UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 8, 2005
VIACOM INC.
(Exact name of registrant as specified in its charter)
Delaware 001-09553 04-2949533
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
1515 Broadway, New York, NY 10036
(Address of principal executive offices) (Zip Code)
(212) 258-6000
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
Acceleration of Vesting of Stock Option Awards
On March 8, 2005, the Compensation Committee (the "Committee") of
the Board of Directors of Viacom Inc. (the "Company") approved the acceleration
of the vesting of unvested stock options having an exercise price of $38 or
greater (other than options under the Company's "Fund the Future" program)
granted under the Company's 2000 Long-Term Management Incentive Plan, as amended
and restated (the "2000 LTMIP"), that are held by current employees, including
all executive officers. Also accelerated were a small number of unvested stock
options having an exercise price of $38 or greater granted under the Company's
1997 Long-Term Management Incentive Plan, as amended and restated (the "1997
LTMIP"). Stock option awards granted from 1999 through 2004 with respect to
approximately 29 million shares of the Company's Class B Common Stock ("Class B
Shares"), including options with respect to approximately 5 million Class B
Shares that are held by the executive officers, are subject to this acceleration
which is effective as of March 8, 2005. The Committee also imposed a holding
period that will require all executive officers to refrain from selling Class B
Shares acquired upon the exercise of these options (other than shares needed to
cover the exercise price and satisfying withholding taxes) until the date on
which the exercise would have been permitted under the option's original vesting
terms or, if earlier, the executive officer's last day of employment.
Because these options had exercise prices in excess of the current
market value of the Class B Shares based on the closing price of $34.74 per
share on March 8, 2005 (they were "underwater"), and were not fully achieving
their original objectives of incentive compensation and employee retention, the
Company expects the acceleration to have a positive effect on employee morale,
retention and perception of option value. The acceleration also eliminates
future compensation expense the Company would otherwise recognize in its
consolidated statement of operations with respect to these options once the
Statement of Financial Accounting Standards No. 123 (revised 2004) "Share-Based
Payment", issued by the Financial Accounting Standards Board, becomes effective
for reporting periods beginning after June 15, 2005. The future expense that is
eliminated as a result of the acceleration of the vesting of these options is
approximately $400 million, or $242 million net of tax (of which approximately
$58 million, or $35 million net of tax, is attributable to options held by
executive officers). This expense will be reflected in pro forma footnote
disclosure to the first quarter 2005 financial statements.
The form of agreement for stock options granted for the years 1999
through 2000 under the 1997 LTMIP and the form of certificate and terms and
conditions of stock options granted for the years 2001 through 2004 under the
2000 LTMIP, including, in each case, options awarded to the Company's executive
officers, and the form of notice to executive officers regarding the
acceleration of vesting are attached hereto as exhibits and their terms are
incorporated herein by reference. Copies of the 1997 LTMIP and 2000 LTMIP have
been filed with the Securites and Exchange Commission as Exhibit B to the
Company's Proxy Statement dated June 5, 2000 and Exhibit 10(d) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001,
respectively, in each case as amended by the Amendment to Viacom Stock Option
Plans filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002.
Compensation Committee Determination Concerning Awards under the Senior
Executive Short-Term Incentive Plan
As previously disclosed in the Company's report on Form 8-K dated
February 1, 2005, the Committee has established performance criteria and target
awards for participants in the Company's Senior Executive Short-Term Incentive
Plan, as amended and restated (the "Senior Executive STIP"), for the 2005 fiscal
year. The performance criteria relates to the achievement over a one-year
performance period ending December 31, 2005 of a specified level of the
Company's operating income (determined in accordance with generally accepted
accounting principles in the United States) before depreciation, amortization
and intercompany eliminations, as set forth in the Senior Executive STIP.
Pursuant to Section 2.4 of the Senior Executive STIP, if the Committee certifies
that the performance goals for fiscal 2005 have been achieved, the Committee may
reduce the amount of any award in its sole discretion to reflect the Committee's
assessment of a participant's individual performance or for any other reason.
On March 8, 2005, the Committee determined that, in exercising its
discretion to reduce the amount of any award (assuming the performance goals for
2005 are achieved), the actual award paid would be based principally on the
financial performance of the Company weighted (i) 75% on the achievement of
specified levels of operating income (determined in accordance with generally
accepted accounting principles in the United States) before depreciation,
amortization and intercompany eliminations and (ii) 25% on free cash flow, in
each case including any adjustments deemed necessary pursuant to Article III of
the Senior Executive STIP. The Committee also determined that it would consider
other factors in utilizing this discretion, including, but not limited to,
certain strategic non-financial goals such as diversity in the workplace, legal
compliance and ethical behavior and may also consider the nature of unusual
expenses or contributors to financial results. A copy of the Senior Executive
STIP has been filed with the Securities and Exchange Commission as Exhibit C to
the Company's Proxy Statement dated April 21, 2003.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Number Description of Exhibit
-------------- ----------------------
10.1 Form of Agreement for Stock Options granted under the
1997 LTMIP
10.2 Form of Certificate and Terms and Conditions for
Stock Options granted under the 2000 LTMIP
10.3 Form of Notice to Executive Officers regarding
Acceleration of Vesting of "Underwater" Options
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VIACOM INC.
(Registrant)
By: /s/ MICHAEL D. FRICKLAS
------------------------------------------
Michael D. Fricklas
Executive Vice President, General Counsel
and Secretary
Date: March 14, 2005
Exhibit Index
Exhibit Number Description of Exhibit
-------------- ----------------------
10.1 Form of Agreement for Stock Options granted under the
1997 LTMIP
10.2 Form of Certificate and Terms and Conditions for
Stock Options granted under the 2000 LTMIP
10.3 Form of Notice to Executive Officers regarding
Acceleration of Vesting of "Underwater" Options
Agreement Under the
Viacom Inc.
1997 Long-Term Management Incentive Plan
for [Insert Year of Grant] Stock Option Grant
---------------------------------------------
AGREEMENT, dated as of [Insert Date of Grant], by and between Viacom
Inc., a Delaware corporation (the "Company"), and ______________ (the
"Participant"), with respect to the [Insert Year of Grant] grant of stock
options under the Company's 1997 Long-Term Management Incentive Plan, as amended
(the "Plan").
This Agreement, together with the Memorandum dated [Insert Date of
Memorandum] and the agreements delivered under the Plan in connection with each
grant of stock options under the Plan, constitutes the prospectus covering the
shares of Class B Common Stock subject to the Plan. The Participant can receive
additional copies of his or her Plan agreements and the Memorandum upon request
to the Administrator, Long-Term Incentive Plans, Viacom Inc., 1515 Broadway, New
York, New York 10036.
WITNESSETH:
WHEREAS, the Participant is now employed by the Company or one of its
subsidiaries in a key capacity and the Company desires to reward the
Participant, in accordance with the terms hereof, for the Participant's
contributions to the financial success of the Company by awarding the
Participant stock options to purchase shares of Class B Common Stock;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
TERMS OF STOCK OPTIONS
Section 1.1 Grant of Stock Options. Subject to the terms and conditions
contained herein and in the Plan, the terms of which are hereby incorporated by
reference, the Company hereby awards to the Participant, effective as of [Insert
Date of Grant] (the "Date of Grant"), a grant of stock options (the "Stock
Options") to purchase _______ shares of Class B Common Stock at an exercise
price of $_______ for each share (the "Exercise Price"). The capitalized terms
used in this Agreement which are not otherwise defined herein shall have the
meanings assigned to them in Article III hereof. The Stock Options granted
hereunder are not intended to be, or qualify as, "Incentive Stock Options"
within the meaning of Section 422 of the Code.
Section 1.2 Terms of Stock Options.
(a) Vesting. The Stock Options shall be exercisable only to the extent
the Participant is vested therein. The Stock Options shall vest in [Insert
Vesting Schedule - generally options vest in four equal installments on the
first, second, third and fourth anniversaries of the Date of Grant].
(b) Option Period. Except as provided in Section 1.2(c) hereof, the
period during which the Stock Options may be exercised shall expire on the
tenth anniversary of the Date of Grant (the "Expiration Date").
(c) Exercise in the Event of Termination of Employment, Retirement,
Death or Permanent Disability.
(i) Termination other than for Cause, Retirement, Death or
Permanent Disability. In the event that (A) the Participant ceases to
be an employee of the Company or any of its subsidiaries by reason of
the voluntary termination by the Participant or the termination by the
Company or any of its subsidiaries other than for Cause, the
Participant may exercise his or her Outstanding Stock Options to the
extent then exercisable until the earlier of six months after the date
of such termination (or such longer period, not in excess of the second
anniversary of the Date of Grant of such Stock Options, as may be
determined by the Committee, in its discretion) or the Expiration Date,
(B) the Participant ceases to be an employee of the Company or any of
its subsidiaries by reason of the Participant's Retirement, the
Participant may exercise his or her Outstanding Stock Options to the
extent then exercisable until the earlier of two years after such date
or the Expiration Date, (C) the Participant dies during a period during
which his or her Stock Options could have been exercised by him or her,
his or her Outstanding Stock Options may be exercised to the extent
exercisable at the date of death by the person who acquired the right
to exercise such Stock Options by will or the laws of descent and
distribution until the earlier of one year after such death (or such
longer period as may be determined by the Committee, in its discretion,
prior to the expiration of such one-year period) or the Expiration
Date, or (D) the Permanent Disability of the Participant occurs, the
Participant may exercise his or her Outstanding Stock Options to the
extent exercisable upon the onset of such Permanent Disability until
the earlier of one year after such date (or such longer period not in
excess of two years after such date as may be determined by the
Committee, in its discretion) or the Expiration Date. Upon the
occurrence of an event described in clauses (A), (B), (C) or (D) of
this Section 1.2(c)(i), all rights with respect to Stock Options that
are not vested as of such event will be relinquished.
(ii) Termination for Cause. If the Participant's employment with
the Company or any of its subsidiaries ends because of a Termination
for Cause, all Outstanding Stock Options, whether or not then vested,
shall terminate effective as of the date of such termination.
Section 1.3 Exercise of Stock Options.
(a) Whole or Partial Exercise. Subject to the restrictions of Section
1.2(b) hereof, the Participant may exercise all vested Stock Options
granted hereunder at one time or in installments of 100 Stock Options (or
in the whole number of unexercised Stock Options in which the Participant
is vested, if such number is less than 100) by written notice to the
Administrator, Long-Term Incentive Plans, Viacom Inc., 1515 Broadway, New
York, New York 10036. Such notice shall (i) state the number of full Stock
Options being exercised, (ii) be signed by the person or persons so
exercising the Stock Options and, in the event the Stock Options are being
exercised (pursuant to Section 1.2(c)(i) hereof) by any person or persons
other than the Participant accompanied by proof satisfactory to the
Company's counsel of the right of such person or persons to exercise the
Stock Options, and (iii) be accompanied by full payment as set forth in
Section 1.3(b) hereof.
(b) Payment of Aggregate Option Price. The written notice of exercise
described above must be accompanied by full payment of the aggregate
Exercise Price which shall be determined by multiplying the number of Stock
Options being exercised by the Exercise Price. Such Exercise Price shall be
paid in cash (e.g. personal bank check, certified check or official bank
check). In addition, in accordance with Section 4.3 hereof, the Participant
shall make an arrangement acceptable to the Company to pay to the Company
an amount sufficient to satisfy the combined Federal, state and local
withholding tax obligations which arise in connection with the exercise of
such Stock Options.
(c) Issuance of Share Certificates. Upon satisfaction of the conditions
set forth in Section 1.3(b) hereof, the Company shall deliver (or cause to
be delivered) a certificate or certificates for the shares of Class B
Common Stock issued pursuant to the exercise of the Stock Options to the
Participant.
ARTICLE II
EFFECT OF CERTAIN CORPORATE CHANGES
In the event of a merger, consolidation, stock split, dividend,
distribution, combination, reclassification or recapitalization that changes the
character or amount of the Class B Common Stock, the Committee shall make such
adjustments to the number of shares of Class B Common Stock subject to the Stock
Options or the exercise price of the Stock Options, in each case, as it deems
appropriate. Such determinations shall be conclusive and binding for all
purposes.
ARTICLE III
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Class B Common Stock" shall mean shares of Class B Common Stock,
par value $0.01 per share, of the Company.
(c) "Code" shall mean the Internal Revenue Code of l986, as amended,
including any successor law thereto.
(d) "Committee" shall mean the Senior Executive Compensation Committee
of the Board (or such other Committee as may be appointed by the Board)
except that (i) the number of directors on the Committee shall not be less
than two and (ii) each member of
the Committee shall be a "non-employee director" within the meaning of Rule
16b-3 under the Exchange Act.
(e) "Exchange Act" shall mean the Securities Exchange Act of l934, as
amended, including any successor law thereto.
(f) "Fair Market Value" of a share of Class B Common Stock on a given
date shall be the closing price of a share of Class B Common Stock on the
New York Stock Exchange or such other national securities exchange as may
be designated by the Committee or, in the event that the Class B Common
Stock is not listed for trading on a national securities exchange but is
quoted on an automated quotation system, the average closing bid price per
share of the Class B Common Stock on such automated quotation system or, in
the event that the Class B Common Stock is not quoted on any such system,
the average of the closing bid prices per share of the Class B Common Stock
as furnished by a professional marketmaker making a market in the Class B
Common Stock designated by the Committee.
(g) "Outstanding Stock Option" shall mean a Stock Option granted to the
Participant which has not yet been exercised and which has not yet expired
in accordance with its terms.
(h) "Permanent Disability" shall have the same meaning as such term or
a similar term has in the long-term disability policy maintained by the
Company or a subsidiary thereof for the Participant and in effect on the
date of the onset of the Participant's Permanent Disability.
(i) "Retirement" shall mean the resignation or termination of
employment after attainment of an age and years of service required for
payment of an immediate pension pursuant to the terms of any qualified
retirement plan maintained by the Company or a subsidiary in which the
Participant participates; provided, however, that no resignation or
termination prior to a Participant's 60th birthday shall be deemed a
retirement unless the Committee so determines in its sole discretion.
(j) "Termination for Cause" shall mean a termination of employment with
the Company or any of its subsidiaries which, as determined by the
Committee, is by reason of (i) "cause" as such term or a similar term is
defined in any employment agreement applicable to the Participant, or (ii)
if there is no such employment agreement or if such employment agreement
contains no such term, (x) dishonesty, conviction of a felony, or willful
unauthorized disclosure of confidential information, (y) failure, neglect
of or refusal by the Participant to substantially perform the duties of the
Participant's employment, or (z) any other act or omission which is
materially injurious to the financial condition or business reputation of
the Company of any subsidiary thereof.
(k) To "vest" a Stock Option held by the Participant shall mean to
render such Stock Option exercisable, subject to the terms of the Plan,
except where the Participant's employment ends because of a Termination for
Cause.
ARTICLE IV
MISCELLANEOUS
Section 4.1 No Rights to Continued Employment. Neither this Agreement,
the Plan nor any action taken in accordance with such documents shall be
construed as giving the Participant any right to be retained by the Company or
any of its subsidiaries.
Section 4.2 Restriction on Transfer. The rights of the Participant with
respect to the Stock Options shall not be transferable by the Participant except
(i) by will or the laws of descent and distribution or (ii) subject to the prior
approval of the Committee, for transfers to members of the Participant's
immediate family or trusts whose beneficiaries are members of the Participant's
immediate family, in each case subject to the condition that the Committee shall
be satisfied that such transfer is being made for estate and/or tax planning
purposes without consideration being received therefor and subject to such other
conditions as the Committee may impose.
Section 4.3 Tax Withholding. As a condition to the exercise of the
Stock Options, the Participant shall make a payment (or an arrangement
acceptable to the Company for the withholding of such payment) sufficient to
satisfy the combined Federal, state and local withholding tax obligations which
arise in connection with the exercise of such Stock Options.
Section 4.4 Stockholder Rights. The grant of Stock Options under this
Agreement shall not entitle the Participant or any permitted transferee to any
rights of a holder of shares of common stock of the Company, other than when and
until share certificates are delivered to the Participant upon exercise of a
Stock Option.
Section 4.5 No Restriction on Right of Company to Effect Corporate
Changes. This Agreement shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Class B Common Stock or the rights thereof or which are convertible
into or exchangeable for Class B Common Stock, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
Section 4.6 Amendment. Other than as provided in Article II hereof,
this Agreement may not be modified, amended or waived in any manner except by an
instrument in writing signed by both parties hereto. The waiver by either party
of compliance with any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any other provision of this Agreement, or
of any subsequent breach by such party of a provision of this Agreement.
Section 4.7 Stockholder Approval. The grant of Stock Options under this
Agreement is subject to the approval of the stockholders of the Company, at the
next annual or special meeting of stockholders, to the extent that the number of
shares of Class B Common Stock subject to the Plan is insufficient to cover the
number of shares of Class B Common Stock subject to Stock Options awarded under
this Agreement.
Section 4.8 Notices. Every notice or other communication relating to
this Agreement shall be in writing, and shall be mailed to or delivered to the
party for whom it is intended at such address as may from time to time be
designated by such party in a notice mailed or delivered to the other party as
herein provided. If no such address has been specified by the Participant, such
notices or communications shall be sent to the Participant's address as
specified in the records of the Company.
Section 4.9 Headings. The headings of sections and subsections herein
are included solely for convenience of reference and shall not affect the
meaning of any of the provisions of this Agreement.
Section 4.10 Receipt of Copy of Plan. By executing this Agreement, the
Participant acknowledges receipt of a copy of the Plan.
Section 4.11 Governing Law. This Agreement and all rights hereunder
shall be construed in accordance with and governed by the laws of the State of
Delaware.
VIACOM INC.
By:
------------------------------------
Senior Vice President,
Human Resources and
Administration
---------------------------------------
Participant
2000 Long-Term Management Incentive Plan
Stock Option Certificate
NAME: ____________
NUMBER OF SHARES COVERED: _______
EXERCISE PRICE: $______
DATE OF GRANT: __________
VIACOM INC.
This certifies that Viacom Inc. (the
"Company") granted to the employee named above (the
"Participant") on the above date ("Date of Grant")
non-qualified stock options (the "Stock Options") to
purchase the number of shares shown above of the
Class B Common Stock, par value $0.01 per share, of
the Company ("Class B Common Stock"), for a purchase
price per share equal to the Exercise Price shown
above, under the Company's 2000 Long-Term Management
Incentive Plan, as amended from time to time (the
"Plan"), all on the terms and conditions attached
hereto as part hereof (the "Terms and Conditions").
------------------------------
[Insert Name and Title of
Executive signing Certificate]
TERMS AND CONDITIONS
Viacom Inc.
2000 Long-Term Management Incentive Plan
Stock Option Certificate
The Stock Option Certificate attached hereto and the Terms and Conditions
for the stock option grant contained herein (the "Certificate"), together with
the Memorandum dated [Insert Date of Memorandum] and the certificates and/or
agreements delivered under the Plan in connection with each grant of stock
options under the Plan, constitutes the prospectus covering the shares of Class
B Common Stock subject to the Plan.
ARTICLE I
TERMS OF STOCK OPTIONS
Section 1.1 Grant of Stock Options. The Stock Options have been
awarded to the Participant subject to the terms and conditions contained in the
Certificate and in the Plan, the terms of which are hereby incorporated by
reference. A copy of the Plan will be provided upon request to the
Administrator, Long-Term Incentive Plans. The Plan has been filed with the
Securities and Exchange Commission. The capitalized terms used in the
Certificate that are not otherwise defined in the Certificate shall have the
meanings assigned to them in Article III hereof. The Stock Options are not
intended to be, or qualify as, "Incentive Stock Options" within the meaning of
section 422 of the Code.
Section 1.2 Terms of Stock Options.
(a) Vesting. The Stock Options shall be exercisable only to the
extent the Participant is vested therein. The Stock Options shall vest
[Insert Vesting Schedule - generally Stock Options vest in four equal
installments on the first, second, third and fourth anniversaries of the
Date of Grant].
(b) Option Period. Except as provided in Section 1.2(c) hereof,
the period during which the Stock Options may be exercised shall expire
on the tenth anniversary of the Date of Grant (the "Expiration Date").
(c) Exercise in the Event of Termination of Employment,
Retirement, Permanent Disability or Death.
(i) Exercise in the Event of Termination of Employment other
than for Cause, Retirement, Permanent Disability or Death. In the
event of a termination of the Participant's employment other than
for Cause or the Participant's Retirement, Permanent Disability or
death, the Participant's Outstanding Stock Options can be
exercised in accordance with the following provisions:
(A) if the Participant ceases to be an employee of the
Company or any of its Subsidiaries by reason of the voluntary
termination by the Participant or the termination by the
Company or any of its Subsidiaries other than for Cause, his
or her Outstanding Stock Options may be exercised to the
extent then exercisable until the earlier of six months after
the date of such termination (or such longer period as may be
determined by the Committee, in its discretion) or the
Expiration Date;
(B) if the Participant ceases to be an employee of the
Company or any of its Subsidiaries by reason of the
Participant's Retirement, the Participant may exercise his or
her Outstanding Stock Options to the extent exercisable on
the date of Retirement until the earlier of the third
anniversary of such date (or such longer period as may be
determined by the Committee, in its discretion) or the
Expiration Date;
(C) if the Permanent Disability of the Participant
occurs, his or her Outstanding Stock Options may be
exercised to the extent exercisable upon the date of the
onset of such Permanent Disability until the earlier of the
third anniversary of such date (or such longer period as may
be determined by the Committee, in its discretion) or the
Expiration Date; and
(D) if a Participant dies during a period during which
his or her Stock Options could have been exercised by him or
her, his or her Outstanding Stock Options may be exercised
to the extent exercisable at the date of death by the person
who acquired the right to exercise such Stock Options by
will or the laws of descent and distribution or permitted
transfer until the earlier of the second anniversary of the
date of death (or such longer period as may be determined by
the Committee, in its discretion) or the Expiration Date.
Upon the occurrence of an event described in clauses (A), (B), (C)
or (D) of this Section 1.2(c)(i), all rights with respect to Stock
Options that are not vested as of such event will be relinquished.
A "termination of employment" occurs, for purposes of the Plan,
when a Participant no longer works for the Company or any of its
Subsidiaries. For the avoidance of doubt, the employment of a
Participant who works for a Subsidiary shall terminate, for Plan
purposes, on the date on which the Participant's employing company
ceases to be a Subsidiary.
(ii) Termination for Cause. If the Participant's employment
with the Company or any of its Subsidiaries ends due to a
Termination for Cause then, unless the Committee in its discretion
determines otherwise, all Outstanding Stock Options, whether or
not then vested, shall terminate effective as of the date of such
termination.
(iii) Exercise Periods following Termination of Employment,
Retirement, Permanent Disability or Death. For the purposes of
determining the dates on which Stock Options may be exercised
following a termination of employment or Retirement, Permanent
Disability or death, the day following the date of termination of
employment or Retirement, Permanent Disability or death shall be
the first day of the exercise period and the Stock Options may be
exercised up to and including the last business day falling within
the exercise period. Thus, if the last day of the exercise period
is not a business day, then the last date the Stock Options may be
exercised is the last business day preceding the end of the
exercise period.
Section 1.3 Exercise of Stock Options.
(a) Whole or Partial Exercise. Subject to the restrictions of
Section 1.2(b) hereof, the Participant may exercise all vested
Outstanding Stock Options granted hereunder at one time or in
installments of 100 Stock Options (or in the whole number of unexercised
Stock Options in which the Participant is vested, if such number is less
than 100) by notice to the Administrator, Long-Term Incentive Plans,
Viacom Inc., 1515 Broadway, New York, New York 10036, or to such agent(s)
for the Company ("Agent") as the Company may from time to time specify,
in such manner and at such address as may be specified from time to time
by the Company. Such notice shall (i) state the number of full Stock
Options being exercised, and (ii) be signed (or otherwise authorized in a
manner acceptable to the Company) by the person or persons so exercising
the Stock Options and, in the event the Stock Options are being exercised
(pursuant to Section 1.2(c)(i) hereof) by any person or persons other
than the Participant accompanied by proof satisfactory to the Company's
counsel of the right of such person or persons to exercise the Stock
Options. Information concerning any Agent and its address may be obtained
by contacting the Administrator, Long-Term Incentive Plans.
(b) Payment of Aggregate Option Price. Full payment of the
aggregate Exercise Price which shall be determined by multiplying the
number of Stock Options being exercised by the Exercise Price shall be
made on or before the settlement date for the shares of Class B Common
Stock issued pursuant to the exercise of the Stock Options. Such Exercise
Price shall be paid in cash (e.g. personal bank check, certified check or
official bank check). In addition, in accordance with Section 4.3 hereof,
the Participant shall make an arrangement acceptable to the Company to
pay to the Company an amount sufficient to satisfy the combined federal,
state and local withholding tax obligations which arise in connection
with the exercise of such Stock Options.
(c) Issuance of Share Certificates. Upon satisfaction of the
conditions set forth in Section 1.3(b) hereof, the Company shall deliver
(or cause to be delivered) a certificate or certificates for the shares
of Class B Common Stock issued pursuant to the exercise of the Stock
Options to the Participant.
(d) Outstanding Stock Options. The number of shares of Class B
Common Stock subject to the Stock Options that is set forth on the Stock
Option Certificate attached hereto or provided simultaneously online may
not reflect the number of Outstanding Stock Options due to Stock Option
exercises or adjustments pursuant to Article II.
ARTICLE II
EFFECT OF CERTAIN CORPORATE CHANGES
In the event of a merger, consolidation, stock split, dividend,
distribution, combination, reclassification or recapitalization that changes the
character or amount of the Class B Common Stock or any other changes in the
corporate structure, equity securities or capital structure of the Company, the
Committee shall make such adjustments to the number of shares of Class B Common
Stock subject to the Stock Options or the exercise price of the Stock Options,
in each case, as it deems appropriate. The Board may, in its sole discretion,
also make such other adjustments as it deems appropriate in order to preserve
the benefits or potential benefits intended to be made available hereunder. Such
determinations shall be conclusive and binding for all purposes.
ARTICLE III
DEFINITIONS
As used in the Certificate, the following terms shall have the
following meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of l986, as
amended, including any successor law thereto.
(c) "Committee" shall mean the Compensation Committee of the
Board (or such other Committee(s) as may be appointed or designated by
the Board to administer the Plan.)
(d) "Fair Market Value" of a share of Class B Common Stock on
a given date shall be the 4:00 p.m. (New York time) closing price on such
date on the New York Stock Exchange or other principal stock exchange on
which the Class B Common Stock is then listed, as reported by The Wall
Street Journal (Northeast edition) or any other authoritative source
selected by the Company.
(e) "Outstanding Stock Option" shall mean a Stock Option
granted to the Participant which has not yet been exercised and which has
not yet expired or been terminated in accordance with its terms.
(f) "Permanent Disability" shall have the same meaning as such
term or a similar term has in the long-term disability policy maintained
by the Company or a Subsidiary thereof for the Participant and in effect
on the date of the onset of the Participant's Permanent Disability.
(g) "Retirement" shall mean the resignation or termination of
employment after attainment of an age and years of service required for
payment of an immediate pension pursuant to the terms of any qualified
defined benefit retirement plan maintained by the Company or a Subsidiary
in which the Participant participates; provided, however, that no
resignation or termination prior to a Participant's 60th birthday shall
be deemed a retirement unless the Committee so determines in its sole
discretion; and provided, further, that the resignation or termination of
employment other than a Termination for Cause after attainment of age 60
shall be deemed a retirement if the Participant does not participate in a
qualified defined benefit retirement plan maintained by the Company or a
Subsidiary.
(h) "Subsidiary" shall mean a corporation (or a partnership or
other enterprise) in which the Company owns or controls, directly or
indirectly, more than 50% of the outstanding shares of stock normally
entitled to vote for the election of directors (or comparable equity
participation and voting power).
(i) "Termination for Cause" shall mean a termination of
employment with the Company or any of its Subsidiaries which, as
determined by the Committee, is by reason of (i) "cause" as such term or
a similar term is defined in any employment agreement applicable to the
Participant, or (ii) if there is no such employment agreement or if such
employment agreement contains no such term, the Participant's: (A)
dishonesty; (B) conviction of embezzlement, fraud or other conduct which
would constitute a felony; (C) willful unauthorized disclosure of
confidential information; (D) failure, neglect of or refusal
to substantially perform the duties of the Participant's employment; or
(E) any other act or omission which is a material breach of the Company's
policies regarding employment practices or the applicable federal, state
and local laws prohibiting discrimination or which is materially
injurious to the financial condition or business reputation of the
Company or any Subsidiary thereof.
(j) To "vest" a Stock Option held by the Participant shall
mean to render such Stock Option exercisable, subject to the terms of the
Plan.
ARTICLE IV
MISCELLANEOUS
Section 4.1 No Rights to Grants or Continued Employment. Neither
the Certificate, the Plan nor any action taken in accordance with such documents
shall confer upon the Participant any right to be employed by the Company or any
Subsidiary thereof, nor to be entitled to any remuneration or benefits not set
forth in the Plan or the Certificate, including the right to receive any future
grants under the Plan or any other plan of the Company or any Subsidiary thereof
or interfere with or limit the right of the Company or any Subsidiary thereof to
modify the terms of or terminate the Participant's employment at any time.
Section 4.2 Restriction on Transfer. The rights of the Participant
with respect to the Stock Options shall not be transferable by the Participant
except (i) by will or the laws of descent and distribution or (ii) subject to
the prior approval of the Committee, for transfers to members of the
Participant's immediate family or trusts whose beneficiaries are members of the
Participant's immediate family, in each case subject to the condition that the
Committee shall be satisfied that such transfer is being made for estate and/or
tax planning purposes without consideration being received therefor and subject
to such other conditions as the Committee may impose.
Section 4.3 Tax Withholding. As a condition to the exercise of the
Stock Options, the Participant shall make a payment in cash equal to the amount
of any federal, state, local or other taxes owed as a result of such exercise.
Section 4.4 Stockholder Rights. The grant of Stock Options under
the Certificate shall not entitle the Participant or any permitted transferee to
any rights of a holder of shares of Class B Common Stock, other than when and
until share certificates are delivered to the Participant upon exercise of a
Stock Option.
Section 4.5 No Restriction on Right of Company to Effect Corporate
Changes. The Certificate shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Class B Common Stock or the rights thereof or which are convertible
into or exchangeable for Class B Common Stock, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
Section 4.6 Interpretation. In the event of a conflict or
ambiguity between the provisions of the Certificate and the provisions of any
employment agreement applicable to the Participant with respect to the Stock
Options, the provisions of such employment agreement shall be deemed controlling
to the extent such provisions are consistent with the provisions of the Plan and
are more favorable to the Participant than the provisions of the Certificate.
Section 4.7 Breach of Covenants. In the event that the Committee
makes a good faith determination that the Participant committed a material
breach of the restrictive covenants relating to non-competition, no solicitation
of employees, confidential information or proprietary property in any employment
or other agreement applicable to the Participant during the one year period
after termination of the Participant's employment with the Company or a
Subsidiary, the Participant will be required to return any "gain" (as defined
below) realized on the Stock Options during the one year period prior to such
breach or at any time after such breach occurs. In addition, if the Committee
makes such determination, the Participant's Outstanding Stock Options will be
terminated. The "gain" on the Stock Options shall mean the difference between
the Fair Market Value and the exercise price of the Stock Options on date of
exercise.
Section 4.8 Headings. The headings of articles and sections herein
are included solely for convenience of reference and shall not affect the
meaning of any of the provisions of the Certificate.
Section 4.9 Governing Law. The Certificate and all rights
hereunder shall be construed in accordance with and governed by the laws of the
State of Delaware.
Bill Roskin Stationery
March 14, 2005
[Insert Name and Address]
Re: Acceleration of "Underwater" Stock Options
Dear [insert first name],
I am pleased to advise that, on March 8, 2005, the Compensation
Committee of Viacom's Board of Directors accelerated the vesting of a major
portion of your unvested stock options granted under the Company's Long-Term
Management Incentive Plans (LTMIP).
The Committee felt it appropriate to require the Company's Section
16 officers to hold the shares acquired upon the exercise of these options until
their original vesting date or, if earlier, the executive's last day of
employment, other than shares needed to cover the exercise price and satisfy
withholding taxes.
This acceleration does not apply to stock options granted since
the Company's new LTMIP was adopted on May 19, 2004 or granted under the
Company's "Fund the Future" program or stock options with an exercise price of
less than $38.
Smith Barney (SB) has not yet updated its website to reflect this
acceleration but will do so shortly. Also, please be reminded that it is
Company policy that Section 16 officers are not permitted to exercise Viacom
stock options through the Company's program with SB. You must execute these
transactions through a broker selected by you.
Of course, you should feel free to call me if you have any
questions.
Sincerely,
William A. Roskin