization (2)                    $4,608     $4,608     $9,941  $10,468  $7,347  $7,079   $7,871    70.8%      70.8%
  Adjusted Market Capitalization (3)            6,957      6,957     10,509   11,036   7,447   7,179   17,885   157.1%     157.1%
  Adjusted Market Capitalization/1993E EBITDA    12.4 x     12.4 x     24.7 x   26.0 x  16.3 x  15.8 x   17.6 x  41.8%      41.8%
  Adjusted Market Capitalization/1994E EBITDA    11.6       11.6       16.3     17.1    11.4    11.0     12.4     7.2%       7.2%
  Market Capitalization/1993 Cash Flow (9)       13.8       13.8       22.7     23.9    24.8    23.9     19.7    43.0%      43.0%
  Market Capitalization/1994 Cash Flow (9)       13.5       14.3       20.9     22.0    15.8    15.2     12.2    -9.7%     -15.1%
Operating Performance/Size
  1994E Revenue                                $2,227     $2,227     $5,225   $5,225  $3,319  $3,319   $7,452   234.6%     234.6%
  1994E EBITDA (4)                                600        600        645      645     653     653    1,439   139.9%     139.9%
  1994E Net Income (4)                            161        141        318      318     357     357      136   -15.2%      -2.9%
  1994E Cash Flow (4)                             342        322        480      480     465     465      648    89.2%     101.1%
Leverage Impact
EBITDA/Net Interest         LTM                   3.5 x      5.0 x      5.5 x    5.5 x    NM      NM      2.9 x -19.4%     -42.9%
                            1993                  3.6        5.1        6.3      6.3      NM      NM      2.7   -25.6%     -47.2%
                            1994 (4)              4.3        6.4        9.2      9.2      NM      NM      3.8   -11.6%     -40.2%
EBITDA/Net Interest & Pref. 1993                  3.6        3.6        6.3      6.3      NM      NM      2.1   -42.2%     -42.2%
                            1994 (4)              4.3        4.3        9.8      9.8      NM      NM      2.8   -36.0%     -36.0%
Debt/EBITDA (8)             LTM                   4.6        2.9        1.2      1.2     1.5     1.5      6.2    34.1%     116.1%
                            1993                  4.2        2.6        2.4      2.4     1.1     1.1      7.2    70.3%     174.0%
                            1994                  3.7        2.3        1.5      1.5     0.8     0.8      4.9    32.0%     117.8%
Debt & Preferred/EBITDA (8) 1993                  4.2        4.2        2.4      2.4     1.1     1.1     10.0   136.9%     136.9%
                            1994 (4), (5)         3.7        3.8        1.5      1.5     0.8     0.8      6.9    85.7%      84.0%
Total Debt/Capitalization                       71.9%      44.7%      18.5%    18.5%   41.9%   41.9%    50.9%   -29.2%      14.0%
   12/31/93E Total Debt                        $2,373     $1,473     $1,014   $1,014    $490    $490   $7,634   221.7%     418.3%

Dilution (1)
    1993E E.P.S. (5) - fully diluted            $1.35      $1.11      $2.38    $2.38   $0.91   $0.91   ($0.43) -131.6%    -138.4%
    1994E E.P.S. - fully diluted                 1.32       1.15       2.55     2.55    1.34    1.34     0.68   -48.8%     -41.4%
    1995E E.P.S. - fully diluted                 1.75       1.58       2.79     2.79    1.71    1.71     0.98   -44.1%     -38.1%
    1993E Cash flow per share - fully diluted    2.78       2.54       3.63     3.63    1.11    1.11     1.98   -28.6%     -21.8%
    1994E Cash flow per share - fully diluted    2.81       2.65       3.91     3.91    1.75    1.75     3.21    14.3%      21.5%
    1995E Cash flow per share - fully diluted    3.44       3.27       4.20     4.20    2.28    2.28     3.61     5.0%      10.5%

    1993E EBITDA                                 $560       $560       $425     $425    $456    $456     $395   -29.5%     -29.5%
    1994E EBITDA                                  600        600        645      645     653     653      560    -6.7%      -6.7%
    1995E EBITDA                                  695        695        696      696     836     836      624   -10.2%     -10.2%


(1) The Post-Convert. figures relate to the issuance of $900 convertible
    preferred to strategic investors
(2) Market capitalization defined as share price multiplied by shares
    outstanding.
(3) Adjusted market capitalization equals market capitalization plus total debt
    less cash and equivalent.
(4) Figures include projected synergies.
(5) Management ownership includes all options.
(6) Convertible preferred ownership stand-alone as if transaction does not
    occur.
(7) Figure provided to demonstrate trailing dilution. Patriot figures adjusted
    for December year end.
(8) Pro forma multiples - 65% of balance sheet cash is backed-out of the debt
    figure
(9) Patriot '93 and '94 stand alone cash flow:  $438 and $475


February 1994                SMITH BARNEY SHEARSON INC.               Page 3



                         With $12 per share CVR Payout
CONFIDENTIAL                    Viacom/Patriot                 Project Voltage

Debt Covenant Analysis
(Dollars expressed in millions, except per share)
                                                      W/McM
   LTM EBITDA
       Patriot (Incl. McMillan)                         560
       Voltage                                          560
        Tackle                                            0
                                                    -------
   Total                                              1,120
   Existing debt
       Patriot                                        1,014
       Viacom                                         2,606
       Tackle (including equity bridge)                   0
                                                    -------
   Total existing debt                                3,620
   Plus:  cash paid to Paramount shareholders         6,592
   Plus:  transaction costs                             100
   Plus:  Subordinated debt to Paramount shareholders   114
   Less:  convertible preferred from strategic
          investors                                  (1,800)
   Less:  debt repayment                                  0
   Less: Option proceeds, use of Tackle cash            (80)
   Less: Tackle bridge                               (1,250)
                                                    -------
   Gross debt                                         7,296
   Cash
       Patriot                                          446
       Viacom                                            48
        Tackle                                            0
                                                    -------
   Total                                                494

   65% of total cash                                    321
   Net debt, with 65% total cash                      6,975
   Convertible preferred                              2,874
   Net debt and conv. pfd., with 65% total cash       9,849

   Gross interest expense                             $392
   Preferred dividends (convertible and/or straight)
        Strategic investors                             90
      Patriot                                           54
                                                    -------
        Total convertible preferred dividends          144
   DEBT/EBITDA, w/ 65% total cash                     6.23 x
   DEBT & PREFERRED/EBITDA, w/ 65% total cash         8.79
   EBITDA/Net interest                                2.86
   EBITDA/Net interest + preferred dividends          2.09


February 1994                SMITH BARNEY SHEARSON INC.               Page 4



                         With $12 per share CVR Payout
CONFIDENTIAL                    Viacom/Patriot                  Project Voltage



Ownership Summary                                                 Voltage Stand-Alone
                                                                                  
(Dollars expressed in millions, except per share)     Pre-Convertible    Post-Convertible     Pro Forma
Voltage     Total Voltage Shareholders Ownership     Shares  Percentage Shares Percentage Shares Percentage
             Primary                                 120.5   100.0%     120.5  100.0%   120.5   60.2%
             Fully diluted                           124.3   100.0%     124.3   90.6%   124.3   44.6%

            Total Voltage Shareholders Voting
             Primary                                  53.4   100.0%      53.4  100.0%   53.4  100.0%
             Fully diluted                            53.4   100.0%      53.4  100.0%   53.4  100.0%

            Management ownership - Primary
             Voting                                   45.6    85.3%      45.6   85.3%   45.6   85.3%
             Economic                                 95.9    77.2%      95.9   77.2%   95.9   47.9%

            Management ownership - Fully diluted
             Voting                                   45.6    85.3%      45.6   85.3%   45.6   85.3%
             Economic                                 99.7    80.2%      99.7   72.7%   99.7   35.7%

            Mr. Voltage ownership - Fully diluted
             Voting                                   45.6    85.3%      45.6   85.3%   45.6   85.3%
             Economic                                 92.1    74.1%      92.1   67.2%   92.1   33.0%

STRATEGIC   Nynex Convertible Preferred @ $600 mm stand alone and $1200 mm pro forma
INVESTORS    Voting                                    0.0     0.0%       0.0    0.0%    0.0    0.0%
             Fully diluted                             0.0     0.0%       8.6    6.2%   17.1    6.1%
            Blockbuster Convertible Preferred @ $300 mm stand alone and $600 mm pro forma
             Voting                                    0.0     0.0%       0.0    0.0%    0.0    0.0%
             Fully diluted                             0.0     0.0%       4.3    3.1%    8.6    3.1%
            New strategic investment  holder - either common or convertible holders
             Voting                                    0.0     0.0%       0.0    0.0%    0.0    0.0%
             Economic                                  0.0     0.0%       0.0    0.0%    0.0    0.0%
TACKLE AS   Tackle ownership - Primary
MERGER       Voting                                    0.0     0.0%       0.0    0.0%    0.0    0.0%
PARTNER      Economic                                  0.0     0.0%       0.0    0.0%   22.7   11.3%
            Tackle ownership - Fully diluted (excludes convert. preferred)
             Voting                                    0.0     0.0%       0.0    0.0%    0.0    0.0%
             Economic                                  0.0     0.0%       0.0    0.0%   22.7    8.1%

   Onwership Analysis Continued on Next Page

TACKLE FULLY DILUTED SHARES
Non-Employee options           $26.50        4.0
Employee options                12.92       14.6
Exchange ratio             CL A            0.080
                           CL B            0.665
Implied options            CL A              1.5
                           CL B             12.4
Calculation of dilutive
options:
    Option proceeds                         $294
    Current share price                   $27.63
Implied dilutive options - pre trans         8.0
Post-transaction dilutive options:           5.9


February 1994              SMITH BARNEY SHEARSON INC.           Page 5






                         With $12 per share CVR Payout
CONFIDENTIAL                    Viacom/Patriot                  Project Voltage

Ownership - Continued                                       Voltage Stand-Alone                                 Analysis
                                                                                        
(Dollars expressed in millions, except per share)    Pre-Convertible    Post-Convertible     Pro Forma         
                                                    Shares  Percentage Shares Percentage Shares Percentage
Patriot     Patriot  management - fully diluted
              Voting                                   0.0     0.0%       0.0    0.0%    0.0    0.0%
              Economic                                 0.0     0.0%       0.0    0.0%    0.0    0.0%
             Patriot  convertible preferred and 
               subdebt, including Convertible Capped Preferred
              Voting                                   0.0     0.0%       0.0    0.0%    0.0    0.0%
              Fully diluted                            0.0     0.0%       0.0    0.0%    0.0    0.0%
             Patriot  warrants
              Voting                                   0.0     0.0%       0.0    0.0%    0.0    0.0%
              Fully diluted                            0.0     0.0%       0.0    0.0%   49.1   17.6%
             Patriot  shareholders voting, 
               includes management
              Primary                                  0.0     0.0%       0.0    0.0%    0.0    0.0%
              Fully diluted                            0.0     0.0%       0.0    0.0%    0.0    0.0%
             Total Patriot  shareholders economic, 
               including convertible preferred holders, excluding warrants
              Primary                                  0.0     0.0%       0.0    0.0%   57.1   28.5%
              Fully diluted                            0.0     0.0%       0.0    0.0%   57.1   20.5%
     Total pro forma primary shares - economic       120.5   100.0%     120.5  100.0%  200.4 100.0%
     Total pro forma fully diluted shares - economic 124.3   100.0%     137.1  100.0%  278.9 100.0%
     Total pro forma primary shares - voting          53.4   100.0%      53.4  100.0%   53.4 100.0%
     Total pro forma fully diluted shares - voting    53.4   100.0%      53.4  100.0%   53.4 100.0%


February 1994                SMITH BARNEY SHEARSON INC.         Page 6





                         With $12 per share CVR Payout
CONFIDENTIAL                    Viacom/Patriot                  Project Voltage

Implied Pro Forma Stock Price - Viacom
(Dollars expressed in millions, except per share)                         Projected
                                   1993     1994    1995    1996    1997      1998      1999     2000     2001     2002      2003
                                   ----     ----    ----    ----    ----      ----      ----     ----     ----     ----      ----
                                                                                          
Total EBITDA pro forma           $1,015   $1,439  $1,604  $1,802  $2,016    $2,200    $2,406   $2,636   $2,894   $3,184    $3,511
Synergies included in EBITDA          0      134     150     171     216       223       229      236      243      251       259
Capitalization adjustments
Total debt                        7,634    7,396   7,159   6,810   6,262     5,667     4,956    4,139    3,202    2,132     1,127
Convertible preferred             2,874    2,874   2,874   2,874   2,874     2,874     2,874    2,874    2,874    2,874     2,874
Less:  warrant proceeds (total)  (3,129)  (3,129) (3,129) (3,129) (3,129)   (3,129)   (3,129)  (3,129)  (3,129)  (3,129)   (3,129)
Less:  cash                        (494)    (494)   (494)   (494)   (494)     (494)     (494)    (494)    (494)    (494)     (494)
 Total capitalization adjustments 6,884    6,646   6,409   6,060   5,513     4,917     4,207    3,389    2,453    1,383       377
Total shares outstanding-primary  200.4    200.4   200.4   200.4   200.4     200.4     200.4    200.4    200.4    200.4     200.4
Total shares outstanding-fully    278.9    278.9   278.9   278.9   278.9     278.9     278.9    278.9    278.9    278.9     278.9
 diluted

Implied stock price-post
 transaction             10.0 x    $0.72  $24.46  $34.45  $46.76  $60.85     $71.53    $81.46   $92.66  $105.28  $119.51  $134.82
                         11.0       6.10   32.08   42.95   56.31   70.03      79.42     90.09   102.11   115.65   130.93   147.41
                         11.6       9.32   36.66   48.04   61.75   74.36      84.15     95.26   107.78   121.88   137.78   154.96
                         12.0      11.47   39.71   51.44   65.03   77.25      87.30     98.71   111.56   126.03   142.35   159.99
                         12.9      16.31   46.57   59.09   71.91   83.76      94.40    106.48   120.06   135.37   152.62   171.32
                         13.0      16.85   47.33   59.94   72.55   84.48      95.19    107.34   121.01   136.41   153.76   172.58
                         13.4      19.00   50.38   62.87   75.14   87.37      98.34    110.79   124.79   140.56   158.33   177.62
                         14.0      22.23   54.95   67.26   79.01   91.71     103.08    115.96   130.46   146.78   165.18   185.17
                         15.0      27.60   62.22   73.59   85.47   98.93     110.96    124.59   139.91   157.16   176.60   197.75
                         15.1      28.14   62.87   74.17   86.12   99.66     111.75    125.45   140.85   158.20   177.74   199.01
                         15.5      30.29   65.50   76.47   88.70  102.55     114.91    128.90   144.63   162.35   182.31   204.05
                         16.0      32.98   68.78   79.35   91.93  106.16     118.85    133.21   149.36   167.54   188.01   210.34

Blended A&B Exchange Ratio        0.464 x  0.464 x 0.464 x 0.464 x 0.464 x   0.464 x   0.464 x  0.464 x  0.464 x  0.464 x  0.464 x
Payment per share, excl. common  $67.48   $67.48  $67.48  $67.48  $67.48    $67.48    $67.48   $67.48   $67.48   $67.48   $67.48

Implied valuation per 
share -   Paramount      10.0  x  $67.81  $78.83  $83.47  $89.19  $95.73    $100.70   $105.31  $110.50  $116.37  $122.98  $130.09
                         11.0      70.31   82.37   87.42   93.62  100.00     104.36    109.31   114.89   121.18   128.28   135.93
                         11.6      71.81   84.50   89.79   96.15  102.01     106.55    111.72   117.53   124.08   131.46   139.44
                         12.0      72.80   85.91   91.37   97.68  103.35     108.02    113.32   119.28   126.00   133.58   141.78
                         12.9      75.05   89.10   94.92  100.87  106.37     111.32    116.92   123.23   130.34   138.35   147.04
                         13.0      75.30   89.46   95.31  101.17  106.71     111.68    117.32   123.67   130.82   138.88   147.62
                         13.4      76.30   90.87   96.67  102.37  108.05     113.15    118.92   125.43   132.75   141.00   149.96
                         14.0      77.80   93.00   98.71  104.17  110.06     115.34    121.33   128.06   135.64   144.18   153.47
                         15.0      80.29   96.37  101.65  107.17  113.42     119.01    125.33   132.45   140.46   149.49   159.31
                         15.1      80.54   96.67  101.92  107.47  113.75     119.37    125.73   132.89   140.94   150.02   159.90
                         15.5      81.54   97.89  102.99  108.67  115.10     120.84    127.34   134.64   142.87   152.14   162.23
                         16.0      82.79   99.41  104.32  110.17  116.78     122.67    129.34   136.84   145.28   154.79   165.16


February 1994                SMITH BARNEY SHEARSON INC.         Page 7




                         With $12 per share CVR Payout
CONFIDENTIAL                    Viacom/Patriot                  Project Voltage

Summary of Refinancing of Existing Debt and New Borrowings
(Dollars expressed in millions, except per share)
                                                                      Existing
                                                                        Debt             Amount           New
   Voltage                                                          (12/31/93E)        Refinanced      Borrowings      Pro Forma
                                                                                                           
     Notes Payable to Banks                                            $1,923               $0            $3,562         $5,485
     11.8% Senior Subordinated Notes Due 1998                               0                0                 0              0
     9.125% Senior Subordinated Notes Due 1999                            150                0                 0            150
     8.75% Senior Subordinated Reset Notes Due 2001                       100                0                 0            100
     10.25% Senior Subordinated Notes Due 2001                            200                0                 0            200
     5.75% Convertible Subordinated Debentures Due 2001                     0                0                 0              0
     Current Maturities                                                     0                0                 0              0
                                                                        -----               --            ------         ------
   Total Viacom                                                         2,373                0             3,562          5,935

   Tackle                                                                   0                0                 0              0
                                                                       ------               --            ------         ------
       Total                                                           $2,373               $0            $3,562         $5,935

   Patriot
     8.5% Notes Due 1996 (1)                                               $0               $0                $0             $0 
     5.875% Notes Due 2000                                                150                0                 0            150
     7.5% Debentures Due 2023                                             150                0                 0            150
     7.5% Notes Due 2002                                                  246                0                 0            246
     8.25% Senior Debentures Due 2022                                     247                0                 0            247
     7% Subordinated Debentures Due 2003                                  176                0                 0            176
     Other Notes, 8.22% (1)                                                 4                0                 0              4
     Capital Leases (1)                                                    41                0                 0             41
     Current Maturities                                                     0                0                 0              0
                                                                       ------               --                --         ------
                                                                       $1,014               $0                $0         $1,014
  New Borrowings
    (Excluding Voltage borrowing on existing credit facilities)

   Convertible PIK debt - Patriot                                         $0                                 $0             $0

   Sub. debt to Patriot                                                   --                --              $685           $685
   Other                                                                  --                --                 0              0

   TOTAL                                                               $3,387               $0            $4,247         $7,634
                                                                       ======               ==            ======         ======



   (1) Estimated.

February 1994                SMITH BARNEY SHEARSON INC.         Page 8



                         With $12 per share CVR Payout
CONFIDENTIAL                 Viacom/Patriot                                             Project Voltage


1993E and 1994E Pro Forma Combined Income Statement Comparison
(Dollars expressed in millions, except per share)

                                 1993 Stand-Alone        Proforma      1994 Stand-Alone      Proforma
                               Pre-Conv.  Post-Conv.       1993      Pre-Conv.  Post-Conv.     1994
                                                                          
   Revenue      Voltage          $2,008      $2,008        $2,008      $2,227     $2,227      $2,227
                Patriot  (1)          -           -         4,691           -          -       5,225
                Tackle                -           -             0                                  0
                                 ------      ------        ------      ------     ------      ------
                  Total           2,008       2,008         6,699       2,227      2,227       7,452

   EBITDA       Voltage             560         560           560         600        600         600
                Patriot  (1)          -           -           425           -          -         645
                Tackle                -           -             0           -          -           0
                McM                   -           -            30           -          -          60
                Patriot
                  Synergies(2)        -           -             0           -          -         134
                BV synergies          -           -             0           -          -           0
                                 ------      ------        ------      ------     ------      ------
                  Total             560         560         1,015         600        600       1,439

              Depreciation and Amortization
                Voltage             172         172           172         181        181         181
                Patriot               -           -           145           -          -         162
                Tackle                -           -             0                                  0
                Transaction 
                  Goodwill(3)         -           -           168           -          -         168
                                 ------      ------        ------      ------     ------      ------
                  Total             172         172           486         181        181         511
              EBIT                  388         388           529         419        419         928

              Net Interest 
                Expense (2)         155         110           377         139         94         377
              Other Expense 
                (Income)            (62)        (62)          (62)         (1)        (1)         (1)
                                 ------      ------        ------      ------     ------      ------
                Pre Tax Income      295         340           214         281        326         552
              Taxes (2)             127         155           150         126        147         278
              Preferred dividends     0          45           144           0         45         144
              Equity in Earnings 
                of Affiliated 
                Companies            (7)         (7)           (7)          6          6           6
                                 ------      ------        ------      ------     ------      ------
                  NET INCOME       $162        $134          ($86)       $161       $141        $136
                                 ======      ======        ======      ======     ======      ======
              Leverage Ratios
              EBITDA/Net Interest 
                Expense            3.62x       5.10x         2.69x       4.31x      6.38x       3.82x
              EBITDA/Net interest 
                plus preferred     3.62        3.62          1.95        4.31       4.31        2.76
              EBITDA/Senior and 
                subordinated       3.62        5.10          2.59        3.90       5.51        3.67
              EBITDA/Senior, 
                subordinated and 
                pref.              3.62        3.62          1.89        3.90       3.90        2.69
              Debt/EBITDA          4.24x       2.63x         7.20x       3.72x      2.26x       4.92x
              Debt + Preferred
                /EBITDA            4.24        1.75         10.04        3.72       1.90        6.91


(1) Patriot adjusted for a December year end.
(2) See attached pages for detailed calculations. 1993 figure includes pro forma
    interest expense on $0.00 cash payment to Patriot shareholders.
(3) Amortization period:     40 years   Figure includes capitalized transaction 
    costs which are amortized over ten years.
(4) Includes early redemption expense on Voltage debt in years 1995 and 1997.

February 1994                SMITH BARNEY SHEARSON INC.         Page 9



                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Patrtiot                                  Project Voltage

Pro Forma Combined Income Statement
(Dollars expressed in millions, except per share)
                                                                       Proforma
                                                                                                
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
  Revenue                               1994     1995     1996      1997      1998      1999      2000      2001      2002      2003
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
                    Voltage           $2,227   $2,541   $2,857    $3,079    $3,383    $3,711    $4,085    $4,514    $5,005    $5,569
                    Patriot (1)        5,225    5,573    5,946     6,344     6,770     7,227     7,715     8,238     8,799     9,399
                    Tackle                 0        0        0         0         0         0         0         0         0         0
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
                      Total            7,452    8,114    8,803     9,423    10,154    10,937    11,800    12,752    13,804    14,968

  EBITDA            Voltage              600      695      814       921     1,033     1,162     1,310     1,480     1,675     1,899
                    Patriot (1)          645      696      750       809       871       938     1,010     1,087     1,170     1,260
                    Tackle (5)             0        0        0         0         0         0         0         0         0         0
                    McM                   60       63       66        69        73        77        80        84        89        93
                    Patriot
                      synergies (2)      134      150      171       216       223       229       236       243       251       259
                    Tackle synergies       0        0        0         0         0         0         0         0         0         0
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
                      Total            1,439    1,604    1,802     2,016     2,200     2,406     2,636     2,894     3,184     3,511

  D & A             Voltage              181      205      229       246       269       294       323       355       393       436
                    Patriot              162      172      184       196       209       223       238       254       271       289
                    Tackle                 0        0        0         0         0         0         0         0         0         0
                    Goodwill (3)         168      168      168       168       168       168       168       168       168       168
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
                      Total              511      546      581       611       647       686       729       778       832       894
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------

  EBIT                                   928    1,058    1,220     1,405     1,553     1,720     1,907     2,116     2,352     2,617

  Net Interest Expense (2)               377      420      413       387       367       324       288       246       199       129
  Other Expense (Income) (3)              (1)      (1)      (1)       (1)       (1)       (1)       (1)       (1)       (1)      (1)
                                         ---      ---      ----      ----      ----      ----      ----      ----      ----      ---
    Pre Tax Income                       552      640      808     1,019     1,187     1,397     1,620     1,872     2,154     2,490
  Taxes (2)                              278      315      381       466       534       620       711       814       930     1,069
  Preferred dividends                    144      144      144       144       144       144       144       144       144       144
  Equity-Affiliated Companies              6       16       27        37        48        48        48        48        48        48
                                      ------   ------   ------    ------    ------    ------    ------    ------    ------    ------
      Net Income                        $136     $197     $311      $447      $557      $682      $813      $961    $1,128    $1,325
                                      ======   ======   ======    ======    ======    ======    ======    ======    ======   =======

  Leverage Ratios
  EBITDA/Net Interest Expense           3.82 x   3.82 x   4.36 x   5.21 x     5.99 x    7.43 x    9.15 x   11.77 x   15.99 x 27.21 x
  EBITDA/Net interest + pref.           2.76     2.85     3.24     3.80       4.31      5.15      6.10      7.43      9.29   12.87  
  EBITDA/Senior and sub.                3.67     3.69     4.21     5.02       5.76      7.11      8.70     11.10 x   14.88 x 24.41  
  EBITDA/Senior, sub., & pref.          2.69     2.77     3.15     3.69       4.18      4.99      5.90      7.43      9.29   12.87  
  Debt/EBITDA                           4.92 x   4.26 x   3.60 x   2.95 x     2.43 x    1.93 x    1.45 x    1.00 x    0.57 x  0.23 x
  Debt + Preferred/EBITDA               6.91     6.05     5.20     4.37       3.74      3.12      2.54      1.99      1.47    1.05  

   (1) Patriot adjusted for a December year end.
   (2) See attached pages for detailed calculations. 1993 figure includes pro 
       forma interest expense on $53.61 cash payment to Patriot shareholders.
   (3) Amortization period:     40 years   Figure includes capitalized 
       transaction costs which are amortized over ten years.  Tackle also 
       included.
   (4) Includes early redemption expense on Viacom debt in years 1995 and 1997.
   (5) Internal projections through 1997.  10% growth thereafter

February 1994                SMITH BARNEY SHEARSON INC.         Page 10


                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Patriot                                  Project Voltage

1993E and 1994E Pro Forma E.P.S. Dilution Comparison
(Dollars expressed in millions, except per share)

                                  1993 Stand-Alone                          Proforma        1994 Stand-Alone           Proforma
                                  ----------------                                          ----------------                   
                                Pre-Conv.    Post-Conv.                      1993         Pre-Conv.    Post-Conv.       1994
                                ---------    ----------                     --------      ---------    ----------      --------
                                                                                                     
   Primary E.P.S.
   Stand alone net income           $162         $134                           $162          $161          $141           $136

   Pro forma net income                -            -                            (86)            -             -            136
   Plus: after tax cost 
     of debt redemption                -            -                              0             -             -              0
                                ---------    ----------                     --------      ---------    ----------      --------
     Adjusted net income             162          134                            (86)          161           141            136

   Primary shares                  120.5        120.5                          201.5         121.7         121.7          201.5

   Primary E.P.S.                  $1.35        $1.11                         ($0.43)        $1.32         $1.15          $0.68

- -------------------------------------------------------------------------------------------------------------------------------
   Accretion / (dilution)
     - Primary E.P.S.            -131.6%      -138.4%                              -        -48.8%        -41.4%              -
- -------------------------------------------------------------------------------------------------------------------------------

   Fully-Diluted E.P.S.
   Pro forma adjusted
     net income                     $162         $134                           ($86)         $161          $141           $136
   Plus preferred dividends            0           45                             90             0            45             90
   Plus after tax cost 
     of convertible debt               0            0                              0             0             0              0
                                ---------    ----------                     --------      ---------    ----------      --------
      Adjusted net income            162          179                              4           161           186            226


   Primary shares                  120.5        120.5                          201.5         121.7         121.7          201.5
   Plus net warrants under
     treasury method (a.)              0            0                              0             0             0              0
   Plus convertible pref.
     and sub. shares                   0         12.9                           25.7             0          12.9           25.7
                                ---------    ----------                     --------      ---------    ----------      --------
       Adjusted shares             120.5        133.4                          227.3         121.7         134.6          227.3
   Implied E.P.S.                  $1.35        $1.34                          $0.02         $1.32         $1.38          $1.00
       Dilutive ?               No           No                             No            No           No              No
   Implied fully-diluted
     E.P.S.                        $1.35        $1.11                         ($0.43)        $1.32         $1.15          $0.68


   Accretion / (dilution)
     - to pro forma E.P.S.       -131.6%      -138.4%                                       -48.8%        -41.4%              -











(a.)  Assumes pro forma stock price at 14x multiple

February 1994                 SMITH BARNEY SHEARSON INC.         Page 11



                                                  With $12 per share CVR Payout
CONFIDENTIAL                                         Viacom/Patriot                      Project Voltage

E.P.S. Dilution Analysis
(Dollars expressed in millions, except per share)
                                                                        Proforma
                                --------------------------------------------------------------------------------------------------
                                  1994      1995      1996      1997      1998      1999      2000      2001      2002      2003
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
                                                                                               
   Primary E.P.S.
   Stand alone net 
     income - (pre
     strategic convert.)           $161      $213      $285      $353      $422      $490      $569      $660      $765      $885

   Pro forma net income             136       197       311       447       557       682       813       961      1,128    1,325
   Plus: after tax cost
     of debt redemption               0         1         0         2         0         0         0         0         0         0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
    Adjusted net income             136       197       311       449       557       682       813       961     1, 128     1,325

   V Stand-alone shares
     outstanding                  121.7     121.7     121.7     121.7     121.7     121.7     121.7     121.7      121.7     121.7
   Plus shares issued 
     to Patriot                    57.1      57.1      57.1      57.1      57.1      57.1      57.1      57.1       57.1      57.1
   Plus shares issued 
     to Tackle                     22.7      22.7      22.7      22.7      22.7      22.7      22.7      22.7       22.7      22.7  
   Plus dilutive 
Patriot securities 
  (Latest 10-Q)                     0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0        0.0       0.0
   Plus dilutive 
Tackle  securities 
   (latest 10-Q)                    0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0        0.0
   Plus shares issued 
to common equity holder             0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0        0.0
   Plus shares 
   converted from 
   Convertible Capped
   Preferred                        0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0        0.0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
   Pro forma 
      shares
     outstanding
     - primary                    201.5     201.5     201.5      201.5     201.5     201.5     201.5     201.5     201.5      201.5

   V stand-alone 
    E.P.S.                        $1.32     $1.75     $2.34      $2.90      $3.47     $4.03     $4.68    $5.42     $6.28      $7.28
   Pro forma E.P.S.               $0.68     $0.98     $1.54      $2.23      $2.76     $3.38     $4.03    $4.77     $5.60      $6.57
   Accretion 
     / (dilution)
     - Primary E.P.S.            -48.8%    -44.1%    -34.2%     -23.1%      -20.3%    -16.1%    -13.8%   -12.0%    -11.0%     -9.7%
   Fully-Diluted E.P.S.
   Pro forma adjusted
     net income                     136      197       311         449         557      682        813      961     1,128     1,325
   Plus preferred 
      dividends                      90       90        90          90          90       90         90       90        90        90
   Plus after tax cost 
of convertible debt                   0         0         0          0           0         0         0         0        0         0
                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
    Adjusted net 
      income                        226        287       401       539        647        772       903      1,051     1,218    1,415
   Pro forma primary 
          shares                  201.5      201.5     201.5     201.5      201.5      201.5     201.5      201.5     201.5    201.5
   Plus net warrants 
    under treasury 
    method (a.)                     0.0        3.3      9.5       15.0      18.7        22.1      25.1       27.8      30.1     32.2
   Plus convertible 
pref. shares                       25.7       25.7     25.7       25.7      25.7        25.7      25.7       25.7      25.7     25.7
                                --------   --------   -------   --------  --------  ---------  --------  --------    ------    -----
  Adjusted shares                 227.3      230.6    236.7      242.2     246.0      249.4      252.4      255.0     257.4    259.4
   Implied E.P.S.                 $1.00      $1.25    $1.69      $2.23     $2.63     $3.09       $3.58      $4.12     $4.73    $5.45
    Dilutive ?                       No        No      Yes        Yes       Yes      Yes         Yes        Yes       Yes      Yes
 Implied fully-
diluted E.P.S.                    $0.68      $0.98    $1.54      $2.23     $2.63     $3.09       $3.58      $4.12     $4.73    $5.45
Stand-alone fully-
  diluted shares 
     outstanding                  121.7      121.7    121.7     121.7      121.7     121.7       121.7       121.7     121.7   121.7
   V stand-alone 
 fully-diluted
     E.P.S. - (pre strategic
     convert.)                    $1.32      $1.75     $2.34     $2.90     $3.47    $4.03       $4.68        $5.42     $6.28   $7.28
   Accretion/(Dilution) - Fully-
      diluted E.P.S.             -48.8%     -44.1%    -34.2%    -23.2%    -24.2%    -23.2%    -  23.5%      -24.0%     -24.7% -25.1%
   V stand-alone net income
     - with preferred              $141      $193      $264      $331      $400      $466        $543        $632      $735    $853
   V stand-alone
     fully-diluted E.P.S.
     - (post strategic 
       convert.)  (b.)            $1.15     $1.58     $2.17     $2.72     $3.28     $3.83     $4.46        $5.19       $6.04   $7.01
   Accretion/(Dilution)- Fully
      -diluted E.P.S.            -41.4%    -38.1%    -29.0%    -18.2%    -20.0%    -19.3%     -19.9%      -20.6%      -21.6%  -22.2%

(a.)  Assumes pro forma stock price at 14x multiple  
(b.)  The Post-Convert. figures relate to the issuance of $900 convertible 
      preferred to strategic investors

February 1994              SMITH BARNEY SHEARSON                        Page 12



                                                     With $12 per share CVR Payout
CONFIDENTIAL                                                Viacom/Patriot                                           Project Voltage
1993E and 1994E Pro Forma Cash Flow Dilution Comparison
(Dollars expressed in millions, except per share)




                                             1993 Stand-Alone                    Proforma        1994 Stand-Alone           Proforma
 Primary Cash Flow Per Share                Pre-Conv.  Post-Conv.                  1993        Pre-Conv Post-Conv             1994
                                            ---------  ----------                ---------     -------- ---------           --------
                                                                                                          
 Cash flow                                    $335        $306                     $400          $342      $322                $648
 Primary C.F.P.S.                            $2.78       $2.54                    $1.98         $2.81     $2.65               $3.21
 Accretion/(Dilution) C.F.P.S. - primary    -28.6%      -21.8%                        -         14.3%     21.5%

 Fully-diluted Cash Flow Per Share
 Cash flow excluding preferred dividends      $335        $351                     $490          $342      $322                $738

 Primary shares plus convert. pref. shares   120.5       133.4                    227.3         121.7     134.6                 227
 Implied cash flow per share                 $2.78       $2.63                    $2.16         $2.81     $2.39               $3.25
  Dilutive?                                  No          No                       No            No         Yes                No
 Implied fully-diluted cash flow per share   $2.78       $2.54                    $1.98         $2.81     $2.65               $3.21
 Accretion/(dilution) to proforma cash flow -28.6%      -21.8%                        -         14.3%     21.5%                   -



                                                                                    Proforma
                                               1994    1995    1996     1997    1998    1999      2000    2001    2002     2,003
                                                                                             

   Primary Cash Flow Per Share
 Voltage stand-alone cash flow  - 
     (pre strategic convert.)                   $342    $419    $515     $599    $691     $785      $892   $1,016  $1,158   $1,321

 Pro forma cash flow                             648     743     892    1,060   1,204    1,367     1,542   1,739    1,960    2,218
 Voltage stand-alone C.F.P.S.                  $2.81   $3.44   $4.23    $4.92   $5.68    $6.45     $7.33   $8.34    $9.51   $10.86
 Voltage pro forma C.F.P.S.                     3.21    3.69    4.43     5.26    5.97     6.79      7.65    8.63     9.73    11.01
 Accretion/(Dilution) C.F.P.S. - primary       14.3%    7.2%    4.7%     6.8%    5.1%     5.2%      4.4%    3.4%     2.2%     1.4%

  Fully-diluted Cash Flow Per Share
  Pro forma cash flow excluding pref. dividends 
     and after tax cost of pref.debt            $738    $833     $982  $1,150  $1,294   $1,457    $1,632  $1,829   $2,050   $2,308
 Primary shares plus convert. pref. shares     227.3   230.6    236.7   242.2   246.0    249.4     252.4   255.0    257.4    259.4
 Implied cash flow per share                   $3.25   $3.61    $4.15   $4.75   $5.26    $5.84     $6.47   $7.17    $7.96    $8.90
   Dilutive?                                   No      Yes      Yes     Yes     Yes      Yes       Yes     Yes      Yes      Yes
 Implied fully-diluted cash flow per share     $3.21   $3.61    $4.15   $4.75   $5.26    $5.84     $6.47   $7.17    $7.96    $8.90
 Stand-alone cash flow per share - 
     (pre strategic convert.)                  $2.81   $3.44   $4.23    $4.92   $5.68    $6.45     $7.33   $8.34    $9.51   $10.86
 Accretion/(Dilution) C.F.P.S. fully-diluted   14.3%    5.0%   -1.9%    -3.6%   -7.4%    -9.3%    -11.8%  -14.0%   -16.3%   -18.0%

 Stand-alone net income - 
     (post strategic convert.)                  $322    $398    $494     $578    $669      $761     $866    $988   $1,128   $1,289
   Stand-alone cash flow per share - 
     (post strategic convert.)                 $2.65   $3.27   $4.00    $4.63   $5.31     $5.99    $6.77   $7.67    $8.71    $9.91
 Accretion/(Dilution) C.F.P.S. fully-diluted   21.5%   10.5%    3.6%     2.6%   -0.9%     -2.4%    -4.5%   -6.5%    -8.6%   -10.3%


February 1994                                  SMITH BARNEY SHEARSON INC.                   Page 13



                                                       With $12 per share CVR Payout
CONFIDENTIAL                                                Viacom/Patriot                                           Project Voltage
EBITDA and Synergy Analysis
(Dollars expressed in millions, except per share)

                                       Proforma                                               Proforma
                                         1993    1994    1995    1996    1997    1998    1999     2000     2001     2002    2003
                                                                                             
 EBITDA
 Voltage                                  $560    $600    $695    $814    $921  $1,033   $1,162   $1,310   $1,480   $1,675  $1,899
 Patriot                                   425     645     696     750     809     871      938     1010     1087     1170    1260
 Tackle                                      0       0       0       0       0       0        0        0        0       0        0
 Synergies                                   0     134     150     171     216     223       229     236      243     251      259
                                        ------    ----    ----   -----   -----  ------    ------  ------   ------   -----    -----
   Total                                 1,015   1,439   1,604   1,802   2,016   2,200     2,406   2,636    2,894   3,184    3,511


 Voltage % of combined adj. market
     capitalization                      38.9%   38.9%   38.9%   38.9%   38.9%   38.9%    38.9%    38.9%    38.9%   38.9%    38.9%
 Implied pro forma EBITDA 
     ownership value                       395     560     624     701     784     856      936    1,025    1,126   1,239    1,366
 Stand alone EBITDA                        560     600     695     814     921   1,033    1,162    1,310    1,480   1,675    1,899
 Percent increase/(decrease)            -29.5%   -6.7%  -10.2%   -13.9% -14.9%  -17.2%   -19.5%   -21.7%   -23.9%  -26.0%   -28.1%



 Synergy Analysis
 Cash flow per share stand alone - 
     post convert                        2.54    $2.65   $3.27   $4.00   $4.63  $5.31    $5.99     $6.77    $7.67   $8.71    $9.91
 Cash flow per share pro forma           1.98     3.21    3.61    4.15    4.75   5.26     5.84      6.47     7.17    7.96     8.90
                                        ------    ----    ----   -----   -----  ------    ------  ------   ------   -----    -----
 Implied difference per share          $0.55   ($0.57) ($0.34) ($0.14) ($0.12) $0.05    $0.14     $0.30    $0.50   $0.75    $1.02
 Pro forma shares outstanding          201.5    201.5   230.6   236.7   242.2  246.0    249.4     252.4    255.0   257.4    259.4
 Implied after tax cash flow 
    to breakeven                         112     (114)    (79)    (34)    (29)    12       36        77      128     193      264

 Implied cash flow to breakeven 
     - pre tax                           184     (187)   (130)    (56)    (48)    20       59       127      213     322      441
 Estimated synergies                       0      134     150     171     216    223      229       236      243     251      259
 Implied total synergies needed 
     for cash flow breakeven             184      (52)     20     115     168    242      288       363      456     573      700



(a.)  Based on adjusted market value divided by market value

February 1994                             SMITH BARNEY SHEARSON INC.                             Page 14



                             With $12 per share CVR Payout
CONFIDENTIAL                         Viacom/Patriot                                                 Project Voltage

Income Tax Calculation and Pro Forma Combined Cash Flow Statement
(Dollars expressed in millions, except per share)

                                   Proforma                                      Proforma
                                   ----------------------------------------------------------------------------------------
                                      1993    1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                   ----------------------------------------------------------------------------------------
                                                                                  
Income Tax Calculation
Stand Alone Pre Tax Income
  Patriot                             $456    $490    $536    $586    $640    $700    $764    $835    $912    $996  $1,088
  Voltage                              295     281     359     462     564     669     791     932   1,094   1,281   1,496
  Tackle                                 0       0       0       0       0       0       0       0       0       0       0
Stand Alone Tax Rate                
  Patriot                            35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%   35.0%
  Voltage                            45.5%   45.0%   45.0%   44.0%   44.0%   44.0%   44.0%   44.0%   44.0%   44.0%   44.0%
  Tackle                              0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%

Weighted Pro Forma Combined Tax Rate 39.1%   38.6%   39.0%   39.0%   39.2%   39.4%   39.6%   39.7%   39.9%   40.1%   40.2%

Pro Forma Combined Pre Tax Income     $214    $552    $640    $808  $1,019  $1,187  $1,397  $1,620  $1,872  $2,154  $2,490
Plus: Transaction Goodwill
  Amortization                         168     168     168     168     168     168     168     168     168     168     168
                                      ----    ----    ----    ----   -----   -----   -----   -----   -----   -----   -----
  Adjusted Pre Tax Income             $382    $720    $808    $977  $1,188  $1,355  $1,566  $1,788  $2,040  $2,323  $2,658

  Implied Income Tax - GAAP           $150    $278    $315    $381    $466    $534    $620    $711    $814    $930  $1,069

Pro Forma Cash Flow Statement
Sources of Funds
  Net Income                                  $136    $197    $311    $447    $557    $682    $813    $961  $1,128  $1,325
  Depreciation and amortization                511     546     581     611     647     686     729     778     832     894
  PIK dividends and/or PIK interest expense      0       0       0       0       0       0       0       0       0       0
  Cash margin on Showtime movies (1)            31      31      31      31      31      31      31      31      31      31
  Deferred taxes and other                     (59)    (90)    (88)    (53)    (79)    (85)    (99)   (114)   (132)   (153)
                                              ----    ----    ----   -----   -----   -----   -----   -----   -----   -----
    Total Sources                              620     684     835   1,036   1,156   1,314   1,475   1,656   1,859   2,096

Uses of Funds
  Capital expenditures                        $200    $220    $242    $263    $287    $313    $343    $376    $413    $455
  Common dividends                               0       0       0       0       0       0       0       0       0       0
  Change in working capital                     71      77      81      83      91      98     105     114     123     133
  Other and capitalization of pre-publication
    costs                                      110     151     163     142     182     192     210     230     253     279
                                               ---     ---     ---     ---     ---     ---     ---     ---     ---     ---
      Total Uses                               381     448     486     488     560     603     658     720     789     867
                                              ----    ----    ----    ----    ----    ----    ----    ----  ------  ------
Total Cash Flow Before Debt Service           $239    $236    $349    $548    $595    $711    $817    $937  $1,070  $1,229

Term Debt Service Requirement                    0    (100)      0    (150)      0       0    (150)      0    (446)   (176)
                                              ----    ----    ----    ----    ----    ----    ----    ----    ----  -------
  Cash Flow Available for Repayment of
    Revolver                                  $239    $136    $349    $398    $595    $711    $667    $937    $624  $1,053

Cash Flow Used for Repayment of Revolver      $239    $136    $349    $398    $595    $711    $667    $937    $624    $829

  Cash flow accumulated                         $0      $0     ($0)     $0      $0     ($0)     $0      $0      $0    $224


   (1) Tax effected difference between operating and cash flow margin on Patriot movies which are shown on Showtime.


February 1994                  SMITH BARNEY SHEARSON INC.             Page 15



                             With $12 per share CVR Payout
CONFIDENTIAL                         Viacom/Patriot              Project Voltage


Debt Amortization Schedule
(Dollars expressed in millions, except per share)
 
                                           Proforma                                      Proforma
                                                    -------------------------------------------------------------------------------
                                              1993    1994    1995    1996    1997    1998    1999    2000    2001    2002    2003
                                           ----------------------------------------------------------------------------------------
                                                                                          
Voltage
  11.8% Senior Subordinated Notes Due 1998      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
  9.125% Senior Subordinated Notes Due 1999    150     150     150     150       0       0       0       0       0       0       0
  8.75% Senior Subordinated Reset Notes Due
    2001                                       100     100       0       0       0       0       0       0       0       0       0
  10.25% Senior Subordinated Notes Due 2001    200     200     200     200     200     200     200     200     200       0       0
  5.75% Convertible Subordinated Debentures
    Due 2001                                     0       0       0       0       0       0       0       0       0       0       0
  Current Maturities                             0       0       0       0       0       0       0       0       0       0       0
                                              ----    ----    ----    ----    ----    ----    ----    ----    ----     ---     ---
    Total                                     $450    $450    $350    $350    $200    $200    $200    $200    $200      $0      $0

Patriot
  8.5% Notes Due 1996 (1)                       $0      $0      $0      $0      $0      $0      $0      $0      $0      $0      $0
  7.5% Notes Due 2002                          246     246     246     246     246     246     246     246     246       0       0
  8.25% Senior Debentures Due 2022             247     247     247     247     247     247     247     247     247     247     247
  5.875% Notes Due 2000                        150     150     150     150     150     150     150       0       0       0       0
  7.5% Debentures Due 2023                     150     150     150     150     150     150     150     150     150     150     150
  7% Subordinated Debentures Due 2003          176     176     176     176     176     176     176     176     176     176       0
  Other Notes, 8.22% (1)                         4       4       4       4       4       4       4       4       4       4       4
  Capital Leases (1)                            41      41      41      41      41      41      41      41      41      41      41
     Current Maturities                          0       0       0       0       0       0       0       0       0       0       0
                                             -----   -----   -----   -----   -----   -----   -----     ---     ---     ---     ---
                                             1,014   1,014   1,014   1,014   1,014   1,014   1,014     864     864     618     442
Notes Payable to Banks                      $5,485  $5,246  $5,110  $4,761  $4,363  $3,768  $3,057  $2,390  $1,453    $829      $0

New Borrowings
Sub. debt to Patriot                          $685    $685    $685    $685    $685    $685    $685    $685    $685    $685    $685
Other                                            0       0       0       0       0       0       0       0       0       0       0
PIK Convertible debt - Patriot                   0       0       0       0       0       0       0       0       0       0       0
  Plus:  PIK interest expense                    0       0       0       0       0       0       0       0       0       0       0
                                              ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
Ending - Convertible debt - Patriot              0       0       0       0       0       0       0       0       0       0       0
Cumulative Cash Balance                       $494    $494    $494    $494    $494    $494    $494    $494    $494    $494    $718

TOTAL DEBT                                  $7,634  $7,396  $7,159  $6,810  $6,262  $5,667  $4,956  $4,139  $3,202  $2,132  $1,127
NET DEBT                                    $7,140  $6,901  $6,665  $6,316  $5,768  $5,173  $4,462  $3,645  $2,708  $1,638    $409

Convertible preferred - Patriot                  0       0       0       0       0       0       0       0       0       0       0
Preferred - Patriot                          1,074   1,074   1,074   1,074   1,074   1,074   1,074   1,074   1,074   1,074   1,074
Convertible preferred - strategic investors  1,800   1,800   1,800   1,800   1,800   1,800   1,800   1,800   1,800   1,800   1,800
Convertible Capped Preferred                     0       0       0       0       0       0       0       0       0       0       0
Perpetual preferred                              0       0       0       0       0       0       0       0       0       0       0
PIK Convertible preferred                        0       0       0       0       0       0       0       0       0       0       0
  Plus:  dividends                               0       0       0       0       0       0       0       0       0       0       0
                                               ---     ---     ---     ---     ---     ---     ---     ---     ---     ---     ---
Ending balance                                   0       0       0       0       0       0       0       0       0       0       0
PIK Straight preferred                           0       0       0       0       0       0       0       0       0       0       0
  Plus:  dividends                               0       0       0       0       0       0       0       0       0       0       0
                                               ---     ---     ---     ---     ---     ---     ---     ---     ---     ---     ---
Ending balance                                   0       0       0       0       0       0       0       0       0       0       0

TOTAL DEBT AND PREFERRED                   $10,508 $10,269 $10,033  $9,684  $9,136  $8,541  $7,830  $7,013  $6,076  $5,006  $4,001

February 1994                  SMITH BARNEY SHEARSON INC.             Page 16








                                                  With $12 per share CVR Payout
CONFIDENTIAL                                          Viacom/Patriot                      Project Voltage

Pro Forma Interest Expense
(Dollars expressed in millions, except per share)
                                                                                          Proforma
                                                         1994    1995   1996   1997   1998   1999   2000   2001  2002    2003
                                                                                           
   Voltage
     11.8% Senior Subordinated Notes Due 1998              $0     $0     $0     $0     $0     $0     $0     $0     $0     $0
     9.125% Senior Subordinated Notes Due 1999             14     14     14     14     14      0      0      0      0      0
     8.75% Senior Subordinated Reset Notes Due 2001         9      9      9      0      0      0      0      0      0      0
     10.25% Senior Subordinated Notes Due 2001             21     21     21     21     21     21     21     21     21      0
     5.75% Convertible Subordinated Debentures Due 2001     0      0      0      0      0      0      0      0      0      0
     Current Maturities                                     0      0      0      0      0      0      0      0      0      0
                                                        -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  
       Total                                              $43    $43    $43    $34    $34    $21    $21    $21    $21     $0
   Patriot
     8.5% Notes Due 1996 (1)                               $0     $0     $0     $0     $0     $0     $0     $0     $0     $0
     7.5% Notes Due 2002                                   18     18     18     18     18     18     18     18     18      0
     5.875% Notes Due 2000                                  9      9      9      9      9      9      9      0      0      0
     7.5% Debentures Due 2023                              11     11     11     11     11     11     11     11     11     11
     8.25% Senior Debentures Due 2022                      20     20     20     20     20     20     20     20     20     20
     7% Subordinated Debentures Due 2003                   12     12     12     12     12     12     12     12     12     12
     Other Notes, 8.22% (1)                                 0      0      0      0      0      0      0      0      0      0
     Capital Leases (1)                                     3      3      3      3      3      3      3      3      3      3
     Current Maturities                                     0      0      0      0      0      0      0      0      0      0
                                                        -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
                                                          $75    $75    $75    $75    $75    $75    $75    $66    $66    $48

   Notes Payable to Banks                                 274    262    255    238    218    188    153    119     73     41

   New Borrowings
   Sub. debt to Patriot                                     0     55     55     55     55     55     55     55     55     55
   Other                                                    0      0      0      0      0      0      0      0      0      0
   Subordinated debt                                        0      0      0      0      0      0      0      0      0      0
   Investment Income                                      (15)   (15)   (15)   (15)   (15)   (15)   (15)   (15)   (15)   (15)
                                                        -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  
     TOTAL INTEREST EXPENSE (INCOME)                     $377   $420   $413   $387   $367   $324   $288   $246   $199   $129
                                                        =====  =====  =====  =====  =====  =====  =====  =====  =====  =====  
   Total dividend calculation
   Convertible preferred - Patriot                          0      0      0      0      0      0      0      0      0      0
   Preferred - Patriot                                     54     54     54     54     54     54     54     54     54     54
   Convertible preferred - Strategic investors             90     90     90     90     90     90     90     90     90     90
   Perpetual preferred                                      0      0      0      0      0      0      0      0      0      0
   Convertible capped preferred                             0      0      0      0      0      0      0      0      0      0
   PIK convertible preferred                                0      0      0      0      0      0      0      0      0      0
   PIK straight preferred                                   0      0      0      0      0      0      0      0      0      0
                                                        -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  
       Total dividends                                    144    144    144    144    144    144    144    144    144    144
      TOTAL INTEREST EXPENSE AND DIVIDENDS               $521   $564   $557   $531   $511   $467   $432   $390   $343   $273
       TOTAL CASH INTEREST EXPENSE AND DIVIDENDS          521    564    557    531    511    467    432    390    343    273




February 1994     SMITH BARNEY SHEARSON INC.                                                             Page 17




                                                  With $12 per share CVR Payout
CONFIDENTIAL                                             Viacom/Patriot                   Project Voltage

Pro Forma Balance Sheet
(Dollars expressed in millions, except per sh       Patriot                                        Voltage
                                                               Adj.     Patriot     Voltage               Tackle
   Assets                      Voltage   Patriot     McM    Patriot      Merger    Pro forma    Tackle    Merger       PRO
   Current Assets            (12/31/93E)(10/31/93E) Adjmts (10/31/93E)   Adjmts.   Pre Tackle (12/31/93E) Adjmts.     FORMA
                                                                                           
     Cash and equivalents          $48        $998   ($552)    $446         $0       $494         $390    ($100)      $494
     Receivables                   402       1,055            1,055          0      1,458          131               1,458
     Inventory                     295         625              625          0        920          296                 920
     Prepaid expenses               97         213              213          0        309          180                 309
     Other                          14         369              369          0        384           71                 384
                                 -----       -----            -----      -----      -----        -----    -----      -----
       Total                       857       3,260            2,708          0      3,565        1,068     (100)     3,565
     PP&E                          894       1,519            1,519          0      2,413           NA                  NA
   Less: A/D                      (374)      (389)             (389)         0       (763)          NA                  NA
                                 -----       -----            -----      -----      -----        -----               -----
     Net PP&E                      520       1,130            1,130          0      1,650          903               1,650
   Net assets of McM                 0           0     552      552          0        552                              552
   Goodwill                      2,110       1,460            1,460      6,329      9,899          815    4,169      9,899
   Investments in affiliates        52         229              229          0        281        1,850   (1,850)       281
   Other                           851       1,463            1,463        100      2,414          323      100      2,414
                                 -----       -----            -----      -----      -----        -----    -----      -----
     Total Assets               $4,391      $7,542           $7,542     $6,429    $18,362       $4,959   $2,319    $18,362
                                 =====       =====            =====      =====      =====        =====    =====      =====
   Liabilities and Equity
   Current Liabilities
     Current maturities             $0          $0               $0         $0         $0           $0                   $0
     Accounts payable               77         155              155          0        232          509                  232
     Accrued expenses              429       1,198            1,198          0      1,627           99                1,627
     Other                         471         139              139          0        610            0                  610
                                 -----       -----            -----      -----      -----        -----                -----
       Total                       977       1,492            1,492          0      2,469          608                2,469
   Long term debt                2,373       1,014            1,014      3,562      6,949        1,740                6,949
   Sub. debt to Patriot              0           0                0        685        685            0        0         685
   Other long term liabilities     116         786              786          0        902          196                  902
   Convertible debt - Patriot        0           0                0          0          0            0                    0
   Convertible preferred - Patriot   0           0                0          0          0            0        0           0
   Straight Preferred - Patriot      0           0                0      1,074      1,074            0        0       1,074
   PIK Convertible debt - Patriot    0           0                0          0          0            0                    0
   PIK Convertible preferred - 
     Patriot                         0           0                0          0          0            0                    0
   PIK Straight preferred - 
     Patriot                         0           0                0          0          0            0                    0
New finacing
   PIK Convertible preferred         0           0                0          0          0            0                    0
   Convertible Capped Preferred 
     Strategic i                     0           0                0          0          0            0                    0
   Convertible preferred - 
     Strategic investors             0           0                0      1,800      1,800            0     (600)      1,800
   Perpetual preferred - 
     Strategic investors             0           0                0          0          0            0                    0
   Common equity                   925       4,250            4,250       (692)     4,483        2,415    2,919       4,483
                                 -----       -----            -----      -----      -----        -----    -----       -----
     Total Liabilities 
       and Equity               $4,391      $7,542           $7,542     $6,429    $18,362       $4,959   $2,319     $18,362
                                 =====       =====            =====      =====      =====        =====    =====      =====

February 1994           SMITH BARNEY SHEARSON INC.                                                          Page 18



                   TAB 8






CONFIDENTIAL                  QVC AND PARAMOUNT             Project Voltage
- --------------------------------------------------------------------------------
                                                         
Transaction Structure and Summary Assumptions

(Dollars expressed in millions, except per share)
Stated Purchase Price Per Share                                         $85.47
Common exchange ratio                                                    0.714
Preferred exchange ratio                                                 0.160

Per Share Consideration                                 $               % 
- -----------------------                              ---------       ---------
    Implied cash consideration per share to Patriot     $46.09           53.9%
    Common stock consideration                           31.40           36.7%
    Preferred with warrants                               7.98            9.3%
                                                     ---------       ---------
      Total purchase price - blended value              $85.47          100.0%
                                                     =========       =========
Uses of Funds                                           $               %
- -------------                                        ---------       ---------
    Purchase Price of Equity                           $10,511           99.1%
    Refinancing of Existing Debt                             0            0.0%
    Transaction costs                                      100            0.9%
    Viacom Termination fee                                   0            0.0%
                                                     ---------       ---------
      Total Uses of Funds                              $10,611          100.0%
                                                     =========       =========
Sources of Funds
- ----------------
    QVC Common Equity issued to Patriot                 $3,861           36.4%
    Convertible preferred to Patriot                       982            9.3%
    Excess cash                                             98            0.9%
    Exercise of Paramount options                           80            0.8%
    New Financing
    -------------
      Senior                                             2,590           24.4%
      Subordinated                                           0            0.0%
      Preferred Stock                                    1,250           11.8%
      Equity Infusion                                    1,750           16.5%
                                                     ---------       ---------
       Total Sources of Funds                          $10,611          100.0%
                                                     =========       =========
Interest Rates
- --------------
      Senior                   5.0%  Preferred stock - strat. invsts      6.0%
      Subordinated             8.5%  Voltage Note                         7.0%
      Reinvestment Rate        3.0%  Convertible pref. - Patriot          6.0%

Second-Tier Exchange Ratio Analysis
- -----------------------------------
Front-end cash per share                          $92.00
% of shares purchased                               50.1%
Implied cash per share                            $46.09
Front-end common stock exchange ratio             0.7136
% consideration in stock                            49.9%
Implied back-end exchange ratio        Ratio    Per Share
                                     --------  -----------
   Common stock ratio                 1.43000      $62.92
   Preferred stock ratio              0.32000       16.00

Back-end value of offer                            $78.92



Preferred Equity Infusion
- -------------------------
Total equity investment
   Comcast, Cox, Advance Publications & BellSouth                      $1,250
Conversion price                                                       $65.45
Current QVC Market price                                               $44.00
Conversion premium                                                      48.7%
Fully diluted shares issued           Comcast                             3.8
                                      BellSouth ($500)                    7.6
                                      Cox Enterprises                     3.8
                                      Advance Publications                3.8
                                                                     --------
                                        Total                            19.1

Common Equity Infusion (1-Include, 0-Exclude)                               1
- --------------------------------------------
   Comcast, Cox, Advance Publications & BellSouth                      $1,750
Stock price                                                            $60.00
Shares issed:                         Comcast                             4.2
                                      BellSouth ($1,000)                 16.7
                                      Cox Enterprises                     4.2
                                      Advance Publications                4.2
                                                                     --------
                                        Total                            29.2

Analysis of Stock Consideration Offered
- ---------------------------------------
QVC shares outstanding
  Primary (includes newly issued common)                                 69.0
  Fully diluted (includes newly issued preferred)                       107.8
Patriot current shares outstanding                                      123.0
Exchange ratio                                                          0.714
Implied shares issued to Patriot                                         87.7
Pro forma shares outstanding                          Primary           156.8
                                                      Fully diluted     209.5

Purchase Price of Equity (Primary)
   Cash Distribution Per Share                                         $46.09
   Stock Consideration Per Share                                        31.40
   Total Patriot Shares Outstanding                                     123.0
   Aggregate Purchase Price - Cash                                     $5,668
   Aggregate Purchase Price - Common stock                              3,861
   Aggregate Purchase Price - Convertible preferred                       982
                                                                     --------
     Total                                                            $10,511
                                                                     ========
Warrants & Preferred Assumptions
Strike price                                                           $70.34
Total preferred shares issued to Patriot                                 19.6
Warrants issued                                                          14.0
Annual dividend                                                         $58.9



- --------------------------------------------------------------------------------

February 1994                     SMITH BARNEY SHEARSON INC.           Page 1





CONFIDENTIAL                  QVC AND PARAMOUNT                Project  Voltage
- --------------------------------------------------------------------------------
Interest Coverage and Additional Borrowing Capacity Analysis
(Dollars expressed in millions, except per share)

   Total debt (before use of Paramount cash)
      -  without repurchase of Liberty shares                       $3,669

      -  with repurchase of 72.2% of Liberty shares                  4,186

     -  with repurchase of 100% of Liberty shares                    4,385
   LTM EBITDA
        Pro forma combined                                             734


   1993 EBITDA
        Pro forma combined                                             758


   65% of cash balance (including $552 use of cash for McM)            298

   Leverage ratios at closing of merger
   Debt - 65% of cash/LTM EBITDA without repurchase of Liberty shares  4.59 x

   Leverage ratios with repurchase of Liberty shares in 18 months
   Debt - 65% of cash/1993 EBITDA with repurchase of 72.2% of Liberty  5.13
   Debt - 65% of cash/1993 EBITDA with repurchase of 100% of Liberty   5.39

   Additional borrowing capacity
   Maximum debt/EBITDA ratio                                           5.50 x

   Additional borrowing capacity @ close of merger (debt/LTM EBITDA)

    -  without repurchase of Liberty shares                            $665
   Per share cash availability (100%)                                 $5.34
   Per share cash availability (51%)                                 $10.47
   Additional borrowing capacity after 18 months (debt/1993E EBITDA)
    -  with repurchase of 72.2% of Liberty shares                      $282
   Per share cash availability (100%)                                 $2.26
   Per share cash availability (51%)                                  $4.44

    -  with repurchase of 100% of Liberty shares                        $82
   Per share cash availability (100%)                                 $0.66
   Per share cash availability (51%)                                  $1.30

- --------------------------------------------------------------------------------

February 1994                 SMITH BARNEY SHEARSON INC.              Page 2









CONFIDENTIAL                  QVC AND PARAMOUNT              Project Voltage

Pro Forma Combined Income Statement
(Dollars expressed in millions, except per share)

    Revenue                            LTM        1993           1994      1995      1996      1997      1998      1999
                                     -------     ------         ------    ------    ------    ------    ------    ------
                                                                                        
     Patriot                                     $4,691         $5,225    $5,573    $5,946    $6,344    $6,770    $7,225
     QVC                                          1,204          1,370     1,521     1,673     1,823     1,987     2,166
                                               --------       --------  --------  --------  --------  --------  --------
      Total                                       5,895          6,595     7,094     7,619     8,167     8,757     9,391


   EBITDA
     Patriot                           530          425            645       696       750       809       871       938
     McM                                30           30             60        63        66        69        73        77
     QVC                               174          184            212       259       293       328       368       413
     Synergies                           0            0             25        25        25        25        25        25
                                  --------     --------       --------  --------  --------  --------  --------  --------
      Total                            734          639            942     1,043     1,134     1,231     1,337     1,452


   Depreciation and Amortization
     Patriot                                        145            162       172       184       196       209       221
     QVC                                             45             47        50        52        55        57        60
     Transaction Goodwill (1)                       165            165       165       165       165       165       165
                                               --------       --------  --------  --------  --------  --------  --------
      Total                                         355            373       386       400       415       431       446
                                               --------       --------  --------  --------  --------  --------  --------
   EBIT                                             285            569       657       734       816       906     1,006


   Net Interest Expense (2)                         193            193       120        64        64        64        64
   Other Expense (Income)                             0              0         0         0         0         0         0
                                               --------       --------  --------  --------  --------  --------  --------
     Pre Tax Income                                  91            375       537       670       752       842       942
   Taxes (2)                                        111            225       290       344       378       414       455
   Preferred dividends                              134            134       134       134       134       134       134
                                               --------       --------  --------  --------  --------  --------  --------
     Net Income                                   ($154)           $16      $112      $192      $241      $294      $354
                                               ========       ========  ========  ========  ========  ========  ========

Leverage Ratios
EBITDA/Net Interest Expense                       3.30x          4.87x     8.70x    17.72x    19.24x    20.89x    22.69x
EBITDA/Senior and sub. interest                   3.13           4.61      7.98     15.16     16.46     17.87     19.41
EBITDA/Net Interest + Preferred                   1.95           2.88      4.11      5.73      6.22      6.76      7.34
EBITDA/Senior and sub. interest                   1.89           2.79      3.94      5.43      5.90      6.41      6.96
  & preferred dividend
Total debt & pref. / EBITDA (3)        7.96x      5.09x          4.64x     3.12x     2.87x     2.64x     2.43x     2.24x
Total debt / EBITDA (3)                4.92       5.65           2.27      0.98      0.90      0.83      0.76      0.70

Total debt - 65% Cash / EBITDA (4)     4.60       5.28           2.02      0.75      0.69      0.64      0.59      0.54


(1) Amortization period:   40 years.  Figure includes capitalized transaction costs which are amortized over ten years.
(2) See attached pages for detailed calculations.
(3) Figures are post merger and exclude any potential benefit from cash on balance sheet.
(4) Figures are for front-end of tender offer.

- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                         SMITH BARNEY SHEARSON INC.                             Page 3









CONFIDENTIAL                                        QVC AND PARAMOUNT                                            Project Voltage
- -----------------------------------------------------------------------------------------------------------------------------------
E.P.S. and Cash Flow Dilution Analysis
(Dollars expressed in millions, except per share)

Primary E.P.S.
                                                               1993        1994      1995      1996      1997      1998      1999
                                                             --------    --------  --------  --------  --------  --------  --------
                                                                                                      
Stand-alone net income                                            $46         $95      $126      $158      $179      $203      $229
Pro forma net income                                             (154)         16       112       192       241       294       354
Stand-alone shares outstanding                                   49.6        49.6      49.6      49.6      49.6      49.6      49.6
Pro forma shares outstanding                                    166.5       166.5     166.5     166.5     166.5     166.5     166.5

QVC stand alone E.P.S.                                          $0.94       $1.92     $2.54     $3.19     $3.61     $4.10     $4.62
QVC Pro Forma E.P.S.                                            -0.93        0.10      0.68      1.15      1.45      1.76      2.12
QVC Accretion (Dilution) - Primary E.P.S.                      -198.7%      -95.0%    -73.5%    -63.9%    -60.0%    -56.9%    -54.0%

Fully-Diluted E.P.S.
Pro forma combined net income                                    (154)         16       112       192       241       294       354
Plus preferred dividends                                          134         134       134       134       134       134       134
                                                             --------    --------  --------  --------  --------  --------  --------
  Adjusted net income                                             (20)        150       246       326       374       428       488

Primary shares                                                  166.5       166.5     166.5     166.5     166.5     166.5     166.5

Plus:  convert. preferred shares                                 33.1        33.1      33.1      33.1      33.1      33.1      33.1
                                                             --------    --------  --------  --------  --------  --------  --------
  Adjusted shares                                               199.5       199.5     199.5     199.5     199.5     199.5     199.5
Implied E.P.S.                                                 ($0.10)      $0.75     $1.23     $1.63     $1.88     $2.14     $2.44
     Dilutive?                                               No          No        No        No         No       No        No
Implied fully-diluted E.P.S.                                   ($0.93)      $0.10     $0.68     $1.15     $1.45     $1.76     $2.12

Stand-alone fully-diluted shares outstanding                     49.6        49.6      49.6      49.6      49.6      49.6      49.6
QVC stand alone E.P.S.                                          $0.94       $1.92     $2.54     $3.19     $3.61     $4.10     $4.62

QVC Accretion (Dilution) - Fully-diluted E.P.S.                -198.7%      -95.0%    -73.5%    -63.9%    -60.0%    -56.9%    -54.0%
Primary Cash Flow Per Share
QVC stand alone cash flow                                          87         139       170       202       223       247       273
Pro forma cash flow                                               200         389       499       592       656       725       799

QVC stand alone cash flow per share                             $1.77       $2.80     $3.43     $4.08     $4.50     $4.98     $5.51
QVC pro forma cash flow per share                               $1.20       $2.34     $3.00     $3.45     $3.94     $4.36     $4.80
QVC Accretion (Dilution) - CFPS - Primary                       -31.8%      -16.6%    -12.6%    -12.7%    -12.4%    -12.6%    -12.8%

Fully-Diluted Cash Flow Per Share
Pro forma combined cash flow, excluding preferred dividends       334         523       633       726       790       859       933

Primary shares plus convertible pref. shares                    199.5       199.5     199.5     199.5     199.5     199.5     199.5
    Implied cash flow per share                                  1.68        2.62      3.17      3.64      3.96      4.31      4.68
     Dilutive?                                               No           No         No        No        No        Yes       Yes
Implied fully-diluted cash flow per share                        $1.20      $2.34     $3.00     $3.56     $3.94     $4.31     $4.68

QVC stand alone cash flow per share                              $1.77      $2.80     $3.43     $4.08     $4.50     $4.98     $5.51
QVC Accretion (Dilution) - CFPS - fully-diluted                  -31.8%     -16.6%    -12.6%    -12.7%    -12.4%    -13.6%    -15.5%

- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                        SMITH BARNEY SHEARSON INC.                                       Page 4









CONFIDENTIAL                  QVC AND PARAMOUNT                                                                 Project  Voltage
- -----------------------------------------------------------------------------------------------------------------------------------
Income Tax Calculation and Pro Forma Combined Cash Flow Statement
(Dollars expressed in millions, except per share)

                                                               1993        1994      1995      1996      1997      1998      1999
                                                             --------    --------  --------  --------  --------  --------  --------
                                                                                                      
Income Tax Calculation
Pro Forma Combined Pre Tax Income                                 $91        $375      $537      $670      $752      $842      $942
Plus: Transaction Goodwill Amort. (Incl. 50% of QVC deprec.)      187         188       189       191       192       193       195
                                                             --------    --------  --------  --------  --------  --------  --------
  Adjusted Pre Tax Income                                        $278        $563      $726      $860      $944    $1,035    $1,137
Income tax rate                                                  40.0%       40.0%     40.0%     40.0%     40.0%     40.0%     40.0%
  Implied Income Tax - GAAP                                      $111        $225      $290      $344      $378      $414      $455
Pro Forma Cash Flow Statement
Sources of Funds
  Net Income                                                                  $16      $112      $192      $241      $294      $354
  Depreciation and Amortization                                               373       386       400       415       431       446
  Dividends                                                                     0         0         0         0         0         0
  Deferred Taxes and Other                                                  1,995     1,996     1,997     1,998         0         0
                                                                         --------  --------  --------  --------  --------  --------
    Total Sources                                                           2,384     2,495     2,589     2,654       725       799
Uses of Funds
  Capital Expenditures                                                        $84       $90       $97      $104      $111      $119
  Dividends                                                                     0         0         0         0         0         0
  Purchase of Liberty Media shares (assuming strike price of $60)             717         0         0         0         0         0
  Change in Working Capital and other                                          66        72        79        81        87        93
  Other                                                                        45        45        48        52        55        59
                                                                         --------  --------  --------  --------  --------  --------
    Total Uses                                                                911       207       224       236       253       272
                                                                         --------  --------  --------  --------  --------  --------
Total Cash Flow Before Debt Service                                        $1,473    $2,288    $2,365    $2,418      $472      $528
                                                                         ========  ========  ========  ========  ========  ========






- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                              SMITH BARNEY SHEARSON INC.                              Page 5








CONFIDENTIAL                                      QVC AND PARAMOUNT                                                Project Voltage
- -----------------------------------------------------------------------------------------------------------------------------------
Debt Paydown and Interest Expense
(Dollars expressed in millions, except per share)



                                                               1994        1995      1996      1997      1998      1999
                                                             --------    --------  --------  --------  --------  --------
                                                                                               
Debt Paydown
Cash flow available for debt payment                           $1,473      $2,288    $2,365    $2,418      $472      $528

Senior debt balance - beginning of year                        $2,590      $1,117        $0        $0        $0        $0
  Retirements (Borrowings)                                      1,473       1,117         0         0         0         0
                                                             --------    --------  --------  --------  --------  --------
    Pro forma balance                                           1,117           0         0         0         0         0

Subordinated debt balance - beginning of year                      $0          $0        $0        $0        $0        $0
  Retirements (Borrowings)                                          0           0         0         0         0         0
                                                             --------    --------  --------  --------  --------  --------
    Pro forma balance                                               0           0         0         0         0         0

Interest expense
  Senior                                                         $129         $56        $0        $0        $0        $0
  Subordinated                                                      0           0         0         0         0         0
Patriot   stand-alone interest expense                             75          75        75        75        75        75
Investment income on Voltage Note                                   0           0         0         0         0         0
  Reinvestment income                                             (11)        (11)      (11)      (11)      (11)      (11)
                                                             --------    --------  --------  --------  --------  --------
    Net interest expense                                         $193        $120       $64       $64       $64       $64
                                                             ========    ========  ========  ========  ========  ========


                                                   1993        1994      1995      1996      1997      1998      1999
                                                 --------    --------  --------  --------  --------  --------  --------
Total debt
Existing debt                                       1,022       1,022     1,022     1,022     1,022     1,022     1,022
New debt
  Senior                                            2,590       1,117         0         0         0         0         0
  Subordinated                                          0           0         0         0         0         0         0

Convertible preferred stock                           982         982       982       982       982       982       982
Preferred stock                                     1,250       1,250     1,250     1,250     1,250     1,250     1,250
                                                 --------    --------  --------  --------  --------  --------  --------
  Total debt and preferred                         $5,843      $4,370    $3,253    $3,253    $3,253    $3,253    $3,253
                                                 ========    ========  ========  ========  ========  ========  ========






- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                           SMITH BARNEY SHEARSON INC.                          Page 6







CONFIDENTIAL                                      QVC AND PARAMOUNT                                                Project Voltage
- -----------------------------------------------------------------------------------------------------------------------------------

Pro Forma Balance Sheet
(Dollars expressed in millions, except per share)

                                               QVC        Patriot          McM      Patriot       Financing
                                           (4/30/93A)    (10/31/93E)     Adjmts   (10/31/93E)    Adjustments   PRO FORMA
                                           ----------    -----------     ------   -----------    -----------   ---------
                                                                                             
Assets

Current Assets
  Cash and equivalents                            $13           $998     ($552)          $446           ($98)        $361
  Receivables                                      89          1,055                    1,055              0       1,144
  Inventory                                       129            625                      625              0         754
  Prepaid expenses                                  5            213                      213              0         217
  Other                                            39            369                      369              0         408
                                           ----------    -----------              -----------    -----------   ---------
    Total                                         274          3,260                    2,708            (98)      2,884

PP&E                                               73          1,519                    1,519              0       1,592
Less: A/D                                           0           (389)                    (389)             0        (389)
                                           ----------    -----------              -----------    -----------   ---------
  Net PP&E                                         73          1,130                    1,130              0       1,203

McM net assets                                      0              0        552           552                        552

Goodwill                                          259          1,460                    1,460          6,181       7,900
Voltage Note                                        0              0                        0              0           0
Other                                             130          1,692                    1,692            100       1,922
                                           ----------    -----------              -----------    -----------   ---------
  Total Assets                                   $737         $7,542                   $7,542         $6,183     $14,461
                                           ==========    ===========              ===========    ===========   =========

Liabilities and Equity
Current Liabilities
  Current maturities                               $3             $0                       $0             $0          $3
  Accounts payable                                 54            155                      155              0         209
  Accrued expenses                                157          1,198                    1,198              0       1,355
  Other                                             0            139                      139              0         139
                                           ----------    -----------              -----------    -----------   ---------
    Total                                         215          1,492                    1,492              0       1,707

Existing debt                                       7          1,014                    1,014              0       1,022    30.2%
New debt                                                           0
  Senior                                           --             --                       --          2,590       2,590    48.8%
  Subordinated                                     --             --                       --              0           0
Other long term liabilities                         0            786                      786              0         786
Convertible preferred stock                         0              0                        0            982         982
Preferred stock                                     0              0                        0          1,250       1,250
Common equity                                     514          4,250                    4,250          1,361       6,125
                                           ----------    -----------              -----------    -----------   ---------
  Total Liabilities and Equity                   $737         $7,542                   $7,542         $6,183     $14,461
                                           ==========    ===========              ===========    ===========   =========

- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                          SMITH BARNEY SHEARSON INC.                                         Page 7








CONFIDENTIAL                                      QVC AND PARAMOUNT                                                Project Voltage
- -----------------------------------------------------------------------------------------------------------------------------------
QVC Economic and Voting Ownership Analysis


                                                      Convertible Preferred - "as if" Converted
                                                   -----------------------------------------------
                                                                                   Newly
                                Common(1)  Class B   Class B   Class C   Class D   Issued    Options   Warrants   Total  % of Total
                                ---------  -------   -------   -------   -------   -------   -------   --------   -----  ----------
                                                                                           
Economic Ownership
  BellSouth                        16,667        0         0         0         0     7,639         0          0   24,306      11.6%
  Comcast                          10,384        0         0       721         0     3,820         0      2,010   16,934       8.1%
  Barry Diller                      1,000        0         0         0         0         0     6,000          0    7,000       3.3%
                                  -------  -------   -------   -------   -------   -------   -------    -------  -------    -------
Total, as a group                  28,051        0         0       721         0    11,459     6,000      2,010   48,240      23.0%

Liberty Media                       8,038        0       179     3,729         0         0         0          0   11,946       5.7%
Cox Enterprises                     4,167        0         0         0         0     3,820         0          0    7,986       3.8%
Advance Publications                4,167        0         0         0         0     3,820         0          0    7,986       3.8%
Other QVC shareholders             24,598        0       371     3,431       830         0     1,997        409   31,636      15.1%
                                  -------  -------   -------   -------   -------   -------   -------    -------  -------    -------
     Total QVC, excluding HSN      69,020        0       550     7,880       830    19,099     7,997      2,419  107,795      51.5%

Patriot shareholders (3)          101,705        0         0         0         0         0         0          0  101,705      48.5%
Viacom, through option election         0        0         0         0         0         0         0          0        0       0.0%
                                  -------  -------   -------   -------   -------   -------   -------    -------  -------    -------
  Total pro forma shares          170,726        0       550     7,880       830    19,099     7,997      2,419  209,500     100.0%
                                  =======  =======   =======   =======   =======   =======   =======    =======  =======    =======


                                                      Convertible Preferred - "as if" Converted
                                                   -----------------------------------------------
                                                                                    Newly
                                 Common    Class B   Class B   Class C   Class D  Issued(2)  Options   Warrants   Total  % of Total
                                ---------  -------   -------   -------   -------   -------   -------   --------   -----  ----------

                                                                                           
Voting Ownership
   BellSouth                       16,667        0         0         0         0     7,639         0          0   24,306      12.2%
   Comcast                         10,384        0         0       721         0     3,820         0          0   14,924       7.5%
   Barry Diller                     1,000        0         0         0         0         0         0          0    1,000       0.5%
                                  -------  -------   -------   -------   -------   -------   -------    -------  -------    -------
Total, as a group                  28,051        0         0       721         0    11,459         0          0   40,230      20.2%

Liberty Media                       8,038        0       179     3,729         0         0         0          0   11,946       6.0%
Cox Enterprises                     4,167        0         0         0         0     3,820         0          0    7,986       4.0%
Advance Publications                4,167        0         0         0         0     3,820         0          0    7,986       4.0%
Other QVC shareholders             24,598        0       371     3,431       830         0         0          0   29,230      14.7%
                                  -------  -------   -------   -------   -------   -------   -------    -------  -------    -------
     Total QVC, excluding HSN      69,020        0       550     7,880       830    19,099         0          0   97,379      48.9%

Patriot shareholders (3)          101,705        0         0         0         0         0         0          0  101,705      51.1%
Viacom, through option election         0        0         0         0         0         0         0          0        0       0.0%
                                  -------  -------   -------   -------   -------   -------   -------    -------  -------    -------
  Total pro forma shares          170,726        0       550     7,880       830    19,099         0          0  199,084     100.0%
                                  =======  =======   =======   =======   =======   =======   =======    =======  =======    =======

(1)  Includes newly issued common equity.
(2)  Assumes newly issued preferred votes on "as if" converted basis.
(3)  Represents fully-diluted shares issued to Patriot, which includes convertible preferred


- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                        SMITH BARNEY SHEARSON INC.                                            Page 8








CONFIDENTIAL                                      QVC AND PARAMOUNT                                                Project Voltage
- -----------------------------------------------------------------------------------------------------------------------------------
Liberty Media Ownership Analysis


                                                   100% of LM Shares Repurchased           72% of LM Shares Redeemed
                                                   -----------------------------           -------------------------
                                                  Share                                   Share
                                    Total         Adjmt     Adj. Totl     %               Adjmt    Adj. Totl    %
                                  ---------      -------   -----------  ------           -------  -----------  ---
                                                                                          
Economic Ownership
  BellSouth                          24,306                     24,306   12.3%                         24,306  12.1%
  Comcast                            16,934                     16,934    8.6%             1,600       18,534   9.2%
  Barry Diller                        7,000                      7,000    3.5%             1,600        8,600   4.3%
                                  ---------                -----------  ------                    -----------   ---
Total, as a group                    48,240                     48,240    24.4%                        51,440  25.6%

Liberty Media                        11,946      (11,946)            0     0.0%           (11,946)          0   0.0%
Cox Enterprises                       7,986                      7,986     4.0%                         7,986   4.0%
Advance Publications                  7,986                      7,986     4.0%                         7,986   4.0%
Other QVC shareholders               31,636                     31,636    16.0%                        31,636  15.8%
                                                                     0     0.0%                             0   0.0%
                                  ---------                -----------  ------                    -----------   ---
  Total QVC, excluding HSN          107,795                     95,849    48.5%                        99,049  49.3%

Patriot shareholders (3)            101,705                    101,705    51.5%                       101,705  50.7%
Viacom, through option election           0                          0     0.0%                             0   0.0%
                                  ---------                -----------  ------                    -----------   ---
  Total pro forma shares            209,500                    197,554   100.0%                       200,754 100.0%
                                  =========                ===========  ======                    ===========   ===



                                                  Share                                   Share
                                    Total         Adjmt     Adj. Totl     %               Adjmt    Adj. Totl    %
                                  ---------      -------   -----------  ------           -------  -----------  ---
                                                                                          
Voting Ownership
  BellSouth                          24,306                     24,306    13.0%                        24,306   13.0%
  Comcast                            14,924                     14,924     8.0%            1,600       16,524    8.8%
  Barry Diller                        1,000                      1,000     0.5%            1,600        2,600    1.4%
                                  ---------                -----------  ------                    -----------    ----
Total, as a group                    40,230                     40,230    21.5%                        40,230    21.5%

Liberty Media                        11,946        (11,946)          0     0.0%           (11,946)          0     0.0%
Cox Enterprises                       7,986                      7,986     4.3%                         7,986     4.3%
Advance Publications                  7,986                      7,986     4.3%                         7,986     4.3%
Other QVC shareholders               29,230                     29,230    15.6%                        29,230    15.6%
                                                                     0     0.0%                             0     0.0%
                                  ---------                -----------  ------                    -----------   ----
  Total QVC, excluding HSN           97,379                     85,433    45.7%                        85,433    45.7%

Patriot shareholders (3)            101,705                    101,705    54.3%                       101,705    54.3%
Viacom, through option election           0                          0     0.0%                             0     0.0%
                                  ---------                -----------  ------                    -----------   ----
  Total pro forma shares            199,084                    187,138   100.0%                       187,138   100.0%
                                  =========                ===========  ======                    ===========  ===



- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                        SMITH BARNEY SHEARSON INC.                                       Page 9








CONFIDENTIAL                                      QVC AND PARAMOUNT                                                Project Voltage
- -----------------------------------------------------------------------------------------------------------------------------------
Implied Pro Forma Stock Price - QVC, Without Synergies
(Dollars expressed in millions, except per share)



                                                                                              Projected
                                                                    ------------------------------------------------------------
                                                                      1993        1994      1995      1996      1997      1998
                                                                    --------    --------  --------  --------  --------  --------
                                                                                                      
EBITDA
  Combined, including McMillan                                        $639        $917     $1,018    $1,109    $1,206    $1,312
  Less:  lost EBITDA - theme parks and TV stations                       0           0          0         0         0         0
  Synergies                                                              0           0          0         0         0         0
                                                                   -------     -------    -------   -------   -------   -------
    Total                                                             $639        $917     $1,018    $1,109    $1,206    $1,312

Capitalization Adjustments:
  Senior and subordinated debt                                      $3,612      $2,139     $1,022    $1,022    $1,022    $1,022
  Preferred                                                          2,232       2,232      2,232     2,232     2,232     2,232
  Less:  sale of theme parks and TV stations                             0           0          0         0         0         0
  Add:  purchase of Liberty shares (assuming $60 strike price)         717         717        717       717       717       717
  Less: Cash                                                          (361)       (361)      (361)     (361)     (361)     (361)
                                                                   -------     -------    -------   -------   -------   -------
    Total capitalization adjustments                                $6,199      $4,726     $3,609    $3,609    $3,609    $3,609
Fully diluted shares, excluding newly issued convertible preferred   176.3       176.3      176.3     176.3     176.3     176.3
Fully diluted shares                                                 209.5       209.5      209.5     209.5     209.5     209.5

     Less:  Shares purchased from Liberty Media                       11.9        11.9       11.9      11.9      11.9      11.9
Fully diluted shares, excluding newly issued convertible preferred   164.4       164.4      164.4     164.4     164.4     164.4
Fully diluted shares                                                 197.6       197.6      197.6     197.6     197.6     197.6

             Implied stock price/share                    10.0x      $1.16      $27.03     $39.97    $45.51    $51.43    $57.85
                                                          11.0        5.05       32.61      46.16     52.26     58.77     66.06
                                                          11.7        7.77       36.51      50.49     56.98     63.91     70.71
                                                          12.0        8.94       38.18      52.35     59.00     66.30     72.70
                                                          13.0       12.83       43.76      58.54     66.00     72.40     79.34
                                                          14.0       16.71       49.34      64.74     71.62     78.51     85.98
                                                          15.0       20.60       54.92      70.31     77.23     84.62     92.62
                                                          16.0       24.49       60.50      75.46     82.84     90.72     99.26

Exchange ratio                                                       0.714x      0.714x      0.714x  0.714x     0.714x    0.714x
Cash payment per stock                                              $46.09      $46.09      $46.09   $46.09    $46.09    $46.09
Convertible preferred per share                                      $7.98       $7.98       $7.98    $7.98     $7.98     $7.98

Implied valuation per share                               10.0x     $54.91      $71.36      $82.60   $86.55    $90.78    $95.35
                                                          11.0       57.68       77.34       87.01    91.37     96.01    101.22
                                                          11.7       59.62       80.13       90.11    97.74     99.68    104.53
                                                          12.0       60.46       81.32       91.43    96.18    101.38    105.96
                                                          13.0       63.23       85.30       95.85   101.17    105.74    110.69
                                                          14.0       66.00       89.28      100.27   105.18    110.10    115.43
                                                          15.0       68.78       93.26      104.25   109.18    114.46    120.17
                                                          16.0       71.55       97.24      107.92   113.19    118.81    124.91

- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                        SMITH BARNEY SHEARSON INC.                                      Page 10








CONFIDENTIAL                                      QVC AND PARAMOUNT                                                Project Voltage
- -----------------------------------------------------------------------------------------------------------------------------------
Implied Pro Forma Stock Price - QVC, With Synergies
(Dollars express in millions, except per share)

                                                                                              Projected
                                                                    ------------------------------------------------------------
                                                                      1993        1994      1995      1996      1997      1998
                                                                    --------    --------  --------  --------  --------  --------
                                                                                                      
EBITDA
  Combined, including McMillan                                        $639        $917     $1,018    $1,109    $1,206    $1,312
  Less:  lost EBITDA - theme parks and TV stations                       0           0          0         0         0         0
  Synergies                                                              0          25         25        25        25        25
                                                                   -------     -------    -------   -------   -------   -------
    Total                                                             $639        $942     $1,043    $1,134    $1,231    $1,337

Capitalization Adjustments:
  Senior and subordinated debt                                      $3,612      $1,422       $305      $305      $305      $305
  Preferred                                                          2,232       2,232      2,232     2,232     2,232     2,232
  Less:  sale of theme parks and TV stations                             0           0          0         0         0         0
  Add:  purchase of Liberty shares (assuming $60 strike price)         717         717        717       717       717       717
  Less: Cash                                                          (361)       (361)      (361)     (361)     (361)     (361)
                                                                   -------     -------    -------   -------   -------   -------
    Total capitalization adjustments                                $6,199      $4,010     $2,893    $2,893    $2,893    $2,893

Fully diluted shares, excluding newly issued convertible preferred   176.3       176.3      176.3     176.3     176.3     176.3
Fully diluted shares                                                 209.5       209.5      209.5     209.5     209.5     209.5
     Less:  Shares purchased from Liberty Media                       11.9        11.9       11.9      11.9      11.9      11.9
Fully diluted shares, excluding newly issued convertible preferred   164.4       164.4      164.4     164.4     164.4     164.4
Fully diluted shares                                                 197.6       197.6      197.6     197.6     197.6     197.6

             Implied stock price/share                    10.0x       $1.16     $28.55     $41.49    $47.03    $52.95    $59.37
                                                          11.0         5.05      34.28      47.83     53.93     60.44     67.46
                                                          11.7         7.77      38.29      52.27     58.76     65.95     72.19
                                                          12.0         8.94      40.01      54.18     60.83     67.82     74.22
                                                          13.0        12.83      45.74      60.52     67.65     74.05     80.99
                                                          14.0        16.71      51.47      66.93     73.39     80.28     87.75
                                                          15.0        20.60      57.20      72.21     79.13     86.51     94.52
                                                          16.0        24.49      62.93      77.49     84.87     92.75    101.29
Exchange ratio                                                       0.714x      0.714x      0.714x  0.714x     0.714x    0.714x
Cash payment per stock                                              $46.09      $46.09      $46.09   $46.09    $46.09    $46.09
Convertible preferred per share                                      $6.95       $6.95       $6.95    $6.95     $6.95     $6.95

Implied valuation per share                               10.0x     $54.91      $74.45      $83.68   $87.64    $91.86    $96.44
                                                          11.0       57.68       78.54       88.21    92.56     97.21    102.21
                                                          11.7       59.62       81.40       91.38    96.01    101.13    105.59
                                                          12.0       60.46       82.63       92.73    97.48    102.47    107.04
                                                          13.0       63.23       86.71       97.26   102.35    106.92    111.87
                                                          14.0       66.00       90.80      101.83   106.44    111.36    116.70
                                                          15.0       68.78       94.89      105.60   110.54    115.81    121.52
                                                          16.0       71.55       98.98      109.37   114.63    120.26    126.35

- -----------------------------------------------------------------------------------------------------------------------------------

February 1994                                        SMITH BARNEY SHEARSON INC.                                    Page 11


Lazard Freres & Co.                                          February 4, 1994
                                        
                                        
                                        
                               Presentation to the
                              Board of Directors of
                                        
                          PARAMOUNT COMMUNICATIONS INC.
                                        
                                        
                                        
                                        



                                        
                                        
- -------------------------------------------------------------------------------
                              Table of Contents
- -------------------------------------------------------------------------------
                                        

           I.  Executive Summary                                               1
          
          II.  Pro Forma Financial and Credit Analysis
               A. Summary Observations                                        22
               B. Income Statements                                           24
               C. Balance Sheets                                              25
               D. Selected Credit Ratios                                      26
          
          III. Common Stock Valuation Analysis
               A. Overview of Valuation Methodologies                         28
               B. Current Market Value Analysis                               29
               C. Recent Market Value Analysis                                31
               D. Comparable Public Company Trading Multiple Analysis         32
               E. Discounted Cash Flow Analysis                               39
               F. Weighted Average Multiple Analysis                          45
          
          IV.  Trading Multiple Analysis                                      48



                          TAB 1


- -------------------------------------------------------------------------------
                              I. Executive Summary
- -------------------------------------------------------------------------------


                        The Process/Contact with Bidders
                                        
                                        
                                        
     
       On   Monday,  January  24,  QVC  requested  a  copy  of  Lazard's   Board
       Presentation   dated  January  21.   Following  QVC's  execution   of   a
       confidentiality agreement, such materials were provided that day.
     
       On  Tuesday,  January 25, both Viacom and Blockbuster were also  provided
       with   these  materials  following  their  execution  of  confidentiality
       agreements.
     
       On  Tuesday,  February  1,  both  bidders announced  their  revised  bids
       shortly before the 5:00 p.m. deadline.
     
       On  Wednesday, Lazard invited both bidders and their respective  advisors
       to  submit  a  memorandum setting forth any information that each  bidder
       may  wish to share with the Paramount Board.  Lazard notified each bidder
       of  its  intention  to  provide a copy of such memorandum  to  the  other
       bidder.
     
       On  Thursday, Lazard received both memoranda and met with representatives
       of the bidders, including Blockbuster.

                                        1


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------
                               The Current Offers
  
  
  QVC Proposal

  QVC's revised proposal consists of:
     1)   A  cash  tender offer for 50.1% of Paramount's shares at  $104.00  per
          share, or a total of $6.5 billion in cash, followed by
     2)   A  second  step merger providing for the issuance of 1.2361 shares  of
          QVC   common  stock,  0.2386  shares  of  QVC  preferred  stock  (non-
          convertible) and 0.32 warrants to buy QVC common stock in exchange for
          each share of Paramount remaining outstanding after the tender offer.
  
  Viacom Proposal
  Viacom's revised proposal consists of:
     1)   A  cash  tender offer for 50.1% of Paramount's shares at  $107.00  per
          share, or a total of $6.7 billion in cash, followed by
     2)   A  second step merger providing for the issuance of  0.93065 shares of
          Viacom  non-voting (Class B) common stock, $17.50 in principal  amount
          of 8% subordinated debentures (exchangeable at Viacom's option into 5%
          exchangeable preferred stock if the Viacom-Blockbuster merger  is  not
          consummated), 0.93065 contingent value rights, 0.5 three-year warrants
          and  0.3  five-year warrants to purchase Viacom non-voting  (Class  B)
          common  stock  in  exchange  for  each share  of  Paramount  remaining
          outstanding after the tender offer.
  
  Blockbuster  related agreements remain unchanged, including the $1.25  billion
  equity infusion, the make-whole rights and the Blockbuster merger agreement.

                                        2


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------
                    Description of Changes from Previous Bids
  
  QVC Proposal
  
    QVC  has  increased  the  cash portion of its offer  by  approximately  $750
     million  while reducing the value of the securities offered in the back-end
     by a substantially equivalent amount:
     - This  $750  million increase in cash will be financed with  the  sale  to
       BellSouth  of  $500 million of additional QVC common stock  at  $42.00  a
       share and the increase in the Bank Credit Agreement of $250 million.
     - The  decrease in the back-end came from the reduction in the  QVC  common
       stock  exchange  ratio from 1.43 to 1.2361 (which represents  about  $507
       million at the above BellSouth purchase price of $42.00 a share) and  the
       reduction in the QVC Merger Preferred exchange ratio from 0.32 to  0.2386
       (which represents about $254 million at liquidation value).

                                        3


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------
               Description of Changes from Previous Bids (cont'd)

  Viacom Proposal

    Viacom  did not alter the cash portion of its offer, which stands at $107.00
     a share for 50.1%.
    It,  however,  improved the value of the securities offered in the  back-end
     by:
     - replacing  the  right to receive $15.20 of liquidation preference  of  5%
       convertible  exchangeable  preferred stock  with  the  right  to  receive
       $17.50 face amount of 8% exchangeable subordinated debentures,
     - replacing  the  conversion feature on the previously-offered  convertible
       preferred  with  0.3  of  a five-year warrant to purchase  one  share  of
       Viacom Class B common stock at $70.00 per share, and
     - improving the terms of the proposed contingent value rights ("CVRs").
    The   8%  exchangeable  subordinated  debentures  will  be  exchangeable  at
     Viacom's  option into 5% exchangeable (non-convertible) preferred stock  in
     the event that the proposed Viacom-Blockbuster merger is not consummated by
     January 1, 1995 or earlier if anyone else acquires a majority ownership  of
     Blockbuster.
     - The  8% debentures will, among other things, have a maturity of 12 years,
       pay interest semi-annually in cash and be non-callable for five years.
       The  5%  preferred  stock  will be, among other things,  exchangeable  at
     - Viacom's  option  into 5% subordinated debentures  of  Viacom  after  the
       third anniversary of the merger and non-callable for five years.
     - The  dividend rate on the 5% preferred (and the interest rate on  the  5%
       debentures into which it could be exchanged) will increase to 10% on  the
       tenth  anniversary of the merger if not previously redeemed,  giving  the
       securities something akin to a ten year "maturity."
    The  new five-year warrants can be exercised with either cash or liquidation
     value of shares of the 5% preferred (or face value of the 5% debentures).
    The  CVR has been improved by increasing to $12.00 (from $10.00) its maximum
     value on the first anniversary of the merger, and increasing such value  to
     $14.00 (from $13.00) on the second such anniversary.
     - The  modification  was made by reducing the floor price  of  the  CVR  to
       $36.00  in the first year and to $37.00 in the second year;  both  prices
       were reduced from the previous floor price of $38.00.

                                        4


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                    Comparison of Current and Previous Bids*
                                    QVC/PCI

                                   [Graph]





* Based on market value of bids at various stock prices. Value of Other 
  Securities held constant at 2/3/94 pricing.

                                                                                    
QVC Share Price:              $30.00    $32.50    $35.00    $37.50    $40.00    $42.50    $45.00    $47.50    $50.00
Total Value of Current Bid:   $76.91    $78.46    $80.00    $81.54    $83.08    $84.62    $86.17    $87.71    $89.25







                                        5


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                    Comparison of Current and Previous Bids*
                                    VIA/PCI

                                     [Graph]

* Based on market value of bids at various stock prices. Value of Other
  Securities held constant at 2/3/94 pricing.

                                                                                      
VIA.B Share Price:             $30.00    $32.50    $35.00    $37.50    $40.00    $42.50    $45.00    $47.50    $50.00
Total Value of Current Bid:    $79.64    $80.80    $81.96    $83.12    $84.28    $85.44    $86.60    $87.76    $88.92





                                        6


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                    Comparison of Current and Previous Bids*
                                  VIA-BV/PCI

                                     [Graph]

* Based on market value of bids at various stock prices. Value of Other
  Securities held constant at 2/3/94 pricing.

                                                                                     
VIA.B Shares                   $30.00    $32.50    $35.00    $37.50    $40.00    $42.50    $45.00    $47.50    $50.00
Total Value of Current Bid:    $81.45    $82.61    $83.78    $84.94    $86.10    $87.26    $88.42    $89.58    $90.74




                                        7


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                          Pro Forma Credit Observations

    Of   the   three  possible  combinations,  the  Viacom-Blockbuster/Paramount
     combination would still produce the strongest credit ratios.  However,  the
     three-way combination's credit ratios have deteriorated somewhat, primarily
     as a result of the increased value of the CVRs and the higher interest rate
     on the subordinated debentures.
                                         QVC/PCI      VIA/PCI      VIA-BV/PCI
                                         -------      -------      ----------
      (Net Debt and Preferred)/EBITDA      7.3x         9.0x         6.8x
      EBITDA/Interest                      3.5          2.9          2.9
      EBITDA/Cash Fixed Charges            2.9          2.1          2.6
      EBITDA/Total Fixed Charges           2.2          2.1          2.6

    Viacom/Paramount's credit would be the weakest of the three, as  the  ratios
     above  indicate.  These ratios have further deteriorated due mainly to  the
     increase in the CVR value.
    The  potential  merger  with  Blockbuster would  significantly  improve  the
     credit profile of Viacom.  This is because Blockbuster has substantial cash
     flow  and  a  relatively  low  level  of  debt,  and  Viacom  is  acquiring
     Blockbuster for all stock.
    While   there  is  no  assurance  that  the  Blockbuster  merger   will   be
     consummated, the parties involved expect it to close in April.   (See  page
     19  below.)   Further, Viacom has attempted to reduce the  credit  risk  by
     adding the exchange feature to the 8% subordinated debentures.
    QVC/Paramount's  credit  is similar to its previous bid  with  approximately
     $250  million of preferred stock being replaced with a like amount of debt.
     As  a result of the $250 million increase in the bank credit agreement, the
     interest rate will be higher by 25 basis points in certain circumstances.
    With  respect to the potential obligation of Viacom as a result of the CVRs,
     we note that:
     -   the maximum obligation could be as much as $1.0 billion if the CVRs are
       not extinguished until the third anniversary of the merger;
     -   Viacom could delay the payment of the potential obligation for up to  3
       years; and
     -   while Viacom could satisfy this obligation with common stock to relieve
       credit  pressure,  doing so would dilute the then  existing  shareholders
       and, hence, could put downside pressure on the stock price.

                                        8


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                             Financing Observations
  
  
  QVC
  
    QVC's  financing  package has been altered and is now  less  favorable  from
     QVC's standpoint:
     -  $6.5 billion of total funds required,
     -   $1.75  billion from the sale of common stock to the Strategic Investors
       at $52 per share (versus $60 previously),
     -   $500  million from the sale of additional common stock to BellSouth  at
       $42 per share,
     -   $1.25  billion  from  the sale of convertible preferred  stock  to  the
       Strategic Investors, which will be convertible into QVC common  stock  at
       $55.00 per share (versus $65.45 previously), and
     -  the remaining $3.0 billion from the Amended Credit Agreement.
  
    The  Credit  Agreement has been amended to reflect the  change  in  the  bid
     structure:
     -  a $250 million increase in the commitment amount to $3.25 billion,
     -    a   25   basis  points  increase  in  the  interest  rate  in  certain
       circumstances,
     -   the  increased commitment ($250 million) may be used to raise the  cash
       portion of the offer to the extent there is a corresponding reduction  to
       the  amount of QVC Merger Preferred Stock offered in the back-end merger,
       and
     -   the  Amended Credit Agreement also permits QVC to further increase  the
       cash  portion  of  the  offer  to the extent  such  increase  comes  from
       additional investments from the Strategic Investors.
  
  
  Viacom
  
    Viacom's  financing  package is essentially unchanged  --  $6.7  billion  of
     total  funds  required  will  be financed with $1.8  billion  of  Strategic
     Investor  Preferred, $1.25 billion of Blockbuster equity infusion and  $3.7
     billion of a 364-day bank facility.

                                        9


 -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                              Valuation Overview
                                        
  
    Lazard's  views  of  value  are provided within  the  framework  of  bidding
     procedures  that allow Paramount's shareholders to choose between  the  two
     bids.
  
    Based  upon  current (2/3/94) market prices and our valuation  of  the  non-
     common  securities, which is based on these market prices, the QVC proposal
     is  valued  at  $5.21  or $3.40 per share more than  the  Viacom  proposal,
     depending  upon whether or not the Blockbuster merger is assumed to  occur.
     We  also provide below the values based on 2/1/94 closing prices, which  is
     reflective  of  the  market just prior to the recent bid announcements  and
     shows corresponding spreads of $4.30 and $2.56.
                                                             
 
                Current Market Value of Bid at 2/3/94          Market Value of Bid at 2/1/94
              -----------------------------------------   --------------------------------------
                 QVC           VIA            VIA-BV        QVC           VIA            VIA-BV
              -----------------------------------------   --------------------------------------
                                                                       
Cash            $52.10       $53.61           $53.61       $52.10       $53.61           $53.61
Preferred         3.76         6.01               --         3.86         6.12               --
Sub. Debt           --           --               --           --           --             8.41
CVR                 --         3.84             3.87           --         3.82             3.86
                ------       ------           ------        ------       ------          ------
   Subtotal     $55.86       $63.46           $65.89        $55.96       $63.55          $65.88

Warrant I         2.55         1.41             0.82          2.34         1.37            0.81
Warrant II          --         0.84             0.82            --         0.85            0.82
Common Equity    28.30        15.79            15.79         27.60        15.85           15.85
                ------       ------           ------        ------       ------          ------
      Total     $86.71       $81.49           $83.31        $85.91       $81.61          $83.35

  
  
    As  the  chart above illustrates, the cash and fixed-income security portion
     of  both Viacom bids represents a higher percentage of the total bid  value
     than the QVC bid, and is even greater with the inclusion of the CVR.

                                        10


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                           Valuation Overview (cont'd)
                                        
  
    As  the next page indicates, at recent market prices (ranging from a 1  week
     average to a 6 month average), QVC's bid is ahead of Viacom's at all points
     but one, and ahead of Viacom-Blockbuster's at only the 1 week, 2 week and 6
     month points (but behind in the intervening period).
  
    Based  upon  other  types of financial analysis, the bids  appear  generally
     lower in value than current market value, with Viacom's bid having a higher
     implied value by varying amounts.
  
    We  believe that these other methodologies are useful but subject to various
     limitations, including:
     - the  absence  of  precise and reliable quantification of  potential  cost
       savings or revenue enhancement opportunities;
     - the  difficulty  of deriving appropriate multiples for each  combination,
       particularly  in  light  of the impact of each bidder's  strategic/merger
       partners;
     - the  unavailability of internal long-term projections for  Paramount  and
       the   difficulty  of  projecting  financial  results  of   any   of   the
       combinations;  again,  particularly  in  light  of  the  impact  of  each
       bidder's strategic/merger partners.
  
    In  contrast,  the current market value may reflect the market's  perception
     of cost savings, revenue enhancement opportunities and the potential impact
     of the strategic/merger partners.  However, as we have noted previously, it
     may  also  be influenced by its views of which bidder is likely to succeed,
     with  Viacom  appearing to be the current leader.  This may be particularly
     true  with  the  current bids, which is presumably each party's  "last  and
     best".

                                        11


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                              Recent Market Values

    As  we  have  discussed, the stock prices of both QVC and Viacom  have  been
     highly  volatile and have declined since the commencement of  this  contest
     for control.
    If  we add to the current cash, preferred/subordinated debt, warrant and CVR
     packages  of  each  bid  the common stock values  implied  by  the  current
     exchange  ratios at recent stock price averages, the following  bid  values
     are derived:

 
                                                               QVC Premium 
                    -----------------------------------------   --------------------------
                       QVC           VIA            VIA-BV        VIA         VIA-BV
                    -------------  ---------------  ---------   ------------  ------------
                                                                   
Current Market (2/3)  $86.71       $81.49           $83.31       $5.21        $3.40
Market at 2/1          85.91        81.61            83.35        4.30         2.56
1 Week Average         85.91        82.06            83.88        3.84         2.03
2 Week Average         85.67        82.37            84.19        3.30         1.48
1 Month Average        84.65        83.43            85.24        1.22        (0.59)
2 Month Average        84.40        84.92            86.74       (0.52)       (2.34)
3 Month Average        86.05        85.60            87.42        0.46        (1.36)
4 Month Average        87.81        86.85            88.67        0.96        (0.86)
5 Month Average        89.37        87.79            89.61        1.58        (0.24)
6 Month Average        91.16        88.58            90.39        2.58         0.77

  
    This  analysis shows QVC ahead in every case but one as compared  to  Viacom
     alone,  but by amounts that are lower than the current market differential.
     Compared  to  Viacom-Blockbuster, QVC is ahead  in  only  the  most  recent
     (current to 2 week) and the earliest cases shown.
    If  QVC's  stock  price were to decline by 19% or $8.50  (from  $45.875  to
     $37.375), with the price of Viacom's Class B shares remaining the same, the
     market  value  of the two bids (QVC vs. Viacom), would be virtually  equal.
     (The lowest point at which QVC's stock has traded since the bidding process
     began  is  $37.00,  which would imply a bid value of $81.23.   It  has  not
     closed  below $37.875, which implies a bid value of $81.77.)  As against  a
     Viacom-Blockbuster combination, QVC's stock price would have to decline  by
     12% or $5.50 to $40.375.
    Conversely, if QVC's stock price were to remain the same, Viacom's  Class  B
     stock price would have to rise by 33% or $11.25 (from $34.00 to $45.25) for
     the market value of the QVC and Viacom bids to be virtually equal.  For the
     QVC  and  Viacom-Blockbuster bids to be virtually equal, Viacom's  Class  B
     stock price would have to rise by 21% or $7.25 to $41.25.

                                        12


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

 
                     Valuation Summary: QVC vs. Viacom (Based on 1993E EBITDA)
                                        Comparable Company Multiples                     DCFs           Weighted
                                        ----------------------------              -------------------
                           Current                 Time                                                  Average
                           Market     Market      Warner     Disney     Turner       Low        High    Unaffected
                            (2/3)     (2/1)       (11.2x)    (13.3x)    (14.8x)     Value      Value     Multiple
                           ------     ------      -------    -------    -------     -----      -----    ----------
      QVC:
- --------------------------
                                                                                 
QVC Stock Price (1)         45.88      44.75       18.11      27.04      33.15      24.75      27.74      26.10
Cash                        52.10      52.10       52.10      52.10      52.10      52.10      52.10      52.10
Other Securities (2)         6.31       6.20        6.31       6.31       6.31       6.31       6.31       6.31
Common Stock                28.30      27.60       11.17      16.68      20.45      15.27      17.11      16.10
                           ------     ------      -------    -------    -------     -----      -----    ----------
Bid Value (3)               86.71      85.91       69.58      75.09      78.86      73.68      75.52      74.51
Implied Acq.
 EBITDA Multiple            19.7x      19.5x       15.9x      17.1x      17.9x      16.8x      17.2x      17.0x
Implied "Back-End"
 Value (3)                  69.34      67.75       35.02      46.06      53.61      43.23      46.93      44.90
 Viacom (only):
- --------------------------
Viacom "B" Stock Price (1)  34.00      34.13       14.05      25.22      32.86      23.59      30.43      29.40
Cash                        53.61      53.61       53.61      53.61      53.61      53.61      53.61      53.61
Other Securities (2)        12.10      12.15       12.10      12.10      12.10      12.10      12.10      12.10
Common Stock                15.79      15.85        6.52      11.71      15.26      10.95      14.13      13.66
                           ------     ------      -------    -------    -------     -----      -----    ----------
Bid Value (3)               81.49      81.61       72.23      77.41      80.96      76.66      79.84      79.36
Implied Acq.
 EBITDA Mult.               18.5x      18.6x       16.5x      17.6x      18.4x      17.5x      18.2x      18.1x
Implied "Back-End"
 Value (3)                  55.88      56.11       37.31      47.71      54.82      46.20      52.57      51.61

Diff. in Cash              (1.50)      (1.50)      (1.50)     (1.50)     (1.50)     (1.50)     (1.50)     (1.50)
Diff. in Other             (5.79)      (5.95)      (5.79)     (5.79)     (5.79)     (5.79)     (5.79)     (5.79)
Diff. in Common            12.51       11.75        4.65       4.97       5.19       4.31       2.98       2.45
                           ------     ------      -------    -------    -------     -----      -----    ----------
Difference in Bid Value     5.21        4.30       (2.65)     (2.33)     (2.11)     (2.98)     (4.32)     (4.85)
  Note: The above table is not intended, and cannot be relied upon, to predict stock prices.
- --------------------------
(1) Except for market price, hypothetical estimates, subject to all of the qualifications noted in the 
    accompanying analyses.
(2) Other Securities includes preferred stock, sub debt, CVRs and warrants.
(3) Implied values assuming hypothetical stock prices under various analyses.


                                        13


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

 
                     Valuation Summary: QVC vs. Viacom-Blockbuster (Based on 1993E EBITDA)
                                        Comparable Company Multiples                     DCFs           Weighted
                                        ----------------------------              -------------------
                           Current                 Time                                                  Average
                           Market     Market      Warner     Disney     Turner       Low        High    Unaffected
                            (2/3)     (2/1)       (11.2x)    (13.3x)    (14.8x)     Value      Value     Multiple
                           ------     ------      -------    -------    -------     -----      -----    ----------
      QVC:
- --------------------------
                                                                                 
QVC Stock Price (1)         45.88      44.75       18.11      27.04      33.15      24.75      27.74      26.10
Cash                        52.10      52.10       52.10      52.10      52.10      52.10      52.10      52.10
Other Securities (2)         6.31       6.20        6.31       6.31       6.31       6.31       6.31       6.31
Common Stock                28.30      27.60       11.17      16.68      20.45      15.27      17.11      16.10
                           ------     ------      -------    -------    -------     -----      -----    ----------
Bid Value (3)               86.71      85.91       69.58      75.09      78.86      73.68      75.52      74.51
Implied Acq.
 EBITDA Multiple            19.7x      19.5x       15.9x      17.1x      17.9x      16.8x      17.2x      17.0x
Implied "Back-End"
 Value (3)                  69.34      67.75       35.02      46.06      53.61      43.23      46.93      44.90
 Viacom-Blockbuster:
- --------------------------
Viacom "B" Stock Price (1)  34.00      34.13       18.35      26.59      32.23      30.84      38.61      29.98
Cash                        53.61      53.61       53.61      53.61      53.61      53.61      53.61      53.61
Other Securities (2)        13.91      13.90       13.91      13.91      13.91      13.91      13.91      13.91
Common Stock                15.79      15.85        8.52      12.35      14.97      14.32      17.93      11.84
                           ------     ------      -------    -------    -------     -----      -----    ----------
Bid Value (3)               83.31      83.35       76.04      79.87      82.49      81.84      85.45      81.44
Implied Acq.
 EBITDA Mult.               18.9x      18.9x       17.3x      18.2x      18.7x      18.6x      19.4x      18.5x
Implied "Back-End"
 Value (3)                  59.53      59.61       44.96      52.63      57.88      56.58      63.81      55.79

Diff. in Cash              (1.50)      (1.50)      (1.50)     (1.50)     (1.50)     (1.50)     (1.50)     (1.50)
Diff. in Other             (7.61)      (7.69)      (7.61)     (7.61)     (7.61)     (7.61)     (7.61)     (7.61)
Diff. in Common            12.51       11.75        2.65       4.33       5.48       0.95      (0.82)      2.18
                           ------     ------      -------    -------    -------     -----      -----    ----------
Difference in Bid Value     3.40        2.56       (6.46)     (4.78)     (3.63)     (8.17)     (9.93)     (6.93)
  Note: The above table is not intended, and cannot be relied upon, to predict stock prices.
- --------------------------
(1) Except for market price, hypothetical estimates, subject to all of the qualifications noted in the 
    accompanying analyses.
(2) Other Securities includes preferred stock, sub debt, CVRs and warrants.
(3) Implied values assuming hypothetical stock prices under various analyses.



                                        14


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

 
                     Valuation Summary: QVC vs. Viacom (Based on 1994E EBITDA)
                                        Comparable Company Multiples                     DCFs           Weighted
                                        ----------------------------              -------------------
                           Current                 Time                                                  Average
                           Market     Market      Warner     Disney     Turner       Low        High    Unaffected
                            (2/3)     (2/1)       (10.4x)    (12.2x)    (11.9x)     Value      Value     Multiple
                           ------     ------      -------    -------    -------     -----      -----    ----------
      QVC:
- --------------------------
                                                                                 
QVC Stock Price (1)         45.88      44.75       19.23      27.67      26.17      24.75      27.74      32.13
Cash                        52.10      52.10       52.10      52.10      52.10      52.10      52.10      52.10
Other Securities (2)         6.31       6.20        6.31       6.31       6.31       6.31       6.31       6.31
Common Stock                28.30      27.60       11.86      17.07      16.14      15.27      17.11      19.82
                           ------     ------      -------    -------    -------     -----      -----    ----------
Bid Value (3)               86.71      85.91       70.27      75.48      74.55      73.68      75.52      78.23
Implied Acq.
 EBITDA Multiple            19.7x      19.5x       16.0x      17.2x      17.0x      16.8x      17.2x      17.8x
Implied "Back-End"
 Value (3)                  69.34      67.75       36.40      46.84      44.99      43.23      46.93      52.35
 Viacom (only):
- --------------------------
Viacom "B" Stock Price (1)  34.00      34.13       16.28      26.99      25.08      23.59      30.43      38.88
Cash                        53.61      53.61       53.61      53.61      53.61      53.61      53.61      53.61
Other Securities (2)        12.10      12.15       12.10      12.10      12.10      12.10      12.10      12.10
Common Stock                15.79      15.85        7.56      12.53      11.65      10.95      14.13      18.05
                           ------     ------      -------    -------    -------     -----      -----    ----------
Bid Value (3)               81.49      81.61       73.26      78.24      77.35      76.66      79.84      83.76
Implied Acq.
 EBITDA Mult.               18.5x      18.6x       16.7x      17.8x      17.6x      17.5x      18.2x      19.0x
Implied "Back-End"
 Value (3)                  55.88      56.11       39.39      49.36      47.59      46.20      52.57      60.42

Diff. in Cash              (1.50)      (1.50)      (1.50)     (1.50)     (1.50)     (1.50)     (1.50)     (1.50)
Diff. in Other             (5.79)      (5.95)      (5.79)     (5.79)     (5.79)     (5.79)     (5.79)     (5.79)
Diff. in Common            12.51       11.75        4.30       4.54       4.50       4.31       2.98       1.76
                           ------     ------      -------    -------    -------     -----      -----    ----------
Difference in Bid Value     5.21        4.30       (2.99)     (2.76)     (2.80)     (2.98)     (4.32)     (5.53)
  Note: The above table is not intended, and cannot be relied upon, to predict stock prices.
- ----------------------
(1) Except for market price, hypothetical estimates, subject to all of the qualifications noted in the 
    accompanying analyses.
(2) Other Securities includes preferred stock, sub debt, CVRs and warrants.
(3) Implied values assuming hypothetical stock prices under various analyses.



                                        15



- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

 
                     Valuation Summary: QVC vs. Viacom-Blockbuster (Based on 1994E EBITDA)
                                        Comparable Company Multiples                     DCFs           Weighted
                                        ----------------------------              -------------------
                           Current                 Time                                                  Average
                           Market     Market      Warner     Disney     Turner       Low        High    Unaffected
                            (2/3)     (2/1)       (10.4x)    (12.2x)    (11.9x)     Value      Value     Multiple
                           ------     ------      -------    -------    -------     -----      -----    ----------
      QVC:
- --------------------------
                                                                                 
QVC Stock Price (1)         45.88      44.75       19.23      27.67      26.17      24.75      27.74      32.13
Cash                        52.10      52.10       52.10      52.10      52.10      52.10      52.10      52.10
Other Securities (2)         6.31       6.20        6.31       6.31       6.31       6.31       6.31       6.31
Common Stock                28.30      27.60       11.86      17.07      16.14      15.27      17.11      19.82
                           ------     ------      -------    -------    -------     -----      -----    ----------
Bid Value (3)               86.71      85.91       70.27      75.48      74.55      73.68      75.52      78.23
Implied Acq.
 EBITDA Multiple            19.7x      19.5x       16.0x      17.2x      17.0x      16.8x      17.2x      17.8x
Implied "Back-End"
 Value (3)                  69.34      67.75       36.40      46.84      44.99      43.23      46.93      52.35
 Viacom-Blockbuster:
- --------------------------
Viacom "B" Stock Price (1)  34.00      34.13       24.18      32.88      31.33      30.84      38.61      42.99
Cash                        53.61      53.61       53.61      53.61      53.61      53.61      53.61      53.61
Other Securities (2)        13.91      13.90       13.91      13.91      13.91      13.91      13.91      13.91
Common Stock                15.79      15.85       11.23      15.27      14.55      14.32      17.93      19.96
                           ------     ------      -------    -------    -------     -----      -----    ----------
Bid Value (3)               83.31      83.35       78.75      82.79      82.07      81.84      85.45      87.48
Implied Acq.
 EBITDA Mult.               18.9x      18.9x       17.9x      18.8x      18.7x      18.6x      19.4x      19.8x
Implied "Back-End"
 Value (3)                  59.53      59.61       50.38      58.48      57.04      56.58      63.81      67.89

Diff. in Cash              (1.50)      (1.50)      (1.50)     (1.50)     (1.50)     (1.50)     (1.50)     (1.50)
Diff. in Other             (7.61)      (7.69)      (7.61)     (7.61)     (7.61)     (7.61)     (7.61)     (7.61)
Diff. in Common            12.51       11.75        0.63       1.80       1.59       0.95      (0.82)     (0.14)
                           ------     ------      -------    -------    -------     -----      -----    ----------
Difference in Bid Value     3.40        2.56       (8.48)     (7.31)     (7.52)     (8.17)     (9.93)     (9.26)
  Note: The above table is not intended, and cannot be relied upon, to predict stock prices.
- --------------------------
(1) Except for market price, hypothetical estimates, subject to all of the qualifications noted in the 
    accompanying analyses.
(2) Other Securities includes preferred stock, sub debt, CVRs and warrants.
(3) Implied values assuming hypothetical stock prices under various analyses.


                                        16


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                            Trading Multiple Analysis
                                        
                                        
                                        
  Our  analysis  indicates that if the various combinations trade  at  the  same
  multiple of EBITDA, either Viacom bid would have a value in excess of the  QVC
  bid.
  
  However, were the QVC combination to trade at a higher multiple, the value  of
  its bid could equal or exceed the value of the Viacom bids.
  
  There  are arguments to support (and refute) a higher multiple for either  the
  QVC or the Viacom combinations.
  
  However,  as  we  set  forth in detail below, we have no reasonable  basis  to
  conclude  from  a  financial point of view that either combination  should  be
  assigned  a  higher  multiple  and, therefore, with  limited  exceptions  also
  discussed below, compare the bids at the same multiples.

                                        17


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                     Observations Regarding Trading Activity
                                        
                                        
    As  we  have  noted,  since the September 13 announcement  of  the  original
     Viacom/Paramount merger, each bidder's stock price has fallen as the  price
     being  offered for Paramount has increased.  QVC has fallen from $62.75  to
     $45.875 (27%) and Viacom B from $59.375 to $34.00 (43%).
  
    It  is  likely  that  the  stock price of the apparent  leading  bidder  for
     Paramount will drop, and that of the apparent trailing bidder will rise, as
     the ultimate resolution approaches.
  
    This  may  explain  the recent trading activity in both QVC's  and  Viacom's
     stock,  with Viacom's price falling and QVC's rising amid reports that  the
     market favors Viacom's bid.
  
    This  phenomenon  may  be more pronounced than before due  to  the  market's
     expectation that these are the "last and final" bids.
  
    This   phenomenon   could  also  affect  the  outcome  of  the   Blockbuster
     shareholders' vote on the Viacom-Paramount/Blockbuster merger.
  
    In   view  of  the  above,  the  decision  made  by  Paramount's  Board  and
     shareholders may be open to second-guessing if the "winning" combination is
     marked-to-market  on  a theoretical basis against the "losing"  combination
     after the fact.
  
    However,  the  more relevant comparison is of the value of the winner's  bid
     versus  the value at which the loser's bid would theoretically have traded,
     had it prevailed.
  
    Most  importantly,  with  the  bidding process that  has  been  established,
     Paramount's  shareholders  (who  are  largely  sophisticated  institutions,
     including  arbitragers) continue to have the ability to choose between  the
     two proposals based upon their views of value.

                                        18


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                       Status of Viacom-Blockbuster Merger
                                        
                                        
                                        
  We  have  again  confirmed  with  Merrill Lynch,  Blockbuster's  banker,  that
  Blockbuster has received no expressions of interest from third parties.
  
  In  addition,  Viacom  and  Blockbuster have  informed  us  of  the  following
  anticipated timetable for the Viacom-Blockbuster merger:
  
  
  January 17       Hart-Scott-Rodino ("HSR") filing for the proposed
                   merger
                 
  February 7       File Viacom/Blockbuster joint proxy statement with
                   the SEC
                 
  March 21         Mail joint proxy statement to Viacom and
                   Blockbuster stockholders
                 
  April 18         Stockholders meetings of Viacom and Blockbuster to
                   approve the proposed merger
                 

                                        19


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                 Stock Price Comparison of QVCN, VIA.B, BV and PCI
                              From 9/13/93 to 2/3/94
                        Since September 12 Board Meeting

                                    [Graph]


        9/13/93   9/28/93   10/13/93  10/28/93  11/12/93  11/30/93  12/15/93  12/31/93  1/17/94   2/1/94    2/3/94
                                                                            
QVCN    62 3/4    59 1/2    57 1/2    57        49 5/8    46 1/2    41        39 1/4    43 1/2    44 3/4    45 7/8
VIA.B   56 3/4    56        57        53 3/8    46 7/8    44 1/8    43 1/2    44 7/8    39 1/8    34 1/8    34
BV      27 5/8    29 1/4    27 3/8    28 1/2    30 5/8    33 3/8    30 7/8    30 5/8    28 1/8    27 5/8    27
PCI     64 1/2    77 3/4    77 3/8    80 3/8    83        78 3/4    81        77 3/4    78 3/4    79 7/8    78 1/8





                                        20


- -------------------------------------------------------------------------------
                          I. Executive Summary (cont'd)
- -------------------------------------------------------------------------------

                      Stock Price Comparison of QVCN and VIA.B
                                 From 12/20/93 to 2/2/92


                                       [Graph]

Announcment of QVC $92.00 tender offer:  12/21
Board endorses QVC offer of $92.00: 12/22
VIA BV merger announced: Viacom bid increaded to $105.00: 1/7
Board rejects Viacom bid: 1/13
Announcement of Viacom $107.00 tender offer: 1/18
Board endorses Viacom offer of $107.00: 1/22
Viacom and QVC submit final bids: 2/2


       12/20/93  12/28/93  1/4/94    1/11/94   1/18/94   1/25/94   2/1/94    2/2/94
                                                       
QVCN   43 1/2    37 7/8    39 3/4    37 7/8    43        44 1/4    44 3/4    46 3/4
VIA.B  45 1/4    46 1/2    44 1/2    38 7/8    37 3/4    35        34 1/8    33 1/2







Note: Date below news stories reflects first day that market was affected by
      particular event.


                            12/20/39    12/28/93   1/4/94     1/11/94    1/18/94  1/25/94  2/1/94   2/3/94
                                                                            
QVC Premium over Viacom*:    ($1.48)    ($5.53)    ($3.44)    ($0.75)    $1.70    $3.75    $4.46    $5.21

* Based on market value of bids at stock prices on dates provided. Value of 
  Other Securities held constant at 2/3/94 pricing.

                                        

                                        21



                                 TAB 2A

                                        
- -------------------------------------------------------------------------------
                  II. Pro Forma Financial and Credit Analysis
- -------------------------------------------------------------------------------
                              Summary Observations

     We  have  developed  pro forma financial statements  for  each  combination
     based  on  each company's estimated fiscal year 1993 data.  The  pro  forma
     statements  were  constructed as if the transaction  had  occurred  at  the
     beginning  of the fiscal year for income and cash flow statements  purposes
     and at the end of the latest quarter for balance sheet purposes.
     Pro  forma  EBITDA  would be $756 million (12.2% margin)  for  the  QVC/PCI
     combination,  $1,126 million (16.2% margin) for the Viacom/PCI  combination
     and   $1,594   million   (17.3%  margin)  for  the   Viacom-Blockbuster/PCI
     combination.
     Due   to  large  goodwill  amortization,  interest  expense  and  preferred
     dividend  charges,  no  combination would have a meaningful  level  of  net
     earnings.
     Of  the three possible combinations, the Viacom-Blockbuster/PCI combination
     would  still  produce the strongest credit ratios.  However, the  three-way
     combination's  credit  ratios have deteriorated somewhat,  primarily  as  a
     result of the increased value of the CVRs, the higher interest rate on  the
     subordinated  debentures  and  the  increased  principal  amount   of   the
     subordinated debentures due to the upward revision in the exchange ratio.
     Viacom/Paramount's credit would be the weakest of the three, as the  ratios
     on  the  following pages indicate.  These ratios have further  deteriorated
     due  mainly to the increase in the CVRs value and the increased liquidation
     preference  of  the  preferred stock due to  the  upward  revision  in  the
     exchange ratio.
     The  Blockbuster merger would significantly improve Viacom's credit because
     Blockbuster has substantial cash flow and a relatively low level  of  debt,
     and Viacom is acquiring Blockbuster for all stock.
     While   there  is  no  assurance  that  the  Blockbuster  merger  will   be
     consummated,  the  parties  involved expect it  to  close  in  April.   The
     Blockbuster  merger  is subject to customary closing  conditions  including
     the approval of the stockholders of Blockbuster.
     Viacom  has  attempted  to reduce the credit risk by  adding  the  exchange
     feature to the 8% subordinated debentures.
     QVC/Paramount's  credit is similar to its previous bid  with  approximately
     $250  million of preferred stock being replaced with a like amount of debt.
     As  a result of the $250 million increase in the bank credit agreement, the
     interest rate will be higher by 25 basis points in certain circumstances.

                                        22


                                        
- -------------------------------------------------------------------------------
             II. Pro Forma Financial and Credit Analysis (cont'd)
- -------------------------------------------------------------------------------

                          Summary Observations (cont'd)
                                        
     With  respect  to  the potential obligation of Viacom as a  result  of  the
     CVRs, we note that:
     -   the maximum obligation could be as much as $1.0 billion if the CVRs are
       not extinguished until the third anniversary of the merger;
     -   Viacom could delay the payment of the potential obligation for up to  3
       years; and
     -   while Viacom could satisfy this obligation with common stock to relieve
       credit  pressure,  so  doing would dilute the then existing  shareholders
       and, hence, could put downside pressure on the stock price.

                                        23



                                 TAB 2B


                                        
- -------------------------------------------------------------------------------
              II. Pro Forma Financial and Credit Analysis (cont'd)
- -------------------------------------------------------------------------------

                             Income Statements
                            -----------------

                                               Pro Forma 1993E
                               ------------------------------------------
                                 QVC/PCI       VIA/PCI        VIA-BV/PCI 
                               -----------  -----------     -------------
Revenues                        $6,182       $6,959           $9,197

EBITDA                             756        1,126            1,594
  % Margin                        12.2%        16.2%            17.3%
Depreciation                      (117)        (166)            (213)
Amortization                      (259)        (307)            (422)
                                -------      -------           ------
EBIT                               379          654              960
Interest and Other, Net           (175)        (319)            (478)
                                -------      -------           ------
Pretax Income                      204          335              482
Income Tax                        (153)        (194)            (295)
Equity Earnings in Affiliates       --           (7)              (7)
Preferred Dividends               (120)        (145)             (60)
                                -------      -------           ------
Net Income (Loss) to Common       ($68)         (11)            $121
                                =======      =======           ======
Earnings (Loss) Per Share       ($0.38)      ($0.05)           $0.32
                                =======      =======           ======


                                        24



                                 TAB 2C

- ----------------------------------------------------------------
      II. Pro Forma Financial and Credit Analysis (cont'd)
- ----------------------------------------------------------------

                             Balance Sheets
                            ---------------

                                            Pro Forma 1993E(1)
                               ------------------------------------------
                                 QVC/PCI       VIA/PCI        VIA-BV/PCI 
                               -----------  -----------     -------------
Cash and Equivalents              $465         $513             $563
Other Current Assets             2,680        3,271            3,949
                               --------     --------         --------
  Total Current Assets           3,145        3,784            4,512
Property and Equipment, Net      1,300        1,750            2,653
Intangible Assets                9,198       10,694           16,109
Other Assets                     1,640        2,388            2,711
                               --------     --------         --------
  Total Assets                 $15,283      $18,616          $25,985
                               ========     ========         ========
Current Liabilities
  (Other than STD)              $1,748       $2,304           $2,786
Total Debt                       3,896        7,055            9,756
Other Long-Term Liabilities        871        1,237            1,433
Contingent Liabilities             119(2)       936(3)           696(4)
                               --------     --------         --------
Stockholders' Equity
  Preferred - Cash - Pay           743        2,890            1,200
  Preferred - PIK                1,250           --               --
  Common                         6,656        4,194(5)        10,115(5)
                               --------     --------         --------
    Total Stockholders' Equity   8,650        7,084           11,315
                               --------     --------         --------
     Total Liabilities and
      Stockholders' Equity     $15,283      $18,616          $25,985
                               ========     ========         ========

- --------------------------
(1) PCI figures adjusted for the Macmillan acquisition.
(2) Represents the estimated fair value of Liberty put.
(3) Includes the maximum value of CVRs ($696) and the estimated fair value
    of Blockbuster make-whole rights ($240).
(4) Represents the maximum value of CVRs ($696).
(5) Includes CVR valuation adjustment (-$217:-$213=VIA/PCI:VIA-BV/PCI) which
    represents the difference between the maximum value and the estimated
    fair value of the CVRs ($479:$483).


                                        25



                                 TAB 2D

- ----------------------------------------------------------------
      II. Pro Forma Financial and Credit Analysis (cont'd)
- ----------------------------------------------------------------

                       Selected Credit Ratios
                       ----------------------

                                            Pro Forma 1993E
                               ------------------------------------------
                                 QVC/PCI       VIA/PCI        VIA-BV/PCI 
                               -----------  -----------     -------------
Net Debt(1)/EBITDA                 4.7x         6.4x             6.1x
(Net Debt + Cash Pay Pref.)/
  EBITDA                           5.7          9.0              6.8
(Net Debt + Total Pay Pref.)/
  EBITDA                           7.3          9.0              6.8

EBITDA/Total Interest              3.5x         2.9x             2.9x
EBITDA/(Total Interest +
 Cash Pref. Dividends)             2.9          2.1              2.6
EBITDA/(Total Interest +
 Total Pref. Dividends)            2.2          2.1              2.6

(EBITDA - Capex)/Total Interest    2.8x         2.2x             2.1x
(EBITDA - Capex)/(Total Interest +
 Cash Pref. Dividends)             2.3          1.6              1.9
(EBITDA - Capex)/(Total Interest +
 Total Pref. Dividends)            1.8          1.6              1.9



- --------------------------
(1) Net debt includes contingent liabilities including the estimated fair
    value of the CVRs.


                                        26



- ----------------------------------------------------------------
      II. Pro Forma Financial and Credit Analysis (cont'd)
- ----------------------------------------------------------------

                       Selected Credit Ratios (cont'd)
                       ----------------------

                                                  Pro Forma 1993E
                                     ------------------------------------------
                                       QVC/PCI       VIA/PCI        VIA-BV/PCI 
                                     -----------  -----------     -------------
Book Basis:
- -----------
Net Book Capitalization                $12,199     $14,562          $21,203
Net Debt(1)/Net Book Capitalization       29.1%       49.9%            45.6%
(Net Debt + Cash Pay Pref.)/
  Net Book Capitalization                 35.2        69.7             51.3
(Net Debt + Total Pay Pref.)/
  Net Book Capitalization                 45.4        69.7             51.3

Market Basis:
- -------------
Net Market Capitalization(2)           $13,423     $17,570          $24,689
Net Debt/Net Market Capitalization        26.4%       41.3%            39.2%
(Net Debt + Cash Pay Pref.)/
  Net Market Capitalization               32.0        57.8             44.0
(Net Debt + Total Pref.)/
  Net Market Capitalization               41.3        57.8             44.0


*  Despite substantial debt and preferred stock, all three combinations would
   have substantial market equity value relative to debt and preferred. Note,
   however, that the statistics presented on a Market Basis are a function of
   the current stock prices.


- --------------------------
(1) Net debt includes contingent liabilities including the estimated fair
    value of the CVRs.
(2) Based on current market prices.


                                        27



                                 TAB 3A

- -------------------------------------------------------------------------------
                  III. Common Stock Valuation Analysis
- -------------------------------------------------------------------------------
    
                   Overview of Valuation Methodologies
                                        
                                        
    The  following  methodologies were employed in valuing  the  equity  portion
     (and resulting implied total consideration) of each bid:
     
     - Current  Market Value Analysis - takes the current market prices  of  the
       securities and applies the applicable exchange ratios.
     
     - Recent  Market  Value  Analysis - same as above, but  with  common  stock
       prices viewed over various time periods.
     
     - Comparable  Public  Company  Trading  Multiple  Analysis  -  applies  the
       multiples  of  comparable  companies to the  pro  forma  EBITDA  of  each
       combination to arrive at a value for each.
     
     - Discounted  Cash Flow Analysis - adds the discounted cash flow  value  of
       each   suitor   (based  on  projections  provided  by  each),   including
       Blockbuster  in the three-party scenario, to the unaffected market  value
       of PCI to derive a value for each.
     
     - Weighted  Average  Unaffected Multiple Analysis  -  adds  the  unaffected
       EBITDA  multiples  of each suitor, including Blockbuster  in  the  three-
       party  scenario, to that of PCI to arrive at a weighted average multiple,
       then applies that multiple to the pro forma EBITDA for each combination.
  
    As  we  have noted, we have not factored in any combination benefits in  any
     of our analysis.
  
    Given  the  uncertainties involved, the volatility of  both  suitors'  stock
     prices,  dynamic  market  conditions  and  the  possible  changes  in   the
     complexion  of  both  potential combinations, none of  these  methodologies
     should be viewed as a reliable predictor of stock prices.

                                        28



                                 TAB 3B


- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

                       Current Market Value Analysis
                       -----------------------------

*  Applying the ratios set forth in each bid to the current market prices
   (at 2/3/94) of the securities offered, the following values are derived:

                                                      % of
                                          QVC        Total
                                      -----------  ---------
Cash 
($104 x 50.1%)                          $52.10        60.1%

Preferred Stock
(0.2386 x $31.58 x 49.9%)                 3.76         4.3

Warrant
(0.32 x $15.94 x 49.9%)                   2.55         2.9



                                      -----------  ---------
Subtotal                                $58.41        67.4%

Common Stock
(1.2361 x $45.88 x 49.9%)                28.30        32.6
                                      -----------  ---------
    Total Consideration                 $86.71       100.0%
                                      ===========  =========




 

                                                       % of                         % of
                                          VIA         Total          VIA-BV        Total
                                      -----------   ---------      -----------  ---------
                                                                     
Cash 
($107 x 50.1%)                          $53.61        65.8%          $53.61        64.3%

Preferred Stock
(0.35 x $34.42 x 49.9%)                   6.01         7.4               --          --

Subordinated Debt
(0.0175 x $963 x 49.9%)                     --          --             8.41        10.1

Warrant I
(0.3 x $9.41 x 49.9%)(1)                  1.41         1.7             0.82         1.0

Warrant II
(0.5 x $3.37 x 49.9%)(2)                  0.84         1.0             0.82         1.0

CVR
(0.93065 x $8.26 x 49.9%)(3)              3.84         4.7             3.87         4.6
                                      -----------   ---------      -----------  ---------
    Subtotal                            $65.70        80.6%          $67.52        81.0%

Common Stock - Class B
(0.93065 x $34.00 x 49.9%)               15.79        19.4            15.79        19.0
                                      -----------   ---------      -----------  ---------
    Total Consideration                 $81.49       100.0%          $83.31       100.0%

                                      ===========   =========      ===========  =========


- --------------------------
(1) The corresponding Warrant I value in the VIA-BV combination is $5.49.
(2) The corresponding Warrant II value in the VIA-BV combination is $3.27.
(3) The corresponding CVR value in the VIA-BV combination is $8.33.



                                        29



- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

                       Current Market Value Analysis (cont'd)
                       -----------------------------

*  We provide below the same analysis of applying the ratios set forth in
   each bid to market prices of the securities offered but at 2/1/94 --
   which is reflective of the market just prior to the recent bid
   announcements.

                                                      % of
                                          QVC        Total
                                      -----------  ---------
Cash 
($104 x 50.1%)                          $52.10        60.6%

Preferred Stock
(0.2386 x $32.43 x 49.9%)                 3.86         4.5

Warrant
(0.32 x $14.67 x 49.9%)                   2.34         2.7



                                      -----------  ---------
Subtotal                                $58.31        67.9%

Common Stock
(1.2361 x $44.75 x 49.9%)                27.60        32.1
                                      -----------  ---------
    Total Consideration                 $85.91       100.0%
                                      ===========  =========


 

                                                       % of                         % of
                                          VIA         Total          VIA-BV        Total
                                      -----------   ---------      -----------  ---------
                                                                     
Cash 
($107 x 50.1%)                          $53.61        65.7%          $53.61        64.3%

Preferred Stock
(0.35 x $35.04 x 49.9%)                   6.12         7.5               --          --

Subordinated Debt
(0.0175 x $963 x 49.9%)                     --          --             8.41        10.1

Warrant I
(0.3 x $9.15 x 49.9%)(1)                  1.37         1.7             0.81         1.0

Warrant II
(0.5 x $3.39 x 49.9%)(2)                  0.85         1.0             0.82         1.0

CVR
(0.93065 x $8.22 x 49.9%)(3)              3.82         4.7             3.86         4.6
                                      -----------   ---------      -----------  ---------
    Subtotal                            $65.76        80.6%          $67.51        81.0%

Common Stock - Class B
(0.93065 x $34.13 x 49.9%)               15.85        19.4            15.85        19.0
                                      -----------   ---------      -----------  ---------
    Total Consideration                 $81.61       100.0%          $83.35       100.0%

                                      ===========   =========      ===========  =========


- --------------------------
(1) The corresponding Warrant I value in the VIA-BV combination is $5.42.
(2) The corresponding Warrant II value in the VIA-BV combination is $3.27.
(3) The corresponding CVR value in the VIA-BV combination is $8.32.



                                        30



                                 TAB 3C


- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

                          Recent Market Value Analysis

    As  we  have  discussed, the stock prices of both QVC and Viacom  have  been
     highly  volatile and have declined since the commencement of  this  contest
     for control.
    If  we add to the current cash, preferred/subordinated debt, warrant and CVR
     packages  of  each  bid  the common stock values  implied  by  the  current
     exchange  ratios at recent stock price averages, the following  bid  values
     are derived:
 
                                                                     QVC Premium
                    -----------------------------------------   --------------------------
                       QVC           VIA            VIA-BV        VIA         VIA-BV
                    -------------  ---------------  ---------   ------------  ------------
                                                                   
Current Market (2/3)  $86.71       $81.49           $83.31       $5.21        $3.40
Market at 2/1          85.91        81.61            83.35        4.30         2.56
1 Week Average         85.91        82.06            83.88        3.84         2.03
2 Week Average         85.67        82.37            84.19        3.30         1.48
1 Month Average        84.65        83.43            85.24        1.22        (0.59)
2 Month Average        84.40        84.92            86.74       (0.52)       (2.34)
3 Month Average        86.05        85.60            87.42        0.46        (1.36)
4 Month Average        87.81        86.85            88.67        0.96        (0.86)
5 Month Average        89.37        87.79            89.61        1.58        (0.24)
6 Month Average        91.16        88.58            90.39        2.58         0.77


    This  analysis shows QVC ahead in every case but one as compared  to  Viacom
     alone,  but by amounts that are lower than the current market differential.
     Compared  to  Viacom-Blockbuster, QVC is ahead  in  only  the  most  recent
     (current to 2 week) and the earliest cases shown.
    If  QVC's  stock  price were to decline by 19% or $8.50,  (from  $45.875  to
     $37.375), with the price of Viacom's Class B shares remaining the same, the
     market  value  of the two bids (QVC vs. Viacom), would be virtually  equal.
     (The lowest point at which QVC's stock has traded since the bidding process
     began  is  $37.00,  which would imply a bid value of $81.23.   It  has  not
     closed  below $37.875, which implies a bid value of $81.77.)  As against  a
     Viacom-Blockbuster combination, QVC's stock price would have to decline  by
     12% or $5.50 to $40.375.
    Conversely, if QVC's stock price were to remain the same, Viacom's  Class  B
     stock price would have to rise by 33% or $11.25 (from $34.00 to $45.25) for
     the market value of the QVC and Viacom bids to be virtually equal.  For the
     QVC  and  Viacom-Blockbuster bids to be virtually equal, Viacom's  Class  B
     stock price would have to rise by 21% or $7.25 to $41.25.

                                        31



                                 TAB 3D



- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

               Comparable Public Company Trading Multiple Analysis
  
    Pro   forma   for   a   combination   with  Paramount,   each   of   Viacom,
     Viacom/Blockbuster  and  QVC  may  be  perceived  to  be   a   "diversified
     entertainment and intellectual property company" rather than  a  "pure-play
     home    shopping   network   company"   (QVC)   or   a   "pure-play   cable
     network/programming company" (Viacom).
  
    The  most relevant comparable companies are Time Warner, Disney and, from  a
     different  perspective,  Turner and, at these  multiples,  both  pro  forma
     combinations  would  have equity values below their current  market  values
     (based on 2/3 prices) as shown below:(1)


                                      QVC/PCI       VIA/PCI        VIA-BV/PCI
                                    -------------  ---------------  ----------
At Time Warner Multiple
- -----------------------
1993: 11.2x      Implied Stock Price    $18.11       $14.05           $18.35
                 Implied Bid Value      $69.58       $72.23           $76.04

1994: 10.4x      Implied Stock Price    $19.23       $16.28           $24.18
                 Implied Bid Value      $70.27       $73.26           $78.75

At Disney Multiple
- ------------------
1993: 13.3x      Implied Stock Price    $27.04       $25.22           $26.59
                 Implied Bid Value      $75.09       $77.41           $79.87

1994: 12.2x      Implied Stock Price    $27.67       $26.99           $32.88
                 Implied Bid Value      $75.48       $78.24           $82.79

At Turner Multiple
- ------------------
1993: 14.8x      Implied Stock Price    $33.15       $32.86           $32.23
                 Implied Bid Value      $78.86       $80.96           $82.49

1994: 11.9x      Implied Stock Price    $26.17       $25.08           $31.33
                 Implied Bid Price      $74.55       $77.35           $82.07

- ----------------------------
(1) The implied stock price for Viacom is that of the Class B shares.


                                        32

- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

            Comparable Public Company Trading Multiple Analysis (cont'd)
            ---------------------------------------------------

                          Time Warner Inc.
                          ----------------

Share Price (2/3/94)                   $ 36.63
Market Value(a)                        $16,051
Market Capitalization(a)                30,534
EBITDA Multiples
  1993E(b)                               11.2x
  1994E(b)                               10.4
P/E Multiples
  1993E(b)                                 NM 
  1994E(b)                                 NM
Senior Debt Rating
  Time Warner Inc.                      Ba1/BBB-
  Time Warner Entertainment            Baa3/BBB-


 
                                                   Historical                  Projected
                                      --------------------------------------------------
    ($ mm, except per share)             1991         1992          1993E(b)    1994E(b)
                                      -----------   ---------      ---------    --------
                                                                     
Revenues
  Publishing                            $3,021       $3,123        $3,305       $3,538
  Music                                  2,960        3,214         3,321        3,704
  Filmed Entertainment                   3,065        3,455         4,202        4,781
  Programming - HBO                      1,366        1,444         1,445        1,536
  Cable                                  1,935        2,091         2,191        2,399
  (Elimination)                           (326)        (257)         (246)        (275)
                                      -----------   ---------      ---------    --------
    Total                              $12,021      $13,070       $14,219      $15,682
      % Growth                              --          8.7%          8.8%        10.3%

EBITDA
  Publishing                              $306         $328          $362         $354
  Music                                    560          585           630          702
  Filmed Entertainment                     390          410           562          644
  Programming - HBO                        195          215           229          223
  Cable                                    872          977         1,038        1,127
  (Corporate)                             (136)        (141)         (135)        (142)
                                      -----------   ---------      ---------    --------
    Total                               $2,187       $2,374        $2,686       $2,908
      % Margin                            18.2%        18.2%         18.9%        18.5%
      % Growth                              --          8.6%         13.1%         8.3%



- --------------------------
(a) Consolidated basis Market capitalization adjusted to reflect the market
    value of equity investments.
(b) Source: PaineWebber November 23, 1993 report Consolidated basis. In the
    multiple calculation, EBITDA adjusted for the difference between the
    actual 1993 results and PaineWebber's 1993 estimated results.



                                        33



- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

          Comparable Public Company Trading Multiple Analysis (cont'd)
                                        
                            Time Warner Inc. (cont'd)
Franchise Properties
  Filmed  Entertainment - studio and library; a perennial  leader  in  both  box
  office results and network television production.
  Music - among the largest record companies in the world.
  Cable  -  2nd  largest  system  operator (behind  TCI)  with  over  7  million
  subscribers, including many attractive urban markets such as Manhattan.
  Publishing  - titles include such leading sellers as People, Time  and  Sports
  Illustrated.
Management Reputation
  Led  by Gerald Levin and a team of prominent division managers, including  Bob
  Daly  and Jerry Semel (Warner Brothers), Bob Morgado (Warner Music Group)  and
  Michael  Fuchs  (HBO),  among  others.  Levin took  control  following  Steven
  Ross's  death  in  late  1992.  While there have  been  several  high  profile
  changes  in  corporate  management since the merger of Time  and  Warner,  the
  Daly/Semel   team  is  among  the  longest-running  and  most  successful   in
  Hollywood.
Major Strategic Alliances
  Time Warner Entertainment, which owns the studio, cable operations  and HBO  -
  U.S. West, C. Itoh and Toshiba.
  Other investments include Turner Broadcasting and Whittle Communications.

                                        34


- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

            Comparable Public Company Trading Multiple Analysis (cont'd)
            ---------------------------------------------------

                          The Walt Disney Company
                          ------------------------

Share Price (2/3/94)                   $ 46.88
Market Value                           $25,996
Market Capitalization(b)                25,651
EBITDA Multiples
  1993                                   13.3x
  1994E(c)                               12.2
P/E Multiples
  1993                                   38.1x
  1994E(c)                               24.0
Senior Debt Rating                     Aa3/AA-


 
                                                   Historical                  Projected(a)
                                      --------------------------------------------------
    ($ in mm, except per share)          1991         1992          1993          1994E
                                      -----------   ---------      ---------    --------
                                                                     
Revenues
  Theme Park & Resorts                  $2,794       $3,307        $3,441       $3,739
  Filmed Entertainment                   2,594        3,115         3,673        4,145
  Consumer Products                        724        1,082         1,415        1,590
                                      -----------   ---------      ---------    --------
    Total                               $6,112       $7,504        $8,529       $9,474
      % Growth                              --         22.8%         13.7%        11.1%

Operating Income
  Theme Park & Resorts                    $547         $644          $747         $832
  Filmed Entertainment                     318          508           622          735
  Consumer Products                        230          283           355          420
  (Corporate)                             (161)        (148)         (164)        (181)
                                      -----------   ---------      ---------    --------
    Total                                 $934       $1,287        $1,560       $1,805
    Depreciation & Amortization            264          317           364          393
                                      -----------   ---------      ---------    --------
      EBITDA                            $1,197       $1,604        $1,925       $2,199
      % Margin                            19.6%        21.4%         22.6%        23.2%
      % Growth                              --         34.0%         20.0%        14.2%

Franchise Properties
- --------------------
*  Filmed Entertainment - studio and library; particularly animated features and family
   entertainment; Aladdin is among the all-time leading sellers in home video; Mickey Mouse
   and other "classic characters" are enduring franchises.
*  World's leading theme park operations.


- --------------------------
(a) Source: Furman Selz January 10, 1994 report.
(b) Adjusted to reflect the market value of equity investments.
(c) Source: Value Line December 3, 1993 report.



                                        35


- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

          Comparable Public Company Trading Multiple Analysis (cont'd)
                                        
                        The Walt Disney Company (cont'd)
Management Reputation
  Michael  Eisner,  Frank  Wells, Jeffrey Katzenberg and  their  associates  are
  credited with a highly successful revitalization of Disney.  Market value  has
  increased  13-fold  since  Eisner took the  helm  in  1984.   Currently  under
  pressure  due  to  Euro-Disney  and weak recent box  office  performance,  but
  investment community appears enthusiastic about a rebound in 1994.

                                        36


- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

            Comparable Public Company Trading Multiple Analysis (cont'd)
            ---------------------------------------------------

                          Turner Broadcasting System, Inc.
                          --------------------------------

Share Price (2/3/94) - TBS.B            $ 25.75
Market Value                            $6,828
Market Capitalization                    8,271
EBITDA Multiples
  1993E(b)                               14.8x
  1994E(b)                               11.9
P/E Multiples
  1993E(b)                               56.9x
  1994E(b)                               32.0
Senior Debt Rating                     Ba2/BB+


 
                                                   Historical                  Projected
                                      --------------------------------------------------
    ($ in mm, except per share)          1991         1992          1993E(a)      1994E(a)
                                      -----------   ---------      ---------    --------
                                                                     
Revenues
  Entertainment                           $711         $847          $920         $990
  News                                     479          536           608          666
  Syndication & Licensing                  192          259           230          250
  Sports                                    53           83            94           95
  Real Estate                               40           41            50           52
  Other                                      4            4             4            4
                                      -----------   ---------      ---------    --------
    Total                               $1,480       $1,770        $1,906       $2,057
      % Growth                              --         19.6%          7.7%         7.9%

EBITDA
  Entertainment                           $213         $250          $260         $266
  News                                     177          183           227          254
  Syndication & Licensing                   75           72            55           60
  Sports                                     4            1             5            7
  Real Estate                                8            7             7            9
 (Other)                                   (20)         (30)          (55)         (55)
                                      -----------   ---------      ---------    --------
    Total                                 $455         $483          $499         $541
      % Margin                            30.7%        27.3%         26.2%        26.3%
      % Growth                              --          6.2%          3.3%         8.4%

Franchise Properties
- --------------------
*  CNN - pioneer of all-news format, developipg internationally.
*  TBS and TNT - leading general entertainment networks.
*  Film libraries.


- --------------------------
(a) Source: Kemper Securities October 27, 1993 report
(b) Source: Value Line September 24, 1993 report.



                                        37




- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

          Comparable Public Company Trading Multiple Analysis (cont'd)
                                        
                    Turner Broadcasting System, Inc. (cont'd)

Management Reputation
  Led  by one-time Time Magazine "Man of the Year" Ted Turner, who is viewed  as
  one of the visionaries of the cable television business.  A  risk-taker  whose
  aggressive  acquisitions,  most  notably  of  film  libraries,  strained   the
  company's  balance sheet and led to a bail-out by the cable  system  operators
  who  now  exert substantial influence at TBS.  Today, TCI and Time Warner  are
  the  largest holders of Turner stock, other than Mr. Turner.  Turner has  been
  vindicated  by  the  performance of TNT and, to a lesser extent,  the  Cartoon
  Network, which were both built around acquired libraries.  Most recent  thrust
  is  to  expand  film  production and theatrical  distribution  through  recent
  acquisitions of New Line Cinema and Castle Rock.
Major Strategic Alliances
  TCI and Time Warner are significant shareholders.

                                        38




                                 TAB 3E



- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

                      Discounted Cash Flow ("DCF") Analysis
                                        
    All  suitors  have  provided Paramount with internal projections  for  their
     businesses  --  QVC for six and Viacom for three years  (as  shown  on  the
     following  pages).  We were also provided with Blockbuster projections  for
     four years.
  
    We  conducted  due  diligence reviews with QVC, Viacom and Blockbuster  with
     respect  to  these  projections, which appear to  be  based  on  reasonable
     assumptions, and therefore found no basis to alter them materially.
  
    Taking  these projections of revenues, profits and cash flow items, we  have
     generated hypothetical, debt-free "long-term investment values" of each  of
     QVC, Viacom and Blockbuster by employing "Discounted Cash Flow" analysis.
  
    The  after-tax free cash flow generated by the business is discounted  at  a
     range  of  discount rates that reflect each company's hypothetical weighted
     average cost of capital.  (Note that although QVC had provided six years of
     projections,  its  discounted value was calculated using three  years  when
     comparing  values with Viacom.  The spread between the value  for  QVC  and
     Viacom using three years versus six was not materially different.)
  
    The   total  discounted  cash  flow  value  is  determined  by  adding   the
     hypothetical  present  value  of the so-called  "terminal  value"  of  each
     company,  which is derived by applying multiples to the EBITDA  figure  for
     the final projected year.
  
    Because  Paramount  does not prepare projections beyond the  current  fiscal
     year, we have added the "unaffected" market capitalization of Paramount  to
     these  discounted  cash flow values in order to derive  implied  pro  forma
     combined asset values.
  
    We  have then imposed the pro forma capital structure implied by each of the
     current  bids to derive hypothetical pro forma combined equity values  and,
     in turn, consideration values.

                                        39




- ---------------------------------------------------------------------------------------------------------------
                                     III. Common Stock Valuation Analysis (cont'd)
- ---------------------------------------------------------------------------------------------------------------

                                         Discounted Cash Flow Analysis (cont'd)
                                                     QVC Stand-Alone



                  Historical      Est.       CAGR                       Projected                       CAGR
              ----------------   -------             ----------------------------------------------
                1991     1992      1993    1991-93    1994    1995    1996    1997    1998    1999     1993-99
              -------  -------   -------  ---------  ------  ------  ------  ------  ------  ------   ---------
                                                                      
Revenue          992    1,071     1,231     15.6%    1,416   1,628   1,873   2,153   2,476   2,848     15.0%
    % Growth             16.1%     15.0%              15.0%   15.0%   15.0%   15.0%   15.0%   15.0%

EBITDA           131      165       190     20.3%      215     255     302     358     422     498     17.4%
    % Margin     14.2%   15.4%     15.4%               15.1%   15.7%   16.1%   16.6%   17.0%   17.5%
    % Growth             25.5%     15.4%               12.9%   18.8%   18.6%   18.3%   18.1%   17.9%

Free Cash Flow   111       32        80        NM       89     107     129     153     182     215     18.1%
    % Margin     12.1%    3.0%      6.5%                6.3%    6.6%    6.9%    7.1%    7.3%    7.6%
    % Growth            (71.5%)   150.6%               12.3%   20.3%   19.7%   19.2%   18.7%   18.4%





                                                  - 40 -









- ---------------------------------------------------------------------------------------------------------------
                                     III. Common Stock Valuation Analysis (cont'd)
- ---------------------------------------------------------------------------------------------------------------

                                         Discounted Cash Flow Analysis (cont'd)
                                                     Viacom Stand-Alone



                  Historical      Est.       CAGR          Projected           CAGR
              ----------------   -------             ----------------------
                1991     1992      1993    1991-93    1994    1995    1996    1993-99
              -------  -------   -------  ---------  ------  ------  ------  ---------
                                                        
Revenue        1,712    1,859     2,008      8.3%    2,173   2,386   2,595       8.9%
    % Growth      --      8.6%      8.0%                8.2%    9.8%    8.8%

EBITDA           469      508       561      9.3%      642     736     825      13.7%
    % Margin     27.4%   27.3%     27.9%               29.5%   30.8%   31.8%
    % Growth      --      8.1%     10.5%               14.5%   14.7%   12.1%

Free Cash Flow    --      210       241        NM       295    350     400      18.5%
    % Margin      --     11.3%     12.0%               13.6%   14.7%   15.4%
    % Growth      --       --     (14.8%)              22.5%   18.8%   14.3%







                                                  - 41 -






- -------------------------------------------------------------------------------
                     III. Common Stock Valuation Analysis (cont'd)
- -------------------------------------------------------------------------------

                       Discounted Cash Flow Analysis (cont'd)
                              Blockbuster Stand-Alone(1)



                Est.     CAGR               Projected           CAGR
              -------                ----------------------
                1993    1991-93(2)   1994     1995     1996    1993-99
              -------  ---------     ------  ------   ------  ---------

Revenue       $1,991     52.6%      $3,024   $3,551   $4,260     28.9%
    % Growth      --                  51.9%    17.4%    20.0%

EBITDA           414     58.8%         627      766      919     30.4%
    % Margin    20.8%                 20.7%    21.6%    20.0%
    % Growth      --                  51.5%    22.2%    21.6%

Free Cash Flow   180       --          131       421     512     41.6%
    % Margin     9.0%                  4.3%    11.8%    12.0%
    % Growth      --                 (27.4%)  221.9%    21.6%





- --------------------
(1) Figures exclude Spelling, Republic and Discovery Zone, which are valued at
    the current market values and treated as adjustments to the DCF value.
(2) CAGR figures provided for 1991-93 are based on consolidated results.



                                    - 42 -






- -------------------------------------------------------------------------------
                     III. Common Stock Valuation Analysis (cont'd)
- -------------------------------------------------------------------------------

                       Discounted Cash Flow Analysis (cont'd)
                           Summary of Implied Bid Values



Exit Multiple
  of EBITDA       Discount Rate      QVC       VIA       VIA-BV
- --------------   ---------------    -----     -----     --------

     10x              12%          $71.92    $73.64      $78.41

     12x              11%          $73.68    $76.66      $81.84

     14x              10%          $75.52    $79.84      $85.45

     16x               9%          $77.46    $83.18      $89.25



Our analysis suggests that the appropriate discount rates and exit multiples
for QVC and Viacom would be substantially the same.  The same discount rates
and a slightly lower range of exit multiples (8x-14x) for Blockbuster is
appropriate.




                                    - 43 -









- ---------------------------------------------------------------------------------------------------------------
                                     III. Common Stock Valuation Analysis (cont'd)
- ---------------------------------------------------------------------------------------------------------------

                                         Discounted Cash Flow Analysis (cont'd)
                                            Derivation of Implied Bid Values



                                           QVC/PCI                           Viacom/PCI                      Viacom-Blockbuster/PCI
                               -------------------------------   -------------------------------   ---------------------------------
                                12x Multiple     14x Multiple     12x Multiple     14x Multiple    12x Multiple(1)   14x Multiple(2)
                               11% Disc. Rate   10% Disc. Rate   11% Disc. Rate   10% Disc. Rate   11% Disc. Rate    10% Disc. Rate
                               --------------   --------------   --------------   --------------   ---------------   ---------------

                                                                                                   
DCF Value of Suitor               $ 3,013          $ 3,545          $ 8,452          $ 9,904           $ 8,452           $ 9,904
DCF Value of Blockbuster               --               --               --               --             8,248             9,831
Asset Value of PCI                  7,010            7,010            7,010            7,010             7,010             7,010
                                 ---------        ---------        ---------        ---------         ---------         ---------
Pro Forma Market Cap.             $10,023          $10,555          $15,462          $16,914           $23,710           $26,745

Net Debt + Op. Proceeds            (3,523)          (3,523)          (7,550)          (7,550)           (9,377)           (9,377)
Total Preferred                    (2,095)          (2,095)          (2,909)          (2,909)           (2,290)           (2,290)
                                 ---------        ---------        ---------        ---------         ---------         ---------
Equity Value                      $ 4,405          $ 4,937          $ 5,004          $ 6,455           $12,043           $15,078

Implied Shares Price              $ 24.75          $ 27.74          $ 23.59          $ 30.43           $ 30.84           $ 38.61

Implied Bid Value per Share       $ 73.68          $ 75.52          $ 76.66          $ 79.84           $ 81.84           $ 85.45






- -------------------------
(1) A multiple of 10x was used for Blockbuster.
(2) A multiple of 12x was used for Blockbuster.


                                                       - 44 -





                                 TAB 3F


- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

                       Weighted Average Multiple Analysis
                                    Overview
                                        
                                        
    Prior  to  the  announcement of the Viacom/PCI, the subsequent QVC  proposal
     and  the initial Blockbuster investment in Viacom, each of Paramount,  QVC,
     Viacom  and  Blockbuster  were  trading in  the  market  at  the  following
     multiples of 1993E EBITDA:
                 
                            Paramount        11.9x
                            QVC              17.5x
                            Viacom           17.5x
                            Blockbuster      14.4x
  
  
    Combining the unaffected multiples of each of the suitors with that of  PCI,
     a weighted average multiple is derived of 13.2x in the QVC/PCI combination,
     14.6x in the VIA/PCI combination and 14.5x in a
     VIA-BV/PCI combination.
     
     - The  QVC/PCI combined multiple is lower because Paramount's EBITDA, which
       on  an  unaffected  basis  commanded a lower  multiple,  accounts  for  a
       greater  proportion  (about three quarters) of  the  total  than  in  the
       Viacom/PCI   combination   (about  half)  or  the  Viacom-Blockbuster/PCI
       combination (about one third).
  
  
    However,  the stock price and trading multiple may also reflect the market's
     perception of such factors as:
     
     - cost savings opportunities
     - revenue growth opportunities
     - the impact of a change in management
     - differences in the leverage of each combination
     - loss of "pure play" investment opportunity

                                        45



- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

                   Weighted Average Multiple Analysis (cont'd)
                                   Limitations
  
  
    Weighted  average  multiple  analysis may  be  a  useful  tool  for  further
     analysis because it generates theoretical pro forma stock values based upon
     pre-transaction trading multiples.
  
    However,  neither QVC nor Viacom is trading at the price implied by weighted
     average multiple analysis.
     
     - Both stocks are now, and have been, above this theoretical level.
     
     - The   implied  market  capitalization  of  QVC/PCI  exceeds  the  implied
       weighted  average unaffected multiple level by $3.5 billion, with  a  gap
       for the Viacom/PCI combination of $1.0 billion.
     
     - The potential three-way combination, by far the largest of the three,  is
       trading  at  an  implied total value that is $0.7 billion more  than  its
       implied weighted average multiple value.

                                        46



- ----------------------------------------------------------------
      III. Common Stock Valuation Analysis (cont'd)
- ----------------------------------------------------------------

                 Weighted Average Multiple Analysis(1)  (cont'd)
                                        
                                        
                                        
 
                                                                         QVC/PCI      VIA/PCI      VIA-BV/PCI
                                                                       -----------  -----------  --------------


                                                                                          
 Multiple at Current Market Value(1)                                      17.9x        15.5x          15.6x
 Weighted Average Unaffected Multiple(1)                                  13.2x        14.6x          14.5x

 Actual Stock Price at 2/1/94                                            $44.88       $34.00         $34.00(2)
 Implied Stock Price at Weighted Average Multiple                        $26.10       $29.40(2)      $29.98(2)
 Diff. between Current Market and Wtd. Avg. Stock Price                  $19.77       $ 4.79         $ 4.02

 Common Stock Component at Implied Stock Prices                          $16.10       $13.66         $13.92
 Cash, Preferred Stock/Sub Debt, Warrant and CVR Component(3)             58.41        65.70          67.52
                                                                         ------       ------         ------

 Deal Value at Weighted Average Multiple                                 $74.51       $79.36         $81.44
 Deal Value at Current Market                                            $86.71       $81.49         $83.31

 Diff. between Current Market and Wtd. Avg. Bid Values - Per Share       $12.19       $ 4.60         $ 1.87
 Diff. between Current Market and Wtd. Avg. Market Cap.                  $3,518       $  975         $  702








- ----------------------
(1) All multiples are of 1993E EBITDA.
(2) Viacom Class B share price.
(3) Preferred is valued at mid-point of value range.



                                        47




                                 TAB 4


- ----------------------------------------------------------------
             IV. Trading Multiple Analysis (cont'd)
- ----------------------------------------------------------------

                                  Introduction
                                        
                                        
                                        
  Our  analysis illustrates that if the various combinations trade at  the  same
  multiple  of  EBITDA,  either  of  the Viacom  bids  (i.e.,  with  or  without
  Blockbuster) would have a value in excess of the QVC bid.
  
  However,  were  the QVC combination to trade at a higher multiple,  the  total
  value of its bid could equal or exceed the value of the Viacom bids.
  
  The  analysis  that  we  have done to date provides  no  reasonable  basis  to
  conclude  from  a  financial point of view whether any of  these  combinations
  would in fact trade at a higher multiple than any of the others.
  

                                        48


- ----------------------------------------------------------------
             IV. Trading Multiple Analysis (cont'd)
- ----------------------------------------------------------------

                            Multiple Differentiation
                                        
                                        
                                        
  One  analysis  that  uses  different multiples for  each  combination  is  the
  weighted  average  unaffected  multiple analysis,  which  is  based  upon  the
  trading  multiples  that  were in effect for each of  the  various  companies,
  including Paramount, prior to the commencement of this process.
  
  As  we  have observed many times before, in this analysis, the QVC combination
  trades  at  the lowest multiple because it includes the largest  component  of
  Paramount's  cash flow, which was awarded the lowest multiple  prior  to  this
  process of any of Paramount, QVC, Viacom or Blockbuster.
  
  As  we  have  also noted, however, this analysis is subject  to  a  number  of
  limitations  in  that  it  does not give effect to  the  possible  combination
  benefits   (including  the  benefits  that  might  arise  from  each  suitors'
  strategic/merger  partners), changes in management,  etc.   Therefore,  as  we
  have  said  repeatedly, the weighted average unaffected multiple analysis  can
  not be relied upon as a predictor of stock prices or multiples.
  
  Finally,  the DCF analysis uses lower exit multiples for Blockbuster than  for
  Viacom   or  QVC.   However,  this  analysis  does  not  apply  multiples   to
  Paramount's EBITDA, or to the EBITDA of any of the combinations.
  

                                        49



- ----------------------------------------------------------------
             IV. Trading Multiple Analysis (cont'd)
- ----------------------------------------------------------------

                           The Case for a QVC Premium
                                        
                                        
                                        
  The  argument that could be advanced to defend a higher multiple for  the  QVC
  combination runs as follows:
  - The  QVC  combination would be a content-driven company  under  the  highly-
     respected leadership of Mr. Diller.
  - In  this  analysis,  the content referred to is mostly Paramount's  content,
     since  QVC's business is a retailing/distribution business, albeit a  high-
     growth, high-multiple business.
  - In   this   analysis,  the  combination  of  QVC's  high-multiple  business,
     Paramount's increasingly valuable content and Mr. Diller's leadership would
     be an attractive play on content and interactivity.  QVC and its management
     would  be  given  credit  for  their ability  to  work  in  an  interactive
     environment, which the market believes to be important to the future of the
     content business.
  - The  sponsorship of BellSouth, Comcast, Cox and Advance would also be  noted
     as  a  positive,  particularly with respect to the number  of  cable  homes
     reached by this group.

                                        50



- ----------------------------------------------------------------
             IV. Trading Multiple Analysis (cont'd)
- ----------------------------------------------------------------

                         Counter Argument to QVC Premium
                                        
                                        
                                        
  The  counter  argument  would be that Mr. Diller is unlikely  to  be  able  to
  enhance Paramount's operations quickly.
  - As  Paramount  itself has seen, enhancing the performance of a studio  is  a
     long  lead-time  proposition  due  to the  fact  that  incoming  management
     inherits  the  development/production slate  of  its  predecessors.   Thus,
     investors  may  grow impatient as it may take new management  a  number  of
     months or years to bring new product to market.
  - In  addition,  QVC's  core  home shopping business will  remain  subject  to
     competitive  threats,  including those from its existing  competitor,  Home
     Shopping   Network,   and   the   recently  announced   efforts   of   Time
     Warner/Spiegel, Macy's, MTV, CUC, etc.
  - Finally, though the QVC combination would have fewer lines of business  than
     either  Viacom combination, Paramount's business lines alone  are  probably
     sufficient in number to alter QVC's current "pure play" investment status.

                                        51



- ----------------------------------------------------------------
             IV. Trading Multiple Analysis (cont'd)
- ----------------------------------------------------------------

                      The Case for a VIA or VIA-BV Premium
                                        
                                        
                                        
  The  weighted  average  unaffected analysis provides  the  foundation  of  the
  argument for a higher multiple for either of the Viacom combinations.
  - Both  Viacom  and Blockbuster traded at higher multiples than did Paramount.
     These  high multiple businesses will represent a greater proportion of  the
     pro forma combined EBITDA than would QVC in its combination.
  - The   investment  community  appeared  to  react  very  positively  to   the
     underlying commercial logic of the initial Viacom/Paramount combination.
  - With  respect  to  synergies, the market may anticipate some  uncomplicated,
     redundancy-related cost savings, coming from the combination of Paramount's
     and  Viacom's TV syndication operations as well as from the combination  of
     their corporate staffs.  This could either be reflected in higher cash flow
     estimates  or  in  a higher near-term multiple to reflect  this  relatively
     straight forward anticipated growth in cash flow.
  - The  addition  of  Blockbuster to the equation  should  increase  this  cash
     flow/multiple effect since Blockbuster also has overlapping operations  and
     costs in these two areas.

                                        52



- ----------------------------------------------------------------
             IV. Trading Multiple Analysis (cont'd)
- ----------------------------------------------------------------

                    Counter Argument to VIA or VIA-BV Premium
                                        
                                        
                                        
  The  counter-argument would be that either Viacom combination will be a large,
  highly  diversified  group that will trade at a multiple  below  the  weighted
  average  of  its  pre-transaction multiples due to the  loss  of  "pure  play"
  status.
  - Moreover,  the presence of Blockbuster seems to provide a partial  hedge  on
     interactivity,  since its prospects could be effected by the  proliferation
     of  video  on  demand.   While such a hedge may be attractive  as  downside
     protection,  aggressive equity investors might prefer  to  make  their  own
     unhedged bets and might therefore discount the three-way combination.
  - Finally,  Viacom's  operations also face competitive threats,  most  notably
     from  the  two  potential  competitors to MTV:  Bertelsmann/TCI  and,  more
     recently, Time Warner/Sony/Thorn EMI/Polygram/Ticketmaster.

                                        53



- ----------------------------------------------------------------
             IV. Trading Multiple Analysis (cont'd)
- ----------------------------------------------------------------

                            Trading Multiple Analysis
                                        
                                        
                                   Conclusions
                                        
  The  case  for  a  higher  multiple for the QVC  combination  is  probably  as
  compelling, but no more compelling, than the case for the higher multiple  for
  either the Viacom or the Viacom-Blockbuster combination.
  
  Therefore, there appears to be no reasonable basis from a financial  point  of
  view  to assign a higher multiple to any of these combinations and it  may  be
  more reasonable to compare the combinations at the same multiples.
  
  Finally, reaching a conclusion with respect to multiple differentiation  would
  provide some guidance regarding bid values, but would inevitably lead  to  the
  quagmire   of  projecting  EBITDA  levels.   As  this  process  has  unfolded,
  Paramount's inability to project its EBITDA -- an inability that is common  in
  the  motion  picture  business  --  has  if  anything  become  more  apparent.
  Therefore,  even  before one tackles the unknowable impact of strategic/merger
  partner  participation, management changes, etc., it is clear  that  projected
  EBITDA analysis would be highly speculative.


                                        54







                        LAZARD FRERES & CO.


                                                February 14, 1994


Mr. Donald Oresman
Executive Vice President,
Chief Administrative Officer,
General Counsel & Secretary
Paramount Communications Inc.
15 Columbus Circle
New York, NY  10023-7780

Dear Mr. Oresman:

         You have inquired as to whether, as of this date, we
would reaffirm our written opinion furnished to the Board of
Directors of Paramount Communications Inc. ("Paramount") set
forth in the letter, dated February 4, 1994 (the "February 4,
1994 Letter"), or whether we would change that opinion in light
of the current market prices of the common stock (the "QVC
Common Stock") of QVC Network, Inc. ("QVC") and the Class B
common stock (the "Viacom Class B Common Stock") of Viacom Inc.
("Viacom").  All defined terms used in this letter have the
same meanings as contained in the February 4, 1994 Letter, and
all of the terms, conditions, assumptions and limitations
contained in the February 4, 1994 Letter are made a part of
this analysis and advice and are incorporated herein by
reference.

         Based on and subject to the foregoing and such other
factors as we deem revelant, including our assessment of
economic, monetary and market conditions existing on the date
of this letter, we want to advise you that, as of this date, we
reaffirm our written opinion set forth in the February 4, 1994
Letter.


                                Very truly yours,

                                /s/ Lazard Freres & Co.

PRELIMINARY COPIES
 
                           [LETTERHEAD OF PARAMOUNT]
 
                                                                        xx. 1994
 
Dear Stockholder:
 
     On behalf of our Board of Directors, I am pleased to invite you to attend a
Special Meeting of Stockholders of Paramount Communications Inc., which will be
held at                at       a.m. (local time) on               , 1994.
 
     At this meeting, stockholders will be asked to approve the merger of a
wholly owned subsidiary of Viacom Inc. with and into Paramount. Paramount and
Viacom have complementary businesses and a commitment to innovation and
creativity. The combination of these businesses will create a global
entertainment and communications company with extraordinary resources.
 
     On February 4, 1994 the Board of Directors of Paramount, after careful
consideration, determined that the combination with Viacom is in the best
interests of Paramount and its stockholders. Accordingly, it unanimously
approved the merger and related transactions and recommended that you vote in
favor of the merger at the meeting.
 
     Pursuant to its successful tender offer, on March 11, 1994, Viacom
completed its purchase of a majority of the outstanding shares of Paramount
Common Stock. In the merger, each share of Paramount Common Stock not owned by
Viacom will be converted into the right to receive (i) 0.93065 of a share of
non-voting Viacom Class B Common Stock, (ii) $17.50 principal amount of 8%
exchangeable subordinated debentures of Viacom, (iii) 0.93065 of a contingent
value right, representing the right to receive (under certain circumstances)
cash or securities depending on market prices of Viacom Class B Common Stock
during a one-, two-or three-year period following the merger, (iv) 0.5 of a
three-year warrant to purchase one share of Viacom Class B Common Stock at $60
per share and (v) 0.3 of a five-year warrant to purchase one share of Viacom
Class B Common Stock at $70 per share.
 
     A Notice of the Special Meeting and a Joint Proxy Statement/Prospectus
containing detailed information concerning the merger with the subsidiary of
Viacom and related transactions is attached. The Joint Proxy
Statement/Prospectus also contains detailed information regarding Viacom's
proposed merger with Blockbuster Entertainment Corporation. I urge you to read
this material carefully.
 
     As Viacom has acquired a majority of the outstanding shares of Paramount
Common Stock, Viacom has sufficient voting power to approve the merger and the
related transactions, even if no other stockholder of Paramount votes in favor
of the merger.
 
     Your participation in this meeting, in person or by proxy, is important.
Please mark, date, sign and return the enclosed proxy as soon as possible,
whether or not you plan to attend the meeting.
 
                                          Sincerely,
                                          SUMNER M. REDSTONE
                                          Chairman of the Board

PRELIMINARY COPIES
 
                             [PARAMOUNT LETTERHEAD]
 
                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
 
     A Special Meeting of Stockholders of Paramount Communications Inc.
("Paramount") will be held on               , 1994, at      a.m. (local time),
at                                              , for the purposes of:
 
   
          1. Considering and voting upon a proposal to approve and adopt the
     Amended and Restated Agreement and Plan of Merger dated as of February 4,
     1994, as further amended as of May 26, 1994 among Paramount, Viacom Inc.
     ("Viacom") and Viacom Sub Inc. (the "Merger Subsidiary"), a wholly owned
     subsidiary of Viacom, a copy of which is attached as Annex I to the
     accompanying Joint Proxy Statement/Prospectus, providing for the merger of
     the Merger Subsidiary with and into Paramount (the "Paramount Merger"),
     pursuant to which each share of Common Stock, par value $1.00 ("Paramount
     Common Stock"), of Paramount (other than shares held by Paramount, Viacom
     and their subsidiaries and by holders who demand and perfect appraisal
     rights) will be converted into the right to receive (i) 0.93065 of a share
     of Class B Common Stock, par value $.01 per share, of Viacom ("Viacom Class
     B Common Stock"), (ii) $17.50 principal amount of 8% exchangeable
     subordinated debentures due 2006 of Viacom, (iii) 0.93065 of a contingent
     value right of Viacom, representing the right to receive (under certain
     circumstances) cash or securities of Viacom depending on market prices of
     Viacom Class B Common Stock during a one-, two-or three-year period
     following the Paramount Merger, (iv) 0.5 of a three-year warrant to
     purchase one share of Viacom Class B Common Stock at $60 per share, and (v)
     0.3 of a five-year warrant to purchase one share of Viacom Class B Common
     Stock at $70 per share, all as more fully described in the accompanying
     Joint Proxy Statement/Prospectus; and
    
 
          2. Transacting any other business that may properly come before the
     meeting or any adjournments or postponements thereof.
 
   
     Only stockholders of record at the close of business on May 31, 1994 are
entitled to notice of the meeting, and only holders of Paramount Common Stock of
record at that time are entitled to vote at the meeting. Every holder of
outstanding shares of Paramount Common Stock entitled to be voted at the meeting
is entitled to one vote for each such share held. The Paramount Merger will be
consummated on the date that the approvals of the stockholders of Paramount and
Viacom are obtained.
    
 
   
     In connection with the Paramount Merger, appraisal rights will be available
to those stockholders of Paramount who meet and comply with the requirements of
Section 262 of the Delaware General Corporation Law ("DGCL"). Any holder of
Paramount Common Stock who wishes to seek appraisal rights must meet and comply
with the requirements of Section 262 of the DGCL, a copy of which Section 262 is
attached as Annex V to the accompanying Joint Proxy Statement/Prospectus. See
the section entitled "Dissenting Stockholders' Rights of Appraisal" in the
accompanying Joint Proxy Statement/Prospectus for a discussion of procedures to
be followed in asserting appraisal rights.
    
 
   
     WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING IN PERSON,
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING
ENVELOPE. IF YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE MARK THE APPROPRIATE
SPACE ON THE ENCLOSED PROXY.
    
 
                                          By order of the Board of Directors,
 
                                          PHILIPPE P. DAUMAN
                                          Secretary
 
              , 1994

PRELIMINARY COPIES
 
                             [LETTERHEAD OF VIACOM]
 
                                                                          , 1994
 
Dear Stockholder:
 
     You are cordially invited to attend a Special Meeting of Stockholders of
Viacom Inc., which will be held at [                 ], New York, New York at
[     ] a.m. (local time) on [         ] [  ], 1994. At the Special Meeting,
holders of Viacom Class A Common Stock will be asked to approve proposals
providing for the merger of a wholly owned subsidiary of Viacom with and into
Paramount Communications Inc.
 
   
     The merger with Paramount reflects our vision of building an integrated
global entertainment company. The combination of Viacom and Paramount will form
an entertainment and communications powerhouse uniquely positioned to exploit
new opportunities in the entertainment business, domestically and around the
world. Viacom is also a party to a merger agreement with Blockbuster
Entertainment Corporation. ANY CONSIDERATION OF THE BLOCKBUSTER MERGER WILL TAKE
PLACE AT A SEPARATE SPECIAL MEETING OF VIACOM STOCKHOLDERS FOR WHICH YOU WILL
RECEIVE A SEPARATE JOINT PROXY STATEMENT/PROSPECTUS OF VIACOM AND BLOCKBUSTER.
    
 
     Pursuant to a successful tender offer, on March 11, 1994, Viacom completed
its purchase of a majority of the outstanding shares of Paramount Common Stock.
In the merger, each share of Paramount Common Stock not owned by Viacom will be
converted into the right to receive (i) 0.93065 of a share of non-voting Viacom
Class B Common Stock, (ii) $17.50 principal amount of 8% exchangeable
subordinated debentures of Viacom, (iii) 0.93065 of a contingent value right,
representing the right to receive (under certain circumstances) cash or
securities depending on market prices of Viacom Class B Common Stock during a
one-, two-or three-year period following the merger, (iv) 0.5 of a three-year
warrant to purchase one share of Viacom Class B Common Stock at $60 per share
and (v) 0.3 of a five-year warrant to purchase one share of Viacom Class B
Common Stock at $70 per share. The proposed merger with Paramount is described
in the accompanying Joint Proxy Statement/Prospectus.
 
   
     The Viacom Board of Directors has determined that the tender offer and the
merger with Paramount, taken together, are fair to, and in the best interests
of, Viacom and its stockholders. Accordingly, the Board approved the Paramount
merger agreement and certain other transactions with Paramount and recommends
that holders of Viacom Class A Common Stock vote to approve the merger with
Paramount and the issuance of shares of Viacom Class B Common Stock and other
Viacom securities in connection with the merger. The Board also recommends that
such holders approve proposals to amend the Restated Certificate of
Incorporation of Viacom to increase the number of shares of Viacom Class A
Common Stock authorized to be issued from 100 million to 200 million, to
increase the number of shares of Viacom Class B Common Stock authorized to be
issued from 150 million to one billion, to increase the number of shares of
preferred stock of Viacom authorized to be issued from 100 million to 200
million and to increase the maximum number of directors constituting the entire
Board of Directors of Viacom from 12 to 20.
    
 
     National Amusements, Inc., which owns approximately 85% of Viacom's voting
stock, has agreed to vote such shares in favor of the transactions contemplated
by the Paramount merger agreement in accordance with National Amusement's
obligations under a Voting Agreement executed with Paramount. Therefore,
approval of such transactions by the stockholders of Viacom is assured.
 
     Immediately following the Special Meeting, the 1994 Annual Meeting of
Viacom Stockholders will be convened for the purposes listed in the accompanying
Notice of Special and Annual Meetings of Stockholders. The proposals to be
considered at the Annual Meeting are described in the accompanying Joint Proxy
Statement/Prospectus.

     Because of the significance to Viacom of the transactions described above,
your participation in these meetings, in person or by proxy, is especially
important.
 
     I hope you will be able to attend the meetings. However, even if you
anticipate attending in person, we urge you to mark, sign and return the
enclosed proxy cards promptly to ensure that your shares of Viacom Class A
Common Stock will be represented at the meetings. If you do attend, you will,
of course, be entitled to vote such shares in person.
 
     Thank you, and I look forward to seeing you at the meetings.
 
                                         Sincerely,
 
                                         SUMNER M. REDSTONE
                                         Chairman of the Board
 
                                       2

PRELIMINARY COPIES
 
                              [VIACOM LETTERHEAD]
                            ------------------------
 
             NOTICE OF SPECIAL AND ANNUAL MEETINGS OF STOCKHOLDERS
                      TO BE HELD ON [              ], 1994
 
                            ------------------------
 
To Viacom Inc. Stockholders:
 
     A Special Meeting (the "Special Meeting") of Stockholders of Viacom Inc.
("Viacom") will be held at [                              ] New York, New York
at [     ] a.m. (local time) on [             ], 1994 to consider the following
proposals:
 
   
          (1) the approval and adoption of the Amended and Restated Agreement
     and Plan of Merger dated as of February 4, 1994, as further amended as of
     May 26, 1994 (the "Paramount Merger Agreement") among Viacom, Viacom Sub
     Inc., a wholly owned subsidiary of Viacom (the "Merger Subsidiary"), and
     Paramount Communications Inc. ("Paramount"), a copy of which is attached as
     Annex I to the accompanying Joint Proxy Statement/Prospectus, providing for
     the merger of the Merger Subsidiary with and into Paramount, pursuant to
     which each share of Common Stock, par value $1.00 per share, of Paramount
     (other than shares held by Viacom, Paramount and their subsidiaries and by
     holders who demand and perfect appraisal rights) will be converted into the
     right to receive (i) 0.93065 of a share of Class B Common Stock, par value
     $.01 per share, of Viacom ("Viacom Class B Common Stock"), (ii) $17.50
     principal amount of 8% exchangeable subordinated debentures due 2006 of
     Viacom, (iii) 0.93065 of a contingent value right of Viacom, representing
     the right to receive (under certain circumstances) cash or securities of
     Viacom depending on market prices of Viacom Class B Common Stock during a
     one-, two-or three-year period following the merger, (iv) 0.5 of a
     three-year warrant to purchase one share of Viacom Class B Common Stock at
     $60 per share, and (v) 0.3 of a five-year warrant to purchase one share of
     Viacom Class B Common Stock at $70 per share, all as more fully described
     in the accompanying Joint Proxy Statement/Prospectus (collectively, the
     "Paramount Merger Consideration"); such approval and adoption includes,
     without limitation, the approval of the issuance of the Paramount Merger
     Consideration;
    

   
          (2) the approval of an amendment to the Restated Certificate of
     Incorporation of Viacom increasing the number of shares of Viacom Class A
     Common Stock authorized to be issued from 100 million to 200 million;
 
          (3) the approval of an amendment to the Restated Certificate of
     Incorporation of Viacom increasing the number of shares of Viacom Class B
     Common Stock authorized to be issued from 150 million to one billion;
 
          (4) the approval of an amendment to the Restated Certificate of
     Incorporation of Viacom increasing the number of shares of preferred stock
     of Viacom authorized to be issued from 100 million to 200 million;
 
          (5) the approval of an amendment to the Restated Certificate of
     Incorporation of Viacom increasing the maximum number of directors
     constituting the Board of Directors of Viacom from 12 to 20; and
    
 
          (6) such other business as may properly be brought before the Special
     Meeting.

     Under applicable law, holders of Viacom Class A Common Stock or Viacom
Class B Common Stock will not have appraisal rights in connection with the
approval and adoption of the Paramount Merger Agreement because, among other
reasons, Viacom is not a constituent corporation in the merger.
 
     The 1994 Annual Meeting of Stockholders of Viacom will be held immediately
following the Special Meeting, at the same location as the Special Meeting, to
consider the following proposals:
 
          (1) the election of 10 directors;
 
          (2) the approval of the Viacom Senior Executive Short-Term Incentive
     Plan;
 
          (3) the approval of the Viacom 1994 Long-Term Management Incentive
     Plan;
 
          (4) the approval of the Viacom Stock Option Plan for Outside
     Directors;
 
          (5) the approval of the appointment of independent auditors for 1994;
     and
 
          (6) such other business as may properly come before the Annual Meeting
     or any adjournment thereof.
 
   
     Pursuant to the By-laws of Viacom, the Board of Directors has fixed the
close of business on May 31, 1994 as the time for determining stockholders of
record entitled to notice of, and to vote at, the Special Meeting and the Annual
Meeting.
    
 
     Each share of Viacom Class A Common Stock will entitle the holder thereof
to one vote on all matters which may properly come before the meetings.
 
   
     WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETINGS IN PERSON, PLEASE
MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING
ENVELOPE. IF YOU PLAN TO ATTEND THE MEETINGS, PLEASE MARK THE APPROPRIATE
SPACE ON EACH OF THE ENCLOSED PROXIES.
    
 
                                          By order of the Board of Directors,
                                          PHILIPPE P. DAUMAN
                                          Secretary
 
   
               , 1994
    
 
                                       2

PRELIMINARY COPIES
                                  VIACOM INC.
                                      AND
                         PARAMOUNT COMMUNICATIONS INC.
                             JOINT PROXY STATEMENT
                            ------------------------
 
                                  VIACOM INC.
                                   PROSPECTUS
   
     This Joint Proxy Statement/Prospectus (this "Proxy Statement/Prospectus")
is being furnished to stockholders of Viacom Inc. ("Viacom") and Paramount
Communications Inc. ("Paramount") in connection with the solicitation of proxies
by the respective Boards of Directors of such corporations for use at their
respective Special Meetings of Stockholders (including any adjournments or
postponements thereof) to be held on [             ], 1994. This Proxy
Statement/Prospectus relates to a business combination transaction pursuant to
which Viacom Sub Inc., a wholly owned subsidiary of Viacom (the "Merger
Subsidiary"), will merge with and into Paramount (the "Paramount Merger"),
pursuant to the Amended and Restated Agreement and Plan of Merger dated February
4, 1994 (the "February 4 Merger Agreement"), as further amended as of May 26,
1994 (the "Paramount Merger Agreement"), among Viacom, the Merger Subsidiary and
Paramount, a copy of which is attached hereto as Annex I.
    
   
     This Proxy Statement/Prospectus is also being furnished to stockholders of
Viacom in connection with the solicitation of proxies by the Viacom Board of
Directors for use at the 1994 Annual Meeting of Stockholders of Viacom (the
"Viacom Annual Meeting"), which is to be held immediately following the Special
Meeting of Stockholders of Viacom referred to above. At the Viacom Annual
Meeting, holders of Class A Common Stock, par value $.01 per share, of Viacom
("Viacom Class A Common Stock") will be asked to consider and vote upon (i) the
election of 10 directors, (ii) the approval of the Viacom Senior Executive
Short-Term Incentive Plan (the "Senior Executive STIP"), (iii) the approval of
the Viacom 1994 Long-Term Management Incentive Plan (the "New LTMIP"), (iv) the
approval of the Viacom Stock Option Plan for Outside Directors (the "Outside
Directors' Plan"), (v) the approval of the appointment of independent auditors
for 1994 and (vi) such other business as may properly come before the Viacom
Annual Meeting or any adjournment thereof.
    
   
     This Proxy Statement/Prospectus also constitutes a prospectus of Viacom
with respect to (i) 56,895,733 shares of the Class B Common Stock, par value
$.01 per share, of Viacom ("Viacom Class B Common Stock" and, together with the
Viacom Class A Common Stock, the "Viacom Common Stock"), (ii) $1,069,870,865
principal amount of 8% exchangeable subordinated debentures due 2006 of Viacom
(the "Viacom Merger Debentures"), (iii) 56,895,733 contingent value rights of
Viacom ( "CVRs"), representing the right to receive (under certain
circumstances) cash or securities of Viacom depending on market prices of Viacom
Class B Common Stock during a one-, two-or three-year period following the
Paramount Merger, (iv) 30,567,739 three-year warrants ("Viacom Three-Year
Warrants") to purchase one share of Viacom Class B Common Stock at $60 per
share, and (v) 18,340,643 five-year warrants ("Viacom Five-Year Warrants" and,
together with Viacom Three-Year Warrants, the "Viacom Warrants") to purchase one
share of Viacom Class B Common Stock at $70 per share, all issuable to the
holders of the Common Stock, par value $1.00 per share, of Paramount ("Paramount
Common Stock") in the Paramount Merger.
    
   
     Viacom has filed an application to list the securities to be issued in the
Paramount Merger on the American Stock Exchange, Inc. (the "AMEX"). The shares
of Viacom Class B Common Stock are traded on the AMEX under the symbol "VIA.B"
and the Viacom Debentures, CVRs, Viacom Three-Year Warrants and Viacom Five-Year
Warrants will be traded under the symbols "VIA.D", "VIA.CV", "VIA.WS.C" and
"VIA.WS.E", respectively.
    
   
     THIS PROXY STATEMENT/PROSPECTUS DOES NOT RELATE TO THE PROPOSED MERGER (THE
"BLOCKBUSTER MERGER" AND, TOGETHER WITH THE PARAMOUNT MERGER, THE "MERGERS")
BETWEEN VIACOM AND BLOCKBUSTER ENTERTAINMENT CORPORATION (TOGETHER WITH ITS
CONSOLIDATED SUBSIDIARIES, "BLOCKBUSTER"). A SEPARATE JOINT PROXY
STATEMENT/PROSPECTUS OF VIACOM AND BLOCKBUSTER RELATING TO THE BLOCKBUSTER
MERGER WILL BE SENT TO STOCKHOLDERS OF VIACOM AND BLOCKBUSTER PRIOR TO ANY
CONSIDERATION OF THE BLOCKBUSTER MERGER.
    
     This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to stockholders of Viacom and Paramount on or about
[             ], 1994.
 
NEITHER THIS TRANSACTION NOR THE SECURITIES COVERED BY THIS PROXY
       STATEMENT/PROSPECTUS HAVE BEEN APPROVED OR DISAPPROVED BY THE
       SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
        COMMISSION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
           ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE
              FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE
                 ACCURACY OR ADEQUACY OF THE INFORMATION
                    CONTAINED IN THIS PROXY
                       STATEMENT/PROSPECTUS. ANY
                    REPRESENTATION TO THE CONTRARY IS
                                   UNLAWFUL.
                            ------------------------
 
     The date of this Proxy Statement/Prospectus is [             ], 1994.

     NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY VIACOM OR PARAMOUNT. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF VIACOM, PARAMOUNT OR BLOCKBUSTER SINCE THE DATE HEREOF OR THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
 
                             AVAILABLE INFORMATION
 
   
     Viacom has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (together with any amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Viacom Class B
Common Stock, the Viacom Merger Debentures, the CVRs, and the Viacom Warrants to
be issued pursuant to the Paramount Merger Agreement. Sumner M. Redstone,
National Amusements, Inc., Viacom and Paramount have filed with the Commission a
Rule 13e-3 Transaction Statement (including any amendments thereto, the
"Schedule 13E-3") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to the Paramount Merger. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto and the Schedule 13E-3 and the
exhibits thereto. Statements contained in this Proxy Statement/Prospectus or in
any document incorporated in this Proxy Statement/Prospectus by reference as to
the contents of any contract or other document referred to herein or therein are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference. Viacom anticipates that it will also file with the
Commission a separate Registration Statement on Form S-4 (together with any
amendments thereto, the "Blockbuster Registration Statement") under the
Securities Act with respect to the securities that will be issued to holders of
Blockbuster Common Stock in connection with the Blockbuster Merger.
    

    
     Viacom, Paramount and Blockbuster are subject to the informational
requirements of the Exchange Act and in accordance therewith file reports, proxy
statements and other information with the Commission. The Schedule 13E-3 and the
reports, proxy statements and other information filed by Viacom and Paramount
and the reports, proxy statements and other information filed by Blockbuster
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should be available at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10007, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, material filed by Viacom and Paramount
can be inspected at the offices of the AMEX, 86 Trinity Place, New York, New
York 10006 and the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street,
New York, New York 10005, respectively. The Common Stock, par value $.10 per
share, of Blockbuster ("Blockbuster Common Stock") is listed and traded on the
NYSE and the London Stock Exchange (the "LSE"), and certain of Blockbuster's
reports, proxy materials and other information may be available for inspection
at the offices of the NYSE, 20 Broad Street, New York, New York 10005 or the
offices of the LSE, Old Broad Street, London, England EC2N 1HP. After
consummation of the Mergers, Paramount and Blockbuster may no longer file
reports, proxy statements or other information with the Commission. Instead,
such information would be provided, to the extent required, in filings made by
Viacom.
    
 
                                      (i)

                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The following documents filed with the Commission by Viacom (File No.
1-9553), Paramount (File No. 1-5404) and Blockbuster (File No. 1-12700) pursuant
to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus:
 
   
          1. Viacom's Annual Report on Form 10-K for the year ended December 31,
     1993 as amended by Form 10-K/A Amendment No. 1 dated May 2, 1994;
    
 
   
          2. Viacom's Quarterly Report on Form 10-Q for the three months ended
     March 31, 1994;
    
 
   
          3. Viacom's Current Reports on Form 8-K dated January 12, 1994, March
     18, 1994 and March 28, 1994;
    
 
   
          4. Paramount's Transition Report on Form 10-K for the six-month period
     ended April 30, 1993, as amended by Form 10-K/A Amendment No. 1 dated
     September 28, 1993, as further amended by Form 10-K/A Amendment No. 2 dated
     September 30, 1993, and as further amended by Form 10-K/A Amendment No. 3
     dated March 21, 1994;
    
 
   
          5. Paramount's Quarterly Reports on Form 10-Q for the three months 
     ended July 31, 1994, the six months ended October 31, 1994 and the nine
     months ended January 31, 1994;
    

   
          6. Paramount's Current Reports on Form 8-K dated June 22, 1993, June
     30, 1993, July 15, 1993, September 15, 1993, January 4, 1994, January 28,
     1994, March 17, 1994 and March 18, 1994;
    
 
   
          7. Blockbuster's Annual Report on Form 10-K for the year ended
     December 31, 1993;
    
 
   
          8. Blockbuster's Quarterly Report on Form 10-Q for the three months
     ended March 31, 1994; and
    
 
   
          9. Blockbuster's Current Reports on Form 8-K dated January 7, 1994
     (filed January 12, 1994), February 15, 1994 (filed February 22, 1994),
     March 10, 1994 (filed March 11, 1994) and May 5, 1994 (filed May 6, 1994).
    
 
     All documents and reports filed by Viacom, Paramount and Blockbuster
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Proxy Statement/Prospectus and prior to the date of the special meetings
of stockholders of Paramount and Viacom and the Viacom Annual Meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and to
be a part hereof from the dates of filing of such documents or reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
 
     This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Such documents (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference) are available, without charge, to any person, including any
beneficial owner, to whom this Proxy Statement/Prospectus is delivered, on
written or oral request, to Viacom International Inc., 1515 Broadway, New York,
New York 10036 (telephone number (212) 258-6000), Attention: John H. Burke. In
order to ensure delivery of the documents prior to the applicable stockholder
meeting, requests should be received by        , 1994.
 
                                      (ii)

                               TABLE OF CONTENTS
 
   

SECTION                                                                                                         PAGE
- -----------------------------------------------------------------------------------------------------------  -----------
                                                                                                          
AVAILABLE INFORMATION......................................................................................           i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................          ii
DEFINITION CROSS-REFERENCE SHEET...........................................................................          vi
SUMMARY....................................................................................................           1
  Business.................................................................................................           1
  The Meetings.............................................................................................           3
  The Paramount Merger.....................................................................................           5
  The Blockbuster Merger...................................................................................          12
  Certain Considerations...................................................................................          15
  Management After the Mergers.............................................................................          15
  Financial Matters After the Mergers......................................................................          15
  Trademarks and Trade Names...............................................................................          16
  Selected Historical Consolidated Financial Data and Unaudited Pro Forma Financial Data, Unaudited Pro
    Forma Combined Financial Data and Other Data...........................................................          17
INTRODUCTION...............................................................................................          30
BUSINESS...................................................................................................          30
THE MEETINGS...............................................................................................          39
  Matters To Be Considered at the Meetings.................................................................          39
  Votes Required...........................................................................................          39
  Voting of Proxies........................................................................................          40
  Revocability of Proxies..................................................................................          40
  Record Date; Stock Entitled To Vote; Quorum..............................................................          40
  Appraisal Rights.........................................................................................          41
  Solicitation of Proxies..................................................................................          41
SPECIAL FACTORS............................................................................................          42
  Background of the Paramount Merger.......................................................................          42
  Purpose and Structure of the Paramount Merger............................................................          50
  Reasons for the Paramount Merger; Recommendations of the Board of Directors; Fairness of the
    Transaction............................................................................................          50
  Opinions of Financial Advisors...........................................................................          53
  Interests of Certain Persons in the Paramount Merger.....................................................          77
  Paramount Voting Agreement...............................................................................          77
  Certain Federal Income Tax Consequences..................................................................          78
  Real Estate Transfer Taxes...............................................................................          85
  Certain Effects of the Paramount Merger; Operations After the Paramount Merger...........................          86
THE PARAMOUNT MERGER.......................................................................................          87
  General..................................................................................................          87
  The Offer................................................................................................          87
  Paramount Merger Consideration...........................................................................          87
  Paramount Effective Time.................................................................................          89
  Stock Exchange Listing...................................................................................          89
  Expenses of the Transaction..............................................................................          90
  Ownership of Viacom Common Stock Immediately After the Paramount Merger and the Mergers..................          90
  Effect on Employee Benefit Stock Plans...................................................................          91
FINANCING OF THE OFFER.....................................................................................          93

    
 
                                     (iii)

   

SECTION                                                                                                         PAGE
- -----------------------------------------------------------------------------------------------------------  -----------
                                                                                                          
SALE OF VIACOM PREFERRED STOCK.............................................................................          95
CERTAIN PROVISIONS OF THE PARAMOUNT MERGER AGREEMENT.......................................................          96
  Procedure for Exchange of Paramount Certificates.........................................................          96
  Certain Representations and Warranties...................................................................          97
  Rights Agreement Amendments..............................................................................          98
  Conduct of Businesses Pending the Paramount Merger.......................................................          99
  Conditions to Consummation of the Paramount Merger.......................................................         100
  Restrictions On Going Private Transactions...............................................................         101
  Blockbuster Merger Agreement.............................................................................         101
  Indemnification; Insurance...............................................................................         101
  Termination..............................................................................................         102
  Expenses.................................................................................................         102
  Amendment and Waiver.....................................................................................         102
EXCHANGE ACT REGISTRATION AND TRADING OF THE PARAMOUNT COMMON STOCK........................................         103
THE BLOCKBUSTER MERGER.....................................................................................         104
  Blockbuster..............................................................................................         104
  Certain Transactions Between Viacom and Blockbuster and With Their Stockholders..........................         105
  Form of the Blockbuster Merger...........................................................................         106
  Blockbuster Merger Consideration.........................................................................         106
  Certain Federal Income Tax Consequences..................................................................         107
  Appraisal Rights with Respect to the Blockbuster Merger..................................................         107
  Treatment of Blockbuster Warrants and Employee Stock Options.............................................         107
CERTAIN CONSIDERATIONS.....................................................................................         109
AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION OF VIACOM..........................................         111
AMENDMENT TO THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF PARAMOUNT.....................................         111
MANAGEMENT BEFORE AND AFTER THE MERGERS....................................................................         111
  Executive Officers and Directors of Viacom...............................................................         111
  Executive Officers and Directors of Paramount............................................................         113
  Management After the Mergers.............................................................................         115
FINANCIAL MATTERS AFTER THE MERGERS........................................................................         115
  Accounting Treatment.....................................................................................         115
  Common Stock Dividend Policy After the Paramount Merger and the Mergers..................................         115
CAPITALIZATION.............................................................................................         116
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS VIACOM-PARAMOUNT/COMBINED COMPANY..............         117
PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
   STATEMENTS..............................................................................................         125
BLOCKBUSTER, SUPER CLUB AND SPELLING ENTERTAINMENT UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
  OPERATIONS...............................................................................................         129
DESCRIPTION OF VIACOM CAPITAL STOCK........................................................................         133
  Viacom Class A Common Stock..............................................................................         133
  Viacom Class B Common Stock..............................................................................         133
  Contingent Value Rights..................................................................................         133
  Viacom Warrants..........................................................................................         137
  Voting and Other Rights of the Viacom Common Stock.......................................................         138
  Viacom Preferred Stock...................................................................................         139
  Series C Preferred Stock.................................................................................         140
DESCRIPTION OF VIACOM DEBENTURES...........................................................................         144

    
 
                                      (iv)

   

SECTION                                                                                                         PAGE
- -----------------------------------------------------------------------------------------------------------  -----------
                                                                                                          
COMPARISON OF STOCKHOLDER RIGHTS...........................................................................         153
  Stockholder Vote Required for Certain Transactions.......................................................         153
  Special Meetings of Stockholders; Stockholder Action by Written Consent..................................         154
  Rights Plans.............................................................................................         155
TRANSACTIONS BY CERTAIN PERSONS IN PARAMOUNT
  COMMON STOCK.............................................................................................         157
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............................................         158
  Viacom Capital Stock.....................................................................................         158
  Paramount Capital Stock..................................................................................         159
OTHER MATTERS..............................................................................................         160
  Regulatory Approvals Required............................................................................         160
  Antitrust Approvals......................................................................................         160
  Stockholder Litigations..................................................................................         162
  Antitrust Litigation.....................................................................................         163
  QVC Litigation...........................................................................................         164
DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL...............................................................         166
VIACOM ANNUAL MEETING MATTERS..............................................................................         169
  Election of Directors....................................................................................         169
  Related Transactions.....................................................................................         172
  Directors' Compensation..................................................................................         173
  Compensation Committee Interlocks and Insider Participation..............................................         174
  Executive Compensation...................................................................................         174
  Compensation Committee Report on Executive Compensation..................................................         174
  Employment Contracts.....................................................................................         185
  Approval of the Viacom Inc. Senior Executive Short-Term Incentive Plan...................................         186
  Approval of the Viacom Inc. 1994 Long-Term Management Incentive Plan.....................................         187
  Approval of the Viacom Inc. Stock Option Plan for Outside Directors......................................         191
  Approval of Appointment of Independent Auditors..........................................................         193
  Other Matters............................................................................................         193
EXPERTS....................................................................................................         195
  Financial Statements.....................................................................................         195
  Legal Opinions...........................................................................................         195
STOCKHOLDER PROPOSALS......................................................................................         196

    
 
   


                                           LIST OF ANNEXES AND EXHIBITS
             
Annex I         Paramount Merger Agreement
Annex II        Paramount Voting Agreement
Annex III       Opinion of Smith Barney Shearson Inc.
Annex IV        Opinion of Lazard Freres & Co.
Annex V         Excerpt from the Delaware General Corporation Law Relating to Dissenters' Rights
Annex VI        Form of Certificate of Merger for the Paramount Merger
Annex VII       Form of Certificate of Amendment to the Restated Certificate of Incorporation of Viacom
Exhibit A       Viacom Inc. Senior Executive Short-Term Incentive Plan
Exhibit B       Viacom Inc. 1994 Long-Term Management Incentive Plan
Exhibit C       Viacom Inc. Stock Option Plan for Outside Directors

    
 
                                      (v)

                        DEFINITION CROSS-REFERENCE SHEET
     Set forth below is a list of certain defined terms used in this Proxy
Statement/Prospectus and the page on which each such term is defined:
   
     TERM                                        PAGE
- ---------------------------------------------  ---------
AMEX                                               Cover
Amended Stock Option Agreement                        46
Bidding Procedures                                    46
Blockbuster                                        Cover
Blockbuster Common Stock                              (i)
Blockbuster Credit Agreement                          94
Blockbuster Effective Time                            12
Blockbuster Merger                                 Cover
Blockbuster Merger Agreement                           2
Blockbuster Merger Consideration                      14
Blockbuster Option Stockholders                      105
Blockbuster Preferred Stock Agreement                 95
Blockbuster Proxy Agreement                          106
Blockbuster Proxy Shares                             106
Blockbuster Proxy Stockholders                       106
Blockbuster Registration Statement                    (i)
Blockbuster Stockholders Stock Option
  Agreement                                          105
Blockbuster Subscription Agreement                     2
Blockbuster Voting Agreement                          12
CVR Agreement                                        133
CVRs                                               Cover
Cityvision                                            24
Class B Value                                         14
combined company                                      12
Commission                                            (i)
Communications Act                                    34
Credit Agreement                                      93
DGCL                                                   5
Discovery Zone                                        14
Exchange Act                                          (i)
FCC                                                   33
February 4 Merger Agreement                        Cover
February 22nd Regulations                             34
First Viacom Offer                                    43
First Viacom Second-Step Merger                       43
Fourth Viacom Offer (see also
  "Offer")                                            48
Fourth Viacom Second-Step Merger                      48
Going Private Transaction                            101
Indenture                                            144
Macmillan                                             20
Macmillan Acquisition                                 20
Major Video                                           24
May Amendment                                          8
Merger Subsidiary                                  Cover
Mergers                                            Cover
MFJ                                                   35
MTVN                                                  30
NAI                                                    4
NYSE                                                  (i)
NYNEX                                                  2
NYNEX Preferred Stock Agreement                       95
New Blockbuster Facility                              93
New LTMIP                                          Cover
Nielsen Report                                        30
November 6 Amendment                                  45
October 24 Merger Agreement                           44
Offer (see also "Fourth Viacom
  Offer")                                              2
Original Merger                                       43
Original Merger Agreement                             42
Original Stock Option Agreement                       42
Original Voting Agreement                             42
Outside Directors                                     77
Outside Directors' Plan                            Cover
Paramount                                          Cover
Paramount Certificates                                96
Paramount Common Stock                             Cover
Paramount Effective Time                               5
Paramount Exchange Agent                              96
Paramount Merger                                   Cover
Paramount Merger Agreement                         Cover
Paramount Merger Consideration                         6
Paramount Option Shares                               91
Paramount Special Meeting                              3
Paramount Stock Options                               91
Paramount Voting Agreement                             4
Parity Stock                                         141
Philips                                              104
Plan                                                  77
Pro Forma Events                                      26
Preferred Stock Investors                             95
Proxy Statement/Prospectus                         Cover
QVC                                                   43
QVC Transaction Consideration                          9
Reconstituted Board of Directors of Paramount          2
Registration Statement                                (i)
Republic Pictures                                     13
Rights                                                49
Rights Agreement                                      44
    
                                      (vi)

   
     TERM                                        PAGE
- ---------------------------------------------  ---------
Rights Agreement Amendments                           98
SNI                                                   30
Schedule 13E-3                                        (i)
Second Viacom Offer                                   45
Second Viacom Second-Step Merger                      45
Securities Act                                        (i)
Senior Executive STIP                              Cover
Series A Preferred Stock                               2
Series B Preferred Stock                               2
Series C Preferred Stock                               6
Significant Stockholder                              101
Sound Warehouse                                       24
Special Meetings                                       3
Spelling Entertainment                                13
Super Club                                            24
telco                                                 34
Third Viacom Offer                                    47
Third Viacom Second-Step Merger                       47
VCR                                                   14
VCR Conversion Date                                   14
VCR Valuation Period                                  14
VSMLP                                                 24
Viacom                                             Cover
Viacom Annual Meeting                              Cover

     TERM                                        PAGE
- ---------------------------------------------  ---------
Viacom Annual Meeting Proposals                        3
Viacom-Blockbuster                                    12
Viacom Charter Amendments                              3
Viacom Class A Common Stock                        Cover
Viacom Class B Common Stock                        Cover
Viacom Common Stock                                Cover
Viacom Debentures                                    144
Viacom Exchange Debentures                             6
Viacom Five-Year Warrant Agreement                   137
Viacom Five-Year Warrants                          Cover
Viacom International                                   1
Viacom Merger Debentures                           Cover
Viacom Preferred Stock                                 2
Viacom Special Meeting                                 3
Viacom Three-Year Warrant Agreement                  137
Viacom Three-Year Warrants                         Cover
Viacom Transaction Consideration                       9
Viacom Warrant Agreements                            137
Viacom Warrants                                    Cover
Virgin                                                13
WJB                                                   24
    
 
                                     (vii)

                                    SUMMARY
 
   
     The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained or
incorporated by reference in this Proxy Statement/Prospectus and the Annexes and
Exhibits hereto. Stockholders are urged to read this Proxy Statement/Prospectus
and the Annexes and Exhibits hereto, and in particular the section herein
entitled "Certain Considerations", in their entirety.
    
 
   
                                            
BUSINESS
  Viacom Inc. ...............................  Viacom's principal asset is its 100% ownership of Viacom
  200 Elm Street                               International ("Viacom International") and its majority ownership
  Dedham, Massachusetts 02026                  of Paramount. Viacom International is a diversified entertainment
  (617) 461-1600                               and communications company with operations in four principal
                                               segments: Networks, Entertainment, Cable Television and
                                               Broadcasting.
                                               Networks. Viacom Networks operates three basic cable services in
                                               the U.S.: MTV: MUSIC TELEVISION, VH-1/VIDEO HITS ONE and
                                               NICKELODEON/NICK AT NITE. Viacom Networks also operates three
                                               premium services: SHOWTIME, THE MOVIE CHANNEL and FLIX. Viacom
                                               also participates as a joint venturer in COMEDY CENTRALTM and ALL
                                               NEWS CHANNELTM. Internationally, MTV Networks operates MTV EUROPE
                                               and MTV LATINO and participates as a joint venturer in NICKELODEON
                                               UK.
                                               Entertainment. Viacom Entertainment is comprised principally of
                                               (i) Viacom Enterprises, which distributes off-network programming
                                               and feature films for television exhibition in various markets
                                               throughout the world and also distributes television programs for
                                               initial U.S. television exhibition on a non-network basis and for
                                               international television exhibition; (ii) Viacom Productions,
                                               which produces television series and other television properties
                                               independently and in association with others primarily for initial
                                               exhibition on U.S. prime time network television; and (iii) Viacom
                                               New Media, which develops, produces, distributes and markets
                                               interactive software for the stand-alone and other multimedia
                                               marketplaces.
                                               Cable Television. Viacom Cable owns and operates cable television
                                               systems servicing approximately 1,111,000 customers as of March
                                               31, 1994 in California, the Pacific Northwest and the Midwest.
                                               Among other projects, Viacom Cable has constructed a fiber optic
                                               cable system in Castro Valley, California to accommodate testing
                                               of new interactive services. In connection with this test, Viacom
                                               has entered into an agreement with AT&T to test and further
                                               develop such services.
                                               Broadcasting. Viacom Broadcasting owns and operates five
                                               network-affiliated television stations and 14 radio stations (two
                                               of which are under contract to be sold) in six of the top eight
                                               radio markets, including duopolies (i.e., ownership of two or more
                                               AM or two or more FM stations in the same


    
 
                                       1

 
   
                                            
                                               market) in each of Los Angeles, Seattle and Washington, D.C.
                                               Strategic Relationships. Viacom has entered into strategic
                                               relationships with Blockbuster and NYNEX Corporation ("NYNEX")
                                               including (i) a $600 million investment by Blockbuster in the
                                               Series A Cumulative Convertible Preferred Stock, par value $.01
                                               per share, of Viacom (the "Series A Preferred Stock"), (ii) a $1.2
                                               billion investment by NYNEX in the Series B Cumulative Convertible
                                               Preferred Stock, par value $.01 per share, of Viacom (the "Series
                                               B Preferred Stock" and, together with the Series A Preferred
                                               Stock, the "Viacom Preferred Stock") and (iii) an agreement with
                                               each of Blockbuster and NYNEX to explore strategic partnership
                                               opportunities.
                                               In addition, on March 10, 1994 Blockbuster purchased approximately
                                               22.7 million shares of Viacom Class B Common Stock for an
                                               aggregate purchase price of approximately $1.25 billion pursuant
                                               to the Subscription Agreement dated as of January 7, 1994 between
                                               Blockbuster and Viacom (the "Blockbuster Subscription Agreement").
                                               Blockbuster Merger. Viacom and Blockbuster are parties to an
                                               Agreement and Plan of Merger (the "Blockbuster Merger Agreement")
                                               dated as of January 7, 1994, as described under "The Blockbuster
                                               Merger."
                                               Ownership of Paramount Common Stock. On March 11, 1994, pursuant
                                               to the terms of its tender offer for shares of Paramount Common
                                               Stock (sometimes hereinafter referred to as the "Offer" and
                                               sometimes as the "Fourth Viacom Offer"), Viacom completed its
                                               purchase of 61,657,432 of such shares, representing a majority of
                                               the shares of Paramount Common Stock outstanding. On March 11,
                                               1994, 10 members of Paramount's Board of Directors resigned and
                                               their positions were filled by 10 designees of Viacom (the
                                               "Reconstituted Board of Directors of Paramount"). Effective March
                                               15, 1994, Paramount's fiscal year was changed such that its fiscal
                                               year (consisting of eleven calendar months) will end March 31,
                                               1994, following which Paramount's fiscal year will be the nine
                                               month period ending December 31, 1994. Thereafter, Paramount's
                                               fiscal year will be the twelve month period ending on December 31
                                               of each year, conforming to that of Viacom.
                                               Recent Developments. On April 4, 1994, Viacom sold its one-third
                                               partnership interest in LIFETIME(R) to its partners The Hearst
                                               Corporation and Capital Cities/ABC Inc. for approximately $317.6
                                               million.
  Paramount Communications Inc. .............  The businesses of Paramount are entertainment and publishing.
  15 Columbus Circle                           Entertainment includes the production, financing and distribution
  New York, New York 10023                     of motion pictures, television programming and prerecorded
  (212) 373-8000                               videocassettes and the operation of motion picture theaters,
                                               independent television stations, regional theme parks and Madison
                                               Square Garden.


    
 
                                       2

 
   
                                            
                                               Publishing includes the publication and distribution of hardcover
                                               and paperback books for the general public, textbooks for
                                               elementary schools, high schools and colleges, and the provision
                                               of information services for business and professions.
THE MEETINGS
  Meetings of Stockholders...................  Viacom. A Special Meeting of Stockholders of Viacom will be held
                                               at [             ], New York, New York on [              ], 1994,
                                               at [        ] a.m., local time (the "Viacom Special Meeting").
                                               The Viacom Annual Meeting will be held immediately following the
                                               Viacom Special Meeting at the same location as the Viacom Special
                                               Meeting.
                                               Paramount. A Special Meeting of Stockholders of Paramount will be
                                               held at [              ] on [              ], 1994, at [        ]
                                               a.m., local time (the "Paramount Special Meeting" and, together
                                               with the Viacom Special Meeting, the "Special Meetings").
  Matters to Be Considered at the Meetings...  Viacom. At the Viacom Special Meeting, holders of Viacom Class A
                                               Common Stock will consider and vote upon (i) a proposal to approve
                                               and adopt the Paramount Merger Agreement, including the issuance
                                               of the Paramount Merger Consideration (as defined below); (ii)
                                               proposals to amend Viacom's Restated Certificate of Incorporation
                                               to (1) increase the number of shares of Viacom Class B Common
                                               Stock authorized to be issued from 150 million to one billion, (2)
                                               increase the number of shares of Viacom Class A Common Stock
                                               authorized to be issued from 100 million to 200 million, (3)
                                               increase the number of shares of preferred stock of Viacom
                                               authorized to be issued from 100 million to 200 million and (4)
                                               increase the maximum number of directors constituting the Board of
                                               Directors of Viacom from 12 to 20 (the matters described in
                                               clauses (1) through (4) above being hereinafter together referred
                                               to as the "Viacom Charter Amendments") and (iii) such other
                                               proposals as may be properly brought before the Viacom Special
                                               Meeting.
                                               At the Viacom Annual Meeting, holders of Viacom Class A Common
                                               Stock will consider and vote upon (i) the election of 10
                                               directors, (ii) the approval of the Senior Executive STIP, (iii)
                                               the approval of the New LTMIP, (iv) the approval of the Outside
                                               Directors' Plan, (v) the approval of the appointment of
                                               independent auditors for 1994 and (vi) such other business as may
                                               properly come before the Viacom Annual Meeting or any adjournment
                                               thereof (the matters described in clauses (i) through (v) above
                                               being hereinafter together referred to as the "Viacom Annual
                                               Meeting Proposals").
                                               Paramount. At the Paramount Special Meeting, holders of Paramount
                                               Common Stock will consider and vote upon (i) a proposal to approve
                                               and adopt the Paramount Merger


    
 
                                       3

 
   
                                            
                                               Agreement and (ii) such other matters as may be properly brought
                                               before the meeting.
  Security Ownership of Management and
    Certain Affiliates.......................  Viacom. As of April 1, 1994, directors and executive officers of
                                               Viacom and their affiliates (other than Sumner M. Redstone,
                                               Chairman of the Board of Viacom) were beneficial owners of less
                                               than 1% of the outstanding shares of Viacom Class A Common Stock
                                               and less than 1% of the outstanding shares of Viacom Class B
                                               Common Stock. National Amusements, Inc. ("NAI"), which is
                                               controlled by Sumner M. Redstone, owned approximately 85% of the
                                               outstanding shares of Viacom Class A Common Stock and 52% of the
                                               outstanding shares of Viacom Class B Common Stock on April 1,
                                               1994.
                                               Paramount. As of March 31, 1994, directors and executive officers
                                               of Paramount were beneficial owners of approximately 2.0% of the
                                               outstanding shares of Paramount Common Stock.
  Votes Required.............................  Viacom. In order to effect the Viacom Charter Amendments, the
                                               Viacom Charter Amendments must be approved by the affirmative vote
                                               of the holders of a majority of the outstanding shares of Viacom
                                               Class A Common Stock. Abstentions and broker non-votes will have
                                               the same effect as votes against the Viacom Charter Amendments.
                                               The affirmative vote of the holders of a majority of the shares of
                                               Viacom Class A Common Stock present in person or represented by
                                               proxy is required for approval of the Paramount Merger Agreement
                                               (including the issuance of the Paramount Merger Consideration) and
                                               approval of the Annual Meeting Proposals. Abstentions will have
                                               the same effect as a vote against approval of the Paramount Merger
                                               Agreement and approval of Annual Meeting Proposals. Broker
                                               non-votes will have no such effect and will not be counted.
                                               Pursuant to a Voting Agreement dated as of January 21, 1994 (the
                                               "Paramount Voting Agreement") between Paramount and NAI, a copy of
                                               which is attached as Annex II, NAI has agreed to vote all of its
                                               shares of Viacom Class A Common Stock in favor of the Paramount
                                               Merger and related transactions. The vote of NAI in accordance
                                               with the Paramount Voting Agreement would be sufficient to approve
                                               the Paramount Merger Agreement and the related transactions
                                               without any action on the part of any other holder of Viacom Class
                                               A Common Stock.
                                               NAI has advised Viacom that it intends to vote all of its shares
                                               of Viacom Class A Common Stock in favor of the Annual Meeting
                                               Proposals and each of the Viacom Charter Amendments; such action
                                               by NAI is sufficient to approve such proposals without any action
                                               on the part of any other holder of Viacom Class A Common Stock.
                                               Paramount. In order to effect the Paramount Merger, the Paramount
                                               Merger Agreement must be approved by the affirmative vote of the
                                               holders of a majority of the


    
 
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                                               outstanding shares of Paramount Common Stock entitled to vote
                                               thereon. Abstentions and broker non-votes will have the same
                                               effect as votes against the Paramount Merger Agreement. As Viacom
                                               has acquired a majority of the outstanding shares of Paramount
                                               Common Stock pursuant to the Offer, Viacom has sufficient voting
                                               power to approve the Paramount Merger Agreement, even if no other
                                               stockholder of Paramount votes in favor of the Paramount Merger
                                               Agreement.
  Record Date................................  Viacom. The record date for the Viacom Special Meeting and the
                                               Viacom Annual Meeting is May 31, 1994. Accordingly, holders of
                                               record of Viacom Common Stock as of such date will be entitled to
                                               notice of, and holders of record of Viacom Class A Common Stock
                                               will be entitled to vote at, the Viacom Special Meeting and the
                                               Viacom Annual Meeting.
                                               Paramount. The record date for the Paramount Special Meeting is
                                               May 31, 1994. Accordingly, holders of record of Paramount Common
                                               Stock as of such date will be entitled to notice of, and to vote
                                               at, the Paramount Special Meeting.
THE PARAMOUNT MERGER
  The Offer..................................  Pursuant to the Offer, on March 11, 1994, Viacom completed its
                                               purchase of a majority of the shares of Paramount Common Stock
                                               outstanding at a price of $107 per share in cash, or an aggregate
                                               cash consideration of approximately $6.6 billion.
  Form of the Paramount Merger...............  The Paramount Merger Agreement provides that the Paramount Merger
                                               will be effected by causing the Merger Subsidiary, a wholly owned
                                               subsidiary of Viacom, to merge with and into Paramount. As a
                                               result, Paramount will be the corporation surviving the merger and
                                               will become a wholly owned subsidiary of Viacom after the
                                               effective time of the Paramount Merger (the "Paramount Effective
                                               Time").
                                               At the Paramount Effective Time, the Restated Certificate of
                                               Incorporation (the "Certificate of Incorporation") and By-Laws of
                                               Paramount will be amended in their entirety to read as the
                                               Certificate of Incorporation and By-Laws of the Merger Subsidiary.
  Conversion of the Paramount Common Stock...  Pursuant to the Paramount Merger Agreement, each share of
                                               Paramount Common Stock not owned by Viacom (other than shares of
                                               Paramount Common Stock held in the treasury of Paramount or owned
                                               by any direct or indirect wholly owned subsidiary of Viacom or of
                                               Paramount and other than shares of Paramount Common Stock held by
                                               stockholders who have demanded and perfected appraisal rights
                                               under the Delaware General Corporation Law ("DGCL")), will be
                                               converted into the right to receive (i) 0.93065 of a share of
                                               Viacom Class B Common Stock, (ii) $17.50 principal amount of the
                                               Viacom Merger Debentures, (iii) 0.93065 of a CVR, (iv) 0.5 of a
                                               Viacom Three-Year Warrant and (v) 0.3 of a Viacom Five-Year


    
 
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                                               Warrant (collectively, the "Paramount Merger Consideration").
  Paramount Merger Consideration.............  Viacom Class B Common Stock has rights, privileges, limitations,
                                               restrictions and qualifications identical to Viacom Class A Common
                                               Stock, except that shares of Viacom Class B Common Stock have no
                                               voting rights other than those required by law.
                                               The Viacom Merger Debentures will bear interest at a rate of 8%
                                               per annum, will have a maturity of 12 years from the Paramount
                                               Effective Time, will be redeemable by Viacom at declining
                                               redemption premiums after the fifth anniversary of the Paramount
                                               Effective Time and will be subordinated in right of payment to all
                                               senior obligations of Viacom.
                                               The Viacom Merger Debentures will be exchangeable, at the option
                                               of Viacom, into the Series C Cumulative Exchangeable Redeemable
                                               Preferred Stock, par value $.01 per share, of Viacom (the "Series
                                               C Preferred Stock"), on or after the earlier of (i) January 1,
                                               1995, but only if the Blockbuster Merger has not been consummated
                                               by such date and (ii) the acquisition by a third party of
                                               beneficial ownership of a majority of the then outstanding voting
                                               securities of Blockbuster, into the Series C Preferred Stock at
                                               the rate of one share of Series C Preferred Stock for each $50 in
                                               principal amount of Viacom Merger Debentures exchanged. At the
                                               time of the exchange of the Series C Preferred Stock for the
                                               Viacom Merger Debentures, all accrued and unpaid interest on the
                                               Viacom Merger Debentures will not be paid and instead the
                                               dividends payable pursuant to subclause (i) of the next sentence
                                               will be payable. The Series C Preferred Stock, if issued, (i)
                                               would accrue dividends from the later of the Paramount Effective
                                               Time and the latest date through which interest has been paid on
                                               the Viacom Merger Debentures at a rate of 5% per annum until the
                                               tenth anniversary of the Paramount Effective Time and 10% per
                                               annum thereafter, (ii) would have a liquidation preference of $50
                                               per share, (iii) would be redeemable at the option of Viacom at
                                               declining redemption premiums after the fifth anniversary of the
                                               Paramount Effective Time and (iv) would be exchangeable at the
                                               option of Viacom into the 5% subordinated debentures due 2014 of
                                               Viacom (the "Viacom Exchange Debentures") after the third
                                               anniversary of the Paramount Effective Time.
                                               Each whole CVR will represent the right, on the first anniversary
                                               of the Paramount Effective Time, to receive, in cash or securities
                                               of Viacom (at the option of Viacom), the amount by which the
                                               average trading value of Viacom Class B Common Stock over a
                                               specified period is less than a minimum price of $48 per share. If
                                               Viacom elects to issue securities in payment for the CVRs, such
                                               securities could take the form of common stock or preferred stock,
                                               options or warrants therefor, other securities convertible into or
                                               exchangeable for common stock or preferred stock, notes,


    
 
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                                               debentures, or any other security of Viacom or any combination of
                                               the foregoing. 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 per
                                               share, and a further one-year extension right which, if exercised
                                               by Viacom, would increase the minimum price to $55 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 (i) $36 per share if Viacom does not
                                               exercise its extension rights, (ii) $37 per share if Viacom
                                               extends the payment and measurement dates of the CVR by one year
                                               or (iii) $38 per share if Viacom exercises its further one-year
                                               extension right.
                                               If the average trading value of a share of Viacom Class B Common
                                               Stock equals or exceeds $48 on the Maturity Date or $51 on the
                                               First Extended Maturity Date (if the Maturity Date is extended by
                                               Viacom to the First Extended Maturity Date) or $55 on the Second
                                               Extended Maturity Date (if the First Extended Maturity Date is
                                               extended by Viacom to the Second Extended Maturity Date), as the
                                               case may be, no amount will be payable with respect to the CVRs.
                                               Certain corporate reorganizations, in which consideration paid to
                                               holders of shares of Viacom Class B Common Stock exceeds minimum
                                               amounts, may also result in no value being payable with respect to
                                               the CVRs. See "Description of Viacom Capital Stock--Contingent
                                               Value Rights."
                                               Each whole Viacom Three-Year Warrant will entitle the holder
                                               thereof to purchase one share of Viacom Class B Common Stock at
                                               any time prior to the third anniversary of the Paramount Effective
                                               Time at a price of $60, payable in cash.
                                               Each whole Viacom Five-Year Warrant will entitle the holder
                                               thereof to purchase one share of Viacom Class B Common Stock at
                                               any time prior to the fifth anniversary of the Paramount Effective
                                               Time at a price of $70, payable in cash or, if issued, in an
                                               equivalent amount of liquidation preference of Series C Preferred
                                               Stock or principal amount of Viacom Exchange Debentures.
                                               No fractional securities will be issued in connection with the
                                               Paramount Merger. In lieu of any such fractional shares, each
                                               holder of Paramount Common Stock will be paid an amount in cash as
                                               described under "Certain Provisions of the Paramount Merger
                                               Agreement--Procedure for Exchange of Paramount Certificates."
                                               On February 1, 1994, the last trading day before the announcement
                                               of the terms of the February 4 Merger Agreement, February 14,
                                               1994, the date on which Lazard Freres reaffirmed its fairness
                                               opinion, and on May [23], 1994, the last trading day before the
                                               printing of this Proxy Statement/Prospectus, the last sales price
                                               of a share of Viacom Class B Common Stock as reported on the AMEX
                                               was $34 1/8, $29 7/8 and $28 3/8, respectively. However, no


    
 
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                                               assurances can be given with respect to the prices at which the
                                               Viacom Class B Common Stock will trade after the date hereof or
                                               after the Paramount Effective Time or the prices at which the
                                               Viacom Merger Debentures (or, if issued, the Series C Preferred
                                               Stock and the Viacom Exchange Debentures), the CVRs and the Viacom
                                               Warrants will trade after the Paramount Effective Time. There has
                                               been no public trading market for the Viacom Merger Debentures,
                                               CVRs or Viacom Warrants and there can be no assurances that an
                                               active market for such securities will develop or continue after
                                               the Paramount Merger.
  Ownership of Viacom Common Stock After the
    Mergers..................................  Following the Paramount Merger. NAI will own approximately 85% of
                                               the voting Viacom Class A Common Stock and approximately 46% of
                                               the aggregate Viacom Common Stock immediately following
                                               consummation of the Paramount Merger. Former stockholders of
                                               Paramount will own approximately 28% of the aggregate Viacom
                                               Common Stock immediately following consummation of the Paramount
                                               Merger. (All percentages of ownership of common stock shown above
                                               in this paragraph are calculated assuming that the Blockbuster
                                               Merger has not yet been consummated.)
                                               Following the Mergers. NAI will own approximately 62% of the
                                               voting Viacom Class A Common Stock and approximately 25% of the
                                               aggregate Viacom Common Stock immediately following consummation
                                               of the Mergers. Former stockholders of Paramount will own
                                               approximately 16% of the aggregate Viacom Common Stock immediately
                                               following consummation of the Mergers. Former stockholders of
                                               Blockbuster will own approximately 27% of the voting Viacom Class
                                               A Common Stock and approximately 46% of the aggregate Viacom
                                               Common Stock immediately following consummation of the Mergers.
                                               (All percentages of ownership of common stock shown above in this
                                               section are calculated based on the number of shares of the
                                               relevant class or classes of stock outstanding as of March 31,
                                               1994.)
  Recommendations of the Boards of
    Directors................................  Viacom. By a unanimous vote (with one director abstaining) of
                                               directors at a special meeting of the Board of Directors of Viacom
                                               held on February 1, 1994, the Viacom Board of Directors determined
                                               that the Offer and the Paramount Merger, taken together, are fair
                                               to, and in the best interests of, Viacom and its stockholders,
                                               approved the Offer and the Paramount Merger and resolved to
                                               recommend that holders of Viacom Class A Common Stock vote FOR
                                               approval of the February 4 Merger Agreement and related
                                               transactions.
                                               On May 26, 1994, the Board of Directors of Viacom approved an
                                               amendment (the "May Amendment") to the February 4 Merger
                                               Agreement. The principal purposes of the May Amendment were to (i)
                                               add Merger Subsidiary as a party, (ii) provide for the merger of
                                               Merger Subsidiary


    
 
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                                               with and into Paramount (rather than Paramount into Viacom) and
                                               (iii) provide for the treatment of Paramount Stock Options in the
                                               Paramount Merger as described under "The Paramount Merger--Effect
                                               on Employee Benefit Stock Plans."
                                               The Board of Directors of Viacom also recommends that the
                                               stockholders of Viacom vote FOR the Viacom Charter Amendments and
                                               Annual Meeting Proposals.
                                               Paramount. On February 4, 1994, the Board of Directors of
                                               Paramount (i) approved the terms of the February 4 Merger
                                               Agreement and authorized its execution and delivery, (ii)
                                               determined that the Offer and the Paramount Merger, taken
                                               together, are fair to, and in the best interests of, the holders
                                               of Paramount Common Stock, (iii) recommended approval and adoption
                                               of the February 4 Merger Agreement by the stockholders of
                                               Paramount and (iv) recommended that holders of Paramount Common
                                               Stock tender their shares pursuant to the Offer.
                                               On May 26, 1994, the Reconstituted Board of Directors of Paramount
                                               approved the May Amendment.
  Opinions of Financial Advisors.............  Viacom. Smith Barney Shearson Inc. ("Smith Barney") has delivered
                                               its opinion to the Board of Directors of Viacom that, as of
                                               February 1, 1994, the financial terms of the Offer and the
                                               Paramount Merger, taken together, are fair, from a financial point
                                               of view, to Viacom and its stockholders whether or not the
                                               Blockbuster Merger is consummated.
                                               Paramount. Lazard Freres & Co. ("Lazard Freres"), financial
                                               advisor to Paramount, has delivered its opinion to the Board of
                                               Directors of Paramount that, as of February 4, 1994, (i) the
                                               consideration to be received by the holders of Paramount Common
                                               Stock in the Offer and the Paramount Merger, taken together (the
                                               "Viacom Transaction Consideration"), was fair to the holders of
                                               Paramount Common Stock from a financial point of view, (ii) the
                                               consideration proposed to be received in the Fourth QVC Offer and
                                               the Fourth QVC Second-Step Merger (each as defined in "Special
                                               Factors--Opinions of Financial Advisors"), taken together (the
                                               "QVC Transaction Consideration"), was fair to the holders of
                                               Paramount Common Stock from a financial point of view and (iii)
                                               the Viacom Transaction Consideration was marginally superior to
                                               the QVC Transaction Consideration from a financial point of view.
                                               On February 14, 1994, Lazard Freres reaffirmed its fairness
                                               opinion.
                                               For information on the assumptions made, matters considered and
                                               limits of the reviews by Smith Barney and Lazard Freres,
                                               stockholders are urged to read in their entirety the opinions of
                                               Smith Barney and Lazard Freres attached as Annexes III and IV,
                                               respectively, to this Proxy Statement/Prospectus.
  Conditions to the Paramount Merger,
    Termination..............................  The obligations of Viacom and Paramount to consummate


    
 
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                                               the Paramount Merger are subject to various conditions, including
                                               obtaining requisite stockholder approvals and approval for listing
                                               on the AMEX, subject to official notice of issuance, of the shares
                                               of Viacom Class B Common Stock, the Viacom Merger Debentures, the
                                               CVRs and the Viacom Warrants to be issued in connection with the
                                               Paramount Merger.
                                               The Paramount Merger Agreement may be terminated at any time prior
                                               to the Paramount Effective Time by mutual consent of Viacom and
                                               Paramount, or by either party if (i) any permanent injunction or
                                               action by any governmental entity preventing consummation of the
                                               Paramount Merger becomes final and nonappealable, (ii) the
                                               Paramount Merger has not been consummated before July 31, 1994;
                                               provided, however, that the Paramount Merger Agreement may be
                                               extended by written notice of either Paramount or Viacom to a date
                                               not later than September 30, 1994 if the Paramount Merger has not
                                               been consummated as a direct result of Viacom or Paramount having
                                               failed by July 31, 1994 to receive all required regulatory
                                               approvals or consents with respect to the Paramount Merger or
                                               (iii) any approval of stockholders of Viacom or Paramount required
                                               for consummation of the Paramount Merger has not been obtained at
                                               the applicable meeting.
                                               Paramount may terminate the Paramount Merger Agreement if Viacom
                                               has breached any representation, warranty, covenant or agreement
                                               in the Paramount Merger Agreement such that the closing conditions
                                               relating to its representations, warranties, covenants and
                                               agreements would be incapable of being satisfied by July 31, 1994.
  Stock Exchange Listing.....................  It is a condition to the Paramount Merger that the shares of
                                               Viacom Class B Common Stock, the Viacom Merger Debentures, the
                                               CVRs and the Viacom Warrants to be issued in the Paramount Merger
                                               as Paramount Merger Consideration be authorized for listing on the
                                               AMEX, subject to official notice of issuance. Viacom has filed an
                                               application to list such securities on the AMEX, subject to
                                               official notice of issuance. The shares of Viacom Class B Common
                                               Stock are traded on the AMEX under the symbol "VIA.B" and the
                                               Viacom Debentures, CVRs, Viacom Three-Year Warrants and Viacom
                                               Five-Year Warrants will be traded under the symbols "VIA.D",
                                               "VIA.CV", "VIA.WS.C" and "VIA.WS.E", respectively.
                                               Viacom has also agreed to use its reasonable best efforts to cause
                                               the Series C Preferred Stock and the Viacom Exchange Debentures to
                                               be approved for listing on the AMEX prior to the issuance thereof.
  Dividends..................................  The Paramount Merger Agreement prohibits the declaration, setting
                                               aside, making or payment of dividends until the Paramount
                                               Effective Time, except for (i) Viacom's regularly scheduled
                                               quarterly dividends to be paid on the Viacom Preferred Stock, (ii)
                                               Paramount's regularly scheduled quarterly dividends, not to exceed
                                               $.20 per share, after consultation with Viacom as to the timing
                                               and


    
 
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                                               advisability of declaring any such dividend and (iii) dividends
                                               paid and declared by subsidiaries of Viacom and Paramount
                                               consistent with past practice.
  Appraisal Rights...........................  In connection with the Paramount Merger, a holder of shares of
                                               Paramount Common Stock who has not voted in favor of the Paramount
                                               Merger will be entitled to demand appraisal rights in respect of
                                               such shares under Section 262 of the DGCL, subject to satisfaction
                                               by such stockholder of the conditions for appraisal rights
                                               established by such Section, which is set forth in full in Annex V
                                               hereto. Holders of Viacom Common Stock will not have appraisal
                                               rights in connection with the Paramount Merger.
  Certain Federal Income Tax Consequences....  No ruling has been (or will be) sought from the Internal Revenue
                                               Service as to the anticipated Federal income tax consequences of
                                               the Paramount Merger. A Paramount stockholder will recognize gain
                                               or loss on all Paramount Common Stock exchanged in the Paramount
                                               Merger equal to the difference between such stockholder's basis in
                                               the Paramount Common Stock so exchanged and the amount of cash
                                               and/or the fair market value on the date of the Paramount Merger
                                               of the Viacom Class B Common Stock, the Viacom Merger Debentures,
                                               the CVRs, the Viacom Three-Year Warrants and the Viacom Five-Year
                                               Warrants received. Neither Paramount nor Viacom will recognize any
                                               gain or loss as a result of the Paramount Merger.
  Financing of the Offer.....................  The total amount of funds required by Viacom to consummate the
                                               Offer and to pay related fees and expenses was approximately $6.7
                                               billion.
                                               The Offer was financed by (i) $1.8 billion from the sale of Viacom
                                               Preferred Stock (see "Sale of Viacom Preferred Stock"), proceeds
                                               of which are reflected as cash and cash equivalents on Viacom's
                                               Balance Sheet as of December 31, 1993, (ii) $1.25 billion from the
                                               sale of Viacom Class B Common Stock to Blockbuster and (iii) $3.7
                                               billion from borrowings under a credit agreement.
                                               During May 1994, Viacom received commitments in the aggregate
                                               amount of $3.0 billion from Bank of America NT&SA, Citibank, N.A.,
                                               Morgan Guaranty Trust Company of New York and The Bank of New
                                               York, managing agents under a proposed long-term $6.8 billion
                                               credit facility, subject to receiving commitments for the
                                               remainder of the facility. On May 5, 1994, Viacom, Viacom
                                               International and Paramount filed a shelf registration statement
                                               with the Commission registering $3.0 billion of debt securities
                                               and preferred stock, guaranteed by Viacom International and, after
                                               the Paramount Effective Time, Paramount. Although Viacom expects
                                               that it will be able to refinance its indebtedness and meet its
                                               obligations without the need to sell any assets, Viacom is continuing
                                               to review opportunities for the sale of non-strategic assets as such
                                               opportunities may arise, including the exploration of the sale of
                                               the operations of Madison Square Garden and certain non-core
                                               publishing assets.


    
 
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  Paramount Voting Agreement.................  Pursuant to the Paramount Voting Agreement, NAI has agreed to vote
                                               its shares of Viacom Class A Common Stock in favor of the
                                               Paramount Merger and related transactions and against any
                                               competing business combination proposal. Approval of the Paramount
                                               Merger Agreement (including the issuance of the Paramount Merger
                                               Consideration) and related transactions by the stockholders of
                                               Viacom is therefore assured.
THE BLOCKBUSTER MERGER
  The Blockbuster Merger
     Agreement...............................  The Blockbuster Merger Agreement provides that, subject to
                                               stockholder approval, at the effective time of the Blockbuster
                                               Merger (the "Blockbuster Effective Time"), Blockbuster will merge
                                               with and into Viacom, with Viacom being the surviving corporation.
                                               Such surviving corporation is hereinafter referred to in this
                                               Proxy Statement/Prospectus as "Viacom-Blockbuster." Viacom-
                                               Blockbuster, together with its consolidated subsidiaries, and
                                               together with Paramount as its wholly owned subsidiary, is
                                               referred to in this Proxy Statement/Prospectus as the "combined
                                               company."
                                               It is anticipated that the Blockbuster Merger will be considered
                                               at separate meetings of the stockholders of Viacom and
                                               Blockbuster. Pursuant to a Voting Agreement dated as of January 7,
                                               1994 (the "Blockbuster Voting Agreement") between Blockbuster and
                                               NAI, NAI has agreed to vote its shares of Viacom Class A Common
                                               Stock in favor of the Blockbuster Merger and against any competing
                                               business combination proposal. Approval of the Blockbuster Merger
                                               by the stockholders of Viacom is therefore assured. In a letter to
                                               stockholders dated May 4, 1994, H. Wayne Huizenga, the Chairman of
                                               the Board of Blockbuster, stated that, although Blockbuster
                                               continues to believe that the combination of Blockbuster with
                                               Viacom and Paramount represents an excellent strategic
                                               opportunity, given Viacom's stock prices as of the date of his
                                               letter, there could be no assurance that the Blockbuster Board
                                               would be able to recommend the Blockbuster Merger Agreement to the
                                               Blockbuster stockholders at the time of any stockholder meeting
                                               called to vote on the Blockbuster Merger. Mr. Huizenga also
                                               stated, among other things, that Blockbuster was unable to say
                                               whether or not the Blockbuster Merger would go forward or whether
                                               or not any special meeting of Blockbuster stockholders would be
                                               called to vote on the Blockbuster Merger. THIS PROXY
                                               STATEMENT/PROSPECTUS IS NOT A SOLICITATION WITH RESPECT TO, NOR A
                                               PROSPECTUS RELATING TO, THE BLOCKBUSTER MERGER.


    
 
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  Blockbuster ...............................  Blockbuster is an international entertainment company with
                                               businesses operating in the home video, music retailing and filmed
                                               entertainment industries. Blockbuster also has investments in
                                               other entertainment related businesses.
                                               Home Video Retailing. Blockbuster owns, operates and franchises
                                               Blockbuster Video videocassette rental and sales stores.
                                               According to a survey published in the December 1993 issue of
                                               Video Store Magazine, Blockbuster's and its franchise owners'
                                               systemwide revenue from the rental and sale of prerecorded
                                               videocassettes is greater than that of any other video specialty
                                               chain in the United States. As of December 31, 1993, there were
                                               3,593 video stores operating in Blockbuster's system, of which
                                               2,698 were Blockbuster-owned and 895 were franchise-owned.
                                               Blockbuster-owned video stores at December 31, 1993 included 775
                                               stores operating under the "Ritz" trade name in the United Kingdom
                                               and Austria and 120 stores operating under the "Video Towne",
                                               "Alfalfa", "Movies at Home" and "Movieland" trade names. The
                                               Blockbuster Video system operates in 49 states and 9 foreign
                                               countries.
                                               Music Retailing. Through music stores operating under various
                                               trade names, including "Blockbuster Music Plus", "Sound
                                               Warehouse", "Music Plus", "Record Bar", "Tracks", "Turtle's" and
                                               "Rhythm and Views", Blockbuster is one of the largest specialty
                                               retailers of prerecorded music in the United States, with 511
                                               stores operating throughout the United States as of December 31,
                                               1993. Blockbuster is also a partner in an international joint
                                               venture with Virgin Retail Group Limited ("Virgin") to develop
                                               music "Megastores" in Continental Europe, Australia and the United
                                               States. The joint venture currently owns interests in and operates
                                               20 "Megastores."
                                               Filmed Entertainment. Blockbuster has interests in the filmed
                                               entertainment industry through investments in Spelling
                                               Entertainment Group Inc. (together with its subsidiaries,
                                               "Spelling Entertainment") and Republic Pictures Corporation
                                               ("Republic Pictures"), each of which operates in a broad range of
                                               filmed entertainment businesses, supported by an extensive library
                                               of television series, feature films, television movies,
                                               mini-series and specials. Blockbuster owns approximately 70.5% of
                                               Spelling Entertainment's outstanding shares of common stock and
                                               approximately 39% of Republic Pictures' outstanding shares of
                                               common stock, including shares subject to certain warrants, as of
                                               December 31, 1993.
                                               Spelling Entertainment and Republic Pictures have entered into an
                                               agreement pursuant to which Spelling Entertainment will acquire
                                               Republic Pictures, which transaction is expected to be consummated
                                               during the second quarter of 1994.
                                               Other Entertainment. As of December 31, 1993, Blockbuster owned
                                               approximately 19.1% of the outstanding


 
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                                               shares of common stock of Discovery Zone, Inc. ("Discovery Zone").
                                               Discovery Zone owns, operates and franchises indoor recreational
                                               facilities for children ("Discovery Zone FunCenters"). Blockbuster
                                               currently operates 34 Discovery Zone facilities as a franchisee of
                                               Discovery Zone and has rights to develop additional Discovery Zone
                                               facilities, directly and in a joint venture with Discovery Zone.
  Conversion of the Blockbuster Common
    Stock....................................  At the Blockbuster Effective Time, each outstanding share of
                                               Blockbuster Common Stock (other than shares of Blockbuster Common
                                               Stock owned by Viacom or any direct or indirect wholly owned
                                               subsidiary of Viacom or of Blockbuster and other than shares of
                                               Blockbuster Common Stock held by stockholders who have demanded
                                               and perfected appraisal rights, if available, under the DGCL) will
                                               be converted into the right to receive (i) 0.08 of a share of
                                               Viacom Class A Common Stock, (ii) 0.60615 of a share of Viacom
                                               Class B Common Stock and (iii) up to an additional 0.13829 of a
                                               share of Viacom Class B Common Stock, with such number of shares
                                               depending on market prices of Viacom Class B Common Stock during
                                               the year following the Blockbuster Effective Time, evidenced by
                                               one variable common right (a "VCR" and, collectively, the
                                               "Blockbuster Merger Consideration").
  Variable Common Rights.....................  The VCRs represent the right to receive shares of Viacom Class B
                                               Common Stock under certain circumstances on the first anniversary
                                               of the Blockbuster Effective Time (the "VCR Conversion Date"). The
                                               number of shares of Viacom Class B Common Stock into which the
                                               VCRs will convert will generally be based upon the value of Viacom
                                               Class B Common Stock (the "Class B Value") determined during the
                                               90 trading day period (the "VCR Valuation Period") immediately
                                               preceding the VCR Conversion Date. The Class B Value will be equal
                                               to the average closing price of a share of Viacom Class B Common
                                               Stock during the 30 consecutive trading days in the VCR Valuation
                                               Period which yields the highest average closing price of a share
                                               of Viacom Class B Common Stock. In the event that the Class B
                                               Value is more than $40 per share but less than $48 per share, each
                                               VCR will convert into 0.05929 of a share of Viacom Class B Common
                                               Stock on the VCR Conversion Date. If the Class B Value is $40 per
                                               share or below, the number of shares of Viacom Class B Common
                                               Stock into which each VCR will convert on the VCR Conversion Date
                                               will increase ratably to the maximum of 0.13829 of a share of
                                               Viacom Class B Common Stock, which will occur if the Class B Value
                                               is $36 per share or below. If the Class B Value is $48 per share
                                               or above, the number of shares of Viacom Class B Common Stock into
                                               which the VCR will convert on the VCR Conversion Date will
                                               decrease ratably to zero, which will occur if the Class B Value is
                                               $52 per share or above.


 
                                       14

 
   
                                            
                                               Notwithstanding the calculation in the above paragraph, the number
                                               of shares of Viacom Class B Common Stock into which each VCR will
                                               convert on the VCR Conversion Date will not exceed 0.05929 of a
                                               share of Viacom Class B Common Stock if the average of the closing
                                               prices for a share of Viacom Class B Common Stock exceeds $40 per
                                               share during any 30 consecutive trading day period following the
                                               Blockbuster Effective Time and prior to the VCR Conversion Date.
                                               In the event that during any such period such average price
                                               exceeds $52 per share, the VCRs will terminate and have no value
                                               and holders thereof will have no further rights with respect to
                                               the VCRs. The dollar amounts are subject to certain downward
                                               adjustments in connection with substantial declines in the
                                               Standard & Poor's 400 Index. Certain days are not included as
                                               "trading days" if the number of shares of Viacom Class B Common
                                               Stock traded on such days is below specified levels.
CERTAIN CONSIDERATIONS                         Stockholders of Viacom and Paramount should carefully evaluate the
                                               matters set forth under "Certain Considerations." Factors to be
                                               considered, among other things, include the potential for
                                               fluctuations in the value of the Paramount Merger Consideration.
                                               Paramount stockholders should also consider that, following
                                               consummation of the Paramount Merger and the Mergers, voting
                                               control of the combined company will be held by a single
                                               stockholder (although certain provisions of the Paramount Merger
                                               Agreement and the Blockbuster Merger Agreement restrict the
                                               ability of certain large stockholders from engaging in going
                                               private transactions). Paramount stockholders should also consider
                                               the total indebtedness of Viacom after the Paramount Merger and
                                               the Mergers, including the maturity of such debt. Finally,
                                               stockholders should consider the changing competitive environment
                                               of the entertainment and telecommunications industries and the
                                               consummation of the Blockbuster Merger.
MANAGEMENT AFTER THE MERGERS
  Executive Officers.........................  Sumner M. Redstone, currently the Chairman of the Board of Viacom
                                               and Paramount, will remain Chairman of the Board of the combined
                                               company. Assuming consummation of the Blockbuster Merger, H. Wayne
                                               Huizenga, currently the Chairman of the Board and Chief Executive
                                               Officer of Blockbuster and a Director of Viacom and Paramount,
                                               will become Vice Chairman of the combined company. Frank J.
                                               Biondi, Jr., currently President, Chief Executive Officer and
                                               Director of Viacom and Paramount, will remain President, Chief
                                               Executive Officer of the combined company.
  Directors..................................  At the Viacom Annual Meeting, holders of Viacom Class A Common
                                               Stock will consider and vote upon the election of 10 directors.
FINANCIAL MATTERS AFTER THE MERGERS
  Accounting Treatment.......................  The Mergers will be accounted for by Viacom under the "purchase"
                                               method of accounting in accordance with generally accepted
                                               accounting principles. Therefore, the


    
 
                                       15

 
                                            
                                               aggregate consideration paid by Viacom in connection with the
                                               Mergers will be allocated to both Paramount's and Blockbuster's
                                               assets and liabilities based on their fair values, with any excess
                                               being treated as goodwill.
                                               The assets and liabilities and results of operations of Paramount
                                               (adjusted for minority ownership interests from the date of the
                                               purchase of the shares of Paramount Common Stock pursuant to the
                                               Offer through the Paramount Effective Time) were consolidated into
                                               the assets and liabilities and results of operations of Viacom as
                                               of March 1, 1994. The assets and liabilities and results of
                                               operations of Blockbuster will be consolidated into the assets and
                                               liabilities and results of operations of Viacom subsequent to the
                                               Blockbuster Effective Time.
  Common Stock Dividend Policy After the
     Paramount Merger
     and the Mergers.........................  It is the current intention of the Viacom Board not to pay cash
                                               dividends on the Viacom Class A Common Stock or Viacom Class B
                                               Common Stock following the Paramount Merger and the Mergers.
                                               Future dividends will be determined by Viacom's Board of Directors
                                               in light of Viacom's alternative opportunities for investment and
                                               the earnings and financial condition of Viacom and its
                                               subsidiaries, among other factors.
TRADEMARKS AND TRADE NAMES                     Viacom. The following trademarks, trade names and service marks
                                               are used in this Proxy Statement/Prospectus and are proprietary to
                                               Viacom:
                                               Viacom Logo(R); MTV: MUSIC TELEVISION(R); NICKELODEON(R); NICK AT
                                               NITE(R); MTV EUROPETM; MTV LATINOTM; NICKELODEON UKTM; VH-1/VIDEO
                                               HITS ONE(R); SHOWTIME(R); THE MOVIE CHANNELTM; FLIXTM; SHOWTIME
                                               SATELLITE NETWORKSTM; SETTM PAY PER VIEW; THE REN & STIMPY SHOWTM;
                                               RUGRATS(R); NICKTOONS(R); DOUGTM; BEAVIS & BUTT-HEADTM; ROCKO'S
                                               MODERN LIFETM; DRACULA UNLEASHEDTM; and UNPLUGGEDTM.
                                               Paramount. The trademarks and trade names used in this Proxy
                                               Statement/Prospectus in connection with Paramount and its
                                               businesses are proprietary or licensed to Paramount or its
                                               subsidiaries.
                                               Blockbuster. The following trademarks and trade names are used in
                                               this Proxy Statement/Prospectus and are proprietary to
                                               Blockbuster:
                                               BLOCKBUSTER(R); BLOCKBUSTER VIDEO(R); BLOCKBUSTER ENTERTAINMENTTM;
                                               MUSIC PLUS(R) and design; SOUND WAREHOUSE(R); TRACKS
                                               MUSIC-VIDEO(R) and design; TURTLE'S(R); VIDEOTOWNE
                                               ENTERTAINMENT(R) and design; RECORD BAR(R); and RHYTHM AND
                                               VIEWS(R) and design.


 
                                       16

               SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
                                     VIACOM
                (IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
 
   
     The following table sets forth certain selected historical consolidated
financial data of Viacom and has been derived from and should be read in
conjunction with the audited consolidated financial statements of Viacom,
including the notes thereto, and the unaudited interim consolidated financial
statements of Viacom, including the notes thereto, which are incorporated by
reference to this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference." The notes to the audited consolidated financial
statements and unaudited interim consolidated financial statements disclose,
among other matters, certain business acquisitions and dispositions, certain
other transactions, and accounting changes. Unaudited interim data for the three
months ended March 31, 1994 and 1993 reflect, in the opinion of management of
Viacom, all adjustments (consisting only of normal recurring adjustments, except
for the merger-related charges associated with the Paramount Merger) considered
necessary for a fair presentation of such data. Results of operations for the
three months ended March 31, 1994 are not necessarily indicative of results
which may be expected for any other interim or annual period.
    
 
   

                                          THREE MONTHS ENDED
                                              MARCH 31,                       YEAR ENDED DECEMBER 31,
                                         --------------------  -----------------------------------------------------
                                          1994(a)     1993      1993(b)    1992(c)     1991       1990      1989(d)
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
RESULTS OF OPERATIONS DATA:
                                                                                      
Revenues...............................  $   878.4  $   470.7  $ 2,004.9  $ 1,864.7  $ 1,711.6  $ 1,599.6  $ 1,436.2
Earnings (loss) from operations........     (300.2)      90.2      385.0      347.9      312.2      223.8      144.7
Earnings (loss) before income taxes....     (352.3)     102.1      301.8      155.6        8.3      (70.4)     144.9
Net earnings (loss) before
  extraordinary items and cumulative
  effect of change in accounting
principle..............................     (431.6)      70.6      169.5       66.1      (46.6)     (89.8)     131.1
Net earnings (loss)....................     (431.6)      81.0      171.0       49.0      (49.7)     (89.8)     131.1
Net earnings (loss) attributable to
  common stock.........................  $  (454.1) $    81.0  $   158.2  $    49.0  $   (49.7) $   (89.8) $   113.6
Net earnings (loss) per common share:
  Net earnings (loss) before
    extraordinary items and cumulative
    effect of change in accounting
    principle..........................  $   (3.59) $     .59  $    1.30  $     .55  $    (.41) $    (.84) $    1.06
  Extraordinary items..................         --         --       (.07)      (.14)      (.03)        --         --
  Cumulative effect of change in
    accounting principle...............         --        .08        .08         --         --         --         --
  Net earnings (loss)..................  $   (3.59) $     .67  $    1.31  $     .41  $    (.44) $    (.84) $    1.06
RATIO OF EARNINGS TO FIXED CHARGES.....         (e)      3.2x       2.8x       1.8x       1.0x         (e)      1.4x

    
 
   

                                                AT MARCH
                                                   31,                         AT DECEMBER 31,
                                               -----------  -----------------------------------------------------
                                                  1994        1993       1992       1991       1990       1989
                                               -----------  ---------  ---------  ---------  ---------  ---------
BALANCE SHEET DATA:
                                                                                      
Total assets.................................   $16,336.2   $ 6,416.9  $ 4,317.1  $ 4,188.4  $ 4,027.9  $ 3,753.0
Total debt, including current
  maturities.................................     7,267.1     2,433.3    2,397.0    2,321.0    2,537.3    2,283.2
Stockholders' equity.........................     3,510.4     2,718.1      756.5      699.5      366.2      455.9

Book value per common share..................   $   11.92   $    7.60  $    6.28  $    5.82  $    3.43  $    4.27

    
 
    See notes to selected historical consolidated financial data of Viacom.
 
                                       17

       NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF VIACOM
 
   
        
      (a)  Results of operations for the first quarter of 1994 reflect the results of Paramount for the month of March
           and merger-related charges of $332.1 million which principally relate to adjustments of programming assets
           based upon new management strategies and additional programming sources resulting from the merger with
           Paramount.
      (b)  During the first quarter of 1993, Viacom adopted Statement of Financial Accounting Standards No. 109,
           "Accounting for Income Taxes," on a prospective basis and recognized a cumulative benefit from a change in
           accounting principle of $10.3 million.
           As part of the settlement of the Time Warner antitrust lawsuit, Viacom sold the stock of Viacom Cablevision
           of Wisconsin, Inc. to Warner Communications Inc., effective January 1, 1993, resulting in a pre-tax gain of
           approximately $55 million.
           During the third quarter of 1993, Viacom International recognized an after-tax extraordinary loss from the
           early extinguishment of debt of $8.9 million (net of a tax benefit of approximately $6.1 million) related to
           the redemption, on July 15, 1993, of the $298 million principal amount outstanding of the 11.8% Senior
           Subordinated Notes.
      (c)  Results of operations for the year ended December 31, 1992 reflect a reserve for litigation of approximately
           $33 million related to a summary judgment against Viacom in a dispute with CBS Inc. Additionally, a gain of
           approximately $35 million related to the Time Warner antitrust lawsuit was recognized in the third quarter of
           1992.
           Results of operations for the year ended December 31, 1992 also include an after-tax extraordinary loss of
           $17.1 million (net of a tax benefit of $11.3 million) from the early extinguishment of the 11.5% Senior
           Subordinated Reset Notes and 14.75% Senior Subordinated Discount Debentures.
      (d)  The results of operations for the year ended December 31, 1989 reflect a pre-tax gain of $313.1 million on
           the sale of the Long Island and Cleveland cable systems.
      (e)  Earnings of Viacom were insufficient to cover fixed charges. Additional earnings required to cover fixed
           charges of Viacom were $343.6 million and $66.2 million for the three months ended March 31, 1994 and the
           year ended December 31, 1990, respectively.
Certain Acquisitions and Dispositions
           In April 1994, Viacom sold its one-third partnership interest in LIFETIME for approximately $317.6 million.
           Pursuant to the Offer, on March 11, 1994, Viacom completed its purchase of 61,657,432 shares of Paramount
           Common Stock, constituting a majority of the shares outstanding, at a price of $107 per share in cash.
           On August 30, 1991, Viacom increased its interest in MTV Europe to 100% through the purchase of the 50.01%
           interest held by an affiliate of Mirror Group Newspapers. As consideration for the purchase, which was valued
           at approximately $65 million, Viacom issued 2,210,884 shares of Viacom Class B Common Stock.
           During 1990, Viacom purchased five radio stations for approximately $121.3 million in the aggregate. These
           stations included: KOFY-FM (now KSRY-FM), San Francisco, California; KLRS-FM (now KSRI-FM), Santa Cruz/San
           Jose, California; KJOI-FM (now KYSR-FM), Los Angeles, California; and KHOW-AM and KSYY-FM (now KHOW-FM),
           Denver, Colorado (which were exchanged for KNDD-FM, Seattle, Washington during 1992).
Cash Dividends
           Viacom has not declared cash dividends with respect to the Viacom Common Stock for any of the periods
           presented.
Viacom Class B Common Stock
           Pursuant to the Blockbuster Subscription Agreement, on March 10, 1994, Viacom sold 22,727,273 shares of
           Viacom Class B Common Stock to Blockbuster at a price of $55.00 per share.
Cancellation of Series A Preferred Stock and Viacom Class B Common Stock Owned by Blockbuster
           If the Blockbuster Merger is consummated, the Series A Preferred Stock and Viacom Class B Common Stock then
           owned by Blockbuster will be cancelled and will no longer be outstanding.


    
 
                                       18

   
               SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
                                   PARAMOUNT
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
    
 
     The following table sets forth certain selected historical consolidated
financial data of Paramount and has been derived from and should be read in
conjunction with the audited consolidated financial statements of Paramount,
including the notes thereto, and the unaudited interim consolidated financial
statements of Paramount, including the notes thereto, which are incorporated by
reference in this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference." The notes to the audited consolidated financial
statements and unaudited interim consolidated financial statements disclose,
among other matters, certain business acquisitions and dispositions, certain
other transactions and accounting changes. Unaudited interim data for the nine
months ended January 31, 1994 and 1993 and for the six months ended April 30,
1992 reflect, in the opinion of management of Paramount, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of such data. Results of operations for the six months ended
April 30, 1993 and the interim nine months ended January 31, 1994 are not
necessarily indicative of results which may be expected for any other interim or
annual period. In 1993, Paramount changed its fiscal year end from October 31 to
April 30. In 1994, Paramount caused its fiscal period to be the eleven month
period ended March 31, 1994. Subsequently, Paramount's fiscal year end will be
December 31 to conform with that of Viacom.


                                         NINE MONTHS ENDED      SIX MONTHS ENDED
                                            JANUARY 31,            APRIL 30,                  YEAR ENDED OCTOBER 31,
                                        --------------------  --------------------  ------------------------------------------
                                         1994(a)     1993      1993(b)     1992       1992      1991(c)     1990      1989(d)
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
RESULTS OF OPERATIONS DATA:
                                                                                             
Revenues..............................  $ 3,757.0  $ 3,210.1  $ 1,898.1  $ 1,998.5  $ 4,264.9  $ 3,895.4  $ 3,869.0  $ 3,391.6
Earnings (loss) from operations.......      298.0      320.1      (10.1)      77.8      396.1      157.8      304.2      192.9
Earnings (loss) from continuing
  operations before income taxes......      277.8      327.4      (16.8)      68.7      397.3      179.7      381.0       19.1
Net earnings (loss) from continuing
  operations before extraordinary item
  and cumulative effect of changes in
accounting principles.................      180.6      225.6       (9.1)      48.7      274.2      127.6      264.4       17.3
Net earnings (loss)...................  $   180.6  $   149.9  $   (76.0) $    48.7  $   265.4  $   127.6  $   264.4  $ 1,414.7
Net earnings (loss) per share:
  Net earnings (loss) from continuing
    operations before extraordinary
    item and cumulative effect of
    changes in accounting
    principles........................  $    1.50  $    1.90  $    (.08) $     .41  $    2.31  $    1.08  $    2.20  $     .14
  Discontinued operations.............         --         --         --         --         --         --         --      12.12
  Extraordinary item..................         --       (.07)        --         --       (.08)        --         --         --
  Cumulative effect of changes in
    accounting principles.............         --       (.57)      (.57)        --         --         --         --       (.48)
  Net earnings (loss).................  $    1.50  $    1.26  $    (.65) $     .41  $    2.23  $    1.08  $    2.20  $   11.78
   
Cash dividends declared per common
  share...............................  $     .60  $     .60  $     .40  $    .375  $    .775  $     .70  $     .70  $     .70
    

 
                                          1988
                                        ---------
                                     
RESULTS OF OPERATIONS DATA:
Revenues..............................  $ 3,055.9
Earnings (loss) from operations.......      375.5
Earnings (loss) from continuing
  operations before income taxes......      268.7
Net earnings (loss) from continuing
  operations before extraordinary item
  and cumulative effect of changes in
accounting principles.................      152.8
Net earnings (loss)...................  $   384.7
Net earnings (loss) per share:
  Net earnings (loss) from continuing
    operations before extraordinary
    item and cumulative effect of
    changes in accounting
    principles........................  $    1.27
  Discontinued operations.............       1.94
  Extraordinary item..................         --
  Cumulative effect of changes in
accounting principles.................         --
  Net earnings (loss).................  $    3.21
Cash dividends declared per common
share.................................  $    .675
 
 

 

                              AT JANUARY    AT APRIL
                                 31,           30,                         AT OCTOBER 31,
                             ------------  -----------  -----------------------------------------------------
                                 1994         1993        1992       1991       1990       1989       1988
                             ------------  -----------  ---------  ---------  ---------  ---------  ---------
BALANCE SHEET DATA:
                                                                               
Total assets...............   $  7,416.8    $ 6,874.8   $ 7,057.0  $ 6,654.7  $ 6,541.0  $ 7,060.0  $ 5,378.1
Long-term debt, including
  current maturities.......      1,010.7        817.1       822.1      718.2      733.8      744.4    1,507.5
Stockholders' equity.......      4,186.8      3,902.1     4,015.5    3,854.8    3,783.8    3,666.8    2,266.2
Book value per common
  share....................   $    34.35    $   33.01   $   34.19  $   32.73  $   32.24  $   30.56  $   19.50

 
   See notes to selected historical consolidated financial data of Paramount.
 
                                       19

     NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PARAMOUNT
 
     Effective May 1, 1993, Paramount adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes," by restating its
prior period financial statements beginning November 1, 1988. The cumulative
effect of this accounting change was a charge of $56.5 million, which is
included in net earnings for the year ended October 31, 1989.
 
        
      (a)  Reflects operating losses at USA Networks, Paramount's 50%-owned cable networks, due largely to a $78 million
           pre-tax charge, the majority of which was recorded in December 1993, to adjust the carrying value of certain
           broadcast rights to net realizable value because of the under performance of certain series programming of
           which Paramount recorded its share.


 
        
      (b)  Includes an after-tax charge of $26.0 million, related to the write-down to net realizable value of certain
           Publishing operations real estate, expected to be sold, and a provision for relocation costs in connection
           with Paramount's planned move of its Publishing operations and Paramount's corporate headquarters.


 
        
           Effective November 1, 1992, Paramount adopted SFAS No. 106, "Employers' Accounting for Postretirement
           Benefits Other Than Pensions." Paramount has elected to record the cumulative effect of the accounting change
           as a charge against income as of November 1, 1992, resulting in a one-time charge of $66.9 million, net of
           income taxes of $34.5 million.


 
        
      (c)  Net earnings for the year ended October 31, 1991 includes a $35.4 million after-tax charge, the majority of
           which was related to a provision for write-downs of certain motion picture and television development
           commitments and entertainment reorganization costs.


 
        
      (d)  During the year ended October 31, 1989, Paramount completed a major reevaluation of its Publishing business
           and, as a result, recorded an $84.3 million after-tax charge, a portion of which was related to the
           write-down of obsolete inventory and the carrying value of pre-publication costs to reflect a more
           conservative estimate of the life cycle of various publishing products. Further, this charge included
           provisions related to certain royalty advances, book returns and capitalized database costs, as well as a
           charge related to a restructuring plan to modify certain publishing systems and other adjustments to the
           carrying value of certain assets and liabilities on Publishing's balance sheet.


 
        
           Includes an after-tax gain of approximately $1.2 billion on the sale of Associates First Capital Corporation,
           Paramount's former consumer/commercial finance business. In addition, Paramount recorded an after-tax charge
           of $30.8 million to provide for additional costs applicable to certain operations previously discontinued.
           Earnings for fiscal 1989 also include an after-tax charge of $48.3 million for costs incurred in Paramount's
           bid to acquire Time Incorporated. In addition, in fiscal 1989 Paramount sold Prentice Hall Information
           Services and Prentice Hall Information Network, two units of its Publishing operations, resulting in an
           after-tax gain of $7.4 million.



   
        
           In December 1988, Paramount completed the sale of a 50% interest in its domestic motion picture theater
           operations for approximately half of Paramount's purchase price. The results for fiscal 1989 reflect the gain
           on this sale of $5.6 million, net of income taxes of $3.3 million.


    
 
Certain Acquisitions and Dispositions
 
        
           In February 1994, Paramount acquired Macmillan Publishing Company and certain other publishing assets of
           Macmillan, Inc. (together, "Macmillan") for approximately $553 million (the "Macmillan Acquisition").


 
        
           In September 1993, Paramount purchased television station WKBD-TV in Detroit from Cox Enterprises Inc. for
           approximately $105 million.


 
        
           In May 1993, Paramount purchased the remaining 80% it did not own of Canada's Wonderland, Inc., later renamed
           Paramount Canada's Wonderland, Inc., a Canadian theme park, for approximately $52 million.


 
                                       20

 
        
           In August and October 1992, Paramount acquired Kings Entertainment Company and Kings Island Company,
           respectively, later renamed Paramount Parks, which own and operate regional theme parks, for a total of
           approximately $400 million.


 
        
           In November 1991, Paramount acquired Macmillan Computer Publishing, later renamed Prentice Hall Computer
           Publishing, a leading publisher of personal computer and related technical books, for approximately $158
           million.


 
        
           In March 1990, Paramount acquired Computer Curriculum Corporation, which develops and markets computer-based
           learning systems, for approximately $75 million.


 
        
           In December 1989, Paramount acquired a preferred and common stock equity interest in Paramount Stations Group
           ("PSG"), formerly TVX Broadcast Group Inc., which owns and operates independent television stations, for
           approximately $110 million. Paramount also acquired PSG debt obligations for approximately $34 million. In
           April 1990, Paramount was granted the right by the FCC to assume control of PSG. Paramount did so by
           converting preferred stock into common stock and, consequently, began reflecting its operations on a
           consolidated basis. In July and October 1990, Paramount purchased additional shares of PSG stock for $3.5
           million and $4.3 million, respectively. In February 1991, Paramount, through a merger, acquired the remaining
           outstanding shares of PSG for approximately $62 million.


 
        
           In October 1989, Paramount sold Associates First Capital Corporation, its former consumer/commercial finance
           business, for $3.35 billion. Paramount realized net proceeds of approximately $2.6 billion and reported a
           gain of approximately $1.2 billion, net of income taxes of $763.4 million. In addition, in fiscal 1989
           Paramount sold Prentice Hall Information Services and Prentice Hall Information Network, two units of its
           Publishing operations, resulting in an after-tax gain of $7.4 million.


 
                                       21

   
            SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF PARAMOUNT
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
    
 
   
     The following selected unaudited pro forma financial data of Paramount for
the two months ended February 28, 1994 and the twelve months ended January 31,
1994 gives effect to, on a purchase accounting basis, (i) the Macmillan
Acquisition, (ii) the acquisition of television station WKBD-TV in Detroit
("WKBD") in September 1993 and (iii) the acquisition of the remaining 80%
interest in Paramount Canada's Wonderland ("PCW") theme park in May 1993. The
unaudited pro forma results of operations data for the two months ended February
28, 1994 was prepared based upon historical consolidated statements of
operations of Paramount and Macmillan for the two months ended February 28,
1994. The unaudited pro forma Paramount results of operations data for the
twelve months ended January 31, 1994 was prepared based upon the historical
consolidated statements of operations of (i) Paramount for the nine months ended
January 31, 1994 and three months ended April 30, 1993 combined, (ii) Macmillan
for the twelve months ended December 31, 1993, (iii) WKBD for the seven months
ended August 31, 1993 and (iv) PCW for the three months ended April 30, 1993.
Financial information of WKBD and PCW subsequent to their acquisition is
included in the Paramount historical financial information. The unaudited pro
forma results of operations data present the transactions as if they had
occurred at the beginning of each period presented. The selected unaudited pro
forma financial data was derived from, and should be read in conjunction with,
the Unaudited Pro Forma Condensed Consolidated Financial Statements and the
notes thereto appearing elsewhere in this Proxy Statement/Prospectus. See
"Paramount, Macmillan and Other Businesses Acquired Unaudited Pro Forma
Condensed Consolidated Financial Statements." The unaudited pro forma data are
not necessarily indicative of the results of operations that would have occurred
if the aforementioned transactions had been in effect at the beginning of each
of the periods presented nor are they necessarily indicative of future operating
results.
    
 
   

                                                                               TWO MONTHS         TWELVE MONTHS
                                                                           ENDED FEBRUARY 28,   ENDED JANUARY 31,
                                                                                  1994                 1994
                                                                           -------------------  ------------------
                                                                                          
Revenues.................................................................       $   717.2          $    5,024.0
Earnings (loss) from operations..........................................           (54.3)                299.5
Net earnings (loss) before cumulative effect of change in accounting
principle................................................................           (55.7)                153.1
Net earnings (loss) per common share before cumulative effect of change
in accounting principle..................................................       $    (.46)         $       1.28

    
 
                                       22

   
               SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
                                  BLOCKBUSTER
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
    
 
   
     The following table sets forth certain selected historical consolidated
financial data of Blockbuster and has been derived from and should be read in
conjunction with the audited consolidated financial statements of Blockbuster,
including the notes thereto, and the unaudited interim consolidated financial
statements of Blockbuster, including the notes thereto, which are incorporated
by reference in this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference." The notes to the audited consolidated financial
statements and unaudited interim consolidated financial statements disclose,
among other matters, certain business acquisitions and certain other
transactions. Unaudited interim data for the three months ended March 31, 1994
and 1993 reflect, in the opinion of management of Blockbuster, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of such data. Results of operations for the three months ended
March 31, 1994 are not necessarily indicative of results which may be expected
for any other interim or annual period.
    
 
   

                                                    THREE MONTHS ENDED
                                                         MARCH 31                       YEAR ENDED DECEMBER 31,
                                                   --------------------  ------------------------------------------------------
                                                     1994       1993      1993(a)     1992(b)    1991(c)     1990      1989(d)
                                                   ---------  ---------  ----------  ---------  ---------  ---------  ---------
RESULTS OF OPERATIONS DATA:
                                                                                                 
Revenues.........................................  $   696.5  $   433.4  $  2,227.0  $ 1,315.8  $   961.6  $   699.7  $   421.9
Earnings from operations.........................      119.6       76.9       423.0      242.9      161.1      122.1       76.9
Earnings before income taxes.....................      115.2       70.4       389.8      231.2      141.0      103.7       67.5
Net earnings.....................................  $    72.6  $    44.7  $    243.6  $   148.3  $    89.1  $    65.9  $    42.7
Net earnings per share--assuming full
dilution(e)......................................  $     .29  $     .22  $     1.10  $     .76  $     .51  $     .39  $     .26
Cash dividends declared per common share.........  $    .025  $     .02  $     .095  $     .06         --         --         --

    
 
   

                                                                                     AT DECEMBER 31,
                                                                  ------------------------------------------------------
                                                   AT MARCH 31,
                                                       1994          1993       1992       1991       1990       1989
                                                  --------------  ----------  ---------  ---------  ---------  ---------
BALANCE SHEET DATA:
                                                                                             
Total assets....................................    $  4,466.7    $  3,521.0  $ 1,540.7  $   893.3  $   702.1  $   468.9
Total debt, including current maturities........       1,997.0         612.6      373.5      214.2      253.9      178.0
Stockholders' equity............................       1,854.3       2,123.4      787.3      480.5      319.4      210.2
Book value per common share.....................    $     7.45    $     8.58  $    3.98  $    2.84  $    2.04  $    1.39

    
 
   
  SEE NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BLOCKBUSTER.
    
 
                                       23

          NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
                                  BLOCKBUSTER
 
   
     Financial data for all periods presented is restated to reflect
Blockbuster's merger with WJB Video Limited Partnership and certain of its
affiliates ("WJB") in August 1993, which was accounted for under the pooling of
interests method of accounting.
    
 
        
      (a)  In April 1993, Blockbuster acquired a majority of Spelling Entertainment's outstanding common stock. In
           November 1993, Blockbuster acquired all of the outstanding capital stock of Super Club Retail Entertainment
           Corporation and subsidiaries ("Super Club"). These transactions were accounted for under the purchase method
           of accounting and, accordingly, the results of operations of Spelling Entertainment and Super Club subsequent
           to their acquisition are included in Blockbuster's consolidated financial statements. At December 31, 1993,
           Blockbuster owned 45,658,640 shares of common stock of Spelling Entertainment, representing approximately
           70.5% of its outstanding shares.
      (b)  In February 1992, Blockbuster acquired substantially all of the outstanding ordinary shares of Cityvision plc
           ("Cityvision"). The transaction was accounted for under the purchase method of accounting and, accordingly,
           the results of operations of Cityvision subsequent to that time are included in Blockbuster's consolidated
           financial statements. In November 1992, Blockbuster acquired all of the outstanding common stock of Sound
           Warehouse, Inc. (together with its subsidiary, "Sound Warehouse") and Show Industries, Inc. ("Show
           Industries"). These transactions were accounted for under the purchase method of accounting and, accordingly,
           the results of operations of Sound Warehouse and Show Industries subsequent to that time are included in
           Blockbuster's consolidated financial statements.
      (c)  Effective April 1991, Blockbuster acquired all of the outstanding shares of capital stock of Erol's Inc.
           ("Erol's"). The transaction was accounted for under the purchase method of accounting and, accordingly, the
           results of operations of Erol's subsequent to that time are included in Blockbuster's consolidated financial
           statements.
      (d)  In January 1989, a wholly owned subsidiary of Blockbuster was merged into Major Video Corp. ("Major Video").
           In August 1989, Blockbuster acquired Video Superstore Master Limited Partnership ("VSMLP"), then its largest
           franchise owner. These transactions were accounted for under the pooling of interests method of accounting.
           Accordingly, financial data has been restated as if Blockbuster, Major Video and VSMLP had operated as one
           entity since inception.
      (e)  Net earnings per share has been adjusted to reflect two-for-one splits of Blockbuster Common Stock in May
           1989 and March 1991.


 
                                       24

   
                 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF
                                  BLOCKBUSTER
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
    
 
   
     The following selected unaudited pro forma financial data of Blockbuster
for the three months ended March 31, 1994 gives effect to the incremental
interest expense incurred on the additional $1.25 billion of borrowings. The
following selected unaudited pro forma financial data of Blockbuster for the
three months ended March 31, 1994 gives effect to the $1.25 billion investment
in Viacom and related interest expense incurred on borrowing used to finance
such investment. The following selected financial data of Blockbuster for the 
year ended December 31, 1993, gives effect to (i) the acquisition of Super Club,
(ii) the acquisition of a majority of the outstanding common stock of Spelling
Entertainment, (iii) a $600 and a $1.25 billion investment in Viacom and related
borrowings to finance such investments and (iv) the sale of 14.6 million shares
of Blockbuster common stock. All of the aforementioned acquisitions were 
accounted for under the purchase method of accounting. The unaudited pro forma 
statement of operations data for the three months ended March 31, 1994 was 
prepared based upon the statement of operations of Blockbuster for the three 
months ended March 31, 1994. The unaudited pro forma statement of operations 
data for the year ended December 31, 1993 wasprepared based upon the results 
of operations of Blockbuster for the year ended December 31, 1993, Super Club 
for the eleven months ended November 20, 1993 and Spelling Entertainment for 
the three months ended March 31, 1993. Financial information subsequent to the 
acquisition of the majority of the outstanding common stock of Spelling 
Entertainment and the acquisition of Super Club is included in the 
Blockbuster historical financial information. The unaudited pro forma 
statements of operations data present the pro forma transactions listed
above as if they had occurred at the beginning of the period presented. The
balance sheet of Blockbuster at March 31, 1994 reflects the pro forma
transactions listed above. The selected unaudited pro forma financial data was
derived from, and should be read in conjunction with, the Unaudited Pro Forma
Condensed Consolidated Statements of Operations of Blockbuster and the notes
thereto appearing elsewhere in this Proxy Statement/Prospectus. See
"Blockbuster, Super Club and Spelling Entertainment Unaudited Pro Forma
Condensed Consolidated Statement of Operations." The unaudited pro forma
financial data is not necessarily indicative of the results of operations that
would have occurred if the aforementioned transactions had been in effect at the
beginning of the periods indicated nor are they necessarily indicative of future
operating results or financial position.
    
 
   

                                                                                           THREE
                                                                                          MONTHS
                                                                                           ENDED      YEAR ENDED
                                                                                         MARCH 31,   DECEMBER 31,
                                                                                           1994          1993
                                                                                        -----------  -------------
RESULTS OF OPERATIONS DATA:
                                                                                               
Revenues..............................................................................   $   696.5    $   2,595.2
Earnings from operations..............................................................       119.6          435.6
Net earnings from continuing operations...............................................        66.0          225.2
Net earnings per share from continuing operations--assuming full dilution.............   $    0.26    $      0.92

    
 
                                       25

   
            SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF
                     VIACOM-PARAMOUNT/THE COMBINED COMPANY
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
    
 
   
     The following selected unaudited pro forma combined financial data gives
effect to (i) the Paramount Merger, which will be accounted for under the
purchase method of accounting, (ii) the elimination of all of the outstanding
Paramount Common Stock, (iii) the issuance of the Paramount Merger
Consideration, (iv) the acquisitions by Paramount described under "Selected
Unaudited Pro Forma Financial Data of Paramount," (v) the Blockbuster Merger,
which will be accounted for under the purchase method of accounting, (vi) the
elimination of all of the outstanding Blockbuster Common Stock, (vii) the
elimination of all the Series A Preferred Stock and Viacom Class B Common Stock
held by Blockbuster, (viii) the issuance of the Blockbuster Merger
Consideration, (ix) the pro forma events of Blockbuster described under
"Selected Unaudited Pro Forma Financial Data of Blockbuster" and (x) the sale of
Viacom's one-third partnership interest in LIFETIME (items (i) through (iv)
being, collectively, the "Paramount Pro Forma Events," items (v) through (ix)
being, collectively, the "Blockbuster Pro Forma Events," and, together with the
Paramount Pro Forma Events and item (x), the "Pro Forma Events"), as if such
events occurred at the beginning of the period presented for results of
operations data. The unaudited pro forma statement of operations data for the
three months ended March 31, 1994 was prepared based upon the statements of
operations of Viacom and Blockbuster for the three months ended March 31, 1994
and of Paramount for the two months ended February 28, 1994. The unaudited pro
forma statements of operations data for the year ended December 31, 1993 was
prepared based upon Viacom and Blockbuster for the year ended December 31, 1993
and of Paramount for the nine months ended January 31, 1994 combined with the
three months ended April 30, 1993. The following selected unaudited pro forma
combined balance sheet data was prepared based upon the balance sheet data of
Viacom and Blockbuster at March 31, 1994. Financial information for Paramount
subsequent to the Offer is included in Viacom's historical information. Such
unaudited pro forma balance sheet data give effect to the Pro Forma Events as if
they occurred on March 31, 1994. The selected unaudited pro forma combined
financial data was derived from, and should be read in conjunction with, the
unaudited pro forma combined condensed financial statements and the notes
thereto appearing elsewhere in this Proxy Statement/Prospectus. See "Unaudited
Pro Forma Combined Condensed Financial Statements." The unaudited pro forma data
are not necessarily indicative of the combined results of operations or
financial position that would have occurred if the Paramount Pro Forma Events or
the Pro Forma Events, as the case may be, had been in effect at the beginning of
the period or on the date indicated nor are they necessarily indicative of
future operating results or financial position of Viacom-Paramount or the
combined company.
    
 
   

                                                VIACOM-PARAMOUNT*                   COMBINED COMPANY**
                                       -----------------------------------  -----------------------------------
                                        THREE MONTHS                         THREE MONTHS
                                         ENDED OR AT        YEAR ENDED        ENDED OR AT        YEAR ENDED
                                       MARCH 31, 1994   DECEMBER 31, 1993   MARCH 31, 1994   DECEMBER 31, 1993
                                       ---------------  ------------------  ---------------
RESULTS OF OPERATIONS DATA:
                                                                                 
Revenues.............................    $   1,595.6        $  7,028.9        $   2,292.1        $  9,624.1
Earnings (loss) from operations......          (48.5)            535.5               47.2             875.7
Earnings (loss) before extraordinary
  item, cumulative effect of change
  in accounting principle and
  preferred stock dividend
  requirements.......................         (337.7)              4.5             (300.4)            116.0
Earnings (loss) attributable to
  common stock before extraordinary
  item and cumulative effect of
  change in accounting principle.....         (360.2)            (85.5)            (315.4)             56.0
Primary earnings per common share
  before extraordinary item and
  cumulative effect of change in
  accounting principle...............    $     (1.79)       $    (0.43)       $     (0.89)       $     0.14
BALANCE SHEET DATA:
Total assets.........................    $  17,888.1                NA        $  24,667.7                NA
Long-term debt, including current
maturities...........................        8,132.0                NA           10,129.0                NA
Stockholders' equity:
  Preferred..........................        1,800.0                NA            1,200.0                NA
  Common.............................        3,708.3                NA            8,475.5                NA
Book value per common share..........    $     18.50                NA        $     22.83                NA

    
 
- ---------------
 * Gives effect only to the Paramount Pro Forma Events and item (x) described
   above.
   
** Gives effect to all of the Pro Forma Events. See "Certain
   Considerations--Consummation of the Blockbuster Merger."
    
 
                                       26

                            COMPARATIVE STOCK PRICES
 
     Viacom Common Stock is listed on the AMEX. Paramount Common Stock and
Blockbuster Common Stock are listed on the NYSE. The following tables set forth,
for the periods indicated, the high and low sales prices per share of Viacom
Common Stock, Paramount Common Stock and Blockbuster Common Stock as reported on
the AMEX or the NYSE Composite Transaction Tape, as the case may be.
 
   

                             VIACOM                VIACOM
                            CLASS A               CLASS B             BLOCKBUSTER                                  PARAMOUNT
                        COMMON STOCK(a)       COMMON STOCK(a)         COMMON STOCK                              COMMON STOCK(b)
                      --------------------  --------------------  --------------------                        --------------------
     QUARTER ENDED      HIGH        LOW       HIGH        LOW       HIGH        LOW        QUARTER ENDED        HIGH        LOW
- --------------------  ---------  ---------  ---------  ---------  ---------  ---------  --------------------  ---------  ---------
                                                                                              
1992                                                                                    1992
  March 31..........  $  37 1/4  $  32 1/8  $  36 1/2  $  31 1/4  $      15  $  11 7/8  January 31..........  $  43 3/8  $  36 1/2
  June 30...........     38 1/2     32 3/8     36 7/8     30 1/2     15 7/8     12 1/8  April 30............     48 3/4     42 1/2
  September 30......     34 7/8     30 7/8     32 7/8         29     13 3/4     11 1/8  July 31.............         48     43 1/4
  December 31.......         44     28 1/8     41 7/8         27     19 1/2     12 3/8  October 31..........     46 3/8     41 1/4
1993                                                                                    1993
  March 31..........  $  46 1/2  $  37 1/2  $  44 1/8  $  35 1/4  $  20 1/8  $  15 3/4  January 31..........  $  47 3/8  $  41 7/8
  June 30...........     52 5/8     37 1/8     49 1/2         36     21 7/8     16 3/4  April 30............     52 5/8     45 5/8
  September 30......     67 1/2     50 1/2     61 1/4     45 3/4     30 1/8     21 3/8  July 31.............     56 5/8     49 1/2
  December 31.......     66 1/2         47     60 1/2     40 3/8     34 1/4     24 1/2  October 31..........         81         51
1994                                                                                    1994
  March 31..........  $  49 3/4  $  28 1/8  $      45  $  23 3/4  $  31 3/8  $  23 3/8  January 31..........  $  83 1/2  $  73 1/2
  through                                                                                 April 30..........     80 1/4     36 5/8
  May 24, 1994......  $  30 5/8  $  24 1/2  $  29 1/4  $  21 3/4  $  27 1/2  $  23 7/8  through
                                                                                          May 24, 1994......  $  43 3/8  $  37 3/8

    
 
- ---------------
(a) For the first through fourth quarters of 1992, NAI purchased 40,500, 19,000,
    35,900 and 76,200 shares of Viacom Class A Common Stock, and 35,700, 32,100,
    44,100 and 139,900 shares of Viacom Class B Common Stock, in each case
    respectively. For the first through third quarters of 1993, NAI purchased
    55,300, 121,800 and 113,100 shares of Viacom Class A Common Stock, and
    47,600, 135,100 and 413,600 shares of Viacom Class B Common Stock, in each
    case respectively. Since the end of the third quarter of 1993, NAI has not
    purchased any shares of Viacom Common Stock. All purchases were made
    pursuant to a publicly reported buying program initiated by NAI in August
    1987 which has been designed to comply with applicable securities
    regulations.
(b) Paramount purchased 1,119,500 shares of Paramount Common Stock in the open
    market between August 13 and October 30, 1992 at an average price of $42.86
    and with a range of $42 1/8 to $43 3/4 per share, and it also purchased
    479,600 shares of Paramount Common Stock in the open market between November
    2, 1992 and January 21, 1993 at an average price of $42.34 and with range of
    $41 7/8 to $43 per share. None of Viacom, NAI or Sumner M. Redstone have
    made any purchases of Paramount Common Stock in the last two fiscal years of
    Paramount.
 
   
     On February 1, 1994, the last trading day before the announcement of the
terms of the February 4 Merger Agreement, the last sales prices of Viacom Class
A Common Stock and Viacom Class B Common Stock and Paramount Common Stock, as
reported on the AMEX and the NYSE Composite Transactions Tape, were $39 per
share, $34 1/8 per share and $79 7/8 per share, respectively.
    
 
     On January 6, 1994, the last trading day before the announcement of the
Blockbuster Merger Agreement, the last sales prices of Viacom Class A Common
Stock and Viacom Class B Common Stock, Blockbuster Common Stock and Paramount
Common Stock, as reported on the AMEX and the NYSE Composite Transactions Tape,
were $47 per share, $42 3/4 per share, $29 7/8 per share and $78 1/2 per share,
respectively.
 
     On [              ], 1994, the last trading day before the printing of this
Proxy Statement/Prospectus, the last sales prices of Viacom Class A Common Stock
and Viacom Class B Common Stock, Paramount Common Stock and Blockbuster Common
Stock, as reported on the AMEX and the NYSE Composite Transactions Tape, were
$[     ] per share, $[     ] per share, $[     ] per share and $[     ] per
share, respectively.
 
     The market prices of Viacom Class A Common Stock, Viacom Class B Common
Stock, Paramount Common Stock and Blockbuster Common Stock are subject to
fluctuation. As a result, Viacom and Paramount stockholders are urged to obtain
current market quotations.
 
     On March 30, 1994, there were approximately 6,912 holders of record of
Viacom Class A Common Stock and approximately 6,861 holders of record of Viacom
Class B Common Stock. On March 31, 1994, there were approximately 24,687 holders
of record of Paramount Common Stock. On February 3, 1994, there were
approximately 12,747 holders of record of Blockbuster Common Stock.
 
                                       27

                           COMPARATIVE PER SHARE DATA
 
   
     Set forth below are historical earnings (loss) before extraordinary item
and cumulative effect of change in accounting principle, cash dividends declared
and book value per common share data of Viacom, Paramount and Blockbuster,
individually, and the respective unaudited pro forma per common share data for
Viacom/Paramount and the combined company. Pro forma equivalent per share
information of Paramount and Blockbuster is also presented below.
Viacom-Paramount and the combined company unaudited pro forma data gives effect
to the Paramount Pro Forma Events and Pro Forma Events, respectively, as if such
events occurred for balance sheet purposes at the balance sheet dates and for
statement of operations purposes at the beginning of the period presented.
Unaudited pro forma data for Viacom-Paramount and the combined company was
prepared based upon (i) Viacom's and Blockbuster's statement of operations and
balance sheet data for the three months ended or at March 31, 1994 and the
respective statement of operations data for the twelve months ended December 31,
1993, and (ii) Paramount's statements of operations data for the two months
ended February 28, 1994, and for the nine months ended or at January 31, 1994
and the three months ended April 30, 1993. The information set forth below
should be read in conjunction with the respective audited and unaudited
consolidated financial statements of Viacom, Paramount and Blockbuster,
including the notes thereto, and the Combined Company Unaudited Pro Forma
Combined Condensed Financial Statements appearing elsewhere in this Proxy
Statement/Prospectus.
    
 

                                                                          NINE MONTHS ENDED    THREE MONTHS ENDED
                                                                          OR AT JANUARY 31,      OR AT APRIL 30,
                                                                                1994                  1993
                                                                        ---------------------  -------------------
PARAMOUNT--HISTORICAL:
                                                                                         
Earnings (loss) per share before extraordinary item and cumulative
effect of change in accounting principle..............................        $    1.50             $   (0.08)
Cash dividends declared per common share..............................        $    0.60             $    0.20
Book value per common share...........................................        $   34.35             $   33.01

 
   

                                                                                 THREE MONTHS
                                                                                  ENDED OR AT    YEAR ENDED OR AT
                                                                                MARCH 31, 1994   DECEMBER 31, 1993
                                                                                ---------------  -----------------
BLOCKBUSTER--HISTORICAL:
                                                                                           
Earnings per share before extraordinary item and cumulative effect of change
in accounting principle--assuming full dilution...............................     $    0.29         $    1.10
Cash dividends declared per common share......................................          0.25         $   0.095
Book value per common share...................................................     $    7.45         $    8.58
VIACOM--HISTORICAL:
Earnings (loss) per share before extraordinary item and cumulative effect of
change in accounting principle................................................     $   (3.59)        $    1.30
Cash dividends declared per common share(a)...................................        --                --
Book value per common share...................................................     $   11.92         $    7.60

    
 
   

                                                          VIACOM-PARAMOUNT                  COMBINED COMPANY(f)
                                                 ----------------------------------  ----------------------------------
                                                  THREE MONTHS                        THREE MONTHS
                                                   ENDED OR AT    YEAR ENDED OR AT     ENDED OR AT    YEAR ENDED OR AT
                                                 MARCH 31, 1994   DECEMBER 31, 1993  MARCH 31, 1994   DECEMBER 31, 1993
                                                 ---------------  -----------------  ---------------  -----------------
PRO FORMA:
                                                                                          
Earnings (loss) per share attributable to
  common stock before extraordinary item and
  cumulative effect of change in accounting
principle......................................     $   (1.79)        $   (0.43)        $    (.89)        $    0.14
Cash dividends declared per common share(a)....        --                --                --                --
Book value per common share....................     $   18.50                NA         $   22.83                NA
PARAMOUNT--PRO FORMA EQUIVALENT PER SHARE
  INFORMATION:
Earnings (loss) per share attributable to
  common stock before extraordinary item and
  cumulative effect of change in accounting
principle(b)...................................     $   (0.83)        $   (0.20)        $   (0.41)        $    0.06
Cash dividends declared per common share.......        --                --                --                --
Book value per common share(b).................     $    8.57         $      NA                                  NA
Equivalent market value(c).....................     $   79.96         $   79.96         $   79.96         $   79.96
                                                                                          (Footnotes on following page)

    
 
                                       28

 
   

                                                          VIACOM-PARAMOUNT                  COMBINED COMPANY(f)
                                                 ----------------------------------  ----------------------------------
                                                  THREE MONTHS                        THREE MONTHS
                                                   ENDED OR AT    YEAR ENDED OR AT     ENDED OR AT    YEAR ENDED OR AT
                                                 MARCH 31, 1994   DECEMBER 31, 1993  MARCH 31, 1994   DECEMBER 31, 1993
                                                 ---------------  -----------------  ---------------  -----------------
BLOCKBUSTER--PRO FORMA EQUIVALENT PER SHARE
  INFORMATION:
                                                                                          
Earnings (loss) per share attributable to common
  stock before extraordinary item and cumulative
  effect of change in accounting
  principle(d).................................            NA                NA         $   (0.61)        $    0.09
Cash dividends declared per common share.......            NA                NA            --                --
Book value per common share(d).................            NA                NA         $   15.65                NA
Equivalent market value(e).....................            NA                NA         $   22.20         $   22.20

    
 
- ---------------
 
   
        
      (a)  Cash dividends declared per common share does not reflect Viacom Preferred Stock dividends paid.
      (b)  Paramount pro forma per share amounts were calculated assuming the issuance of 0.93065 of a share of Viacom
           Class B Common Stock in exchange for each of the remaining 61.1 million shares of Paramount Common Stock
           outstanding (other than shares held in the treasury of Paramount or owned by Viacom or any direct or indirect
           wholly owned subsidiary of Paramount or Viacom) after consummation of the Offer. This results in stockholders
           of Paramount receiving approximately 0.46 of a share in exchange for each share of Paramount Common Stock.
           This factor of 0.46 is applied to the pro forma earnings and book value per common share amounts.
      (c)  Paramount equivalent market value was calculated by (i) applying the approximate 0.46 exchange ratio to the
           closing price of the Viacom Class B Common Stock reported on the AMEX Composite Transaction Tape on March 4,
           1994 and (ii) adding to such amount (x) cash paid pursuant to the Offer and (y) $17.50 principal amount of
           Viacom Merger Debentures, 0.93065 of a CVR, 0.5 of a Viacom Three-Year Warrant and 0.3 of a Viacom Five-Year
           Warrant to be issued by Viacom as part of the Paramount Merger Consideration for each share remaining of
           Paramount Common Stock outstanding at the Paramount Effective Time. The consideration described in the
           foregoing clauses (x) and (y) represents $67.68 of the equivalent market value. The estimated trading values
           as of March 31, 1994 ascribed for illustrative purposes only, and based upon various assumptions and
           projections, per CVR, Viacom Three-Year Warrant and Viacom Five-Year Warrant by Viacom's financial advisor,
           were approximately $10, $1 and $2, respectively.
      (d)  Blockbuster pro forma per share amounts were calculated assuming the issuance of 0.08 of a share of Viacom
           Class A Common Stock and 0.60615 of a share of Viacom Class B Common Stock in exchange for each of the
           approximately 249.1 million shares of Blockbuster Common Stock outstanding as of March 31, 1994 (other than
           shares owned by Viacom or any direct or indirect wholly owned subsidiary of Blockbuster or Viacom) in
           accordance with the Blockbuster Merger Agreement. This exchange results in stockholders of Blockbuster
           receiving approximately 0.69 of a share of the combined company in exchange for each share of Blockbuster
           Common Stock. This factor of 0.69 is applied to the combined company pro forma earnings and book value per
           common share amounts.
      (e)  Blockbuster equivalent market value was calculated by (i) applying the 0.08 and 0.60615 share exchange ratios
           to the closing prices of the Viacom Class A Common Stock and Viacom Class B Common Stock, respectively and
           (ii) applying the assumed exchange ratio of 0.13829 of a share of Viacom Class B Common Stock per VCR to the
           closing price of Viacom Class B Common Stock. The VCR market value described in the foregoing clause (ii)
           represents $3.66 of the equivalent market value. Closing prices of Viacom Class A Common Stock and Viacom
           Class B Common Stock were based on closing sales prices on the AMEX Composite Transactions Tape on March 31,
           1994.
      (f)  See "Certain Considerations--Consummation of the Blockbuster Merger."


    
 
                                       29

                                  INTRODUCTION
 
     This Proxy Statement/Prospectus is being furnished to stockholders of
Viacom in connection with the solicitation of proxies by the Board of Directors
of Viacom for use at the Viacom Special Meeting to be held at
[                               ], New York, New York, on [              ],
1994, at [     ] a.m., New York time, and at any adjournment or postponement
thereof.
 
     This Proxy Statement/Prospectus is also being furnished to stockholders of
Viacom in connection with the solicitation of proxies by the Board of Directors
of Viacom for use at the Viacom Annual Meeting which is to be held immediately
following the Viacom Special Meeting at the same location.
 
     This Proxy Statement/Prospectus is also being furnished to stockholders of
Paramount in connection with the solicitation of proxies by the Board of
Directors of Paramount for use at the Paramount Special Meeting to be held at
             , on [              ], 1994, at [     ] a.m., local time, and at
any adjournment or postponement thereof.

   
     This Proxy Statement/Prospectus also constitutes a prospectus of Viacom
with respect to 56,895,733 shares of Viacom Class B Common Stock, $1,069,870,865
principal amount of Viacom Merger Debentures, 56,895,733 CVRs, 30,567,739 Viacom
Three-Year Warrants and 18,340,643 Viacom Five-Year Warrants, issuable to the
holders of Paramount Common Stock in the Paramount Merger.
    
 
   
     THIS PROXY STATEMENT/PROSPECTUS IS NOT A SOLICITATION OF PROXIES WITH
RESPECT TO, NOR A PROSPECTUS RELATING TO, THE BLOCKBUSTER MERGER. A SEPARATE
JOINT PROXY STATEMENT/PROSPECTUS OF VIACOM AND BLOCKBUSTER RELATING TO THE
BLOCKBUSTER MERGER WILL BE SENT TO STOCKHOLDERS OF VIACOM AND BLOCKBUSTER PRIOR
TO ANY CONSIDERATION OF THE BLOCKBUSTER MERGER.
    
 
                                    BUSINESS
 
     Viacom's principal assets are its 100% ownership of Viacom International
and its majority ownership of Paramount. Viacom International is a diversified
entertainment and communications company with operations in four principal
segments: Networks, Entertainment, Cable Television and Broadcasting. The
principal executive offices of Viacom are located at 200 Elm Street, Dedham,
Massachusetts 02026.
 
     VIACOM NETWORKS. Viacom Networks is comprised of MTV Networks ("MTVN") and
Showtime Networks Inc. ("SNI").
 
     MTV Networks. MTVN operates three 24-hours-a-day, advertiser-supported,
     ------------
basic cable services in the U.S.: MTV: MUSIC TELEVISION, VH-1/VIDEO HITS ONE,
and NICKELODEON/NICK AT NITE. Internationally, MTVN operates MTV EUROPE and MTV
LATINO. In September 1993, MTVN launched Nickelodeon UK, a joint venture with a
subsidiary of British Sky Broadcasting Limited. MTVN has licensing arrangements
covering the distribution of regionally specific program services called MTV:
MUSIC TELEVISION in Asia, Japan and Brazil.
 
     MTV. At December 31, 1993, MTV was licensed to approximately 52.2 million
domestic cable subscribers (based on subscriber counts provided by each cable
system). According to the December 1993 sample reports issued by the A.C.
Nielsen Company (the "Nielsen Report"), MTV reached approximately 59 million
subscriber households. In addition to music videos, MTV offers regularly
scheduled youth-oriented programming such as the animated BEAVIS & BUTT-HEAD
SHOW and specials such as the Annual MTV Video Music Awards and the MTV Movie
Awards, public affairs campaigns and series such as UNPLUGGED. MTV successfully
merchandised BEAVIS & BUTT-HEAD in 1993 featuring an album released by Geffen
Records and a book published by a division of Simon & Schuster. MTV's CHOOSE OR
LOSE political awareness campaign, which included studio interviews with
candidates Bill Clinton and Al Gore, extensively promoted the registration of
hundreds of thousands of new young voters. MTV's UNPLUGGED features live
acoustical performances by artists such as Eric Clapton, Rod Stewart and 10,000
Maniacs. MTV licenses the distribution of UNPLUGGED home video versions of these
performances. MTV Productions was formed in 1993 to
                                       30

develop and produce theatrical motion pictures and television programs,
including the joint development of a theatrical motion picture based on JOE'S
APARTMENT with Geffen Pictures for distribution by Warner Bros.
 
     Nickelodeon. At December 31, 1993, NICKELODEON was licensed to
approximately 53.4 million cable subscribers and NICK AT NITE was licensed to
approximately 53.1 million cable subscribers (based on subscriber counts
provided by each cable system). According to the Nielsen Report, NICKELODEON and
NICK AT NITE each reached approximately 60.9 million subscriber households. In
1993, NICKELODEON, the first network for kids, expanded its successful
NICKTOONS, NICKELODEON's original animated programming, with the introduction of
ROCKO'S MODERN LIFE in addition to THE REN & STIMPY SHOW, DOUG and RUGRATS.
NICKELODEON also exhibits, on Saturday nights, SNICK, its first prime-time block
of original NICKELODEON programming. MTVN, in cooperation with MCA Inc. ("MCA"),
operates NICKELODEON STUDIOS FLORIDA at Universal Studios in Orlando, Florida,
which combines state-of-the-art television production facilities with
interactive features that demonstrate the operation of NICKELODEON's studios
from a kid's perspective. In June 1993, NICKELODEON launched NICKELODEON
MAGAZINE, a bi-monthly children's magazine. In April 1993, NICKELODEON and Sony
Music entered into an agreement for Sony to manufacture and distribute
NICKELODEON audio and video products in the U.S. and Canada through its Sony
Wonder Children's label.
 
     VH-1. At December 31, 1993, VH-1 was licensed to approximately 45.5 million
cable subscribers (based on subscriber counts provided by each cable system).
According to the Nielsen Report, VH-1 reached approximately 49.5 million
subscriber households. Created in 1985 to reach viewers aged 25 to 49, VH-1
provides music and lifestyle programming. VH-1 offers programs such as original
and acquired comedy programming including STAND-UP SPOTLIGHT and Gallagher
specials; FT: FASHION TELEVISION; and the ONE-TO-ONE series which profiles pop
artists.
 
     MTVN has agreements with some U.S. record companies which, in exchange for
cash and advertising time, license the availability of such companies' music
videos for exhibition on MTV and on MTVN's other basic cable networks; a number
of other record companies provide MTVN with music videos in exchange for
promotional consideration only. The agreements generally provide that the videos
are available for debut by MTVN and, in some cases, that videos are subject to
exclusive periods on MTV. These record companies provide a substantial portion
of the music videos exhibited on MTV and VH-1. MTVN is currently in negotiations
for the renewal and extension of certain of its record company agreements.
Although MTVN believes that these agreements will be renewed, there can be no
assurance that the terms of such renewals will be as favorable as existing
arrangements.
 
     A number of record companies have announced plans to launch music-based
program services in the U.S. and internationally. For example,
Telecommunications, Inc. and Bertelsman AG announced plans for a music
video/home shopping channel and Sony Corp.'s Sony Music and Time Warner Inc.'s
Time Warner Music Group are discussing the formation of a world wide music video
program service with such other major record companies as EMI Music, a unit of
Thorn EMI PLC, and Polygram.
 
     Viacom International participates as a joint venturer in COMEDY CENTRAL.
 
     Comedy Central. Viacom International and HBO, through a 50-50 joint
venture, operate COMEDY CENTRAL, a 24-hours-a-day, seven-days-a-week program
service targeted to audiences ranging from the ages of 18 to 34. The format
consists primarily of comedy programming, including movies, series, situation
comedies, stand-up and sketch comedy, commentary, promotions, specials, game
shows, talk shows and other original and acquired comedy programming. According
to the Nielsen Report, COMEDY CENTRAL reached approximately 30.3 million
subscriber households.
 
     Showtime Networks. SNI operates three 24-hours-a-day, commercial-free,
     -----------------
premium subscription services offered to cable television operators and other
distributors: SHOWTIME, offering theatrically released feature films, comedy
specials, dramatic series, boxing events, family programs and original movies;
THE MOVIE CHANNEL, offering feature films and related programming including film
                                       31

festivals; and FLIX, an added-value premium subscription service featuring
movies primarily from the 1960s, '70s and '80s which was launched on August 1,
1992. As of December 31, 1993, SHOWTIME, THE MOVIE CHANNEL and FLIX in the
aggregate had approximately 11.9 million subscribers.
 
     SNI also provides special events, such as sports events, and feature films
to licensees on a pay-per-view basis through its operation of SET PAY PER VIEW,
a division of Viacom International.
 
     Showtime Satellite Networks Inc. ("SSN"), a subsidiary of SNI, packages for
distribution to home satellite dish owners (on a direct retail basis) SHOWTIME,
THE MOVIE CHANNEL, FLIX, Viacom Networks' basic cable program services, ALL NEWS
CHANNEL, a 24-hour satellite-delivered news service which is a joint venture
between Viacom Satellite News Inc., a subsidiary of Viacom International, and
Conus Communications Company Limited Partnership, a limited partnership whose
managing general partner is Hubbard Broadcasting, Inc., and certain third-party
program services. Also, SNI offers SHOWTIME, THE MOVIE CHANNEL and FLIX to
third-party licensees for subdistribution to home satellite dish owners.
 
     In addition to SNI's other motion picture licensing agreements, SNI and
Sony Pictures Entertainment Inc. recently entered into a five-year agreement
under which SNI has agreed to acquire the exclusive premium television rights to
TriStar Pictures feature films. A continuation of SNI's previous three-year
arrangement with TriStar, this new agreement includes all qualifying TriStar
films theatrically released from 1994 through 1998, up to a maximum of 75
pictures.
 
     SNI has also recently entered into a seven-year agreement with
Metro-Goldwyn-Mayer Inc. ("MGM") under which SNI has agreed to acquire the
exclusive premium television rights to MGM and United Artists feature films. The
agreement includes all qualifying pictures theatrically released from September
1, 1994 through August 31, 2001, up to a maximum of 150 pictures. The agreement
also calls for SNI and MGM to co-finance the production of certain exclusive
original movies to be produced for a U.S. premiere on SNI's program services.
 
     The cost of acquiring premium television rights to programming, including
exclusive rights, is the principal expense of SNI. At December 31, 1993, in
addition to such commitments reflected in Viacom's financial statements, SNI had
commitments to acquire such rights at a cost of approximately $1.8 billion. Most
of the $1.8 billion is payable within the next seven years as part of normal
programming expenditures of SNI. These commitments are contingent upon delivery
of motion pictures which are not yet available for premium television exhibition
and, in many cases, have not yet been produced.
 
     SNI also arranges for the development and production of original programs
and motion pictures that premiere on SHOWTIME through its operation of the
Showtime Entertainment Group. The Showtime Entertainment Group's activities also
now include operating Viacom Pictures, a division of Viacom International, which
arranges for the development and production of motion pictures that are
exhibited theatrically in foreign markets and premiere domestically on SHOWTIME.
 
     In addition to exhibiting the Showtime Entertainment Group's original
programs and motion pictures on SNI's premium subscription services, SNI
distributes certain Showtime Entertainment Group programming for foreign
theatrical exhibition and exploitation in various other media worldwide.
 
     Viacom Networks has entered into an agreement as of August 27, 1992 with
United States Satellite Broadcasting, Inc., a subsidiary of Hubbard
Broadcasting, Inc., for the direct broadcast high-powered Ku-band satellite
distribution ("DBS") of each of Viacom Networks' wholly owned basic cable and
premium networks, expected to be offered beginning in 1994.
 
     ENTERTAINMENT. Viacom Entertainment is comprised of (i) Viacom Enterprises,
which distributes television series such as ROSEANNE, THE COSBY SHOW, A
DIFFERENT WORLD and various classic CBS network series such as I LOVE LUCY,
feature films, made-for-television movies, mini-series and specials for
television exhibition in various markets throughout the world, and also
distributes television programs such as THE MONTEL WILLIAMS SHOW and NICK NEWS
for initial United
                                       32

States television exhibition on a non-network ("first run") basis and for
international television exhibition; (ii) Viacom Productions, which produces
television series such as MATLOCK, starring Andy Griffith, and DIAGNOSIS MURDER,
starring Dick Van Dyke, and other television properties both independently and
in association with others primarily for initial exhibition on United States
prime time network television; (iii) Viacom New Media, which develops, produces,
distributes and markets interactive software for the stand-alone and other
multimedia marketplaces, and includes ICOM Simulations, Inc. (predecessor to
VNM, Inc.) an interactive software development company acquired by Viacom in May
1993. Viacom New Media released an interactive horror movie on CD-ROM entitled
DRACULA UNLEASHED in the fourth quarter 1993 and is in the process of developing
cartridge video games based on certain MTV Networks programs, such as BEAVIS &
BUTT-HEAD and ROCKO'S MODERN LIFE, as well as original CD-ROM products and
expects to participate in the development of interactive programming for the
Viacom/AT&T Castro Valley cable system project (described below); and (iv)
Viacom World Wide, which explores and develops business opportunities in
international markets primarily in cable and premium television. Viacom
Enterprises and Viacom Productions are expected to be consolidated with
Paramount's television operations during 1994.
 
   
     CABLE TELEVISION. Viacom Cable owns and operates cable television systems
serving approximately 1,111,000 customers as of March 31, 1994 in three regions
of the United States: California, the Pacific Northwest and the Midwest. Viacom
Cable has constructed a fiber optic cable system in Castro Valley, California to
provide more channels with significantly better picture quality, and to
accommodate testing of new services including an interactive on-screen
programming guide known as StarSight (in which a consolidated affiliate of
Viacom International currently has a 21.4% equity interest and has the right to
increase its equity interest to 35% and in which Spelling Entertainment has a
5.8% equity interest), other interactive programs with Viacom New Media,
video-on-demand premium services, multiplexed premium services, and advanced
interactive video and data services. Viacom has entered into an agreement with
AT&T to test and further develop such services. As part of Viacom's strategic
relationship with NYNEX, Viacom has granted NYNEX a right of first refusal with
respect to providing telephony service upgrade expertise to Viacom Cable.
    
 
   
     BROADCASTING. Viacom Broadcasting owns and operates five network affiliated
television stations. Viacom Broadcasting also operates 14 radio stations in six
of the top eight radio markets, with duopolies in Los Angeles, Seattle and
Washington, D.C. Viacom Broadcasting owns and operates the following five
television properties: KMOV-TV (CBS), St. Louis, MO; WVIT-TV (NBC), Hartford-New
Haven, CT; WNYT-TV (NBC), Albany, NY; KSLA-TV (CBS), Shreveport, LA; WHEC-TV
(NBC), Rochester, NY and the following 14 radio stations: WLTW-FM, New York, NY;
KXEZ-FM and KYSR-FM, Los Angeles, CA; WLIT-FM, Chicago, IL; WLTI-FM, Detroit,
MI; WMZQ-AM/FM, WCXR-FM and WCPT-AM, Washington, D.C.; KBSG-AM/FM and KNDD-FM,
Seattle, WA; KSOL-FM, San Francisco, CA; and KYLZ-FM, Santa Cruz/San Jose, CA.
On November 1, 1993 Viacom Broadcasting exchanged KIKK-AM/FM, Houston, TX, for
Westinghouse Broadcasting Company, Inc.'s WCXR-FM and WCPT-AM, Washington, D.C.,
and cash. Pursuant to the consent granted by the Federal Communications
Commission ("FCC") to the transfer of control of the broadcast licenses of
Paramount to Viacom, Viacom has undertaken to dispose of one of its two AM
stations and one of its two FM stations serving Washington, D.C. See "--Viacom
Recent Developments" below.
    
 
     STRATEGIC RELATIONSHIPS. Viacom has entered into strategic relationships
with Blockbuster and NYNEX including (i) a $600 million investment by
Blockbuster in the Series A Preferred Stock, (ii) a $1.2 billion investment by
NYNEX in the Series B Preferred Stock and (iii) an agreement with each of
Blockbuster and NYNEX to explore strategic partnership opportunities. See "Sale
of Viacom Preferred Stock." In addition, on March 10, 1994 Blockbuster purchased
approximately 22.7 million shares of Viacom Class B Common Stock for an
aggregate purchase price of approximately $1.25 billion pursuant to the
Blockbuster Subscription Agreement.
 
     REGULATORY MATTERS. The 1992 Cable Act amended the Communications Act of
1934. Rate regulations adopted in April 1993 by the FCC govern rates charged to
subscribers for regulated tiers of
                                       33

   
cable service and became effective on September 1, 1993. On February 22, 1994,
the FCC adopted additional rules (the "February 22nd Regulations") which were
published by the FCC on March 30, 1994. The "benchmark" formula adopted as part
of the regulations establishes an "initial permitted rate" which may be charged
by cable operators for specified tiers of cable service. The regulations also
establish the prices which may be charged for equipment used to receive these
services. Based upon Viacom's preliminary review of the recently published
February 22nd Regulations, the new formula may require up to approximately a 17%
reduction of rates from those charged on September 30, 1992, rather than the 10%
reduction required by the April 1993 regulations. The February 22nd Regulations
also adopted interim standards governing "cost-of-service" proceedings pursuant
to which a cable operator would be permitted to charge rates in excess of rates
which it would otherwise be permitted to charge under such regulations, provided
that the operator substantiates that its costs in providing services justify
such rates.
    
 
   
     Based on its implementation of the April 1993 regulations, Viacom estimates
that it will recognize a reduction to revenue ranging from $27 million to $32
million on an annualized basis substantially all of which will be reflected as a
reduction in earnings from operations of its cable television division. Viacom's
estimated reduction does not reflect further reductions to revenue which would
result from the lowering of the initial permitted rates pursuant to the February
22nd Regulations. These new and reduced initial permitted rates will apply
prospectively either from May 15, 1994 or July 14, 1994, pursuant to some
conditions. Until the February 22nd Regulations are more fully analyzed, it is
not possible to accurately predict the effects of the interim standards
governing cost-of-service proceedings; however, based on a preliminary analysis,
Viacom believes it is unlikely that it will be able to utilize such proceedings
so as to charge rates in excess of rates which it would otherwise be permitted
to charge under the regulations. Viacom's ability to mitigate the effects of
these new rate regulations by employing techniques such as the pricing and
repricing of new or currently offered unregulated program services and ancillary
services are uncertain. No such potential mitigating factors are reflected in
the estimated reductions to revenues. The stated reduction to revenues has been
mitigated to a small extent by higher customer growth due to lower primary
service rates. Any required further reduction in rates could be similarly
mitigated. Viacom also cannot predict the effect, if any, of cable system rate
regulation on license fee rates payable by cable systems to program services
such as those owned by Viacom.
    
 
     In a recent decision by the U.S. District Court for the Eastern District of
Virginia, the Court declared the restrictions contained in the Communications
Act of 1934, as amended (the "Communications Act") on the provision of video
programming by a telephone company in its local service area to be
unconstitutional and has enjoined enforcement of those restrictions. The Court
has held that this decision does not apply to geographic areas outside of its
jurisdiction. An appeal of the Court's holding of the unconstitutionality of
such restrictions has been filed. Several similar suits have recently been filed
in different jurisdictions by regional Bell Operating Companies (including
NYNEX) ("BOCs") challenging the very same restrictions. In an interpretation of
the current restrictions contained in the Communications Act, the FCC in 1992
established its "Video Dial Tone" policy. The Video Dial Tone policy is being
challenged in court by cable interests as violating the Communications Act. It
is also being challenged by telephone interests as not being liberal enough. The
policy permits in-service-area delivery of video programming by a telephone
company (a "telco", as further defined below) and exempts telcos from the
Communications Act's franchising requirements so long as their facilities are
capable of two-way video and are used for transmission of video programming on a
common carrier basis, i.e., use of the facilities must be available to all
programmers and program packagers on a non-discriminatory, first-come
first-served basis. Telcos are also permitted to provide to facilities users
additional "enhanced" services such as video gateways, video processing
services, customer premises equipment and billing and collection. These can be
provided on a non-common carrier basis. There are currently pending in Congress
four principal bills (in the Senate, S. 1086, the Telecommunications
Infrastructure Act of 1993, and S. 1822, the Communications Act of 1994 (which
is expected to supersede S. 1086) and in the House, H.R. 3626, the Antitrust
Reform Act 1993, and H.R. 3636, the
                                       34

National Communications Competition and Information Infrastructure Act of 1993)
which would, among other things, permit a BOC or a Regional Holding Company
("RHC", a BOC or RHC, a "telco") to offer cable service under certain stated
conditions including providing safeguards and transition rules designed to
protect against anti-competitive activity by the telcos and cross-subsidization
of a telco's cable business by the telco's charges to its telephone customers.
These bills also generally eliminate state and local entry barriers which
currently either prohibit or restrict an entity's (including a cable operator's)
capacity to offer telecommunications services (including telephone exchange
service) in competition with telcos and to interconnect on a non-discriminatory
basis with telcos and utilize certain telco facilities in order to provide
service in competition with a telco. The Clinton Administration has indicated
its intention to propose reform of federal telecommunications legislation,
although such proposal has not been finalized.
 
     The Modification of Final Judgment (the "MFJ") is the consent decree
pursuant to which AT&T was reorganized and was required to divest its local
telephone service monopolies. As a result, seven regional holding companies were
formed (including NYNEX) comprised of operating companies within their regions.
In addition, all territory in the continental United States served by the BOCs
was divided into geographical areas termed Local Access and Transport Areas
("LATAs"). The MFJ restricts the RHCs, the BOCs and their affiliates from
engaging in inter-LATA telecommunications services and from manufacturing
telecommunications products. As a result of NYNEX's investment in Viacom, Viacom
arguably could be considered an affiliate of an RHC for MFJ purposes. As a
result, Viacom transferred certain of its operations and properties to an
affiliated entity which will be consolidated into Viacom for financial reporting
purposes. Neither the transfer nor the operations of the affiliate as an entity
separate from Viacom will have a material effect on the financial condition or
the results of operations of Viacom. However, should the MFJ restrictions be
modified or waived, Viacom intends to retransfer the assets and operations and
any future appreciation in the value of such assets after such retransfer will
be for the benefit of the holders of Viacom Common Stock.
 
     OWNERSHIP OF PARAMOUNT COMMON STOCK. On March 11, 1994, Viacom, pursuant to
the terms of the Offer, completed its purchase of 61,657,432 shares of Paramount
Common Stock, representing a majority of the shares of Paramount Common Stock
outstanding. Pursuant to the Paramount Merger Agreement, a wholly owned
subsidiary of Viacom will be merged with and into Paramount and, as a result,
Paramount will become a wholly owned subsidiary of Viacom. On March 11, 1994, 10
members of Paramount's Board of Directors resigned and their positions were
filled by 10 designees of Viacom. See "Management Before and After the
Mergers--Executive Officers and Directors of Paramount." Effective March 15,
1994, Paramount's fiscal year was changed such that its fiscal year (consisting
of eleven calendar months) will end March 31, 1994, following which Paramount's
fiscal year will be the nine month period ending December 31, 1994. Thereafter,
Paramount's fiscal year will be the twelve month period ending on December 31 of
each year, conforming to that of Viacom. Effective March 14, 1994, the Paramount
Board replaced Ernst & Young with Price Waterhouse as its independent public
accountants. Price Waterhouse are the independent public accountants of Viacom.
 
     BLOCKBUSTER MERGER. Viacom and Blockbuster are parties to the Blockbuster
Merger Agreement. See "The Blockbuster Merger." Upon consummation of the
Blockbuster Merger, the Series A Preferred Stock and the Viacom Class B Common
Stock owned by Blockbuster will cease to be outstanding.
 
     VIACOM RECENT DEVELOPMENTS. On April 4, 1994, Viacom sold its one-third
partnership interest in LIFETIME to its partners The Hearst Corporation and
Capital Cities/ABC Inc. for approximately $317.6 million.
 
   
     On March 29, 1994 Viacom entered into an agreement to sell its California
radio stations, KSOL-FM and KYLZ-FM.
    
 
     PARAMOUNT. The businesses of Paramount are entertainment and publishing.
Entertainment includes the production, financing and distribution of motion
pictures, television programming and prerecorded videocassettes and the
operation of motion picture theaters, independent television stations,
                                       35

regional theme parks and Madison Square Garden. Publishing includes the
publication and distribution of hardcover and paperback books for the general
public, textbooks for elementary schools, high schools and colleges, and the
provision of information services for business and professions.
 
   
     Entertainment.  Theatrical Motion Pictures.  Paramount Pictures produces
     -------------
and/or finances feature motion pictures for exhibition in theaters and on
television and for distribution by videocassettes and video discs. Motion
pictures are produced by Paramount Pictures, produced by independent producers
and financed in whole or in part by Paramount Pictures, or produced by others
and acquired by Paramount Pictures. Each picture is, in effect, a separate and
distinct product with its financial success dependent upon many factors, among
which cost and public response are of fundamental importance. In the
twelve-month period ended January 31, 1994, Paramount Pictures released fifteen
feature motion pictures. Paramount Pictures distributes its motion pictures for
theatrical release outside the United States and Canada through United
International Pictures, a company owned by Paramount Pictures, MCA and
Metro-Goldwyn-Mayer Inc.
    
 
     Most motion pictures are also licensed for exhibition on television, with
fees generally collected in installments. License fees are recorded as revenue
in the year that the films are available for telecast, which, among other
reasons, may cause substantial fluctuation in Paramount's operating results. At
January 31, 1994, unrecognized revenues attributable to licensing of completed
films from Paramount Pictures' license agreements were $575 million.
 
     Paramount Pictures has an exclusive pay television license agreement with
HBO which includes new Paramount Pictures' motion pictures released theatrically
through December 1997. Paramount Pictures also licenses its motion pictures to
home and hotel/motel pay-per-view, airlines, schools and universities. Paramount
Pictures also distributes its motion pictures for pay television release outside
the United States and Canada through United International Pictures. In 1993,
Paramount acquired a joint venture interest in HBO Pacific Partners, C.V. and
granted to it a license to carry Paramount Pictures' motion pictures on pay
television in Singapore, Thailand, the Philippines and other territories through
1999. Paramount Pictures has approximately 900 motion pictures in its library.
United International Pictures and United Cinemas International (as described
below) are the subject of various governmental inquiries by the Commission of
the European Community and the Monopolies and Mergers Commission of the United
Kingdom. Such inquiries are not expected to have a material effect on the
business of Paramount.
 
     Television Programs. Paramount Pictures is engaged in the production and
distribution of series, mini-series, specials and made-for-television movies for
network television, first-run syndication, pay and basic cable, videocassettes
and video discs, and live television programming. The receipt and recognition of
revenues for license fees for completed television programming in syndication is
similar to that of feature films exhibited on television and, consequently,
operating results are subject to substantial fluctuation. At January 31, 1994,
the unrecognized revenues from such television license agreements were $198
million. Certain programs are licensed in exchange for cash and/or advertising
time which Paramount Pictures retains and sells through its wholly owned
affiliate, Premier Advertiser Sales. Premier Advertiser Sales also sells
advertising time in programming distributed by third parties. Paramount
Pictures' foreign television revenues include the licensing of series,
mini-series and specials made for U.S. television and theatrical and
made-for-television movies that are part of its television library. In addition,
foreign television revenues also include revenues derived from distribution of
television product acquired from independent producers.
 
     Home Video. Paramount Pictures sells videocassettes for the home video
market, featuring its motion picture and television program library,
acquisitions from third parties and programs made originally for the home video
market. It also licenses this product for distribution on video disc. Paramount
Pictures distributes its home video products outside the United States and
Canada through Cinema International B.V., a joint venture with MCA.
 
     Theatrical Exhibition. Famous Players operates 462 screens in 114 theaters
throughout Canada. Cinamerica, a joint venture with Time Warner Inc. ("Time
Warner"), includes Mann and Festival
                                       36

Theaters and operates 341 screens in 66 theaters in California, Colorado,
Arizona and Alaska. United Cinemas International, a joint venture with MCA,
operates 235 screens in 25 theaters in the United Kingdom and Ireland, 42
screens in three theaters in Germany and 76 screens in 25 theaters in Spain.
United Cinemas International plans to construct and operate additional theaters
in the United Kingdom, Germany, Austria and Spain. It also manages, in six
countries, 31 screens in 17 theaters which are owned by Cinema International
Corporation, a joint venture with MCA.
 
     Television Broadcasting and Cable Television Networks. PSG owns and
operates seven television stations: WTXF(TV), Philadelphia; KRRT(TV), San
Antonio; WLFL(TV), Raleigh/Durham; WDCA-TV, Washington, D.C.; KTXA(TV), Dallas;
KTXH(TV), Houston; and WKBD(TV), Detroit. Paramount and MCA jointly own USA
Networks, which operates two national advertiser-supported basic cable
television networks, USA Network and the Sci-Fi Channel. USA Network is one of
the largest of its kind in the United States, reaching approximately 62.5
million households.
 
     Theme Parks. Paramount Parks owns and operates five regional theme parks:
Paramount's Carowinds, in Charlotte, North Carolina; Paramount's Great America,
in Santa Clara, California; Paramount's Kings Dominion, located near Richmond,
Virginia; Paramount's Kings Island, located near Cincinnati, Ohio; and Paramount
Canada's Wonderland, located near Toronto, Ontario. In May 1993, Paramount Parks
acquired the 80% interest in Paramount Canada's Wonderland which it did not
previously own. The majority of the theme parks' operating income is generated
from May through September.
 
   
     Madison Square Garden. Madison Square Garden's activities include the
operation of the Madison Square Garden Arena, which seats approximately 20,000
people, and The Paramount, a theater which seats approximately 5,600 people, the
New York Knickerbockers Basketball Club of the National Basketball Association
and the New York Rangers Hockey Club of the National Hockey League. It also
supplies and distributes television programming for cable systems principally in
New York, New Jersey and Connecticut through the Madison Square Garden Network.
Its programming includes its own sporting events and rights to the New York
Yankees baseball games through the year 2000. In addition, Madison Square Garden
produces, promotes and/or presents live entertainment, which includes television
event production of the Miss Universe, Miss USA and Miss Teen USA pageants and
auto thrill shows through SRO Motorsports. See "Special Factors--Certain Effects
of the Paramount Merger; Operations After the Paramount Merger."
    
 
   
     Publishing.  Paramount Publishing includes well-known imprints such as
     ----------
Simon & Schuster, Pocket Books, Prentice Hall, Silver Burdett Ginn and Computer
Curriculum Corporation, among others.
    
 
     Educational Publishing. Paramount Publishing's Elementary, Secondary and
Higher Education groups publish elementary, secondary and college textbooks and
related materials, computer-based educational products, audiovisual products and
vocational and technical materials under such imprints as "Prentice Hall,"
"Silver Burdett Ginn," "Allyn & Bacon," "Globe Fearon," "Modern Curriculum
Press," "Coronet/MTI Film & Video," "Computer Curriculum Corporation," "Simon &
Schuster Workplace Resources," "Academic Reference," "Regents/PH," "American
Teaching Aids," "Judy/Instructo," "Ginn Press," "Alemany" and "Cambridge."
 
     Consumer Publishing. Paramount Publishing's Consumer group publishes and
distributes hardcover, trade paperback and mass market books and audio tapes. It
publishes its hardcover trade books principally under the "Simon & Schuster,"
"Pocket Books," "Poseidon Press," "Little Simon," "Simon & Schuster Books for
Young Readers," "Green Tiger" and "Julian Messner" imprints; its trade paperback
books under the "Fireside" and "Touchstone" imprints; and its mass market
paperbacks under the "Pocket Books," "Pocket Star," "Archway," "Washington
Square Press" and "Minstrel" imprints. Audio cassettes are sold under the
imprints "Audio Works" and "Sound Ideas." Books of other publishing companies,
including "Harlequin" and "Silhouette" romance novels, books published under the
imprints of "Baen," "Meadowbrook," "Picture Book Studios" and "Rabbit Ears," and
audio cassettes under the "Nightingale Conant Audio" imprint are also
distributed.
 
                                       37

     The Consumer group also publishes or distributes consumer information and
special-interest books, including "Prentice Hall" reference books; "Arco"
college entrance and civil service test preparation material; "J.K. Lasser" tax
guides; "Webster's New World" and "Harrap's" bilingual dictionaries; travel
books under the "Frommer's," "American Express," "Baedeker" and "Mobil"
imprints; cookbooks under the "Betty Crocker" imprint; gardening books under the
"Burpee" and "Horticulture" imprints; maps under the "Gousha" imprint; and
"Monarch Notes" study guides.
 
     Business, Technical and Professional. Paramount Publishing's Business,
Technical and Professional group publishes books, newsletters and software for a
variety of professional groups, including lawyers, accountants, tax
professionals, business executives and the medical community. These materials
are published under the "Prentice Hall," "Bureau of Business Practice,"
"Parker," "Appleton & Lange" and "New York Institute of Finance" imprints. It
publishes Prentice Hall Computer Publishing computer reference books under the
"Que," "Brady," "Sams," "New Riders," "Alpha Books" and "Hayden" imprints.
 
     International. The international operations include publishing in Canada,
the United Kingdom, Australia, Brazil, Mexico, Singapore, Japan and India
primarily under the "Prentice Hall" and "Simon & Schuster" imprints as well as
distribution of Paramount Publishing's products worldwide. Paramount Publishing
also publishes German language computer books and software in Germany under the
"Markt & Technik" imprint.
 
     Paramount Recent Developments. In February 1994, Paramount completed the
     -----------------------------
acquisition of Macmillan Publishing Company and certain other publishing assets
of Macmillan, Inc. for approximately $553 million. Macmillan Publishing, which
includes such imprints as "Macmillan" and "Scribner's", publishes books and
materials through five divisions--College, Children's Books, Adult Trade,
Reference and The Free Press, a publisher of scholarly and professional
materials--as well as Jossey-Bass, a publisher of books and periodicals for
select professionals.
 
     Provisions in certain consent decrees entered into by the television
networks which prohibited the networks from acquiring financial interests and
syndication rights in television programming by non-network suppliers such as
Paramount Pictures were recently vacated by a federal district court.
Accordingly, subject to certain restrictions imposed by the FCC, the networks
will be able to negotiate with program suppliers to acquire financial interests
and syndication rights in television programs that air on the networks.
 
     Paramount and BHC Communications, Inc., which is majority owned by
Chris-Craft Industries, Inc., are forming a joint venture to be known as the
Paramount Television Network which will provide prime-time television
programming primarily to broadcast affiliates nationwide in competition with the
three major networks and the Fox Broadcasting Network. The network is expected
to begin operations in January 1995.
 
     Under the joint venture agreement for USA Networks between subsidiaries of
Paramount and MCA, such subsidiaries and certain of their affiliates are
restricted, subject to certain exceptions and unless the other party consents,
from engaging outside of USA Networks in the business of providing to cable
television systems national, video, advertiser-supported, basic cable
entertainment networks or providing national video entertainment programming
services to cable television systems and/or other entities on a pay-per-view
basis. Although Viacom and Paramount do not believe that these restrictions were
violated by the consummation of the Offer, there can be no assurance that MCA
might not seek damages or other relief in connection with the consummation of
the Offer or the Paramount Merger or the business activities that may be engaged
in thereafter.
 
                                       38

                                  THE MEETINGS
 
MATTERS TO BE CONSIDERED AT THE MEETINGS

   
     Viacom. At the Viacom Special Meeting, holders of Viacom Class A Common
Stock will consider and vote upon approval of the Paramount Merger Agreement
(including the issuance of the Paramount Merger Consideration) and the Viacom
Charter Amendments. Such stockholders will also consider and vote upon such
other matters as may properly be brought before the Viacom Special Meeting.
    
 
   
     ON FEBRUARY 1, 1994, THE BOARD OF DIRECTORS OF VIACOM UNANIMOUSLY APPROVED
THE FEBRUARY 4 MERGER AGREEMENT AND RECOMMENDED A VOTE FOR APPROVAL OF THE
FEBRUARY 4 MERGER AGREEMENT (INCLUDING THE ISSUANCE OF THE PARAMOUNT MERGER
CONSIDERATION) AND THE VIACOM CHARTER AMENDMENTS. ON MAY 26, 1994, THE BOARD OF
DIRECTORS OF VIACOM UNANIMOUSLY APPROVED THE MAY AMENDMENT.
    
 
     At the Viacom Annual Meeting, holders of Viacom Class A Common Stock will
consider and vote upon the Viacom Annual Meeting Proposals. Such stockholders
will also consider and vote upon such other matters as may properly be brought
before the Viacom Annual Meeting.
 
     THE BOARD OF DIRECTORS OF VIACOM RECOMMENDS A VOTE FOR APPROVAL OF THE
VIACOM ANNUAL MEETING PROPOSALS, INCLUDING THE SLATE OF DIRECTORS NOMINATED BY
THE VIACOM BOARD OF DIRECTORS.
 
     Paramount. At the Paramount Special Meeting, holders of Paramount Common
Stock will consider and vote upon a proposal to approve and adopt the Paramount
Merger Agreement and such other matters as may properly be brought before the
meeting.
 
   
     ON FEBRUARY 4, 1994, THE BOARD OF DIRECTORS OF PARAMOUNT UNANIMOUSLY
APPROVED THE FEBRUARY 4 MERGER AGREEMENT AND RECOMMENDED A VOTE FOR APPROVAL AND
ADOPTION OF THE FEBRUARY 4 MERGER AGREEMENT. ON MAY 26, 1994, THE RECONSTITUTED
BOARD OF DIRECTORS OF PARAMOUNT UNANIMOUSLY APPROVED THE MAY AMENDMENT.
    
 
   
     THIS PROXY STATEMENT/PROSPECTUS IS NOT A SOLICITATION OF PROXIES WITH
RESPECT TO, NOR A PROSPECTUS RELATING TO, THE BLOCKBUSTER MERGER. A SEPARATE
JOINT PROXY STATEMENT/PROSPECTUS OF VIACOM AND BLOCKBUSTER RELATING TO THE
BLOCKBUSTER MERGER WILL BE SENT TO STOCKHOLDERS OF VIACOM AND BLOCKBUSTER PRIOR
TO ANY CONSIDERATION OF THE BLOCKBUSTER MERGER.
    
 
VOTES REQUIRED
 
     Viacom. Each share of Viacom Class A Common Stock is entitled to one vote.
Except as required by Delaware law, holders of Viacom Class B Common Stock are
not entitled to vote on any matter.
 
     The affirmative vote of the holders of a majority of the outstanding shares
of Viacom Class A Common Stock is required to approve the Viacom Charter
Amendments. Because approval of the Viacom Charter Amendments requires the
affirmative vote of such holders, abstentions and broker non-votes will have the
same effect as votes against the Viacom Charter Amendments.
 
     The affirmative vote of the holders of a majority of the shares of Viacom
Class A Common Stock present in person or represented by proxy is required for
approval of the Paramount Merger Agreement and the Viacom Annual Meeting
Proposals. Abstentions will have the same effect as a vote against such
proposals. Broker non-votes will have no such effect and will not be counted.
 
   
     NAI, which is controlled by Sumner M. Redstone, owned approximately 85% of
the Viacom Class A Common Stock and 52% of the Viacom Class B Common Stock as of
April 1, 1994. NAI has agreed to vote all of its shares of Viacom Class A Common
Stock in favor of the Paramount Merger Agreement pursuant to the terms of the
Paramount Voting Agreement, a copy of which is attached as Annex II. See
"Special Factors--Paramount Voting Agreement." Such action by NAI in accordance
with the Paramount Voting Agreement would be sufficient to approve the Paramount
Merger Agreement and related transactions without any action on the part of any
other holder of Viacom Class A Common Stock.
    
 
                                       39

     NAI has advised Viacom that it intends to vote all of its shares in favor
of the Viacom Annual Meeting Proposals (including the slate of directors
nominated by the Viacom Board of Directors) and in favor of each of the Viacom
Charter Amendments; such action by NAI is sufficient to approve such proposals
without any action on the part of any other holder of Viacom Class A Common
Stock.
 
     Paramount. The affirmative vote of the holders of a majority of the
outstanding shares of Paramount Common Stock entitled to vote thereon is
required to approve and adopt the Paramount Merger Agreement. Each share of
Paramount Common Stock is entitled to one vote. Because approval of the
Paramount Merger Agreement requires the vote of a majority of the outstanding
shares of Paramount Common Stock, abstentions and broker non-votes will have the
same effect as votes against the Paramount Merger Agreement. As Viacom has
acquired a majority of the outstanding shares of Paramount Common Stock pursuant
to the Offer, Viacom has sufficient voting power to approve the Paramount Merger
Agreement, even if no other stockholder of Paramount votes in favor of the
Paramount Merger Agreement.
 
     At March 31, 1994, Paramount's current directors and executive officers may
be deemed to be beneficial owners of approximately 2,238,531 shares of Paramount
Common Stock, or approximately 2.0% of the then outstanding shares of Paramount
Common Stock. See "Security Ownership of Certain Beneficial Owners and
Management."
 
VOTING OF PROXIES
 
     Shares represented by properly executed proxies received in time for the
Special Meetings and the Viacom Annual Meeting, as the case may be, will be
voted at such meetings in the manner specified by the holders thereof. Proxies
which are properly executed but which do not contain voting instructions will be
voted (i) in the case of proxies for Viacom Class A Common Stock, in favor of
the Paramount Merger Agreement (including the issuance of the Paramount Merger
Consideration) and the Viacom Charter Amendments, at the Viacom Special Meeting,
and in favor of the Viacom Annual Meeting Proposals (including the slate of
directors nominated by the Viacom Board of Directors), at the Viacom Annual
Meeting, or (ii) in the case of proxies for Paramount Common Stock, in favor of
approval and adoption of the Paramount Merger Agreement.
 
     It is not expected that any matter other than those referred to herein will
be brought before either of the Special Meetings or the Viacom Annual Meeting.
If, however, other matters are properly presented, the persons named as proxies
will vote in accordance with their judgment with respect to such matters.
 
REVOCABILITY OF PROXIES
 
   
     The grant of a proxy on the enclosed Viacom or Paramount forms does not
preclude a stockholder from voting in person. A stockholder may revoke a proxy
at any time prior to its exercise by submitting a new proxy at a later date, by
filing with the Secretary of Viacom (in the case of a Viacom stockholder) or the
Secretary of Paramount (in the case of a Paramount stockholder) a duly executed
revocation of proxy bearing a later date or by voting in person at the meeting.
Attendance at the relevant Special Meeting or the Viacom Annual Meeting will not
of itself constitute revocation of a proxy.
    
 
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
 
   
     Viacom. Only holders of record of Viacom Class A Common Stock and Viacom
Class B Common Stock at the close of business on May 31, 1994 will be entitled
to receive notice of the Viacom Special Meeting and the Viacom Annual Meeting,
and only holders of record of Viacom Class A Common Stock on the close of
business on May 31, 1994 will be entitled to vote on the matters to be voted on
at such meetings. As of this record date, Viacom had outstanding [            ]
shares of Viacom Class A Common Stock and [            ] shares of Viacom Class
B Common Stock.
    
 
                                       40

     Shares representing a majority of the voting power of the outstanding
shares of Viacom Class A Common Stock entitled to vote must be represented in
person or by proxy at the Viacom Special Meeting and the Viacom Annual Meeting
in order for a quorum to be present with respect to the Viacom Class A Common
Stock for purposes of approving the matters to be voted on at such meetings.
Abstentions and broker non-votes are counted for the purposes of establishing a
quorum. As NAI has agreed to vote its shares of Viacom Class A Common Stock in
favor of the Paramount Merger and related transactions pursuant to the Paramount
Voting Agreement and, as NAI has announced its intention to vote at the Viacom
Annual Meeting, the presence of the requisite quorums at the Viacom Special
Meeting and the Viacom Annual Meeting is assured. Holders of Viacom Class B
Common Stock are not entitled to vote on any of the matters to be voted on at
the Viacom Special Meeting or the Viacom Annual Meeting.
 
   
     Paramount. Only stockholders of record of Paramount at the close of
business on May 31, 1994 will be entitled to receive notice of the Paramount
Special Meeting, and only holders of record of Paramount Common Stock at that
time will be entitled to vote at the Paramount Special Meeting. As of this
record date, Paramount had outstanding [        ] shares of Paramount Common
Stock, exclusive of shares held in its treasury. A majority of the outstanding
shares of Paramount Common Stock must be represented in person or by proxy at
the Paramount Special Meeting in order for a quorum to be present. Abstentions
and broker non-votes are counted for the purposes of establishing a quorum.
    
 
APPRAISAL RIGHTS
 
   
     Paramount. In the event the Paramount Merger is consummated, record holders
of Paramount Common Stock will be entitled to appraisal rights under Section 262
of the DGCL because such persons hold stock of a constituent corporation in the
Paramount Merger and such holders are required by the terms of the Paramount
Merger Agreement to accept for such stock consideration other than shares of the
corporation resulting from the Paramount Merger. Stockholders who have not voted
in favor of the Paramount Merger will have the right to obtain a cash payment
for the "fair value" of their shares (excluding any element of value arising
from the accomplishment or expectation of the Paramount Merger). Such "fair
value" would be determined in judicial proceedings, the result of which cannot
be predicted. In order to exercise appraisal rights, dissenting stockholders
must comply with the procedural requirements of Section 262 of the DGCL, a
description of which is provided in "Dissenting Stockholders' Rights of
Appraisal" and the full text of which is attached to this Proxy
Statement/Prospectus as Annex V. Failure to take any of the steps required under
Section 262 of the DGCL on a timely basis may result in the loss of appraisal
rights. Except as set forth above, stockholders of Paramount will have no
appraisal rights in connection with the Paramount Merger.
    
 
   
     Viacom. Stockholders of Viacom will have no appraisal rights in connection
with the Paramount Merger.
    
 
SOLICITATION OF PROXIES
 
     Each of Viacom and Paramount will bear the cost of the solicitation of
proxies from its own stockholders, except that Viacom and Paramount will share
equally the cost of printing this Proxy Statement/Prospectus. In addition to
solicitation by mail, the directors, officers and employees of each company and
its subsidiaries may solicit proxies from stockholders of such company by
telephone or telegram or in person. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and Viacom and Paramount will reimburse such custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in
connection therewith.
 
     STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
 
                                       41

                                SPECIAL FACTORS
 
BACKGROUND OF THE PARAMOUNT MERGER
 
     For several years, Sumner M. Redstone, Chairman of the Board of Directors
of Viacom, and Martin S. Davis, Chairman of the Board and Chief Executive
Officer of Paramount, held discussions from time to time concerning the
possibility of a business combination. These discussions were preliminary and
inconclusive.
 
     On April 20, 1993, at the invitation of Robert Greenhill (the Chief
Executive Officer of Smith Barney), Messrs. Redstone and Davis met with Mr.
Greenhill and agreed to explore once again the possibility of combining the two
companies.
 
     From April to late June 1993, the two companies engaged in preliminary
discussions concerning certain possible terms of a business combination, the
discussions involving at various times Messrs. Redstone, Davis and Greenhill,
Philippe P. Dauman, Senior Vice President and General Counsel of Viacom, and
Donald Oresman, Executive Vice President and General Counsel of Paramount. These
discussions were also inconclusive.
 
     During the week of June 28, Messrs. Redstone and Davis decided to renew
discussions. On July 1, 1993, Viacom and Paramount executed and exchanged
confidentiality agreements in anticipation of exchanging confidential
information and conducting due diligence (however, no such information was
exchanged until the week of September 6, 1993). Discussions between the parties
continued, and on July 6, 1993, a meeting was held, including Messrs. Dauman,
Oresman and Greenhill and Felix Rohatyn of Lazard Freres. Viacom's
representatives expressed a willingness to negotiate a transaction based upon
consideration payable to Paramount's stockholders valued at $63 per share,
conditioned upon Paramount's willingness to grant to Viacom an option to acquire
from Paramount shares, representing up to 20% of Paramount's then outstanding
shares, at an exercise price of the then current market price of Paramount's
Common Stock, and pay to Viacom a fee in an amount to be negotiated, plus
expenses, in the event the transaction did not close. In addition, Viacom
proposed that the parties should explore entering into other business
transactions, including possible joint venture arrangements, simultaneously with
entering into a merger agreement. Discussions were terminated on July 7, 1993,
due to the parties' belief that they would be unable to reach agreement on
certain significant terms, including the consideration to be received by
Paramount stockholders, the consideration which would be payable to Viacom if
the transaction did not close and the proposed joint venture arrangements
between the parties, as outlined above.
 
     On August 20, 1993, Mr. Greenhill arranged for Messrs. Davis and Redstone
to meet later that day. At the end of this meeting they agreed to authorize
their respective senior managements and advisors to again explore terms upon
which the parties might reach agreement on a business combination. However,
discussions terminated on August 25, 1993, primarily due to disagreement over
the consideration to be offered to Paramount stockholders in the combination and
Viacom's insistence on an option on 20% of Paramount's stock at market and a
termination fee in the amount of $150 million, plus expenses.
 
     A series of discussions began again in early September. On September 7,
1993, Messrs. Dauman and Oresman and the companies' respective financial and
legal advisors met, and following that meeting Messrs. Redstone and Davis met to
review the status of the discussions between the companies. On the basis of that
review, Messrs. Redstone and Davis agreed to direct their respective senior
managements and advisors to conduct due diligence, exchange and negotiate
transaction documentation, and otherwise seek to reach agreement on all terms.
 
     From September 8 through September 11, 1993, senior management of Viacom
and Paramount, assisted by their legal and financial advisors, exchanged
financial and legal due diligence materials, conducted due diligence, and
negotiated a merger agreement (the "Original Merger Agreement") and a stock
option agreement (the "Original Stock Option Agreement") between Paramount and
Viacom and a voting agreement (the "Original Voting Agreement") between
Paramount and NAI.
 
                                       42

     On September 9, 1993, at a regularly scheduled meeting, the Paramount Board
of Directors met and reviewed the status of negotiations and received an
analysis of the businesses of Viacom and Paramount and an analysis of certain
other merger transactions.
 
     The negotiations over the principal issues in the agreements were concluded
during a meeting between Messrs. Dauman and Oresman and their respective legal
advisors in New York on September 11, 1993.
 
     On September 12, 1993, the Viacom Board and the Paramount Board each met
and approved the proposed transactions. Paramount and Viacom entered into
certain related agreements and announced a merger of Paramount with and into
Viacom (the "Original Merger"). In the Original Merger, each share of Paramount
Common Stock was to be converted into the right to receive (i) 0.1 shares of
Viacom Class A Common Stock, (ii) 0.9 shares of Viacom Class B Common Stock and
(iii) $9.10 in cash. At the meeting of the Paramount Board, Lazard Freres
delivered a written opinion to the effect that as of September 12, 1993 the
consideration to be received by Paramount's stockholders in the Original Merger
was fair to the stockholders of Paramount from a financial point of view.
 
     By a letter to Paramount dated September 20, 1993, QVC Network, Inc.
("QVC") proposed a business combination of Paramount and QVC under which each
outstanding share of Paramount Common Stock would be converted into the right to
receive 0.893 of a share of QVC Common Stock and $30 in cash. Under the terms of
the Original Merger Agreement, Paramount was not permitted to hold discussions
with QVC until the Paramount Board could establish that (i) the proposal was not
subject to any material financing contingency and (ii) that such discussions
were required for the Paramount Board to comply with its fiduciary duties to the
Paramount stockholders. Having made such findings, Paramount, by letter dated
October 13, 1993, requested that QVC produce, as a prelude to discussions,
information regarding QVC and the feasibility of its proposal. On October 20,
QVC delivered to Paramount certain materials. On October 21, the day after QVC
delivered these materials, QVC publicly announced that it would commence a
tender offer for 51% of the shares of Paramount Common Stock at $80 per share
(the "First QVC Offer") and, if successful, would propose a second-step merger
(the "First QVC Second-Step Merger") in which the remaining shares would be
converted into the right to receive 1.42857 shares of QVC Common Stock.
 
     On October 21, 1993, QVC commenced an action in the Delaware Chancery Court
naming as defendants Paramount, certain of its directors and Viacom. QVC alleged
causes of action for breaches of fiduciary duty against Paramount and its Board,
and alleged that Viacom aided and abetted those breaches of duty. The action
sought to enjoin the proposed merger between Paramount and Viacom on the ground
that certain provisions of the Original Merger Agreement and the Original Stock
Option Agreement were unlawful and had been entered into in breach of the
Paramount directors' fiduciary duties. QVC's action was subsequently
consolidated with a number of class actions brought by certain Paramount
stockholders in the Delaware Chancery Court.
 
     After QVC's October 21 announcement, Viacom proposed to modify the Original
Merger Agreement and the related agreements to increase the value of the merger
consideration to $80 per share of Paramount Common Stock (based on Viacom's
closing stock prices as of October 22, 1993) and to provide for the commencement
by Viacom of a tender offer for 51% of the Paramount Common Stock outstanding at
a price of $80 per share (the "First Viacom Offer") following which, in a
second-step merger (the "First Viacom Second-Step Merger"), holders of shares of
Paramount Common Stock not acquired in the First Viacom Offer would receive (i)
0.20408 shares of Viacom Class A Common Stock, (ii) 1.08317 shares of Viacom
Class B Common Stock and (iii) 0.20408 shares of a new series of cumulative
convertible exchangeable preferred stock of Viacom (the "Viacom Merger Preferred
Stock").
 
     Following discussions between Paramount and Viacom, at a meeting of the
Paramount Board held on October 24, 1993, the Paramount Board considered (i) the
events that had transpired since Paramount and Viacom entered into the Original
Merger Agreement, including the First QVC Offer
                                       43

and the First QVC Second-Step Merger to the extent of available information, and
(ii) presentations from the Paramount Board's legal and financial advisors with
respect to the proposed revisions to the Original Merger Agreement, and with
respect to the First QVC Offer and the First QVC Second-Step Merger to the
extent of available information. The Paramount Board also received the oral
opinion of Lazard Freres to the effect that as of October 24, 1993 the
consideration to be received by Paramount's stockholders in the First Viacom
Offer and the First Viacom Second-Step Merger, taken together, was fair to the
stockholders of Paramount from a financial point of view.
 
     The Paramount Board, by unanimous vote, (i) approved the Amended and
Restated Agreement and Plan of Merger dated as of October 24, 1993 between
Viacom and Paramount (the "October 24 Merger Agreement") (to provide for the
revised acquisition structure and expanded termination rights in favor of
Paramount), (ii) determined that the First Viacom Offer and the First Viacom
Second-Step Merger were consistent with and in furtherance of the long-term
business strategy of Paramount and, taken together, were fair to, and in the
best interests of, Paramount's stockholders, (iii) recommended approval and
adoption of the October 24 Merger Agreement and (iv) agreed to recommend that
holders of Paramount Common Stock tender their shares pursuant to the First
Viacom Offer.
 
     Late the same day, Viacom's Board of Directors, by unanimous vote, (i)
determined that the October 24 Merger Agreement was fair to, and in the best
interests of, the stockholders of Viacom, (ii) approved the October 24 Merger
Agreement and (iii) authorized the commencement of the First Viacom Offer.
 
     After the meetings, Viacom and Paramount executed the October 24 Merger
Agreement.
 
     The October 24 Merger Agreement provided that the Paramount Board would
amend the Rights Agreement dated as of September 7, 1988 between Paramount and
Chemical Bank, as amended (the "Rights Agreement") to permit Viacom to
consummate its tender offer unless there existed a tender offer or exchange
offer to acquire Paramount or a written, bona fide proposal to acquire Paramount
pursuant to a merger, consolidation, share exchange, business combination,
tender or exchange offer or other similar transaction and that amending the
Rights Agreement would be inconsistent with the Paramount Board's satisfaction
of its fiduciary duties to stockholders under applicable law.
 
     On October 25, 1993, Viacom commenced the First Viacom Offer. On October
27, 1993, QVC (together with its co-bidders, Comcast Corporation ("Comcast") and
Liberty Media Corporation ("Liberty Media")) commenced the First QVC Offer.
 
     On October 28, 1993, QVC sent a letter to Paramount requesting that
Paramount negotiate with QVC regarding a merger proposal. By letter dated
October 29, 1993, Paramount indicated that it was prepared, as it was prior to
the commencement of the First QVC Offer, to meet with QVC to discuss its
proposal. On November 1, 1993, representatives of Paramount met with
representatives of QVC to discuss QVC's proposal. At the meeting, QVC's
representatives indicated that Paramount should not assume that there would be
no further increase in the value of the consideration proposed to be paid by QVC
with respect to the First QVC Offer and First QVC Second-Step Merger. However,
QVC's representatives stated that any further increase in QVC's bid would be, in
part, a function of the adoption by Paramount of certain auction bidding
procedures requested by QVC. QVC also presented to Paramount an informational
request and a form of merger agreement. In a letter to QVC dated November 1,
1993, Paramount stated that the requested auction bidding procedures were
inappropriate and, in addition, their adoption by Paramount would be
inconsistent with Paramount's contractual obligations under the October 24
Merger Agreement. Paramount's letter also referred to the provisions in the
October 24 Merger Agreement (i) allowing the Paramount Board to keep the Rights
Agreement in place with respect to the First Viacom Offer "if, in its view, the
existence of a better alternative would make an amendment to the Rights
Agreement inconsistent with its fiduciary duties" and (ii) permitting Paramount
to terminate the October 24 Merger Agreement "if the Paramount Board determines
to recommend to its stockholders another transaction in the exercise of its
fiduciary duties." By letter to Paramount dated November 2, 1993, counsel for
QVC expressed its displeasure at Paramount's failure
                                       44

to adopt QVC's requested auction bidding procedures but was silent as to whether
any alternative proposal would be made by QVC.
 
     On November 5, 1993, Viacom proposed an amendment (the "November 6
Amendment") to the October 24 Merger Agreement which provided that the per share
consideration in the First Viacom Offer be increased from $80 to $85 (the
"Second Viacom Offer"). In addition, the proposed amendment provided that the
consideration in the First Viacom Second-Step Merger be revised by increasing
the amount of the Viacom Merger Preferred Stock from 0.20408 to 0.30408 shares
per share of Paramount Common Stock (the "Second Viacom Second-Step Merger"),
representing an increase of $5 in the value of the liquidation preference of the
Viacom Merger Preferred Stock to be paid.
 
     Following discussions between Paramount and Viacom with regard to the terms
of this proposal, at a meeting held on November 6, 1993, the Paramount Board
considered the terms of the proposed amendments and received the oral opinion of
Lazard Freres that as of November 6, 1993 the consideration to be received by
Paramount's stockholders in the amended Second Viacom Offer and Second Viacom
Second-Step Merger, taken together, was fair to the stockholders of Paramount
from a financial point of view.
 
     The Paramount Board, by unanimous vote, (i) approved the November 6
Amendment, (ii) determined that the amended Second Viacom Offer and Second
Viacom Second-Step Merger were consistent with and in the furtherance of the
long-term business strategy of Paramount and, taken together, were fair to, and
in the best interests of, Paramount's stockholders, (iii) recommended approval
and adoption of the October 24 Merger Agreement, as amended by the November 6
Amendment, by Paramount's stockholders and (iv) agreed to recommend that holders
of Paramount Common Stock tender their shares pursuant to the Second Viacom
Offer.
 
     The Board of Directors of Viacom also met on November 6, 1993. At such
meeting, the Viacom Board of Directors, by unanimous vote, (i) determined that
the October 24 Merger Agreement, as amended by the November 6 Amendment, was
fair to, and in the best interests of, the stockholders of Viacom, (ii) approved
the October 24 Merger Agreement, as amended by the November 6 Amendment, and
(iii) authorized the increase in the per share consideration to be paid in the
Second Viacom Offer.
 
     After the meetings, the November 6 Amendment was executed, and Viacom
publicly announced the Second Viacom Offer and Second Viacom Second-Step Merger.
 
     On November 12, 1993, QVC amended the First QVC Offer to provide for the
purchase of 51% of the shares of Paramount Common Stock at a price of $90 per
share (the "Second QVC Offer"). QVC also stated its intention, if it acquired
51% of the shares of Paramount Common Stock pursuant to the Second QVC Offer, to
effect a second-step merger on revised terms (the "Second QVC Second-Step
Merger"). The revised terms of the Second QVC Second-Step Merger provided that
each share of Paramount Common Stock remaining after the consummation of the
Second QVC Offer would be exchanged for (i) 1.43 shares of QVC Common Stock and
(ii) 0.32 shares of a new series of cumulative convertible exchangeable
preferred stock of QVC (the "QVC Merger Preferred Stock"). In addition, at this
time Liberty Media terminated its participation as a co-bidder in the Second QVC
Offer and BellSouth Corporation ("BellSouth") joined QVC as a co-bidder.
 
                                       45

     At a meeting held on November 15, 1993, the Paramount Board considered the
terms of the Second QVC Offer and Second QVC Second-Step Merger, and the Second
Viacom Offer and Second Viacom Second-Step Merger, with its legal and financial
advisors. The Paramount Board considered, among other factors, the highly
conditional nature of the Second QVC Offer and the financing and other
uncertainties (including the then non-binding nature of BellSouth's commitments)
with respect to QVC's ability to consummate such offer. The Paramount Board also
received the written opinion of Lazard Freres that as of November 15, 1993 the
consideration to be received by Paramount's stockholders in the Second Viacom
Offer and the Second Viacom Second-Step Merger, taken together, were fair to the
stockholders of Paramount from a financial point of view.
 
     The Paramount Board unanimously determined that the Second QVC Offer was
not in the best interests of Paramount and its stockholders and recommended that
stockholders reject the Second QVC Offer and not tender any of their shares
pursuant to the Second QVC Offer.
 
     On November 24, 1993, the Delaware Chancery Court issued a preliminary
injunction (the "Preliminary Injuction") in connection with the Delaware
litigation commenced by QVC and certain stockholders of Paramount prohibiting
Paramount from amending the Rights Agreement to permit completion of the pending
Second Viacom Offer, and denying Viacom the ability to exercise its rights
pursuant to the amended stock option agreement of Viacom and Paramount (as
amended, the "Amended Stock Option Agreement"). However, the Chancery Court
upheld the validity of the $100 million termination fee payable to Viacom.
 
     The Preliminary Injunction was appealed by Viacom and Paramount to the
Delaware Supreme Court. On December 9, 1993, the Delaware Supreme Court issued
an order (the "Order") which (i) affirmed the Preliminary Injunction and (ii)
remanded the proceeding to the Delaware Chancery Court for proceedings
consistent with the Order. By letter dated December 10, 1993, Paramount's
attorneys advised the Delaware Chancery Court that the Paramount Board was to
meet on December 13, 1993 to consider how to comply with the Order and the prior
order and opinion of the Delaware Chancery Court.
 
     At a meeting held on December 13, 1993, the Paramount Board determined that
it was unable to take a position with respect to whether stockholders should
accept or reject either the Second QVC Offer or the Second Viacom Offer and
requested that Paramount stockholders take no action until they had been further
advised of the Paramount Board's positions. The Paramount Board also adopted
procedures (the "Bidding Procedures") for the purpose of considering proposals
to acquire Paramount. From December 14-17, 1993, a number of letters pertaining
to the Bidding Procedures, including proposals for their modification, were
exchanged between Paramount's financial and legal advisors and the legal
advisors of Viacom and QVC.
 
     The Board of Directors of Viacom held a meeting on December 20, 1993. At
such meeting, the Viacom Board, by unanimous vote, approved a proposed exemption
agreement (the "Viacom Exemption Agreement") setting forth the Bidding
Procedures to be followed by Viacom in connection with the Second Viacom Offer.
 
     Pursuant to the Bidding Procedures, on December 20, 1993, Viacom and QVC
each submitted acquisition proposals to the Paramount Board. Viacom's proposal
consisted of a continuation of the Second Viacom Offer and Second Viacom
Second-Step Merger. QVC's proposal consisted of a revision of the Second QVC
Offer to provide for the purchase of 50.1% of the outstanding Paramount shares,
on a fully diluted basis, at $92 per share (the "Third QVC Offer") to be
followed by a revised second-step merger (the "Third QVC Second-Step Merger") in
which each remaining share would be converted into the right to receive (i) 1.43
shares of QVC Common Stock, (ii) 0.32 shares of a new series of 6% cumulative
non-convertible exchangeable preferred stock (the "New QVC Merger Preferred
Stock") and (iii) 0.32 ten-year warrants to purchase QVC Common Stock.
 
     At a meeting held on December 21 and 22, 1993, the Paramount Board
considered (i) the events that had transpired since the Paramount Board's last
meeting on December 13, 1993 and (ii) presentations from the Paramount Board's
legal and financial advisors with respect to each of the
                                       46

proposals. The Paramount Board also received the written opinion of Lazard
Freres, dated December 21, 1993, stating that as of such date the aggregate
consideration payable to Paramount stockholders in the Third QVC Offer and Third
QVC Second-Step Merger, taken together, (a) was fair to Paramount stockholders
from a financial point of view and (b) was superior from a financial point of
view to the aggregate consideration payable in the Second Viacom Offer and the
Second Viacom Second-Step Merger, taken together.
 
     The Paramount Board thereupon unanimously (i) approved the terms of a
merger agreement (which included a form of exemption agreement; the "QVC Merger
Agreement") and a voting agreement between QVC and its principal stockholders,
(ii) determined that the Third QVC Offer and Third QVC Second-Step Merger, taken
together, were fair to and in the best interests of Paramount's stockholders,
(iii) recommended approval and adoption of the QVC Merger Agreement by
Paramount's stockholders and (iv) recommended that holders of Paramount Common
Stock tender such shares pursuant to the Third QVC Offer. The Paramount Board
also (a) recommended that stockholders reject the Second Viacom Offer and not
tender any of their shares pursuant to the Second Viacom Offer, (b) authorized
the termination of the October 24 Merger Agreement, as amended by the November 6
Amendment, and (c) approved the terms of the Viacom Exemption Agreement (which
included a form of merger agreement).
 
     The QVC Merger Agreement and the Viacom Exemption Agreement incorporated
the Bidding Procedures previously adopted by the Paramount Board. In addition,
the QVC Merger Agreement (as well as the form of merger agreement annexed to the
Viacom Exemption Agreement) (i) permitted Paramount to terminate such agreement
in order to accept a transaction that offered better value and (ii) contained no
stock option, asset lock-up, termination fee, expense reimbursements or other
provisions that could deter a higher offer for Paramount.
 
     After the meeting on December 22, Paramount terminated the October 24
Merger Agreement, as amended by the November 6 Amendment, and the QVC Merger
Agreement and the Viacom Exemption Agreement were executed by the respective
parties.
 
     On January 6, 1994, the Viacom Board of Directors met to consider a
proposal to amend and supplement the Second Viacom Offer. At such meeting, the
Viacom Board of Directors (i) determined that the Second Viacom Offer, as
amended as described below, was fair to and in the best interests of the
stockholders of Viacom and (ii) authorized the proposed amendment and supplement
to the Second Viacom Offer.
 
     Pursuant to the Bidding Procedures, on January 7, 1994, Viacom amended the
terms of the Second Viacom Offer to provide for the purchase of 50.1% of the
outstanding shares of Paramount Common Stock, on a fully diluted basis, at $105
per share (the "Third Viacom Offer") and amended the terms of the Second Viacom
Second-Step Merger to provide for the exchange of (i) 0.93065 shares of Viacom
Class B Common Stock and (ii) 0.30408 shares of Viacom Merger Preferred Stock
for each share remaining after consummation of the Third Viacom Offer (the
"Third Viacom Second-Step Merger").
 
     At a meeting held on January 12, 1994, the Paramount Board considered
presentations from its legal and financial advisors with respect to the Third
Viacom Offer and Third Viacom Second-Step Merger, as well as the Third QVC Offer
and Third QVC Second-Step Merger. The Paramount Board also received the written
opinion of Lazard Freres, dated January 12, 1994, stating that as of such date
the aggregate consideration payable to Paramount stockholders in the Third QVC
Offer and Third QVC Second-Step Merger, taken together, (i) was fair to
Paramount stockholders from a financial point of view and (ii) was superior from
a financial point of view to the aggregate consideration payable to Paramount
stockholders in the Third Viacom Offer and Third Viacom Second-Step Merger,
taken together.
 
     The Paramount Board unanimously (a) recommended that stockholders reject
the Third Viacom Offer and not tender any of their shares pursuant to the Third
Viacom Offer and (b) reaffirmed (1) its determination that the Third QVC Offer
and Third QVC Second-Step Merger, taken together, were
                                       47

fair to and in the best interests of Paramount's stockholders and (2) its
recommendation that holders of Paramount shares tender such shares pursuant to
the Third QVC Offer.
 
     On January 17, 1994, the Viacom Board of Directors met to consider a
proposed amendment and supplement to the Third Viacom Offer. The Viacom Board of
Directors, at such meeting, by unanimous vote, (i) determined that the Third
Viacom Offer, as amended and supplemented as described below, was fair to, and
in the best interests of, the stockholders of Viacom and (ii) authorized the
proposed amendment and supplement to the Third Viacom Offer.
 
   
     Pursuant to the Bidding Procedures, on January 18, 1994, Viacom increased
the per share purchase price in the Third Viacom Offer to $107 (sometimes
hereinafter referred to as the "Offer" and sometimes as the "Fourth Viacom
Offer") and amended the terms of the Third Viacom Second-Step Merger to provide
for the exchange of (i) 0.93065 shares of Viacom Class B Common Stock, (ii)
0.30408 shares of Viacom Merger Preferred Stock, (iii) 0.93065 CVRs and (iv) 0.5
Viacom Three-Year Warrants for each Paramount share remaining after consummation
of the Fourth Viacom Offer (the "Fourth Viacom Second-Step Merger").
    
 
     At a meeting held on January 21, 1994, the Paramount Board considered
presentations from its legal and financial advisors with respect to the Fourth
Viacom Offer and Fourth Viacom Second-Step Merger, as well as the Third QVC
Offer and Third QVC Second-Step Merger. The Paramount Board also received the
written opinion of Lazard Freres dated January 21, 1994 stating that as of such
date (i) the aggregate consideration payable to Paramount stockholders in the
Fourth Viacom Offer and Fourth Viacom Second-Step Merger, taken together, was
fair to Paramount stockholders from a financial point of view, (ii) the
aggregate consideration payable to Paramount stockholders in the Third QVC Offer
and Third QVC Second-Step Merger, taken together, was fair to Paramount
stockholders from a financial point of view and (iii) the aggregate
consideration payable to Paramount stockholders in the Fourth Viacom Offer and
Fourth Viacom Second-Step Merger, taken together, was marginally superior from a
financial point of view to the aggregate consideration payable to Paramount
stockholders in the Third QVC Offer and Third QVC Second-Step Merger, taken
together.
 
     The Paramount Board unanimously (i) approved the terms of a new merger
agreement with Viacom (the "January 21 Merger Agreement") and the Paramount
Voting Agreement, (ii) determined that the Fourth Viacom Offer and Fourth Viacom
Second-Step Merger, taken together, were fair to and in the best interests of
Paramount's stockholders, (iii) recommended approval and adoption of the January
21 Merger Agreement by Paramount's stockholders and (iv) recommended that
holders of Paramount shares tender such shares pursuant to the Fourth Viacom
Offer. The Paramount Board also unanimously (a) recommended that stockholders
reject the Third QVC Offer and not tender any of their shares pursuant to such
offer and (b) authorized the termination of the QVC Merger Agreement.
 
     After the meeting on January 21, 1994, Paramount terminated the QVC Merger
Agreement and entered into the January 21 Merger Agreement, the Paramount Voting
Agreement and an exemption agreement with QVC (the "QVC Exemption Agreement"),
all in substantially the form previously agreed to by the respective parties on
December 22, 1993.
 
   
     On February 1, 1994, in anticipation of the submission on such date of
final bids under the Bidding Procedures, the Board of Directors of Viacom
considered a proposed amendment and supplement to the Fourth Viacom Offer
pursuant to which Viacom would revise the package of securities to be issued in
the Fourth Viacom Second-Step Merger. The Viacom Board of Directors received
presentations from the management of Viacom, Smith Barney and its legal advisors
with respect to the Fourth Viacom Offer and Fourth Viacom Second-Step Merger and
the proposed amendments thereto. The Viacom Board of Directors also received the
written opinion of Smith Barney that the Offer and the Paramount Merger, as
revised by the proposed amendment and supplement, taken together were fair, from
a financial point of view, to Viacom and its stockholders. The opinion of Smith
Barney is set forth in full as Annex III of this Proxy Statement/Prospectus. See
"--Opinions of Financial Advisors." The Viacom Board of Directors, by unanimous
vote (with Mr. H. Wayne Huizenga abstaining)
                                       48
    

(i) determined that the Offer, as amended and supplemented, was fair to, and in
the best interests of, the stockholders of Viacom and (ii) authorized the Offer.
 
     Pursuant to the Bidding Procedures, on February 1, 1994, both Viacom and
QVC submitted their final proposals for the acquisition of Paramount. Viacom, in
proposing the Offer and the Paramount Merger, did not alter the terms of the
Fourth Viacom Offer but revised the Fourth Viacom Second-Step Merger to provide
for the exchange of (i) 0.93065 shares of Viacom Class B Common Stock, (ii)
0.93065 CVRs, (iii) 0.5 Viacom Three-Year Warrants, (iv) 0.3 Viacom Five-Year
Warrants and (v) $17.50 in principal amount of Viacom Merger Debentures for each
Paramount share remaining after consummation of the Offer. QVC increased the per
share purchase price in the Third QVC Offer to $104 (the "Fourth QVC Offer") and
amended the terms of the Third QVC Second-Step Merger to provide for the
exchange of (a) 1.2361 shares of QVC Common Stock, (b) 0.2386 shares of New QVC
Merger Preferred Stock and (c) 0.32 ten-year warrants for each Paramount share
remaining after consummation of the Fourth QVC Offer (the "Fourth QVC
Second-Step Merger"). Both the Offer and the Fourth QVC Offer were scheduled to
expire at midnight on February 14, 1994.
 
     At a meeting held on February 4, 1994, the Paramount Board considered
presentations from its legal and financial advisors with respect to the Offer
and the Paramount Merger, as well as the Fourth QVC Offer and Fourth QVC
Second-Step Merger. The Paramount Board also received the written opinion of
Lazard Freres dated February 4, 1994 stating that as of such date (i) the Viacom
Transaction Consideration was fair to Paramount stockholders from a financial
point of view, (ii) the QVC Transaction Consideration was fair to Paramount
stockholders from a financial point of view and (iii) the Viacom Transaction
Consideration was marginally superior from a financial point of view to the QVC
Transaction Consideration.
 
     The Paramount Board unanimously (i) approved the terms of the February 4
Merger Agreement (which amended and restated the January 21 Merger Agreement to
provide for the terms of the Offer and the Paramount Merger), (ii) determined
that the Offer and the Paramount Merger, taken together, were fair to, and in
the best interests of, Paramount's stockholders, (iii) recommended approval and
adoption of the February 4 Merger Agreement and (iv) recommended that holders of
shares of Paramount Common Stock tender such shares pursuant to the Offer. The
Paramount Board also unanimously recommended that stockholders reject the Fourth
QVC Offer and not tender any of their shares pursuant to such offer. After the
meeting on February 4, 1994, Paramount entered into the February 4 Merger
Agreement.
 
     At the request of Mr. Donald Oresman of Paramount on February 14, 1994,
Lazard Freres delivered a letter, dated February 14, 1994, to Mr. Oresman
advising him that, as of February 14, 1994, Lazard Freres reaffirmed its written
opinion addressed to the Paramount Board, dated February 4, 1994.
 
     As of midnight on February 14, 1994, approximately 74.6% of the outstanding
Paramount shares had been tendered pursuant to the Offer and not withdrawn while
approximately 8.5% of the outstanding Paramount shares were validly tendered
pursuant to the Fourth QVC Offer and not withdrawn. As a result, pursuant to the
Bidding Procedures, on February 15, 1994 Viacom waived certain conditions to the
Offer and extended the offer until March 1, 1994 and QVC terminated the Fourth
QVC Offer.
 
     By unanimous written consent, effective March 1,1994 the Paramount Board
approved an amendment to the Rights Agreement providing that the consummation of
the Offer would not cause the rights under the Rights Agreement (the "Rights")
to become exercisable. Immediately after midnight on March 1, 1994, all
conditions to the Offer were deemed to have been satisfied and Viacom accepted
for payment 61,657,432 of the shares of Paramount Common Stock validly tendered
and not withdrawn pursuant to the Offer.
 
   
     On May 26, 1994, the Reconstituted Board of Directors of Paramount and the
Viacom Board each approved the May Amendment. The principal purposes of the May
Amendment were to (i) add Merger Subsidiary as a party, (ii) provide for the
merger of Merger Subsidiary with and into Paramount
                                       49
    

   
(rather than Paramount into Viacom) and (iii) provide for the treatment of
Paramount Stock Options in the Paramount Merger as described under "The
Paramount Merger--Effect on Employee Benefit Stock Plans."
    
 
PURPOSE AND STRUCTURE OF THE PARAMOUNT MERGER
 
     Viacom and NAI's purpose for the Paramount Merger is to acquire beneficial
ownership of 100% of the equity of Paramount for the reasons described in
"--Background of the Paramount Merger" and "--Reasons for the Paramount Merger;
Recommendation of the Board of Directors; Fairness of the Transaction." The
Paramount Merger is structured as a merger because it ensures that Viacom will
acquire beneficial ownership of 100% of the equity of Paramount in a single
transaction. Viacom's acquisition of the shares of Paramount Common Stock owned
by the holders of Paramount Common Stock other than Viacom and its subsidiaries
will enable Viacom to realize the benefits and bear the risks of complete
ownership of Paramount including the opportunity to (i) facilitate inter-company
activity between Viacom and Paramount, (ii) permit combinations of management
and other resources of Viacom and Paramount, including, among other things, the
consolidation and rationalization of Paramount's business and operating
structure with a view to improving operations and reducing expenses of Viacom
and Paramount (see "--Certain Effects of the Paramount Merger; Operations After
the Paramount Merger"), (iii) enable Paramount's management (or any successors
thereto) to devote itself to building long-term values for Paramount without
concern that such efforts may adversely affect short-term results and the market
price for Paramount Common Stock, and (iv) eliminate the need for Paramount to
comply with the reporting requirements of the Exchange Act, to maintain
separately audited financial statements and to maintain its current listing on
the NYSE. In addition, Viacom believes that if Paramount were to continue to
have public stockholders, Paramount would require more management time and
attention than it would as a wholly owned subsidiary of Viacom.
 
     The Paramount Merger will be effected by causing a wholly owned subsidiary
of Viacom to merge with and into Paramount. As a result, Paramount will be the
corporation surviving the Paramount Merger and will become a wholly owned
subsidiary of Viacom after the Paramount Effective Time.
 
REASONS FOR THE PARAMOUNT MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS;
FAIRNESS OF THE TRANSACTION

   
     Viacom. At the meetings of the Viacom Board of Directors described above in
"--Background of the Paramount Merger," the Viacom Board received presentations
from Viacom's management regarding the business and prospects of Paramount. The
Viacom Board also received further presentations regarding, and reviewed the
terms of, the February 4 Merger Agreement and the Offer, as amended and
supplemented, with members of Viacom's management and its financial and legal
advisors. In making its determination set forth below, the Viacom Board reviewed
with Smith Barney its financial analyses, with a view to understanding the bases
of its analyses and opinions, and reviewed and discussed with management the
results of management's due diligence investigations, the business opportunities
created by a combined Viacom-Paramount and risks associated with the
transactions. By a unanimous vote (with one director abstaining) of directors at
a special meeting of the Board of Directors of Viacom held on February 1, 1994,
the Viacom Board of Directors determined that the Offer and the Paramount
Merger, taken together, are fair to and in the best interests of Viacom and its
stockholders, approved the Offer and the Paramount Merger and resolved to
recommend that the stockholders of Viacom vote FOR approval of the February 4
Merger Agreement and related transactions.
    
 
     In reaching its conclusion to enter into the February 4 Merger Agreement,
the Viacom Board of Directors considered the following material factors:
 
          1. The fact that Paramount and Viacom have businesses that are highly
     complementary to each other and the fact that such businesses consist of
     many well-known entertainment and media franchises; in particular, that:
 
             . the combination of Paramount and Viacom will bring together the
        creative talent, intellectual property, managerial resources and
        trademarks of Paramount and Viacom;
 
                                       50

             . each company would add enhanced and complementary distribution
        capabilities;
 
             . the combination of Paramount with Viacom would be able to
        penetrate markets and achieve business goals that would otherwise be
        more difficult to achieve; and
 
             . as a result of all of the foregoing, combining Paramount with
        Viacom would create a company better positioned than each of the
        companies would be separately to adapt and benefit from technological
        and other developments in the distribution and form of entertainment
        programming and to successfully meet competitive challenges;
 
          2. The terms of the proposed transaction including the terms of the
     securities to be issued in the Paramount Merger, and the fact that the
     Viacom Board believes that for the reasons discussed in paragraphs 1, 3, 4
     and 5, the prospects for earnings before interest, taxes, depreciation and
     amortization and earnings per share will be enhanced by the Paramount
     Merger;
 
          3. The financial condition of a combined Viacom and Paramount, the
     impact of the Paramount Merger on the ability of the resultant entity to
     pursue further growth through acquisition or the development of new or
     complementary businesses and the anticipated ability of a combined Viacom
     and Paramount to meet its financial obligations;
 
          4. The fact that Viacom and Paramount are each pursuing international
     business strategies and that the combination is expected to result in a
     strongly enhanced international presence and to enable the sharing of
     knowledge of international markets;
 
          5. The fact that the combination of Paramount and Viacom is expected
     to result in significant opportunities for increased revenues from (i)
     cross-promotion and utilization of Viacom's and Paramount's well-known
     brand names, such as using Viacom's Showtime, MTV and Nickelodeon brands to
     enhance Paramount's live entertainment businesses, (ii) the utilization of
     distribution capabilities of each company to distribute products of the
     other (for example, the distribution of Paramount's theatrical motion
     picture library on an existing or new cable network of Viacom or the
     development of a broadcast network) and (iii) the development of new
     businesses based upon the management and creative skills of a combined
     Viacom and Paramount (for example, the development of retail stores based
     on the combined characters and trademarks of Viacom and Paramount); and the
     fact that Viacom and Paramount could achieve cost reductions through the
     combination of similar businesses and economies of scale;
 
   
          6. Smith Barney's opinion to the effect that, as of February 1, 1994,
     the proposed financial terms of the Offer and the Paramount Merger, taken
     together, were fair, from a financial point of view, to Viacom and its
     stockholders, whether or not the Blockbuster Merger is consummated (in this
     respect, while the Viacom Board of Directors did not explicitly adopt Smith
     Barney's financial analyses, the Viacom Board of Directors took such
     analyses into account in its overall evaluation of the Offer and Paramount
     Merger); and
    
 
          7. The fact that NAI is the owner of approximately 85% of the
     outstanding voting stock of Viacom; the fact that, as a result of the
     proposed Paramount Merger, NAI would continue to hold approximately 85% of
     the outstanding voting stock of Viacom and as a result of the proposed
     Mergers, NAI would continue to hold approximately 61% of the outstanding
     voting stock of the combined company; and the fact that the Paramount
     Merger Consideration consists of no shares of Viacom Class A Common Stock.
     In this regard, the Viacom Board of Directors also noted that the economic
     interests of NAI and Viacom's public stockholders are aligned in connection
     with the Offer and the Paramount Merger.
 
          8. Certain risks associated with the proposed transaction, as set
     forth under "Certain Considerations."
 
     The Viacom Board considered that the combination of Viacom and Paramount
with Blockbuster would provide additional business opportunities of the kind
specified above. However, the Viacom Board concluded that, even without
Blockbuster, the combination of Viacom with Paramount could be financed on a
reasonable basis and would result in all of the benefits described above.
 
                                       51

     In view of the wide variety of factors considered by the Viacom Board, the
Viacom Board did not find it practicable to quantify or otherwise attempt to
assign relative weights to the specific factors considered in making its
determination. However, as a general matter, the Viacom Board believed that the
factors discussed in paragraphs 1, 2, 4, 5 and 6 supported its decision to
approve the Offer and the Paramount Merger and outweighed the risks associated
therewith referred to in paragraph 8.
 
   
     Viacom believes that the consideration paid in the Offer and the Paramount
Merger, taken together, is fair to the stockholders of Paramount. Viacom's
belief is based upon the fact that the terms of the Offer and the February 4
Merger Agreement were the product of arm's-length negotiations between Viacom,
Paramount and their respective financial and legal advisors and were approved by
the Paramount Board at a time when none of Viacom, NAI or Sumner M. Redstone (or
any of their affiliates) was a member of the Paramount Board; that the Paramount
Board received a fairness opinion from Lazard Freres, which was reaffirmed on
February 14, 1994; and that the terms of the Offer and Paramount Merger were
agreed to following an extensive public bidding process. While the Paramount
Merger does not require the approval of a majority of the unaffiliated
stockholders of Paramount, Viacom believes that the Paramount Merger is
procedurally fair to Paramount stockholders for the reasons set forth above. In
addition, as the terms of the Paramount Merger were disclosed to Paramount
stockholders at the time they made their decision to tender their shares, the
Paramount unaffiliated stockholders in effect selected the Paramount Merger by
virtue of tendering into the Offer.
    
 
   
     On May 26, 1994, the Viacom Board approved the May Amendment.
    
 
   
     THE BOARD OF DIRECTORS OF VIACOM RECOMMENDS THAT HOLDERS OF VIACOM CLASS A
COMMON STOCK VOTE FOR APPROVAL OF THE PARAMOUNT MERGER AGREEMENT AND RELATED
TRANSACTIONS.
    
 
     Paramount. At its February 4, 1994 meeting, the Paramount Board considered
presentations from its legal and financial advisors with respect to the Offer
and the Paramount Merger, as well as the Fourth QVC Offer and the Fourth QVC
Second-Step Merger. It unanimously (i) approved the terms of the February 4
Merger Agreement and authorized its execution and delivery, (ii) determined that
the Offer and the Paramount Merger, taken together, were fair to, and in the
best interests of, Paramount's stockholders, (iii) recommended approval and
adoption of the February 4 Merger Agreement by Paramount's stockholders and (iv)
recommended that holders of shares of Paramount Common Stock tender their shares
pursuant to the Offer. The Paramount Board also unanimously recommended that
stockholders reject the Fourth QVC Offer and not tender any of their shares
pursuant to the Fourth QVC Offer.
 
   
     The Paramount Board, in reaching its conclusions, gave consideration to the
following material factors:
    
 
          (i) The presentation by Lazard Freres to the Paramount Board and its
     written opinion dated February 4, 1994 stating that as of such date (a) the
     Viacom Transaction Consideration was fair to Paramount stockholders from a
     financial point of view, (b) the QVC Transaction Consideration was fair to
     Paramount stockholders from a financial point of view and (c) the Viacom
     Transaction Consideration was marginally superior to the QVC Transaction
     Consideration from a financial point of view;
 
          (ii) The Paramount Board's determination, taking into account Lazard
     Freres' presentation and written opinion, that the Offer and the Paramount
     Merger, taken together, represented the best value available under the
     circumstances to Paramount stockholders. This determination was also based
     upon the Paramount Board's view that the Viacom Transaction Consideration
     has a more certain value than the QVC Transaction Consideration because (a)
     the Viacom Transaction Consideration contains a larger percentage of cash
     and securities readily susceptible to valuation than the QVC Transaction
     Consideration and (b) the CVRs to be issued in the Paramount Merger would
     afford a degree of value assurance protection to Paramount stockholders
     with respect to the Viacom Class B Common Stock to be issued in the
     Paramount Merger;
 
                                       52

          (iii) The terms and provisions of the February 4 Merger Agreement,
     including the following:
 
             (a) The bidding procedures incorporated in the February 4 Merger
        Agreement (and in the QVC Exemption Agreement) that were designed to
        remove the coercive element from any offer by QVC or Viacom and to
        provide stockholders with a meaningful choice between a tender offer
        from QVC or Viacom;
 
             (b) Paramount's right to terminate the February 4 Merger Agreement
        in order to accept a transaction that offers better value; and
 
             (c) The absence of any stock option, asset lock-up, termination
        fee, expense reimbursements or other provisions that could deter a
        higher offer for Paramount; and
 
          (iv) The conditions to the Offer and the Paramount Board's
     determination that all such conditions had been satisfied or could
     reasonably be expected to be satisfied by the expiration date of the Offer.
 
   
     Each of the Viacom Board and the Paramount Board asked extensive questions
of its respective financial advisor concerning all aspects of the Offer and the
Paramount Merger and, in the context of the Paramount Board, the QVC Merger,
including questions concerning valuation techniques and comparative results.
    
 
   
     On May 26, 1994, the Reconstituted Paramount Board of Directors approved
the May Amendment.
    
 
   
     In the context of the auction of Paramount, the Paramount Board was faced
with competing offers from Viacom and QVC, each of which contemplated a first
step cash tender offer for a majority of Paramount stock which would thereby
permit consummation of a specified second step merger without any vote of the
unaffiliated shareholders of Paramount. The Paramount Board approved the
Paramount Merger as part of its recommendation to the stockholders of Paramount
that they tender their shares to Viacom pursuant to the Offer. Since the terms
of the second step merger were disclosed to the Paramount stockholders at the
time they made their decision to tender their shares, the Paramount unaffiliated
stockholders in effect selected the Paramount Merger by virtue of tendering into
the Offer.
    
 
OPINIONS OF FINANCIAL ADVISORS
 
   
     Smith Barney has delivered its written opinion to the Viacom Board that as
of February 1, 1994, the financial terms of the Offer and the Paramount Merger,
taken together, were fair, from a financial point of view, to Viacom and its
stockholders, whether or not the Blockbuster Merger is consummated. VIACOM
STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY FOR ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITS OF REVIEW BY SMITH BARNEY. Smith Barney did
not make or seek to obtain an appraisal of Viacom's, Paramount's or
Blockbuster's assets in rendering its opinion. No limitations were imposed by
the Viacom Board upon Smith Barney with respect to the investigations made or
procedures followed by it in rendering its opinion. Smith Barney has not been
requested to update its opinion to the date of this Proxy Statement/Prospectus.
    
 
   
     Copies of the February 1, 1994 opinion of Smith Barney and related written
presentation to the Viacom Board have been filed as exhibits to the Schedule
13E-3 filed with the Commission with respect to the Paramount Merger and may be
inspected and copied, and obtained by mail, from the Commission as set forth in
"Available Information" and will be made available for inspection and copying at
the principal executive offices of Viacom International at 1515 Broadway, New
York, New York 10036 during regular business hours by any interested public
stockholder of Paramount or his or her representative who has been so designated
in writing.
    
 
                                       53

   
     THE FULL TEXT OF THE OPINION OF SMITH BARNEY, WHICH SETS FORTH ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY SMITH BARNEY, IS
ALSO ATTACHED HERETO AS ANNEX III TO THIS PROXY STATEMENT/PROSPECTUS. SMITH
BARNEY'S OPINION IS DIRECTED ONLY TO THE FINANCIAL TERMS OF THE OFFER AND
PARAMOUNT MERGER TAKEN TOGETHER AND DOES NOT (I) ADDRESS THE FINANCIAL TERMS OF
THE OFFER OR THE PARAMOUNT MERGER INDEPENDENT OF THE OTHER OR (II) CONSTITUTE A
RECOMMENDATION TO ANY VIACOM STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE
AT THE VIACOM SPECIAL MEETING. THE SUMMARY OF THE OPINION OF SMITH BARNEY SET
FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
    
 
     In arriving at its opinion, Smith Barney (i) reviewed the Offer; (ii)
reviewed the January 21 Merger Agreement in the form presented to the Viacom
Board; (iii) met with certain senior officers of Viacom, Blockbuster and
Paramount to discuss the business, operations, assets, financial condition and
prospects of their respective companies; (iv) examined certain publicly
available business and financial information relating to Viacom, Blockbuster and
Paramount, and certain financial forecasts and other data for Viacom,
Blockbuster and Paramount which were provided to Smith Barney by the senior
management of Viacom, Blockbuster and Paramount, respectively, which are not
publicly available; (v) took into account certain long-term strategic benefits
of the Paramount Merger and the Blockbuster Merger, both operational and
financial, that were described to Smith Barney by Viacom, Blockbuster and
Paramount senior management; and (vi) reviewed the financial terms of the Offer
and the Paramount Merger as set forth in the revised Offer to Purchase of Viacom
used in connection with the Offer and of the Blockbuster Merger as set forth in
the Blockbuster Merger Agreement, in relation to, among other things, current
and historical market prices and trading volumes of Viacom Common Stock,
Paramount Common Stock and Blockbuster Common Stock; the earnings and book value
per share of each of Viacom, Paramount and Blockbuster; and the capitalization
and financial condition of each of Viacom, Paramount and Blockbuster. Smith
Barney also considered, to the extent publicly available, the financial terms of
certain other business combination transactions which Smith Barney considered
relevant in evaluating the Offer and Paramount Merger and the Blockbuster Merger
and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies that they considered
relevant in evaluating Viacom, Blockbuster and Paramount. Smith Barney also
evaluated the pro forma financial impact of the Offer and Paramount Merger and
of the Blockbuster Merger on Viacom. In addition to the foregoing, Smith Barney
conducted such other analyses and examinations and considered such other
financial, economic and market criteria as it deemed necessary in arriving at
its opinion.
 
   
     In arriving at its opinion, Smith Barney relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise discussed with it,
including certain financial forecasts and other information prepared by Viacom
management and set forth in the February 1, 1994 Viacom Board Presentation filed
as an exhibit to the Schedule 13E-3 filed with the Commission with respect to
the Paramount Merger. With respect to financial forecasts and other information
provided to or otherwise discussed with it, Smith Barney assumed that such
forecasts and other information were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the respective senior
managements of Viacom, Blockbuster and Paramount as to the expected future
financial performance of Viacom, Blockbuster and Paramount. Smith Barney also
relied upon the views of the management of Viacom, Paramount and Blockbuster in
assuming that certain long-term strategic benefits, both operational and
financial, will result from each of the Offer, the Paramount Merger and the
Blockbuster Merger. Smith Barney expressed no opinion as to what the value of
the Paramount Merger Consideration will be when issued to Paramount stockholders
pursuant to the Paramount Merger or the price at which the Paramount Merger
Consideration will trade subsequent to the Paramount Merger. Smith Barney has
not made or been provided with an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Viacom, Blockbuster or
Paramount nor have they made any physical inspection of the properties or assets
of Viacom, Blockbuster or Paramount. Smith Barney's opinion was based upon
                                       54
    

financial, stock market and other conditions and circumstances existing and
disclosed to it as of the date of its opinion.
 
February 1, 1994 Viacom Board Presentation
 
     At the February 1, 1994 meeting of the Viacom Board of Directors, Smith
Barney presented information and materials relating to the following matters:
(i) the proposed Offer and Paramount Merger, (ii) the pro forma impact to Viacom
of two different business combination scenarios (a combined Viacom and Paramount
and a combined Viacom, Paramount and Blockbuster), and (iii) quantitative
analysis relating to the foregoing matters.
 
                       THE OFFER AND THE PARAMOUNT MERGER
 
  Transaction Overview
 
     Smith Barney presented to the Viacom Board a summary of the Offer and
Paramount Merger, including the following:
 
     . An overview of the key elements of the Offer and the Paramount Merger.
 
   
     . A comparison of the per share consideration at face value ($86.28
compared to $83.46) and trading value ($84.17 compared to $80.30) of the Fourth
Viacom Offer and the Third Viacom Offer.
    
 
   
     . An overview of the aggregate consideration at face value (approximately
$10.53 billion) and trading value (approximately $10.27 billion) of the Offer.
    
 
     . A summary of the sources of financing for the Paramount Merger.
 
  Viacom Merger Debentures
 
     . A summary list of the terms of the Viacom Merger Debentures and the
advantages of their use in the Paramount Merger.
 
   
     The advantages and disadvantages of the Viacom Merger Debentures, as
compared to the use of the Viacom Merger Preferred Stock included in the Third
Viacom Second-Step Merger, were discussed by Smith Barney as follows:
    
 
   
     . Lower after-tax cost equivalent Viacom Merger Debentures than Viacom
Merger Preferred Stock for the first three years.
    
 
   
     . Issuing Viacom Merger Debentures would allow Viacom to take advantage of
greater leverage capability if Blockbuster Merger is consummated.
    
 
   
     . Viacom Merger Debentures estimated to trade at par value versus 20%
discount for the Viacom Merger Preferred Stock under then existing market
conditions.
    
 
   
     The advantages and disadvantages of the Viacom Exchange Debentures were not
discussed with the Viacom Board by Smith Barney.
    
 
   
  Valuation Analyses
    
 
   
     Smith Barney also reviewed with the Viacom Board the analyses discussed
below relating to the valuation of Paramount which reflected the significant
changes that occurred in the valuation being placed on the entertainment
companies since Viacom and Paramount announced the Original Merger in September
1993.
    
 
                                       55

     Public and Precedent Private Market Breakdown
 
   
     Smith Barney reviewed with the Viacom Board the public and private market
breakdown analysis of Paramount. Based on the comparable company and selected
transaction analyses discussed below, Smith Barney explained to the Viacom Board
that this analysis consisted of the valuation of each of Paramount's significant
component business segments, which valuation consists of an analysis of the
multiples at which companies in lines of businesses comparable to such Paramount
business segments trade in the public market. The two industries Smith Barney
analyzed were the entertainment and publishing industries, however, such
analyses were extended into more specific segments of these industries. The
entertainment industry was divided into the film/entertainment, movie theaters,
cable programming and broadcasting segments. The publishing industry was
segmented into educational, consumer and professional publishing. The
combination of the selected comparable company and selected comparable
transactions analyses generated an equity value range of approximately $6.5
billion to $11.2 billion in the aggregate, or approximately $53.13 to $90.95 per
share.
    

   
     Analysis of Public Trading Valuation of Selected Comparable Companies
    
 
     Smith Barney presented to the Viacom Board an analysis of the public
trading valuation of selected comparable companies, including share price,
market value, adjusted market value, multiples of market value and multiples of
adjusted market value. Smith Barney also discussed a five-year estimated
earnings per share growth for such selected comparable companies. All earnings
per share figures for the Comparable Companies were based on the consensus net
income estimates of selected investment banking firms and all earnings per share
estimates for Viacom and Paramount were based on internal estimates.
 
   
     Such comparable companies that Smith Barney examined included A.H. Belo
Corporation, Ackerly Communications, Inc., Capital Cities/ABC, Inc., Carmike
Cinemas, Inc., CBS Inc., Cineplex Odeon Corporation, Clear Channel
Communications, Inc., Gaylord Entertainment Co., Granite Broadcasting
Corporation, Harcourt General, Inc., Heritage Media Corporation, Houghton
Mifflin Company, International Family Entertainment, Inc., John Wiley & Sons,
Inc., King World Productions, Inc., Liberty Media Corporation, Marvel
Entertainment Group, Inc., McGraw Hill, Inc., Multimedia, Inc., New Line Cinema
Corporation, News Corporation Limited, Outlet Communications, Inc., Park
Communications Inc., Plenum Publishing Corporation, Reader's Digest Association,
Inc., Scholastic Corporations, Scripps Howard Broadcasting Co., The Walt Disney
Company, Thomas Nelson, Inc., Time Warner, Inc., Turner Broadcasting System,
Inc., United Television, Inc., Waverly, Inc. and Western Publishing Group, Inc.
    
 
     Smith Barney compared market values as multiples to, among other things,
latest 12 months after-tax cash flow, book value, and estimated calendar 1993
and 1994 net income for both the entertainment and publishing industries. The
respective multiples of the entertainment comparable companies were between the
following ranges: (i) latest 12 months after tax cash flow: 5.6x to 67.6x (with
a mean of 16.0x and a median of 13.7x); (ii) book value: 1.0x to 12.7x (with a
mean of 5.3x and a median of 3.9x); (iii) estimated 1993 calendar net income:
14.7x to 74.5x (with a mean of 26.0x and a median of 22.4x); and (iv) estimated
calendar 1994 net income: 13.5x to 46.4x (with a mean of 20.9x and a median of
19.1x). The respective multiples of the publishing comparable companies were
between the following ranges: (i) latest 12 months after tax cash flow: 6.3x to
44.6x (with a mean of 17.0x and a median of 11.4x); (ii) book value: 1.8x to
21.3x (with a mean of 5.1x and median of 3.4x); (iii) estimated 1993 calendar
net income: 16.1x to 44.0x) (with a mean of 23.3x and a median of 20.6x); and
(iv) estimated calendar 1994 net income: 11.7x to 32.7x (with a mean of 19.2x
and a median of 17.5x).
 
     Smith Barney compared adjusted market capitalization to, among other
things, historical net revenues; EBITDA and EBIT of the comparable companies.
The entertainment comparable companies for the respective multiples were between
the following ranges: (i) latest 12 months net revenue: 1.0x to 5.4x (with a
mean of 2.8x and a median of 2.4x); (ii) latest 12 months EBITDA: 6.9x to 31.6x
(with a
                                       56

mean of 12.1x and a median of 9.9x); and (iii) latest 12 months EBIT: 7.4x to
41.4x (with a mean of 18.2x and a median of 15.2x). The publishing comparable
companies for the respective multiples were between the following ranges: (i)
latest 12 months net revenue: 0.6x to 20.0x (with a mean of 3.6x and a median of
1.5x); (ii) latest 12 months EBITDA: 5.3x to 25.1x (with a mean of 12.2x and a
median of 10.7x); and (iii) latest 12 months EBIT: 6.7x to 34.4x (with a mean of
18.3x and a median of 16.1x).
 
     Smith Barney also presented an analysis of operating statistics of the
comparable companies including, among other things, operating margins (in
relation to EBITDA, EBIT and after tax cash flow), three year historical revenue
growth, three year average EBITDA and EBIT margins, and debt to capitalization
ratios, in each case as compared to Paramount.

   
     Analysis of Selected Transactions
    
 
     Smith Barney analyzed, among other things, the purchase prices as multiples
of net income and book value of the selected mergers and acquisitions and
transaction value as a multiple of revenues, EBITDA and total assets of the
selected mergers and acquisitions and compared these multiples with the
multiples of Paramount's performance implied by the Paramount merger
consideration. As set forth above under "Analysis of Public Trading Valuation of
Selected Comparable Companies," the analysis consisted of the valuation of each
of Paramount's significant component segments business, including the
entertainment and publishing industries.
 
     Such comparable transactions that Smith Barney reviewed included the
acquisition by Turner Broadcasting System, Inc. of New Line Cinema Corporation,
the acquisition by Turner Broadcasting System, Inc. of Castle Rock
Entertainment, the acquisition by Matsushita Acquisition Corporation of MCA
Inc., the acquisition by Sony USA Inc. of Columbia Pictures Entertainment Inc.,
the acquisition by Time Inc. of Warner Communications Inc., the acquisition by
McGraw Hill, Inc. of Macmillan-McGraw Hill School Publishing Co. and the
acquisition by General Cinema Corp. of Harcourt Brace Jovanovich, Inc.
 
     The multiples of net income and book value for the entertainment selected
transactions were between the following ranges: (i) latest 12 months net income:
27.3x to 49.9x (with a mean of 43.1x and a median of 28.4x); and (ii) book
value: 1.7x to 11.2x (with a mean of 7.8x and a median of 4.3x). The multiples
of revenues, EBITDA and total assets for the entertainment selected transactions
were between the following ranges: (i) revenues: 0.9x to 9.9x (with a mean of
2.9x and a median of 1.9x); (ii) EBITDA: 9.3x to 21.1x (with a mean of 14.5x and
a median of 13.3x; and (iii) total assets: 0.7x to 3.3x (with a mean of 1.6x and
a median of 1.1x). The multiples of net income and book value for the publishing
selected transactions were between the following ranges: (i) latest 12 months
net income: 13.8x to 56.9x (with a mean of 31.2x and a median of 29.4x); and
(ii) book value: 5.0x to 11.2x (with a mean of 7.3x and a median of 7.0x). The
multiples of revenues, EBITDA and total assets for the publishing selected
transactions were between the following ranges: (i) revenues: 1.1x to 2.7x (with
a mean and a median of 2.0x); (ii) EBITDA: 6.2x to 14.8x (with a mean of 10.3x
and a median of 10.0x); and (iii) total assets: 0.5x to 6.6x (with a mean of
2.7x and a median of 2.1x).
 
     No company, transaction or business used in the comparable company and
selected merger and acquisition transactions analyses as a comparison is
identical to Viacom or Paramount or the Viacom/Paramount merger. Accordingly, an
analysis of the results of the foregoing is not entirely mathematical; rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that can affect the
acquisition or public trading value of the comparable companies or the business
segment or company to which they are being compared.
 
     Discounted Cash Flow Analysis
 
     Smith Barney discussed with the Viacom Board its updated DCF analysis of
Paramount, identifying the difficulty of preparing long term forecasts with
respect to Paramount's business due to the "hit
                                       57

   
driven" nature of the business. Smith Barney also reviewed with the Viacom Board
certain projections contained in the DCF analysis and the assumptions underlying
such projections. In its DCF analysis, Smith Barney applied discount rates
ranging between 10% and 12%, and applied terminal value multiples ranging
between 14.0x and 16.0x EBITDA. This analysis generated an equity value range of
approximately $9.0 billion to $11.0 billion in the aggregate, or approximately
$73.22 to $89.53 per share.
    
 
     Smith Barney noted that each of the foregoing analyses may be subject to
change depending upon the availability of new information which may have the
effect of changing the ascribed valuation per share.
 
                                PRO FORMA IMPACT
 
     Smith Barney presented to the Viacom Board information concerning the pro
forma impact of the Paramount Merger, including the following:
 
  No CVR Liability
 
     . A pro forma summary of the impact of the Paramount Merger, assuming no
payment under the CVRs (with and without giving effect to the Blockbuster
Merger), on Viacom's pro forma stock price and cash flow per share, estimated
for the years 1994 to 1996, and the ratios of debt to EBITDA and EBITDA to net
interest and preferred dividend requirements, estimated for the years 1993 to
1996.
 
  CVR Liability
 
     . A pro forma summary of the impact of the Fourth Viacom Offer, assuming a
$10 per share CVR payment and of the impact of the Paramount Merger to Viacom
(with and without giving effect to the Blockbuster Merger) and assuming $12 and
$7 per share CVR payments on Viacom's pro forma stock price and cash flow per
share for the years 1994 to 1996, and the ratios of debt to EBITDA and EBITDA to
net interest and preferred dividends for the years 1993 to 1996.
 
   
     The pro forma impact summaries were based upon the detailed quantitative
analysis discussed below.
    
 
   
  Quantitative Analysis
    
 
     Combined Company
 
     Smith Barney presented to the Viacom Board an analysis of the Paramount
Merger (assuming consummation of the Blockbuster Merger (assuming the exercise
of VCRs resulting in a weighted average Class B exchange ratio of 0.66544), the
expiration of the CVRs without liability and the exercise of the Viacom
Warrants), that included:
 
     . A transaction structure and an analysis of the Paramount Merger setting
forth the kind and amount of securities to be issued in the Paramount Merger,
the source and use of funds and the per share consideration to be paid to
Paramount stockholders in the Paramount Merger. Smith Barney also discussed the
impact of the use of convertible preferred stock and convertible debt as part of
the consideration in the Paramount Merger.
 
     . An analysis of the pro forma impact of the Paramount Merger to Viacom
(with and without giving effect to the impact on Viacom of the sale of
convertible preferred stock to NYNEX and Blockbuster if the Offer and Paramount
Merger were not consummated), Paramount and Blockbuster on stand-alone bases,
including with respect to estimated 1994 revenue, cash flow and net income,
estimated 1993 and 1994 leverage and estimated earnings per share, cash flow per
share and EBITDA for 1993, 1994 and 1995. Smith Barney noted that the 1993 pro
forma EBITDA for the Paramount
                                       58

   
Merger and the Blockbuster Merger was $1,471 million (assuming no impact of
potential synergies, which are considered to be substantial in subsequent
years), the 1993 pro forma combined total debt was $9,763 million (includes
Viacom Merger Debentures issued to Paramount stockholders as part of the
Paramount Merger Consideration but does not include Viacom Preferred Stock
issued to NYNEX), and the 1993 pro forma combined total cash was $784 million
(includes estimated deductions for merger transaction fees). The
accretive/(dilutive) impact of the Paramount Merger (assuming consummation of
the Blockbuster Merger and expiration of the CVRs without liability) for 1994
and 1995 when compared against Viacom on a stand-alone basis (assuming sale of
convertible preferred to NYNEX) was as follows: (i) estimated earnings per
share: 2.7% and 18.8%, respectively; (ii) cash flow per share: 19.2% and 21.6%,
respectively; and (iii) EBITDA (Viacom's EBITDA on a stand-alone basis as
compared to the relative "ownership" of total pro forma EBITDA): 8.7% and 13.0%,
respectively. The pro forma analysis assumed a certain level of long-term
strategic benefits which were based upon the views of Viacom management.
    
 
     . An analysis of the combined company's compliance with certain bank
covenants and an analysis of relative ratios of debt to EBITDA, debt and
preferred stock to EBITDA, EBITDA to net interest and EBITDA to net interest and
preferred dividends.
 
     . An analysis of the share ownership of Viacom by Viacom's management,
Paramount stockholders, and Blockbuster stockholders and NYNEX, both on
stand-alone bases and pro forma giving effect to the Paramount Merger.
 
     . An analysis of the estimated 1993 through 2003 Viacom implied pro forma
stock prices, assuming consummation of the Blockbuster Merger and the Offer and
the Paramount Merger.
 
     . A summary of refinancings of existing debt and new borrowings by Viacom,
Paramount and Blockbuster, on stand-alone bases and pro forma giving effect to
the Offer and the Paramount Merger, both actual and estimated.
 
     . An estimated 1993 and 1994 pro forma combined income statement comparison
of Viacom both on stand-alone bases with and without giving effect to the
conversion of Viacom Preferred Stock, and pro forma giving effect to the
Blockbuster Merger and the Offer and the Paramount Merger, as well as a pro
forma combined income statement of the combined company for the years 1994 to
2003.
 
     . A comparison of estimated 1993 and 1994 earnings per share of Viacom both
on stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma earnings per share giving effect to the
Blockbuster Merger and the Paramount Merger, as well as an earnings per share
dilution analysis for the combined company for the years 1994 to 2003.
 
     . A comparison of estimated 1993 and 1994 cash flow of Viacom both on
stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma cash flow giving effect to the Blockbuster
Merger and the Offer and the Paramount Merger, as well as a cash flow
dilution/accretion analysis for the combined company for the years 1994 to 2003.
 
     . A pro forma EBITDA analysis (including projected synergies), income tax
calculation and pro forma combined cash flow statement and a debt amortization
schedule, all estimated for the years 1993 to 2003.
 
     . A pro forma interest expense table of the estimated combined company,
estimated for the years 1994 to 2003, and a pro forma balance sheet for the
combined company.
 
                                       59

  Viacom/Paramount
 
     Smith Barney presented to the Viacom Board an analysis of the Paramount
Merger (assuming the expiration of the CVRs without liability and the exercise
of the Viacom Warrants), that included:
 
     . A transaction structure and an analysis of the Paramount Merger setting
forth the kind and amount of securities to be issued in the Paramount Merger,
the source and use of funds and the per share consideration to be paid to
Paramount stockholders in the Paramount Merger. Smith Barney also discussed the
impact of the use of convertible preferred stock and convertible debt as part of
the consideration in the Paramount Merger.
 
   
     . An analysis of the pro forma impact of the Paramount Merger to Viacom
(with and without giving effect to the impact on Viacom of the sale of Viacom
Preferred Stock to NYNEX and Blockbuster if the Offer and Paramount Merger were
not consummated), Paramount and Blockbuster on stand-alone bases, including with
respect to estimated 1994 revenue, cash flow and net income, estimated 1993 and
1994 leverage and estimated earnings per share, cash flow per share and EBITDA
for 1993, 1994 and 1995. Smith Barney noted that the 1993 pro forma EBITDA for
the Paramount Merger was $1,015 million (assuming no impact of potential
synergies, which are considered to be substantial in subsequent years), the 1993
pro forma combined total debt was $6,949 million (does not include Series C
Preferred Stock potentially issued to Paramount stockholders as part of the
Paramount Merger Consideration and Viacom Preferred Stock issued to NYNEX and
Blockbuster), and the 1993 pro forma combined total cash was $494 million
(includes estimated deductions for merger transaction fees). The
accretive/(dilutive) impact of the Paramount Merger (assuming no consummation of
the Blockbuster Merger and expiration of the CVRs without liability) for 1994
and 1995 when compared against Viacom on a stand-alone basis (assuming sale of
convertible preferred to NYNEX and Blockbuster) was as follows: (i) estimated
earnings per share: (38.3)% and (25.4)%, respectively; (ii) cash flow per share:
21.5% and 14.3%, respectively; and (iii) EBITDA (Viacom's EBITDA on a
stand-alone basis as compared to the relative "ownership" of total pro forma
EBITDA): (3.0)% and (6.6)%, respectively. The pro forma analysis assumed a
certain level of long-term strategic benefits which were based upon the views of
Viacom management.
    
 
     . An analysis of the Viacom/Paramount entity's compliance with certain bank
covenants and an analysis of relative ratios of debt to EBITDA, debt and
preferred stock to EBITDA, EBITDA to net interest and EBITDA to net interest and
preferred dividends.
 
     . An analysis of the share ownership of Viacom by Viacom's management,
Paramount stockholders, and Blockbuster stockholders and NYNEX, both on
stand-alone bases and pro forma giving effect to the Paramount Merger.
 
     . An analysis of the estimated 1993 through 2003 Viacom implied pro forma
stock prices, assuming the use of Viacom Warrants in the Paramount Merger.
 
     . A summary of refinancings of existing debt and new borrowings by Viacom
and Paramount, on stand-alone bases and pro forma giving effect to the Paramount
Merger both actual and estimated.
 
     . An estimated 1993 and 1994 pro forma combined income statement comparison
of Viacom both on stand-alone bases with and without giving effect to the
conversion of the Viacom Preferred Stock, and pro forma giving effect to the
Paramount Merger, as well as a pro forma combined income statement of the
Viacom/Paramount entity for the years 1994 to 2003.
 
     . A comparison of estimated 1993 and 1994 earnings per share of Viacom both
on stand-alone bases with and without giving effect to the conversion of the
Viacom Preferred Stock, and with pro forma earnings per share giving effect to
the Paramount Merger, as well as an earnings per share dilution analysis for the
Viacom/Paramount entity for the years 1994 to 2003.
 
                                       60

     . A comparison of estimated 1993 and 1994 cash flow of Viacom both on
stand-alone bases with and without giving effect to the conversion of the Viacom
Preferred Stock, and with pro forma cash flow giving effect to the Paramount
Merger, as well as a cash flow dilution/accretion analysis for the
Viacom/Paramount entity for the years 1994 to 2003.
 
     . A pro forma EBITDA analysis (including projected synergies), income tax
calculation and pro forma combined cash flow statement and a debt amortization
schedule, all estimated for the years 1993 to 2003.
 
     . A pro forma interest expense table of the estimated Viacom/Paramount
entity, estimated for the years 1994 to 2003, and a pro forma balance sheet for
the Viacom/Paramount entity.
 
     Combined Company
 
     Smith Barney presented to the Viacom Board an analysis of the Paramount
Merger assuming consummation of the Blockbuster Merger (assuming the exercise of
VCRs resulting in a weighted average Class B exchange ratio of 0.66544),
liability per CVR of $12 per share and the exercise of the Viacom Warrants
(although the occurrence of the exercise of the Viacom Warrants as well as
liability under the CVRs and the exercise of VCRs resulting in an increased
overall Class B exchange ratio would take place only under limited
circumstances, these assumptions were utilized to provide a conservative
analysis to the Viacom Board). The Smith Barney presentation included:
 
     . A transaction structure and an analysis of the Paramount Merger setting
forth the kind and amount of securities to be issued in the Paramount Merger,
the source and use of funds in the per share consideration to be paid to
Paramount stockholders and the Paramount Merger. Smith Barney also discussed the
impact of the use of convertible preferred stock, convertible debt and
contingent value rights as part of the consideration in the Paramount Merger.
 
   
     . An analysis of the pro forma impact of the Paramount Merger to Viacom
(with and without giving effect to the impact on Viacom of the sale of Viacom
Preferred Stock to NYNEX and Blockbuster if the Offer and Paramount Merger were
not consummated), Paramount and Blockbuster on stand-alone bases, including with
respect to estimated 1994 revenue, cash flow and net income, estimated 1993 and
1994 leverage and estimated earnings per share, cash flow per share and EBITDA
for 1993, 1994 and 1995. Smith Barney noted that the 1993 pro forma EBITDA for
the Paramount Merger and the Blockbuster Merger was $1,471 million (assuming no
impact of potential synergies, which are considered to be substantial in
subsequent years), the 1993 pro forma combined total debt was $10,448 million
(includes Viacom Merger Debentures issued to Paramount stockholders as part of
the Paramount Merger Consideration but does not include Viacom Preferred Stock
issued to NYNEX), and the 1993 pro forma combined total cash was $784 million
(includes estimated deductions for merger transaction fees). The
accretive/(dilutive) impact of the Paramount Merger (assuming consummation of
the Blockbuster Merger and expiration of the CVRs with liability) for 1994 and
1995 when compared against Viacom on a stand-alone basis (assuming sale of
convertible preferred to NYNEX) was as follows: (i) estimated earnings per
share: 1.0% and 11.8%, respectively; (ii) cash flow per share: 19.2% and 19.2%,
respectively; and (iii) EBITDA (Viacom's EBITDA on a stand-alone basis as
compared to the relative "ownership" of total pro forma EBITDA): 5.6% and 9.8%,
respectively. The pro forma analysis assumed a certain level of long-term
strategic benefits which were based upon the views of Viacom management.
    
 
     . An analysis of the combined company's compliance with certain bank
covenants and an analysis of relative ratios debt to EBITDA, debt and preferred
stock to EBITDA, EBITDA to net interest and EBITDA to net interest and preferred
dividends.
 
     . An analysis of the share ownership of Viacom by Viacom's management,
Paramount stockholders, and Blockbuster stockholders and NYNEX, both on
stand-alone bases and pro forma giving effect to the Paramount Merger.
 
                                       61

     . An analysis of the estimated 1993 through 2003 Viacom implied pro forma
stock prices, assuming consummation of the Blockbuster Merger and the Paramount
Merger.
 
     . A summary of refinancings of existing debt and new borrowings by Viacom,
Paramount and Blockbuster, on stand-alone bases and pro forma giving effect to
the Paramount Merger, both actual and estimated.
 
     . An estimated 1993 and 1994 pro forma combined income statement comparison
of Viacom both on stand-alone bases with and without giving effect to the
conversion of Viacom Preferred Stock, and pro forma giving effect to the
Blockbuster Merger and the Paramount Merger, as well as a pro forma combined
income statement of the combined company for the years 1994 to 2003.
 
     . A comparison of estimated 1993 and 1994 earnings per share of Viacom both
on stand-alone bases with and without giving effect to the conversion of the
Viacom Preferred Stock, and with pro forma earnings per share giving effect to
the Blockbuster Merger and the Paramount Merger, as well as an earnings per
share dilution analysis for the combined company for the years 1994 to 2003.
 
     . A comparison of estimated 1993 and 1994 cash flow of Viacom both on
stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma cash flow giving effect to the Blockbuster
Merger and the Paramount Merger, as well as a cash flow dilution/accretion
analysis for the combined company for the years 1994 to 2003.
 
     . A pro forma EBITDA analysis (including projected synergies), income tax
calculation and pro forma combined cash flow statement and a debt amortization
schedule, all estimated for the years 1993 to 2003.
 
     . A pro forma interest expense table of the estimated combined company,
estimated for the years 1994 to 2003, and a pro forma balance sheet for the
combined company.
 
     Viacom/Paramount
 
     Smith Barney presented to the Viacom Board an analysis of the Paramount
Merger, assuming liability per CVR of $12 per share and the exercise of the
Viacom Warrants (although the occurrence of both the exercise of the Viacom
Warrants and payment under the CVRs would take place only under limited
circumstances, these assumptions were utilized to provide a conservative
analysis to the Viacom Board). The Smith Barney presentation included:
 
     . A transaction structure and an analysis of the Paramount Merger setting
forth the kind and amount of securities to be issued in the Paramount Merger, 
the source and use of funds and the per share consideration to be paid to 
Paramount Stockholders in the Paramount Merger. Smith Barney also discussed the
impact of the use of contingent value rights, convertible debt and convertible
preferred stock as part of the consideration in the Paramount Merger.

   
     . An analysis of the pro forma impact of the Paramount Merger to Viacom
(with and without giving effect to the impact on Viacom of the sale of
convertible preferred stock to NYNEX and Blockbuster if the Offer and Paramount
Merger were not consummated), Paramount and Blockbuster on stand-alone bases,
including with respect to 1994 revenue, cash flow and net income, estimated 1993
and 1994 leverage and estimated earnings per share, cash flow per share and
EBITDA for 1993, 1994 and 1995. Smith Barney noted that the 1993 pro forma
EBITDA for the Paramount Merger was $1,015 million (assuming no impact of
potential synergies, which are considered to be substantial in subsequent
years), the 1993 pro forma combined total debt was $7,634 million (does not
include Series C Preferred Stock potentially issued to Paramount stockholders as
part of the Paramount Merger Consideration or Viacom Preferred Stock issued to
NYNEX and Blockbuster), and the 1993 pro forma combined total cash was $494
million (includes estimated deductions for merger transaction fees). The
accretive/(dilutive) impact of the Paramount Merger (assuming no consummation of
the Blockbuster
    
                                       62

   
Merger and expiration of the CVRs with liability) for 1994 and 1995 when
compared against Viacom on a stand-alone basis (assuming sale of convertible
preferred to NYNEX and Blockbuster) was as follows: (i) estimated earnings per
share: (41.4)% and (38.1)%, respectively; (ii) cash flow per share: 21.5% and
10.5%, respectively; and (iii) EBITDA (Viacom's EBITDA on a stand-alone basis as
compared to the relative "ownership" of total pro forma EBITDA): (6.7)% and
(10.2)%, respectively. The pro forma analysis assumed a certain level of
long-term strategic benefits which were based upon the views of Viacom
management.
    
 
     . An analysis of the Viacom/Paramount entity's compliance with certain bank
covenants an analysis of relative ratios of debt to EBITDA, debt and preferred
stock to EBITDA, EBITDA to net interest and EBITDA to net interest and preferred
dividends.
 
     . An analysis of the share ownership of Viacom by Viacom's management,
Paramount stockholders, and Blockbuster stockholders and NYNEX, both on
stand-alone bases and pro forma giving effect to the Paramount Merger.
 
     . An analysis of the estimated 1993 through 2003 Viacom implied pro forma
stock prices, assuming the use of warrants in the Paramount Merger.
 
     . A summary of refinancings of existing debt in new borrowings by Viacom
and Paramount, on stand-alone bases and pro forma giving effect to the Paramount
Merger both actual and estimated.
 
     . An estimated 1993 and 1994 pro forma combined income statement comparison
of Viacom both on stand-alone bases with and without giving effect to the
conversion of Viacom Preferred Stock, and pro forma giving effect to the
Paramount Merger, as well as a pro forma combined income statement of the
Viacom/Paramount entity for the years 1994 to 2003.
 
     . A comparison of estimated 1993 and 1994 earnings per share of Viacom both
on stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma earnings per share giving effect to the
Paramount Merger, as well as an earnings per share dilution analysis for the
Viacom/Paramount entity for the years 1994 to 2003.
 
     . A comparison of estimated 1993 and 1994 cash flow of Viacom both on
stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma cash flow giving effect to the Paramount
Merger, as well as a cash flow dilution/accretion analysis for the
Viacom/Paramount entity for the years 1994 to 2003.
 
     . A pro forma EBITDA analysis (including projected synergies), income tax
calculation and pro forma combined cash flow statement and a debt amortization
schedule, all estimated for the years 1993 to 2003.
 
     . A pro forma interest expense table of the estimated Viacom/Paramount
entity, estimated for the years 1993 to 2003, and a pro forma balance sheet for
the Viacom/Paramount entity.
 
  QVC/Paramount
 
     Smith Barney presented to the Viacom Board an analysis of a QVC/Paramount
Merger that included:
 
     . A transaction structure and an analysis of a QVC/Paramount Merger setting
forth the kind and amount of securities to be issued in a QVC/Paramount Merger,
the source and use of funds and the per share consideration to be paid to
Paramount stockholders in a QVC/Paramount Merger. Smith Barney also discussed
the impact of the use of preferred stock with warrants as part of the
consideration in the proposed QVC/Paramount Merger.
 
     . An analysis of the debt structure of QVC and its additional borrowing
capacity.
 
                                       63

     . A pro forma combined income statement of the combined QVC and Paramount
for the years 1993 to 1999 and relative leverage ratios.
 
     . An earnings per share and cash flow dilution/accretion analysis of QVC
both on stand-alone bases and pro forma giving effect to a QVC/Paramount Merger
for the years 1993 to 1999.
 
     . An income tax calculation and pro forma combined cash flow statement
estimated for the years 1993 to 1999.
 
     . A debt paydown and interest expense table of the combined company,
estimated for the years 1994 to 1999, and a pro forma balance sheet for the
combined QVC and Paramount.
 
     . An analysis of the economic and voting ownership of QVC assuming the
consummation of the QVC/Paramount Merger and the conversion of the QVC
convertible preferred stock.
 
     . An analysis of the economic and voting ownership of Liberty Media.
 
     . An analysis of the QVC implied estimated pro forma stock price from 1993
through 1998, both with and without attendant synergies.
 
   
     Viacom used this analysis in developing its own, superior bid.
    
 
     In arriving at its opinions, Smith Barney performed a variety of financial
analyses, the material portions of which are summarized above. The summary set
forth above does not purport to be a complete description of the analyses
performed by Smith Barney. In addition, Smith Barney believes that its analyses
must be considered as a whole and that selecting portions of its analyses and of
the factors considered by it, without considering all such factors and analyses,
could create a misleading view of the process underlying its analyses set forth
in its opinion. The matters considered by Smith Barney in arriving at its
opinion are based on numerous macroeconomic, operating and financial assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond Viacom's or Paramount's control. Any
estimates incorporated in the analyses performed by Smith Barney are not
necessarily indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty. Arriving at a fairness opinion is a complex
process, not necessarily susceptible to partial or summary description. No
company utilized as a comparison is identical to Viacom, Paramount or the
business segment for which a comparison is being made. Accordingly, an analysis
of comparable companies and comparable business combinations resulting from the
transactions is not mathematical; rather, it involves complex considerations and
judgements concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the value of the
comparable companies or company to which they are being compared.
 
     The Viacom Board selected Smith Barney as its financial advisor because it
is a nationally recognized investment banking firm and the members of senior
management of Smith Barney have substantial experience in transactions similar
to the Paramount Merger and are familiar with Viacom and its business. Smith
Barney is an investment banking firm engaged, among other things, in the
valuation of businesses and their securities in connection with mergers and
acquisitions. Smith Barney has rendered from time to time various investment
banking services to Viacom, including acting as an underwriter of public
offerings of certain securities of Viacom and StarSight Telecast, Inc., a
company in which Viacom holds a significant interest, for which it received
customary compensation.
 
     Pursuant to the terms of an engagement letter dated September 12, 1993,
Viacom has paid Smith Barney a fee of $3.0 million for acting as financial
advisor in connection with the Paramount Merger, including rendering its
opinion. In addition, Viacom has agreed to pay Smith Barney an additional fee
                                       64

of $9.5 million in connection with consummation of the transaction. Whether or
not the Paramount Merger is consummated, Viacom has also agreed to reimburse
Smith Barney for its reasonable out-of-pocket expenses, including all reasonable
fees and disbursements of counsel, and to indemnify Smith Barney and certain
related persons against certain liabilities relating to or arising out of its
engagement, including certain liabilities under the Federal securities laws.
 
     Bear, Stearns & Co. Inc. ("Bear Stearns") and Goldman, Sachs & Co. have
also been engaged by Viacom as financial advisors in connection with the Offer
and the Paramount Merger.
 
   
     Paramount. Paramount has retained Lazard Freres to act as its financial
advisor in connection with the Offer and the Paramount Merger. At the meeting of
the Board of Directors of Paramount held on February 4, 1994, Lazard Freres
delivered its written opinion to the Board of Directors of Paramount that, as of
February 4, 1994, (i) the Viacom Transaction Consideration was fair to the
holders of Paramount Common Stock from a financial point of view, (ii) the QVC
Transaction Consideration was fair to the holders of Paramount Common Stock from
a financial point of view, and (iii) the Viacom Transaction Consideration was
marginally superior to the QVC Transaction Consideration from a financial point
of view. PARAMOUNT STOCKHOLDERS ARE URGED TO READ THE TEXT OF THE LAZARD FRERES
OPINION IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF
REVIEW BY LAZARD FRERES. Lazard Freres has not been requested to update its
opinion to the date of this Proxy Statement/Prospectus.
    
 
     Copies of the February 4, 1994 opinion of Lazard Freres, the written
presentation of Lazard Freres to the Board of Directors of Paramount on February
4, 1994 and the February 14, 1994 Letter (as defined below) have been filed as
exhibits to the Schedule 13E-3 filed with the Commission with respect to the
Paramount Merger and may be inspected and copied, and obtained by mail, from the
Commission as set forth in "Available Information" and will be made available
for inspection and copying at the principal executive offices of Paramount at 15
Columbus Circle, New York, New York 10023 during regular business hours by any
interested public stockholder of Paramount or his or her representative who has
been so designated in writing.
 
   
     A COPY OF THE FULL TEXT OF THE LAZARD FRERES OPINION WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN,
IS ATTACHED AS ANNEX IV HERETO. THE SUMMARY DISCUSSION OF THE OPINION OF LAZARD
FRERES SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. LAZARD FRERES' OPINION IS
DIRECTED ONLY TO LAZARD FRERES' CONCLUSIONS FROM A FINANCIAL POINT OF VIEW AS OF
FEBRUARY 4, 1994 OF THE ITEMS REFERRED TO IN SUCH OPINION, AND, AS EXPRESSLY
SET FORTH IN ITS OPINION, LAZARD FRERES' CONCLUSIONS ARE DIRECTED ONLY TO THE
CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF PARAMOUNT COMMON STOCK IN THE
OFFER AND THE PARAMOUNT MERGER, TAKEN TOGETHER, AND ARE NOT DIRECTED TO THE
CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF PARAMOUNT COMMON STOCK EITHER
IN THE OFFER OR IN THE PARAMOUNT MERGER INDEPENDENT OF THE OTHER.  LAZARD 
FRERES OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO 
HOW SUCH STOCKHOLDER SHOULD VOTE AT THE PARAMOUNT SPECIAL MEETING. 
    
 
     In connection with rendering its opinion to the Board of Directors of
Paramount on February 4, 1994 and its delivery of the February 14, 1994 Letter,
Lazard Freres, among other things: (i) reviewed the terms and conditions of (a)
the amended proposal by QVC (the "Amended QVC Proposal") to acquire Paramount as
set forth in Amendment Number 34 to the Tender Offer Statement on Schedule 14D-1
filed by QVC, Comcast and BellSouth with the Commission on February 1, 1994 and
the QVC Exemption Agreement, including the form Agreement and Plan of Merger
between QVC and Paramount attached thereto (the "Form QVC Merger Agreement"),
and (b) the written proposal submitted to Paramount by Viacom on February 1,
1994 and Amendment Number 35 to the Tender Offer Statement on Schedule 14D-1
filed by Viacom, NAI, Mr. Sumner M. Redstone and Blockbuster with the Commission
on February 1, 1994 (collectively, the "Amended Viacom Proposal"), and the
Agreement and Plan of Merger, dated as of January 21, 1994, as amended on
January 27, 1994 and as proposed as of February 4, 1994 to be amended to reflect
the Amended Viacom Proposal (the 
                                       65

"Amended Viacom Merger Agreement"), including the Form Exemption Agreement
between Viacom and Paramount attached thereto; (ii) reviewed the terms and
conditions of the Blockbuster Merger Agreement and the Blockbuster Subscription
Agreement, analyzed the Amended Viacom Proposal, both with and without giving
effect to the proposed Blockbuster Merger contemplated by the Blockbuster
Merger Agreement, and observed that the proposed Blockbuster Merger is subject
to the approval of the stockholders of Blockbuster; (iii) analyzed certain 
historical business and financial information relating to Paramount, Viacom, 
QVC and Blockbuster; (iv) reviewed certain financial forecasts and other data 
provided by Paramount, Viacom, QVC and Blockbuster relating to their respective
businesses (except in the case of Paramount, financial forecasts for the then 
current fiscal year only, having been advised that Paramount did not prepare 
projections beyond the then current fiscal year); (v) reviewed public 
information with respect to certain public companies in lines of businesses 
that Lazard Freres believed to be comparable to the businesses of Paramount,
Viacom, QVC and Blockbuster; (vi) reviewed the financial terms of certain
recent business combinations involving companies in lines of business that
Lazard Freres believed to be comparable to the businesses of Paramount,
Viacom, QVC and Blockbuster, and in other industries generally; (vii) reviewed
the historical stock prices and trading volumes of Paramount Common Stock,
Viacom Class B Common Stock, the QVC Common Stock and Blockbuster Common
Stock; and (viii) reviewed the procedures for bidding set forth in the
Amended Viacom Merger Agreement and the QVC Exemption Agreement, in particular
noting the respective provisions therein providing for extensions of the Fourth
QVC Offer or the Offer, as applicable, for 10 business days upon delivery of a
Completion Certificate (referred to in the Amended Viacom Merger Agreement or
the QVC Exemption Agreement, as applicable) by Viacom or QVC, as applicable. In
addition, Lazard Freres conducted discussions with members of the senior
management of Paramount, Viacom, QVC and Blockbuster with respect to the
business and prospects of Paramount, Viacom, QVC and Blockbuster and the
strategic objectives of each, and Lazard Freres conducted such other financial
studies, analyses and investigations as Lazard Freres deemed appropriate.
 
     In preparing its written opinion to the Board of Directors of Paramount on
February 4, 1994, its presentation to the Board of Directors of Paramount on
February 4, 1994 and the February 14, 1994 Letter, Lazard Freres assumed and
relied upon the accuracy and completeness of the financial and other information
that was provided by Paramount, Viacom, QVC and Blockbuster, and on the
representations and warranties contained in the Amended Viacom Merger Agreement
and the Form QVC Merger Agreement. Lazard Freres did not independently verify
such information and did not undertake an independent valuation or appraisal of
any of the assets of Paramount, Viacom, QVC or Blockbuster. In addition, Lazard
Freres assumed that the financial forecasts furnished to it by Paramount,
Viacom, QVC and Blockbuster were reasonably prepared on a basis reflecting, as
of the date of its opinion, its presentation to the Board of Directors of
Paramount and the February 14, 1994 Letter, the best currently available
judgments of the management of each of Paramount, Viacom, QVC and Blockbuster as
to the future financial performance of Paramount, Viacom, QVC and Blockbuster,
respectively. Lazard Freres also assumed that the Amended Viacom Proposal and
the Amended QVC Proposal were made in compliance with the terms and conditions
of the Amended Viacom Merger Agreement and the QVC Exemption Agreement,
respectively. Lazard Freres' opinion as of February 4, 1994, its presentation to
the Board of Directors of Paramount and the February 14, 1994 Letter were also
based on economic, monetary and market conditions existing on the date of the
opinion. In accordance with the Bidding Procedures established by Paramount's
Board of Directors on December 13, 1993, Paramount's Board of Directors had
authorized Lazard Freres to respond to inquiries with respect to Paramount from
prospective bidders (in addition to QVC and Viacom) and to receive proposals
from additional bidders, if any. Lazard Freres did not, however, solicit third
party indications of interest in acquiring all or any part of Paramount.
 
     As part of Lazard Freres' analyses in connection with rendering its opinion
on February 4, 1994 and the February 14, 1994 Letter, Lazard Freres continued to
evaluate the proposed Viacom and QVC transactions, as it had done in the past,
not only on the basis of their then current market values but also applying
other financial valuation methodologies generally applicable to transactions of
this type.
                                       66

Lazard Freres noted that these financial valuation methodologies, which are
subject to certain limitations as applied to the prospective combinations,
including the lack of projections for Paramount beyond the then current fiscal
year and the difficulties in quantifying synergies and revenue enhancements
resulting from the combinations, generally favored in varying degrees the Viacom
Transaction Consideration from a financial point of view. On the basis of recent
market values on the date of its opinion and the February 14, 1994 Letter,
Lazard Freres observed that the QVC Transaction Consideration had a somewhat
higher market valuation than the Viacom Transaction Consideration. In this
connection, Lazard Freres observed the high volatility of Viacom Class B Common
Stock and QVC Common Stock and that the market prices of the stocks seemed to be
impacted by the perception of the marketplace as to whether QVC or Viacom would
be the ultimate acquiror of Paramount.
 
   
     In connection with rendering its opinion and the conclusion set forth in
the February 14, 1994 Letter, Lazard Freres also observed the express preference
of Paramount's Board of Directors in the Bidding Procedures for cash and
securities readily susceptible to valuation, such as securities with a fixed
income stream, with a liquidation preference, or in the case of equity
securities, securities which enjoy the benefits of a wide collar or other value
assurance mechanism. In this regard, Lazard Freres noted that there was a
greater percentage of cash and fixed income securities as components of the
Viacom Transaction Consideration than the QVC Transaction Consideration,
although the magnitude of the difference in the respective percentages between
the two then current bids had decreased in comparison to the then most recent
previous bids submitted by Viacom and QVC. Lazard Freres further noted the
offering of the CVRs in the Amended Viacom Proposal. In this connection, as
noted below, Lazard Freres continued to view the offering of the CVRs in the
Amended Viacom Proposal as a favorable factor because the CVRs were a security
that provided, in part, an opportunity for the holders of the CVRs to be
compensated if the market price of Viacom Class B Common Stock failed to
appreciate satisfactorily.
    
 
     In reaching its opinion on February 4, 1994 and the conclusion set forth in
the February 14, 1994 Letter, Lazard Freres also noted that it took into account
various factors, including its assessment of the probability of consummation of
the proposed Blockbuster Merger contemplated by the Blockbuster Merger Agreement
under the circumstances existing on February 4, 1994 and February 14, 1994, as
applicable, and that, given the terms and conditions of the proposed Fourth QVC
Offer and the Fourth QVC Second-Step Merger and the proposed Offer and the
Paramount Merger and the limitations of the financial valuation methodologies
referred to above, Lazard Freres had continued to view as a favorable factor an
offer that contains a greater percentage of cash and securities readily
susceptible to valuation.
 
     In connection with the Amended Viacom Proposal and the Amended QVC
Proposal, at the meeting of the Board of Directors of Paramount held on February
4, 1994, Lazard Freres delivered its written opinion to the Board of Directors
of Paramount that, as of the date of the opinion, (i) the Viacom Transaction
Consideration was fair to the holders of Paramount Common Stock from a financial
point of view, (ii) the QVC Transaction Consideration was fair to the holders of
Paramount Common Stock from a financial point of view, and (iii) the Viacom
Transaction Consideration was marginally superior to the QVC Transaction
Consideration from a financial point of view.
 
FEBRUARY 4, 1994 BOARD PRESENTATION
 
     Prior to delivering its written opinion to the Board of Directors of
Paramount, Lazard Freres reviewed certain information with the Board of
Directors of Paramount relating to Paramount, Viacom, Blockbuster and QVC and
the financial terms of the Amended Viacom Proposal, after giving effect to the
proposed Blockbuster Merger (the "Viacom-Blockbuster Proposal"), the Amended
Viacom Proposal, without giving effect to the proposed Blockbuster Merger (the
"Viacom Alone Proposal") and the Amended QVC Proposal (the foregoing are
sometimes individually referred to herein as a "Proposal" and collectively as
the "Proposals").
 
                                       67

                                    SUMMARY
 
     . Lazard Freres described their recent contacts with QVC, Viacom and
Blockbuster and their respective advisors and a chronology of events since the
then most recent meeting of the Board of Directors of Paramount on January 21,
1994.
 
     . Lazard Freres reviewed the financial terms of the Proposals and noted
that Viacom's agreements with Blockbuster (including the Blockbuster Merger
Agreement and the Blockbuster Subscription Agreement) had remained unchanged.
 
     . Lazard Freres described the changes to the respective Proposals by QVC
and Viacom from their then most recent previous bids. Lazard Freres noted that
QVC had increased the cash portion of its bid by approximately $750 million,
while reducing the value of securities offered in the proposed Fourth QVC
Second-Step Merger by a substantially equivalent amount. With respect to the
Amended Viacom Proposal, Lazard Freres observed that the cash portion of its
offer had remained unchanged, but the value of the securities offered in the
proposed Paramount Merger had been improved. Lazard Freres described in detail
the changes to, and the terms of, the various securities offered by Viacom that
produced this improvement.
 
     . Lazard Freres reviewed graphic representations that compared the Amended
QVC Proposal, the Viacom Alone Proposal and the Viacom-Blockbuster Proposal with
QVC's and Viacom's then most recent previous bids and showed the value of the
respective bids at various per share prices for QVC Common Stock and Viacom
Class B Common Stock. The comparison of the two QVC bids showed that at stock
prices for QVC Common Stock below approximately $48 per share, the then current
QVC bid was slightly higher than the then most recent previous bid by QVC, while
at stock prices higher than approximately $48 per share, the then most recent
previous bid by QVC had a slightly higher value. However, with respect to the
Amended Viacom Proposal, at all stock prices for Viacom Class B Common Stock,
the then current Viacom Alone Proposal and the Viacom-Blockbuster Proposal had
higher values than the then most recent previous Viacom bid, and with respect to
the analysis of the Viacom-Blockbuster Proposal only, the difference was even
greater, given the different securities being offered by Viacom depending upon
whether the Blockbuster Merger would be consummated.
 
     . Lazard Freres further noted that the three-way combination of
Viacom-Blockbuster/Paramount would have the strongest credit ratios of the three
possible combinations, while the credit ratios for the Viacom/Paramount
combination would have the weakest, given Blockbuster's substantial cash flow
and relatively low level of debt and the fact that Viacom would be acquiring
Blockbuster for all stock.
 
     . Lazard Freres noted that QVC's financing package for the Amended QVC
Proposal had been altered to provide for more cash and was less favorable from
QVC's standpoint compared to the financing package for the then most recent
previous QVC bid, while the Viacom financing package for the Amended Viacom
Proposal had remained essentially unchanged compared to the financing package
for the then most recent previous Viacom bid.
 
     . Lazard Freres also presented an overview of its valuation of the Amended
QVC Proposal, the Viacom Alone Proposal and the Viacom-Blockbuster Proposal.
Lazard Freres expressly noted that its views of value were provided within a
framework of Bidding Procedures adopted by Paramount (and agreed to by the
bidders) that allowed the holders of Paramount Common Stock to choose between
the competing Proposals. Lazard Freres discussed with the Board of Directors of
Paramount that, based on the closing market prices of QVC Common Stock and
Viacom Class B Common Stock for February 3, 1994, and its valuation of the
non-common securities that were offered in each of the bids (which was also
based on those February 3, 1994 closing prices), the Amended QVC Proposal had a
value (on a per share of Paramount Common Stock basis) that was higher than the
Viacom-Blockbuster Proposal and
                                       68

the Viacom Alone Proposal by $5.21 and $3.40 per share, respectively. Lazard
Freres also noted that the total consideration offered in the Amended Viacom
Proposal contained a greater percentage of cash and fixed income securities than
the Amended QVC Proposal. As described in more detail below, Lazard Freres also
analyzed the respective values of the Amended QVC Proposal, the Viacom Alone
Proposal and the Viacom-Blockbuster Proposal at recent market prices for QVC
Common Stock and Viacom Class B Common Stock (ranging from a one week average to
a six month average prior to February 3, 1994).
 
     . Lazard Freres noted that by using various financial valuation
methodologies (other than current and recent market values) to analyze the
respective Proposals (as described in more detail below), (i) both the Amended
QVC Proposal and the Amended Viacom Proposal had implied values that were lower
than the values obtained by using current market value methodology to value the
Proposals, and (ii) the Viacom Alone Proposal and the Viacom-Blockbuster
Proposal each had a higher implied value by varying amounts than the Amended QVC
Proposal (with the differences being greater for the Viacom-Blockbuster
Proposal). Lazard Freres specifically noted that it believed that these
financial valuation methodologies were useful but subject to various
limitations, including: the absence of precise and reliable quantification of
potential cost savings or revenue enhancement opportunities; the difficulty of
deriving appropriate multiples for each combination; the unavailability of
internal long-term projections for Paramount; and the difficulty of projecting
financial results of any of the combinations, in each case, particularly in
light of each bidder's strategic/merger partners.
 
     . Lazard Freres discussed with the Board of Directors of Paramount that the
then current market prices of QVC Common Stock and Viacom Class B Common Stock
may have reflected the market's perception of cost savings, revenue enhancement
opportunities and the potential impact of the bidders' respective
strategic/merger partners, but, reiterating what Lazard Freres had indicated
previously to the Paramount Board, these current market prices may also have
been influenced by the market's views as to which bidder would likely acquire
Paramount, with Viacom having appeared to have been the leader on February 4,
1994, and, as Lazard Freres noted, this influence on these current market prices
may have been even greater at that time given the fact that the Amended Viacom
Proposal and the Amended QVC Proposal were presumably each bidder's "last and
final bid."
 
     . Lazard Freres also reviewed its comparisons of the Amended QVC Proposal,
the Viacom Alone Proposal and the Viacom-Blockbuster Proposal using both 1993
estimated EBITDA and 1994 estimated EBITDA for each of the companies on the
basis of comparable company trading multiples, discounted cash flow analysis and
weighted average unaffected multiples. As noted above, each of these financial
valuation methodologies produced in varying degrees, in the cases of both 1993
and 1994 estimated EBITDA, higher implied total bid values for the Viacom Alone
Proposal and the Viacom-Blockbuster Proposal in comparison to the Amended QVC
Proposal. This difference was greater in the case of the Viacom-Blockbuster
Proposal.
 
     . Lazard Freres noted that in connection with its comparable company
trading analysis, if the various proposed combined companies were to trade at
the same multiple of EBITDA, each of the Viacom Alone Proposal and the
Viacom-Blockbuster Proposal would have implied bid values higher than the
Amended QVC Proposal; however, if the QVC/Paramount combined company were to
trade at a higher multiple than the Viacom/Paramount or
Viacom-Blockbuster/Paramount combined companies, the implied value of the
Amended QVC Proposal could equal or exceed the implied values of either the
Viacom Alone Proposal or the Viacom-Blockbuster Proposal.
 
     . As reviewed below, Lazard Freres discussed with the Board of Directors of
Paramount that although there were arguments to support (and refute) a higher
multiple for either of the proposed QVC or Viacom combinations, Lazard Freres
had no reason to conclude from a financial point of view that
                                       69

either of the proposed combinations should be assigned a higher multiple, and
thus in most instances, Lazard Freres' analysis compared the Amended QVC
Proposal, the Viacom Alone Proposal and the Viacom-Blockbuster Proposal at the
same EBITDA multiples.
 
     . Lazard Freres also reviewed its various observations regarding the
trading activity of QVC Common Stock and Viacom Class B Common Stock noting
that, since September 13, 1993 (the date of the first public announcement of the
Original Merger), QVC Common Stock had fallen 27% and Viacom Class B Common
Stock had fallen 43%. In addition, Lazard Freres explained that it was likely
that the stock price of the apparent leader for Paramount would drop and that of
the apparent trailing bidder would rise, as the ultimate resolution of the
bidding approached, and this phenomenon may have explained the then recent
trading activity of QVC Common Stock and Viacom Class B Common Stock, with the
price of QVC Common Stock rising, and the price of Viacom Class B Common Stock
falling, amid various reports that the market favored Viacom's bid. Lazard
Freres also noted that this phenomenon could affect the outcome of the
shareholder vote of the Blockbuster stockholders on the proposed Blockbuster
Merger. However, Lazard Freres commented that, rather than comparing the implied
bid values on the basis of a "winning" and "losing" bid, the more relevant
comparison would be to compare the implied bid values of each bid assuming that
bid were the winning bid, and most importantly, Lazard Freres explained that
given the bidding process, the holders of Paramount Common Stock would have the
ability to choose between the Amended QVC Proposal and the Amended Viacom
Proposal based on their own views of value.
 
     . Lazard Freres advised the Board of Directors of Paramount of the status
of the proposed Blockbuster Merger, including noting that it had again confirmed
with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Blockbuster's financial
advisor, that Blockbuster had not received any expressions of interest from
third parties and summarizing the anticipated timetable for the Blockbuster
Merger provided to Lazard Freres by Viacom and Blockbuster.
 
     . In addition, Lazard Freres reviewed a graphic representation of the stock
price performance of QVC Common Stock, Viacom Class B Common Stock, Blockbuster
Common Stock and Paramount Common Stock during the period from September 13,
1993 through February 3, 1994 and the stock performance of QVC Common Stock and
Viacom Class B Common Stock during the period from December 20, 1993 through
February 3, 1994.
 
                    PRO FORMA FINANCIAL AND CREDIT ANALYSIS
 
     Lazard Freres reviewed its analysis of the pro forma financial statements
for each of the proposed QVC/Paramount combination, proposed Viacom/Paramount
combination and proposed Viacom-Blockbuster/Paramount combination using each
company's estimated fiscal year 1993 data. Lazard Freres noted that pro forma
1993 EBITDA was estimated to be $756 million (12.2% margin) for the
QVC/Paramount combination, $1,126 million (16.2% margin) for the
Viacom/Paramount combination and $1,594 million (17.3% margin) for the
Viacom-Blockbuster/Paramount combination, and due to large goodwill
amortization, interest expense and preferred dividend charges, no combination
would be expected to have a meaningful level of net earnings. As noted above, of
the three possible combinations, Lazard Freres explained that the proposed
Viacom-Blockbuster/Paramount combined company would produce the strongest credit
ratios while the proposed Viacom/Paramount combined company would have the
weakest. Lazard Freres explained that the Blockbuster Merger would significantly
improve Viacom's credit ratios because Blockbuster has substantial cash flow and
a relatively low level of debt, and Viacom would be acquiring Blockbuster in the
Blockbuster Merger for all stock. Lazard Freres further commented that while
there was no assurance that the Blockbuster Merger would be consummated, the
parties involved had informed Lazard Freres that they expected the
                                       70

proposed Blockbuster Merger to close in April 1994. In addition, Lazard Freres
noted that Viacom had attempted to reduce the credit risk by adding the exchange
feature to the Viacom Merger Debentures. Finally, Lazard Freres noted that with
respect to the potential obligation of Viacom as a result of the CVRs: the
maximum obligation for Viacom could be as much as approximately $1.0 billion if
the CVRs were not extinguished until the third anniversary of the Paramount
Merger; under the terms of the CVRs, Viacom could delay the payment of its
potential obligation for up to three years; and while Viacom could satisfy its
obligation under the CVRs by issuing shares of Viacom Class B Common Stock, such
an issuance would dilute the then existing shareholders and, hence, could put
downward pressure on Viacom's stock price.
 
     Lazard Freres also reviewed the pro forma income statements and balance
sheets for each of the three possible combinations and selected credit ratios
for each of them.
 
     VALUATION ANALYSIS OF AMENDED VIACOM PROPOSAL AND AMENDED QVC PROPOSAL
 
     Lazard Freres reviewed various analyses with respect to the valuation of
the Amended Viacom Proposal and the Amended QVC Proposal and expressly noted
that Lazard Freres did not factor into its analysis any combination benefits
such as cost savings or revenue enhancement and expressly cautioned that given
the uncertainties involved in these valuation analyses, the volatility of the
stock prices of QVC and Viacom, the dynamic market conditions and the possible
changes in the complexion of any of the potential combinations, none of these
valuation analyses should be viewed as a reliable predictor of stock prices.
 
  Current Market Analysis
 
     Lazard Freres first reviewed its current market analysis of the equity
portion (and resulting implied total consideration) of each of the Amended QVC
Proposal, the Viacom Alone Proposal and the Viacom-Blockbuster Proposal pursuant
to which Lazard Freres calculated these values by applying the exchange ratio of
each Proposal to the then current market prices of the securities being offered.
Based on the closing price of QVC Common Stock and Viacom Class B Common Stock
on February 3, 1994, Lazard Freres analysis showed that the implied value of the
total consideration offered in (i) the Amended QVC Proposal was $86.71 per share
of Paramount Common Stock, comprised of $52.10 of cash (60.1% of total), $3.76
of New QVC Merger Preferred Stock (4.3% of total), $2.55 of the ten-year
warrants to purchase QVC Common Stock (2.9% of total) and $28.30 of QVC Common
Stock (32.6% of total); (ii) the Viacom Alone Proposal was $81.49 per share of
Paramount Common Stock, comprised of $53.61 of cash (65.8% of total), $6.01 of
Series C Preferred Stock (7.4% of total), $1.41 of Viacom Three-Year Warrants
(1.7% of total), $0.84 of Viacom Five-Year Warrants (1.0% of total), $3.84 of
CVR (4.7% of total) and $15.79 of Viacom Class B Common Stock (19.4% of total);
and (iii) the Viacom-Blockbuster Proposal was $83.31 per share of Paramount
Common Stock, comprised of $53.61 of cash (64.3% of total), $8.41 of Viacom
Merger Debentures (10.1% of total), $0.82 of Viacom Three-Year Warrants (1.0% of
total), $0.82 of Viacom Five-Year Warrants (1.0% of total), $3.87 of CVR (4.6%
of total) and $15.79 of Viacom Class B Common Stock (19.0% of total).
 
     Lazard Freres also reviewed the implied value of the total consideration
offered in the Amended QVC Proposal, the Viacom Alone Proposal and the
Viacom-Blockbuster Proposal based on the closing market price of QVC Common
Stock and Viacom Class B Common Stock of February 1, 1994 (which was reflective
of the market immediately prior to the public announcement of the Proposals):
$85.91 per share for the Amended QVC Proposal, $81.61 per share for the Viacom
Alone Proposal and $83.35 per share for the Viacom-Blockbuster Proposal. The
relative percentages of the components of each bid were essentially identical to
the percentages for the February 3, 1994 market prices. Lazard Freres observed
that, using the respective closing market prices of QVC Common Stock and Viacom
Class B
                                       71

Common Stock on February 3, 1994, if the price of the Viacom Class B Common
Stock had remained unchanged, the price of QVC Common Stock would have to
decline by 19% for the respective implied market values of the total
consideration offered in the Amended QVC Proposal and the Viacom Alone Proposal
to be equivalent and by 12% for the respective implied market values of the
total consideration offered in the Amended QVC Proposal and the
Viacom-Blockbuster Proposal to be equivalent, and, conversely, if the price of
QVC Common Stock had remained unchanged, the price of Viacom Class B Common
Stock would have to rise by 33% for the respective implied market values of the
total consideration offered in the Amended QVC Proposal and the Viacom Alone
Proposal to be equivalent and by 21% for the respective implied market values of
the total consideration offered in the Amended QVC Proposal and the
Viacom-Blockbuster Proposal to be equivalent.
 
  Recent Market Value Analysis
 
     Lazard Freres next reviewed with the Board of Directors of Paramount its
recent market analysis of each Proposal by applying the exchange ratio of each
Proposal to the average prices of QVC Common Stock and Viacom Class B Common
Stock over various time periods from one week prior to February 4, 1994 up to
six months prior to February 4, 1994. Lazard Freres noted that the implied value
of the total consideration offered in the Amended QVC Proposal was higher than
the value of the Viacom Alone Proposal during each period other than one, but
lower than the Viacom-Blockbuster Proposal during each period other than with
the one and two week averages and the six month average.
 
  Comparable Public Company Trading Analysis
 
     Lazard Freres also discussed with the Board of Directors of Paramount that
it performed comparable public company trading multiple analysis of each of the
Proposals in which Lazard Freres applied the multiples of comparable public
companies to the estimated pro forma 1993 and 1994 EBITDA for each of the three
possible combinations to arrive at an implied value of the total consideration
offered in each Proposal. In connection with its analysis, Lazard Freres noted
that each of the pro forma QVC/Paramount, Viacom/Paramount and
Viacom-Blockbuster/Paramount combinations may be perceived in the market to be a
"diversified entertainment and intellectual property company" rather than a
"pure-play home shopping network company" (in the case of the pro forma QVC
combination) or a "pure-play cable network/programming company" (in the case of
either of the pro forma Viacom combinations). Lazard Freres further noted that
while there were no public companies with precisely the same mix of businesses
as the pro forma combined companies, perhaps the most relevant comparable
companies were Time Warner Inc. ("Time Warner"), The Walt Disney Company
("Disney") and Turner Broadcasting Systems, Inc. ("Turner"), and when Lazard
Freres applied the multiples for these companies to the estimated pro forma 1993
and 1994 EBITDA for each of three possible pro forma combinations, the implied
bid values of the total consideration offered in the Amended QVC Proposal, the
Viacom Alone Proposal and the Viacom-Blockbuster Proposal were below the then
current market values of the Proposals (based on the closing prices of QVC
Common Stock and Viacom Class B Common Stock on February 3, 1994). In addition,
Lazard Freres commented to the Board of Directors of Paramount that the
estimated 1993 and 1994 EBITDA multiples for Time Warner, Disney and Turner that
were used in its analysis were based on estimates set forth in various research
analyst reports.
 
     Lazard Freres' analysis showed that applying Time Warner's multiples of
11.2 times 1993 estimated EBITDA and 10.4 times 1994 estimated EBITDA to the pro
forma estimated 1993 and 1994 EBITDA for each of the three possible
combinations, the implied common equity prices for the pro forma combined
QVC/Paramount company were $18.11 per share and $19.23 per share, respectively,
and the implied values of the total consideration offered in the Amended QVC
Proposal were $69.58 per share and $70.27 per share, respectively; the implied
common equity (i.e., Viacom Class B Common
                                       72

Stock) prices for the pro forma combined Viacom/Paramount company were $14.05
per share and $16.28 per share, respectively, and the implied values of the
total consideration offered in the Viacom Alone Proposal were $72.23 per share
and $73.26 per share, respectively; and the implied common equity values for the
pro forma combined Viacom-Blockbuster/Paramount company were $18.35 and $24.18
per share, respectively, and the implied values of the total consideration
offered in the Viacom-Blockbuster Proposal were $76.04 per share and $78.75 per
share, respectively. In addition, Lazard Freres reviewed its analysis that
showed that by applying Disney's multiples of 13.3 times 1993 EBITDA and 12.2
times 1994 estimated EBITDA to the pro forma estimated 1993 and 1994 EBITDA for
each of the three possible combinations, the implied common equity prices for
the pro forma combined QVC/Paramount company were $27.04 per share and $27.67
per share, respectively, and the implied values of the total consideration
offered in the Amended QVC Proposal were $75.09 per share and $75.48 per share,
respectively; the implied common equity prices for the pro forma combined
Viacom/Paramount company were $25.22 per share and $26.99 per share,
respectively, and the implied values of the total consideration offered in the
Viacom Alone Proposal were $77.41 per share and $78.24 per share, respectively;
and the implied common equity prices for the pro forma combined Viacom-
Blockbuster/Paramount company were $26.59 per share and $32.88 per share,
respectively, and the implied values of the total consideration offered in the
Viacom-Blockbuster Proposal were $79.87 per share and $82.79 per share. Finally,
Lazard Freres discussed its analysis of Turner's multiples that revealed that by
applying Turner's multiples of 14.8 times 1993 estimated EBITDA and 11.9 times
1994 estimated EBITDA to the pro forma estimated 1993 and 1994 EBITDA for each
of the three possible combinations, the implied common equity prices for the pro
forma combined QVC/Paramount company were $33.15 per share and $26.17 per share,
respectively, and the implied values of the total consideration offered in the
Amended QVC Proposal were $78.86 per share and $74.55 per share, respectively;
the implied common equity price for the pro forma combined Viacom/Paramount
company were $32.86 per share and $25.08 per share, respectively, and the
implied values of the total consideration offered in the Viacom Alone Proposal
were $80.96 per share and $77.35 per share, respectively, and the implied common
equity prices for the pro forma combined Viacom-Blockbuster/Paramount company
were $32.23 per share and $31.33 per share, respectively, and the implied values
of the total consideration offered in the Viacom-Blockbuster Proposal were
$82.49 per share and $82.07 per share, respectively.
 
     In connection with its comparable public company trading multiple analysis,
Lazard Freres reviewed with the Board of Directors of Paramount various
historical and projected financial information regarding Time Warner, Disney and
Turner.
 
  Discounted Cash Flow ("DCF") Analysis
 
     Lazard Freres discussed with the Board of Directors of Paramount its DCF
analysis of each of the Proposals. In connection with preparing its DCF
analysis, Lazard Freres was provided with projections, on a stand-alone basis,
for each of QVC (covering six years), Viacom (covering three years) and
Blockbuster (covering four years). Lazard Freres noted that it had conducted due
diligence reviews of each of QVC, Viacom and Blockbuster and found that these
projections appeared to be based on reasonable assumptions, and thus Lazard
Freres did not alter the operating assumptions in performing its DCF analysis.
Lazard Freres explained that by using these projections, it generated a
hypothetical, debt-free "long-term investment value" of each of the companies
and these values were based on assumed discount rates ranging between 9% and 12%
and assumed terminal value multiples ranging between 10 times and 16 times
EBITDA for the final projected year of each of QVC and Viacom and assumed
terminal value multiples ranging between 8 times and 14 times EBITDA for the
final projected year of Blockbuster. In preparing its DCF analysis, Lazard
Freres used the third projected year for each company as the final projected
year. Since Paramount did not prepare projections beyond the then
                                       73

current fiscal year, Lazard Freres noted that it added the "unaffected" market
capitalization of Paramount (i.e., the aggregate unaffected equity market value,
plus the aggregate outstanding debt, less cash) to these discounted cash flow
values for each of the three companies in order to derive an implied pro forma
combined asset value for each of the three possible combinations. In order to
derive an implied value for the total consideration offered in each of the
Proposals, Lazard Freres explained that it used these implied pro forma combined
asset values to determine the hypothetical pro forma combined equity values of
each of the proposed combinations. Lazard Freres reviewed the results of its DCF
analysis which showed that with a terminal value multiple of 12 times EBITDA
(except in the case of Blockbuster, in which 10 times EBITDA was used) and a
discount rate of 11%, the Amended QVC Proposal had an implied value of $73.68
per share, the Viacom Alone Proposal had an implied value of $76.66 per share
and the Viacom-Blockbuster Proposal had an implied value of $81.84 per share and
that with a terminal value multiple of 14 times EBITDA (except in the case of
Blockbuster, in which 12 times EBITDA was used) and a discount rate of 10%, the
Amended QVC Proposal had an implied value of $75.52 per share, the Viacom Alone
Proposal had an implied value of $79.84 per share and the Viacom-Blockbuster
Proposal had an implied value of $85.45 per share.
 
  Weighted Average Multiple Analysis
 
     Finally, Lazard Freres presented its weighted average multiple analysis of
the Proposals. Lazard Freres explained that this analysis produced an implied
valuation of the total consideration offered in each Proposal by first adding
the "unaffected" EBITDA multiples of each bidder, including Blockbuster in the
proposed three-way combination (i.e., the EBITDA multiple one month prior to the
first public announcement of the proposed Paramount transactions for each
company), to that of Paramount to arrive at a weighted average multiple for each
pro forma combined company, and by then applying that multiple to the estimated
pro forma 1993 EBITDA for each of the three proposed combined companies. With
Paramount's multiple of 11.9 times estimated EBITDA, Lazard Freres noted that
the combined weighted average multiple for the proposed QVC/Paramount combined
company was 13.2 times estimated 1993 EBITDA, for the proposed Viacom/Paramount
combined company was 14.6 times estimated 1993 EBITDA and for the proposed
Viacom-Blockbuster/Paramount combined company was 14.5 times estimated 1993
EBITDA. Lazard Freres indicated that the QVC/Paramount combined multiple was
lower because Paramount's EBITDA (which on an unaffected basis commanded a lower
multiple) accounts for a greater proportion (about three-quarters) of the total
than in the Viacom/Paramount combined company (about half) or in the
Viacom-Blockbuster/Paramount combined company (about one-third). Lazard Freres
explained to the Board of Directors of Paramount that the actual stock prices
and trading multiples for any of the proposed combined companies may reflect the
market's perception of such factors as cost savings opportunities, revenue
growth opportunities, the impact of a change in management, difference in the
leverage of each combination and the loss of "pure play" investment opportunity,
and these possible factors were not taken into account in its analysis. Lazard
Freres further noted that weighted average multiple analysis was a useful tool
for further analysis because it generates pro forma stock values for each of the
possible combined companies based upon pre-transaction trading multiples;
however, Lazard Freres pointed out that neither the QVC Common Stock nor the
Viacom Class B Common Stock had been trading at the price implied by the
weighted average multiple analysis, and, in fact, both stocks were, and had
been, above these theoretical levels since the proposed transactions were
publicly announced. Lazard Freres presented to the Board of Directors of
Paramount the results of its weighted average multiple analysis that showed that
the implied value of the consideration offered for (i) the Amended QVC Proposal
was $74.51 per share (with a weighted average EBITDA multiple of 13.2 times),
(ii) the Viacom Alone Proposal was $79.36 per share (with a weighted average
EBITDA multiple of 14.6 times), and (iii) the Viacom-Blockbuster proposal was
$81.44 per share (with a weighted average EBITDA multiple of 14.5 times).
 
                                       74

                           TRADING MULTIPLE ANALYSIS
 
     Lazard Freres also discussed with the Board of Directors of Paramount that
its analysis indicated that if each of the three proposed combined companies
traded at the same multiple of EBITDA, the total implied value of the
consideration offered in either the Viacom Alone Proposal or the Viacom-
Blockbuster Proposal would be in excess of the total implied value of the
consideration offered in the Amended QVC Proposal; however, if the proposed
QVC/Paramount combined company were to trade at a higher multiple, the total
implied value of the consideration offered in the Amended QVC Proposal would
have equaled or exceeded the total implied value of the consideration offered in
either the Viacom Alone Proposal or the Viacom-Blockbuster Proposal. Lazard
Freres reviewed various arguments that would have supported a higher multiple
for one Proposal over another Proposal, but concluded that its analysis did not
provide a reasonable basis to conclude from a financial point of view whether
any of the three proposed combined companies would in fact trade at a higher
multiple than any of the others.
 
     In the course of its presentation at the meeting of the Board of Directors
of Paramount on February 4, 1994, Lazard Freres referred to summary materials
prepared by Lazard Freres that covered various items that Lazard Freres had
reviewed with the Paramount Board at earlier meetings at which prior bids by QVC
and Viacom were discussed. These items included a detailed overview of the
proposed Blockbuster Merger (including a description of the VCRs), the terms and
conditions of Blockbuster's commitment to purchase $1.25 billion of Viacom Class
B Common Stock pursuant to the Blockbuster Subscription Agreement, and the
"make-whole" rights offered by Viacom to Blockbuster under the Blockbuster
Subscription Agreement. In addition, Lazard Freres reviewed the pro forma
ownership profile of the surviving companies for each of three proposed combined
companies under the Proposals.
 
     These summary materials prepared by Lazard Freres also presented an
overview of Blockbuster's business (including a summary of Blockbuster's
operations by business segment), a financial summary, a comparative analysis of
Blockbuster's multiples to comparable companies, a discussion of the risk of
obsolescence of Blockbuster's core video rental business and a stock ownership
profile of Blockbuster.
 
     Lazard Freres had also summarized terms and conditions of the sources of
bank and strategic investor equity financing for each of the Amended QVC
Proposal and the Amended Viacom Proposal. Moreover, these materials included a
graphic representation of the stock price performance of QVC Common Stock,
Viacom Class B Common Stock, Paramount Common Stock and Blockbuster Common
Stock, as well as the S&P 400 Index over approximately 18-month and five-year
time periods and an analysis using 1993 estimated EBITDA for each of Paramount,
QVC, Blockbuster and Viacom that set forth the contribution that each company
would provide to total pro forma 1993 estimated EBITDA for each of the three
combined companies. This analysis showed that Paramount's business would
contribute approximately 75% of the EBITDA in a merger with QVC, whereas the
contribution by Viacom in the pro forma Viacom/Paramount combined company would
be approximately 50% and the contributions by each of Viacom and Blockbuster
would be approximately one-third in the pro forma Viacom-Blockbuster/Paramount
combined company. Lazard Freres also summarized each bidder's views regarding
the potential benefits that could be achieved by combining Paramount with each
of them and the views of Paramount's management regarding these possible
combination benefits. Finally, Lazard Freres described the results of various
sensitivity analyses that it performed on the implied value of the total
consideration offered in each of the Proposals that revealed that the implied
values of each of the Proposals were sensitive to changes in assumed EBITDA or
the assumed multiple at which the assumed EBITDA is capitalized.
 
     At the request of Mr. Donald Oresman of Paramount on February 14, 1994,
Lazard Freres delivered a letter, dated February 14, 1994 (the "February 14,
1994 Letter"), to Mr. Oresman advising
                                       75

him that, as of February 14, 1994, Lazard Freres reaffirmed its written opinion
addressed to the Paramount Board, dated February 4, 1994.
 
     THE OPINION OF LAZARD FRERES DATED FEBRUARY 4, 1994 (AND ANNEXED HERETO)
SHOULD BE READ IN ITS ENTIRETY. THE SUMMARY OF THE FINANCIAL AND COMPARATIVE
ANALYSES SET FORTH ABOVE CONTAINS INFORMATION WITH RESPECT TO ALL MATERIAL
ANALYSES EMPLOYED BY LAZARD FRERES IN REACHING ITS OPINION ON FEBRUARY 4, 1994
AND ITS CONCLUSION IN THE FEBRUARY 14, 1994 LETTER BUT DOES NOT PURPORT TO BE A
COMPLETE DESCRIPTION OF THE PRESENTATION OF LAZARD FRERES TO THE BOARD OF
DIRECTORS OF PARAMOUNT ON FEBRUARY 4, 1994 OR THE ANALYSES CONDUCTED BY LAZARD
FRERES. LAZARD FRERES BELIEVES THAT ITS ANALYSES MUST BE CONSIDERED AS A WHOLE
AND THAT SELECTING PORTIONS OF ITS ANALYSES AND THE FACTORS CONSIDERED BY IT,
WITHOUT CONSIDERING ALL FACTORS AND ANALYSES, COULD CREATE AN INCOMPLETE AND/OR
MISLEADING VIEW OF THE PROCESS UNDERLYING ITS OPINION. THE PREPARATION OF AN
OPINION IS A COMPLEX PROCESS AND IS NOT NECESSARILY SUSCEPTIBLE TO PARTIAL
ANALYSIS OR SUMMARY DESCRIPTION. IN PERFORMING ITS ANALYSES, LAZARD FRERES MADE
NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS AND
ECONOMIC CONDITIONS AND OTHER MATTERS, MANY OF WHICH ARE BEYOND THE CONTROL OF
PARAMOUNT, VIACOM, QVC OR BLOCKBUSTER. ANY ESTIMATE CONTAINED IN THE ANALYSES
PERFORMED BY LAZARD FRERES IS NOT NECESSARILY INDICATIVE OF ACTUAL VALUES OR
ACTUAL FUTURE RESULTS, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE THAN AS
SET FORTH THEREIN. ANALYSES RELATING TO THE VALUE OF ANY BUSINESS DO NOT PURPORT
TO BE APPRAISALS OR TO REFLECT THE PRICES AT WHICH ANY SUCH BUSINESS MAY
ACTUALLY BE SOLD. BECAUSE SUCH ESTIMATES ARE INHERENTLY SUBJECT TO UNCERTAINTY,
NONE OF PARAMOUNT, LAZARD FRERES OR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR
THEIR ACCURACY.
 
     Lazard Freres is a nationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts, and valuations for estate, corporate and other purposes. Lazard Freres
was selected to act as financial advisor to the Board of Directors of Paramount
because of its expertise and its reputation in investment banking and mergers
and acquisitions.
 
     Pursuant to an engagement letter, dated September 12, 1993, with Lazard
Freres (the "Lazard Engagement Letter"), Paramount paid Lazard Freres for its
financial advisory services in connection with the Offer and the Paramount
Merger (i) a fee of $3.0 million upon execution of the Viacom Merger Agreement
on September 12, 1993, and (ii) an additional fee of $9.5 million upon
consummation of the Offer. In addition, the Lazard Engagement Letter provides
that Paramount will reimburse Lazard Freres for its reasonable out-of-pocket
expenses (including fees and expenses of its legal counsel) and will indemnify
Lazard Freres and certain related parties against certain liabilities arising
out of the Offer and the Paramount Merger and its engagement.
 
     Lazard Freres has from time to time in the past provided, and is currently
providing, in matters unrelated to Paramount, financial advisory or financing
services to one or more of the respective equity investors in Viacom and QVC, or
persons engaged in pending transactions with one or more of such investors and
has received, or expects to receive, fees for the rendering of such services.
From 1985 to March 1994, Lester Pollack, a General Partner of Lazard Freres
served as a director of Paramount. As of March 28, 1994, Lazard Freres and its
affiliates held 6,990 shares of Paramount Common Stock (including 965 shares of
Paramount Common Stock held by Mr. Pollack), 1,450 shares of Viacom Class A
Common Stock, 9,260 shares of Viacom Class B Common Stock and 120 shares of
Blockbuster Common Stock in customer trading and other accounts. In the ordinary
course of its business, Lazard Freres and its affiliates may also actively trade
in securities of Paramount, Viacom or Blockbuster for its own account and for
the account of its customers and, accordingly, may at any time hold a long or
short position in such securities.
 
                                       76

INTERESTS OF CERTAIN PERSONS IN THE PARAMOUNT MERGER
 
     On May 25, 1993, Viacom established a Stock Option Plan (the "Plan") for
Outside Directors (defined below). Pursuant to the Plan, members of the Viacom
Board of Directors who are not officers or employees of Viacom or NAI or members
of their immediate family ("Outside Directors") (as of May 25, 1993, George
Abrams, Ken Miller and William Schwartz) received a one-time grant of stock
options for 5,000 shares of Viacom Class B Common Stock with an exercise price
of $45.25, the closing price of the Viacom Class B Common Stock on the AMEX on
the date of grant. In addition, under the terms of the Plan, each new Outside
Director, including Outside Directors of the combined company, receive a
one-time grant of stock options for 5,000 shares of Viacom Class B Common Stock
with an exercise price equal to the closing price of the Viacom Class B Common
Stock on the AMEX on the date of such Outside Director's election or appointment
to the Board. Each grant of stock options under this Plan will vest on the first
anniversary of the date of grant. H. Wayne Huizenga (who holds such options for
the benefit of Blockbuster), William C. Ferguson (who holds such options for the
benefit of NYNEX) and Frederic V. Salerno (who holds such options for the
benefit of NYNEX) each received a one-time grant of stock options for 5,000
shares of Viacom Class B Common Stock with an exercise price set at the closing
price of the Viacom Class B Common Stock on the date of the grant as set out
below. The Plan and all outstanding grants are subject to stockholder approval
at the next annual stockholder meeting of Viacom or the combined company.
 

     NAME                                                                       DATE OF GRANT       EXERCISE PRICE
- -------------------------------------------------------------------------  -----------------------  --------------
                                                                                              
H. Wayne Huizenga,
  for the benefit of Blockbuster.........................................  October 22, 1993           $    53.25
William C. Ferguson,
  for the benefit of NYNEX...............................................  November 19, 1993          $    42.50
Frederic V. Salerno,
  for the benefit of NYNEX...............................................  January 27, 1994           $    36.75

 
PARAMOUNT VOTING AGREEMENT
 
     The following is a summary of the material provisions of the Paramount
Voting Agreement, which is attached as Annex II to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Paramount Voting Agreement.
 
     Pursuant to the Paramount Voting Agreement, NAI agreed to vote the shares
of Viacom Class A Common Stock held by it (a) in favor of the Paramount Merger,
the Paramount Merger Agreement and the transactions contemplated by the
Paramount Merger Agreement and (b) against any proposal for any
recapitalization, merger, sale of assets or other business combination involving
Viacom (other than the Paramount Merger) or any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Viacom under the Paramount Merger Agreement or
which could result in any of the conditions to Viacom's obligations under the
Paramount Merger Agreement not being fulfilled.

   
     As of the date of this Proxy Statement/Prospectus, NAI owns 45,547,214
shares of Viacom Class A Common Stock, representing approximately 85% of the
outstanding voting shares of capital stock of Viacom.
    
 
                                       77

CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
     The following summary, based upon current law, is a general discussion of
certain Federal income tax consequences of the Paramount Merger to Viacom,
Paramount and Paramount stockholders assuming the Paramount Merger is
consummated as contemplated herein. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations
thereunder and administrative rulings and judicial authority as of the date
hereof, all of which are subject to change, possibly with retroactive effect.
Any such change could affect the continuing validity of this summary. This
summary applies to Paramount stockholders who hold their shares of Paramount
Common Stock as capital assets. This summary does not discuss all aspects of
income taxation that may be relevant to a particular Paramount stockholder in
light of such stockholder's specific circumstances or to certain types of
stockholders subject to special treatment under the Federal income tax laws (for
example, foreign persons, dealers in securities, banks and other financial
institutions, insurance companies, tax-exempt organizations and stockholders who
acquired shares of Paramount Common Stock pursuant to the exercise of options or
otherwise as compensation or through a tax-qualified retirement plan), and it
does not discuss any aspect of state, local, foreign or other tax laws. Because
of the unique nature of certain instruments to be received by Paramount
stockholders in the Paramount Merger, the Internal Revenue Service may take the
position that the Federal income tax consequences of holding such instruments
are different from those described below. No ruling has been (or will be) sought
from the Internal Revenue Service as to the anticipated tax consequences of the
Paramount Merger. Simpson Thacher & Bartlett, counsel to Paramount, has advised
Paramount and Shearman & Sterling, counsel to Viacom, has advised Viacom that,
in their opinions, the following discussion, insofar as it relates to matters of
Federal income tax law, is a fair and accurate summary of such matters.
PARAMOUNT STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE TAX
CONSEQUENCES TO THEM OF THE PARAMOUNT MERGER, INCLUDING THE APPLICABILITY AND
EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
 
     The Paramount Merger. Exchanges of Paramount Common Stock pursuant to the
Paramount Merger will be taxable transactions for Federal income tax purposes. A
Paramount stockholder who exchanges Paramount Common Stock for Viacom Class B
Common Stock, Viacom Merger Debentures, CVRs, Viacom Three-Year Warrants and
Viacom Five-Year Warrants in the Paramount Merger will recognize capital gain or
loss for Federal income tax purposes equal to the difference between such
stockholder's basis in the Paramount Common Stock so exchanged and the fair
market value on the date of the Paramount Merger of the Viacom Class B Common
Stock, the Viacom Merger Debentures, the CVRs, the Viacom Three-Year Warrants
and the Viacom Five-Year Warrants received. Such gain or loss will be long-term
gain or loss if, at the time of the Paramount Merger, the Paramount Common Stock
exchanged had been held for more than one year. Under current law, long-term
capital gains of individuals are, under certain circumstances, taxed at lower
rates than items of ordinary income (including short-term capital gains).
 
     Such Paramount stockholder will have a tax basis in the Viacom Class B
Common Stock, the Viacom Merger Debentures, the CVRs, the Viacom Three-Year
Warrants and the Viacom Five-Year Warrants received equal to their respective
fair market values on the date of the Paramount Merger. The holding period of
such stockholder in the Viacom Merger Debentures will begin on the day following
the date of the Paramount Merger. The holding period of such stockholder for
long-term capital gains purposes in the Viacom Class B Common Stock, the CVRs,
the Viacom Three-Year Warrants and the Viacom Five-Year Warrants received could
depend, in part, on the characterization of the CVRs for Federal income tax
purposes, as discussed below under "Ownership of CVRs--Straddle Rules."
 
     Neither Paramount nor Viacom will recognize any gain or loss as a result of
the Paramount Merger.
 
                                       78

     Backup Withholding. To prevent "backup withholding" of Federal income tax
on payments of cash in lieu of a fractional share of Viacom Class B Common
Stock, a fractional Viacom Merger Debenture, a fractional CVR, a fractional
Viacom Three-Year Warrant, and a fractional Viacom Five-Year Warrant to a
Paramount stockholder in the Paramount Merger, a Paramount stockholder must,
unless an exception applies under the applicable law and regulations, provide
the payor of such cash with such stockholder's correct taxpayer identification
number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury
that such number is correct and that such stockholder is not subject to backup
withholding. A Substitute Form W-9 will be provided to each Paramount
stockholder in the letter of transmittal to be mailed to each stockholder after
the Paramount Effective Time. If the correct TIN and certifications are not
provided, a $50 penalty may be imposed on a Paramount stockholder by the
Internal Revenue Service, and cash received by such stockholder in the Paramount
Merger may be subject to backup withholding at a rate of 31%.
 
     Tax Considerations Regarding the Ownership of Viacom Merger Debentures,
Series C Preferred Stock, Viacom Exchange Debentures, the CVRs, the Viacom
Three-Year Warrants and the Viacom Five-Year Warrants. The following is a
discussion of certain Federal income tax considerations regarding the ownership
of the Viacom Merger Debentures, the Series C Preferred Stock, the Viacom
Exchange Debentures, the CVRs, the Viacom Three-Year Warrants and the Viacom
Five-Year Warrants.
 
     (a) Ownership of Viacom Merger Debentures. Although the proper
characterization of the Viacom Merger Debentures for Federal income tax purposes
is not free from doubt, Viacom intends to treat the Viacom Merger Debentures as
debt instruments for such purposes, and the following discussion assumes that
the Viacom Merger Debentures will be so treated. If the Viacom Merger Debentures
were treated as equity for Federal income tax purposes, then the discussion of
Federal income tax considerations under "Ownership of Series C Preferred Stock"
generally would apply to the Viacom Merger Debentures.
 
     A holder of a Viacom Merger Debenture will be required to report as income
for Federal income tax purposes stated interest earned on the Viacom Merger
Debenture in accordance with the holder's method of tax accounting. A holder of
a Viacom Merger Debenture using the accrual method of accounting for tax
purposes is required to include stated interest in ordinary income as such
interest accrues, while a cash-basis holder must include stated interest in
income when payments are received (or made available for receipt) by such
holder.
 
     If at the time the Viacom Merger Debentures are issued the issue price of
the Viacom Merger Debentures (i.e., the fair market value of the Viacom Merger
Debentures as of the issue date) is less than the "stated redemption price at
maturity" of the Viacom Merger Debentures, the Viacom Merger Debentures will
bear "original issue discount" equal to the amount of such difference, subject
to a de minimis exception. If the Viacom Merger Debentures bear "original issue
discount," such discount will be includible in the income of the holder on a
"yield to maturity" basis pursuant to section 1272 of the Code. Thus, the holder
will be required to report income in advance of the receipt of cash in respect
of such "original issue discount."
 
     If at the time the Viacom Merger Debentures are issued or subsequently
acquired the holder's basis in the Viacom Merger Debentures exceeds the amount
payable at maturity with respect to such Viacom Merger Debentures, such
difference may be deducted as interest, on an economic accrual basis, over the
term of the Viacom Merger Debentures by the holder of such Viacom Merger
Debentures, at such holder's election, pursuant to section 171 of the Code. In
addition, a holder of a Viacom Merger Debenture who pays an "acquisition
premium" for a Viacom Merger Debenture bearing original issue discount will be
entitled to a reduction in the amount of original issue discount includible in
such holder's income. Furthermore, the Code provides generally that, in the case
of a holder of a Viacom Merger Debenture who purchases such Viacom Merger
Debenture at a "market discount" and thereafter recognizes a gain upon a
disposition of such Viacom Merger Debenture, the lesser of such
                                       79

gain or the portion of the market discount which accrued while the Viacom Merger
Debenture was held by the holder will generally be treated as interest income at
the time of disposition. In addition, a holder of a Viacom Merger Debenture
acquired at a market discount may be required to defer the deduction of a
portion of the interest paid or accrued on indebtedness incurred to purchase or
carry the Viacom Merger Debenture until it is disposed of in a taxable
transaction.
 
     If the Viacom Merger Debentures are exchanged for Series C Preferred Stock,
such exchange will not be a taxable transaction. Such holder will have an
aggregate tax basis in the Series C Preferred Stock received in the exchange
equal to the aggregate basis in the Viacom Merger Debentures exchanged therefor.
The holding period of such holder in the Series C Preferred Stock received will
include the holding period of such holder in the Viacom Merger Debentures
exchanged therefor.
 
     (b) Ownership of Series C Preferred Stock. Distributions paid on Series C
Preferred Stock will, to the extent of Viacom's current and accumulated earnings
and profits, be taxed as dividends. If the amount of a distribution on the
Series C Preferred Stock exceeds the current and accumulated earnings and
profits of Viacom, such excess first will be applied to reduce a holder's tax
basis in such holder's Series C Preferred Stock to the extent thereof. The
amount of such distribution in excess of such holder's tax basis will be treated
as gain from the sale or exchange of the Series C Preferred Stock.
 
   
     In addition, generally under section 305 of the Code and the Treasury
regulations promulgated thereunder, if the redemption price of a preferred stock
exceeds its issue price (i.e., its fair market value on the date of issuance)
and such excess constitutes an unreasonable redemption premium, then such excess
would be considered a constructive distribution taxable as a dividend (to the
extent of current and accumulated earnings and profits) included in income over
the period during which such preferred stock cannot be redeemed. Accordingly, if
the Series C Preferred Stock were deemed to be issued with an unreasonable
redemption premium, a holder of Series C Preferred Stock would realize taxable
income without the receipt of cash over the period during which the Series C
Preferred Stock cannot be called for redemption.
    
 
   
     A corporate holder of Series C Preferred Stock generally will be entitled
to the 70% corporate dividends-received deduction with respect to taxable
dividends paid on such stock, provided that such corporate holder has met the
requirements imposed by section 246 of the Code regarding the holding period for
the Series C Preferred Stock (see the discussion regarding the possible impact
of the ownership of CVRs on this requirement under "Ownership of CVRs--Corporate
Dividends-Received Deduction"), is not affected by the limit on aggregate
deductions under that section and is not subject to the limitation imposed by
section 246A of the Code with respect to debt-financed portfolio stock, all of
which conditions depend upon the particular holder's own circumstances. If a
corporate holder of Series C Preferred Stock is required to include in income
constructive dividends under section 305 of the Code (as described above), it is
possible that such dividends, together with any cash dividends, would qualify as
"extraordinary dividends" within the meaning of section 1059 of the Code.
Moreover, it should be noted that, under section 1059 of the Code, a corporate
holder of Series C Preferred Stock may be required to reduce its basis in such
stock if it receives an "extraordinary dividend" with respect to such stock.
    
 
     Under the terms of the Series C Preferred Stock, Viacom may, at its option
beginning on the third anniversary of the Paramount Effective Time, issue Viacom
Exchange Debentures in exchange for all or part of the Series C Preferred Stock.
Also, unless previously exchanged, Viacom may redeem all or part of the Series C
Preferred Stock at any time after the fifth anniversary of the Paramount
Effective Time. Such an exchange for Viacom Exchange Debentures or redemption of
the Series C Preferred Stock will constitute a taxable transaction.
 
     Whether any such exchange or redemption of Series C Preferred Stock will be
taxable to holders as a capital gain or loss or be treated as a dividend
distribution to the extent of current and accumulated earnings and profits will
be determined by applying the tests of section 302 of the Code to a holder's
particular circumstances. Capital gain or loss treatment will apply if the
exchange or redemption
                                       80

completely terminates the holder's actual and constructive stock interest in
Viacom or if the exchange or redemption is not essentially equivalent to a
dividend with respect to such holder. A holder whose relative actual and
constructive stock interest is minimal and who exercises no control over
corporate affairs generally will be entitled to capital gain or loss treatment
if an exchange or redemption results in a reduction in such holder's actual and
constructive stock interest. Corporate holders of Series C Preferred Stock
should note that, if the exchange or redemption is not pro rata as to all
holders and is taxable as a dividend, such dividend will be an "extraordinary
dividend" for purposes of section 1059 of the Code (see the second immediately
preceding paragraph).
 
     (c) Ownership of Viacom Exchange Debentures. A holder of a Viacom Exchange
Debenture will be required to report as income for Federal income tax purposes
stated interest earned on the Viacom Exchange Debenture in accordance with the
holder's method of tax accounting. A holder of a Viacom Exchange Debenture using
the accrual method of accounting for tax purposes is required to include stated
interest in ordinary income as such interest accrues, while a cash-basis holder
must include stated interest in income when payments are received (or made
available for receipt) by such holder.
 
     If at the time the Series C Preferred Stock is exchanged for Viacom
Exchange Debentures the issue price of the Viacom Exchange Debentures (i.e., the
fair market value of the Viacom Exchange Debentures if they are publicly traded
upon their issuance, or otherwise of the Series C Preferred Stock, as of the
issue date) is less than the "stated redemption price at maturity" of the Viacom
Exchange Debentures, the Viacom Exchange Debentures will bear "original issue
discount" equal to the amount of such difference, subject to a de minimis
exception. If the Viacom Exchange Debentures bear "original issue discount,"
such discount will be includible in the income of the holder on a "yield to
maturity" basis pursuant to section 1272 of the Code. Thus, the holder will be
required to report income in advance of the receipt of cash in respect of such
"original issue discount."
 
     If at the time the Viacom Exchange Debentures are issued or subsequently
acquired the holder's basis in the Viacom Exchange Debentures exceeds the amount
payable at maturity with respect to such Viacom Exchange Debentures, such
difference may be deducted as interest, on an economic accrual basis, over the
term of the Viacom Exchange Debentures by the holder of such Viacom Exchange
Debentures, at such holder's election, pursuant to section 171 of the Code. In
addition, a holder of a Viacom Exchange Debenture who pays an "acquisition
premium" for a Viacom Exchange Debenture bearing original issue discount will be
entitled to a reduction in the amount of original issue discount includible in
such holder's income. Furthermore, the Code provides generally that, in the case
of a holder of a Viacom Exchange Debenture who purchases such Viacom Exchange
Debenture at a "market discount" and thereafter recognizes a gain upon a
disposition of such Viacom Debenture, the lesser of such gain or the portion of
the market discount which accrued while the Viacom Exchange Debenture was held
by the holder will generally be treated as interest income at the time of
disposition. In addition, a holder of a Viacom Exchange Debenture acquired at a
market discount may be required to defer the deduction of a portion of the
interest paid or accrued on indebtedness incurred to purchase or carry the
Viacom Exchange Debenture until it is disposed of in a taxable transaction.
 
     (d) Ownership of the CVRs. The Federal income tax consequences resulting
from the maturity, lapse, or disposition of the CVRs received by a Paramount
stockholder in the Paramount Merger (an "Initial CVR Holder") will depend upon
how the CVRs are characterized for Federal income tax purposes. Although no
court has addressed the proper characterization of the CVRs for Federal income
tax purposes, the Internal Revenue Service has taken the position that rights
which were in many respects similar to the CVRs should be treated as cash
settlement put options for Federal income tax purposes. It also is possible that
the CVRs might be treated as debt instruments for Federal income tax purposes.
The following discussion examines the Federal income tax consequences if the
CVRs were treated as cash settlement put options or as debt instruments. It
should be noted, however, that the CVRs might be treated in some other manner,
and that subsequent legislation, regulations, court decisions and revenue
rulings could affect the Federal income tax treatment of the CVRs.
 
                                       81

     Treatment of the CVRs as Cash Settlement Put Options. If the CVRs were
treated as cash settlement put options, an Initial CVR Holder would realize
capital gain or loss upon the lapse, payment at maturity or sale or exchange of
such holder's CVRs in an amount equal to the difference between the amount
realized, if any, and such holder's tax basis for CVRs. Upon payment at
maturity, the amount realized would be the cash or the fair market value of the
Viacom securities received in satisfaction of the CVRs. However, some or all of
any loss so realized might be deferred, or an Initial CVR Holder's holding
period might be adjusted, under the straddle rules described below.
 
     Straddle Rules. Section 1092 of the Code provides special rules concerning
the recognition of losses and the determination of holding periods with respect
to positions that are part of a "straddle." The term "straddle" means offsetting
positions with respect to personal property. The term "position" means an
interest (including an option) in personal property. For this purpose, "personal
property" includes stock only if such stock is part of a straddle where one of
the offsetting positions is either an option with respect to such stock or
substantially identical stock or securities or, under regulations which have
been proposed but have not yet been finalized, a position with respect to
substantially similar or related property (other than stock) (for example, a
debt instrument). Positions are treated as "offsetting" where the risk of loss
from holding one position is substantially diminished by reason of holding
another position.
 
     It is possible that the holding of CVRs and the Viacom Class A Common
Stock, the Viacom Class B Common Stock or another security of Viacom (e.g., the
Viacom Three-Year Warrants, the Viacom Five-Year Warrants or another class of
Viacom security) by an Initial CVR Holder (regardless of whether the holder
acquired any such shares of Viacom Common Stock or other security of Viacom in
the Paramount Merger or otherwise) would be a straddle if the CVRs were treated
as cash settlement put options. It should be noted that the Code directs the
Secretary of the Treasury to issue regulations prescribing the method for
determining the portion of a position that is subject to the straddle rules when
the size of the position exceeds the size of the offsetting position. No such
regulations have been issued to date.
 
     If holding the CVRs and Viacom Common Stock or another security of Viacom
were treated as a straddle, then any loss realized in a taxable year by an
Initial CVR Holder upon a sale or other disposition (including retirement) of
either the CVRs or Viacom Common Stock or another security of Viacom would be
recognized only to the extent it exceeds the unrecognized gain (as of the end of
such year) with respect to the retained position. The unrecognized portion of
such loss would be deferred and would be treated as a loss incurred in a later
taxable year, the recognition of which would continue to be subject to the
straddle rules.
 
     In addition, if the CVRs and Viacom Common Stock or another security of
Viacom were treated as a straddle, special rules would apply to determine
whether capital gain or loss upon the disposition of such stock or security and
the CVRs would be treated as long term or short term. If an Initial CVR Holder
would not have a long-term holding period (i.e., a holding period of more than
one year) for Viacom Common Stock or another security of Viacom when such holder
receives a CVR that is part of a straddle including such stock or security, then
such holder's holding period for any such stock or security before the
acquisition of the CVR would be disregarded, and instead his holding period for
any such stock or security and the CVR would begin only upon the disposition, if
any, of the other. As a result of this rule, any capital gain or loss recognized
upon the disposition of any such share or the disposition of the CVR, whichever
occurred first, would be short term, and any capital gain or loss recognized
upon the disposition of the second position would be long term or short term,
depending on whether a long-term holding period would have been acquired
commencing with the disposition of the first position.
 
     If an Initial CVR Holder were treated as having held Viacom Common Stock or
another security of Viacom for more than one year when such holder receives a
CVR that is part of a straddle including such stock or security, then such
holder would retain the long-term holding period for such stock or
                                       82

security. Thus, any capital gain or loss recognized by the Initial CVR Holder on
the disposition of such stock or security would be long term. The Initial CVR
Holder's holding period for the CVR for purposes of determining the term of any
capital gain will begin only when (if ever) such holder disposes of such stock
or security. However, any capital loss recognized by the Initial CVR Holder upon
maturity, or upon an earlier termination or disposition of the CVR, would be
treated as long term, regardless of the holder's holding period for the CVR.
 
     Section 263(g) of the Code disallows a deduction for interest and carrying
charges allocable to a position that is a part of a straddle and requires such
amounts to be added to the tax basis of such position.
 
     Treatment of the CVRs as Debt Instruments. The following discussion of the
treatment of the CVRs as debt instruments is based principally on sections 1271
through 1275 of the Code and certain proposed Treasury regulations regarding
contingent-payment obligations (the "Proposed Regulations") under the original
issue discount provisions of the Code. The application of these Code provisions
and the Proposed Regulations to the CVRs cannot be predicted with certainty
without further guidance from the Internal Revenue Service, because they do not
specifically contemplate a debt instrument as to which all of the payments are
contingent, such as the CVRs would be if they were treated as debt. Further,
there can be no assurance that the ultimate Federal income tax treatment under
final Treasury regulations would not differ materially from the discussion
below. For example, the Internal Revenue Service issued revised proposed
Treasury regulations in January 1993, which were withdrawn shortly thereafter,
that would have provided for different Federal income tax treatment of the CVRs
as debt instruments from that discussed below.
 
     If the CVRs are treated as debt obligations, no interest income (including
in the form of original issue discount) should accrue to an Initial CVR Holder
prior to maturity. At maturity, the amount of cash or the portion of the fair
market value of the Viacom security, if any, received by an Initial CVR Holder
pursuant to a CVR equal to the "issue price" of the CVR (i.e., the holder's tax
basis in the CVR) should be treated as a payment of principal, and any excess
amount of cash or fair market value should be treated as ordinary interest
income. If the amount of cash or the fair market value of the Viacom security
received by an Initial CVR Holder pursuant to a CVR was less than the issue
price, or if no cash or Viacom security was received at maturity, the Initial
CVR Holder should recognize a capital loss equal to the amount by which the
holder's tax basis in the CVR exceeded the amount of cash or the fair market
value of the Viacom security, if any, received by the holder.
 
     If an Initial CVR Holder sold or otherwise disposed of a CVR prior to
maturity, the holder should recognize ordinary income to the extent that the
amount realized on such sale or disposition exceeded the holder's tax basis in
the CVR. If the amount realized was less than the tax basis, the holder should
recognize a short-term capital loss equal to the difference.
 
     Corporate Dividends-Received Deduction. If the CVRs were treated as cash
settlement put options, it appears that a corporate Initial CVR Holder's holding
period for Viacom Class B Common Stock for purposes of the dividends-received
deduction under section 243 to 246 of the Code would not include any days on
which it holds a CVR. This treatment might render such Initial CVR Holder
ineligible for the dividends-received deduction in respect of dividend income on
Viacom Class B Common Stock. If the CVRs were treated as debt instruments,
proposed Treasury regulations also would treat the CVRs as having the same
effect on the dividends-received deduction with respect to Viacom Class B Common
Stock. In addition, the CVRs also might have the same effect on the
dividends-received deduction with respect to Viacom Class A Common Stock or
another class of Viacom stock held by an Initial CVR Holder if any such stock
and Viacom Class B Common Stock are "substantially identical stock" for this
purpose or, if they are not, if the holding of CVRs and Viacom Class A Common
Stock or another class of Viacom stock would be treated as diminishing such
holder's risk of loss under proposed Treasury regulations.
 
                                       83

     Treatment of Capital Losses. For Federal income tax purposes, capital
losses of individuals may be offset against capital gains and, to the extent
such losses exceed capital gains, against up to $3,000 of ordinary income
($1,500 for a married individual filing a separate return). Capital losses of
corporations may only be offset against capital gains. Capital losses not used
in the year recognized may, within certain limitations, be carried over to other
taxable years.
 
     An Initial CVR Holder should note that, if the CVRs were treated as cash
settlement put options, any gain on the CVRs would be treated as capital gain
which could be offset by any corresponding capital loss on the Initial CVR
Holder's Viacom Class A Common Stock, Viacom Class B Common Stock or another
Viacom security if such stock or security was sold and such loss was realized.
However, the ordinary income that the CVRs may generate if they were treated as
debt instruments could not be offset for Federal income tax purposes by any such
capital loss (except to the extent discussed in the preceding paragraph with
respect to individuals). An initial CVR Holder should be aware that, if the
value of CVRs decrease, this issue will not arise since any loss on the CVRs
will be treated as capital loss regardless of whether the CVRs are treated as
cash settlement put options or debt obligations.
 
     As the use of capital losses by an Initial CVR Holder will depend upon
multiple factors, including such holder's particular circumstances, and upon the
issue of whether the CVRs are treated as cash settlement put options or debt
instruments for Federal income tax purposes, Initial CVR Holders should consult
their tax advisors regarding the use of capital losses.
 
     (e) Ownership of the Viacom Three-Year and Five-Year Warrants. If a holder
exercises a Viacom Three-Year Warrant or Viacom Five-Year Warrant solely by the
delivery of cash, the holder will not recognize gain or loss on the exercise,
except with respect to cash, if any, received in lieu of a fractional share of
Viacom Class B Common Stock. The tax basis of the Viacom Class B Common Stock
acquired (including a fractional share deemed acquired) as a result of such
exercise of a Viacom Three-Year Warrant or Viacom Five-Year Warrant will equal
the sum of (i) the holder's tax basis in the Viacom Three-Year Warrant or Viacom
Five-Year Warrant exercised and (ii) the exercise price. The holding period for
such Viacom Class B Common Stock will commence upon the date of exercise.
 
     It is not clear whether the delivery of Series C Preferred Stock or Viacom
Exchange Debentures to pay the exercise price on the exercise of a Viacom
Five-Year Warrant will be considered a taxable disposition of such Series C
Preferred Stock or Viacom Exchange Debentures or will qualify generally as a
tax-free exchange. If the delivery by a holder qualifies as a taxable
disposition of Series C Preferred Stock or Viacom Exchange Debentures, the
holder will recognize (1) gain or loss equal to the difference, if any, between
(i) the exercise price, which will equal the liquidation preference of the
Series C Preferred Stock or the principal amount of the Viacom Exchange
Debentures so delivered and (ii) the holder's tax basis in them, plus (2) gain
or loss with respect to cash, if any, received in lieu of a fractional share of
Viacom Class B Common Stock. The tax basis of the Viacom Class B Common Stock
acquired (including a fractional share deemed acquired) as a result of such
exercise of a Viacom Five-Year Warrant will equal the sum of (i) the holder's
tax basis in the Viacom Five-Year Warrant exercised and (ii) the exercise price.
The holding period for such Viacom Class B Common Stock will commence upon the
date of exercise.
 
     If the delivery of Series C Preferred Stock or Viacom Exchange Debentures
by a holder qualifies generally as a tax-free exchange, no gain or loss will be
recognized by the holder, except (1) with respect to cash, if any, received in
lieu of a fractional share of Viacom Class B Common Stock, and (2) as to a
cash-basis holder, ordinary income equal to the lesser of (i) the amount of
accrued interest not previously includible in income by the holder on Viacom
Exchange Debentures so delivered or (ii) the excess of the fair market value of
the Viacom Class B Common Stock acquired (including a fractional share deemed
acquired) by the holder over the principal amount of such Viacom Exchange
Debentures. Except as discussed in the following sentence, the tax basis for the
Viacom Class B Common Stock acquired (including a fractional share deemed
acquired) as a result of such exercise of a Viacom Five-Year Warrant should
equal the sum of (i) the holder's tax basis for the Series C Preferred Stock or
                                       84

Viacom Exchange Debentures so delivered (less the tax basis, if any, for such
Viacom Exchange Debentures attributable to any original issue discount thereon
previously includible in income by the holder) and (ii) the holder's tax basis
for the Warrant, and the holding period for such Viacom Class B Common Stock
will include the holding period of such Series C Preferred Stock or Viacom
Exchange Debentures. The tax basis for the Viacom Class B Common Stock, if any,
deemed acquired by the holder in exchange for any original issue discount or
accrued interest previously or then includible in income by the holder on Viacom
Exchange Debentures so delivered should equal the fair market value of such
Viacom Class B Common Stock at the time of the exchange, and the holding period
for such Viacom Class B Common Stock should commence on the day after the
exchange.
 
     A holder's receipt of cash lieu of a fractional share of Viacom Class B
Common Stock upon an exercise of a Viacom Three-Year Warrant or Viacom Five-Year
Warrant generally will result in the recognition of capital gain or loss equal
to the difference, if any, between the cash received and the holder's tax basis
in the Viacom Class B Common Stock acquired upon such exercise allocable to such
fractional share.
 
     In general, the sale or exchange of a Viacom Three-Year or Five-Year
Warrant will result in a capital gain or loss, if any, equal to the difference
between the amount realized from such sale or exchange and the holder's tax
basis in the Viacom Three-Year or Five-Year Warrant. The expiration of a Viacom
Three-Year or Five-Year Warrant will result in a capital loss to the holder
thereof equal to the holder's tax basis therein.
 
     Under the terms of each of the Viacom Three-Year and Five-Year Warrants,
the number of shares of Viacom Class B Common Stock that may be acquired upon
exercise of a Viacom Three-Year or Five-Year Warrant will be adjusted upon the
happening of certain events. Section 305(c) of the Code and the Treasury
regulations thereunder provide that, if such adjustments result in a
constructive increase in a holder's proportionate interest in Viacom's earnings
and profits or assets, such increase will be treated as a deemed distribution to
the holder taxable under the dividend provisions of section 301 of the Code.
 
     THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE BASED UPON PRESENT
LAW, ARE FOR GENERAL INFORMATION ONLY AND DO NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS WHICH MAY APPLY TO A PARAMOUNT
STOCKHOLDER. THE TAX EFFECTS AS APPLICABLE TO A PARTICULAR PARAMOUNT STOCKHOLDER
MAY BE DIFFERENT FROM THE TAX EFFECTS AS APPLICABLE TO OTHER PARAMOUNT
STOCKHOLDERS, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX
LAWS, AND THUS PARAMOUNT STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS.
 
REAL ESTATE TRANSFER TAXES
 
     The New York State Real Property Transfer Gains Tax, the New York State
Real Estate Transfer Tax, and the New York City Real Property Transfer Tax
(collectively, the "Real Estate Transfer Taxes") apply to the transfer or
acquisition, directly or indirectly, of controlling interests in an entity which
owns interests in real property located in New York State or New York City, as
the case may be. The Offer and the Paramount Merger will result in the transfer
of controlling interests in entities which own New York State or New York City
real property for purposes of the Real Estate Transfer Taxes. Although any Real
Estate Transfer Taxes could be imposed directly on the Paramount stockholders,
Viacom and Paramount will complete and file any necessary tax returns and will
pay all Real Estate Transfer Taxes that are imposed as a result of the Offer and
the Paramount Merger. Upon receipt of the consideration for either the Offer or
the Paramount Merger, each Paramount stockholder will be deemed to have agreed
to be bound by the Real Estate Transfer Tax returns filed by Viacom and
Paramount.
 
                                       85

CERTAIN EFFECTS OF THE PARAMOUNT MERGER; OPERATIONS AFTER THE PARAMOUNT MERGER
 
     As a result of the Paramount Merger, there will be no public market for
Paramount Common Stock. Upon consummation of the Paramount Merger, the Paramount
Common Stock will cease to be quoted on the NYSE, the registration of the
Paramount Common Stock under the Exchange Act will be terminated and such stock
will no longer constitute "margin securities" under the rules of the Board of
Governors of the Federal Reserve System. See "Exchange Act Registration and
Trading of the Paramount Common Stock."
 
   
     Viacom currently owns 61,657,432 shares of Paramount Common Stock acquired
pursuant to the Offer, representing a majority of the shares of Paramount Common
Stock outstanding. As a result of the Paramount Merger, the existing
stockholders of Paramount will share in Paramount's, Viacom's, and, if the
Blockbuster Merger is consummated, Blockbuster's earnings and assets with the
existing stockholders of Viacom and, if the Blockbuster Merger is consummated,
the existing stockholders of Blockbuster. Accordingly, to the extent Paramount's
performance on a stand-alone basis would exceed the performance of Viacom (or
Viacom and Blockbuster) on a consolidated basis, existing Paramount stockholders
will be disadvantaged by having to share Paramount's earnings and assets with
Viacom's (or Viacom's and Blockbuster's) existing stockholders. Conversely,
Paramount's existing stockholders will be advantaged to the extent
Viacom-Paramount (or the combined company) would outperform Paramount on a
stand-alone basis. Following completion of the Paramount Merger, Viacom will own
the entire equity interest in Paramount and will thereby own a 100% interest in
Paramount's net assets and earnings. Accordingly, after the Paramount Merger,
unaffiliated stockholders of Paramount will no longer have a direct equity
interest in Paramount and instead will own approximately 28.4% of the
outstanding shares of Viacom Common Stock and thereby have an approximately
28.4% interest in Viacom-Paramount's net assets and earnings. After the Mergers,
unaffiliated stockholders of Paramount will own approximately 15.3% of the
outstanding shares of Viacom Common Stock and thereby have an approximately
15.3% interest in the net assets and earnings of the combined company. See "The
Paramount Merger--Ownership of Viacom Common Stock Immediately After the
Paramount Merger and the Mergers." Accordingly, based on year-end 1993 pro forma
financial results for Viacom-Paramount and year-end 1993 historical results for
Paramount, as a result of the Paramount Merger the interest of Paramount's
unaffiliated stockholders in earnings from operations and stockholders' equity
will increase to $154 million from $151 million and will decline to $1.8 billion
from $2.1 billion, respectively. In the case of pro forma financial results for
the combined company, the interest of Paramount's unaffiliated stockholders in
earnings from operations and stockholders' equity will decline to $135 million
and $1.6 billion, respectively.
    
 
     Viacom is considering various plans to restructure Paramount and its
subsidiaries following the Paramount Merger in order to, among other things,
simplify Paramount's corporate structure, improve operating efficiencies, save
expenses and make cash flow from operating subsidiaries more available to
Viacom. While engaged in this process, Viacom has identified substantial amounts
of redundancies in corporate overhead and is currently in the process of
implementing overhead reductions, including personnel reductions. Viacom expects
to take additional steps in this regard prior to and following the Paramount
Merger.
 
     Viacom has also announced that it is in the process of seeking indications
of interest for the possible sale of Paramount's Madison Square Garden
operations and certain publishing assets, which Viacom has determined are not
core strategic assets.
 
     Except for the Mergers and except as otherwise described in this Proxy
Statement/Prospectus, none of Sumner M. Redstone, NAI, Viacom or Paramount have
any present plans or proposals which relate to or would result in (i) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving Paramount or any of its subsidiaries, (ii) a sale or
transfer of a material amount of assets of Paramount or any of its subsidiaries,
(iii) any material change in the present dividend rate or policy or indebtedness
or capitalization of Paramount or (iv) any other material change in Paramount's
                                       86

corporate structure or business. See "Financing of the Offer," "Certain
Considerations" and "Financial Matters After the Mergers."
 
                              THE PARAMOUNT MERGER
 
GENERAL
 
     The discussion in this Proxy Statement/Prospectus of the Paramount Merger
and the description of the Paramount Merger's principal terms are subject to and
qualified in their entirety by reference to the Paramount Merger Agreement, a
copy of which is attached to this Proxy Statement/Prospectus as Annex I and
which is incorporated herein by reference.
 
THE OFFER
 
     Pursuant to the Offer, on March 11, 1994 Viacom completed its purchase of a
majority of the shares of Paramount Common Stock at a price of $107 per share
net to the seller in cash, or aggregate cash consideration of approximately $6.6
billion.
 
PARAMOUNT MERGER CONSIDERATION
 
   
     At the Paramount Effective Time, each outstanding share of Paramount Common
Stock issued and outstanding immediately prior to the Paramount Effective Time
(other than shares of Paramount Common Stock held by Paramount, Viacom or any
direct or indirect wholly owned subsidiary of Viacom or of Paramount and by
holders who shall have demanded and perfected appraisal rights under the DGCL)
will be converted into the right to receive (i) 0.93065 of a share of Viacom
Class B Common Stock, (ii) $17.50 principal amount of the Viacom Merger
Debentures, (iii) 0.93065 of a CVR, (iv) 0.5 of a Viacom Three-Year Warrant and
(v) 0.3 of a Viacom Five-Year Warrant. On February 1, 1994, the last trading day
before the announcement of the terms of the February 4 Merger Agreement, on
February 14, 1994, the date on which Lazard Freres reaffirmed its fairness
opinion, and on May [23], 1994, the last trading day before the printing of this
Proxy Statement/Prospectus, the last sales price of a share of Viacom Class B
Common Stock as reported on the AMEX was $34 1/8, $29 7/8 and $28 3/8,
respectively. However, no assurances can be given with respect to the prices at
which the Viacom Class B Common Stock will trade after the date hereof or after
the Paramount Effective Time or the prices at which the Viacom Merger Debentures
(or, if issued, the Series C Preferred Stock and the Viacom Exchange
Debentures), the CVRs and the Viacom Warrants will trade after the Paramount
Effective Time. There has been no public trading market for the Viacom Merger
Debentures, CVRs or Viacom Warrants and there can be no assurances that an
active market for such securities will develop or continue after the Paramount
Merger.
    
 
   
     The Viacom Merger Debentures will bear interest (unless exchanged for
Series C Preferred Stock as described below) at a rate of 8% per annum from the
Paramount Effective Time, payable semi-annually beginning January 1, 1995, will
have a maturity of 12 years from the Paramount Effective Time, will be
redeemable, at the option of Viacom, in whole or in part, at declining
redemption premiums after the fifth anniversary of the Paramount Effective Time
and will be subordinated in right of payment to all senior obligations of
Viacom.
    

   
     The Viacom Merger Debentures will be exchangeable, at the option of Viacom,
in whole but not in part, on or after the earlier of (i) January 1, 1995, but
only if the Blockbuster Merger has not been consummated by such date and (ii)
the acquisition by a third party of beneficial ownership of a majority of the
then outstanding voting securities of Blockbuster, into the Series C Preferred
Stock at the rate of one share of Series C Preferred Stock for each $50 in
principal amount of Viacom Merger Debentures exchanged. At the time of exchange
of the Series C Preferred Stock for the Viacom Merger Debentures, all accrued
and unpaid interest on the Viacom Merger Debentures will not be paid and instead
the dividends payable pursuant to subclause (i) of the next sentence will be
payable. The Series C Preferred Stock, if issued, (i) would accrue dividends
from the later of the Paramount Effective Time and the
    
                                       87

   
latest date through which interest has been paid on the Viacom Merger Debentures
at a rate of 5% per annum until the tenth anniversary of the Paramount Effective
Time and 10% per annum thereafter, (ii) would have a liquidation preference of
$50 per share, (iii) would be redeemable at the option of Viacom in whole or in
part at declining redemption premiums after the fifth anniversary of the
Paramount Effective Time and (iv) would be exchangeable in whole or in part at
the option of Viacom into the Viacom Exchange Debentures after the third
anniversary of the Paramount Effective Time. The Viacom Exchange Debentures
would be subordinated obligations of Viacom, would bear interest at the rate of
5% per annum until the tenth anniversary of the Paramount Effective Time and 10%
per annum thereafter, would be redeemable at the option of Viacom, in whole or
in part, at declining redemption premiums after the fifth anniversary of the
Paramount Effective Time, and would mature on the twentieth anniversary of the
Paramount Effective Time.
    
 
   
     Each whole CVR will represent the right, on the first anniversary of the
Paramount Effective Time, to receive, in cash or securities (at the option of
Viacom), the amount by which the average trading value of Viacom Class B Common
Stock is less than a minimum price of $48 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 per share, and
a further one-year extension right which, if exercised by Viacom, would increase
the minimum price to $55 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 (i) $36 per share if Viacom does not
exercise its extension rights, (ii) $37 per share if Viacom extends the payment
and measurement dates of the CVR by one year or (iii) $38 per share if Viacom
exercises its further one-year extension right. If Viacom elects to issue
securities in payment for the CVRs, such securities could take the form of
common stock or preferred stock, options or warrants therefor, other securities
convertible into or exchangeable for common stock or preferred stock, notes,
debentures, or any other security of Viacom or any combination of the foregoing.
    
 
     If the Average Trading Value of a share of Viacom Class B Common Stock
equals or exceeds $48 on the Maturity Date or $51 on the First Extended Maturity
Date (if the Maturity Date is extended by Viacom to the First Extended Maturity
Date) or $55 on the Second Extended Maturity Date (if the First Extended
Maturity Date is extended by Viacom to the Second Extended Maturity Date), as
the case may be, no amount will be payable with respect to the CVRs. Certain
corporate reorganizations, in which consideration paid to holders of shares of
Viacom Class B Common Stock exceeds minimum amounts may also result in no value
being payable with respect to the CVRs.
 
     Each whole Viacom Three-Year Warrant will entitle the holder thereof to
purchase one share of Viacom Class B Common Stock at any time prior to the third
anniversary of the Paramount Effective Time at a price of $60, payable in cash.
Each whole Viacom Five-Year Warrant will entitle the holder thereof to purchase
one share of Viacom Class B Common Stock at any time prior to the fifth
anniversary of the Paramount Effective Time at a price of $70, payable in cash
or by exchanging, if issued, either Series C Preferred Stock with an equivalent
liquidation preference or an equivalent principal amount of Viacom Exchange
Debentures. 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.
 
     Due to a lack of an existing market for the CVRs and Viacom Warrants, it is
impracticable to determine an actual value for the CVRs and Viacom Warrants at
this time. While the CVRs and Viacom Warrants will be listed for trading on the
AMEX, there are no assurances that a liquid public market reflecting the
fundamental value of the CVRs and Viacom Warrants will develop.
 
     For a more detailed description of the Paramount Merger Consideration, see
"Description of Viacom Capital Stock" and "Description of Viacom Debentures."
For a description of the provisions with respect to fractional shares see
"Certain Provisions of the Paramount Merger Agreement-- Procedure for Exchange
of Paramount Certificates." Any shares of Paramount Common Stock held by
                                       88

Paramount, Viacom or any direct or indirect wholly owned subsidiary of Paramount
or Viacom will be cancelled.
 
     The financial terms of the Paramount Merger were determined through
negotiations between Viacom and Paramount, each of which was advised with
respect to such negotiations by its respective legal and financial advisors.
 
     Any shares of Viacom Class B Common Stock, Viacom Merger Debentures, CVRs,
Viacom Three-Year Warrants, or Viacom Five-Year Warrants issued in connection
with the Paramount Merger, or shares of Series C Preferred Stock issued upon the
exchange (if any) of Viacom Merger Debentures, Viacom Exchange Debentures issued
upon the exchange (if any) of shares of Series C Preferred Stock, securities
issued pursuant to the CVRs, or shares of Viacom Class B Common Stock issued
upon exercise of the Viacom Three-Year Warrants or Viacom Five-Year Warrants, to
residents of Canada may be subject to certain resale restrictions, including
that they may be required to be resold outside of Canada or pursuant to an
available exemption under applicable Canadian securities laws.
 
     No fractional securities will be issued in connection with the Paramount
Merger. In lieu of any such fractional shares each holder of Paramount Common
Stock will be paid an amount in cash as described under "Certain Provisions of
the Paramount Merger Agreement--Procedure for Exchange of Paramount
Certificates."
 
PARAMOUNT EFFECTIVE TIME
 
     The Paramount Merger will become effective upon the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware or such later
time as is specified in such certificate a form of which is attached as Annex
VI. Such filing will be made as promptly as practicable after satisfaction or
waiver of the conditions to the Paramount Merger unless another date is agreed
to by Paramount and Viacom. The Paramount Merger Agreement may be terminated by
either party if, among other reasons, the Paramount Merger shall not have been
consummated on or before July 31, 1994; provided, however, that the Paramount
Merger Agreement may be extended by written notice of either Viacom or Paramount
to a date not later than September 30, 1994, if the Paramount Merger shall not
have been consummated as a direct result of Viacom or Paramount having failed by
July 31, 1994, to receive all required regulatory approvals or consents with
respect to the Paramount Merger. See "Certain Provisions of the Paramount Merger
Agreement--Termination" and "Certain Provisions of the Paramount Merger
Agreement--Conditions to Consummation of the Paramount Merger."
 
STOCK EXCHANGE LISTING
 
   
     It is a condition to the Paramount Merger that the shares of Viacom Class B
Common Stock, the Viacom Merger Debentures, the CVRs and the Viacom Warrants to
be issued in the Paramount Merger as Paramount Merger Consideration be
authorized for listing on the AMEX, subject to official notice of issuance.
Viacom has filed an application to list such securities on the AMEX, subject to
official notice of issuance. The shares of Viacom Class B Common Stock are
traded on the AMEX under the symbol "VIA.B" and the Viacom Debentures, CVRs,
Viacom Three-Year Warrants and Viacom Five-Year Warrants will be traded under
the symbols "VIA.D", "VIA.CV", "VIA.WS.C" and "VIA.WS.E", respectively.
    
 
     Viacom has also agreed to use its reasonable best efforts to cause the
Series C Preferred Stock and the Viacom Exchange Debentures to be approved for
listing on the AMEX prior to the issuance thereof.
 
                                       89

EXPENSES OF THE TRANSACTION
 
     It is estimated that, if the Paramount Merger is consummated, expenses
incurred in connection with the Offer and the Paramount Merger will be
approximately as follows:
 
   
                                                                            
Financial advisory fees......................................................  $
                                                                               -------------
Commission filing fees.......................................................
Legal fees...................................................................
Accounting fees..............................................................
Printing costs...............................................................
Proxy solicitation, distribution and Paying Agent fees.......................
Blue Sky fees................................................................
Miscellaneous................................................................
                                                                               -------------
             Total...........................................................  $
                                                                               -------------
                                                                               -------------


    
 
     All costs and expenses incurred in connection with the Paramount Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expenses, except that expenses incurred in connection with
printing, filing and mailing this Proxy Statement/Prospectus and all Commission
and other regulatory filing fees in connection therewith will be shared equally
by Viacom and Paramount.
 
OWNERSHIP OF VIACOM COMMON STOCK IMMEDIATELY AFTER THE PARAMOUNT MERGER AND THE
MERGERS
 
                  PERCENTAGE OWNERSHIP OF VIACOM COMMON STOCK*
 

                                                         FOLLOWING CONSUMMATION OF             FOLLOWING CONSUMMATION OF
                                                           THE PARAMOUNT MERGER**                     THE MERGERS
                                                    ------------------------------------  ------------------------------------
                                                     VIACOM CLASS A         VIACOM         VIACOM CLASS A         VIACOM
                                                      COMMON STOCK       COMMON STOCK       COMMON STOCK       COMMON STOCK
                                                    -----------------  -----------------  -----------------  -----------------
                                                                                                 
NAI...............................................           85.2%              46.0%             62.1%              24.8%
Pre-Merger(s) stockholders of Viacom (other than
NAI)..............................................           14.8%              25.6%             10.8%              13.9%
Former stockholders of Blockbuster................             --%                --%             27.1%              46.0%
Former stockholders of Paramount..................         --                   28.4             --                  15.3%

 
- ---------------
 
 * All percentages of ownership of common stock shown above in this section are
   calculated based on the number of shares of the relevant class or classes of
   stock outstanding as of March 31, 1994. Percentages of ownership do not give
   effect to potential dilution related to employee or director stock options or
   warrants, Viacom Preferred Stock, VCRs, CVRs and Viacom Warrants.
 
** All percentages of ownership of common stock shown in this column are
   calculated assuming the Blockbuster Merger has not yet been consummated.
 
                                       90

EFFECT ON EMPLOYEE BENEFIT STOCK PLANS
 
   
     Assumption of Paramount Stock Options. The Paramount Merger Agreement
amended the February 4 Merger Agreement to modify the treatment of outstanding
options to purchase shares of Paramount Common Stock granted under Paramount's
employee stock option plans ("Paramount Stock Options"). In general, the
principal effect of such amendment was to adjust the terms of the Paramount
Stock Options outstanding at the Paramount Effective Time so that the holders of
such options receive additional value, based upon the price per share paid in
the Offer, with respect to one half of the Paramount Common Stock subject to
such options. Pursuant to the Paramount Merger Agreement, at the Paramount
Effective Time, Paramount's obligations with respect to Paramount Stock Options
will be assumed by Viacom. The Paramount Stock Options will continue to have the
same terms and conditions as in effect immediately prior to the Paramount
Effective Time, except that such Paramount Stock Options will be exercisable for
(i) that number of whole shares of Viacom Class B Common Stock equal to the
product of the number of shares of Paramount Common Stock covered by such
Paramount Stock Option immediately prior to the Effective Time (the "Paramount
Option Shares") multiplied by 0.5 and multiplied further by 0.93065, rounded up
to the nearest whole number of shares of Viacom Class B Common Stock, (ii) that
number of whole CVRs equal to the product of the number of Paramount Option
Shares multiplied by 0.5 and multiplied further by 0.93065, rounded up to the
nearest whole number of CVRs, provided that, if the option holder has not
exercised his or her Paramount Stock Option prior to the maturity of the CVRs,
then the CVRs described above shall be replaced by that number of shares of
Viacom Class B Common Stock equal in value to the amount by which the "Target
Price" exceeds the greater of the "Current Market Value" and the "Minimum Price"
all as defined in "Description of Viacom Capital Stocks--CVRs," on the
applicable maturity date multiplied by the number of such CVRs, rounded up to
the nearest whole number of shares, (iii) that number of whole Viacom Three-Year
Warrants equal to the product of the number of Paramount Option Shares
multiplied by 0.5 and multiplied further by 0.5 and rounded up to the nearest
whole number of Viacom Three-Year Warrants, provided that, if the option holder
has not exercised his or her Paramount Stock Option prior to the third
anniversary of the Paramount Effective Time, then the Viacom Three-Year Warrants
described above shall be replaced by that number of shares of Viacom Class B
Common Stock equal in value to the fair market value of such Viacom Three-Year
Warrants (as determined by reference to the average trading price for the
five-day trading period immediately prior to the third anniversary of the
Paramount Effective Time, if available, or, if not available, in the reasonable
judgment of the Viacom Board), rounded up to the nearest whole number of shares,
(iv) that number of whole Viacom Five-Year Warrants equal to the product of the
number of Paramount Option Shares multiplied by 0.5 and multiplied further by
0.3 and rounded up to the nearest whole number of Viacom Five-Year Warrants,
provided that, if the option holder has not exercised his or her Paramount Stock
Option prior to the fifth anniversary of the Paramount Effective Time, then the
Viacom Five-Year Warrants described above shall be replaced by that number of
shares of Viacom Class B Common Stock equal in value to the fair market value of
such Viacom Five-Year Warrants (as determined by reference to the average
trading price for the five-day trading period immediately prior to the fifth
anniversary of the Paramount Effective Time, if available, or if not available,
in the reasonable judgment of the Viacom Board), rounded up to the nearest whole
number of shares, (v) that (A) principal amount of whole Viacom Merger
Debentures equal to the product of the number of shares of Paramount Common
Stock covered by such Paramount Stock Option immediately prior to the Paramount
Effective Time multiplied by 0.5 and multiplied further by $17.50 plus an amount
in cash (without interest), rounded to the nearest cent, determined by
multiplying (x) the fair market value of one Viacom Merger Debenture, as
determined by reference to a five-day average trading price, if available, or if
not available, in the reasonable judgment of the Viacom Board by (y) the
fractional interest in a Viacom Merger Debenture to which such option holder
would otherwise be entitled or (B) if issued, that number of whole shares of
Series C Preferred Stock equal to the product of the number of shares of
Paramount Common Stock covered by such Paramount Stock Option immediately prior
to the Paramount Effective Time multiplied by 0.5 and multiplied further by 0.35
and rounded up to the nearest whole number of
                                       91
    

   
shares of Series C Preferred Stock or (C) if issued, that principal amount of
whole Viacom Exchange Debentures equal to the product of the number of shares of
Paramount Common Stock covered by such Paramount Stock Option immediately prior
to the Paramount Effective Time multiplied by 0.5 and multiplied further by
$17.50 plus an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (x) the fair market value of one Viacom Exchange
Debenture, as determined by reference to a five-day average trading price, if
available, or if not available, in the reasonable judgment of the Viacom Board
by (y) the fractional interest in a Viacom Exchange Debenture to which such
option holder would otherwise be entitled, and (vi) that number of whole shares
of Viacom Class B Common Stock equal to the result of the number of Paramount
Option Shares multiplied by 0.5 and multiplied further by $107, with such
product being divided by the First Year Anniversary Average Trading Price (as
defined below) and rounded up to the nearest whole number, provided that, if the
option holder exercises his or her Paramount Stock Options prior to the first
anniversary of the Paramount Effective Time, then the whole shares of Viacom
Class B Common Stock shall be replaced by a right to receive such shares on the
first anniversary of the Paramount Effective Time. In addition, pursuant to the
Paramount Merger Agreement, Viacom agrees to provide each holder of a Paramount
Stock Option not less than ten days' advance notice of any involuntary
termination of employment (other than by reason of death or disability) in order
to permit such holder to exercise his or her then exercisable Paramount Stock
Options during such ten-day period. As used above, the "First Year Anniversary
Average Trading Price" means the average closing price on the AMEX (or such
other exchange on which such shares are then listed) for a share of Viacom Class
B Common Stock during the 30 consecutive trading days immediately preceding the
first anniversary of the Paramount Effective Time. The Paramount Merger
Agreement requires Viacom to reserve for issuance the securities underlying such
assumed Paramount Stock Options and to promptly issue to each holder of such
Paramount Stock Options evidence of the assumption thereof.
    
 
     Other Effects of the Paramount Merger. Where permitted under the terms of
any Paramount benefit plan or employment agreement, the Paramount Merger
Agreement requires that the Paramount Board approve the transactions
contemplated by the Paramount Merger Agreement prior to the Paramount Effective
Time so that the transactions contemplated by the Paramount Merger Agreement do
not accelerate or trigger changes to benefits or the terms of any such plan or
agreement. The Paramount Merger Agreement also provides that Paramount will not
terminate its annual or long-term performance plans prior to the Paramount
Effective Time, and will delay the establishment of future performance targets
under its annual plan and the implementation of a new performance cycle under
its long-term plan until Paramount and Viacom review the terms of such plans
after the Paramount Effective Time. Pursuant to the Paramount Merger Agreement
and where permitted under the terms of any Viacom benefit plan or employment
agreement, Viacom also will insure that the transactions contemplated by the
Paramount Merger Agreement will not accelerate or trigger changes to benefits or
the terms of any such plan or agreement.
 
                                       92

                             FINANCING OF THE OFFER
 
     The total amount of funds required by Viacom to consummate the Offer and to
pay related fees and expenses was approximately $6.7 billion. The Offer was
financed by (i) $1.8 billion from the sale of Viacom Preferred Stock (see "Sale
of Viacom Preferred Stock"), proceeds of which are reflected as cash and cash
equivalents on Viacom's balance sheet as of December 31, 1993, (ii) $1.25
billion from the sale of Viacom Class B Common Stock to Blockbuster and (iii)
$3.7 billion from the Credit Agreement dated as of November 19, 1993, as amended
as of January 4, 1994 and as further amended as of February 15, 1994, among
Viacom, the Banks named therein (the "Banks"), and The Bank of New York,
Citibank, N.A. and Morgan Guaranty Trust Company of New York, as Managing Agents
(as so amended, the "Credit Agreement"). After the Blockbuster Merger, the
Series A Preferred Stock and the Viacom Class B Common Stock owned by
Blockbuster will cease to be outstanding and bank facilities used by Viacom and
Blockbuster will be repaid or refinanced as described below. The following is a
summary of the principal terms of the bank agreements of Viacom and Blockbuster
which have been filed with the Commission under the Exchange Act and are
incorporated by reference herein. Such summary does not purport to be complete
and is subject to and qualified in its entirety by reference to such bank
agreements.
 
     The Credit Agreement provides that, in order to pay for the Offer and
related expenses, up to $3.7 billion may be borrowed, repaid and reborrowed
until November 18, 1994, at which time all amounts outstanding will become due
and payable.
 
     The Credit Agreement provides that Viacom may elect to borrow at either the
Base Rate or the Eurodollar Rate, subject to certain limitations. The "Base
Rate" will be the higher of (i) Citibank, N.A.'s Base Rate and (ii) the Federal
Funds Rate plus 0.50%. The "Eurodollar Rate" will be the London Interbank
Offered Rate plus (i) 0.9375%, until Viacom's senior unsecured long-term debt is
rated by Standard & Poor's Corporation ("S&P") or Moody's Investors Service,
Inc. ("Moody's"), and (ii) thereafter, a variable rate ranging from 0.2500% to
0.9375% dependent on the senior unsecured long-term debt ratings assigned to
Viacom. The Eurodollar Rate is available for one, two, three or six month
borrowings. Interest on Base Rate borrowings will be payable quarterly in
arrears. Interest on Eurodollar Rate borrowings will be payable in arrears (i)
at the end of each applicable interest period and (ii) in the case of a period
longer than three months, every three months.
 
     The Credit Agreement provides that Viacom will pay each of the Banks a
facility fee on such Bank's commitment in effect from time to time (whether or
not utilized) from November 19, 1993 until November 18, 1994 payable quarterly
in arrears, at the rate of (i) 0.3750% per annum, until Viacom's senior
unsecured long-term debt is rated by S&P or Moody's and (ii) thereafter, a
variable rate ranging from 0.1000% to 0.3750% dependent on the senior unsecured
long-term debt ratings assigned to Viacom.
 
     The Credit Agreement contains representations, warranties and covenants
customary in facilities of this type. The Credit Agreement requires, among other
things, that Viacom maintain certain financial ratios and comply with certain
financial covenants.
 
     Under the Credit Agreement, Viacom has agreed to indemnify each of the
Banks and certain related persons against certain liabilities.
 
     Blockbuster obtained a portion of the funds necessary to purchase the
shares of Viacom Class B Common Stock under the Blockbuster Subscription
Agreement pursuant to a credit agreement dated as of February 15, 1994 (the "New
Blockbuster Facility"), with certain banks named therein, Bank of America, as
Agent, and BA Securities Inc., as Arranger, for the aggregate amount of $1
billion. The New Blockbuster Facility has a 364-day term and bears interest at
Blockbuster's option at the Reference Rate or at LIBOR plus a margin ranging
from 0.50% up to 1.0% (based upon Blockbuster's public debt rating) for the
first six months after the initial borrowing and plus 1.25% thereafter. Under
the New Blockbuster Facility, the Reference Rate is generally defined as the
higher of (i) the rate of
                                       93

interest publicly announced from time to time by the Bank of America in San
Francisco, California as its reference rate, or (ii) 0.5% per annum above the
latest Federal Funds Rate in effect on such day. LIBOR is generally defined as
the average London interbank offered rate for 1-, 2-, 3-or 6-month Eurodollar
deposits.
 
     Blockbuster obtained the remainder of such funds from its Amended and
Restated Credit Agreement dated as of December 22, 1993 (the "Blockbuster Credit
Agreement"), with certain banks named therein and Bank of America, for itself
and as agent, pursuant to which such banks have agreed to advance Blockbuster on
an unsecured basis an aggregate of $1 billion for a term of 40 months.
Outstanding advances, if any, become due at the expiration of the 40-month term.
The Blockbuster Credit Agreement and the New Blockbuster Facility require, among
other things, that Blockbuster maintain certain financial ratios and comply with
certain financial covenants. Borrowings under the Blockbuster Credit Agreement
shall bear interest at either the Reference Rate, the Offshore Rate, the CD Rate
or a rate submitted by any Bank presenting a Competitive Bid Offer to
Blockbuster. The "Reference Rate" will be the higher of (i) the rate of interest
publicly announced from time to time by the Bank of America in San Francisco,
California as its Reference Rate, and (ii) 0.5% per annum above the Federal
Funds Rate. The "Offshore Rate" will be the London Interbank Offered Rate plus a
variable rate ranging from 0.3125% to 0.6500% depending on Blockbuster's public
debt rating and outstanding borrowings under the Blockbuster Credit Agreement.
The "CD Rate" will be based upon a formula of the interest rates chargeable on
certificates of deposit plus a variable rate ranging from 0.4375% to 0.7750%
depending on Blockbuster's public debt rating and outstandings under the
Blockbuster Credit Agreement.
 
     The Blockbuster Credit Agreement and the New Blockbuster Facility contain
certain covenants and events of default, including a change of control default,
which will require either a waiver in connection with the Blockbuster Merger or
the refinancing of the indebtedness under such facilities prior to the
Blockbuster Merger.
 
   
     Accordingly, assuming consummation of the Blockbuster Merger, the foregoing
facilities, together with other current maturities, may require Viacom to
refinance up to $5.7 billion ($4.0 billion if the Blockbuster Merger is not
consummated) within the next six months. During May 1994, Viacom received
commitments in the aggregate amount of $3.0 billion from Bank of America NT&SA,
Citibank, N.A., Morgan Guaranty Trust Company of New York and The Bank of New
York, managing agents under a proposed long-term $6.8 billion credit facility,
subject to receiving commitments for the remainder of the facility. The new
facility is expected to have scheduled maturities commencing December 1996 and a
final maturity of July 2002. The new Viacom facility will refinance existing
bank indebtedness at Viacom, Viacom International and Paramount and will be
available for general corporate purposes. Viacom expects during the second
quarter of 1994 to receive commitments for the remainder of the facility from a
syndicate of financial institutions.
    
 
   
     On May 5, 1994, Viacom, Viacom International and Paramount filed a shelf
registration statement with the Commission registering $3.0 billion of debt
securities and preferred stock, guaranteed by Viacom International and, after
the Paramount Effective Time, Paramount. Some or all of the securities may be 
issued in one or more offerings.
    
 
   
     Although Viacom expects that it will be able to refinance its indebtedness
and meet its obligations without the need to sell any assets, Viacom is
continuing to review opportunities for the sale of non-strategic assets as such
opportunities may arise, including the exploration of the sale of the operations
of Madison Square Garden and certain non-core publishing assets.
    
 
 
                                       94

                         SALE OF VIACOM PREFERRED STOCK
 
     On October 22, 1993, Blockbuster purchased $600 million of Series A
Preferred Stock pursuant to an amended and restated subscription agreement (the
"Blockbuster Preferred Stock Agreement") dated October 21, 1993 between Viacom
and Blockbuster. On November 19, 1993, NYNEX (NYNEX and Blockbuster are
hereinafter collectively referred to as the "Preferred Stock Investors")
purchased $1.2 billion of Series B Preferred Stock pursuant to a subscription
agreement (the "NYNEX Preferred Stock Agreement") dated October 4, 1993, as
amended as of November 19, 1993, between Viacom and NYNEX. Additional terms of
the Viacom Preferred Stock are described under "Description of Viacom Capital
Stock--Viacom Preferred Stock."
 
     The following description and that set forth under "Description of Viacom
Capital Stock--Viacom Preferred Stock" is qualified in its entirety by reference
to the respective Certificate of Designations of the Series A Preferred Stock
and the Series B Preferred Stock.
 
     Each of the Blockbuster Preferred Stock Agreement and the NYNEX Preferred
Stock Agreement provides that for so long as the Preferred Stock Investor and
its affiliates beneficially own at least $300 million, based on liquidation
preference, of the Viacom Preferred Stock initially purchased or the equivalent
in number of shares of Viacom Preferred Stock and shares of Viacom Class B
Common Stock issued on conversion of Viacom Preferred Stock, the Preferred Stock
Investor will be entitled to designate one representative to the Board of
Directors of Viacom. The Director designated by Blockbuster is H. Wayne
Huizenga, Chairman and Chief Executive Officer of Blockbuster, and the Director
designated by NYNEX is William C. Ferguson, Chairman of the Board of NYNEX. See
"Management Before and After the Mergers."
 
     Each of the Blockbuster Preferred Stock Agreement and the NYNEX Preferred
Stock Agreement provides the Preferred Stock Investors with registration rights
with respect to the Viacom Preferred Stock and the Viacom Class B Common Stock
issued upon conversion thereof and, for so long as the Preferred Stock Investor
beneficially owns all of the series of Viacom Preferred Stock initially
purchased by it, the right to participate in certain extraordinary dividends or
distributions by Viacom on the same basis as if such Preferred Stock Investor
had converted the Viacom Preferred Stock into Viacom Class B Common Stock,
subject to certain adjustments being made to the terms of the Viacom Preferred
Stock. The NYNEX Preferred Stock Agreement also provides for Viacom to
repurchase from NYNEX the Series B Preferred Stock and Viacom Class B Common
Stock issued upon conversion thereof in the event that continued beneficial
ownership by NYNEX would be in violation of the MFJ. Under the MFJ, neither
NYNEX nor any "affiliated enterprise," which, as of and after the purchase of
the Series B Preferred Stock by NYNEX, may include Viacom and certain of its
affiliates, may provide interexchange telecommunications service, interexchange
access and information access services and certain other activities. See
"Business."
 
     In their agreements with Viacom, Blockbuster and NYNEX each agreed to
pursue appropriate strategic partnership opportunities in the domestic and
international media, entertainment, video transport and telecommunications
sectors. The foregoing summaries of the material provisions of the Blockbuster
Preferred Stock Agreement and the NYNEX Preferred Stock Agreement do not purport
to be complete and are qualified in their entirety by reference to the
Blockbuster Preferred Stock Agreement and the NYNEX Preferred Stock Agreement,
respectively. The Blockbuster Preferred Stock Agreement and the NYNEX Preferred
Stock Agreement have been filed with the Commission under the Exchange Act by
each of Viacom and Blockbuster or NYNEX, as the case may be, and are
incorporated herein by reference.
 
                                       95

              CERTAIN PROVISIONS OF THE PARAMOUNT MERGER AGREEMENT
 
     The following is a summary of the material provisions of the Paramount
Merger Agreement not summarized elsewhere in this Proxy Statement/Prospectus.
The Paramount Merger Agreement is attached as Annex I to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Paramount Merger Agreement.
 
PROCEDURE FOR EXCHANGE OF PARAMOUNT CERTIFICATES
 
     As soon as reasonably practicable after the Paramount Effective Time,
Viacom will instruct Paramount's transfer agent, Chemical Bank, to mail to each
holder of record of a certificate or certificates which immediately prior to the
Paramount Effective Time evidenced outstanding shares of Paramount Common Stock
(other than Dissenting Shares) (the "Paramount Certificates") (i) a letter of
transmittal and (ii) instructions to effect the surrender of the Paramount
Certificates in exchange for the certificates evidencing shares of Viacom Class
B Common Stock, the Viacom Merger Debentures, CVRs, Viacom Warrants and cash in
lieu of fractional shares. Upon surrender of a Paramount Certificate for
cancellation to the bank or trust company designated in its capacity as Exchange
Agent (the "Paramount Exchange Agent") together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Paramount Certificate shall be entitled to
receive in exchange therefor (i) certificates evidencing that number of whole
shares of Viacom Class B Common Stock and that number of whole CVRs, Viacom
Merger Debentures and Viacom Warrants which such holder has the right to receive
in respect of the shares of Paramount Common Stock formerly evidenced by such
Paramount Certificate, (ii) any dividends or other distributions to which such
holder is entitled as described below and (iii) cash in lieu of fractional
shares of Viacom Class B Common Stock and fractional CVRs, Viacom Merger
Debentures and Viacom Warrants, and the Paramount Certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of shares
of Paramount Common Stock which is not registered in the transfer records of
Paramount, shares of Viacom Class B Common Stock, CVRs, Viacom Merger
Debentures, Viacom Warrants and cash in lieu of fractional shares may be issued
and paid to a transferee if the Paramount Certificate evidencing such shares of
Paramount Common Stock is presented to the Paramount Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered, each
Paramount Certificate shall be deemed at any time after the Paramount Effective
Time to evidence only the right to receive upon such surrender the certificates
evidencing Viacom Class B Common Stock, CVRs, Viacom Merger Debentures, Viacom
Warrants, cash in lieu of fractional shares, any dividends and other
distributions to which such holder is entitled and cash in lieu of fractional
shares as described above.
 
   
     PARAMOUNT STOCKHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO THE
PARAMOUNT EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL AND SHOULD NOT RETURN
THEIR STOCK CERTIFICATES WITH THE ENCLOSED PROXY OR FORM OF ELECTION.
    
 
     No dividends or other distributions declared or made after the Paramount
Effective Time with respect to shares of Viacom Class B Common Stock and the
CVRs, Viacom Merger Debentures and Viacom Warrants with a record date after the
Paramount Effective Time shall be paid to the holder of any unsurrendered
Paramount Certificate with respect to the shares of Viacom Class B Common Stock
and the CVRs, Viacom Merger Debentures or Viacom Warrants they are entitled to
receive until the holder of such Paramount Certificate shall surrender such
Paramount Certificate.
 
                                       96

     No fraction of a share of Viacom Class B Common Stock or fraction of a CVR,
Viacom Merger Debenture or Viacom Warrant will be issued in the Paramount
Merger. In lieu of any such fractional shares or fractional CVRs, Viacom Merger
Debentures or Viacom Warrants, each holder of Paramount Common Stock upon
surrender of a Paramount Certificate for exchange will be paid (1) an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(x) the per share closing price on the AMEX of Viacom Class B Common Stock on
the date of the Paramount Effective Time by (y) the fractional interest to which
such holder would otherwise be entitled (after taking into account all shares of
Paramount Common Stock then held of record by such holder) plus (2) an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(x) the fair market value of one CVR, as determined by reference to a five-day
average trading price, if available, or if not available, in the reasonable
judgment of the Viacom Board by (y) the fractional interest in a CVR to which
such holder would otherwise be entitled (after taking into account all shares of
Paramount Common Stock then held of record by such holder) plus (3) an amount in
cash (without interest) rounded to the nearest cent, determined by multiplying
(x) the fair market value of one Viacom Three-Year Warrant, as determined by
reference to a five-day average trading price, if available, or if not
available, in the reasonable judgment of the Viacom Board by (y) the fractional
interest in a Viacom Three-Year Warrant to which such holder would otherwise be
entitled (after taking into account all shares of Paramount Common Stock then
held of record by such holder) plus (4) an amount in cash (without interest)
determined as described below in respect of the fractional interest in a Viacom
Merger Debenture to which such holder would otherwise be entitled (after taking
into account all shares of Paramount Common Stock then held of record by such
holder) plus (5) an amount in cash (without interest) rounded to the nearest
cent, determined by multiplying (x) the fair market value of one Viacom
Five-Year Warrant, as determined by reference to a five-day average trading
price, if available, or if not available, in the reasonable judgment of the
Viacom Board by (y) the fractional interest in a Viacom Five-Year Warrant to
which such holder would otherwise be entitled (after taking into account all
shares of Paramount Common Stock then held of record by such holder).
 
     The Viacom Merger Debentures will be issued in the Paramount Merger only in
principal amounts of $1,000 or integral multiples thereof. Holders of shares of
Paramount Common Stock otherwise entitled to fractional amounts of Viacom Merger
Debentures will be entitled to receive promptly from the Exchange Agent a cash
payment in an amount equal to such holder's proportionate interest (after taking
into account all shares of Paramount Common Stock then held of record by such
holder) in the proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such holders, of the aggregate fractional
principal amount of Viacom Merger Debentures.
 
     Neither Viacom nor Paramount will be liable to any holder of shares of
Paramount Common Stock for any such shares of Viacom Class B Common Stock, CVRs,
Viacom Merger Debentures, Viacom Warrants (or dividends or distributions with
respect thereto) or cash in respect of shares of Paramount Common Stock or cash
in lieu of fractional shares of Viacom Class B Common Stock, CVRs, Viacom Merger
Debentures or Viacom Warrants delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
 
     After the Paramount Effective Time, there will be no transfers on the stock
transfer books of Paramount of shares of Paramount Common Stock.
 
CERTAIN REPRESENTATIONS AND WARRANTIES
 
     The Paramount Merger Agreement contains various representations and
warranties of Viacom and Paramount relating to, among other things, the
following matters (which representations and warranties are subject, in certain
cases, to specified exceptions): (i) the due organization, existence and good
standing of, and similar corporate matters with respect to, each of Viacom,
Paramount, the Viacom Material Subsidiaries, and the Paramount Material
Subsidiaries (as such terms are defined in the
                                       97

Paramount Merger Agreement); (ii) each of Viacom's and Paramount's
organizational documents; (iii) each of Viacom's and Paramount's capital
structure; (iv) the authorization, execution, delivery, performance by and
enforceability of the Paramount Merger Agreement against Viacom and Paramount;
(v) the absence of any governmental or regulatory authorization, consent or
approval required to consummate the Paramount Merger, other than as disclosed;
(vi) the absence of any conflict with such party's Certificate of Incorporation
or By-laws, or with applicable law, or with certain contracts, other than as
disclosed; (vii) required filings, permits and consents to effectuate the
Paramount Merger; (viii) compliance with applicable laws; (ix) reports and other
documents filed with the Commission and other regulatory authorities and the
accuracy of the information contained therein; (x) the absence of certain
changes or events prior to the date of the Paramount Merger Agreement having a
material adverse effect on the financial condition, business or operations of
Viacom and its subsidiaries or Paramount and its subsidiaries, as the case may
be, except for any actions taken by Viacom in connection with the Blockbuster
Merger or the Blockbuster Subscription Agreement; (xi) the absence of material
pending or threatened litigation; (xii) the qualification, operation and
liability under certain employee benefit plans of Viacom and its subsidiaries
and Paramount and its subsidiaries, as the case may be; (xiii) the right to use
all material patents, trademarks or copyrights for use in connection with the
business of Viacom and its subsidiaries or Paramount and its subsidiaries, as
the case may be; (xiv) certain tax matters and payment of taxes; (xv) the
opinion of the respective financial advisors of Viacom and Paramount as to the
fairness of the financial terms of the Offer and the Paramount Merger to their
respective stockholders; (xvi) the absence of any brokerage, finder's or other
fee due in connection with the Paramount Merger (except, in the case of Viacom,
to Smith Barney and, in the case of Paramount, to Lazard Freres); and (xvii) the
votes required by the stockholders of Viacom and Paramount to approve the
transaction. In addition, Paramount represented and warranted to Viacom that all
necessary action was taken to amend the Rights Agreement, so that (a) none of
the transactions contemplated by the Paramount Merger Agreement will lead to (1)
the exercise of the Rights, (2) Viacom or a Viacom subsidiary being deemed an
"Acquiring Person" (as defined in the Rights Agreement) or (3) the "Stock
Acquisition Date" (as defined in the Rights Agreement) occurring upon any such
event and (b) the "Expiration Date" (as defined in the Rights Agreement) of the
Rights will occur immediately prior to the Paramount Effective Time. Viacom has
represented and warranted (i) that as of the date of the Paramount Merger
Agreement and based on the number of issued and outstanding shares of Paramount
Common Stock as of September 3, 1993 set forth in the Merger Agreement, Viacom
and its affiliates beneficially owned, in the aggregate, less than 5% of the
issued and outstanding shares of Paramount Common Stock, (ii) that, since
September 12, 1993, neither Viacom nor, to Viacom's knowledge, its affiliates
have purchased or sold shares of Viacom Class A Common Stock or Viacom Class B
Common Stock and neither Viacom nor, to Viacom's knowledge, its affiliates have
any knowledge of any such trading and (iii) that the representations and
warranties of Viacom contained in the Blockbuster Merger Agreement are true and
correct as of the date of the Paramount Merger Agreement and the date of
consummation of the Offer, except as would not have a material adverse effect on
the financial condition of the combined company.
 
RIGHTS AGREEMENT AMENDMENTS
 
     Pursuant to the Paramount Merger Agreement, on March 1, 1994, Paramount
amended the Rights Agreement so that the acquisition of Paramount Common Stock
pursuant to the Offer or the Paramount Merger does not cause the Rights issued
thereunder to become exercisable, and on January 21, 1994, Paramount amended the
Rights Agreement so that the Rights will expire immediately prior to the
Paramount Effective Time (the "Rights Agreement Amendments"). For a complete
description of the Rights Agreement, as amended, see "Comparison of Stockholder
Rights--Rights Plans."
 
                                       98

CONDUCT OF BUSINESSES PENDING THE PARAMOUNT MERGER
 
     Each of Viacom and Paramount has agreed that prior to the Paramount
Effective Time, unless otherwise consented to in writing by the other party and
except, in the case of Viacom, for actions taken by Viacom in order to
consummate the Blockbuster Merger, the businesses of each of Paramount and
Viacom and their respective subsidiaries will in all material respects be
conducted in, and each of Paramount and Viacom and their respective subsidiaries
will not take any material action except in, the ordinary course of business,
consistent with past practice. In addition, each of Paramount and Viacom will
use its reasonable best efforts to preserve substantially intact its business
organization, to keep available the services of its and its subsidiaries'
current officers, employees and consultants and to preserve its and its
subsidiaries' relationships with customers, suppliers and other persons with
which it or any of its subsidiaries has significant business relations. By way
of amplification and not limitation, Viacom and Paramount have agreed that,
except as contemplated by the Paramount Merger Agreement and for any actions
taken by Viacom in order to consummate the Blockbuster Merger, neither Viacom
nor Paramount nor any of their respective subsidiaries will, prior to the
Paramount Effective Time, directly or indirectly do, or propose or agree to do,
any of the following without the prior written consent of the other (provided
that the following restrictions do not apply to any subsidiaries which Paramount
or Viacom, as the case may be, do not control): (i) amend the Certificate of
Incorporation or By-laws of Viacom or Paramount (except, with respect to Viacom,
any amendments to its Restated Certificate of Incorporation contemplated by the
Paramount Merger Agreement and the filing of the Certificate of Designation for
the Series C Preferred Stock); (ii) issue, sell, pledge, dispose of, grant,
encumber or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of (a) any shares of capital stock of any class of it or any of its
subsidiaries, or any options (other than the grant of options in the ordinary
course of business consistent with past practice to employees who are not
executive officers of Paramount or Viacom), warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest),
of it or any of its subsidiaries (other than the issuance of shares of capital
stock in connection with any dividend reinvestment plan or by any Paramount
benefit plan with an employee stock fund or employee stock ownership plan
feature, consistent with applicable securities laws or the exercise of options,
warrants or other similar rights or conversion of convertible preferred stock
outstanding as of the date of the Paramount Merger Agreement and in accordance
with the terms of such options, warrants or rights in effect on the date of the
Paramount Merger Agreement or otherwise permitted to be granted pursuant to the
Paramount Merger Agreement) or (b) any assets of it or any of its subsidiaries,
except for sales in the ordinary course of business or which, individually, do
not exceed $10 million or which, in the aggregate, do not exceed $25 million;
(iii) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except (a) in the case of Viacom, with respect to the Viacom
Preferred Stock, (b) in the case of Paramount, regular quarterly dividends in
amounts not in excess of $.20 per share of Paramount Common Stock, per quarter
and payable consistent with past practice; provided that, prior to the
declaration of any such dividend, Paramount shall consult with Viacom as to the
timing and advisability of declaring any such dividend, and (c) dividends
declared and paid by a subsidiary of either Paramount or Viacom, each such
dividend to be declared and paid in the ordinary course of business consistent
with past practice; (iv) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock
other than acquisitions by a dividend reinvestment plan or by any Paramount
benefit plan with an employee stock fund or employee stock ownership plan
feature, consistent with applicable securities laws; (v) (a) acquire (including,
without limitation, by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership, other business organization or any division
thereof or any assets, except for such acquisitions which, individually, do not
exceed $10 million or which, in the aggregate, do not exceed $25 million; (b)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except (1) for any such indebtedness incurred by Viacom in connection with the
Paramount Merger or the Offer, (2) the
                                       99

refinancing of existing indebtedness, (3) borrowings under commercial paper
programs in the ordinary course of business, (4) borrowings under existing bank
lines of credit in the ordinary course of business, or (5) which, in the
aggregate, do not exceed $25 million; or (c) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter described in
this clause (v); (vi) increase the compensation payable or to become payable to
its executive officers or employees, except for increases in the ordinary course
of business in accordance with past practices, or grant any severance or
termination pay to, or enter into any employment or severance agreement with any
director or executive officer of it or any of its subsidiaries, or establish,
adopt, enter into or amend in any material respect or take action to accelerate
any rights or benefits under any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director,
executive officer or employee; or (vii) take any action, other than reasonable
and usual actions in the ordinary course of business and consistent with past
practice, with respect to accounting policies or procedures.
 
CONDITIONS TO CONSUMMATION OF THE PARAMOUNT MERGER
 
     The obligations of Viacom and Paramount to consummate the Paramount Merger
are subject to the satisfaction or, where legally permissible, waiver of various
conditions, including (i) the effectiveness of the Registration Statement and
the absence of any stop order suspending the effectiveness thereof and any
proceedings for that purpose initiated by the Commission; (ii) the approval of
the Paramount Merger Agreement by the requisite holders of Paramount Common
Stock and the approval of the Paramount Merger Agreement and related
transactions by the requisite holders of Viacom Class A Common Stock; (iii) no
governmental entity having enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Paramount Merger
or any transaction contemplated by the Paramount Merger Agreement; provided,
however, that the parties have agreed to use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be vacated or
lifted; and (iv) the shares of Viacom Class B Common Stock and the Viacom
Warrants, Viacom Merger Debentures and CVRs issuable to stockholders of
Paramount in accordance with the terms of the Paramount Merger Agreement being
authorized for listing on AMEX upon official notice of issuance.
 
     The obligations of Paramount to effect the Paramount Merger and the other
transactions contemplated by the Paramount Merger Agreement are also subject to
the following conditions: (i) each of the representations and warranties of
Viacom contained in the Paramount Merger Agreement being true and correct as of
the Paramount Effective Time, as though made on and as of the Paramount
Effective Time, except (a) for changes specifically permitted by the Paramount
Merger Agreement and (b) that those representations and warranties which address
matters only as of a particular date are required to remain true and correct as
of such date, except in any case for such failures to be true and correct which
would not, individually or in the aggregate, have a material adverse effect on
Viacom and its subsidiaries, taken as a whole; (ii) Viacom having performed or
complied in all material respects with all agreements and covenants required by
the Paramount Merger Agreement to be performed or complied with by it on or
prior to the Paramount Effective Time; (iii) since the date of the Paramount
Merger Agreement, there being no change, occurrence or circumstance in the
business, results of operations or financial condition of Viacom or any of its
subsidiaries having or reasonably likely to have, individually or in the
aggregate, a material adverse effect on the business, results of operations or
financial condition of Viacom and its subsidiaries, taken as a whole; and (iv)
Viacom having filed with the Secretary of State of the State of Delaware a
certificate of amendment to Viacom's Restated Certificate of Incorporation
pursuant to which certain amendments required by the Paramount Merger Agreement
became effective (to the extent not previously voted upon and approved by the
holders of Viacom Class A Common Stock).
 
                                      100

RESTRICTIONS ON GOING PRIVATE TRANSACTIONS
 
     From and after the Paramount Effective Time and until the tenth anniversary
of the Paramount Effective Time, Viacom shall not enter into any agreement with
any stockholder (a "Significant Stockholder") who beneficially owns more than
35% of the then outstanding securities entitled to vote at a meeting of the
stockholders of Viacom that would constitute a Rule 13e-3 transaction under the
Exchange Act (a "Going Private Transaction"), unless Viacom provides in any
agreement pursuant to which such Going Private Transaction shall be effected
that, as a condition to the consummation of such Going Private Transaction, (a)
the holders of a majority of the shares not beneficially owned by the
Significant Stockholder that are voted and present at the meeting of
stockholders called to vote on such Going Private Transaction shall have voted
in favor thereof and (b) a special committee of independent directors shall have
(i) approved the terms and conditions of the Going Private Transaction and shall
have recommended that the stockholders vote in favor thereof and (ii) received
from its financial advisor a written financial fairness opinion for inclusion in
the proxy statement to be delivered to the stockholders. Such restrictions shall
not apply to any Significant Stockholder if there exists another stockholder who
beneficially owns a greater percentage of outstanding securities entitled to
vote at the meeting than such Significant Stockholder.
 
BLOCKBUSTER MERGER AGREEMENT
 
     Viacom has agreed that the terms of the Blockbuster Merger Agreement shall
not, without the consent of Paramount, be amended or waived in any manner that
would have a material adverse effect on the value of the Paramount Merger
Consideration and the consideration paid pursuant to the Offer, taken together.
 
INDEMNIFICATION; INSURANCE
 
     Viacom and Paramount have agreed in the Paramount Merger Agreement that the
Certificate of Incorporation and By-laws of Paramount will contain the
provisions with respect to indemnification set forth in the Restated Certificate
of Incorporation and By-laws of Viacom on the date of the Paramount Merger
Agreement, which provisions will not be amended, repealed or otherwise modified
for a period of six years after the Paramount Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Paramount Effective Time were directors or officers of Paramount in
respect of actions or omissions occurring at or prior to the Paramount Effective
Time (including, without limitation, the transactions contemplated by the
Paramount Merger Agreement), unless such modification is required by law. The
parties have also agreed in the Paramount Merger Agreement that after the
Paramount Effective Time, Paramount will indemnify, defend and hold harmless the
present and former officers and directors of Paramount (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of the
combined company (which approval shall not unreasonably be withheld), or
otherwise in connection with any claim, action, suit, proceeding or
investigation (a "Claim"), based in whole or in part on the fact that such
person is or was a director or officer of Paramount and arising out of actions
or omissions occurring at or prior to the Paramount Effective Time (including,
without limitation, the transactions contemplated by the Paramount Merger
Agreement), in each case to the full extent permitted under the DGCL. Viacom and
Paramount have agreed in the Paramount Merger Agreement that Paramount will
advance expenses as incurred to the fullest extent permitted by the DGCL,
provided that the recipient thereof provides the undertaking to repay such
advances contemplated by the DGCL. Viacom and Paramount have also agreed in the
Paramount Merger Agreement that if any such claim, action or proceeding is
brought against any indemnified party (whether arising prior to or after the
Paramount Effective Time) after the Paramount Effective Time, Paramount will pay
the reasonable fees and expenses of counsel selected by such indemnified party
and will use its reasonable best efforts to assist in the vigorous defense of
such matter.
 
                                      101

     The Paramount Merger Agreement further provides that, with respect to
matters occurring prior to the Paramount Effective Time, Paramount will cause to
be maintained for three years after the Paramount Effective Time the current
policies of directors' and officers' liability insurance maintained by
Paramount, or may substitute therefor policies of at least the same coverage,
containing terms and conditions which are no less advantageous. Paramount will
not be required to pay premiums for such insurance in excess of an amount equal
to 200% of current annual premiums paid by Paramount for such insurance.
 
TERMINATION
 
     The Paramount Merger Agreement may be terminated at any time prior to the
Paramount Effective Time, whether before or after approval of the Paramount
Merger Agreement by the stockholders of Paramount or the approval of the
issuance of the shares of Viacom Common Stock in accordance with the Paramount
Merger Agreement by the stockholders of Viacom (a) by mutual consent of
Paramount and Viacom; (b) by Paramount, upon a breach by Viacom of any of its
representations, warranties, covenants or agreements set forth in the Paramount
Merger Agreement, or if any representation or warranty of Viacom shall have
become untrue, in either case such that the conditions relating to such other
party's representations, warranties, agreements or covenants would be incapable
of being satisfied by July 31, 1994 (provided that in any case, a wilful breach
will be deemed to cause such conditions to be incapable of being satisfied); (c)
by either Viacom or Paramount, if any permanent injunction or action by any
governmental entity preventing the consummation of the Paramount Merger shall
have become final and nonappealable; (d) by either Viacom or Paramount, if the
Paramount Merger shall not have been consummated before July 31, 1994; provided,
however, that the Paramount Merger Agreement may be extended by written notice
of either Viacom or Paramount to a date not later than September 30, 1994, if
the Paramount Merger shall not have been consummated as a direct result of
Viacom or Paramount having failed by July 31, 1994 to receive all required
regulatory approvals or consents with respect to the Paramount Merger; and (e)
by either Viacom or Paramount, if the Paramount Merger Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
Paramount or Viacom at their respective Special Meeting.
 
     In the event of termination of the Paramount Merger Agreement by either
Viacom or Paramount, the Paramount Merger Agreement will become void and there
will be no liability or obligation on the part of Viacom or Paramount other than
under certain provisions of the Paramount Merger Agreement relating to any
breach of the Paramount Merger Agreement or confidential treatment of non-public
information.
 
EXPENSES
 
     Under the Paramount Merger Agreement all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred by Viacom and Paramount will be borne solely and entirely
by the party which has incurred such costs and expenses; provided, however, that
all costs and expenses related to printing, filing and mailing the Registration
Statement and this Proxy Statement/Prospectus and all Commission and other
regulatory filing fees incurred in connection with the Registration Statement
and this Proxy Statement/Prospectus will be borne equally by Paramount and
Viacom.
 
AMENDMENT AND WAIVER
 
     Subject to applicable law, the Paramount Merger Agreement may be amended by
action taken by or on behalf of the respective Boards of Directors of Viacom or
Paramount at any time prior to the Paramount Effective Time. After approval of
the Paramount Merger by the stockholders of Paramount
                                      102

or Viacom, no amendment, which under applicable law may not be made without the
approval of the stockholders of Paramount or Viacom, may be made without such
approval.
 
     At any time prior to the Paramount Effective Time, either Paramount or
Viacom may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained in the Paramount
Merger Agreement or in any document delivered pursuant thereto and (iii) waive
compliance by the other party with any of the agreements or conditions contained
therein.
 
   
     On May 26, 1994, the Viacom Board and the Reconstituted Board of Directors
of Paramount approved the May Amendment, the principal purposes of which were to
(i) add Merger Subsidiary as a party, (ii) provide for the merger of Merger
Subsidiary with and into Paramount (rather than Paramount into Viacom) and (iii)
provide for the treatment of Paramount Stock Options in the Paramount Merger as
described under "The Paramount Merger--Effect on Employee Benefit Stock Plans."
    
 
   
                     EXCHANGE ACT REGISTRATION AND TRADING
                         OF THE PARAMOUNT COMMON STOCK
    
 
   
     Paramount Common Stock is currently registered under the Exchange Act,
which requires, among other things, that Paramount furnish certain information
to its stockholders and to the Commission and comply with the Commission's proxy
rules in connection with meetings of stockholders. Registration of the Paramount
Common Stock also makes certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), applicable to Paramount
and its officers and directors. Registration of the Paramount Common Stock under
the Exchange Act may be terminated upon the application of Paramount to the
Commission if the Paramount Common Stock is not quoted through the inter-dealer
quotation system of a registered national securities association and there are
fewer than 300 holders of record of such class, which conditions will be
satisfied upon consummation of the Paramount Merger. Paramount intends to file
with the Commission a notice of termination of registration of Paramount Common
Stock as soon as practicable after the Paramount Effective Time. After
consummation of the Paramount Merger, Paramount may no longer be required to
file annual and quarterly reports with the Commission, comply with the proxy
rules or send annual reports to stockholders. In addition, upon the
effectiveness of the termination of registration, Paramount, its officers and
directors and certain of its stockholders will no longer be required to make any
other filing with the Commission with respect to the Paramount Common Stock. It
is expected that, after the effective date of the Paramount Merger, Paramount
Common Stock will cease to be traded on the NYSE.
    
 
                                      103

                             THE BLOCKBUSTER MERGER
 
BLOCKBUSTER
 
     Blockbuster is an international entertainment company with businesses
operating in the home video, music retailing and filmed entertainment
industries. Blockbuster also has investments in other entertainment related
businesses. The principal executive offices of Blockbuster are located at One
Blockbuster Plaza, Fort Lauderdale, Florida 33301 (telephone: (305) 832-3000).
 
     HOME VIDEO RETAILING. Blockbuster owns, operates and franchises Blockbuster
Video videocassette rental and sales stores. Blockbuster believes that
Blockbuster Video stores, which range in size from approximately 3,800 to 11,500
square feet, are generally larger than most videocassette rental and sales
stores. Blockbuster Video stores generally carry a comprehensive selection of
7,000 to 13,000 prerecorded videocassettes, consisting of more than 5,000
titles. The proprietary computer software used in Blockbuster Video stores has
been designed and developed by Blockbuster and is available only to
Blockbuster-owned and franchise-owned Blockbuster Video stores and to other
video stores which are to be converted to the Blockbuster Video format.
Blockbuster's home video stores do not sell video hardware at retail, although
video hardware is typically included in store equipment sold at wholesale to
franchise owners. Blockbuster Video stores, however, offer customers a limited
number of video hardware units for rental. According to a survey published in
the December 1993 issue of Video Store Magazine, Blockbuster's and its franchise
owners' systemwide revenue from the rental and sale of prerecorded
videocassettes is greater than that of any other video specialty chain in the
United States.
 
     Since February 1992, Blockbuster has operated video stores under the trade
name "Ritz" in the United Kingdom and Austria through Cityvision. These stores
average 1,100 square feet in size with, on average, approximately 3,000
prerecorded videocassettes available for rental and sale.
 
     Since acquiring all of the outstanding capital stock of Super Club from
subsidiaries of Philips Electronics N.V. ("Philips") in November 1993,
Blockbuster has operated video stores under the trade names "Video Towne",
"Alfalfa", "Movies at Home" and "Movieland" in the United States. These stores
average 6,700 square feet in size with, on average, approximately 5,000
prerecorded videocassettes available for rental and sale.
 
     As of December 31, 1993, there were 3,593 video stores operating in
Blockbuster's system, of which 2,698 were Blockbuster-owned and 895 were
franchise-owned. Blockbuster-owned video stores at December 31, 1993 included
775 stores operating under the "Ritz" trade name in the United Kingdom and
Austria and 120 stores operating under the "Video Towne", "Alfalfa", "Movies at
Home" and "Movieland" trade names. The Blockbuster Video system operates in 49
states and 9 foreign countries.
 
     MUSIC RETAILING. Through music stores operating under various trade names,
including "Blockbuster Music Plus", "Sound Warehouse", "Music Plus", "Record
Bar", "Tracks", "Turtle's" and "Rhythm and Views", Blockbuster is among the
largest specialty retailers of prerecorded music in the United States, with 511
stores operating throughout the country as of December 31, 1993. Blockbuster is
also a partner in an international joint venture with Virgin to develop music
"Megastores" in continental Europe, Australia and the United States. The joint
venture currently owns interests in and operates 20 "Megastores."
 
     FILMED ENTERTAINMENT. Blockbuster has interests in the filmed entertainment
industry through investments in Spelling Entertainment and Republic Pictures,
each of which operates in a broad range of filmed entertainment businesses,
supported by an extensive library of television series, feature films,
television movies, mini-series and specials. Blockbuster owns approximately
70.5% of Spelling Entertainment's outstanding shares of common stock and
approximately 39% of Republic Pictures' outstanding shares of common stock,
including shares subject to certain warrants, as of December 31, 1993.
 
                                      104

     Spelling Entertainment and Republic Pictures have entered into an agreement
pursuant to which Spelling Entertainment will acquire Republic Pictures, which
transaction is expected to be consummated during the second quarter of 1994.
 
     OTHER ENTERTAINMENT. As of December 31, 1993, Blockbuster owned
approximately 19.1%, of the outstanding common stock of Discovery Zone.
Discovery Zone owns, operates and franchises Discovery Zone FunCenters.
Blockbuster currently operates 34 Discovery Zone facilities as a franchisee of
Discovery Zone and has rights to develop additional Discovery Zone facilities
directly and in a joint venture with Discovery Zone.
 
   
     CERTAIN RECENT DEVELOPMENTS. For a description of Blockbuster's purchase of
Series A Preferred Stock see "Sale of Viacom Preferred Stock." For a description
of Blockbuster's purchase of Viacom Class B Common Stock, see "--Certain
Transactions Between Viacom and Blockbuster and With Their Stockholders." During
the three months ended March 31, 1994, Blockbuster acquired businesses that own
and operate video stores and indoor recreational facilities for children and
invested in a business which develops, publishes and distributes interactive
software. The aggregate purchase price paid by Blockbuster was approximately
$53,040,000 and consisted of cash and 1,358,706 shares of Blockbuster Common
Stock.
    
 
   
     In a letter to stockholders dated May 4, 1994, H. Wayne Huizenga, the
Chairman of the Board of Blockbuster, stated that, although Blockbuster
continues to believe that the combination of Blockbuster with Viacom and
Paramount represents an excellent strategic opportunity, given Viacom's stock
prices as of the date of his letter, there could be no assurance that the
Blockbuster Board would be able to recommend the Blockbuster Merger Agreement to
the Blockbuster stockholders at the time of any stockholder meeting called to
vote on the Blockbuster Merger. Mr. Huizenga also stated, among other things,
that Blockbuster was unable to say whether or not the Blockbuster Merger would
go forward or whether or not any special meeting of Blockbuster stockholders
would be called to vote on the Blockbuster Merger.
    
 
CERTAIN TRANSACTIONS BETWEEN VIACOM AND BLOCKBUSTER AND WITH THEIR STOCKHOLDERS
 
  Blockbuster Subscription Agreement.
 
   
     On March 10, 1994 Blockbuster purchased approximately 22.7 million shares
of Viacom Class B Common Stock for an aggregate purchase price of approximately
$1.25 billion, or $55 per share pursuant to the Blockbuster Subscription
Agreement. If the Blockbuster Merger Agreement is terminated, Viacom will be
obligated to make certain payments to Blockbuster or to sell certain assets to
Blockbuster in the event that Viacom Class B Common Stock trades (for a
specified period) at levels below $55 per share during the one year period after
such termination.
    
 
  Blockbuster Voting Agreement.
 
     Pursuant to the Blockbuster Voting Agreement, NAI has agreed to vote its
shares of Viacom Class A Common Stock in favor of the Blockbuster Merger
Agreement and against any competing business combination proposal. Approval of
the Blockbuster Merger Agreement by the stockholders of Viacom is therefore
assured.
 
  Blockbuster Stockholders Stock Option Agreement.
 
     Pursuant to the Amended and Restated Stockholders Stock Option Agreement
dated as of January 7, 1994 (the "Blockbuster Stockholders Stock Option
Agreement"), among Viacom and certain stockholders of Blockbuster (the
"Blockbuster Option Stockholders"), the Blockbuster Option Stockholders have
granted to Viacom (i) options to purchase an aggregate of approximately 15.6
million shares of Blockbuster Common Stock (representing approximately 6.3% of
the outstanding Blockbuster Common Stock as of January 7, 1994), and shares
subsequently acquired by the Blockbuster Option
                                      105

Stockholders, at a price of $30.125 per share under certain circumstances in the
event the Blockbuster Merger Agreement is terminated and (ii) proxies to vote
such shares in favor of the Blockbuster Merger and against any competing
business combination proposal.
 
  Blockbuster Proxy Agreement.
 
     Pursuant to the Amended and Restated Proxy Agreement dated as of January 7,
1994 (the "Blockbuster Proxy Agreement") among Viacom and certain stockholders
of Blockbuster (the "Blockbuster Proxy Stockholders"), the Blockbuster Proxy
Stockholders have granted to Viacom proxies to vote shares of Blockbuster Common
Stock owned by such stockholders in favor of the Blockbuster Merger Agreement
and against any competing business combination proposal, which shares, together
with the shares subject to the Blockbuster Stockholders Stock Option Agreement
(collectively, the "Blockbuster Proxy Shares"), represent approximately 22.3% of
the outstanding shares of Blockbuster Common Stock as of January 7, 1994.
 
FORM OF THE BLOCKBUSTER MERGER
 
     If all required stockholder approvals are obtained and all other conditions
to the Blockbuster Merger are satisfied or waived, then Blockbuster will be
merged with and into Viacom, with Viacom being the surviving corporation.
 
BLOCKBUSTER MERGER CONSIDERATION
 
     At the Blockbuster Effective Time, each share of Blockbuster Common Stock
that is issued and outstanding immediately prior to the Blockbuster Effective
Time (other than shares of Blockbuster Common Stock owned by Viacom or any
direct or indirect wholly owned subsidiary of Viacom or of Blockbuster and other
than shares of Blockbuster Common Stock held by stockholders who shall have
demanded and perfected appraisal rights, if available, under the DGCL) will be
automatically converted into the right to receive (i) 0.08 of a share of Viacom
Class A Common Stock, (ii) 0.60615 of a share of Viacom Class B Common Stock and
(iii) up to an additional 0.13829 of a share of Viacom Class B Common Stock,
with such number of shares depending on market prices of Viacom Class B Common
Stock during the year following the Blockbuster Effective Time, evidenced by one
VCR. No fractional securities will be issued in the Blockbuster Merger.
 
     The VCRs represent the right to receive shares of Viacom Class B Common
Stock under certain circumstances on the first anniversary of the Blockbuster
Effective Time (the "VCR Conversion Date"). The number of shares of Viacom Class
B Common Stock into which each VCR will convert on the VCR Conversion Date will
not exceed 0.05929 of a share of Viacom Class B Common Stock if the average of
the closing prices for a share of Viacom Class B Common Stock exceeds $40 per
share during any 30 consecutive trading day period following the Blockbuster
Effective Time and prior to the VCR Conversion Date. In the event that during
any such period such average price exceeds $52 per share, the VCRs will
terminate and have no value and the holders thereof will have no further rights
with respect to the VCRs.
 
     If the calculation in the above paragraph is inapplicable, the number of
shares of Viacom Class B Common Stock into which the VCRs will convert will
generally be based upon the value of Viacom Class B Common Stock (the "Class B
Value") determined during the 90 trading day period (the "VCR Valuation Period")
immediately preceding the VCR Conversion Date. The Class B Value will be equal
to the average closing price of a share of Viacom Class B Common Stock during
the 30 consecutive trading days in the VCR Valuation Period which yields the
highest average closing price of a share of Viacom Class B Common Stock. In the
event that the Class B Value is more than $40 per share but less than $48 per
share, each VCR will convert into 0.05929 of a share of Viacom Class B Common
Stock on the VCR Conversion Date. If the Class B Value is $40 per share or
below, the number of shares of Viacom Class B Common Stock into which each VCR
will convert on the VCR Conversion Date will
                                      106

increase ratably to the maximum of 0.13829 of a share of Viacom Class B Common
Stock, which will occur if the Class B Value is $36 per share or below. If the
Class B Value is $48 per share or above, the number of shares of Viacom Class B
Common Stock into which the VCR will convert on the VCR Conversion Date will
decrease ratably to zero, which will occur if the Class B Value is $52 per share
or above.
 
     The dollar amounts will be reduced by a percentage equal to any percentage
decline in excess of 25% in the Standard & Poor's 400 Index from the Blockbuster
Effective Time until the VCR Conversion Date. Certain days are not included as
"trading days" if the number of shares of Viacom Class B Common Stock traded on
such days is below specified levels. See "Description of Viacom Capital
Stock--Viacom Common Stock."
 
     Upon consummation of the Blockbuster Merger, any shares of Blockbuster
Common Stock owned by Viacom or any direct or indirect wholly owned subsidiary
of Blockbuster or Viacom will be cancelled.
 
     The Blockbuster Merger Consideration was determined through negotiations
between Viacom and Blockbuster, each of which was advised with respect to such
negotiations by its respective financial advisor.
 
     Any shares of Viacom Class A Common Stock, shares of Viacom Class B Common
Stock or VCRs issued as part of the Blockbuster Merger Consideration, or shares
of Viacom Class B Common Stock issued upon the maturity of the VCRs, to
residents of Canada may be subject to certain resale restrictions, including
that they may be required to be resold outside of Canada or pursuant to an
available exemption under applicable Canadian securities laws.
 
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
     The Blockbuster Merger will constitute a reorganization within the meaning
of section 368(a)(1)(A) of the Code. Neither Blockbuster nor Viacom will
recognize any gain or loss as a result of the Blockbuster Merger. No ruling has
been (or will be) sought from the Internal Revenue Service as to the tax
consequences of the Blockbuster Merger.
 
APPRAISAL RIGHTS WITH RESPECT TO THE BLOCKBUSTER MERGER
 
     It is uncertain whether appraisal rights are available to holders of
Blockbuster Common Stock under the DGCL in connection with the Blockbuster
Merger. Although the VCRs evidence only the right to receive shares of Viacom
Class B Common Stock under certain circumstances, the VCRs could be
characterized as consideration other than shares of stock of Viacom. If the VCRs
are considered to be "shares of stock" of Viacom under Section 262(b) of the
DGCL, then the holders of Blockbuster Common Stock will not have appraisal
rights. However, if the VCRs are not considered to be "shares of stock," then
appraisal rights will be available to those stockholders of Blockbuster who meet
and comply with the requirements of Section 262 of the DGCL. Stockholders of
Viacom will have no appraisal rights in connection with the Blockbuster Merger.
 
TREATMENT OF BLOCKBUSTER WARRANTS AND EMPLOYEE STOCK OPTIONS
 
     The Blockbuster Merger Agreement provides that, at the Blockbuster
Effective Time, Viacom will assume Blockbuster's obligations with respect to
each outstanding stock option to purchase shares of Blockbuster Common Stock,
subject to the following modification. The Blockbuster stock options assumed by
Viacom will have the same terms and conditions as those of the applicable stock
option plans and agreements pursuant to which the Blockbuster stock options were
issued except that each Blockbuster stock option will be exercisable for (A)
that number of whole shares of (i) Viacom Class A Common Stock equal to the
product of the number of shares of Blockbuster Common Stock covered by such
Blockbuster stock option multiplied by 0.08 and (ii) Viacom Class B Common Stock
equal to the product of the number of shares of Blockbuster Common Stock covered
by such Blockbuster stock
                                      107

option multiplied by 0.60615 and (B) that number of VCRs equal to the number of
shares of Blockbuster Common Stock covered by such Blockbuster stock option (or,
on or after the VCR Conversion Date, the number of shares of Viacom Class B
Common Stock (if any) into which the VCRs were converted).
 
     At January 31, 1994, an aggregate of 18,163,772 shares of Blockbuster
Common Stock were subject to options granted to employees and directors of
Blockbuster under various stock option plans. Such plans generally provide that
the options granted thereunder become immediately exercisable in the event
Blockbuster participates in a Business Combination with a Substantial
Stockholder (each as defined under the Blockbuster Certificate of
Incorporation). The Blockbuster Merger would constitute a Business Combination
of Blockbuster with a Substantial Stockholder and, accordingly, options granted
under those stock plans will become immediately exercisable upon consummation of
the Blockbuster Merger. However, Viacom and Blockbuster have agreed to use their
best efforts to secure from each executive of Blockbuster who enters into an
employment agreement with Blockbuster an agreement that such executive will
waive such acceleration of exercisability, which waiver will lapse (resulting in
the executive's options becoming immediately exercisable if they have not
already done so in accordance with the applicable vesting schedule) upon a
termination of the executive's employment for any reason.
 
     Under the Blockbuster Merger Agreement, Blockbuster has the right to adopt
one or more additional stock option plans covering up to an additional 4,500,000
shares of Blockbuster Common Stock. On February 7, 1994, the Board of Directors
of Blockbuster adopted, subject to stockholder approval, Blockbuster's 1994
Stock Option Plan and an amendment to Blockbuster's 1991 Non-employee Director
Stock Option Plan.
 
     At March 3, 1994, 3,488,859 shares of Blockbuster Common Stock were subject
to warrants held beneficially by employees or directors of Blockbuster. Warrants
held by employees or directors of Blockbuster will be converted into Viacom
warrants on the same terms and conditions except that each such warrant will be
exercisable for (A) that number of whole shares of (i) Viacom Class A Common
Stock equal to the product of the number of shares of Blockbuster Common Stock
covered by such Blockbuster warrant multiplied by 0.08 and (ii) Viacom Class B
Common Stock equal to the product of the number of shares of Blockbuster Common
Stock covered by such Blockbuster warrant multiplied by 0.60615 and (B) that
number of VCRs equal to the number of shares of Blockbuster Common Stock covered
by such Blockbuster warrant (or, on or after the VCR Conversion Date, the number
of shares of Viacom Class B Common Stock (if any) into which the VCRs were
converted). Warrants of Blockbuster Common Stock which are not held by employees
or directors of Blockbuster will be treated in accordance with their terms.
 
                                      108

                             CERTAIN CONSIDERATIONS
 
     Stockholders of Viacom and Paramount should consider carefully all of the
information contained in this Proxy Statement/Prospectus and, in particular, the
following:
 
   
          Financial Terms of the Offer and the Paramount Merger. Smith Barney
     has delivered its opinion to the Board of Directors of Viacom that, as of
     February 1, 1994, the financial terms of the Offer and the Paramount
     Merger, taken together, were fair, from a financial point of view, to
     Viacom and its stockholders, whether or not the Blockbuster Merger is
     consummated. Lazard Freres has delivered its opinion to the Board of
     Directors of Paramount that, as of February 4, 1994 (i) the Viacom
     Transaction Consideration was fair to the holders of Paramount Common Stock
     from a financial point of view, (ii) the QVC Transaction Consideration was
     fair to the holders of Paramount Common Stock from a financial point of
     view and (iii) the Viacom Transaction Consideration was marginally superior
     to the QVC Transaction Consideration from a financial point of view.
     However, no assurances can be given with respect to the prices at which the
     Viacom Class B Common Stock will trade after the date hereof or after the
     Paramount Effective Time or the prices at which the Viacom Merger
     Debentures (or, if issued, the Series C Preferred Stock and the Viacom
     Exchange Debentures), the CVRs and the Viacom Warrants will trade after the
     Paramount Effective Time. There has been no public trading market for the
     Viacom Merger Debentures, CVRs or Viacom Warrants and there can be no
     assurances that an active market for such securities will develop or
     continue after the Paramount Merger.
    
 
   
          Controlling Stockholder. Immediately after completion of the Paramount
     Merger and before the completion of the Blockbuster Merger, NAI (which is
     controlled by Sumner M. Redstone) will own approximately 85% of the voting
     stock and 46% of the total (voting and non-voting) common stock of Viacom.
     Immediately after completion of the Mergers, NAI will own approximately 62%
     of the voting stock and approximately 25% of the total (voting and
     non-voting) common stock of Viacom. As such, Mr. Redstone will be in a
     position to control the election of the Board of Directors as well as the
     direction and future operations of Viacom (although certain provisions of
     the Paramount Merger Agreement and the Blockbuster Merger Agreement
     restrict the ability of certain large stockholders from engaging in going
     private transactions). See "The Paramount Merger--Ownership of Viacom
     Common Stock After the Mergers" and "Certain Provisions of the Paramount
     Merger Agreement--Restrictions On Going Private Transactions."
    
 
          Total Indebtedness and Certain Refinancing. Viacom anticipates that,
     following the Mergers, the combined company will have outstanding total
     indebtedness of approximately $10.0 billion ($8.0 billion if the
     Blockbuster Merger is not consummated) and 5% Viacom Preferred Stock with a
     liquidation preference of $1.2 billion ($1.8 billion if the Blockbuster
     Merger is not consummated).  Of such $10.0 billion, $3.7 billion was 
     borrowed under Viacom's Credit Agreement and must be repaid by November 18,
     1994. In addition, the $1.0 billion borrowed under the New Blockbuster 
     Facility must be repaid by February 14, 1995 and both the New Blockbuster 
     Facility and the Blockbuster Credit Agreement contain certain covenants 
     and events of default, including a change of control default, which will 
     require either a waiver in connection with the Blockbuster Merger or the 
     refinancing of the indebtedness incurred under such facilities prior to 
     the Blockbuster Merger.

   
          Accordingly, assuming consummation of the Blockbuster Merger, the
     foregoing facilities, together with other current maturities, may require
     Viacom to refinance up to $5.7 billion ($4.0 billion if the Blockbuster
     Merger is not consummated) within the next six months. During May 1994,
     Viacom received commitments in the aggregate amount of $3.0 billion from
     Bank of America NT&SA, Citibank, N.A., Morgan Guaranty Trust Company of New
     York and The Bank of New York, managing agents under a proposed long-term
     $6.8 billion credit facility, subject to
     receiving commitments for the remainder of the facility. The new facility
     is expected to have scheduled maturities commencing December 1996 and a
     final maturity of July 2002. The new 
    
                                      109

   
     Viacom facility will refinance existing bank indebtedness at Viacom,
     Viacom International and Paramount and will be available for general
     corporate purposes. Viacom expects during the second quarter of 1994 to
     receive commitments for the remainder of the facility from a syndicate of
     financial institutions.
    
 
   
          On May 5, 1994, Viacom, Viacom International and Paramount filed a
     shelf registration statement with the Commission registering $3 billion of
     debt securities and preferred stock, guaranteed by Viacom International 
     and, after the Paramount Effective Time, Paramount. Some or all of the 
     securities may be issued in one or more offerings.
    
 
   
          Although Viacom expects that it will be able to refinance its
     indebtedness and meet its obligations without the need to sell any assets,
     Viacom is continuing to review opportunities for the sale of non-strategic
     assets as such opportunities may arise, including the exploration of the
     sale of the operations of Madison Square Garden and certain non-core
     publishing assets.
    
 
   
          Changing Competitive Environment. The entertainment and
     telecommunications industries of which the combined company will be a part
     are rapidly changing as a result of evolving distribution technologies,
     particularly the advent of digital compression, and related ongoing and
     anticipated changes to regulation of the communications industry. The
     future success of the combined company will be affected by such changes,
     the nature of which cannot be forecast with certainty. Although management
     believes that such technological developments are likely to enhance the
     value of the combined company's entertainment properties and trademarks,
     there can be no assurance that such developments will not limit the
     combined company's access to certain distribution channels or create
     additional competitive pressures on some or all of the combined company's
     businesses.
    
    
          Combining the Companies. Viacom, Paramount and Blockbuster are large,
     diversified enterprises, with operations and sales worldwide. Although
     management of the companies believe that their respective operations are
     complementary and that, assuming approval by the stockholders of
     Blockbuster, integration of the companies will be accomplished promptly and
     without substantial difficulty, there can be no assurance that future
     results will improve as a result of the Mergers. If the Mergers are
     consummated, the combined company, on a pro forma basis, will be
     substantially more leveraged than any of Paramount, Viacom or Blockbuster
     immediately prior to the Mergers. See "Unaudited Pro Forma Combined
     Condensed Financial Statements."
     
          Consummation of the Blockbuster Merger. Although Viacom and
     Blockbuster have entered into the Blockbuster Merger Agreement and Viacom
     has the right to vote the Blockbuster Proxy Shares, representing
     approximately 22.3% of the outstanding shares of Blockbuster Common Stock
     as of January 7, 1994, the Blockbuster Merger remains subject to
     stockholder approval. As such, there can be no assurance that the
     Blockbuster Merger will be consummated. In considering the Mergers, the
     Viacom Board of Directors concluded that, even without Blockbuster, the
     combination of Viacom with Paramount could be financed on a reasonable
     basis and would result in all of the benefits described under "Special
     Factors--Reasons for the Paramount Merger; Recommendations of the Board of
     Directors; Fairness of the Transaction."
    
          In a letter to stockholders dated May 4, 1994, H. Wayne Huizenga, the
     Chairman of the Board of Blockbuster, stated that, although Blockbuster
     continues to believe that the combination of Blockbuster with Viacom and
     Paramount represents an excellent strategic opportunity, given Viacom's
     stock prices as of the date of his letter, there could be no assurance that
     the Blockbuster Board would be able to recommend the Blockbuster Merger
     Agreement to the Blockbuster stockholders at the time of any stockholder
     meeting called to vote on the Blockbuster Merger. Mr. Huizenga also stated,
     among other things, that Blockbuster was unable to say whether or not the
     Blockbuster Merger would go forward or whether or not any special meeting
     of Blockbuster stockholders would be called to vote on the Blockbuster
     Merger.
    
                                      110

   
       AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION OF VIACOM
    
 
     Viacom's Board of Directors is proposing to amend Viacom's Restated
Certificate of Incorporation to (i) increase the number of shares of Viacom
Class A Common Stock authorized to be issued from 100 million to 200 million,
(ii) increase the number of shares of Viacom Class B Common Stock authorized to
be issued from 150 million to one billion, (iii) increase the number of shares
of the preferred stock of Viacom authorized to be issued from 100 million to 200
million and (iv) increase the maximum number of directors constituting the Board
of Directors of Viacom from 12 to 20. The form of such amendment to the Viacom
Restated Certificate of Incorporation is included in the Form of Certificate of
Amendment, a copy of which is attached as Annex VII to this Proxy
Statement/Prospectus.
 
     The additional shares of Viacom Class A Common Stock, Viacom Class B Common
Stock and preferred stock of Viacom to be authorized would be available not only
to consummate the Paramount Merger, but also for possible future financing and
acquisition transactions, stock dividends or splits and other corporate
purposes. The additional shares of Viacom Class A Common Stock, Viacom Class B
Common Stock and preferred stock of Viacom would be available for issuance
without further action by the stockholders of Viacom unless such action is
required by applicable law or the rules of the AMEX, on which the issued shares
of Viacom Class A Common Stock and Viacom Class B Common Stock are listed. The
AMEX requires stockholder approval as a prerequisite to listing shares in
certain instances, including in connection with acquisition transactions where
the present or potential issuance of shares could result in an increase in the
number of shares of common stock outstanding by 20% or more.
 
   
     On April 30, 1994 there were 53,449,525 issued and outstanding shares of
Viacom Class A Common Stock and 90,083,203 issued and outstanding shares of
Viacom Class B Common Stock. As of May 23, there were 61,135,478 outstanding
shares of Paramount Common Stock not owned by Viacom. Based on this number,
56,895,733 shares of Viacom Class B Common Stock will be issued in the Paramount
Merger at the Paramount Effective Time. On May 10, 1994, there were 249,063,868
shares of Blockbuster Common Stock outstanding. Based on this number, 19,925,109
shares of Viacom Class A Common Stock and 150,970,063 shares of Viacom Class B
Common Stock will be issued in connection with the Blockbuster Merger at the
Blockbuster Effective Time. Accordingly, 126,625,372 shares of Viacom Class A
Common Stock and 702,051,001 shares of Viacom Class B Common Stock will be
authorized but unissued immediately following the Mergers. For further
information regarding Viacom Common Stock, see "Description of Viacom Capital
Stock" and "Capitalization."
    
 
                 AMENDMENT TO THE CERTIFICATE OF INCORPORATION
                            AND BY-LAWS OF PARAMOUNT
 
     Upon consummation of the Paramount Merger, the Certificate of Incorporation
and By-Laws of Paramount shall be amended in their entirety to read as the
Certificate of Incorporation and By-Laws of the Merger Subsidiary. The form of
the proposed amendment to the Certificate of Incorporation and By-Laws of
Paramount is included in the Form of Certificate of Merger for the Paramount
Merger, a copy of which is attached as Annex VI to this Proxy
Statement/Prospectus.
 
                    MANAGEMENT BEFORE AND AFTER THE MERGERS
 
EXECUTIVE OFFICERS AND DIRECTORS OF VIACOM
 
   
     GEORGE S. ABRAMS, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     FRANK J. BIONDI, JR., see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
     RAYMOND A. BOYCE, Senior Vice President, Corporate Relations of Viacom and
Viacom International, 58. Mr. Boyce assumed his present position in 1988. Prior
to that, he served as Vice President, Public Relations of the Entertainment
Business Sector of The Coca-Cola Company from 1982 to 1987. In 1979, Mr. Boyce
joined Columbia Pictures Industries, Inc. and served first as Director,
Corporate 
                                      111

Communications and later as Vice President, Corporate Communications until 
The Coca-Cola Company's acquisition of Columbia Pictures Industries, Inc.
in 1982.
 
     VAUGHN A. CLARKE, Vice President, Treasurer of Viacom and Viacom
International, 40. Mr. Clarke assumed his present position in April 1993. Prior
to that, he spent 12 years at Gannett Co., Inc., where he held various
management positions, most recently as Assistant Treasurer.
 
   
     PHILIPPE P. DAUMAN, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     THOMAS E. DOOLEY, Executive Vice President, Finance, Corporate Development
and Communications of Viacom, Viacom International and Paramount, 37. Mr. Dooley
was elected to his present position in March 1994. From July 1992 to March 1994,
he served as Senior Vice President, Corporate Development of Viacom and Viacom
International. From August 1993 to March 1994, he also served as President,
Interactive Television of Viacom International. Prior to that, he served as Vice
President, Treasurer of Viacom and Viacom International since 1987. In December
1990, he was named Vice President, Finance of Viacom and Viacom International.
Mr. Dooley joined Viacom International in 1980 in the corporate finance area and
held various positions in the corporate and divisional finance areas, including
Director of Business Analysis from 1985 to 1986.
    
 
   
     WILLIAM C. FERGUSON, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     MICHAEL D. FRICKLAS, Senior Vice President, Deputy General Counsel of
Viacom, Viacom International and Paramount, 34. Mr. Fricklas was elected to his
present position with Viacom and Viacom International in March 1994 and with
Paramount in April 1994. From July 1993 to March 1994, he served as Vice
President, Deputy General Counsel of Viacom and Viacom International. He served
as Vice President, General Counsel and Secretary of Minorco (U.S.A.) Inc. from
1990 to 1993. Prior to that, Mr. Fricklas was an attorney in private practice at
the law firm of Shearman & Sterling.
    
 
     JOHN W. GODDARD, Senior Vice President of Viacom and Viacom International
and President, Chief Executive Officer of Viacom Cable, 52. Mr. Goddard was
elected Senior Vice President of Viacom in November 1987 and Senior Vice
President of Viacom International and President, Chief Executive Officer of
Viacom Cable Television in September 1983. In August 1980, Mr. Goddard was
appointed President of Viacom Cable and, in September 1980, he was elected Vice
President of Viacom International. From September 1978 through July 1980, Mr.
Goddard was Executive Vice President, Viacom Communications. From June 1971
until September 1978, Mr. Goddard was President and General Manager of Tele-Vue
Systems, a subsidiary of Viacom International.
 
     EDWARD D. HOROWITZ, Senior Vice President, Technology of Viacom and Viacom
International and Chairman, Chief Executive Officer of New Media and Interactive
Television, 46. Mr. Horowitz became Senior Vice President in April 1989 and
served as Chairman, Chief Executive Officer of Viacom Broadcasting from July
1992 to March 1994. He was elected to his present positions in March 1994. From
1974 to April 1989, Mr. Horowitz held various positions with Home Box Office,
most recently as Senior Vice President, Technology and Operations. Prior to
that, he held several other management positions with Home Box Office, including
Senior Vice President, Network Operations and New Business Development and Vice
President, Affiliate Sales.
 
   
     H. WAYNE HUIZENGA, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     KEVIN C. LAVAN, Vice President, Controller and Chief Accounting Officer of
Viacom and Viacom International, 41. Mr. Lavan was elected Vice President of
Viacom and Viacom International in May 1989. He was elected Controller, Chief
Accounting Officer of Viacom and Viacom International in December 1987. In
December 1990, he assumed the added responsibilities of oversight of tax
matters. From 1991 to 1992, he also served as Senior Vice President, Chief
Financial Officer of Viacom Pictures. Mr. Lavan joined Viacom International in 
1984 as Assistant Controller.
    

     HENRY J. LEINGANG, Senior Vice President, Chief Information Officer of
Viacom and Viacom International, 44. Mr. Leingang was elected to his present
position in May 1993. Prior to that, he served 
                                      112


 
as Vice President, Chief Information Officer when he joined Viacom in 1990.
Mr. Leingang was Vice President, Information Services of the Trian Group
(formerly Triangle Industries) from 1984 to 1990. From 1982 to 1984, he served
as Corporate Director, MIS, and Manager, MIS Planning and Control for
Interpace Corporation. Prior to that, he held positions with Touche Ross & 
Company, McGraw-Hill Book Company and General Electric Credit Corp.
 
   
     KEN MILLER, see "Viacom Annual Meeting Matters--Election of Directors."
    
   
     BRENT D. REDSTONE, see "Viacom Annual Meeting Matters--Election of
Directors."
    
   
     SUMNER M. REDSTONE, see "Viacom Annual Meeting Matters--Election of
Directors."
    
   
     WILLIAM A. ROSKIN, Senior Vice President, Human Resources and
Administration of Viacom and Viacom International, 51. Mr. Roskin was elected to
his present position in July 1992. Prior to that, he served as Vice President,
Human Resources and Administration of Viacom and Viacom International from April
1988. From May 1986 to April 1988, he was Senior Vice President, Human Resources
at Coleco Industries, Inc. From 1976 to 1986, he held various executive
positions at Warner Communications, serving most recently as Vice President,
Industrial and Labor Relations.
    
   
     FREDERIC V. SALERNO, see "Viacom Annual Meeting Matters--Election of
Directors."
    
   
     WILLIAM SCHWARTZ, see "Viacom Annual Meeting Matters--Election of
Directors."
    
   
     GEORGE S. SMITH, JR., Senior Vice President, Chief Financial Officer of
Viacom, Viacom International and Paramount, 45. Mr. Smith was elected to his
present position with Viacom and Viacom International in November 1987 and with
Paramount in April 1994. In May 1985, Mr. Smith was elected Vice President,
Controller of Viacom International. From 1983 until May 1985, he served as Vice
President, Finance and Administration of Viacom Broadcasting and from 1981 until
1983, he served as Controller of Viacom Radio. Mr. Smith joined Viacom
International in 1977 in the Corporate Treasurer's office and until 1981 served
in various financial planning capacities.
    
 
     MARK M. WEINSTEIN, Senior Vice President, Government Affairs of Viacom and
Viacom International, 51. Mr. Weinstein was elected to his present position with
Viacom and Viacom International in February 1993. Prior to that, Mr. Weinstein
served as Senior Vice President, General Counsel and Secretary of Viacom and
Viacom International beginning in the fall of 1987. In January 1986, Mr.
Weinstein was appointed Vice President, General Counsel of Viacom International.
From 1976 through 1985, he was Deputy General Counsel of Warner Communications
and in 1980 became Vice President. Previously, Mr. Weinstein was an attorney in
private practice at the law firm of Paul, Weiss, Rifkind, Wharton & Garrison.
 
EXECUTIVE OFFICERS AND DIRECTORS OF PARAMOUNT
 
   
     GEORGE S. ABRAMS, see "Viacom Annual Meeting Matters--Election of
Directors."
    
   
     FRANK J. BIONDI, JR., see "Viacom Annual Meeting Matters--Election of
Directors."
    
   
     PHILIPPE P. DAUMAN, see "Viacom Annual Meeting Matters--Election of
Directors."
    
   
     MARTIN S. DAVIS, Director of Paramount, 67. He was elected a Director of
Paramount in 1967. Mr. Davis, who became a corporate officer of Paramount in
1969, served as Chairman from 1983 to April 1994 and as Chairman and Chief
Executive Officer of Paramount from 1983 to March 1994. He is a member of the
Board of Trustees of Montefiore Medical Center and is Chairman of the Board of
Trustees of the New York City Chapter of the National Multiple Sclerosis
Society. Mr. Davis is also a member of the FCC's Advisory Committee on Advanced
Television Service.
    
   
     WILLIAM C. FERGUSON, see "Viacom Annual Meeting Matters--Election of
Directors."
    
   
     IRVING R. FISCHER, Director of Paramount, 61. Mr. Fischer was elected a
Director of Paramount in 1984 and is a member of the Audit Committee. Mr.
Fischer is Chairman and Chief Executive Officer of HRH Construction Corporation.
Mr. Fischer joined HRH Construction Corporation in 1956 and
                                      113

assumed his present position in 1981. Mr. Fischer is Vice Chairman of the New
York City Chapter of the National Multiple Sclerosis Society and a member of 
the New York City Holocaust Memorial Commission. He is an Adjunct Professor of 
Urban Planning, Columbia University.
    
 
   
     H. WAYNE HUIZENGA, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     KEN MILLER, see "Viacom Annual Meeting Matters--Election of Directors."
    
 
   
     RONALD L. NELSON, Director of Paramount, 41. Mr. Nelson was elected a
Director of Paramount in 1992. Mr. Nelson served as Executive Vice President and
Chief Financial Officer of Paramount from 1990 to March 1994 after having served
as Senior Vice President and Chief Financial Officer since 1987. From 1979 to
1987, he held various operating and financial positions with Paramount
Communications Entertainment Group and Paramount Pictures. Mr. Nelson is a
member of the New York Chapter of Financial Executives Institute and serves on
its CFO Advisory Board.
    
 
     DONALD ORESMAN, Director of Paramount, 68. Mr. Oresman was elected a
Director of Paramount in 1976. Mr. Oresman served as Executive Vice President
and General Counsel of Paramount from 1983 to March 1994 and as Chief
Administrative Officer from 1987 to March 1994. Mr. Oresman practiced law with
Simpson Thacher & Bartlett, attorneys, from 1957 until he joined Paramount in
December 1983. He is a Director of North American Watch Corporation, a Trustee
of The New York Landmarks Conservancy, and a Councilor of the American
Antiquarian Society.
 
     JAMES A. PATTISON, Director of Paramount, 65. Mr. Pattison was elected a
Director of Paramount in 1988 and is a member of Paramount's Audit Committee.
Mr. Pattison is Chairman and Chief Executive Officer of The Jim Pattison Group.
The Jim Pattison Group is a diversified company with operations in
communications, automotive services, food products, packaging and financial
services. Mr. Pattison founded the company in 1961 and has been its Chief
Executive Officer since then. In 1986, Mr. Pattison served as President and
Chairman of Expo '86, the World's Fair held in Vancouver, B.C. In 1986, he was
made an officer of the Order of Canada. He is a Director of the Toronto-Dominion
Bank and Canadian Pacific Ltd.
 
   
     BRENT D. REDSTONE, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     SUMNER M. REDSTONE, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     FREDERIC V. SALERNO, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     WILLIAM SCHWARTZ, see "Viacom Annual Meeting Matters--Election of
Directors."
    
 
   
     The names, business experience for the past five years and ages as of May
23, 1994 of all executive officers (who are not Directors) are listed below:
    
 
     THOMAS E. DOOLEY, see "--Executive Officers and Directors of Viacom."
    
     MICHAEL D. FRICKLAS, see "--Executive Officers and Directors of Viacom."
     
     ROBERT C. GREENBERG, Senior Vice President, Human Resources of Paramount,
36. Mr. Greenberg assumed his present position in 1993. Prior to that, he was a
principal with the consulting firm of Towers Perrin.
 
     RUDOLPH L. HERTLEIN, Senior Vice President and Controller of Paramount, 53.
Mr. Hertlein assumed his present position in 1993. Prior to that, he served as
Senior Vice President, Internal Audit and Special Projects since 1992 and,
before that, as Vice President, Internal Audit and Special Projects.
 
     LAWRENCE E. LEVINSON, Senior Vice President, Government Relations of
Paramount, 63.
 
     GEORGE S. SMITH, JR., see "--Executive Officers and Directors of Viacom."
                                      114

     The term of office of all directors is until the next annual meeting and
the term of office of all officers is for one year and until their successors
are chosen and qualify.
 
MANAGEMENT AFTER THE MERGERS
 
   
     Upon the completion of the Mergers, Sumner M. Redstone, currently the
Chairman of the Board of Viacom and Paramount, will continue as Chairman of the
Board of the combined company. Assuming consummation of the Blockbuster Merger,
H. Wayne Huizenga, currently the Chairman of the Board and Chief Executive
Officer of Blockbuster and a Director of Viacom and Paramount, will become Vice
Chairman of the combined company. Frank J. Biondi, Jr., currently President,
Chief Executive Officer and Director of Viacom and Paramount, will remain
President, Chief Executive Officer of the combined company. For a discussion of
the Board of Directors of the combined company, see "Viacom Annual Meeting
Matters--Election of Directors."
    
 
                      FINANCIAL MATTERS AFTER THE MERGERS
 
ACCOUNTING TREATMENT
 
   
     The Mergers will be accounted for by Viacom under the "purchase" method of
accounting in accordance with generally accepted accounting principles.
Therefore, the aggregate consideration paid by Viacom in connection with the
Mergers will be allocated to Paramount's assets and liabilities or Blockbuster's
assets and liabilities, as the case may be, based on their fair values with any
excess being treated as goodwill. As is the case with all of Viacom's long-term
assets and liabilities, Viacom will perform periodic reviews of the goodwill
arising from the Mergers to ensure that this goodwill is carried at the lower of
cost or market in light of current business conditions.
    
 
   
     The assets and liabilities and results of operations of Paramount (adjusted
for minority ownership interests from the date of the purchase of the shares of
Paramount Common Stock pursuant to the Offer through the Paramount Effective
Time) were consolidated into the assets and liabilities and results of
operations of Viacom as of March 1, 1994. The assets and liabilities and results
of operations of Blockbuster will be consolidated into the assets and
liabilities and results of operations of Viacom subsequent to the Blockbuster
Effective Time.
    
 
COMMON STOCK DIVIDEND POLICY AFTER THE PARAMOUNT MERGER AND THE MERGERS
 
     It is the current intention of the Viacom Board not to pay cash dividends
on the Viacom Class A Common Stock or Viacom Class B Common Stock following the
Paramount Merger and the Mergers. Future dividends will be determined by
Viacom's Board of Directors in light of Viacom's alternative opportunities for
investment and the earnings and financial condition of Viacom and its
subsidiaries, among other factors.
 
                                      115

                                 CAPITALIZATION
                             (DOLLARS IN MILLIONS)
 
    The following table sets forth the historical capitalization of Viacom,
Blockbuster and Paramount and the pro forma capitalization of the combined
company after giving effect to the Pro Forma Events.
 
   

                                                         HISTORICAL              PRO FORMA
                                               ------------------------------     VIACOM-        PRO FORMA
                                                   VIACOM       BLOCKBUSTER      PARAMOUNT        COMBINED
                                               MARCH 31, 1994  MARCH 31, 1994  MARCH 31, 1994     COMPANY
                                               --------------  --------------  --------------  --------------
                                                                                   
Total debt:
  Current maturities.........................    $     39.1      $  1,000.0      $     39.1      $     39.1
                                               --------------  --------------  --------------  --------------
  Due after one year:
    Senior...................................       6,597.4           997.0         6,392.4         8,389.4
    Senior subordinated......................         450.0          --               450.0           450.0
    Subordinated.............................         180.6          --             1,250.5(b)      1,250.5(b)
                                               --------------  --------------  --------------  --------------
      Due after one year.....................       7,228.0           997.0         8,092.9        10,089.9
                                               --------------  --------------  --------------  --------------
        Total debt, including current
          maturities.........................       7,267.1         1,997.0         8,132.0        10,129.0
                                               --------------  --------------  --------------  --------------
Stockholders' equity:
  Preferred..................................       1,800.0          --             1,800.0         1,200.0(c)
  Common.....................................       1,710.4(a)      1,854.3         3,708.3(d)      8,471.0(e)
                                               --------------  --------------  --------------  --------------
        Total stockholders' equity...........       3,510.4         1,854.3         5,508.3         9,671.0
                                               --------------  --------------  --------------  --------------
        Total capitalization.................    $ 10,777.5      $  3,851.3      $ 13,640.3      $ 19,800.0
                                               --------------  --------------  --------------  --------------
                                               --------------  --------------  --------------  --------------

    
 
- ---------------
 
   
        
      (a)  On March 31, 1994, there were 53,449,525 outstanding shares of Viacom Class A Common Stock (100,000,000 shares
           authorized) and 90,078,203 outstanding shares of Viacom Class B Common Stock (150,000,000 shares authorized);
           there were approximately 223,460 unissued shares of Viacom Class A Common Stock and 29,408,859 unissued shares
           of Viacom Class B Common Stock reserved principally for exercise of stock options granted under the Viacom
           Long-Term Incentive Plan and conversion of Viacom Preferred Stock.
      (b)  The pro forma debt capitalization reflects the issuance of approximately $1.1 billion of Viacom Merger
           Debentures in connection with the Paramount Merger.
      (c)  The pro forma preferred equity capitalization reflects the assumed cancellation of $600 million of Series A
           Preferred Stock upon consummation of the Blockbuster Merger. The proceeds of the sale of Viacom Preferred
           Stock have been used to finance a portion of the cash paid in the Offer.
      (d)  The pro forma common equity capitalization reflects the assumed conversion of the Paramount Common Stock not
           then owned by Viacom into the Paramount Merger Consideration.
      (e)  The pro forma common equity capitalization reflects (i) the assumed conversion of Blockbuster Common Stock
           into the Blockbuster Merger Consideration and (ii) the assumed cancellation of $1.25 billion of Viacom Class B
           Common Stock held by Blockbuster in consolidation as a result of the assumed Blockbuster Merger.


    
 
                                      116

   
          UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
                       VIACOM-PARAMOUNT/COMBINED COMPANY
    
 
   
     The following unaudited pro forma combined condensed balance sheet at March
31, 1994 gives effect to the completion of the Paramount Merger and the
Blockbuster Merger as if these events had occurred on such date, and was
prepared based upon the balance sheet of Viacom and Blockbuster at March 31,
1994. Balance sheet information for Paramount at March 31, 1994 is consolidated
in Viacom's historical balance sheet. Viacom's balance sheet also contains pro
forma adjustments for the sale of Viacom's one third partnership interest in
LIFETIME. (See Note 1 herein).
    
 
   
     The following unaudited pro forma combined condensed statements of
operations for the three months ended March 31, 1994 and for the year ended
December 31, 1993 give effect to the completion of the Offer, the Paramount
Merger, the Blockbuster Merger, the issuance of Viacom Preferred Stock and the
sale of Viacom's one third partnership interest in LIFETIME as if they had
occurred simultaneously at the beginning of each period presented. The unaudited
pro forma combined condensed statement of operations for the three months ended
March 31, 1994 was prepared based upon the statements of operations of Viacom
and Blockbuster for the three months ended March 31, 1994. The unaudited pro
forma combined condensed statement of operations for the year ended December 31,
1993 was prepared based upon the statement of operations of Viacom and
Blockbuster for the year ended December 31, 1993 and of Paramount for the nine
months ended January 31, 1994 and three months ended April 30, 1993 combined.
Financial information for Paramount subsequent to the Offer is included in the
Viacom historical information. Results of operations for January 1994 are
included in the statement of operations for the three months ended March 31,
1994 and year ended January 31, 1994. Revenues and earnings from operations for
the month of January 1994 were $394 million and $38.7 million, respectively.
These unaudited pro forma combined condensed financial statements should be read
in conjunction with the audited financial statements, including the notes
thereto, of Viacom and Blockbuster and the audited financial statements and the
unaudited interim financial statements, including the notes thereto, of
Paramount, which are incorporated by reference in this Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference."
    
 
   
     The unaudited pro forma data are not necessarily indicative of the results
of operations or financial position of Viacom-Paramount or the combined company
that would have occurred if the completion of the Offer, the Paramount Merger
and the Blockbuster Merger had occurred at the beginning of the period or the
date indicated, nor are they necessarily indicative of future operating results
or financial position.
    
 
     The pro forma adjustments are based upon available information and certain
assumptions set forth herein, including the notes to the unaudited pro forma
combined condensed financial statements, which Viacom, Paramount and Blockbuster
believe are reasonable under the circumstances. The pro forma adjustments
reflect the Paramount Merger Consideration and the Blockbuster Merger
Consideration (see "Notes 2 and 3", respectively). The Paramount and Blockbuster
historical information have been adjusted for certain acquisitions, and certain
significant transactions which have occurred or which may occur (see Paramount
and Blockbuster Unaudited Pro Forma Condensed Consolidated Information.)
 
   
     Both the Paramount Merger and the Blockbuster Merger will be accounted for
by the purchase method of accounting. Accordingly, Viacom's cost to acquire
Paramount and Blockbuster, calculated to be approximately $10.0 billion and $5.7
billion, respectively, as of March 31, 1994, will be allocated to the assets and
liabilities acquired according to their respective fair values with the excess
to goodwill. Viacom's cost to acquire Paramount and Blockbuster pursuant to the
respective merger agreements is subject to change based primarily upon the
market value of Viacom Common Stock at the time of the respective mergers. 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
                                      117



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 the purposes of developing such unaudited pro forma combined
condensed financial information. For the Paramount Merger, the approximate $6.0
billion pro forma excess of unallocated acquisition costs as of March 31, 1994
is being amortized over 40 years at a rate of $149.0 million per year. For the
Blockbuster Merger, the approximate $3.8 billion pro forma excess of unallocated
acquisition costs as of March 31, 1994 is also being amortized over 40 years at
a rate of $95.4 million per year. Such amortization period is based on Viacom's
belief that the combined company has substantial potential for achieving
long-term appreciation as a fully integrated, global entertainment and
communications company. The Mergers will permit the continued expansion of
current lines of business, as well as the development of new businesses, via the
cross-promotion of the well known franchises, trademarks and products of Viacom,
Blockbuster and Paramount. Additionally, the combined company will have enhanced
and complimentary product distribution capabilities which can be used to
strategically exploit its franchise trademarks and products on an accelerated
basis. Viacom believes that the combined company will benefit from the Mergers
for an indeterminable period of time of at least 40 years, and, therefore, a 40
year amortization period is appropriate.
    
 
     As is the case with all of Viacom's long-term assets and liabilities,
Viacom will perform periodic reviews of the goodwill arising from the Mergers to
ensure that this goodwill is carried at the lower of cost or market in light of
current business conditions.
 
     After the consummation of the Mergers, Viacom will arrange for independent
appraisal of the significant assets, liabilities and business operations of
Paramount and Blockbuster. Using this information, Viacom will make a final
allocation of the excess purchase price, including allocation to intangibles
other than goodwill. Viacom believes that any significant allocation of excess
purchase price to intangibles will be amortized over 40 years, and so any such
allocation would not cause a material difference in pro forma results.
 
     The future results of operations of the combined company will reflect
increased amortization of goodwill as described in notes 5a and 6b, increased
interest expense as described in note 5b, and increased preferred stock dividend
requirements as described in note 4d. The following unaudited pro forma combined
condensed statement of operations does not reflect potential cost savings
attributable to consolidation of certain operating and administrative functions
including the elimination of duplicate facilities and personnel. The future
financial position of the combined company will reflect increased goodwill as
described above, increased long-term debt as described in notes 2b and 3c, and
increased common stockholders' equity resulting from the issuance of Viacom
Common Stock to stockholders of Paramount and Blockbuster.
 
   
     See also "Certain Considerations--Consummation of the Blockbuster Merger."
    
 
                                      118

   
              UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
                                 MARCH 31, 1994
                       VIACOM-PARAMOUNT/COMBINED COMPANY
                                 (IN MILLIONS)
    
 
   


                                          VIACOM
                             ---------------------------------   PARAMOUNT     VIACOM/                  BLOCKBUSTER
                                         PRO FORMA                MERGER      PARAMOUNT    HISTORICAL    MERGER         COMBINED
                             HISTORICAL ADJUSTMENTS  PRO FORMA  ADJUSTMENTS    COMBINED    BLOCKBUSTER  ADJUSTMENTS      COMPANY
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
                                                                                               
   ASSETS
Cash & short term
investments................  $   446.2               $   446.2                $    446.2    $    77.2   $   (30.0)(3a)  $  493.4
Other current assets.......    3,247.0                 3,247.0         61.4      3,308.4        632.7                    3,941.1
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
    Total current assets...    3,693.2                 3,693.2         61.4      3,754.6        709.9       (30.0)       4,434.5
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
Property and equipment,
net........................    1,801.8                 1,801.8         11.6      1,813.4        570.7                    2,834.1
Intangible assets, at
amortized cost.............    8,057.8                 8,057.8   $ 1,295.4(2c)   9,353.2        863.5     3,817.0(3a)   14,033.7
Investments in Viacom,
Inc........................                                                                   1,478.6    (1,478.6)(3b)
Other assets...............    2,783.4       (49.9)(1a)2,733.5       233.4       2,966.9        844.0                    3,810.9
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
                             $16,336.2   $   (49.9)  $16,286.3   $ 1,295.4    $ 17,888.1    $ 4,466.7   $ 2,308.4      $24,663.2
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........  $ 3,345.5               $ 3,345.5      (22.6)    $  3,322.9    $ 1,464.1   $(1,000.0)(3c) $ 3,782.0
Long-term debt.............    7,228.0   $ (205.0)(1b) 7,023.0  $ 1,069.9(2b)    8,092.9        997.0     1,000.0(3c)   10,089.9
Other liabilities..........      967.1                   967.1       (3.1)         964.0        151.3                    1,115.3
Minority interest in
Paramount..................    1,285.2                 1,285.2    (1,285.2)
Stockholders' equity:
  Preferred................    1,800.0                 1,800.0                   1,800.0                   (600.0)(3b)   1,200.0
  Common...................    1,710.4       155.1(1)  1,865.5     1,842.8(2,5a) 3,708.3      1,854.3     2,908.4(3a,b)  8,471.0
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
    Total stockholders'
equity.....................    3,510.4       155.1     3,665.5     1,842.8       5,508.3      1,854.3     2,308.4        9,671.0
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
                             $16,336.2   $   155.1   $16,286.3   $ 1,295.4    $ 17,888.1    $ 4,466.7   $ 2,308.4      $24,665.2
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------
                             ---------  -----------  ---------  -----------  ------------  -----------  ---------      ---------

    
 
   See notes to unaudited pro forma combined condensed financial statements.
 
                                      119

   
         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
                   FOR THE THREE MONTHS ENDED MARCH 31, 1994
                       VIACOM-PARAMOUNT/COMBINED COMPANY
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
    
   


                                        VIACOM
                          -----------------------------------                PARAMOUNT         VIACOM/
                                      PRO FORMA                 PRO FORMA     MERGER          PARAMOUNT        PRO FORMA
                           VIACOM    ADJUSTMENTS   PRO FORMA   PARAMOUNT*   ADJUSTMENTS       COMBINED        BLOCKBUSTER**
                          ---------  -----------  -----------  -----------  -----------  -------------------  -----------
                                                                                         
Revenues................  $   878.4                $   878.4    $   717.2                     $ 1,595.6        $   696.5
Expenses
 Operating..............      820.3                    820.3        562.2    $  (297.9)         1,084.6            513.3
 Selling, general and
   administrative.......      298.5                    298.5        192.6        (34.2)           456.9             63.6
 Depreciation and
   amortization.........       59.8                     59.8         16.7         26.1(5b)        102.6
                          ---------  -----------  -----------  -----------  -----------        --------       -----------
   Total expenses.......    1,178.6                  1,178.6        771.5       (306.0)         1,644.1            576.9
                          ---------  -----------  -----------  -----------  -----------        --------       -----------
Earnings (loss) from
  operations............    (300.2)                   (300.2)       (54.3)       306.0            (48.5)           119.6
 Interest expense.......     (47.3)        (2.4)       (44.9)       (17.1)       (65.9)(5c)      (127.9)           (22.0)
 Interest and other
   investment income....                                              8.2                           8.2              1.4
 Other items, net(7)....      (4.8)                     (4.8)       (21.3)        27.2              1.1              5.8
                          ---------  -----------  -----------  -----------  -----------        --------       -----------
   Total other income
     (expense)..........     (52.1)        (2.4)       (49.7)       (30.2)       (38.7)          (118.6)           (14.8)
                          ---------  -----------  -----------  -----------  -----------        --------       -----------
Earnings (loss) before
  income taxes..........    (352.3)         2.4       (349.9)        84.5        267.3           (167.1)           104.8
Provision for income
  taxes.................       95.1          .8         95.9         28.8        102.5(5d)          169.6           38.8
Equity in earnings
 (loss) of affiliated
 companies, net of
   tax..................        3.5        (4.5)        (1.0)                                      (1.0)
Minority interest.......       12.3                     12.3                     (12.3)
                          ---------  -----------  -----------  -----------  -----------        --------       -----------
Earnings (loss) before
 extraordinary item,
 cumulative effect of
 change in accounting
 principle and preferred
 stock dividend
 requirements............    (431.6)        (2.9)      (434.5)       (55.7)       152.5          (337.7)             66.0
Preferred stock dividend
  requirements..........       22.5                     22.5                                       22.5
                          ---------  -----------  -----------  -----------  -----------        --------       -----------
Earnings (loss)
 attributable to common
 stock before
 extraordinary item and
 cumulative effect of
 change in accounting
 principle...............  $ (454.1)   $    (2.9)   $  (457.0)   $   (55.7)   $   152.5        $  (360.2)       $    66.0
                          ---------  -----------  -----------  -----------  -----------        --------       -----------
                          ---------  -----------  -----------  -----------  -----------        --------       -----------
Weighted average number
 of common shares or
 common shares and
 common share
 equivalents............      126.4        17.4                                   56.9            200.7
Earnings (loss) per
 common share before
 cumulative effect of
 change in accounting
 principle..............  $  (3.59)                                                           $   (1.79)


 



                           BLOCKBUSTER
                            MERGER      COMBINED
                          ADJUSTMENTS    COMPANY
                          -----------  -----------
                                  
Revenues................                $ 2,292.1
Expenses
 Operating..............   $ (117.5)(6a)  1,480.4
 Selling, general and
   administrative.......                    520.5
 Depreciation and
   amortization.........        23.9(6b)    244.0
                               117.5(6a)
                          -----------  -----------
   Total expenses.......        23.9      2,244.9
                          -----------  -----------
Earnings (loss) from
  operations............       (23.9)        47.2
 Interest expense.......                   (149.9)
 Interest and other
   investment income....                      9.6
 Other items, net(7)....        (7.5)(6c)    (0.6)
                          -----------  -----------
   Total other income
     (expense)..........        (7.5)      (140.9)
                          -----------  -----------
Earnings (loss) before
  income taxes..........       (31.4)       (93.7)
Provision for income
  taxes.................        (2.7)(6d)   205.7
Equity in earnings
 (loss) of affiliated
 companies, net of
 tax....................                     (1.0)
Minority interest.......
                          -----------  -----------
Earnings (loss) before
 extraordinary item,
 cumulative effect of
 change in accounting
 principle and preferred
 stock dividend
 requirements...........       (28.7)      (300.4)
Preferred stock dividend
 requirements...........        (7.5)(6c)    15.0
                          -----------  -----------
Earnings (loss)
 attributable to common
 stock before
 extraordinary item and
 cumulative effect of
 change in accounting
 principle..............   $   (21.2)   $  (315.4)
                          -----------  -----------
                          -----------  -----------
Weighted average number
 of common shares or
 common shares and
 common share
 equivalents............       153.4        354.1(9)
Earnings (loss) per
 common share before
 cumulative effect of
 change in accounting
 principle..............                $   (0.89)
 

    
 
   See notes to unaudited pro forma combined condensed financial statements.
 
- ---------------
 
 * See Unaudited Pro Forma Condensed Consolidated Financial Statements of
   Paramount.
 
   
** See Unaudited Pro Forma Condensed Consolidated Statement of Operations of
   Blockbuster.
    
 
                                      120

   
         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1993
                       VIACOM-PARAMOUNT/COMBINED COMPANY
                (IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
    
   


                                                                                OFFER
                                       VIACOM                                    AND
                         -----------------------------------                  PARAMOUNT         VIACOM/
                                     PRO FORMA                  PRO FORMA      MERGER          PARAMOUNT        PRO FORMA
                          VIACOM    ADJUSTMENTS   PRO FORMA   PARAMOUNT(8)*  ADJUSTMENTS       COMBINED        BLOCKBUSTER**
                         ---------  -----------  -----------  -------------  -----------  -------------------  -----------
                                                                                          
Revenues...............  $$2,004.9                $ 2,004.9     $ 5,024.0                      $ 7,028.9        $ 2,595.2
Expenses
 Operating.............      877.6                    877.6       3,315.7                        4,193.3          1,947.6
 Selling, general and
administrative.........      589.2                    589.2       1,243.7                        1,832.9            212.0
 Depreciation and
amortization...........      153.1                    153.1         165.1     $   149.0(5b)        467.2
                         ---------  -----------  -----------  -------------  -----------        --------       -----------
   Total expenses......    1,619.9                  1,619.9       4,724.5         149.0          6,493.4          2,159.6
                         ---------  -----------  -----------  -------------  -----------        --------       -----------
Earnings from
operations.............      385.0                    385.0         299.5        (149.0)           535.5            435.6
 Interest expense......    (145.0)   $     8.9(4a)   (136.1)        (94.3)       (250.5)(5c)      (480.9)           (98.7)
 Interest and other
investment income......                                              43.9                           43.5              7.2
 Other items, net(7)...       61.8                     61.8          (7.4)                          54.4             16.3
                         ---------  -----------  -----------  -------------  -----------        --------       -----------
   Total other income
(expense)..............     (83.2)         8.9        (74.3)        (57.8)       (250.5)          (382.6)           (75.2)
                         ---------  -----------  -----------  -------------  -----------        --------       -----------
Earnings before income
taxes..................      301.8         8.9        310.7         241.7        (399.5)           152.9            360.4
Provision for income
taxes..................      129.8         3.1(4b)    132.9          88.6         (88.5)(5d)       133.0            135.1
Equity in loss of
 affiliated companies,
net of tax.............      (2.5)       (12.9)(4c)   (15.4)                                       (15.4)
                         ---------  -----------  -----------  -------------  -----------        --------       -----------
Earnings before
 extraordinary item,
 cumulative effect of
 change in accounting
 principle and
 preferred stock
 dividend
requirements...........      169.5        (7.1)       162.4         153.1        (311.0)             4.5            225.3
Preferred stock
 dividend
requirements...........       12.8   $     77.2(4d)     90.0                                        90.0
                         ---------  -----------  -----------  -------------  -----------        --------       -----------
Earnings (loss)
 attributable to common
 stock before
 extraordinary item and
 cumulative effect of
 change in accounting
principle..............  $   156.7   $   (84.3)   $    72.4     $   153.1     $  (311.0)       $   (85.5)       $   225.3
                         ---------  -----------  -----------  -------------  -----------        --------       -----------
                         ---------  -----------  -----------  -------------  -----------        --------       -----------
Weighted average number
 of common shares or
 common shares and
 common share
 equivalents...........      120.6        22.7                                     56.9            200.2
Primary earnings per
 common share before
 extraordinary item and
 cumulative effect of
 change in accounting
 principle.............  $    1.30                                                             $   (0.43)
 

 
                         BLOCKBUSTER
                           MERGER      COMBINED
                         ADJUSTMENTS    COMPANY
                         -----------  -----------
                                 
Revenues...............                $ 9,624.1
Expenses
 Operating.............   $  (410.7)(6a) 5,730.2
 Selling, general and
administrative.........                  2,044.9
 Depreciation and
amortization...........        95.4(6b)    973.3
                              410.7(6a)
                         -----------  -----------
   Total expenses......        95.4      8,748.4
                         -----------  -----------
Earnings from
operations.............       (95.4)       875.7
 Interest expense......                   (579.6)
 Interest and other
investment income......                     51.1
 Other items, net(7)...       (30.0)(6c)    40.7
                         -----------  -----------
   Total other income
(expense)..............       (30.0)      (487.8)
                         -----------  -----------
Earnings before income
taxes..................      (125.4)       387.9
Provision for income
taxes..................       (11.6)(6d)   256.5
Equity in loss of
 affiliated companies,
net of tax.............                    (15.4)
                         -----------  -----------
Earnings before
 extraordinary item,
 cumulative effect of
 change in accounting
 principle and
 preferred stock
 dividend
requirements...........      (113.8)       116.0
Preferred stock
 dividend
requirements...........       (30.0)(6c)    60.0
                         -----------  -----------
Earnings (loss)
 attributable to common
 stock before
 extraordinary item and
 cumulative effect of
 change in accounting
principle..............   $   (83.8)   $    56.0
                         -----------  -----------
                         -----------  -----------
Weighted average number
 of common shares or
 common shares and
 common share
equivalents............       211.6        411.8(9)
Primary earnings per
 common share before
 extraordinary item and
 cumulative effect of
 change in accounting
principle..............                $    0.14

    
 
   See notes to unaudited pro forma combined condensed financial statements.
 
- ---------------
 
 * See Unaudited Pro Forma Condensed Consolidated Financial Statements of
   Paramount.
 
** See Unaudited Pro Forma Condensed Consolidated Financial Statements of
   Blockbuster.
 
                                      121

   
                          NOTES TO UNAUDITED PRO FORMA
                    COMBINED CONDENSED FINANCIAL STATEMENTS
                       VIACOM-PARAMOUNT/COMBINED COMPANY
                    (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
    
 
     (1) Pro forma adjustments made to Viacom's historical balance sheet reflect
the following:
 
   
     (a) The sale of Viacom's one-third partnership interest in LIFETIME.
    
 
   
     (b) The repayment of bank debt from the after-tax proceeds from the sale of
         the one-third partnership interest in LIFETIME.
    
 
   
     (2) The cost to acquire Paramount pursuant to the Offer and the Paramount
Merger, the financing of such cost and the determination of the unallocated
excess of acquisition cost over the net assets acquired are as set forth below.
In furtherance of the Paramount Merger, on March 11, 1994, Viacom, pursuant to
the terms of the Offer, completed its purchase of 61,657,432 shares of Paramount
Common Stock, representing a majority of the shares of Paramount Common Stock
outstanding as of the expiration of the Offer. In the Paramount Merger, each
remaining outstanding share of Paramount Common Stock will be converted into the
right to receive the Paramount Merger Consideration. As of March 31, 1994, the
closing price of shares of Viacom Class B Common Stock on the AMEX was $26 1/2.
As of March 31, 1994 there were 122.8 million shares of Paramount Common Stock
outstanding.
    
 
     (a) Total acquisition costs:
 
   

Cash.............................................................  $  6,597.3
Viacom Merger Debentures.........................................     1,069.9
Viacom Class B Common Stock......................................     1,507.7
CVRs.............................................................       571.3
Viacom Three-Year Warrants.......................................        31.5
Viacom Five-Year Warrants........................................        40.5
Paramount Merger costs...........................................        90.0
                                                                   ----------
Acquisition costs financed.......................................     9,908.2
Excess value of exchange ratio over exercise price of Paramount
employee stock options...........................................        54.2
                                                                   ----------
Total acquisition costs..........................................  $  9,962.4
                                                                   ----------
                                                                   ----------

    
 
     (b) Financing of the Offer and the Paramount Merger:
 
   
Cash.............................................................  $  2,897.3
Credit Agreement.................................................     3,700.0
Viacom Merger Debentures.........................................     1,069.9
Viacom Class B Common Stock......................................     1,507.7
CVRs.............................................................       571.3
Viacom Three-Year Warrants.......................................        31.5
Viacom Five-Year Warrants........................................        40.5
                                                                   ----------
Total financing of the Offer and the Paramount Merger............  $  9,908.2
                                                                   ----------
                                                                   ----------
    
 
   
     (c) The unallocated excess of acquisition costs over the net assets
acquired pursuant to the Paramount Merger.
    
 
   
     (3) 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 the Blockbuster Merger Consideration for each of such
holder's shares. As of

                                     122
    

   
March 31, 1994, the closing price of shares of Viacom Class A Common Stock and 
Viacom Class B Common Stock on the AMEX was $30 7/8 and $26 1/2, respectively. 
As of March 31, 1994, there were 249.1 million shares of Blockbuster Common 
Stock outstanding.
    
 
     (a) Total acquisition costs and financing:
 
   

Viacom Class A Common Stock......................................  $    615.2
Viacom Class B Common Stock......................................     4,000.7
VCRs.............................................................       912.7
                                                                   ----------
Acquisition costs financed.......................................     5,528.6
Excess value of exchange ratio over exercise price of Blockbuster
stock options and warrants.......................................       112.7
Blockbuster Merger costs.........................................        30.0
                                                                   ----------
Total acquisition costs..........................................     5,671.3
Blockbuster pro forma net assets as of December 31, 1993.........     1,854.3
                                                                   ----------
Excess of acquisition costs over net assets acquired.............  $  3,817.0
                                                                   ----------
                                                                   ----------
    
 
   
     (b) Eliminates Blockbuster's $600 million investment in Series A Preferred
         Stock and $1.25 billion investment in Viacom Class B Common Stock, net
         of an unrealized holding loss.
    
 
     (c) Assumes additional borrowings incurred by Blockbuster, which were used
         to finance the purchase of Viacom Class B Common Stock, will be
         refinanced on a long-term basis as part of an overall refinancing of
         indebtedness of the combined company. Viacom believes, based on
         discussions with a number of bank lenders and investment banking
         institutions and based on the pro forma financial position and results
         of operations, that it will have the ability to refinance its
         indebtedness on a long-term basis.
 
     (4) Pro forma adjustments made to Viacom's historical results reflect the
following:
    
     (a) A decrease in interest expense of $2.4 million for the three months
         ended March 31, 1994 and $8.9 million for the year ended December 31,
         1993 resulting from the repayment of bank debt of approximately $205
         million.
     
     (b) Pro forma income tax adjustments reflect the income tax effects
         calculated at the statutory tax rate in effect during the period
         presented.
    
     (c) Eliminates Viacom's equity in earnings, net of tax, of LIFETIME.
     
     (d) The additional 5% cumulative dividend requirement of the $1.8 billion
         of Viacom Preferred Stock sold to NYNEX and Blockbuster in the amount
         of $77.2 million for the year ended December 31, 1993 as if the
         transactions had occurred at the beginning of the year.
 
     (5) Other pro forma adjustments related to the Offer and the Paramount
Merger reflect the following:
 
   
     (a) A reversal of merger related charges principally relates to adjustments
         of programming assets based upon new management strategies and
         additional programming sources and other costs incurred related to
         the merger with Paramount.

     (b) An increase in amortization expense resulting from the increase in
         intangibles.
    
 
   
     (c) An increase in interest expense resulting from additional debt
         financing of approximately $3.7 billion under the Credit Agreement, the
         issuance of Viacom Merger Debentures and a decrease of interest income
         resulting from the use of cash to finance the Offer. The assumed
         interest rate on the debt financing under the Credit Agreement of 4.6%
         for the three months ended March 31, 1994 and 4.3% for the year ended
         December 31, 1993 was calculated based on average historical London
         Interbank Offered Rates. A change in the assumed interest rate of 1/8%
         will result in a change in interest expense of $4.5 million on an
         annual basis.
    
                                      123

 
     (d) Pro forma income tax adjustments reflect the income tax effects
         calculated at the statutory tax rate in effect during the period
         presented. The effective income tax rate on a pro forma basis is
         adversely affected by amortization of excess acquisition costs, 
         which are assumed to be not deductible for tax purposes.
 
     (e) Intercompany transactions were immaterial in each of the statements
         presented.
 
     (6) Other pro forma adjustments related to the Blockbuster Merger reflect
the following:
    
     (a) Reclassification of the historical presentation of depreciation and
         amortization to conform the presentations of Viacom and Blockbuster
         financial statements.
     
   
     (b) An increase in amortization expense resulting from the increase in
         intangibles.
    
 
   
     (c) Eliminates the 5% cumulative annual dividend on the $600 million
         intercompany Series A Preferred Stock investment by Blockbuster.
    
 
     (d) Reflects the income tax effects of certain pro forma adjustments
         calculated at the statutory tax rate in effect during the period
         presented. The effective income tax rate on a pro forma basis is
         adversely affected by amortization of excess acquisition costs, which
         are assumed to be not deductible for tax purposes.
 
     (e) Intercompany transactions were immaterial in each of the statements
         presented.
 
     (7) Other items, net, of Viacom for the year ended December 31, 1993
reflects a net gain of $61.8 million due to the sale of the Viacom Cablevision
of Wisconsin, Inc. system and other non-recurring transactions.
 
     (8) Reflects operating losses at USA Networks, Paramount's 50%-owned cable
networks, due largely to a $78 million pre-tax charge, the majority of which was
recorded in December 1993, to adjust the carrying value of certain broadcast
rights to net realizable value because of the under performance of certain
series programming of which Paramount recorded its share.
 
   
     (9) Pro forma primary earnings per common share is calculated based on the
weighted average number of shares of Viacom Common Stock outstanding, the number
of shares of Viacom Common Stock to be issued in connection with the Paramount
Merger and Blockbuster Merger and respective common share equivalents as if
these transactions occurred at the beginning of the period presented. Common
share equivalents would have an antidilutive effect on losses per common share
and therefore are not included in such calculation. Conversion of the Series B
Preferred Stock would have an antidilutive effect on earnings per common share
and therefore fully diluted earnings per common share is not presented.
    
 
                                      124

               PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED
        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
   
The following unaudited pro forma Paramount condensed consolidated statement of
operations for the two months ended February 28, 1994 and twelve months ended
January 31, 1994 give effect, on a purchase accounting basis, to the acquisition
of Macmillan. The unaudited pro forma condensed consolidated statement of
operations for the twelve months ended January 31, 1994 also includes the
acquisitions of television station WKBD-TV in Detroit ("WKBD") in September 1993
and the remaining 80% interest in Paramount Canada's Wonderland ("PCW") theme
park in May 1993. The acquisitions of WKBD and PCW are included in the
applicable unaudited pro forma condensed consolidated statement of operations in
"Other Businesses Acquired and Pro Forma Adjustments."
    
 
   
The unaudited pro forma Paramount condensed consolidated statement of operations
for the two months ended February 28, 1994 and the twelve months ended January
31, 1994 include the unaudited historical consolidated statement of operations
of Paramount for the two months ended February 28, 1994 and the twelve months
ended January 31, 1994 and of Macmillan for the two months ended February 28,
1994 and the twelve months ended December 31, 1993. The unaudited pro forma
condensed consolidated statement of operations for the twelve months ended
January 31, 1994 also includes the historical statement of operations of WKBD
for the seven months ended August 31, 1993; and of PCW for the three months
ended April 30, 1993. Financial information of WKBD and PCW subsequent to their
acquisitions are included in Paramount's historical financial statements.
Macmillan's fiscal year-end was March 31, PCW's fiscal year-end was February 28,
and WKBD's fiscal year-end was December 31; their pro forma periods described
above have been derived by accumulating monthly and quarterly financial
information for the respective entities.
    
 
   
The unaudited pro forma Paramount condensed consolidated statements of
operations are not necessarily indicative of the results which actually would
have occurred if the acquisitions had been in effect since the beginning of each
period presented, nor are they necessarily indicative of future results.
    
 
   
Adjustments have been made to reflect the acquisitions, on a purchase accounting
basis, as if such transactions had taken place at the beginning of each period
presented, for the purpose of presenting the unaudited pro forma Paramount
condensed consolidated statement of operations.
    
 
                                      125

   
               PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                   FOR THE TWO MONTHS ENDED FEBRUARY 28, 1994
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
    
 
   


                                                                         HISTORICAL
                                                                      -----------------     MACMILLAN
                                                                             TWO         ACQUISITION AND
                                                                        MONTHS ENDED        PRO FORMA
                                                                      FEBRUARY 28, 1994  ADJUSTMENTS(1)   PRO FORMA
                                                                      -----------------  ---------------  ---------
                                                                                                 
Revenues............................................................      $   680.6         $    36.6     $   717.2
Expenses:
  Operating.........................................................          530.8              31.4         562.2
  Selling, general and
     administrative.................................................          176.6              16.0         192.6
  Depreciation and amortization.....................................           14.1               2.6          16.7
                                                                           --------      ---------------  ---------
       Total expenses...............................................          721.5              50.0         771.5
                                                                           --------      ---------------  ---------
Earnings (loss) from operations.....................................          (40.9)            (13.4)        (54.3)
                                                                           --------      ---------------  ---------
Other income (expense):
  Interest expense..................................................          (17.1)                          (17.1)
  Interest and other investment
     income.........................................................           11.1              (2.9)          8.2
  Other items, net..................................................          (19.0)             (2.3)        (21.3)
                                                                           --------      ---------------  ---------
       Total other expense..........................................          (25.0)             (5.2)        (30.2)
                                                                           --------      ---------------  ---------
Earnings (loss) before income taxes.................................          (65.9)            (18.6)        (84.5)
Provision (benefit) for income taxes................................          (23.0)             (5.8)        (28.8)
                                                                           --------      ---------------  ---------
Net earnings (loss).................................................      $   (42.9)        $   (12.8)    $   (55.7)
                                                                           --------      ---------------  ---------
                                                                           --------      ---------------  ---------
Weighted average number of
  common shares.....................................................          121.9                           121.9
Net earnings (loss) per common
  share.............................................................      $    (.35)        $             $    (.46)

    
 
   
 See notes to unaudited pro forma condensed consolidated financial statements.
    
 
                                      126

               PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                  FOR THE TWELVE MONTHS ENDED JANUARY 31, 1994
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
 
   


                                                           HISTORICAL                                  OTHER
                                                --------------------------------    MACMILLAN       BUSINESSES
                                                      NINE            THREE        ACQUISITION     ACQUIRED AND
                                                  MONTHS ENDED     MONTHS ENDED   AND PRO FORMA      PRO FORMA
                                                JANUARY 31, 1994  APRIL 30, 1993  ADJUSTMENTS(1)  ADJUSTMENTS(2)   PRO FORMA
                                                ----------------  --------------  --------------  ---------------  ----------
                                                                                                    
Revenues......................................     $  3,757.0       $    954.4      $    287.7       $    24.9     $  5,024.0
Expenses:
  Operating...................................        2,499.1            628.3           167.0            21.3        3,315.7
  Selling, general and
     administrative...........................          835.4            315.8            92.5                        1,243.7
  Depreciation and amortization...............          124.5             22.2            16.3             2.1          165.1
                                                ----------------  --------------  --------------       -------     ----------
       Total expenses.........................        3,459.0            966.3           275.8            23.4        4,724.5
                                                ----------------  --------------  --------------       -------     ----------
Earnings (loss) from operations...............          298.0            (11.9)           11.9             1.5          299.5
                                                ----------------  --------------  --------------       -------     ----------
Other income (expense):
  Interest expense............................          (70.6)           (23.7)                                         (94.3)
  Interest and other investment
     income...................................           53.1             22.2           (26.4)           (5.0)          43.9
  Other items, net............................           (2.7)            (2.2)           (2.6)            0.1           (7.4)
                                                ----------------  --------------  --------------       -------     ----------
       Total other expense....................          (20.2)            (3.7)          (29.0)           (4.9)         (57.8)
                                                ----------------  --------------  --------------       -------     ----------
Earnings (loss) before income taxes...........          277.8            (15.6)          (17.1)           (3.4)         241.7
Provision (benefit) for income taxes..........           97.2             (6.4)           (1.5)           (0.7)          88.6
                                                ----------------  --------------  --------------       -------     ----------
Net earnings (loss)...........................     $    180.6       $     (9.2)     $    (15.6)      $    (2.7)    $    153.1
                                                ----------------  --------------  --------------       -------     ----------
                                                ----------------  --------------  --------------       -------     ----------
Weighted average number of
  common shares...............................          120.3            118.8                                          119.9
Net earnings (loss) per common
  share.......................................     $     1.50       $    (0.08)                                    $     1.28

    
 
   
 See notes to unaudited pro forma condensed consolidated financial statements.
    
 
                                      127

               PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED
              NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
    
(1) The Macmillan Acquisition includes the following pro forma adjustments:
     
   
Estimated amortization of intangible assets of $2.1 million for the two months
ended February 28, 1994 and $12.8 million for the twelve months ended January
31, 1994 over a 40 year life.
    
 
   
Estimated reduction of interest income of $2.9 million for the two months ended
February 28, 1994 and $26.4 million for the twelve months ended January 31, 1994
at Paramount's average interest rates in effect during the respective periods,
due to the use of cash and cash equivalents and short-term investments for the
acquisition.
    
 
   
Estimated income tax benefit of $5.8 million for the two months ended February
28, 1994 and $(1.5) million for the twelve months ended January 31, 1994, based
upon pro forma adjustments, along with an adjustment to provide for Macmillan
Federal income taxes at the statutory rate.
    
 
   
(2) Other Businesses Acquired include the following pro forma adjustments for
the twelve months ended January 31, 1994:
    
 
Decrease estimated combined annual amortization of intangible assets over a 40
year life and depreciation expense, based on a preliminary purchase price
allocation analysis, of $(0.2) million.
 
Elimination of historical interest expense related to debt not acquired from, or
prepaid upon acquisition of, the Other Businesses.
 
Estimated reduction to interest income, at Paramount's average interest rates in
effect during the twelve-month period, of $5.0 million due to the use of cash
and cash equivalents and short-term investments for the acquisitions.
 
Conform the Other Businesses' accounting policies related to the accrual of
certain operating expenses to that of Paramount and to eliminate the effect of
intercompany transactions between the Other Businesses and Paramount. The effect
of these adjustments is to reduce operating expenses by $2.9 million.
 
Estimated income tax benefit of $(2.4) million, based upon pro forma
adjustments, along with an adjustment to provide for Federal income taxes at the
statutory rate.
 
                                      128

   
                          BLOCKBUSTER, SUPER CLUB AND
                             SPELLING ENTERTAINMENT
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
    
 
   
     The historical financial statements of Blockbuster include the financial
position and results of operations of WJB, with which Blockbuster merged 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 has been restated as if the companies had operated as one entity
since inception.
    
 
   
     The following unaudited pro forma condensed consolidated statement of
operations for the three months ended March 31, 1994 present the pro forma
results of operations as if the $1.25 billion in borrowings had been consummated
at January 1, 1993 and related interest expense incurred on borrowings used to
finance such investment had been included from such time. The unaudited pro
forma condensed consolidated statement of operations for the year ended 
December 31, 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 had been consummated 
at January 1, 1993. The aforementioned unaudited pro forma statement of 
operations also contains pro forma adjustments for certain significant
transactions which occurred during 1993 or 1994 in connection with the Offer and
the Paramount Merger. These transactions include a $600 million and a $1.25
billion investment in Viacom, additional borrowings of $600 million and $1.25
billion, and the sale of 14,650,000 shares of Blockbuster Common Stock, and are
reflected in the unaudited pro forma condensed consolidated statement of
operations as if these transactions had been consummated as of January 1, 1993.
    
 
     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.
 
   
     The unaudited pro forma condensed consolidated statements of operations
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 statements 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. These unaudited pro forma condensed consolidated 
statements of operations should be read in conjunction with the respective 
historical statements of operations and notes thereto of Blockbuster, Super 
Club and Spelling Entertainment.
    
 
                                      129

   
               BLOCKBUSTER, SUPER CLUB AND SPELLING ENTERTAINMENT
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                   FOR THE THREE MONTHS ENDED MARCH 31, 1994
                      (In millions, except per share data)
    
 
   


                                                                                     PRO FORMA
                                                                                    ADJUSTMENTS
                                                                                --------------------     PRO
                                                                   BLOCKBUSTER    DEBIT     CREDIT      FORMA
                                                                   -----------  ---------  ---------  ---------
                                                                                          
Revenue:
  Rental revenue.................................................   $   392.6                         $   392.6
  Product sales..................................................       205.3                             205.3
  Other revenue..................................................        98.6                              98.6
                                                                   -----------  ---------  ---------  ---------
                                                                        696.5                             696.5
Operating Costs and Expenses:
  Cost of product sales..........................................       133.4                             133.4
  Operating expenses.............................................       379.9                             379.9
  Selling, general and administrative............................        63.6                              63.6
                                                                   -----------  ---------  ---------  ---------
Operating income.................................................       119.6                             119.6
Interest expense.................................................       (11.6)  $    10.4(a)              (22.0)
Interest income..................................................         1.4                               1.4
Other income, net................................................         5.9                               5.9
                                                                   -----------  ---------  ---------  ---------
Income before taxes..............................................       115.2        10.4                 104.8
Provision for income taxes.......................................        42.6                    3.8(j)    38.8
                                                                   -----------  ---------  ---------  ---------
Income from continuing operations................................   $    72.6   $    10.4  $     3.8  $    66.0
                                                                   -----------  ---------  ---------  ---------
                                                                   -----------  ---------  ---------  ---------
Weighted average common and common equivalent shares
  outstanding--assuming full dilution............................       253.8                             253.8
                                                                   -----------                        ---------
                                                                   -----------                        ---------
Income from continuing operations per common and common
  equivalent share--assuming full dilution.......................   $    0.29                         $    0.29
                                                                   -----------                        ---------
                                                                   -----------                        ---------

    
 
         The accompanying notes are an integral part of this statement.
 
                                      130

   
               BLOCKBUSTER, SUPER CLUB AND SPELLING ENTERTAINMENT
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1993
                      (In millions, except per share data)
    
   


                                                                              SPELLING                      PRO FORMA
                                                            SUPER CLUB      ENTERTAINMENT                  ADJUSTMENTS
                                                           ELEVEN MONTHS    THREE MONTHS               --------------------
                                             BLOCKBUSTER  ENDED 11/20/93    ENDED 3/31/93   COMBINED     DEBIT     CREDIT
                                             -----------  ---------------  ---------------  ---------  ---------  ---------
                                                                                                
Revenue:
  Rental revenue...........................   $ 1,285.4      $    58.7                      $ 1,344.1
  Product sales............................       658.1          254.5                          912.6
  Other revenue............................       283.5            3.4        $    51.5         338.4
                                             -----------       -------           ------     ---------  ---------  ---------
                                                2,227.0          316.7             51.5       2,595.2
Operating Costs and Expenses:
  Cost of product sales....................       430.2          185.8                          616.0
  Operating expenses.......................     1,195.5          119.3             38.0       1,352.8             $    21.3(c-g)
  Selling, general and administrative......       178.3           26.0              7.7         212.0
                                             -----------       -------           ------     ---------  ---------  ---------
Operating income (loss)....................       423.0          (14.4)             5.8         414.4                  21.3
Interest expense...........................       (33.8)          (2.6)            (2.5)        (38.9) $    60.3(h)      .5(h)
Interest income............................         6.8             .2               .2           7.2
Other income (expense), net................        (6.2)            .1              (.9)         (7.0)        .9(b)    24.3(a)
                                             -----------       -------           ------     ---------  ---------  ---------
Income (loss) before taxes.................       389.8          (16.7)             2.6         375.7       61.3       46.1
Provision for income taxes.................       146.2             .1              1.7         148.0                  12.7(j)
                                             -----------       -------           ------     ---------  ---------  ---------
Income (loss) from continuing operations...   $   243.6      $   (16.8)       $      .9     $   227.7  $    61.3  $    58.8
                                             -----------       -------           ------     ---------  ---------  ---------
                                             -----------       -------           ------     ---------  ---------  ---------
Weighted average common and common
equivalent shares outstanding..............       220.2
                                             -----------
                                             -----------
Income from continuing operations per
common and common equivalent share.........   $    1.11
                                             -----------
                                             -----------
Weighted average common and common
  equivalent shares outstanding-- assuming
full dilution..............................       221.5
                                             -----------
                                             -----------
Income from continuing operations per
  common and common equivalent
share--assuming full dilution..............   $    1.10
                                             -----------
                                             -----------
 

 
                                                PRO
                                               FORMA
                                             ---------
                                          
Revenue:
  Rental revenue...........................  $ 1,344.1
  Product sales............................      912.6
  Other revenue............................      338.4
                                             ---------
                                               2,595.2
Operating Costs and Expenses:
  Cost of product sales....................      616.0
  Operating expenses.......................    1,331.5
  Selling, general and administrative......      212.0
                                             ---------
Operating income (loss)....................      435.6
Interest expense...........................      (98.7)
Interest income............................        7.2
Other income (expense), net................       16.4
                                             ---------
Income (loss) before taxes.................      360.5
Provision for income taxes.................      135.3
                                             ---------
Income (loss) from continuing operations...  $   225.2
                                             ---------
                                             ---------
Weighted average common and common
equivalent shares outstanding..............      242.8
                                             ---------
                                             ---------
Income from continuing operations per
common and common equivalent share.........  $    0.93
                                             ---------
                                             ---------
Weighted average common and common
  equivalent shares outstanding-- assuming
full dilution..............................      244.0
                                             ---------
                                             ---------
Income from continuing operations per
  common and common equivalent
share--assuming full dilution..............  $    0.92
                                             ---------
                                             ---------

    
 
         The accompanying notes are an integral part of this statement.
 
                                      131

   
                          BLOCKBUSTER, SUPER CLUB AND
                             SPELLING ENTERTAINMENT
              NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                            STATEMENT OF OPERATIONS
    
 
   
        
      (a)  Represents additional interest expense resulting from Blockbuster's additional borrowings used to fund its
           investment in Viacom.
      (b)  Represents the recording of the minority interest resulting from Blockbuster's purchase of the majority of
           the outstanding common stock of Spelling Entertainment.
      (c)  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 and Spelling Entertainment are being amortized over a 40 year life which approximates
           the useful life.
      (d)  Represents a reduction to videocassette rental inventory expense due to adjustments to the carrying value of
           Super Club's videocassette rental inventory as a result of the preliminary purchase price allocation and the
           assignment of remaining useful lives.
      (e)  Represents a reduction to property and equipment depreciation expense resulting from adjustments to the
           carrying value of Super Club's property and equipment as a result of the preliminary purchase price
           allocation and the assignment of remaining useful lives.
      (f)  Represents reductions to occupancy expense resulting from preliminary purchase price allocations which
           reflect the fair market value of certain lease liabilities related to Super Club.
      (g)  Represents reductions to amortization of film costs and program rights, depreciation and rent expenses
           resulting from preliminary purchase price allocations which reflect the fair market value of various assets
           and liabilities related to Spelling Entertainment.
      (h)  Represents the reduction in interest expense resulting from the revaluation of outstanding indebtedness of
           Spelling Entertainment by Blockbuster at current interest rates.
      (i)  Represents dividend income related to a portion of Blockbuster's investment in Viacom.
      (j)  Represents the incremental change in the combined entity's provision for income taxes as a result of the
           pretax earnings of Super Club and Spelling Entertainment and all pro forma adjustments as described above.


    
 
                                      132

                      DESCRIPTION OF VIACOM CAPITAL STOCK
 
     The authorized capital stock of Viacom consists of 100 million shares of
Viacom Class A Common Stock, 150 million shares of Viacom Class B Common Stock
and 100 million shares of preferred stock, par value $0.01 per share, issuable
in series. The following description of Viacom's capital stock does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
the DGCL, Viacom's Restated Certificate of Incorporation, the Certificate of
Designations for the Series A Preferred Stock, the Certificate of Designations
for the Series B Preferred Stock, the VCR Certificate, the Form of Certificate
of Designations for the Series C Preferred Stock, the CVR Agreement (as
described below), and the Viacom Warrant Agreements (as described below).
 
     The following descriptions of the Viacom Common Stock, CVRs and Viacom
Warrants should be read carefully by Paramount stockholders since the Paramount
Merger Consideration includes such securities.
 
VIACOM CLASS A COMMON STOCK
 
     As of the record date of the Viacom Special Meeting, there were
[            ] shares of Viacom Class A Common Stock issued and outstanding. All
outstanding shares of Viacom Class A Common Stock are fully paid and
non-assessable. Shares of Viacom Class A Common Stock do not have conversion
rights and are not redeemable.
 
VIACOM CLASS B COMMON STOCK
    
     Viacom Class B Common Stock has rights, privileges, limitations,
restrictions and qualifications identical to Viacom Class A Common Stock except
that shares of Viacom Class B Common Stock have no voting rights other than
those required by law. As of the record date of the Viacom Special Meeting,
there were [            ] shares of Viacom Class B Common Stock issued and
outstanding. All outstanding shares of Viacom Class B Common Stock are fully
paid and non-assessable. Shares of Viacom Class B Common Stock do not have
conversion rights and are not redeemable.
     
CONTINGENT VALUE RIGHTS
 
   
     GENERAL. The CVRs will be issued under the CVR Agreement (the "CVR
Agreement") between Viacom and Harris Trust and Savings Bank, as Trustee (the
"CVR Trustee"), a form of which is filed as an exhibit to the Registration
Statement of which this Proxy Statement/Prospectus is a part. The following
summaries of certain provisions of the CVR Agreement do not purport to be
complete, and where reference is made to particular provisions of the CVR
Agreement, such provisions, including the definitions of certain terms, are
incorporated by reference as a part of such summaries or terms, which are
qualified in their entirety by such reference. References to sections in the
following summaries are references to sections of the CVR Agreement. The
definitions of certain capitalized terms used in the following summary are set
forth below under "Certain Definitions."
    
 
     PAYMENT AT MATURITY DATE, FIRST EXTENDED MATURITY DATE OR SECOND EXTENDED
MATURITY DATE. The CVR Agreement provides that, subject to adjustment as
described under "Antidilution" below, Viacom shall pay to each holder of the
CVRs (each such person, a "CVR Holder") on the Maturity Date, unless Viacom
shall, in its sole discretion, extend the Maturity Date to the First Extended
Maturity Date, then on the First Extended Maturity Date, unless Viacom shall, in
its sole discretion, extend the First Maturity Date to the Second Extended
Maturity Date, then on the Second Extended Maturity Date, for each CVR held by
such CVR Holder an amount, if any, as determined by Viacom, by which the Target
Price (as defined below) exceeds the greater of the Current Market Value and the
Minimum Price (each as defined below). Such determination by Viacom absent
manifest error shall be final and binding on Viacom and the CVR Holders.
(Section 301(c)).
    
     Such amount, if any, shall be payable by Viacom, at Viacom's sole
discretion, either (i) in such coin or currency of the United States of America
as at the time is legal tender for the payment of public and private debts;
provided, however, Viacom may pay such amounts by its check payable in such
money or (ii) by delivering the equivalent fair market value (as determined by
an Independent Financial Expert)
                                      133


of securities of Viacom, including, without limitation, common stock or
preferred stock, options or warrants therefor, other securities convertible into
or exchangeable for common stock or preferred stock, notes, debentures, or any
other security or any combination of the foregoing. Such securities shall be
offered pursuant to registration under the Securities Act or under an exemption
thereof and the type and the terms of such securities shall be at Viacom's sole
discretion. Harris Trust Company of New York has been appointed as paying agent
in the Borough of Manhattan, The City of New York. (Section 307)
    
 
   
     Viacom may at its option extend the Maturity Date to the First Extended
Maturity Date and may at its option extend the First Extended Maturity Date to
the Second Extended Maturity Date. Such options shall be exercised by (i)
publishing notice of an extension in the Authorized Newspaper and (ii)
furnishing notice to the CVR Holders of such extension, in each case, not less
than one business day preceding the Maturity Date or the First Extended Maturity
Date, as the case may be; provided, however, that no defect in any such notice
shall affect the validity of the extension of the Maturity Date to the First
Extended Maturity Date or the extension of the First Extended Maturity Date to
the Second Extended Maturity Date, and that any notice when published and mailed
to a CVR Holder in the aforesaid manner shall be conclusively deemed to have
been received by such CVR Holder whether or not actually received by such CVR
Holder. (Section 301(d))
    
 
     The CVRs are unsecured obligations of Viacom and will rank equally with all
other unsecured indebtedness of Viacom.
 
     PAYMENT UPON THE OCCURRENCE OF A DISPOSITION. Upon the consummation of a
Disposition (as defined below), Viacom shall pay (in cash or securities of
Viacom) to each CVR Holder for each CVR held by such CVR Holder an amount, if
any, as determined by Viacom, by which the Discounted Target Price exceeds the
greater of (i) the fair market value as determined by an Independent Financial
Expert, of the consideration, if any, received for each share of Viacom Class B
Common Stock by the holder thereof as a result of such Disposition and assuming
that such holder did not exercise any right of appraisal granted under law with
respect to such Disposition and (ii) the Minimum Price. Such determinations by
Viacom and such Independent Financial Expert absent manifest error shall be
final and binding on Viacom and the CVR Holders. Such payment, if any, shall be
made on the Disposition Payment Date established by Viacom, which in no event
shall be more than 30 days after the date on which the Disposition was
consummated. (Section 301(e)) As soon as practicable, Viacom shall give CVR
Holders notice of such Disposition and the Disposition Payment Date. (Section
301(f))
 
     DETERMINATION THAT NO AMOUNT IS PAYABLE WITH RESPECT TO THE CVRS. If the
average trading value of a share of Viacom Class B Common Stock equals or
exceeds $48 on the Maturity Date or $51 on the First Extended Maturity Date (if
the Maturity Date is extended by Viacom to the First Extended Maturity Date) or
$55 on the Second Extended Maturity Date (if the First Extended Maturity Date is
extended by Viacom to the Second Extended Maturity Date), as the case may be, no
amount will be payable with respect to the CVRs. Certain corporate
reorganizations, in which consideration paid to holders of shares of Viacom
Class B Common Stock exceeds minimum amounts may also result in no value being
payable with respect to the CVRs.
 
     In the event that Viacom determines that no amount is payable with respect
to the CVRs to the CVR Holders on the Maturity Date, the First Extended Maturity
Date, the Second Extended Maturity Date or the Disposition Payment Date, as the
case may be, Viacom shall give to the CVR Holders notice of such determination.
Upon making such determination and absent manifest error, the CVRs shall
terminate and become null and void and the CVR Holders shall have no further
rights with respect thereto. The failure to give such notice or any defect
therein shall not affect the validity of such determination. (Section 301(j))
 
     NO INTEREST. Notwithstanding any provision of the CVR Agreement or of the
CVRs to the contrary, other than in the case of interest on the Default Amount,
no interest shall accrue on any amounts payable on the CVRs to the CVR Holders.
(Section 301(i))
 
                                      134

     EVENTS OF DEFAULT. If an Event of Default occurs and is continuing, either
the CVR Trustee or CVR Holders of not less than 25% of the outstanding CVRs, by
notice in writing to Viacom (and to the CVR Trustee if given by CVR Holders),
may declare the CVRs to be due and payable immediately, and upon any such
declaration, Viacom shall pay to the CVR Holders (in cash or securities of
Viacom, at Viacom's option) for each CVR held by the CVR Holders, the Default
Amount with interest at the Default Interest Rate, from the Default Payment Date
through the date payment is made to the CVR Trustee. (Section 801)
 
     If, at any time after the CVRs shall have been so declared due and payable,
and before any judgment or decree for the payment of the amounts due shall have
been obtained or entered, Viacom shall pay or shall deposit with the CVR Trustee
a sum sufficient to pay all amounts which shall have become due otherwise than
by acceleration (with interest upon such overdue amount at the Default Interest
Rate to the date of such payment or deposit) and such amount as shall be
sufficient to cover reasonable compensation to the CVR Trustee, its agents,
attorneys and counsel, and all other expenses and liabilities incurred and all
advances made by the CVR Trustee except as a result of negligence or bad faith,
and if any and all Events of Default, other than the nonpayment of the amounts
which shall have become due by acceleration, shall have been cured, waived or
otherwise remedied, then the CVR Holders holding a majority of all the CVRs then
Outstanding, by written notice to Viacom and to the CVR Trustee, may waive all
defaults with respect to the CVRs and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereof. (Section 801)
 
   
     CERTAIN PURCHASES AND SALES. Viacom and NAI will not, and Viacom will not
permit any of its subsidiaries or controlled affiliates (including Paramount)
to, purchase any shares of Viacom Class B Common Stock in open market
transactions, in privately negotiated transactions or otherwise, on any day
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. (Section 704)
    
 
   
     ANTIDILUTION. In the event 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 Viacom Class B Common Stock,
Viacom shall similarly subdivide or combine the CVRs and shall appropriately
adjust the Discounted Target Price, the Target Price and the Minimum Price.
Whenever such an adjustment is made, Viacom shall (i) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (ii) promptly file with the CVR Trustee a copy
of such certificate and (iii) mail a brief summary thereof to each CVR Holder.
The CVR Trustee shall be fully protected in relying on any such certificate and
on any adjustment therein contained. Such adjustment absent manifest error shall
be final and binding on Viacom and the CVR Holders. Each outstanding CVR shall
thenceforth represent that number of adjusted CVRs necessary to reflect such
subdivision or combinations, and reflect the adjusted Discounted Target Price,
Target Price and Minimum Price. (Section 301(k))
    
 
     CERTAIN DEFINITIONS.
 
     "Authorized Newspaper" means The Wall Street Journal (Eastern Edition), or
if The Wall Street Journal (Eastern Edition) shall cease to be published, or, if
the publication or general circulation of The Wall Street Journal (Eastern
Edition) shall be suspended for whatever reason, such other English language
newspaper as is selected by Viacom with general circulation in The City of New
York, New York.
 
     "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 AMEX (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 and (ii) with respect
to the Second Extended Maturity Date, the average of the closing prices on the
AMEX (or such other exchange on which such shares are then listed) of the Viacom
Class B Common Stock during the 20
                                      135

consecutive trading days in the Valuation Period which yield the highest such
average of the closing prices for any such period within the Valuation Period.
 
     "Default Amount" means the amount, if any, by which the Discounted Target
Price exceeds the Minimum Price.
 
     "Default Interest Rate" means 8% per annum.
 
     "Default Payment Date" means the date upon which the CVRs become due and
payable pursuant to Section 801.
 
   
     "Discounted Target Price" means (i) if a Disposition or an Event of Default
shall occur prior to the Maturity Date, $48.00 discounted back from the Maturity
Date to the Disposition Payment Date or the Default Payment Date, as the case
may be, at 8% per annum; (ii) 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 back from the First Extended Maturity Date to the Disposition
Payment Date or Default Payment Date, as the case may be, at 8% per annum; or
(iii) 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 back from the Second Extended Maturity Date to the Disposition
Payment Date or Default Payment Date, as the case may be, at 8% per annum. In
each case, upon each occurrence of an event specified under "Antidilution"
above, such amounts, as they may have been previously adjusted, shall be
adjusted as described under "Antidilution" above.
    
 
     "Disposition" means (i) a merger, consolidation or other business
combination involving Viacom as a result of which no shares of Viacom Class B
Common Stock shall remain outstanding, (ii) a sale, transfer or other
disposition, in one or a series of transactions, of all or substantially all of
the assets of Viacom or (iii) a reclassification of Viacom Class B Common Stock
as any other capital stock of Viacom or any other Person; provided, however,
that a "Disposition" shall not mean, or occur upon, a merger of Viacom and any
wholly owned subsidiary of Viacom.
 
     "Disposition Payment Date" means the date established by Viacom, which in
no event shall be more than 30 days after the date on which the disposition was
consummated, upon which Viacom shall pay in the manner provided in Section 307
of the CVR Agreement to each CVR Holder for each CVR held by such CVR Holder an
amount, if any, as determined by Viacom.
 
   
     "Event of Default," with respect to the CVRs, means each 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 either at the Maturity Date, the First
Extended Maturity Date, the Second Extended Maturity Date, the Disposition
Payment Date or otherwise; or (b) default in the performance, or breach of any
covenant or warranty of Viacom, and continuance of such default or breach for a
period of 90 days after written notice has been given to Viacom by the CVR
Trustee or to Viacom and the CVR Trustee by CVR Holders holding at least 25% of
the CVRs; or (c) certain events of bankruptcy, insolvency, reorganization, or
other similar events in respect of Viacom.
    
    
     "Independent Financial Expert" means a nationally recognized investment
banking firm.
     
     The "Minimum Price" means (i) at the Maturity Date, $36.00, (ii) at the
First Extended Maturity Date, $37.00 and (iii) at the Second Extended Maturity
Date, $38.00. In each case, upon each occurrence of an event specified under
"Antidilution" above, such amounts, as they may have been previously adjusted,
shall be adjusted as described under "Antidilution" above.
 
     The "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, upon each occurrence of an event specified under
"Antidilution" above, such amounts, as they may have been previously adjusted,
shall be adjusted as described under "Antidilution" above.
 
                                      136

     "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.
 
VIACOM WARRANTS
 
   
     General. Viacom will issue an aggregate of 30,567,739 Viacom Three-Year
Warrants and 18,340,643 Viacom Five-Year Warrants in connection with the
Paramount Merger. The Viacom Three-Year Warrants are being offered pursuant to a
Warrant Agreement (the "Viacom Three-Year Warrant Agreement") that will be
entered into between Viacom and Harris Trust and Savings Bank, as Warrant Agent.
The Viacom Five-Year Warrants are being offered pursuant to a Warrant Agreement
(the "Viacom Five-Year Warrant Agreement" and, together with the Viacom
Three-Year Warrant Agreement, the "Viacom Warrant Agreements") that will be
entered into between Viacom and Harris Trust and Savings Bank, as Warrant Agent.
The following summary of certain provisions of the Viacom Warrant Agreements
does not purport to be complete and is subject to and is qualified in its
entirety by reference to the provisions of the Viacom Warrant Agreements,
including the definitions of certain terms therein. A copy of the form of the
Viacom Warrant Agreements, including the form of Viacom Warrant Certificates (as
defined below), is filed as an exhibit to the Registration Statement, to which
this Proxy Statement/Prospectus forms a part.
    
 
     Each Viacom Three-Year Warrant is evidenced by a warrant certificate (the
"Viacom Three-Year Warrant Certificate") which entitles the warrantholder, at
any time prior to third anniversary of the Paramount Effective Time (the
"Three-Year Expiration Date"), to purchase one share of Viacom Class B Common
Stock at a price (the "Three-Year Exercise Price") of $60 per share, subject to
certain adjustments. Viacom Three-Year Warrants that are not exercised prior to
the Three-Year Expiration Date will expire and become void.
 
     Each Viacom Five-Year Warrant is evidenced by a warrant certificate (the
"Viacom Five-Year Warrant Certificate" and, together with the Viacom Three-Year
Warrant Certificate, the "Viacom Warrant Certificates") which entitles the
warrantholder at any time prior to the fifth anniversary of the Paramount
Effective Time (the "Five-Year Expiration Date" and, together with the
Three-Year Expiration Date, the "Viacom Warrant Expiration Dates"), to purchase
one share of Viacom Class B Common Stock at a price (the "Five-Year Exercise
Price" and, together with the Three-Year Exercise Price, the "Viacom Warrant
Exercise Prices") of $70 per share, subject to certain adjustments. Viacom
Five-Year Warrants that are not exercised prior to the Five-Year Expiration Date
will expire and become void.
 
     The aggregate number of shares of Viacom Class B Common Stock issuable upon
exercise of the Viacom Warrants is equal to 25% of the Viacom Class B Common
Stock to be outstanding after the Paramount Merger and 14% after the Mergers.
 
     Exercise of Viacom Warrants. To exercise all or any of the Viacom Warrants
represented by a Viacom Warrant Certificate, the warrantholder is required to
surrender to the Warrant Agent the Viacom Warrant Certificate, a duly executed
copy of the subscription form set forth in the Viacom Warrant Certificate, and
payment in full of the Viacom Warrant Exercise Price for each share of Viacom
Class B Common Stock as to which a Viacom Warrant is exercised. In the case of
the Viacom Three-Year Warrants, such payment may be made in cash or by certified
or official bank or bank cashier's check payable to the order of Viacom.
 
     In the case of Viacom Five-Year Warrants, such payment may be made (i) in
cash or by certified or official bank or bank cashier's check payable to the
order of Viacom or (ii) by exchanging, if issued, either Series C Preferred
Stock with a liquidation preference equal to the Five-Year Exercise Price, or
Viacom Exchange Debentures with a principal amount equal to the Five-Year
Exercise Price. Upon the exercise of any Viacom Warrants in accordance with the
Viacom Warrant Agreement, the Viacom Warrant Agent will cause Viacom to transfer
promptly to or upon the written order of the Warrantholder appropriate evidence
of ownership of any shares of Viacom Class B Common Stock,
                                      137

registered or otherwise placed in such name or names as such warrantholder may
direct in writing, and will deliver such evidence of ownership to the person or
persons entitled to receive the same and an amount in cash, in lieu of any
fractional shares, if any. All shares of Viacom Class B Common Stock issuable by
Viacom upon the exercise of the Viacom Warrants must be validly issued, fully
paid and nonassessable.
    
     Antidilution Provisions. The number of shares of Viacom Class B Common
Stock that may be purchased upon the exercise of each Viacom Warrant, and
payment of the Viacom Warrant Exercise Price, are subject to adjustment in the
event of certain transactions, including Viacom's (a) issuing shares of Viacom
Class B Common Stock as a stock dividend to the holders of Viacom Common Stock,
(b) subdividing or combining the outstanding shares of Viacom Class B Common
Stock into a greater or lesser number of shares, (c) issuing any shares of its
capital stock in a reclassification or reorganization of the Viacom Class B
Common Stock, (d) issuing, selling, distributing or otherwise granting rights to
subscribe for or to purchase warrants or options for the purchase of Viacom
Class B Common Stock or any stock or securities convertible into or exchangeable
for Viacom Class B Common Stock, and (e) issuing, selling or otherwise
distributing certain convertible securities. No fractional shares will be issued
upon exercise of Viacom Warrants, but Viacom will pay the cash value of any
fractional shares otherwise issuable. In case of any consolidation, merger or
sale of all or substantially all of the assets of Viacom in a transaction in
which the holders of Viacom Class B Common Stock immediately prior to such
transaction receive securities, cash or other assets of Viacom (or any other
person), the holder of each outstanding Viacom Warrant shall have the right to
the kind and amount of securities, cash or other assets receivable by a holder
of the number of shares of Viacom Class B Common Stock into which such Viacom
Warrants were exercisable immediately prior thereto.
     
   
     Trading/Listing. Viacom has filed an application to list the Viacom
Warrants on the AMEX, subject to official notice of issuance. The Viacom
Three-Year Warrants and the Viacom Five-Year Warrants will be traded on the AMEX
under the symbols "VIA.WS.C" and "VIA.WS.E", respectively.
    
 
VOTING AND OTHER RIGHTS OF THE VIACOM COMMON STOCK
 
     Voting Rights. Under the Viacom Restated Certificate of Incorporation,
except as noted below or otherwise required by the DGCL, the holders of the
outstanding shares of Viacom Class A Common Stock vote together with the holders
of the outstanding shares of all other classes of capital stock of Viacom
entitled to vote, without regard to class. At the present time, however, there
are no outstanding shares of any other class of capital stock of Viacom entitled
to vote. Each holder of an outstanding share of Viacom Class A Common Stock is
entitled to cast one vote for each such share registered in the name of such
holder. The affirmative vote of the holders of a majority of the outstanding
shares of Viacom Class A Common Stock is necessary to approve any consolidation
or merger of Viacom with or into another corporation pursuant to which shares of
Viacom Class A Common Stock would be converted into or exchanged for any
securities or other consideration.
 
     A holder of an outstanding share of Viacom Class B Common Stock is not
entitled, except as may be required by Delaware law, to vote on any question
presented to the stockholders of Viacom, including both the election of
directors and certain amendments to the Restated Certificate of Incorporation
which might affect Viacom Class B Common Stock or the holders thereof. Under
Delaware law and the Viacom Restated Certificate of Incorporation, holders of
shares of Viacom Class B Common Stock are entitled to vote, as a class, only
with respect to any proposed amendment to the Viacom Restated Certificate of
Incorporation which would (i) increase or decrease the par value of a share of
Viacom Class B Common Stock or (ii) alter or change the powers, preferences or
special rights of the shares of Viacom Class B Common Stock so as to affect them
adversely. Any future change in the number of authorized shares of Viacom Class
B Common Stock or any consolidation or merger of Viacom with or into another
corporation pursuant to which shares of Viacom Class B Common Stock would be
converted into or exchanged for any securities or other consideration could be
consummated with the
                                      138

approval of the holders of a majority of the outstanding shares of Viacom Class
A Common Stock and without any action by the holders of shares of Viacom Class B
Common Stock.
 
     Dividends. Subject to the rights and preferences of any outstanding
preferred stock, dividends on Viacom Class A Common Stock and Viacom Class B
Common Stock would be payable out of the funds of Viacom legally available
therefor when, as and if declared by the Viacom Board. However, no dividend may
be paid or set aside for payment and no distribution may be made on either class
of Viacom Common Stock unless at the same time and in respect of the same
declaration date and record date a ratable dividend is paid or set aside for
payment or a distribution is made on the other class of Viacom Common Stock.
 
     Rights in Liquidation. In the event Viacom is liquidated, dissolved or
wound up, whether voluntarily or involuntarily, the net assets of Viacom would
be divided ratably among the holders of the then outstanding shares of Viacom
Class A Common Stock and Viacom Class B Common Stock after payment or provision
for payment of the full preferential amounts to which the holders of any series
of preferred stock of Viacom then issued and outstanding would be entitled.
 
     Split, Subdivision or Combination. If Viacom splits, subdivides or combines
the outstanding shares of Viacom Class A Common Stock or Viacom Class B Common
Stock, the outstanding shares of the other class of Viacom Common Stock shall be
proportionally split, subdivided or combined in the same manner and on the same
basis as the outstanding shares of the other class of Viacom Common Stock have
been split, subdivided or combined.
 
     Preemptive Rights. Shares of Viacom Class A Common Stock and shares of
Viacom Class B Common Stock do not entitle a holder to any preemptive rights
enabling a holder to subscribe for or receive shares of stock of any class or
any other securities convertible into shares of stock of any class of Viacom.
The Viacom Board possesses the power to issue shares of authorized but unissued
Viacom Class A Common Stock and Viacom Class B Common Stock without further
stockholder action, subject, so long as shares of Viacom Class A Common Stock
and Viacom Class B Common Stock are listed on the AMEX, to the requirements of
such exchange. The number of authorized shares of Viacom Class A Common Stock
and Viacom Class B Common Stock could be increased with the approval of the
holders of a majority of the outstanding shares of Viacom Class A Common Stock
and without any action by the holders of shares of Viacom Class B Common Stock.
 
     Trading Market. The outstanding shares of Viacom Class A Common Stock and
Viacom Class B Common Stock are listed for trading on the AMEX. The Registrar
and Transfer Agent for Viacom Common Stock is The First Chicago Trust Company of
New York.
 
     Alien Ownership. The Viacom Restated Certificate of Incorporation provides
that Viacom may prohibit the ownership or voting of a percentage of its equity
securities in order to ensure compliance with the requirements of the
Communications Act.
 
VIACOM PREFERRED STOCK
 
   
     The Viacom Board, without further action by the stockholders, is authorized
to issue up to 100 million shares of preferred stock in one or more series and
to designate as to any such series the dividend rate, redemption prices and
terms, preferences on liquidation or dissolution, rights in the event of a
merger, consolidation, distribution or sale of assets, conversion rights, voting
rights and any other powers, preferences, and relative, participating, optional
or other special rights and qualifications, limitations or restrictions. The
rights of the holders of Viacom Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of Viacom Preferred Stock and
any preferred stock of Viacom that may be issued in the future. The Viacom
Preferred Stock will rank senior to Viacom Common Stock with respect to
dividends and distribution of assets upon liquidation or winding up. Issuance of
a new series of preferred stock, while providing desirable flexibility in
connection with possible acquisitions or other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or
discouraging a third party from acquiring, a majority of the outstanding voting
stock of Viacom.
    
 
                                      139

     Viacom has issued 24 million shares of Series A Preferred Stock to
Blockbuster and 24 million shares of Series B Preferred Stock to NYNEX, both of
which classes have indentical rights and restrictions and rank equally as to
dividends and distribution of assets upon liquidation. Upon consummation of the
Blockbuster Merger, the Series A Preferred Stock owned by Blockbuster will cease
to be outstanding. Pursuant to the Paramount Merger, Viacom is reserving for
issuance a new series of preferred stock, the Series C Preferred Stock. See
"--Series C Preferred Stock."
 
     Holders of shares of Viacom Preferred Stock will be entitled to receive
cumulative cash dividends at the rate per annum of $1.25 per share of Series A
Preferred Stock and $2.50 per share of Series B Preferred Stock, payable
quarterly. So long as any shares of Viacom Preferred Stock are outstanding,
Viacom may not (i) declare or pay any dividend or distribution on any junior
stock of Viacom or (ii) redeem or set apart funds for the purchase or redemption
of any junior stock unless all accrued and unpaid dividends with respect to the
Viacom Preferred Stock have been paid or funds have been set apart for payment
through the current dividend period.
 
   
     Shares of Viacom Preferred Stock may not be redeemed by Viacom prior to
October 1, 1998, after which date such stock will be redeemable at Viacom's
option for an aggregate redemption price of at least $100 million at declining
redemption prices annually until October 1, 2003. In the event of any
liquidation, dissolution or winding up of Viacom, whether voluntary or
involuntary, holders of shares of Viacom Preferred Stock shall receive $25.00
per share of Series A Preferred Stock and $50 per share of Series B Preferred
Stock plus an amount per share equal to all dividends accrued and unpaid thereon
to the date of final distribution to such holders.
    
 
     The holders of shares of Viacom Preferred Stock will have no voting rights,
unless dividends payable on Series A Preferred Stock or Series B Preferred Stock
fall in arrears for dividend periods totalling at least 360 days, in which case
the number of directors of Viacom will be increased by two in respect of each
such series and the holders of shares of each such series will have the right to
elect two additional directors to the Viacom Board at Viacom's next annual
meeting of stockholders and at each subsequent annual meeting until all such
dividends have been paid in full.
 
     Changes to Viacom's Restated Certificate of Incorporation which adversely
affect the rights of the holders of Series A Preferred Stock or Series B
Preferred Stock require two-thirds approval of the outstanding shares of such
series. The Certificates of Designation of the Series A Preferred Stock and
Series B Preferred Stock may not be amended without the consent of the purchaser
thereof as long as such outstanding shares are owned in full by Blockbuster or
NYNEX, as the case may be.
 
     Shares of Viacom Preferred Stock will be convertible at any time at the
option of the holders thereof into shares of Viacom Class B Common Stock at a
conversion price of $70 per share of Viacom Class B Common Stock (equivalent to
a conversion rate of 0.3571 shares of Viacom Class B Common Stock for each share
of Series A Preferred Stock and 0.7143 for each share of Series B Preferred
Stock), subject to customary adjustments. Holders of Viacom Preferred Stock will
have no preemptive rights with respect to any shares of Viacom Common Stock or
any other Viacom securities convertible into or carrying rights or options to
purchase any such shares.
 
SERIES C PREFERRED STOCK
 
     Pursuant to the Paramount Merger and the terms of the Viacom Merger
Debentures, Viacom has reserved for issuance a new series of preferred stock,
the Series C Preferred Stock. If issued, the Series C Preferred Stock would be
fully paid and nonassessable. The holders of the Series C Preferred Stock would
have no preemptive rights with respect to any shares of Viacom Common Stock or
any other securities of Viacom convertible into or carrying rights or options to
purchase any such shares.
 
     Ranking. If issued, the Series C Preferred Stock would rank senior to the
Viacom Common Stock with respect to dividends and upon liquidation or winding
up. If issued, the Series C Preferred Stock would rank equally with the Series A
Preferred Stock and the Series B Preferred Stock as to dividends and the
distribution of assets upon liquidation or winding up.
 
                                      140

   
     Dividends. Holders of shares of Series C Preferred Stock, if issued, would
be entitled to receive, when, as and if declared by the Viacom Board, out of
funds legally available for payment, cumulative cash dividends at the rate per
annum of $2.50 per share until the tenth anniversary of the Paramount Effective
Time, and at the rate per annum of $5.00 per share thereafter. Dividends shall
accrue and be cumulative from the later of the Paramount Effective Time and the
latest date through which interest had been paid on the Viacom Merger
Debentures, whether or not in any dividend period or periods there shall be
funds legally available for the payment of such dividends. Dividends on the
Series C Preferred Stock would be payable quarterly on the first business day of
January, April, July and October of each year, commencing on the first such date
following issuance of the Series C Preferred Stock, or at such additional times
and for such interim periods, if any, as determined by the Viacom Board. Each
such dividend will be payable in arrears to holders of record as they appear on
the stock records of Viacom at the close of business on such record dates, not
exceeding 60 days preceding the payment dates thereof, as shall be fixed by the
Viacom Board. Accrued and unpaid dividends shall accrue interest at the Base
Rate as announced from time to time by Citibank, N.A. The amount of dividends
payable on the Series C Preferred Stock for each full dividend period shall be
computed by dividing the annual dividend rate by four. The amount of dividends
payable for the initial dividend period on the Series C Preferred Stock, or any
other period shorter or longer than a full dividend period shall be computed on
the basis of a 360-day year consisting of twelve 30-day months.
    
 
   
     So long as any shares of Series C Preferred Stock are outstanding, no
dividends, except as described below, may be declared or paid or set apart for
payment on any class or series of stock of Viacom ranking, as to dividends, on a
parity with the Series C Preferred Stock, nor shall any such shares be redeemed
or purchased by Viacom or any subsidiary, unless full cumulative dividends on
the Series C Preferred Stock have been declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment. When dividends
are not paid in full or a sum sufficient for such payment is not set apart on
the shares of the Series C Preferred Stock and any other class or series of
stock ranking on a parity as to dividends with the Series C Preferred Stock, all
dividends declared on the Series C Preferred Stock and on such other stock shall
be declared pro rata so that the amounts of dividends per share declared on the
Series C Preferred Stock and on such other stock shall in all cases bear to each
other the same ratio that the accrued dividends per share on the shares of
Series C Preferred Stock and such other stock bear to each other.
    
 
     So long as any shares of Series C Preferred Stock are outstanding, neither
Viacom nor any subsidiary may (i) declare or pay or set apart for payment any
dividend or other distribution with respect to any junior stock of Viacom or
(ii) redeem or set apart funds for the purchase, redemption or other acquisition
of any junior stock, unless (A) all accrued and unpaid dividends with respect to
the Series C Preferred Stock and any of the stock ranking on a parity with such
stock as to dividends or upon liquidation ("Parity Stock") at the time such
dividends are payable have been paid or funds have been set apart for payment of
such dividends and (B) sufficient funds have been set apart for the payment of
the dividend for the current dividend period with respect to the Series C
Preferred Stock and any Parity Stock.
 
     As used herein, (i) the term "dividend" does not include dividends payable
solely in shares of junior stock on junior stock, or options, warrants or rights
to holders of junior stock to subscribe for or purchase any junior stock, and
(ii) the term "junior stock" means the Viacom Common Stock and any other class
of capital stock of Viacom now or hereafter issued and outstanding that ranks
junior as to dividends and upon liquidation to the Series C Preferred Stock.
 
     Redemption. Shares of Series C Preferred Stock may not be redeemed by
Viacom prior to the fifth anniversary of the Paramount Effective Time, after
which date the shares of such stock will be redeemable at the option of Viacom,
in whole or in part, at any time or from time to time, out of funds
                                      141

legally available therefor, at the redemption prices set forth below, plus in
each case an amount equal to accrued and unpaid dividends, if any, to the
redemption date, whether or not earned or declared.
 


                                                                                            REDEMPTION PRICE FOR
                 IF REDEEMED DURING THE 12-MONTH PERIOD BEGINNING ON THE                     SERIES C PREFERRED
               ANNIVERSARY OF THE PARAMOUNT EFFECTIVE TIME INDICATED BELOW                          STOCK
- -----------------------------------------------------------------------------------------  -----------------------
                                                                                        
Fifth....................................................................................         $   52.50
Sixth....................................................................................         $   52.00
Seventh..................................................................................         $   51.50
Eighth...................................................................................         $   51.00
Ninth....................................................................................         $   50.50
Tenth and thereafter.....................................................................         $   50.00

 
     If fewer than all of the shares of Series C Preferred Stock are to be
redeemed, the shares to be redeemed shall be selected by lot or pro rata or in
some other equitable manner determined by Viacom. If fewer than all the shares
represented by any certificate are redeemed, a new certificate will be issued
representing the unredeemed shares without cost to the holder thereof. No
fractional shares will be issued upon redemption, but an adjustment in cash will
be made in respect of any fraction of an unredeemed share which would otherwise
be issuable.
 
     In the event that full cumulative dividends on the Series C Preferred Stock
and any other class or series of stock ranking, as to dividends, on a parity
with the Series C Preferred Stock have not been paid or declared and set apart
for payment, the Series C Preferred Stock may not be redeemed in part and Viacom
may not purchase or acquire shares of Series C Preferred Stock or such other
stock otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of shares of Series C Preferred Stock and such other stock.
 
     On and after the date fixed for redemption, provided that the redemption
price (including any accrued and unpaid dividends to the date fixed for
redemption) has been duly paid or provided for, dividends shall cease to accrue
on the Series C Preferred Stock called for redemption, such shares shall no
longer be deemed to be outstanding and all rights of the holders of such shares
as stockholders of Viacom shall cease except the right to receive from Viacom
the redemption price without interest thereon after the redemption date and any
cash adjustment in lieu of fractional unredeemed shares.
 
     Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Viacom, whether voluntary or involuntary, before any payment or
distribution of the assets of Viacom (whether capital or surplus) shall be made
to or set apart for the holders of junior stock, upon liquidation, dissolution
or winding up, the holders of the shares of Series C Preferred Stock shall be
entitled to receive $50.00 per share (the "liquidation preference") plus an
amount equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid thereon to the date of final distribution to such
holders; but such holders shall not be entitled to any further payment. If, upon
any liquidation, dissolution or winding up of Viacom, the assets of Viacom, or
proceeds thereof, distributable among the holders of the shares of Series C
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidation payments on any other shares of stock ranking, as to
liquidation, dissolution or winding up, on a parity with the Series C Preferred
Stock, then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Series C Preferred Stock and any such other stock ratably
in accordance with the respective amounts which would be payable on such shares
of Series C Preferred Stock and any such other stock if all amounts payable
thereon were paid in full. Neither a consolidation or merger of Viacom with
another corporation nor a sale or transfer of all or substantially all of
Viacom's assets nor a statutory share exchange will be considered a liquidation,
dissolution or winding up, voluntary or involuntary, of Viacom.
 
     Voting Rights. Except as indicated below, or except as otherwise from time
to time required by applicable law, the holders of shares of Series C Preferred
Stock will have no voting rights.
    
     Whenever dividends payable on Series C Preferred Stock shall be in arrears
for such number of dividend periods which shall in the aggregate contain not
less than 360 days, the number of directors of Viacom will be increased by two
and the holders of Series C Preferred Stock, voting together as a class
                                      142


with the holders of any other class or series of Parity Stock upon which like
voting rights have been conferred and are exercisable, will have the right to
elect two additional directors to the Viacom Board at Viacom's next annual
meeting of stockholders and at each subsequent annual meeting until all such
dividends on such series have been paid in full. At elections of such directors,
each holder of Series C Preferred Stock shall be entitled to one vote per share.
Upon any termination of the right of the holders of such series to vote for
directors as provided above, the term of office of all directors then in office,
elected by such series, shall terminate immediately.
    
 
     The approval of two-thirds of the outstanding shares of Series C Preferred
Stock shall be required in order to amend the Restated Certificate of
Incorporation of Viacom to affect materially and adversely the rights,
preferences or voting powers of the holders of such series of stock or to
authorize, create, issue or increase the authorized or issued amount of, any
class of stock having rights senior or superior with respect to dividends and
upon liquidation to such series; provided, however, that any increase in the
amount of authorized preferred stock or the creation and issuance of other
series of preferred stock, or any increase in the amount of authorized shares of
such series or of any other series of preferred stock, in each case ranking on a
parity with or junior to the Series C Preferred Stock with respect to the
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely
affect such rights, preferences or voting powers.
 
     Exchangeability of Series C Preferred Stock. The Series C Preferred Stock
is exchangeable in whole, or in part, at the option of Viacom, for Viacom
Exchange Debentures on any scheduled dividend payment date beginning on or after
the third anniversary of the Paramount Effective Time. Holders of Series C
Preferred Stock so exchanged will be entitled to receive $50.00 principal amount
of Viacom Exchange Debentures for each share of Series C Preferred Stock held by
such holders at the time of exchange plus an amount per share in cash equal to
all accrued and unpaid dividends thereon to the date of exchange (the "Series C
Exchange Date"). The Viacom Exchange Debentures will be issuable only in
registered form and in denominations of $1,000 and integral multiples thereof.
See "Description of Viacom Debentures." An amount in cash will be paid to
holders for any principal amount otherwise issuable which is less than $1,000.
Viacom will mail written notice of its intention to exchange to each holder of
record of the Series C Preferred Stock not less than 10 nor more than 60 days
prior to the date fixed for exchange.
 
   
     Upon the Series C Exchange Date, the rights of holders of Series C
Preferred Stock as stockholders of Viacom shall cease (except the right to
receive the Viacom Exchange Debentures, any accrued and unpaid dividends to but
not including the Series C Exchange Date, and any cash adjustment in lieu of any
principal amount less than $1,000) and the shares of Series C Preferred Stock so
exchanged no longer will be deemed outstanding. If full cumulative dividends on
the shares of Series C Preferred Stock to be exchanged have not been paid to the
Series C Exchange Date, or funds set aside to provide for payment in full of the
dividends, Viacom may not exchange the Series C Preferred Stock for the Viacom
Exchange Debentures.
    
 
     Listing. Viacom has agreed to use its reasonable best efforts to cause the
shares of Series C Preferred Stock to be approved for listing on the AMEX prior
to the issuance thereof.
 
                                      143

                        DESCRIPTION OF VIACOM DEBENTURES
 
   
     GENERAL. The Viacom Merger Debentures and the Viacom Exchange Debentures
(collectively, the "Viacom Debentures") will be issued under an Indenture (the
"Indenture"), between Viacom and Harris Trust and Savings Bank, as trustee (the
"Trustee"), which will be subject to and governed by the Trust Indenture Act of
1939, as amended (the "TIA"). The Viacom Debentures will be general unsecured
junior subordinated obligations of Viacom and will be issued in registered form
without coupons in denominations of $1,000 and integral multiples thereof.
    
 
   
     As indicated under "Subordination" below, the Viacom Debentures will be
subordinated and subject in right of payment to the prior payment in full of all
Senior Obligations of Viacom.
    
 
     The following summary of certain provisions of the Indenture and the Viacom
Debentures does not purport to be complete and is subject to and qualified in
its entirety by reference to the Indenture and the Viacom Debentures, including
the definitions therein of terms not defined in this Proxy Statement/Prospectus.
The definitions of certain capitalized terms used in the following summary are
set forth below under "Certain Definitions." A copy of the Indenture, including
the form of the Viacom Merger Debentures and the form of the Viacom Exchange
Debentures, is filed as an exhibit to the Registration Statement, of which this
Proxy Statement/Prospectus forms a part. Section references used in this section
of the Proxy Statement/Prospectus refer to sections of the Indenture.
 
   
     SUBORDINATION. The payment of the principal of and interest on the Viacom
Debentures is subordinated in right of payment, to the extent set forth in the
Indenture, to the prior payment in full of all Senior Obligations of Viacom, as
that term is defined in the Indenture. (Section 101) By reason of such
subordination, in the event of the insolvency of Viacom, creditors of Viacom who
are not holders of Senior Obligations of Viacom may recover less ratably than
holders of Senior Obligations of Viacom and may recover more or less ratably
than Holders of the Viacom Debentures and Viacom may be unable to make all
payments due under the Viacom Debentures. There are no restrictions in the
Indenture on the amount of Senior Obligations or any other indebtedness that may
be issued by Viacom, and the Viacom Debentures will be subordinated to
substantially all future indebtedness of Viacom and effectively subordinated to
all indebtedness and other liabilities of subsidiaries of Viacom. Upon any
distribution of the assets of Viacom upon any dissolution, winding up,
liquidation, or reorganization of Viacom, the holders of Senior Obligations of
Viacom will be entitled to receive payment in full before holders of the Viacom
Debentures are entitled to receive any payment. (Section 1302)
    
    
     "Senior Obligations" means with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money, including all
obligations of Viacom under its bank credit facilities, or for the deferred
purchase price of property or services, including, without limitation, all
obligations, contingent or otherwise, of such Person in connection with any
letters of credit and acceptances issued under letter of credit facilities,
acceptance facilities or other similar facilities, (ii) all indebtedness of such
Person evidenced by bonds, notes, debentures or other similar instruments, (iii)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property),
including trade accounts payable arising in the ordinary course of business,
(iv) all Capitalized Lease Obligations of such Person, (v) all Senior
Obligations referred to in (but not excluded from) clause (i), (ii), (iii) or
(iv) above of other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the holder of such Senior Obligations has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Senior Obligations, (vi) all liabilities that such Person has
guaranteed or that is otherwise its legal liability, other than endorsements for
collection or deposit, in either case in the ordinary course of business, or any
obligation or liability of such Person in respect of leasehold interests
assigned by such Person to any
                                      144

other Person, (vii) all Redeemable Capital Stock issued by such Person valued at
the greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends, (viii) all obligations under interest rate
contracts of such Person and (ix) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types referred
to in clauses (i) through (viii) above, unless, in the case of any particular
indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such indebtedness shall
not be senior in right of payment to the Viacom Debentures. Notwithstanding the
foregoing, "Senior Obligations" shall not include indebtedness evidenced by the
Viacom Debentures. For purposes hereof, the "maximum fixed repurchase price" of
any Redeemable Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Redeemable Capital Stock as
if such Redeemable Capital Stock were purchased on any date on which Obligations
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value to be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock. (Section 101)
     
   
     If (a) in the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior
Obligations of Viacom beyond any applicable grace period with respect thereto,
or in the event that any nonpayment event of default with respect to any Senior
Obligations of Viacom shall have occurred and be continuing and shall have
resulted in such Senior Obligations becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable, or
(b) in the event that any other nonpayment event of default with respect to any
Senior Obligations of Viacom shall have occurred and be continuing permitting
the holders of such Senior Obligations (or a trustee on behalf of the holders
thereof) to declare such Senior Obligations due and payable prior to the date on
which it would otherwise have become due and payable, then no payment, direct or
indirect (including any payment which may be payable by reason of the payment of
any other indebtedness of Viacom being subordinated to the payment of the Viacom
Debentures), shall be made by Viacom on account of principal of (or premium, if
any) or interest on the Viacom Debentures or on account of the purchase or
redemption or other acquisition of Viacom Debentures (x) in case of any payment
or nonpayment event of default specified in (a), unless and until (A) such event
of default shall have been cured or waived or shall have ceased to exist or such
acceleration shall have been rescinded or annulled or (B) the Senior Obligations
in respect of which such declaration of acceleration has occurred is discharged,
(y) in case of any nonpayment event of default specified in (b), from the
earlier of the dates Viacom and the Trustee receive written notice of such event
of default from an Agent Bank or any other representative of a holder of Senior
Obligations of Viacom until the earlier of (A) 180 days after such date and (B)
the date, if any, on which the Senior Obligations to which such default relates
are discharged or such default is waived by the holders of such Senior
Obligations or otherwise cured (provided that further written notice relating to
the same Senior Obligations received by Viacom or the Trustee within 12 months
after such receipt shall not be effective for purposes of this clause (y)) or
(z) in case of any payment or nonpayment event of default specified in clause
(a) or (b), as long as any judicial proceeding is pending with respect to such
event. (Section 1303)
    
    
     If Viacom fails to make any payment on the Viacom Debentures when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Viacom
Debentures to accelerate the maturity thereof. See "--Events of Default."
    
    
     As a holding company, Viacom is dependent on dividends or other
intercompany transfers of funds from its subsidiaries to meet its debt service
and other obligations. Claims of creditors of Viacom's subsidiaries, including
trade creditors, will generally have priority as to the assets of such
subsidiaries over the claims of Viacom and the holders of Viacom's indebtedness
and other obligations, including the Viacom Debentures. When issued, the Viacom
Debentures will be subordinate in right of payment to all
                                      145


then existing indebtedness of Viacom, as shown on its consolidated financial
statements, including the notes thereto, which are incorporated by reference in
this Proxy Statement/Prospectus.
    
 
     The Viacom Debentures will be effectively subordinated to all indebtedness
and other liabilities, including current liabilities and commitments under
leases, if any, of Viacom's subsidiaries. Any right of Viacom to receive assets
of any of its subsidiaries upon liquidation or reorganization of the subsidiary
(and the consequent right of the holders of the Viacom Debentures to participate
in those assets) will be effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent that
Viacom is itself recognized as a creditor of such subsidiary, in which case the
claims of Viacom would still be subordinated to any security interests in the
assets of such subsidiary and any indebtedness of such subsidiary senior to that
held by Viacom.
 
   
     COVENANTS. The Indenture contains covenants of Viacom with respect to the
following matters: (i) payment of principal, premium, if any, and interest
(Section 1001); (ii) maintenance of an office or agency (Section 1002); (iii)
arrangements regarding the handling of money for security payments to be held in
trust (Section 1003); (iv) maintenance of corporate existence (Section 1004);
and (v) provision of compliance certificates. (Section 1005)
    
 
     EVENTS OF DEFAULT. The following are Events of Default under the Indenture:
 
          (i) default in the payment of any interest on any Viacom Debenture
     when it becomes due and payable, and continuance of such default for a
     period of 30 days whether or not such payment shall be prohibited by the
     subordination provisions of the Indenture; or
 
   
          (ii) default in the payment of the principal of (or premium, if any,
     on) any Viacom Debenture at its Maturity, upon acceleration, redemption or
     when otherwise due and payable, whether or not such payment shall be
     prohibited by the subordination provisions of the Indenture; or
    
 
          (iii) default in the payment of any redemption payment on any Viacom
     Debenture when it becomes due and payable, and continuance of such default
     for a period of 30 days whether or not such payment shall be prohibited by
     the subordination provisions of the Indenture; or
 
   
          (iv) default in the performance, or breach, of any covenant or
     warranty of Viacom in the Indenture (other than a default in the
     performance, or breach, of a covenant or warranty a default which is
     specifically dealt with elsewhere in the Indenture), and continuance of
     such default or breach for a period of 60 days after there has been given,
     by registered or certified mail, to Viacom and the Agent Bank by the
     Trustee or to Viacom, the Trustee and the Agent Bank by the Holders of at
     least 25% in principal amount of the Outstanding Viacom Debentures a
     written notice specifying such default or breach and requiring it to be
     remedied and stating that such notice is a "Notice of Default" under the
     Indenture; or
    
 
   
          (v) the entry by a court having jurisdiction in the premises of (A) a
     decree or order for relief in respect of Viacom or any Subsidiary of Viacom
     in an involuntary case or proceeding under any applicable federal or state
     bankruptcy, insolvency, reorganization or other similar law or (B) a decree
     or order adjudging Viacom or any such Subsidiary a bankrupt or insolvent,
     or approving as properly filed a petition seeking reorganization,
     arrangement, adjustment or composition of or in respect of Viacom or any
     such Subsidiary under any applicable federal or state law, or appointing a
     custodian, receiver, liquidator, assignee, trustee, sequestrator or other
     similar official of Viacom or any such Subsidiary or of any substantial
     part of its property, or ordering the winding up or liquidation of its
     affairs, and the continuance of any such decree or order for relief or any
     such other decree or order unstayed and in effect for a period of 60
     consecutive days; provided that, in the case of any such Subsidiary, the
     entry of such a decree or order shall not constitute an Event of Default
     under the Indenture unless the claims of such Subsidiary's creditors shall,
     in the aggregate, be in excess of $100 million; or
    
 
                                      146

   
          (vi) the commencement by Viacom or any Subsidiary of Viacom of a
     voluntary case or proceeding under any applicable federal or state
     bankruptcy, insolvency, reorganization or other similar law or of any other
     case or proceeding to be adjudicated a bankrupt or insolvent, or the
     consent by it to the entry of a decree or order for relief in respect of
     Viacom or any such Subsidiary in an involuntary case or proceeding under
     any applicable federal or state bankruptcy, insolvency, reorganization or
     other similar law or to the commencement of any bankruptcy or insolvency
     case or proceeding against it, or the filing by it of a petition or answer
     or consent seeking reorganization or relief under any applicable federal or
     state law, or the consent by it to the filing of such petition or to the
     appointment of or taking possession by a custodian, receiver, liquidator,
     assignee, trustee, sequestrator or similar official of Viacom or any such
     Subsidiary or of any substantial part of its property, or the making by it
     of an assignment for the benefit of creditors, or the admission by it in
     writing of its inability to pay its debts generally as they become due or
     the taking of corporate action by Viacom or any such Subsidiary in
     furtherance of any such action; provided that, in the case of any such
     Subsidiary, none of the foregoing actions shall constitute an Event of
     Default under the Indenture unless the claims of such Subsidiary's
     creditors shall, in the aggregate, be in excess of $100 million. (Section
     501)
    
 
   
     If an Event of Default (other than an Event of Default specified in (v) or
(vi) above) occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Viacom
Debentures may, and the Trustee at the request of such Holders shall, declare
due and payable immediately the unpaid principal of (and premium, if any) and
accrued interest in respect of each Viacom Debenture then Outstanding (the
"Default Amount"). Upon any such declaration, the Default Amount shall become
due and payable on all Outstanding Viacom Debentures (i) if no Credit Agreement
is in effect, immediately, or (ii) if any Credit Agreement is in effect, upon
the first to occur of (a) an acceleration under such Credit Agreement and (b)
the fifth business day after receipt by Viacom and by the Agent Bank of written
notice of such declaration unless (in the absence of an acceleration under the
Credit Agreement) on or prior to such fifth business day Viacom shall have
discharged the indebtedness, if any, that is the subject of such Event of
Default or otherwise cured the default relating to such Event of Default and
shall have given written notice of such discharge or cure to the Trustee and the
Agent Bank. Notwithstanding any other provision of the Indenture relating to
acceleration of maturity, rescission and annulment, if an Event of Default
specified in (v) or (vi) above occurs, then the Default Amount on the Viacom
Debentures then Outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. (Section 502)
    
 
   
     At any time after such a declaration of acceleration, with respect to
Viacom Debentures has been made and before a judgment or decree for payment of
the money due has been obtained by the Trustee, the Holders of a majority in
principal amount of the Outstanding Viacom Debentures may, under certain
circumstances, rescind or annul such declaration and its consequences if Viacom
(without violating the subordination provisions of the Indenture) has paid or
deposited with the Trustee a sum sufficient to pay all overdue interest and
other required amounts and if all Events of Default, other than the nonpayment
of accelerated principal, premium, if any, and interest, have been cured or
waived as provided in the Indenture. (Section 502) The Holders of not less than
a majority in principal amount of the Viacom Debentures then Outstanding also
have the right to waive any past Default under the Indenture, except a Default
(a) in the payment of principal of, premium, if any, or interest on, any Viacom
Debenture or (b) in respect of any other provision of the Indenture that cannot
be modified or amended without the consent of the Holder of each Outstanding
Viacom Debenture affected thereby. (Section 513)
    
 
   
     No Holder of any Viacom Debenture shall have any right to institute any
proceeding with respect to such Indenture, or for the appointment of a receiver
or trustee, or for any remedy thereunder, unless (i) such Holder has previously
given to the Trustee written notice of a continuing Event of Default with
respect to the Viacom Debentures, (ii) the Holders of at least 25% in principal
amount of the
                                      147



Outstanding Viacom Debentures have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee under the
Indenture, (iii) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding and
(iv) the Trustee has not received from the Holders of a majority in principal
amount of the Outstanding Viacom Debentures during such 60-day period a
direction inconsistent with such request. (Section 507) Such limitations do not
apply, however, to a suit instituted by a holder of a Viacom Debenture for the
enforcement of payment of the principal of, premium, if any, or interest on,
such Viacom Debenture on or after the respective due dates expressed in such
Viacom Debenture. (Section 508)
    
 
   
     During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
shall have offered the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction. (Section 602) Subject to certain provisions
concerning the rights of the Trustee, the Holders of a majority in principal
amount of the Outstanding Viacom Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee under the
Indenture. (Section 512)
    
 
   
     Viacom is required to furnish to the Trustee annual statements as to the
performance by Viacom of its obligations under the Indenture. Viacom is also
required, so long as any of the Viacom Debentures are Outstanding, to notify the
Trustee of the occurrence of any default. (Section 1005)
    
 
   
     DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE. Viacom may, at its option
and at any time, elect to defease and have the obligations of Viacom discharged
with respect to the Outstanding Viacom Debentures ("defeasance"). Such
defeasance means that Viacom shall be deemed to have paid and discharged the
entire indebtedness represented by the outstanding Viacom Debentures and to have
satisfied all other obligations under such Viacom Debentures and the Indenture,
except for (i) the rights of Holders of the Outstanding Viacom Debentures to
receive, solely from the trust fund described below, payments of the principal
of, premium, if any, and interest on such Viacom Debentures when such payments
are due, (ii) Viacom's obligations with respect to such Viacom Debentures
concerning issuing temporary Viacom Debentures, registration of Viacom
Debentures, replacement of mutilated, destroyed, lost or stolen Viacom
Debentures and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee under the Indenture, and (iv) the defeasance
provisions of the Indenture. (Section 1202) In addition, Viacom may, at its
option and at any time, elect to have its obligations released with respect to
certain covenants that are described in the Indenture with respect to the
Outstanding Viacom Debentures ("covenant defeasance") and any omission to comply
with such obligations shall not constitute a Default or an Event of Default with
respect to the Viacom Debentures. (Section 1203)
    
 
   
     In order to exercise either defeasance or covenant defeasance, (i) Viacom
shall irrevocably deposit with the Trustee, as trust funds in trust for the
purpose of making the following payments, specifically pledged as security for
the benefit of and dedicated solely to the Holders of such Viacom Debentures,
money, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amount as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay and
discharge (a) each installment of the principal of (and premium, if any, on) and
interest on the Outstanding Viacom Debentures to Stated Maturity of each such
installment of principal and interest on the day on which such payments are due
and payable in accordance with the terms of the Indenture and (b) any mandatory
sinking fund payments or analogous payments applicable to the Outstanding Viacom
Debentures on the due dates thereof; (ii) Viacom shall have delivered to the
Trustee an opinion of counsel to the effect that the Holders of the Outstanding
Viacom Debentures will
                                      148



not recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance, as the case may be, and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant
defeasance, as the case may be, had not occurred; (iii) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as clauses (v) and (vi) under the first paragraph under "--Events of
Default" is concerned, at any time during the period ending on the 91st day
after the date of deposit or, if longer, ending on the day following the
expiration of the longest preference period applicable to Viacom in respect of
such deposit; (iv) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, the Indenture or any
other agreement or instrument to which Viacom is a party or by which it is
bound; (v) such defeasance or covenant defeasance shall not (a) cause the
Trustee to have a conflicting interest as defined in TIA Section 310(b) or
otherwise for purposes of the TIA with respect to any securities of Viacom or
(b) result in the trust arising from such deposit to constitute, unless it is
qualified as, a regulated investment company under the Investment Company Act of
1940, as amended, (vi) such defeasance or covenant defeasance shall not cause
any Viacom Debentures then listed on any registered securities exchange under
the Exchange Act to be delisted, and (vii) Viacom shall have delivered to the
Trustee an officer's certificate and an opinion of counsel, each stating that
all conditions precedent and subsequent provided for relating to either the
defeasance or the covenant defeasance, as the case may be, have been complied
with. (Section 1204)
    
 
   
     SATISFACTION AND DISCHARGE. The Indenture will be discharged and will cease
to be of further effect (except as to surviving rights of registration of
transfer or exchange of Viacom Debentures, as expressly provided for in the
Indenture) as to all Outstanding Viacom Debentures issued under the Indenture
when either (i) such Viacom Debentures theretofore authenticated and delivered
(except lost, stolen or destroyed Viacom Debentures which have been replaced or
paid and Viacom Debentures for whose payment money has theretofore been
deposited in trust and thereafter repaid or discharged from such trust as
provided in the Indenture) have been delivered to the Trustee for cancellation
or (ii) all such Viacom Debentures not theretofore delivered to the Trustee for
cancellation have become due and payable, or will become due and payable or are
to be called for redemption within one year, and in the case of (ii), Viacom has
irrevocably deposited or caused to be deposited with the Trustee solely for the
benefit of the Holders of Viacom Debentures money or U.S. Government
Obligations, or a combination thereof, in such amounts as will be sufficient to
pay and discharge the entire indebtedness on such Viacom Debentures for
principal (and premium, if any) and interest to the date of such deposit (if
such Viacom Debentures are then due and payable) or to the applicable maturity
or redemption date (as the case may be), and Viacom has paid all sums payable by
it under the Indenture. In addition, Viacom must deliver to the Trustee an
officer's certificate and an opinion of counsel stating that all conditions
precedent to satisfaction and discharge have been complied with. (Section 401)
    
 
   
     CONSOLIDATION, MERGER AND SALE OF ASSETS. The Indenture provides that
Viacom may, without the consent of the Holders of any of the Outstanding Viacom
Debentures, consolidate with, merge into or transfer its assets substantially as
an entirety to any corporation, partnership or trust organized under the laws of
the United States of America, any state thereof or the District of Colombia,
provided that (i) the successor Person assumes through a supplemental indenture
Viacom's obligations under the Viacom Debentures and the Indenture, (ii)
immediately after giving pro forma effect to the transaction, there exists no
Event of Default and (iii) Viacom deliver's to the Trustee an officer's
certificate regarding compliance with the foregoing. (Section 801)
    
 
   
     MODIFICATION OR WAIVER. Modification and amendment of the Indenture may be
made by Viacom and the Trustee with the consent of the Holders of not less than
a majority in principal amount of all Outstanding Viacom Debentures, provided
that no such modification or amendment may, without the consent of the Holder of
each Outstanding Viacom Debenture, among other things: (i) change the Stated
Maturity of the principal of or any installment of principal of or interest on
any Viacom Debenture; (ii) reduce the principal amount or the rate of interest
on, or any premium payable upon the
                                      149



redemption of, any Viacom Debenture; (iii) impair the right to institute suit
for the enforcement of any such payment after the Stated Maturity thereof or any
Redemption Date therefor; (iv) reduce the above-stated percentage of Holders of
Outstanding Viacom Debentures, as the case may be, necessary to modify or amend
the Indenture or to consent to any waiver thereunder or (v) modify any of the
provisions of the Indenture relating to the subordination of the Viacom
Debentures in a manner adverse to the Holders thereof. (Section 902)
    
 
   
     Modification and amendment of the Indenture may be made by Viacom and the
Trustee without the consent of any Holder, for any of the following purposes:
(i) to evidence the succession of another Person to Viacom as obligor under the
Indenture; (ii) to add to the covenants of Viacom for the benefit of the Holders
or to surrender any right or power conferred upon Viacom in the Indenture; (iii)
to add additional Events of Default; (iv) to provide for the acceptance of
appointment by a successor Trustee; or (v) to cure any ambiguity, defect or
inconsistency in the Indenture, provided such action does not adversely affect
the interest of Holders in any material respect. (Section 901)
    
 
     CERTAIN DEFINITIONS. Set forth below is a summary of certain defined terms
used in the Indenture. Reference is made to the Indenture for the full
definition of all such terms, as well as any other capitalized terms used herein
for which no definition is provided.
 
     "Agent Bank" means any agent or agents from time to time under the Credit
Agreement, or any successor or successors thereto.
 
   
     "Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) real or
personal property that is required to be classified and accounted for as a
capital lease obligation under generally accepted accounting principles, and,
for the purposes of the Indenture, the amount of such obligation at any date
shall be the capitalized amount thereof at such date, determined in accordance
with such principles.
    
 
   
     "Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether or not outstanding or issued after the date of
the Indenture.
    
 
   
     "Credit Agreement" means any credit agreement under which Viacom is a
borrower, in the principal amount of at least $100 million.
    
 
   
     "Lien" means any pledge, mortgage, lien, encumbrance or other security
interest.
    
 
   
     "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof, or any other entity.
    
 
   
     "Redeemable Capital Stock" means any Capital Stock that either by its
terms, by the terms of any security into which it is convertible or exchangeable
or otherwise, (i) is or upon the happening of an event or passage of time would
be required to be redeemed on or prior to the final Stated Maturity of the
Securities or (ii) is redeemable at the option of the holder thereof at any time
prior to such final Stated Maturity, or (iii) is convertible into or
exchangeable for debt securities at any time prior to such final Stated
Maturity.
    
 
   
     "Stated Maturity", when used with respect to any Viacom Debenture or any
installment of principal thereof or interest thereon, means the date specified
in such Viacom Debenture as the fixed date on which the principal of such Viacom
Debenture or such installment of principal or interest is due and payable.
    
 
   
     TRADING/LISTING. Viacom has filed an application to list the Viacom Merger
Debentures on the AMEX, subject to official notice of issuance. The Viacom
Merger Debentures will be traded on the AMEX under the symbol VIA.D.
    
 
   
     THE TRUSTEE. Harris Trust and Savings Bank will serve as trustee under the
Indenture.
    
 
                                      150

     VIACOM MERGER DEBENTURES. The Viacom Merger Debentures will be limited to
$        in aggregate principal amount and will mature 12 years from the
Paramount Effective Time.
 
   
     Interest. The Viacom Merger Debentures will bear interest from the
Paramount Effective Time or from the most recent Interest Payment Date to which
interest has been paid, at a rate of 8% per annum, payable semi-annually on
January 15 and July 15 (each an "Interest Payment Date") of each year,
commencing on January 1, 1995, to holders of record at the close of business on
the January 1 and July 1 next preceding each Interest Payment Date, except that
the initial record date will be December 15, 1994. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Payment of the principal of
(and premium, if any, on) and interest on Viacom Merger Debentures will be made
at the office or agency of Viacom maintained for that purpose in The City of New
York, or at such other office or agency of Viacom as may be maintained for such
purpose, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of Viacom (i) by
check mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register or (ii) by transfer to an account maintained by
the payee located in the United States.
    
 
     Optional Redemption. The Viacom Merger Debentures may not be redeemed prior
to the fifth anniversary of the Paramount Effective Time. On or after that date,
Viacom may, at its option, redeem the Viacom Merger Debentures, in whole or in
part, from time to time, at the redemption prices (expressed as a percentage of
principal amount) set forth below, together with accrued and unpaid interest, if
any, to the redemption date:
 


IF REDEEMED DURING THE 12 MONTH PERIOD BEGINNING ON THE
ANNIVERSARY OF THE PARAMOUNT EFFECTIVE DATE INDICATED BELOW                      PERCENTAGE
- ------------------------------------------------------------------------------  -------------
                                                                             
Fifth.........................................................................          103%
Sixth.........................................................................          102%
Seventh.......................................................................          101%
Eighth and thereafter.........................................................          100%

 
     The Viacom Merger Debentures are not subject to any mandatory redemption
and are not entitled to any sinking fund.
 
   
     Notice of redemption will be mailed at least 30 days, but not more than 60
days, before the redemption date to each Holder of Viacom Merger Debentures to
be redeemed. (Section 1104) If less than all of the Viacom Merger Debentures are
to be redeemed, the Trustee shall select the Viacom Merger Debentures to be
redeemed by such method that the Trustee considers fair and appropriate,
provided such method complies with the rules of any national securities exchange
or quotation system on which the Viacom Merger Debentures are then listed, and
which may provide for the selection for redemption of portions of the principal
of Viacom Merger Debentures; provided, however, that no such partial redemption
shall reduce the portion of the principal amount of a Viacom Merger Debenture
not redeemed to less than $1,000. (Section 1103)
    
 
   
     Exchange for Series C Preferred Stock. Viacom may, at its option, on or
after the earlier of (i) January 1, 1995, but only if the Blockbuster Merger has
not been consummated by such date, and (ii) the acquisition by a third party of
beneficial ownership of a majority of the outstanding voting securities of
Blockbuster, exchange the Viacom Merger Debentures, in whole but not in part,
for shares of Viacom's Series C Preferred Stock. Holders of Viacom Merger
Debentures so exchanged will be entitled to receive one fully paid and
nonassessable share of Series C Preferred Stock for each $50 in principal amount
of Viacom Merger Debentures. At the time of the exchange of the Series C
Preferred Stock for the Viacom Merger Debentures, all accrued and unpaid
interest on the Viacom Merger Debentures will not be paid and the dividends on
the Series C Preferred Stock will be deemed to have accrued from the later of
the Paramount Effective Time and the latest date through which interest has been
paid on the Viacom Merger Debentures. (Section 1401)
    
 
                                      151

     VIACOM EXCHANGE DEBENTURES. The Viacom Exchange Debentures will be limited
in aggregate principal amount to an amount equal to the aggregate liquidation
preference of the Series C Preferred Stock exchanged and will mature 20 years
from the Paramount Effective Time.
 
     Interest. The Viacom Exchange Debentures will bear interest from the date
on which the Viacom Exchange Debentures are issued in exchange for the
outstanding shares of Series C Preferred Stock (the "Exchange Date"), payable
semi-annually on January 15 and July 15 (each an "Interest Payment Date") of
each year, commencing on the first such date after the Exchange Date, at the
rate of 5% per annum until the tenth anniversary of the Paramount Effective Time
and, thereafter, at the rate of 10% per annum, to holders of record at the close
of business on the January 1 and July 1 next preceding each Interest Payment
Date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Payment of the principal of (and premium, if any, on) and interest on
Viacom Exchange Debentures will be made at the office or agency of Viacom
maintained for that purpose in The City of New York, or at such other office or
agency of Viacom as may be maintained for such purpose, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of interest
may be made at the option of Viacom (i) by check mailed to the address of the
Person entitled hereto as such address shall appear on the Security Register or
(ii) by transfer to an account maintained by the payee located in the United
States.
 
     Optional Redemption. The Viacom Exchange Debentures may not be redeemed
prior to the fifth anniversary of the Paramount Effective Time. On or after that
date, Viacom may, at its option, redeem the Viacom Exchange Debentures, in whole
or in part, from time to time, at the redemption prices (expressed as a
percentage of principal amount) set forth below, together with accrued and
unpaid interest, if any, to the redemption date:
 


IF REDEEMED DURING THE 12 MONTH PERIOD BEGINNING ON THE
ANNIVERSARY OF THE PARAMOUNT EFFECTIVE DATE INDICATED BELOW                      PERCENTAGE
- ------------------------------------------------------------------------------  -------------
                                                                             
Fifth.........................................................................          105%
Sixth.........................................................................          104%
Seventh.......................................................................          103%
Eighth........................................................................          102%
Ninth.........................................................................          101%
Tenth and thereafter..........................................................          100%

 
     The Viacom Exchange Debentures are not subject to any mandatory redemption
and are not entitled to any sinking fund.
 
   
     Notice of redemption will be mailed at least 30 days, but not more than 60
days, before the redemption date to each Holder of Viacom Exchange Debentures to
be redeemed. (Section 1104) If less than all of the Viacom Exchange Debentures
are to be redeemed, the Trustee shall select the Viacom Exchange Debentures to
be redeemed by such method that the Trustee considers fair and appropriate,
provided such method complies with the rules of any national securities exchange
or quotation system on which the Viacom Exchange Debentures are then listed, and
which may provide for the selection for redemption of portions of the principal
of Viacom Exchange Debentures; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Viacom Exchange
Debenture not redeemed to less than $1,000. (Section 1103)
    
 
                                      152

                        COMPARISON OF STOCKHOLDER RIGHTS
 
     The following is a summary of material differences between the rights of
holders of Viacom Common Stock and the rights of holders of Paramount Common
Stock. As each of Viacom and Paramount is organized under the laws of Delaware,
these differences arise principally from provisions of the charter and by-laws
of each of Viacom and Paramount, as well as the existence of Paramount's Rights
Agreement.
 
     The following summaries do not purport to be complete statements of the
rights of Viacom stockholders under Viacom's Restated Certificate of
Incorporation and By-laws as compared with the rights of Paramount stockholders
under Paramount's Certificate of Incorporation, By-laws and Rights Agreement or
a complete description of the specific provisions referred to herein. The
identification of specific differences is not meant to indicate that other equal
or more significant differences do not exist. These summaries are qualified in
their entirety by reference to the DGCL and governing corporate instruments of
Viacom and Paramount, to which stockholders are referred. The terms of Viacom's
capital stock are described in greater detail under "Description of Viacom
Capital Stock."
 
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
 
     Powers and Rights of Viacom Class A Common Stock and Viacom Class B Common
Stock. Except as otherwise expressly provided below, all issued and outstanding
shares of Viacom Class A Common Stock and Viacom Class B Common Stock are
identical and entitle the holders to the same rights and privileges. With
respect to all matters upon which stockholders are entitled to vote, holders of
outstanding shares of Viacom Class A Common Stock vote together with the holders
of any other outstanding shares of capital stock of Viacom entitled to vote,
without regard to class, and every holder of outstanding shares of Viacom Class
A Common Stock is entitled to cast one vote in person or by proxy for each share
of Viacom Class A Common Stock outstanding in such stockholder's name. Except as
otherwise required by the DGCL, the holders of outstanding shares of Viacom
Class B Common Stock are not entitled to any votes upon any questions presented
to stockholders of Viacom.
 
     Paramount Common Stock is not divided into classes and entitles holders
thereof to one vote for each share on each matter upon which stockholders have
the right to vote.
 
     Certain Business Combinations. Viacom's Restated Certificate of
Incorporation and By-laws do not contain any supermajority voting provisions or
any other provisions relating to the approval of business combinations and other
transactions by holders of Viacom Class A Common Stock.
 
     Paramount's Certificate of Incorporation requires the affirmative vote of
80% of the voting power of the then outstanding shares of Voting Stock (as
defined therein) to approve any merger or other Business Combination (as defined
therein), which term includes a merger with an Interested Stockholder or an
Affiliate of an Interested Stockholder (as defined therein), the sale, issuance
or transfer of Paramount's assets or securities to an Interested Stockholder or
an Affiliate of an Interested Stockholder in exchange for cash or securities or
other property with a fair market value of $25 million or more, the adoption of
a plan of liquidation and certain similar extraordinary corporate transactions
which would have the effect of increasing the proportionate interest in
Paramount of an Interested Stockholder or an Affiliate of an Interested
Stockholder, unless (a) the transaction has been approved by a majority of the
Disinterested Directors (as defined therein) or (b) the terms of the Business
Combination and parties thereto satisfy certain specified tests and conditions.
 
     Removal of Directors. Both Viacom's and Paramount's By-laws provide that
any director may be removed with or without cause at any time by the affirmative
vote of the holders of record of a majority of all the issued and outstanding
stock entitled to vote for the election of directors at a special meeting of the
stockholders called for that purpose. Viacom's By-laws also provide that any
director may be removed for cause by the affirmative vote of a majority of the
entire board of directors.
 
                                      153

     Amendments of Certificate of Incorporation. Viacom's Restated Certificate
of Incorporation does not contain any supermajority voting provisions for the
amendment thereof. Under the DGCL, unless otherwise specified in a corporation's
Certificate of Incorporation, all amendments to such Certificate of
Incorporation must be approved by the affirmative vote of holders of a majority
of the shares of capital stock entitled to vote thereon, unless a class vote is
required under the DGCL.
 
     Paramount's Certificate of Incorporation provides that the affirmative vote
of the holders of at least 80% of the voting power of all the shares of
Paramount entitled to vote generally in the election of directors, voting
together as a single class, is required to alter, amend or repeal Article XI,
regarding business combinations, or Article XII, regarding the requirement that
the holders of Paramount Common Stock can act only at annual or special
meetings. Paramount reserves the right from time to time to alter, amend or
repeal other provisions of the Paramount Certificate of Incorporation in the
manner prescribed by the DGCL.
 
SPECIAL MEETINGS OF STOCKHOLDERS; STOCKHOLDER ACTION BY WRITTEN CONSENT
 
     Viacom's By-laws provide that a special meeting of stockholders may be
called by the affirmative vote of a majority of its Board of Directors, the
Chairman of the Board, the Vice Chairman of the Board or the President and shall
be called by the Chairman of the Board, the Vice Chairman of the Board, the
President or Secretary at the request in writing of the holders of record of at
least 50.1% of the aggregate voting power of all outstanding shares of capital
stock of Viacom entitled to vote generally in the election of directors, acting
together as a single class.
 
     Article XII of Paramount's Certificate of Incorporation provides that a
special meeting of stockholders may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of Directors
or by the Chief Executive Officer of Paramount. The affirmative vote of 80% of
the voting power of all the shares of Paramount entitled to vote generally in
the election of directors, voting together as a single class, is required to
alter, amend or repeal Article XII or to adopt any provision inconsistent
therewith.
 
     Viacom's Restated Certificate of Incorporation and By-laws do not set forth
procedures regarding stockholder nomination of directors.
 
     Article III, Section 15 of Paramount's By-laws provides that any
stockholder may nominate candidates for election as directors of Paramount;
provided, however, that not less than 60 days prior to the date of the
anniversary of the annual meeting held in the prior year, in the case of an
annual meeting, or, in the case of a special meeting called for the purpose of
electing directors, not more than 10 days following the earlier of the date of
notice of such special meeting or the date on which a public announcement of
such meeting is made, any stockholder who intends to make a nomination at the
meeting delivers written notice to the Secretary of Paramount setting forth (i)
the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (ii) a representation that the
stockholder is a holder of record of stock of Paramount specified in such
notice, is or will be entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice; (iii) a statement that the nominee (or nominees) is willing to be
nominated; and (iv) such other information concerning each such nominee as would
be required under the rules of the Commission in a proxy statement soliciting
proxies for the election of such nominee and in a Schedule 14B (or other
comparable required filing then in effect) under the Exchange Act.
 
     In addition to any other requirements relating to amendments to Paramount's
By-laws, no proposal by any stockholder to repeal or amend Article III, Section
15 of Paramount's By-laws may be brought before any meeting of the stockholders
of Paramount unless written notice is given of (i) such proposed repeal or the
substance of such proposed amendment; (ii) the name and address of the
stockholder who intends to propose such repeal or amendment; and (iii) a
representation that the stockholder is a holder
                                      154

of record of stock of Paramount specified in such notice, is or will be entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to make the proposal. Such notice must be given in the manner and at the
time specified in Article III, Section 15 of Paramount's By-laws.
 
     Viacom's By-laws provide that any action required to be taken at any annual
or special meeting of stockholders of Viacom, or any action which may be taken
at any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by stockholders representing
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of such action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
 
     Article XII of Paramount's Certificate of Incorporation prohibits the
holders of Paramount Common Stock from acting by written consent in lieu of a
meeting.
 
RIGHTS PLANS
 
     Viacom. Viacom does not have a stockholder rights plan.
 
     Paramount. The following is a description of the Rights Agreement. By
unanimous written consent effective March 1, 1994, the Paramount Board approved
an amendment to the Rights Agreement providing that the consummation of the
Offer would not cause the Rights to become exerciseable.
 
     On September 7, 1988, the Board of Directors of Paramount declared a
dividend distribution of one Right for each outstanding share of Paramount's
Common Stock. The distribution was paid as of September 19, 1988 to stockholders
of record on that date. Each Right entitles the registered holder to purchase
from Paramount one share of Paramount Common Stock at a purchase price of $200
per share (the "Purchase Price"). The Paramount Board has also authorized the
issuance of one Right (subject to adjustment) with respect to each share of
Paramount Common Stock that becomes outstanding between September 18, 1988 and
the Distribution Date (as defined below). The following is a description of the
Rights Agreement, as amended, and the Rights issued thereunder.
 
     Until the close of business on the Distribution Date (which date shall not
be deemed to have occurred solely by reason of: (x) the approval, execution or
delivery of the Paramount Merger Agreement, (y) the acquisition of shares of
Paramount Common Stock pursuant to the Offer, as defined in the Paramount Merger
Agreement, or (z) the consummation of the Paramount Merger, as defined in the
Paramount Merger Agreement, which will occur on the earlier of (i) the tenth day
following a public announcement that a person or group of affiliated or
associated persons (each, an "Acquiring Person" (which term shall not include
Viacom or any of its affiliates which would otherwise become Acquiring Persons
solely by reason of: (x) the approval, execution or delivery of the Paramount
Merger Agreement, (y) the acquisition of shares of Paramount Common Stock
pursuant to the Offer, as defined in the Paramount Merger Agreement, or (z) the
consummation of the Paramount Merger, as defined in the Paramount Merger
Agreement)) has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding Paramount Common Stock (the "Stock Acquisition
Date" (which date shall not be deemed to have occurred solely by reason of:
(x) the approval, execution or delivery of the Paramount Merger Agreement, (y)
the acquisition of shares of Paramount Common Stock pursuant to the Offer, as
defined in the Paramount Merger Agreement, or (z) the consummation of the
Paramount Merger, as defined in the Paramount Merger Agreement)) or (ii) a date
fixed by the Board of Directors of Paramount after the commencement of a tender
offer or exchange offer which would result in the ownership of 30% or more of
the outstanding Paramount Common Stock, the Rights will be represented by and
transferred with, and only with, the Paramount Common Stock. Until the
Distribution Date, new certificates issued for Paramount Common Stock after
September 19, 1988 will contain a legend incorporating the Rights Agreement by
reference, and the surrender for transfer of any
                                      155

of Paramount's Common Stock certificates will also constitute the transfer of
the Rights associated with Paramount Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
Right certificates will be mailed to holders of record of Paramount Common Stock
as of the close of business on the Distribution Date, and thereafter the
separate certificates alone will evidence the Rights.
 
     The Rights are not exercisable until the Distribution Date. The Rights will
expire at the earliest of (i) the close of business on September 30, 1998, (ii)
the time at which the Rights are redeemed by Paramount as described below and
(iii) immediately prior to the Effective Time of the Paramount Merger.
 
     The Purchase Price payable, and the number of shares of Paramount Common
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
Paramount Common Stock, (ii) upon the grant to holders of the Paramount Common
Stock of certain rights or warrants to subscribe for Paramount Common Stock or
convertible securities at less than the current market price of the Common Stock
or (iii) upon the distribution to holders of Paramount Common Stock of evidences
of indebtedness or assets (excluding regular cash dividends and dividends
payable in Paramount Common Stock) or of subscription rights or warrants (other
than those referred to above).
 
     Unless the Rights are earlier redeemed, in the event that, after the Stock
Acquisition Date, Paramount was to be acquired in a merger or other business
combination (in which any shares of Paramount's Common Stock are changed into or
exchanged for other securities or assets) or more than 50% of the assets or
earning power of Paramount and its subsidiaries (taken as a whole) were to be
sold or transferred in one or a series of related transactions, the Rights
Agreement provides that proper provision shall be made so that each holder of
record of a Right will from and after such date have the right to receive, upon
payment of the Purchase Price, that number of shares of common stock of the
acquiring company having a market value at the time of such transaction equal to
two times the Purchase Price.
 
     In the event that any person becomes an Acquiring Person, each holder of a
Right, other than the Acquiring Person, will have the right to receive, upon
payment of the Purchase Price, a number of shares of Paramount Common Stock
having a market value equal to twice the Purchase Price. To the extent that
insufficient shares of Paramount Common Stock are available for the exercise in
full of the Rights, holders of Rights will receive upon exercise shares of
Paramount Common Stock to the extent available and then cash, property or other
securities of Paramount (which may be accompanied by a reduction in the Purchase
Price), in proportions determined by Paramount, so that the aggregate value
received is equal to twice the Purchase Price. Rights are not exercisable
following the Stock Acquisition Date until the expiration of the period during
which the Rights may be redeemed as described below. Notwithstanding the
foregoing, following the Stock Acquisition Date, Rights that are (and, under
certain circumstances, Rights that were) beneficially owned by an Acquiring
Person will be null and void.
 
     No fractional shares of Paramount Common Stock or other Paramount
securities will be issued upon exercise of the Rights and, in lieu thereof, a
payment in cash will be made to the holder of such Rights equal to the same
fraction of the current market value of a share of Paramount Common Stock or
other Paramount securities.
 
     At any time until ten days following the Stock Acquisition Date (subject to
extension by the Board of Directors), the Board of Directors may cause Paramount
to redeem the Rights in whole, but not in part, at a price of $.01 per Right,
subject to adjustment (the "Redemption Price"). Immediately upon the action of
the Board of Directors authorizing redemption of the Rights, the right to
exercise the Rights will terminate, and the holders of Rights will only be
entitled to receive the Redemption Price without any interest thereon.
 
     For as long as the Rights are then redeemable, Paramount may, except with
respect to the Redemption Price or the final date of expiration of the Rights,
amend the Rights in any manner,
                                      156

including an amendment to extend the time period in which the Rights may be
redeemed. At any time when the Rights are not then redeemable, Paramount may
amend the Rights in any manner that does not adversely affect the interests of
holders of the Rights as such.
 
     Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of Paramount, including, without limitation, the right to vote or to
receive dividends.
 
           TRANSACTIONS BY CERTAIN PERSONS IN PARAMOUNT COMMON STOCK
 
   
     Since 60 days prior to the initial filing of the Schedule 13E-3, through
May 19, 1994, none of Sumner M. Redstone, NAI, Viacom or Paramount, any
majority-owned subsidiary thereof, any current director or executive officer
thereof and no pension, profit-sharing or similar plan of Sumner M. Redstone,
NAI, Viacom or Paramount has effected any purchases or sales of Paramount Common
Stock except for (i) the sale of 52,000 shares of Paramount Common Stock by
Ronald L. Nelson on March 22, 1994 and (ii) the sale of 38,608 shares of 
Paramount Common Stock by James A. Pattison on March 21, 1994. In addition, 
none of Sumner M. Redstone, NAI nor Viacom has purchased any shares of
Paramount Common Stock since March 2, 1994, the day such parties became
affiliates of Paramount pursuant to the Offer. See "Summary--Comparative Stock
Prices" for a description of purchases of shares of Paramount Common Stock by
Paramount since October 31, 1991.
    
 
                                      157

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
VIACOM CAPITAL STOCK
 
     Set forth below, as of April 1, 1994 (and without giving effect to the
transactions contemplated by the Mergers), is certain information concerning
beneficial ownership of Viacom Common Stock by (i) each director of Viacom, (ii)
each of the executive officers named below, (iii) all executive officers and
directors of Viacom as a group, and (iv) holders of 5% or more of the
outstanding Viacom Common Stock. The following table excludes shares of Viacom
Class B Common Stock issuable upon conversion of the Viacom Preferred Stock.
 


                                 SHARES OF VIACOM COMMON STOCK BENEFICIALLY OWNED
                                                       TITLE OF CLASS
                                                         OF COMMON          NUMBER OF         OPTION    PERCENT OF
     NAME                                                  STOCK              SHARES         SHARES(1)     CLASS
- -----------------------------------------------------  --------------  --------------------  ---------  -----------
                                                                                            
George S. Abrams.....................................     Class A                  --(2)        --          --
                                                          Class B                 200(2)        --          (6)
Frank J. Biondi, Jr..................................     Class A                 415(3)        24,000      (6)
                                                          Class B             178,318(3)(4)    114,000      (6)
Neil S. Braun........................................     Class A                 232(3)        10,000      (6)
                                                          Class B                 236(3)        46,000      (6)
Philippe P. Dauman...................................     Class A               1,000           --          (6)
                                                          Class B               8,300           --          (6)
William C. Ferguson..................................        --                    --           --          --
John W. Goddard......................................     Class A               4,371(3)        15,000      (6)
                                                          Class B               4,377(3)        69,000      (6)
H. Wayne Huizenga....................................        --                    --           --          --
Ken Miller...........................................     Class A                  --(2)        --          --
                                                          Class B                  --(2)        --          --
National Amusements, Inc.............................     Class A          45,547,214(5)        --            85.2%
                                                          Class B          46,565,414(5)        --            51.7%
Brent D. Redstone....................................        --                    --           --          --
Sumner M. Redstone...................................     Class A          45,547,294(5)        --            85.2%
                                                          Class B          46,565,494(5)        --            51.7%
Frederic V. Salerno..................................        --                    --           --          --
William Schwartz.....................................     Class A                  --(2)        --          --
                                                          Class B                  --(2)        --          --
Mark M. Weinstein....................................     Class A                 318(3)         7,500      (6)
                                                          Class B                 324(3)        34,500      (6)
All Directors and executive officers as a group other
  than Mr. Sumner Redstone (22 persons)..............     Class A              14,363(3)        76,350      (6)
                                                          Class B             200,273(3)       385,839      (6)

 
- ---------------
 
(1) Reflects shares of Viacom Class A Common Stock or Viacom Class B Common
    Stock subject to options to purchase such shares which on December 31, 1993
    were unexercised but were exercisable within a period of 60 days from that
    date. These shares are excluded from the column headed "Number of Shares".
(2) Messrs. Abrams, Miller and Schwartz participate in a Deferred Compensation
    Plan in which their directors' fees are converted into stock units. Messrs.
    Abrams, Miller and Schwartz have been credited with 3,306, 3,021 and 3,052
    Viacom Class A Common Stock units, respectively, and 3,477, 3,164 and 3,196
    Viacom Class B Common Stock units, respectively.
(3) Includes shares held through Viacom International's 401(k) plan as of
    December 31, 1993.
(4) Includes 177,897 shares held as a result of the accelerated valuation and
    payment of Mr. Biondi's Long-Term Incentive Plan phantom shares in December
    1992.
   
(5) Except for 80 shares of each class of such Viacom Common Stock owned
    directly by Mr. Redstone, all shares are owned of record by NAI. Mr.
    Redstone is the Chairman and the controlling stockholder of NAI and,
    accordingly, is shown above as the owner of all such shares.
    
(6) Less than 1%.
 
                                      158

PARAMOUNT CAPITAL STOCK
    
     The following table sets forth, as of March 31, 1994, the aggregate amount
and percentage of Paramount Common Stock beneficially owned by each current
executive officer and director of Paramount, NAI and Viacom and by certain
pension, profit-sharing and similar plans of Paramount. Any such person whose
name does not appear did not beneficially own any Paramount Common Stock as of
March 31, 1994. The table also sets forth, as of March 31, 1994, the aggregate
amount and percentage of Paramount Common Stock beneficially owned by all
current directors and executive officers, as a group, of each of Paramount, NAI
and Viacom. Except as otherwise indicated, no pension, profit-sharing or similar
plan of Paramount, Sumner M. Redstone, NAI or Viacom owns any Paramount Common
Stock.
     
              SHARES OF PARAMOUNT COMMON STOCK BENEFICIALLY OWNED
 
   


                                                                                       NUMBER OF SHARES
                                                                                         OF PARAMOUNT
                                                                                         COMMON STOCK       PERCENT
                                                                                       -----------------  -----------
                                                                                                    
Martin S. Davis(1)...................................................................          824,379          0.67
Irving R. Fischer....................................................................            2,413             *
Robert C. Greenberg..................................................................               54             *
Rudolph L. Hertlein..................................................................            4,502             *
Lawrence E. Levinson.................................................................            6,747             *
Ronald L. Nelson.....................................................................           86,740          0.07
Donald Oresman(2)....................................................................        1,313,696          1.07
Paramount Employee Stock Ownership Plan..............................................          365,946           .30
Paramount Employees' Savings Plan....................................................          568,530           .46
Paramount Long-Term Performance Plan.................................................           64,986           .05
Prentice Hall Computer Publishing Division Retirement Plan...........................            4,255             *
Directors and Executive Officers of Paramount as a group.............................        2,238,531          2.00
Directors and Executive Officers of NAI (other than Sumner M. Redstone) as a group...
Directors and Executive Officers of Viacom (other than Sumner M. Redstone) as a
  group..............................................................................

    
 
The above individuals have sole voting and investment power, unless otherwise
indicated. Ownership of less than .01% of Paramount Common Stock is shown by an
asterisk. It has been assumed that all stock options that are exercisable were
exercised.
 
- ---------------
 
(1) Includes 42,968 shares owned by a charitable foundation of which he is an
    officer and director and 103,454 shares owned by a charitable remainder
    trust of which he is a beneficiary.
 
(2) As a co-trustee, Mr. Oresman shares voting and investment power over 977,592
    shares owned by a trust.
 
                                      159

         STOCKHOLDERS OWNING MORE THAN 5% OF PARAMOUNT COMMON STOCK(a)
 
     As of March 31, 1994, to the best of Paramount's knowledge, no person
beneficially owned more than five percent of the outstanding Paramount Common
Stock.
 
- ---------------
 
(a) Excludes 61,657,432 shares of Paramount Common Stock acquired by Viacom
    pursuant to the Offer.
 
                                 OTHER MATTERS
 
REGULATORY APPROVALS REQUIRED
 
     FCC Approvals. Paramount (through subsidiaries which it controls) owns and
operates seven broadcast television stations: WKBD (TV) (Detroit), WTXF (TV)
(Philadelphia), KRRT (TV) (Kerrville, TX), WLFL (TV) (Raleigh/Durham), WDCA-(TV)
(Washington, D.C.), KTXA (TV) (Arlington, TX) and KTXH (TV) (Houston). These
stations are subject to FCC regulation under which licenses are granted when and
if the FCC finds the public interest, convenience and necessity will be served
thereby. The FCC is also empowered to modify and revoke such licenses.
 
     Additionally, the Communications Act and FCC Regulations prohibit the
transfer of control of any license, or the assignment of any license, or the
transfer or assignment of any rights arising thereunder, without prior FCC
approval and requires that the FCC find that the proposed transfer or assignment
would serve the public interest, convenience and necessity. The FCC will
consider the applicant's legal, financial, technical and other qualifications to
operate the licensed entities for the transfer to be approved.
 
     Consummation of the Offer resulted in the acquisition of control of
Paramount and thus required prior FCC approval. Such approval was granted on
March 8, 1994, pursuant to an application filed in September 1993 (the
"Application")
 
     Paramount has an approximately 6.4% interest in Combined Broadcasting, Inc.
("Combined"), which owns television stations in Chicago, Philadelphia and Miami.
Because of Paramount's interest in Combined, the combined company will have an
interest in more than the 12 television stations allowed by the FCC's rules. The
combined company has taken the steps necessary to achieve compliance with the
FCC's multiple ownership rules by placing Paramount's existing interest in
Combined into an insulated voting trust, which interest, under FCC rules, is not
considered for purposes of determining compliance with the FCC's multiple
ownership requirements.
 
     Pursuant to a transaction consummated on November 1, 1993, Viacom owns two
AM and two FM stations serving the Washington, D.C. area. The combined company
will therefore own four radio stations and a television station in Washington,
D.C. Pursuant to the FCC order granting the Application, the combined company
has a period of eighteen months following consummation of the Paramount Merger,
in which to divest two of the radio stations (one AM and one FM).
 
ANTITRUST APPROVALS
 
     Under the HSR Act and the rules promulgated thereunder by the FTC, certain
acquisition transactions may not be consummated unless notice has been given and
certain information has been furnished to the Antitrust Division of the United
States Department of Justice (the "Antitrust Division") and the FTC and
specified waiting period requirements have been satisfied. Viacom and Paramount
each filed with the Antitrust Division and the FTC a Notification and Report
Form with respect to the Original Merger Agreement on September 21, 1993.
Accordingly, the waiting period under the HSR Act applicable to the acquisition
of Paramount and the shares of Paramount Common Stock by Viacom expired on
October 21, 1993. The expiration of the HSR Act waiting period does not preclude
the Antitrust Division or the FTC from challenging the Paramount Merger on
antitrust
                                      160

grounds. State Attorneys General and private parties may also bring legal
actions under the federal or state antitrust laws under certain circumstances.
Based upon an examination of information available to Viacom and Paramount
relating to the businesses in which Viacom, Paramount and their respective
subsidiaries are engaged, Viacom and Paramount believe that the consummation of
the Paramount Merger will not violate the antitrust laws.
 
     Competition Act of Canada and Investment Canada Act. Subject to certain
thresholds, Canada's Competition Act requires prenotification to the Director of
Investigation and Research (the "Director") of an acquisition of voting shares
of a corporation that directly or through subsidiaries conducts an operating
business in Canada where the parties to the transaction and their affiliates
have assets in Canada, or annual gross revenues from sales in, from or into
Canada, in excess of C$400 million, and where the corporation whose shares are
being acquired or its affiliates own Canadian assets the value of which exceeds
C$35 million, or the gross revenues from sales in or from Canada generated from
such assets exceeds C$35 million in the last fiscal year (a "Notifiable
Transaction").
 
     If a transaction is a Notifiable Transaction, subject to certain
exemptions, a prescribed filing must be made with the Director, and the
transaction may not be completed prior to the expiration or earlier termination
of the applicable waiting period after such filing has been delivered to the
Director. The relevant waiting period is seven or 21 days, depending on the type
of filing that the acquiror makes with the Director. If the Director determines
that the transaction is likely to lessen competition substantially in any
relevant market, he may attempt to obtain an order preventing the completion or
implementation of the transaction.
 
     Even if a transaction is not a Notifiable Transaction, the Director has the
right, prior to and for a period of up to three years after its implementation,
to review the transaction to determine if it is likely to lessen competition
substantially in any market in Canada. Where the Director concludes that such a
substantial lessening of competition is likely to occur, he may take steps to
prevent the completion of the transaction or to seek other relief (including
divestiture) in respect of a completed transaction.
 
     On October 29, 1993, Viacom made the necessary prenotification filing and
the applicable seven-day waiting period has expired. On November 19, 1993,
Viacom was advised by the Director that based on his review of the information
provided by Paramount and Viacom, he did not intend to challenge the completion
of the transaction (although he may re-examine the matter within a period of
three years following implementation of the transaction).
 
     The Investment Canada Act (the "ICA") requires that notice of the
acquisition of "control" by "non-Canadians" (as defined in the ICA) be furnished
to Investment Canada, a Canadian governmental agency (the "Agency"), and that
certain of these investments to acquire control of a Canadian business be
reviewed and approved by the Minister (as defined in the ICA) as investments
that are "likely to be of net benefit" to Canada based upon criteria set forth
in the ICA. Transactions which involve the acquisition of control of "cultural
business" will be subject to review and approval under the ICA. Some of
Paramount's Canadian businesses are engaged primarily in "cultural businesses"
as defined in the ICA so the acquisition is reviewable. An indirect acquisition
of a corporation in Canada carrying on a Canadian business through the purchase
of voting shares of a corporation incorporated outside of Canada may be
implemented without prior approval but the application for review must be filed
not later than 30 days after the acquisition. Where the Minister does not
approve an acquisition, he shall issue to the investor a notice which will have
the effect of precluding the completion of the acquisition or, if the
acquisition has been implemented, requiring divestiture of the acquisition. On
April 11, 1994, Viacom filed an Application for Review with the Agency in
connection with its purchase of the majority of the outstanding shares of
Paramount Common Stock. The Agency's review of Viacom's Application will not
result in any delay in completion of the Paramount Merger.
 
     Foreign Approvals. In connection with the Paramount Merger, Viacom has made
mandatory pre-acquisition notification filings with the German Federal Cartel
Office on October 29, 1993, and with the Irish Department of Enterprise and
Employment on November 4, 1993, and a voluntary pre-acquisition
                                      161

notification filing with the Office of Fair Trading in the United Kingdom on
October 28, 1993. Viacom has been informed in writing by the relevant
governmental authority in each of these jurisdictions that such authority will
take no action against the Paramount Merger. Accordingly, with Viacom having
complied with the relevant pre-merger filing requirements in these
jurisdictions, the laws of such jurisdictions do not prohibit the consummation
of the Paramount Merger. Viacom and Paramount conduct operations in a number of
other foreign countries, some of which have voluntary merger notification
systems. It is recognized that certain filings may not be made and certain
approvals may not be obtained prior to the date of the Paramount Special
Meeting, the Viacom Special Meeting or the Paramount Effective Time in those
countries in which filings or approvals are not as a matter of practice required
to be made or obtained prior to the consummation of a merger transaction. The
failure to make any such filings or to obtain any such approvals is not
anticipated to have a material effect on the Paramount Merger or the combined
company.
 
STOCKHOLDER LITIGATIONS
 
     On September 13, 1993, four putative class actions were filed in the Court
of Chancery in the State of Delaware on behalf of Paramount stockholders
alleging causes of action arising out of the proposed merger of Viacom and
Paramount: Isquith, et al. v. Paramount Communications Inc., et al., Civ. Action
No. 13117; Tuchman v. Paramount Communications Inc., et al., Civ. Action No.
13119; Segesta, et al. v. Paramount Communications Inc., et al., Civ. Action No.
13120; and Goldberg, et al. v. Davis, et al., Civ. Action No. 13121. Also on
September 13, 1993, two putative class action complaints were filed in New York
Supreme Court, New York County: Rubenstein v. Paramount Communications Inc., et
al., Index No. 93123169; and Tuchman, et al. v. Paramount Communications Inc.,
et al., Index No. 93123202 (the "New York Actions"). On September 14, 1993,
three additional putative class actions were filed in Delaware Chancery Court:
Sonem Partners, Ltd. v. Paramount Communications Inc., et al., Civ. Action No.
13123; Schwartz v. Davis, et al., Civ. Action No. 13124; and Soshtain, et al. v.
Paramount Communications Inc., et al., Civ. Action No. 13126. On September 17,
another putative class complaint was filed in Delaware Chancery Court:
Sorrentino, et al. v. Davis, et al., Civ. Action No. 13133. On September 20,
1993, the Isquith, et al. v. Paramount Communications Inc., et al. complaint was
amended and recaptioned Rubenstein, et al. v. Paramount Communications Inc., et
al. On September 22, 1993 and September 23, 1993, respectively, two more
putative class action complaints were filed in the Delaware Chancery Court:
Hagne v. Davis, et al., Civ. Action No. 13141; and Dwyer v. Davis, et al., Civ.
Action No. 13143. Two additional putative class action complaints were filed in
the Delaware Chancery Court on September 27, 1993: Citron v. Davis et al., Civ.
Action No. 13147; and John P. McCarthy Profit Sharing Plan v. Davis et al., Civ.
Action No. 13148. On September 28, 1993, another putative class action complaint
was filed in Delaware Chancery Court: Sonet, et al. v. Paramount Communications
Inc., et al., Civ. Action No. 13152. The defendants in these actions include
Paramount and certain of its directors and, except for the Dwyer action, Viacom,
and in the Segesta and Soshtain actions and the New York Actions, Sumner
Redstone. The New York Actions also named as a defendant Frank J. Biondi, Jr.,
President and Chief Executive Officer of Viacom. The Dwyer and Sonet actions
erroneously identified defendant James A. Nicholas as a current director of
Paramount. In addition, the New York Actions incorrectly identify defendants
Earl H. Doppelt, Rudolph L. Hertlein, Lawrence E. Levinson, Eugene I. Meyers and
Jerry Sherman (executive officers of Paramount) as Paramount directors. The
stockholder lawsuits alleged substantially similar causes of action for breaches
of fiduciary duty against Paramount and the Paramount Board, and alleged that
Viacom (and in the Segesta and Soshtain actions and the New York Actions, Mr.
Redstone) aided and abetted those breaches of duty. The New York Actions also
alleged that defendant Biondi aided and abetted purported breaches of fiduciary
duties by Paramount's directors. The stockholder actions, except for the Sonet
action, sought inter alia to enjoin the proposed merger of Viacom and Paramount
on the ground that the consideration to be paid was inadequate and unfair and
that the Paramount Board has failed to maximize stockholder value. Certain of
the shareholder actions, including the Sonet action, sought to enjoin the
operation of certain provisions of the Original Merger Agreement and the
Original Stock Option Agreement and also sought to enjoin the operation of the
                                      162

Rights Agreement. On September 27, 1993, the Delaware Chancery Court entered an
order consolidating Civ. Action Nos. 13117, 13119, 13120, 13121, 13123, 13124,
13126, 13133, 13141, and 13143 as In re Paramount Communications Inc.
Shareholders Litigation, Consolidated Civ. Action No. 13117. Also on September
27, 1993, all plaintiffs, except for plaintiffs in the Citron, John P. McCarthy
Profit Sharing Plan and Sonet actions and plaintiffs in the New York Actions,
filed a motion for preliminary injunctive relief and also filed a motion for
expedited discovery. On October 23, 1993, the Delaware Chancery Court entered a
supplemental order consolidating Citron v. Davis et al., Civ. Action No. 13147,
and John P. McCarthy Profit Sharing Plan v. Davis et al., Civ. Action No. 13148,
with and into In re Paramount Communications Inc. Shareholders Litigation,
Consolidated Civ. Action No. 13117.
 
     On October 26, 1993, an additional putative class action and derivative
complaint was filed in Delaware Chancery Court on behalf of Paramount
stockholders: B.T.Z. Inc. v. Davis, et al., Civ. Action No. 13219. The
defendants in this case included Paramount and certain of its directors. Viacom
was not named as a defendant. Plaintiffs' derivative cause of action alleged,
inter alia, that demand had not been made on the Paramount Board because of the
circumstances of the case, or alternatively, because demand would be futile.
This lawsuit alleged causes of action for breaches of fiduciary duty against
Paramount and the Paramount Board. In addition, this lawsuit alleged a cause of
action for interference with contract and with prospective advantage on the
ground that the director defendants interfered with the plaintiffs' contractual
and common law rights to sell their shares in lawful transactions and interfered
with plaintiffs' prospective advantage in any such transactions. The action
sought, inter alia, to enjoin the operation of certain provisions of the October
24 Merger Agreement and the Amended Stock Option Agreement to enjoin the
operation of the Rights Agreement and to require that Paramount be auctioned to
the highest bidder. This action was consolidated with and into In re Paramount
Communications Inc. Shareholders Litigation, consolidated Civ. Action No. 13117.
On November 5, 1993, plaintiffs in In re Paramount Communications Inc.
Shareholders Litigation, Consolidated Civ. Action No. 13117, filed a
Consolidated and Amended Class Action Complaint (the "Amended Consolidated
Complaint"), which named Paramount, its directors and Viacom as defendants. The
Amended Consolidated Complaint alleged, inter alia, that Paramount's directors
committed various breaches of their fiduciary duties and that Viacom aided and
abetted those purported breaches. Plaintiffs in the consolidated action sought,
inter alia, an injunction against the operation of the October 24 Merger
Agreement and the Amended Stock Option Agreement on the ground that Paramount's
directors failed to maximize shareholder value, and an order preventing
defendants from consummating a merger with Viacom or from withdrawing measures
such as the Rights Agreement unless Paramount conducted an auction for
Paramount.
 
     The request for injunctive relief raised in these stockholder actions was
addressed by the Delaware courts in conjunction with the QVC litigation, as
described below.
 
ANTITRUST LITIGATION
 
     On September 23, 1993, Viacom International filed an action in the United
States District Court for the Southern District of New York styled Viacom
International Inc. v. Tele-Communications, Inc., et al., Case No. 93 Civ. 6658,
against Tele-Communications, Inc. ("TCI"), Liberty, Satellite Services, Inc.
("SSI"), Encore Media Corp., Netlink USA, and QVC. The complaint alleges
violations of Sections 1 and 2 of the Sherman Act, Section 7 of the Clayton Act,
Section 12 of the Cable Act, and New York's Donnelly Act, and tortious
interference, against all defendants, and a breach of contract claim against
defendants TCI and SSI only. In addition to other relief, Viacom International
seeks injunctive relief against defendants' anticompetitive conduct, including
enjoining the consummation of QVC's proposed acquisition of Paramount, and
damages in an amount to be determined at trial, including trebled damages and
attorneys' fees under the Sherman and Clayton Acts.
 
                                      163

     The 19 claims for relief in the complaint are based on allegations that
defendants, controlled by John C. Malone, exert monopoly power in the U.S. cable
industry through their control over approximately one in four of all cable
households in the United States. Among other things, the complaint alleges that
defendants conspired to force SNI to enter into a merger with a
Malone-controlled pay television service; defendants have attempted to eliminate
The Movie Channel from at least 28 of TCI's systems and have plans to eliminate
The Movie Channel from another 27 such systems; defendants have conspired with
General Instrument Corporation ("GI") to entrench GI's monopoly power in the
markets for digital compression and encryption systems and to use such monopoly
power to weaken and eliminate the defendants' competitors; and TCI's
construction of a central authorization center to illegally control the
distribution of programming services through refusals to deal and denial of
direct access. On November 9, 1993, Viacom International amended its complaint
in Viacom International Inc. v. Tele-Communications, Inc., et al., Case No. 93
Civ. 6658, to add Comcast Corporation as an additional defendant and to
incorporate into the allegations additional anticompetitive activities by the
defendants.
 
   
     On November 23, 1993, defendants answered the amended complaint and
generally denied the material allegations set forth therein. Thereafter, Viacom
International voluntarily dismissed its claims against QVC and Comcast
Corporation. On April 1, 1994, defendants made a motion for partial summary
judgment dismissing all causes of action relating to QVC's proposed acquisition
of Paramount, on the ground that such causes of action are moot and otherwise
fail to state a claim upon which relief can be granted. On May 16, 1994, Viacom
International submitted an opposition to defendants' motion for partial summary
judgment, and the motion is currently sub judice. The parties are currently
engaged in discovery.
    
 
QVC LITIGATION
 
     On October 21, 1993, QVC commenced an action in the Court of Chancery for
the State of Delaware styled QVC Network, Inc. v. Paramount Communications Inc.,
et al., Civ. Action No. 13208. This lawsuit alleged causes of action arising out
of the Original Merger Agreement, the QVC proposal made to the Paramount Board
on September 20, 1993, and the announcement of the First QVC Offer. The suit
alleged various breaches of fiduciary duties against Paramount and certain
members of the Paramount Board, and alleged that Viacom aided and abetted those
breaches of duty.
 
     The suit sought to enjoin: (i) various provisions of the Original Merger
Agreement; (ii) consummation of the merger of Viacom and Paramount; (iii) the
payment of any money or issuance of any stock by Paramount pursuant to the
Original Merger Agreement; (iv) any actions by the Paramount Board designed to
impede a bidding contest for Paramount; and (v) any actions by Viacom intended
to cause Paramount to forgo any transaction other than the merger of Viacom and
Paramount. The suit also sought a declaratory judgment that: (i) various
provisions of the Original Merger Agreement were unlawful; (ii) Paramount's
refusal to negotiate a merger with QVC was a breach of the fiduciary duties of
the directors of Paramount; (iii) any rights purportedly acquired by Viacom
pursuant to the Original Merger Agreement were null and void; and (iv)
consummation of the merger of Viacom and Paramount, as contemplated by the
Original Merger Agreement, was unlawful. In addition, the suit sought rescission
of any transaction consummated pursuant to the Original Merger Agreement prior
to a final judgment of the Chancery Court and damages flowing therefrom.
 
     On October 28, 1993, QVC filed a motion in Delaware Chancery Court for
leave to file a First Amended and Supplemental Complaint to amend and supplement
the QVC Network action. On October 29, 1993, defendants consented to the filing
of this amended complaint, and on that date, the First Amended and Supplemented
Complaint was filed with the court. The named defendants in the First Amended
and Supplemental Complaint were identical to the named defendants in the initial
complaint, with the exception that one named defendant in the initial complaint,
Ronald L. Nelson, was no longer a named defendant. QVC alleged causes of action
for breaches of fiduciary duties against Paramount and the Paramount Board and
alleged that Viacom aided and abetted certain of those
                                      164

breaches of duty. The amended complaint alleged one additional breach of
fiduciary duty claim against Paramount and the named directors of Paramount. The
action sought, inter alia, to enjoin any steps to carry out the October 24
Merger Agreement on the ground that certain provisions of the October 24 Merger
Agreement and the Amended Stock Option Agreement were allegedly unlawful and
purportedly were entered into in breach of Paramount's directors' fiduciary
duties. QVC also filed a motion for preliminary injunctive relief. Oral argument
on such motion was heard on November 16, 1993.
 
     On November 24, 1993, the Delaware Court of Chancery issued the Preliminary
Injunction Order (the "Preliminary Injunction Order") sought by QVC and certain
stockholders of Paramount pursuant to which:
 
        (1) Paramount was preliminarily enjoined absent further order of the
            Court from amending the Rights Agreement, redeeming the rights under
            the Rights Agreement or taking any other action under the Rights
            Agreement to facilitate the Second Viacom Offer or the merger of
            Viacom and Paramount.
 
        (2) Paramount and Viacom were enjoined from (i) taking any action to
            exercise, cash out, enforce, effectuate or consummate any term or
            provision of the Amended Stock Option Agreement or (ii) causing
            Paramount or its subsidiaries or affiliates to pay money, transfer
            assets or issue securities of Paramount to Viacom or any of its
            affiliates or subsidiaries other than in the ordinary course of
            business or pursuant to the termination fee contemplated by the
            Amended Stock Option Agreement.
 
        (3) QVC's motion to enjoin payment of the termination fee contemplated
            by the Amended Stock Option Agreement was denied.
 
     In addition to the Preliminary Injunction Order, the Delaware Court of
Chancery issued on November 24, 1993 a separate order certifying an appeal from
the Preliminary Injunction Order to the Supreme Court of the State of Delaware.
 
     On the same day, Paramount and Viacom filed a notice of appeal with respect
to the Preliminary Injunction Order. The Supreme Court of the State of Delaware,
pursuant to an Order dated November 29, 1993, accepted the appeal and scheduled
oral argument on the appeal for December 9, 1993.
 
     On December 9, 1993, the Supreme Court of the State of Delaware issued an
order (the "Order") pursuant to which the Court, among other things: (1)
affirmed the order of the Delaware Chancery Court entered November 24, 1993; and
(2) remanded the proceeding to the Delaware Chancery Court for proceedings
consistent with the Order.
 
     These cases are still pending; however, Viacom believes the issues to be
moot. The only issue outstanding relates to the payment of attorneys' fees and
Paramount and Viacom have agreed that any fees awarded by the Delaware Chancery
Court will be paid by Paramount or Viacom, subject to Paramount's and Viacom's
right to contest any fee requests that may be made and to appeal any decision
made on such requests to the Delaware Supreme Court. Plaintiffs' counsel has
acknowledged the right of Paramount and Viacom to assert in opposition to such
requests any argument that would have been available to Paramount stockholders
had attorneys' fees and expenses been sought directly from them.
 
                                      165

                  DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL
 
     If the Paramount Merger is consummated, holders of shares of Paramount
Common Stock are entitled to appraisal rights under Section 262 of the DGCL
("Section 262"), provided that they comply with the conditions established by
Section 262.
 
     SECTION 262 IS REPRINTED IN ITS ENTIRETY AS ANNEX V TO THIS PROXY
STATEMENT/PROSPECTUS. THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF
THE LAW RELATING TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO ANNEX V. THIS DISCUSSION AND ANNEX V SHOULD BE REVIEWED CAREFULLY
BY ANY HOLDER WHO WISHES TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO
PRESERVE THE RIGHT TO DO SO, AS FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH
HEREIN OR THEREIN WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
 
     A record holder of shares of Paramount Common Stock who makes the demand
described below with respect to such shares, who continuously is the record
holder of such shares through the Paramount Effective Time, who otherwise
complies with the statutory requirements of Section 262 and who neither votes in
favor of the Paramount Merger Agreement nor consents thereto in writing will be
entitled to an appraisal by the Delaware Court of Chancery (the "Delaware
Court") of the fair value of his or her shares of Paramount Common Stock. All
references in this summary of appraisal rights to a "stockholder" or "holders of
shares of Paramount Common Stock" are to the record holder or holders of shares
of Paramount Common Stock. Except as set forth herein, stockholders of Paramount
will not be entitled to appraisal rights in connection with the Paramount
Merger. Stockholders of Viacom will have no appraisal rights in connection with
the Paramount Merger.
 
     Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the Paramount Special Meeting, not less than 20
days prior to the meeting, a constituent corporation must notify each of the
holders of its stock for which appraisal rights are available that such
appraisal rights are available and include in each such notice a copy of Section
262. This Proxy Statement/Prospectus shall constitute such notice to the record
holders of Paramount Common Stock.
 
     Holders of shares of Paramount Common Stock who desire to exercise their
appraisal rights must not vote in favor of the Paramount Merger Agreement and
must deliver a separate written demand for appraisal to Paramount prior to the
vote by the stockholders of Paramount on the Paramount Merger Agreement. A
stockholder who signs and returns a proxy without expressly directing by
checking the applicable boxes on the reverse side of the proxy card enclosed
herewith that his or her shares of Paramount Common Stock be voted against the
proposal or that an abstention be registered with respect to his or her shares
of Paramount Common Stock in connection with the proposal will effectively have
thereby waived his or her appraisal rights as to those shares of Paramount
Common Stock because, in the absence of express contrary instructions, such
shares of Paramount Common Stock will be voted in favor of the proposal. See
"The Meetings--Voting of Proxies." Accordingly, a stockholder who desires to
perfect appraisal rights with respect to any of his or her shares of Paramount
Common Stock must, as one of the procedural steps involved in such perfection,
either (i) refrain from executing and returning the enclosed proxy card and from
voting in person in favor of the proposal to approve the Paramount Merger
Agreement, or (ii) check either the "Against" or the "Abstain" box next to the
proposal on such card or affirmatively vote in person against the proposal or
register in person an abstention with respect thereto. A demand for appraisal
must be executed by or on behalf of the stockholder of record and must
reasonably inform Paramount of the identity of the stockholder of record and
that such record stockholder intends thereby to demand appraisal of the
Paramount Common Stock. A person having a beneficial interest in shares of
Paramount Common Stock that are held of record in the name of another person,
such as a broker, fiduciary or other nominee, must act promptly to cause the
record holder to follow the steps summarized herein properly and in a timely
manner to perfect whatever appraisal rights are available. If the shares of
Paramount Common Stock are owned of record by a person other than the beneficial
owner, including a broker, fiduciary (such as a trustee, guardian or custodian)
or other nominee, such demand must be executed by or for the record owner. If
the shares of Paramount Common Stock are owned of record by more than one
person, as in a
                                      166

joint tenancy or tenancy in common, such demand must be executed by or for all
joint owners. An authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, such person is acting as agent for the
record owner.
 
     A record owner, such as a broker, fiduciary or other nominee, who holds
shares of Paramount Common Stock as a nominee for others, may exercise appraisal
rights with respect to the shares held for all or less than all beneficial
owners of shares as to which such person is the record owner. In such case, the
written demand must set forth the number of shares covered by such demand. Where
the number of shares is not expressly stated, the demand will be presumed to
cover all shares of Paramount Common Stock outstanding in the name of such
record owner.
 
     A stockholder who elects to exercise appraisal rights should mail or
deliver his or her written demand to: Viacom International Inc., 1515 Broadway,
New York, New York 10036, Attention: Philippe P. Dauman, Secretary.
 
     The written demand for appraisal should specify the stockholder's name and
mailing address, the number of shares of Paramount Common Stock owned, and that
the stockholder is thereby demanding appraisal of his or her shares. A proxy or
vote against the Paramount Merger Agreement will not by itself constitute such a
demand. Within ten days after the Paramount Effective Time, the combined company
must provide notice of the Paramount Effective Time to all stockholders who have
complied with Section 262.
 
     Within 120 days after the Paramount Effective Time, either the combined
company or any stockholder who has complied with the required conditions of
Section 262 may file a petition in the Delaware Court, with a copy served on the
combined company in the case of a petition filed by a stockholder, demanding a
determination of the fair value of the shares of all dissenting stockholders.
There is no present intent on the part of Viacom to file an appraisal petition
and stockholders seeking to exercise appraisal rights should not assume that the
combined company will file such a petition or that the combined company will
initiate any negotiations with respect to the fair value of such shares.
Accordingly, Paramount stockholders who desire to have their shares appraised
should initiate any petitions necessary for the perfection of their appraisal
rights within the time periods and in the manner prescribed in Section 262.
Within 120 days after the Paramount Effective Time, any stockholder who has
theretofore complied with the applicable provisions of Section 262 will be
entitled, upon written request, to receive from the combined company a statement
setting forth the aggregate number of shares of Paramount Common Stock not
voting in favor of the Paramount Merger Agreement and with respect to which
demands for appraisal were received by Paramount and the number of holders of
such shares. Such statement must be mailed within 10 days after the written
request therefor has been received by the combined company.
 
     If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Delaware Court may dismiss
the proceedings as to such stockholder. Where proceedings are not dismissed, the
Delaware Court will appraise the shares of Paramount Common Stock owned by such
stockholders, determining the fair value of such shares exclusive of any element
of value arising from the accomplishment or expectation of the Paramount Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining fair value, the Delaware Court
is to take into account all relevant factors. In Weinberger v. UOP Inc., the
Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered, and
                                      167

that "fair price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court stated that in
making this determination of fair value the court must consider market value,
asset value, dividends, earnings prospects, the nature of the enterprise and any
other facts which could be ascertained as of the date of the merger which throw
light on future prospects of the merged corporation. In Weinberger, the Delaware
Supreme Court stated that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger
and not the product of speculation, may be considered." Section 262, however,
provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger."
 
     Holders of shares of Paramount Common Stock considering seeking appraisal
should recognize that the fair value of their shares determined under Section
262 could be more than, the same as or less than the consideration they are
entitled to receive pursuant to the Paramount Merger Agreement if they do not
seek appraisal of their shares. The cost of the appraisal proceeding may be
determined by the Delaware Court and taxed against the parties as the Delaware
Court deems equitable in the circumstances. Upon application of a dissenting
stockholder of Paramount, the Delaware Court may order that all or a portion of
the expenses incurred by any dissenting stockholder in connection with the
appraisal proceeding, including without limitation, reasonable attorney's fees
and the fees and expenses of experts, be charged pro rata against the value of
all shares of stock entitled to appraisal.
 
     Any holder of shares of Paramount Common Stock who has duly demanded
appraisal in compliance with Section 262 will not, after the Paramount Effective
Time, be entitled to vote for any purpose any shares subject to such demand or
to receive payment of dividends or other distributions on such shares, except
for dividends or distributions payable to stockholders of record at a date prior
to the Paramount Effective Time.
 
     At any time within 60 days after the Paramount Effective Time, any
stockholder will have the right to withdraw such demand for appraisal and to
accept the terms offered in the Paramount Merger; after this period, the
stockholder may withdraw such demand for appraisal only with the consent of the
combined company. If no petition for appraisal is filed with the Delaware Court
within 120 days after the Paramount Effective Time, stockholders' rights to
appraisal shall cease, and all holders of shares of Paramount Common Stock will
be entitled to receive the consideration offered pursuant to the Paramount
Merger Agreement. Inasmuch as the combined company has no obligation to file
such a petition, and Viacom has no present intention to do so, any holder of
shares of Paramount Common Stock who desires such a petition to be filed is
advised to file it on a timely basis. Any stockholder may withdraw such
stockholder's demand for appraisal by delivering to the combined company a
written withdrawal of his or her demand for appraisal and acceptance of the
Paramount Merger, except (i) that any such attempt to withdraw made more than 60
days after the Paramount Effective Time will require written approval of the
combined company and (ii) that no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
 
                                      168

   
                         VIACOM ANNUAL MEETING MATTERS
    
 
   
ELECTION OF DIRECTORS
    
 
   
     The election of ten directors of Viacom is proposed, each to hold office
for one year and until his successor is elected and qualified. The persons named
in the enclosed Viacom Annual Meeting Proxy Card will vote the shares covered by
each such Proxy for the election of the nominees set forth below, unless
instructed to the contrary. Each nominee is now a member of the Board of
Directors of Viacom. If, for any reason, any of said nominees becomes
unavailable for election, the holders of the Viacom Annual Meeting proxies may
exercise discretion to vote for substitutes proposed by the Board. Management
has no reason to believe that the persons named will be unable to serve if
elected or decline to do so.
    
 
   
Information Concerning Directors and Nominees
    
 
   
     Set forth below is certain information concerning each nominee for director
of Viacom. All of the nominees are currently directors of Viacom, Viacom
International and Paramount.
    
 
   


     NOMINEE FOR DIRECTOR*                                  CORPORATION OFFICES AND PRINCIPAL OCCUPATION**
- --------------------------------------------------  --------------------------------------------------------------
                                                 
George S. Abrams..................................  Associated with Winer & Abrams, a law firm located in Boston,
  Age 61                                              Massachusetts, for more than five years. Mr. Abrams became a
Director since 1987                                   director of Paramount in 1994 and NAI in 1992. He is the
                                                      former General Counsel and Staff Director of the United
                                                      States Senate Judiciary Committee on Refugees. Mr. Abrams is
                                                      also a member of the Boards of Trustees and Visiting
                                                      Committees of a number of art museums, art-related
                                                      organizations and educational institutions.
Frank J. Biondi, Jr...............................  President, Chief Executive Officer of Viacom and Viacom
  Age 49                                              International since July 1987 and Paramount since March
Director since 1987                                   1994. Mr. Biondi became a director of Paramount in 1994.
                                                      From November 1986 to July 1987, Mr. Biondi was Chairman,
                                                      Chief Executive Officer of Coca-Cola Television and, from
                                                      1985, Executive Vice President of the Entertainment Business
                                                      Sector of The Coca-Cola Company. Mr. Biondi joined Home Box
                                                      Office in 1978 and held various positions there until his
                                                      appointment as President, Chief Executive Officer in 1983.
                                                      In 1984, he was elected to the additional position of
                                                      Chairman and continued to serve in such capacities until
                                                      October 1984. Mr. Biondi recently became a director of
                                                      Maybelline, Inc.
Philippe P. Dauman................................  Executive Vice President, General Counsel, Chief
  Age 40                                              Administrative Officer and Secretary of Viacom, Viacom
Director since 1987                                   International and Paramount since March 1994. Mr. Dauman
                                                      became a director of Paramount in 1994 and NAI in 1992. From
                                                      February 1993 to March 1994, Mr. Dauman served as Senior
                                                      Vice President, General Counsel and Secretary of Viacom and
                                                      Viacom International. Prior to that, Mr. Dauman was a
                                                      partner in the law firm of Shearman & Sterling in New York,
                                                      which he joined in 1978. Mr. Dauman became a director of NAI
                                                      in 1992 and Paramount in 1994.

    
 
                                      169

   
                                                 
William C. Ferguson...............................  Chairman of the Board and Chief Executive Officer of NYNEX
  Age 63                                              since October 1989. Mr. Ferguson became a director of
Director since 1993                                   Paramount in 1994. He served as Vice Chairman of the Board
                                                      of NYNEX from 1987 to 1989 and as President and Chief
                                                      Executive Officer from June to September 1989. He has served
                                                      as a director of NYNEX since 1987. He is also a director of
                                                      CPC International, Inc. and General Re Corporation.
H. Wayne Huizenga.................................  Chairman of the Board and Chief Executive Officer of
  Age 56                                              Blockbuster since April 1987. Mr. Huizenga became a director
Director since 1993                                   of Paramount in 1994. He served as President of Blockbuster
                                                      from April 1987 until June 1988. He is a co-founder of Waste
                                                      Management, Inc. (now WMX Technologies, Inc.), a waste
                                                      disposal and collection company, where he served in various
                                                      capacities, including President, Chief Operating Officer and
                                                      a director, until May 1984. From May 1984 to the present,
                                                      Mr. Huizenga has been an investor in other businesses and is
                                                      the sole stockholder and Chairman of the Board of Huizenga
                                                      Holdings, Inc., a holding and management company with
                                                      various business interests. In connection with these
                                                      business interests, Mr. Huizenga has been actively involved
                                                      in strategic planning for, and executive management of,
                                                      these businesses. He also has a majority ownership interest
                                                      in Florida Marlins Baseball, Ltd., a Major League Baseball
                                                      sports franchise, owns the Florida Panthers Hockey Club,
                                                      Ltd., a National Hockey League sports franchise, and has a
                                                      limited partnership interest in Miami Dolphins, Ltd. ("Miami
                                                      Dolphins"), a National Football League sports franchise, and
                                                      an ownership interest in Robbie Stadium Corporation and
                                                      certain affiliated entities, which own and operate Joe
                                                      Robbie Stadium in South Florida. Mr. Huizenga has entered
                                                      into an agreement to purchase the remaining ownership
                                                      interest in the Miami Dolphins. He is Chairman of the Board
                                                      of Directors of Spelling Entertainment Group Inc. He is also
                                                      a director of Discovery Zone, Inc.
Ken Miller........................................  President, Chief Executive Officer of The Lodestar Group, an
  Age 51                                              investment firm, since 1988. Mr. Miller became a director of
Director since 1987                                   Paramount in 1994. He was Vice Chairman of Merrill Lynch
                                                      Capital Markets during 1987 and a Managing Director of
                                                      Merrill Lynch Capital Markets for more than the preceding
                                                      five years. He is Chairman of the Board of Directors of
                                                      Kinder-Care Learning Centers, Inc.
Brent D. Redstone.................................  Assistant District Attorney for Suffolk County, Massachusetts
  Age 43                                              from 1976 to October 1991, serving from 1988 through 1991 on
Director since 1991                                   the Homicide Unit responsible for the investigation and
                                                      trial of homicide cases. Mr. Redstone became a director of
                                                      Paramount in 1994 and NAI in 1992.


    
 
                                      170

   
                                                 
Sumner M. Redstone................................  Chairman of the Board of Viacom and Viacom International since
  Age 69                                              June 1987 and Paramount since April 1994. He has served as
Director since 1986                                   Chairman of the Board of NAI since 1986 and President, Chief
                                                      Executive Officer of NAI since 1967. Mr. Redstone is the
                                                      former Chairman of the Board of the National Association of
                                                      Theater Owners and is currently a member of its Executive
                                                      Committee. During the Carter Administration, Mr. Redstone
                                                      was appointed a member of the Presidential Advisory
                                                      Committee on the Arts for the John F. Kennedy Center for the
                                                      Performing Arts and, in 1984, he was appointed a Director of
                                                      the Kennedy Presidential Library Foundation. Mr. Redstone
                                                      has recently accepted a visiting professorship at Brandeis
                                                      University. Since 1982, Mr. Redstone has been a member of
                                                      the faculty of Boston University Law School, where he has
                                                      lectured in entertainment law. Mr. Redstone graduated from
                                                      Harvard University in 1944 and received an LL.B. from
                                                      Harvard University School of Law in 1947. Upon graduation,
                                                      Mr. Redstone served as Law Secretary with the United States
                                                      Court of Appeals, and then as a Special Assistant to the
                                                      United States Attorney General.
Frederic V. Salemo................................  Vice Chairman--Finance and Business Development of NYNEX since
  Age 49                                              March 1, 1994. Mr. Salerno became a director of Paramount in
Director since 1994                                   1994. He was Vice Chairman of the Board of NYNEX and
                                                      President of the Worldwide Services Group from 1991 to 1994
                                                      and President and Chief Executive Officer of New York
                                                      Telephone Company from 1987 to 1991. He is also a director
                                                      of The Bear Stearns Companies Inc. and Avnet, Inc.
William Schwartz..................................  Vice President for Academic Affairs (the chief academic
  Age 59                                              officer) of Yeshiva University since 1992 and University
Director since 1987                                   Professor of Law at Yeshiva University and the Cardozo
                                                      School of Law since 1991. Mr. Schwartz became a director of
                                                      Paramount in 1994. He has been of Counsel to Cadwalader,
                                                      Wickersham & Taft since 1988. Mr. Schwartz was Dean of the
                                                      Boston University School of Law from 1980 to 1988, a
                                                      professor of law at Boston University from 1955 to 1991 and
                                                      Director of the Feder Center for Estate Planning at Boston
                                                      University School of Law from 1988 to 1991. He has served as
                                                      Chairman of the Board of Directors of UST Corporation since
                                                      1993. He previously served as Vice Chairman of UST
                                                      Corporation since 1985 and has been a director of UST
                                                      Corporation for more than five years. Mr. Schwartz is a
                                                      trustee of several educational and charitable organizations
                                                      and an honorary member of the National College of Probate
                                                      Judges. He served as Chairman of the Boston Mayor's Special
                                                      Commission on Police Procedures and was formerly a member of
                                                      the Legal Advisory Board of the NYSE.


    
 
- ---------------
 
   
*  Brent Redstone is the son of Sumner Redstone. None of the other nominees for
   director is related to any other director or executive officer of Viacom,
   Viacom International or Paramount by blood, marriage or adoption.
    
 
   
** NAI, Paramount and Viacom International are affiliates of Viacom. None of the
   other corporations or organizations indicated herein is a parent, subsidiary
   or other affiliate of Viacom.
    
 
                                      171

   
Meetings and Committees of the Viacom Board of Directors
    
 
   
     During 1993, the Viacom Board of Directors held nine (9) regular meetings
and seven (7) special meetings.
    
 
   
     Set forth below is certain information concerning the standing committees
of the Board of Directors (1).
    
 
   


                                                                                                          NUMBER OF
                                                                                                          MEETINGS
     COMMITTEE                                            MEMBERS OF COMMITTEE                           DURING 1993
- ------------------------------------  -------------------------------------------------------------  -------------------
                                                                                               
Audit Committee.....................  Messrs. Abrams*, Ferguson,** Huizenga,** Miller, Salerno,**                 3
                                      and Schwartz
Compensation Committee..............  Messrs. Abrams, Ferguson,** Huizenga,** Miller, Brent                       9
                                      Redstone, Sumner Redstone,* Salerno,** and Schwartz

    
 
- ---------------
 
   
 * Chairman of the Committee
    
 
   
** Messrs. Huizenga, Ferguson and Salerno became members of the Audit and
   Compensation Committees when they were appointed to the Boards of Directors
   of Viacom and Viacom International on October 22, 1993, November 19, 1993
   and January 27, 1994, respectively.
    
 
   
NOTE:
    
 
   
(1) Viacom does not currently have a Nominating Committee.
    
 
   
     The functions of the Audit Committee include reviewing with the independent
auditors the plans and results of the annual audit, approving the audit and
non-audit services by such auditors, reviewing the scope and results of Viacom's
internal auditing procedures, reviewing the adequacy of Viacom's system of
internal accounting controls and reviewing the annual financial statements
prepared for release to stockholders and the public. The functions of the
Compensation Committee include reviewing the salaries and bonuses of employees
earning over a specified amount. In addition, the Committee reviews and approves
participation in, and administers, the Senior Executive STIP and the long-term
incentive compensation plans.
    
 
   
RELATED TRANSACTIONS
    
 
   
     For a description of certain related transactions, see "Special
Factors--Paramount Voting Agreement", "Sale of Viacom Preferred Stock" and "The
Blockbuster Merger--Certain Transactions Between Viacom and Blockbuster and
With Their Stockholders."
    
 
   
     Viacom, Viacom International and NAI entered into a tax sharing agreement
governing the filing of consolidated federal tax returns in 1987. This agreement
required that Viacom and/or the Viacom International pay NAI to the extent they
would have paid Federal income taxes on a separate company basis and entitled
them to receive payments from NAI to the extent losses and credits reduced NAI's
federal income taxes. This agreement was in effect for periods ending on or
before June 10, 1991, when NAI's percentage ownership of Viacom Common Stock was
reduced to less than 80% on a combined basis. For periods commencing on or after
June 11, 1991, Viacom and Viacom International have not filed consolidated
federal tax returns with NAI.
    
 
   
     Philippe P. Dauman, a director and Executive Vice President, General
Counsel, Chief Administrative Officer and Secretary of Viacom, Viacom
International and Paramount, became an executive officer of Viacom and Viacom
International on February 1, 1993. Prior to that, he was a partner with the law
firm of Shearman & Sterling, which has previously performed and is currently
performing legal services for Viacom and its subsidiaries.
    
 
                                      172

   
DIRECTORS' COMPENSATION
    
 
   
     Directors of Viacom and Viacom International who are not officers or
employees of Viacom, Viacom International or NAI or members of their immediate
family ("Outside Directors") are entitled to receive the directors' fees and are
eligible to participate in Viacom International's retirement plans described
below. Messrs. Abrams, Miller and Schwartz were Outside Directors for the entire
1993 calendar year. Mr. Dauman was an Outside Director until January 31, 1993.
Messrs. Huizenga, Ferguson and Salerno became Outside Directors on October 22,
1993, November 20, 1993 and January 27, 1994, respectively. In 1993, only
Outside Directors received any compensation for services as a director.
    
 
   
     Directors' Fees. Outside Directors received the following fees for the
first quarter of 1993: (i) a combined quarterly fee of $6,000 for membership on
the Boards of Directors of Viacom and Viacom International, and (ii) a per
meeting attendance fee of $1,000 for each Board meeting, $500 for each Audit
Committee meeting and $500 for each Compensation Committee meeting (except that
only one Board attendance fee is payable when both Boards meet on the same day
and only one Audit Committee or Compensation Committee attendance fee is payable
when the corresponding committees of both Boards meet on the same day).
Effective April 1, 1993, the fees for Outside Directors were increased as
follows: (i) a combined quarterly fee of $7,500 for membership on both Boards,
(ii) a per meeting attendance fee of $1,500 for each Board meeting (the $500 per
meeting attendance fee for each Audit or Compensation Committee remained
unchanged), and (iii) a $7,500 annual retainer fee for the Chairman of the Audit
Committee (currently Mr. Abrams). Compensation for Messrs. Huizenga and
Ferguson's services as Outside Directors for 1993 was paid to Blockbuster and
NYNEX, respectively.
    
 
   
     Deferred Compensation Plan. In 1989, Viacom International established an
unfunded Deferred Compensation Plan permitting participating Outside Directors
to defer payment of all of their membership and attendance fees. A participant
can elect to have deferred fees credited to an account which shall either accrue
interest or be deemed invested in a number of stock units equal to the number of
shares of Viacom Common Stock the amount of such fees would have purchased at
such time. Since 1989, Messrs. Abrams, Miller and Schwartz have elected to have
their fees credited to their stock unit accounts. The Plan permits participants
to elect to have amounts credited to a participant's account paid in a lump sum
or in three or five annual installments seven months after the director's
retirement, with the value of the stock units determined by reference to the
fair market values of the Viacom Class A Common Stock and Viacom Class B Common
Stock at that time and, if the participant had elected installment payments,
credited with interest until payment had been made in full. For 1993, the stock
unit accounts of Messrs. Abrams, Miller and Schwartz were credited with 607, 516
and 499 Viacom Class A Common Stock units, respectively, and 648, 552 and 534
Viacom Class B Common Stock units, respectively.
    
 
   
     Retirement Income Plan. In 1989, Viacom International established an
unfunded, non-qualified Retirement Income Plan pursuant to which each Outside
Director will receive annual payments commencing on such director's retirement
equal to 100% of the amount of the annual Board membership fees at the time of
such retirement, provided he has served on the Boards of both companies for at
least three years. The Plan provides that the director or his estate will
receive such annual payments for the number of years of such director's service
on the Boards (with current Outside Directors receiving credit for their years
of service on the Boards of Viacom and Viacom International prior to 1989). Mr.
Dauman, who ceased to be an Outside Director in February 1993, will receive
payments under this Plan for the period that he was an Outside Director when he
retires from the Board.
    
 
   
     Outside Directors' Stock Option Plan. In 1993, the Viacom Board of
Directors (with Outside Directors Messrs. Abrams, Miller and Schwartz
abstaining) adopted the Outside Directors' Plan, subject to the approval of such
Plan by the stockholders of Viacom at the Annual Meeting. For a description of
such Plan and terms of the one-time grants of stock options thereunder to the
Outside Directors, see "Approval of the Viacom Stock Option Plan for Outside
Directors" below.
    
 
                                      173

   
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
    
 
   
     Messrs. Abrams, Miller, Sumner Redstone, Brent Redstone and Schwartz were
members of the Compensation Committee for the entire 1993 calendar year. Mr.
Dauman resigned from the Compensation Committee when he became Senior Vice
President, General Counsel and Secretary of Viacom and Viacom International on
February 1, 1993. Prior to that, he was a partner with the law firm of Shearman
& Sterling. Messrs. Huizenga, Ferguson and Salerno became members of the
Compensation Committee when they joined the Boards of Directors of Viacom and
Viacom International on October 22, 1993, November 20, 1993 and January 27,
1994, respectively. Messrs. Korff and Magner resigned from the Compensation
Committee on March 15, 1994 when they resigned from the Boards of Directors of
Viacom and Viacom International and Mr. Korff resigned from his position as a
Viacom Senior Vice President. Mr. Korff's position as an officer had been purely
nominal since he did not have any responsibilities or authority as a Viacom
officer and had never received any compensation for such office since Viacom was
formed. Mr. Korff had never been eligible to participate in any of Viacom's
benefit and incentive plans, including, without limitation, the plans
administered by the Compensation Committee.
    
 
   
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
    
 
   
     All members of the Compensation Committee are non-employee directors. The
members include Mr. Sumner Redstone, the controlling stockholder of Viacom. The
Committee reviews and, with any changes it believes appropriate, approves
Viacom's executive compensation. Independent compensation consultants have
advised the Committee with respect to the long-term incentive compensation plans
since 1987.
    
 
   
     The objectives of the executive compensation package for Viacom's executive
officers are to:
    
 
   
     -- Set levels of base salary and annual bonus compensation that will
        attract and retain superior executives in the highly competitive
        environment of media companies;
    
 
   
     -- Provide annual bonus compensation for executive officers that varies
        directly with Viacom's financial performance and, in the case of
        executive officers with divisional responsibilities, also with the
        financial performance of their respective divisions, and, in addition,
        reflects the executive officer's individual contribution to that
        performance; and
    
 
   
     -- Provide long-term incentive compensation that is tied to Viacom's stock
        price so as to focus the attention of executives on managing Viacom from
        the perspective of an owner with an equity stake.
    
 
   
     Viacom has just completed an historic transaction in the acquisition of
Paramount. It is therefore more crucial than ever that Viacom attract and retain
executives with broad media-based experience. The Committee's goal is to develop
a compensation package that enables Viacom to accomplish this.
    
 
   
     In that connection, the Committee evaluates the competitiveness of its
executive compensation packages based on information from a variety of sources,
including information supplied by consultants and information obtained from the
media or from Viacom's own experience. The Committee also focuses on executive
compensation offered by the members of the peer group included in the
Performance Graph* set forth below. At times, the Committee also evaluates
compensation at a broader range of companies whether or not included in the peer
group that have particular lines of business comparable to those of Viacom.
    
 
   
- ---------------
    
 
   
* As a result of the Paramount Merger and the anticipated Blockbuster Merger, it
  is likely that the composition of the peer group included in the Performance
  Graph will be reviewed and adjusted for subsequent years.
    
 
                                      174

   
     While the Committee evaluates this information and has generally attempted
to peg overall compensation to the median to 75th percentile level (with base
salaries generally being pegged to the median level and annual bonus
compensation to the 75th percentile level), it ultimately determines the
appropriate compensation for each position based on the requirements and
characteristics of that position and the knowledge, skills and abilities of the
executive. For Viacom's executive officers as a whole and for Mr. Biondi
specifically, the Committee believes that it has achieved its goal of providing
overall 1993 compensation, and the base salary and annual bonus components, at
the median to 75th percentile level.
    
 
   
  Executive Compensation
    
 
   
     Executive compensation is comprised of base salary, annual bonus
compensation and long-term incentive compensation in the form of stock options
and phantom share awards. Long-term incentive compensation for executive
officers with divisional responsibilities has also included performance share
awards tied to divisional performance.
    
 
   
  Base Salaries
    
 
   
     Base salary levels for executive officers are consistent with competitive
practice and level of responsibility. Base salary levels for the more senior
executive officers are generally set forth in the executives' employment
contracts and increases in their base salary in 1993 were generally made in
accordance with their contracts. Increases in base salary in 1993 for other
senior executives were set consistent with the considerations discussed above
with respect to base salary levels and increases were within the range of
percentages by which the salaries of other senior executives at that level
increased. The employment contracts for Mr. Biondi and the other four named
executive officers are described under "--Employment Contracts".
    
 
   
  Incentive Compensation
    
 
   
  Limits to Tax Deductibility of Executive Compensation
    
 
   
     The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986, as amended, generally limiting to $1,000,000 the
federal tax deductibility of compensation (including stock options) paid to
Viacom's Chief Executive Officer and the four most highly compensated officers,
other than the Chief Executive Officer, starting with the 1994 calendar year.
The tax law change includes an exception to the deduction limitation for
performance-based compensation (including stock-based compensation, such as
stock options), provided such compensation meets certain requirements, including
stockholder approval. The Senior Executive STIP and the New LTMIP have been
designed to comply with this exception. The Senior Executive STIP will provide
objective performance-based annual bonuses for selected executive officers of
Viacom, subject to a maximum limit, starting with the 1994 calendar year.
Long-term incentive compensation for Viacom's executive officers will be
provided under the New LTMIP starting with the 1994 calendar year, primarily
through grants of stock options. The Viacom Board of Directors has adopted, and
is recommending that the stockholders approve, the Senior Executive STIP and the
New LTMIP. Viacom does not expect compensation paid to Viacom's Chief Executive
Officer and the other four most highly compensated officers for 1994 to exceed
the Section 162(m) deductibility limit because of the anticipated stockholder
approval of the Senior Executive STIP and the New LTMIP, the effect of the
"grandfathering" provisions of the tax laws and the deferral of a portion (not
in excess of 15%) of annual cash compensation under Viacom International's
401(k) and excess 401(k) plans. For a description of the Senior Executive STIP
and the New LTMIP, see "--Approval of the Viacom Inc. Senior Executive
Short-Term Incentive Plan" and "--Approval of the Viacom Inc. 1994 Long-Term
Management Incentive Plan" below.
    
 
                                      175

   
  Annual Bonus Compensation
    
 
   
     Annual bonus compensation for Viacom's executive officers from 1989 through
1993 was provided under Viacom International's Short-Term Incentive Plan (the
"STIP"). During each of those calendar years, target levels of annual operating
income and cash flow were established for Viacom as a whole and for each of its
divisions and subsidiaries. Operating income is defined as revenues less
operating expenses (other than depreciation and amortization); cash flow is
defined as operating income (as defined) less cash capital expenditures and
increases or decreases in working capital and in other balance sheet
investments. Historically, the operating income and cash flow goals have
generally been given equal weight. Additional targets have also been established
for specific divisions and subsidiaries. For 1993, operating income and cash
flow goals were given equal weight for Viacom as a whole and were generally
given equal weight for its divisions and subsidiaries.
    
 
   
     The level of achievement of the applicable corporate or divisional goals
determined the aggregate amounts available for funding awards for corporate or
divisional executives; the amounts were subject to upward or downward adjustment
pursuant to a mathematical formula based on the level of achievement and could
exceed 100% of targeted amounts. The aggregate amount available for funding
annual bonuses for executive officers with exclusive corporate responsibilities
was based exclusively on achievement of Viacom's annual financial targets. For
executive officers with divisional responsibilities, most (approximately 80%) of
their annual bonuses (including 1993 bonuses) was based on the aggregate amounts
available for annual bonuses for their particular divisions, which was
determined by the level of achievement of the applicable divisional targets; the
remaining 20% was based on the aggregate amount available for annual bonuses for
corporate executives.
    
 
   
     The Committee approved a specific target bonus for each executive officer
which was expressed as a percentage of his salary. These targets are included in
the executive officers' employment contracts and for the named executive
officers other than Mr. Biondi are described under "--Employment Contracts".
    
 
   
     At the beginning of each calendar year, the executive officers were
assigned individual goals for that year. The goals for executive officers with
divisional responsibilities tended to parallel the applicable divisional goals.
At the end of each calendar year, an assessment was made of each executive
officer's individual performance. If the officer had achieved 100% of his
individual goals, he would receive an award of 100% of his target bonus,
assuming the applicable corporate and/or divisional targets had been fully
achieved. Thus, since the applicable individual and corporate and/or divisional
targets for 1991 and 1992 were both fully met or exceeded, each of the named
executives received at least 100% of their target bonus for those years. The
applicable individual and corporate targets and the targets of each division,
other than the Cable Division, were also fully met or exceeded for 1993 and each
of the named executives, other that Mr. Goddard, received at least 100% of their
target bonus for 1993. In addition, each of such executives also received a
special bonus in recognition of their outstanding personal contributions to such
achievement, as well as their special efforts to effect the Paramount Merger.
Mr. Goddard's 1993 annual bonus reflected the Cable Division's less than 100%
achievement of its targets.
    
 
   
  Long-Term Incentive Compensation
    
 
   
     The Committee believes that the use of equity-based long-term incentive
plans directly links executive interests to enhancing stockholder value.
    
    
     Viacom's first long-term incentive program was provided under the Viacom
Inc. Long-Term Incentive Plan ("LTIP"), established in 1987 after Viacom
International was acquired by NAI. The LTIP was developed with the assistance of
Towers Perrin, an independent consultant. Since it was crucial to the success of
Viacom that it attract and retain the services of experienced executives, the
Committee awarded a single substantial grant of phantom shares to Viacom's
executive officers as of August 1987. The size of the grant to each executive
was within the range assigned to the executive's
                                      176


relative level of responsibility. Payment for most LTIP phantom shares was
accelerated and made in December 1992. The reasons for the acceleration and the
operation of the LTIP are described in more detail below.
    
 
   
     Most subsequent long-term incentive compensation for Viacom's executive
officers has been provided under the five (5) year Viacom Inc. 1989 Long-Term
Management Incentive Plan (the "LTMIP") through annual stock option grants. The
LTMIP was also developed with the assistance of Towers Perrin.
    
 
   
     Payments for phantom shares granted under the LTIP was based on the amount
by which the fair market value of the Viacom Common Stock as of certain
valuation dates exceeded the initial value of the phantom shares on the date of
grant, subject to a $31.23 per share payment limit. These phantom shares had an
average initial value of $19.50. In 1990, Viacom issued a share of Viacom Class
B Common Stock for each share of Viacom Class A Common Stock then outstanding.
As adjusted by the Committee for this stock split, the value of each phantom
share was determined by reference to the combined fair market values of a share
of Viacom Class A Common Stock and a share of Viacom Class B Common Stock. The
first valuation date was December 15, 1992 for 25% of the grant, although a
portion of these phantom shares were valued as of December 15, 1990. The second
valuation date was December 15, 1993 for another 25% and the final valuation
date is December 15, 1994 for the remaining 50%. These phantom shares vested
over the three year period from 1987 through 1990.
    
 
   
     Subsequent minor grants of LTIP phantom shares were made with initial
values set at the fair market value of the Viacom Common Stock at the time of
grant.
    
 
   
     On December 17, 1992, the Committee approved the acceleration of the
valuation and payment to active employees, including Viacom's executive
officers, of the LTIP phantom shares granted as of August 1987 that would
otherwise be valued and paid after the December 15, 1993 and December 15, 1994
valuation dates. Payment for these phantom shares was made in December 1992 at
the same time that payment was made for the LTIP phantom shares with a December
15, 1992 valuation date. The Committee took this action, in part, to preserve
individual and corporate tax benefits which might be lost in the future if
certain announced tax law changes were enacted. The Committee also took this
action because these phantom shares had already reached the $31.23 per share
payment limit, thereby reducing their value as incentives to enhancing
stockholder value, and because the remaining valuation and payment dates (i.e.,
December 15, 1993 and December 15, 1994) were more than six or seven years after
the original grant. For a description of the acceleration of the valuation and
payment of Mr. Biondi's LTIP phantom shares, see "--Chief Executive Officer's
Compensation" below.
    
 
   
     Under the LTMIP, the Committee awarded annual grants of stock options for
Viacom Class B Common Stock to Viacom's executive officers for the years 1990,
1991, 1992 and 1993. The Committee also awarded Mr. Dauman a special one-time
grant of 60,000 stock options for Viacom Class B Common Stock as of February 1,
1993 when he became an executive officer of Viacom and Viacom International. The
exercise price of all of these stock options was set at the fair market value of
the Viacom Class B Common Stock at the time of grant. The grant awarded by the
Committee for 1989 consisted of a combination of stock options and phantom
shares. Included in Messrs. Biondi, Braun, Goddard and Weinstein's 1989 grant
were certain stock options conditioned upon their becoming available from
forfeitures by other participants in the LTMIP. After the 1990 stock split, the
Committee adjusted the phantom shares granted in 1989 in the same manner that it
adjusted the LTIP phantom shares and each stock option granted in 1989 became
exercisable for a share of Viacom Class A Common Stock and a share of Viacom
Class B Common Stock. All of the stock options granted under the LTMIP are
ten-year non-qualified options that become fully exercisable four years after
the grant.
    
    
     The pattern for determining awards to Viacom's executive officers under the
LTMIP was essentially consistent with the pattern developed for the the LTIP
except that (i) each of the five awards to these officers for the 1989 through
1993 period was approximately one-fifth of the size of the 1987 LTIP grants to
executives at their level and (ii) an effort was made to reduce the difference
between the grants
                                      177


at the divisional Chairman level and the grants at the divisional President
level. The 1993 LTMIP awards were generally consistent with the pattern
described above. The amounts therefore reflected the amounts of outstanding
awards, as adjusted for promotions. In addition, from time to time, in
determining the amount of the LTMIP awards, special note was taken of either a
unique competitive situation or extraordinary individual contributions which had
already occurred or were expected in the future. Mr. Dauman's initial LTMIP
grant was thus intended in part, to attract him to Viacom and based, in part, in
recognition of his extraordinary services to Viacom before he became an
executive officer of Viacom.
    
 
   
     In 1993, the Viacom Inc. Long-Term Incentive Plan (Divisional) (the
"Divisional LTIP") was adopted by the Committee. The Divisional LTIP was
developed with the assistance of Frederic W. Cook & Co., Inc. to provide
long-term compensation for divisional executives based on the performance of
their respective divisions. The Divisional LTIP is designed to provide
divisional executives with annual grants of performance shares that vest after
three years. Long-term financial and strategic goals are established by the
Committee for each division or subsidiary at the time the performance shares are
granted. The amount payable for the performance shares is based on the
achievement during the three years of those goals, with the amounts payable
varying directly with the level of achievement. Amounts are payable if certain,
though not all, of the goals are achieved provided certain minimum levels are
achieved.
    
 
   
     The first grant of performance shares under the Divisional LTIP was made in
June 1993 with respect to the three year period that commenced January 1, 1993.
The financial goals included the attainment of specified levels of cumulative
operating income and average return on net assets employed. In addition,
strategic targets were established for specific divisions and subsidiaries. The
Committee established the amounts and terms of these grants. Executive officers
with divisional responsibilities such as Messrs. Braun and Goddard received a
grant under the Divisional LTIP for the three year period that commenced January
1, 1993. The 1992 and 1993 LTMIP grants to these executives were reduced to
reflect their participation in the Divisional Plan. It is expected that long-
term compensation for 1994 and subsequent years for executive officers with
divisional responsibilities will be awarded under the New LTMIP and not under
the Divisional LTIP.
    
 
   
  Chief Executive Officer's Compensation
    
 
   
     Mr. Biondi's compensation package was negotiated in 1987 when he became
President, Chief Executive Officer of Viacom and Viacom International. It
included his initial base salary and 10% annual rate of increase, his guaranteed
annual bonus compensation and a grant of 240,000 LTIP phantom shares. His
employment contract is more fully described under "--Employment Contracts".
    
 
   
     Mr. Biondi's salary increased during 1993 by the stipulated 10%. His 1993
annual bonus reflected full achievement of Viacom's operating income and cash
flow goals for the year. In addition, he received a special bonus in recognition
of his outstanding personal contribution to that achievement, as well as his
special efforts to effect the Paramount Merger. Mr. Biondi's 1993 stock option
award under the LTMIP is consistent with the overall program and is shown in the
Summary Compensation Table.
    
    
     As part of the Committee's approval of the accelerated valuation and
payment of the LTIP phantom shares discussed above, the Committee approved the
December 1992 payment of Mr. Biondi's LTIP phantom shares with December 15, 1993
and December 15, 1994 valuation dates. Payment was made in shares of Viacom
Class B Common Stock with the number of shares based on the fair market value of
the Viacom Class B Common Stock on December 17, 1992. The Committee determined
that payment to Mr. Biondi in stock, rather than cash, was preferable because
Mr. Biondi's LTIP phantom shares, unlike those of other employees, were not
subject to the $31.23 per share payment limit, and the payment in stock would
allow him to continue to benefit from, and would further link his interests to,
increases in stockholder value. As a result of the foregoing, Mr. Biondi
recognized taxable income and Viacom International recognized a corresponding
deduction, of $10,263,600, of which $3,370,053 was withheld as taxes and the
remainder paid as 177,897 shares of Viacom Class B Common Stock, all of
                                      178


which have been retained by Mr. Biondi. Mr. Biondi also received a cash payment
in December 1992 in the amount of $3,421,200 for his LTIP phantom shares with a
December 15, 1992 valuation date.
    
 
   
Sumner M. Redstone, Chairman
George S. Abrams
Philippe P. Dauman*
William C. Ferguson
H. Wayne Huizenga
Ira A. Korff**
Jerome Magner**
Ken Miller
Brent D. Redstone
Frederic V. Salerno***
William Schwartz
Members of the Compensation Committee
    
 
   
- ---------------
    
 
   
  * Mr. Dauman resigned from the Compensation Committee on February 1, 1993 when
    he became an executive officer of Viacom and Viacom International.
    
 
   
 ** Messrs. Korff and Magner resigned on March 15, 1994 when they resigned from
    the Boards of Directors of Viacom and Viacom International.
    
 
   
*** Mr. Salerno became a member of the Compensation Committee when he became a
    director of Viacom and Viacom International on January 27, 1994.
    
 
                                      179

   
                           SUMMARY COMPENSATION TABLE
    
 
   


                                                                            LONG-TERM COMPENSATION
                                                                           -------------------------
                                                                             AWARDS
                                                                           ----------
        NAME AND PRINCIPAL                       ANNUAL COMPENSATION(1)    SECURITIES     PAYOUTS
           POSITION AT                         --------------------------  UNDERLYING  -------------    ALL OTHER
        END OF FISCAL 1993            YEAR        SALARY        BONUS      OPTIONS(2)  LTIP PAYOUTS   COMPENSATION(3)
- ----------------------------------  ---------  ------------  ------------  ----------  -------------  --------------
                                                                                    
Frank J. Biondi, Jr. .............       1993  $  1,010,904  $  1,600,000      90,000              0    $   65,180
  President, Chief Executive             1992       922,045     1,000,000      90,000  $  13,684,800(4)     46,032
  Officer of Viacom and Viacom           1991       835,151       900,000      90,000              0        --
  International
Neil S. Braun.....................       1993  $    552,115  $    450,000      30,000  $      39,038    $   24,788
  Senior Vice President of Viacom        1992       456,130       375,000      30,000      2,037,485(5)     16,275
  and Viacom International;              1991       414,087       320,000      36,000              0        --
  Chairman, Chief Executive
  Officer of the Viacom
  Entertainment Group*
Philippe P. Dauman................       1993  $    553,846  $    900,000     120,000***             0            0
  Senior Vice President, General
  Counsel and Secretary of Viacom
  and Viacom International**
John W. Goddard...................       1993  $    562,154  $    500,000      40,500              0    $   26,500
  Senior Vice President of Viacom        1992       513,923       764,664      40,500  $   4,028,670(5)     32,362
  and Viacom International;              1991       474,228       708,000      54,000              0        --
  President, Chief Executive
  Officer of the Viacom Cable
  Television Division
Mark M. Weinstein.................       1993  $    493,039  $    450,000      30,000              0    $   23,538
  Senior Vice President,                 1992       368,538       225,000      30,000  $   2,014,335(5)     15,118
  Government Affairs of Viacom and       1991       337,038       300,000      27,000              0        --
  Viacom International

    
 
- ---------------
 
   
        
        *  On March 17, 1994, Mr. Braun relinquished his responsibilities as Chairman, Chief Executive Officer of the
           Viacom Entertainment Group. Mr. Braun has informed Viacom that he intends to resign as an executive officer
           of Viacom and Viacom International effective June 30, 1994.
       **  On March 15, 1994, Mr. Dauman became Executive Vice President, General Counsel, Chief Administrative Officer
           and Secretary of Viacom and Viacom International.
      ***  Mr. Dauman received two grants in 1993: a special one-time grant of 60,000 options for Viacom Class B Common
           Stock as of February 1, 1993 when he joined Viacom and a regular grant of 60,000 options for Viacom Class B
           Common Stock as of August 1, 1993. See Option Grant Table below.


    
 
   
NOTES:
    
 
   
(1) For 1993, salary and bonus includes compensation deferred under Viacom
    International's 401(k) and excess 401(k) plans for Mr. Biondi in the amount
    of $253,285, for Mr. Braun in the amount of $150,000, for Mr. Goddard in the
    amount of $53,000 and for Mr. Weinstein in the amount of $47,044.
    
 
   
(2) In addition, conditions relating to certain options granted in 1989 were met
    as follows: for Mr. Biondi for 834 options in 1993, 373 options in 1992 and
    1,189 options in 1991; for Mr. Braun for 334 options in 1993, 149 options in
    1992 and 475 options in 1991; for Mr. Goddard for 667 options in 1993, 299
    options in 1992 and 951 options in 1991; and for Mr. Weinstein for 334
    options in 1993, 149 options in 1992 and 475 options in 1991. These options
    are more fully described above in the "Compensation Committee Report on
    Executive Compensation".
    
 
(3) Includes the following: Viacom International's matching contributions under
    its 401(k) plan for Mr. Biondi of $4,497 for 1993 and $3,491 for 1992; for
    Mr. Braun of $1,375 for 1993 and $1,374 for 1992; and for each of Messrs.
    Goddard and Weinstein of $4,497 for 1993 and $4,364 for 1992; and credits
    for
                                         (Footnotes continued on following page)
 
                                      180

(Footnotes continued from preceding page)
   
    Viacom International's matching contributions under its excess 401(k) plan
    for Mr. Biondi of $60,682 for 1993 and $42,541 for 1992; for Mr. Braun of
    $23,413 for 1993 and $14,901 for 1992; for Mr. Goddard of $22,003 for 1993
    and $27,998 for 1992; and for Mr. Weinstein of $19,041 for 1993 and $10,754
    for 1992. Disclosure regarding these items is not required for calendar year
    1991.
    
   
(4) Consists of: $3,421,200 paid in cash for Mr. Biondi's LTIP phantom shares
    with a December 1992 valuation date; and 177,897 shares of Viacom Class B
    Common Stock valued on December 17, 1992 and $3,370,053 which was withheld
    as taxes for his LTIP phantom shares for which the valuation and payment was
    accelerated. Mr. Biondi's LTIP payout is more fully described above in the
    "Compensation Committee Report on Executive Compensation".
    
   
(5) Represents substantially all amounts payable with respect to the LTIP
    phantom shares granted to the named executives. Includes payment for the
    LTIP phantom shares with a December 1992 valuation date, as well as the
    accelerated payment of the LTIP phantom shares with future valuation dates.
    The amount payable for their LTIP phantom shares was the $31.23 per share
    payment limit (except for certain minor grants made after 1987). The LTIP
    payouts are more fully described above in the "Compensation Committee Report
    on Executive Compensation".
    
 
   
                          OPTION GRANTS IN FISCAL 1993
    
   
     The following Option Grant Table includes columns designated "Potential
Realizable Gain". The calculations in those columns are based on hypothetical 5%
and 10% growth assumptions proposed by the Securities and Exchange Commission.
There is no way to anticipate what the actual growth rate of the Viacom Class B
Common Stock will be.
    
   

                                                                                                    POTENTIAL REALIZABLE
                                                          INDIVIDUAL GRANTS                        GAIN AT ASSUMED ANNUAL
                                      ----------------------------------------------------------    RATES OF STOCK PRICE
                                      NUMBER OF SHARES    % OF TOTAL                              APPRECIATION FOR OPTION
                                      OF VIACOM CLASS B     OPTIONS                                   TERM COMPOUNDED
                                        COMMON STOCK      GRANTED TO     EXERCISE                       ANNUALLY(1)
                                         UNDERLYING      EMPLOYEES IN      PRICE     EXPIRATION   ------------------------
    NAME                                   OPTIONS        FISCAL 1993    ($/SHARE)      DATE          5%           10%
- ------------------------------------  -----------------  -------------  -----------  -----------  -----------  -----------
                                                                                             
Frank J. Biondi, Jr. ...............         90,000(2)         10.74%    $  55 1/4     7/31/2003  $ 3,127,180  $ 7,924,885
Neil S. Braun.......................         30,000(2)          3.58%       55 1/4     7/31/2003    1,042,395    2,641,630
Philippe P. Dauman..................         60,000(3)          7.16%       43 1/4     1/31/2003    2,084,785    5,283,255
                                             60,000(2)          7.16%       55 1/4     7/31/2003    1,631,980    4,135,760
John W. Goddard.....................         40,500(2)          4.83%       55 1/4     7/31/2003    1,407,230    3,566,200
Mark M. Weinstein...................         30,000(2)          3.58%       55 1/4     7/31/2003    1,042,395    2,641,628

    
 
- ---------------
   
NOTES:
    
   
(1) The total potential gain for all five named executives over the ten year
    term of the options listed in the table would be 37/100 of one percent of
    the total gain in the Viacom Class B Common Stock value. If the Viacom Class
    B Common Stock value were to appreciate 5% over the ten year term of the
    options, the value of all shares of Viacom Class B Common Stock owned by
    Viacom's stockholders would grow from $3.7 billion to $6.1 billion, a gain
    of $2.4 billion. If it were to appreciate 10%, the value of all outstanding
    shares of Viacom Class B Common Stock would grow from $3.7 billion to $9.7
    billion, a gain of $6 billion.
    
   
(2) These options, which were granted as of August 1, 1993, will vest in
    one-third increments on August 1, 1995, August 1, 1996 and August 1, 1997.
    In addition, conditions relating to certain options granted in 1989 were met
    in 1993 as follows: for Mr. Biondi for 834 options; for Mr. Braun for 334
    options; for Mr. Goddard for 667 options; and for Mr. Weinstein for 334
    options. These options are more fully described above in the "Compensation
    Committee Report on Executive Compensation".
    
 
   
(3) These options, which were granted to Mr. Dauman as of February 1, 1993 when
    he joined Viacom will vest in one-third increments on August 1, 1994, August
    1, 1995 and August 1, 1996. These options are more fully described above in
    the "Compensation Committee Report on Executive Compensation".
    
                                      181

   
                   AGGREGATED OPTION EXERCISES IN FISCAL 1993
                   AND VALUE OF OPTIONS AT END OF FISCAL 1993
    
 
   


                                                                    NUMBER OF SECURITIES(1)
                                                                     UNDERLYING UNEXERCISED       VALUE OF UNEXERCISED
                                                                       OPTIONS AT END OF        IN-THE-MONEY OPTIONS AT
                                          SHARES                          FISCAL 1993              END OF FISCAL 1993
                                        ACQUIRED ON      VALUE     --------------------------  --------------------------
    NAME                                 EXERCISE      REALIZED    EXERCISABLE  NONEXERCISABLE EXERCISABLE  NONEXERCISABLE
- -------------------------------------  -------------  -----------  -----------  -------------  -----------  -------------
                                                                                          
Frank J. Biondi, Jr. ................          -0-           -0-      138,000       270,000    $ 2,770,500   $ 2,823,750
Neil S. Braun........................          -0-           -0-       56,000        96,000      1,122,500     1,051,500
Philippe P. Dauman...................          -0-           -0-            0       120,000              0        97,500
John W. Goddard......................          -0-           -0-       84,000       135,000      1,683,750     1,518,750
Mark M. Weinstein....................          -0-           -0-       42,000        87,000        841,875       886,125

    
 
- ---------------
 
   
NOTE:
    
 
   
(1) Options listed below are for shares of Viacom Class B Common Stock except
    that exercisable options include for Mr. Biondi 24,000 options each for a
    share of Viacom Class A Common Stock and a share of Viacom Class B Common
    Stock, for Mr. Braun 10,000 of such options, for Mr. Goddard 15,000 of such
    options and for Mr. Weinstein 7,500 of such options; the aggregate number of
    exercisable options includes two underlying securities for each of these
    options.
    
 
   
                           LONG-TERM INCENTIVE PLANS
                             AWARDS IN FISCAL 1993
    
 
   


                                           NUMBER OF                                   ESTIMATED FUTURE PAYOUTS
                                          PERFORMANCE    PERFORMANCE PERIOD   ------------------------------------------
     NAME                                   SHARES      UNTIL MATURATION(1)    THRESHOLD     TARGET(2)     MAXIMUM(3)
- ---------------------------------------  -------------  --------------------  ------------  -----------  ---------------
                                                                                          
Frank J. Biondi, Jr. ..................            0             --                --           --             --
Neil S. Braun..........................        6,875(4)   1/1/93-12/31/95     $  24,062.50      --             --
Philippe P. Dauman.....................            0             --                --           --             --
John W. Goddard........................        5,600(5)   1/1/93-12/31/95         (5)           --             --
Mark M. Weinstein......................            0             --                --           --             --

    
 
- ---------------
 
   
NOTES:
    
 
   
(1) These performance shares vest at the end of the three-year performance
    period. They are more fully described above in the "Compensation Committee
    Report on Executive Compensation".
    
 
   
(2) The value of the performance shares will be determined by reference to the
    performance criteria.
    
 
   
(3) There is no maximum since the value of the performance shares can increase
    without limit pursuant to the formula established under the performance
    criteria.
    
 
   
(4) The performance criteria for determining the value of Mr. Braun's shares was
    based 50% on measuring Viacom Entertainment's cumulative operating income
    over the three-year period and 50% on the achievement during the three-year
    period of certain performance criteria which were targeted as key items in
    executing Viacom Entertainment's strategic plan.
    
 
   
(5) The performance criteria applicable to Mr. Goddard's performance shares is
    being adjusted by the Compensation Committee to reflect regulatory changes
    applicable to the Viacom Cable Division.
    
 
                                      182

   
                               PENSION PLAN TABLE
    
 
   


                                                                         YEARS OF SERVICE
                                                  ---------------------------------------------------------------
    REMUNERATION                                      15           20           25           30           35
- ------------------------------------------------  -----------  -----------  -----------  -----------  -----------
                                                                                       
$  50,000.......................................  $     9,546  $    12,728  $    15,911  $    18,297  $    20,684
100,000.........................................       20,796       27,728       34,661       39,860       45,059
200,000.........................................       43,296       57,728       72,161       82,985       93,809
300,000.........................................       65,796       87,728      109,661      126,110      142,559
400,000.........................................       88,296      117,728      147,161      169,235      191,309
500,000.........................................      110,796      147,728      184,661      212,360      240,059
600,000.........................................      133,296      177,728      222,161      255,485      288,809
700,000.........................................      155,796      207,728      259,661      298,610      337,559
800,000.........................................      178,296      237,728      297,161      341,735      386,309
900,000.........................................      200,796      267,728      334,661      384,860      435,059
1,000,000.......................................      223,296      297,728      372,161      427,985      483,809
1,100,000.......................................      245,796      327,728      409,661      471,110      532,559
1,200,000.......................................      268,296      357,728      447,161      514,235      581,309
1,300,000.......................................      290,796      387,728      484,661      557,360      630,059

    
 
   
     Under the Viacom Pension Plan, and the Viacom Excess Pension Plan for
certain higher compensated employees, an eligible employee will receive a
benefit at retirement that is based upon the employee's number of years of
benefit service and average annual salary (salary as set forth in the Summary
Compensation Table) for the highest 60 consecutive months out of the final 120
months. The benefits under the Viacom Excess Pension Plan are not subject to the
Internal Revenue Code provisions that limit the compensation subject to benefits
under the Viacom Pension Plan. The number of years of benefit service that have
been credited for Messrs. Biondi, Braun, Goddard and Weinstein are approximately
6.6, 5, 27 and 8, respectively. Mr. Dauman has been credited with one year of
service under the Viacom Pension Plan; however, the benefits payable under the
Viacom Excess Pension Plan shall be calculated as though he had ten years of
credited service. The foregoing table illustrates, for representative average
annual pensionable compensation and years of benefit service classifications,
the annual retirement benefit payable to employees under the Plans upon
retirement in 1993 at age 65, based on the straight-life annuity form of benefit
payment and not subject to deduction or offset.
    
 
                                      183

   
                               PERFORMANCE GRAPH
    
 
   
     The following graph compares the cumulative total stockholder return on the
Viacom Class A Common Stock and, as of June 18, 1990, the Viacom Class B Common
Stock with the cumulative total return on the companies listed in the Standard &
Poor's 500 Stock Index and a Peer Group* of companies (identified below). The
total return data was obtained from Standard & Poor's Compustat Services, Inc.,
which first reported trading activity for the Viacom Class B Common Stock on
June 18, 1990.
    
 
   

                              VIACOM COMMON STOCK
                   CUMULATIVE TOTAL STOCKHOLDERS RETURN FOR
                   FIVE-YEAR PERIOD ENDED DECEMBER 31, 1993

 December 31...

 VIACOM CLASS A    100.00    184.74    166.78    217.61    279.56    310.54
 VIACOM CLASS B                        159.33    220.80    270.94    290.35
 S&P 500           100.00    131.59    127.49    166.17    178.81    196.75
 PEER GROUP        100.00    135.32    101.66    131.76    167.40    243.51

    
 
     Effective June 13, 1990, one share of Viacom Class B Common Stock was
issued for each share of Viacom Class A Common Stock then outstanding. The
Viacom Class B Common Stock has rights, privileges, restrictions and
qualifications identical to the Viacom Class A Common Stock except that shares
of Viacom Class B Common Stock have no voting rights other than those required
by law. As of April 1, 1994, NAI owned 45,547,214 shares or 85.2% of the Viacom
Class A Common Stock and 45,565,414 shares or 51.7% of the Viacom Class B Common
Stock. Sumner M. Redstone, the controlling stockholder of NAI, is the Chairman
of the Board of Viacom, Viacom International and Paramount.
 
   
     The performance graph assumes $100 invested on December 31, 1988 in each of
the Viacom Class A Common Stock, the S&P 500 Index, and the Peer Group*,
including reinvestment of dividends, through the fiscal year ended December 31,
1993. The cumulative total stockholder return on the Viacom Class B Common Stock
assumes the investment in Viacom Class B Common Stock as of June 18, 1990 (the
first date on which the Viacom Class B Common Stock was publicly traded) of an
amount equal to the cumulative total stockholder return on the Viacom Class A
Common Stock as of that date ($176.31).
    
 
- ---------------
 
   
* The Peer Group consists of the following companies: BHC Communications, Inc.;
  Cablevision Systems Corp.; Capital Cities/ABC, Inc.; CBS Inc.; Comcast;
  Gaylord Entertainment Co.; King World Productions Inc.; Liberty Media;
  Multimedia, Inc.; Paramount; Spelling Entertainment; Tele-Communications,
  Inc.; The News Corp. Ltd. (ADRs); Time Warner Inc.; and Turner Broadcasting
  System Inc. As a result of the Paramount Merger and the anticipated
  Blockbuster Merger, it is likely that the composition of the peer   group
  included in the Performance Graph will be reviewed and adjusted for subsequent
  years.
    
 
                                      184

   
EMPLOYMENT CONTRACTS
    
 
   
     It is expected that a new employment contract will be entered into shortly
with Mr. Biondi to reflect his new responsibilities as a result of the Paramount
Merger as the President, Chief Executive Officer of Viacom. Mr. Biondi's current
contract provided that he will be employed as President, Chief Executive Officer
of Viacom International until July 31, 1995 at a base salary of $966,000 for the
contract year that ended July 31, 1993 and $1,063,000 for the following contract
year, with an increase for the last annual period of not less that 10%. His
current contract also provided that he would receive guaranteed bonus
compensation for the contract year that ended July 31, 1993 of not less than
$465,850, with 10% annual increases for the two succeeding contract years. Mr.
Biondi's current contract provides that, in the event of a change in control of
Viacom or Viacom International, he can terminate his contract upon the earlier
of one year after the change in control or the last day of the term of his
contract and receive his guaranteed bonus compensation for the contract year in
which termination occurs pro-rated to the date of termination. Viacom
International's obligations under this contract are guaranteed by Viacom.
    
 
   
     Mr. Braun's contract currently provides that he will be employed as an
executive of Viacom International until December 31, 1995, at a base salary of
$550,000 for calendar year 1993, with $50,000 annual increases for the two
succeeding calendar years. For the 1993, 1994 and 1995 calendar years, his
target bonus is set at 75% of his base salary at the end of each year and his
STIP bonus compensation shall not be less than 50% of his base salary at that
time. Mr. Braun has informed Viacom that he intends to exercise his contractual
right to resign effective June 30, 1994. He will continue to receive his current
salary and guaranteed STIP bonus compensation through December 31, 1995.
    
 
   
     Mr. Dauman became Executive Vice President, General Counsel, Chief
Administrative Officer and Secretary of Viacom and Viacom International on March
15, 1994. Previously, he had served as Senior Vice President, General Counsel
and Secretary of Viacom and Viacom International since February 1, 1993. It is
expected that his employment contract will be amended shortly to reflect his new
responsibilities. Mr. Dauman's contract currently provides that he will be
employed as an executive of Viacom International until January 31, 1998, at a
salary of $600,000 for the contract year ending January 31, 1994, with annual
increases of not less than 10%. Currently, for the 1993 through 1997 calendar
years, his target bonus is set at 100% of his base salary at the end of each
year and his STIP bonus compensation shall not be less than 75% of his base
salary at that time.
    
 
   
     Mr. Goddard's contract provides that he will be employed as an executive of
Viacom International until December 31, 1994 at an annual base salary of
$560,000 for the 1993 calendar year and $610,000 for the 1994 calendar year. Mr.
Goddard's contract provides that his target bonus for each calendar year shall
be 100% of his base salary at the end of each year.
    
 
   
     Mr. Weinstein became Senior Vice President, Government Affairs of Viacom
and Viacom International on February 1, 1993. His contract was amended in 1993
to reflect his new responsibilities. As amended, his contract provides that he
will be employed as an executive of Viacom International until December 31,
1997, at a salary of $500,000 for the contract year that began February 1, 1993,
with $50,000 annual increases on each February 1st during the employment term.
For calendar years 1993 through 1997, his target bonus is set at 75% of his base
salary at the end of each year and his STIP bonus compensation shall not be less
than 56.25% of his base salary at that time.
    
 
                                      185

   
APPROVAL OF THE VIACOM INC. SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN
    
 
   
     The Viacom Board of Directors adopted the Senior Executive STIP on March
31, 1994, subject to the approval of the Senior Executive STIP by the
affirmative vote of the holders of a majority of the shares of Viacom Class A
Common Stock represented in person or by proxy and entitled to vote at the
Viacom Annual Meeting. The Board recommends that the stockholders approve the
Senior Executive STIP. Viacom has been advised that NAI intends to vote all of
its shares of Viacom Class A Common Stock for the approval of the Senior
Executive STIP. Such vote will be sufficient to approve the Senior Executive
STIP without any action on the part of any other stockholder of Viacom.
    
 
   
  STIP Generally
    
 
   
     The following description of the material features of the Senior Executive
STIP is qualified in its entirety by the full text of the Senior Executive STIP,
as set forth in Exhibit A to this Proxy Statement/Prospectus. The Senior
Executive STIP will provide objective performance-based annual bonuses for
selected senior executives of Viacom, subject to a maximum limit, starting with
the 1994 calendar year, as described in more detail below. Amounts paid under
the Senior Executive STIP are intended to qualify as "performance-based
compensation" which is excluded from the $1,000,000 limit on deductible
compensation set forth in Section 162(m) of the Code.
    
 
   
  Administration
    
 
   
     The Senior Executive STIP is administered by the Compensation Committee,
which is authorized to approve awards to selected executive officers (the
"Participants") at the level of Senior Vice President of Viacom or above.
Approximately eight officers are expected to participate in the Senior Executive
STIP annually. The Compensation Committee must be comprised of at least three
directors, each of whom must be an "outside director" within the meaning of
Section 162(m) of the Code.
    
 
   
  Awards
    
 
   
     Prior to the commencement of each calendar year, the Compensation Committee
will establish performance criteria and target awards for each Participant,
except that, as permitted by Section 162(m) of the Code, the performance
criteria and target awards for 1994 were established on March 31, 1994.
    
 
   
     The performance criteria relate to the achievement of annual financial
goals. Those goals are based on the attainment of specified levels of operating
income and/or cash flow for Viacom as a whole. The awards for Participants with
exclusive corporate responsibilities are based on achievement of Viacom's
financial performance criteria. The awards for Participants with
responsibilities for Viacom's divisions and/or subsidiaries is also based on the
achievement of performance criteria established by the Compensation Committee
for such divisions and/or subsidiaries. Such criteria relate to operating income
and/or cash flow levels for such divisions and/or subsidiaries and, in the case
of the Viacom Cable Division, also relate to the attainment of specified levels
of "customer months" and "ancillary revenues". For this purpose, "operating
income" means revenues less operating expenses (other than depreciation and
amortization) and "cash flow" means "operating income" less cash capital
expenditures and increases or decreases in working capital and in other balance
sheet investments. "Customer months" means the number of months for which
customers were billed for services other than premium, pay-per-view and
ancillary services and "net ancillary revenues" means revenues from premium,
pay-per-view and ancillary services less operating costs.
    
 
   
     The total of all awards to any Participant for any calendar year shall not
exceed the amount determined by multiplying such Participant's base salary in
effect on March 31, 1994 by a factor of six (6). In the case of a Participant
hired after March 31, 1994, the Participant's salary for this purpose shall be
the Participant's base salary on the date of hire. The base salaries of the
President, Chief Executive Officer and the other four named executive officers
are disclosed under "--Employment Contracts" above.
    
 
                                      186

   
     At the end of each performance year, the Compensation Committee will
certify whether the performance criteria have been achieved; if so, the awards
have been earned, subject to the Compensation Committee's right, in its sole
discretion, to reduce the amount of the award to any Participant to reflect the
Compensation Committee's assessment of the Participant's individual performance
or for any other reason. These awards are payable in cash as soon as practicable
thereafter.
    
 
   
     To receive payment of an award, the Participant must have remained in the
continuous employ of Viacom or its subsidiaries through the end of the
applicable performance period. If Viacom or any subsidiary terminates a
Participant's employment other than for "cause" or a Participant becomes
"permanently disabled" or dies during a performance period, such Participant or
his estate shall be awarded, unless his employment contract provides otherwise,
a pro rata portion of the award for such performance period, subject to the
Compensation Committee's right, in its sole discretion, to reduce the amount of
such award to reflect the Compensation Committee's assessment of such
Participant's individual performance prior to the termination of such
Participant's employment, such Participant's becoming permanently disabled or
such Participant's death, as the case may be, or for any other reason.
    
 
   
  Adjustments
    
 
   
     In the event that, during a performance period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin off,
combination, liquidation, dissolution, sale of assets, or other similar
corporate transaction or event, or any extraordinary event, or any other event
which distorts the applicable performance criteria occurs involving Viacom or a
subsidiary or division thereof, the Compensation Committee shall adjust or
modify, as determined by the Compensation Committee in its sole and absolute
discretion, the calculation of operating income and/or cash flow, or the
applicable performance goals, to the extent necessary to prevent reduction or
enlargement of Participants' awards for such performance period attributable to
such transaction or event.
    
 
   
     The performance goals established for 1994 relate to the achievement of
specified levels of operating income and cash flow for Viacom and certain
divisions of Viacom International, without giving effect to the Paramount or
Blockbuster Mergers. Pursuant to this authorization, the Compensation Committee
will adjust the 1994 performance criteria to reflect the Paramount and
Blockbuster Mergers.
    
 
   
  Transfer Restrictions, Etc.
    
 
   
     The rights of a Participant with respect to awards under the Senior
Executive STIP are not transferable by the Participant other than by will or the
laws of descent and distribution. No award under the Senior Executive STIP will
be construed as giving any employee a right to continued employment with Viacom.
    
 
   
  STIP Amendment
    
 
   
     The Viacom Board of Directors may at any time alter, amend, suspend or
terminate the Senior Executive STIP in whole or in part.
    
 
   
APPROVAL OF THE VIACOM INC. 1994 LONG-TERM MANAGEMENT INCENTIVE PLAN
    
 
   
     The Viacom Board of Directors adopted the LTMIP on May 26, 1994, subject to
the approval of the LTMIP by the affirmative vote of the holders of a majority
of the shares of Viacom Class A Common Stock represented in person or by proxy
and entitled to vote at the Viacom Annual Meeting. The Board recommends that the
stockholders approve the LTMIP. Viacom has been advised that NAI intends to vote
all of its shares of Viacom Class A Common Stock for the approval of the LTMIP.
Such vote will be sufficient to approve the LTMIP without any action on the part
of any other stockholder of Viacom.
    
 
                                      187

   
  LTMIP Generally
    
 
   
     The following description of the material features of the LTMIP is
qualified in its entirety by the full text of the LTMIP, as set forth in Exhibit
B to this Proxy Statement/Prospectus. The purpose of the LTMIP is to benefit and
advance the interests of Viacom by rewarding certain key employees for their
contributions to the financial success of Viacom and to motivate such employees
to continue to do so in the future. This goal is imperative in light of Viacom's
recent acquisition of Paramount and its anticipated merger with Blockbuster.
    
 
   
     The LTMIP provides for grants of stock options to purchase shares of Viacom
Class B Common Stock ("Stock Options"), stock appreciation rights ("SARs"),
restricted shares of Viacom Class B Common Stock ("Restricted Shares") and
phantom shares ("Phantom Shares"), the terms and conditions of which are
described in more detail below. Approximately   key employees of Viacom are
eligible for grants under the LTMIP. Compensation relating to awards under the
LTMIP is generally intended to qualify as "performance-based compensation" which
is excluded from the $1,000,000 limit on deductible compensation set forth in
Section 162(m) of the Code.
    
 
   
     The maximum aggregate number of shares of Viacom Class B Common Stock that
may be granted under the LTMIP (whether reserved for issuance upon grants of
Stock Options or SARs or granted as Restricted Shares) is             . Shares
of Viacom Class B Common Stock covered by expired or terminated Stock Options or
SARs and Restricted Shares that are forfeited under the terms of the LTMIP will
not be counted in applying such limit on grants under the LTMIP. The maximum
aggregate number of (i) shares of Viacom Class B Common Stock that may be
granted under the LTMIP subject to the Stock Options or SARs or granted as
Restricted Shares and (ii) Phantom Shares that may be granted under the LTMIP to
any employee at the level of Senior Vice President of Viacom or above during any
calendar year is                . The fair market value of a share of Viacom
Class B Common Stock was $        as of May   , 1994. Grants under the LTMIP are
authorized by the Compensation Committee in its sole discretion. For this reason
it is not possible to determine the benefits or amounts that will be received by
any particular employees or group of employees in the future.
    
 
   
  Administration
    
 
   
     The LTMIP is administered by the Compensation Committee, which is
authorized to select from among the group of eligible employees, those
individuals (the "Participants") who are to receive grants under the LTMIP. The
Compensation Committee must be comprised of at least three directors, each of
whom must be a disinterested person within the meaning of Rule 16b-3 of the
Exchange Act.
    
 
   
  Stock Options
    
 
   
     Stock Options granted under the LTMIP will be either incentive stock
options ("Incentive Stock Options") or options that do not qualify as Incentive
Stock Options for federal income tax purposes ("Non-Qualified Stock Options"),
as determined by the Compensation Committee. The LTMIP further empowers the
Compensation Committee, subject to certain limits described below, to determine
the exercise price of Stock Options granted under the LTMIP, the vesting
schedule applicable to such Stock Options and the period during which they can
be exercised. The per share exercise price of Stock Options granted under the
LTMIP cannot be, with respect to Nonqualified Stock Options, less than 50% and,
with respect to Incentive Stock Options, less than 100% of the fair market value
of a share of Viacom Class B Common Stock on the date of grant. No Stock Option
granted under the LTMIP can be exercised less than six months after the date of
grant or more than ten years after the date of grant. Each share of Viacom Class
B Common Stock purchased through the exercise of a Stock Option must be paid in
full at the time of exercise in cash or, in the discretion of the Compensation
Committee, in shares of Viacom Class B Common Stock (or other Viacom securities
designated by the Compensation Committee) or in a combination of cash and shares
(or such other securities).
    
 
                                      188

   
     If the Participant's employment terminates for any reason other than death
or for "cause", his Stock Options cannot be exercised more than three months
after the date of such termination. In the event of a Participant's death, his
Stock Options may be exercised to the extent exercisable at the date of death by
the person who acquired the right to exercise such Stock Options by will or the
laws of descent and distribution for one year after such death (or such longer
period as may, in a special case, be fixed by the Compensation Committee) but
not beyond the expiration date of such Stock Options. In the event of a
Participant's permanent disability, he may exercise his Stock Options to the
extent exercisable at the onset of such disability for one year after such date
but not beyond the expiration date of such Stock Options. If a Participant's
employment is terminated for "cause", then, unless the Compensation Committee
determines otherwise, all Stock Options (whether or not then vested) will be
forfeited by the Participant effective as of the date of such termination.
    
 
   
  SARs
    
 
   
     The Compensation Committee may grant SARs only in tandem with Stock
Options, either at the time of grant or by amendment at any time prior to the
exercise, expiration or termination of such Stock Options. Each SAR entitles the
holder to surrender the related Stock Option in lieu of exercise for an amount
equal to the excess of the fair market value of the share of Viacom Class B
Common Stock subject to the Stock Option over the Stock Option exercise price.
This amount will be paid in cash or, in the discretion of the Compensation
Committee, in shares of Viacom Class B Common Stock (or other Viacom securities
designed by the Compensation Committee) or in a combination of cash and shares
(or such other securities). No Stock Appreciation Right can be exercised unless
the related Stock Option is then exercisable.
    
 
   
  Restricted Shares
    
 
   
     Restricted Shares granted under the LTMIP will be subject to a vesting
schedule established by the Compensation Committee; provided, that no Restricted
Shares shall vest until at least six months after the date of grant. The
Compensation Committee may, in its discretion, accelerate the dates on which
Restricted Shares vest. Stock certificates representing the number of Restricted
Shares granted to a Participant under the LTMIP will be registered in the
registrant's name as of the date of grant but remain held by Viacom. The
Participant will have all rights as a holder of such shares of Viacom Class B
Common Stock except that (i) the Participant will not be entitled to delivery of
such certificates until the shares represented thereby have vested, (ii) the
Restricted Shares cannot be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of until such shares have vested, and (iii) if the
Participant's employment terminates for any reason or, in the event of the
Participant's death, retirement or permanent disability, the Restricted Shares
will be forfeited as of the date of such event (unless, in a special case, the
Compensation Committee determines otherwise with respect to some or all of the
unvested Restricted Shares).
    
 
   
  Phantom Shares
    
 
   
     The value of the Phantom Shares granted under the LTMIP is determined by
reference to the fair market value of a share of Viacom Class B Common Stock and
cash payments are made with respect to such Phantom Shares based, subject to any
applicable limit on the maximum amount payable, on any increase in value
("appreciation value") determined as of certain valuation dates over their
"initial value". The LTMIP empowers the Compensation Committee to determine the
initial value of the Phantom Shares as of the date of grant; provided, that the
initial value of a Phantom Share shall not be less than 50% of the average fair
market value of a share of Viacom Class B Common Stock over the 30-day period
ending on the date of grant. The LTMIP further empowers the Compensation
Committee to determine the valuation dates (not later than the eighth
anniversary of the date of grant) applicable to a grant of Phantom Shares, the
period (not in excess of five years from the date of grant) during which the
Phantom Shares vest and any limit on the maximum amount of appreciation value
payable for the Phantom Shares granted under the LTMIP.
    
 
                                      189

   
     If a Participant's employment terminates for any reason other than for
"cause" or, in the event of the Participant's death, retirement or permanent
disability, then, unless the Compensation Committee determines otherwise, the
cash payments for such Participant's Phantom Shares will be the lesser of the
appreciation value determined as of the date of such termination or event or as
of the originally scheduled valuation dates and such payments will be made after
the originally scheduled valuation dates. All rights with respect to Phantom
Shares that are not vested as of the date of such termination or event, as the
case may be, will be relinquished by the Participant. If a Participant's
employment is terminated for "cause" all Phantom Shares (whether or not vested)
will be forfeited by the Participant.
    
 
   
  Adjustments
    
 
   
     In the event of certain "Reorganization Events" (as defined in the LTMIP)
affecting Viacom, the Compensation Committee will take one of the following
actions (determined in its sole discretion), unless a given Participant agrees
otherwise. With respect to Stock Options, SARs and Restricted Shares, the
Compensation Committee will (1) cause the surviving entity or new owner of
Viacom to adopt the LTMIP and outstanding agreements (subject to equitable
adjustment as specified in the LTMIP), (2) cause the surviving entity or new
owner to grant substitute stock options, stock appreciation rights or restricted
shares with an equivalent value, (3) solely with respect to outstanding Stock
Options, provide for payment upon their termination or cancellation in cash or
securities equal to the excess of the fair market value of the shares of Viacom
Class B Common Stock subject to such Stock Options over the aggregate exercise
price of such Stock Options, or (4) accelerate the vesting dates of outstanding
Stock Options, SARs and Restricted Shares. With respect to Phantom Shares
granted pursuant to the LTMIP, the Compensation Committee will (1) cause the
surviving entity or new owner of Viacom to adopt the LTMIP and outstanding
agreements (subject to certain equitable adjustments specified in the LTMIP), or
(2) determine the appreciation value of Phantom Shares with reference to the
consideration to be paid for the Viacom Class B Common Stock in the
Reorganization Event and modify the LTMIP and outstanding agreements, if
appropriate, to provide that payments will be based on the appreciation value of
the Phantom Shares as so determined. If, however, the Compensation Committee
determines that the previous actions would be a material impediment to the
Reorganization Event, the Compensation Committee is authorized to take such
other action as it deems equitable and appropriate to provide each Participant
with a benefit equivalent to that which he would have received had the
Reorganization Event not occurred. In the event a division or subsidiary of
Viacom is acquired by another entity or Viacom is dissolved, liquidated or
reorganized other than in a Reorganization Event, or the Viacom Board of
Directors proposes any of such transactions or events, the Compensation
Committee is also authorized to make such adjustments, if any, as it determines
are equitable or appropriate to provide each Participant with a benefit
equivalent to that to which he would have been entitled had such transaction or
event not occurred.
    
 
   
     In the event of a stock dividend or split or certain other changes in the
capital structure of Viacom which affect the Viacom Class B Common Stock, the
Compensation Committee will, in its discretion, make any of the following
adjustments to provide each Participant with a benefit equivalent to the benefit
to which he would have been entitled had such event not occurred: (i) adjust the
number of shares of Viacom Class B Common Stock subject to Stock Options or SARs
or the number of Restricted Shares or Phantom Shares granted to each
Participant, (ii) adjust the exercise price of shares of Viacom Class B Common
Stock subject to such Stock Options or SARs or the initial value of such Phantom
Shares, and (iii) make any other adjustments, or take such other action, as the
Compensation Committee deems appropriate.
    
 
   
  Transfer Restrictions, Etc.
    
    
     The rights of a Participant with respect to the Stock Options, SARs,
Restricted Shares or Phantom Shares granted under the LTMIP are not transferable
by the Participant other than by will or the laws of descent and distribution.
Except as described above, no grant under the LTMIP entitles a Participant
                                      190


to any rights of a holder of shares of Viacom Class B Common Stock, nor will any
grant be construed as giving any employee a right to continued employment with
Viacom.
    
 
   
  LTMIP Amendment and Term
    
 
   
     The Viacom Board of Directors may at any time alter, amend, suspend or
terminate the LTMIP in whole or in part, except that any amendment which must be
approved by the Viacom stockholders in order to maintain the continued
qualification of the LTMIP under Rule 16b-3 under the Exchange Act will not be
effective unless and until such stockholder approval has been obtained in
compliance with such rule. Unless terminated earlier by action of the Viacom
Board of Directors, the LTMIP will terminate on                , and no
additional grants under the LTMIP will be made after that date.
    
 
   
  Tax Consequences
    
 
   
     The following is intended as a general summary of the federal income tax
consequences associated with the grant and exercise of Stock Options. This
summary does not purport to be complete and does not address any applicable
state or local tax law.
    
 
   
     Nonqualified Stock Options. In general, the grant of a Nonqualified Stock
Option will not result in the recognition of taxable income by the Participant
or in a tax deduction to Viacom or its subsidiaries. Upon exercise of a
Nonqualified Stock Option, a Participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares purchased over
the exercise price of the Nonqualified Stock Option. The amount of the income so
recognized is subject to income tax withholding and a tax deduction equal to the
amount of such income is allowable to the employing company. Gain or loss upon a
subsequent sale of the stock received upon exercise of a Nonqualified Stock
Option generally would be taxed as capital gain or loss (long-term or
short-term, depending on the holding period of the stock sold). Certain
additional rules apply where the Participant is subject to the liability
provisions of Section 16(b) of the Exchange Act or if the exercise price for a
Nonqualified Stock Option is paid in shares or other securities previously owned
by the Participant.
    
 
   
     Incentive Stock Options. Neither the grant nor the exercise of an Incentive
Stock Option will result in the Participant recognizing income for federal
income tax purposes and neither Viacom nor its subsidiaries will be entitled to
a tax deduction. However, the excess of the fair market value of the shares over
the exercise price on the exercise date will constitute an adjustment to taxable
income for purposes of the alternative minimum tax. If the shares acquired upon
exercise of an Incentive Stock Option are not disposed of within the one-year
period beginning on the date of the transfer of such shares to the Participant,
nor within the two-year period beginning on the date of grant of the Incentive
Stock Option, any profit realized by the Participant upon the disposition of
such shares will be taxed as long-term capital gain and no deduction will be
allowed to the employing company. If the shares acquired upon exercise of the
Incentive Stock Option are disposed of within the one-year period from the date
of transfer of such shares to the Participant or within the two-year period from
the date of grant of the Incentive Stock Option, the excess of the fair market
value of the shares on the date of exercise or, if less, over exercise price
will be taxable as ordinary income of the Participant at the time of
disposition, and a corresponding tax deduction to Viacom will be allowable.
Certain additional rules apply if the exercise price for an Incentive Stock
Option is paid in shares or other securities previously owned by the
Participant.
    
 
   
APPROVAL OF THE VIACOM INC. STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
    
    
     The Viacom Board of Directors adopted (with Outside Directors Messrs.
Abrams, Miller and Schwartz abstaining) the Outside Directors' Plan on May 25,
1993, subject to the approval of the Outside Directors' Plan by the affirmative
vote of the holders of a majority of the shares of Viacom Class A Common Stock
represented in person or by proxy and entitled to vote at the Viacom Annual
Meeting. The Board recommends the stockholders approve the Outside Directors'
Plan. Viacom has been advised that NAI intends to vote all of its shares of
Viacom Class A Common Stock for the
                                      191


approval of the Outside Directors' Plan. Such vote will be sufficient to approve
the Outside Directors' Plan without any action on the part of any other
stockholder of Viacom.
    
 
   
  Outside Directors' Plan Generally
    
 
   
     The following description of the material features of the Outside
Directors' Plan is qualified in its entirety by the full text of the Outside
Directors' Plan, as set forth in Exhibit C to this Proxy Statement/Prospectus.
The Outside Directors' Plan provides for automatic one-time grants of Non-
Qualified Stock Options to purchase 5,000 shares of Viacom Class B Common Stock
("Outside Directors' Stock Options") to directors who are not employees of
Viacom, Viacom International or NAI ("Outside Directors"). As more fully
described below, the six (6) persons who are Outside Directors have received
such automatic one-time grants, subject to stockholder approval of the Outside
Directors' Plan. The fair market value of a share of Viacom Class B Common Stock
was $        as of May   , 1994.
    
 
   
     The total number of shares of Viacom Class B Common Stock reserved for
issuance upon grant of Outside Directors' Stock Options is 100,000. Shares of
Viacom Class B Common Stock covered by expired or terminated Stock Options will
not be counted in applying such limit on grants of Outside Directors' Stock
Options.
    
 
   
  Administration
    
 
   
     The Outside Directors' Plan is administered by the members of the Viacom
Board of Directors who are not Outside Directors.
    
 
   
  Outside Directors' Stock Options
    
 
   
     On May 25, 1993, Messrs. Abrams, Miller and Schwartz, who then constituted
the Board's Outside Directors, each received an Outside Directors' Stock Option
grant with a per share exercise price of $45 1/2 which was the closing price of
a share of Viacom Class B Common Stock on the American Stock Exchange on the
date of grant, subject to stockholder approval of the Outside Director's Plan.
    
 
   
     The Outside Directors' Plan provides that each person who subsequently
becomes an Outside Director will receive an Outside Directors' Stock Option
grant, effective as of the date of such person's election or appointment to the
Board, with a per share exercise price equal to the closing price on that date
of a share of Viacom Class B Common Stock on the American Stock Exchange or such
other national securities exchange as may be designed by the Viacom Board.
Accordingly, Messrs. Huizenga, Ferguson and Salerno each received an Outside
Directors' Stock Option grant when they were appointed to the Viacom Board,
which grants are subject to stockholder approval of the Outside Directors' Plan.
The per share exercise prices of their grants are $53 1/4, $42 1/2 and $36 3/4,
respectively, which were the closing prices of a share of the Viacom Class B
Common Stock on the American Stock Exchange on the dates of their appointment to
the Viacom Board. Mr. Huizenga holds his Outside Directors' Stock Option grant
for the benefit of Blockbuster. Messrs. Ferguson and Salerno each hold their
Outside Directors' Stock Option grants for the benefit of NYNEX.
    
 
   
     Each grant of Outside Directors' Stock Options vests on the first
anniversary of the date of grant. No Outside Directors' Stock Option may be
exercised less than six months after the date of grant or more than ten years
after the date of grant. Each share of Viacom Class B Common Stock purchased
through the exercise of an Outside Directors' Stock Option must be paid in full
at the time of exercise in cash.
    
 
   
     An Outside Director may exercise his Stock Options up to one year after the
Outside Director ceases to serve for any reason, including death or permanent
disability, as a member of the Board of Directors; provided, however, that the
Stock Options are exercisable only to the extent exercisable on the date of
termination and in no event after the Stock Options have otherwise expired.
    
 
                                      192

   
  Adjustments
    
 
   
     In the event of certain "Reorganization Events" (which are defined
identically in the LTMIP, the New LTMIP and the Outside Directors' Plan)
affecting Viacom, all of the Outside Director's Stock Options shall be
immediately exercisable as of the date of such event. In the event of a stock
dividend or split or certain other changes in the capital structure of Viacom
which affect the Viacom Class B Common Stock, the Outside Directors' Stock
Options will be adjusted in the same manner as the Stock Options under the LTMIP
and the New LTMIP are adjusted.
    
 
   
  Transfer Restrictions, Etc.
    
 
   
     The rights of an Outside Director with respect to the Outside Directors'
Stock Options are not transferable by the Outside Director other than by will or
the laws of descent and distribution. No grant of Outside Directors' Stock
Options entitles an Outside Director to any rights of a holder of shares of
Viacom Class B Common Stock, except upon delivery of share certificates upon
exercise of an Outside Directors' Stock Option, nor will any such grant be
construed as giving an Outside Director the right to remain a member of the
Viacom Board.
    
 
   
  Amendment and Term
    
 
   
     The Viacom Board of Directors may at any time alter, amend, suspend or
terminate the Outside Directors' Plan in whole or in part. The provisions with
respect to eligibility or the time or amount of grants, however, will not be
amended more than once every six months other than to comply with applicable
law. Any amendment which must be approved by the Viacom stockholders under the
requirements of applicable law or in order to maintain the continued
qualification of the Outside Directors' Plan under Rule 16b-3(c)(2)(ii) under
the Exchange Act will not be effective unless and until such stockholder
approval has been obtained in compliance with such rule. Unless terminated
earlier by action of the Viacom Board of Directors, the Outside Directors' Plan
will terminate on May 25, 2003, and no additional grants of Outside Directors'
Stock Options may be made after that date.
    
 
   
  Tax Consequences
    
 
   
     For a description of the federal income tax consequences associated with
the grant and exercise of the Outside Directors' Stock Options, see the
discussion under the "--Approval of the Viacom Inc. 1994 Long-Term Management
Incentive Plan--Tax Consequences--Non-Qualified Stock Options" above.
    
 
   
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
    
 
   
     The Board of Directors recommends that the stockholders approve the
appointment of Price Waterhouse as independent auditors to serve until the
Annual Meeting of Stockholders in 1995.
    
 
   
     In connection with the audit function for 1993, Price Waterhouse also
reviewed the annual reports on Form 10-K of Viacom and Viacom International and
their filings with the Commission, including the filings in connection with the
Mergers and provided certain other accounting, tax and consulting services.
    
 
   
     Representatives of Price Waterhouse are expected to be present at the
Viacom Annual Meeting and will be given an opportunity to make a statement if
they so desire. They will also be available to respond to questions at the
meeting.
    
 
   
OTHER MATTERS
    
    
     As of the date of this Proxy Statement/Prospectus, management of Viacom
does not intend to present and has not been informed that any other person
intends to present any matter for action not specified in this Proxy
Statement/Prospectus. If any other matters properly come before the Viacom
                                      193


Annual Meeting, it is intended that the holders of Viacom Annual Meeting proxies
will act in respect thereof in accordance with their best judgment.
    
 
   
     VIACOM HAS SENT A COPY OF ITS REPORT ON FORM 10-K/A FOR THE YEAR ENDED
DECEMBER 31, 1993, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, TO EACH
OF ITS STOCKHOLDERS OF RECORD ON MAY 31, 1994 AND EACH BENEFICIAL STOCKHOLDER ON
THAT DATE. IF YOU HAVE NOT RECEIVED YOUR COPY, VIACOM WILL PROVIDE A COPY
WITHOUT CHARGE (A REASONABLE FEE WILL BE CHARGED FOR EXHIBITS), UPON RECEIPT OF
WRITTEN REQUEST THEREFOR MAILED TO VIACOM'S OFFICES, ATTENTION SECRETARY.
    
 
                                      194

                                    EXPERTS
 
FINANCIAL STATEMENTS
 
     The financial statements incorporated in this Proxy Statement/Prospectus by
reference to the Annual Report on Form 10-K of Viacom for the year ended
December 31, 1993 have been so incorporated in reliance on the reports of Price
Waterhouse, independent accountants, given on the authority of such firm as
experts in auditing and accounting.
 
   
     The consolidated financial statements of Paramount incorporated by
reference in this Proxy Statement/Prospectus and Registration Statement at April
30, 1993 and at October 31, 1992 and 1992, and for the six-month period ended
April 30, 1993, and for each of the three years in the period ended October 31,
1992 included in its Transition Report on Form 10-K for the six months ended
April 30, 1993, as amended by Form 10-K/A Amendments No. 1, 2 and 3 have been
audited by Ernst & Young, independent auditors, as set forth in their reports
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
    
 
   
     The consolidated financial statements and schedules of Blockbuster as of
December 31, 1993 and 1992 and for the three years ended December 31, 1993
incorporated by reference in this Proxy Statement/Prospectus have been audited
by Arthur Andersen & Co., independent certified public accountants, as indicated
in their reports with respect thereto, and are incorporated by reference herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
    
 
     The consolidated financial statements at May 31, 1992 and 1991 and for each
of the three years in the period ended May 31, 1992 of Sound Warehouse, Inc. and
subsidiary and the financial statements at December 31, 1991 and 1990 and for
each of the three years in the period ended December 31, 1991 of Show
Industries, Inc. incorporated by reference in this Proxy Statement/Prospectus
have been audited by Price Waterhouse, independent accountants, as set forth in
their reports thereon. The financial statements of Sound Warehouse, Inc. and
Show Industries, Inc. incorporated by reference in this Proxy
Statement/Prospectus have been so incorporated in reliance on the reports of
Price Waterhouse, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
 
     The consolidated financial statements of Spelling Entertainment Group Inc.
incorporated by reference in this Proxy Statement/Prospectus and Registration
Statement and included in Blockbuster Entertainment Corporation's Current Report
on Form 8-K dated March 31, 1993, have been audited by Ernst & Young,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
 
     The consolidated financial statements of Super Club as of April 3, 1993,
and for the fifty-two week period then ended, incorporated by reference in this
Proxy Statement/Prospectus and included in Blockbuster's Current Report on Form
8-K dated November 5, 1993, have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in auditing and accounting. The report of KPMG Peat Marwick
refers to a change in the method of depreciating certain new release copies of
video rental cassettes.
 
LEGAL OPINIONS
    
     The legality of the Viacom Class B Common Stock, the Viacom Merger
Debentures, the CVRs and the Viacom Warrants being offered hereby will be passed
upon for Viacom by Shearman & Sterling, New York, New York.
     
                                      195

                             STOCKHOLDER PROPOSALS
 
     Any Viacom stockholder who wishes to submit a proposal for presentation to
the 1995 Annual Meeting of Stockholders must submit the proposal to Viacom, 1515
Broadway, New York, New York 10036, Attention: Secretary, not later than
December 30, 1994, for inclusion, if appropriate, in Viacom's proxy statement
and the form of proxy relating to the 1995 Annual Meeting.
 
                                          By Order of the Board of Directors
                                          VIACOM INC.




                                          PHILIPPE P. DAUMAN
                                          Secretary
 
                                          By Order of the Board of Directors
                                          PARAMOUNT COMMUNICATIONS INC.




                                          PHILIPPE P. DAUMAN
                                          Secretary
 




                                      196






 PRELIMINARY COPIES
                                                                      ANNEX I




                           PARAMOUNT MERGER AGREEMENT





                                                                [CONFORMED COPY]
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------









 
                              AMENDED AND RESTATED
                          AGREEMENT AND PLAN OF MERGER

                                    BETWEEN

                                  VIACOM INC.

                                      AND

                         PARAMOUNT COMMUNICATIONS INC.




                          DATED AS OF FEBRUARY 4, 1994








 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                             INDEX OF DEFINED TERMS
 

                                                                                                     SECTION
                                                                                                ------------------
                                                                                             
affiliate.....................................................................................  SECTION 9.3
Agreement.....................................................................................  PREAMBLE
AMEX..........................................................................................  SECTION 1.7
beneficial owner..............................................................................  SECTION 9.3
Blockbuster...................................................................................  SECTION 4.3
Blockbuster Merger Agreement..................................................................  SECTION 4.8
Blockbuster Subscription Agreement............................................................  SECTION 4.3
Blue Sky Laws.................................................................................  SECTION 3.5
Business Combination..........................................................................  SECTION 8.5
business day..................................................................................  SECTION 9.3
Cash Election.................................................................................  SECTION 1.6
Cash Election Number..........................................................................  SECTION 1.6
Cash Election Shares..........................................................................  SECTION 1.6
Cash Fraction.................................................................................  SECTION 1.6
Certificate of Merger.........................................................................  SECTION 1.3
Certificates..................................................................................  SECTION 1.7
Claim.........................................................................................  SECTION 6.3
Class A Exchange Ratio........................................................................  SECTION 1.6
Class B Exchange Ratio........................................................................  SECTION 1.6
Code..........................................................................................  RECITALS
Communications Act............................................................................  SECTION 3.5
Competing Transaction.........................................................................  SECTION 8.1
Confidentiality Agreements....................................................................  SECTION 6.1
control.......................................................................................  SECTION 9.3
controlled....................................................................................  SECTION 9.3
controlled by.................................................................................  SECTION 9.3
CVRs..........................................................................................  SECTION 1.6
CVR Exchange Ratio............................................................................  SECTION 1.6
Debenture Exchange Ratio......................................................................  SECTION 1.6
Delaware Law..................................................................................  RECITALS
Dissenting Shares.............................................................................  SECTION 1.10
ERISA.........................................................................................  SECTION 3.10
Effective Time................................................................................  SECTION 1.3
Exchange Act..................................................................................  SECTION 2.2
Exchange Agent................................................................................  SECTION 1.7
Exchange Cash Consideration...................................................................  SECTION 1.7
Exchange Debenture Trustee....................................................................  SECTION 4.3
Exchange Fund.................................................................................  SECTION 1.7
Exchange Ratios...............................................................................  SECTION 1.6
Exemption Agreement...........................................................................  SECTION 2.1(d)
Expiration Date...............................................................................  SECTION 2.1
FCC...........................................................................................  SECTION 2.6
Final Expiration Date.........................................................................  SECTION 2.1(c)
Financing.....................................................................................  SECTION 4.17
Five Year Warrant Exchange Ratio..............................................................  SECTION 1.6
Five Year Warrants............................................................................  SECTION 1.6
Form of Election..............................................................................  SECTION 1.6
Forward Merger................................................................................  RECITALS
fully diluted basis...........................................................................  SECTION 9.3

 
                                       i


                                                                                                     SECTION
                                                                                                ------------------
                                                                                             
Gains Tax.....................................................................................  SECTION 6.18
Governmental Entity...........................................................................  SECTION 3.5
HSR Act.......................................................................................  SECTION 4.5
Incentive Stock Option........................................................................  SECTION 1.9
Indemnified Parties...........................................................................  SECTION 6.3
Indenture.....................................................................................  SECTION 4.3
IRS...........................................................................................  SECTION 3.10
Material Paramount Subsidiary.................................................................  SECTION 3.1
Material Viacom Subsidiary....................................................................  SECTION 4.1
Merger........................................................................................  RECITALS
Merger Consideration..........................................................................  SECTION 1.7
Merger Debenture Trustee......................................................................  SECTION 4.3
Merger Subsidiary.............................................................................  RECITALS
Minimum Condition.............................................................................  SECTION 2.1
National......................................................................................  RECITALS
Non-Election..................................................................................  SECTION 1.6
Non-Election Fraction.........................................................................  SECTION 1.6
Non-Election Shares...........................................................................  SECTION 1.6
Offer.........................................................................................  RECITALS
Offer Documents...............................................................................  SECTION 2.1(b)
Offer to Purchase.............................................................................  SECTION 2.1(b)
Other Offer...................................................................................  SECTION 2.1(c)
Other Offeror.................................................................................  SECTION 2.1(c)
Other Exemption Agreement.....................................................................  SECTION 2.1(d)
Other Expiration Date.........................................................................  SECTION 2.1(d)
Paramount.....................................................................................  PREAMBLE
Paramount 1992 Balance Sheet..................................................................  SECTION 3.12
Paramount Common Stock........................................................................  RECITALS
Paramount Disclosure Schedule.................................................................  SECTION 3.3
Paramount Indentures..........................................................................  SECTION 6.17
Paramount Material Adverse Effect.............................................................  SECTION 3.1
Paramount Plans...............................................................................  SECTION 3.10
Paramount Preferred Stock.....................................................................  SECTION 3.3
Paramount SEC Reports.........................................................................  SECTION 3.7
Paramount Subsidiary..........................................................................  SECTION 3.1
Paramount Triggering Event....................................................................  SECTION 6.9
Per Share Amount..............................................................................  RECITALS
Per Share Cash Amount.........................................................................  SECTION 1.6
Proxy Statement...............................................................................  SECTION 6.6
Registration Statement........................................................................  SECTION 6.6
Representatives...............................................................................  SECTION 1.6
Respective Representatives....................................................................  SECTION 6.1
Reverse Merger................................................................................  RECITALS
Rights........................................................................................  SECTION 3.13
Rights Agreement..............................................................................  SECTION 3.13
Rights Condition..............................................................................  SECTION 2.1
Schedule 14D-1................................................................................  SECTION 2.1
Schedule 14D-9................................................................................  SECTION 2.2
SEC...........................................................................................  SECTION 2.1
Securities Act................................................................................  SECTION 3.5
Securities Election...........................................................................  SECTION 1.6

 
                                       ii


                                                                                                     SECTION
                                                                                                ------------------
                                                                                             
Securities Election Number....................................................................  SECTION 1.6
Securities Fraction...........................................................................  SECTION 1.6
Significant Stockholder.......................................................................  SECTION 6.21
Stock Election Shares.........................................................................  SECTION 1.6
Stock Option..................................................................................  SECTION 3.3
Stockholders' Meetings........................................................................  SECTION 6.7
subsidiaries..................................................................................  SECTION 9.3
subsidiary....................................................................................  SECTION 9.3
Surviving Corporation.........................................................................  SECTION 1.1
Three Year Warrant Exchange Ratio.............................................................  SECTION 1.6
Three Year Warrants...........................................................................  SECTION 1.6
Transactions..................................................................................  SECTION 3.4
Transfer Tax..................................................................................  SECTION 6.18
under common control with.....................................................................  SECTION 9.3
Viacom........................................................................................  PREAMBLE
Viacom Certificate Amendments.................................................................  SECTION 4.4
Viacom 1992 Balance Sheet.....................................................................  SECTION 4.12
Viacom Class A Common Stock...................................................................  RECITALS
Viacom Class B Common Stock...................................................................  SECTION 1.6
Viacom Disclosure Schedule....................................................................  SECTION 4.3
Viacom Exchange Debenture Indenture...........................................................  SECTION 4.3
Viacom Exchange Debentures....................................................................  ANNEX B
Viacom Exchange Preferred Stock...............................................................  ANNEX B
Viacom International..........................................................................  SECTION 4.7
Viacom Material Adverse Effect................................................................  SECTION 4.1
Viacom Merger Debenture Indenture.............................................................  SECTION 4.3
Viacom Merger Debentures......................................................................  SECTION 1.6
Viacom Plans..................................................................................  SECTION 4.10
Viacom Preferred Stock........................................................................  SECTION 4.3
Viacom SEC Reports............................................................................  SECTION 4.7
Viacom Series A Preferred.....................................................................  SECTION 4.3
Viacom Subsidiary.............................................................................  SECTION 4.1
Viacom Triggering Event.......................................................................  SECTION 6.9
Viacom Vote Matter............................................................................  SECTION 4.4
Voting Agreement..............................................................................  RECITALS
Warrants......................................................................................  SECTION 1.6

 
                                      iii

                               TABLE OF CONTENTS
 

                                                                                                                  PAGE
                                                                                                               -----------
                                                        ARTICLE I
                                                                                                              
                                                        THE MERGER...........................................           2
SECTION     1.1.       The Merger............................................................................           2
SECTION     1.2.       Closing...............................................................................           2
SECTION     1.3.       Effective Time........................................................................           2
SECTION     1.4.       Effect of the Merger..................................................................           2
SECTION     1.5.       Certificate of Incorporation; By-Laws.................................................           2
SECTION     1.6.       Conversion of Securities..............................................................           2
SECTION     1.7.       Exchange of Certificates and Cash.....................................................           6
SECTION     1.8.       Stock Transfer Books..................................................................           8
SECTION     1.9.       Stock Options; Payment Rights.........................................................           9
SECTION     1.10.      Dissenting Shares.....................................................................          10
                                                        ARTICLE II
                                                        THE OFFER............................................          11
SECTION     2.1.       The Offer.............................................................................          11
SECTION     2.2.       Action by Paramount...................................................................          13
SECTION     2.3.       Receipt of Common Stock...............................................................          13
SECTION     2.4.       Completion Certificate................................................................          14
SECTION     2.5.       Termination of the Offer..............................................................          14
SECTION     2.6.       Board of Directors; Section 14(f).....................................................          14
                                                       ARTICLE III
                                       REPRESENTATIONS AND WARRANTIES OF PARAMOUNT...........................          15
SECTION     3.1.       Organization and Qualification;Subsidiaries...........................................          15
SECTION     3.2.       Certificate of Incorporation and By-Laws..............................................          15
SECTION     3.3.       Capitalization........................................................................          15
SECTION     3.4.       Authority Relative to This Agreement..................................................          16
SECTION     3.5.       No Conflict; Required Filings and Consents............................................          16
SECTION     3.6.       Compliance............................................................................          17
SECTION     3.7.       SEC Filings; Financial Statements.....................................................          17
SECTION     3.8.       Absence of Certain Changes or Events..................................................          18
SECTION     3.9.       Absence of Litigation.................................................................          18
SECTION     3.10.      Employee Benefit Plans................................................................          18
SECTION     3.11.      Trademarks, Patents and Copyrights....................................................          19
SECTION     3.12.      Taxes.................................................................................          19
SECTION     3.13.      Amendment to Rights Agreement.........................................................          20
SECTION     3.14.      Opinion of Financial Advisor..........................................................          20
SECTION     3.15.      Vote Required.........................................................................          20
SECTION     3.16.      Brokers...............................................................................          20
                                                        ARTICLE IV
                                         REPRESENTATIONS AND WARRANTIES OF VIACOM............................          21
SECTION     4.1.       Organization and Qualification; Subsidiaries..........................................          21
SECTION     4.2.       Certificate of Incorporation and By-Laws..............................................          21
SECTION     4.3.       Capitalization........................................................................          21

 
                                       iv

 

                                                                                                                  PAGE
                                                                                                               -----------
                                                                                                              
SECTION     4.4.       Authority Relative to This Agreement..................................................          23
SECTION     4.5.       No Conflict; Required Filings and Consents............................................          23
SECTION     4.6.       Compliance............................................................................          24
SECTION     4.7.       SEC Filings; Financial Statements.....................................................          24
SECTION     4.8.       Absence of Certain Changes or Events..................................................          25
SECTION     4.9.       Absence of Litigation.................................................................          25
SECTION     4.10.      Employee Benefit Plans................................................................          25
SECTION     4.11.      Trademarks, Patents and Copyrights....................................................          26
SECTION     4.12.      Taxes.................................................................................          26
SECTION     4.13.      Opinion of Financial Advisor..........................................................          27
SECTION     4.14.      Vote Required.........................................................................          27
SECTION     4.15.      Ownership of Paramount Common Stock...................................................          27
SECTION     4.16.      Brokers...............................................................................          27
SECTION     4.17.      Financing.............................................................................          27
SECTION     4.18.      Purchases of Securities...............................................................          27
SECTION     4.19.      Representations in Blockbuster Merger Agreement.......................................          27

                                                        ARTICLE V
                                         CONDUCT OF BUSINESSES PENDING THE MERGER............................          27
SECTION     5.1.       Conduct of Respective Businesses by Paramount and Viacom Pending the Merger...........          27

                                                        ARTICLE VI
                                                   ADDITIONAL COVENANTS......................................          29
SECTION     6.1.       Access to Information; Confidentiality................................................          29
SECTION     6.2.       Intentionally omitted.................................................................          29
SECTION     6.3.       Directors' and Officers' Indemnification and Insurance................................          29
SECTION     6.4.       Notification of Certain Matters.......................................................          30
SECTION     6.5.       Tax Treatment.........................................................................          31
SECTION     6.6.       Registration Statement; Joint Proxy Statement; Offer Documents and Schedule 14D-9.....          31
SECTION     6.7.       Stockholders' Meetings................................................................          32
SECTION     6.8.       Letters of Accountants................................................................          32
SECTION     6.9.       Employee Benefits.....................................................................          32
SECTION     6.10.      Further Action; Reasonable Best Efforts...............................................          33
SECTION     6.11.      Debt Instruments......................................................................          33
SECTION     6.12.      Public Announcements..................................................................          33
SECTION     6.13.      Listing of Viacom Securities..........................................................          34
SECTION     6.14.      Affiliates of Paramount...............................................................          34
SECTION     6.15.      Conveyance Taxes......................................................................          34
SECTION     6.16.      Rights Agreement......................................................................          34
SECTION     6.17.      Assumption of Debt and Leases.........................................................          34
SECTION     6.18.      Gains Tax.............................................................................          34
SECTION     6.19.      Reverse Merger........................................................................          35
SECTION     6.20.      Post-Offer Agreements.................................................................          35
SECTION     6.21.      Transactions With Significant Stockholder After the Effective Time....................          35
SECTION     6.22.      Blockbuster Merger Agreement and Subscription Agreement...............................          35

 
                                       v

 

                                                                                                                  PAGE
                                                                                                               -----------
                                                       ARTICLE VII
                                                                                                              
                                                    CLOSING CONDITIONS.......................................          36
SECTION     7.1.       Conditions to Obligations of Each Party to Effect the Merger..........................          36
SECTION     7.2.       Additional Conditions to Obligations of Viacom........................................          36
SECTION     7.3.       Additional Conditions to Obligations of Paramount.....................................          37
                                                       ARTICLE VIII
                                            TERMINATION, AMENDMENT AND WAIVER................................          37
SECTION     8.1.       Termination...........................................................................          37
SECTION     8.2.       Effect of Termination.................................................................          39
SECTION     8.3.       Amendment.............................................................................          39
SECTION     8.4.       Waiver................................................................................          39
SECTION     8.5.       Fees, Expenses and Other Payments.....................................................          39
                                                        ARTICLE IX
                                                    GENERAL PROVISIONS.......................................          40
SECTION     9.1.       Effectiveness of Representations, Warranties and Agreements...........................          40
SECTION     9.2.       Notices...............................................................................          40
SECTION     9.3.       Certain Definitions...................................................................          41
SECTION     9.4.       Time Period...........................................................................          42
SECTION     9.5.       Headings..............................................................................          42
SECTION     9.6.       Severability..........................................................................          42
SECTION     9.7.       Entire Agreement......................................................................          42
SECTION     9.8.       Assignment............................................................................          42
SECTION     9.9.       Parties in Interest...................................................................          42
SECTION     9.10.      Specific Performance..................................................................          42
SECTION     9.11.      Governing Law.........................................................................          42
SECTION     9.12.      Counterparts..........................................................................          42

ANNEX A                Conditions to the Offer...............................................................

ANNEX B                Principal Terms of Viacom Merger Debentures

ANNEX C                Principal Terms of Contingent Value Rights

ANNEX D                Principal Terms of Three Year Warrants

ANNEX E                Principal Terms of Five Year Warrants

EXHIBIT 6.14           Form of Affiliate Letter

 
                                       vi

     AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of February 4,
1994 (this "Agreement"), between VIACOM INC., a Delaware corporation ("Viacom"),
and PARAMOUNT COMMUNICATIONS INC., a Delaware corporation ("Paramount"),
amending and restating the Agreement and Plan of Merger, dated as of January 21,
1994, between Viacom and Paramount, as amended (the "January Merger Agreement").
 
                                  WITNESSETH:
 
     WHEREAS, on January 21, 1994, Viacom and Paramount entered into the January
Merger Agreement, pursuant to which Viacom and Paramount agreed to enter into a
business combination transaction;
 
     WHEREAS, Viacom and Paramount have determined that it is in the best
interest of their respective shareholders to enter into this Agreement so as to
facilitate the business combination of the two companies through a first-step
cash tender offer and a second-step merger, while preserving the ability to
proceed with a single-step merger in appropriate circumstances, and in
accordance with the General Corporation Law of the State of Delaware ("Delaware
Law"), Paramount and Viacom have agreed to enter into a business combination
transaction pursuant to which Paramount will merge with and into Viacom (the
"Forward Merger") or alternatively, a subsidiary of Viacom ("Merger Subsidiary")
will merge with and into Paramount (the "Reverse Merger" and, together with the
Forward Merger, the "Merger");
 
     WHEREAS, in furtherance of the Merger, Viacom has amended and supplemented
its outstanding tender offer (as amended and supplemented in accordance with
this Agreement, the "Offer") to acquire 61,657,432 shares of common stock, par
value $1.00 per share, of Paramount ("Paramount Common Stock"), or such greater
number of shares as equals 50.1% of the shares of Paramount Common Stock
outstanding on a fully diluted basis (as defined in Section 9.3 herein), for
$107.00 per Paramount share (the consideration per share of Paramount Common
Stock to be paid pursuant to the Offer being referred to as the "Per Share
Amount"), upon the terms and subject to the conditions of this Agreement and the
Offer;
 
     WHEREAS, the Board of Directors of Paramount has determined that the Merger
and the Offer are consistent with and in furtherance of the long-term business
strategy of Paramount and are fair to, and in the best interests of, Paramount
and the holders of Paramount Common Stock and has approved and adopted this
Agreement and has approved the Merger and the other transactions contemplated
hereby (including, without limitation, the Offer) and recommended approval and
adoption of this Agreement and approval of the Merger by the stockholders of
Paramount and agreed to continue to recommend that stockholders of Paramount
tender their shares of Paramount Common Stock pursuant to the Offer;
 
     WHEREAS, the Board of Directors of Viacom has determined that the Merger
and the Offer are consistent with and in furtherance of the long-term business
strategy of Viacom and are fair to, and in the best interests of, Viacom and its
stockholders and has approved and adopted this Agreement and has approved the
Merger and the other transactions contemplated hereby (including, without
limitation, the making of the Offer) and recommended approval and adoption of
this Agreement and approval of the Merger by the holders of the Class A Common
Stock, par value $.01 per share, of Viacom (the "Viacom Class A Common Stock");
 
     WHEREAS, for federal income tax purposes, it is intended that the Forward
Merger qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
 
     WHEREAS, concurrently with the execution of the January Merger Agreement
and as an inducement to Paramount to enter into the January Merger Agreement,
National Amusements, Inc., a Maryland corporation and the majority stockholder
of Viacom ("National"), and Paramount entered into a Voting Agreement (the
"Voting Agreement") pursuant to which National shall, among other things, vote
its shares of Viacom Class A Common Stock in favor of the Merger and the other
transactions contemplated by this Agreement, as amended from time to time;
 
                                      I-1

     NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
 
                                   ARTICLE I
 
                                   THE MERGER
 
     SECTION 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with Delaware Law, at the Effective
Time (as defined in Section 1.3), Paramount shall be merged with and into
Viacom; provided, however, that if, after consulting with Paramount and its
professional advisors in good faith, Shearman & Sterling, counsel to Viacom, is
unable to deliver an opinion in form and substance reasonably satisfactory to
Viacom (such opinion to be based on customary assumptions and representations)
that the Forward Merger will qualify as a reorganization under Section 368(a) of
the Code, Viacom may elect to cause a subsidiary of Viacom to merge with and
into Paramount. As a result of the Forward Merger, the separate corporate
existence of Paramount (or, in the case of the Reverse Merger, Merger
Subsidiary) shall cease and Viacom (or, in the case of the Reverse Merger,
Paramount) shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
 
     SECTION 1.2. Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1 and subject to the satisfaction or, if permissible, waiver of the
conditions set forth in Article VII, the consummation of the Merger will take
place as promptly as practicable (and in any event within two business days)
after satisfaction or waiver of the conditions set forth in Article VII, at the
offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York, unless
another date, time or place is agreed to in writing by the parties hereto.
 
     SECTION 1.3. Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in such form as required by, and executed in accordance
with the relevant provisions of, Delaware Law (the date and time of such filing,
or such later date or time as set forth therein, being the "Effective Time").
 
     SECTION 1.4. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Viacom (or, in the case of the Reverse
Merger, Merger Subsidiary) and Paramount shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Viacom (or, in the case of
the Reverse Merger, Merger Subsidiary) and Paramount shall become the debts,
liabilities and duties of the Surviving Corporation.
 
     SECTION 1.5. Certificate of Incorporation; By-Laws. (a) At the Effective
Time of the Forward Merger, the Certificate of Incorporation and the By-Laws of
Viacom, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and the By-Laws of the Surviving Corporation.
 
     (b) Alternatively, at the Effective Time of the Reverse Merger, the
Certificate of Incorporation and By-Laws, respectively, of the Surviving
Corporation shall be amended and restated in their entirety to read as the
Certificate of Incorporation and By-Laws of Merger Subsidiary.
 
     SECTION 1.6. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Viacom, Paramount or the
holders of any of the following securities:
 
          (a) In the event that the Offer has been consummated prior to the
     Effective Time, each share of Paramount Common Stock issued and outstanding
     immediately prior to the Effective Time (other than any shares of Paramount
     Common Stock to be canceled pursuant to Section 1.6(c) and any Dissenting
     Shares (as defined in Section 1.10)) shall be converted into the right to
     receive
                                      I-2

     (A) .93065 shares of Class B common stock, par value $0.01 per share
     ("Viacom Class B Common Stock"), of Viacom, (B) $17.50 principal amount of
     8% exchangeable subordinated debentures (the "Viacom Merger Debentures") of
     Viacom having the principal terms described in Annex B, (C) .93065
     contingent value rights of Viacom (the "CVRs") having the principal terms
     described in Annex C, (D) .50 warrants (the "Three Year Warrants") of
     Viacom having the principal terms described in Annex D and (E) .30 warrants
     (the "Five Year Warrants", and together with the Three Year Warrants, the
     "Warrants") of Viacom having the principal terms described in Annex E;
     provided, however, that, in any event, if between the date of this
     Agreement and the Effective Time the outstanding shares of Viacom Class B
     Common Stock or Paramount Common Stock shall have been changed into a
     different number of shares or a different class, by reason of any stock
     dividend, subdivision, reclassification, recapitalization, split,
     combination or exchange of shares, the amounts of Viacom Class B Common
     Stock, Viacom Merger Debentures, CVRs and Warrants specified above shall be
     correspondingly adjusted to reflect such stock dividend, subdivision,
     reclassification, recapitalization, split, combination or exchange of
     shares. All such shares of Paramount Common Stock shall no longer be
     outstanding and shall automatically be canceled and retired and shall cease
     to exist, and each certificate previously evidencing any such shares shall
     thereafter represent the right to receive, upon the surrender of such
     certificate in accordance with the provisions of Section 1.7 certificates
     evidencing (a) such number of whole shares of Viacom Class B Common Stock
     and (b) such number of whole CVRs, Viacom Merger Debentures and Warrants
     into which such Paramount Common Stock was converted in accordance
     herewith. The holders of such certificates previously evidencing such
     shares of Paramount Common Stock outstanding immediately prior to the
     Effective Time shall cease to have any rights with respect to such shares
     of Paramount Common Stock except as otherwise provided herein or by law. No
     fractional share of Viacom Class B Common Stock or fractional CVR, Viacom
     Merger Debenture or Warrant shall be issued and, in lieu thereof, a cash
     payment shall be made pursuant to Section 1.7(d).
 
          (b) In the event that the Offer has not been consummated prior to the
     Effective Time:
 
             (i) subject to the further provisions of this Section 1.6, each
        share of Paramount Common Stock issued and outstanding immediately prior
        to the Effective Time (other than any shares of Paramount Common Stock
        to be canceled pursuant to Section 1.6(c) and any Dissenting Shares),
        shall be converted, subject to Section 1.7(d), into the right to receive
        (A)(i) .93065 of a share of Viacom Class B Common Stock (the "Class B
        Exchange Ratio"); (ii) $17.50 principal amount of Viacom Merger
        Debentures (the "Debenture Exchange Ratio"); (iii) .93065 CVRs (the "CVR
        Exchange Ratio"); (iv) .50 Three Year Warrants (the "Three Year Warrant
        Exchange Ratio"); and (v) .30 Five Year Warrants (the "Five Year Warrant
        Exchange Ratio", and together with the Class B Exchange Ratio, the
        Debenture Exchange Ratio, the CVR Exchange Ratio and Three Year Warrant
        Exchange Ratio, the "Exchange Ratios"), (B) $107.00 in cash (the "Per
        Share Cash Amount") or (C) a combination of shares of Viacom Class B
        Common Stock, CVRs, Viacom Merger Debentures, Warrants and cash
        determined in accordance with Sections 1.6(b)(iv), (v) and (vi);
        provided, however, that, in any event, if between the date of this
        Agreement and the Effective Time the outstanding shares of Viacom Class
        B Common Stock, Viacom Merger Debentures or Paramount Common Stock shall
        have been changed into a different number of shares or a different
        class, by reason of any stock dividend, subdivision, reclassification,
        recapitalization, split, combination or exchange of shares, the Exchange
        Ratios and Per Share Cash Amount shall be correspondingly adjusted to
        reflect such stock dividend, subdivision, reclassification,
        recapitalization, split, combination or exchange of shares. All such
        shares of Paramount Common Stock shall no longer be outstanding and
        shall automatically be canceled and retired and shall cease to exist,
        and each certificate previously evidencing any such shares shall
        thereafter represent the right to receive, upon the surrender of such
        certificate in accordance with the provisions of Section 1.7 and in
        accordance with the allocation procedures set forth in
                                      I-3

        this Section 1.6, (i) certificates evidencing (x) such number of whole
        shares of Viacom Class B Common Stock and (y) such number of whole CVRs,
        Viacom Merger Debentures and Warrants into which such Paramount Common
        Stock was converted in accordance with the Exchange Ratios and/or (ii)
        the Per Share Cash Amount multiplied by the number of shares of
        Paramount Common Stock previously evidenced by the canceled certificate.
        The holders of such certificates previously evidencing such shares of
        Paramount Common Stock outstanding immediately prior to the Effective
        Time shall cease to have any rights with respect to such shares of
        Paramount Common Stock except as otherwise provided herein or by law. No
        fractional share of Viacom Class B Common Stock or fractional CVR,
        Viacom Merger Debenture or Warrant shall be issued and, in lieu thereof,
        a cash payment shall be made pursuant to Section 1.7(d).
 
             (ii) Subject to the election and allocation procedures set forth in
        this Section 1.6, each holder of record of shares of Paramount Common
        Stock as of the record date for the meeting of stockholders of Paramount
        referred to in Section 6.7 will be entitled to (A) elect to receive
        certificates evidencing such number of whole shares of Viacom Class B
        Common Stock and (y) such number of whole CVRs, Viacom Merger Debentures
        and Warrants into which such number of shares of Paramount Common Stock
        would be converted in accordance with the Exchange Ratios (a "Securities
        Election"), (B) elect to receive the Per Share Cash Amount multiplied by
        such number of shares of Paramount Common Stock (a "Cash Election"), or
        (C) indicate that such holder has no preference as to the receipt of
        cash or shares of Viacom Class B Common Stock and CVRs, Viacom Merger
        Debentures and Warrants in exchange for such shares of Paramount Common
        Stock (a "Non-Election"). All such elections shall be made on a form
        designed for that purpose and mutually acceptable to Viacom and
        Paramount (a "Form of Election") and mailed to holders of record of
        shares of Paramount Common Stock as of the record date for the meeting
        of stockholders of Paramount referred to in Section 6.7. Holders of
        record of shares of Paramount Common Stock who hold such shares as
        nominees, trustees or in other representative capacities
        ("Representatives") may submit multiple Forms of Election, provided that
        such Representative certifies that each such Form of Election covers all
        the shares of Paramount Common Stock held by such Representative for a
        particular beneficial owner entitled to so elect pursuant to the first
        sentence of this Section 1.6(b)(ii). Elections shall be made by holders
        of Paramount Common Stock by mailing to the Exchange Agent (as defined
        in Section 1.7) properly completed and signed Forms of Election. In
        order to be effective, a Form of Election must be received by the
        Exchange Agent no later than the close of business on the last business
        day prior to the Effective Time. All elections may be revoked until the
        last business day prior to the Effective Time. Viacom shall have the
        discretion, which it may delegate in whole or in part to the Exchange
        Agent, to determine whether Forms of Election have been properly
        completed and signed and properly and timely submitted or revoked and to
        disregard immaterial defects in Forms of Election, and any good faith
        decision of Viacom or the Exchange Agent in such matters shall be
        binding and conclusive. Neither Viacom nor the Exchange Agent shall be
        under any obligation to notify any person of any defect in a Form of
        Election. Any holder of shares of Paramount Common Stock who fails to
        make an election and any holder who fails to submit to the Exchange
        Agent a properly completed and signed and properly and timely submitted
        Form of Election shall be deemed to have made a Non-Election.
 
             (iii) The aggregate number of shares of Paramount Common Stock to
        be converted into the right to receive cash in the Merger (the "Cash
        Election Number") shall be equal to 50.1% of the number of shares of
        Paramount Common Stock outstanding immediately prior to the Effective
        Time, and the aggregate number of shares of Paramount Common Stock to be
        converted into the right to receive shares of Viacom Class B Common
        Stock, CVRs, Viacom Merger Debentures and Warrants in the Merger (the
        "Securities Election Number") shall be
                                      I-4

        equal to 49.9% of the number of shares of Paramount Common Stock
        outstanding immediately prior to the Effective Time.
 
             (iv) If the aggregate number of shares of Paramount Common Stock
        with respect to which Cash Elections have been made plus Dissenting
        Shares (the "Cash Election Shares") exceeds the Cash Election Number,
        all shares of Paramount Common Stock with respect to which Securities
        Elections have been made (the "Securities Election Shares") and all
        shares of Paramount Common Stock with respect to which Non-Elections
        have been made (the "Non-Election Shares") shall be converted into the
        right to receive shares of Viacom Class B Common Stock and CVRs, Viacom
        Merger Debentures and Warrants, and the Cash Election Shares (other than
        Dissenting Shares) shall be converted into the right to receive shares
        of Viacom Class B Common Stock, CVRs, Viacom Merger Debentures, Warrants
        and cash in the following manner:
 
           each Cash Election Share (other than Dissenting Shares) shall be
           converted into the right to receive (i) an amount in cash, without
           interest, equal to the product of (x) the Per Share Cash Amount and
           (y) a fraction (the "Cash Fraction"), the numerator of which shall be
           the Cash Election Number and the denominator of which shall be the
           total number of Cash Election Shares, (ii) a number of shares of
           Viacom Class B Common Stock equal to the product of (x) the Class B
           Exchange Ratio and (y) a fraction equal to one minus the Cash
           Fraction, (iii) a number of CVRs equal to the product of (x) the CVR
           Exchange Ratio and (y) a fraction equal to one minus the Cash
           Fraction, (iv) a principal amount of Viacom Merger Debentures equal
           to the product of (x) the Debenture Exchange Ratio and (y) a fraction
           equal to one minus the Cash Fraction, (v) a number of Three Year
           Warrants equal to the product of (x) the Three Year Warrant Exchange
           Ratio and (y) a fraction equal to one minus the Cash Fraction and
           (vi) a number of Five Year Warrants equal to the product of (x) the
           Five Year Warrant Exchange Ratio and (y) a fraction equal to one
           minus the Cash Fraction.
 
             (v) If the aggregate number of Securities Election Shares exceeds
        the Securities Election Number, all Cash Election Shares (other than
        Dissenting Shares) and all Non-Election Shares shall be converted into
        the right to receive cash, and all Securities Election Shares shall be
        converted into the right to receive shares of Viacom Class B Common
        Stock, CVRs, Viacom Merger Debentures, Warrants and cash in the
        following manner:
 
           each Securities Election Share shall be converted into the right to
           receive (i) a number of shares of Viacom Class B Common Stock equal
           to the product of (x) the Class B Exchange Ratio and (y) a fraction
           (the "Securities Fraction"), the numerator of which shall be the
           Securities Election Number and the denominator of which shall be the
           total number of Securities Election Shares, (ii) a number of CVRs
           equal to the product of (x) the CVR Exchange Ratio and (y) the
           Securities Fraction, (iii) the principal amount of Viacom Merger
           Debentures equal to the product of (x) the Debenture Exchange Ratio
           and (y) the Securities Fraction, (iv) a number of Three Year Warrants
           equal to the product of (x) the Three Year Warrant Exchange Ratio and
           (y) the Securities Fraction, (v) a number of Five Year Warrants equal
           to the product of (x) the Five Year Warrant Exchange Ratio and (y)
           the Securities Fraction and (vi) an amount in cash, without interest,
           equal to the product of (x) the Per Share Cash Amount and (y) a
           fraction equal to one minus the Securities Fraction.
 
             (vi) In the event that neither Section 1.6(b)(iv) nor Section k
        1.6(b)(v) above is applicable, all Cash Election shares shall be
        converted into the right to receive cash, all Securities Election Shares
        shall be converted into the right to receive shares of Viacom Class B
        Common Stock, CVRs, Viacom Merger Debentures and Warrants, and the
        Non-Election
                                      I-5

        Shares, if any, shall be converted into the right to receive shares of
        Viacom Class B Common Stock, CVRs, Viacom Merger Debentures, Warrants
        and cash in the following manner:
 
           each Non-Election Share shall be converted into the right to receive
           (i) an amount in cash, without interest, equal to the product of (x)
           the Per Share Cash Amount and (y) a fraction (the "Non-Election
           Fraction"), the numerator of which shall be the excess of the Cash
           Election Number over the total number of Cash Election Shares and the
           denominator of which shall be the excess of (A) the number of shares
           of Paramount Common Stock outstanding immediately prior to the
           Effective Time over (B) the sum of the total number of Cash Election
           Shares and the total number of Securities Election Shares, (ii) a
           number of shares of Viacom Class B Common Stock equal to the product
           of (x) the Class B Exchange Ratio and (y) a fraction equal to one
           minus the Non-Election Fraction, (iii) a number of CVRs equal to the
           product of (x) the CVR Exchange Ratio and (y) a fraction equal to one
           minus the Non-Election Fraction, (iv) the principal amount of Viacom
           Merger Debentures equal to the product of (x) the Debenture Exchange
           Ratio and (y) a fraction equal to one minus the Non-Election
           Fraction, (v) a number of Three Year Warrants equal to the product of
           (x) the Three Year Warrant Exchange Ratio and (y) a fraction equal to
           one minus the Non-Election Fraction and (vi) a number of Five Year
           Warrants equal to the product of (x) the Five Year Warrant Exchange
           Ratio and (y) a fraction equal to one minus the Non-Election
           Fraction.
 
             (vii) The Exchange Agent shall make all computations contemplated
        by this Section 1.6 and all such computations shall be binding and
        conclusive on the holders of Paramount Common Stock.
 
          (c) Each share of Paramount Common Stock held in the treasury of
     Paramount and each share of Paramount Common Stock owned by Viacom or any
     direct or indirect wholly owned subsidiary of Viacom or of Paramount
     immediately prior to the Effective Time shall automatically be canceled and
     extinguished without any conversion thereof and no payment shall be made
     with respect thereto.
 
          (d) In the Reverse Merger, each share of common stock of Merger
     Subsidiary issued and outstanding immediately prior to the Effective Time
     shall be converted into and exchanged for one validly issued, fully paid
     and nonassessable share of common stock of the Surviving Corporation.
 
     SECTION 1.7. Exchange of Certificates and Cash. (a) Exchange Agent. As of
the Effective Time (in the case of a Merger to which Section 1.6(a) applies) or
promptly after completion of the allocation procedures set forth in Section 1.6
(in the case of a Merger to which Section 1.6(b) applies), Viacom shall deposit,
or shall cause to be deposited, with or for the account of a bank or trust
company designated by Viacom, which shall be reasonably satisfactory to
Paramount (the "Exchange Agent"), for the benefit of the holders of shares of
Paramount Common Stock (other than Dissenting Shares), for exchange in
accordance with this Article I, through the Exchange Agent, (i) certificates
evidencing the shares of Viacom Class B Common Stock, the Viacom Merger
Debentures, the Warrants and the CVRs issuable pursuant to Section 1.6 in
exchange for outstanding shares of Paramount Common Stock and (ii) cash, if any,
in the aggregate amount required to be exchanged for shares of Paramount Common
Stock pursuant to Section 1.6 (the "Exchange Cash Consideration") (such
certificates for shares of Viacom Class B Common Stock, the Viacom Merger
Debentures, the Warrants and the CVRs, together with any dividends or
distributions with respect thereto, and the Exchange Cash Consideration, if any,
being hereafter collectively referred to as the "Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the shares of Viacom
Class B Common Stock, the Viacom Merger Debentures, Warrants, CVRs and cash, if
any, contemplated to be issued pursuant to Section 1.6 out of the Exchange Fund
to holders of shares of Paramount Common Stock. Except as contemplated by
Section 1.7(d) hereof, the Exchange Fund shall not be used for any other
purpose. Any interest, dividends or other income earned on the investment of
cash or other property held in the Exchange Fund shall be for the account of
Viacom.
 
                                      I-6

     (b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Viacom will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Paramount Common Stock (other
than Dissenting Shares) (the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Viacom may reasonably specify) and (ii) instructions to effect the surrender of
the Certificates in exchange for the certificates evidencing shares of Viacom
Class B Common Stock, the Viacom Merger Debentures, CVRs, Warrants and cash.
Upon surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) certificates
evidencing that number of whole shares of Viacom Class B Common Stock and that
number of whole CVRs, Viacom Merger Debentures and Warrants which such holder
has the right to receive in accordance with Section 1.6 in respect of the shares
of Paramount Common Stock formerly evidenced by such Certificate, (B) cash, if
any, which such holder has the right to receive in accordance with Section 1.6,
(C) any dividends or other distributions to which such holder is entitled
pursuant to Section 1.7(c), and (D) cash in lieu of fractional shares of Viacom
Class B Common Stock and fractional CVRs, Viacom Merger Debentures and Warrants
to which such holder is entitled pursuant to Section 1.7(d) (the shares of
Viacom Class B Common Stock, CVRs, Viacom Merger Debentures, Warrants,
dividends, distributions and cash described in clauses (A), (B), (C) and (D)
being, collectively, the "Merger Consideration"), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Paramount Common Stock which is not registered in the transfer
records of Paramount, shares of Viacom Class B Common Stock, CVRs, Viacom Merger
Debentures, Warrants and cash may be issued and paid in accordance with this
Article I to a transferee if the Certificate evidencing such shares of Paramount
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 1.7, each Certificate shall be deemed at any time
after the Effective Time to evidence only the right to receive upon such
surrender the Merger Consideration.
 
     (c) Distributions With Respect to Unexchanged Shares of Viacom Class B
Common Stock, CVRs, Viacom Merger Debentures and Warrants. No dividends or other
distributions declared or made after the Effective Time with respect to shares
of Viacom Class B Common Stock, CVRs, Viacom Merger Debentures and Warrants with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Viacom Class B Common
Stock, CVRs, Viacom Merger Debentures or Warrants they are entitled to receive
until the holder of such Certificate shall surrender such Certificate.
 
     (d) Fractional Shares, CVRs, Viacom Merger Debentures and Warrants. (i) No
fraction of a share of Viacom Class B Common Stock or fraction of a CVR, Viacom
Merger Debenture or Warrant shall be issued in the Merger. In lieu of any such
fractional shares or fractional CVRs, Viacom Merger Debentures or Warrants, each
holder of Paramount Common Stock entitled to receive shares of Viacom Class B
Common Stock, CVRs, Viacom Merger Debentures and Warrants in the Merger, upon
surrender of a Certificate for exchange pursuant to this Section 1.7, shall be
paid (1) an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (x) the per share closing price on the American Stock
Exchange ("AMEX") of Viacom Class B Common Stock on the date of the Effective
Time (or, if shares of Viacom Class B Common Stock do not trade on the AMEX on
such date, the first date of trading of such Viacom Class B Common Stock on the
AMEX after the Effective Time) by (y) the fractional interest in Viacom Class B
Stock to which such holder would otherwise be entitled (after taking into
account all shares of Paramount Common Stock then held of record by such
                                      I-7

holder) plus (2) an amount in cash (without interest), rounded to the nearest
cent, determined by multiplying (x) the fair market value of one CVR, as
determined by reference to a five day average trading price, if available, or if
not available, in the reasonable judgment of the Viacom Board of Directors by
(y) the fractional interest in a CVR to which such holder would otherwise be
entitled (after taking into account all shares of Paramount Common Stock then
held of record by such holder) plus (3) an amount in cash (without interest)
rounded to the nearest cent, determined by multiplying (x) the fair market value
of one Three Year Warrant, as determined by reference to a five day average
trading price, if available, or if not available, in the reasonable judgment of
the Viacom Board of Directors by (y) the fractional interest in a Three Year
Warrant to which such holder would otherwise be entitled (after taking into
account all shares of Paramount Common Stock then held of record by such holder)
plus (4) an amount in cash (without interest) determined in accordance with
clause (ii) of this Section 1.7(d) in respect of the fractional interest in a
Viacom Merger Debenture to which such holder would otherwise be entitled (after
taking into account all shares of Paramount Common Stock then held of record by
such holder) plus (5) an amount in cash (without interest) rounded to the
nearest cent, determined by multiplying (x) the fair market value of one Five
Year Warrant, as determined by reference to a five day average trading price, if
available, or if not available, in the reasonable judgment of the Viacom Board
of Directors by (y) the fractional interest in a Five Year Warrant to which such
holder would otherwise be entitled (after taking into account all shares of
Paramount Common Stock then held of record by such holder). (ii) The Viacom
Merger Debentures shall be issued in the Merger only in principal amounts of
$1,000 or integral multiples thereof. Holders of shares of Paramount Common
Stock otherwise entitled to fractional amounts of Viacom Merger Debentures shall
be entitled to receive promptly from the Exchange Agent a cash payment in an
amount equal to such holder's proportionate interest (after taking into account
all shares of Paramount Common Stock then held of record by such holder) in the
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional principal amount of
Viacom Merger Debentures.
 
     (e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Paramount Common Stock for six months
after the Effective Time shall be delivered to Viacom, upon demand, and any
holders of Paramount Common Stock who have not theretofore complied with this
Article I shall thereafter look only to Viacom for the Merger Consideration to
which they are entitled pursuant to this Article I.
 
     (f) No Liability. Neither Viacom nor Paramount shall be liable to any
holder of shares of Paramount Common Stock for any such shares of Viacom Class B
Common Stock, CVRs, Viacom Merger Debentures, Warrants (or dividends or
distributions with respect thereto) or cash from the Exchange Fund delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
 
     (g) Withholding Rights. Viacom or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Paramount Common Stock such amounts as
Viacom or the Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Viacom or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Paramount Common
Stock in respect of which such deduction and withholding was made by Viacom or
the Exchange Agent.
 
     SECTION 1.8. Stock Transfer Books. At the Effective Time, the stock
transfer books of Paramount shall be closed, and there shall be no further
registration of transfers of shares of Paramount Common Stock thereafter on the
records of Paramount. On or after the Effective Time, any Certificates
                                      I-8

presented to the Exchange Agent or Viacom for any reason shall be converted into
the Merger Consideration.
 
     SECTION 1.9. Stock Options; Payment Rights. (a) At the Effective Time,
Paramount's obligations with respect to each outstanding Stock Option (as
defined in Section 3.3) to purchase shares of Paramount Common Stock, as amended
in the manner described in the following sentence, shall be assumed by Viacom.
The Stock Options so assumed by Viacom shall continue to have, and be subject
to, the same terms and conditions as set forth in the stock option plans and
agreements pursuant to which such Stock Options were issued as in effect
immediately prior to the Effective Time, except that each such Stock Option
shall be exercisable for (i) that number of whole shares of Viacom Class B
Common Stock equal to the product of the number of shares of Paramount Common
Stock covered by such Stock Option immediately prior to the Effective Time
multiplied by the Class B Exchange Ratio and rounded up to the nearest whole
number of shares of Viacom Class B Common Stock, (ii) that number of whole CVRs
equal to the product of the number of shares of Paramount Common Stock covered
by such Stock Option immediately prior to the Effective Time multiplied by the
CVR Exchange Ratio and rounded up to the nearest whole number of CVRs; provided,
that, if the option holder has not exercised his or her Stock Option prior to
the maturity of the CVRs, then the CVRs described above shall be replaced by
that number of shares of Viacom Class B Common Stock equal in value to the
amount by which the Target Price (as defined in Annex C hereto) exceeds the
greater of the Current Market Value (as defined in Annex C hereto) and the
Minimum Price (as defined in Annex C hereto) on the applicable maturity date
multiplied by the number of such CVRs, rounded up to the nearest whole number of
shares, (iii) that number of whole Three Year Warrants equal to the product of
the number of shares of Paramount Common Stock covered by such Stock Option
immediately prior to the Effective Time multiplied by the Three Year Warrant
Exchange Ratio and rounded up to the nearest whole number of Three Year
Warrants; provided, that, if the option holder has not exercised his or her
Stock Option prior to the third anniversary of the Effective Time, then the
Three Year Warrants described above shall be replaced by that number of shares
of Viacom Class B Common Stock equal in value to the fair market value of such
Three Year Warrants (as determined by reference to the average trading price for
the five-day trading period immediately prior to the third anniversary of the
Effective Time, if available, or, if not available, in the reasonable judgment
of the Viacom Board of Directors), rounded up to the nearest whole number of
shares; (iv) that number of whole Five Year Warrants equal to the product of the
number of shares of Paramount Common Stock covered by such Stock Option
immediately prior to the Effective Time multiplied by the Five Year Warrant
Exchange Ratio and rounded up to the nearest whole number of Five Year Warrants;
provided, that, if the option holder has not exercised his or her Stock Option
prior to the fifth anniversary of the Effective Time, then the Five Year
Warrants described above shall be replaced by that number of shares of Viacom
Class B Common Stock equal in value to the fair market value of such Five Year
Warrants (as determined by reference to the average trading price for the
five-day trading period immediately prior to the fifth anniversary of the
Effective Time, if available, or if not available, in the reasonable judgment of
the Viacom Board of Directors), rounded up to the nearest whole number of
shares; and (v) that (A) principal amount of whole Viacom Merger Debentures
equal to the product of the number of shares of Paramount Common Stock covered
by such Stock Option immediately prior to the Effective Time multiplied by the
Debenture Exchange Ratio plus an amount in cash (without interest), rounded to
the nearest cent, determined by multiplying (x) the fair market value of one
Viacom Merger Debenture, as determined by reference to a five day average
trading price, if available, or if not available, in the reasonable judgment of
the Viacom Board of Directors by (y) the fractional interest in a Viacom Merger
Debenture to which such option holder would otherwise be entitled or (B) if
issued, that number of whole shares of Viacom Exchange Preferred Stock (as
defined in Annex B) equal to the product of the number of shares of Paramount
Common Stock covered by such Stock Option immediately prior to the Effective
Time multiplied by .35 and rounded up to the nearest whole number of shares of
Viacom Exchange Preferred Stock or (C) if issued, that principal amount of whole
Viacom Exchange Debentures (as defined in Annex B) equal to the
                                      I-9

product of the number of shares of Paramount Common Stock covered by such Stock
Option immediately prior to the Effective Time multiplied by the Debenture
Exchange Ratio plus an amount in cash (without interest), rounded to the nearest
cent, determined by multiplying (x) the fair market value of one Viacom Exchange
Debenture, as determined by reference to a five day average trading price, if
available, or if not available, in the reasonable judgment of the Viacom Board
of Directors by (y) the fractional interest in a Viacom Exchange Debenture to
which such option holder would otherwise be entitled, provided that there shall
be no such rounding up with respect to Incentive Stock Options (as defined
below). Viacom shall (i) reserve for issuance the number of shares of Viacom
Class B Common Stock, CVRs, Viacom Merger Debentures and Warrants that will
become issuable upon the exercise of such Stock Options pursuant to this Section
1.9 and (ii) promptly after the Effective Time, issue to each holder of an
outstanding Stock Option a document evidencing the assumption by Viacom of
Paramount's obligations with respect thereto under this Section 1.9. Nothing in
this Section 1.9 shall affect the schedule of vesting with respect to the Stock
Options to be assumed by Viacom as provided in this Section 1.9. In the case of
any Stock Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code (an "Incentive Stock Option"), the
option price, the number and type of shares purchasable pursuant to such
Incentive Stock Option and the terms and conditions of exercise of such
Incentive Stock Option shall be determined immediately after the Effective Time
in such manner as to comply with Section 424(a) of the Code. To preserve the
qualification of all Incentive Stock Options under Section 422 of the Code, (i)
in addition to the Viacom Class B Common Stock and (ii) in lieu of all CVRs,
Viacom Merger Debentures or Warrants for which an Incentive Stock Option would
otherwise become exercisable pursuant to the foregoing provisions of this
Section 1.9, such Incentive Stock Option shall become exercisable for that
number of shares of Viacom Class B Common Stock equal to the fair market value
of such CVRs, Viacom Merger Debentures or Warrants (determined, at the time of
the Merger, by reference to a five-day average trading price of such securities,
if available, or if not available, in the reasonable judgment of the Viacom
Board of Directors).
 
     SECTION 1.10. Dissenting Shares. (a) Notwithstanding any other provision of
this Agreement to the contrary, shares of Paramount Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of Delaware Law and who shall not
have withdrawn such demand or otherwise have forfeited appraisal rights
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the Merger Consideration. Such stockholders shall be
entitled to receive payment of the appraised value of such shares of Paramount
Common Stock held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares of Paramount Common Stock under such Section 262 shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration (as if such Shares were Non-Election Shares in
the case of a Merger to which section 1.6(b) applies), upon surrender, in the
manner provided in Section 1.7, of the certificate or certificates that formerly
evidenced such shares of Paramount Common Stock.
 
     (b) Paramount shall give Viacom (i) prompt notice of any demands for
appraisal received by Paramount, withdrawals of such demands, and any other
instruments served pursuant to Delaware Law and received by Paramount and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under Delaware Law. Paramount shall not, except with the
prior written consent of Viacom, make any payment with respect to any demands
for appraisal, or offer to settle, or settle, any such demands.
 
                                      I-10

                                   ARTICLE II
 
                                   THE OFFER
 
     SECTION 2.1. The Offer. (a) Viacom has amended and supplemented the Offer
to (i) provide that the purchase price offered for shares pursuant to the Offer
shall be the Per Share Amount, (ii) provide that the obligation of Viacom to
accept for payment and pay for Shares tendered pursuant to the Offer shall be
subject to the condition (as such condition may be amended in accordance with
the terms hereof, the "Minimum Condition") that at least 61,657,432 shares of
Paramount Common Stock (or such greater number of shares as equals 50.1% of the
shares of Paramount Common Stock then outstanding on a fully diluted basis)
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer, that the Board of Directors of Paramount, in accordance with Section
3.13 of this Agreement, shall have amended the Rights Agreement to make the
Rights (such terms being used as defined in Section 3.13) inapplicable to the
Offer and the Merger as contemplated by Section 3.13 or the Rights shall be
otherwise inapplicable to the Offer and the Merger (the "Rights Condition"), and
also shall be subject to the satisfaction of the other conditions set forth in
Annex A hereto and (iii) extend the expiration date of the Offer until Midnight
on February 14, 1994. Viacom expressly reserves the right to waive any such
condition (other than the Minimum Condition), to increase the aggregate cash
consideration to be paid pursuant to the Offer and to increase the number of
shares of Paramount Common Stock sought in the Offer; provided, however, that no
change may be made without the prior written consent of Paramount which
decreases the number of shares of Paramount Common Stock sought in the Offer
below 50.1% of the outstanding shares of Paramount Common Stock on a fully
diluted basis; which decreases the aggregate cash consideration payable in the
Offer or changes the form of consideration payable in the Offer (except to the
extent the Other Offeror (as defined below) has made such changes with the
consent of Paramount); or which imposes conditions to the Offer in addition to
those set forth in Annex A hereto. Notwithstanding the foregoing sentence, so
long as the Other Offeror is bound by substantially identical restrictions made
for the benefit of Paramount, Viacom shall not amend the Offer in order to
increase by less than $60 million the aggregate cash consideration to be paid
pursuant to the Offer or increase the number of shares of Paramount Common Stock
for which tenders are sought by less than 2% of the outstanding shares of
Paramount Common Stock. The Per Share Amount shall, subject to applicable
withholding of taxes, be net to the seller in cash, upon the terms and subject
to the conditions of the Offer. Subject to the terms and conditions of the Offer
(including, without limitation, the Minimum Condition and the terms of this
Agreement), Viacom shall pay, as promptly as practicable after expiration of the
Offer, for all shares of Paramount Common Stock validly tendered and not
withdrawn at the earliest such time following expiration of the Offer that all
conditions to the Offer shall have been waived or satisfied by Viacom.
 
     (b) Viacom has filed with the Securities and Exchange Commission (the
"SEC") an amendment to its Tender Offer Statement on Schedule 14D-1 (together
with all amendments and supplements thereto, the "Schedule 14D-1") with respect
to the Offer. The Schedule 14D-1 contains or incorporates by reference an
amendment and supplement to the offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule 14D-1, the Offer to Purchase and such other documents, together
with all supplements and amendments thereto, being referred to herein
collectively as the "Offer Documents"). Viacom and Paramount agree to correct
promptly any information provided by any of them for use in the Offer Documents
which shall have become false or misleading, and Viacom further agrees to take
all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with
the SEC and the other Offer Documents as so corrected to be disseminated to
holders of shares of Paramount Common Stock, in each case as and to the extent
required by applicable federal securities laws.
 
     (c) (i) Notwithstanding the amendment of the Offer, Viacom shall be free to
terminate the Offer at any time subject to its continuing obligations to
consummate the Merger, including without limitation pursuant to Sections 6.6 and
6.10, provided that prior to such termination of the Offer,
                                      I-11

Viacom shall have determined in good faith that either (x) terminating the Offer
will facilitate the earlier consummation of the Merger in accordance with the
terms of this Merger Agreement or (y) the conditions to the Offer (other than
the Minimum Condition and the Rights Condition) are unlikely to be satisfied.
Notwithstanding the foregoing, Viacom hereby agrees that, without the written
consent of Paramount, it may not terminate the Offer unless required to
terminate pursuant to Section 2.5 hereof or extend the Expiration Date (as
defined below) except for failure to satisfy a condition at the Expiration Date,
at any time that all of the conditions to the Offer have been satisfied or that
there exists no material risk that the conditions will not be satisfied by such
Expiration Date, provided, Viacom may extend the Expiration Date pursuant to
this Section 2.1(c), Sections 2.1(a), 2.1(d) and 2.3 hereof or any such
extension required by Federal securities laws. (ii) No extension of the
expiration date (such expiration date as extended from time to time shall be
defined herein to mean the "Expiration Date") permitted pursuant to this
Agreement shall be for a period of less than three business days, and the
Expiration Date shall not be extended for any reason beyond 12:00 midnight on
February 14, 1994, or such later date in accordance with the last parenthetical
of Section 2.1(d)(ii), Section 2.3, or as required by law to the extent that the
extension arises due to an event outside the control of Viacom (those events not
deemed to be outside the control of the Offeror shall include, without
limitation, any change in the terms of the Offer or the Merger) (the "Final
Expiration Date"); Viacom agrees that it will not increase the price per share
of Paramount Common Stock payable in the Offer or the Merger or otherwise amend
the Offer or the terms of the Merger primarily to extend the expiration date of
the tender offer by QVC Network, Inc. ("QVC") (the "Other Offeror") to purchase
the outstanding shares of Paramount Common Stock (the "Other Offer"). Any
amendment to the Offer or any change in the consideration offered to the
Paramount stockholders in the Merger that results in an extension of the
Expiration Date shall be publicly announced by 5:00 p.m. on the date of such
amendment or change. Viacom hereby agrees that it shall not (a) seek to amend or
waive any provision of this Agreement that is substantially identical to the
provisions relating to the bidding procedures contained in the Other Exemption
Agreement (the "Bidding Procedures") or (b) 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 relating to the
Bidding Procedures.
 
     (d) In order to cause the Offer and the Other Offer to remain on the same
time schedule, Viacom hereby agrees that if the Other Offeror remains subject to
an agreement (the "Other Exemption Agreement"), containing terms for the benefit
of Paramount substantially similar to the form of exemption agreement between
Viacom and Paramount dated as of December 22, 1993, as amended (the "Exemption
Agreement"), and (i) extends the expiration date of the Other Offer (such
expiration date, as extended from time to time, the "Other Expiration Date") in
accordance with the Other Exemption Agreement, then the Expiration Date shall be
extended (as soon as practicable, but not later than one business day following
the announcement of the extension of the Other Expiration Date) by Viacom to the
Other Expiration Date, or (ii) if upon notification to Paramount by Viacom and
the Other Offeror of the results of their respective offers (which notification
shall be required to be delivered by Viacom and the Other Offeror no later than
promptly following the expiration of their respective offers), Paramount has
notified Viacom and the Other Offeror (which notification shall be required to
be delivered by Paramount promptly) that a number of shares of Paramount Common
Stock that would satisfy the Minimum Condition or the minimum condition defined
in the Other Offer (which under no circumstances may be less than 50.1% of the
outstanding shares of Paramount Common Stock on a fully diluted basis) (the
"Other Minimum Condition") shall not have been validly tendered (and not
withdrawn) pursuant to either the Offer or the Other Offer, respectively, at the
Expiration Date (or a number of shares of Paramount Common Stock that would
satisfy the Minimum Condition and the Other Minimum Condition shall have been
validly tendered and not withdrawn pursuant to both the Offer and the Other
Offer at the Expiration Date), then Viacom shall extend the Expiration Date of
the Offer for a period of 10 business days.
 
     (e) Viacom shall be subject to the obligations of Sections 2.1(c)(ii),
2.1(d) and 2.5 for so long as the Other Offeror remains subject to the
obligations set forth in the Other Exemption Agreement;
                                      I-12

provided, however, that Viacom shall not be subject to Sections 2.1(c)(ii),
2.1(d) and 2.5 in the event that the Other Offeror has not performed or complied
in all material respects with the Other Exemption Agreement.
 
     SECTION 2.2. Action by Paramount. (a) Paramount hereby approves of and
consents to the making of the Offer and represents that (i) the Board of
Directors of Paramount, at a meeting duly called and held on February 4, 1994,
has unanimously (A) determined that the Offer and the Merger, taken together,
are fair to and in the best interests of the holders of shares of Paramount
Common Stock, (B) approved and adopted this Agreement and the transactions
contemplated hereby and (C) recommended that the stockholders of Paramount
approve and adopt this Agreement and the transactions contemplated hereby and
accept the Offer, and (ii) Lazard Freres & Co. has delivered to the Board an
opinion on February 4, 1994, to the effect that, as of such date, the
consideration to be received by the holders of shares of Paramount Common Stock
pursuant to the Offer and the Merger, taken together, is fair to the holders of
shares of Paramount Common Stock from a financial point of view. Subject to the
fiduciary duties of the Board of Directors of Paramount under applicable law as
advised by independent legal counsel (who may be such party's regularly engaged
legal counsel), Paramount hereby consents to the inclusion in the Offer
Documents prepared in connection with the Offer of the recommendation of the
Board of Directors of Paramount described in the immediately preceding sentence.
 
     (b) As soon as reasonably practicable after the date hereof, Paramount
shall file with the SEC an amendment to its Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject to the fiduciary duties of
the Board of Directors of Paramount under applicable law as advised by
independent legal counsel (who may be such party's regularly engaged legal
counsel), the recommendation of the Board of Directors of Paramount described in
Section 2.2(a) and shall disseminate the Schedule 14D-9 to the extent required
by Rule 14e-2 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and any other applicable federal securities laws.
Paramount and Viacom agree to correct promptly any information provided by any
of them for use in the Schedule 14D-9 which shall have become false or
misleading, and Paramount further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
holders of shares of Paramount Common Stock, in each case as and to the extent
required by applicable federal securities laws.
 
     (c) Paramount shall promptly furnish Viacom with mailing labels containing
the names and addresses of all record holders of shares of Paramount Common
Stock and with security position listings of shares of Paramount Common Stock
held in stock depositories, each as of a recent date, together with all other
available listings and computer files containing names, addresses and security
position listings of record holders and beneficial owners of shares of Paramount
Common Stock. Paramount shall furnish Viacom with such additional information,
including, without limitation, updated listings and computer files of
stockholders, mailing labels and security position listings, and such other
assistance as Viacom or its agents may reasonably request. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger or the Offer, Viacom shall hold in confidence the information
contained in such labels, listings and files, shall use such information only in
connection with the Merger and the Offer, and, if this Agreement shall be
terminated in accordance with Section 8.1, shall deliver to Paramount all copies
of such information then in its possession.
 
     SECTION 2.3. Receipt of Common Stock. Unless the event referred to in the
last parenthetical of Section 2.1(d)(ii) that would satisfy the Minimum
Condition occurs, in the event that a number of shares of Paramount Common Stock
shall have been validly tendered and not withdrawn in the Offer at the
Expiration Date and, as of such Expiration Date, Viacom has waived all
conditions to the Offer (other than the Minimum Condition and the conditions
relating to the Rights Agreement, Article XI of
                                      I-13

the Paramount Certificate of Incorporation, Section 203 of Delaware Law and
judicial or governmental injunction, each as set forth therein), then Viacom
shall extend the Expiration Date to a date 10 business days from the then
scheduled Expiration Date; provided, that such extension shall be for a period
of 5 business days in the event that the Other Offer has been terminated prior
to the foregoing Expiration Date.
 
     SECTION 2.4. Completion Certificate. At such time as Viacom has fulfilled
the terms of Section 2.3 above, Viacom shall deliver to the Board of Directors
of Paramount a certificate (the "Completion Certificate"), executed by an
authorized officer of Viacom, certifying that all the terms of Section 2.3 have
been fulfilled.
 
     SECTION 2.5. Termination of the Offer. Unless the event referred to in the
last parenthetical of Section 2.1(d)(ii) occurs, Viacom hereby agrees to
terminate the Offer at such time as Viacom has been notified pursuant to a
certificate executed by an authorized officer of Paramount that (i) a number of
shares of Paramount Common Stock that would satisfy the Other Minimum Condition
shall have been validly tendered to the Other Offer and not withdrawn at the
Other Expiration Date of the Other Offer, (ii) all conditions to the Other
Offer, except the Other Minimum Condition and the conditions relating to the
Rights Agreement, Article XI of the Paramount Certificate of Incorporation,
Section 203 of the Delaware Law and judicial or governmental injunction, each as
set forth therein, shall have been waived and (iii) a completion certificate
from the Other Offeror has been delivered to Paramount; provided, however, that
Viacom shall not be required to terminate the Offer in the event that the Other
Offeror has not performed or complied in all material respects with the Other
Exemption Agreement.
 
     SECTION 2.6. Board of Directors; Section 14(f). (a) If requested by Viacom,
Paramount shall, promptly following the acceptance for payment of the shares of
Paramount Common Stock to be purchased pursuant to the Offer, and from time to
time thereafter, take all actions necessary to cause a majority of directors
(and of members of each committee of the Board of Directors) of Paramount and of
each subsidiary of Paramount to be comprised of the designees of Viacom
(whether, at the request of Viacom, by means of increasing the size of the Board
of Directors of Paramount or seeking the resignation of directors and causing
Viacom's designees to be elected); provided, that prior to receipt by Viacom of
long-form approval by the Federal Communications Commission (the "FCC")
permitting Viacom to control Paramount, Paramount shall take all actions
necessary to elect the Viacom voting trustee approved by the FCC to the
Paramount Board of Directors and to otherwise act in a manner consistent with
the voting trust agreement approved by the FCC.
 
     (b) Paramount's obligations to cause designees of Viacom to be elected or
appointed to the Board of Directors of Paramount shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Paramount shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section, and shall include in the
Schedule 14D-9 such information with respect to Viacom and its officers and
directors as is required under Section 14(f) and Rule 14f-1. Viacom will supply
to Paramount any information with respect to it and its nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
 
     (c) Following the election or appointment of Viacom's designees pursuant to
this Section and prior to the Effective Time, any amendment or termination of
this Agreement, extension for the performance or waiver of the obligations or
other acts of Viacom or waiver of Paramount's rights hereunder, will require the
concurrence of a majority of directors of Paramount then in office who are
directors on the date hereof or are designated by a majority of the directors of
Paramount who are directors on the date hereof.
 
                                      I-14

                                  ARTICLE III
 
                  REPRESENTATIONS AND WARRANTIES OF PARAMOUNT
 
     Paramount hereby represents and warrants to Viacom that:
 
     SECTION 3.1. Organization and Qualification; Subsidiaries. (a) Each of
Paramount and each Material Paramount Subsidiary (as defined below) is a
corporation, partnership or other legal entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Paramount Material Adverse Effect (as defined below). Paramount and each
Material Paramount Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Paramount Material Adverse Effect. The
term "Paramount Material Adverse Effect" means any change or effect that is or
is reasonably likely to be materially adverse to the business, results of
operations or financial condition of Paramount and the Paramount Subsidiaries,
taken as a whole; provided, however, where such term qualifies a representation
or warranty contained in this Article III during the period beginning after the
date hereof and until the Effective Time, then such term shall mean any change
or effect that is or is reasonably likely to be materially adverse to the
business or financial condition of Paramount and the Paramount Subsidiaries,
taken as a whole.
 
     (b) Each subsidiary of Paramount (a "Paramount Subsidiary") that
constitutes a Significant Subsidiary of Paramount within the meaning of Rule
1-02 of Regulation S-X of the SEC is referred to herein as a "Material Paramount
Subsidiary".
 
     SECTION 3.2. Certificate of Incorporation and By-Laws. Paramount has
heretofore made available to Viacom a complete and correct copy of the
Certificate of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of Paramount and each Material Paramount
Subsidiary. Such Certificates of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect. Neither Paramount nor any
Material Paramount Subsidiary is in violation of any provision of its
Certificate of Incorporation, By-Laws or equivalent organizational documents,
except for such violations that would not, individually or in the aggregate,
have a Paramount Material Adverse Effect.
 
     SECTION 3.3. Capitalization. The authorized capital stock of Paramount
consists of 600,000,000 shares of Paramount Common Stock and 75,000,000 shares
of Preferred Stock, par value $.01 per share ("Paramount Preferred Stock"). As
of February 3, 1994, 121,937,762 shares of Paramount Common Stock were issued
and outstanding, all of which were validly issued, fully paid and nonassessable.
As of February 3, 1994, 25,924,286 shares were held in the treasury of
Paramount. As of January 31, 1994, 9,409,208 shares were reserved for future
issuance pursuant to Paramount's 1992 Stock Option Plan and 1989 Stock Option
Plan (any employee stock option issued under any such plan being a "Stock
Option") and reserved for future issuance under the Long-Term Incentive Plan.
Between August 31, 1993 and the date of this Agreement, awards have been made
under the Long-Term Performance Plan as indicated on Schedule 3.3. As of
February 3, 1994, options to acquire 2,398,060 shares of Paramount Common Stock
were outstanding. As of the date hereof, no shares of Paramount Preferred Stock
are issued and outstanding. Except as set forth in Section 3.3 of the Disclosure
Schedule previously delivered by Paramount to Viacom (the "Paramount Disclosure
Schedule"), or except as set forth in this Section 3.3, and except pursuant to
the Rights Agreement (as defined in Section 3.13), there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating
                                      I-15

to the issued or unissued capital stock of Paramount or any Material Paramount
Subsidiary or obligating Paramount or any Material Paramount Subsidiary to issue
or sell any shares of capital stock of, or other equity interests in, Paramount
or any Material Paramount Subsidiary. All shares of Paramount Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. Except as set forth in
Section 3.3 of the Paramount Disclosure Schedule, there are no material
outstanding contractual obligations of Paramount or any Paramount Subsidiary to
repurchase, redeem or otherwise acquire any shares of Paramount Common Stock or
any capital stock of any Material Paramount Subsidiary, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
Paramount Subsidiary or any other person. Each outstanding share of capital
stock of each Material Paramount Subsidiary is duly authorized, validly issued,
fully paid and nonassessable and each such share owned by Paramount or another
Paramount Subsidiary is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on
Paramount's or such other Paramount Subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever. Set forth in Section 3.3 of the
Disclosure Schedule is Paramount's percentage interest in the outstanding
capital stock or partnership interests of USA Networks, United Cinemas
International Multiplex B.V., United International Pictures and Cinamerica
Theatres, L.P.
 
     SECTION 3.4. Authority Relative to This Agreement. Paramount has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions (including, without
limitation, the Offer) contemplated hereby (the "Transactions"). The execution
and delivery of this Agreement by Paramount and the consummation by Paramount of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the part of
Paramount are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding shares of Paramount Common Stock, and the filing and recordation of
appropriate merger documents as required by Delaware Law). This Agreement has
been duly and validly executed and delivered by Paramount and, assuming the due
authorization, execution and delivery by Viacom, constitutes a legal, valid and
binding obligation of Paramount, enforceable against Paramount in accordance
with its terms. Paramount has taken all appropriate actions so that the
restrictions on business combinations contained in Section 203 of Delaware Law
and Article XI of Paramount's Certificate of Incorporation will not apply with
respect to or as a result of the Transactions.
 
     SECTION 3.5. No Conflict; Required Filings and Consents. (a) Except as set
forth in Section 3.05 of the Disclosure Schedule, the execution and delivery of
this Agreement by Paramount does not, and the performance by Paramount of its
obligations under this Agreement will not, (i) conflict with or violate the
Certificate of Incorporation or By-Laws or equivalent organizational documents
of Paramount or any Material Paramount Subsidiary, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Paramount or
any Paramount Subsidiary or by which any property or asset of Paramount or any
Paramount Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Paramount or any Paramount Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Paramount or any Paramount
Subsidiary is a party or by which Paramount or any Paramount Subsidiary or any
property or asset of Paramount or any Paramount Subsidiary is bound or affected,
except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay consummation of the Merger or the Offer in any material respect, or
otherwise prevent Paramount from performing its obligations under this Agreement
in any material respect, and would not, individually or in the aggregate, have a
Paramount Material Adverse Effect.
 
                                      I-16

     (b) The execution and delivery of this Agreement by Paramount does not, and
the performance of this Agreement by Paramount will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign (each a "Governmental
Entity"), except (i) for (A) applicable requirements, if any, of the Exchange
Act, the Securities Act of 1933, as amended (the "Securities Act"), state
securities or "blue sky" laws ("Blue Sky Laws") and state takeover laws, (B)
applicable requirements of the Communications Act of 1934, as amended (the
"Communications Act"), and of state and local governmental authorities,
including state and local authorities granting franchises to operate cable
systems, (C) applicable requirements of the Investment Canada Act of 1985 and
the Competition Act (Canada), (D) filing and recordation of appropriate merger
documents as required by Delaware Law and (E) applicable requirements, if any,
of any non-United States competition, antitrust and investment laws and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not prevent or delay consummation
of the Merger or the Offer in any material respect, or otherwise prevent
Paramount from performing its obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, have a Paramount
Material Adverse Effect.
 
     SECTION 3.6. Compliance. Except as set forth in Section 3.6 of the
Paramount Disclosure Schedule, neither Paramount nor any Paramount Subsidiary is
in conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to Paramount or any Paramount Subsidiary or
by which any property or asset of Paramount or any Paramount Subsidiary is bound
or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Paramount or any Paramount Subsidiary is a party or by which Paramount or any
Paramount Subsidiary or any property or asset of Paramount or any Paramount
Subsidiary is bound or affected, except for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have a Paramount
Material Adverse Effect.
 
     SECTION 3.7. SEC Filings; Financial Statements. Except as set forth in
Section 3.7 of the Paramount Disclosure Schedule, (a) Paramount has filed all
forms, reports and documents required to be filed by it with the SEC since
October 31, 1990, and has heretofore made available to Viacom, in the form filed
with the SEC (excluding any exhibits thereto), (i) its Annual Reports on Form
10-K for the fiscal years ended October 31, 1990, 1991 and 1992, respectively,
(ii) its Transition Report on Form 10-K for the six months ended April 30, 1993,
as amended, (iii) its Quarterly Reports on Form 10-Q for the periods ended July
31, 1993 and October 31, 1993, (iv) all proxy statements relating to Paramount's
meetings of stockholders (whether annual or special) held since October 31,
1990, and (v) all other forms, reports and other registration statements (other
than Quarterly Reports on Form 10-Q not referred to in clause (iii) above and
preliminary materials) filed by Paramount with the SEC since October 31, 1990
(the forms, reports and other documents referred to in clauses (i), (ii), (iii),
(iv) and (v) above being referred to herein, collectively, as the "Paramount SEC
Reports"). The Paramount SEC Reports and any forms, reports and other documents
filed by Paramount with the SEC after the date of this Agreement (x) were or
will be prepared in accordance with the requirements of the Securities Act and
the Exchange Act, as the case may be, and the rules and regulations thereunder
and (y) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Paramount Subsidiary is required to file any form,
report or other document with the SEC.
 
     (b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Paramount SEC Reports was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented the financial position, results of operations
and cash flows of Paramount and the consolidated Paramount Subsidiaries as at
the respective dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited statements, to normal
                                      I-17

and recurring year-end adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount).
 
     (c) Except as set forth in Section 3.7 of the Paramount Disclosure Schedule
or except as and to the extent set forth in the Paramount SEC Reports filed with
the SEC prior to the date of this Agreement, Paramount and the Paramount
Subsidiaries do not have any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) other than liabilities and
obligations which would not, individually or in the aggregate, have a Paramount
Material Adverse Effect.
 
     SECTION 3.8. Absence of Certain Changes or Events. Since April 30, 1993,
except as contemplated by this Agreement or as set forth in Section 3.8 of the
Paramount Disclosure Schedule, contemplated by this Agreement or disclosed in
any Paramount SEC Report filed since April 30, 1993 and prior to the date of
this Agreement, Paramount and the Paramount Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since April 30, 1993, there has not been (i) as of the date
hereof, any change, occurrence or circumstance in the business, results of
operations or financial condition of Paramount or any Paramount Subsidiary
having, individually or in the aggregate, a Paramount Material Adverse Effect,
(ii) any damage, destruction or loss (whether or not covered by insurance) with
respect to any property or asset of Paramount or any Paramount Subsidiary and
having, individually or in the aggregate, a Paramount Material Adverse Effect,
(iii) any change by Paramount in its accounting methods, principles or
practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Paramount or any Paramount
Subsidiary or any redemption, purchase or other acquisition of any of their
respective securities other than regular quarterly dividends on the shares of
Paramount Common Stock not in excess of $.20 per share and dividends by a
Paramount Subsidiary to Paramount and other than to fund pre-established
Paramount Plans and dividend reinvestment plans, or (v) other than as set forth
in Section 3.3 and pursuant to the plans, programs or arrangements referred to
in Section 3.10 and other than in the ordinary course of business consistent
with past practice, any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
Paramount or any Paramount Subsidiary.
 
     SECTION 3.9. Absence of Litigation. Except as set forth in Section 3.9 of
the Paramount Disclosure Schedule or except as disclosed in the Paramount SEC
Reports filed with the SEC prior to the date of this Agreement, there is no
claim, action, proceeding or investigation pending or, to the best knowledge of
Paramount, threatened against Paramount or any Paramount Subsidiary, or any
property or asset of Paramount or any Paramount Subsidiary, before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, which, individually or in the aggregate, is reasonably
likely to have a Paramount Material Adverse Effect. Except as disclosed in the
Paramount SEC Reports filed with the SEC prior to the date of this Agreement,
neither Paramount nor any Paramount Subsidiary nor any property or asset of
Paramount or any Paramount Subsidiary is subject to any order, writ, judgment,
injunction, decree, determination or award having or reasonably likely to have,
individually or in the aggregate, a Paramount Material Adverse Effect.
 
     SECTION 3.10. Employee Benefit Plans. With respect to all the employee
benefit plans, programs and arrangements maintained for the benefit of any
current or former employee, officer or director of Paramount or any Paramount
Subsidiary (the "Paramount Plans"), except as set forth in Section 3.10 of the
Paramount Disclosure Schedule or the Paramount SEC Reports and except as would
not, individually or in the aggregate, have a Paramount Material Adverse Effect:
(i) each Paramount Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service (the "IRS") that it is so qualified and nothing has occurred since the
date of such letter that could reasonably be expected to affect the qualified
status of such
                                      I-18

Paramount Plan; (ii) each Paramount Plan has been operated in all respects in
accordance with its terms and the requirements of applicable law; (iii) neither
Paramount nor any Paramount Subsidiary has incurred any direct or indirect
liability under, arising out of or by operation of Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), in connection with
the termination of, or withdrawal from, any Paramount Plan or other retirement
plan or arrangement, and no fact or event exists that could reasonably be
expected to give rise to any such liability; and (iv) Paramount and the
Paramount Subsidiaries have not incurred any liability under, and have complied
in all material respects with, the Worker Adjustment Retraining Notification
Act, and no fact or event exists that could give rise to liability under such
act. Except as set forth in Section 3.10 of the Paramount Disclosure Schedule or
the Paramount SEC Reports, the aggregate accumulated benefit obligations of each
Paramount Plan subject to Title IV of ERISA (as of the date of the most recent
actuarial valuation prepared for such Paramount Plan) do not exceed the fair
market value of the assets of such Paramount Plan (as of the date of such
valuation).
 
     SECTION 3.11. Trademarks, Patents and Copyrights. Paramount and the
Paramount Subsidiaries own or possess adequate licenses or other valid rights to
use all material patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets, applications
for trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of Paramount
and the Paramount Subsidiaries as currently conducted or as contemplated to be
conducted, and Paramount is unaware of any assertion or claim challenging the
validity of any of the foregoing which, individually or in the aggregate, would
have a Paramount Material Adverse Effect. The conduct of the business of
Paramount and the Paramount Subsidiaries as currently conducted does not
conflict in any way with any patent, patent right, license, trademark, trademark
right, trade name, trade name right, service mark or copyright of any third
party that, individually or in the aggregate, would have a Paramount Material
Adverse Effect. To the best knowledge of Paramount, there are no infringements
of any proprietary rights owned by or licensed by or to Paramount or any
Paramount Subsidiary which, individually or in the aggregate, would have a
Paramount Material Adverse Effect.
 
     SECTION 3.12. Taxes. Paramount and the Paramount Subsidiaries have timely
filed all federal, state, local and foreign tax returns and reports required to
be filed by them through the date hereof and shall timely file all returns and
reports required on or before the Effective Time, except for such returns and
reports the failure of which to file timely would not, individually or in the
aggregate, have a Paramount Material Adverse Effect. Such reports and returns
are and will be true, correct and complete, except for such failure to be true,
correct and complete as would not, individually or in the aggregate, have a
Paramount Material Adverse Effect. Paramount and the Paramount Subsidiaries have
paid and discharged all federal, state, local and foreign taxes due from them,
other than such taxes that are being contested in good faith by appropriate
proceedings and are adequately reserved as shown in the audited consolidated
balance sheet of Paramount dated October 31, 1992 (the "Paramount 1992 Balance
Sheet") and its most recent quarterly financial statements, except for such
failures to so pay and discharge which would not, individually or in the
aggregate, have a Paramount Material Adverse Effect. Neither the IRS nor any
other taxing authority or agency, domestic or foreign, is now asserting or, to
the best knowledge of Paramount, threatening to assert against Paramount or any
Paramount Subsidiary any deficiency or material claim for additional taxes or
interest thereon or penalties in connection therewith which, if such
deficiencies or claims were finally resolved against Paramount and the Paramount
Subsidiaries would, individually or in the aggregate, have a Paramount Material
Adverse Effect. The accruals and reserves for taxes (including interest and
penalties, if any, thereon) reflected in the Paramount 1992 Balance Sheet and
the most recent quarterly financial statements are adequate in accordance with
generally accepted accounting principles, except where the failure to be
adequate would not have a Paramount Material Adverse Effect. Paramount and the
Paramount Subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities or are properly holding for such payment
all taxes required by law to be withheld or collected, except for such
                                      I-19

failures to have so withheld or collected and paid over or to be so holding for
payment which would not, individually or in the aggregate, have a Paramount
Material Adverse Effect. There are no material liens for taxes upon the assets
of Paramount or the Paramount Subsidiaries, other than liens for current taxes
not yet due and payable and liens for taxes that are being contested in good
faith by appropriate proceedings. Neither Paramount nor any Paramount Subsidiary
has agreed to or is required to make any adjustment under Section 481(a) of the
Code. Neither Paramount nor any Paramount Subsidiary has made an election under
Section 341(f) of the Code. For purposes of this Section 3.12, where a
determination of whether a failure by Paramount or a Paramount Subsidiary to
comply with the representations herein has a Paramount Material Adverse Effect
is necessary, such determination shall be made on an aggregate basis with all
other failures within this Section 3.12.
 
     SECTION 3.13. Amendment to Rights Agreement. (a) The Board of Directors of
Paramount has taken all necessary action to amend the Rights Agreement, dated as
of September 7, 1988, as amended, between Paramount and Manufacturers Hanover
Trust Company, as Rights Agent (the "Rights Agreement") so that (i) none of the
execution or delivery of this Agreement, the exchange of the shares of Paramount
Common Stock for the shares of Viacom Class B Common Stock and CVRs, Viacom
Merger Debentures, Warrants and cash in accordance with Article II or the making
of the Offer will cause (A) the rights (the "Rights") issued pursuant to the
Rights Agreement to become exercisable under the Rights Agreement, (B) Viacom or
any of the Viacom Subsidiaries to be deemed an "Acquiring Person" (as defined in
the Rights Agreement), or (C) the "Stock Acquisition Date" (as defined in the
Rights Agreement) to occur upon any such event and (ii) the "Expiration Date"
(as defined in the Rights Agreement) of the Rights shall occur immediately prior
to the Effective Time. Paramount agrees to take all necessary action to amend
the Rights Agreement so that the consummation of the Offer, on the terms
permitted hereunder, will not cause any of the effects referred to in Section
3.13 (a)(i)(A), (B) or (C) to occur; provided, however, that Paramount shall not
be required to make such amendments to the Rights Agreement if (i) Viacom has
not performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the consummation of the Offer or (ii) Paramount obtains and there is
in force from the Delaware Court of Chancery an order permanently, preliminarily
or temporarily declaring that the making of such amendments to the Rights
Agreement would be contrary to the fiduciary duties of the Board of Directors of
Paramount. Notwithstanding anything else contained herein, in no event shall the
Board of Directors of Paramount make an amendment of the Rights Agreement in
favor of the Other Offeror or any other person without making such amendments in
favor of Viacom; provided that Paramount will not be obligated to make such
amendments for Viacom if Viacom has become obligated to terminate its Offer
pursuant to Section 2.5 of this Agreement.
 
     (b) The "Distribution Date" (as defined in the Rights Agreement) has not
occurred.
 
     SECTION 3.14. Opinion of Financial Advisor. Paramount has received the
opinion of Lazard Freres & Co., dated February 4, 1994, to the effect that, as
of such date, the consideration to be received by the stockholders of Paramount
pursuant to the offer and the Merger, taken together, is fair to such
stockholders from a financial point of view, a copy of which opinion will be
delivered to Viacom promptly upon receipt.
 
     SECTION 3.15. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Paramount Common Stock is the only vote of
the holders of any class or series of Paramount capital stock necessary to
approve the Merger.
 
     SECTION 3.16. Brokers. No broker, finder or investment banker (other than
Lazard Freres & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Paramount. Paramount has heretofore furnished to Viacom a
complete and correct copy of all agreements between Paramount and Lazard Freres
& Co. pursuant to which such firm would be entitled to any payment relating to
the Transactions.
 
                                      I-20

                                   ARTICLE IV
 
                    REPRESENTATIONS AND WARRANTIES OF VIACOM
 
     Viacom hereby represents and warrants to Paramount that:
 
     SECTION 4.1. Organization and Qualification; Subsidiaries. (a) Each of
Viacom and each Material Viacom Subsidiary (as defined below) is a corporation,
partnership or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Viacom Material
Adverse Effect (as defined below). Viacom and each Material Viacom Subsidiary is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Viacom Material Adverse Effect. The term "Viacom Material Adverse Effect" means
any change or effect that is or is reasonably likely to be materially adverse to
the business, results of operations or financial condition of Viacom and the
Viacom Subsidiaries, taken as a whole; provided, however, where such term
qualifies a representation or warranty contained in this Article IV during the
period beginning after the date hereof and until the Effective Time, then such
term shall mean any change or effect that is or is reasonably likely to be
materially adverse to the business or financial condition of Viacom and the
Viacom Subsidiaries, taken as a whole.
 
     (b) Each subsidiary of Viacom (a "Viacom Subsidiary") that constitutes a
Significant Subsidiary of Viacom within the meaning of Rule 1-02 of Regulation
S-X of the SEC is referred to herein as a "Material Viacom Subsidiary".
 
     SECTION 4.2. Certificate of Incorporation and By-Laws. Viacom has
heretofore made available to Paramount a complete and correct copy of the
Certificate of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of Viacom and each Material Viacom
Subsidiary. Such Certificates of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect. Neither Viacom nor any
Material Viacom Subsidiary is in violation of any provision of its Certificate
of Incorporation, By-Laws or equivalent organizational documents, except for
such violations that would not, individually or in the aggregate, have a Viacom
Material Adverse Effect.
 
     SECTION 4.3. Capitalization. The authorized capital stock of Viacom
consists of 100,000,000 shares of Viacom Class A Common Stock, (together with
the Viacom Class B Common Stock, the "Viacom Common Stock"), 150,000,000 shares
of Viacom Class B Common Stock and 100,000,000 shares of Preferred Stock, par
value $.01 per share ("Viacom Preferred Stock"), of which 24,000,000 shares have
been designated Viacom Series A Preferred Stock (the "Viacom Series A Preferred
Stock") and 24,000,000 shares have been designated Viacom Series B Preferred
Stock (the "Viacom Series B Preferred Stock"). As of November 30, 1993, (i)
53,449,125 shares of Viacom Class A Common Stock and 67,345,982 shares of Viacom
Class B Common Stock were issued and outstanding, all of which were validly
issued, fully paid and non-assessable, (ii) no shares were held in the treasury
of Viacom, (iii) no shares were held by the Viacom Subsidiaries, and (iv)
224,610 shares of Viacom Class A Common Stock and 3,760,297 shares of Viacom
Class B Common Stock were reserved for future issuance pursuant to employee
stock options or stock incentive rights granted pursuant to Viacom's 1989
Long-Term Management Incentive Plan and the Viacom Inc. Stock Option Plan for
Outside Directors. As of the date hereof, 24,000,000 shares of Viacom Series A
Preferred Stock and 24,000,000 shares of Viacom Series B Preferred Stock are
issued and outstanding. Except as set forth in this Section 4.3 or as
contemplated by this Agreement, there are no options, warrants or other rights,
                                      I-21

 
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Viacom or any Material Viacom Subsidiary or
obligating Viacom or any Material Viacom Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in, Viacom or any Material Viacom
Subsidiary, except for (i) options granted since November 30, 1993 in the
ordinary course consistent with past practice, (ii) the reservation of
17,140,800 shares of Viacom Class B Common Stock for issuance upon conversion of
shares of Viacom Series B Preferred Stock, (iii) the reservation of 8,570,400
shares of Viacom Class B Common Stock for issuance upon conversion of shares of
Viacom Series A Preferred Stock, (iv) the issuance of any securities in
connection with the acquisition of Blockbuster Entertainment Corporation, a
Delaware corporation ("Blockbuster"), and (v) the reservation of 22,727,273
shares of Viacom Class B Common Stock for issuance upon the consummation of the
transactions contemplated by the Subscription Agreement, dated as of January 7,
1994 (the "Blockbuster Subscription Agreement"), between Blockbuster and Viacom.
All shares of Viacom Common Stock and other securities subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in Section
4.3 of the Disclosure Schedule previously delivered by Viacom to Paramount (the
"Viacom Disclosure Schedule"), there are no material outstanding contractual
obligations of Viacom or any Viacom Subsidiary to repurchase, redeem or
otherwise acquire any shares of Viacom Common Stock or any capital stock of any
Material Viacom Subsidiary, or make any material investment (in the form of a
loan, capital contribution or otherwise) in, any Viacom Subsidiary or any other
person, other than the amended and restated subscription agreement dated as of
October 21, 1993 between Viacom and Blockbuster, the subscription agreement
dated as of October 4, 1993, as amended, between Viacom and NYNEX Corporation
and the Blockbuster Subscription Agreement. Each outstanding share of capital
stock of each Material Viacom Subsidiary is duly authorized, validly issued,
fully paid and nonassessable and each such share owned by Viacom or another
Viacom Subsidiary is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on Viacom's
or such other Viacom Subsidiary's voting rights, charges and other encumbrances
of any nature whatsoever. If and when the Warrants are exercised for Viacom
Class B Common Stock in accordance with the terms of the Warrants, such shares
of Viacom Class B Common Stock issued upon such exercise will be duly
authorized, validly issued, fully paid and non-assessable, and the holders of
outstanding shares of capital stock of Viacom are not entitled to any preemptive
or other rights with respect to the Warrants or the Viacom Class B Common Stock
issued upon such exercise. The Viacom Merger Debentures will be duly authorized,
and when the Viacom Merger Debentures have been duly executed, authenticated,
issued and delivered in the Merger pursuant to the terms of this Agreement and
the Indenture pursuant to which they are issued (the "Viacom Merger Debenture
Indenture") between Viacom and the trustee thereunder (the "Merger Debenture
Trustee"), such Viacom Merger Debentures will then constitute valid and legal
binding obligations of Viacom entitled to the benefits provided by the Viacom
Merger Debenture Indenture. Prior to the Effective Time, the Viacom Merger
Debenture Indenture will have been duly authorized by Viacom, duly qualified
under the Trust Indenture Act of 1939 and, when duly executed and delivered by
Viacom and the Merger Debenture Trustee, will constitute a valid and binding
instrument of Viacom enforceable in accordance with its terms. The shares of
Viacom Exchange Preferred Stock initially issuable upon the exchange of the
Viacom Merger Debentures will, if issued, be duly authorized, validly issued,
fully paid, non-assessable and free of pre-emptive rights. The Viacom Exchange
Debentures initially issuable upon exchange of the Viacom Exchange Preferred
Stock for such Viacom Exchange Debentures will be duly authorized; and when the
Viacom Exchange Debentures have been duly executed, authenticated, issued and
delivered in exchange for the Viacom Exchange Preferred Stock in accordance with
the terms of the Viacom Exchange Debentures and the Indenture pursuant to which
they are issued (the "Viacom Exchange Debenture Indenture") between Viacom and
the trustee thereunder (the "Exchange Debenture Trustee"), such Viacom Exchange
Debentures will then constitute valid and legal binding obligations of Viacom
entitled to the benefits provided by the Viacom Exchange Debenture Indenture. By
the date of issuance of the Viacom Exchange Preferred Stock, the Viacom Exchange
Debenture Indenture will have been duly authorized
                                      I-22

by Viacom, duly qualified under the Trust Indenture Act of 1939, and, when duly
executed and delivered by Viacom and the Exchange Debenture Trustee, will
constitute a valid and binding instrument of Viacom enforceable in accordance
with its terms. Upon their issuance, the Warrants and the CVRs shall each
constitute legal, valid and binding obligations of Viacom enforceable in
accordance with their terms.
 
     SECTION 4.4. Authority Relative to This Agreement. Viacom has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Viacom and the consummation by
Viacom of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and the Voting Agreement has been
approved by the Viacom Board of Directors for purposes of Section 203 of
Delaware Law and no other corporate proceedings on the part of Viacom are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger (including the
issuance of, to the extent required by law, the Viacom Class B Common Stock, the
Viacom Merger Debentures, the CVRs, the Warrants, the Viacom Exchange Preferred
Stock and the Viacom Exchange Debentures), the approval by the holders of a
majority of the then outstanding shares of Viacom Class A Common Stock of (i)
this Agreement and the Merger and (ii) to the extent such matters have not been
previously voted upon and approved by the holders of the Viacom Class A Common
Stock, the amendment to Viacom's certificate of incorporation necessary to
increase (x) the shares of authorized Class B Viacom Common Stock to a number
not less than the number sufficient to consummate the issuance of shares of
Viacom Common Stock contemplated under this Agreement (including such shares
issuable upon the exercise of the Warrants and, if applicable, in connection
with the CVRs) and (y) the size of the Board of Directors of Viacom to a number
not less than 13 (collectively, the "Viacom Vote Matter"; and the amendments to
Viacom's Restated Certificate of Incorporation described in clauses (ii)(x) and
(y) above being, collectively, the "Viacom Certificate Amendments"), and the
filing and recordation of the foregoing amendment to Viacom's Restated
Certificate of Incorporation and appropriate merger documents as required by
Delaware Law). This Agreement has been duly and validly executed and delivered
by Viacom and, assuming the due authorization, execution and delivery by
Paramount, constitutes a legal, valid and binding obligation of Viacom,
enforceable against Viacom in accordance with its terms.
 
     SECTION 4.5. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Viacom does not, and the performance of the
transactions contemplated hereby by Viacom will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws or equivalent organizational
documents of Viacom or any Material Viacom Subsidiary, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Viacom or any Viacom Subsidiary or by which any property or asset of Viacom or
any Viacom Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of Viacom or any Viacom Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Viacom or any Viacom Subsidiary is a party or
by which Viacom or any Viacom Subsidiary or any property or asset of Viacom or
any Viacom Subsidiary is bound or affected, except in the case of clauses (ii)
and (iii) of this Section 4.5, for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or delay consummation of
the Merger in any material respect, or otherwise prevent Viacom from performing
its obligations under this Agreement in any material respect, and would not,
individually or in the aggregate, have a Viacom Material Adverse Effect.
 
     (b) The execution and delivery of this Agreement by Viacom does not, and
the performance of this Agreement by Viacom will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of the
                                      I-23

Exchange Act, Securities Act, Trust Indenture Act of 1939, state securities or
Blue Sky Laws and state takeover laws, (B) the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (C)
applicable requirements of the Communications Act, and of state and local
governmental authorities, including state and local authorities granting
franchises to operate cable systems, (D) applicable requirements of the
Investment Canada Act of 1985 and the Competition Act (Canada), (E) filing and
recordation of appropriate merger documents and the Viacom Certificate
Amendments as required by Delaware Law and (F) applicable requirements, if any,
of any non-United States competition, antitrust and investment laws and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not prevent or delay consummation
of the Merger in any material respect, or otherwise prevent Viacom from
performing its obligations under this Agreement in any material respect, and
would not, individually or in the aggregate, have a Viacom Material Adverse
Effect.
 
     SECTION 4.6. Compliance. Neither Viacom nor any Viacom Subsidiary is in
conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to Viacom or any Viacom Subsidiary or by
which any property or asset of Viacom or any Viacom Subsidiary is bound or
affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Viacom or any Viacom Subsidiary is a party or by which Viacom or any Viacom
Subsidiary or any property or asset of Viacom or any Viacom Subsidiary is bound
or affected, except for any such conflicts, defaults or violations that would
not, individually or in the aggregate, have a Viacom Material Adverse Effect.
 
     SECTION 4.7. SEC Filings; Financial Statements. (a) Viacom has filed all
forms, reports and documents required to be filed by it with the SEC since
December 31, 1990, and has heretofore made available to Paramount, in the form
filed with the SEC (excluding any exhibits thereto), (i) its Annual Reports on
Form 10-K for the fiscal years ended December 31, 1990, 1991 and 1992,
respectively, (ii) its Quarterly Reports on Form 10-Q for the periods ended
March 31, 1993, June 30, 1993 and September 30, 1993, (iii) all proxy statements
relating to Viacom's meetings of stockholders (whether annual or special) held
since January 1, 1991 and (iv) all other forms, reports and other registration
statements (other than Quarterly Reports on Form 10-Q not referred to in clause
(ii) above and preliminary materials) filed by Viacom with the SEC since
December 31, 1990 (the forms, reports and other documents referred to in clauses
(i), (ii), (iii), and (iv) above being referred to herein, collectively, as the
"Viacom SEC Reports"). The Viacom SEC Reports and any other forms, reports and
other documents filed by Viacom with the SEC after the date of this Agreement
(x) were or will be prepared in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed, or will not
at the time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Viacom Subsidiary (other than
Viacom International Inc., a Delaware corporation ("Viacom International")) is
required to file any form, report or other document with the SEC.
 
     (b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Viacom SEC Reports was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented the consolidated financial position, results
of operations and cash flows of Viacom and the consolidated Viacom Subsidiaries
as at the respective dates thereof and for the respective periods indicated
therein (subject, in the case of unaudited statements, to normal and recurring
year-end adjustments which were not and are not expected, individually or in the
aggregate, to be material in amount).
 
     (c) Except as and to the extent set forth in the Viacom SEC Reports filed
with the SEC prior to the date of this Agreement, Viacom and the Viacom
Subsidiaries do not have any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) other than liabilities and
obligations which would not, individually or in the aggregate, have a Viacom
Material Adverse Effect.
 
                                      I-24

     SECTION 4.8. Absence of Certain Changes or Events. Since December 31, 1992,
except as contemplated by this Agreement, any actions taken by Viacom in order
to consummate the acquisition of Blockbuster, or any actions taken by Viacom in
order to consummate the transactions contemplated by the Blockbuster
Subscription Agreement, as set forth in Section 4.8 of the Viacom Disclosure
Schedule or disclosed in any Viacom SEC Report filed since December 31, 1992 and
prior to the date of this Agreement, Viacom and the Viacom Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since December 31, 1992 there has not been
(i) as of the date hereof, any change, occurrence or circumstance in the
business, results of operations or financial condition of Viacom or any Viacom
Subsidiary having, individually or in the aggregate, a Viacom Material Adverse
Effect, (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any property or asset of Viacom or any Viacom
Subsidiary and having, individually or in the aggregate, a Viacom Material
Adverse Effect, (iii) any change by Viacom in its accounting methods, principles
or practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Viacom or any Viacom Subsidiary
or any redemption, purchase or other acquisition of any of their respective
securities other than dividends by a Viacom Subsidiary to Viacom or (v) other
than as set forth in Section 4.3 and pursuant to the plans, programs or
arrangements referred to in Section 4.10, other than in the ordinary course of
business consistent with past practice and other than as contemplated by the
Agreement and Plan of Merger, dated as of January 7, 1994 (the "Blockbuster
Merger Agreement"), between Blockbuster and Viacom, any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of Viacom or any Viacom
Subsidiary, except for the establishment of the Viacom Inc. Stock Option Plan
for Outside Directors and the grant of options to purchase an aggregate of 5,000
shares thereunder.
 
     SECTION 4.9. Absence of Litigation. Except as disclosed in the Viacom SEC
Reports filed with the SEC prior to the date of this Agreement there is no
claim, action, proceeding or investigation pending or, to the best knowledge of
Viacom, threatened against Viacom or any Viacom Subsidiary, or any property or
asset of Viacom or any Viacom Subsidiary, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, which individually or in the aggregate, is reasonably likely to have a
Viacom Material Adverse Effect. Except as disclosed in the Viacom SEC Reports
filed with the SEC prior to the date of this Agreement, neither Viacom nor any
Viacom Subsidiary nor any property or asset of Viacom or any Viacom Subsidiary
is subject to any order, writ, judgment, injunction, decree, determination or
award having or reasonably likely to have, individually or in the aggregate, a
Viacom Material Adverse Effect.
 
     SECTION 4.10. Employee Benefit Plans. With respect to all the employee
benefit plans, programs and arrangements maintained for the benefit of any
current or former employee, officer or director of Viacom or any Viacom
Subsidiary (the "Viacom Plans"), except as set forth in Section 4.10 of the
Viacom Disclosure Schedule or the Viacom SEC Reports and except as would not,
individually or in the aggregate, have a Viacom Material Adverse Effect: (i)
none of the Viacom Plans is a multiemployer plan within the meaning of ERISA;
(ii) none of the Viacom Plans promises or provides retiree medical or life
insurance benefits to any person; (iii) each Viacom Plan intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS that it is so qualified and nothing has
occurred since the date of such letter that could reasonably be expected to
affect the qualified status of such Viacom Plan; (iv) each Viacom Plan has been
operated in all respects in accordance with its terms and the requirements of
applicable law; (v) neither Viacom nor any Viacom Subsidiary has incurred any
direct or indirect liability under, arising out of or by operation of Title IV
of ERISA in connection with the termination of, or withdrawal from, any Viacom
Plan or other retirement plan or arrangement, and no fact or event exists that
could reasonably be expected to give
                                      I-25

rise to any such liability; and (vi) Viacom and the Viacom Subsidiaries have not
incurred any liability under, and have complied in all respects with, the Worker
Adjustment Retraining Notification Act, and no fact or event exists that could
give rise to liability under such Act. Except as set forth in Section 4.10 of
the Viacom Disclosure Schedule or the Viacom SEC Reports, the aggregate
accumulated benefit obligations of each Viacom Plan subject to Title IV of ERISA
(as of the date of the most recent actuarial valuation prepared for such Viacom
Plan) do not exceed the fair market value of the assets of such Viacom Plan (as
of the date of such valuation).
 
     SECTION 4.11. Trademarks, Patents and Copyrights. Viacom and the Viacom
Subsidiaries own or possess adequate licenses or other valid rights to use all
material patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of Viacom and
the Viacom Subsidiaries as currently conducted or as contemplated to be
conducted, and Viacom is unaware of any assertion or claim challenging the
validity of any of the foregoing which, individually or in the aggregate, would
have a Viacom Material Adverse Effect. The conduct of the business of Viacom and
the Viacom Subsidiaries as currently conducted does not conflict in any way with
any patent, patent right, license, trademark, trademark right, trade name, trade
name right, service mark or copyright of any third party that, individually or
in the aggregate, would have a Viacom Material Adverse Effect.
 
     SECTION 4.12. Taxes. Viacom and the Viacom Subsidiaries have timely filed
all federal, state, local and foreign tax returns and reports required to be
filed by them through the date hereof and shall timely file all returns and
reports required on or before the Effective Time, except for such returns and
reports the failure of which to file timely would not, individually or in the
aggregate, have a Viacom Material Adverse Effect. Such reports and returns are
and will be true, correct and complete, except for such failures to be true,
correct and complete as would not, individually or in the aggregate, have a
Viacom Material Adverse Effect. Viacom and the Viacom Subsidiaries have paid and
discharged all federal, state, local and foreign taxes due from them, other than
such taxes that are being contested in good faith by appropriate proceedings and
are adequately reserved as shown in the audited consolidated balance sheet of
Viacom dated December 31, 1992 (the "Viacom 1992 Balance Sheet") and its most
recent quarterly financial statements, except for such failures to so pay and
discharge which would not, individually or in the aggregate, have a Viacom
Material Adverse Effect. Neither the IRS nor any other taxing authority or
agency, domestic or foreign, is now asserting or, to the best knowledge of
Viacom, threatening to assert against Viacom or any Viacom Subsidiary any
deficiency or material claim for additional taxes or interest thereon or
penalties in connection therewith which, if such deficiencies or claims were
finally resolved against Viacom and the Viacom Subsidiaries would, individually
or in the aggregate, have a Viacom Material Adverse Effect. The accruals and
reserves for taxes (including interest and penalties, if any, thereon) reflected
in the Viacom 1992 Balance Sheet and the most recent quarterly financial
statements are adequate in accordance with generally accepted accounting
principles, except where the failure to be adequate would not have a Viacom
Material Adverse Effect. Viacom and the Viacom Subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities or are
properly holding for such payment all taxes required by law to be withheld or
collected, except for such failures to have so withheld or collected and paid
over or to be so holding for payment which would not, individually or in the
aggregate, have a Viacom Material Adverse Effect. There are no material liens
for taxes upon the assets of Viacom or the Viacom Subsidiaries, other than liens
for current taxes not yet due and payable and liens for taxes that are being
contested in good faith by appropriate proceedings. Neither Viacom nor any
Viacom Subsidiary has agreed to or is required to make any adjustment under
Section 481(a) of the Code. Neither Viacom nor any Viacom Subsidiary has made an
election under Section 341(f) of the Code. For purposes of this Section 4.12,
where a determination of whether a failure by Viacom or a Viacom Subsidiary to
comply with the representations herein has a Viacom Material Adverse Effect is
necessary, such determination shall be made on an aggregate basis with all other
failures within this Section 4.12.
 
                                      I-26

     SECTION 4.13. Opinion of Financial Advisor. Viacom has received the opinion
of Smith Barney Shearson Inc., dated February 1, 1994, to the effect that, as of
such date, the financial terms of the proposed acquisition by Viacom of
Paramount are fair from a financial point of view to Viacom and its
stockholders. A copy of such opinion will be delivered to Paramount promptly.
 
     SECTION 4.14. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Viacom Class A Common Stock is the only
vote of the holders of any class or series of Viacom capital stock necessary to
approve the Viacom Vote Matter.
 
     SECTION 4.15. Ownership of Paramount Common Stock. As of the date of this
Agreement and based on the number of issued and outstanding shares of Paramount
Common Stock as of September 3, 1993 set forth in Section 3.3, Viacom and its
affiliates beneficially own, in the aggregate, less than five percent of the
issued and outstanding shares of Paramount Common Stock.
 
     SECTION 4.16. Brokers. No broker, finder or investment banker (other than
Smith Barney Shearson Inc., Goldman Sachs & Co. and Bear, Stearns & Co. Inc.) is
entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Viacom.
Viacom has heretofore furnished to Paramount a complete and correct copy of all
agreements between Viacom and each of Smith Barney Shearson Inc., Goldman Sachs
& Co. and Bear, Stearns & Co. Inc. pursuant to which each such firm would be
entitled to any payment relating to the Transactions.
 
     SECTION 4.17. Financing. Viacom has delivered to Paramount binding
commitments or agreements to obtain the financing in contemplation of the
Transactions (the "Financing") in an amount sufficient, together with the Viacom
Class B Common Stock, the Viacom Merger Preferred Stock, the CVRs and Warrants,
to acquire all the shares of Paramount Common Stock in the Offer and the Merger
and to pay all related contemplated fees and expenses. Viacom knows of no fact
or circumstance (including the obligations of Viacom under this Agreement) that
is reasonably likely to result in the inability of Viacom to receive the
proceeds from such Financing.
 
     SECTION 4.18. Purchases of Securities. Since September 12, 1993, neither
Viacom nor, to Viacom's knowledge, its affiliates have purchased or sold shares
of Viacom Class A Common Stock or Viacom Class B Common Stock and neither Viacom
nor, to Viacom's knowledge, its affiliates have any knowledge of any such
trading.
 
     SECTION 4.19. Representations in Blockbuster Merger Agreement. Viacom
hereby confirms that the representations and warranties contained in Sections
3.07, 3.08 and 3.09 of the Blockbuster Merger Agreement shall be true and
correct as of the date hereof and as of the date of consummation of the Offer,
except as would not have a material adverse effect on the financial condition of
Paramount, Viacom and Blockbuster and their subsidiaries taken as a whole.
 
                                   ARTICLE V
 
                    CONDUCT OF BUSINESSES PENDING THE MERGER
 
     SECTION 5.1. Conduct of Respective Businesses by Paramount and Viacom
Pending the Merger Each of Paramount and Viacom covenants and agrees that,
between the date of this Agreement and the Effective Time, unless the other
party shall have consented in writing (such consent not to be unreasonably
withheld) and, except, in the case of Viacom, for actions taken by Viacom in
order to consummate (x) the acquisition of Blockbuster and (y) the transactions
contemplated by the Blockbuster Subscription Agreement, the businesses of each
of Paramount and Viacom and their respective subsidiaries shall, in all material
respects, be conducted in, and each of Paramount and Viacom and their respective
subsidiaries shall not take any material action except in, the ordinary course
of business,
                                      I-27

consistent with past practice; and each of Paramount and Viacom shall use its
reasonable best efforts to preserve substantially intact its business
organization, to keep available the services of its and its subsidiaries'
current officers, employees and consultants and to preserve its and its
subsidiaries' relationships with customers, suppliers and other persons with
which it or any of its subsidiaries has significant business relations. By way
of amplification and not limitation, except (i) as contemplated by this
Agreement (including, without limitation, the making of the Offer and Section
6.16), (ii) for any actions taken by Viacom in order to consummate the
acquisition of Blockbuster, (iii) for any actions taken by Viacom in order to
consummate the transactions contemplated by the Blockbuster Subscription
Agreement or (iv) as set forth on Section 5.1 of the Paramount Disclosure
Schedule or Section 5.1 of the Viacom Disclosure Schedule, neither Viacom nor
Paramount nor any of their respective subsidiaries shall, between the date of
this Agreement and the Effective Time, directly or indirectly do, or propose or
agree to do, any of the following without the prior written consent of the other
(provided that the following restrictions shall not apply to any subsidiaries
which Paramount or Viacom, as the case may be, do not control):
 
          (a) amend or otherwise change the Certificate of Incorporation or
     By-Laws of Viacom or Paramount (except, with respect to Viacom, the Viacom
     Certificate Amendments and the Certificate of Designations to be filed with
     the Secretary of State of the State of Delaware in respect of the Viacom
     Merger Preferred Stock);
 
          (b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
     issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
     shares of capital stock of any class of it or any of its subsidiaries, or
     any options (other than the grant of options in the ordinary course of
     business consistent with past practice to employees who are not executive
     officers of Paramount or Viacom), warrants, convertible securities or other
     rights of any kind to acquire any shares of such capital stock, or any
     other ownership interest (including, without limitation, any phantom
     interest), of it or any of its subsidiaries (other than the issuance of
     shares of capital stock in connection with any dividend reinvestment plan
     or by any Paramount Plan with an employee stock fund or employee stock
     ownership plan feature, consistent with applicable securities laws or the
     exercise of options, warrants or other similar rights, or conversion of
     convertible preferred stock outstanding as of the date of this Agreement
     and in accordance with the terms of such options, warrants or rights in
     effect on the date of this Agreement or otherwise permitted to be granted
     pursuant to this Agreement) or (ii) any assets of it or any of its
     subsidiaries, except for sales in the ordinary course of business or which,
     individually do not exceed $10,000,000 or which, in the aggregate, do not
     exceed $25,000,000;
 
          (c) declare, set aside, make or pay any dividend or other
     distribution, payable in cash, stock, property or otherwise, with respect
     to any of its capital stock, except (i) in the case of Viacom, with respect
     to the Series A Preferred Stock and the Series B Preferred Stock, and in
     the case of Paramount, regular quarterly dividends in amounts not in excess
     of $.20 per quarter and payable consistent with past practice; provided
     that, prior to the declaration of any such dividend, Paramount shall
     consult with Viacom as to the timing and advisability of declaring any such
     dividend and (ii) dividends declared and paid by a subsidiary of either
     Paramount or Viacom, each such dividend to be declared and paid in the
     ordinary course of business consistent with past practice;
 
          (d) reclassify, combine, split, subdivide or redeem, purchase or
     otherwise acquire, directly or indirectly, any of its capital stock other
     than acquisitions by a dividend reinvestment plan or by any Paramount Plan
     with an employee stock fund or employee stock ownership plan feature,
     consistent with applicable securities laws;
 
          (e) (i) acquire (including, without limitation, by merger,
     consolidation, or acquisition of stock or assets) any corporation,
     partnership, other business organization or any division thereof or any
     assets, except for such acquisitions which, individually do not exceed
     $10,000,000 or which, in
                                      I-28

     the aggregate, do not exceed $25,000,000; (ii) incur any indebtedness for
     borrowed money or issue any debt securities or assume, guarantee or
     endorse, or otherwise as an accommodation become responsible for, the
     obligations of any person, or make any loans or advances, except (A) for
     any such indebtedness incurred by Viacom in connection with the Merger or
     the Offer, (B) the refinancing of existing indebtedness, (C) borrowings
     under commercial paper programs in the ordinary course of business, (D)
     borrowings under existing bank lines of credit in the ordinary course of
     business, (E) which, in the aggregate, do not exceed $25,000,000; or (iii)
     enter into or amend any contract, agreement, commitment or arrangement with
     respect to any matter set forth in this Section 5.1(e);
 
          (f) increase the compensation payable or to become payable to its
     executive officers or employees, except for increases in the ordinary
     course of business in accordance with past practices, or grant any
     severance or termination pay to, or enter into any employment or severance
     agreement with any director or executive officer of it or any of its
     subsidiaries, or establish, adopt, enter into or amend in any material
     respect or take action to accelerate any rights or benefits under any
     collective bargaining, bonus, profit sharing, thrift, compensation, stock
     option, restricted stock, pension, retirement, deferred compensation,
     employment, termination, severance or other plan, agreement, trust, fund,
     policy or arrangement for the benefit of any director, executive officer or
     employee; or
 
          (g) take any action, other than reasonable and usual actions in the
     ordinary course of business and consistent with past practice, with respect
     to accounting policies or procedures.
 
                                   ARTICLE VI
 
                              ADDITIONAL COVENANTS
 
     SECTION 6.1. Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, each of Paramount and Viacom shall (and shall
cause its subsidiaries and officers, directors, employees, auditors and agents
to) afford the officers, employees and agents of the other party (the
"Respective Representatives") reasonable access at all reasonable times to its
officers, employees, agents, properties, offices, plants and other facilities,
books and records, and shall furnish such Respective Representatives with all
financial, operating and other data and information as may be reasonably
requested.
 
     (b) All information obtained by Paramount or Viacom pursuant to this
Section 6.1 shall be kept confidential in accordance with the confidentiality
agreements, dated July 1, 1993 (the "Confidentiality Agreements"), between
Paramount and Viacom.
 
     (c) No investigation pursuant to this Section 6.1 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
 
     SECTION 6.2. Intentionally omitted.
 
     SECTION 6.3. Directors' and Officers' Indemnification and
Insurance. (a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-Laws of Viacom on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of Paramount in respect
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by law.
 
                                      I-29

     (b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers and
directors of Paramount (collectively, the "Indemnified Parties") against all
losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of, with the approval of the Surviving Corporation (which approval
shall not unreasonably be withheld), or otherwise in connection with any claim,
action, suit, proceeding or investigation (a "Claim"), based in whole or in part
on the fact that such person is or was a director or officer of Paramount and
arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), in each case to the full extent permitted under Delaware Law (and
shall pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under
Delaware Law, upon receipt from the Indemnified Party to whom expenses are
advanced of the undertaking to repay such advances contemplated by Section
145(e) of Delaware Law).
 
     (c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain
Paramount's regularly engaged independent legal counsel or other independent
legal counsel satisfactory to them, provided that such other counsel shall be
reasonably acceptable to the Surviving Corporation, (ii) the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received and (iii) the
Surviving Corporation will use its reasonable best efforts to assist in the
vigorous defense of any such matter, provided that the Surviving Corporation
shall not be liable for any settlement of any Claim effected without its written
consent, which consent shall not be unreasonably withheld. Any Indemnified Party
wishing to claim indemnification under this Section 6.3 upon learning of any
such Claim, shall notify the Surviving Corporation (although the failure so to
notify the Surviving Corporation shall not relieve the Surviving Corporation
from any liability which the Surviving Corporation may have under this Section
6.3, except to the extent such failure prejudices the Surviving Corporation),
and shall deliver to the Surviving Corporation the undertaking contemplated by
Section 145(e) of Delaware Law. The Indemnified Parties as a group may retain no
more than one law firm (in addition to local counsel) to represent them with
respect to each such matter unless there is, under applicable standards of
professional conduct (as determined by counsel to the Indemnified Parties), a
conflict on any significant issue between the positions of any two or more
Indemnified Parties, in which event such additional counsel as may be required
may be retained by the Indemnified Parties.
 
     (d) For a period of three years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Paramount (provided
that the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend pursuant to this Section 6.3(d) more
than an amount equal to 200% of current annual premiums paid by Paramount for
such insurance (which premiums Paramount represents and warrants to be $850,000
in the aggregate).
 
     (e) This Section 6.3 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on the Surviving Corporation and its
respective successors and assigns.
 
     SECTION 6.4. Notification of Certain Matters. Paramount shall give prompt
notice to Viacom, and Viacom shall give prompt notice to Paramount, of (i) the
occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of
which would be likely to cause (x) any representation or warranty contained in
this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of Paramount or Viacom, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.4 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
 
                                      I-30

     SECTION 6.5. Tax Treatment. Each of Paramount and Viacom will use its
reasonable best efforts to cause the Forward Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code and to
deliver, in connection with the legal opinion referred to in Section 1.1,
letters of representation reasonable under the circumstances as to their present
intentions and present knowledge.
 
     SECTION 6.6. Registration Statement; Joint Proxy Statement; Offer Documents
and Schedule 14D-9. (a) As promptly as practicable after the execution of this
Agreement, Viacom and Paramount shall prepare and file with the SEC an amendment
to the joint proxy statement previously filed with the SEC relating to the
meetings of Paramount's stockholders and holders of Viacom Class A Common Stock
to be held in connection with the Merger (together with any amendments thereof
or supplements thereto, the "Proxy Statement") and, as promptly as practicable
following consummation of the Offer (or expiration or termination of the Offer
without any purchase of shares thereunder), Viacom shall prepare and file with
the SEC a registration statement on Form S-4 (together with any amendments
thereto, the "Registration Statement") in which the Proxy Statement shall be
included as a prospectus, in connection with the registration under the
Securities Act of the shares of Viacom Class B Common Stock, the CVRs, the
Viacom Merger Debentures and Warrants to be issued to the stockholders of
Paramount pursuant to the Merger, the Viacom Exchange Preferred Stock into which
such Viacom Merger Debentures are exchangeable, the Viacom Class B Common Stock
issuable upon the exercise of the Warrants and the Viacom Exchange Debentures
for which such Viacom Exchange Preferred Stock is exchangeable. Each of
Paramount and Viacom shall use all reasonable efforts to have or cause the
Registration Statement to become effective as promptly as practicable, and shall
take all or any action required under any applicable federal or state securities
laws in connection with the issuance of shares of Viacom Class B Common Stock,
the CVRs, the Viacom Merger Debentures and Warrants pursuant to the Merger.
Paramount shall furnish all information concerning Paramount as Viacom may
reasonably request in connection with such actions and the preparation of the
Registration Statement and Proxy Statement. As promptly as practicable after the
Registration Statement shall have become effective, each of Viacom and Paramount
shall mail the Proxy Statement to its respective stockholders; provided that no
such mailing shall be required while the Offer remains outstanding. The Proxy
Statement shall include the recommendation of the Board of Directors of each of
Viacom and Paramount in favor of the Merger, unless otherwise necessary due to
the applicable fiduciary duties of the respective directors of Viacom and
Paramount, as determined by such directors in good faith after consultation with
and based upon the advice of independent legal counsel (who may be such party's
regularly engaged independent legal counsel).
 
     (b) The information supplied by Viacom for inclusion in the Registration
Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
Viacom and Paramount, (iii) the time of each of the Stockholders' Meetings (as
defined in Section 6.7), and (iv) the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to Viacom or any of the Viacom Subsidiaries, or their respective
officers or directors, should be discovered by Viacom which should be set forth
in an amendment or a supplement to the Registration Statement or Proxy
Statement, Viacom shall promptly inform Paramount.
 
     (c) The information supplied by Paramount for inclusion in the Registration
Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
Paramount and Viacom, (iii) the time of each of the Stockholders' Meetings, and
(iv) the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. If at any time prior to the
Effective Time any event or circumstance relating to Paramount or any of the
Paramount Subsidiaries, or their respective officers or directors, should be
discovered by Paramount
                                      I-31

which should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement, Paramount shall promptly inform Viacom.
 
     (d) Viacom represents and warrants to Paramount that the Offer Documents
will not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of Paramount, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. The Offer Documents shall comply in all material respects as to form
with the requirements of the Exchange Act and the rules and regulations
thereunder.
 
     (e) Paramount represents and warrants to Viacom that neither the Schedule
14D-9 nor any information supplied by Paramount for inclusion in the Offer
Documents shall, at the respective times the Schedule 14D-9, the Offer Documents
or any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of Paramount, as the case may be, shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. The Schedule 14D-9 shall comply in all material respects as to form
with the requirements of the Exchange Act and the rules and regulations
thereunder.
 
     SECTION 6.7. Stockholders' Meetings. Paramount shall call and hold a
meeting of its stockholders and Viacom shall call and hold a meeting of the
holders of the Viacom Class A Common Stock (collectively, the "Stockholders'
Meetings") as promptly as practicable for the purpose of voting upon the
approval, in the case of Paramount, of the Merger and, in the case of Viacom, of
the Viacom Vote Matter (to the extent such matters have not been previously
voted upon and approved by the holders of the Viacom Class A Common Stock), and
Viacom and Paramount shall use their reasonable best efforts to hold the
Stockholders' Meetings on the same day and as soon as practicable after the date
on which the Registration Statement becomes effective; provided that neither
Paramount nor Viacom shall be required to call or hold a stockholders meeting
while the Offer remains outstanding. Paramount shall use its reasonable best
efforts to solicit from its stockholders proxies in favor of the approval of the
Merger, and Viacom shall use its reasonable best efforts to solicit from its
stockholders proxies in favor of the Viacom Vote Matter and each of Paramount
and Viacom shall take all other action necessary or advisable to secure the vote
or consent of stockholders required by Delaware Law to obtain such approvals,
unless otherwise necessary under the applicable fiduciary duties of the
respective directors of Paramount and Viacom, as determined by such directors in
good faith after consultation with and based upon the advice of independent
legal counsel (who may be such party's regularly engaged independent legal
counsel).
 
     SECTION 6.8. Letters of Accountants. (a) Paramount shall use its reasonable
best efforts to cause to be delivered to Viacom "comfort" letters of Ernst &
Young, Paramount's independent public accountants, dated and delivered the date
on which the Registration Statement shall become effective and as of the
Effective Time, and addressed to Viacom, in form and substance reasonably
satisfactory to Viacom and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
 
     (b) Viacom shall use its reasonable best efforts to cause to be delivered
to Paramount "comfort" letters of Price Waterhouse, Viacom's independent public
accountants, dated the date on which the Registration Statement shall become
effective and as of the Effective Time, and addressed to Paramount, in form and
substance reasonably satisfactory to Paramount and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
 
     SECTION 6.9. Employee Benefits. The "Continuing Directors" (as such term is
defined in certain Paramount Plans, including, without limitation, Paramount's
Corporate Annual Performance Plan, Corporate Long-Term Performance Plan,
Supplemental Executive Retirement Plan, Non-Qualified Retirement Plan,
Retirement Plan for Non-Employee Directors, Deferred Compensation Plan for
                                      I-32

Directors and employment agreements with Messrs. Doppelt, Greenberg, Hertlein,
Levinson, Meyers and Sherman) prior to the Effective Time shall approve the
transactions contemplated by this Agreement, and prior to the Effective Time
Paramount and its officers and directors shall take such other actions, or shall
forbear from taking any action, as may be necessary to insure that such
transactions shall not constitute a "Change in Control" (or other similar event
accelerating or triggering changes to benefits or the terms of any Paramount
Plan (a "Paramount Triggering Event")) for purposes of any Paramount Plan under
which a Change in Control (or other Paramount Triggering Event) may be avoided
by action or inaction, as the case may be, by Paramount or any of its officers
or directors. Paramount shall not terminate either Paramount's Corporate Annual
Performance Plan or Paramount's Long-Term Performance Plan prior to the
Effective Time, and shall (a) delay the establishment and announcement of
targets for awards under Paramount's Corporate Annual Performance Plan with
respect to Paramount's 1994 fiscal year until after the Effective Time, and (b)
delay the implementation of a new performance cycle under Paramount's Corporate
Long-Term Performance Plan, in each case, until Paramount and Viacom shall
review the terms of such Plans after the Effective Time and make such changes as
they deem appropriate taking into consideration the effects of the Merger.
Viacom shall take or forbear from taking such action as may be necessary to
insure that the transactions contemplated by this Agreement shall not constitute
a change in ownership or control (or other similar event accelerating or
triggering changes to benefits or the terms of any Viacom Plan (a "Viacom
Triggering Event")) for purposes of any Viacom Plan under which any such change
in ownership or control (or other Viacom Triggering Event) may be avoided by
action or inaction, as the case may be, by Viacom or any of its officers or
directors.
 
     SECTION 6.10. Further Action; Reasonable Best Efforts. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall (i) make
promptly any filings with or applications to the FCC with respect to the
Transactions and (ii) use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using its reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Entities
and parties to contracts with Viacom and Paramount and their respective
subsidiaries as are necessary for the consummation of the Transactions. In case
at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such action.
 
     (b) Each party shall use its best efforts to not take any action, or enter
into any transaction, which would cause any of its representations or warranties
contained in this Agreement to be untrue or result in a breach of any covenant
made by it in this Agreement.
 
     SECTION 6.11. Debt Instruments. Prior to or at the Effective Time,
Paramount and each Paramount Subsidiary shall use its reasonable best efforts to
prevent the occurrence, as a result of the Merger, the Offer and the other
transactions contemplated by this Agreement, of a change in control or any event
which constitutes a default (or an event which with notice or lapse of time or
both would become a default) under any debt instrument of Paramount or any
Paramount Subsidiary, including, without limitation, debt securities registered
under the Securities Act.
 
     SECTION 6.12. Public Announcements. Viacom and Paramount shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any Transaction and shall not issue
any such press release or make any such public statement without the prior
consent of the other party, which shall not be unreasonably withheld; provided,
however, that a party may, without the prior consent of the other party, issue
such press release or make such public statement as may be required by law or
any listing agreement with a national securities exchange to which Viacom or
Paramount is a party if it has used all reasonable efforts to consult with the
other party and to obtain such party's consent but has been unable to do so in a
timely manner.
 
                                      I-33

     SECTION 6.13. Listing of Viacom Securities. Viacom shall use its reasonable
best efforts to cause the shares of Viacom Class B Common Stock and the
Warrants, Viacom Merger Debentures and CVRs to be issued in the Merger to be
approved for listing on the AMEX prior to the Effective Time and the Viacom
Exchange Preferred Stock and the Viacom Exchange Debentures to be approved for
listing on the AMEX prior to the issuance thereof.
 
     SECTION 6.14. Affiliates of Paramount. Paramount represents and warrants to
Viacom that Paramount will promptly deliver to Viacom a letter identifying all
persons who may be deemed affiliates of Paramount under Rule 145 of the
Securities Act, including, without limitation, all directors and executive
officers of Paramount, and Paramount represents and warrants to Viacom that
Paramount has advised the persons identified in such letter of the resale
restrictions imposed by applicable securities laws. Paramount shall use its
reasonable best efforts to obtain from each person identified in such letter a
written agreement, substantially in the form of Exhibit 6.14. Paramount shall
use its reasonable best efforts to obtain as soon as practicable from any person
who may be deemed to have become an affiliate of Paramount after Paramount's
delivery of the letter referred to above and prior to the Effective Time, a
written agreement substantially in the form of Exhibit 6.14.
 
     SECTION 6.15. Conveyance Taxes. Viacom and Paramount shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time.
 
     SECTION 6.16. Rights Agreement. Except as contemplated by this Agreement,
the Board of Directors of Paramount shall not amend or modify the Rights
Agreement or redeem the Rights prior to the Effective Time except pursuant to
the Other Exemption Agreement.
 
     SECTION 6.17. Assumption of Debt and Leases. With respect to debt issued by
Paramount under indentures qualified under the Trust Indenture Act of 1939
("Paramount Indentures"), Viacom shall execute and deliver to the trustees under
the respective Paramount Indentures, Supplemental Indentures, in form
satisfactory to the respective trustees, expressly assuming the obligations of
Paramount with respect to the due and punctual payment of the principal of (and
premium, if any) and interest, if any, on all debt securities issued by
Paramount under the respective Indentures and the due and punctual performance
of all the terms, covenants and conditions of the respective Paramount
Indentures to be kept or performed by Paramount and shall deliver such
Supplemental Indentures to the respective trustees under the Paramount
Indenture. Viacom shall similarly deliver instruments of assumption to the
holders of any debt obligations of, and the lessors of any real property to,
Paramount, which debt obligations or leases expressly require such assumption in
order for the Merger to comply with the debt instrument or lease.
 
     SECTION 6.18. Gains Tax. Except as provided in Section 1.7(b), Viacom shall
pay any New York State Tax on Gains Derived from Certain Real Property Transfers
(the "Gains Tax"), New York State Real Estate Transfer Tax and New York City
Real Property Transfer Tax (the "Transfer Taxes") and any similar taxes in any
other jurisdiction (and any penalties and interest with respect to such taxes),
which become payable in connection with the Offer and the Merger, on behalf of
the stockholders of Paramount. Viacom and Paramount shall cooperate in the
preparation, execution and filing of any required returns with respect to such
taxes (including returns on behalf of the stockholders of Paramount) and in the
determination of the portion of the consideration allocable to the real property
of Paramount and the Paramount Subsidiaries in New York State and City (or in
any other jurisdiction, if applicable). The terms of the Offer to Purchase and
of the Proxy Statement shall provide that the stockholders of Paramount shall be
deemed to have agreed to be bound by the allocation established
                                      I-34

pursuant to this Section 6.18 in the preparation of any return with respect to
the Gains Tax and the Transfer Taxes and any similar taxes, if applicable.
 
     SECTION 6.19. Reverse Merger. In the event that a decision is made to
structure the Merger as a Reverse Merger pursuant to Section 1.1, Viacom agrees
to form Merger Subsidiary as promptly as practicable following such decision and
to cause a merger agreement conforming to Section 251 of the Delaware Law and
effecting the terms hereof to be adopted by Merger Subsidiary. Paramount agrees
in such case to enter into such merger agreement.
 
     SECTION 6.20. Post-Offer Agreements. In the event that the Offer is
consummated and subject to any applicable requirements of the FCC: (a) the
affirmative vote of a majority of the directors of Paramount who are directors
on the date hereof and continue as directors on the date of the actions
described below will be required to amend, modify or waive any provisions of
this Agreement, or to approve any other action by Paramount with respect to the
transactions contemplated hereby which adversely affect the interests of the
stockholders of Paramount; (b) Viacom shall not directly or indirectly cause
Paramount to breach its obligations hereunder; and (c) at the Paramount
Stockholders' Meeting, Viacom shall cause all shares of Paramount Common Stock
then owned by it or its subsidiaries to be voted in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby.
 
     SECTION 6.21. Transactions With Significant Stockholder After the Effective
Time. From and after the Effective Time and until the tenth anniversary of the
Effective Time, Viacom shall not enter into any agreement with any stockholder
(the "Significant Stockholder") who beneficially owns more than 35% of the then
outstanding securities entitled to vote at a meeting of the stockholders of
Viacom that would constitute a Rule 13e-3 (as such rule is in effect today)
transaction under the Exchange Act with respect to any class of common stock of
Viacom (any such transaction being a "Going Private Transaction") unless Viacom
provides in any agreement pursuant to which such Going Private Transaction shall
be effected that, as a condition to the consummation of such Going Private
Transaction, (a) the holders of a majority of the shares of each class of common
stock subject to such Going Private Transaction and not beneficially owned by
the Significant Stockholder that are voted and present (whether in person or by
proxy) at the meeting of stockholders called to vote on such Going Private
Transaction shall have voted in favor thereof and (b) a special committee (the
"Special Committee") of the Board of Directors of Viacom comprised solely of the
independent directors of Viacom shall have (i) approved the terms and conditions
of the Going Private Transaction and shall have recommended that the
stockholders vote in favor thereof and (ii) received from its financial advisor
a written opinion addressed to the Special Committee, for inclusion in the proxy
statement to be delivered to the stockholders, and dated the date thereof,
substantially to the effect that the consideration to be received by the
stockholders (other than the Significant Stockholder) in the Going Private
Transaction is fair to them from a financial point of view. Notwithstanding
anything to the contrary in this Section 6.21, the restrictions contained in
this Section 6.21 shall not apply to any Significant Stockholder if there exists
another stockholder who beneficially owns a greater percentage of outstanding
securities entitled to vote at the meeting than the Significant Stockholder.
 
     SECTION 6.22. Blockbuster Merger Agreement and Subscription
Agreement. Viacom hereby agrees that, from and after the date of this Agreement,
the terms of (i) the Blockbuster Merger Agreement and (ii) the Blockbuster
Subscription Agreement shall not, without the consent of Paramount, be amended
or waived in any manner that would have a material adverse effect on the value
of the aggregate consideration to be received by the Paramount stockholders
pursuant to the terms of the Offer and the Merger taken together.
 
                                      I-35

                                  ARTICLE VII
 
                               CLOSING CONDITIONS
 
     SECTION 7.1. Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger and the
other transactions contemplated herein shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable law:
 
          (a) Effectiveness of the Registration Statement. The Registration
     Statement shall have been declared effective by the SEC under the
     Securities Act. No stop order suspending the effectiveness of the
     Registration Statement shall have been issued by the SEC and no proceedings
     for that purpose shall have been initiated or, to the knowledge of Viacom
     or Paramount, threatened by the SEC.
 
          (b) Stockholder Approval. This Agreement and the Merger shall have
     been approved and adopted by the requisite vote of the stockholders of
     Paramount and the Viacom Vote Matter (to the extent not previously voted
     upon and approved by the holders of Viacom Class A Common Stock) shall have
     been approved and adopted by the requisite vote of the stockholders of
     Viacom.
 
          (c) No Order. No Governmental Entity or federal or state court of
     competent jurisdiction shall have enacted, issued, promulgated, enforced or
     entered any statute, rule, regulation, executive order, decree, injunction
     or other order (whether temporary, preliminary or permanent) which is in
     effect and which materially restricts, prevents or prohibits consummation
     of the Merger or any transaction contemplated by this Agreement; provided,
     however, that the parties shall use their reasonable best efforts to cause
     any such decree, judgment, injunction or other order to be vacated or
     lifted.
 
          (d) AMEX Listing. The shares of Viacom Class B Common Stock and the
     Warrants, Viacom Merger Debentures and CVRs issuable to stockholders of
     Paramount in accordance with Article II shall have been authorized for
     listing on the AMEX upon official notice of issuance.
 
     SECTION 7.2. Additional Conditions to Obligations of Viacom. The
obligations of Viacom to effect the Merger and the transactions contemplated
herein are also subject to the following conditions:
 
          (a) Representations and Warranties. Each of the representations and
     warranties of Paramount contained in this Agreement (including, without
     limitation, Section 6.06), without giving effect to any notification to
     Viacom delivered pursuant to Section 6.4, shall be true and correct as of
     the Effective Time as though made on and as of the Effective Time, except
     (i) for changes specifically permitted by this Agreement and (ii) that
     those representations and warranties which address matters only as of a
     particular date shall remain true and correct as of such date, except in
     any case for such failures to be true and correct which would not,
     individually or in the aggregate, have a Paramount Material Adverse Effect.
     Viacom shall have received a certificate of the Chief Executive Officer and
     Chief Financial Officer of Paramount to such effect.
 
          (b) Agreement and Covenants. Paramount shall have performed or
     complied in all material respects with all agreements and covenants
     required by this Agreement to be performed or complied with by it on or
     prior to the Effective Time. Viacom shall have received a certificate of
     the Chief Executive Officer and Chief Financial Officer of Paramount to
     that effect.
 
          (c) Material Adverse Change. Since the date of this Agreement, there
     shall have been no change, occurrence or circumstance in the business,
     results of operations or financial condition of Paramount or any Paramount
     Subsidiary having or reasonably likely to have, individually or in the
     aggregate, a material adverse effect on the business, results of operations
     or financial condition of
                                      I-36

     Paramount and the Paramount Subsidiaries, taken as a whole. Viacom shall
     have received a certificate of the Chief Executive Officer and Chief
     Financial Officer of Paramount to such effect.
 
Notwithstanding the foregoing, the obligations of Viacom to effect the Merger
and the other transactions contemplated herein following prior consummation of
the Offer shall not be subject to the conditions set forth in Sections 7.2(a),
(b) and (c).
 
     SECTION 7.3. Additional Conditions to Obligations of Paramount. The
obligation of Paramount to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions:
 
          (a) Representations and Warranties. Each of the representations and
     warranties of Viacom contained in this Agreement (including, without
     limitation, Section 6.6), without giving effect to any notification made by
     Viacom to Paramount pursuant to Section 6.4, shall be true and correct as
     of the Effective Time, as though made on and as of the Effective Time,
     except (i) for changes specifically permitted by this Agreement and (ii)
     that those representations and warranties which address matters only as of
     a particular date shall remain true and correct as of such date, except in
     any case for such failures to be true and correct which would not,
     individually or in the aggregate, have a Viacom Material Adverse Effect.
     Paramount shall have received a certificate of the Chief Executive Officer
     and Chief Financial Officer of Viacom to such effect.
 
          (b) Agreements and Covenants. Viacom shall have performed or complied
     in all material respects with all agreements and covenants required by this
     Agreement to be performed or complied with by it on or prior to the
     Effective Time. Paramount shall have received a certificate of the Chief
     Executive Officer and Chief Financial Officer of Viacom to that effect.
 
          (c) No Material Adverse Change. Since the date of this Agreement,
     there shall have been no change, occurrence or circumstance in the
     business, results of operations or financial condition of Viacom or any
     Viacom Subsidiary having or reasonably likely to have, individually or in
     the aggregate, a material adverse effect on the business, results of
     operations or financial condition of Viacom and the Viacom Subsidiaries,
     taken as a whole. Paramount shall have received a certificate of the Chief
     Executive Officer and Chief Financial Officer of Viacom to such effect.
 
          (d) Amendments to Viacom's Certificate of Incorporation. Viacom shall
     have filed with the Secretary of State of the State of Delaware a
     certificate of amendment to Viacom's certificate of incorporation pursuant
     to which the Viacom Certificate Amendments shall have become effective.
 
                                  ARTICLE VIII
 
                       TERMINATION, AMENDMENT AND WAIVER
 
     SECTION 8.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders of Paramount or the approval by the
stockholders of Viacom of the issuance of the shares of Viacom Common Stock in
accordance with Article II:
 
          (a) by mutual consent of Paramount and Viacom;
 
          (b) by Viacom, prior to consummation of the Offer, upon a breach of
     any representation, warranty, covenant or agreement on the part of
     Paramount set forth in this Agreement, or if any representation or warranty
     of Paramount shall have become untrue, in either case such that the
     conditions set forth in Section 7.2(a) or Section 7.2(b), as the case may
     be, would be incapable of being satisfied by July 31, 1994 (or as otherwise
     extended); provided, that in any case, a wilful breach shall be deemed to
     cause such conditions to be incapable of being satisfied for purposes of
     this Section 8.1(b);
 
                                      I-37

          (c) by Paramount, upon a breach of any representation, warranty,
     covenant or agreement on the part of Viacom set forth in this Agreement, or
     if any representation or warranty of Viacom shall have become untrue, in
     either case such that the conditions set forth in Section 7.3(a) or Section
     7.3(b), as the case may be, would be incapable of being satisfied by July
     31, 1994 (or as otherwise extended); provided, that in any case, a wilful
     breach shall be deemed to cause such conditions to be incapable of being
     satisfied for purposes of this Section 8.1(c);
 
          (d) by either Viacom or Paramount, if any permanent injunction or
     action by any Governmental Entity preventing the consummation of the Merger
     shall have become final and nonappealable;
 
          (e) by either Viacom or Paramount, if the Merger shall not have been
     consummated before July 31, 1994; provided, however, that this Agreement
     may be extended by written notice of either Viacom or Paramount to a date
     not later than September 30, 1994, if the Merger shall not have been
     consummated as a direct result of Viacom or Paramount having failed by July
     31, 1994, to receive all required regulatory approvals or consents with
     respect to the Merger;
 
          (f) by either Viacom or Paramount, if this Agreement and the Merger
     shall fail to receive the requisite vote for approval and adoption by the
     stockholders of Paramount or Viacom at the Stockholders' Meetings;
 
          (g) by Viacom, if (i) the Board of Directors of Paramount shall
     withdraw, modify or change its recommendation of this Agreement, the Merger
     or the Offer in a manner adverse to Viacom or shall have resolved to do any
     of the foregoing; provided, that a statement by the Board of Directors of
     Paramount that it is neutral or unable to take a position with respect to
     the Offer after the commencement or amendment of a tender offer by a third
     party shall not be deemed to constitute a withdrawal, modification or
     change of its recommendation of this Agreement if the
     Solicitation/Recommendation Statement on Schedule 14D-9 relating to such
     third party tender offer recommends rejection of such tender offer and the
     Board of Directors of Paramount reconfirms its recommendation of the Offer
     on the date of the filing thereof; (ii) the Board of Directors of Paramount
     shall have recommended to the stockholders of Paramount a Competing
     Transaction (as defined below); (iii) Viacom has not consummated the Offer
     and a tender offer or exchange offer for 30% or more of the outstanding
     shares of capital stock of Paramount is commenced, and the Board of
     Directors of Paramount recommends that the stockholders of Paramount tender
     their shares in such tender or exchange offer; or (iv) Viacom has not
     consummated the Offer and any person shall have acquired beneficial
     ownership or the right to acquire beneficial ownership of or any "group"
     (as such term is defined under Section 13(d) of the Exchange Act and the
     rules and regulations promulgated thereunder) shall have been formed which
     beneficially owns, or has the right to acquire "beneficial ownership" (as
     defined in the Rights Plan) of, more than 30% of the then outstanding
     shares of capital stock of Paramount;
 
          (h) by Paramount, if the Board of Directors of Paramount (x) fails to
     make or withdraws or modifies its recommendation referred to in Section
     2.2(a) or Section 6.6(a) if there exists at such time a tender offer or
     exchange offer or a proposal by a third party to acquire Paramount pursuant
     to a merger, consolidation, share exchange, business combination, tender or
     exchange offer or other similar transaction or (y) recommends to
     Paramount's stockholders approval or acceptance of any of the foregoing in
     each case only if the Board of Directors of Paramount, after consultation
     with and based upon the advice of independent legal counsel (who may be
     such party's regularly engaged independent legal counsel), determines in
     good faith that such action is necessary for the Board of Directors of
     Paramount to comply with its fiduciary duties to stockholders under
     applicable law; and
 
          (i) by Paramount, if due to the occurrence or circumstance that would
     result in a failure to satisfy any of the conditions set forth in Annex A
     or otherwise, (A) the Offer shall have expired without the purchase of
     shares of Paramount Common Stock thereunder or Viacom shall be
                                      I-38

     obligated to terminate the Offer pursuant to Section 2.5 or (B) Viacom
     shall have failed to accept for payment shares of Paramount Common Stock
     pursuant to the Offer prior to 9:00 a.m. on the first business day
     following the Final Expiration Date, unless such failure to accept for
     payment shares of Paramount Common Stock shall have been caused by or
     resulted from the failure of Paramount to perform in any material respect
     its material covenants and agreements contained in this Agreement or
     resulted from the termination of the Offer pursuant to Section 2.1(c).
 
     The right of any party hereto to terminate this Agreement pursuant to this
Section 8.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement. For purposes of this
Agreement, "Competing Transaction" shall mean any of the following involving
Paramount or any Paramount Subsidiaries: (i) any merger, consolidation, share
exchange, business combination, or other similar transaction; (ii) any
disposition of 30% or more of the assets of Paramount and the Paramount
Subsidiaries, taken as a whole in the single transaction or series of
transactions; (iii) any tender offer or exchange offer for 30% or more of the
outstanding shares of capital stock of Paramount or the filing of a registration
statement under the Securities Act in connection therewith; (iv) any person
having acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder) having been
formed which beneficially owns or has the right to acquire beneficial ownership
of, 30% or more of the then outstanding shares of capital stock of Paramount; or
(v) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
 
     SECTION 8.2. Effect of Termination. Except as provided in Section 9.1, in
the event of the termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void, there shall be no liability on the part
of Paramount or Viacom or any of their respective officers or directors to the
other and all rights and obligations of any party hereto shall cease; provided,
however, that (i) nothing herein shall relieve any party from liability for the
wilful breach of any of its representations, warranties, covenants or agreements
set forth in this Agreement and (ii) if Viacom or Paramount shall terminate this
Agreement in accordance with the provisions of Section 8.1, and if Viacom shall
continue the Offer, the exemption agreement between the parties dated as of
December 22, 1993 shall again become effective.
 
     SECTION 8.3. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, further, that, after approval of the
Merger by the stockholders of Paramount or Viacom, no amendment, which under
applicable law may not be made without the approval of the stockholders of
Paramount or Viacom, may be made without such approval. This Agreement may not
be amended except by an instrument in writing signed by the parties hereto.
 
     SECTION 8.4. Waiver. At any time prior to the Effective Time, either party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
 
     SECTION 8.5. Fees, Expenses and Other Payments. All costs and expenses,
including, without limitation, fees and disbursements of counsel, financial
advisors and accountants, incurred by the parties hereto shall be borne solely
and entirely by the party which has incurred such costs and expenses; provided,
however, that all costs and expenses related to printing, filing and mailing the
Registration Statement and the Proxy Statement and all SEC and other regulatory
filing fees incurred in connection with the Registration Statement and the Proxy
Statement shall be borne equally by Paramount and Viacom.
 
                                      I-39

                                   ARTICLE IX
 
                               GENERAL PROVISIONS
 
     SECTION 9.1. Effectiveness of Representations, Warranties and
Agreements. (a) Except as set forth in Section 9.1(b), the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement.
 
     (b) The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Articles I, II
and IX and Sections 6.3 and 6.21 shall survive the Effective Time and those set
forth in Sections 2.2(c), 2.3, 6.1(b), 8.2 and 8.5 and Article IX hereof shall
survive termination.
 
     (c) Each of the representations and warranties made in Article III shall be
deemed to be made on September 12, 1993 and not made on the date hereof, except
for representations and warranties which address matters as of a particular
date, provided, that the representations set forth in the last sentence of
Section 3.4, Sections 3.13, 3.14, 4.13 and 4.17 and any representations and
warranties with respect to this Agreement, the Merger and the Offer are made on
the date hereof.
 
     (d) Each of Paramount and Viacom agree that nothing herein shall constitute
a waiver of any rights, claims or defenses of Viacom or Paramount created by or
arising under the Amended and Restated Agreement and Plan of Merger, dated as of
October 24, 1993, as subsequently amended, or the Stock Option Agreement, dated
as of September 12, 1993, between Paramount and Viacom, as amended by Amendment
No. 1 thereto, dated as of October 24, 1993, all of which rights, claims and
defenses are hereby expressly reserved.
 
     SECTION 9.2. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
 
     (a) If to Viacom:
       Viacom Inc.
       1515 Broadway
       New York, NY 10036
       Attention: Senior Vice President,
                 General Counsel
 
       Telecopier No.: (212) 258-6134
 
       with a copy to:
       Shearman & Sterling
       599 Lexington Avenue
       New York, NY 10022
       Attention: Stephen R. Volk, Esq.
       Telecopier No.: (212) 848-7179
 
                                      I-40

     (b) If to Paramount:
        Paramount Communications Inc.
        15 Columbus Circle
        New York, NY 10023
        Attention: Executive Vice President and
                 General Counsel
 
        Telecopier No.: (212) 373-8184
 
        with a copy to:
        Simpson Thacher & Bartlett
        425 Lexington Avenue
        New York, NY 10017
        Attention: Joel S. Hoffman
        Telecopier No.: (212) 455-2502
 
     SECTION 9.3. Certain Definitions. For purposes of this Agreement, the term:
 
          (a) "affiliate" means a person that, directly or indirectly, through
     one or more intermediaries, controls, is controlled by, or is under common
     control with, the first mentioned person;
 
          (b) "beneficial owner" with respect to any shares of Paramount Common
     Stock means, unless otherwise defined herein, a person who shall be deemed
     to be the beneficial owner of such shares (i) which such person or any of
     its affiliates or associates (as such term is defined in Rule 12b-2
     promulgated under the Exchange Act) beneficially owns, directly or
     indirectly, (ii) which such person or any of its affiliates or associates
     has, directly or indirectly, (A) the right to acquire (whether such right
     is exercisable immediately or subject only to the passage of time),
     pursuant to any agreement, arrangement or understanding or upon the
     exercise of conversion rights, exchange rights, warrants or options, or
     otherwise or (B) the right to vote pursuant to any agreement, arrangement
     or understanding or (iii) which are beneficially owned, directly or
     indirectly, by any other persons with whom such person or any of its
     affiliates or associates, or any person with whom such person or any of its
     affiliates or associates has any agreement, arrangement or understanding
     for the purpose of acquiring, holding, voting or disposing of any shares;
 
          (c) "business day" shall have the meaning set forth in Rule
     14d-1(c)(6) as promulgated under the Exchange Act;
 
          (d) "control" (including the terms "controlled", "controlled by" and
     "under common control with") means the possession, directly or indirectly
     or as trustee or executor, of the power to direct or cause the direction of
     the management or policies of a person, whether through the ownership of
     stock or as trustee or executor, by contract or credit arrangement or
     otherwise;
 
          (e) The parties agree that the term "fully diluted basis" as used
     herein, shall mean giving effect to the shares of Paramount Common Stock
     then outstanding plus the shares of Paramount Common Stock issuable upon
     the exercise of the then exercisable stock options;
 
          (f) The parties agree that the term "Merger", as used herein, may
     refer to, consistent with the context of such usage, each of the single
     step merger, the second step merger following the Offer, or both. The
     parties hereto agree to promptly amend this Agreement subsequent to the
     execution and delivery thereof to provide for more precise defined terms
     and usage thereof; and
 
          (g) "subsidiary" or "subsidiaries" of Paramount, Viacom, the Surviving
     Corporation or any other person means any corporation, partnership, joint
     venture or other legal entity of which Paramount, Viacom, the Surviving
     Corporation or such other person, as the case may be (either
                                      I-41

     alone or through or together with any other subsidiary), owns, directly or
     indirectly, 50% or more of the stock or other equity interests, the holders
     of which are generally entitled to vote for the election of the board of
     directors or other governing body of such corporation or other legal
     entity.
 
     SECTION 9.4. Time Period. In computing any time period hereunder, the
computation shall be governed by Rule 14d-1(c)(6) as promulgated under the
Exchange Act.
 
     SECTION 9.5. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
 
     SECTION 9.6. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
 
     SECTION 9.7. Entire Agreement. This Agreement (together with the Exhibits,
the Paramount Disclosure Schedule, the Viacom Disclosure Schedule and the other
documents delivered pursuant hereto) and the Confidentiality Agreements
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof.
 
     SECTION 9.8. Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
 
     SECTION 9.9. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied (other than the provisions of Section 6.3), is intended to or
shall confer upon any person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, including to confer third party
beneficiary rights; provided, however, nothing in the foregoing shall be deemed
to derogate from any rights of the Other Offeror (other than as a third party
beneficiary) as against Paramount or its Board with respect to any amendment of
this Agreement or failure to enforce the Agreement.
 
     SECTION 9.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
 
     SECTION 9.11. Governing Law. Except to the extent that Delaware Law is
mandatorily applicable to the Merger and the rights of the stockholders of
Paramount and Viacom, this Agreement 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 9.12. Counterparts. This Agreement 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.
 
                                      I-42

     IN WITNESS WHEREOF, Viacom and Paramount have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
 
                                                     
ATTEST:                                                 VIACOM INC.
By     /s/ KATHERINE B. ROSENBERG         ............  By         /s/ PHILIPPE P. DAUMAN
                 Assistant Secretary                    ......................................................
                                                                        Senior Vice President,
                                                                    General Counsel and Secretary
ATTEST:                                                 PARAMOUNT COMMUNICATIONS INC.
By          /s/ EARL H. DOPPELT


                                                     
                 Assistant Secretary                    By          /s/ DONALD ORESMAN
                                                        ......................................................
                                                                       Executive Vice President


 
                                      I-43

                                                                         ANNEX A
 
                            CONDITIONS TO THE OFFER
 
     Notwithstanding any other provision of the Offer, Viacom shall not be
required to accept for payment or pay for any shares of Paramount Common Stock
tendered pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for shares of Paramount
Common Stock tendered, if (i) the Minimum Condition shall not have been
satisfied, (ii) the Rights Condition shall not have been satisfied, or (iii) at
any time on or after the date of this Agreement, and prior to the acceptance for
payment of shares of Paramount Common Stock, any of the following conditions
shall not exist:
 
          (a) No Governmental Entity or federal or state court of competent
     jurisdiction shall have enacted, issued, promulgated, enforced or entered
     any statute, rule, regulation, executive order, decree, injunction or other
     order (whether temporary, preliminary or permanent) which is in effect and
     which materially restricts, prevents or prohibits consummation of the
     Offer, the Merger or any transaction contemplated by the Agreement;
     provided that Viacom shall have used its reasonable best efforts to cause
     any such decree, judgment, injunction or other order to be vacated or
     lifted;
 
          (b) Each of the representations and warranties of Paramount contained
     in the Agreement (including, without limitation, Section 6.6), without
     giving effect to any notification to Viacom delivered pursuant to Section
     6.4, shall be true and correct as of the date of consummation of the Offer
     as though made on and as of such date, except (i) for changes specifically
     permitted by the Agreement and (ii) that those representations and
     warranties which address matters only as of a particular date shall remain
     true and correct as of such date, except in any case for such failures to
     be true and correct which would not, individually or in the aggregate, have
     a Paramount Material Adverse Effect;
 
          (c) Paramount shall have performed or complied in all material
     respects with all agreements and covenants required by the Agreement to be
     performed or complied with by it on or prior to the date of consummation of
     the Offer;
 
          (d) Since December 22, 1993, there shall have been no change,
     occurrence or circumstance in the business, results of operations or
     financial condition of Paramount or any Paramount Subsidiary having or
     reasonably likely to have, individually or in the aggregate, a material
     adverse effect on the business, results of operations or financial
     condition of Paramount and the Paramount Subsidiaries, taken as a whole;
 
          (e) The Agreement shall not have been terminated in accordance with
     its terms;
 
          (f) Viacom shall not have terminated the Offer under Sections 2.1(c)
     or 2.5 of the Agreement;
 
          (g) Viacom and Paramount shall not have agreed that Viacom shall
     terminate the Offer or postpone the acceptance for payment of or payment
     for shares of Paramount Common Stock thereunder;
 
and, in the reasonable judgment of Viacom in any such case, and regardless of
the circumstances (including any action or inaction by Viacom or any of its
affiliates) giving rise to any such condition, it is inadvisable to proceed with
such acceptance for payment or payment.
 
     The foregoing conditions are for the sole benefit of Viacom and may be
asserted by Viacom regardless of the circumstances giving rise to any such
condition or may be waived by Viacom in whole or in part at any time and from
time to time in their sole discretion, subject to the terms of this Agreement.
The failure by Viacom at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right; the waiver of any such right with
respect to particular facts and other circumstances shall not be deemed a waiver
with respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
 
                                      I-44

                                                                         ANNEX B
 
                  PRINCIPAL TERMS OF VIACOM MERGER DEBENTURES
 
                                      
VIACOM MERGER DEBENTURES
Issuer.................................  Viacom.
Interest...............................  8% per annum, payable semi-annually, provided that the initial interest
                                           payment date shall be January 1, 1995.
Maturity...............................  12 years from the Effective Time.
Optional Redemption....................  Not redeemable prior to the fifth anniversary of the Effective Time. On
                                           and after that date, redeemable, in whole or in part, at the option of
                                           Viacom, initially at a redemption price of 103% of the principal
                                           amount thereof and thereafter at prices declining to 100% of the
                                           principal amount thereof on the eighth anniversary of the Effective
                                           Time, plus, in each case, all accrued and unpaid interest.
Mandatory Redemption...................  None.
Denomination...........................  Issuable in minimum denominations of $1,000 and integral multiples
                                           thereof.
Exchange for Viacom Exchange Preferred   Exchangeable, at the option of Viacom, in whole but not in part, on or
Stock..................................    after the earlier of (i) January 1, 1995, but only if the Blockbuster
                                           Merger has not been consummated by such date, and (ii) the acquisition
                                           by a third party of beneficial ownership of a majority of the
                                           outstanding voting securities of Blockbuster, into shares of Viacom's
                                           5% Cumulative Exchangeable Preferred Stock (the "Viacom Exchange
                                           Preferred Stock") at the rate of one share of Viacom Exchange
                                           Preferred Stock for each $50 in principal amount of Viacom Merger
                                           Debentures exchanged. At the time of the exchange, dividends on the
                                           Viacom Exchange Preferred Stock will be deemed to have accrued from
                                           the date of issuance of the Viacom Merger Debentures, and no accrued
                                           interest will be paid with respect to the Viacom Merger Debentures.
Subordination..........................  Subordinated in right of payment to all Senior Indebtedness of Viacom.
                                           Senior Indebtedness of Viacom will be defined as (a) the principal of,
                                           premium, if any, and accrued and unpaid interest on (i) indebtedness
                                           of Viacom for money borrowed, including all obligations of Viacom
                                           under its bank credit facilities, (ii) guarantees by Viacom of
                                           indebtedness for money borrowed by any other person, including any
                                           guarantees by Viacom of obligations of Viacom International Inc.,
                                           (iii) trade credit of Viacom and indebtedness evidenced by notes,
                                           debentures, bonds or other instruments of indebtedness for payment of
                                           which Viacom is responsible or liable, by guarantees or otherwise, and
                                           (iv) obligations of Viacom under capital leases, and (b)
                                           modifications, renewals, extensions and refunding of any such
                                           indebtedness, obligations or guarantees,


 
                                      I-45

                                      
                                           unless it is provided that such indebtedness, obligations or
                                           guarantees, or such modifications, renewals, extensions or refundings
                                           thereof, are not superior in right of payment to the Viacom Merger
                                           Debentures. No payment on account of principal or interest on the
                                           Viacom Merger Debentures may be made if at the time of such payment
                                           there exists a payment default with respect to any Senior
                                           Indebtedness. Upon any distribution of the assets of Viacom upon any
                                           dissolution, total or partial liquidation or reorganization of or
                                           similar proceeding relating to Viacom, the holders of its Senior
                                           Indebtedness will be entitled to receive payment in full before the
                                           Viacom Merger Debenture holders are entitled to receive any payment.
Events of Default......................  The term "Event of Default" when used in the indenture for the Viacom
                                           Merger Debentures will mean any of the following: (i) failure of
                                           Viacom to pay (whether or not prohibited by the subordination
                                           provisions) interest for thirty days on the principal of or any
                                           redemption payment on any of the Viacom Merger Debentures, (ii)
                                           failure to perform any other covenant contained in the Indenture for
                                           sixty days after notice to Viacom by the trustee (or to Viacom and the
                                           trustee by the holders of at least 25% in aggregate principal amount
                                           of Viacom Merger Debentures then outstanding) and (iii) certain events
                                           of bankruptcy, insolvency or reorganization. Any acceleration of the
                                           Viacom Merger Debentures following an Event of Default shall not be
                                           effective until 5 business days after notice of acceleration to
                                           holders of Senior Indebtedness under Viacom's bank credit facilities.
VIACOM EXCHANGE PREFERRED STOCK
Dividends..............................  Cumulative from the Effective Time at the annual rate of $2.50 per share
                                           of Viacom Exchange Preferred Stock, payable quarterly; provided that,
                                           from and after the tenth anniversary of the Effective Time, the annual
                                           rate shall increase from $2.50 to $5.00 per share of Viacom Exchange
                                           Preferred Stock.
Liquidation Preference.................  $50.00 per share of Viacom Exchange Preferred Stock, plus accrued and
                                           unpaid dividends.
Optional Redemption....................  Not redeemable prior to the fifth anniversary of the Effective Time. On
                                           and after that date, redeemable in whole or in part, at the option of
                                           Viacom, initially at a per share redemption price of $52.50 and
                                           thereafter at prices declining to $50.00 on and after the tenth
                                           anniversary of the Effective Time, plus, in each case, all accrued and
                                           unpaid dividends.
Mandatory Redemption...................  None.
Exchange for Viacom Exchange             Exchangeable in whole or in part, at the option of Viacom, on any
Debentures.............................    dividend payment date beginning on and after the third anniversary of
                                           the Effective Time, for Viacom's 5% Subordinated Debentures (the
                                           "Viacom Exchange Debentures") at the rate of $50.00 principal amount
                                           of Viacom Exchange Debentures for each share of Viacom Exchange


 
                                      I-46

                                      
                                           Preferred Stock. Viacom may effect such exchange only if all accrued
                                           and unpaid dividends on the Viacom Exchange Preferred Stock have been
                                           paid.
Voting Rights..........................  No voting rights except (i) as otherwise required by law and (ii) for
                                           the right to elect two additional directors to Viacom's Board of
                                           Directors in the event that Viacom has failed to pay dividends payable
                                           on the shares of Viacom Exchange Preferred Stock for such number of
                                           dividend periods which shall in the aggregate contain not less than
                                           360 days. In any such election, the holders of shares of Viacom
                                           Exchange Preferred Stock will vote separately as a class with the
                                           holders of shares of any one or more other shares of preferred stock
                                           ranking on a parity with the Viacom Exchange Preferred Stock. Such
                                           right to elect two directors will continue until such dividend
                                           arrearages have been paid.
VIACOM EXCHANGE DEBENTURES
Interest...............................  5% per annum; provided that, from and after the tenth anniversary of the
                                           Effective Time, the interest rate shall increase to 10% per annum,
                                           payable semi-annually.
Aggregate Principal Amount.............  Equal to aggregate liquidation preference of Viacom Exchange Preferred
                                           Stock exchanged, with the Viacom Exchange Debentures being issued in
                                           minimum denominations of $1,000 and integral multiples thereof.
Maturity...............................  20 years from the Effective Time.
Optional Redemption....................  Not redeemable prior to the fifth anniversary of the Effective Time. On
                                           and after that date, redeemable, in whole or in part, at the option of
                                           Viacom, initially at a redemption price of 105% of the principal
                                           amount thereof and thereafter at prices declining to 100% of the
                                           principal amount thereof on and after the tenth anniversary of the
                                           Effective Time, plus, in each case, all accrued and unpaid interest.
Mandatory Redemption...................  None.
Subordination..........................  Same as the Viacom Merger Debentures.
Events of Default......................  Same as the Viacom Merger Debentures.


 
                                      I-47

                                                                         ANNEX C
 
                                      
                               PRINCIPAL TERMS OF CONTINGENT VALUE RIGHTS ("CVRS")
Issuer.................................  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 (i) at the Maturity Date, $36.00, (ii) at the
                                           First Extended Maturity Date, $37.00 and (iii) at the Second Extended
                                           Maturity Date, $38.00. In each case, 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


 
                                      I-48

                                      
                                           Maturity Date to the second anniversary of the Effective Time (the
                                           "First 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 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


 
                                      I-49

                                      
                                           Date or Default Payment 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.


 
                                      I-50

                                                                         ANNEX D
 
                     PRINCIPAL TERMS OF THREE YEAR WARRANTS
 
     Each Three Year Warrant will entitle the holder thereof to purchase one
share of Viacom Class B Common Stock per whole Three Year 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 Three Year 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 Three Year Warrant will be issued in the Merger. In lieu thereof, a cash
payment will be made in an amount determined in accordance with Section 1.7 of
this Agreement.
 
                                      I-51

                                                                         ANNEX E
 
                     PRINCIPAL TERMS OF FIVE YEAR WARRANTS
 
     Each Five Year Warrant will entitle the holder thereof to purchase one
share of Viacom Class B Common Stock per whole Five Year Warrant at any time
prior to the fifth anniversary of the Merger at a price of $70.00, exercisable
for cash or by exchanging, if issued, either Viacom Exchange Preferred Stock
with an equivalent liquidation preference or an equivalent principal amount of
Viacom Exchange Debentures. The terms of the Five Year 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 Five Year Warrant will be issued in the Merger. In
lieu thereof, a cash payment will be made in an amount determined in accordance
with Section 1.7 of this Agreement.
 
                                      I-52

                                                                    EXHIBIT 6.14
 
                            FORM OF AFFILIATE LETTER
 
Viacom Inc.
1515 Broadway
New York, NY 10036
 
Gentlemen:
 
     I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Paramount Communications Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Amended and Restated Agreement and Plan of Merger dated as of February 4, 1994
(the "Agreement"), between Viacom Inc., a Delaware corporation ("Viacom"), and
the Company, the Company will be merged with and into Viacom or a wholly owned
Subsidiary of Viacom (the "Merger").
 
     As a result of the Merger, I may receive (i) shares of Class B common
stock, par value $.01 per share, of Viacom, (ii) 8% exchangeable subordinated
debentures of Viacom, (iii) CVRs (as defined in the Agreement) and (iv) Warrants
(as defined in the Agreement) (collectively, the "Viacom Securities"). I would
receive such securities in exchange for, respectively, shares (or options for
shares) owned by me of common stock, par value $1.00 per share, of the Company
(the "Company Securities").
 
     I represent, warrant and covenant to Viacom that in the event I receive any
Viacom Securities as a result of the Merger:
 
          A. I shall not make any sale, transfer or other disposition of the
     Viacom Securities in violation of the Act or the Rules and Regulations.
 
          B. I have carefully read this letter and the Agreement and discussed
     the requirements of such documents and other applicable limitations upon my
     ability to sell, transfer or otherwise dispose of Viacom Securities to the
     extent I felt necessary, with my counsel or counsel for the Company.
 
          C. I have been advised that the issuance of Viacom Securities to me
     pursuant to the Merger has been registered with the Commission under the
     Act on a Registration Statement Form S-4. However, I have also been advised
     that, because at the time the Merger is submitted for a vote of the
     stockholders of the Company, (a) I may be deemed to be an affiliate of the
     Company and (b) the distribution by me of the Viacom Securities has not
     been registered under the Act, I may not sell, transfer or otherwise
     dispose of Viacom Securities issued to me in the Merger unless (i) such
     sale, transfer or other disposition is made in conformity with the volume
     and other limitations of Rule 145 promulgated by the Commission under the
     Act, (ii) such sale, transfer or other disposition has been registered
     under the Act or (iii) in the opinion of counsel reasonably acceptable to
     Viacom, such sale, transfer or other disposition is otherwise exempt from
     registration under the Act.
 
          D. I understand that Viacom is under no obligation to register the
     sale, transfer or other disposition of the Viacom Securities by me or on my
     behalf under the Act or to take any other
                                      I-53

     action necessary in order to make compliance with an exemption from such
     registration available solely as a result of the Merger.
 
          E. I also understand that there will be placed on the certificates for
     the Viacom Securities issued to me, or any substitutions therefor, a legend
     stating in substance:
 
        "THE [SHARES] [RIGHTS] [DEBENTURES] [WARRANTS] REPRESENTED BY THIS
        CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
        UNDER THE SECURITIES ACT OF 1933 APPLIES. THE [SHARES] [RIGHTS]
        [DEBENTURES] [WARRANTS] REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
        TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED BETWEEN
        THE REGISTERED HOLDER HEREOF AND VIACOM INC., A COPY OF WHICH AGREEMENT
        IS ON FILE AT THE PRINCIPAL OFFICES OF VIACOM INC."
 
          F. I also understand that unless a sale or transfer is made in
     conformity with the provisions of Rule 145, or pursuant to a registration
     statement, Viacom reserves the right to put the following legend on the
     certificates issued to my transferee:
 
        "THE [SHARES] [RIGHTS] [DEBENTURES] [WARRANTS] REPRESENTED BY THIS
        CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
        AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
        TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
        1933 APPLIES. THE [SHARES] [RIGHTS] [DEBENTURES] [WARRANTS] HAVE BEEN
        ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
        WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT
        OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
        ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
        SECURITIES ACT OF 1933."
 
     It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to Viacom a copy of a letter from
the staff of the Commission, or an opinion of counsel reasonably satisfactory to
Viacom in form and substance reasonably satisfactory to Viacom, to the effect
that such legend is not required for purposes of the Act.
 
     Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
 
                                                    Very truly yours,
 
                                          ......................................
 
                                          Name:
 
Accepted this   day of
             , 1994, by
VIACOM INC.
By ...................................
 
   Name:
    Title:
 
                                      I-54




PRELIMINARY COPIES                                                  ANNEX II


 
                           PARAMOUNT VOTING AGREEMENT



                                                                [CONFORMED COPY]
 
                                VOTING AGREEMENT
 
     VOTING AGREEMENT, dated as of January 21, 1994 (this "Agreement"), between
NATIONAL AMUSEMENTS, INC., a Maryland corporation (the "Stockholder"), and
PARAMOUNT COMMUNICATIONS INC., a Delaware corporation ("Paramount").
 
     WHEREAS, Viacom Inc., a Delaware corporation ("Viacom"), and Paramount
propose to enter into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), which provides, among other things, that
Paramount will merge with Viacom pursuant to the merger contemplated by the
Merger Agreement (the "Merger");
 
     WHEREAS, as of the date hereof, the Stockholder owns (i) 45,547,214 shares
of Class A Common Stock, par value $.01 per share, of Viacom ("Viacom Class A
Common Stock") and (ii) 46,565,414 shares of Class B Common Stock, par value
$.01 per share, of Viacom ("Viacom Class B Common Stock"; together with the
Viacom Class A Common Stock, the "Viacom Common Stock"); and
 
     WHEREAS, as a condition to the willingness of Paramount to enter into the
Merger Agreement, Paramount has required that the Stockholder agree, and in
order to induce Paramount to enter into the Merger Agreement, the Stockholder
has agreed, to enter into this Agreement with respect to all the shares of
Viacom Class A Common Stock now owned and which may hereafter be acquired by the
Stockholder (the "Shares").
 
     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
 
                                   ARTICLE I
 
                                VOTING OF SHARES
 
     SECTION 1.01. Voting Agreement. The Stockholder hereby agrees that during
the time this Agreement is in effect, at any meeting of the stockholders of
Viacom, however called, and in any action by consent of the stockholders of
Viacom, the Stockholder shall vote the Shares: (a) in favor of the Merger, the
Merger Agreement (as amended from time to time) and the transactions
contemplated by the Merger Agreement, including, but not limited to, the
amendments to the Certificate of Incorporation of Viacom contemplated thereby,
and (b) against any proposal for any recapitalization, merger, sale of assets or
other business combination between Viacom and any person or entity (other than
the Merger and any merger of Blockbuster Entertainment Corporation, a Delaware
corporation ("Blockbuster"), with Viacom) or any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Viacom under the Merger Agreement or which
could result in any of the conditions to Viacom's obligations under the Merger
Agreement not being fulfilled. The Stockholder acknowledges receipt and review
of a copy of the Merger Agreement.
 
                                   ARTICLE II
 
               REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
 
     The Stockholder hereby represents and warrants to Paramount as follows:
 
     SECTION 2.01. Authority Relative to This Agreement. The Stockholder has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to
                                      II-1

consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Stockholder and the consummation by the Stockholder of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Stockholder, and no other corporate proceedings on the
part of the Stockholder are necessary to authorize this Agreement or to
consummate such transactions. This Agreement has been duly and validly executed
and delivered by the Stockholder and, assuming the due authorization, execution
and delivery by Paramount, constitutes a legal, valid and binding obligation of
the Stockholder, enforceable against the Stockholder in accordance with its
terms.
 
     SECTION 2.02. No Conflict. (a) The execution and delivery of this Agreement
by the Stockholder do not, and the performance of this Agreement by the
Stockholder shall not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws or equivalent organizational documents of the
Stockholder, (ii) conflict with or violate any law, rule, regulation, order,
judgement or decree applicable to the Stockholder or by which the Shares are
bound or affected or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the Shares pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Stockholder is a party or by which the Stockholder or the Shares
are bound or affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which would
not prevent or delay the performance by the Stockholder of its obligations under
this Agreement.
 
     (b) The execution and delivery of this Agreement by the Stockholder do not,
and the performance of this Agreement by the Stockholder shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity (as such term is defined in the Merger Agreement)
except for applicable requirements, if any, of the Securities Exchange Act of
1934, as amended, and except where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by the Stockholder of its obligations
under this Agreement.
 
     SECTION 2.03. Title to the Shares. As of the date hereof, the Stockholder
is the record and beneficial owner of 45,547,214 shares of Viacom Class A Common
Stock. Other than 46,565,414 shares of Viacom Class B Common Stock of which the
Stockholder is the record and beneficial owner, such Shares are all the
securities of Viacom owned, either of record or beneficially, by the
Stockholder. The Shares are owned free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Stockholder's voting rights, charges and other encumbrances
of any nature whatsoever (other than a voting agreement entered into in
connection with the merger of Blockbuster and Viacom). The Stockholder has not
appointed or granted any proxy, which appointment or grant is still effective,
with respect to the Shares.
 
                                  ARTICLE III
 
                         COVENANTS OF THE STOCKHOLDERS
 
     SECTION 3.01. No Inconsistent Agreements. The Stockholder hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, the Stockholder shall not enter into any voting agreement or grant a
proxy or power of attorney with respect to the Shares which is inconsistent with
this Agreement (it being agreed that any voting agreement entered into in
connection with a merger of Viacom and Blockbuster shall not be deemed to be
inconsistent with this Agreement).
 
                                      II-2

     SECTION 3.02. Transfer of Title. The Stockholder hereby covenants and
agrees that the Stockholder shall not transfer record or beneficial ownership of
any of the Shares unless the transferee agrees in writing to be bound by the
terms and conditions of this Agreement.
 
                                   ARTICLE IV
 
                                 MISCELLANEOUS
 
     SECTION 4.01. Termination. This Agreement shall terminate upon the
termination of the Merger Agreement.
 
     SECTION 4.02. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
 
     SECTION 4.03. Entire Agreement. This Agreement constitutes the entire
agreement between Paramount and the Stockholder with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between Paramount and the Stockholder with respect to the
subject matter hereof.
 
     SECTION 4.04. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
 
     SECTION 4.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable or being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated to the fullest extent possible.
 
     SECTION 4.06. Governing Law. Except to the extent that the General
Corporation Law of the State of Delaware is mandatorily applicable to the rights
of the stockholders of Viacom, this Agreement 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.
 
     IN WITNESS WHEREOF, the Stockholder and Paramount have caused this
Agreement to be duly executed on the date hereof.
 
                                          NATIONAL AMUSEMENTS, INC.
 
                                          By:       /s/ SUMNER M. REDSTONE
                                              ..................................
                                              Name: Sumner M. Redstone
                                              Title: Chairman of the Board,
                                                     President and
                                                     Chief Executive Officer
 
                                          PARAMOUNT COMMUNICATIONS INC.
 
                                          By:       /s/ DONALD ORESMAN
                                              ..................................
                                              Name: Donald Oresman
                                              Title: Executive Vice President,
                                                     Chief Administrative 
                                                     Officer, General Counsel 
                                                     and Secretary

                                      II-3


PRELIMINARY COPIES                                                    ANNEX III
 
 



                    OPINION OF SMITH BARNEY SHEARSON INC.




                                                                       ANNEX III
 
SMITH BARNEY SHEARSON
 
February 1, 1994
 
The Board of Directors
VIACOM INC.
1515 Broadway
New York, NY 10036
 
Gentlemen:
 
     You have requested our opinion as to the fairness, from a financial point
of view, to Viacom Inc. ("Viacom") and its stockholders, of the terms of the
proposed acquisition (the "Acquisition") by Viacom of Paramount Communications
Inc. ("Paramount"). We understand that the Acquisition will be effected pursuant
to the terms and subject to the conditions set forth in Viacom's Offer to
Purchase, dated October 25, 1993, as amended and supplemented by the Supplement
thereto, dated November 8, 1993, the Second Supplement thereto, dated January 7,
1994, the Third Supplement thereto, dated January 18, 1994 and the Fourth
Supplement thereto, to be filed with the Securities and Exchange Commission on
February 1, 1994 (as amended and supplemented, the "Offer to Purchase"). The
terms of the Offer to Purchase provide for the Acquisition pursuant to a tender
offer (the "Offer") by Viacom for 61,607,892 shares of common stock, par value
$1.00 per share, of Paramount ("Paramount Common Stock"), or such greater number
of shares as equals 50.1% of the shares outstanding on a fully diluted basis, as
of the expiration of the Offer, at a price of $107.00 per share in cash, to be
followed by a merger of either Paramount with and into Viacom or a new
subsidiary of Viacom with and into Paramount (the "Merger"). In the event the
Offer is consummated, each share of Paramount Common Stock issued and
outstanding at the Effective Time, subject to adjustment as specified in the
Offer to Purchase, will be converted into the right to receive (a) 0.93065 of a
share of Class B common stock, par value $.01 per share, of Viacom (the "Class B
Common Stock"); (b) $17.50 face amount of 5% exchangeable debentures of $50.00,
of Viacom containing the principal terms described in the Offer to Purchase (the
"Merger Debentures"); (iii) 0.93065 of a contingent value right issued by Viacom
("CVRs") which, as more fully described in the Offer to Purchase, entitles the
holder to consideration in certain circumstances; (iv) 0.500 of a warrant issued
by Viacom each of which, as more fully described in the Offer to Purchase,
entitle the holder to purchase Class B Common Stock at $60.00 per share under
certain circumstances (the "$60.00 Warrants"), and (v) 0.300 of a warrant issued
by Viacom each of which, as more fully described in the Offer to Purchase,
entitle the holder to purchase Class B Common Stock at $70.00 per share under
certain circumstances (the "$70.00 Warrants") (the Merger Debentures, CVRs,
$60.00 Warrants and $70.00 Warrants, together with the Class B Common Stock,
being the "Viacom Securities"). The terms set forth in the preceding two
sentences are referred to in this letter as the "Financial Terms of the
Acquisition."
 
     We understand further that Viacom and Blockbuster Entertainment Corporation
("Blockbuster") have entered into an Agreement and Plan of Merger (the
"Blockbuster Merger Agreement") pursuant to which Blockbuster will merge with
and into Viacom (the "Blockbuster Merger"). As more fully described in the
Blockbuster Merger Agreement, and subject to the terms and conditions set forth
therein, each share of common stock, par value $.10 per share, of Blockbuster,
issued and outstanding as of the effective time of the Blockbuster Merger will
be converted into the right to receive (a) 0.0800 of a share of Class A common
stock, par value $.01 per share, of Viacom, (b) 0.60615 of a share of Class B

                                     III-1


Common Stock and (c) 1.0000 variable contingent right ("VCRs") issued by Viacom
which, as more fully described in the Blockbuster Merger Agreement, provides for
up to a maximum of 0.13829 of a share of Class B Common Stock to be issued
subsequent to the consummation of the Blockbuster Merger for each VCR held.
 
     We further understand that the consummation of the Acquisition will not be
conditioned upon the consummation of the Blockbuster Merger and may occur
whether or not the Blockbuster Merger is consummated.
 
     In arriving at our opinion, we have (i) reviewed the Offer to Purchase;
(ii) reviewed the Exemption Agreement between Viacom and Paramount dated as of
December 22, 1993 and the form of Agreement and Plan of Merger attached thereto;
(iii) reviewed the Blockbuster Merger Agreement; (iv) met with certain senior
officers of Viacom, Paramount and Blockbuster to discuss the business,
operations, assets, financial condition and prospects of their respective
companies; (v) examined certain publicly available business and financial
forecasts and other data for each of Viacom, Paramount and Blockbuster which
were provided to us by the senior management of Viacom, Paramount and
Blockbuster, respectively, which are not publicly available; (vi) taken into
account certain long-term strategic benefits expected to occur from each of the
Acquisition and the Blockbuster Merger, both operational and financial, that
were described to us by Viacom, Paramount and Blockbuster senior management; and
(vii) reviewed the financial terms of the Acquisition as set forth in the Offer
to Purchase and the Blockbuster Merger as set forth in the Blockbuster Merger
Agreement in relation to, among other things, current and historical market
prices and trading volumes of the Class B Common Stock, Paramount Common Stock
and the common stock of Blockbuster; the earnings and book value per share of
each of Viacom, Paramount and Blockbuster; and the capitalization and financial
condition of each of Viacom, Paramount and Blockbuster. We have also considered,
to the extent publicly available, the financial terms of certain other business
combination transactions which we considered relevant in evaluating each of the
Acquisition and the Blockbuster Merger and analyzed certain financial, stock
market and other publicly available information relating to the businesses of
other companies that we considered relevant in evaluating Viacom, Paramount and
Blockbuster. We have also evaluated the pro forma financial impact of each of
the Acquisition and Blockbuster Merger on Viacom. In addition to the foregoing,
we have conducted such other analyses and examinations and considered such other
financial, economic and market criteria as we deemed necessary in arriving at
our opinion.
 
     In arriving at our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise discussed with us.
With respect to financial forecasts and other information provided to or
otherwise discussed with us prepared by the senior managements of Viacom,
Paramount and Blockbuster with respect to the expected future financial
performance of Viacom, Paramount and Blockbuster, we assumed that such forecasts
and other information were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective senior managements
of Viacom, Paramount and Blockbuster. We have also relied upon the views of the
management of Viacom, Paramount and Blockbuster and have assumed, with your
consent, that certain long-term strategic benefits, both operational and
financial, will result from each of the Acquisition and the Blockbuster Merger.
We express no opinion as to what the value of the Viacom Securities will be when
issued to Paramount stockholders pursuant to the Merger or the price at which
the Viacom Securities will trade subsequent to the Acquisition. We have not made
or been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Viacom, Paramount or Blockbuster nor
have we made any physical inspection of the properties or assets of Viacom,
Paramount or Blockbuster. Our opinion herein is necessarily based upon
financial, stock market and other conditions and circumstances existing and
disclosed to us as of the date hereof.
 
     Smith Barney Shearson Inc. has acted as financial advisor to the Board of
Directors of Viacom in connection with this transaction and will receive a fee
for such services. In the ordinary course of our business, we may actively trade
the equity or debt securities of Viacom, Paramount or Blockbuster for

                                     III-2


our own account or for the account of our customers and, accordingly, may at any
time hold a long or short position in such securities.
 
     Our advisory services and the opinion expressed herein are provided solely
for the use of Viacom's Board of Directors in evaluating the Acquisition and are
not on behalf of, and are not intended to confer rights or remedies upon,
Paramount, any stockholder of Viacom or Paramount or any person other than
Viacom's Board of Directors. It is understood that this opinion letter is for
the information of the Board of Directors of Viacom only, and without our prior
written consent, is not to be quoted or referred to, in whole or in part, in
connection with the offering or sale of securities, nor shall this letter be
used for any other purpose, other than in connection with the Tender Offer
Statement on Schedule 14D-1 and any amendments thereto to be filed by Viacom
with the Securities and Exchange Commission in connection with the Acquisition
or the Blockbuster Merger or in connection with the respective proxy statements
of Blockbuster and Paramount or the proxy statement/prospectus of Viacom
relating to the Acquisition or any Registration Statement of which any such
proxy statement or proxy statement/prospectus forms a part.
 
     Based upon and subject to the foregoing, our experience as investment
bankers and other factors we deemed relevant, we are of the opinion that, as of
the date hereof, the Financial Terms of the Acquisition are fair, from a
financial point of view, to Viacom and its stockholders, whether or not the
Blockbuster Merger is consummated.
 
                                                    Very truly yours,
                                                /s/ SMITH BARNEY SHEARSON
                                          ......................................
                                                Smith Barney Shearson Inc.
 






                                     III-3





PRELIMINARY COPIES                                             ANNEX IV







                         OPINION OF LAZARD FRERES & CO.


                                                            ANNEX IV

LAZARD FRERES & CO.
One Rockefeller Plaza
New York, NY 10020

Telephone (212) 632-6000
Facsimile (212) 632-6060                                           NEW YORK


                                                           February 4, 1994


The Board of Directors
Paramount Communications Inc.
15 Columbus Circle
New York, NY  10023-7780

Dear Members of the Board:

     You have requested our opinion, as of this date, as to the
relationship from a financial point of view of the Viacom Transaction
Consideration (as defined below) to the QVC Transaction Consideration (as
defined below).

     We understand that, as set forth in Amendment Number 34 to the Tender
Offer Statement on Schedule 14D-1 filed by QVC Network, Inc. ("QVC"),
Comcast Corporation and BellSouth Corporation with the Securities and
Exchange Commission (the "Commission") on February 1, 1994 (the "QVC Tender
Offer Statement"), QVC has amended its proposal (the "Amended QVC
Proposal") to acquire Paramount Communications Inc. ("Paramount") by
amending the terms of the cash tender offer (the "QVC Offer") that QVC
commenced on October 27, 1993 and the terms of the consideration payable to
the holders (the "Stockholders") of common stock of Paramount ("Common
Stock") in the QVC Second-Step Merger (as defined below).  Under the
Amended QVC Proposal, (i) QVC is offering in the QVC Offer to purchase
61,657,432 shares of Common Stock, or such greater number as equals 50.1%
of the outstanding shares of Common Stock (on a fully diluted basis), at a
purchase price of $104.00 per share in cash, and (ii) following completion
of the QVC Offer, in accordance with the form of Agreement and Plan of
Merger, between QVC and Paramount (the "Form QVC Merger Agreement") that is
attached to the Exemption Agreement, dated as of January 21, 1994, between
QVC and Paramount, as amended on January 27, 1994 (the "QVC Exemption
Agreement"), Paramount would be merged into QVC in the proposed second-step
merger between QVC and Paramount (the "QVC Second-Step Merger";
collectively with the QVC Offer, the "QVC Two-Step Transaction"), and each
share of Common Stock not purchased in 

                                        IV-1



the QVC Offer (other than shares of Common Stock held in the treasury of 
Paramount or owned by Paramount or any direct or indirect wholly-owned 
subsidiary of Paramount or QVC or shares of Common Stock held by those 
Stockholders (as defined below) who exercise and perfect stockholders 
appraisal rights under Delaware law) would be converted into the right 
to receive (a) 1.2361 shares of common stock of QVC (the "QVC Common 
Stock"), (b) 0.2386 shares of a new series of 6% cumulative non-convertible 
exchangeable preferred stock of QVC (the "QVC Merger Preferred Stock") 
and (c) 0.32 warrants to purchase one share of QVC Common Stock at a 
price of $70.34 per share, exercisable at any time by the
holder prior to the tenth anniversary of the QVC Second-Step Merger (the
"QVC Warrants") (the aggregate consideration payable to the Stockholders
pursuant to the QVC Offer set forth in clause (i) and the aggregate
consideration payable to the Stockholders pursuant to the QVC Second-Step
Merger set forth in subclauses (a), (b) and (c) of clause (ii) is
collectively referred to as the "QVC Transaction Consideration").  We also
understand that the Amended QVC Proposal provides that the QVC Merger
Preferred Stock will pay cumulative quarterly dividends at a rate of $3.00
per annum per share, will have a liquidation preference of $50.00 per
share, will be redeemable for cash by QVC at declining redemption premiums
on and after the fifth anniversary of the QVC Second-Step Merger and will
be exchangeable by QVC into QVC's 6% subordinated debentures (the "QVC
Debentures") at an exchange rate of $50.00 principal amount of QVC
Debenture per share of QVC Merger Preferred Stock on and after the third
anniversary of the QVC Second-Step Merger.  In addition, we understand that
the QVC Warrants will be exercisable with cash or by using an equivalent
amount of liquidation preference of QVC Merger Preferred Stock or principal
amount of QVC Debentures and will be redeemable for cash by QVC, at its
option, at $15.00 per QVC Warrant on and after the fifth anniversary of the
QVC Second-Step Merger.

     In addition, we understand that, as set forth in (i) the written
proposal submitted to Paramount by Viacom Inc. ("Viacom") on February 1,
1994 and (ii) Amendment Number 35 to the Tender Offer Statement on Schedule
14D-1 filed by Viacom, National Amusements, Inc., Mr. Sumner M. Redstone
and Blockbuster Entertainment Corporation ("Blockbuster") with the
Commission on February 1, 1994 (the "Viacom Tender Offer Statement")
(collectively, the "Amended Viacom Proposal"), Viacom did not amend the
terms of the cash tender offer (the "Viacom Offer") that it had commenced
on October 25, 1993, but amended the terms of the consideration payable to the 

                                        IV-2


Stockholders in the proposed Viacom Second-Step Merger (as defined
below).  Under the Amended Viacom Proposal, (a) Viacom is continuing to
offer in the Viacom Offer to purchase 61,657,432 shares of Common Stock, or
such greater number as equals 50.1% of the outstanding shares of Common
Stock (on a fully diluted basis), at a purchase price of $107.00 per share
in cash, and (b) following completion of the Viacom Offer, in accordance
with the Agreement and Plan of Merger, between Viacom and Paramount, dated
as of January 21, 1994, as amended on January 27, 1994 and as proposed to
be amended to reflect the Amended Viacom Proposal (the "Viacom Merger
Agreement"), Paramount would be merged into Viacom in the proposed second-
step merger between Viacom and Paramount (the "Viacom Second-Step Merger";
collectively with the Viacom Offer, the " Viacom Two-Step Transaction"),
and each share of Common Stock not purchased in the Viacom Offer (other
than shares of Common Stock held in the treasury of Paramount or owned by
Paramount or any direct or indirect wholly-owned subsidiary of Paramount or
Viacom or shares of Common Stock held by those Stockholders who exercise
and perfect stockholders appraisal rights under Delaware law) would be
converted into the right to receive (1) 0.93065 shares of Class B common
stock of Viacom (the "Viacom Class B Common Stock"), (2) $17.50 principal
amount of 8% exchangeable subordinated debentures of Viacom (the "Viacom
Exchangeable Debentures"), (3) 0.5 warrants to purchase one share of Viacom
Class B Common Stock at a price of $60.00 per share, exercisable at any
time by the holder prior to the third anniversary of the Viacom Second-Step
Merger, (4) 0.3 warrants to purchase one share of Viacom Class B Common
Stock at a price of $70.00 per share, exercisable at any time by the holder
prior to the fifth anniversary of the Viacom Second-Step Merger (the
"Viacom Five Year Warrants") and (5) 0.93065 contingent value rights of
Viacom (the "Viacom CVRs") having the terms described below (the aggregate
consideration payable to Stockholders pursuant to the Viacom Offer set
forth in clause (a) and the aggregate consideration payable to Stockholders
pursuant to the Viacom Second- Step Merger set forth in subclauses (1),
(2), (3), (4) and (5) of clause (b) is collectively referred to as the
"Viacom Transaction Consideration").  In addition, we understand that the
Amended Viacom Proposal provides that the Viacom Exchangeable Debentures
will mature on the twelfth anniversary of the Viacom Second-Step Merger,
will pay interest semi-annually beginning on January 1, 1995 and will be
non-callable until the fifth anniversary of the Viacom Second-Step Merger,
and thereafter may be redeemed for cash by Viacom at declining redemption
premiums.  The Amended Viacom Proposal also provides that Viacom will have
the option to exchange at par the Viacom 

                                        IV-3


Exchangeable Debentures for the equivalent liquidation preference 
of a new series of Viacom 5% cumulative exchangeable (non-convertible) 
preferred stock (the "Viacom Merger Preferred Stock") if the 
proposed merger between Viacom and Blockbuster contemplated by 
the Agreement and Plan of Merger, dated as of January 7, 1994, between 
Blockbuster and Viacom (the "Blockbuster Merger Agreement") has not 
been consummated by January 1, 1995, or earlier, if beneficial
ownership of a majority of the outstanding shares of common stock of
Blockbuster (the "Blockbuster Common Stock") has been acquired by a third
party prior to January 1, 1995.  The Amended Viacom Proposal further
provides that the Viacom Merger Preferred Stock will be non-callable until
the fifth anniversary of the Viacom Second-Step Merger, and thereafter, may
be redeemed by Viacom for cash at declining redemption premiums and will
have a liquidation preference of $50.00 per share.  In addition, the Viacom
Merger Preferred Stock will be exchangeable into Viacom's 5% subordinated
debentures (the "Viacom Subordinated Debentures") after the third
anniversary of the Viacom Second-Step Merger at an exchange rate of $50.00
principal amount of Viacom Subordinated Debentures for each share of Viacom
Merger Preferred Stock.  Moreover, the dividend rate on the Viacom Merger
Preferred Stock and the interest rate on the Viacom Subordinated Debentures
will increase to 10% per annum on the tenth anniversary of the Viacom
Second-Step Merger, if not previously redeemed by Viacom.  We further
understand that the Amended Viacom Proposal provides that the Viacom Five
Year Warrants will be exercisable with cash or by using an equivalent
liquidation preference of Viacom Merger Preferred Stock or principal amount
of Viacom Subordinated Debentures.  We also understand that the Amended
Viacom Proposal provides that each Viacom CVR will represent the right on
the first anniversary of the Viacom Second-Step Merger to receive in cash
or securities, at Viacom's election, the amount by which the Average
Trading Value (as defined in the Amended Viacom Proposal and as described
below) of Viacom Class B Common Stock is less than a minimum price of
$48.00 per share of Viacom Class B Common Stock, and Viacom will have the
right, in its sole discretion, to extend the payment measurement dates of
the Viacom CVR by one year, in which case the minimum price will increase
to $51.00 per share of Viacom Class B Common Stock, and a further one year
extension right which, if exercised, would increase the minimum price to
$55.00 per share of Viacom Class B Common Stock.  As used in the Amended
Viacom Proposal, the "Average Trading Value" will be based upon the market
prices of Viacom Class B Common Stock during the 60 trading days ending on
the last day of the relevant period and is subject to a floor of $36.00 per
share of Viacom Class B Common Stock on the first anniversary of the Viacom
Second-Step Merger, a floor of $37.00 per share of Viacom Class B Common

                                        IV-4


Stock on the second anniversary of the Viacom Second-Step Merger and a
floor of $38.00 per share of Viacom Class B Common Stock on the third
anniversary of the Viacom Second-Step Merger.

     Lazard Freres & Co. has from time to time acted as financial advisor
to Paramount and has acted as its financial advisor in connection with
proposed QVC Two-Step Transaction and proposed Viacom Two-Step Transaction.
As you know, a General Partner of our firm is a member of Paramount's Board
of Directors.  In addition, we have from time to time in the past provided,
and we are currently providing, in matters unrelated to Paramount,
financial advisory or financing services to one or more of the respective
equity investors in Viacom and QVC, or persons engaged in pending
transactions with one or more of such investors, and we have received, or
expect to receive, fees for the rendering of such services.  In connection
with our opinions set forth in this letter, we have, among other things:

     (i)  reviewed the terms and conditions of (a) the Amended QVC
Proposal, the QVC Tender Offer Statement, and the QVC Exemption Agreement
(including the Form QVC Merger Agreement attached thereto) and (b) the
Amended Viacom Proposal, the Viacom Tender Offer Statement and the Viacom
Merger Agreement (including the form Exemption Agreement between Viacom and
Paramount attached thereto);

    (ii)  reviewed  the terms and conditions of the Blockbuster Merger
Agreement and the Subscription Agreement, dated January 7, 1994, between
Viacom and Blockbuster, analyzed the Amended Viacom Proposal both with and
without giving effect to the consummation of the proposed merger between
Viacom and Blockbuster contemplated by the Blockbuster Merger Agreement and
observed that the proposed merger between Viacom and Blockbuster is subject
to the approval of the stockholders of Blockbuster;

   (iii)  analyzed certain historical business and financial information
relating to Paramount, Viacom, QVC and Blockbuster, including (a) the
Annual Reports to Stockholders and the Annual Reports on Form 10-K of
Paramount for each of the fiscal years ended October 31, 1988 through 1992,
the Transition Report on Form 10-K of Paramount for the period from
November 1, 1992 through April 30, 1993 and Quarterly Reports on Form 10-Q
of Paramount for the quarters ended January 31, April 30, and July 31 for
each of the same fiscal years and for the quarters ended 

                                        IV-5

January 31, April 30, July 31 and October 31, 1993, (b) the Annual 
Reports to Stockholders and the Annual Reports on Form 10-K of Viacom 
for each of the fiscal years ended December 31, 1988 through 1992, and 
Quarterly Reports on Form 10-Q of Viacom for the quarters ended March 31, 
June 30 and September 30 for each of the same fiscal years, and for the 
quarters ended March 31, June 30, and September 30, 1993, (c) the Annual 
Reports to Stockholders and the Annual Reports on Form 10-K of QVC for 
each of the fiscal years ended January 31, 1989 through 1993, and Quarterly 
Reports on Form 10-Q of QVC for the quarters ended April 30, July 31 and 
October 31 for each of the same fiscal years, and for the quarters ended 
April 30, July 31 and October 31, 1993 and (d) the Annual Reports to 
Stockholders and the Annual Reports on Form 10-K of Blockbuster for each 
of the fiscal years ended December 31, 1988 through 1992, and Quarterly 
Reports on Form 10-Q of Blockbuster for the quarters ended March 31, June 
30 and September 30 for each of the same fiscal years, and for the quarters 
ended March 31, June 30, and September 30, 1993;

    (iv)  reviewed certain financial forecasts and other data provided to
us by Paramount, Viacom, QVC and Blockbuster relating to their respective
businesses (except in the case of Paramount, financial forecasts for the
current fiscal year only, having been advised that Paramount has not
prepared projections beyond the current fiscal year);

     (v)  conducted discussions with members of the senior management of
Paramount, Viacom, QVC and Blockbuster with respect to the business and
prospects of Paramount, Viacom, QVC and Blockbuster and the strategic
objectives of each;

    (vi)  reviewed public information with respect to certain other
companies in lines of businesses we believe to be comparable to the
businesses of Paramount, Viacom, QVC and Blockbuster;

   (vii)  reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be comparable to
those of Paramount, Viacom, QVC and Blockbuster, and in other industries
generally;

  (viii)  reviewed the historical stock prices and trading volumes of the
Common Stock, Viacom Class B 

                                        IV-6


Common Stock, QVC Common Stock and Blockbuster Common Stock;

    (ix)  reviewed the procedures for bidding set forth in the Viacom
Merger Agreement and the QVC Exemption Agreement, in particular noting the
respective provisions therein providing for the extension of the QVC Offer
or the Viacom Offer, as applicable, for 10 business days upon delivery of a
Completion Certificate (referred to in the Viacom Merger Agreement or the
QVC Exemption Agreement, as applicable) by Viacom or QVC, as applicable;
and

     (x)  conducted such other financial studies, analyses and
investigations as we deemed appropriate.

     We have assumed and relied upon the accuracy and completeness of the
financial and other information provided by Paramount, Viacom, QVC and
Blockbuster to us, and on the representations contained in the Viacom
Merger Agreement and the Form QVC Merger Agreement, and we have not
undertaken any independent verification of such information or any
independent valuation or appraisal of any of the assets of Paramount,
Viacom, QVC or Blockbuster.  With respect to the financial forecasts
referred to above, we have assumed that they have been reasonably prepared
on a basis reflecting the best currently available judgments of the
managements of Paramount, Viacom, QVC or Blockbuster as to the future
financial performance of Paramount, Viacom, QVC and Blockbuster,
respectively.  In addition, we have assumed that the Amended Viacom
Proposal and the Amended QVC Proposal, were made in compliance with the
terms and conditions of the Viacom Merger Agreement and the QVC Exemption
Agreement, respectively.  Further, our opinions are based on economic,
monetary and market conditions existing on this date.

     We have not reviewed any proxy statement or similar document that may
be prepared for use in connection with the proposed QVC Two-Step
Transaction or the proposed Viacom Two-Step Transaction.  In accordance
with the Procedures for Submissions of Proposals (the "Bidding Procedures")
established by Paramount's Board of Directors on December 13, 1993,
Paramount's Board of Directors has authorized us to respond to inquiries
with respect to Paramount from prospective bidders (in addition to QVC and
Viacom) and to receive proposals from additional bidders, if any.  We have
not, however, solicited third party indications of interest in acquiring
all or any part of Paramount.

                                        IV-7



     As part of our analysis, we have continued to evaluate the
transactions, as we have in the past, not only on the basis of current
market values but also applying other financial valuation methodologies
generally applicable to transactions of this type.  These financial
valuation methodologies, which are subject to certain limitations as
applied to these prospective combinations, including the lack of
projections for Paramount beyond the current fiscal year and the
difficulties in quantifying synergies and revenue enhancements resulting
from the combinations, generally favor in varying degrees the Viacom
Transaction Consideration from a financial point of view.  On the basis of
recent market values, the QVC Transaction Consideration has had a somewhat
higher market valuation than the Viacom Transaction Consideration; in this
connection, we observe the high volatility of Viacom Class B Common Stock
and QVC Common Stock and that the market prices of the stocks seem to be
impacted by the perception of the market-place as to whether QVC or Viacom
would be the ultimate acquiror of Paramount.

     We observe the express preference of Paramount's Board of Directors in
the Bidding Procedures for cash and securities readily susceptible to
valuation, such as securities with a fixed income stream, with a liquidation
preference, or in the case of equity securities, securities which enjoy the
benefits of a wide collar or other value assurance mechanism.  In this
regard, we note that there is a greater percentage of cash and fixed income
securities as components of the Viacom Transaction Consideration than the QVC
Transaction Consideration, although the magnitude of the difference in the
respective percentages between the two current bids has decreased in
comparison to the most recent previous bids submitted by Viacom and QVC.
We further note the offering of the Viacom CVRs in the Amended Viacom
Proposal.

     Our engagement and the opinions expressed herein are solely for the
benefit of Paramount's Board of Directors and are not on behalf of, and are not
intended to confer rights or remedies upon, Viacom, QVC, Blockbuster, any
stockholders of Paramount, Viacom, QVC or Blockbuster or any other person
other than Paramount's Board of Directors.

     In reaching our opinions expressed herein, we have taken into account
various factors, including our assessment of the probability of
consummation of the proposed merger between Viacom and Blockbuster
contemplated by the Blockbuster Merger Agreement under the circumstances
existing on the date of this letter and that, given the terms and
conditions of the proposed QVC Two-Step Transaction and the proposed Viacom
Two-Step Transaction and the limitations of the financial valuation

                                        IV-8


methodologies referred to above, we continue to view as a favorable factor
an offer that contains a greater percentage of cash and securities readily
susceptible to valuation.  Based on and subject to the foregoing and such
other factors as we deemed relevant, including our assessment of economic,
monetary and market conditions existing on the date of this letter, we are
of the opinion that, as of this date, (i) the QVC Transaction Consideration
is fair to the Stockholders from a financial point of view (ii) the
Viacom Transaction Consideration is fair to the Stockholders from a financial
point of view and (iii) the Viacom Transaction Consideration is marginally
superior to the QVC Transaction Consideration from a financial point of view.

                                   Very truly yours,


                                   /s/ Lazard Freres & Co.


                                        IV-9




PRELIMINARY COPIES                                                     ANNEX V



 
                           EXCERPT FROM THE DELAWARE
                            GENERAL CORPORATION LAW
                         RELATING TO DISSENTERS' RIGHTS


                GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
 
Sec. 262. Appraisal rights.
 
     (a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with the provisions of subsection (d) of this Section and
who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to 228 of this Chapter shall be entitled to an
appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this Section. As
used in this Section, the word "stockholder" means a holder of record of stock
in a stock corporation and also a member of record of a non-stock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a non-stock
corporation.
 
     (b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sections 251, 252, 254, 257, 258, 263 or 264 of this
Chapter:
 
          (1) Provided, however, that no appraisal rights under this Section
     shall be available for the shares of any class or series of stock which, at
     the record date fixed to determine the stockholders entitled to receive
     notice of and to vote at the meeting of stockholders to act upon the
     agreement of merger or consolidation, were either (i) listed on a national
     securities exchange or designated as a national market system security on
     an interdealer quotation system by the National Association of Securities
     Dealers, Inc. or (ii) held of record by more than 2,000 stockholders; and
     further provided that no appraisal rights shall be available for any shares
     of stock of the constituent corporation surviving a merger if the merger
     did not require for its approval the vote of the stockholders of the
     surviving corporation as provided in subsection (f) of Section 251 of this
     Chapter.
 
          (2) Notwithstanding the provisions of subsection (b)(1) of this
     Section, appraisal rights under this Sectionshall be available for the
     shares of any class or series of stock of a constituent corporation if the
     holders thereof are required by the terms of an agreement of merger or
     consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of
     this Chapter to accept for such stock anythingexcept: (i) shares of stock
     of the corporation surviving or resulting from such merger or
     consolidation; (ii) shares of stock of any other corporation which at the
     effective date of the merger or consolidation will be either listed on a
     national securities exchange or designated as a national market system
     security on an interdealer quotation system by the National Association of
     Securities Dealers, Inc. or held of record by more than 2,000 stockholders;
     (iii) cash in lieu of fractional shares of the corporations described in
     the foregoing clauses (i) and (ii); or (iv) any combination of the shares
     of stock and cash in lieu of fractional shares described in the foregoing
     clauses (i), (ii) and (iii) of this subsection.
 
          (3) In the event all of the stock of a subsidiary Delaware corporation
     party to a merger effected under Section 253 of this Chapter is not owned
     by the parent corporation immediately prior to the merger, appraisal rights
     shall be available for the shares of the subsidiary Delaware corporation.
 
     (c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this Section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this Section, including those set forth in subsections (d) and
(e), shall apply as nearly as is practicable.
 
                                      V-1

     (d) Appraisal rights shall be perfected as follows:
 
          (1) If a proposed merger or consolidation for which appraisal rights
     are provided under this Section is to be submitted for approval at a
     meeting of stockholders, the corporation, not less than 20 days prior to
     the meeting, shall notify each of its stockholders who was such on the
     record date for such meeting with respect to shares for which appraisal
     rights are available pursuant to subsections (b) or (c) hereof that
     appraisal rights are available for any or all of the shares of the
     constituent corporations, and shall include in such notice a copy of this
     Section. Each stockholder electing to demand the appraisal of his shares
     shall deliver to the corporation, before the taking of the vote on the
     merger or consolidation, a written demand for appraisal of his shares. Such
     demand will be sufficient if it reasonably informs the corporation of the
     identity of the stockholder and that the stockholder intends thereby to
     demand the appraisal of his shares. A proxy or vote against the merger or
     consolidation shall not constitute such a demand. A stockholder electing to
     take such action must do so by a separate written demand as herein
     provided. Within 10 days after the effective date of such merger or
     consolidation, the surviving or resulting corporation shall notify each
     stockholder of each constituent corporation who has complied with the
     provisions of this subsection and has not voted in favor of or consented to
     the merger or consolidation of the date that the merger or consolidation
     has become effective; or
 
          (2) If the merger or consolidation was approved pursuant to Section
     228 or Section 253 of this Chapter, the surviving or resulting corporation,
     either before the effective date of the merger or consolidation or within
     10 days thereafter, shall notify each of the stockholders entitled to
     appraisal rights of the effective date of the merger or consolidation and
     that appraisal rights are available for any or all of the shares of the
     constituent corporation, and shall include in such notice a copy of this
     Section. The notice shall be sent by certified or registered mail, return
     receipt requested, addressed to the stockholder at his address as it
     appears on the records of the corporation. Any stockholder entitled to
     appraisal rights may, within 20 days after the date of mailing of the
     notice, demand in writing from the surviving or resulting corporation the
     appraisal of his shares. Such demand will be sufficient if it reasonably
     informs the corporation of the identity of the stockholder and that the
     stockholder intends thereby to demand the appraisal of his shares.
 
     (e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with the provisions of subsections (a) and (d) hereof and who is
otherwise entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
 
     (f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the
                                      V-2

time and place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders shown on
the list at the addresses therein stated. Such notice shall also be given by one
or more publications at least one week before the day of the hearing, in a
newspaper of general circulation published in the City of Wilmington, Delaware
or such publication as the Court deems advisable. The forms of the notices by
mail and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
 
     (g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provisions of this Section and who have
become entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
 
     (h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this Section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this Section.
 
     (i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any other state.
 
     (j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
 
     (k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this Section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this Section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this Section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder
                                      V-3


without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
 
     (l) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
 





                                      V-4



PRELIMINARY COPIES                                                    ANNEX VI



 
             FORM OF CERTIFICATE OF MERGER FOR THE PARAMOUNT MERGER




                             CERTIFICATE OF MERGER
                                    MERGING
                                VIACOM SUB INC.
                                 WITH AND INTO
                         PARAMOUNT COMMUNICATIONS INC.
                         PURSUANT TO SECTION 251 OF THE
                        DELAWARE GENERAL CORPORATION LAW
 
     The undersigned, being the [Title] of Paramount Communications Inc., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware ("Paramount"), DOES HEREBY CERTIFY AS
FOLLOWS:
 
     FIRST: That the name of and the state of incorporation of each of the
constituent corporations in the merger is as follows:
 

                                                                              STATE OF
     NAME                                                                   INCORPORATION
- ----------------------------------------------------------------------  ---------------------
                                                                              
Viacom Sub Inc. ......................................................           Delaware
Paramount Communications Inc. ........................................           Delaware

 
   
     SECOND: That an Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994, as further amended as of May 26, 1994 (the "Merger
Agreement"), among Paramount, Viacom Sub Inc. (the "Merger Subsidiary") and
Viacom Inc. has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with Section 251 of the
General Corporation Law of the State of Delaware.
    
 
     THIRD: That Paramount shall be the surviving corporation (the "Surviving
Corporation").
 
     FOURTH: The Restated Certificate of Incorporation of Paramount will be
amended in its entirety to read as the Restated Certificate of Incorporation
attached hereto as Exhibit A.
 
     FIFTH: That an executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at the following
address:
 
                               15 Columbus Circle
                            New York, New York 10023
 
     SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request, and without cost, to any stockholder of any
constituent corporation.
 
     IN WITNESS WHEREOF, Paramount has caused this Certificate of Merger to be
signed by             , its [Title of Officer], and attested by             ,
its [Assistant] Secretary, this      day of [           ], 19  .
 
                                          PARAMOUNT COMMUNICATIONS INC.
 
                                          By:
                                              ..................................
 
                                              Title:
 
ATTEST:
 
 .....................................
 
        [Assistant] Secretary
 
                                      VI-1

                                                                       EXHIBIT A
 
                                    RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                         PARAMOUNT COMMUNICATIONS INC.
 
     FIRST: The name of the corporation (hereinafter called the "corporation")
is
 
                         PARAMOUNT COMMUNICATIONS INC.
 
     SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is
                                       ; and the name of the registered agent of
the corporation in the State of Delaware is                .
 
     THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
 
     FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is Two Hundred (200), all of which are without par
value. All such shares are of one class and are shares of Common Stock.
 
     FIFTH: The corporation is to have perpetual existence.
 
     SIXTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
 
     SEVENTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
 
          1. The management of the business and the conduct of the affairs of
     the corporation shall be vested in its Board of Directors. The number of
     directors which shall constitute the whole Board of Directors shall be
     fixed by, or in the manner provided in, the By-Laws. The phrase "whole
     Board" and the phrase "total number of directors" shall be deemed to have
     the same meaning, to wit, the total number of directors which the
     corporation would have if there were no vacancies. No election of directors
     need be by written ballot.
 
          2. After the original or other By-Laws of the corporation have been
     adopted, amended, or repealed, as the case may be, in accordance with the
     provisions of Section 109 of the General Corporation Law of the State of
     Delaware, and, after the corporation has received any payment for any of
     its stock, the power to adopt, amend, or repeal the By-Laws of the
     corporation may be exercised by the Board of Directors of the corporation;
     provided, however, that any provision for the classification of directors
     of the corporation for staggered terms pursuant to the provisions of
     subsection (d) of Section 141 of the General Corporation Law of the State
     of Delaware shall be set forth in an initial By-Law or in a By-Law adopted
     by the stockholders entitled to vote of the
                                      VI-2

     corporation unless provisions for such classification shall be set forth in
     this certificate of incorporation.
 
          3. Whenever the corporation shall be authorized to issue only one
     class of stock, each outstanding share shall entitle the holder thereof to
     notice of, and the right to vote at, any meeting of stockholders. Whenever
     the corporation shall be authorized to issue more than one class of stock,
     no outstanding share of any class of stock which is denied voting power
     under the provisions of the certificate of incorporation shall entitle the
     holder thereof to the right to vote at any meeting of stockholders except
     as the provisions of paragraph (2) of subsection (b) of Section 242 of the
     General Corporation Law of the State of Delaware shall otherwise require;
     provided, that no share of any such class which is otherwise denied voting
     power shall entitle the holder thereof to vote upon the increase or
     decrease in the number of authorized shares of said class.
 
     EIGHTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.
 
     NINTH: The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
 
     TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
 
                                      VI-3






 PRELIMINARY COPIES                                                ANNEX VII





 
                        FORM OF CERTIFICATE OF AMENDMENT




                            CERTIFICATE OF AMENDMENT
                                       OF
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                  VIACOM INC.
                         PURSUANT TO SECTION 242 OF THE
                        DELAWARE GENERAL CORPORATION LAW
 
     The undersigned, being the [Title] of Viacom Inc., a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware ("Viacom"), DOES HEREBY CERTIFY AS FOLLOWS:
 
   
     FIRST: At a meeting of the Board of Directors of Viacom duly called and
held on May 26, 1994, resolutions were duly adopted setting forth proposed
amendments (which are set forth herein in Articles SECOND and THIRD) to the
Restated Certificate of Incorporation of Viacom, declaring such amendments to be
advisable and directing that such amendments be submitted to the stockholders of
Viacom for approval at the Special Meeting of Stockholders to be held on
               .
    
 
     SECOND: That Section 1(a) of Article IV of the Restated Certificate of
Incorporation of Viacom be, and the same hereby is, amended in full to read as
follows:
 
     "(a) The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 1,400,000,000. The classes and the
aggregate number of shares of stock of each class which the Corporation shall
have authority to issue are as follows:
 
          (i) 200,000,000 shares of Class A Common Stock, $0.01 par value
     ("Class A Common Stock").
 
          (ii) 1,000,000,000 shares of Class B Common Stock, $0.01 par value
     ("Class B Common Stock").
 
          (iii) 200,000,000 shares of Preferred Stock, $0.01 par value
     ("Preferred Stock")."
 
     THIRD: That the first sentence of Section (2) of Article V of the Restated
Certificate of Incorporation of Viacom be, and the same hereby is, amended by
deleting the number "twelve" and replacing such number with the number "twenty".
 
     FOURTH: That such amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
 
     IN WITNESS WHEREOF, this Certificate has been executed by         , [Title
of Officer] of Viacom, and attested by         , [Assistant] Secretary of
Viacom, this               day of            , 1994.
 
                                          VIACOM INC.
 
                                          By:
                                              ..................................
 
                                              Title:
 
ATTEST:
 
 .....................................
 
[Assistant] Secretary
 
                                     VII-1

                                                                       EXHIBIT A
   
                                  VIACOM INC.
                                SENIOR EXECUTIVE
                           SHORT-TERM INCENTIVE PLAN

                                   ARTICLE I

                                    GENERAL

     SECTION 1.1 Purpose. The purpose of the Viacom Inc. Senior Executive
Short-Term Incentive Plan (the "Plan") is to benefit and advance the interests
of Viacom Inc., a Delaware corporation (the "Company"), by rewarding selected
senior executive officers of the Company and its subsidiaries for their
contributions to the Company's financial success and thereby motivate them to
continue to make such contributions in the future by granting annual
performance-based awards ("Awards").

     SECTION 1.2 Administration of the Plan. The Plan shall be administered by a
committee ("Committee") which shall adopt such rules as it may deem appropriate
in order to carry out the purpose of the Plan. The Committee shall be the
Compensation Committee of the Company's Board of Directors ("Board") (or such
other Committee as may be appointed by the Board) except that (i) the number of
directors on the Committee shall not be less than three (3) and (ii) each member
of the Committee shall be an "outside director" within the meaning of Section
162(m)(4)of the Internal Revenue Code of 1986, as amended (the "Code"). All
questions of interpretation, administration and application of the Plan shall be
determined by a majority of the members of the Committee then in office, except
that the Committee may authorize any one or more of its members, or any officer
of the Company, to execute and deliver documents on behalf of the Committee. The
determination of such majority shall be final and binding in all matters
relating to the Plan. The Committee shall have authority to determine the terms
and conditions of the Awards granted to eligible persons specified in Section
1.3 below ("Participants").

     SECTION 1.3 Eligible Persons. Awards may be granted only to employees of
the Company or one of its subsidiaries who are at the level of Senior Vice
President of the Company or at a more senior level. An individual shall not be
deemed an employee for purposes of the Plan unless such individual receives
compensation from either the Company or one of its subsidiaries for services
performed as an employee of the Company or any of its subsidiaries.

                                   ARTICLE II

                                     AWARDS

     SECTION 2.1 Awards. The Committee may grant Awards to eligible employees
with respect to each fiscal year of the Company, subject to the terms and
conditions set forth in the Plan.

     SECTION 2.2 Terms of Awards. Prior to the commencement of each fiscal year
of the Company (or by March 31, 1994, in the case of the fiscal year ending
December 31, 1994), the Committee shall establish (i) performance goals and
objectives ("Performance Targets") for the Company and the subsidiaries and
divisions thereof for such fiscal year ("Performance Period") and (ii) target
awards ("Target Awards") for each Participant which shall be a percentage of the
Participant's salary (as
                                      A-1
    

   
defined in Section 2.3 below). Such Performance Targets shall relate to the
achievement of annual financial goals based on the attainment of specified
levels of Operating Income and/or Cash Flow (as such terms are defined below)
for the Company and the subsidiaries and divisions thereof. With respect to the
Viacom Cable Division, the Performance Targets shall also relate to the
achievement of annual goals based on the attainment of specified levels of
Customer Months and Ancillary Revenues (as such terms are defined below). For
purposes of the Plan, "Operating Income" shall mean revenues less operating
expenses (other than depreciation and amortization) and "Cash Flow" shall mean
Operating Income less cash capital expenditures and increases or decreases in
working capital and in other balance sheet investments. "Customer Months" shall
mean the number of months for which Viacom Cable Division customers were billed
for services other than premium, pay-per-view and ancillary services. "Net
Ancillary Revenues" shall mean revenues from premium, pay-per-view and ancillary
services less operating costs.

     SECTION 2.3 Limitation on Awards. The aggregate amount of all Awards to any
Participant for any Performance Period shall not exceed the amount determined by
multiplying such Participant's Salary by a factor of six (6). For purposes of
the Plan, "Salary" shall mean the base salary of the Participant on March 31,
1994 or, in the case of a Participant hired after March 31, 1994, such
Participant's base salary on the date of hire.

     SECTION 2.4 Determination of Award. The Committee shall, promptly after the
date on which the necessary financial or other information for a particular
Performance Period becomes available, certify whether the Performance Targets
have been achieved in the manner required by Section 162(m) of the Code. If the
Performance Targets have been achieved, the Awards for such Performance Period
shall have been earned except that the Committee may, in its sole discretion,
reduce the amount of any Award to reflect the Committee's assessment of the
Participant's individual performance or for any other reason. Subject to Section
2.5, such Awards shall become payable in cash as promptly as practicable
thereafter.

     SECTION 2.5 Employment Requirement. To be eligible to receive payment of an
Award, the Participant must have remained in the continuous employ of the
Company or its subsidiaries through the end of the applicable Performance
Period. If the Company or any subsidiary terminates a Participant's employment
other than for "cause" or a Participant becomes "permanently disabled" (in each
case, as determined by the Committee in its sole discretion) or a Participant
dies during a Performance Period, such Participant or his estate shall be
awarded, unless his employment contract provides otherwise, a pro rata portion
of the amount of the Award for such Performance Period except that the Committee
may, in its sole discretion, reduce the amount of such Award to reflect the
Committee's assessment of such Participant's individual performance prior to the
termination of such Participant's employment, such Participant's becoming
permanently disabled or such Participant's death, as the case may be, or for any
other reason.

                                  ARTICLE III

                              ADJUSTMENT OF AWARDS

     In the event that, during a Performance Period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin off,
combination, liquidation, dissolution, sale of assets, or other similar
corporate transaction or event, or any extraordinary event, or any other event
which distorts the applicable performance criteria occurs involving the Company
or a subsidiary or division thereof, the Committee shall adjust or modify, as
determined by the Committee in its sole and absolute discretion, the calculation
of Operating Income and/or Cash Flow, or the applicable Performance Targets, to
the extent necessary to prevent reduction or enlargement of Participants' Awards
under the Plan for such Performance Period attributable to such transaction or
event. Such adjustments shall be conclusive and binding for all purposes.

                                      A-2
    

   
                                   ARTICLE IV

                                 MISCELLANEOUS

     SECTION 4.1 No Rights to Awards or Continued Employment. No employee shall
have any claim or right to receive Awards under the Plan. Neither the Plan nor
any action taken hereunder shall be construed as giving any employee any right
to be retained by the Company or any of its subsidiaries.

     SECTION 4.2 Restriction on Transfer. The rights of a Participant with
respect to Awards under the Plan shall not be transferable by the Participant to
whom such Award is granted, otherwise than by will or the laws of descent and
distribution.

     SECTION 4.3 Tax Withholding. The Company or a subsidiary thereof, as
appropriate, shall have the right to deduct from all payments made under the
Plan to a Participant or to a Participant's beneficiary or beneficiaries any
Federal, state or local taxes required by law to be withheld with respect to
such payments.

     SECTION 4.4 No Restriction on Right of Company to Effect Changes. The Plan
shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any recapitalization, reorganization, merger,
acquisition, divestiture, consolidation, spin off, combination, liquidation,
dissolution, sale of assets, or other similar corporate transaction or event
involving the Company or a subsidiary or division thereof or any other event or
series of events, whether of a similar character or otherwise.

     SECTION 4.5 Source of Payments. The Company shall not have any obligation
to establish any separate fund or trust or other segregation of assets to
provide for payments under the Plan. To the extent any person acquires any
rights to receive payments hereunder from the Company, such rights shall be no
greater than those of an unsecured creditor.

     SECTION 4.6 Amendment and Termination. The Board may at any time and from
time to time alter, amend, suspend or terminate the Plan in whole or in part. No
termination or amendment of the Plan may, without the consent of the Participant
to whom an Award has been made, adversely affect the rights of such Participant
in such Award.

     SECTION 4.7 Governmental Regulations. The Plan, and all Awards hereunder,
shall be subject to all applicable rules and regulations of governmental or
other authorities.

     SECTION 4.8 Headings. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the meaning of
any of the provisions of the Plan.

     SECTION 4.9 Governing Law. The Plan and all rights and Awards hereunder
shall be construed in accordance with and governed by the laws of the State of
Delaware.

     SECTION 4.10 Effective Date. The Plan shall be effective as of January 1,
1994; provided, however, that it shall be a condition to the effectiveness of
the Plan, and any Awards hereunder, that the shareholders of the Company approve
the adoption of the Plan at the 1994 Annual Meeting of Shareholders. Such
approval shall meet the requirements of Section 162(m) of the Code and the
regulations thereunder. If such approval is not obtained, then the Plan and any
Award hereunder shall be void ab initio.

                                      A-3
    

   
                                                                       EXHIBIT B

                                  VIACOM INC.
                    1994 LONG-TERM MANAGEMENT INCENTIVE PLAN

                                   ARTICLE I

                                    GENERAL

     SECTION 1.1 Purpose. The purpose of the Viacom Inc. 1994 Long-Term
Incentive Plan (the "Plan") is to benefit and advance the interests of Viacom
Inc., a Delaware corporation (the "Company"), and its subsidiaries by rewarding
certain key employees of the Company and its subsidiaries for their
contributions to the financial success of the Company and thereby motivate them
to continue to make such contributions in the future.

     SECTION 1.2 Definitions. As used in the Plan, the following terms shall
have the following meanings:

          (a) "Agreement" shall mean the written agreement governing a Grant
     under the Plan, in a form approved by the Committee, which shall contain
     terms and conditions not inconsistent with the Plan and which shall
     incorporate the Plan by reference.

          (b) "Appreciation Value" shall mean the excess, if any, of the Value
     of a Phantom Share on the applicable Valuation Date or date of termination
     of employment or of the Participant's death, retirement or Permanent
     Disability (as described in Section 4.5(a) hereof), as the case may be,
     over the Initial Value of such Phantom Share.

          (c) "Beneficiary" or "Beneficiaries" shall mean the person(s)
     designated by the Participant pursuant to the provisions of the Agreement
     to receive payments pursuant to such Agreement upon the Participant's
     death. If no Beneficiary is so designated by the Participant or if no
     Beneficiary is living at the time such a payment is due pursuant to such
     Agreement, payments shall be made to the estate of the Participant. The
     Agreement shall provide the Participant with the right to change the
     designated Beneficiaries from time to time by written instrument executed
     by the Participant and filed with the Committee in accordance with such
     rules as may be specified by the Committee. No such written designation
     shall be effective unless received by the Committee prior to the date of
     death of the Participant.

          (d) "Board" shall mean the Board of Directors of the Company.

          (e) "Class B Common Stock" shall mean the shares of Class B Common
     Stock, par value $0.01 per share, of the Company.

          (f) "Code" shall mean the Internal Revenue Code of 1986, as amended,
     including any successor law thereto.

          (g) "Committee" shall mean the Compensation Committee of the Board (or
     such other Committee as may be appointed by the Board) except that (i) the
     number of directors on the Committee shall be not less than three and (ii)
     each member of the Committee shall be a "disinterested person" within the
     meaning of Rule 16b-3 under the Exchange Act.

          (h) "Date of Grant" shall mean the date of the Grant of the Stock
     Options, Stock Appreciation Rights, Restricted Shares and/or Phantom Shares
     as set forth in the applicable Agreement.

                                      B-1
    

   
          (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
     amended, including any successor law thereto.

          (j) "Fair Market Value" of a share of Class B Common Stock on a given
     date shall be the closing price of a share of the Class B Common Stock on
     the American Stock Exchange or such other national securities exchange as
     may be designated by the Committee, or, in the event that the Class B
     Common Stock is not listed for trading on a national securities exchange
     but is quoted on an automated quotation system, the average closing bid per
     share of the Class B Common Stock on such automated quotation system or, in
     the event that the Class B Common Stock is not quoted on any such system,
     the average of the closing bid prices per share of the Class B Common Stock
     as furnished by a professional marketmaker making a market in the Class B
     Common Stock designated by the Committee.

          (k) "Grant" shall mean a grant under the Plan which may consist of a
     grant of Stock Options, Stock Appreciation Rights, Restricted Shares or
     Phantom Shares or a combination of any of the above.

          (l) "Initial Value" shall mean the value of a Phantom Share as
     specified by the Committee as of the Date of Grant or the Value of a
     Phantom Share calculated as of the Date of Grant or such earlier date as
     the Committee may determine; provided, however, that in no event shall the
     Initial Value be less than 50% of the Value of the relevant Phantom Share
     as of the Date of Grant.

          (m) "Outstanding Phantom Share" shall mean a Phantom Share granted to
     a Participant for which the Valuation Date has not yet occurred.

          (n) "Outstanding Stock Option" shall mean a Stock Option granted to a
     Participant which has not yet been exercised and which has not yet expired
     in accordance with its terms.

          (o) "Participant" shall mean any employee who has met the eligibility
     requirements set forth in Section 1.4 hereof and to whom an outstanding
     Grant has been made under the Plan.

          (p) "Permanent Disability" shall have the same meaning as such term or
     a similar term has in the long-term disability policy maintained by the
     Company or a subsidiary thereof for the Participant and in effect on the
     date of the onset of the Participant's Permanent Disability, unless the
     Committee determines otherwise, in its discretion, and sets forth an
     alternative definition in the applicable Agreement.

          (q) "Phantom Share" shall mean a contractual right granted to a
     Participant pursuant to Article IV, to receive an amount equal to the
     Appreciation Value at such time, and subject to such terms and conditions,
     as are set forth in the Plan and the applicable Agreement.

          (r) "Restricted Share" shall mean a share of Class B Common Stock
     granted to a Participant pursuant to Article III, which is subject to the
     restrictions set forth in Section 3.3 hereof, and subject to such other
     terms and conditions as are set forth in the Plan and the applicable
     Agreement.

          (s) "Retirement" shall mean the resignation or termination of
     employment after attainment of an age required for payment of an immediate
     pension pursuant to the terms of any qualified retirement plan maintained
     by the Company or a subsidiary in which the Participant participates;
     provided, however, that no resignation or termination prior to a
     Participant's 60th birthday shall be deemed a retirement unless the
     Committee so determines in its sole discretion.

          (t) "Stock Appreciation Right" shall mean a contractual right granted
     to a Participant pursuant to Article II, to receive an amount determined in
     accordance with Section 2.5 of the Plan.

          (u) "Stock Option" shall mean a contractual right granted to a
     Participant pursuant to Article II, to purchase Class B Common Stock at
     such time and price, and subject to such other terms and conditions, as are
     set forth in the Plan and the applicable Agreement. Stock Options may
                                      B-2
    

   
     be "Incentive Stock Options" within the meaning of Section 422 of the Code
     or "Non-Qualified Stock Options" which do not meet the requirements of such
     Code section.

          (v) "Termination for Cause" shall mean a termination of employment
     with the Company or any of its subsidiaries which, as determined by the
     Committee, is by reason of (i) "cause" as such term or a similar term is
     defined in any employment agreement applicable to the Participant, or (ii)
     if there is no such employment agreement or if such employment agreement
     contains no such term, (x) a failure or refusal by a Participant to
     substantially perform a material duty of such Participant's employment, (y)
     the commission by the Participant of a felony or the perpetration by the
     Participant of a dishonest act or common law fraud against the Company or
     any subsidiary thereof, or (z) any other act or omission which is
     materially injurious to the financial condition or business reputation of
     the Company or any subsidiary thereof.

          (w) "Valuation Date" shall mean the date on which the Appreciation
     Value of a Phantom Share shall be measured and fixed in accordance with
     Section 4.2(a) hereof.

          (x) The "Value" of a Phantom Share shall be determined by reference to
     the "average Fair Market Value" of a share of Class B Common Stock. The
     "average Fair Market Value" on a given date of a share of Class B Common
     Stock shall be determined over the 30-day period ending on such date or
     such other period as the Committee may decide shall be applicable to a
     Grant of Phantom Shares, determined by dividing (i) by (ii), where (i)
     shall equal the sum of the Fair Market Values on each day that the Class B
     Common Stock was traded and a closing price was reported on such national
     securities exchange or on such automated quotation system or by such
     marketmaker, as the case may be, during such period, and (ii) shall equal
     the number of days on which the Class B Common Stock was traded and a
     closing price was reported on such national securities exchange or on such
     automated quotation system or by such marketmaker, as the case may be,
     during such period.

          (y) To "vest" a Stock Option, Stock Appreciation Right, Restricted
     Stock or Phantom Share held by a Participant shall mean to render such
     Stock Option, Stock Appreciation Right, Restricted Share or Phantom Share
     nonforfeitable, except where, with respect to Stock Options, Stock
     Appreciation Rights and Phantom Shares, a Participant's employment ends
     because of a Termination for Cause.

     SECTION 1.3 Administration of the Plan. The Plan shall be administered by
the Committee which shall adopt such rules as it may deem appropriate in order
to carry out the purpose of the Plan. All questions of interpretation,
administration and application of the Plan shall be determined by a majority of
the members of the Committee then in office, except that the Committee may
authorize any one or more of its members, or any officer of the Company, to
execute and deliver documents on behalf of the Committee. The determination of
such majority shall be final and binding to all matters relating to the Plan.
The Committee shall have authority to select Participants from among the class
of eligible persons specified in Section 1.4 below and to determine the number
of Stock Options, Stock Appreciation Rights, Restricted Shares or Phantom Shares
(or combination thereof) to be granted to each Participant.

     SECTION 1.4 Eligible Persons. Grants may be awarded only to key employees
of the Company or one of its subsidiaries. An individual shall not be deemed an
employee for purposes of the Plan unless such individual receives compensation
from either the Company or a subsidiary of the Company for services performed as
an employee of the Company or any of its subsidiaries.

     SECTION 1.5 Class B Common Stock Subject to the Plan. The total aggregate
number of shares of Class B Common Stock that may be distributed under the Plan
(whether reserved for issuance upon grant of Stock Options or Stock Appreciation
Rights or granted as Restricted Shares) shall be       , subject to adjustment
pursuant to Section 5.2 hereof. The shares of Class B Common Stock shall be made
available from authorized but unissued Class B Common Stock or from Class B
Common Stock
                                      B-3
    

   
issued and held in the treasury of the Company. The delivery of shares of Class
B Common Stock upon exercise of a Stock Option or Stock Appreciation Right in
any manner and the vesting of Restricted Shares shall result in a decrease in
the number of shares which thereafter may be issued for purposes of this Section
1.5, by the number of shares as to which the Stock Option or Stock Appreciation
Right is exercised or by the number of Restricted Shares which vest. Shares of
Class B Common Stock with respect to which Stock Options and Stock Appreciation
Rights expire, are cancelled without being exercised or are otherwise terminated
may be regranted under the Plan. Restricted Shares that are forfeited for any
reason shall not be deemed granted for purposes of this Section 1.5 and may
thereafter be regranted under the Plan.

     SECTION 1.6 Limit on Annual Grants to Participants. The maximum aggregate
number of (i) shares of Class B Common Stock that may be distributed under the
Plan (whether reserved for issuance upon grant of Stock Options or Stock
Appreciation Rights or granted as Restricted Shares) and (ii) Phantom Shares
that may be granted under the Plan during any calendar year to any Participant
at the level of Senior Vice President of the Company or above is
                     .

     SECTION 1.7 Agreements. Each Agreement (i) shall state the Date of Grant
and the name of the Participant, (ii) shall specify the terms of the Grant,
(iii) shall be signed by the Participant and a person designated by the
Committee, (iv) shall incorporate the Plan by reference and (v) shall be
delivered to the Participant. The Agreement shall contain such other terms and
conditions as are required by the Plan and, in addition, such other terms not
inconsistent with the Plan as the Committee may deem advisable.

                                   ARTICLE II

                     PROVISIONS APPLICABLE TO STOCK OPTIONS

     SECTION 2.1 Grants of Stock Options. The Committee may from time to time
grant to eligible employees Stock Options on the terms and conditions set forth
in the Plan and on such other terms and conditions as are not inconsistent with
the purposes and provisions of the Plan, as the Committee, in its discretion,
may from time to time determine. Each Agreement covering a Grant of Stock
Options shall specify the number of Stock Options granted, the exercise price of
such Stock Options, whether such Stock Options are Incentive Stock Options or
Non-Qualified Stock Options and the period during which such Stock Options may
be exercised.

     SECTION 2.2 Exercise Price. The Committee shall establish the per share
exercise price at the time any Stock Option is granted at such amount as the
Committee shall determine, except that such exercise price shall not be less
than 50% of the Fair Market Value of a share of Class B Common Stock subject to
the Option on the Date of Grant and that, with respect to an Incentive Stock
Option, such exercise price shall not be less than 100% of the Fair Market Value
of a share of Class B Common Stock on the Date of Grant. The exercise price will
be subject to adjustment in accordance with the provisions of Article 5.2 of the
Plan.

     SECTION 2.3 Exercise of Stock Options.

     (a) Exercisability. Stock Options shall be exercisable only to the extent
the Participant is vested therein. A Participant shall vest in Stock Options
over such time and in such increments as the Committee shall determine and
specify in a vesting schedule set forth in the applicable Agreement. The
Committee may, however, in its sole discretion, accelerate the time at which a
Participant vests in his Stock Options.

                                      B-4
    

   
     (b) Option Period. For each Stock Option granted, the Committee shall
specify the period during which the Stock Option may be exercised; provided,
however, that anything in the Plan or in the applicable Agreement to the
contrary notwithstanding:

          (i) Earliest Exercise Date. No Stock Option granted under the Plan
     shall be exercisable until six months after the Date of Grant thereof.

          (ii) Latest Exercise Date. No Stock Option granted under the Plan
     shall be exercisable after the tenth anniversary of the Date of Grant
     thereof.

          (iii) Registration Restrictions. A Stock Option shall not be
     exercisable, no transfer of shares of Class B Common Stock shall be made to
     any Participant, and any attempt to exercise a Stock Option or to transfer
     any such shares shall be void and of no effect, unless and until (A) a
     registration statement under the Securities Act of 1933, as amended, has
     been duly filed and declared effective pertaining to the shares of Class B
     Common Stock subject to such Stock Option, and the shares of Class B Common
     Stock subject to such Stock Option have been duly qualified under
     applicable Federal or state securities or blue sky laws or (B) the
     Committee, in its sole discretion, determines, or the Participant, upon the
     request of the Committee, provides an opinion of counsel satisfactory to
     the Committee, that such registration or qualification is not required as a
     result of the availability of an exemption from registration or
     qualification under such laws. Without limiting the foregoing, if at any
     time the Committee shall determine, in its sole discretion, that the
     listing, registration or qualification of the shares of Class B Common
     Stock subject to such Stock Option under any Federal or state law or on any
     securities exchange or the consent or approval of any governmental
     regulatory body is necessary or desirable as a condition of, or in
     connection with, delivery or purchase of such shares pursuant to the
     exercise of a Stock Option, such Stock Option shall not be exercised in
     whole or in part unless and until such listing, registration,
     qualification, consent or approval shall have been effected or obtained
     free of any conditions not acceptable to the Committee.

     (c) Exercise in the Event of Termination of Employment, Retirement, Death
or Permanent Disability.

          (i) Termination other than for Cause, Retirement, Death or Permanent
     Disability. In the event that (A) the Participant ceases to be an employee
     of the Company or any of its subsidiaries by reason of the voluntary
     termination by the Participant, the termination by the Company or any of
     its subsidiaries other than for Cause or the Participant's Retirement, his
     Outstanding Stock Options may be exercised to the extent then exercisable
     until the earlier of three months after the date of such termination or
     Retirement or the expiration of such Stock Options, (B) a Participant dies
     during a period during which his Stock Options could have been exercised by
     him, his Outstanding Stock Options may be exercised to the extent
     exercisable at the date of death by the person who acquired the right to
     exercise such Stock Options by will or the laws of descent and distribution
     until the earlier of one year after such death (or such longer period as
     may be determined by the Committee, in its discretion, prior to the
     expiration of such one-year period) or the expiration of such Stock
     Options, and (C) the Permanent Disability of the Participant occurs, the
     Participant may exercise his Outstanding Stock Options to the extent
     exercisable upon date of the onset of such Permanent Disability until the
     earlier of one year after such date or the expiration of such Stock
     Options. Upon the occurrence of an event described in clauses (A), (B) or
     (C) of this Section 2.2(c)(i), all rights with respect to Stock Options
     that are not vested as of such event will be relinquished.

          (ii) Termination for Cause. If a Participant's employment with the
     Company or any of its subsidiaries ends because of a Termination for Cause,
     then unless the Committee, in its discretion, determines otherwise, all
     Outstanding Stock Options, whether or not then vested, shall terminate
     effective as of the date of such termination.

                                      B-5
    

   
          (iii) Maximum Exercise Period. Anything in this Section 2.3 to the
     contrary notwithstanding, no Stock Option shall be exercisable after the
     earlier to occur of (A) the expiration of the option period set forth in
     the applicable Agreement or (B) the tenth anniversary of the Date of Grant
     thereof.

     SECTION 2.4 Payment of Purchase Price Upon Exercise. Every share purchased
through the exercise of a Stock Option shall be paid for in full at the time of
exercise in cash or, in the discretion of the Committee, in shares of Class B
Common Stock or other securities of the Company designed by the Committee or in
a combination of cash, shares or such other securities.

     SECTION 2.5 Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights only in tandem with a Stock Option, either at the time of
Grant or by amendment at any time prior to the exercise, expiration or
termination of such Stock Option. Each Stock Appreciation Right shall be subject
to the same terms and conditions as the related Stock Option and shall be
exercisable only at such times and to such extent as the related Stock Option is
exercisable. A Stock Appreciation Right shall entitle the holder to surrender to
the Company the related Stock Option unexercised and receive from the Company in
exchange therefor an amount equal to the excess of the Fair Market Value of the
shares of Class B Common Stock subject to such Stock Option, determined as of
the day preceding the surrender of such Stock Option, over the Stock Option
aggregate exercise price. Such amount shall be paid in cash or, in the
discretion of the Committee, in shares of Class B Common Stock or other
securities of the Company designated by the Committee or in a combination of
cash, shares or such other securities.

                                  ARTICLE III

                   PROVISIONS APPLICABLE TO RESTRICTED SHARES

     SECTION 3.1 Grants of Restricted Shares. The Committee may from time to
time grant to eligible employees Restricted Shares on the terms and conditions
set for in the Plan and on such other terms and conditions as are not
inconsistent with the purposes and provisions of the Plan, as the Committee, in
its discretion, may from time to time determine. Each Agreement covering a Grant
of Restricted Shares shall specify the number of Restricted Shares granted and
the vesting schedule (as provided for in Section 3.2 hereof) for such Restricted
Shares.

     SECTION 3.2 Vesting. The Committee shall establish the vesting schedule
applicable to Restricted Shares granted hereunder, which vesting schedule shall
specify the period of time and the increments in which a Participant shall vest
in the Grant of Restricted Shares; provided, however, that no such Restricted
Share shall vest until six months after the Date of Grant thereof.

     SECTION 3.3 Rights and Restrictions Governing Restricted Shares. As of the
Date of Grant of Restricted Shares, one or more certificates representing the
appropriate number of shares of Class B Common Stock granted to a Participant
shall be registered in his name but shall be held by the Company for the account
of the Participant. The Participant shall have all rights of a holder as to such
shares of Class B Common Stock (including, to the extent applicable, the right
to receive dividends and to vote), subject to the following restrictions: (a)
the Participant shall not be entitled to delivery of certificates representing
such shares of Class B Common Stock until such shares have vested; (b) none of
the Restricted Shares may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of until such shares have vested; and (c) except as
otherwise provided in Section 3.6 below, all unvested Restricted Shares shall be
immediately forfeited upon a Participant's termination of employment with the
Company for any reason or the Participant's death, Retirement or Permanent
Disability.

                                      B-6
    

   
     SECTION 3.4 Adjustment with Respect to Restricted Shares. Any other
provision of the Plan to the contrary notwithstanding, the Committee may, in its
discretion, at any time accelerate the date or dates on which Restricted Shares
vest.

     SECTION 3.5 Delivery of Restricted Shares. On the date on which Restricted
Shares vest, all restrictions contained in the Agreement covering such
Restricted Shares and in the Plan shall lapse as to such Restricted Shares and
one or more stock certificates for the appropriate number of shares of Common
Stock, free of the restrictions set forth in the Plan and applicable Agreement,
shall be delivered to the Participant or such shares shall be credited to a
brokerage account if the Participant so directs; provided, however, that such
certificates shall bear such legends as the Committee, in its sole discretion,
may determine to be necessary or advisable in order to comply with applicable
Federal or state securities laws.

     SECTION 3.6 Termination of Employment, Retirement, Death or Permanent
Disability. In the event that (i) the Participant's employment with the Company
or any of its subsidiaries ends by reason of voluntary termination by the
Participant, termination by the Company or any of its subsidiaries other than
for Cause, termination by the Company or any of its subsidiaries for Cause or
the Participant's retirement, or (ii) the Participant's death or Permanent
Disability, prior to the date or dates on which Restricted Shares vest, the
Participant shall forfeit all unvested Restricted Shares as of the date of such
event, unless, other than in the case of a termination by the Company or its
subsidiaries for Cause, the Committee determines that the circumstances in the
particular case so warrant and provides that some or all of such Participant's
unvested Restricted Shares shall vest as of the date of such event, in which
case certificates representing such shares shall be delivered, in accordance
with Section 3.5 above, to the Participant or in the case of the Participant's
death, to the person or persons who acquired the right to receive such
certificates by will or the laws of descent and distribution.

                                   ARTICLE IV

                    PROVISIONS APPLICABLE TO PHANTOM SHARES

     SECTION 4.1 Grants of Phantom Shares. The Committee may from time to time
grant to eligible employees Phantom Shares, the value of which is determined by
reference to a share of Class B Common Stock, on the terms and conditions set
forth in the Plan and on such other terms and conditions as are not inconsistent
with the purposes and provisions of the Plan as the Committee, in its
discretion, may from time to time determine. Each Agreement covering a Grant of
Phantom Shares shall specify the number of Phantom Shares granted, the Initial
Value of such Phantom Shares, the Valuation Dates, the number of Phantom Shares
whose Appreciation Value shall be determined on each such Valuation Date, any
applicable vesting schedule (as provided for in Section 4.3 hereof) for such
Phantom Shares, and any applicable limitation on payment (as provided for in
Section 4.4 hereof) for such Phantom Shares.

     SECTION 4.2 Appreciation Value.

     (a) Valuation Dates; Measurement of Appreciation Value. The Committee shall
provide in the Agreement for one or more Valuation Dates on which the
Appreciation Value of the Phantom Shares granted pursuant to the Agreement shall
be measured and fixed, and shall designate in the Agreement the number of such
Phantom Shares whose Appreciation Value is to be calculated on each such
Valuation Date. Unless otherwise determined by the Committee, each Valuation
Date shall be December 15 and no Valuation Date shall occur later than the year
in which the eighth (8th) anniversary of the Date of Grant occurs.

     (b) Payment of Appreciation Value. Except as otherwise provided in Section
4.5 hereof, and subject to the limitation contained in Section 4.4 hereof, the
Appreciation Value of a Phantom Share
                                      B-7
    

   
shall be paid to a Participant in cash in a lump sum as soon as practicable
following the Valuation Date applicable to such Phantom Share.

     SECTION 4.3 Vesting. The Committee may, in its discretion, provide in the
Agreement that Phantom Shares granted thereunder shall vest (subject to such
terms and conditions as the Committee may provide in the Agreement) over such
period of time, not in excess of five years from the Date of Grant, as may be
specified in a vesting schedule contained therein.

     SECTION 4.4 Limitation on Payment. The Committee may, in its discretion,
establish and set forth in the Agreement a maximum dollar amount payable under
the Plan for each Phantom Share granted pursuant to such Agreement.

     SECTION 4.5 Termination of Employment, Death, Retirement or Permanent
Disability.

     (a) Voluntary Termination, Termination by the Company Other Than for Cause,
Death, Retirement or Permanent Disability. If, before the occurrence of one or
more Valuation Dates applicable to the Participant's Outstanding Phantom Shares,
(i) the Participant's employment with the Company or any of its subsidiaries
ends by reason of the voluntary termination by the Participant, the termination
by the Company or any of its subsidiaries other than for Cause or the
Participant's Retirement or (ii) the Participant's death or Permanent Disability
occurs, then, unless the Committee, in its discretion, determines otherwise, the
Appreciation Value of each Outstanding Phantom Share as to which the
Participant's rights are vested as of the date of such event shall be the lesser
of (x) the Appreciation Value of such Phantom Share calculated as of the date of
such event or (y) the Appreciation Value of such Phantom Share calculated as of
the originally scheduled Valuation Date applicable thereto. Unless the
Committee, in its discretion, determines otherwise, the Appreciation Value so
determined for each such vested Outstanding Phantom Share shall then be payable
to the Participant or the Participant or the Participant's Beneficiary following
the originally scheduled Valuation Date applicable thereto in accordance with
Section 4.2(b) hereof. Upon the occurrence of an event described in this Section
4.5(a), all rights with respect to Phantom Shares that are not vested as of such
date will be relinquished.

     (b) Termination for Cause. If a Participant's employment with the Company
or any of its subsidiaries ends because of a Termination for Cause, then, unless
the Committee, in its discretion, determines otherwise, all Outstanding Phantom
Shares, whether or not vested, and any and all rights to the payment of
Appreciation Value with respect to such Outstanding Phantom Shares shall be
forfeited effective as of the date of such termination.

                                   ARTICLE V

           EFFECT OF CERTAIN CORPORATE CHANGES AND CHANGES IN CONTROL

     SECTION 5.1 Effect of Reorganization. In the event that (i) the Company is
merged or consolidated with another corporation, (ii) one person becomes the
beneficial owner of more than fifty percent (50%) of the issued and outstanding
equity securities of the Company (for purposes of this Section 5.1, the terms
"person" and "beneficial owner" shall have the meanings assigned to them in
Section 13(d) of the Exchange Act), (iii) all or substantially all of the assets
of the Company are acquired by another corporation, person or entity (each such
event in (i) or (ii) or any other similar event or series of events which
results in an event described in (i), (ii) or (iii), being hereinafter referred
to as a "Reorganization Event") or (iv) the Board shall propose that the Company
enter into a Reorganization Event, then the following shall apply:

          (a) With respect to Stock Options and Stock Appreciation Rights
     granted pursuant to Article II hereof and with respect to Restricted Shares
     granted pursuant to Article III hereof, the Committee shall take one of the
     following actions, the choice of which being in its sole discretion,
     unless, in the case of any Participant, the Participant agrees otherwise:
     (i) cause the surviving entity or new
                                      B-8
    

   
     owner, as the case may be, to agree to adopt the Plan and maintain it, with
     respect to all Outstanding Stock Options, Stock Appreciation Rights and
     Restricted Shares, in accordance with the terms in effect as of the date of
     the Reorganization Event, and to agree to adopt the related Agreements and
     to continue to effect their respective terms as such terms were in effect
     as of the date of the Reorganization Event, except that equitable
     adjustments shall be made, if appropriate, to reflect the relative values
     of the Class B Common Stock immediately prior to and following the
     occurrence of the Reorganization Event; (ii) cause the surviving entity or
     new owner, as the case may be, to grant new stock options and stock
     appreciation rights, if applicable (the "Substitute Options"), in
     substitution for the unexercised Stock Options and Stock Appreciation
     Rights as of the date of the Reorganization Event or to award new
     restricted shares (the "New Restricted Shares") in substitution for the
     unvested Restricted Shares, as of the date of the Reorganization Event;
     provided, however, that such Substitute Options or such New Restricted
     Shares, as the case may be, shall have a value, as of the date of such
     Reorganization Event, equal to the value of such unexercised Stock Options
     and Stock Appreciation Rights or such unvested Restricted Shares as of such
     date; (iii) solely with respect to Outstanding Stock Options, provide for
     the payment upon termination or cancellation of Outstanding Stock Options
     of an amount in cash or securities equal to the excess, if any, of the
     aggregate Fair Market Value of the Class B Common Stock subject to such
     Stock Options at the time of such termination or cancellation over the
     aggregate exercise price of such Stock Options; or (iv) advance the dates
     upon which all Outstanding Stock Options, Stock Appreciation Rights and
     Restricted Shares vest;

          (b) With respect to Phantom Shares granted pursuant to Article IV
     hereof, the Committee shall take one of the following actions, the choice
     of which being in its sole discretion, unless, in the case of any
     Participant, the Participant agrees otherwise: (i) cause the surviving
     entity or new owner, as the case may be, to agree to adopt the Plan and to
     maintain it, with respect to all Outstanding Phantom Shares under the Plan
     as of the date of the Reorganization Event, in accordance with the terms in
     effect as of the date of the Reorganization Event, and to agree to adopt
     the related Agreements and to continue in effect their respective terms as
     such terms were in effect as of the date of the Reorganization Event,
     except that (A) the Plan and related Agreements may be modified to utilize
     the stock of such surviving entity or new owner, in lieu of the Class B
     Common Stock, to measure the Value of the Phantom Shares, if equitable
     adjustments are made to reflect the relative values of such stock
     immediately prior to the occurrence of the Reorganization Event or (B) if
     the Class B Common Stock continues to be utilized to measure the Value of
     the Phantom Shares, equitable adjustments are to be made to reflect the
     relative values of such stock immediately prior to and following the
     Reorganization Event, if appropriate; or (ii) determine the Appreciation
     Value of the Phantom Shares by reference to the consideration to be paid
     for the Class B Common Stock in such Reorganization Event, and modify the
     Plan and the related Agreements, if appropriate, to provide that when and
     if the Participant is entitled to a payment under the provisions of the
     Plan and related Agreement (including, without limitation, the provisions
     regarding vesting, payment, limitation on payment and employment
     requirements) as they were in effect prior to the proposal of the
     Reorganization Event, such payment shall be computed on the basis of such
     Appreciation Value as so determined.

     Notwithstanding the provisions of Sections 5.1(a) and 5.1(b) above, in the
event that the effect of the provisions contained therein should become a
material impediment, either from a financial point of view or otherwise, to the
consummation of a proposed Reorganization Event, the Committee may take such
action as it deems equitable and appropriate to provide each Participant with a
benefit equivalent to that which he would have been entitled had such event not
occurred. Further, for the purposes of the first sentence of this Section 5.1,
no event or series of events involving National Amusements, Inc., the Company or
any of their respective subsidiaries or affiliates shall be deemed to be a
Reorganization Event unless such event or series of events results in there
being no class of equity securities of the Company which is publicly traded. Any
action taken by the Committee may be made conditional upon the consummation of
the applicable Reorganization Event. Further, in the event that a division or
                                      B-9
    

   
subsidiary of the Company is acquired by another corporation, person, or entity,
the Company is reorganized, dissolved or liquidated, an event or series of
events involving a corporate restructuring not described in the first sentence
of this Section occurs, or the Board shall propose that the Company enter into
any such transaction, event or series of events, then the Committee will take
such action, if any, as it, in its sole discretion, deems equitable or
appropriate to provide each Participant with a benefit equivalent to that which
he would have been entitled had such event not occurred.

     SECTION 5.2 Dilution and Other Adjustments. In the event of a stock
dividend or split, issuance or repurchase of stock or securities convertible
into or exchangeable for shares of stock, grants of options, warrants or rights
(other than pursuant to the Plan) to purchase stock, recapitalization,
combination, exchange or similar change affecting the Class B Common Stock, the
Committee shall, in its discretion, make any or all of the following adjustments
to provide each Participant with a benefit equivalent to that which he would
have been entitled had such event not occurred: (i) adjust the number of shares
of Class B Common Stock subject to any Stock Options or Stock Appreciation
Rights or the number of Restricted Shares or Phantom Shares granted to each
Participant, (ii) adjust the exercise price of the shares of Class B Common
Stock subject to such Stock Options or Stock Appreciation Rights or the Initial
Value of such Phantom Shares, and (iii) make any other adjustments, or take such
action, as the Committee, in its discretion, deems appropriate. Such adjustments
shall be conclusive and binding for all purposes. In the event of a change in
the Class B Common Stock which is limited to a change in the designation thereof
to "Capital Stock" or other similar designation, or to a change in the par value
thereof, or from par value to no par value, without increase or decrease in the
number of issued shares, the shares resulting from any such change shall be
deemed to be Class B Common Stock within the meaning of the Plan.

                                   ARTICLE VI

                                 MISCELLANEOUS

     SECTION 6.1 No Rights to Grants or Continued Employment. No employee shall
have any claim or right to receive Grants under the Plan. Neither the Plan nor
any action taken hereunder shall be construed as giving any employee any right
to be retained by the Company or any of its subsidiaries.

     SECTION 6.2 Restriction on Transfer. The rights of a Participant with
respect to Stock Options, Stock Appreciation Rights, Restricted Shares or
Phantom Shares shall not be transferable by the Participant to whom such Stock
Options, Stock Appreciation Rights, Restricted Shares or Phantom Shares are
granted, otherwise than by will or the laws of descent and distribution.

     SECTION 6.3 Tax Withholding. The Company or a subsidiary thereof, as
appropriate, shall have the right to deduct from all payments made under the
Plan to a Participant or to a Participant's Beneficiary any Federal, state or
local taxes required by law to be withheld with respect to such payments. The
Committee, in its discretion, may require, as a condition to the exercise of any
Stock Option or Stock Appreciation Right, that a Participant pay an additional
amount in cash equal to the amount of any Federal, state or local taxes owed by
the Participant as a result of such exercise.

     SECTION 6.4 Stockholder Rights. No Grant under the Plan shall entitle a
Participant or Beneficiary to any rights of a holder of shares of Class B Common
Stock, except as provided in Article III with respect to Restricted Shares or
upon the delivery of share certificates to a Participant upon exercise of a
Stock Option or upon the delivery of share certificates in settlement of a Stock
Appreciation Right.

     SECTION 6.5 No Restriction on Right of Company to Effect Corporate
Changes. The Plan shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options, warrants
                                      B-10
    

   
or rights to purchase stock or of bonds, debentures, preferred or prior
preference stock whose rights are superior to or affect the Class B Common Stock
or the rights thereof or which are convertible into or exchangeable for Class B
Common Stock, or the dissolution or liquidation or the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

     SECTION 6.6 Source of Payments. The general funds of the Company shall be
the sole source of cash settlements of Stock Appreciation Rights under the Plan
and payments of Appreciation Value, and the Company shall not have any
obligation to establish any separate fund or trust or other segregation of
assets to provide for payments under the Plan. Nothing contained in this Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Company and
a Participant or any other person. To the extent person acquires any rights to
receive payments hereunder from the Company, such rights shall be no greater
than those of an unsecured creditor.

                                  ARTICLE VII

                           AMENDMENT AND TERMINATION

     The Board may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part; provided, however, that any amendment
which must be approved by the shareholders of the Company in order to maintain
the continued qualification of the Plan under Rule 16b-3 under the Exchange Act
shall not be effective unless and until such shareholder approval has been
obtained in compliance with such rule. No termination or amendment of the Plan
may, without the consent of the Participant to whom a grant has been made,
adversely affect the rights of such Participant in the Stock Options, Stock
Appreciation Rights, Restricted Shares or Phantom Shares covered by such Grant.
Unless previously terminated pursuant to this Article VII, the Plan shall
terminate on the       anniversary of the Effective Date (as defined below), and
no further Grants may be awarded hereunder after such date.

                                  ARTICLE VIII

                                 INTERPRETATION

     SECTION 8.1 Governmental Regulations. The Plan, and all Grants hereunder,
shall be subject to all applicable rules and regulations of governmental or
other authorities.

     SECTION 8.2 Headings. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the meaning of
any of the provisions of the Plan.

     SECTION 8.3 Governing Law. The Plan and all rights hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.

                                   ARTICLE IX

                    EFFECTIVE DATE AND STOCKHOLDER APPROVAL

     The Plan shall be effective as of        , 1994 (the "Effective Date") and
stockholder approval shall be sought at the first annual meeting of stockholders
following such date. In the event that stockholder approval is not obtained on
or before the date of such annual meeting, the Plan and all Grants thereunder
shall be void ab initio and of no effect. No Stock Option or Stock Appreciation
Right shall be exercisable, no Restricted Share shall vest and no Appreciation
Value shall be paid with respect to a Phantom Share until the date of such
stockholder approval.

                                      B-11
    

   
                                                                       EXHIBIT C

                                  VIACOM INC.
                               STOCK OPTION PLAN
                                  FOR OUTSIDE
                                   DIRECTORS

                                   ARTICLE I

                                    GENERAL

     SECTION 1.1 Purpose. The purpose of the Viacom Inc. Stock Option Plan for
Outside Directors (the "Plan") is to benefit and advance the interests of Viacom
Inc., a Delaware corporation (the "Company"), and its subsidiaries by obtaining
and retaining the services of qualified persons who are not employees of the
Company or its subsidiaries to serve as directors and to induce them to make a
maximum contribution to the success of the Company and its subsidiaries.

     SECTION 1.2 Definitions. As used in the Plan, the following terms shall
have the following meanings:

          (a) "Board" shall mean the Board of Directors of the Company.

          (b) "Class B Common Stock" shall mean the shares of Class B Common
     Stock, par value $0.01 per share, of the Company.

          (c) "Code" shall mean the Internal Revenue Code of 1986, as amended,
     including any successor law thereto.

          (d) "Date of Grant" shall mean May 25, 1993, for each person who is an
     Outside Director on such date, and, for each person who becomes an Outside
     Director for the first time after such date, the date of such individual's
     election or appointment to the Board.

          (e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
     amended, including any successor law thereto.

          (f) "Effective Date" of the Plan shall be May 25, 1993.

          (g) "Fair Market Value" of a share of Class B Common Stock on a given
     date shall be the average closing price of a share of Class B Common Stock
     on the American Stock Exchange or such other national securities exchange
     as may be designated by the Board or, in the event that the Class B Common
     Stock is not listed for trading on a national securities exchange but is
     quoted on an automated quotation system, the average closing bid price per
     share of Class B Common Stock on such automated quotation system or, in the
     event that the Class B Common Stock is not quoted on any such system, the
     average of the closing bid prices per share of Class B Common Stock as
     furnished by a professional marketmaker making a market in the Class B
     Common Stock designated by the Board.

          (h) "Grant" shall mean a grant of Stock Options under the Plan.

          (i) "LTMIP" shall mean the Company's 1989 Long-Term Management
     Incentive Plan and/or any successor to such Plan, as applicable.

          (j) "Non-Qualified Stock Options" shall mean Stock Options which do
     not meet the requirements of Section 422 of the Code.

                                      C-1
    

   
          (k) "Outside Director" shall mean any member of the Board of Directors
     of the Company who is not an employee of the Company, Viacom International
     Inc., National Amusements, Inc. or any of their respective subsidiaries. An
     individual shall not be deemed an employee for purposes of the Plan unless
     such individual receives compensation from either the Company or a
     subsidiary of the Company for services performed as an employee of the
     Company or any of its subsidiaries.

          (l) "Outstanding Stock Option" shall mean a Stock Option granted to an
     Outside Director which has not yet been exercised and which has not yet
     expired in accordance with its terms.

          (m) "Stock Option" shall mean a contractual right granted to an
     Outside Director under the Plan to purchase a share of Class B Common Stock
     at such time and price, and subject to the terms and conditions, as are set
     forth in the Plan.

          (n) To "vest" a Stock Option held by an Outside Director shall mean to
     render such Stock Option nonforfeitable.

     SECTION 1.3 Administration of the Plan. The Plan shall be administered by
the members of the Board who are not Outside Directors. All questions of
interpretation, administration and application of the Plan shall be determined
by the Board. The Board may authorize any officer of the Company to execute and
deliver a stock option certificate on behalf of the Company to an Outside
Director.

     SECTION 1.4 Class B Common Stock Subject to the Plan. The total number of
shares of Class B Common Stock that shall be reserved for distribution upon
grant of Stock Options under the Plan shall be 100,000, subject to adjustment
pursuant to Section 4.2 hereof. The shares of Class B Common Stock shall be made
available from authorized but unissued Class B Common Stock or from Class B
Common Stock issued and held in the treasury of the Company, as shall be
determined by the Board. Exercise of Stock Options in any manner shall result in
a decrease in the number of shares of Class B Common Stock which thereafter may
be issued for purposes of this Section 1.4, by the number of shares as to which
the Stock Options are exercised. Shares of Class B Common Stock with respect to
which Stock Options expire, are cancelled without being exercised or are
otherwise terminated, may be regranted under the Plan.

                                   ARTICLE II

                            GRANTS OF STOCK OPTIONS

     On May 25, 1993, each person who is an Outside Director on such date shall
be granted Non-Qualified Stock Options to purchase 5,000 shares of Class B
Common Stock at an option price per share equal to the Fair Market Value of a
share of Class B Common Stock on May 25, 1993 (the "Date of Grant" of such Stock
Options), on the terms and conditions set forth in the Plan. Thereafter, each
person who becomes an Outside Director for the first time after such date shall
be granted Non-Qualified Stock Options to purchase 5,000 shares of Class B
Common Stock, effective as of the date of such individual's election or
appointment to the Board (the "Date of Grant" of such Stock Options), at an
option price per share equal to the Fair Market Value of a share of Class B
Common Stock on the Date of Grant, on the terms and conditions set forth in the
Plan. The exercise price of the Stock Options granted under the Plan shall be
subject to adjustment in accordance with the provisions of Section 4.2 of the
Plan. The terms and conditions of a Grant of Stock Options shall be set forth in
an option certificate which shall be delivered to the Outside Director
reasonably promptly following the Date of Grant of such Stock Options.

                                      C-2
    

   
                                  ARTICLE III

                     TERMS AND CONDITIONS OF STOCK OPTIONS

     SECTION 3.1 Exercise of Stock Options.

     (a) Exercisability. Stock Options shall be exercisable only to the extent
the Outside Director is vested therein. Each Grant of Stock Options under the
Plan shall vest on the first anniversary of the Date of Grant of such Stock
Options.

     (b) Option Period.

          (i) Earliest Exercise Date. No Stock Option granted under the Plan
     shall be exercisable until six months after the Date of Grant thereof.

          (ii) Latest Exercise Date. No Stock Option granted under the Plan
     shall be exercisable after the tenth anniversary of the Date of Grant
     thereof.

          (iii) Registration Restrictions. Any attempt to exercise a Stock
     Option or to transfer any share issued upon exercise of a Stock Option by
     any Outside Director shall be void and of no effect, unless and until (A) a
     registration statement under the Securities Act of 1933, as amended, has
     been duly filed and declared effective pertaining to the shares of Class B
     Common Stock subject to such Stock Option have been duly qualified under
     applicable Federal or state securities or blue sky laws or (B) the Board,
     in its sole discretion, determines, or the Outside Director, upon the
     request of the Board, provides an opinion of counsel satisfactory to the
     Board, that such registration or qualification is not required as a result
     of the availability of any exemption from registration or qualification
     under such laws. Without limiting the foregoing, if at any time the Board
     shall determine, in its sole discretion, that the listing, registration or
     qualification of the shares of Class B Common Stock under any Federal or
     state law or on any securities exchange or the consent or approval of any
     governmental regulatory body is necessary or desirable as a condition of,
     or in connection with, delivery or purchase of such shares pursuant to the
     exercise of a Stock Option, such Stock Option shall not be exercised in
     whole or in part unless and until such listing, registration,
     qualification, consent or approval shall have been effected or obtained
     free of any conditions not acceptable to the Board.

     (c) Exercise in the Event of Termination of Services.

          (i) Termination other than for Death or Disability. If the services of
     an Outside Director as a Director of the Company terminate for any reason
     other than for death or disability, the Outside Director may exercise any
     Outstanding Stock Options only within one year after the termination date,
     but only to the extent such Outstanding Stock Options were vested on the
     date of such Outside Director's termination. Upon a termination described
     in this Section 3.1(c)(i), the Outside Director shall relinquish all rights
     with respect to Stock Options that are not vested as of such termination
     date.

          (ii) Death. If an Outside Director dies within a period during which
     his Stock Options could have been exercised by him, his Outstanding Stock
     Options may be exercised only within one year after his death, but only to
     the extent such Outstanding Stock Options were vested on the date of death,
     by any person who acquired the right to exercise such Stock Options by will
     or the laws of descent and distribution.

          (iii) Permanent Disability. If the services of an Outside Director as
     a Director of the Company terminate by reason of permanent disability, he
     may exercise his Outstanding Stock Options only within one year after the
     termination of his services, but only to the extent such Outstanding Stock
     Options were vested when his services terminated.

                                      C-3
    

   
     SECTION 3.2 Payment of Purchase Price Upon Exercise. Every share of Class B
Common Stock purchased through the exercise of a Stock Option shall be paid for
in full at the time of exercise in cash (e.g., personal bank check, certified
check or official bank check). In addition, the Outside Director shall make an
arrangement acceptable to the Company to pay to the Company an amount sufficient
to satisfy the combined Federal, state and local withholding tax obligations
which arise in connection with the exercise of such Stock Options.

                                   ARTICLE IV

           EFFECT OF CERTAIN CORPORATE CHANGES AND CHANGES IN CONTROL

     SECTION 4.1 Effect of Reorganization. In the event that (i) the Company is
merged or consolidated with another corporation, (ii) one person becomes the
beneficial owner of more than fifty percent (50%) of the issued and outstanding
equity securities of the Company (for purposes of this Section 4.1, the terms
"person" and "beneficial owner" shall have the meanings assigned to them in
Section 13(d) of the Exchange Act), (iii) all or substantially all of the assets
of the Company are acquired by another corporation, person or entity (each such
event in (i), (ii) or (iii) or any other similar event or series of events which
results in an event described in (i), (ii) or (iii), being hereinafter referred
to as a "Reorganization Event") or (iv) the Board shall propose that the Company
enter into a Reorganization Event, then all the Outstanding Stock Options under
the Plan shall be immediately exercisable as of the date of such Reorganization
Event. For the purposes of this Section 4.1, no event or series of events
involving National Amusements, Inc., the Company or any of their respective
subsidiaries or affiliates shall be deemed to be a Reorganization Event unless
such event or series of events results in there being no class of equity
securities of the Company which is publicly traded.

     SECTION 4.2 Dilution and Other Adjustments. In the event of a stock
dividend or split, issuance or repurchase of stock or securities convertible
into or exchangeable for shares of stock, grants of options, warrants or rights
(other than pursuant to the Plan) to purchase stock, recapitalization,
combination, exchange or similar change affecting the Class B Common Stock, as
the case may be, in order to provide each Outside Director with a benefit
equivalent to that which he would have been entitled had such event not
occurred, the Outstanding Stock Options under the Plan shall be adjusted in the
same manner as the Outstanding Stock Options (as such term is defined in the
LTMIP) under the LTMIP shall be adjusted. Such adjustments shall be conclusive
and binding for all purposes. In the event of a change in the Class B Common
Stock which is limited to a change in the designation thereof to "Capital Stock"
or other similar designation, or to a change in the par value thereof, or from
par value to no par value, without increase or descrease in the number of issued
shares, the shares resulting from any such change shall be deemed to be Class B
Common Stock within the meaning of the Plan.

                                   ARTICLE V

                                 MISCELLANEOUS

     SECTION 5.1 Restriction on Transfer. The rights of an Outside Director with
respect to Stock Options shall not be transferable by the Outside Director to
whom such Stock Options are granted, otherwise than by will or the laws of
descent and distribution.

     SECTION 5.2 Stockholder Rights. No Grant of Stock Options under the Plan
shall entitle an Outside Director to any rights of a holder of shares of Class B
Common Stock, except upon the delivery of share certificates to an Outside
Director upon exercise of a Stock Option.

     SECTION 5.3 No Restriction on Right of Company to Effect Corporate
Changes. The Plan shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or
                                      C-4
    

   
its business, or any merger or consolidation of the Company, or any issue of
stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Class B Common Stock or the rights thereof or which are convertible
into or exchangeable for Class B Common Stock, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.

     SECTION 5.4 No Right to Reelection. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any of its members
for reelection by the Company's stockholders, nor confer upon any Outside
Director the right to remain a member of the Board for any period of time, or at
any particular rate of compensation.

                                   ARTICLE VI

                           AMENDMENT AND TERMINATION

     The Board may at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part; provided, however, that in no event may
the provisions of the Plan respecting eligibility to participate or the timing
or amount of grants be amended more frequently than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or any rules or regulations thereunder; and
provided, further, that any amendment which under the requirements of applicable
law must be approved by the stockholders of the Company shall not be effective
unless and until such stockholder approval has been obtained in compliance with
such law; and provided, further, that any amendment that must be approved by the
stockholders of the Company in order to maintain the continued qualification of
the Plan under Rule 16b-3(c)(2)(ii) under the Exchange Act shall not be
effective unless and until such stockholder approval has been obtained in
compliance with such rule. No termination or amendment of the Plan may, without
the consent of an Outside Director to whom a Grant has been made, adversely
affect the rights of such Director in the Stock Options covered by such Grant.
Unless previously terminated pursuant to this Article VI, the Plan shall
terminate on the tenth anniversary of the Effective Date, and no further Grants
may be awarded hereunder after such date.

                                  ARTICLE VII

                                 INTERPRETATION

     SECTION 7.1 Governmental Regulations. The Plan, and all Grants hereunder,
shall be subject to all applicable rules and regulations of governmental or
other authorities.

     SECTION 7.2 Headings. The headings of sections and subsections herein are
included solely for the convenience of reference and shall not affect the
meaning of any of the provisions of the Plan.

     SECTION 7.3 Governing Law. The Plan and all rights hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.

                                  ARTICLE VIII

                    EFFECTIVE DATE AND STOCKHOLDER APPROVAL

     The Effective Date of the Plan shall be May 25, 1993 and stockholder
approval shall be sought at the first annual meeting of stockholders following
such date. In the event that stockholder approval is not obtained on or before
the date of such annual meeting, the Plan and all Grants hereunder shall be void
ab initio and of no effect. No Stock Option shall be exercisable until the date
of such stockholder approval.
    
                                      C-5

PARAMOUNT COMMUNICATIONS INC.
15 COLUMBUS CIRCLE
NEW YORK, NEW YORK 10023-7780

THE UNDERSIGNED HEREBY APPOINTS FRANK J. BIONDI, JR. AND PHILIPPE P. DAUMAN, AND
EACH OF THEM, AS PROXIES WITH FULL POWER OF SUBSTITUTION, TO REPRESENT AND TO
VOTE ON BEHALF OF THE UNDERSIGNED ALL OF THE SHARES OF COMMON STOCK OF PARAMOUNT
COMMUNICATIONS INC. WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL
MEETING OF STOCKHOLDERS TO BE HELD AT [PLACE] ON [DAY], [DATE], AT [TIME], AND
AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF, UPON THE FOLLOWING PROPOSAL MORE
FULLY DESCRIBED IN THE NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND THE VIACOM
INC. AND PARAMOUNT COMMUNICATIONS INC. JOINT PROXY STATEMENT/PROSPECTUS.

YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX, BUT
YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATION.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE
THE AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, AS FURTHER AMENDED AS OF
MAY 26, 1994, PROVIDING FOR A BUSINESS COMBINATION TRANSACTION BETWEEN PARAMOUNT
COMMUNICATIONS INC. AND VIACOM SUB INC., A WHOLLY OWNED SUBSIDIARY OF VIACOM
INC., AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS.

YOUR SIGNATURE ON THE PROXY IS YOUR ACKNOWLEDGEMENT OF RECEIPT OF THE NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS AND THE JOINT PROXY STATEMENT, BOTH DATED
[DATE].

THE SIGNER HEREBY REVOKES ALL PROXIES HERETOFORE GIVEN BY THE SIGNER TO VOTE AT
SAID MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.

THE PROXIES ARE DIRECTED TO VOTE AS SPECIFIED BELOW AND IN THEIR DISCRETION ON
ALL OTHER MATTERS.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER PROVIDING FOR A BUSINESS
COMBINATION TRANSACTION BETWEEN PARAMOUNT COMMUNICATIONS INC. AND VIACOM SUB
INC.

/ / FOR / / AGAINST / / ABSTAIN

IF YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE CHECK THIS BOX. / /

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PARAMOUNT
COMMUNICATIONS INC. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.

PLEASE SIGN EXACTLY AS NAME(S)
APPEARS BELOW. WHEN SHARES ARE
HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE
AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.

DATED: .........................

SIGNATURE: .....................

...............................
SIGNATURE IF HELD JOINTLY

SPECIAL MEETING PROXY CARD
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036

The undersigned hereby appoints Frank J. Biondi, Jr. and Philippe P. Dauman,
and each of them, as proxies with full power of substitution, to represent and
to vote on behalf of the undersigned all of the shares of Class A Common Stock
of Viacom Inc. which the undersigned is entitled to vote at the Special Meeting
of Stockholders to be held at [ ], New York, New York on
[DAY], [DATE], at [TIME], and at any adjournments or postponements thereof, upon
the following proposal more fully described in the Notice of Special and Annual
Meetings of Stockholders and the VIACOM INC. and PARAMOUNT COMMUNICATIONS INC.
Joint Proxy Statement/Prospectus.

The proxies are directed to vote as specified below and in their discretion on
all other matters.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1), (2), (3), (4) and (5).

1. PROPOSAL TO APPROVE AND ADOPT THE AMENDED AND RESTATED AGREEMENT AND PLAN OF
MERGER, AS FURTHER AMENDED AS OF MAY 26, 1994, PROVIDING FOR A BUSINESS
COMBINATION TRANSACTION BETWEEN PARAMOUNT COMMUNICATIONS INC. AND VIACOM SUB
INC., A WHOLLY OWNED SUBSIDIARY OF VIACOM INC., INCLUDING THE APPROVAL OF THE
ISSUANCE OF SECURITIES OF VIACOM INC. IN CONNECTION THEREWITH.

/ / FOR / / AGAINST / / ABSTAIN

2. PROPOSAL TO APPROVE THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION OF VIACOM INC. TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
CLASS A COMMON STOCK.

/ / FOR / / AGAINST / / ABSTAIN

3. PROPOSAL TO APPROVE THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION OF VIACOM INC. TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
CLASS B COMMON STOCK.

/ / FOR / / AGAINST / / ABSTAIN

4. PROPOSAL TO APPROVE THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION OF VIACOM INC. TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
PREFERRED STOCK.

/ / FOR / / AGAINST / / ABSTAIN

continued on reverse side

5. PROPOSAL TO APPROVE THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION OF VIACOM INC. TO INCREASE THE MAXIMUM NUMBER OF DIRECTORS
CONSTITUTING THE ENTIRE BOARD FROM 12 TO 20.

/ / FOR / / AGAINST / / ABSTAIN

IF YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE CHECK THIS BOX. / /

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VIACOM
INC. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER.
Please sign exactly as name(s)
appears below. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.

Dated: ........................

Signature: ....................

...............................
Signature if held jointly

ANNUAL MEETING PROXY CARD
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036

The undersigned hereby appoints Frank J. Biondi, Jr. and Philippe P. Dauman,
and each of them, as proxies with full power of substitution, to represent and
to vote on behalf of the undersigned all of the shares of Class A Common Stock
of Viacom Inc. which the undersigned is entitled to vote at the Annual Meeting
of Stockholders to be held at [ ], New York, New York on
[DAY], [DATE], at [TIME], and at any adjournments or postponements thereof, upon
the following matters more fully described in the Notice of Special and Annual
Meetings to Stockholders and the VIACOM INC. and PARAMOUNT COMMUNICATIONS INC.
Joint Proxy Statement/Prospectus.

You are encouraged to specify your choices by marking the appropriate boxes,
but you need not mark any boxes if you wish to vote in accordance with the Board
of Directors' recommendations.

The proxies are directed to vote as specified below and in their discretion on
all other matters.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1), (2), (3), (4) and (5). UNLESS
OTHERWISE SPECIFIED, THE VOTE REPRESENTED BY THIS PROXY WILL BE CAST FOR (1),
(2), (3), (4) and (5).

1. ELECTION OF DIRECTORS

NOMINEES: GEORGE S. ABRAMS, FRANK J. BIONDI, JR., PHILIPPE P. DAUMAN, WILLIAM C.
FERGUSON, H. WAYNE HUIZENGA, KEN MILLER, BRENT D. REDSTONE, SUMNER M. REDSTONE,
FREDERIC V. SALERNO, WILLIAM SCHWARTZ.

/ / FOR ALL NOMINEES (EXCEPT AS MARKED TO / / WITHHOLD AUTHORITY TO VOTE ALL
THE CONTRARY BELOW) NOMINEES

TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), WRITE NAME(S) OF
SUCH NOMINEE(S) IN THE SPACE PROVIDED BELOW:

- --------------------------------------------------------------------------------

2. APPROVAL OF THE VIACOM INC. SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN.

/ / FOR / / AGAINST / / ABSTAIN

3. APPROVAL OF THE VIACOM INC. 1994 LONG-TERM MANAGEMENT INCENTIVE PLAN.

/ / FOR / / AGAINST / / ABSTAIN

continued on reverse side

4. APPROVAL OF THE VIACOM INC. STOCK OPTION PLAN FOR OUTSIDE DIRECTORS.

/ / FOR / / AGAINST / / ABSTAIN

5. APPROVAL OF THE APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT AUDITORS OF
VIACOM INC. FOR 1994.

/ / FOR / / AGAINST / / ABSTAIN

IF YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE CHECK THIS BOX. / /

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VIACOM
INC. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER.

Please sign exactly as name(s)
appears below. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.

Dated: ........................

Signature: ....................

...............................
Signature if held jointly












                         REPORT OF INDEPENDENT AUDITORS


Stockholders and Board of Directors
Paramount Communications Inc.

    We have audited the accompanying consolidated balance sheet of Paramount
Communications Inc. as of April 30, 1993 and October 31, 1992 and 1991, and the
related consolidated statements of earnings, changes in stockholders' equity,
and cash flows for the six-month period ended April 30, 1993 and for each of
the three years in the period ended October 31, 1992.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

    We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Paramount
Communications Inc. at April 30, 1993 and October 31, 1992 and 1991, and the
consolidated results of its operations and its cash flows for the six-month
period ended April 30, 1993 and for each of the three years in the period ended
October 31, 1992 in conformity with generally accepted accounting principles.

    As discussed in Notes A and J, in the six-month period ended April 30,
1993, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions."  As discussed in Notes A and I, effective May 1, 1993, the Company
adopted SFAS No. 109, "Accounting for Income Taxes."


                                                 Ernst & Young

New York, New York
August 27, 1993,
except for Notes A and I, as to which the date is
September 10, 1993


                                       1




                       CONSOLIDATED STATEMENT OF EARNINGS




                                 Six Months Ended April 30               Year Ended October 31
                                 --------------------------     ------------------------------
                                           1993        1992        1992       1991        1990
- ----------------------------------------------------------------------------------------------
                                                 (Unaudited)
                                                   (In millions, except per share)
                                                                                              
                                                                      
REVENUES                               $1,898.1    $1,998.5    $4,264.9   $3,895.4    $3,869.0

Cost of goods sold                      1,286.8     1,383.1     2,739.8    2,638.7     2,542.6
Selling, general and
    administrative expenses               621.4       537.6     1,129.0    1,098.9     1,022.2
- ----------------------------------------------------------------------------------------------
                                        1,908.2     1,920.7     3,868.8    3,737.6     3,564.8
- ----------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)                   (10.1)       77.8       396.1      157.8       304.2

Other income (expense) -- Note C           (3.7)       (6.6)       (6.6)       0.1        (2.0)

Interest and other investment
    income (expense)
    -- net -- Note K
      Interest expense                    (47.9)      (59.8)     (113.8)    (112.0)     (123.9)
      Interest and other investment
        income                             44.9        57.3       121.6      133.8       202.7
- ----------------------------------------------------------------------------------------------
                                           (3.0)       (2.5)        7.8       21.8        78.8
- ----------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES       (16.8)       68.7       397.3      179.7       381.0
Provision (benefit) for income taxes
    -- Notes A and I                       (7.7)       20.0       123.1       52.1       116.6
- ----------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY
    ITEM AND CUMULATIVE EFFECT OF
    ACCOUNTING CHANGE                      (9.1)       48.7       274.2      127.6       264.4
Extraordinary item -- Note D                                       (8.8)
Cumulative effect of accounting
    change --  Note A                     (66.9)                                               
- ----------------------------------------------------------------------------------------------
NET EARNINGS (LOSS)                      $(76.0)      $48.7      $265.4     $127.6      $264.4
- ----------------------------------------------------------------------------------------------

Average common and common equivalent
    shares outstanding -- Note A          118.8       119.0       119.2      118.5       120.1
Earnings (loss) per share -- Note A
    Earnings (loss) before
      extraordinary item and cumulative
      effect of accounting change         $(.08)       $.41       $2.31      $1.08       $2.20
    Net earnings (loss)                    (.65)        .41        2.23       1.08        2.20
- ----------------------------------------------------------------------------------------------


See notes to consolidated financial statements.

                                       2





                           CONSOLIDATED BALANCE SHEET



                                                              April 30                          October 31
                                                              --------            ------------------------
                                                                  1993              1992              1991
- ----------------------------------------------------------------------------------------------------------
                                                                               (In millions)
                                                                                         
ASSETS

CURRENT ASSETS
Cash and cash equivalents -- Notes A and L                      $372.6            $324.3            $555.3
Short-term investments -- Notes A and L                          569.7             912.0           1,020.7
Trade receivables -- net -- Note K                               829.6             972.9             904.1
Inventories -- Notes A and E                                     617.3             580.2             590.4
Prepaid income taxes                                             131.7             139.7             115.4
Prepaid expenses and other -- Note K                             400.2             342.7             407.9
- ----------------------------------------------------------------------------------------------------------
    TOTAL CURRENT ASSETS                                       2,921.1           3,271.8           3,593.8
- ----------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT -- Note A
Land                                                             210.8             210.4             130.8
Buildings                                                        591.4             590.6             537.3
Machinery, equipment and other                                   606.9             573.8             358.2
- ----------------------------------------------------------------------------------------------------------
                                                               1,409.1           1,374.8           1,026.3
    Less allowance for depreciation                              336.1             315.5             268.2
- ----------------------------------------------------------------------------------------------------------
                                                               1,073.0           1,059.3             758.1
- ----------------------------------------------------------------------------------------------------------
OTHER ASSETS
Investment in affiliated companies -- Notes A and F              243.9             228.9             204.4
Noncurrent receivables and inventories -- Notes A and E          689.8             604.7             483.0
Intangible assets -- net -- Note A                             1,517.5           1,528.1           1,239.3
Deferred costs and other -- Note A                               429.5             364.2             376.1
- ----------------------------------------------------------------------------------------------------------
                                                               2,880.7           2,725.9           2,302.8
- ----------------------------------------------------------------------------------------------------------
                                                              $6,874.8          $7,057.0          $6,654.7
- ----------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt                            $109.8             $10.0            $198.3
Trade accounts payable                                           194.7             143.7             119.8
Income taxes payable                                              26.6             139.2             131.4
Accrued expenses and other -- Notes K and L                    1,128.4           1,114.1           1,002.5
- ----------------------------------------------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES                                  1,459.5           1,407.0           1,452.0
- ----------------------------------------------------------------------------------------------------------
DEFERRED LIABILITIES -- Note K                                   805.9             822.4             828.0
LONG-TERM DEBT, net of current maturities -- Notes A, G and L    707.3             812.1             519.9
STOCKHOLDERS' EQUITY -- Note H
Common Stock, recorded at $1.00 par value; 600,000,000 shares
    authorized; shares outstanding, 118,199,396 at April 30,
    1993 (excluding 29,665,980 shares held in treasury),
    117,459,926 at October 31, 1992 (excluding 30,405,450
    shares held in treasury) and 117,757,018 at October 31,
    1991 (excluding 30,108,358 shares held in treasury)          118.2             117.5             117.8
Paid-in surplus                                                  712.8             665.7             629.5
Retained earnings -- Notes A, F and I                          3,082.5           3,228.6           3,096.4
Cumulative translation adjustments                               (11.4)              3.7              11.1
- ----------------------------------------------------------------------------------------------------------
                                                               3,902.1           4,015.5           3,854.8
- ----------------------------------------------------------------------------------------------------------
                                                              $6,874.8          $7,057.0          $6,654.7
- ----------------------------------------------------------------------------------------------------------


See notes to consolidated financial statements.

                                       3





           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY



                                                                      Three Years and Six Months Ended April 30, 1993
                                                     ----------------------------------------------------------------
                                                                                          Cumulative            Total
                                                     Common    Paid-in    Retained       Translation    Stockholders'
                                                      Stock    Surplus    Earnings       Adjustments           Equity
- ---------------------------------------------------------------------------------------------------------------------
                                                                            (In millions)
                                                                                              
BALANCE AT OCTOBER 31, 1989, NET OF TREASURY
    -- AS REPORTED                                   $120.0     $539.0    $3,054.7              $3.8         $3,717.5
Cumulative effect of accounting change
    -- Note A                                                                (50.7)                             (50.7)
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1989, NET OF TREASURY
    -- AS ADJUSTED                                    120.0      539.0     3,004.0               3.8          3,666.8
Common Stock issued
    Exercise of stock options and grants
        to employees                                    0.4       37.6                                           38.0
    Dividend reinvestment and stock
        purchase plan                                   0.1        3.1                                            3.2
Acquisition of stock for the treasury                  (3.1)     (14.6)     (110.0)                            (127.7)
Common Stock dividends ($.70 per share)                                      (83.4)                             (83.4)
Translation adjustments                                                                         11.7             11.7
Tax benefit from exercise of stock options                        10.8                                           10.8
Net earnings for the year                                                    264.4                              264.4
- ---------------------------------------------------------------------------------------------------------------------

BALANCE AT OCTOBER 31, 1990, NET OF TREASURY          117.4      575.9     3,075.0              15.5          3,783.8
Common Stock issued
    Exercise of stock options and grants
        to employees                                    1.0       51.8                                           52.8
    Dividend reinvestment and stock
        purchase plan                                   0.1        3.3                                            3.4
Acquisition of stock for the treasury                  (0.7)      (3.7)      (23.8)                             (28.2)
Common Stock dividends ($.70 per share)                                      (82.4)                             (82.4)
Translation adjustments                                                                         (4.4)            (4.4)
Tax benefit from exercise of stock options                         2.2                                            2.2
Net earnings for the year                                                    127.6                              127.6
- ---------------------------------------------------------------------------------------------------------------------

BALANCE AT OCTOBER 31, 1991, NET OF TREASURY          117.8      629.5     3,096.4              11.1          3,854.8
Common Stock issued
    Exercise of stock options and grants to employees   0.7       38.1                                           38.8
    Dividend reinvestment and stock
        purchase plan                                   0.1        3.6                                            3.7
Acquisition of stock for the treasury                  (1.1)      (6.4)      (41.7)                             (49.2)
Common Stock dividends ($.775 per share)                                     (91.5)                             (91.5)
Translation adjustments                                                                         (7.4)            (7.4)
Tax benefit from exercise of stock options                         0.9                                            0.9
Net earnings for the year                                                    265.4                              265.4
- ---------------------------------------------------------------------------------------------------------------------

BALANCE AT OCTOBER 31, 1992, NET OF TREASURY          117.5      665.7     3,228.6               3.7          4,015.5
Common Stock issued
    Exercise of stock options and grants
      to employees                                      1.3       41.6                                           42.9
    Dividend reinvestment and stock
        purchase plan                                              1.9                                            1.9
Acquisition of stock for the treasury                  (0.6)      (3.5)      (22.9)                             (27.0)
Common Stock dividends ($.40 per share)                                      (47.2)                             (47.2)
Translation adjustments                                                                        (15.1)           (15.1)
Tax benefit from exercise of stock options                         7.1                                            7.1
Net loss for the six months ended April 30, 1993                             (76.0)                             (76.0)
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT APRIL 30, 1993, NET OF TREASURY           $118.2     $712.8    $3,082.5            $(11.4)        $3,902.1
- ---------------------------------------------------------------------------------------------------------------------


See notes to consolidated financial statements.

                                       4





                      CONSOLIDATED STATEMENT OF CASH FLOWS



                                             Six Months Ended April 30                          Year Ended October 31
                                             -------------------------        ---------------------------------------
                                                       1993       1992        1992              1991             1990
- ---------------------------------------------------------------------------------------------------------------------
                                                             (Unaudited)
                                                                         (In millions)
                                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings (loss) before extraordinary
    item and cumulative effect of
    accounting change                                 $(9.1)     $48.7      $274.2            $127.6           $264.4
Non-cash expenses
    Depreciation                                       37.1       35.2        71.7              59.1             45.8
    Deferred income taxes                              28.9        1.0        (3.2)            (37.5)            23.1
    Amortization of intangible assets                   4.3        4.0        44.4              39.2             33.6
    Amortization of pre-publication costs              24.0       23.5        87.0              88.0             67.2
    Provision for real estate write-down and
      relocation                                       40.0
Undistributed net earnings of unconsolidated
    affiliates                                        (11.3)     (14.1)      (19.7)            (15.7)           (31.2)
Theatrical and television inventories and
    broadcast rights
      Gross additions                                (526.8)    (472.0)     (909.6)           (953.6)          (863.7)
      Amortization                                    387.0      413.7       834.7             945.2            836.3
Decrease (increase) in network features and
    syndication licenses                                4.2      (66.5)      (78.2)            (47.1)          (117.5)
Increase in pre-publication costs                     (39.6)     (44.9)      (87.7)            (77.8)          (110.1)
Decrease (increase) in trade receivables              194.6      162.7        (8.4)            (44.6)             1.0
Decrease (increase) in inventories (other than
    theatrical and television)                        (23.5)     (11.9)       19.4              19.2            (15.0)
Decrease (increase) in prepaid expenses               (67.6)      31.2       (13.4)            (45.0)           (21.8)
Increase (decrease) in trade accounts payable          51.0       (3.4)        8.5             (24.3)            24.9
Increase (decrease) in income taxes payable
    (including $667.4 million in 1990 related to
    gain on sale of business)                        (112.6)     (41.7)       12.4             (29.8)          (634.7)
Increase (decrease) in accrued expenses and other     (50.7)     (19.6)       34.4             (10.3)           (76.4)
Other -- net                                          (91.1)     (66.4)      (48.4)             91.7             93.9
- ---------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS PROVIDED FROM (USED FOR)
    OPERATING ACTIVITIES                             (161.2)     (20.5)      218.1              84.3           (480.2)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTMENT AND OTHER ACTIVITIES

Expenditures for property, plant and equipment
    (excluding capitalized leases)                    (55.9)     (68.8)     (120.0)           (167.5)          (186.7)
Proceeds on disposal of property, plant and
    equipment                                           1.1        5.2        11.8               2.2              2.6
Purchase price of acquired businesses (net of
    acquired cash)                                     (0.1)    (161.5)     (585.1)            (86.9)          (220.9)
Decrease (increase) in investment in affiliated
    companies                                          (3.7)      13.3        10.8               8.3
Decrease (increase) in short-term and other
    investments                                       317.1      114.3       209.0            (467.1)          (476.8)
Increase in investments maturing after one year                                                (43.6)          (211.0)
Decrease in investments maturing after one year                   25.6        49.1             205.5
Decrease in notes receivable                            1.3        4.7         8.9              17.3            515.8
- ---------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS PROVIDED FROM (USED FOR) INVESTMENT
    AND OTHER ACTIVITIES                              259.8      (67.2)     (415.5)           (531.8)          (577.0)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of long-term debt                                       245.7       492.4
Payments of long-term debt                             (5.9)    (214.5)     (395.7)            (26.9)          (138.1)
Loss on early extinguishment of debt                                         (13.4)
Issuance of Common Stock (excluding grants
    to employees)                                      29.8        9.8        23.8              14.5             13.4
Acquisition of stock for the treasury                 (27.0)      (0.7)      (49.2)            (15.2)          (142.3)
Dividends                                             (47.2)     (44.2)      (91.5)            (82.4)           (83.4)
- ---------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED FOR FINANCING ACTIVITIES          (50.3)      (3.9)      (33.6)           (110.0)          (350.4)
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS       48.3      (91.6)     (231.0)           (557.5)        (1,407.6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR        324.3      555.3       555.3           1,112.8          2,520.4
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD           $372.6     $463.7      $324.3            $555.3         $1,112.8
- ---------------------------------------------------------------------------------------------------------------------


See notes to consolidated financial statements.


                                       5






                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                    NOTE A-- SIGNIFICANT ACCOUNTING POLICIES

                          Principles of Consolidation
The consolidated financial statements include the accounts of Paramount
Communications Inc. (Company) and its majority-owned affiliates.   The
Company's investments in its 20-50% owned investees are carried on the equity
basis.  The income taxes of the investees are included in the provision for
income taxes.

Certain amounts in the consolidated financial statements for  periods prior to
April 30, 1993 have been reclassified to conform to current presentation for
comparative purposes.

                               Accounting Changes
Effective November 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."  This statement requires that the projected
future cost of providing postretirement benefits, such as health care and life
insurance, be recognized as an expense as employees render service instead of
when the benefits are paid.  The Company's previous practice was to recognize
the cost of such postretirement benefits when paid.

The Company elected to record the cumulative effect of the accounting change as
a charge against income as of November 1, 1992, resulting in a one-time charge
of $66.9 million, net of income taxes of $34.5 million, or $.57 per share.  The
incremental effect of this accounting change on each of the quarters in the six
months ended April 30, 1993 was to increase net periodic postretirement benefit
cost by approximately $2.6 million on a pre-tax basis.

In February 1992, the Financial Accounting Standards Board issued SFAS No. 109,
"Accounting for Income Taxes."  Effective May 1, 1993, the Company adopted the
provisions of this standard by restating its prior period financial statements
beginning November 1, 1988.  The effect of adopting SFAS No. 109 was to
decrease the loss before cumulative effect of accounting change and net loss by
$1.8 million ($.01 per share) for the six months ended April 30, 1993; increase
earnings before extraordinary item and net earnings by $4.0 million ($.04 per
share) for the year ended October 31, 1992; and, increase net earnings by $5.4
million ($.05 per share), $5.3 million ($.04 per share)  and $2.0 million ($.02
per share - unaudited) for the years ended October 31, 1991 and 1990 and the
six months ended April 30, 1992, respectively.  The cumulative effect of
adopting SFAS No. 109 as of October 31, 1989, decreased the beginning balance
of 1990's retained earnings by $50.7 million.

Under SFAS No. 109, the liability method is used in accounting for income
taxes.  Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.  Prior to the adoption
of SFAS No. 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and
were measured at the tax rate in effect in the year the differences originated.

                           Change in Fiscal Year End
In June 1993, the Board of Directors approved a change in the Company's fiscal
year end to April 30 from October 31.

                           Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments with original maturities
of three months or less.

                            Short-Term Investments
Short-term investments consist of instruments with original maturities in
excess of three months and are carried at cost, which approximates market.

                                  Inventories
Inventories are generally determined using the lower of cost (first-in,
first-out or average cost method) or net realizable value.

           Theatrical and Television Inventories, Revenues and Costs
Feature films are produced or acquired for distribution, normally, first in the
theatrical market followed by videocassettes, pay cable, network television and
syndicated television.  On average, the length of the revenue cycle for feature
films approximates four years.  Theatrical revenues from domestic and foreign
markets are recognized as films are exhibited, revenues from the sale of
videocassettes are recognized upon delivery of the merchandise and revenues
from all television sources are recognized upon availability of the film for
telecast.


                                       6





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Television series initially produced for the networks and first-run syndication
are generally licensed to domestic and foreign markets concurrently.  The more
successful series are later syndicated in domestic markets and in certain
foreign markets.  The length of the revenue cycle for television series will
vary depending on the number of seasons a series remains in active production.
Revenues arising from television license agreements are recognized in the year
that the films or television series are available for telecast.

Inventories related to theatrical and television product (which include direct
production costs, production overhead, capitalized interest, and acquisition
costs) are stated at the lower of cost less amortization or net realizable
value.  Inventories are amortized and participations and residuals are accrued
on an individual product basis in the proportion that current revenues bear to
the estimated remaining total lifetime revenues.  Domestic syndication and
basic cable revenue estimates are not included in the estimated lifetime
revenues of network series until such sales are probable.  Estimates of total
lifetime revenues and expenses are periodically reviewed.  The costs of feature
and television films are classified as current assets to the extent such costs
are expected to be recovered through the respective primary markets.  Other
costs relating to film production are classified as noncurrent.

The Company estimates that approximately 94% of unamortized film costs at April
30, 1993 will be amortized within the next three years.

                         Publishing Revenue Recognition
The Company's publishing segment follows standard industry practice of
recognizing revenue when merchandise is shipped and billed.

                                Broadcast Rights
Broadcast rights are recorded when the license period begins and the program
becomes available for use, and are stated at the lower of cost less
amortization or net realizable value.  Broadcast rights for feature films and
syndicated programs are amortized using the straight-line method based on
program usage.  Sports rights are generally charged to expense when the event
is telecast.  Contract payments are generally made in installments over a term
somewhat shorter than the contract.

                         Property, Plant and Equipment
Property, plant and equipment are carried at cost.  Provision for depreciation
on substantially all depreciable assets is computed using the straight-line
method over the estimated useful lives of the assets.

                               Intangible Assets
Intangible assets primarily represent the excess of cost of purchased
businesses over the value of their net underlying assets (goodwill) and are
being amortized annually by the straight-line method over appropriate periods
not exceeding forty years.  Intangible assets are net of accumulated
amortization of $233.9, $230.1 and $186.0 million at April 30, 1993 and October
31, 1992 and 1991, respectively.

                            Deferred Costs and Other
Deferred costs and other includes certain pre-publication costs being amortized
annually by the straight-line method or an accelerated basis over appropriate
periods, the majority of which is four years.

                           Unamortized Debt Discount
Debt discount is amortized over the term of the related debt using the interest
method.

                                  Income Taxes
Provision for income taxes includes deferred taxes which represent future tax
effects of items reported for income tax purposes in periods different than for
financial purposes.

                    Deferred Off-Season Theme Park Expenses
Certain expenses incurred in the off-season to prepare the theme parks for the
operating season are deferred and amortized over the subsequent operating
season, which generally begins in March and finishes in October.

                           Earnings (Loss) Per Share
Earnings (loss) per share amounts are based on the weighted average common and
dilutive common equivalent (stock options) shares outstanding during the
respective periods.  Earnings (loss) per share are computed by dividing the
average common and, where dilutive, common equivalent shares outstanding into
the earnings (loss) applicable to such shares.

                           NOTE B -- ACQUISITION AND
                           DISPOSITION OF BUSINESSES

In August and October 1992, the Company acquired Kings Entertainment Company
and Kings Island Company, respectively, later renamed Paramount Parks, which
own and operate regional theme parks, for a total of approximately $400
million.


                                       7




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In November 1991, the Company acquired Macmillan Computer Publishing, later
renamed Prentice Hall Computer Publishing, a leading publisher of personal
computer and related technical books, for approximately $158 million.

The acquisitions are being accounted for as purchases and the financial
statements include the results of their operations from the dates of
acquisition.

The following table summarizes, on a pro forma basis, the combined results of
operations as though Kings Entertainment Company, Kings Island Company and
Macmillan Computer Publishing had been acquired on November 1, 1990.  It
includes estimated amounts for a reduction of interest income due to the use of
short-term investments for the acquisitions, amortization of estimated
intangible assets, additional depreciation expense and an adjustment for income
taxes, at the statutory rate.  These pro forma results do not necessarily
reflect the actual results of operations as they would have been had the
acquisitions taken place on that date, nor are they necessarily indicative of
future results.



                                                        Year Ended October 31
                                                -----------------------------
                                                1992                     1991
- -----------------------------------------------------------------------------
                                              (In millions, except per share)
                                                                             
                                                         (Unaudited)
                                                               
Revenues                                    $4,464.1                 $4,203.5
Earnings before extraordinary item             277.7                    133.2
Net earnings                                   268.9                    133.2
Earnings per share
  Earnings before extraordinary item            2.34                     1.13
  Net earnings                                  2.26                     1.13
- -----------------------------------------------------------------------------


In March 1990, the Company acquired Computer Curriculum Corporation, which
develops and markets computer-based learning systems, for approximately $75
million.

In December 1989, the Company acquired a preferred and common stock equity
interest in Paramount Stations Group (PSG), formerly TVX Broadcast Group Inc.,
which owns and operates independent television stations, for approximately $110
million.  The Company also acquired PSG debt obligations for approximately $34
million.  In April 1990, the Company was granted the right by the Federal
Communications Commission to assume control of PSG.  The Company did so by
converting preferred stock into common stock and, consequently, began
reflecting its operations on a consolidated basis.  In July and October 1990,
the Company purchased additional shares of PSG stock for $3.5 million and $4.3
million, respectively.  In February 1991, the Company, through a merger,
acquired the remaining outstanding shares of PSG for approximately $62 million.

In May 1993, the Company purchased the remaining 80% it did not own of Canada's
Wonderland, Inc., later renamed Paramount Canada's Wonderland, Inc., a Canadian
theme park, for approximately $52 million.

In June 1993, the Company announced it signed a definitive agreement to
purchase television station WKBD-TV in Detroit from Cox Enterprises Inc. for
approximately $105 million; this acquisition was completed in September 1993.

During the six months ended April 30, 1993 and 1992  and the years ended
October 31, 1992, 1991 and 1990, the Company also acquired or sold certain
other businesses.  The contributions of these businesses in the aggregate were
not significant to the Company's results of operations for the periods
presented, nor are they expected to have a material effect on the Company's
results on a continuing basis.

                        NOTE C -- OTHER INCOME (EXPENSE)

Other income (expense) includes foreign exchange gains (losses), minority
interest and other.

                          NOTE D -- EXTRAORDINARY ITEM

In September 1992, the Company redeemed $175 million of 9 3/4% senior
debentures due 2016 for $1,061.25 per $1,000 principal amount.  The premium
paid by the Company and the write-off of related unamortized discount and
issuance costs resulted in a loss of $8.8 million, net of an income tax benefit
of $4.6 million.

                                       8



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             NOTE E -- INVENTORIES

Inventories as described in Note A are stated as follows
(in millions):



                                        April 30                                     October 31
                                        --------                   ----------------------------
                                            1993                   1992                    1991
- -----------------------------------------------------------------------------------------------
                                                                                
CURRENT
Finished goods                            $248.3                 $230.1                  $229.8
Work in process                             12.8                   10.6                    20.3
Materials and supplies                      29.5                   26.4                    20.8
- -----------------------------------------------------------------------------------------------
                                           290.6                  267.1                   270.9
- -----------------------------------------------------------------------------------------------
Theatrical and television productions
  Released                                 176.9                  169.1                   161.2
  Completed, not released                   32.7                   35.7                    43.3
  In process and other                      61.8                   75.9                    84.4
- -----------------------------------------------------------------------------------------------
                                           271.4                  280.7                   288.9
- -----------------------------------------------------------------------------------------------
Broadcast rights                            55.3                   32.4                    30.6
- -----------------------------------------------------------------------------------------------
                                           617.3                  580.2                   590.4
- -----------------------------------------------------------------------------------------------
NONCURRENT
Theatrical and television productions
  Released                                 155.3                  103.9                    71.1
  In process and other                     247.0                  174.8                   119.2
- -----------------------------------------------------------------------------------------------
                                           402.3                  278.7                   190.3
- -----------------------------------------------------------------------------------------------
Broadcast rights                           107.0                  104.4                   111.5
- -----------------------------------------------------------------------------------------------
                                           509.3                  383.1                   301.8
- -----------------------------------------------------------------------------------------------
                                        $1,126.6                 $963.3                  $892.2
- -----------------------------------------------------------------------------------------------


                             NOTE F--INVESTMENT IN
                              AFFILIATED COMPANIES

Investments in affiliated companies primarily include the Company's interest in
USA Networks, national advertiser-supported basic cable television networks
(50% owned); Cinamerica, a domestic motion picture theater operation (50%
owned); United Cinemas International Multiplex B.V., engaged in theatrical
exhibition of motion pictures in the United Kingdom, Ireland, Germany and Spain
(49% owned); Cinema International Corporation N.V., which owns motion picture
screens in seven countries (49% owned); and as of August 1992, Canada's
Wonderland, Inc., a Canadian theme park (20% owned).

Summarized financial information for the above companies is as follows
(in millions):



                                Six Months Ended                         Year Ended
                                  or at April 30                   or at October 31
                                ----------------       ----------------------------
                                1993        1992       1992        1991        1990
- -----------------------------------------------------------------------------------
                                       (Unaudited)
                                                              
Revenues                      $372.6      $354.7     $783.2      $683.0      $548.3
Gross profit                   129.0       139.8      321.6       226.3       208.3
Net earnings                    36.2        49.3       83.2        74.4        52.1
Current assets                $326.7                 $337.8      $227.8
Noncurrent assets              855.8                  934.2       741.2
Current liabilities            223.7                  248.8       167.6
Noncurrent liabilities         493.4                  595.4       430.4            
- -----------------------------------------------------------------------------------


Included in the operating income of the Company's Entertainment operations are
equity in earnings for the above affiliated companies of $24.0, $34.1
(unaudited), $58.7, $47.6 and $43.7 million, respectively, for the six months
ended April 30, 1993 and 1992 and the years ended October 31, 1992, 1991 and
1990.  Dividends received from these affiliated companies were $7.8, $10.5
(unaudited), $22.0, $32.5 and $10.8 million, respectively, for the six months
ended April 30, 1993 and 1992 and the years ended October 31, 1992, 1991 and
1990.

Included in consolidated retained earnings at April 30, 1993 is $161.7 million
of undistributed earnings of affiliates.

                                       9


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            NOTE G-- LONG-TERM DEBT

Long-term debt includes (in millions):
                                       April 30              October 31
                                       --------        ----------------
                                           1993        1992        1991
- -----------------------------------------------------------------------
8-1/2% senior notes due 1996 (prepaid
   July 1993)                             $99.8       $99.8       $99.7
7-1/2% senior notes due 2002              246.3       246.0
8-1/4% senior debentures due 2022         246.8       246.7
11-5/8% senior notes due 1992                                     125.0
9.55% note payable to an institutional
   investor due 1999 (prepaid 1992)                                62.6
9-3/4% senior debentures due 2016
   (prepaid 1992)                                                 173.6
12-3/8% subordinated notes due 1995
   (prepaid 1992)                                                  19.5
7% subordinated debentures due 2003,
   net of unamortized discount of $53.7
   at April 30, 1993, $55.1 at
   October 31, 1992 and $57.8 at
   October 31, 1991 (effective average
   interest rate of 11%)                  177.7       176.3       173.6
Other notes and debentures due
   1993 to 1996 (effective average
   interest rate of 8.22%)                 12.2        12.2        17.4
Obligations under capital leases           34.3        41.1        46.8
- -----------------------------------------------------------------------
                                          817.1       822.1       718.2
Less current maturities                   109.8        10.0       198.3
- -----------------------------------------------------------------------
                                         $707.3      $812.1      $519.9
- -----------------------------------------------------------------------
Maturities of long-term debt (including the present value of obligations under
capital leases as set forth in Note J) during the five years ending April 30,
1998 are (in millions):
- --------------------------------------------------------
 1994                                             $109.8
 1995                                               10.7
 1996                                               20.1
 1997                                                3.1
 1998                                                0.4
- --------------------------------------------------------
The Company has complied with restrictions and limitations required under terms
of various loan agreements.

In July 1993, the Company completed a public offering of $150 million of 5 7/8%
senior notes due 2000 and $150 million of 7 1/2% senior debentures due 2023.

                            NOTE H -- CAPITAL STOCK

The authorized capital stock of the Company includes 75,000,000 shares of
Preferred Stock, all of which are undesignated.

Each share of Common Stock outstanding has a related Common Stock purchase
right which will become exercisable after a specified period of time only if a
person or group acquires beneficial ownership of 15% or more of the outstanding
Common Stock of the Company or announces or commences a tender or exchange
offer that would result in the offeror acquiring 30% or more of the Company's
Common Stock.  Once exercisable, each right would entitle its registered holder
to purchase one share of the Company's Common Stock at a price of $200 per
share, subject to adjustment to prevent dilution.  Upon the occurrence of
certain events or transactions specified in the rights agreement, the rights
holder is entitled to receive for $200 per right a number of shares of the
Company's or an acquiring company's common stock having a market value equal to
twice the right's exercise price.  The rights may be redeemed by the Company
for $.01 per right prior to the tenth day after a person or group acquires 15%
or more of the outstanding Common Stock of the Company.  The rights expire on
September 30, 1998, unless redeemed earlier by the Company.  On March 1, 1994
the rights were amended to permit consummation of the tender offer by Viacom
Inc.,  without causing the rights to become exercisable.  In addition, the
rights have been amended to provide that the rights expire immediately prior to
the merger between the Company and Viacom.  See Note O.

Common Stock outstanding at April 30, 1993, does not include 2,127,817 shares
reserved under the 1984 Stock Option Plan; 4,469,718 shares reserved under the
1989 Stock Option Plan; 5,750,000 shares reserved under the 1992 Stock Option
Plan; and 3,130,018 shares reserved under the Long-Term Performance Plan.

The Company's 1973 Key Employees Stock Purchase Plan and 1984, 1989 and 1992
Stock Option Plans provide for the issuance of options to key employees to
purchase Common Stock of the Company at a price not less than fair market value
on the date of grant.  Options may not be granted under these plans that expire
more than ten years from the date of grant.  The Company may establish
installment exercise terms for a stock option so that the option becomes fully
exercisable in a series of cumulative portions.  The Company may also
accelerate the period for the exercise of any stock option or portion thereof.

Each option granted under the Company's 1984, 1989 and 1992 Stock Option Plans
contains a Limited Right which entitles the holder thereof, only upon the
occurrence of certain specified events constituting a change in control of the
Company and only after the Compensation Committee of the Board of Directors of
the Company so determines, to receive cash in lieu of exercising the option.
                                       10



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transactions involving outstanding stock options under these plans were:



                                                      Number of Common Shares                               Option Price
                                                  ---------------------------------------------   --------------------------------
                                                  1973 Plan       1984 Plan      1989 Plan           Per Share    Aggregate
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 (In millions)
                                                                                                    
 Outstanding at October 31, 1989                    100,000       4,585,753        498,700       $7.75- $55.63     $172.1
 Granted                                                                         1,275,155        34.63- 55.00       66.1
 Issued                                                            (309,887)                      15.38- 39.56      (10.1)
 Rescinded                                                          (32,675)       (56,550)       31.69- 55.00       (4.4)
- ----------------------------------------------------------------------------------------------------------------------------------
 Outstanding at October 31, 1990                    100,000       4,243,191      1,717,305         7.75- 55.63      223.7
 Granted                                                                         2,967,650        36.94- 42.13      119.9
 Issued                                             (30,000)       (750,710)                      11.80- 43.13      (24.1)
 Rescinded                                                         (320,700)      (487,970)       31.69- 55.00      (36.1)
- ----------------------------------------------------------------------------------------------------------------------------------
 Outstanding at October 31, 1991                     70,000       3,171,781      4,196,985         7.75- 55.63      283.4
 Granted                                                                           468,500        37.50- 47.13       20.0
 Issued                                             (40,000)       (295,198)      (221,183)        7.75- 41.81      (20.1)
 Rescinded                                                          (45,075)      (325,825)       20.19- 55.00      (15.7)
- ----------------------------------------------------------------------------------------------------------------------------------
 Outstanding at October 31, 1992                     30,000       2,831,508      4,118,477        13.94- 55.63      267.6
 Granted                                                                           442,500        44.19- 50.69       19.7
 Issued                                             (30,000)       (703,091)      (309,099)       13.94- 45.81      (27.8)
 Rescinded                                                             (600)       (36,035)       33.88- 55.00       (1.9)
- ----------------------------------------------------------------------------------------------------------------------------------
 Outstanding at April 30, 1993                         -0-        2,127,817      4,215,843        15.25- 55.63     $257.6
- ----------------------------------------------------------------------------------------------------------------------------------
 Exercisable at
   October 31, 1991                                  70,000       3,159,281      1,077,475
   October 31, 1992                                  30,000       2,831,508      2,287,869
   April 30, 1993                                      -0-        2,127,817      2,238,430
 Reserved for future grants at
   October 31, 1991                                                                803,015
   October 31, 1992                                                                660,340
   April 30, 1993                                                                  253,875                              
- ----------------------------------------------------------------------------------------------------------------------------------


No options have been granted under the 1992 Stock Option Plan, and at April 30,
1993, 5,750,000 shares were reserved for future grants under this plan.

The Company follows the practice of recording amounts received upon the
exercise of options by crediting Common Stock and paid-in surplus.  No charges
are reflected in the consolidated statement of earnings as a result of the
grant or exercise of stock options.  The Company records compensation expense
related to stock appreciation rights of each plan and share unit features of
the 1973 Plan based on the change in the quoted market price of the Common
Stock for the period.  The exercise prices of options are subject to
anti-dilution provisions.  The Company realizes an income tax benefit from the
exercise or early disposition of certain stock options.  This benefit results
in a decrease in current income taxes payable and an increase in paid-in
surplus.

During the six months ended April 30, 1993 and the year ended October 31, 1991,
125,000 and 200,000 shares, respectively, of Common Stock of the Company were
granted to certain key employees subject to restrictions which will lapse on
certain dates through February 1997.  The average market price of these shares
on the dates on which they were granted ranged from $43.06 to $44.19.  During
the six months ended April 30, 1993 and the years ended October 31, 1991 and
1990, 50,000, 292,000 and 125,000, respectively, of previously granted shares
were rescinded.  At April 30, 1993, the unvested portion of previously granted
shares totaling $34.1 million is included as a reduction of stockholders'
equity.  Compensation expense is recorded over the period during which services
are performed.

During the six months ended April 30, 1993 and the years ended October 31, 1992
and 1991, 61,094, 64,205 and 138,485 shares, respectively, of Common Stock of
the Company were granted to employees at an average market price of $43.50 ,
$37.63 and $41.88 under the terms of the Company's Long-Term Performance Plan.
At April 30, 1993 and October 31, 1992 and 1991, there were 3,130,018,
3,191,112 and 3,255,317 shares, respectively, of Common Stock reserved for
future grants under this plan.

                                       11




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              NOTE I--INCOME TAXES

As described in Note A, effective May 1, 1993, the Company adopted SFAS No.
109, "Accounting for Income Taxes" by restating its prior period financial
statements beginning November 1, 1988.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.  Significant components
of the Company's deferred income tax assets and liabilities were as follows (in
millions):



                                                               April 30              October 31
                                                               --------     -------------------
                                                                   1993        1992        1991
- -----------------------------------------------------------------------------------------------
                                                                                
Deferred tax assets:
  Costs of motion picture and
    television production                                         $89.2       $75.0       $50.4
  Employee compensation and other
    payroll related expenses                                       44.5        60.7        53.2
  Provisions for real estate
    write-down, relocation and
    prior year publishing charge                                   40.5        24.8        26.9
  Sales returns and allowances                                     46.4        45.8        38.2
  Discontinued operations                                          34.2        29.0        37.8
  Postretirement benefit obligation                                34.5
  Preacquisition net operating loss
    carryforwards of subsidiaries
    and other                                                      50.0        60.3        66.0
  Other                                                            32.1        42.0        54.8
- -----------------------------------------------------------------------------------------------
                                                                  371.4       337.6       327.3
- -----------------------------------------------------------------------------------------------
  Valuation allowance for deferred
    tax assets                                                    (50.0)      (60.3)      (66.0)
- -----------------------------------------------------------------------------------------------
    Total deferred tax assets                                     321.4       277.3       261.3
- -----------------------------------------------------------------------------------------------
Deferred tax liabilities:
    Income on motion picture and
      television production                                       (12.4)      (13.1)      (16.8)
    Expenses related to renovation
      project                                                      (9.2)       (9.2)       (9.2)
    Self insurance                                                (10.5)       (3.1)
    Deferred seasonal expenses                                    (41.9)      (26.8)
    Other                                                         (18.4)      (17.9)      (21.7)
- -----------------------------------------------------------------------------------------------
      Total deferred tax liabilities                              (92.4)      (70.1)      (47.7)
- -----------------------------------------------------------------------------------------------
    Net deferred tax assets                                      $229.0      $207.2      $213.6
- -----------------------------------------------------------------------------------------------


Provision (benefit) for income taxes includes (in millions):



                                                 Six Months
                                             Ended April 30               Year Ended October 31
                                            ---------------        ----------------------------
                                            1993       1992        1992        1991        1990
- -----------------------------------------------------------------------------------------------
                                                  (Unaudited)
                                                                          
Current
  Federal                                 $(54.1)    $(16.7)      $62.4       $26.1       $37.3
  Foreign                                   16.1       31.1        55.1        47.5        49.0
  State and other                            1.4        4.6         8.8        16.0         7.2
- -----------------------------------------------------------------------------------------------
                                           (36.6)      19.0       126.3        89.6        93.5
- -----------------------------------------------------------------------------------------------
Deferred
  Federal                                   27.7        1.0         4.0       (28.0)       20.3
  Foreign                                    1.2                   (7.2)       (4.2)       (1.3)
  State and other                                                              (5.3)        4.1
- -----------------------------------------------------------------------------------------------
                                            28.9        1.0        (3.2)      (37.5)       23.1
- -----------------------------------------------------------------------------------------------
                                           $(7.7)     $20.0      $123.1       $52.1      $116.6
- -----------------------------------------------------------------------------------------------


The components of earnings (loss) before income taxes were as follows (in
millions):
                                       12



                             Six Months
                          Ended April 30               Year Ended October 31
                          --------------         ----------------------------
                          1993       1992        1992        1991        1990
- -----------------------------------------------------------------------------
                                (Unaudited)
Domestic               $ (47.8)      $7.7      $301.8       $68.0      $218.4
Foreign                   31.0       61.0        95.5       111.7       162.6
- -----------------------------------------------------------------------------
                       $ (16.8)     $68.7      $397.3      $179.7      $381.0
- -----------------------------------------------------------------------------

                                       13




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation between the provision (benefit) for income taxes computed by
applying the statutory Federal income tax rate to earnings (loss) before income
taxes and the actual provision (benefit) for income taxes is as follows (in
millions):



                                                       Six Months
                                                   Ended April 30                                Year Ended October 31
                                            ---------------------              ---------------------------------------
                                            1993             1992              1992             1991              1990
- ----------------------------------------------------------------------------------------------------------------------
                                                        (Unaudited)
                                                                                                 
Provision (benefit)
   for income taxes
   at statutory rate                       $ (5.7)           $23.4            $135.1            $61.1            $129.5
Increase (decrease) in
  taxes arising from
  effect of
    Income (principally
      foreign) taxed at
      lower rates                           (1.2)            (7.4)            (13.4)           (19.6)            (34.5)
    Amortization of
      intangible assets                      1.3              1.0              13.1              8.8               9.6
    U. S. state and local
      income taxes                           1.0              3.0               5.3              7.0               7.8
    Tax exempt interest                                                                         (5.4)             (8.0)
    Restoration of reserves
      no longer required                    (3.9)                             (21.4)
    Other                                    0.8                                4.4              0.2              12.2
- ----------------------------------------------------------------------------------------------------------------------
Provision (benefit) for
  income taxes                            $ (7.7)           $20.0            $123.1            $52.1            $116.6
- ----------------------------------------------------------------------------------------------------------------------
Effective tax rate                          45.8%            29.1%            31.0%            29.0%             30.6%
- ----------------------------------------------------------------------------------------------------------------------


Total income tax payments were $59.6, $43.5 (unaudited), $120.0, $103.8 and
$720.4 million (including $667.4 million resulting from the fiscal 1989 sale of
Associates First Capital Corporation), respectively, for the six months ended
April 30, 1993 and 1992 and the years ended October 31, 1992, 1991 and 1990.
The Company's share of the undistributed earnings of foreign subsidiaries not
included in its consolidated Federal income tax return, that could be subject
to additional income taxes if remitted, was approximately $810 million at April
30, 1993.  No provision has been made for taxes that could result from the
remittance of such undistributed earnings since the Company intends to reinvest
these earnings indefinitely; determination of the related unrecognized deferred
U.S. income tax liability is not practicable.

In August 1993, the Budget Reconciliation Act of 1993 (the "Act") was enacted
into law.  One of the provisions of the Act increased the corporate income tax
rate to 35% effective January 1, 1993.  This increase, from the previous 34%
rate, had no material effect on the Company.  The Company expects to benefit
from a section of the Act permitting tax deductions derived from the
amortization of certain intangible assets acquired after July 25, 1991, which
deductions have not previously been claimed on tax returns filed by the
Company.  However, the Company believes that any tax benefits generated by the
amortization of intangible assets previously acquired by it will not be
material.

Furthermore, to the extent that the Company is affected by several other
provisions of the Act, the results should not be material.

                    NOTE J -- COMMITMENTS AND CONTINGENCIES

                                     Leases
Total rental expense was $45.7, $43.1 (unaudited), $87.0, $80.0 and $76.8
million, respectively, for the six months ended April 30, 1993 and 1992 and the
years ended October 31, 1992, 1991 and 1990.

At April 30, 1993, the minimum lease payments under capital leases and
noncancellable operating leases were as follows (in millions):

                                                   Year Ending April 30
                                              -------------------------
                                              Capital         Operating
                                               Leases            Leases
- -----------------------------------------------------------------------
1994                                            $14.4             $65.2
1995                                             13.8              56.7
1996                                              9.7              44.5
1997                                              3.8              38.1
1998                                              0.7              35.9
Thereafter                                        5.1             388.4
- -----------------------------------------------------------------------
Total minimum lease payments                     47.5            $628.8
                                                                 ------
- -----------------------------------------------------------------------
Less amounts representing interest               13.2                   
- -----------------------------------------------------------------------
Present value of net minimum lease payments     $34.3                  
- -----------------------------------------------------------------------
Many of the leases also require the lessee to pay property taxes, insurance and
ordinary repairs and maintenance.

                             Employee Benefit Plans
The cost of pension benefits for eligible employees, measured by length of
service, compensation and other factors, is currently being funded through
trusts established under the plans.  In general, the Company's funding policy
is to make contributions to the plans as necessary to meet minimum funding
requirements.
                                       14


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of net periodic pension cost for the Company's plans were as
follows (in millions):



                                                       Six Months
                                                   Ended April 30                                Year Ended October 31
                                            ---------------------              ---------------------------------------
                                            1993             1992              1992              1991             1990
- ----------------------------------------------------------------------------------------------------------------------
                                                         (Unaudited)
                                                                                                 
Service cost-benefits
  earned                                    $9.2             $9.0             $18.1             $17.2            $15.8
Interest cost on projected
  benefit obligation                        18.9             17.0              34.1              32.4             30.6
Less return on plan assets                 (25.2)           (20.6)            (41.2)            (59.4)           (36.0)
Net amortization
  and deferral                               3.9              1.1               1.9              19.7             (3.4)
- ----------------------------------------------------------------------------------------------------------------------
Net periodic pension cost                   $6.8             $6.5             $12.9              $9.9             $7.0
- ----------------------------------------------------------------------------------------------------------------------


In addition, the Company had other pension expense for the six months ended
April 30, 1993 and 1992 and the years ended October 31, 1992, 1991 and 1990 of
$5.0, $4.7 (unaudited), $9.2, $9.2 and $10.6 million, respectively, primarily
related to multiemployer pension plans.

The funded status and amounts recognized in the Company's consolidated balance
sheet for its domestic and non-U.S. plans is as follows  (in millions):


                                       April 30                                      October 31
                                       --------                  ------------------------------
                                           1993                     1992                   1991
- -----------------------------------------------------------------------------------------------
                                                                                
Actuarial present value of benefit
  obligation
   Vested                                $345.8                   $325.6                 $307.1
   Nonvested                               19.4                     17.8                   16.8
- -----------------------------------------------------------------------------------------------
Accumulated benefit obligation            365.2                    343.4                  323.9
Effect of projected future salary
   increases                               57.1                     55.8                   53.1
- -----------------------------------------------------------------------------------------------
Projected benefit obligation              422.3                    399.2                  377.0
Plan assets at fair value                 453.0                    432.1                  416.8
- -----------------------------------------------------------------------------------------------
Plan assets in excess of projected
  benefit obligation                       30.7                     32.9                   39.8
Unrecognized net gain                     (34.9)                   (30.2)                 (23.8)
Unrecognized prior service cost            (8.2)                    (9.7)                 (11.2)
Unrecognized net asset at date
  of adoption of SFAS No. 87               (9.0)                    (9.7)                 (12.7)
- -----------------------------------------------------------------------------------------------
Net pension liability                    $(21.4)                  $(16.7)                 $(7.9)
- -----------------------------------------------------------------------------------------------


Plan assets consist primarily of marketable equity and fixed income securities
and the Company's Common Stock.  At April 30, 1993 and October 31, 1992 and
1991, the Company's plans owned 932,076 shares of the Company's Common Stock
with an aggregate market value of $48.5, $39.3 and $37.4 million, respectively.

In the six months ended April 30, 1993 and the years ended October 31, 1992 and
1991, the weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation for the Company's plans were 8.5% and 6.0%,
respectively.  The expected long-term rate of return on assets used for the
majority of the Company's plans was 10.0% for the six months ended April 30,
1993 and 1992 and the years ended October 31,  1992, 1991 and 1990.

                  Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the Company sponsors a welfare plan
which provides certain postretirement health care and life insurance benefits
for substantially all employees and their covered dependents who generally have
worked ten years and are eligible for early or normal retirement under the
provisions of the Company's retirement plan.  The welfare plan is contributory
and contains cost-sharing features such as deductibles and coinsurance which
are adjusted annually.  The plan is not funded.  The Company continues to fund
these benefits as claims are paid.

As described in Note A, effective November 1, 1992, the Company adopted  SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions."  Postretirement benefit costs for prior years, which were recorded
on a cash basis, have not been restated.

                                       15



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of the amounts recognized in the Company's consolidated balance
sheet are as follows (in millions):

                                           April 30  November 1
                                           --------  ----------
                                               1993        1992
- ---------------------------------------------------------------
 Accumulated postretirement benefit
   obligation attributable to:
      Current retirees                         $51.7      $49.2
      Fully eligible active plan participants   20.2       19.2
      Other active plan participants            34.7       33.0
- ---------------------------------------------------------------
      Accumulated postretirement benefit
        obligation                            $106.6     $101.4
- ---------------------------------------------------------------

The components of net periodic postretirement benefit cost for the six months
ended April 30, 1993, are as follows (in millions):
- ---------------------------------------------------------------
Service cost-benefits earned                               $2.4
Interest cost on accumulated postretirement
  benefit obligation                                        4.2
- ---------------------------------------------------------------
Net periodic postretirement benefit cost                   $6.6
- ---------------------------------------------------------------

The discount rate used in determining the accumulated postretirement benefit
obligation was 8.5%.  At April 30, 1993, the assumed weighted average health
care cost trend rates to be used in measuring the accumulated postretirement
benefit obligation for 1994 are 13% for retirees age 65 and over and 15% for
retirees under age 65.   Both rates are assumed to decrease gradually each year
to 6.7% in 2011 and thereafter.  A one percentage point increase in each year
of these health care cost trend rates would increase the accumulated
postretirement benefit obligation at April 30, 1993 by $19.2 million, and
increase the sum of the service and interest cost components of net periodic
postretirement benefit cost by $1.4 million.

In addition, the Company contributes to multiemployer plans which provide
health and welfare benefits to active as well as retired employees.  The cost
of these benefits for the six months ended April 30, 1993, was $5.6 million.

                                  Commitments
At April 30, 1993, the Company is obligated to make future payments for various
feature films, syndicated programs, sports events and other programming
totaling approximately $401 million.  This amount includes $327 million related
to Madison Square Garden Network's agreement to televise New York Yankees
baseball games through the year 2000.

                               Legal Proceedings
The Company is a defendant in various lawsuits wherein substantial amounts are
claimed.  In the opinion of counsel, these suits should not result in judgments
that in the aggregate would have a material adverse effect on the Company's
financial statements.

                       NOTE K -- SUPPLEMENTAL INFORMATION

Trade receivables are net of allowance for doubtful accounts of $64.1, $65.5
and $59.6 million at April 30, 1993 and October 31, 1992 and 1991,
respectively.

Prepaid expenses and other includes royalties advances of $182.8, $161.6 and
$156.4 million at April 30, 1993 and October 31, 1992 and 1991, respectively.

The details of accrued expenses and other are as follows
(in millions):
                                      April 30             October 31
                                      --------       ----------------
                                          1993       1992        1991
- ---------------------------------------------------------------------
Participations payable and accrued
  syndication expenses                  $334.6     $363.0      $348.2
Deferred television contracts income      90.6       86.9        73.7
Accrued compensation and other
  employee benefit related items         114.7      140.6        97.2
Reverse repurchase liability              75.1       50.1
Other                                    513.4      473.5       483.4
- ---------------------------------------------------------------------
                                      $1,128.4   $1,114.1    $1,002.5
- ---------------------------------------------------------------------

                                       16


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred liabilities includes participations payable and deferred syndication
expenses of $193.7, $189.2 and $187.9 million at April 30, 1993 and October 31,
1992 and 1991, respectively.

The details of interest and other investment income (expense) -- net are as
follows (in millions):
                              Six Months
                          Ended April 30     Year Ended October 31
                          --------------    ----------------------
                           1993     1992    1992     1991     1990
- ------------------------------------------------------------------
                                (Unaudited)
Interest expense
  Interest on
    indebtedness
    and other             $(44.9) $(54.4) $(104.1) $(108.6) $(116.2)
Imputed interest
  on long-term
  liabilities               (5.8)   (8.5)   (14.7)   (14.6)   (22.9)
Less capitalized
  interest                   2.8     3.1      5.0     11.2     15.2
- -------------------------------------------------------------------
                           (47.9)  (59.8)  (113.8)  (112.0)  (123.9)
- ------------------------------------------------------------------- 
Interest and other
  investment income
    Interest and other
      income on
      investments           28.6    40.0     88.4    106.9    180.3
    Imputed interest
      on long-term
      receivables           16.3    17.3     33.2     26.9     22.4
- -------------------------------------------------------------------
                            44.9    57.3    121.6    133.8    202.7
- -------------------------------------------------------------------
                           $(3.0)  $(2.5)    $7.8    $21.8    $78.8
- -------------------------------------------------------------------

Imputed interest relates principally to network and syndication licenses of
motion picture and television products.  Capitalized interest relates to
projects under construction and theatrical and television productions in
process.  Interest paid on borrowings was $40.8, $51.0 (unaudited), $91.0,
$99.5 and $105.6 million, respectively, for the six months ended April 30, 1993
and 1992 and the years ended October 31, 1992, 1991 and 1990.

                        NOTE L -- FINANCIAL INSTRUMENTS

The Company adopted SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments" in the six months ended April 30, 1993.  This statement requires
disclosure of estimated fair values for all financial instruments for which it
is practicable to estimate fair value.

The Company has used various methods and assumptions to estimate the fair value
of its financial instruments at April 30, 1993.  For cash and cash equivalents,
the carrying amount approximates fair value because of the short maturities of
these instruments.  Quoted market prices or dealer quotes for the same or
similar instrument were used for short-term investments and the majority of
long-term debt.  Other techniques, such as estimated cash flows and termination
cost have been used to estimate the fair value of the remaining financial
instruments.  These values represent a general approximation of possible value
and may not be indicative of the amounts that could be realized in a current
market exchange.

The carrying amounts and fair values of the Company's recorded financial
instruments at April 30, 1993 are as follows (in millions):
                                                     Carrying          Fair
                                                       Amount         Value
- ---------------------------------------------------------------------------
Cash and cash equivalents                              $372.6        $372.6
Short-term investments                                  569.7         577.4
Long-term debt (including current maturities) (1)       782.8         859.8
Reverse repurchase liability                             75.1          75.1
- ---------------------------------------------------------------------------
(1) Excludes obligations under capital leases classified as long-term debt.

Periodically, the Company enters into interest rate swap agreements.  These
agreements generally allow the Company to exchange fixed rates for variable
rates without the exchange of cash with respect to the underlying principal
amounts.   Net interest payments or receipts, which were not material, are
recorded as adjustments to interest expense.  The fair value of interest rate
swaps at April 30, 1993 was not material.

The Company has guaranteed third party securities and commitments relating
primarily to joint venture obligations, theater leases and standby letters of
credit totaling approximately $320 million at April 30, 1993.  These guarantees
had a fair value of $293 million at April 30, 1993.
                                       17




                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               NOTE M -- FINANCIAL REPORTING BY BUSINESS SEGMENTS

A summary description of the Company's business segments and their respective
Revenues and Operating Income (Loss) for the six months ended April 30, 1993
and 1992 and the years ended October 31, 1992, 1991 and 1990 is presented
elsewhere herein.

Depreciation, capital expenditures and identifiable assets were as follows
(in millions):



                                              Depreciation                            Capital Expenditures (1)
                                -----------------------------------------   ------------------------------------------
                                    Six Months                                  Six Months
                                Ended April 30      Year Ended October 31   Ended April 30       Year Ended October 31
                                --------------     ----------------------   --------------    ------------------------
                                  1993    1992     1992     1991     1990    1993      1992    1992      1991     1990
- ----------------------------------------------------------------------------------------------------------------------
                                      (Unaudited)                                 (Unaudited)
                                                                                 
Business Segments
  Entertainment                  $24.6   $23.1    $49.0    $38.1    $28.0   $46.0     $58.6   $94.3    $146.6   $174.7
  Publishing                      11.6    11.2     20.9     19.1     15.8     8.7      10.0    24.6      25.8     12.6
- ----------------------------------------------------------------------------------------------------------------------
    Total                         36.2    34.3     69.9     57.2     43.8    54.7      68.6   118.9     172.4    187.3
Corporate and Other
  Non-Segment Items                0.9     0.9      1.8      1.9      2.0     1.2       0.2     1.1       0.5      0.6
- ----------------------------------------------------------------------------------------------------------------------
                                 $37.1   $35.2    $71.7    $59.1    $45.8   $55.9     $68.8  $120.0    $172.9   $187.9
- ----------------------------------------------------------------------------------------------------------------------





                                            Identifiable Assets
                                  ---------------------------------------
                                  April 30                     October 31
                                  --------      -------------------------
                                      1993      1992      1991       1990
- -------------------------------------------------------------------------
                                                     
Business Segments
  Entertainment                   $3,377.8 $3,221.9   $2,493.7   $2,223.0
  Publishing                       2,321.3  2,396.5    2,226.4    2,191.5
- -------------------------------------------------------------------------
    Total                          5,699.1  5,618.4    4,720.1    4,414.5
Corporate and Other
  Non-Segment Items                1,175.7  1,438.6    1,934.6    2,126.5
- -------------------------------------------------------------------------
                                  $6,874.8 $7,057.0   $6,654.7   $6,541.0
- -------------------------------------------------------------------------

- -------------
(1) Including capitalized leases.

Identifiable assets are those which can be directly identified or associated
with the segments.  Corporate and other non-segment items principally include
cash and cash equivalents, short-term investments, notes receivable, prepaid
income taxes and corporate property and equipment.


                                       18




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                    NOTE N -- QUARTERLY RESULTS (UNAUDITED)

The following summarizes the quarterly operating results of the Company for the
six months ended April 30, 1993 and the years ended October 31, 1992 and 1991
(in millions, except per share):


                                                                                                     Earnings (Loss) Per Share
                                                                                                    --------------------------
                                                                           Earnings                      Earnings
                                                                      (Loss) Before                 (Loss) Before
                                                                      Extraordinary                 Extraordinary
                                                                           Item and                      Item and
                                                                         Cumulative                    Cumulative
                                          Operating          Earnings     Effect of           Net       Effect of          Net
                                 Cost of     Income     (Loss) Before    Accounting      Earnings      Accounting     Earnings
 Quarter Ended    Revenues    Goods Sold     (Loss)      Income Taxes        Change        (Loss)          Change       (Loss)
- ------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                 
1993
  January 31        $943.7        $648.8       $1.8             $(1.2)         $0.1        $(66.8)           $-0-        $(.57)
  April 30           954.4         638.0      (11.9)            (15.6)         (9.2)         (9.2)           (.08)        (.08)
- ------------------------------------------------------------------------------------------------------------------------------ 
                  $1,898.1      $1,286.8     $(10.1)           $(16.8)        $(9.1)       $(76.0)          $(.08)       $(.65)
- ------------------------------------------------------------------------------------------------------------------------------ 
1992
  January 31      $1,070.6        $761.4      $27.6             $27.1         $19.4         $19.4            $.16         $.16
  April 30           927.9         621.7       50.2              41.6          29.3          29.3             .25          .25
  July 31          1,063.9         629.2      156.9             166.6         114.3         114.3             .96          .96
  October 31       1,202.5         727.5      161.4             162.0         111.2         102.4             .94          .86
- ------------------------------------------------------------------------------------------------------------------------------
                  $4,264.9      $2,739.8     $396.1            $397.3        $274.2        $265.4           $2.31        $2.23
- ------------------------------------------------------------------------------------------------------------------------------
1991
  January 31        $897.1        $658.3     $(27.0)           $(10.8)        $(5.9)        $(5.9)          $(.05)       $(.05)
  April 30           868.1         646.9      (86.3)            (80.8)        (53.7)        (53.7)           (.46)        (.46)
  July 31            963.9         553.9      149.5             148.8         102.6         102.6             .87          .87
  October 31       1,166.3         779.6      121.6             122.5          84.6          84.6             .72          .72
- ------------------------------------------------------------------------------------------------------------------------------
                  $3,895.4      $2,638.7     $157.8            $179.7        $127.6        $127.6           $1.08        $1.08
- ------------------------------------------------------------------------------------------------------------------------------





                    NOTE O -- SUBSEQUENT EVENTS (UNAUDITED)

                       Tender Offers and Merger Proposals

On December 13, 1993, the Company's Board of Directors adopted procedures (the
"Bidding Procedures") for the purpose of considering proposals to acquire the
Company.  Pursuant to the Bidding Procedures, from December 20, 1993 through
February 1, 1994, Viacom Inc. (Viacom) and QVC Network, Inc. (QVC) submitted a
series of bids for the Company.  After the initial round of bidding, the
Company entered into a merger agreement with QVC.  Prior to the February 1
bidding deadline established by the Bidding Procedures, Viacom substantially
increased its bid and the Company terminated the agreement with QVC and entered
into a merger agreement with Viacom.

On February 1, 1994, both Viacom and QVC submitted their final proposals for
the acquisition of the Company.  Viacom's proposal consisted of a tender offer
(the "Viacom Offer") for 50.1% of the outstanding shares of the Company's
Common Stock (the "Shares"), on a fully diluted basis, at $107 per Share to be
followed by a merger (the "Viacom Second-Step Merger") in which each remaining
Share would be converted into the right to receive (i) 0.93065 shares of Viacom
Class B Common Stock, (ii) 0.93065 Contingent Value Rights, (iii) 0.5
three-year Warrants to purchase Viacom Class B Common Stock, (iv) 0.3 five-year
Warrants to purchase Viacom Class B Common Stock and (v) $17.50 in principal
amount of 8% exchangeable subordinated debentures of Viacom.

QVC's proposal consisted  of a tender offer (the "QVC Offer") for 50.1% of the
outstanding Shares, on a fully diluted basis, at $104 per Share to be followed
by a merger in which each remaining Share would be converted into the right to
receive (i) 1.2361 shares of QVC Common Stock, (ii) 0.2386 shares of a new
series of 6% cumulative non-convertible exchangeable preferred stock and (iii)
0.32 ten-year Warrants to purchase QVC Common Stock.  At a meeting held on 
February 4, 1994, the Company's Board of Directors recommended that 
stockholders ac-

                                       19




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


cept the Viacom Offer and reject the QVC Offer.  At that time, the Company
entered into an Amended and Restated Merger Agreement with Viacom (the
"Restated Viacom Merger Agreement").

As of midnight on February 14, 1994, approximately 74.6% of the outstanding
Shares, on a fully diluted basis, had been validly tendered pursuant to the
Viacom Offer and not withdrawn.  As a result, pursuant to the Bidding
Procedures, on February 15, 1994 Viacom waived certain conditions to the Viacom
Offer and extended the offer until March 1, 1994 and QVC terminated the QVC
Offer.  Immediately after midnight on March 1, 1994, all conditions to the
Viacom Offer were deemed to have been satisfied and Viacom accepted for payment
61,657,432, of the Shares validly tendered and not withdrawn pursuant to the
Viacom Offer.

Pursuant to the Restated Viacom Merger Agreement, a special meeting of the
Company's stockholders will be called to act on the Viacom Second- Step Merger.
The approval of holders of a majority of all outstanding voting shares of both
Viacom and the Company is required to approve the merger.  The approval by
Viacom's stockholders is assured by means of a voting agreement between
Viacom's parent corporation and the Company.  The approval by Paramount's
stockholders is assured since Viacom now owns a majority of the outstanding
Shares.

The Restated Viacom Merger Agreement also provides that consummation of the
Viacom Second-Step Merger is subject to certain customary conditions.

                          Acquisition and Disposition
                                 Of Businesses

In February 1994, the Company acquired Macmillan Publishing Company and certain
other assets of Macmillan Inc., a leading book publisher, for approximately
$553 million.

In June 1993, the Company agreed to sell Prentice Hall Legal and Financial
Services, Prentice Hall Legal Practice Management and Prentice Hall
Professional Software, three of its Publishing software and information
services units, to Information America, Inc.  This agreement was terminated in
October 1993.

                                       20



                          Report of Independent Auditors


Stockholders and Board of Directors
Paramount Communications Inc.


     In connection with our audits of the consolidated financial statements of
Paramount Communications Inc. as of April 30, 1993 and October 31, 1992 and 
1991, and for the six-month period ended April 30, 1993 and for each of the
three years in the period ended October 31, 1992, we have also audited the
consolidated schedules included in this filing on Form 10-K/A as listed in the
accompanying index.

     In our opinion, the consolidated schedules referred to above present
fairly, in all material respects, the information required to be stated 
therein.



                                                           ERNST & YOUNG

New York, New York
August 27, 1993


                                       21


          SCHEDULE I --- MARKETABLE SECURITIES --- OTHER INVESTMENTS

                         PARAMOUNT COMMUNICATIONS INC.
                               AT APRIL 30, 1993
                                 (IN MILLIONS)



- -----------------------------------------------------------------------------------------------------------------------------------
   COL. A                                     COL. B               COL. C                     COL. D               COL. E 
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                AMOUNT  AT WHICH   
                                            NUMBER  OF                                                           EACH PORTFOLIO
                                            SHARES OR                                          MARKET          OF EQUITY SECURITY
                                         UNITS - PRINCIPAL                                    VALUE OF          ISSUES AND EACH
                                            AMOUNT  OF                                       EACH ISSUE         OTHER SECURITY
    NAME OF ISSUER                          BONDS AND             COST  OF                   AT BALANCE         ISSUE CARRIED IN
AND TITLE OF EACH ISSUE                       NOTES              EACH ISSUE                  SHEET DATE        THE BALANCE SHEET
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
United States Government and Agency                     
 Bonds, Notes and Bills . . . . . . . . . .   $ 425.8             $ 433.8                     $ 439.1             $ 433.8
                                                        
Commercial Paper/Corporate Obligations. . .      45.1                45.8                        46.6                45.8
                                                        
Asset-Backed Securities . . . . . . . . . .      16.6                16.8                        17.4                16.8
                                                        
Mortgage-Backed Securities. . . . . . . . .      71.5                73.3                        74.3                73.3
                                              -------             -------                     -------             -------
                                              $ 559.0             $ 569.7                     $ 577.4             $ 569.7
                                              -------             -------                     -------             -------
                                              -------             -------                     -------             -------
                              


                                      22


  SCHEDULE II --- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
             PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES

                        PARAMOUNT COMMUNICATIONS INC.
                       SIX MONTHS ENDED APRIL 30, 1993
                            (DOLLARS IN MILLIONS)
                                                                      
                                                                          
                                                                    
                                                                  
- --------------------------------------------------------------------------------------------------------------------------
                COL. A                                       COL. B           COL. C                     COL. D      
- --------------------------------------------------------------------------------------------------------------------------
                                                                                                       DEDUCTIONS 
                                                                                                -------------------------
                                                            BALANCE                                (1)           (2)
                                                          AT BEGINNING                           AMOUNTS       AMOUNTS
            NAME OF DEBTOR                                 OF PERIOD         ADDITIONS          COLLECTED    WRITTEN-OFF
- --------------------------------------------------------------------------------------------------------------------------
                                                                                                 
William Bernstein:  6% note payable . . . . . . . . . .                         $ 0.4             $ 0.4       

Rolando Blackman: 10% note payable; due in                                                                  
  monthly installments from September 15, 1994                                                              
  to August 15, 1995  . . . . . . . . . . . . . . . . .      $ 0.2                                          
                                                                                                            
David Checketts:  note payable; principal to be                                                             
  repaid the earlier of February 28, 1995 or 180 days                                                       
  after termination; interest rate set quarterly based                                                      
  on the 90 day commercial paper composite rate;                                                            
  secured by residential real estate  . . . . . . . . .        0.5                                          

Arthur Cohen:  6% note payable; principal to be repaid                                                      
  monthly with the balance due on demand or no later                                                        
  than October 31, 1995 . . . . . . . . . . . . . . . .        0.1                                          

Patrick Ewing:  10% note payable;                                                                           
   due September 1995   . . . . . . . . . . . . . . . .        3.0                                          

Robert Gutkowski:  6% note payable; due November 1,                                                         
  1993; interest due on first business day of each month                                                    
  commencing February 1, 1993; secured by residential                                                       
  real estate . . . . . . . . . . . . . . . . . . . . .        0.4                                          
                                                                                                            
Robert Klingensmith:  10% note payable; principal
  to be repaid out of future compensation;
  secured by residential real estate  . . . . . . . . .        0.3                                  0.3



                                                      
                                                      
                                               
                                             
- --------------------------------------------------------------------------------------------------------------------------
                 COL. A                                                  COL. E
- --------------------------------------------------------------------------------------------------------------------------
                                                                 BALANCE AT END OF PERIOD
                                                              -------------------------------
                                                                  (1)                (2)
             NAME OF DEBTOR                                     CURRENT           NOT CURRENT            
- --------------------------------------------------------------------------------------------------------------------------
                                                                         
William Bernstein:  6% note payable . . . . . . . . . . 

Rolando Blackman: 10% note payable; due in            
  monthly installments from September 15, 1994        
  to August 15, 1995  . . . . . . . . . . . . . . . . .                            $ 0.2
                                                      
David Checketts:  note payable; principal to be       
  repaid the earlier of February 28, 1995 or 180 days 
  after termination; interest rate set quarterly based
  on the 90 day commercial paper composite rate;      
  secured by residential real estate  . . . . . . . . .                              0.5

Arthur Cohen:  6% note payable; principal to be repaid
  monthly with the balance due on demand or no later  
  than October 31, 1995 . . . . . . . . . . . . . . . .           $ 0.1

Patrick Ewing:  10% note payable;                     
   due September 1995 . . . . . . . . . . . . . . . . .                              3.0

Robert Gutkowski:  6% note payable; due November 1,   
  1993; interest due on first business day of each month
  commencing February 1, 1993; secured by residential 
  real estate . . . . . . . . . . . . . . . . . . . . .             0.4
                                                      
Robert Klingensmith:  10% note payable; principal     
  to be repaid out of future compensation;            
  secured by residential real estate  . . . . . . . . .                 

                                      23



   SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
             PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES

                         PARAMOUNT COMMUNICATIONS INC.
                        SIX MONTHS ENDED APRIL 30, 1993
                             (DOLLARS IN MILLIONS)                   
                                                                  
                                                             
- --------------------------------------------------------------------------------------------------------------------------------
                        COL. A                              COL. B             COL. C                    COL. D  
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                       DEDUCTIONS
                                                                                                --------------------------
                                                            BALANCE                                (1)            (2)         
                                                          AT BEGINNING                           AMOUNTS        AMOUNTS      
                   NAME OF DEBTOR                          OF PERIOD          ADDITIONS         COLLECTED      WRITTEN-OFF  
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Earl Lestz:  8% note payable; principal to be                                                                               
  repaid out of future compensation . . . . . . . . . .      0.5                                  0.1                       
                                                                                                                            
Barry London:  6% note payable  . . . . . . . . . . . .                         0.1               0.1                       
                                                                                                                            
Anthony Mason:  10% note payable;  due in 48 semi-                                                                          
  monthly installments beginning July 15, 1993  . . . .      0.1                                                            
                                                                                                                            
Patrick Purcell:  7% note payable; principal to                                                                             
  be repaid out of future compensation;                                                                                       
  secured by residential real estate. . . . . . . . . .      0.6                0.1                
                                                                                                                            
Patrick Riley:                                                                                                              
  Relocation bridge loan; due no later than                                                                                   
    August 31, 1993; interest rate set quarterly based                                                                        
    on the 90 day commercial paper composite rate;                                                                            
    secured by residential real estate. . . . . . . . .      1.0                                                          
  Note payable; due no later than December 31, 1996;                                                                       
    interest rate set quarterly based on the 90 day                                                                           
    commercial paper composite rate; secured by                                                                               
    residential real estate . . . . . . . . . . . . . .      2.0                                                          

Neil Smith:  note payable; principal to be repaid the                                                                       
  earlier of May 31, 1997 or 180 days after termination;                                                                    
  interest rate set quarterly based on the 90 day                                                                           
  commercial paper composite rate; secured by                                                                               
  residential real estate . . . . . . . . . . . . . . .      0.4                                                          
                                                           -----             -----              -----
                                                           $ 9.1             $ 0.6              $ 0.9                     
                                                           -----             -----              -----
                                                           -----             -----              -----
                                                             


- --------------------------------------------------------------------------------------------------------------------------------
                   COL. A                                                COL. E
- --------------------------------------------------------------------------------------------------------------------------------
                                                                 BALANCE AT END OF PERIOD
                                                               ------------------------------
                                                                 (1)                 (2)
               NAME OF DEBTOR                                  CURRENT            NOT CURRENT   
- --------------------------------------------------------------------------------------------------------------------------------
                                                                            
Earl Lestz:  8% note payable; principal to be         
  repaid out of future compensation . . . . . . . . . . .                             0.4
                                                      
Barry London:  6% note payable. . . . . . . . . . . . . .                       
                                                      
Anthony Mason:  10% note payable;  due in 48 semi-    
  monthly installments beginning July 15, 1993. . . . . .                             0.1
                                                      
Patrick Purcell:  7% note payable; principal to       
  be repaid out of future compensation;                 
  secured by residential real estate. . . . . . . . . . .          0.1                0.6
                                                      
Patrick Riley:                                        
  Relocation bridge loan; due no later than             
    August 31, 1993; interest rate set quarterly based  
    on the 90 day commercial paper composite rate;      
    secured by residential real estate. . . . . . . . . .          1.0
  Note payable; due no later than December 31, 1996; 
    interest rate set quarterly based on the 90 day     
    commercial paper composite rate; secured by         
    residential real estate . . . . . . . . . . . . . . .                             2.0
                                                      
Neil Smith:  note payable; principal to be repaid the 
  earlier of May 31, 1997 or 180 days after termination;
  interest rate set quarterly based on the 90 day     
  commercial paper composite rate; secured by         
  residential real estate . . . . . . . . . . . . . . . .                             0.4
                                                                 -----              -----
                                                                 $ 1.6              $ 7.2
                                                                 -----              -----
                                                                 -----              -----
                                              
                                      24


  SCHEDULE II --- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
             PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES

                        PARAMOUNT COMMUNICATIONS INC.
                         YEAR ENDED OCTOBER 31, 1992
                            (DOLLARS IN MILLIONS)

                                                                         
                                                                   
                                                               
- ------------------------------------------------------------------------------------------------------------------------------------
                    COL. A                                 COL. B             COL. C                    COL. D            
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     DEDUCTIONS           
                                                                                                ----------------------
                                                            BALANCE                                (1)          (2)       
                                                          AT BEGINNING                           AMOUNTS       AMOUNTS    
                   NAME OF DEBTOR                          OF PERIOD          ADDITIONS         COLLECTED    WRITTEN-OFF  
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Rolando Blackman: 10% note payable; due in                                                                                
  monthly installments from September 15, 1994                                                                            
  to August 15, 1995 . . . . . . . . . . . . . . . . . .                       $ 0.2                                     
                                                                                                                          
David Checketts:  note payable; principal to be                                                                           
  repaid the earlier of February 28, 1995 or 180 days                                                
  after termination; interest rate set quarterly based                                               
  on the 90 day commercial paper composite rate;                                                     
  secured by residential real estate . . . . . . . . . .                         0.5                
                                                                                                                          
Arthur Cohen:  6% note payable; principal to be repaid                                                                    
  monthly with the balance due on demand or no later                                                 
  than October 31, 1995    . . . . . . . . . . . . . . .                         0.1                
                                                                                                                          
Alan Cole-Ford:  6.8% note payable; due October 15,                                                                       
  1996; secured by residential real estate . . . . . . .     $  0.1                              $ 0.1 (A)                  
                                                                                                                          
Patrick Ewing:  10% note payable;                                                                                         
  due September 1995 . . . . . . . . . . . . . . . . . .        3.0                                  

Robert Gutkowski:  6% note payable; due November 1,                                                                        
  1993; interest due on first business day of each month                                             
  commencing February 1, 1993; secured by residential                                                
  real estate  . . . . . . . . . . . . . . . . . . . . .                         0.4                
                                                                                                                          
Robert Klingensmith:  10% note payable; principal                                                                         
  to be repaid out of future compensation;                                                           
  secured by residential real estate . . . . . . . . . .        0.8              0.1               0.6      
                                                              

                                                  
                                                
- ------------------------------------------------------------------------------------------------------------------------------------
                       COL. A                                                   COL. E
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                        BALANCE AT END OF PERIOD
                                                                      -----------------------------
                                                                        (1)                (2)
                   NAME OF DEBTOR                                     CURRENT           NOT CURRENT                   
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                 
Rolando Blackman: 10% note payable; due in               
  monthly installments from September 15, 1994           
  to August 15, 1995 . . . . . . . . . . . . . . . . . .                                    $0.2
                                                         
David Checketts:  note payable; principal to be          
  repaid the earlier of February 28, 1995 or 180 days    
  after termination; interest rate set quarterly based   
  on the 90 day commercial paper composite rate;         
  secured by residential real estate . . . . . . . . . .                                     0.5
                                                         
Arthur Cohen:  6% note payable; principal to be repaid   
  monthly with the balance due on demand or no later     
  than October 31, 1995  . . . . . . . . . . . . . . . .            $0.1
                                                         
Alan Cole-Ford:  6.8% note payable; due October 15,      
  1996; secured by residential real estate   . . . . . . 
                                                         
Patrick Ewing:  10% note payable;                        
   due September 1995  . . . . . . . . . . . . . . . . .                                     3.0
                                                         
Robert Gutkowski:  6% note payable; due November 1,            
  1993; interest due on first business day of each month 
  commencing February 1, 1993; secured by residential    
  real estate  . . . . . . . . . . . . . . . . . . . . .                                     0.4
                                                         
Robert Klingensmith:  10% note payable; principal        
  to be repaid out of future compensation;               
  secured by residential real estate . . . . . . . . . .             0.1                     0.2


- ------------------
Note A ---  Reclassified since individual is no longer an employee.

                                      25

  SCHEDULE II --- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
             PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES

                        PARAMOUNT COMMUNICATIONS INC.
                         YEAR ENDED OCTOBER 31, 1992
                            (DOLLARS IN MILLIONS)
                                                               
                                                                                                                    
- ----------------------------------------------------------------------------------------------------------------------------
                       COL. A                               COL. B             COL. C                    COL. D               
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                                       DEDUCTIONS 
                                                                                                --------------------------
                                                            BALANCE                                (1)              (2)      
                                                          AT BEGINNING                           AMOUNTS          AMOUNTS    
                   NAME OF DEBTOR                          OF PERIOD          ADDITIONS         COLLECTED       WRITTEN-OFF  
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Earl Lestz:  8% note payable; principal to be                                                                                
  repaid out of future compensation  . . . . . . . . . .       0.5                                                           
                                                                                                                             
Barry London:  7% note payable; due October 1992 . . . .                          3.0              3.0                       
                                                                                                                             
Anthony Mason:  10% note payable;  due in 48 semi-                                                                           
  monthly installments beginning July 15, 1993 . . . . .                          0.1                                        
                                                                                                                             
Patrick Purcell:  7% note payable; principal to                                                                              
  be repaid out of future compensation;                                                                                        
  secured by residential real estate . . . . . . . . . .       0.6                                                           
                                                                                                                             
Patrick Riley:                                                                                                               
  Relocation bridge loan; due no later than                                                                                    
    August 31, 1993; interest rate set quarterly based                                                                         
    on the 90 day commercial paper composite rate;                                                                             
    secured by residential real estate . . . . . . . . .       1.0                                                           
  Note payable; due no later than December 31, 1996;                                                                        
    interest rate set quarterly based on the 90 day                                                                            
    commercial paper composite rate; secured by                                                                                
    residential real estate  . . . . . . . . . . . . . .       2.0                                                           
                                                                                                                             
Neil Smith:  note payable; principal to be repaid the                                                                        
  earlier of May 31, 1997 or 180 days after termination;                                                                     
  interest rate set quarterly based on the 90 day                                                                            
  commercial paper composite rate; secured by                                                                                
  residential real estate  . . . . . . . . . . . . . . .                          0.4                                        
                                                             -----             ------            -----
                                                             $ 8.0             $  4.8            $ 3.7
                                                             -----             ------            -----
                                                             -----             ------            -----
 
                                                 
                                               
- ----------------------------------------------------------------------------------------------------------------------------
                       COL. A                                             COL. E
- ----------------------------------------------------------------------------------------------------------------------------
                                                                   BALANCE AT END OF PERIOD
                                                                   ------------------------
                                                                    (1)              (2)
                   NAME OF DEBTOR                                 CURRENT         NOT CURRENT     
- ----------------------------------------------------------------------------------------------------------------------------
                                                                            
Earl Lestz:  8% note payable; principal to be           
  repaid out of future compensation  . . . . . . . . . .                                0.5
                                                        
Barry London:  7% note payable; due October 1992 . . . .
                                                        
Anthony Mason:  10% note payable;  due in 48 semi-      
  monthly installments beginning July 15, 1993 . . . . .                                0.1
                                                        
Patrick Purcell:  7% note payable; principal to         
  be repaid out of future compensation;                   
  secured by residential real estate . . . . . . . . . .            0.1                 0.5
                                                        
Patrick Riley:
  Relocation bridge loan; due no later than               
    August 31, 1993; interest rate set quarterly based    
    on the 90 day commercial paper composite rate;        
    secured by residential real estate . . . . . . . . .            1.0
  Note payable; due no later than December 31, 1996;   
    interest rate set quarterly based on the 90 day       
    commercial paper composite rate; secured by           
    residential real estate  . . . . . . . . . . . . . .                                2.0
                                                        
Neil Smith:  note payable; principal to be repaid the   
  earlier of May 31, 1997 or 180 days after termination;
  interest rate set quarterly based on the 90 day       
  commercial paper composite rate; secured by           
  residential real estate  . . . . . . . . . . . . . . .                                0.4
                                                                  -----               -----
                                                                  $ 1.3               $ 7.8
                                                                  -----               -----
                                                                  -----               -----

                                      26





   SCHEDULE II --- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
             PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
                                      
                        PARAMOUNT COMMUNICATIONS INC.
                         YEAR ENDED OCTOBER 31, 1991
                            (DOLLARS IN MILLIONS)


                                                                 

- -------------------------------------------------------------------------------------------------------------------------------
                      COL. A                               COL. B              COL. C                     COL. D               
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
                                                                                                        DEDUCTIONS  
                                                                                               --------------------------------
                                                            BALANCE                                (1)              (2)        
                                                          AT BEGINNING                           AMOUNTS          AMOUNTS      
                   NAME OF DEBTOR                          OF PERIOD          ADDITIONS         COLLECTED       WRITTEN-OFF    
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                                   
James Boyd:  16% note payable;                                                                                                 
  relocation bridge loan . . . . . . . . . . . . . . . .      $0.2                                 $0.2                        
                                                                                                                               
Alan Cole-Ford:  6.8% note payable; due October 15,                                                                            
  1996; secured by residential real estate . . . . . . .                        $ 0.1                                          
                                                                                                                               
Richard Evans:  7% note payable; secured by                                                                                    
  residential real estate. . . . . . . . . . . . . . . .       0.2                                  0.2                        
                                                                                                                               
Patrick Ewing:  10% note payable;                                                                                              
  due September 1995 . . . . . . . . . . . . . . . . . .       5.0                                  2.0                        
                                                                                                                               
Robert Klingensmith:  10% note payable; principal                                                                              
  to be repaid out of future compensation;                                                                                     
  secured by residential real estate . . . . . . . . . .       0.8                0.1               0.1                        
                                                                                                                               
Earl Lestz:  8% note payable; principal to be                                                                                  
  repaid out of future compensation. . . . . . . . . . .       0.5                                                             
                                                                                                                               
Frank Mancuso:  6% note payable;
  secured by residential real estate . . . . . . . . . .       2.0                                  2.0





                                                     
                                                     
                                                     
                                              
                                            
- -------------------------------------------------------------------------------------------------------------------------------
                      COL. A                                    COL. E
- -------------------------------------------------------------------------------------------------------------------------------
                                                     
                                                        BALANCE AT END OF PERIOD 
                                                     ------------------------------
                                                         (1)              (2)
                   NAME OF DEBTOR                      CURRENT         NOT CURRENT                                          
- -------------------------------------------------------------------------------------------------------------------------------
                                                                
James Boyd:  16% note payable;                       
  relocation bridge loan . . . . . . . . . . . . . . .      
                                                     
Alan Cole-Ford:  6.8% note payable; due October 15,  
  1996; secured by residential real estate . . . . . .                     $0.1
                                                     
Richard Evans:  7% note payable; secured by          
  residential real estate. . . . . . . . . . . . . . .      
                                                     
Patrick Ewing:  10% note payable;                    
  due September 1995 . . . . . . . . . . . . . . . . .                      3.0
                                                     
Robert Klingensmith:  10% note payable; principal    
  to be repaid out of future compensation;                     
  secured by residential real estate . . . . . . . . .   $0.1               0.7
                                                     
Earl Lestz:  8% note payable; principal to be        
  repaid out of future compensation. . . . . . . . . .    0.1               0.4
                                                     
Frank Mancuso:  6% note payable;                     
  secured by residential real estate . . . . . . . . .
                                                     



                                      27




  SCHEDULE II --- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
             PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES

                        PARAMOUNT COMMUNICATIONS INC.
                         YEAR ENDED OCTOBER 31, 1991
                            (DOLLARS IN MILLIONS)
                                                                        
                                                                    
                                                               
- ----------------------------------------------------------------------------------------------------------------------------------
                       COL. A                               COL. B             COL. C                      COL. D              
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                         DEDUCTIONS
                                                                                                --------------------------
                                                            BALANCE                                (1)            (2)      
                                                          AT BEGINNING                           AMOUNTS        AMOUNTS    
                   NAME OF DEBTOR                          OF PERIOD          ADDITIONS         COLLECTED      WRITTEN-OFF       
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Patrick Purcell:  7% note payable; principal to be                                                                          
  repaid out of future compensation;                                                                                       
  secured by residential real estate. . . . . . . . . . .      0.7                0.1              0.2                          
                                                                                                                           
Patrick Riley:                                                                                                             
  Relocation bridge loan; due no later than                                                                             
     August 31, 1992; interest rate set quarterly based                                                                    
     on the 90 day commercial paper composite                                                                              
     rate; secured by residential real estate . . . . . .                         1.0                                         
  Note payable; due no later than December 31, 1996;                                                                       
     interest rate set quarterly based on the 90 day                                                                       
     commercial paper composite rate; secured                                                                              
     by residential real estate . . . . . . . . . . . . .                         2.0               
                                                             -----             ------            -----
                                                             $ 9.4             $  3.3            $ 4.7                    
                                                             -----             ------            -----
                                                             -----             ------            -----
                                                               



                                                        
                                                        
                                                 
                                               
- ----------------------------------------------------------------------------------------------------------------------------------
                       COL. A                                               COL. E
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                    BALANCE AT END OF PERIOD
                                                                  ----------------------------
                                                                    (1)               (2)
                   NAME OF DEBTOR                                 CURRENT          NOT CURRENT
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                           
Patrick Purcell:  7% note payable; principal to be      
  repaid out of future compensation;                    
  secured by residential real estate . . . . . . . . . . .         0.1                 0.5
                                                        
Patrick Riley:                                          
  Relocation bridge loan; due no later than          
     August 31, 1992; interest rate set quarterly based 
     on the 90 day commercial paper composite           
     rate; secured by residential real estate  . . . . . .         1.0
  Note payable; due no later than December 31, 1996;    
     interest rate set quarterly based on the 90 day    
     commercial paper composite rate; secured           
     by residential real estate  . . . . . . . . . . . . .                             2.0
                                                                 -----               -----
                                                                 $ 1.3               $ 6.7
                                                                 -----               -----
                                                                 -----               -----


                                      28



  SCHEDULE II --- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
             PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
                                      
                        PARAMOUNT COMMUNICATIONS INC.
                         YEAR ENDED OCTOBER 31, 1990
                            (DOLLARS IN MILLIONS)

                                                           
                                                                                                                     
- --------------------------------------------------------------------------------------------------------------------------------
                       COL. A                              COL. B              COL. C                    COL. D               
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                        DEDUCTIONS            
                                                                                             -----------------------------------
                                                            BALANCE                                (1)              (2)       
                                                          AT BEGINNING                           AMOUNTS          AMOUNTS     
                   NAME OF DEBTOR                          OF PERIOD          ADDITIONS         COLLECTED       WRITTEN-OFF   
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     
James Boyd:  16% note payable;                                                                                                
  relocation bridge loan . . . . . . . . . . . . . . . .                        $ 0.2                                          
                                                                                                                              
Richard Evans:  7% note payable; due                                                                                          
  December 1990; secured by                                                                                                   
  residential real estate  . . . . . . . . . . . . . . .    $ 0.2                                                            
                                                                                                                              
Patrick Ewing:  10% note payable; $2.0 million due                                                                            
  June 1991, $3.0 million due September 1991 or,                                                                              
  subject to certain conditions, September 1995  . . . .      5.0                                                            
                                                                                                                              
Sidney Ganis: 8.5% note payable;                                                                                              
  secured by second mortgage on residence  . . . . . . .      1.0                 0.1             $ 1.1  (A)                  
                                                                                                                              
Robert Klingensmith:  10% note payable; principal                                                                             
  to be repaid out of future compensation;                                                                                    
  secured by residential real estate . . . . . . . . . .                          0.8                                         
                                                                                                                              
Earl Lestz:  8% note payable; principal to be                                                                                 
  repaid out of future compensation  . . . . . . . . . .                          0.5                                         
                                                                                                                              
Frank Mancuso:  6% note payable; principal                                                                                    
  to be paid from proceeds on sale of former                                                                                  
  residence with balance to be paid within                                                                                    
  one year of termination of employment or                                                                                    
  within 60 days if employed elsewhere;                                                                                       
  secured by residential real estate . . . . . . . . . .      2.0                 0.1               0.1                       
                                                                                                                              


                                               
                                        
                                      
- --------------------------------------------------------------------------------------------------------------------------------
                       COL. A                                COL. E
- --------------------------------------------------------------------------------------------------------------------------------
                                                         BALANCE AT END OF PERIOD
                                                      ------------------------------
                                                        (1)                 (2)
                   NAME OF DEBTOR                     CURRENT            NOT CURRENT
- --------------------------------------------------------------------------------------------------------------------------------
                                                                  
James Boyd:  16% note payable;                 
  relocation bridge loan  . . . . . . . . . . . . . .   $ 0.2
                                               
Richard Evans:  7% note payable; due           
  December 1990; secured by                    
  residential real estate . . . . . . . . . . . . . .     0.2
                                          
Patrick Ewing:  10% note payable; $2.0 million due
  June 1991, $3.0 million due September 1991 or,
  subject to certain conditions, September 1995 . . .     5.0
                                               
Sidney Ganis: 8.5% note payable;               
  secured by second mortgage on residence . . . . . .
                                               
Robert Klingensmith:  10% note payable; principal
  to be repaid out of future compensation;     
  secured by residential real estate  . . . . . . . .     0.1               $0.7
                                               
Earl Lestz:  8% note payable; principal to be  
  repaid out of future compensation . . . . . . . . .     0.1                0.4
                                               
Frank Mancuso:  6% note payable; principal     
  to be paid from proceeds on sale of former   
  residence with balance to be paid within     
  one year of termination of employment or     
  within 60 days if employed elsewhere;        
  secured by residential real estate  . . . . . . . .                        2.0


- -----------------
Note A ---  Reclassified since individual is no longer an employee.

                                      29



  SCHEDULE II --- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
             PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
                                      
                        PARAMOUNT COMMUNICATIONS INC.
                         YEAR ENDED OCTOBER 31, 1990
                            (DOLLARS IN MILLIONS)


                                                                   
                                                               
- --------------------------------------------------------------------------------------------------------------------------------
                      COL. A                                COL. B            COL. C                    COL. D                 
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
                                                                                                       DEDUCTIONS              
                                                                                              ----------------------------------
                                                            BALANCE                                (1)               (2)       
                                                          AT BEGINNING                           AMOUNTS           AMOUNTS     
                   NAME OF DEBTOR                          OF PERIOD          ADDITIONS         COLLECTED         WRITTEN-OFF  
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Patrick Purcell:  7% note payable; principal to                                                                                
  be repaid out of future compensation;                                                                                        
  secured by residential real estate . . . . . . . . . .        0.9                                 0.2                        
                                                                                                                               
Lucille Salhany-Polcari: Non-interest bearing loan                                                                             
  payable in full within 60 days of termination. . . . .        0.1                                 0.1                        
                                                                                                                               
Ronald Suchodolski:  relocation bridge loan. . . . . . .        0.1                                 0.1                        
                                                              -----             ------            -----
                                                              $ 9.3             $  1.7            $ 1.6                        
                                                              -----             ------            -----
                                                              -----             ------            -----
   




                                                  
                                           
                                         
- --------------------------------------------------------------------------------------------------------------------------------
                      COL. A                                COL. E
- --------------------------------------------------------------------------------------------------------------------------------
                                                  
                                                    BALANCE AT END OF PERIOD
                                                  -------------------------------
                                                      (1)              (2)
                   NAME OF DEBTOR                   CURRENT         NOT CURRENT
- --------------------------------------------------------------------------------------------------------------------------------
                                                              
Patrick Purcell:  7% note payable; principal to   
  be repaid out of future compensation;           
  secured by residential real estate . . . . . . . .   0.1               0.6
                                                  
Lucille Salhany-Polcari: Non-interest bearing loan
  payable in full within 60 days of termination. . .      
                                                          
Ronald Suchodolski:  relocation bridge loan. . . . .   
                                                     -----             -----
                                                     $ 5.7             $ 3.7
                                                     -----             -----
                                                     -----             -----






                                      30


          SCHEDULE VII --- GUARANTEES OF SECURITIES OF OTHER ISSUERS

                         PARAMOUNT COMMUNICATIONS INC.
                               AT APRIL 30, 1993
                                 (IN MILLIONS)




- ------------------------------------------------------------------------------------------------------------------------------------
              COL. A                             COL. B                       COL. C                             COL. F
- ------------------------------------------------------------------------------------------------------------------------------------
                                                TITLE  OF                       TOTAL                                        
                                                ISSUE OF                       AMOUNT                                       
     NAME OF ISSUER OF SECURITIES              EACH CLASS                    GUARANTEED                            NATURE
       GUARANTEED BY PERSON FOR              OF SECURITIES                       AND                                 OF          
       WHICH STATEMENT IS FILED                GUARANTEED                    OUTSTANDING                          GUARANTEE      
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       
CBF Fabrics, Inc.                           Industrial Revenue Bond          $   2.7                       Principal and interest

Kayser-Roth Corporation                     Secured Notes                        1.0                       Principal and interest

Simmons Manufacturing                       Industrial Revenue Bond              9.7                       Principal and interest
  Company Inc.
   
Ontario Limited                             Revolving Credit                     2.4                       Principal and interest

Redevelopment Agency of                     Senior Secured Refunding Notes      39.0                       Principal and interest
  the City of Santa Clara,
  California

United Cinemas International                Revolving Credit                    87.7                       Principal and interest

Cinema International Corporation, N.V.      Revolving Credit                    12.4                       Principal and interest
                                                                             -------
                                                                             $ 154.9
                                                                             -------
                                                                             -------
    

- ---------------------
NOTE:    Information for Columns D, E, and G is not applicable at April 30,
         1993.





                                     31


                  SCHEDULE VIII --- VALUATION AND QUALIFYING ACCOUNTS

                         PARAMOUNT COMMUNICATIONS INC.
     SIX MONTHS ENDED APRIL 30, 1993 AND THREE YEARS ENDED OCTOBER 31, 1992  
                                 (IN MILLIONS)                               
      



- ------------------------------------------------------------------------------------------------------------------------------------
            COL. A                                    COL. B                      COL. C                   COL. D         COL. E
- ------------------------------------------------------------------------------------------------------------------------------------

                                                                                  ADDITIONS
                                                                         ----------------------------
                                                                                              (2)  
                                                                            (1)            CHARGED TO
                                                     BALANCE             CHARGED TO          OTHER                          BALANCE
                                                   AT BEGINNING           COSTS AND        ACCOUNTS--     DEDUCTIONS--     AT END OF
          DESCRIPTION                                OF PERIOD             EXPENSES         DESCRIBE        DESCRIBE         PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                
Allowance for doubtful accounts deducted from   
trade receivables on the balance sheet:         

Six months ended April 30, 1993 . . . . . . . .        $ 65.5                $ 8.0            $ 2.1(A)       $11.5(B)        $64.1
                                                       ------                -----            -----          -----           -----
                                                       ------                -----            -----          -----           -----
                                                                                                        
Year ended October 31, 1992 . . . . . . . . . .        $ 59.6                $16.6            $ 8.9(A)       $19.6(B)        $65.5
                                                       ------                -----            -----          -----           -----
                                                       ------                -----            -----          -----           -----
                                                                                                        
Year ended October 31, 1991 . . . . . . . . . .        $ 59.8                $19.4            $ 4.0(A)       $23.6(B)        $59.6
                                                       ------                -----            -----          -----           -----
                                                       ------                -----            -----          -----           -----
                                                                                                        
Year ended October 31, 1990 . . . . . . . . . .        $ 56.3                $10.4            $ 8.2(A)       $15.1(B)        $59.8
                                                       ------                -----            -----          -----           -----
                                                       ------                -----            -----          -----           -----

- ---------------------
Note A---Represents balance sheet reclassification related to certain
         entertainment receivables.

Note B---Primarily write-off of uncollectible accounts net of
         collections of accounts previously written-off.

                                     32


            SCHEDULE X --- SUPPLEMENTARY INCOME STATEMENT INFORMATION
                         

                        PARAMOUNT COMMUNICATIONS INC.
     SIX MONTHS ENDED APRIL 30, 1993 AND THREE YEARS ENDED OCTOBER 31, 1992    
                             (DOLLARS IN MILLIONS)                             
      





- ------------------------------------------------------------------------------------------------------------------------------------
                                    COL. A                                                      COL. B
- ------------------------------------------------------------------------------------------------------------------------------------
                                     ITEM                                            CHARGED TO COSTS AND EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------

                                                                             Six Months                                          
                                                                           Ended April 30              Year Ended October 31        
                                                                           --------------          ------------------------------
                                                                                1993                 1992       1991       1990   
                                                                                ----                 ----       ----       ----
                                                                                                                    
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . . . .            $21.1                $40.6      $33.1     $29.9
                                                                                                                                   
Taxes, other than payroll and                                                                                                      
  income taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . .             16.9                 46.8       48.3      40.7    
                                                                                                                                   
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             77.4                171.5      152.0     136.5    
                                                                                                                                   
Advertising costs . . . . . . . . . . . . . . . . . . . . . . . . . .            250.9                563.3      514.0     495.0    
                                                                                                    


- ----------------
Amounts for depreciation and amortization of preoperating costs and similar 
deferrals are not presented as such amounts do not exceed 1% of revenues.   





                                     33








                        PARAMOUNT COMMUNICATIONS INC.
                        PART I. FINANCIAL INFORMATION

                      CONSOLIDATED STATEMENT OF EARNINGS
                                  (Unaudited)



                                                                                    Three Months Ended
                                                                                         July 31
                                                                            ---------------------------------
                                                                                1993                 1992
                                                                            -----------           -----------
                                                                             (In millions, except per share)
                                                                                            
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $   1,351.7           $   1,063.9

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . .          842.4                 629.2
Selling, general and administrative expenses . . . . . . . . . . . . . .          318.7                 277.8
                                                                            -----------           ----------- 
                                                                                1,161.1                 907.0              
                                                                            -----------           ----------- 
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . .          190.6                 156.9
                                                                                          
Other expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (0.8)                 (1.0)

Interest and other investment income (expense) -- net                                       
        Interest expense . . . . . . . . . . . . . . . . . . . . . . . .          (21.0)                (25.0)  
        Interest and other investment income . . . . . . . . . . . . . .           16.4                  35.7
                                                                            -----------           ----------- 
                                                                                   (4.6)                 10.7
                                                                            -----------           ----------- 
Earnings before Income Taxes . . . . . . . . . . . . . . . . . . . . . .          185.2                 166.6
Provision for income taxes - Notes A and D . . . . . . . . . . . . . . .           64.8                  52.3
                                                                            -----------           ----------- 
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $     120.4           $     114.3
                                                                            ===========           =========== 
Average common and common equivalent                                   
        shares outstanding . . . . . . . . . . . . . . . . . . . . . . .          119.8                 119.6
Net earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .    $      1.01           $       .96
Cash dividends declared per common share . . . . . . . . . . . . . . . .            .20                   .20



                See notes to consolidated financial statements.




                                      -1-


                         PARAMOUNT COMMUNICATIONS INC.

                          CONSOLIDATED BALANCE SHEET




                                                                                    July 31           April 30  
                                                                                     1993               1993   
                                                                                     ----               ----
                                                                                  (Unaudited)          (Note)
                                                                                          (In millions)
                                                                                            
                                  ASSETS

Current Assets
 Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . .           $      397.0      $      372.6
 Short-term investments . . . . . . . . . . . . . . . . . . . . . . .                  602.6             569.7
 Trade receivables. . . . . . . . . . . . . . . . . . . . . . . . . .                1,097.4             829.6
 Inventories - Note C . . . . . . . . . . . . . . . . . . . . . . . .                  684.2             617.3
 Prepaid income taxes . . . . . . . . . . . . . . . . . . . . . . . .                  112.6             131.7
 Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . .                  379.5             400.2
                                                                                ------------      ------------
   Total Current Assets . . . . . . . . . . . . . . . . . . . . . . .                3,273.3           2,921.1

Property, Plant and Equipment
 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  248.8             210.8
 Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  595.3             591.4
 Machinery, equipment and other . . . . . . . . . . . . . . . . . . .                  684.9             606.9
                                                                                ------------      ------------
                                                                                     1,529.0           1,409.1
   Less allowance for depreciation  . . . . . . . . . . . . . . . . .                  363.6             336.1
                                                                                ------------      ------------
                                                                                     1,165.4           1,073.0

Other Assets
 Investment in affiliated companies . . . . . . . . . . . . . . . . .                  233.3             243.9
 Noncurrent receivables and inventories - Note C. . . . . . . . . . .                  612.3             689.8
 Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . .                1,505.7           1,517.5
 Deferred costs and other . . . . . . . . . . . . . . . . . . . . . .                  439.8             429.5
                                                                                ------------      ------------
                                                                                     2,791.1           2,880.7
                                                                                ------------      ------------
                                                                                $    7,229.8      $    6,874.8
                                                                                ============      ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
 Current maturities of long-term debt . . . . . . . . . . . . . . . .           $       10.0      $      109.8
 Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . .                  160.9             194.7
 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . .                   57.8              26.6
 Accrued expenses and other . . . . . . . . . . . . . . . . . . . . .                1,186.9           1,128.4
                                                                                ------------      ------------
   Total Current Liabilities. . . . . . . . . . . . . . . . . . . . .                1,415.6           1,459.5

Deferred Liabilities. . . . . . . . . . . . . . . . . . . . . . . . .                  804.7             805.9
Long-Term Debt, net of current maturities . . . . . . . . . . . . . .                1,004.1             707.3
Stockholders' Equity
 Common Stock, recorded at $1.00 par value; 600,000,000 shares
  authorized; shares outstanding, 118,384,222 at July 31, 1993
  (excluding 29,481,154 shares held in treasury) and 118,199,396 at
  April 30, 1993 (excluding 29,665,980 shares held in treasury) . . .                  118.4             118.2
 Paid-in surplus. . . . . . . . . . . . . . . . . . . . . . . . . . .                  722.4             712.8
 Retained earnings - Note D . . . . . . . . . . . . . . . . . . . . .                3,179.2           3,082.5
 Cumulative translation adjustments . . . . . . . . . . . . . . . . .                  (14.6)            (11.4)
                                                                                ------------      ------------
                                                                                     4,005.4           3,902.1
                                                                                ------------      ------------
                                                                                $    7,229.8      $    6,874.8
                                                                                ============      ============



Note:  Restated from audited financial statements.

                See notes to consolidated financial statements.




                                      -2-


                         PARAMOUNT COMMUNICATIONS INC.

                CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
                                  (Unaudited)



                                                                                               Three Months Ended
                                                                                                    July 31
                                                                                              --------------------
                                                                                                1993         1992
                                                                                                ----         ----
                                                                                                  (In millions)
                                                                                                     
Cash Flows from Operating Activities
  Gross cash flows provided from operating activities. . . . . . . . . . . . . . .            $ 206.6      $ 186.8
  Undistributed net earnings of unconsolidated affiliates. . . . . . . . . . . . .               (4.7)       (10.1)
  Theatrical and television inventories and broadcast rights                                  
    Gross additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (264.4)      (171.3)
    Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              254.6        196.0
  Decrease in network features and syndication licenses. . . . . . . . . . . . . .                8.1         27.7
  Increase in pre-publication costs. . . . . . . . . . . . . . . . . . . . . . . .              (16.8)       (22.0)
  Increase in trade receivables. . . . . . . . . . . . . . . . . . . . . . . . . .             (276.7)      (306.9)
  Decrease in inventories (other than theatrical and television) . . . . . . . . .               18.6         19.7
  Decrease in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . .               44.7          5.1
  Increase (decrease) in trade accounts payable. . . . . . . . . . . . . . . . . .              (36.2)        15.5
  Increase (decrease) in income taxes payable. . . . . . . . . . . . . . . . . . .               31.2         (9.9)
  Increase (decrease) in accrued expenses. . . . . . . . . . . . . . . . . . . . .               55.7         (5.2)
  Other -- net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (30.2)        (6.3)
                                                                                              -------      -------
    Net cash flows used for operating activities . . . . . . . . . . . . . . . . .               (9.5)       (80.9)

Cash Flows from Investment and Other Activities
  Expenditures for property, plant and equipment (excluding
    capitalized leases). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (33.4)       (22.8)
  Proceeds on disposal of property, plant and equipment. . . . . . . . . . . . . .                1.9          5.6
  Purchase price of acquired businesses (net of acquired cash) . . . . . . . . . .              (52.3)        (0.1)
  Decrease (increase) in investment in affiliated companies. . . . . . . . . . . .                0.2         (7.9)
  Increase in short-term and other investments . . . . . . . . . . . . . . . . . .              (32.3)      (192.6)
  Decrease in investments maturing after one year. . . . . . . . . . . . . . . . .                            23.5
  Decrease in notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . .                1.3          1.2
                                                                                              -------      -------
    Net cash flows used for investment and other activities. . . . . . . . . . . .             (114.6)      (193.1)

Cash Flows from Financing Activities
  Proceeds of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .              298.8
  Payments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .             (134.0)        (4.1)
  Issuance of Common Stock (excluding grants to employees) . . . . . . . . . . . .                7.4          6.7
  Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (23.7)       (23.7)
                                                                                              -------      -------
    Net cash flows provided from (used for) financing activities . . . . . . . . .              148.5        (21.1)
                                                                                              -------      -------
Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . . . . .               24.4       (295.1)
Cash and Cash Equivalents at Beginning of Year . . . . . . . . . . . . . . . . . .              372.6        463.7
                                                                                              -------      -------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . . . . . .            $ 397.0      $ 168.6
                                                                                              =======      =======




                See notes to consolidated financial statements.




                                      -3-


                         PARAMOUNT COMMUNICATIONS INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A -- Basis of Presentation

        The accompanying consolidated financial statements of Paramount
Communications Inc. and its consolidated subsidiaries (Company) have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.  In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included.  The results of operations of any
interim period are subject to year-end audit and adjustments, and are not
necessarily indicative of the results of operations for the fiscal year.  For
further information, refer to the consolidated financial statements and
accompanying footnotes included in the Company's transition report on Form 10-K
for the six months ended April 30, 1993.

        Certain amounts in the consolidated financial statements for the
prior-year period have been reclassified to conform to current presentation for
comparative purposes.

Change in Fiscal Year End

        In June 1993, the Board of Directors approved a change in the Company's
fiscal year end to April 30 from October 31.

Accounting Change

        In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes."  Effective May 1, 1993, the Company adopted the provisions of
this standard by restating its prior period financial statements beginning
November 1, 1988.  The effect of adopting SFAS No. 109 was  to decrease the
loss before cumulative effect of accounting change and net loss by $1.8 million
($.01 per share) for the six months ended April 30, 1993; increase earnings
before extraordinary item and net earnings by $4.0 million ($.04 per share) for
the year ended October 31, 1992; and, increase net earnings by $5.4 million
($.05 per share) and $1.0 million ($.01 per share) for the year ended October
31, 1991 and the three months ended July 31, 1992, respectively.  The
cumulative effect of adopting SFAS No. 109 as of October 31, 1990, decreased
the beginning balance of 1991's retained earnings by $45.4 million.

        Under SFAS No. 109, the liability method is used in accounting for
income taxes.  Under this method, deferred tax assets and liabilities are
determined based upon differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.  Prior to
the adoption of SFAS No.  109, income tax expense was determined using the
deferred method.  Deferred tax expense was based on items of income and expense
that were reported in different years in the financial statements and tax
returns and were measured at the tax rate in effect in the year the differences
originated.  For further detail, see Note D to the consolidated financial
statements. 

Note B -- Acquisition and Disposition of Businesses

        In May 1993, the Company purchased the remaining 80% it did not own of
Canada's Wonderland, Inc., a Canadian theme park, for approximately $52
million.   In June 1993, the Company agreed to sell  Prentice Hall Legal and
Financial Services, Prentice Hall Legal Practice Management and Prentice Hall
Professional Software, three of its Publishing software and information
services units, to Information America, Inc. (IA) for common stock, debt,
preferred stock, common stock warrants and options.   The transaction is
subject to approval by IA's shareholders.  At closing, the Company will own an
approximately 49% common stock interest in IA.   In September 1993, the Company
purchased television station WKBD-TV in Detroit from Cox Enterprises Inc. for
approximately $105 million.

        In August and October 1992, the Company acquired Kings Entertainment
Company and Kings Island Company, respectively, later renamed Paramount Parks,
which own and operate regional theme parks, for a total of approximately $400
million.

        During the periods ended July 31, 1993 and 1992, the Company also
acquired or sold certain other businesses.  The contributions of these
businesses in the aggregate were not significant to the Company's results of
operations for the periods presented, nor are they expected to have a material
effect on the Company's results on a continuing basis.



                                     -4-


                         PARAMOUNT COMMUNICATIONS INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note C -- Inventories

        Inventories are stated as follows (in millions):



                                                                     July 31          April 30                                
                                                                      1993              1993
                                                                    --------          --------
                                                                           
Current
        Lower of cost or net realizable value                    
                Finished goods   . . . . . . . . . . . . . . .   $      233.8    $      248.3
                Work in process  . . . . . . . . . . . . . . .            9.7            12.8
                Materials and supplies . . . . . . . . . . . .           30.8            29.5
                                                                 ------------    ------------
                                                                        274.3           290.6
        Theatrical and television productions
                Released   . . . . . . . . . . . . . . . . . .          214.8           176.9
                Completed, not released  . . . . . . . . . . .           74.7            32.7
                In process and other . . . . . . . . . . . . .           75.9            61.8
                                                                 ------------    ------------
                                                                        365.4           271.4
                                        
        Broadcast rights . . . . . . . . . . . . . . . . . . .           44.5            55.3
                                                                 ------------    ------------
                                                                        684.2           617.3
Noncurrent                                                      
        Theatrical and television productions                   
                Released . . . . . . . . . . . . . . . . . . .          144.2           155.3
                In process and other . . . . . . . . . . . . .          191.4           247.0
                                                                 ------------    ------------
                                                                        335.6           402.3
                                                                
        Broadcast rights . . . . . . . . . . . . . . . . . . .          100.3           107.0
                                                                 ------------    ------------
                                                                        435.9           509.3  
                                                                 ------------    ------------
                                                                 $    1,120.1    $    1,126.6
                                                                 ============    ============







                                     -5-








                         PARAMOUNT COMMUNICATIONS INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note D -- Income Taxes

        As described in Note A, effective May 1, 1993, the Company adopted SFAS
No. 109, "Accounting for Income Taxes" by restating its prior period financial
statements beginning November 1, 1988.

        Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred income tax assets and
liabilities as of April 30, 1993, were as follows (in millions):



                                                                                  April 30
                                                                                    1993    
                                                                                  --------
                                                                                  
Deferred tax assets:
        Costs of motion picture and television production . . . . . . . . .     $       89.2
        Employee compensation and other payroll related expenses. . . . . .             44.5
        Provisions for real estate write-down, relocation and prior year
                publishing charge . . . . . . . . . . . . . . . . . . . . .             40.5
        Sales returns and allowances  . . . . . . . . . . . . . . . . . . .             46.4
        Discontinued operations   . . . . . . . . . . . . . . . . . . . . .             34.2    
        Postretirement benefit obligation . . . . . . . . . . . . . . . . .             34.5
        Preacquisition net operating loss carryforwards of subsidiaries 
                 and other  . . . . . . . . . . . . . . . . . . . . . . . .             50.0
        Other   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             32.1
                                                                               -------------
                                                                                       371.4
        Valuation allowance for deferred tax assets . . . . . . . . . . . .            (50.0)
                                                                               -------------
                Total deferred tax assets . . . . . . . . . . . . . . . . .            321.4

Deferred tax liabilities:                                       
        Income on motion picture and television production. . . . . . . . .            (12.4)
        Expenses related to renovation project. . . . . . . . . . . . . . .             (9.2)           
        Self insurance  . . . . . . . . . . . . . . . . . . . . . . . . . .            (10.5)                  
        Deferred seasonal expenses. . . . . . . . . . . . . . . . . . . . .            (41.9)                  
        Other   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (18.4)                  
                                                                               -------------
                Total deferred tax liabilities  . . . . . . . . . . . . . .            (92.4)
                                                                               -------------
                Net deferred tax assets . . . . . . . . . . . . . . . . . .    $       229.0   
                                                                               =============


        The net change in the valuation allowance from October 31, 1992 to
April 30, 1993 was a decrease of $10.3 million.              

        Provision (benefit) for income taxes includes (in millions):



                                                                Six Months Ended    Year  Ended  
                                                                 April 30, 1993   October 31, 1992     
                                                                ----------------  ----------------
                                                                            
Current
        Federal  . . . . . . . . . . . . . . . . . . . . . .     $      (54.1)    $      62.4                    
        Foreign  . . . . . . . . . . . . . . . . . . . . . .             16.1            55.1                    
        State and other  . . . . . . . . . . . . . . . . . .              1.4             8.8
                                                                  -----------     -----------
                                                                        (36.6)          126.3       
Deferred                                                    
        Federal  . . . . . . . . . . . . . . . . . . . . . .             27.7             4.0                     
        Foreign  . . . . . . . . . . . . . . . . . . . . . .              1.2            (7.2)
                                                                  -----------     -----------
                                                                         28.9            (3.2)       
                                                                  -----------     -----------
                                                                 $       (7.7)    $     123.1       
                                                                 ============     ===========






                                     -6-


                        PARAMOUNT COMMUNICATIONS INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        The components of the provision (benefit) for deferred taxes were as
follows (in millions):



                                                                                      Six Months Ended       Year Ended
                                                                                       April 30, 1993     October 31, 1992
                                                                                      ----------------    ----------------
                                                                                                         
Costs of motion picture and television production  . . . . . . . . . . . . . . . . .        $(19.1)            $  4.0             
Income on motion picture and television production . . . . . . . . . . . . . . . . .          (0.8)               3.0
Valuation of inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          12.5              (13.9)
Employee compensation and other payroll related expenses . . . . . . . . . . . . . .          27.5               (8.4)
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (4.2)              (2.0)
Reversal of differences related to a prior year publishing charge  . . . . . . . . .          (0.5)              14.5
Expenses related to renovation project . . . . . . . . . . . . . . . . . . . . . . .                             (1.4) 
Self insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           9.0                8.7
Deferred seasonal expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          18.2
Provision for real estate write-down and relocation  . . . . . . . . . . . . . . . .         (13.6)
Other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (0.1)              (7.7)
                                                                                            ------             ------
                                                                                            $ 28.9             $ (3.2)       
                                                                                            ======             ======


        The components of earnings (loss) before income taxes were as follows
(in millions):



                                                                                      Six Months Ended      Year Ended
                                                                                       April 30, 1993     October 31, 1992
                                                                                      ----------------    ----------------
                                                                                                         
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $(47.8)            $301.8
Foreign  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          31.0               95.5
                                                                                            ------             ------
                                                                                            $(16.8)            $397.3
                                                                                            ======             ======


        A reconciliation between the provision (benefit) for income taxes
computed by applying the statutory Federal income tax rate to earnings (loss)
before income taxes and the actual provision (benefit) for income taxes is as
follows (in millions):



                                                                                      Six Months Ended        Year Ended
                                                                                       April 30, 1993      October 31, 1992
                                                                                      ----------------     ----------------
                                                                                                         
Provision (benefit) for income taxes at statutory rate . . . . . . . . . . . . . . .        $(5.7)             $135.1
Increase (decrease) in taxes arising from effect of:      
        Income (principally foreign) taxed at lower rates  . . . . . . . . . . . . .         (1.2)              (13.4)
        Amortization of intangible assets  . . . . . . . . . . . . . . . . . . . . .          1.3                13.1
        U. S. state and local income taxes . . . . . . . . . . . . . . . . . . . . .          1.0                 5.3
        Restoration of reserves no longer required . . . . . . . . . . . . . . . . .         (3.9)              (21.4)
        Other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          0.8                 4.4
                                                                                            -----              ------
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . .        $(7.7)             $123.1
                                                                                            =====              ======



        Total income tax payments were $59.6 and $120.0 million, respectively,
for the six months ended  April 30, 1993 and the year ended October 31,
1992.  The Company's share of the undistributed earnings of foreign
subsidiaries not included in its consolidated Federal income tax return,
that could be subject to additional income taxes if remitted, was
approximately $810 million at April 30, 1993.   No provision has been made
for taxes that could result from the remittance of such undistributed
earnings since the Company intends to reinvest these earnings indefinitely;
determination of the related unrecognized deferred U.S. income tax liability
is not practicable.





                                     -7-






                         PARAMOUNT COMMUNICATIONS INC.

                         PART I. FINANCIAL INFORMATION

                       CONSOLIDATED STATEMENT OF EARNINGS
                                  (UNAUDITED)





                                                               THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                   OCTOBER 31                      OCTOBER 31
                                                               ------------------             --------------------
                                                               1993          1992             1993            1992
                                                               ----          ----             ----            ----

                                                                               (IN MILLIONS, EXCEPT PER SHARE)

                                                                                              
REVENUES  . . . . . . . . . . . . . . . . . . . . . . . .    $1,391.8      $ 1,202.5       $ 2,743.5      $ 2,266.4

Cost of goods sold  . . . . . . . . . . . . . . . . . . .       918.4          727.5         1,760.8        1,356.7
Selling, general and administrative expenses  . . . . . .       313.7          313.6           632.4          591.4
                                                             --------      ---------       ---------      ---------
                                                              1,232.1        1,041.1         2,393.2        1,948.1
                                                             --------      ---------       ---------      ---------
OPERATING INCOME  . . . . . . . . . . . . . . . . . . . .       159.7          161.4           350.3          318.3

Other income (expense)  . . . . . . . . . . . . . . . . .        (2.7)           1.0            (3.5)

Interest and other investment income (expense) -- net
  Interest expense  . . . . . . . . . . . . . . . . . . .       (25.1)         (29.0)          (46.1)         (54.0)
  Interest and other investment income  . . . . . . . . .        17.0           28.6            33.4           64.3
                                                             --------      ---------       ---------      ---------
                                                                 (8.1)          (0.4)          (12.7)          10.3
                                                             --------      ---------       ---------      ---------
EARNINGS BEFORE INCOME TAXES  . . . . . . . . . . . . . .       148.9          162.0           334.1          328.6
Provision for income taxes - Note A . . . . . . . . . . .        52.1           50.8           116.9          103.1
                                                             --------      ---------       ---------      ---------

EARNINGS BEFORE EXTRAORDINARY ITEM  . . . . . . . . . . .        96.8          111.2           217.2          225.5
Extraordinary item -  Note C  . . . . . . . . . . . . . .                       (8.8)                          (8.8)
                                                             --------      ---------       ---------      --------- 

NET EARNINGS  . . . . . . . . . . . . . . . . . . . . . .    $   96.8      $   102.4       $   217.2      $   216.7
                                                             ========      =========       =========      =========

Average common and common equivalent
  shares outstanding  . . . . . . . . . . . . . . . . . .                                      120.2          119.4

Earnings per share
  Earnings before extraordinary item  . . . . . . . . . .    $    .80      $     .93       $    1.81      $    1.89
  Net earnings  . . . . . . . . . . . . . . . . . . . . .         .80            .86            1.81           1.82
Cash dividends declared per common share  . . . . . . . .         .20            .20             .40            .40



                See notes to consolidated financial statements.



                                     -1-



                         PARAMOUNT COMMUNICATIONS INC.

                           CONSOLIDATED BALANCE SHEET


                                                                                           OCTOBER 31         APRIL 30
                                                                                             1993               1993
                                                                                             ----               ----
                                                                                          (UNAUDITED)          (NOTE)
                                                                                                  (IN MILLIONS)
                            ASSETS
                                                                                                       
CURRENT ASSETS
   Cash and cash equivalents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  380.6          $  372.6
   Short-term investments   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       626.5             569.7
   Trade receivables  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,062.2             829.6
   Inventories - Note D   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       633.7             617.3
   Prepaid income taxes   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       135.4             131.7
   Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       402.9             400.2
                                                                                           --------          --------

      TOTAL CURRENT ASSETS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,241.3           2,921.1

PROPERTY, PLANT AND EQUIPMENT
   Land   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       252.3             210.8
   Buildings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       604.5             591.4
   Machinery, equipment and other . . . . . . . . . . . . . . . . . . . . . . . . . . .       715.4             606.9
                                                                                           --------          --------
                                                                                            1,572.2           1,409.1
      Less allowance for depreciation . . . . . . . . . . . . . . . . . . . . . . . . .       382.4             336.1
                                                                                           --------          --------
                                                                                            1,189.8           1,073.0
OTHER ASSETS
   Investment in affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . .       247.5             243.9
   Noncurrent receivables and inventories - Note D  . . . . . . . . . . . . . . . . . .       774.5             689.8
   Intangible assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,560.3           1,517.5
   Deferred costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       432.1             429.5
                                                                                           --------          --------
                                                                                            3,014.4           2,880.7
                                                                                           --------          --------
                                                                                           $7,445.5          $6,874.8
                                                                                           ========          ========
   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . .    $   10.1          $  109.8
   Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       196.5             194.7
   Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        64.5              26.6
   Accrued expenses and other   . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,170.5           1,128.4
                                                                                           --------          --------
      TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,441.6           1,459.5

DEFERRED LIABILITIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       871.2             805.9
LONG-TERM DEBT, net of current maturities   . . . . . . . . . . . . . . . . . . . . . .     1,002.9             707.3
STOCKHOLDERS' EQUITY
   Common Stock, recorded at $1.00 par value; 600,000,000 shares
      authorized; shares outstanding, 119,585,360 at October 31, 1993
      (excluding 28,280,016 shares held in treasury) and 118,199,396 at
      April 30, 1993 (excluding 29,665,980 shares held in treasury) . . . . . . . . . .       119.6             118.2
   Paid-in surplus  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       778.1             712.8
   Retained earnings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,252.2           3,082.5
   Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . .       (20.1)            (11.4)
                                                                                           --------          -------- 
                                                                                            4,129.8           3,902.1
                                                                                           --------          --------
                                                                                           $7,445.5          $6,874.8
                                                                                           ========          ========

Note:  Derived from audited financial statements.

                See notes to consolidated financial statements.

                                      -2-


                         PARAMOUNT COMMUNICATIONS INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)




                                                                                                SIX MONTHS ENDED
                                                                                                   OCTOBER 31
                                                                                              ----------------------
                                                                                              1993              1992
                                                                                              ----              ----
                                                                                                 (IN MILLIONS)
                                                                                                       
CASH FLOWS FROM OPERATING ACTIVITIES
   Earnings before extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . .    $  217.2          $  225.5
   Non-cash expenses
      Depreciation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        60.0              36.5
      Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1.9              (4.2)
      Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . .        43.5              40.4
      Amortization of pre-publication costs . . . . . . . . . . . . . . . . . . . . . .        59.3              63.5
   Undistributed net earnings of unconsolidated affiliates  . . . . . . . . . . . . . .       (10.7)             (5.6)
   Theatrical and television inventories and broadcast rights . . . . . . . . . . . . .
      Gross additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (629.6)           (437.6)
      Amortization  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       570.3             421.0
   Increase in network features and syndication licenses  . . . . . . . . . . . . . . .       (65.4)            (11.7)
   Increase in pre-publication costs  . . . . . . . . . . . . . . . . . . . . . . . . .       (40.9)            (42.8)
   Increase in trade receivables  . . . . . . . . . . . . . . . . . . . . . . . . . . .      (220.4)           (171.1)
   Decrease in inventories (other than theatrical and television)   . . . . . . . . . .        31.8              31.3
   Increase in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (0.6)            (44.6)
   Increase (decrease) in trade accounts payable    . . . . . . . . . . . . . . . . . .        (0.7)             11.9
   Increase in income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . .        37.9              54.1
   Increase in accrued expenses and other . . . . . . . . . . . . . . . . . . . . . . .       106.3              54.0
   Other -- net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        39.5              18.0
                                                                                           --------          --------

      NET CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES   . . . . . . . . . . . . . . .       199.4             238.6

CASH FLOWS FROM INVESTMENT AND OTHER ACTIVITIES
   Expenditures for property, plant and equipment (excluding capitalized leases)  . . .       (73.9)            (51.2)
   Proceeds on disposal of property, plant and equipment  . . . . . . . . . . . . . . .         4.7               6.6
   Purchase price of acquired businesses (net of acquired cash) . . . . . . . . . . . .      (157.3)           (423.6)
   Increase in investment in affiliated companies . . . . . . . . . . . . . . . . . . .        (7.9)             (2.5)
   Decrease (increase) in short-term and other investments  . . . . . . . . . . . . . .      (131.9)             94.7
   Decrease in investments maturing after one year  . . . . . . . . . . . . . . . . . .                          23.5
   Decrease in notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1.3               4.2
                                                                                           --------          --------

      NET CASH FLOWS USED FOR INVESTMENT AND OTHER ACTIVITIES   . . . . . . . . . . . .      (365.0)           (348.3)

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       298.8             246.7
   Payments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (136.7)           (181.2)
   Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . .                         (13.4)
   Issuance of Common Stock (excluding grants to employees) . . . . . . . . . . . . . .        58.9              14.0
   Acquisition of stock for the treasury  . . . . . . . . . . . . . . . . . . . . . . .                         (48.5)
   Dividends  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (47.4)            (47.3)
                                                                                           ---------         -------- 

      NET CASH FLOWS PROVIDED FROM (USED FOR) FINANCING ACTIVITIES  . . . . . . . . . .       173.6             (29.7)
                                                                                           --------          -------- 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  . . . . . . . . . . . . . . . . . . .         8.0            (139.4)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR  . . . . . . . . . . . . . . . . . . . .       372.6             463.7
                                                                                           --------          --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD  . . . . . . . . . . . . . . . . . . . . . .    $  380.6          $  324.3
                                                                                           ========          ========


                See notes to consolidated financial statements.


                                      -3-


                         PARAMOUNT COMMUNICATIONS INC.

                  NOTES  TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A -- BASIS OF PRESENTATION

    The accompanying consolidated financial statements of Paramount
Communications Inc. and its consolidated subsidiaries (Company) have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.  In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included.  The results of operations of any
interim period are subject to year-end audit and adjustments, and are not
necessarily indicative of the results of operations for the fiscal year.  For
further information, refer to the consolidated financial statements and
accompanying footnotes included in the Company's transition report on Form 10-K
for the six months ended April 30, 1993, as amended.

Accounting Change

    In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes."  Effective May 1, 1993, the Company adopted the provisions of this
standard by restating its prior period financial statements beginning November
1, 1988.  The effect of adopting SFAS No. 109 was to increase earnings before
extraordinary item and net earnings by $1.0 million ($.01 per share) and $2.0
million ($.02 per share) for the three and six months ended October 31, 1992,
respectively.

    Under SFAS No. 109, the liability method is used in accounting for income
taxes.  Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.  Prior to the adoption
of SFAS No. 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and
were measured at the tax rate in effect in the year the differences originated.

NOTE B -- ACQUISITION AND DISPOSITION OF BUSINESSES

    In May 1993, the Company purchased the remaining 80% it did not own of
Canada's Wonderland, Inc., later renamed Paramount Canada's Wonderland, Inc., a
Canadian theme park, for approximately $52 million.  In June 1993, the Company
agreed to sell Prentice Hall Legal and Financial Services, Prentice Hall Legal
Practice Management and Prentice Hall Professional Software, three of its
Publishing software and information services units, to Information America,
Inc.  This agreement was terminated in October 1993.  In September 1993, the
Company purchased television station WKBD-TV in Detroit from Cox Enterprises
Inc. for approximately $105 million.  In November 1993, the Company entered
into an agreement to purchase Macmillan Publishing Company and certain other
assets of Macmillan Inc., a leading book publisher, for approximately $553
million.  The transaction is expected to close in early 1994.

    The Company and BHC Communications, Inc., which is majority-owned by
Chris-Craft Industries, Inc., have agreed to form a joint venture to be known
as the Paramount Television Network which will provide prime-time television
programming primarily to broadcast affiliates nationwide in competition with
the three major networks and the Fox Broadcasting Network.  Subject to certain
conditions, the network is expected to begin operations in January 1995.

    In August and October 1992, the Company acquired Kings Entertainment
Company and Kings Island Company, respectively, later renamed Paramount Parks,
which own and operate regional theme parks, for a total of approximately $400
million.

    During the periods ended October 31, 1993 and 1992, the Company also
acquired or sold certain other businesses.  The contributions of these
businesses in the aggregate were not significant to the Company's results of
operations for the periods presented, nor are they expected to have a material
effect on the Company's results on a continuing basis.


                                     -4-


                         PARAMOUNT COMMUNICATIONS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE C -- EXTRAORDINARY ITEM

    In September 1992, the Company redeemed $175 million of 9 3/4% senior
debentures due 2016 for $1,061.25 per $1,000 principal amount.  The premium
paid by the Company and the write-off of related unamortized discount and
issuance costs resulted in a loss of $8.8 million, net of an income tax benefit
of $4.6 million.

NOTE D -- INVENTORIES

    Inventories are stated as follows (in millions):



                                                                                           OCTOBER 31         APRIL 30
                                                                                              1993              1993
                                                                                              ----              ----
                                                                                                       
Current
   Lower of cost or net realizable value
      Finished goods  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $   225.3         $   248.3
      Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         11.2              12.8
      Materials and supplies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         24.5              29.5
                                                                                           ---------         ---------
                                                                                               261.0             290.6
   Theatrical and television productions
      Released  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        164.5             176.9
      Completed, not released . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         51.4              32.7
      In process and other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        108.3              61.8
                                                                                           ---------         --------- 
                                                                                               324.2             271.4

   Broadcast rights.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         48.5              55.3
                                                                                           ---------         ---------
                                                                                               633.7             617.3
Noncurrent
   Theatrical and television productions
      Released  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         96.1             155.3
      In process and other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        315.6             247.0
                                                                                           ---------         ---------
                                                                                               411.7             402.3
   Broadcast rights   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        128.9             107.0
                                                                                           ---------         ---------
                                                                                               540.6             509.3
                                                                                           ---------         ---------
                                                                                           $ 1,174.3         $ 1,126.6
                                                                                           =========         =========


NOTE E -- TENDER OFFERS

    On October 25, 1993, Viacom Inc. (Viacom) commenced a tender offer for 51%
of the outstanding shares of Common Stock of the Company at a price of $80 per
share in cash, which offer, as subsequently revised, provides for the purchase
of 51% of the shares at a price of $85 per share in cash (as so revised, the
"Viacom Offer").  The Viacom Offer is being made pursuant to an Amended and
Restated Agreement and Plan of Merger, dated as of October 24, 1993, as
subsequently amended (the "Restated Merger Agreement"), between Viacom and the
Company, which amended and restated in its entirety the Agreement and Plan of
Merger, dated as of September 12, 1993, between Viacom and the Company.

    The Viacom Offer and the Restated Merger Agreement contemplate the merger
(the "Viacom Second - Step Merger") of the Company with Viacom on the terms,
and subject to the conditions, set forth in the Restated Merger Agreement.  In
the Viacom Second-Step Merger, each remaining share of Common Stock would be
converted into the right to receive (i) 0.20408 shares of Viacom Class A Common
Stock, (ii) 1.08317 shares of Viacom Class B Common Stock and (iii) 0.30408
shares of a new series of Viacom cumulative convertible exchangeable preferred
stock (the "Viacom Merger Stock Consideration").










                                     -5-


                         PARAMOUNT COMMUNICATIONS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The Restated Merger Agreement contemplates that if the Viacom Offer is not
consummated and certain other conditions are satisfied, the Company will be
merged with Viacom on alternate terms (the "Viacom Alternate Merger").  In the
Viacom Alternate Merger, each share will be converted into the right to
receive, at each stockholder's election, either (i) the Viacom Merger Stock
Consideration or (ii) $85 in cash.  If either alternative is oversubscribed,
stockholders will receive part of their consideration in cash or stock, as the
case may be.

    Pursuant to the Restated Merger Agreement, a special meeting of the
Company's common stockholders will be called to act on the Viacom Second-Step
Merger or the Viacom Alternate Merger.  The approval of holders of a majority
of all outstanding shares is required to approve either of the Viacom
Second-Step Merger or the Viacom Alternate Merger.  In addition, consummation
of the Merger is subject to certain conditions, including receipt of regulatory
approvals.

    If the Restated Merger Agreement is terminated under certain limited
circumstances, Viacom will be entitled to a termination payment of $100
million.  In addition, the Company has granted Viacom an option to purchase up
to 23,699,000 shares of Common Stock at an exercise price of $69.14 per share,
pursuant to a stock Option Agreement, dated as of September 12, 1993, as
subsequently amended (the "Stock Option Agreement"), between the Company and
Viacom.  Under the Stock Option Agreement, Viacom also has the right to cause
the Company to pay, in consideration for the cancellation of the option, an
amount equal to the excess of the then current market price of the shares over
the $69.14 exercise price multiplied by the number of shares as to which the
option is exercisable.  Viacom's rights under the Stock Option Agreement will
become exercisable upon the same conditions triggering the termination fee
under the Restated Merger Agreement.

    On October 27, 1993, QVC Network, Inc. (QVC) commenced an unsolicited
tender offer for approximately 51% of the Common Stock at a price of $80 per
share in cash, which offer, as subsequently revised, provides for the purchase
of approximately 51% of the Common Stock at a price of $90 per share in cash
(the "QVC Offer").  Although there is no binding agreement between QVC and 
the Company with respect to a merger of the two entities, QVC has stated its 
intention, if it acquires 51% of the Common Stock, to effect a second-step 
merger wherein each share of Common Stock would be exchanged for (i) 1.43 
shares of QVC common stock and (ii) 0.32 shares of a new series of QVC 
cumulative convertible exchangeable preferred stock.

    QVC commenced litigation in Delaware State Court, and on December 9, 1993
the Delaware Supreme Court affirmed the order of the Delaware Chancery Court
granting QVC's motion for a preliminary injunction prohibiting the Company from
amending the Company's Shareholder Rights Plan or taking other action to permit
completion of the currently pending Viacom Offer and related merger and denying 
Viacom the ability to exercise its rights pursuant to the Stock Option 
Agreement described above.

    On December 13, 1993 the Company's Board of Directors adopted procedures
for the purpose of considering any proposals to acquire the Company.
Proposals are required to be delivered no later than 4:00 p.m., New York
City time on Monday, December 20, 1993, unless extended.  The Company's
Board also determined that, under the current circumstances, it is unable
to take a position with respect to whether stockholders should accept or
reject either the QVC Offer or the Viacom Offer and requested that the
Company's stockholders take no action with respect to either the QVC Offer
or the Viacom Offer until they have been further advised of the Board's
positions.

                                     -6-







                         PARAMOUNT COMMUNICATIONS INC.

                         PART I. FINANCIAL INFORMATION

                       CONSOLIDATED STATEMENT OF EARNINGS
                                  (UNAUDITED)




                                                                          THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                              JANUARY 31                  JANUARY 31
                                                                          ------------------          -----------------
                                                                          1994         1993           1994         1993
                                                                          ----         ----           ----         ----
                                                                               (IN MILLIONS, EXCEPT PER SHARE)
                                                                                                    
REVENUES  . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $ 1,013.5    $   943.7      $ 3,757.0    $ 3,210.1

Cost of goods sold  . . . . . . . . . . . . . . . . . . . . . . .          784.2        648.8        2,545.0      2,005.5
Selling, general and administrative expenses  . . . . . . . . . .          281.6        293.1          914.0        884.5
                                                                       ---------    ---------      ---------    ---------
                                                                         1,065.8        941.9        3,459.0      2,890.0
                                                                       ---------    ---------      ---------    ---------
OPERATING INCOME (LOSS)   . . . . . . . . . . . . . . . . . . . .          (52.3)         1.8          298.0        320.1

Other income (expense)  . . . . . . . . . . . . . . . . . . . . .            0.8         (1.5)          (2.7)        (1.5)

Interest and other investment income (expense) -- net
    Interest expense  . . . . . . . . . . . . . . . . . . . . . .          (24.5)       (24.2)         (70.6)       (78.2)
    Interest and other investment income  . . . . . . . . . . . .           19.7         22.7           53.1         87.0
                                                                       ---------    ---------      ---------    ---------
                                                                            (4.8)        (1.5)         (17.5)         8.8
                                                                       ---------    ---------      ---------    ---------

EARNINGS (LOSS) BEFORE INCOME TAXES   . . . . . . . . . . . . . .          (56.3)        (1.2)         277.8        327.4
Provision (benefit) for income taxes - Note A . . . . . . . . . .          (19.7)        (1.3)          97.2        101.8
                                                                       ---------    ---------      ---------    ---------

EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
    EFFECT OF ACCOUNTING CHANGE . . . . . . . . . . . . . . . . .          (36.6)         0.1          180.6        225.6
Extraordinary item - Note D . . . . . . . . . . . . . . . . . . .                                                    (8.8)
Cumulative effect of accounting change - Note A . . . . . . . . .                       (66.9)                      (66.9)
                                                                       ---------    ---------      ---------    --------- 

NET EARNINGS (LOSS)   . . . . . . . . . . . . . . . . . . . . . .      $   (36.6)   $   (66.8)     $   180.6    $   149.9
                                                                       =========    =========      =========    =========

Average common and common equivalent
    shares outstanding  . . . . . . . . . . . . . . . . . . . . .                                      120.3        118.8

Earnings (loss) per share
    Earnings (loss) before extraordinary item and cumulative
       effect of accounting change  . . . . . . . . . . . . . . .      $    (.31)   $     .01      $    1.50    $    1.90
    Extraordinary item  . . . . . . . . . . . . . . . . . . . . .                                                    (.07)
    Cumulative effect of accounting change  . . . . . . . . . . .                        (.57)                       (.57)
    Net earnings (loss) . . . . . . . . . . . . . . . . . . . . .           (.31)        (.56)          1.50         1.26
Cash dividends declared per common share  . . . . . . . . . . . .            .20          .20            .60          .60



                See notes to consolidated financial statements.





                                      -1-



                         PARAMOUNT COMMUNICATIONS INC.

                           CONSOLIDATED BALANCE SHEET



                                                                                           JANUARY 31       APRIL 30
                                                                                              1994            1993
                                                                                              ----            ----
                                                                                          (UNAUDITED)        (NOTE)
                                                                                                 (IN MILLIONS)
                                                                                                    
                                    ASSETS
CURRENT ASSETS
  Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .               $  727.6        $  372.6
  Short-term investments  . . . . . . . . . . . . . . . . . . . . . . . . .                  153.9           569.7
  Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .                1,043.3           829.6
  Inventories - Note E  . . . . . . . . . . . . . . . . . . . . . . . . . .                  625.2           617.3
  Prepaid income taxes  . . . . . . . . . . . . . . . . . . . . . . . . . .                  180.2           131.7
  Prepaid expenses and other  . . . . . . . . . . . . . . . . . . . . . . .                  450.9           400.2
                                                                                          --------        --------
     TOTAL CURRENT ASSETS   . . . . . . . . . . . . . . . . . . . . . . . .                3,181.1         2,921.1
PROPERTY, PLANT AND EQUIPMENT
  Land  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  252.7           210.8
  Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  651.7           591.4
  Machinery, equipment and other. . . . . . . . . . . . . . . . . . . . . .                  705.4           606.9
                                                                                          --------        --------
                                                                                           1,609.8         1,409.1
    Less allowance for depreciation . . . . . . . . . . . . . . . . . . . .                  400.5           336.1
                                                                                          --------        --------
                                                                                           1,209.3         1,073.0
OTHER ASSETS
  Investment in affiliated companies  . . . . . . . . . . . . . . . . . . .                  209.0           243.9
  Noncurrent receivables and inventories - Note E . . . . . . . . . . . . .                  786.3           689.8
  Intangible assets   . . . . . . . . . . . . . . . . . . . . . . . . . . .                1,567.9         1,517.5
  Deferred costs and other  . . . . . . . . . . . . . . . . . . . . . . . .                  463.2           429.5
                                                                                          --------        --------
                                                                                           3,026.4         2,880.7
                                                                                          --------        --------
                                                                                          $7,416.8        $6,874.8
                                                                                          ========        ========
           LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current maturities of long-term debt  . . . . . . . . . . . . . . . . . .               $   10.4        $  109.8
  Trade accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . .                  150.1           194.7
  Income taxes payable  . . . . . . . . . . . . . . . . . . . . . . . . . .                   36.3            26.6
  Accrued expenses and other    . . . . . . . . . . . . . . . . . . . . . .                1,233.1         1,128.4
                                                                                          --------        --------
    TOTAL CURRENT LIABILITIES   . . . . . . . . . . . . . . . . . . . . . .                1,429.9         1,459.5
DEFERRED LIABILITIES  . . . . . . . . . . . . . . . . . . . . . . . . . . .                  799.8           805.9
LONG-TERM DEBT, net of current maturities   . . . . . . . . . . . . . . . .                1,000.3           707.3
STOCKHOLDERS' EQUITY
  Common Stock, recorded at $1.00 par value; 600,000,000 shares
    authorized; shares outstanding, 121,896,951 at January 31, 1994
    (excluding 25,965,097 shares held in treasury) and 118,199,396 at
    April 30, 1993 (excluding 29,665,980 shares held in treasury  . . . . .                  121.9           118.2
  Paid-in surplus   . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  894.3           712.8
  Retained earnings   . . . . . . . . . . . . . . . . . . . . . . . . . . .                3,191.4         3,082.5
  Cumulative translation adjustments  . . . . . . . . . . . . . . . . . . .                  (20.8)          (11.4)
                                                                                          --------        -------- 
                                                                                           4,186.8         3,902.1
                                                                                          --------        --------
                                                                                          $7,416.8        $6,874.8
                                                                                          ========        ========
Note:  Derived from audited financial statements.


                See notes to consolidated financial statements.





                                      -2-


                         PARAMOUNT COMMUNICATIONS INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)




                                                                                               NINE MONTHS ENDED
                                                                                                  JANUARY 31       
                                                                                            -----------------------
                                                                                                1994        1993
                                                                                                ----        ----
                                                                                                  (IN MILLIONS)
                                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES
   Earnings before extraordinary item and cumulative effect of accounting change  .        $  180.6       $  225.6
   Non-cash expenses
      Depreciation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            78.8           53.7
      Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (53.3)          (3.8)
      Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . .            45.7           42.4
      Amortization of pre-publication costs . . . . . . . . . . . . . . . . . . . .            74.6           76.9
   Undistributed net earnings of unconsolidated affiliates  . . . . . . . . . . . .           (10.3)         (18.7)
   Theatrical and television inventories and broadcast rights
      Gross additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (918.1)        (670.2)
      Amortization  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           838.4          625.5
   Decrease (increase) in network features and syndication licenses . . . . . . . .           (36.0)           5.3
   Increase in pre-publication costs  . . . . . . . . . . . . . . . . . . . . . . .           (62.0)         (59.8)
   Increase in trade receivables  . . . . . . . . . . . . . . . . . . . . . . . . .          (214.2)         (68.4)
   Decrease in inventories (other than theatrical and television)   . . . . . . . .            35.1           30.8
   Increase in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . .           (49.7)         (77.5)
   Increase (decrease) in trade accounts payable    . . . . . . . . . . . . . . . .           (47.1)          11.9
   Increase in income taxes payable . . . . . . . . . . . . . . . . . . . . . . . .             9.7           16.9
   Increase in accrued expenses and other . . . . . . . . . . . . . . . . . . . . .           168.4            2.6
   Other -- net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (22.0)         (80.4)
                                                                                           --------       --------
      NET CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES   . . . . . . . . . . . . .            18.6          112.8

CASH FLOWS FROM INVESTMENT AND OTHER ACTIVITIES
   Expenditures for property, plant and equipment (excluding
      capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (111.8)         (72.1)
   Proceeds on disposal of property, plant and equipment  . . . . . . . . . . . . .             5.1            7.2
   Purchase price of acquired businesses (net of acquired cash) . . . . . . . . . .          (166.8)        (423.6)
   Decrease (increase) in investment in affiliated companies  . . . . . . . . . . .            30.1           (1.9)
   Decrease in short-term and other investments . . . . . . . . . . . . . . . . . .           340.7          156.0
   Decrease in investments maturing after one year  . . . . . . . . . . . . . . . .                           23.5
   Decrease in notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . .             4.5            5.1
                                                                                           --------       --------
      NET CASH FLOWS PROVIDED FROM (USED FOR) INVESTMENT AND OTHER ACTIVITIES   . .           101.8         (305.8)

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .           298.8          246.7
   Payments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .          (140.1)        (184.6)
   Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . .                          (13.4)
   Issuance of Common Stock (excluding grants to employees) . . . . . . . . . . . .           147.6           31.4
   Acquisition of stock for the treasury  . . . . . . . . . . . . . . . . . . . . .                          (68.8)
   Dividends  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (71.7)         (70.9)
                                                                                           --------       -------- 
      NET CASH FLOWS PROVIDED FROM (USED FOR) FINANCING ACTIVITIES  . . . . . . . .           234.6          (59.6)
                                                                                           --------       -------- 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  . . . . . . . . . . . . . . . . .           355.0         (252.6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR  . . . . . . . . . . . . . . . . . .           372.6          463.7
                                                                                           --------       --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD  . . . . . . . . . . . . . . . . . . . .        $  727.6       $  211.1
                                                                                           ========       ========


                See notes to consolidated financial statements.





                                      -3-


                         PARAMOUNT COMMUNICATIONS INC.

                  NOTES  TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A -- BASIS OF PRESENTATION

    The accompanying consolidated financial statements of Paramount
Communications Inc. and its consolidated subsidiaries (Company) have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.  In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included.  The results of operations of any
interim period are subject to year-end audit and adjustments, and are not
necessarily indicative of the results of operations for the fiscal year.  For
further information, refer to the consolidated financial statements and
accompanying footnotes included in the Company's transition report on Form 10-K
for the six months ended April 30, 1993, as amended.

Accounting Changes

    Effective November 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."  This statement requires that the projected
future cost of providing postretirement benefits, such as health care and life
insurance, be recognized as an expense as employees render service instead of
when the benefits are paid.  The Company's previous practice was to recognize
the cost of such postretirement benefits when paid.

    The Company elected to record the cumulative effect of the accounting
change as a charge against income as of November 1, 1992, resulting in a
one-time charge of $66.9 million, net of income taxes of $34.5 million, or $.57
per share.  

    In February 1992, the Financial Accounting Standards Board (FASB) issued 
SFAS No. 109, "Accounting for Income Taxes."  Effective May 1, 1993, the 
Company adopted the provisions of this standard by restating its prior period 
financial statements beginning November 1, 1988.  The effect of adopting SFAS 
No. 109 was an adjustment which increased earnings before extraordinary item 
and cumulative effect of accounting change by $0.9 million ($.01 per share) and 
$2.9 million ($.03 per share) for the three and nine months ended January 31, 
1993, respectively.  This adjustment also decreased net loss and increased net 
earnings for the prior-year three- and nine-month periods, respectively.

    Under SFAS No. 109, the liability method is used in accounting for income
taxes.  Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.  Prior to the adoption
of SFAS No. 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and
were measured at the tax rate in effect in the year the differences originated.

NOTE B -- TENDER OFFERS AND MERGER PROPOSALS

    On December 13, 1993, the Company's Board of Directors adopted procedures
(the "Bidding Procedures") for the purpose of considering proposals to acquire
the Company.  Pursuant to the Bidding Procedures, from December 20, 1993
through February 1, 1994, Viacom Inc. (Viacom) and QVC Network, Inc. (QVC)
submitted a series of bids for the Company.  After the initial round of
bidding, the Company entered into a merger agreement with QVC.  Prior to the
February 1 bidding deadline established by the Bidding Procedures, Viacom
substantially increased its bid and the Company terminated the agreement with
QVC and entered into a merger agreement with Viacom.

    On February 1, 1994, both Viacom and QVC submitted their final proposals
for the acquisition of the Company.  Viacom's proposal consisted of a tender
offer (the "Viacom Offer") for 50.1% of the outstanding shares of the Company's
Common Stock (the "Shares"), on a fully diluted basis, at $107 per Share to be
followed by a merger (the "Viacom Second-Step Merger") in which each remaining
Share would be converted into the right to receive (i) 0.93065 shares of Viacom
Class B Common Stock, (ii) 0.93065 Contingent Value Rights, (iii) 0.5
three-year Warrants to purchase Viacom Class B Common Stock, (iv) 0.3 five-year
Warrants to purchase Viacom Class B Common Stock and (v) $17.50 in principal
amount of 8% exchangeable subordinated debentures of Viacom.





                                      -4-


                         PARAMOUNT COMMUNICATIONS INC.

                  NOTES  TO CONSOLIDATED FINANCIAL STATEMENTS


    QVC's proposal consisted  of a tender offer (the "QVC Offer") for 50.1% of
the outstanding Shares, on a fully diluted basis, at $104 per Share to be
followed by a merger in which each remaining Share would be converted into the
right to receive (i) 1.2361 shares of QVC Common Stock, (ii) 0.2386 shares of a
new series of 6% cumulative non-convertible exchangeable preferred stock and
(iii) 0.32 ten-year Warrants to purchase QVC Common Stock.

    At a meeting held on February 4, 1994, the Company's Board of Directors
recommended that stockholders accept the Viacom Offer and reject the QVC Offer.
At that time, the Company entered into an Amended and Restated Merger Agreement
with Viacom (the "Restated Viacom Merger Agreement").

    As of midnight on February 14, 1994, approximately 74.6% of the outstanding
Shares, on a fully diluted basis, had been validly tendered pursuant to the
Viacom Offer and not withdrawn.  As a result, pursuant to the Bidding
Procedures, on February 15, 1994 Viacom waived certain conditions to the Viacom
Offer and extended the offer until March 1, 1994 and QVC terminated the QVC
Offer.  Immediately after midnight on March 1, 1994, all conditions to the
Viacom Offer were deemed to have been satisfied and Viacom accepted for payment
61,657,432, of the Shares validly tendered and not withdrawn pursuant to the
Viacom Offer.

    Pursuant to the Restated Viacom Merger Agreement, a special meeting of the
Company's stockholders will be called to act on the Viacom Second-Step Merger.
The approval of holders of a majority of all outstanding voting shares of both
Viacom and the Company is required to approve the merger.  The approval by
Viacom's stockholders is assured by means of a voting agreement between
Viacom's parent corporation and the Company.  The approval by Paramount's
stockholders is assured since Viacom now owns a majority of the outstanding
Shares.

    The Restated Viacom Merger Agreement also provides that consummation of the
Viacom Second-Step Merger is subject to certain customary conditions.

NOTE C -- ACQUISITION AND DISPOSITION OF BUSINESSES

    In May 1993, the Company purchased the remaining 80% it did not own of
Canada's Wonderland, Inc., later renamed Paramount Canada's Wonderland, Inc., a
Canadian theme park, for approximately $52 million.  In September 1993, the
Company purchased television station WKBD-TV in Detroit from Cox Enterprises
Inc. for approximately $105 million.  In February 1994, the Company acquired
Macmillan Publishing Company and certain other assets of Macmillan Inc., a
leading book publisher, for approximately $553 million.

    The Company and BHC Communications, Inc., which is majority-owned by
Chris-Craft Industries, Inc., are forming a joint venture to be known as the
Paramount Television Network which will provide prime-time television
programming primarily to broadcast affiliates nationwide in competition with
the three major networks and the Fox Broadcasting Network.  The network is
expected to begin operations in January 1995.

    In August and October 1992, the Company acquired Kings Entertainment
Company and Kings Island Company, respectively, later renamed Paramount Parks,
which own and operate regional theme parks, for a total of approximately $400
million.

    During the periods ended January 31, 1994 and 1993, the Company also
acquired or sold certain other businesses.  The contributions of these
businesses in the aggregate were not significant to the Company's results of
operations for the periods presented, nor are they expected to have a material
effect on the Company's results on a continuing basis.

NOTE D --  EXTRAORDINARY ITEM

    In September 1992, the Company redeemed $175 million of 9 3/4% senior
debentures due 2016 for $1,061.25 per $1,000 principal amount.  The premium
paid by the Company and the write-off of related unamortized discount and
issuance costs resulted in a loss of $8.8 million, net of an income tax benefit
of $4.6 million.





                                      -5-


                         PARAMOUNT COMMUNICATIONS INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE E -- INVENTORIES

    Inventories are stated as follows (in millions):



                                                                                               JANUARY 31      APRIL 30
                                                                                                  1994           1993
                                                                                                  ----           ----
                                                                                                       
Current
  Lower of cost or net realizable value
    Finished goods  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $  223.2       $  248.3
    Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               14.5           12.8
    Materials and supplies  . . . . . . . . . . . . . . . . . . . . . . . . . . . .               22.3           29.5
                                                                                              --------       --------
                                                                                                 260.0          290.6
  Theatrical and television productions
    Released  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              222.0          176.9
    Completed, not released   . . . . . . . . . . . . . . . . . . . . . . . . . . .               27.8           32.7
    In process and other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               66.5           61.8
                                                                                              --------       --------
                                                                                                 316.3          271.4

  Broadcast rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               48.9           55.3
                                                                                              --------       --------
                                                                                                 625.2          617.3
Noncurrent
  Theatrical and television productions
    Released  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              120.1          155.3
    In process and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              332.2          247.0
                                                                                              --------       --------
                                                                                                 452.3          402.3
  Broadcast rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              116.3          107.0
                                                                                              --------       --------
                                                                                                 568.6          509.3
                                                                                              --------       --------
                                                                                              $1,193.8       $1,126.6
                                                                                              ========       ========






                                      -6-