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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Viacom Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
PRELIMINARY COPY
[LOGO OF VIACOM](R)
April 16, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Viacom Inc., which will be held at the Equitable Center, 787 Seventh Avenue
(at 51st Street), New York, New York, at 10:00 a.m. on Wednesday, May 23, 2001.
Holders of Class A Common Stock are being asked to vote on the matters listed on
the enclosed Notice of 2001 Annual Meeting of Stockholders.
National Amusements, Inc., which beneficially owns approximately 68% of the
Class A Common Stock, has advised the Company that it intends to vote its shares
of Class A Common Stock for each of these matters. Therefore, approval is
assured.
If you hold shares of Class A Common Stock, we urge you to mark, sign and
return the enclosed proxy card promptly, even if you anticipate attending in
person, to ensure that your shares of Class A Common Stock will be represented
at the Annual Meeting. If you do attend, you will, of course, be entitled to
vote your shares in person.
If you plan to attend the Annual Meeting and hold registered shares of
Class A Common Stock, you should mark the appropriate box on the enclosed proxy
card and an admission ticket will be sent to you. If you hold registered shares
of Class B Common Stock or you beneficially hold shares of Class A or Class B
Common Stock and you plan to attend the Annual Meeting, you should obtain an
admission ticket in advance by sending a written request, along with proof of
ownership, such as a bank or brokerage firm account statement, for beneficially
owned shares to the Manager - Investor Relations, Viacom Inc., 1515 Broadway,
52nd Floor, New York, New York 10036.
Thank you, and I look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Sumner M. Redstone
SUMNER M. REDSTONE
Chairman of the Board and
Chief Executive Officer
PRELIMINARY COPY
[LOGO OF VIACOM](R)
---------------------
VIACOM INC.
NOTICE OF 2001 ANNUAL MEETING
AND PROXY STATEMENT
---------------------
To Viacom Inc. Stockholders:
The Annual Meeting of Stockholders of Viacom Inc. will be held at the
Equitable Center, 787 Seventh Avenue (at 51st Street), New York, New York at
10:00 a.m. on Wednesday, May 23, 2001. The principal business of the meeting
will be consideration of the following matters:
1. The election of 18 directors;
2. The approval of the adoption of an amendment to the Viacom Inc. Restated
Certificate of Incorporation to increase (i) the number of shares of Class
A Common Stock authorized to be issued from 500 million to 750 million, and
(ii) the number of shares of Class B Common Stock authorized to be issued
from 3 billion to 10 billion;
3. The approval of the appointment of PricewaterhouseCoopers LLP to serve as
independent accountants until the 2002 Annual Meeting of Stockholders; and
4. Such other business as may properly come before the Annual Meeting or any
adjournment thereof.
By order of the Board of Directors,
/s/ Michael D. Fricklas
MICHAEL D. FRICKLAS
Secretary
April 16, 2001
PRELIMINARY COPY
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PROXY STATEMENT
-----------------
The enclosed Proxy is being solicited by the Board of Directors of Viacom
Inc. (the "Company" or "Viacom") for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on May 23, 2001. Holders of shares of the
Company's Class A Common Stock, $0.01 par value ("Class A Common Stock"), on the
books of the Company at the close of business on April 2, 2001 are entitled to
notice of and to vote at the Annual Meeting. The Company then had outstanding
[______________] shares of Class A Common Stock, each of such shares being
entitled to one vote, and [________________] shares of non-voting Class B Common
Stock, $0.01 par value ("Class B Common Stock" and, together with the Class A
Common Stock, "Common Stock").
The enclosed Proxy may be revoked at any time prior to being voted upon by
written notice to the Secretary of the Company, by submission of a Proxy bearing
a later date or by voting in person at the meeting. Each valid and timely Proxy
not revoked will be voted at the meeting in accordance with the instructions
thereon or if no instructions are specified thereon, then the Proxy will be
voted as recommended by the Board of Directors. The affirmative vote of the
holders of a majority of the shares of Class A Common Stock present in person or
represented by proxy and entitled to vote is required for the election of
directors and the appointment of the independent accountants. The affirmative
vote of the holders of a majority of the outstanding shares of Class A Common
Stock is required for the adoption of the proposed amendment to the Viacom Inc.
Restated Certificate of Incorporation. A broker non-vote with respect to the
election of directors or the appointment of the accountants will have no effect
on such matters. A broker non-vote with respect to the proposed amendment to the
Viacom Inc. Restated Certificate of Incorporation will have the effect of a vote
against the amendment. An abstention with respect to any matter brought before
the meeting will have the effect of a vote against such matter.
As of April 2, 2001, National Amusements, Inc. ("National Amusements")
beneficially owned approximately [______%] of the Class A Common Stock and
approximately [_______%] of the outstanding Class A Common Stock and Class B
Common Stock on a combined basis. Sumner M. Redstone, the controlling
stockholder of National Amusements, is Chairman of the Board and Chief Executive
Officer of the Company.
National Amusements has advised the Company that it intends to vote all of
its shares of Class A Common Stock in favor of the election of the 18 nominated
directors, the amendment of the Restated Certificate of Incorporation and the
appointment of PricewaterhouseCoopers LLP. Such action by National Amusements
will be sufficient to elect such directors, approve the amendment to the
Restated Certificate of Incorporation and approve the appointment of the
independent accountants without any action on the part of any other holder of
Class A Common Stock.
The complete mailing address of the principal executive offices of the
Company is 1515 Broadway, New York, New York 10036-5794. The Company intends to
commence its distribution of the Proxy Statement and the Proxy on or about April
16, 2001.
1
ELECTION OF DIRECTORS
The election of 18 directors of the Company is proposed, each to hold
office for one year and until his or her successor is elected and qualified. The
persons named in the enclosed Proxy will vote the shares of Class A Common Stock
covered by 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 the Company. If, for any reason, any of said nominees becomes
unavailable for election, the holders of the 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 will decline to do
so.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Set forth below is certain information concerning each nominee for director
of the Company. All of the nominees are currently directors of the Company.
Nominee for Company Offices and
Director* Principal Occupation**
--------- ----------------------
George S. Abrams................... Attorney associated with the law firm of Winer and Abrams in Boston,
Age 69 Massachusetts since 1969. Mr. Abrams served as the General Counsel and Staff
Director since 1987 Director of the United States Senate Judiciary Subcommittee on Refugees from
1965 through 1968. He is currently a member of the Boards of Trustees and
Visiting Committees of a number of art museums, arts-related organizations and
educational institutions, including The European Fine Arts Foundation, the
Museum of Fine Arts in Boston and the Harvard University Art Museums. Mr.
Abrams is a director of National Amusements and Sonesta International Hotels
Corporation.
David R. Andelman.................. Attorney associated with the law firm of Lourie and Cutler, P.C. in Boston,
Age 61 Massachusetts since 1964. Mr. Andelman serves as a director and treasurer of
Director since December 2000 Lourie & Cutler, P.C. He is a director of Downeast Food Distributors, Inc.,
Louisiana Marine Transport, Inc. and National Amusements.
George H. Conrades................. Chairman and Chief Executive Officer of Akamai Technologies, Inc. since April
Age 62 1999 and partner with Polaris Venture Partners since August 1998. Mr.
Director since May 2000 Conrades served as Executive Vice President of GTE Corporation ("GTE") and
President of GTE Internetworking from 1997 to 1998. Prior to the acquisition
of BBN Corporation by GTE in 1997, Mr. Conrades served as President and Chief
Executive Officer of BBN Corporation from 1994 to 1997 and was appointed
Chairman of the Board in 1995. In 1992, Mr. Conrades retired from
International Business Machines as Senior Vice President and as a member of
the Corporate Management Board, after serving in various management positions
since 1961. Mr. Conrades is a trustee of The Scripps Research Institute and
Ohio Wesleyan University. Mr. Conrades is a director of Cardinal Health, Inc.
and was a director of CBS Corporation ("CBS") until the merger of CBS with the
Company in May 2000 (the "CBS Merger") and a director of Infinity Broadcasting
Corporation ("Infinity") until the merger of Infinity with the Company in
February 2001 (the "Infinity Merger").
2
Nominee for Company Offices and
Director* Principal Occupation**
--------- ----------------------
Philippe P. Dauman................ Co-Chairman and Chief Executive Officer of DND Capital Partners, L.L.C., a
Age 47 private equity firm, since May 2000. Mr. Dauman served as Deputy Chairman of
Director since 1987 the Company from 1996 until May 2000 and Executive Vice President from 1994
until May 2000. From 1993 to 1998, Mr. Dauman also served as General Counsel
and Secretary of the Company. Prior to that, he was a partner in the law firm
of Shearman & Sterling in New York, which he joined in 1978. He is currently
a trustee of The Museum of the City of New York and a member of the Board of
Visitors of Columbia Law School. Mr. Dauman is a director of Blockbuster
Inc. ("Blockbuster"), Genuity Inc., Lafarge Corporation and National
Amusements.
William H. Gray III............... President and Chief Executive Officer of The College Fund/UNCF since 1991.
Age 59 From 1979 to 1991, Mr. Gray served as a member of the United States House of
Director since May 2000 Representatives and as house majority whip. He is a director of The Chase
Manhattan Bank, N.A., Dell Corporation, Electronic Data Systems Corporation,
Ezgov.com, J. P. Morgan Chase & Co., MBIA Inc., Pfizer Inc., The Prudential
Insurance Company of America, Rockwell International Corporation and Visteon
Corporation. Mr. Gray was a director of CBS until the CBS Merger.
Mel Karmazin...................... President and Chief Operating Officer since May 2000. Mr. Karmazin served as
Age 57 President and Chief Executive Officer of CBS from January 1999 until the CBS
Director since May 2000 Merger. He was President and Chief Operating Officer of CBS from April 1998
through December 1998. Mr. Karmazin joined CBS in December 1996 as Chairman
and Chief Executive Officer of CBS Radio and served as Chairman and Chief
Executive Officer of the CBS Station Group (Radio and Television) from May
1997 to April 1998. Prior to joining CBS, Mr. Karmazin served as President
and Chief Executive Officer of Infinity from 1981 until its acquisition by CBS
in December 1996. Mr. Karmazin has served as Chairman of Infinity from
December 1998 to date and served as its President and Chief Executive Officer
from December 1998 until the Infinity Merger. Mr. Karmazin is on the Board of
Trustees for The Museum of Television and Radio and is a director of
Blockbuster, the New York Stock Exchange, Inc. ("NYSE") and Westwood One,
Inc. Mr. Karmazin was a director of CBS until the CBS Merger and was a
director of Infinity until the Infinity Merger.
Jan Leschly....................... Chairman and Chief Executive Officer of Care Capital L.L.C., a private equity
Age 60 firm, since May 2000. Mr. Leschly served as the Chief Executive Officer of
Director since May 2000 SmithKline Beecham Corp. from 1994 until April 2000. Mr. Leschly served as
Chairman of SmithKline Beecham's Worldwide Pharmaceutical business from 1990
to 1994 and has been a director of SmithKline Beecham Corp. since 1990. Prior
to that, he was President and Chief Operating Officer of Squibb Corporation.
Before joining Squibb Corporation in 1979, he served as Executive Vice
President and President of the Pharmaceutical Division of Novo-Nordisk for
eight years. Mr. Leschly serves on The International Advisory Board of
DaimlerChrysler and is a member of the Business Council and Chairman of the
International Tennis Hall of Fame. Mr. Leschly is a director of the American
Express Co., The Maersk Group and Ventro Corporation and was a director of CBS
until the CBS Merger.
3
Nominee for Company Offices and
Director* Principal Occupation**
--------- ----------------------
David T. McLaughlin............... Chairman of the Board of Orion Safety Products (formerly Standard Fusee
Age 69 Corporation) since 1988 and Chief Executive Officer from 1988 to December 31,
Director since May 2000 2000. Mr. McLaughlin served as Chairman of The Aspen Institute from 1987 to
1988 and was appointed President and Chief Executive Officer in 1988, a
position he held until 1997. Upon his retirement from The Aspen Institute in
1997, he was named president emeritus. Mr. McLaughlin was President of
Dartmouth College from 1981 to 1987. He served as Chairman and Chief
Executive Officer of Toro Company from 1977 to 1981, after serving in various
management positions at Toro Company since 1970. Mr. McLaughlin became
Chairman of the Board of CBS in January 1999 and served as a director of CBS
from 1979 until the CBS Merger. He served as a director of Infinity until the
Infinity Merger. Mr. McLaughlin is a director of Atlas Air, Inc. and
PartnerRe Ltd.
Ken Miller........................ Vice Chairman of Credit Suisse First Boston Corporation since 1994. Mr.
Age 58 Miller served as President, Chief Executive Officer of The Lodestar Group, an
Director since 1987 investment firm, from 1988 to 1994. Prior to that, he was Vice Chairman of
Merrill Lynch Capital Markets. Mr. Miller is a director of the New York City
Investment Partnership, Refugees International and the United Nations
Association.
Leslie Moonves.................... President and Chief Executive Officer of CBS Television since 1998. He joined
Age 51 CBS as President, CBS Entertainment in 1995. Prior to that, Mr. Moonves was
Director since May 2000 President of Warner Bros. Television from 1993 when Warner Bros. and Lorimar
Television combined operations. From 1989 to 1993, he was President of Lorimar
Television. He is a director of the NCAA Foundation, the Academy of
Television Arts and Sciences Foundation and the Los Angeles Free Clinic. He
serves on the Board of Governors of UCLA Center for Communications Policy, The
Executive Board of the UCLA Medical Center, and is a trustee of the National
Council for Families and Television and the American Film Institute. Mr.
Moonves was a director of CBS until the CBS Merger.
Brent D. Redstone................. Director of National Amusements. Mr. Redstone served as Special Counsel to
Age 50 the law firm of Davis, Graham and Stubbs, L.L.P. in Denver, Colorado from July
Director since 1991 1998 to January 2000. He previously served as a member of the Board of
Directors of the American Prosecutors Research Institute, located in
Alexandria, Virginia. He served as Assistant District Attorney for Suffolk
County, Massachusetts from 1977 to 1991.
4
Nominee for Company Offices and
Director* Principal Occupation**
--------- ----------------------
Shari Redstone.................... President of National Amusements since January 2000. Prior to that, Ms.
Age 47 Redstone served as Executive Vice President of National Amusements since
Director since 1994 1994. She practiced law from 1978 to 1993; her practice included corporate
law, estate planning and criminal law. Ms. Redstone participated on the
Executive Committee at the Boston University School of Law in the early
1980's. Ms. Redstone is a member of the Board of Directors and Executive
Committee for the National Association of Theatre Owners, Co-Chairman of
MovieTickets.com, Inc., Chairman and Chief Executive Officer of CineBridge
Ventures, Inc., a member of the Board of Trustees at Dana Farber Cancer
Institute and a member of the Board of Directors at Combined Jewish
Philanthropies. She also is a member of the Board of Trustees at Tufts
University, a member of the Advisory Committee for Tufts Hillel and a member
of the Board of Overseers at Brandeis University. Ms. Redstone is a director
of National Amusements.
Sumner M. Redstone................ Chairman of the Board of the Company since 1987 and Chief Executive Officer
Age 77 since 1996. Mr. Redstone has served as Chairman of the Board of National
Director since 1986 Amusements since 1986 and Chief Executive Officer of National Amusements since
1967. He also served as President of National Amusements from 1967 through
1999. He is a member of the Advisory Council for the Academy of Television
Arts and Sciences Foundation and is on the Board of Trustees for The Museum of
Television and Radio. Mr. Redstone served as the first Chairman of the Board
of the National Association of Theatre Owners and is currently a member of its
Executive Committee. Since 1982, Mr. Redstone has been a member of the
faculty of Boston University Law School, where he has lectured on
entertainment law, and since 1994, he has been a Visiting Professor at
Brandeis University. 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. He served as a director of Infinity until the Infinity Merger. Mr.
Redstone is a director of Blockbuster.
Frederic V. Salerno............... Vice Chairman and Chief Financial Officer of Verizon Communications Inc.
Age 57 ("Verizon"), formerly Bell Atlantic Corporation ("Bell Atlantic"), since June
Director since 1994 2000. Prior to that, Mr. Salerno served as Senior Executive Vice President
and Chief Financial Officer/Strategy and Business Development of Bell Atlantic
since August 1997. Prior to the merger of Bell Atlantic and NYNEX Corporation
("NYNEX"), Mr. Salerno served as Vice Chairman - Finance and Business
Development of NYNEX from 1994 to 1997. Mr. Salerno was Vice Chairman of the
Board of NYNEX and President of the Worldwide Services Group from 1991 to
1994. Mr. Salerno is a director of Avnet Inc. and The Bear Stearns Companies,
Inc.
5
Nominee for Company Offices and
Director* Principal Occupation**
--------- ----------------------
William Schwartz.................. Counsel to Cadwalader, Wickersham & Taft since 1988. Mr. Schwartz also served
Age 67 as Vice President for Academic Affairs (the chief academic officer) of Yeshiva
Director since l987 University from 1993 to July 1998 and has been University Professor of Law at
Yeshiva University and the Cardozo School of Law since 1991. He was Dean of
the Boston University School of Law from 1980 to 1988 and a professor of law
at Boston University from 1955 to 1991. Mr. Schwartz was Chairman of the
Board of UST Corporation and is a member of the Advisory Board of WCI Steel,
Inc. He is 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.
Ivan Seidenberg................... President and Co-Chief Executive Officer of Verizon (formerly Bell Atlantic)
Age 54 since June 2000. Prior to that, Mr. Seidenberg served as Chairman of the
Director since 1995 Board of Bell Atlantic since December 1998 and Chief Executive Officer since
June 1998. Mr. Seidenberg served as Vice Chairman, President and Chief
Operating Officer of Bell Atlantic from 1997 to 1998. Prior to the merger of
Bell Atlantic and NYNEX, he served as Chairman and Chief Executive Officer of
NYNEX since 1995 and before that as President and Chief Executive Officer of
NYNEX from January 1995 to March 1995. Previously, he served as President and
Chief Operating Officer of NYNEX during 1994 and as Vice Chairman of NYNEX
from 1991 to 1995. Mr. Seidenberg became a director of NYNEX in 1991. He is
a director of American Home Products Corporation, Boston Properties, Inc., CVS
Corporation, Honeywell International Inc. and Verizon.
Patty Stonesifer.................. Co-Chair and President of the Bill and Melinda Gates Foundation (the
Age 44 "Foundation") since 1999. From 1997 to 1999, Ms. Stonesifer served as
Director since May 2000 Chairwoman and President of the Gates Learning Foundation until it combined
with the William H. Gates Foundation to form the Foundation. Prior to that,
Ms. Stonesifer ran her own management consulting firm from 1996 to 1997. From
1988 to 1996, she held various senior management positions at Microsoft
Corporation including Senior Vice President, Interactive Media Division, and
Senior Vice President, Consumer Division. Ms. Stonesifer is a director of
Amazon.com and she was a director of CBS until the CBS Merger.
Robert D. Walter.................. Founder, Chairman and Chief Executive Officer of Cardinal Health, Inc. since
Age 55 1971. He is a member of the Boards of Trustees of Battelle Memorial Institute
Director since May 2000 and Ohio University. Mr. Walter is a director of Bank One Corporation and was
a director of CBS until the CBS Merger and a director of Infinity until the
Infinity Merger.
______________________
* Brent Redstone is the son of Sumner Redstone, and Shari Redstone is Sumner
Redstone's daughter. None of the other nominees for director is related to
any other director or executive officer of the Company by blood, marriage or
adoption.
** National Amusements and Blockbuster are affiliates of the Company.
6
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 2000, the Board of Directors held eight (8) regular meetings and two
(2) special meetings.
Set forth below is certain information concerning the standing committees
of the Board of Directors before and after the CBS Merger.
Board Committees before the CBS Merger
Number of Meetings
During the Period
from January 1, 2000
Committee Members of Committee through May 3, 2000
--------- -------------------- -------------------
Audit Committee.....................Messrs. Abrams, Miller, Salerno*, Schwartz and Seidenberg 1
Compensation Committee..............Messrs. Abrams, Miller, Brent Redstone, Salerno, 2
Schwartz* and Seidenberg and Ms. Shari Redstone
Senior Executive Compensation
Committee...........................Messrs. Salerno, Schwartz* and Seidenberg 3
Governance and Nominations
Committee...........................Messrs. Abrams*, Dauman, Miller, Seidenberg and Sumner 0
Redstone
_____________
* Chairman
Board Committees after the CBS Merger
Number of Meetings
During the Period from
May 4, 2000 through
Committee Members of Committee December 31, 2000
--------- -------------------- -----------------
Audit Committee.....................Messrs. Conrades, Miller, Salerno*, Schwartz, 4
Seidenberg and Walter and Ms. Stonesifer
Compensation Committee..............Messrs. Gray, Leschly, Salerno, Schwartz* and 6
Seidenberg and Ms. Stonesifer
Governance and Nominations
Committee...........................Messrs. Abrams*, Andelman**, Gray, Dauman, Karmazin, 0
Leschly, McLaughlin, Miller and Sumner Redstone
Officers Nominating Committee.......Mr. Karmazin Not Applicable
__________________
* Chairman
** Mr. Andelman became a member of the Governance and Nominations Committee
when he became a director on December 14, 2000. Mr. Dooley served as a
member of this Committee until he resigned from the Board on November 15,
2000.
7
The functions of the Audit Committee include considering the appointment of
the independent accountants for the Company, reviewing with the auditors the
plan and scope of the audit and audit fees, monitoring the adequacy of reporting
and internal controls and meeting periodically with internal auditors and
independent accountants. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. The Board has adopted a written charter for the Audit Committee, a
copy of which is attached to this Proxy Statement as Exhibit A. The Audit
Committee charter is reviewed once each year. The Board has determined that all
of the members of the Audit Committee are "independent" as defined by the rules
of the New York Stock Exchange.
The functions of the Compensation Committee include reviewing the Company's
general compensation strategy and reviewing and approving executive compensation
(except with respect to matters entrusted to the Officers' Nominating Committee
as described below). The Committee administers the Company's annual bonus
compensation plan, long-term compensation plans, stock option plans and
individual stock option grants, as well as its benefit plans. In addition, the
Committee administers the bonus plan (the "Senior Executive STIP") for
executives subject to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), determining the executive officers who participate in the
plan, establishing performance targets and determining specific bonuses for the
participants. The Compensation Committee does not have the power to approve the
annual compensation of any talent, as that term is commonly used in the media or
entertainment industries, or of any executive whose annual cash compensation,
measured as salary plus target bonus, is less than $1 million. These powers are
delegated to the Officers Nominating Committee.
Prior to the CBS Merger, the Compensation Committee, as described above,
was comprised of two separate Committees: the Compensation Committee and the
Senior Executive Compensation Committee. The Compensation Committee reviewed the
Company's general compensation strategy, the terms of employment agreements for
executives earning over a specified amount, and administered the Company's
annual bonus compensation plan and long-term compensation plans. The Senior
Executive Compensation Committee reviewed compensation and administered
employment agreements for executive officers subject to Section 162(m) of the
Code, administered the Company's stock option plans, approved individual stock
option grants and administered the Senior Executive STIP.
During the three year period following the CBS Merger, the Officers
Nominating Committee has the power, subject to the powers of the Compensation
Committee, to hire, elect, terminate, change positions, allocate
responsibilities and determine non-equity compensation of officers and
employees, other than the Chairman, the Chief Executive Officer and Chief
Operating Officer. The Officers Nominating Committee does not, however, have the
power to fill the position of Chief Financial Officer, Controller or General
Counsel without approval by a majority of the Board of Directors, although the
Officers Nominating Committee has the power to terminate the employment of the
persons holding those positions. Any action taken by the Officers Nominating
Committee may be overturned by a vote of at least 14 directors.
The functions of the Governance and Nominations Committee include
addressing nominations to the Board and corporate governance issues. The
Governance and Nominations Committee will consider nominees recommended by the
stockholders of the Company; recommendations should be submitted to the Company,
to the attention of Michael D. Fricklas, Secretary.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below, as of February 28, 2001, is certain information concerning
beneficial ownership of each equity security of the Company and Blockbuster by
(i) each director of the Company, (ii) each of the current or former executive
officers whose individual compensation is disclosed in the tables that appear on
subsequent pages, and (iii) current directors and executive officers of the
Company as a group. Also set forth below, as of February 28, 2001, is certain
information concerning beneficial ownership by holders of 5% or more of the
Class A Common Stock.
Beneficial Ownership of Equity Securities
-----------------------------------------------------------------------------------
Number of Option Percent of
Name Title of Equity Security Equity Shares Shares(1) Class
---- ------------------------ ------------- --------- -----
George S. Abrams Viacom Class A Common 15,681(2) -- (16)
Viacom Class B Common 16,416(2) 48,000 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
David R. Andelman Viacom Class A Common 175(2) -- (16)
Viacom Class B Common 176(2) -- (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
George H. Conrades Viacom Class A Common 541(2) -- --
Viacom Class B Common 41,064(2)(3)(4) 16,654 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
Philippe P. Dauman Viacom Class A Common 2,121(5) -- (16)
Viacom Class B Common 17,560(5) 3,540,000 (16)
Blockbuster Class A Common 8,012 -- (16)
Blockbuster Class B Common -- -- --
Thomas E. Dooley* Viacom Class A Common 786(5) -- (16)
Viacom Class B Common 1,716(5) 2,974,000 (16)
Blockbuster Class A Common 6,818 -- (16)
Blockbuster Class B Common -- -- --
Michael D. Fricklas Viacom Class A Common 46(5) -- (16)
Viacom Class B Common 1,032(5) 110,000 (16)
Blockbuster Class A Common 1,000 -- (16)
Blockbuster Class B Common -- -- --
William H. Gray III Viacom Class A Common -- -- --
Viacom Class B Common 14,111(3)(4) 11,319 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
9
Beneficial Ownership of Equity Securities
------------------------------------------------------------------------------------
Number of Option Percent of
Name Title of Equity Security Equity Shares Shares(1) Class
---- ------------------------ ------------- --------- -----
Mel Karmazin Viacom Class A Common -- -- --
Viacom Class B Common 4,464,963(6)(7) 5,001,964 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
Jan Leschly Viacom Class A Common 570(2) -- (16)
Viacom Class B Common 43,973(2) 4,412 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
David T. McLaughlin Viacom Class A Common 9,500 -- (16)
Viacom Class B Common 35,106(3)(4) 39,733 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
Ken Miller Viacom Class A Common 14,224(2) -- (16)
Viacom Class B Common 14,511(2) 48,000 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
Leslie Moonves Viacom Class A Common -- -- --
Viacom Class B Common 41,390(6)(8) 2,341,667 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
National Amusements, Inc. Viacom Class A Common 93,658,828(9) -- 68.1%
200 Elm Street Viacom Class B Common 104,334,828(9) -- 6.3%
Dedham, MA 02026 Blockbuster Class A Common 144,000,000(10) -- 82.3%
Blockbuster Class B Common 144,000,000(10) -- 100.0%
Brent D. Redstone Viacom Class A Common -- (11) -- --
Viacom Class B Common -- (11) -- --
Blockbuster Class A Common -- (11) -- --
Blockbuster Class B Common -- (11) -- --
Shari Redstone Viacom Class A Common -- (11) -- --
Viacom Class B Common -- (11) -- --
Blockbuster Class A Common -- (11) -- --
Blockbuster Class B Common -- (11) -- --
10
Beneficial Ownership of Equity Securities
---------------------------------------------------------------------------------
Number of Option Percent of
Name Title of Equity Security Equity Shares Shares(1) Class
---- ------------------------ ------------- --------- -----
Sumner M. Redstone Viacom Class A Common 93,658,988(9) -- 68.1%
Viacom Class B Common 104,334,988(9) 3,000,000 6.3%
Blockbuster Class A Common 144,000,000(10) -- 82.3%
Blockbuster Class B Common 144,000,000(10) -- 100.0%
Fredric G. Reynolds** Viacom Class A Common -- -- --
Viacom Class B Common 97,671(12) 275,500 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
William A. Roskin Viacom Class A Common 565(5) -- (16)
Viacom Class B Common 2,144(5) 264,000 (16)
Blockbuster Class A Common 2,500 -- (16)
Blockbuster Class B Common -- -- --
Frederic V. Salerno Viacom Class A Common 1,984(2) -- (16)
Viacom Class B Common 1,989(2) 28,000(13) (16)
Blockbuster Class A Common 5,000 -- (16)
Blockbuster Class B Common -- -- --
William Schwartz Viacom Class A Common 15,177(2) -- (16)
Viacom Class B Common 15,453 48,000 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
Ivan Seidenberg Viacom Class A Common 1,853(2) -- (16)
Viacom Class B Common 1,858(2) 25,000(13) (16)
Blockbuster Class A Common 5,000 -- (16)
Blockbuster Class B Common -- -- --
Patty Stonesifer Viacom Class A Common 654(2) -- (16)
Viacom Class B Common 6,020(2) 905 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
Robert D. Walter Viacom Class A Common 494(2) -- (16)
Viacom Class B Common 79,449(2)(3)(4) 15,840 (16)
Blockbuster Class A Common -- -- --
Blockbuster Class B Common -- -- --
Capital Research and Viacom Class A Common 8,251,800(14) -- 6.0%
Management Company
333 South Hope Street
Los Angeles, CA 90071
11
Beneficial Ownership of Equity Securities
------------------------------------------------------------------------------------
Number of Option Percent of
Name Title of Equity Security Equity Shares Shares(1) Class
---- ------------------------ ------------- --------- -----
Mario J. Gabelli Viacom Class A Common 11,898,000(15) -- 8.6%
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434
Current directors and Viacom Class A Common 64,650(2)(5)(6) -- (16)
executive officers as a Viacom Class B Common 4,914,736(2-8)(12) 12,150,651 (16)
group other than Blockbuster Class A Common 21,712 -- (16)
Mr. Sumner Redstone Blockbuster Class B Common -- -- --
(26 persons)
_____________
* Mr. Dooley resigned from the Board of Directors on November 15, 2000.
** In March 2001, the Company announced that Mr. Reynolds will become
President of the CBS Television Stations Division.
NOTES:
(1) Reflects shares subject to options to purchase such shares which on
February 28, 2001 were unexercised but were exercisable within a period of
60 days from that date. These shares are excluded from the column headed
"Number of Equity Shares".
(2) Includes Viacom Class A Common Stock units and Class B Common Stock units
credited as of January 1, 2001 to Messrs. Abrams, Andelman, Conrades,
Leschly, Miller, Salerno, Schwartz, Seidenberg and Walter and Ms.
Stonesifer pursuant to the Deferred Compensation Plan described below
under which their directors' fees are converted into stock units.
(3) Includes Viacom Class B Common Stock equivalents credited to Messrs.
Conrades, Gray, McLaughlin and Walter pursuant to the CBS Deferred
Compensation and Stock Plan for Directors.
(4) Includes Viacom Class B Common Stock credited to Messrs. Conrades, Gray,
McLaughlin and Walter pursuant to the CBS Deferred Compensation and Stock
Plan for Directors.
(5) Includes shares held through the Viacom 401(k) Plan.
(6) Includes shares held through the CBS or Infinity 401(k) Plans.
(7) Includes (i) 2,218,538 shares as to which Mr. Karmazin has sole voting
power but no investment power; and (ii) 52,535 shares held by the Karmazin
Foundation and 568,628 shares held by the Karmazin Charitable Lead Annuity
Trusts I and II, as to which Mr. Karmazin disclaims beneficial ownership,
except, in the case of the Trusts to the extent of his pecuniary interest.
(8) Includes 558 shares for which Mr. Moonves disclaims beneficial ownership.
(9) Except for 160 shares of each class of Common Stock owned directly by Mr.
Redstone, all shares are owned beneficially by National Amusements. Mr.
Redstone is the beneficial owner of the controlling interest in National
Amusements and, accordingly, beneficially owns all such shares.
(10) The shares of Blockbuster Class B Common Stock are owned beneficially by
the Company. Mr. Redstone is the beneficial owner of the controlling
interest in the Company and, accordingly, beneficially owns all such
shares. Each share of Blockbuster Class B Common Stock is convertible at
the option of the holder thereof into one share of Blockbuster Class A
Common Stock. As a result, National Amusements and Mr. Redstone are also
deemed to beneficially own 144,000,000 shares of Blockbuster Class A
Common Stock.
(11) Brent Redstone and Shari Redstone are stockholders of National Amusements
and, accordingly, each has a significant indirect beneficial interest in
the Company shares owned by National Amusements and the Blockbuster shares
owned by the Company.
(12) Includes 26,640 shares of Viacom Class B Common Stock held by the LAJADESH
Foundation, as to which Mr. Reynolds has shared voting and investment
power and as to which he disclaims beneficial ownership.
(13) Consists of options for 25,000 shares held by Mr. Salerno and options for
22,000 shares held by Mr. Seidenberg, for the benefit of Verizon, as
successor to Bell Atlantic, since these options were granted while they
represented Bell Atlantic (and previously NYNEX) which held Viacom
Preferred Stock and options for 3,000 shares held by each of Messrs.
Salerno and Seidenberg, individually, since these options were awarded to
these directors after the Viacom Preferred Stock was redeemed at the end
of 1998.
12
(14) Capital Research and Management Company, an investment advisor, filed with
the Securities and Exchange Commission (the "Commission") a Statement on
Schedule 13G (the "Capital Statement"), dated February 9, 2001, reporting
beneficial ownership as of December 31, 2001 of 8,251,800 shares of Viacom
Class A Common Stock, representing approximately 6% of the outstanding
shares of such class. The Capital Statement reported that the shares are
generally held for investment and that Capital Research and Management
Company has sole investment power but does not have voting power over such
shares.
(15) Mario J. Gabelli and various entities, including investment companies,
which he directly or indirectly controls or for which he acts as chief
investment officer, filed with the Commission Amendment No. 4 to their
Statement on Schedule 13D (the "Gabelli Statement"), dated January 27,
2000 reporting an aggregate beneficial ownership of 11,898,000 shares of
Class A Common Stock, representing approximately 8.6% of the outstanding
shares of such class. The Gabelli Statement reported that the shares are
generally held for investment and that the entities reporting beneficial
ownership generally have sole investment and voting power over such
shares.
(16) Less than 1%.
DIRECTORS' COMPENSATION
Directors of the Company who are not officers or employees of the Company
or National Amusements or members of their immediate family ("Outside
Directors") are entitled to receive the directors' fees and are eligible to
participate in the Company's stock option plans described below. Messrs. Abrams,
Miller, Salerno, Schwartz and Seidenberg were Outside Directors for the entire
2000 calendar year and Messrs. Conrades, Dauman, Gray, Leschly, McLaughlin and
Walter and Ms. Stonesifer were Outside Directors since May 2000. Mr. Andelman
was an Outside Director since December 2000. Mr. Dooley served as an Outside
Director from May 2000 until his resignation from the Board in November 2000. In
2000, only Outside Directors received any compensation for services as a
director.
Directors' Fees. Outside Directors received the following fees for 2000:
(i) a quarterly retainer of $12,500 for 2000; (ii) a per meeting attendance fee
of $1,500 for each Board meeting; (iii) a per meeting attendance fee of $1,500
for each meeting of the Audit Committee and of the Compensation Committee; and
(iv) a $7,500 annual retainer fee for the Chairman of the Audit Committee
(currently Mr. Salerno), for the Chairman of the Compensation Committee
(currently Mr. Schwartz) and for the Chairman of the Governance and Nominations
Committee (currently Mr. Abrams).
Deferred Compensation Plan. Messrs. Abrams, Conrades, Leschly, Miller,
Salerno, Schwartz, Seidenberg and Walter and Ms. Stonesifer have deferred
payment of their retainer and attendance fees, pursuant to the Company's
unfunded Deferred Compensation Plan; these amounts are deemed invested in the
number of stock units equal to the number of shares of Common Stock such amounts
would have purchased when deferred. Payment will be made in a lump sum or in
three or five annual installments starting seven months after their retirement,
with the value of the stock units determined by reference to the fair market
values of the Class A Common Stock and Class B Common Stock at the time of
retirement and, in the case of installment payments, credited with interest. For
2000, the stock unit accounts of Messrs. Abrams, Conrades, Leschly, Miller,
Salerno, Schwartz, Seidenberg and Walter and Ms. Stonesifer were credited with
686; 337; 348; 641; 761; 784; 718; 323 and 399 Class A Common Stock units and
687; 338; 349; 642; 761; 784; 718; 324 and 400 Class B Common Stock units,
respectively.
Outside Directors' Stock Option Grants. Each Outside Director receives an
annual grant of stock options to purchase 3,000 shares of Class B Common Stock.
Each Outside Director also received a grant of non-qualified stock options to
purchase 10,000 shares of Class B Common Stock when such person became an
Outside Director or when the program was established in May 1993 for Outside
Directors elected before that date. Each Outside Director who had served as an
Outside Director since 1989 also received a one-time grant in November 1994 of
stock options to purchase 20,000 shares of Class B Common Stock. The per share
exercise price of each grant has been the closing price of a share of Class B
Common Stock on the American Stock Exchange or the NYSE on the date of grant.
Accordingly, Messrs. Conrades, Dauman, Dooley, Gray, Leschly, McLaughlin and
Walter and Ms. Stonesifer each received a grant of non-qualified stock options
to purchase 10,000 shares of Class B Common Stock with a per share exercise
price of $55.75 (the closing price of a share of Class B Common Stock on the
NYSE on the date of grant) when they became Outside Directors on May 4, 2000. In
addition, on August 1, 2000, Messrs. Abrams, Conrades, Dauman, Dooley, Gray,
Leschly, McLaughlin, Miller, Salerno, Schwartz, Seidenberg and Walter and Ms.
Stonesifer each received an annual grant to purchase 3,000 shares of Class B
Common Stock, with a
13
per share exercise price of $70.00 (the closing price of a share of Class B
Common Stock on the NYSE on the date of grant). The grants to Mr. Dooley were
cancelled when he resigned from the Board in November 2000. Mr. Andelman
received a grant of non-qualified stock options to purchase 10,000 shares of
Class B Common Stock, with a per share exercise price of $54.25 (the closing
price of a share of Class B Common Stock on the NYSE on the date of grant), when
he was appointed to the Board on December 14, 2000.
Retirement Income Plan. Outside Directors appointed or elected before
January 1, 1999 were eligible to participate in the unfunded, non-qualified
Retirement Income Plan established in 1989. Pursuant to this plan, such Outside
Directors will receive annual payments commencing on such director's retirement
equal to 100% of the amount of the annual Board retainer at the time of such
retirement (not including meeting attendance fees or the annual retainer for
serving as Chairman of the Audit, Compensation or Governance and Nominations
Committee). The Plan provides that such director or his estate will receive such
annual payments for the number of years of such director's service on the Board.
14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Abrams, Miller, Brent Redstone, Salerno, Schwartz and Seidenberg
and Ms. Shari Redstone were members of the Compensation Committee for the period
from January 1, 2000 through the CBS Merger on May 4, 2000 and Messrs. Gray,
Leschly, Salerno, Schwartz, Seidenberg and Ms. Stonesifer were members of the
Compensation Committee from May 4, 2000 to December 31, 2000.
Shari Redstone is an executive officer and director of National Amusements.
Mr. Dauman, who served as an executive officer of the Company until shortly
before the CBS Merger, is a director of the Company and National Amusements.
George S. Abrams, a director of the Company and National Amusements,
entered into an agreement with the Company in 1994 to provide legal and
governmental consulting services for the Company. During the year ended December
31, 2000, the Company made payments to Mr. Abrams for such services in the
aggregate amount of $120,000.
Ken Miller, a director of the Company, is Vice Chairman of Credit Suisse
First Boston Corporation. Credit Suisse First Boston Corporation has performed,
and, in the future, is expected to perform from time to time, investment banking
services for the Company.
National Amusements, the Company's major stockholder, licenses films in the
ordinary course of its business for its motion picture theaters from all major
studios including Paramount Pictures, a division of the Company. During the year
ended December 31, 2000, National Amusements made payments to Paramount Pictures
in the aggregate amount of approximately $14,439,000 to license Paramount
Pictures films. National Amusements licenses films from a number of unaffiliated
companies and the Company believes that the terms of the licenses between
National Amusements and Paramount Pictures were no less favorable to Paramount
Pictures than licenses between unaffiliated companies and National Amusements
were to such unaffiliated companies. The Company expects to continue to license
Paramount Pictures films to National Amusements upon similar terms in the
future.
Mr. Redstone and National Amusements own an aggregate of approximately
27.9% of the common stock of Midway Games Inc. ("Midway"). During the year ended
December 31, 2000, Blockbuster purchased approximately $5.6 million of home
video games from Midway. The Company believes that the terms of these purchases
were no less favorable to the Company than it would have obtained from parties
in which there was no such ownership interest. The Company expects to purchase
video games from Midway in the future.
National Amusements and AMC Entertainment, Inc., which operate movie
theatre chains, entered into a joint venture agreement on February 29, 2000 with
Hollywood.com to form MovieTickets.com, Inc. ("MovieTickets"). National
Amusements owns approximately 25% of MovieTickets. Shari Redstone, a director of
the Company, is an executive officer and director of National Amusements and
Co-Chairman of MovieTickets. The joint venture entered into an agreement in
principle during 2000 for the Company to acquire a 5% interest for $25 million
of advertising over five years. The acquisition closed in March 2001. Famous
Players, the Company's Canadian theatre chain, also has a 5% interest in Movie
Tickets. The Company believes that the terms of its agreement with MovieTickets
are no less favorable to the Company than it would have obtained from parties in
which there was no such ownership interest.
15
AUDIT COMMITTEE
Report of the Audit Committee
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2000.
We have discussed with PricewaterhouseCoopers, LLP the matters required to
be discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants. Also, we have received and reviewed
the written disclosures and the letter from PricewaterhouseCoopers, LLP required
by Independence Standard No. 1, Independence Discussions with Audit Committees,
as amended, by the Independence Standards Board, and have discussed with the
auditors their independence.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the financial statements referred to above be included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2000.
We have also considered whether the services performed by
PricewaterhouseCoopers, LLP not related to the audit of the financial statements
referred to above and to the reviews of the interim financial statements
included in the Company's Forms 10-Q for the quarters ended March 31, 2000, June
30, 2000 and September 30, 2000 is compatible with maintaining
PricewaterhouseCoopers independence.
Members of the Audit Committee
------------------------------
George H. Conrades
Ken Miller
Frederic V. Salerno, Chairman
William Schwartz
Ivan Seidenberg
Patty Stonesifer
Robert D. Walter
16
EXECUTIVE COMPENSATION
Report of the Compensation Committee on Executive Compensation
The Compensation Committee and the Senior Executive Compensation Committee
for the period from January 1, 2000 through the CBS Merger on May 4, 2000 and
the Compensation Committee for the balance of 2000 (collectively, the
"Committee") has furnished the following report on executive compensation for
2000.
All members of the Committee were non-employee directors. Before the CBS
Merger, the Compensation Committee reviewed and approved the Company's executive
compensation and the Senior Executive Compensation Committee reviewed and
approved compensation for executive officers, if their compensation was, or
could become, subject to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). After the CBS Merger, the Compensation Committee reviewed
and approved compensation for executives if their salary and target bonus
compensation equaled or exceeded $1 million per annum. Independent compensation
consultants have advised the Committee from time to time with respect to the
Company's long-term incentive compensation plans since 1987.
The objectives of the executive compensation package for the Company's
executive officers are to:
. Set levels of annual salary and bonus compensation that will attract and
retain superior executives in the highly competitive environment of
entertainment and media companies;
. Provide annual bonus compensation for executive officers that varies
with the Company's financial performance and reflects the executive
officer's individual contribution to that performance;
. Provide long-term compensation that is tied to the Company's stock price
so as to focus the attention of the executive officers on managing the
Company from the perspective of an owner with an equity stake; and
. Emphasize performance-based compensation, through annual bonus
compensation and long-term compensation, over fixed compensation.
The Committee evaluated 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 the
Company's own experience. The Committee also focused on executive compensation
offered by the members of the peer group included in the performance graphs set
forth on subsequent pages. At times, the Committee also evaluated compensation
relative to a broader range of companies, whether or not included in such peer
group, that have particular lines of business comparable to those of the
Company.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Code generally limits to $1 million the federal tax
deductibility of compensation (including stock options) paid in one year to the
Company's Chief Executive Officer and the other executive officers whose
compensation is individually disclosed in the tables that appear on subsequent
pages (the "named executive officers"). The tax deductibility of deferred
compensation paid to an executive officer when he is no longer subject to
Section 162(m) is not subject to the limitation. Performance-based compensation
(including stock options) is also subject to an exception, provided such
compensation meets certain requirements, including stockholder approval.
Compensation for the Company's executive officers is comprised of base
salary, annual bonus compensation, long-term compensation in the form of stock
options and deferred compensation for any executive officer whose annual base
salary exceeds $1 million. The annual bonus plan for most of the Company's
executive officers (the "Senior Executive STIP") and the Company's stock option
plans (the "LTMIP") were designed to comply with the exception for
performance-based compensation. The Senior Executive STIP provides objective
performance-based annual bonuses, subject to a maximum limit of eight (8) times
the executive's annual salary compensation,
17
consisting of base salary plus any deferred compensation. Long-term compensation
for the Company's executive officers has been provided through grants of LTMIP
stock options. It is expected that long-term compensation for future years will
continue to be provided through grants of LTMIP stock options. The stockholders
of the Company have approved the Senior Executive STIP and the LTMIP.
Annual Salary Compensation
Annual salary compensation levels for executive officers are designed to be
consistent with competitive practice and level of responsibility. Annual salary
compensation for 2000 consisted of base salary and, for the Chief Executive
Officer and the Chief Operating Officer, deferred compensation.
Annual Bonus Compensation
Annual bonus compensation for 2000 for the named executive officers (other
than Messrs. Dauman and Dooley) was provided under the Senior Executive STIP. In
accordance with the Senior Executive STIP and as permitted by Section 162(m) of
the Code, the Committee established performance criteria and target awards for
these executive officers. The performance criteria related to the attainment of
a specified level of operating income for the Company as a whole. For this
purpose, the Senior Executive STIP uses the EBITDA definition of revenues less
operating expenses (other than depreciation, amortization and non-recurring
charges) to define "operating income".
The level of the Senior Executive STIP annual bonuses for 2000 for the
Company's executive officers was based on the determination of the Committee
that the performance criteria established for 2000 had been exceeded. The
Committee considered a number of factors, including the role played by the
executive officers in completing the CBS Merger and successfully integrating the
operations of CBS and Viacom while achieving record operating results, and
awarded the annual bonuses set forth in the Summary Executive Compensation
Table.
Annual bonus compensation for the Company's executive officers not
participating in the Senior Executive STIP was provided under the Company's
Short-Term Incentive Plan based on individual performance and the Company's
financial performance.
Long-Term Compensation
The Committee believes that the use of equity-based long-term compensation
plans appropriately links executive interests to enhancing stockholder value.
Annual grants of LTMIP stock options for Class B Common Stock are generally
awarded to the Company's executive officers. The grants of LTMIP stock options
for Class B Common Stock awarded to the Company's executive officers (other than
the Chief Executive Officer and the Chief Operating Officer) in 1999 represented
such executives' grants for 1999 and 2000. However, certain executive officers
received an additional grant in 2000 in recognition of the additional
responsibilities that they had assumed as a result of the CBS Merger. These
stock options vest over a three or four year period and have a ten-year term
from the date of grant. The exercise price of these stock options was set at the
fair market value of the Class B Common Stock on the date of grant.
18
Chief Executive Officer's and Chief Operating Officer's Compensation
Mr. Redstone, the Chairman of the Board, Chief Executive Officer and
controlling stockholder of the Company, waived payment of any compensation for
his services as Chief Executive Officer of the Company for the period from
January 1, 2000 to May 4, 2000.
The Company entered into employment agreements with Mr. Redstone to serve
as its Chairman and Chief Executive Officer and with Mr. Karmazin to serve as
its President and Chief Operating Officer after the CBS Merger. The terms of
those agreements are described below under "Employment and Severance
Agreements". Effective upon the CBS Merger, Messrs. Redstone and Karmazin each
received a grant of options to purchase 2 million shares of Class B Common Stock
that vest in three equal annual installments.
The level of the Senior Executive STIP annual bonuses for 2000 for Messrs.
Redstone and Karmazin was based on the determination of the Compensation
Committee that the performance criteria established for 2000 had been exceeded.
The Committee considered a number of factors, including the role played by
Messrs. Redstone and Karmazin in completing the CBS Merger and successfully
integrating the operations of CBS and Viacom while achieving record operating
results, and awarded the annual bonuses set forth in the Summary Executive
Compensation Table.
Members of the Members of the Members of the
Compensation Committee Senior Executive Compensation Committee Compensation Committee
Before the CBS Merger: Before the CBS Merger: After the CBS Merger:
---------------------- ---------------------- ---------------------
George S. Abrams Frederic V. Salerno William H. Gray III
Ken Miller William Schwartz, Chairman Jan Leschly
Brent D. Redstone Ivan Seidenberg Frederic V. Salerno
Shari Redstone William Schwartz, Chairman
Frederic V. Salerno Ivan Seidenberg
William Schwartz, Chairman Patty Stonesifer
Ivan Seidenberg
19
Summary Executive Compensation Table
The following table sets forth information concerning total compensation
for the Chief Executive Officer and the four most highly compensated executive
officers of the Company who served in such capacities during 2000 and for
Messrs. Dauman and Dooley for services rendered to the Company during each of
the last three fiscal years.
Long-Term
Compensation
Annual Compensation (1) Awards
----------------------------------------- ------------
Securities
Name and Principal Position Other Annual Underlying All Other
at End of 2000 Year Salary Bonus Compensation(2) Options Compensation(3)
-------------------------------- ---- ------ ----- --------------- ------- ---------------
Sumner M. Redstone 2000 $2,021,862 $15,000,000 $ 80,030 2,000,000 $ 33,014
Chairman and Chief 1999 0 0 114,042 0 0
Executive Officer 1998 0 0 -- 4,000,000 0
Mel Karmazin 2000 2,021,862 15,000,000 -- 2,000,000 50,112
President and Chief
Operating Officer*
Michael D. Fricklas 2000 747,115 1,000,000 -- 100,000 18,750
Executive Vice President, 1999 600,000 750,000 -- 110,000 18,750
General Counsel and 1998 529,711 550,000 -- 0 18,750
Secretary
Fredric G. Reynolds 2000 562,308 2,750,000 -- 0 21,859,386(4)
Executive Vice President and
Chief Financial Officer**
William A. Roskin 2000 747,115 900,000 -- 100,000 18,750
Senior Vice President, 1999 599,231 650,000 -- 110,000 18,750
Human Resources and 1998 550,000 450,000 -- 0 18,750
Administration
Philippe P. Dauman*** 2000 708,269 0 77,641 0 33,688,972(5)
1999 1,881,000 8,119,000 -- 0 107,563
1998 1,710,000 6,000,000 -- 2,000,000 103,288
Thomas E. Dooley*** 2000 708,269 0 -- 0 33,684,634(5)
1999 1,881,000 8,119,000 -- 0 107,563
1998 1,710,000 6,000,000 -- 2,000,000 103,288
________________
* Mr. Karmazin became President and Chief Operating Officer of the Company on
May 4, 2000.
** Mr. Reynolds became Executive Vice President and Chief Financial Officer of
the Company on May 4, 2000. In March 2001, the Company announced that Mr.
Reynolds will become President of the CBS Television Stations Division and
Richard J. Bressler will join the Company as Senior Executive Vice
President and Chief Financial Officer, assuming the duties of Chief
Financial Officer effective May 1, 2001.
*** Messrs. Dauman and Dooley each served as Deputy Chairman and Executive Vice
President of the Company until shortly before the CBS Merger on May 4,
2000.
20
NOTES:
(1) Mr. Redstone waived payment of compensation for his services as Chief
Executive Officer during 1998, 1999 and the period from January 1, 2000
through the CBS Merger on May 4, 2000. Annual compensation for the named
executives (other than Messrs. Dauman and Dooley) includes the following
amounts of compensation deferred under the Company's 401(k) and Excess
401(k) Plans and for Messrs. Redstone and Karmazin pursuant to their
employment agreements: for each of Messrs. Redstone and Karmazin for 2000
in the amount of $1,360,323; for Mr. Fricklas for 2000 in the amount of
$152,753, for 1999 in the amount of $115,477 and for 1998 in the amount of
$82,365; and for Mr. Roskin for 2000 in the amount of $209,567, for 1999 in
the amount of $157,385 and for 1998 in the amount of $127,413.
(2) In accordance with the rules of the Securities and Exchange Commission,
amounts totaling less than $50,000 have been omitted. Amounts included in
Other Annual Compensation for Messrs. Redstone and Dauman for 2000 relate
to non-business use of Company aircraft.
(3) The Company maintains a program of life and disability insurance which is
generally available to all salaried employees on the same basis. In
addition, during 2000, the Company maintained for Messrs. Karmazin, Dauman
and Dooley certain supplemental life insurance benefits. All Other
Compensation includes premiums paid by the Company for this supplemental
coverage for 2000 for Mr. Karmazin of $17,098 and for each of Messrs.
Dauman and Dooley of $25,788; the Company's matching contributions under
the Viacom 401(k) Plan for Mr. Fricklas of $4,250, for Mr. Roskin of
$1,750, for Mr. Dauman of $4,250 and for Mr. Dooley of $3,750; credits for
the Company's matching contributions under the Viacom Excess 401(k) Plan
for 2000 for Mr. Fricklas of $14,500, for Mr. Roskin of $17,000, for Mr.
Dauman of $55,500 and for Mr. Dooley of $56,000; and credits for the
Company's matching contributions for compensation deferred pursuant to
their employment agreements for 2000 for each of Messrs. Redstone and
Karmazin of $33,014 and for each of Messrs. Dauman and Dooley of $8,224.
(4) Mr. Reynolds received this payment after the CBS Merger upon exercise of
stock appreciation rights granted in tandem with CBS stock options.
(5) Includes the one-time cash payment to Messrs. Dauman and Dooley of
$33,595,210 and $33,590,872, respectively, that represents payment of all
amounts that would have been payable under their employment agreements
through December 31, 2003, and a $5,000,000 transaction bonus. These
amounts do not include payouts of their deferred compensation accounts and
their accounts in the Company's Excess 401(k) Plan. The terms of their
employment and severance agreements are described below under "Employment
and Severance Agreements".
21
Option Grants in Fiscal 2000
The following table sets forth certain information with respect to
executive stock options to purchase shares of Class B Common Stock awarded
during 2000 to the named executives. The table includes a column designated
"Grant Date Present Value". The calculation in that column is based on the
Black-Scholes option pricing model adapted for use in valuing executive stock
options. There is no way to anticipate what the actual growth rate of the Class
B Common Stock will be.
Individual Grants
------------------------------------------------------------------
% of Total
Number of Shares of Options Granted Grant Date
Class B Common Stock to Employees in Exercise Price Expiration Present
Name Underlying Options Fiscal 2000 ($/Share) Date Value(4)
---- -------------------- --------------- -------------- ---------- --------
Sumner M. Redstone....... 2,000,000(1) 17.94% $55.7500 5/4/10 $53,816,000
Mel Karmazin............. 2,000,000(1) 17.94% 55.7500 5/4/10 53,816,000
Michael D. Fricklas...... 100,000(2) (5) 54.0625 5/25/10 2,619,000
Fredric G. Reynolds...... 0 0 -- -- --
William A. Roskin........ 100,000(2) (5) 54.0625 5/25/10 2,619,000
Philippe P. Dauman....... 10,000(3) (5) 55.7500 5/4/10 269,080
3,000(3) (5) 70.0000 8/1/10 99,225
Thomas E. Dooley......... 10,000(3) (5) 55.7500 5/4/10 269,080
3,000(3) (5) 70.0000 8/1/10 99,225
________________
NOTES:
(1) These grants were awarded to Messrs. Redstone and Karmazin on May 4, 2000
and vest in one-third increments on May 4, 2001, May 4, 2002 and May 4,
2003.
(2) These grants were awarded to Messrs. Fricklas and Roskin on May 25, 2000
and vest in one-third increments on May 25, 2001, May 25, 2002 and May 25,
2003.
(3) The grants for 10,000 and 3,000 shares were awarded to Messrs. Dauman and
Dooley on May 4, 2000 and August 1, 2000, respectively, in connection with
their services as outside directors after the CBS Merger. The grants vest
one year after the date of grant. The grants to Mr. Dooley were cancelled
when he resigned from the Board in November 2000.
(4) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised. There is no assurance that the value realized
by an executive will be at or near the value estimated by the Black-Scholes
model. The grant date values presented in the table were determined in part
using the following assumptions. No adjustments were made for
non-transferability or risk of forfeiture.
Expected volatility............................................ 32.10%
Risk-free rate of return....................................... 6.56%
Dividend yield................................................. 0.00%
Time of exercise............................................... 6.8 years
The approach used in developing the assumptions upon which the
Black-Scholes valuation was done is consistent with the requirements of the
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation".
(5) Less than 1%.
22
Aggregated Option Exercises in Fiscal 2000
and Value of Options at End of Fiscal 2000
The following table sets forth as to the Chief Executive Officer and the
named executive officers information with respect to option exercises during
2000 and the status of their options on December 31, 2000.
Number of Shares of
Class B Common Stock
Number of Shares of Underlying Unexercised Value of Unexercised
Class B Common Stock Options as of In-the-Money Options as
Acquired December 31, 2000 of December 31, 2000
Name on Exercise Value Realized Exercisable Nonexercisable Exercisable Nonexercisable
---- ------------------- -------------- ----------- -------------- ----------- --------------
Sumner M. Redstone....... 0 $ 0 3,000,000 6,500,000 $ 83,875,000 $80,500,000
Mel Karmazin............. 0 0 4,655,043 3,008,453 154,180,286 204,829
Michael D. Fricklas...... 22,000 1,083,500 110,000 270,000 3,105,000 2,419,375
Fredric G. Reynolds...... 50,000 1,824,797 221,250 165,292 3,864,060 14,647
William A. Roskin........ 0 0 264,000 270,000 7,593,375 2,419,375
Philippe P. Dauman....... 500,000 23,750,000 3,540,000 13,000 74,735,000 0
Thomas E. Dooley......... 500,000 23,750,000 3,474,000 0 74,023,250 0
40,000 2,273,750
Viacom Pension Plan Table
YEARS OF SERVICE
---------------------------------------------
Remuneration 15 20 25 30
------------ ----------- ---------- --------- --------
$ 150,000...................................................... $ 36,743 $ 48,990 $ 61,238 $ 73,485
300,000...................................................... 76,118 101,490 126,863 152,235
450,000...................................................... 115,493 153,990 192,488 230,985
600,000...................................................... 154,868 206,490 258,113 309,735
750,000...................................................... 194,243 258,990 323,738 388,485
Under the terms of the Viacom Pension Plan and the Viacom Excess Pension
Plan (collectively, the "Viacom Pension Plans") 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
compensation (salary and bonus) for the highest 60 consecutive months out of the
final 120 months. Such compensation is limited to $750,000 per year or, for any
executive employed by Viacom as of December 31, 1995, the executive's base
salary as of December 31, 1995, if greater. The benefits under the Viacom Excess
Pension Plan are not subject to the Internal Revenue Code provisions that limit
the compensation used to determine benefits and the amount of annual benefits
payable under the Viacom Pension Plan. 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 Viacom Pension Plans upon retirement in 2000 at age 65, based on the
straight-life annuity form of benefit payment and not subject to deduction or
offset.
23
Mr. Karmazin has been credited with approximately one year of benefit
service under the Viacom Pension Plans; however, the benefits will be calculated
as though he had approximately 13 years of credited service in accordance with
the terms of his employment agreement with the Company. The number of years of
benefit service that have been credited for Messrs. Fricklas and Roskin are
approximately 6.5 years and 13 years, respectively. Messrs. Dauman and Dooley
have been credited with 7 and 21 years of service under the Viacom Pension
Plans; however, the benefits will be calculated as though they, respectively,
had 20 and 23 years of credited service in accordance with the terms of their
agreements with the Company entered into on September 6, 1999. The terms of
these agreements are described below under "Employment and Severance
Agreements". Mr. Redstone does not participate in the Viacom Pension Plans.
Mr. Karmazin has a vested benefit under an Infinity pension plan which was
frozen in November 1987. He has not accrued any additional benefits under this
plan since November 1987. As of December 31, 2000, the estimated monthly benefit
amount payable to Mr. Karmazin upon retirement at normal retirement age under
this frozen pension plan was $1,408.
During the period from March 1, 1994 through December 31, 1997, Mr.
Reynolds participated in the Westinghouse Pension Plan. Effective January 1,
1998, he became a participant in the Group W component of the CBS Combined
Pension Plan. Effective April 1, 1999, the CBS Combined Pension Plan was amended
and Mr. Reynolds became a participant in the cash balance component of the CBS
Combined Pension Plan (the "CBS Cash Balance Plan"). The CBS Cash Balance Plan
is non-contributory. All employer contributions are actuarially determined. The
CBS Cash Balance Plan credits the active participant's hypothetical account
annually with 2% of base/benefit pay (pay for this purpose is subject to a
maximum of $550,000), an interest credit on the opening account balance (which
is the converted accrued benefit from the prior component plan) and on the
ongoing account (which is the annual credit to the account); and, in certain
circumstances, a transition credit which is unique to each individual. Mr.
Reynolds also has vested benefits under the Westinghouse Executive Pension Plan,
which were frozen effective March 31, 1999. Mr. Reynolds has not accrued
additional benefits under the Westinghouse Executive Pension Plan since March
31, 1999. As of December 31, 2000, the estimated monthly benefit amount payable
to Mr. Reynolds upon retirement at normal retirement age under the Westinghouse
Executive Pension Plan was $5,870.
24
Performance Graphs
The following graphs compare the cumulative total stockholder return on the
Class A Common Stock and the 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.
The performance graph in Exhibit I assumes $100 invested on December 31,
1995 in each of the Class A Common Stock, the Class B Common Stock, the S&P 500
Index and the Peer Group, including reinvestment of dividends, through the
fiscal year ended December 31, 2000.
National Amusements acquired control of the Company in June 1987. The
performance graph in Exhibit II assumes $100 invested on December 31, 1987 in
each of the Class A Common Stock, the S&P 500 Index and the Peer Group,
including reinvestment of dividends, through the fiscal year ended December 31,
2000.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following performance
graphs and the Report of the Audit Committee and the Report of the Compensation
Committee on Executive Compensation set forth above shall not be incorporated by
reference into any such filings.
25
Exhibit I
Total Cumulative Stockholder Return for
Five-Year Period Ending December 31, 2000
[LINE GRAPH]
-----------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 1996 1997 1998 1999 2000
-----------------------------------------------------------------------------------------------------------------------------------
Class A Common 100.00 74.59 88.38 159.05 261.35 203.24
-----------------------------------------------------------------------------------------------------------------------------------
Class B Common 100.00 73.61 87.47 156.20 255.15 197.36
-----------------------------------------------------------------------------------------------------------------------------------
S&P 500 100.00 122.90 163.95 210.80 255.15 231.94
-----------------------------------------------------------------------------------------------------------------------------------
Peer Group* 100.00 110.52 162.33 207.15 237.55 191.09
-----------------------------------------------------------------------------------------------------------------------------------
* The Peer Group consists of the following companies: BHC Communications,
Inc.; The Walt Disney Company; Gaylord Entertainment Co.; The News Corp.
Ltd. (ADRs); AOL Time Warner Inc.(formerly Time Warner Inc.) and Tribune
Company. The Seagram Company Ltd., which was part of the Peer Group, has
been deleted because it was acquired by Vivendi S.A. in December 2000 and,
as a result, this security was no longer publicly traded on December 31,
2000.
26
Exhibit II
Total Cumulative Stockholder Return for
Thirteen-Year Period Ending December 31, 2000
[LINE GRAPH]
-------------------------------------------------------------------------------------------------------------
December 31, 1987 1988 1989 1990 1991 1992 1993
-------------------------------------------------------------------------------------------------------------
Viacom Common* 100.00 171.72 317.24 286.41 373.70 480.08 533.27
-------------------------------------------------------------------------------------------------------------
S&P 500 100.00 116.50 153.30 148.52 193.58 208.31 229.21
-------------------------------------------------------------------------------------------------------------
Peer Group** 100.00 112.96 160.22 126.12 152.86 198.17 240.21
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
December 31, 1994 1995 1996 1997 1998 1999 2000
-------------------------------------------------------------------------------------------------------------
Viacom Common* 454.17 504.63 376.32 445.86 802.41 1,318.49 1,025.34
-------------------------------------------------------------------------------------------------------------
S&P 500 232.32 319.31 394.41 526.15 676.52 818.86 744.34
-------------------------------------------------------------------------------------------------------------
Peer Group** 220.51 273.15 301.87 443.40 565.83 648.86 521.96
-------------------------------------------------------------------------------------------------------------
* Viacom Class B Common Stock is omitted as it did not trade as a public
security prior to June 18, 1990.
** The Peer Group consists of the following companies: BHC Communications,
Inc.; The Walt Disney Company; Gaylord Entertainment Co.; The News Corp.
Ltd. (ADRs); AOL Time Warner Inc.(formerly Time Warner Inc.) and Tribune
Company. The Seagram Company Ltd., which was part of the Peer Group, has
been deleted because it was acquired by Vivendi S.A. in December 2000 and,
as a result, this security was no longer publicly traded on December 31,
2000.
27
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Redstone, the Chairman of the Board, Chief Executive Officer and
controlling stockholder of the Company, did not receive compensation for his
services as Chief Executive Officer for the period through the CBS Merger. The
Company entered into an employment agreement with Mr. Redstone to serve as its
Chairman and Chief Executive Officer after the CBS Merger. Under that agreement,
Mr. Redstone received a salary of $1 million per annum and annual bonus
compensation, with an established target bonus of $5 million for calendar year
2000, prorated to reflect the actual number of days that the agreement was in
effect during the year 2000. The target bonus amount increases by 10% annually
through 2003. Mr. Redstone also received deferred compensation of $2 million
during calendar year 2000, prorated to reflect the number of days the agreement
was in effect during the year 2000, thereafter to be increased annually by 10%
of his salary and deferred compensation for the preceding year. Effective upon
the CBS Merger, he received a grant of options to purchase 2 million shares of
Class B Common Stock that vest in three equal annual installments.
The Company entered into an employment agreement with Mr. Karmazin to serve
as its President and Chief Operating Officer after the CBS Merger until December
31, 2003. Under that agreement, Mr. Karmazin received a salary of $1 million per
annum and annual bonus compensation, with an established target bonus of $5
million for calendar year 2000, prorated to reflect the actual number of days
that the agreement was in effect during the year 2000. The target bonus amount
increases by 10% annually through 2003. Mr. Karmazin also received deferred
compensation of $2 million during calendar year 2000, prorated to reflect the
number of days the agreement was in effect during the year 2000, thereafter to
be increased annually by 10% of his salary and deferred compensation for the
preceding year. Effective upon the CBS Merger, he received a grant of options to
purchase 2 million shares of Class B Common Stock that vest in three equal
annual installments. Mr. Karmazin will be provided with $5 million of life
insurance during the employment term. In the event of the termination of Mr.
Karmazin's employment without "cause" or voluntary termination for "good
reason", as these terms are defined in his agreement, during the employment
term, he will be entitled to receive salary, target bonus and deferred
compensation for the balance of the employment term and his stock options
(including options that would have vested during the employment term) shall
remain exercisable for two years following the date of termination or, if later,
until December 31, 2003 (but not beyond the expiration of such stock options).
The Company entered into a new employment agreement with Mr. Fricklas on
May 1, 2000 that provides that he will be employed as Executive Vice President,
General Counsel and Secretary of the Company until August 1, 2003, at a salary
of $800,000 per annum, with $75,000 annual increases. Mr. Fricklas' target bonus
is set at 60% of his base salary. Pursuant to his agreement, on May 25, 2001, he
received a grant of options to purchase 100,000 shares of Class B Common Stock
that vest in three equal annual installments. In the event of the termination of
Mr. Fricklas' employment without "cause" or voluntary termination for "good
reason", as these terms are defined in his agreement, during the employment
term, he will be entitled to receive salary and target bonus for the balance of
the employment term, subject to mitigation after the first twelve months, and
his stock options (including options that would have vested during the
employment term) shall remain exercisable for six months following the date of
termination (but not beyond the expiration of such stock options).
The Company entered into a new employment agreement with Mr. Roskin on May
1, 2000 that provides that he will be employed as Senior Vice President, Human
Resources and Administration of the Company until August 1, 2003, at a salary of
$800,000 per annum, with $75,000 annual increases. Mr. Roskin's target bonus is
set at 60% of his base salary. Pursuant to his agreement, on May 25, 2001, he
received a grant of options to purchase 100,000 shares of Class B Common Stock
that vest in three equal annual installments. In the event of the termination of
Mr. Roskin's employment without "cause" or voluntary termination for "good
reason", as these terms are defined in his agreement, during the employment
term, he will be entitled to receive salary and target bonus for the balance of
the employment term, subject to mitigation after the first twelve months, and
his stock options (including options that would have vested during the
employment term) shall remain exercisable for six months following the date of
termination (but not beyond the expiration of such stock options).
28
Pursuant to a March 1999 agreement, in the event of the termination of Mr.
Reynolds' employment without "cause" or voluntary termination for "good reason",
as these terms are defined in the agreement, Mr. Reynolds will be entitled to
receive separation pay in the amount of two times base salary and annual
incentive target award opportunity, and his stock options will continue to vest
and remain exercisable for two years following the date of termination (but not
the expiration of such stock options).
During 2001, the Company and Mr. Moonves amended Mr. Moonves' employment
agreement. The agreement provides that he will be employed as President and
Chief Executive Officer, CBS Television, through July 16, 2004, and that he will
receive a salary of $3 million per annum and a guaranteed annual bonus of
$2.5 million per annum. In addition, Mr. Moonves is eligible to receive an
annual incentive award of up to $2 million, based on the achievement of certain
financial and other goals established by the Compensation Committee of the
Board. He also receives a monthly payment of $1,500 to offset certain benefits
from his former employer that he lost when he was retained by CBS Broadcasting
in 1995. Pursuant to his agreement, on May 25, 2001, Mr. Moonves received a
grant of options to purchase 750,000 shares of Class B Common Stock that vest in
three equal annual installments. In the event of the termination of Mr. Moonves'
employment other than for "cause" or for "good reason", as these terms are
defined in his agreement, during the employment term, he will be entitled to
receive salary and bonus payments for the balance of the employment term. In
addition, any unvested stock options granted to Mr. Moonves before the CBS
Merger will continue to vest in accordance with the terms of the stock option
agreements under which they were granted and will remain exercisable for three
years after the termination of his employment (but not beyond the expiration
date of such stock options); any unvested portion of the options granted on May
25, 2001 will vest and remain exercisable for three years after the termination
of his employment.
Messrs. Dauman and Dooley entered into employment agreements during 1998
which provided that they would each be employed as Deputy Chairman and Executive
Vice President of the Company until December 31, 2003, at a salary of $1 million
per annum. The agreements provided that each executive would also receive
deferred compensation, payable the year after he ceases to be an executive
officer of the Company, in an amount equal to $881,000 for 1999, $1,069,000 for
2000 and no less than $1,069,000 per year for 2001-2003. The target bonus for
each executive for each calendar year during the employment term was set at 250%
of his salary and deferred compensation for such year. Each executive was
provided with $5 million of life insurance during the employment term.
Pursuant to agreements entered into with the Company on September 6, 1999,
Messrs. Dauman and Dooley resigned from the Company shortly before the CBS
Merger. After their resignation, each received a one-time cash payment equal to
the amount that would have been payable under their employment agreements
through their original terms, or December 31, 2003, payouts of all deferred
compensation accounts and the balance of their accounts under the Company's
Excess 401(k) Plan, and a transaction bonus in the amount of $5 million. The
amounts of the payments that Messrs. Dauman and Dooley received are set forth in
the Summary Executive Compensation Table above.
All equity-based compensation awards previously granted to Messrs. Dauman
and Dooley vested on the effective date of their resignation and each stock
option will continue to be exercisable in accordance with its terms until
December 31, 2003, subject to their compliance with the provisions of their
agreements. In addition, the Company provides each of Messrs. Dauman and Dooley
with an office that is comparable in quality and size to the office the
executive had prior to the termination of his employment at a location in
midtown Manhattan, and a secretary until December 31, 2003, or until he obtains
full time employment, if earlier.
Messrs. Dauman and Dooley will continue to participate in all savings,
retirement, welfare and fringe benefit plans of the Company, or will receive the
cash equivalent of these benefits with an income tax gross up, through December
31, 2003, or, with respect to any welfare benefit, the date on which they become
entitled to comparable benefits through a subsequent employer, if earlier. Mr.
Dauman also received all additional service credit necessary to provide him with
20 years of service under any Company plans for which that credit would entitle
him to additional benefits.
29
The agreements provide for a gross-up payment to be made to Messrs. Dauman
and Dooley to eliminate the effects of any possible imposition under the
Internal Revenue Code of the "golden parachute" excise tax on any payment or
benefit they receive under their agreements or otherwise. Messrs. Dauman and
Dooley will be bound by restrictive covenants, including a noncompetition
covenant that applies for one year following the termination of their
employment.
30
RELATED TRANSACTION
In November 1995, the Company entered into an agreement with Gabelli Asset
Management Company ("GAMCO") providing that GAMCO would manage certain assets in
the Viacom Pension Plan. For the year ended December 31, 2000, the Company
paid GAMCO approximately $365,700 for such investment management services. GAMCO
is expected to continue to provide such investment management services in the
future. The Company entered into the arrangement with GAMCO prior to GAMCO's
disclosure of its interest in the Company. The Company believes that the terms
of the agreement with GAMCO are no less favorable to the Company than it could
have obtained from an unaffiliated party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the NYSE. Executive
officers, directors and greater than 10% stockholders are required by the
Exchange Act to furnish the Company with copies of all Section 16(a) forms they
file. Based upon the Company's compliance program, as well as a review of the
copies of such forms furnished to the Company, or written representations that
no Form 5's were required, the Company believes that during 2000, its executive
officers, directors and greater than 10% beneficial owners complied with all
applicable Section 16(a) filing requirements, except that Mr. Leslie Moonves, a
director of the Company, inadvertently failed to file a report relating to the
purchase of 110 shares of the Class B Common Stock. Mr. Moonves promptly
reported the transaction upon discovering the omission.
31
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends that the stockholders approve the
appointment of PricewaterhouseCoopers LLP as independent accountants to serve
until the Annual Meeting of Stockholders in 2002.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the 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 Annual
Meeting.
In connection with the audit function for 2000, PricewaterhouseCoopers LLP
also reviewed the Company's Annual Report on Form 10-K and its filings with the
Commission and provided certain other accounting, tax and consulting services.
Audit Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered for the audit of the Company's annual financial statements for
the year ended December 31, 2000 and for the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q for that year were $2.7
million.
Financial Information Systems Design and Implementation Fees
During the year ended December 31, 2000, PricewaterhouseCoopers LLP did not
render any professional services to the Company relating to financial
information systems design and implementation.
All Other Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for services
rendered to the Company, other than the services described above, were $9.7
million.
32
APPROVAL OF THE ADOPTION OF AN AMENDMENT TO
VIACOM INC.'S RESTATED CERTIFICATE OF INCORPORATION
INCREASING THE AUTHORIZED SHARES OF
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
The Board of Directors of the Company has approved and is submitting for
stockholder approval an amendment to the Company's Restated Certificate of
Incorporation to increase (i) the number of shares of Class A Common Stock
authorized to be issued from 500 million to 750 million, and (ii) the number of
shares of Class B Common Stock authorized to be issued from 3 billion to 10
billion. The text of the amendment is attached as Exhibit B. This summary of the
amendment should be read in conjunction with the full text of such changes set
forth in Exhibit B.
Purpose of the Amendment
The purpose of the amendment described above is to make available
additional shares of Class A Common Stock and Class B Common Stock for possible
future stock dividends and splits, financing and acquisition transactions or
other corporate purposes.
The Board of Directors of the Company recommends a vote "FOR" the adoption
of the foregoing amendment.
33
OTHER MATTERS
As of the date of this Proxy Statement, Management 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. If any other matters
properly come before the Annual Meeting, it is intended that the holders of the
Proxies will act in respect thereof in accordance with their best judgment.
In order for proposals by stockholders to be considered for inclusion in
the Proxy and Proxy Statement relating to the 2002 Annual Meeting of
Stockholders, such proposals must be received at the principal executive offices
of the Company on or before December 18, 2001 and should be submitted to the
attention of Michael D. Fricklas, Secretary.
By Order of the Board of Directors,
/s/ Michael D. Fricklas
MICHAEL D. FRICKLAS
Secretary
____________________
THE COMPANY HAS SENT A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2000, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO,
TO EACH OF ITS STOCKHOLDERS OF RECORD ON APRIL 2, 2001 AND EACH BENEFICIAL
STOCKHOLDER ON THAT DATE. IF YOU HAVE NOT RECEIVED YOUR COPY, THE COMPANY WILL
PROVIDE A COPY WITHOUT CHARGE (A REASONABLE FEE WILL BE CHARGED FOR EXHIBITS),
UPON RECEIPT OF WRITTEN REQUEST THEREFOR MAILED TO THE COMPANY'S OFFICES,
ATTENTION SECRETARY.
34
EXHIBIT A
VIACOM INC.
AUDIT COMMITTEE CHARTER
-----------------------
The board of directors hereby constitutes and establishes an audit committee
with authority, responsibility, and specific duties described below.
* * * * * * *
Composition
The audit committee shall be comprised of that number of directors as the board
of directors shall determine from time to time, such number not to be less than
three (3), each of which directors shall, in the opinion of the board of
directors, meet all applicable requirements of the Audit Committee Policy of the
New York Stock Exchange or other principal exchange on which the company's
securities are listed, with respect to independence, financial literacy,
accounting or related financial expertise, and any other matters required by
such exchange. The members of the audit committee, including the chairman, shall
be appointed annually by the board of directors. The committee will meet at
least four times annually, or more frequently as circumstances dictate.
Authority
---------
The audit committee is granted the authority to perform each of the specific
duties enumerated in this committee charter and, upon the direction and approval
of the board of directors, to direct an investigation into any activity of the
company. The committee is empowered to retain persons having special competence
as necessary to assist the committee in fulfilling its responsibility.
Responsibility
The audit committee is primarily responsible for overseeing the company's
continued emphasis on internal financial controls, and assisting the board of
directors in fulfilling its fiduciary responsibilities as they relate to the
company's accounting policies and controls, financial reporting practices, the
quality and integrity of the company's financial reports, and business ethics
policies. The audit committee is to serve as a focal point for communications
relating to financial accounting, reporting and controls among the non-committee
directors, corporate management, internal auditors, and the company's
independent accountants. The independent accountants are accountable to the
audit committee and the board of directors.
Specific Duties
The audit committee is to:
1. Recommend to the board of directors the selection, retention and, when
necessary, the replacement of the independent accountants to audit the
consolidated financial statements of the company.
2. Meet with the independent accountants, principal internal auditor and
management to review the scope of the proposed audit for the current year
and any non-audit services performed. Review the compensation paid the
independent accountants for all services provided to ensure that the
independence of the accountants has not been impaired. To assist in its
evaluation of the independent accountants' independence and objectivity in
all services provided, the committee shall request and review a statement
from the independent accountants delineating all relationships between the
accountants and the company. Discuss with the company's management its
satisfaction with the quality of all services provided by the independent
accountants.
A-1
3. Review with the company's management, independent accountants, and
principal internal auditor the adequacy and effectiveness of the company's
systems of internal accounting, operating and financial reporting
controls. Additionally, review any significant risks or exposures and
audit findings or activities (including any significant pending or
threatened litigation, or environmental or other material loss
contingencies and the related financial statement impact) and management's
response thereto.
Review the company's quarterly and annual results of operations regarding
transactions, estimates, and judgments and the accounting and reporting
practices applied hereto, prior to its release of earnings, and review the
company's Form 10-Q's as deemed necessary by the committee. The committee
will review the company's annual report on Form 10-K prior to filing such
report.
4. Review with the company's management, independent accountants, and
principal internal auditor the adequacy and effectiveness of the internal
auditing function and recommend any changes in its authority,
responsibility or duties.
5. Review expense accounts and perquisites with respect to officers,
including their use of corporate assets, with the principal internal
auditor based on internal audit's review of these areas.
6. Discuss the proposed internal audit plan for the coming year with the
principal internal auditor and the independent accountants to ensure
internal and external audit efforts have been coordinated and directed
toward maximizing audit effectiveness.
7. Review a summary of internal audit findings and inquire whether
appropriate corrective actions have been taken on significant audit
findings. Also, review the current status of the annual internal audit
plan and explanations for any significant deviations from the original
plan.
8. Review matters relating to changes in accounting principles as well as
important developments emanating from the accounting and auditing
professions, the SEC, and other authorities.
9. Make itself available to meet independently with the independent
accountants, principal internal auditor, and management in executive
sessions. Among the items to be discussed in these meetings are the
evaluation of the company's financial and other management and independent
accountants, and whether there was full, free, and unrestricted access to
all company records, property, personnel and business transactions during
the audit(s). Additional items to be discussed include: the independent
accountants' qualitative judgments about the appropriateness, not just the
acceptability, of the accounting principles and the clarity of the
financial disclosure practices used or proposed to be adopted by the
company; the independent accountants' views about whether management's
choices of accounting principles are conservative or aggressive from the
perspective of income, asset, or liability recognition; and the
independent accountants' reasoning for the appropriateness of the
accounting principles adopted by management with respect to new
transactions or events or significant and unusual accounting or tax
issues.
10. Discuss with the independent accountants any significant proposed
adjustments and their recommendations for improving internal accounting
controls or management systems. Also, inquire whether there was any
disagreement with management which, if not resolved to the independent
accountant's satisfaction, would have caused them to issue a qualified
report on the company's financial statements. "Disagreements" for this
purpose shall be those contemplated by Item 304 of SEC Regulation S-K or
successor rule.
11. Submit minutes of all audit committee meetings to the board of directors
of the company.
A-2
12. Recommend to the board of directors any changes in the authority,
responsibility or duties of the committee.
13. Annually review and reassess the adequacy of this charter and, as
appropriate, recommend amendments to the board of directors.
In carrying out its responsibilities the audit committee must remain flexible in
order to react to changing conditions and to assure the board of directors and
stockholders that corporate accounting and reporting practices are functioning
in accordance with all requirements and are of the highest quality.
A-3
EXHIBIT B
Text of Amendment to Viacom Inc.'s
Restated Certificate of Incorporation
Increasing the Authorized Shares of
Class A Common Stock and Class B Common Stock
That Section (1)(a) of Article IV of the Restated Certificate of
Incorporation be, and the same hereby is, amended in full to read:
"(a) The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 10,775,000,000 shares. 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) 750,000,000 shares of Class A Common Stock, $0.01 par value
("Class A Common Stock").
(ii) 10,000,000,000 shares of Class B Common Stock, $0.01 par value
("Class B Common Stock").
(iii) 25,000,000 shares of Preferred Stock, $0.01 par value ("Preferred
Stock")."
B-1
VIACOM INC.
1515 Broadway
New York, New York 10036
Annual Meeting Proxy Card
-------------------------
P The undersigned hereby appoints SUMNER M. REDSTONE, MEL KARMAZIN and
R MICHAEL D. FRICKLAS, and each of them, as proxies with full power of
O substitution, to represent and to vote on behalf of the undersigned all
X of the shares of Class A Common Stock of Viacom Inc. which the
Y undersigned is entitled to vote at the Annual Meeting of Stockholders
to be held at the Equitable Center, 787 Seventh Avenue (at 51st
Street), New York, New York at 10:00 a.m. on Wednesday, May 23, 2001,
and at any adjournments or postponements thereof, upon the matters set
forth on the reverse side as more fully described in the Notice of 2001
Annual Meeting and Proxy Statement.
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.
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 on the reverse hereof and
in their discretion on all other matters. The Board of Directors
recommends a vote FOR Proposals (1) - (3). Unless otherwise specified,
the vote represented by this proxy will be cast FOR Proposals (1) -
(3).
VIACOM INC.
P.O. Box 11033
New York, NY 10203-0033
(Continued, and to be signed and dated
on the reverse side.)
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below for all nominees listed below
Nominees: George S. Abrams, David R. Andelman, George H. Conrades, Philippe P. Dauman, William H. Gray III, Mel Karmazin, Jan
Leschly, David T. McLaughlin, Ken Miller, Leslie Moonves, Brent D. Redstone, Shari Redstone, Sumner M. Redstone, Frederic V.
Salerno, William Schwartz, Ivan Seidenberg, Patty Stonesifer, Robert D. Walter
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), write name(s) of such nominee(s) in the space provided
below.)
*Exceptions_________________________________________________________________________________________________________
2. Approval of the adoption of an amendment to the Viacom Inc.
Restated Certificate of Incorporation.
FOR AGAINST ABSTAIN
3. Appointment of PricewaterhouseCoopers LLP to serve as independent
accountants for Viacom Inc. until the 2002 Annual Meeting of
Stockholders.
FOR AGAINST ABSTAIN
IF YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE CHECK THIS BOX AND AN ADMISSION
TICKET WILL BE SENT TO YOU.
Please sign exactly as your name(s) appear hereon.
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 _____________________________________, 2001
SIGNED ____________________________________
(Please sign, date and return this proxy in Change of Address and/or Votes MUST be indicated by
the enclosed postage prepaid envelope.) Comments, Mark Here an (x) in Black or Blue Ink