[LOGO]
April 12, 1996
Dear Stockholder:
You are cordially invited to attend the 1996 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 Thursday, May 23, 1996.
Holders of Viacom Inc. Class A Common Stock are being asked to vote on the
matters listed on the enclosed Notice of 1996 Annual Meeting of Stockholders.
National Amusements, Inc., which owns approximately 61% of the Class A
Common Stock, has advised the Company that it intends to vote its shares of
Class A Common Stock for these matters other than the stockholder proposal.
Therefore, approval of such matters by the stockholders of the Company is
assured.
I hope you will be able to attend the Annual Meeting. However, 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 such
shares in person.
IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON AND HOLD REGISTERED
SHARES OF COMMON STOCK, YOU SHOULD MARK THE APPROPRIATE BOX ON THE ENCLOSED
PROXY CARD (FOR HOLDERS OF CLASS A COMMON STOCK) OR TICKET REQUEST FORM (FOR
HOLDERS OF CLASS B COMMON STOCK) AND AN ADMISSION TICKET WILL BE SENT TO YOU. IF
YOU HOLD COMMON STOCK BENEFICIALLY AND PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON, YOU MUST 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, TO THE MANAGER--INVESTOR RELATIONS, VIACOM INC., 1515 BROADWAY, 45TH
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
[LOGO]
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VIACOM INC.
NOTICE OF 1996 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 May 23, 1996. The principal business of the meeting will be
consideration of the following matters:
1. The election of 11 directors;
2. The approval of an amendment to the Viacom Inc. Senior Executive
Short-Term Incentive Plan;
3. The approval of the appointment of Price Waterhouse LLP to serve as
independent accountants until the 1997 Annual Meeting of Stockholders; and
4. A stockholder proposal as described in the attached Proxy Statement;
and
5. Such other business as may properly come before the Annual Meeting or
any adjournment thereof.
By order of the Board of
Directors,
/s/ Philippe P. Dauman
PHILIPPE P. DAUMAN
Secretary
April 12, 1996
-------------------
PROXY STATEMENT
-------------------
The enclosed Proxy is being solicited by the Board of Directors of Viacom
Inc. (the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held May 23, 1996. The 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 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 a plurality of the votes cast is required for the
election of directors. The affirmative vote of a majority of the votes cast is
required for the approval of the proposed amendment to the Viacom Inc. Senior
Executive Short-Term Incentive Plan (the "Senior Executive STIP Amendment"), the
appointment of the independent accountants and the approval of the stockholder
proposal described below (the "Stockholder Proposal"). Abstentions and broker
non-votes will not be included in vote totals and will have no effect on the
outcome of the vote.
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 1, 1996 are entitled to notice of and to vote at the Annual Meeting.
The Company then had outstanding 75,235,683 shares of Class A Common Stock, each
of such shares being entitled to one vote, and 295,597,280 shares of non-voting
Class B Common Stock, $0.0l par value ("Class B Common Stock" and, together with
the Class A Common Stock, "Common Stock").
As of April 1, 1996, National Amusements, Inc. ("NAI") owned approximately
61% of the Class A Common Stock and approximately 25% of the outstanding Class A
Common Stock and Class B Common Stock on a combined basis. Sumner M. Redstone,
the controlling stockholder of NAI, is the Chairman of the Board and Chief
Executive Officer of the Company.
NAI 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 11 nominated directors and
the approval of the Senior Executive STIP Amendment and the appointment of Price
Waterhouse LLP to serve as the Company's independent accountants until the 1997
Annual Meeting of Stockholders and against approval of the Stockholder Proposal;
such action by NAI is sufficient to elect such directors and approve the Senior
Executive STIP Amendment and the appointment of independent accountants and
prevent approval of the Stockholder Proposal 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. The Company intends to
commence its distribution of the Proxy Statement and the Proxy on or about April
12, 1996.
1
ELECTION OF DIRECTORS
The election of 11 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 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............. Associated with the law firm of Winer and Abrams in Boston,
Age 64 Massachusetts since 1969. Mr. Abrams served as the General Counsel and
Director since 1987 Staff 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 Boston Museum of Fine Arts and the Harvard University
Art Museums. Mr. Abrams is a director of NAI and Sonesta
International Hotels Corporation.
Philippe P. Dauman........... Deputy Chairman of the Board of the Company since January 1996 and
Age 42 Executive Vice President, General Counsel, Chief Administrative
Director since 1987 Officer and Secretary of the Company since March 1994. From February
1993 to March 1994, Mr. Dauman served as Senior Vice President,
General Counsel and Secretary of the Company. Prior to that, Mr.
Dauman was a partner in the law firm of Shearman & Sterling in New
York, which he joined in 1978. Mr. Dauman is a director of NAI and
Spelling Entertainment Group Inc. ("Spelling").
Thomas E. Dooley............. Deputy Chairman of the Board of the Company since January 1996 and
Age 39 Executive Vice President--Finance, Corporate Development and
Director since January 1996 Communications of the Company since March 1994. From July 1992 to
March 1994, Mr. Dooley served as Senior Vice President, Corporate
Development of the Company. From August 1993 to March 1994, he also
served as President, Interactive Television. Prior to that, he
served as Vice President, Treasurer of the Company since 1987. In
December 1990, he was named Vice President, Finance of the Company.
Mr. Dooley joined Viacom International Inc. in 1980 in the corporate
finance area and held various positions in the corporate and
divisional finance areas. Mr. Dooley is a director of StarSight
Telecast, Inc. and became a director of Spelling in 1996.
2
NOMINEE FOR COMPANY OFFICES AND
DIRECTOR* PRINCIPAL OCCUPATION**
----------- ----------------------
George D. Johnson, Jr........ President and Chief Executive Officer and a director of Extended Stay
Age 53 America, Inc. since January 1995. Mr. Johnson served as President,
Director since 1994 Retail Operations of Blockbuster Entertainment Group ("Blockbuster")
from September 1994 until December 1994. Mr. Johnson served as a
director and President, Domestic Consumer Division of Blockbuster
Entertainment Corporation ("BEC") from August 1993 until September
1994. From 1987 to August 1993, he was managing general partner of
WJB Video Limited Partnership ("WJB"), which prior to its merger
with BEC in August 1993 was BEC's largest franchise owner. From 1967
through 1987, Mr. Johnson served as Counsel to the law firm of
Johnson, Smith, Hibbard & Wildman in Spartanburg, South Carolina.
Mr. Johnson is a director of Duke Power Company and Republic
Industries Inc.
Ken Miller................... Vice Chairman of CS First Boston, Inc. since June 1994. Mr. Miller
Age 53 served as President, Chief Executive Officer of The Lodestar Group, an
Director since 1987 investment firm, from 1988 to June 1994. He was Vice Chairman of
Merrill Lynch Capital Markets during 1987 and a Managing Director of
Merrill Lynch Capital Markets for more than the preceding five
years.
Brent D. Redstone............ Attorney residing in Denver, Colorado. Mr. Redstone is a member of the
Age 45 Board of Directors of the American Prosecutors Research Institute,
Director since 1991 located in Alexandria, Virginia. He served as Assistant District
Attorney for Suffolk County, Massachusetts from 1976 to 1991. Mr.
Redstone is a director of NAI.
Shari Redstone............... Executive Vice President of NAI since 1994. Prior to that, she served
Age 42 as Vice President, Corporate Planning and Development of NAI. Ms.
Director since 1994 Redstone 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 1980s. She is currently a member of the
Board of Directors at Combined Jewish Philanthopies, a member of the
Board of Directors and Executive Committee for the National
Association of Theatre Owners, and a member of the Board of Trustees
at Dana Farber Cancer Institute. She also is a member of the Board
of Trustees at Tufts University and a member of the Advisory
Committee for Tufts Hillel. Ms. Redstone is a director of NAI.
Sumner M. Redstone........... Chairman of the Board of the Company since 1987 and Chief Executive
Age 72 Officer since January 1996. Mr. Redstone has served as Chairman of the
Director since 1986 Board of NAI since 1986 and President, Chief Executive Officer of
NAI since 1967. He served as the first Chairman of the Board of the
National Association of Theatre Owners and is currently a member of
its Executive Committee. During the Carter Administration, Mr.
Redstone was appointed a member of the Presidential Advisory
Committee on the Arts for the John F. Kennedy Center for the
Performing Arts and, in 1984, he was appointed a Director of the
Kennedy Presidential Library Foundation. Since 1982, Mr. Redstone
has been a member of the faculty of Boston University Law School,
where he has lectured in 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. Mr. Redstone is a director of Spelling.
3
NOMINEE FOR COMPANY OFFICES AND
DIRECTOR* PRINCIPAL OCCUPATION**
----------- ----------------------
Frederic V. Salerno.......... Vice Chairman--Finance and Business Development of NYNEX Corporation
Age 52 ("NYNEX") since March 1994. Mr. Salerno was Vice Chairman of the
Director since 1994 Board of NYNEX and President of the Worldwide Services Group from
1991 to 1994 and President and Chief Executive Officer of New York
Telephone Company from 1987 to 1991. Mr. Salerno is a director of
Avnet, Inc., The Bear Stearns Companies Inc. and Orange and Rockland
Utilities, Inc.
William Schwartz............. Vice President for Academic Affairs (the chief academic officer) of
Age 62 Yeshiva University since 1993 and University Professor of Law at
Director since 1987 Yeshiva University and the Cardozo School of Law since 1991. Mr.
Schwartz has been of Counsel to Cadwalader, Wickersham & Taft since
1988. He was Dean of the Boston University School of Law from 1980
to 1988, a professor of law at Boston University from 1955 to 1991
and Director of the Feder Center for Estate Planning at Boston
University School of Law from 1988 to 1991. Mr. Schwartz has served
as Vice Chairman of the Board of UST Corporation since 1985. He also
served as Chairman of UST Corporation from 1993 to 1994. Mr.
Schwartz has also been a director of WCI Steel, Inc. since 1994 and
is Chairman of its Audit Committee. Mr. Schwartz is a trustee of
several educational and charitable organizations and an honorary
member of the National College of Probate Judges. He served as
Chairman of the Boston Mayor's Special Commission on Police
Procedures and was formerly a member of the Legal Advisory Board of
the New York Stock Exchange.
Ivan Seidenberg.............. Chairman and Chief Executive Officer of NYNEX since April 1995. Prior
Age 49 to that, Mr. Seidenberg served as President and Chief Executive
Director since 1995 Officer of NYNEX since January 1995. Previously, he served as
President and Chief Operating Officer from February 1994 to January
1995 and as Vice Chairman from April 1991 to February 1994. Mr.
Seidenberg became a director of NYNEX in 1991. He is also a director
of Allied Signal Inc. and Melville Corporation.
- ------------
* 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.
** Viacom International Inc., NAI and Spelling are affiliates of the Company.
None of the other corporations or organizations indicated herein is a parent,
subsidiary or other affiliate of the Company.
4
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1995 the Board of Directors held nine (9) regular meetings and three
(3) special meetings.
Set forth below is certain information concerning the standing committees of
the Board of Directors.
NUMBER OF
MEETINGS
COMMITTEE MEMBERS OF COMMITTEE DURING 1995
- --------- -------------------- -----------
Audit Committee.............. Messrs. Abrams*, Miller, Salerno, Schwartz and
Seidenberg** 4
Compensation Committee....... Messrs. Abrams, Miller, Brent Redstone, Salerno,
Schwartz*** and Seidenberg** and Ms. Redstone 10
- ------------
* Chairman of the Audit Committee
** Mr. Seidenberg became a member of the Audit and Compensation Committees when
he was appointed to the Board of Directors on July 27, 1995. William C.
Ferguson resigned from the Board and the Audit and Compensation Committees
at that time.
*** Mr. Schwartz became Chairman of the Compensation Committee on January 29,
1996 when Mr. Sumner Redstone resigned as Chairman and as a member of that
Committee.
The functions of the Audit Committee include reviewing with the independent
accountants the plans and results of the annual audit, approving the audit and
non-audit services by such independent accountants, reviewing the scope and
results of the Company's internal auditing procedures, reviewing the adequacy of
the Company's system of internal accounting controls and reviewing the annual
financial statements prepared for release to stockholders and the public. The
functions of the Compensation Committee include reviewing the salaries and
bonuses of employees earning over a specified amount. In addition, the Committee
reviews and approves participation in, and administers, the Senior Executive
Short-Term Incentive Plan and the Company's long-term compensation plans.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below, as of April 1, 1996, is certain information concerning
beneficial ownership of each equity security of the Company and Spelling by (i)
each director of the Company, (ii) each of the named executive officers and
(iii) all directors and executive officers of the Company as a group. Also set
forth below, as of April 1, 1996, is certain information concerning beneficial
ownership of each equity security of the Company by holders of 5% or more of the
Class A Common Stock. The following table excludes shares of Class B Common
Stock issuable upon conversion of the Class B Preferred Stock of the Company.
BENEFICIAL OWNERSHIP OF EQUITY SECURITIES
----------------------------------------------------------------
NUMBER
TITLE OF OF EQUITY OPTION PERCENT
NAME EQUITY SECURITY SHARES SHARES(1) OF CLASS
- ---- ---------------- ------------- ------------- --------
George S. Abrams...................... Class A Common --(2) -- --
Class B Common 200(2) 16,500 (6)
Frank J. Biondi, Jr.*................. Class A Common 453(3) 24,000 (6)
Class B Common 178,441(3) 1,294,000 (6)
Philippe P. Dauman.................... Class A Common 1,060(3) -- (6)
Class B Common 8,430(3) 60,000 (6)
Thomas E. Dooley...................... Class A Common 2,120(3) 4,000 (6)
Class B Common 2,214(3) 77,666 (6)
Edward D. Horowitz.................... Class A Common 281(3) 4,000 (6)
Class B Common 789(3) 88,000 (6)
George D. Johnson, Jr................. Class A Common 6,482(4) 68,706 (6)
Class B Common 49,298(4) 540,042 (6)
Ken Miller............................ Class A Common --(2) -- --
Class B Common --(2) 16,500 (6)
National Amusements, Inc.............. Class A Common 45,547,214(5) -- 60.5%
200 Elm Street Class B Common 46,565,414(5) -- 15.7%
Dedham, MA 02026
Brent D. Redstone..................... -- -- -- --
Shari Redstone........................ -- -- -- --
Sumner M. Redstone.................... Class A Common 45,547,294(5) -- 60.5%
Class B Common 46,565,494(5) -- 15.7%
Frederic V. Salerno................... Class B Common -- 6,500(7) (6)
William Schwartz...................... Class A Common --(2) -- --
Class B Common --(2) 16,500 (6)
Ivan Seidenberg....................... -- -- -- --
Mark M. Weinstein..................... Class A Common 392(3) 7,500 (6)
Class B Common 486(3) 91,500 (6)
The five named executive officers and
all other directors and executive
officers as a group other than Mr.
Sumner Redstone (21 persons)........ Class A Common 16,278(3) 118,106 (6)
Class B Common 256,254(3) 2,366,497 (6)
3 Year Warrant 1,573 1,875 (6)
5 Year Warrant 943 1,125 (6)
Spelling Common -- -- --
- ------------
* Prior to January 1996, Chief Executive Officer of the Company.
NOTES:
(1) Reflects shares subject to options to purchase such shares which on April 1,
1996 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". Mr. Biondi's shares subject to options includes the
1,000,000 options granted in 1994 which became exercisable in connection
with the termination of his employment as President, Chief Executive Officer
in January 1996.
6
(2) Messrs. Abrams, Miller and Schwartz participate in the Deferred Compensation
Plan described below in which their directors' fees are converted into stock
units. As of January 1, 1996, Messrs. Abrams, Miller and Schwartz had been
credited with 4,482, 4,114 and 4,086 Class A Common Stock units,
respectively, and 4,682, 4,285 and 4,254 Class B Common Stock units,
respectively.
(3) Includes shares held through the Company's 401(k) plans as of December 31,
1995.
(4) Does not include 158,833 shares of Class A Common Stock and 1,003,470 shares
of Class B Common Stock transferred to irrevocable trusts, of which Mr.
Johnson and his wife are beneficiaries, for which Mr. Johnson disclaims
beneficial ownership. Also does not include 14,110 shares of Class A Common
Stock and 110,929 shares of Class B Common Stock held in trusts for the
benefit of Mr. Johnson's children for which Mr. Johnson disclaims beneficial
ownership.
(5) Except for 80 shares of each class of Common Stock owned directly by Mr.
Redstone, all shares are owned of record by NAI. Mr. Redstone is the
Chairman and the beneficial owner of the controlling interest in NAI and,
accordingly, beneficially owns all such shares.
(6) Less than 1%.
(7) Held for the benefit of NYNEX.
DIRECTORS' COMPENSATION
Directors of the Company who are not officers or employees of the Company or
NAI or members of their immediate family ("Outside Directors") are entitled to
receive the directors' fees and are eligible to participate in the Company's
retirement and stock option plans described below. Messrs. Abrams, Miller,
Salerno and Schwartz were Outside Directors for the entire 1995 calendar year.
Mr. Seidenberg became an Outside Director on July 27, 1995 when Mr. Ferguson
resigned from the Board. In 1995, only Outside Directors received any
compensation for services as a director.
Directors' Fees. Outside Directors received the following fees for 1995: (i)
a quarterly fee of $7,500 for membership on the Board of Directors of the
Company, (ii) a per meeting attendance fee of $1,500 for each Board meeting,
$500 for each Audit Committee meeting and $500 for each Compensation Committee
meeting, and (iii) a $7,500 annual retainer fee for the Chairman of the Audit
Committee (currently Mr. Abrams). Mr. Schwartz received an $7,500 annual
retainer fee when he became Chairman of the Compensation Committee in January
1996. Compensation for Messrs. Ferguson, Salerno and Seidenberg's services as
Outside Directors for 1995 was paid to NYNEX.
Deferred Compensation Plan. In 1989, the Company established an unfunded
Deferred Compensation Plan permitting participating Outside Directors to defer
payment of all of their membership and attendance fees. A participant can elect
to have deferred fees credited to an account which shall either accrue interest
or be deemed invested in a number of stock units equal to the number of shares
of Common Stock the amount of such fees would have purchased at such time. Since
1989, Messrs. Abrams, Miller and Schwartz have elected to have their fees
credited to their stock unit accounts. The Plan permits participants to elect to
have amounts credited to a participant's account paid in a lump sum or in three
or five annual installments starting seven months after the director's
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 that
time and, if the participant had elected installment payments, credited with
interest until payment had been made in full. For 1995, the stock unit accounts
of Messrs. Abrams, Miller and Schwartz were credited with 663, 581 and 580 Class
A Common Stock units, respectively, and 670, 587 and 587 Class B Common Stock
units, respectively.
Retirement Income Plan. In 1989, the Company established an unfunded,
non-qualified Retirement Income Plan pursuant to which each Outside Director
will receive annual payments commencing on such director's retirement equal to
100% of the amount of the annual Board membership fees at the time of such
retirement, provided he has served on the Board for at least three years. The
Plan provides that the director or his estate will receive such annual payments
for the number of years of such director's service on the Board (with current
Outside Directors receiving credit for their years of service on the Board prior
to 1989).
7
1993 Outside Directors' Stock Option Plan. In 1993, the Board of Directors
of the Company (with Outside Directors Messrs. Abrams, Miller and Schwartz
abstaining) adopted the Viacom Inc. Outside Directors' Stock Option Plan (the
"1993 Outside Directors' Plan"), which was approved by the stockholders of the
Company at the 1994 Annual Meeting of Stockholders. The 1993 Outside Directors'
Plan provides for automatic one-time grants of non-qualified stock options to
purchase 5,000 shares of Class B Common Stock (the "1993 Outside Directors'
Stock Options") to each Outside Director on May 25, 1993 when such Plan was
adopted and to each subsequent Outside Director, effective as of such person's
election or appointment to the Board. Accordingly, on May 25, 1993, Messrs.
Abrams, Miller and Schwartz, who then constituted the Board's Outside Directors,
each received a 1993 Outside Directors' Stock Option grant, with a per share
exercise price of $45.50 which was the closing price of a share of Class B
Common Stock on the American Stock Exchange ("AMEX") on the date of grant.
Messrs. Salerno and Seidenberg each received a 1993 Outside Directors' Stock
Option grant when they were appointed to the Board, with per share exercise
prices of $36.75 and $50, respectively, which were the closing prices of a share
of the Class B Common Stock on the AMEX on the dates of their appointment to the
Board. Messrs. Salerno and Seidenberg each hold their 1993 Outside Directors'
Stock Option grants for the benefit of NYNEX.
1994 Outside Directors' Stock Option Plan. In November 1994, the Board of
Directors of the Company (with current Outside Directors Abrams, Miller, Salerno
and Schwartz and former Outside Director Ferguson abstaining) adopted the Viacom
Inc. 1994 Outside Directors' Stock Option Plan (the "1994 Outside Directors
Plan"), which was approved by the stockholders of the Company at the 1995 Annual
Meeting of Stockholders. The 1994 Outside Directors' Plan provides for the
following grants of stock options (collectively, the "1994 Outside Directors'
Stock Options"): (i) automatic one-time grants on November 8, 1994 of stock
options to purchase 1,500 shares of Class B Common Stock to each person who was
an Outside Director on November 8, 1994; (ii) automatic one-time grants on
November 8, 1994 of stock options to purchase 10,000 shares of Class B Common
Stock to each person who was an Outside Director both on November 8, 1994 and in
July 1987; and (iii) automatic grants of stock options to purchase 1,500 shares
of Class B Common Stock to each person who is an Outside Director on August 1,
1995 and on each of the second through ninth anniversaries thereof. Accordingly,
on November 8, 1994, Messrs. Abrams, Miller and Schwartz each received 1994
Outside Directors' Stock Options to purchase 11,500 shares of Class B Common
Stock and Mr. Salerno received 1994 Outside Directors' Stock Options to purchase
1,500 shares of Class B Common Stock, each with a per share exercise price of
$37.875 which was the closing price of a share of Class B Common Stock on the
AMEX on the date of grant. In addition, on August 1, 1995, Messrs. Abrams,
Miller, Salerno, Schwartz and Seidenberg each received 1994 Outside Director's
Stock Options to purchase 1,500 shares of Class B Common Stock, with a per share
exercise price of $50.50 which was the closing price of a share of Class B
Common Stock on the AMEX on the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Abrams, Miller, Sumner Redstone, Brent Redstone, Salerno, Schwartz
and Shari Redstone were members of the Compensation Committee for the entire
1995 calendar year. Mr. Seidenberg became a director and a member of the
Compensation Committee on July 27, 1995 when Mr. Ferguson resigned from the
Board and the Compensation Committee.
Sumner Redstone and Shari Redstone are executive officers of NAI. Mr.
Dauman, an executive officer of the Company, is a director of NAI.
Steven R. Berrard, who served as a director of the Company until March 1996,
served as the President, Chief Executive Officer and a director of Spelling
during 1995. Mr. Dauman served on the Compensation Committee of Spelling during
1995.
Mr. Berrard also served as Chief Executive Officer and a director of
Discovery Zone, Inc. during 1995. Messrs. Biondi and Dauman, while executive
officers of the Company, served on the Compensation Committee of Discovery Zone,
Inc. during 1995.
8
George S. Abrams, a director of the Company, entered into an agreement with
the Company in 1994 to provide legal and governmental consulting services for
the Company upon its request. During the fiscal year ended December 31, 1995,
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 CS First Boston,
Inc. CS First Boston, Inc. has from time to time performed investment banking
services for the Company.
NAI, 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 fiscal year
ended December 31, 1995, NAI made payments to Paramount Pictures in the
aggregate amount of approximately $9,507,000 to license Paramount Pictures
films. NAI licenses films from a number of unaffiliated companies and the
Company believes that the terms of the licenses were no less favorable to the
Company than licenses between unaffiliated companies and NAI were to such
unaffiliated companies. The Company expects to continue to license Paramount
Pictures films to NAI upon similar terms in the future.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
All members of the Compensation Committee are non-employee directors. Mr.
Sumner Redstone, the controlling stockholder of the Company, served on the
Committee until January 1996 when he assumed the responsibilities of Chief
Executive Officer of the Company after Mr. Biondi's departure. The Committee
reviews and, with any changes it believes appropriate, approves the Company's
executive compensation. Independent compensation consultants have advised the
Committee from time to time with respect to the 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 base salary and annual 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, in the case of executive
officers with divisional responsibilities, also with the financial
performance of their respective operating units, and, in addition,
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 executives on managing the
Company from the perspective of an owner with an equity stake;
. Emphasize performance-based compensation, through annual bonus
compensation and long-term compensation, over fixed compensation; and
. Promote interdivisional cooperation.
The Committee evaluates the competitiveness of its executive compensation
packages based on information from a variety of sources, including information
supplied by consultants and information obtained from the media or from the
Company's own experience. The Committee also focuses on executive compensation
offered by the members of the peer group included in the Performance Graphs set
forth below. At times, the Committee also evaluates 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.
9
Executive Compensation
Executive compensation is comprised of base salary, annual bonus
compensation and long-term compensation primarily in the form of stock options.
Base Salaries
Base salary levels for executive officers are designed to be consistent with
competitive practice and level of responsibility. Base salary levels are
generally set forth in the executive officers' employment agreements and
increases in their base salary in 1995 were generally made in accordance with
their agreements. The employment agreements for Mr. Biondi and the other four
named executive officers are described below under "Employment Agreements".
Incentive Compensation
Compliance with Internal Revenue Code Section 162(m). The Omnibus Budget
Reconciliation Act of 1993 added Section 162(m) to the Internal Revenue Code of
1986, as amended (the "Code"), generally limiting to $1 million the federal tax
deductibility of compensation (including stock options) paid to the Company's
Chief Executive Officer and the other four named executive officers. The tax law
change includes an exception to the deduction limitation for performance-based
compensation (including stock-based compensation, such as stock options),
provided such compensation meets certain requirements, including stockholder
approval. The Viacom Inc. Senior Executive Short-Term Incentive Plan (the
"Senior Executive STIP") and the Viacom Inc. 1994 Long-Term Management Incentive
Plan (the "1994 LTMIP") adopted by the Company's Board of Directors in 1994 and
approved by the Company's stockholders at the 1994 Annual Meeting, were designed
to comply with this exception. The Senior Executive STIP currently provides
objective performance-based annual bonuses for selected executive officers of
the Company, subject to a maximum limit of six (6) times the executive's base
salary in effect on March 31, 1994 when the Senior Executive STIP was adopted.
As described below under "Amendment to the Viacom Inc. Senior Executive
Short-Term Incentive Plan", the Company is seeking stockholder approval for an
amendment to the Senior Executive STIP to change the maximum limit to eight (8)
times the executive's current base salary; this resets the effective date for
the base salary to March 27, 1996 when the Board approved this amendment to the
Senior Executive STIP. Long-term compensation for the Company's executive
officers is being provided under the 1994 LTMIP through grants of stock options.
Compensation paid to Mr. Biondi and the other four named executive officers for
1995 does not exceed the Section 162(m) deductibility limit because of the
stockholder approval of the Senior Executive STIP and the 1994 LTMIP and the
deferral of a portion (not in excess of 15%) of annual cash compensation under
the Company's 401(k) and excess 401(k) plans and, in the case of Mr. Biondi,
pursuant to his employment agreement.
Annual Bonus Compensation. Annual bonus compensation for 1995 for Mr. Biondi
and the four named executive officers 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 Compensation 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, "operating income" means revenues less operating
expenses (other than depreciation and amortization). The award for Mr. Horowitz
was also based on the achievement of performance criteria established by the
Compensation Committee for his operating units.
The level of the Senior Executive STIP annual bonuses for 1995 for each of
the named executive officers was based on a determination of the Committee, the
starting point of which was the maximum bonus payable pursuant to the Senior
Executive STIP for such executive officers (i.e., six times the executive's base
salary in effect on March 31, 1994), since the performance criteria established
by the Committee for 1995 had been achieved. The Committee considered a number
of factors, including the executives' achievements in continuing to successfully
10
integrate the operations of Paramount and Blockbuster into the Company while
achieving higher levels of operating income, and awarded the annual bonuses set
forth below in the Summary Compensation Table.
Annual bonus compensation for executive officers other than Mr. Biondi and
the four named executive officers for 1995 was provided under the Company's
Short-Term Incentive Plan (the "STIP"). Target levels of annual operating income
(as defined above) were established for 1995 for the Company as a whole (for the
Company's operating units, the 1995 target levels also related to cash flow).
The level of achievement of the applicable corporate (or divisional) goals
established the bench mark for the aggregate amounts available for funding
awards for corporate (or divisional) executives; the amounts were subject to
upward or downward adjustment based for the most part on the level of
achievement and could exceed 100% of targeted amounts. These amounts were
further adjusted to reflect a factor for interdivisional cooperation based on
interdivisional initiatives. Finally, individual awards were adjusted to reflect
the executive officer's performance.
The Committee approved a specific target bonus for each executive officer
which was expressed as a percentage of his or her salary. These targets are
included in the executive officers' employment agreements. Since the corporate
(and divisional) targets were substantially met or exceeded for 1995, the
executive officers receiving bonuses under the STIP were eligible to receive, at
a minimum, substantially all of their target bonuses.
Long-Term Compensation. The Committee believes that the use of equity-based
long-term compensation plans directly links executive interests to enhancing
stockholder value.
From 1990 to 1993, the Committee followed the practice of making annual
grants of stock options to the Company's executive officers under the Viacom
Inc. 1989 Long-Term Management Incentive Plan. In 1994, the Committee, in
recognition of the extraordinary efforts leading to the completion of the
Paramount and Blockbuster mergers (the "Mergers"), awarded 1994 stock options
for Class B Common Stock under the 1994 LTMIP to the Company's executive
officers (other than Mr. Biondi) representing such executives' grants for 1994
and 1995; these stock options vest over a five-year period and have a ten-year
term. The $34.75 per share exercise price of such stock options was the closing
price of a share of Class B Common Stock on the AMEX on the date of grant. No
additional stock options were awarded to this group for 1995.
The size of the grant to each executive was within the range assigned to the
executive's relative level of responsibility. In determining the amounts
awarded, the Committee considered the amounts awarded in prior years, as
adjusted for changes in responsibility.
Special stock option grants under the 1994 LTMIP were awarded in January
1996 to Sumner Redstone and Messrs. Dauman and Dooley to reflect their
additional responsibilities after Mr. Biondi's departure as President, Chief
Executive Officer. Mr. Redstone assumed the responsibilities of the Chief
Executive Officer of the Company and Messrs. Dauman and Dooley were appointed
Deputy Chairmen. The $40 per share exercise price of such special stock option
grants was the closing price of a share of Class B Common Stock on the AMEX on
the date of grant. These stock options vest over a four-year period and have a
ten-year term. The Company has entered into new employment agreements with
Messrs. Dauman and Dooley to reflect their new responsibilities. These
agreements are described below under "Employment Agreements".
Chief Executive Officer's Compensation
Pursuant to his employment agreement, Mr. Biondi is entitled to receive base
salary, deferred compensation and annual bonus for a three-year period following
the termination of his employment on January 17, 1996.
Mr. Biondi's compensation package for 1995 included his base salary and
deferred compensation, the right to earn an annual bonus based upon achievement
of corporate objectives established by the Committee under the Senior Executive
STIP and a grant of 1994 LTMIP stock options to purchase 1,000,000 shares of
Class B Common Stock. His compensation package was designed to comply with the
limits on annual compensation set forth in
11
Section 162(m) of the Code. His employment agreement is more fully described
below under "Employment Agreements".
The level of the Senior Executive STIP annual bonus for 1995 for Mr. Biondi
was based on a determination of the Committee, the starting point of which was
the maximum bonus payable pursuant to the Senior Executive STIP, since the
performance criteria established by the Committee for 1995 had been achieved.
The Committee considered a number of factors, including Mr. Biondi's role in
continuing to integrate the operations of Paramount and Blockbuster into the
Company and the Company's obligations to Mr. Biondi under his employment
agreement, and awarded Mr. Biondi the annual bonus set forth below in the
Summary Compensation Table.
Sumner M. Redstone*
George S. Abrams
William C. Ferguson**
Ken Miller
Brent D. Redstone
Shari Redstone
Frederic V. Salerno
William Schwartz*, Chairman
Ivan Seidenberg**
Members of the Compensation Committee
- ------------
* Mr. Schwartz became Chairman of the Compensation Committee when Mr. Sumner
Redstone resigned as Chairman and as a member of the Committee on January 29,
1996.
** Mr. Seidenberg became a director and a member of the Compensation Committee
on July 27, 1995 when Mr. Ferguson resigned from the Board and the
Compensation Committee.
12
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION (1) ---------- --------
NAME AND PRINCIPAL ----------------------------------------- SECURITIES
POSITION AT END OTHER ANNUAL UNDERLYING LTIP ALL OTHER
OF FISCAL 1995* YEAR SALARY BONUS COMPENSATION(2) OPTIONS(3) PAYOUTS COMPENSATION
- ----------------------------- ---- ---------- ---------- --------------- ---------- -------- ------------
Frank J. Biondi, Jr.......... 1995 $1,218,889 $3,000,000 $53,808 0 $378,757(4) $ 9,704(5)
President, Chief 1994 1,107,808 3,000,000 81,176 1,000,000 0 60,441
Executive Officer 1993 1,010,904 1,600,000 -- 90,000 0 65,180
Philippe P. Dauman........... 1995 $ 860,000 $2,200,000 -- 0 0 $ 46,723(5)
Executive Vice President, 1994 760,692 1,510,000 -- 200,000 0 14,291
General Counsel, Chief 1993 553,846 900,000 -- 120,000 0 0
Administrative Officer and
Secretary
Thomas E. Dooley............. 1995 $ 860,000 $2,200,000 -- 0 $ 64,000(4) $ 36,526(5)
Executive Vice President-- 1994 720,000 1,510,000 -- 200,000 0 18,267
Finance, Corporate 1993 426,635 400,000 -- 35,000 0 20,909
Development and
Communications
Edward D. Horowitz........... 1995 $ 525,000 $ 550,000 -- 0 $298,400(6) $ 25,380(5)
Senior Vice President, 1994 462,789 525,000 -- 81,000 0 19,781
Technology and Chairman, 1993 376,442 400,000 -- 30,000 0 15,500
Chief Executive Officer,
Viacom Interactive Media
Mark M. Weinstein............ 1995 $ 595,769 $ 450,000 -- 0 $117,903(4) $ 24,852(5)
Senior Vice President, 1994 545,962 433,125 -- 60,000 0 26,341
Government Affairs 1993 493,039 450,000 -- 30,000 0 23,538
- ------------
* In January 1996, Sumner M. Redstone, Chairman of the Board and controlling
stockholder of the Company, assumed the responsibilities of Chief Executive
Officer of the Company, after Mr. Biondi's departure. At that time, Messrs.
Dauman and Dooley were appointed Deputy Chairmen, roles they assumed in
addition to the positions indicated in the table.
NOTES:
(1) Salary and bonus includes compensation deferred under the Company's 40l(k)
and excess 401(k) plans and, in the case of Mr. Biondi for 1995 and 1994,
pursuant to his employment agreement, in the following amounts: for Mr.
Biondi for 1995 in the amount of $237,698, for 1994 in the amount of
$137,054 and for 1993 in the amount of $253,285; for Mr. Dauman for 1995 in
the amount of $118,500 and for 1994 in the amount of $111,227; for Mr.
Dooley for 1995 in the amount of $115,467, for 1994 in the amount of $74,088
and for 1993 in the amount of $28,346; for Mr. Horowitz for 1995 in the
amount of $52,500, for 1994 in the amount of $49,389 and for 1993 in the
amount of $38,750; and for Mr. Weinstein for 1995 in the amount of $51,445,
for 1994 in the amount of $48,954 and for 1993 in the amount of $47,077.
(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 Mr. Biondi that represented more than 25% of
his total Other Annual Compensation for 1995 consisted of reimbursement for
medical expenses of $22,090 and non-business use of Company aircraft of
$16,812 and for 1994 consisted of reimbursement for legal expenses of
$43,316 and medical expenses of $20,641.
(3) Mr. Biondi's 1994 grant of 1,000,000 options for Class B Common Stock
represented the grant for the entire six (6) year term (from August 1994
through July 2000) of his employment agreement. Mr. Biondi's employment
agreement is more fully described below under "Employment Agreements". The
1994 grants for Messrs. Dauman, Dooley, Horowitz and Weinstein were intended
to represent the entire grant of options for such individuals for calendar
years 1994 and 1995, and no grants were made in 1995.
(4) Represents the amount paid in cash for the phantom shares granted to the
named executives in 1989 (the "1989 Phantom Shares") under the Viacom Inc.
1989 Long-Term Management Incentive Plan with a December 1995 valuation
date.
(5) 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 1995, the Company maintained for certain members of senior
management, including Messrs. Biondi, Dauman and Dooley, certain
supplemental life insurance benefits. All Other Compensation consists of
premiums paid by the Company for this supplemental coverage for 1995 for Mr.
Biondi of approximately $325 and for each of Messrs. Dauman and Dooley of
approximately $20; the Company's matching contributions under its 401(k)
plan for 1995 for Mr. Biondi of $3,668, for Mr. Dauman of $3,000, for Mr.
Dooley of $3,750, for Mr. Horowitz of $3,750 and for Mr. Weinstein of
$3,750; and credits for the Company's matching contributions under its
excess 401(k) plan and, in the case of Mr. Biondi with respect to
compensation deferred pursuant to his employment agreement, for 1995 for Mr.
Biondi of $5,711, for Mr. Dauman of $43,703, for Mr. Dooley of $32,776, for
Mr. Horowitz of $21,630 and for Mr. Weinstein of $21,102.
(6) Consists of amounts paid in cash for the 1989 Phantom Shares granted to Mr.
Horowitz with a December 1995 valuation date and the performance shares
granted to Mr. Horowitz under the Viacom Inc. Long-Term Incentive Plan
(Divisional) for the three year period that commenced January 1, 1993.
13
AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND VALUE OF OPTIONS AT END OF FISCAL 1995
NUMBER OF SECURITIES(1)
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT END OF IN-THE-MONEY OPTIONS AT
FISCAL 1995 END OF FISCAL 1995
SHARES ACQUIRED ---------------------------- ----------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- ---- --------------- -------------- ----------- -------------- ----------- --------------
Frank J. Biondi, Jr............ -0- -0- 294,000 1,090,000 $ 5,801,250 $8,827,500
Philippe P. Dauman............. -0- -0- 60,000 260,000 165,000 2,607,500
Thomas E. Dooley............... -0- -0- 77,666 233,334 1,381,000 2,680,000
Edward D. Horowitz............. -0- -0- 88,000 110,000 1,657,375 1,177,625
Mark M. Weinstein.............. -0- -0- 91,500 90,000 1,782,063 912,500
- ------------
NOTE:
(1) Options listed below are for shares of Class B Common Stock except that
exercisable options include for Mr. Biondi 24,000 options each for a share
of Class A Common Stock and a share of Class B Common Stock, for Mr. Dooley
4,000 of such options, for Mr. Horowitz 4,000 of such options and for Mr.
Weinstein 7,500 of such options; the aggregate number of exercisable options
includes two underlying securities for each of these options.
PENSION PLAN TABLE
YEARS OF SERVICE
-------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
$ 50,000....................................... $11,181 $14,908 $18,635 $22,362 $26,089
100,000....................................... 24,306 32,408 40,510 48,612 56,714
200,000....................................... 50,556 67,408 84,260 101,112 117,964
300,000....................................... 76,806 102,408 128,010 153,612 179,214
400,000....................................... 103,056 137,408 171,760 206,112 240,464
500,000....................................... 129,306 172,408 215,510 258,612 301,714
600,000....................................... 155,556 207,408 259,260 311,112 362,964
700,000....................................... 181,806 242,408 303,010 363,612 424,214
800,000....................................... 208,056 277,408 346,760 416,112 485,464
900,000....................................... 234,306 312,408 390,510 468,612 546,714
1,000,000...................................... 260,556 347,408 434,260 521,112 607,964
1,100,000...................................... 286,806 382,408 478,010 573,612 669,214
1,200,000...................................... 313,056 417,408 521,760 626,112 730,464
1,300,000...................................... 339,306 452,408 565,510 678,612 791,714
1,400,000...................................... 365,556 487,408 609,260 731,112 852,964
1,500,000...................................... 391,806 522,408 653,010 783,612 914,214
Under the terms of the Company's Pension Plan and the Company's Excess
Pension Plan for certain higher compensated employees, as amended as of January
1, 1996, 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 the greater of base salary as
of December 31, 1995 and $750,000. The benefits under the Company's Excess
Pension Plan are not subject to the Internal Revenue Code provisions that limit
the compensation subject to benefits and the amount of annual benefits payable
under the Company's 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 Plans, as amended, upon retirement in 1995 at age 65, based on the
straight-life annuity form of benefit payment and not subject to deduction or
offset.
The number of years of benefit service that have been credited for Messrs.
Biondi, Dooley, Horowitz and Weinstein are approximately 8.6, 14, 5 and 10,
respectively. Mr. Dauman has been credited with three years of service under the
Company's Pension Plan; however, the benefits payable under the Company's Excess
Pension Plan shall be calculated as though he had 12 years of credited service.
14
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 "Peer Group"). The total return
data was obtained from Standard & Poor's Compustat Services, Inc.
NAI acquired control of the Company in June 1987. The performance graph in
Exhibit I 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, 1995. The cumulative total
stockholder return on the Class B Common Stock assumes the investment in Class B
Common Stock as of June 18, 1990 (the first date on which the Class B Common
Stock was publicly traded) of an amount equal to the cumulative total
stockholder return on the Class A Common Stock as of that date ($302.78).
The performance graph in Exhibit II assumes $100 invested on December 31,
1990 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, 1995.
Effective on June 13, 1990, the Company effected a stock split by issuing a
dividend of one share of Class B Common Stock for each share of Class A Common
Stock then outstanding. The Class B Common Stock has rights, privileges,
restrictions and qualifications identical to the Class A Common Stock except
that shares of Class B Common Stock have no voting rights other than those
required by law. As of April 1, 1996, NAI owned 45,547,214 shares or 60.5% of
the Class A Common Stock and 45,565,414 shares or 15.7% of the Class B Common
Stock. Sumner M. Redstone, the controlling stockholder of NAI, is the Chairman
of the Board and Chief Executive Officer of the Company.
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 Compensation Committee Report on Executive Compensation set forth
above shall not be incorporated by reference into any such filings.
15
EXHIBIT I
TOTAL CUMULATIVE STOCKHOLDER RETURN FOR
EIGHT-YEAR PERIOD ENDING DECEMBER 31, 1995
Dollars
600 --------------------------------------------------------------------------------------------------------------
550 -
500 -
450 -
400 -
350 -
300 -
250 -
200 -
150 -
100 -
50 -
--------------------------------------------------------------------------------------------------------------
1987 1988 1989 6/18/90 1990 1991 1992 1993 1994 1995
DECEMBER 31 1987 1988 1989 6/18/90 1990 1991 1992 1993 1994 1995
CLASS A COMMON 100.00 171.72 317.24 286.41 373.70 480.08 533.27 454.17 504.63
CLASS B COMMON 302.78 273.61 379.17 465.28 498.61 452.78 526.39
S&P 500 100.00 116.50 153.30 148.52 193.58 208.31 229.21 232.32 319.31
PEER GROUP 100.00 118.12 156.93 120.76 144.34 179.40 228.40 203.55 259.86
16
EXHIBIT II
TOTAL CUMULATIVE STOCKHOLDER RETURN FOR
FIVE-YEAR PERIOD ENDING DECEMBER 31, 1995
Dollars
200 --------------------------------------------------------------------------------------------------------------
250 -
150 -
100 -
50 --
--------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
DECEMBER 31 1990 1991 1992 1993 1994 1995
CLASS A COMMON 100.00 130.48 167.62 186.19 158.57 176.19
CLASS B COMMON 100.00 138.58 170.05 182.23 165.48 192.39
S&P 500 100.00 130.34 140.25 154.32 156.42 214.99
PEER GROUP 100.00 119.52 148.55 189.13 168.55 215.18
The Peer Group consists of the following companies: BHC Communications,
Inc.; Capital Cities/ABC, Inc.; Gaylord Entertainment Co.; King World
Productions Inc.; McGraw-Hill Companies Inc.; Melville Corporation; Musicland
Stores Corp.; Spelling Entertainment Group Inc.; The News Corp. Ltd. (ADRs);
Time Warner Inc.; Tribune Company; and Turner Broadcasting System Inc. Three
companies which were previously included in the Peer Group have been deleted
because they were acquired and, as a result, their securities were no longer
publicly traded on December 31, 1995: CBS, Inc. which was acquired by
Westinghouse Electric Corporation in November 1995; Liberty Media Corp. which
was acquired by Tele-Communications, Inc. in September 1994; and Multimedia,
Inc. which was acquired by Gannett Co., Inc. in December 1995.
17
EMPLOYMENT AGREEMENTS
Mr. Biondi's employment agreement provided that he would be employed as
President, Chief Executive Officer of the Company until July 31, 2000, at a
salary of $990,000 per annum. His target bonus for calendar year 1995 was set at
$2,893,275 and, for each succeeding calendar year, at 110% of his target bonus
for the preceding calendar year. In addition, Mr. Biondi's employment agreement
provided for deferred compensation, payable the year after he ceased to be an
executive officer of the Company, in the amount of $179,000 for the period from
August 18, 1994 through July 31, 1995 and, for each succeeding agreement year
(from August 1st through the following July 31st), in an amount equal to the
excess of (i) 110% of his salary and deferred compensation for the preceding
agreement year over (ii) $990,000. Mr. Biondi's employment agreement also
provided for the grant of stock options under the 1994 LTMIP to purchase
1,000,000 shares of Class B Common Stock, which represented Mr. Biondi's stock
option grant for the entire six-year term of his employment agreement. Upon the
termination of Mr. Biondi's employment as President, Chief Executive Officer on
January 17, 1996, his employment agreement provided that he would receive
salary, deferred compensation and target bonus as described above for the three-
year period ending January 17, 1999. The 1,000,000 stock options described above
vested on the termination of his employment.
Mr. Dauman became Deputy Chairman in January 1996; he continues to serve as
Executive Vice President, General Counsel, Chief Administrative Officer and
Secretary of the Company. The Company has recently entered into a new employment
agreement with Mr. Dauman to reflect his new responsibilities. His new agreement
provides that he will be employed as Deputy Chairman and Executive Vice
President, General Counsel, Chief Administrative Officer and Secretary of the
Company until December 31, 2000, at a salary of $1,000,000 per annum. Mr.
Dauman's agreement provides that he will receive deferred compensation, starting
with the 1997 calendar year, payable the year after he ceases to be an executive
officer of the Company, in an amount equal to 10% of his salary and deferred
compensation for the preceding calendar year. The agreement provides that Mr.
Dauman's target bonus for each calendar year during the employment term is 250%
of his salary and deferred compensation for such year. In addition, Mr. Dauman's
agreement provided for a special grant of stock options under the 1994 LTMIP to
purchase 250,000 shares of Class B Common Stock, with an exercise price of $40
per share, the closing price of a share of Class B Common Stock on the AMEX on
January 29, 1996, the date of grant. The agreement also provides for him to
receive annual grants of stock options to purchase 150,000 shares of Class B
Common Stock. The special and annual grants of stock options each vest over a
four-year period and have a ten-year term. The agreement states that Mr. Dauman
shall be provided with $5,000,000 of life insurance during the employment term.
Mr. Dauman's agreement provides that, in the event of the termination of his
employment without "cause" or voluntary termination for "good reason" during the
employment term, he shall be entitled to receive salary, deferred compensation
and target bonus for the balance of the employment term, subject to mitigation
after the first two years, and his stock options (all of which will have vested
upon termination of employment) shall remain exercisable for six months
following the date of termination (but not beyond the expiration date of such
stock options).
Mr. Dooley became Deputy Chairman in January 1996; he continues to serve as
Executive Vice President-- Finance, Corporate Development and Communications of
the Company. The Company has recently entered into a new employment agreement
with Mr. Dooley to reflect his new responsibilities. His new agreement provides
that he will be employed as Deputy Chairman and Executive Vice
President--Finance, Corporate Development and Communications of the Company
until December 31, 2000, at a salary of $1,000,000 per annum. Mr. Dooley's
agreement provides that he will receive deferred compensation, starting with the
1997 calendar year, payable the year after he ceases to be an executive officer
of the Company, in an amount equal to 10% of his salary and deferred
compensation for the preceding calendar year. The agreement provides that Mr.
Dooley's target bonus for each calendar year during the employment term is 250%
of his salary and deferred compensation for such year. In addition, Mr. Dooley's
agreement provided for a special grant of stock options under the 1994 LTMIP to
purchase 250,000 shares of Class B Common Stock, with an exercise price of $40
per share, the closing price of a share of Class B Common Stock on the AMEX on
January 29, 1996, the date of grant. The agreement also provides for him to
receive annual grants of stock options to purchase 150,000 shares of Class B
Common Stock. The special and annual grants of stock options each vest over a
four-year period and have a ten-year term. The agreement states that Mr. Dooley
shall be provided with $5,000,000 of life insurance during the employment term.
Mr.
18
Dooley's agreement provides that, in the event of the termination of his
employment without "cause" or voluntary termination for "good reason" during the
employment term, he shall be entitled to receive salary, deferred compensation
and target bonus for the balance of the employment term, subject to mitigation
after the first two years, and his stock options (all of which will have vested
upon termination of employment) shall remain exercisable for six months
following the date of termination (but not beyond the expiration date of such
stock options).
Mr. Horowitz's employment agreement provides that he will be employed as
Senior Vice President, Technology of the Company and Chairman, Chief Executive
Officer of Viacom Interactive Media until June 30, 1997, at a salary of $500,000
for the agreement year ended June 30, 1995, with annual increases of $50,000 on
each July 1st during the employment term. The agreement provides that Mr.
Horowitz's target bonus is set at 100% of his base salary for calendar years
1995 through 1997. Mr. Horowitz's agreement provides that, in the event of the
termination of Mr. Horowitz's employment without "cause" or voluntary
termination for "good reason" during the employment term, he shall be entitled
to receive salary and target bonus (pro-rated for any partial calendar year) for
the balance of the employment term, subject to mitigation after the first 18
months, and his stock options (all of which will have vested upon termination of
employment) shall remain exercisable for six months following the date of
termination (but not beyond the expiration date of such stock options).
Mr. Weinstein's employment agreement provides that he will be employed as
Senior Vice President, Government Affairs of the Company until December 31,
1997, at a salary of $550,000 for the agreement year that began February 1,
1994, with $50,000 annual increases on each February 1st during the employment
term. For calendar years 1995 through 1997, Mr. Weinstein's target bonus is set
at 75% of his base salary at the end of each year and his bonus compensation
shall not be less than 56.25% of his base salary at that time. Mr. Weinstein's
agreement provides that in the event of the termination of Mr. Weinstein's
employment without "cause" or voluntary termination for "good reason", he shall
be entitled to receive salary and bonus for the balance of the employment term,
subject to mitigation after the first 18 months. In addition, the agreement
provides that his stock options which are then exercisable shall be exercisable
for three months after the date of termination and stock options which are not
then exercisable shall, at the Committee's option, either be accelerated and
exercisable for three months after such termination or canceled and treated as
stock appreciation rights with the value determined and payable when the options
would otherwise have vested. The LTMIP stock options granted in 1994 to Mr.
Weinstein will become exercisable in full by December 31, 1997.
RELATED TRANSACTIONS
In 1993, BEC merged with WJB in a pooling of interest business combination.
As a result of this transaction, BEC added 209 Blockbuster Video stores and six
Discovery Zone FunCenters as Blockbuster-owned operations and, in addition,
acquired rights to develop additional Blockbuster Video stores and Discovery
Zone FunCenters. BEC also acquired the real estate on which 51 of such
Blockbuster Video stores are located. George D. Johnson, Jr., who is a director
of the Company, and certain trusts for the benefit of Mr. Johnson's son and
daughter were equity holders of WJB. As a result of the combination with WJB,
BEC became successor in interest to a property management agreement with Johnson
Development Associates, Inc. ("Johnson Development"), a South Carolina
corporation, pursuant to which Johnson Development serves as the property
manager of such 51 Blockbuster Video store locations. Mr. Johnson is an equity
holder of Johnson Development. Pursuant to the terms of the management agreement
with Johnson Development, Blockbuster is obligated to make monthly payments to
Johnson Development in the aggregate amount of approximately $17,000 for its
services. The management agreement remains in effect until terminated by either
party upon 180 days notice. The Company believes that the terms of the
management agreement with Johnson Development are no less favorable to the
Company than it could have obtained from an unaffiliated party.
As a result of the combination with WJB, BEC also became a successor in
interest to a lease agreement with Bell Hill Associates L.P. ("Bell Hill") for
the use of office space located in Spartanburg, South Carolina. Mr. Johnson is
general partner of Bell Hill, and a limited partnership, of which Mr. Johnson,
his wife and trusts for the benefit of his children are equity holders, is its
sole limited partner. Under such lease agreement, Blockbuster is obligated to
make monthly lease payments in the amount of $38,106. Such lease remains in
effect until January 30, 2005. The Company believes that the terms of the lease
agreement with Bell Hill are no less favorable to the Company than it could have
obtained from an unaffiliated party.
19
As a result of the combination with WJB, BEC also became a successor in
interest to a lease agreement with Reidville Road Associates ("Reidville"). Mr.
Johnson is general partner of Reidville. Under such lease agreement, Blockbuster
is obligated to make monthly lease payments in the amount of $5,600. Such lease
remains in effect until June 16, 1997 and is renewable for an additional term of
five years at the option of Blockbuster. The Company believes that the terms of
the lease agreement with Reidville are no less favorable to the Company than it
could have obtained from an unaffiliated party.
As a result of the combination with WJB, BEC also became a successor in
interest to a lease agreement with Lawson's Fork Associates. Mr. Johnson is a
general partner of Lawson's and a limited partnership, of which Mr. Johnson, his
wife and trusts for the benefit of his children are equity holders, is a limited
partner of Lawson's. Under such lease agreement, Blockbuster is obligated to
make monthly lease payments in the amount of $7,000. Such lease remains in
effect until August 18, 1999 and is renewable for one additional five year term
at Blockbuster's option. The Company believes that the terms of the lease
agreement with Lawson's are no less favorable to the Company than it could have
obtained from an unaffiliated party.
In December 1994, Blockbuster entered into a lease agreement with Beaumont
Avenue Associates ("Beaumont") to lease space for a Blockbuster-owned video
store. Mr. Johnson and a limited partnership, of which Mr. Johnson, his wife and
trusts for the benefit of his children are equity holders, are general partners
of Beaumont. Under such agreement, Blockbuster is obligated to make monthly
lease payments in the amount of $5,775. Such lease is for an initial term of ten
years and is renewable for two additional five year terms at Blockbuster's
option. The Company believes that the terms of the lease agreement with Beaumont
are no less favorable to the Company than it could have obtained from an
unaffiliated party.
H. Wayne Huizenga, who served as a director of the Company from September
1994 until he resigned from the Board in November 1995, is the sole stockholder
and Chairman of the Board of Huizenga Holdings, Inc. ("Huizenga Holdings"), a
holding and management company with various business interests. During the
fiscal year ended December 31, 1995, Blockbuster made payments to Huizenga
Holdings in the aggregate amount of approximately $865,000 for the business use
of certain airplanes owned by Huizenga Holdings. Also during this period,
Blockbuster paid all direct costs associated with the operation of such
airplanes. Huizenga Holdings reimbursed Blockbuster approximately $1,376,000 for
Huizenga Holdings' share of all direct costs associated with Huizenga Holdings'
business use of such airplanes during this period. The Company believes that the
terms of its use of the airplanes are more favorable to the Company than it
could have obtained from an unaffiliated party.
In May 1995, Blockbuster entered into a lease agreement with Huizenga
Holdings for the use of additional office space in One Blockbuster Plaza. For
the fiscal year ended December 31, 1995, Blockbuster received approximately
$100,000 in payments under said lease. Such lease is for an initial term of
three years and is renewable for three one-year extensions at the option of
Huizenga Holdings. The Company believes that the terms of the lease agreement
with Huizenga Holdings are more favorable to the Company than it could have
obtained from an unaffiliated party.
Mr. Huizenga owns Robbie Stadium Corporation and certain affiliated entities
(collectively, the "Stadium Companies"), which own and operate the Joe Robbie
Stadium in South Florida. During the fiscal year ended December 31, 1995,
Blockbuster made payments in the aggregate amount of approximately $631,000 to
the Stadium Companies for signage and other advertising and for tickets to
sporting and other events, for which BEC contracted with the Stadium Companies
prior to Mr. Huizenga's investment therein. Blockbuster also made payments
during the fiscal year ended December 31, 1995 in the aggregate amount of
approximately $12,000 to the Stadium Companies for scoreboard signage pursuant
to a contract entered into by BEC and the Stadium Companies after Mr. Huizenga's
investment therein. The Company believes that the amounts paid for scoreboard
signage are comparable to the amounts paid by unaffiliated parties.
In February 1993, BEC entered into an agreement with the Florida Marlins
Baseball, Ltd. (the "Florida Marlins") to sponsor certain events at or in
connection with Florida Marlins baseball games in the 1993 through 1995 baseball
seasons. BEG contracted to pay the Florida Marlins an aggregate of $366,500 for
these sponsorship rights, which amount is subject to reduction due to canceled
baseball games in the 1994 and 1995 baseball seasons.
20
Mr. Huizenga is the majority owner of the Florida Marlins and the Chairman and
Chief Executive Officer of Florida Marlins, Inc., its managing general partner.
H. Wayne Huizenga, Jr., G. Harry Huizenga, Bonnie J. Hudson and Harris W.
Hudson, who are Mr. Huizenga's son, father, sister and brother-in-law,
respectively, are all limited partners in the Florida Marlins. Mr. Berrard, who
served as a director of the Company from September 1994 until he resigned from
the Board in March 1996, also is a limited partner in the Florida Marlins. The
Company believes that the terms of the sponsorship agreement are no less
favorable to the Company than it could have obtained from an unaffiliated party.
Prior to the Company's acquisition of Combined Broadcasting of Miami, Inc.
("CBM"), a Delaware corporation and the licensee of television station WBFS-TV
in Miami, Florida, CBM entered into an agreement with the Florida Marlins under
which CBM obtained the live over-the-air broadcast rights to certain of the
Florida Marlins baseball games for the 1995 and 1996 baseball seasons. Under
such agreement, CBM agreed to make payments for such rights of up to $4,431,000
and $4,696,860 for the 1995 and 1996 seasons, respectively. In addition, CBM
agreed to make bonus payments to the Florida Marlins in certain situations.
Also, pursuant to such agreement, the Florida Marlins agreed that, prior to
negotiating with any other person for such broadcast rights for the period
subsequent to the term of the agreement, it will first negotiate with CBM for a
new grant of such rights.
In August 1993, BEC entered into a contract with the Florida Panthers Hockey
Club, Ltd. whereby Blockbuster contracted to pay an aggregate of $487,790 for
advertising and sponsorship activities during the 1993-94 and 1994-95 hockey
seasons, which amount is subject to reduction due to canceled hockey games in
the 1994-95 hockey season. The Company believes that the amounts paid were
comparable to the amounts paid by unaffiliated parties.
In September 1995, Blockbuster acquired certain assets of Donovan
Entertainment, Inc. ("Donovan"), in exchange for the payment of $2,925,000 to
Donovan. The assets acquired from Donovan consisted of all three of the
Blockbuster Video stores which Donovan owned as a franchisee of Blockbuster. H.
Wayne Huizenga, Jr., a son of Mr. Huizenga, is a stockholder of Donovan. The
Company believes that the terms of the acquisition of assets from Donovan are
substantially similar to the terms of other acquisitions of similarly situated
businesses of franchise owners.
During the fiscal year ended December 31, 1995, Blockbuster received from
Dorn Video, Inc. ("Dorn"), a Florida corporation and a franchise owner of
Blockbuster, an aggregate of approximately $109,000 for the purchase of
inventory and equipment and in payment of franchise royalty fees. H. Wayne
Huizenga, Jr., a son of Mr. Huizenga, is a creditor of Dorn. In September 1995,
Blockbuster acquired certain assets of Dorn, in exchange for the payment of
$1,345,000 to Dorn. The assets acquired from Dorn consisted of one of the three
Blockbuster Video stores which Donovan owned as a franchisee of Blockbuster. The
Company believes that the terms of the acquisition of assets from Dorn were
substantially similar to the terms of the acquisitions of similarly situated
businesses of franchise owners. The Company also believes that the terms of the
development and franchise agreements with Dorn are no less favorable to
Blockbuster than those with Blockbuster's other franchise owners and that the
terms of such agreements are substantially similar to the terms of Blockbuster's
other franchise and development agreements.
In September 1994, BEC entered into franchise and development agreements
with Mountain High Video, Inc. ("Mountain High"), related to a single video
store. During the fiscal year ended December 31, 1995, BEG received from
Mountain High an aggregate of approximately $45,000 for the purchase of
inventory and equipment and in payment of franchise royalty and development
fees. Harris W. Hudson and Steven Hudson, respectively the brother-in-law and
nephew of Mr. Huizenga, are the stockholders of Mountain High. The Company
believes that the terms of the franchise and development agreements with
Mountain High are no less favorable than those with Blockbuster's other
franchise owners, and that the terms of such agreements are substantially
similar to the terms of Blockbuster's other franchise and development
agreements.
In December 1992, BEC entered into franchise and development agreements with
Royal Palm Video, Inc. ("Royal Palm"), a Florida corporation. During the fiscal
year ended December 31, 1995, BEC received an
21
aggregate of approximately $144,000 from Royal Palm for the purchase of
inventory and equipment and in payment of franchise and development fees. In
February 1994, Blockbuster entered into franchise and development agreements
with Polo Video, Inc. ("Polo"), a Florida corporation. During the fiscal year
ended December 31, 1995, Blockbuster received an aggregate of approximately
$139,000 from Polo for the purchase of inventory and equipment and in payment of
franchise and development fees. E. Charles Pike, a brother-in-law of Mr.
Huizenga, is a principal stockholder of Royal Palm and Polo. The Company
believes that the terms of the franchise and development agreements with Royal
Palm and Polo are no less favorable to Blockbuster than those with Blockbuster's
other franchise owners, and that the terms of such agreements are substantially
similar to the terms of Blockbuster's other franchise and development
agreements.
For the fiscal year ended December 31, 1995, Blockbuster paid approximately
$1,933,000 to Psychemedics for testing services in connection with Blockbuster's
drug screening policy. Mr. Huizenga owns 11.5% of the common stock of
Psychemedics and each of Mr. Huizenga's spouse, father and children own less
than 1% of such common stock. The Company believes that the terms of the
agreement with Psychemedics are no less favorable to the Company than it could
have obtained from an unaffiliated party using comparable testing procedures.
In April 1995, Blockbuster entered into an agreement with Butler's Pantry
for the operation of the food services facilities at the employee cafeteria at
Blockbuster's headquarters in Ft. Lauderdale, Florida. For the fiscal year ended
December 31, 1995, Blockbuster paid approximately $143,000 to Butler's Pantry.
William Butler, Mr. Berrard's brother-in-law, owns Butler's Pantry. Prior to
forming Butler's Pantry, Mr. Butler was employed by several leading food service
companies, including Aramark Corporation (formerly known as ARA Services, Inc.),
Sheraton Corporation and Freshie Food Service Company. The Company believes that
the terms of the agreement with Butler's Pantry are no less favorable to the
Company than it could have obtained from an unaffiliated party.
In October 1995, Blockbuster purchased 2.53 acres of land from S-H Property
Holdings ("S-H") for $2,680,000; the parking lot for the Blockbuster Golf &
Games facility is located on this property. This property was acquired in
conjunction with the acquisition by Blockbuster Golf & Games of a contiguous
parcel in order to ensure the Company control over all real estate necessary for
the operation of the facility. Huizenga Holdings owns 50% of S-H. The Company
believes that the purchase was made on terms that are no less favorable to the
Company than it could have obtained from an unaffiliated party.
On March 8, 1995, Spelling entered into an agreement with 2301 S.E. 17th
St., Ltd. (the "Partnership"), the owner of the Hyatt Regency Pier Sixty Six
hotel (the "Hotel") in Ft. Lauderdale, Florida in connection with the filming of
a television pilot entitled "Pier 66" on location in and around the Hotel (the
"Premises"). Messrs. Berrard and Huizenga own an 8.33% and a 16.66% interest,
respectively, in 2301 Joint Venture ("2301 JV"), a Florida general partnership.
2301 JV holds a 79.5% limited partnership interest in the Partnership. In
consideration of the favorable publicity the Hotel received for being depicted
in the pilot, Spelling was not charged fees for the use of the Premises and the
Hotel provided rooms during preproduction and production of the pilot. The
estimated value of the location filming rights and rooms provided on the pilot
was $103,000.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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 ten percent 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 AMEX.
Executive officers, directors and greater than ten percent 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 Forms 5 were required, the Company believes that during
1995, its executive officers, directors and greater than ten percent beneficial
owners complied with all applicable Section 16(a) filing requirements.
22
APPROVAL OF AMENDMENT TO THE VIACOM INC.
SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN
The Viacom Inc. Senior Executive Short-Term Incentive Plan (the "Senior
Executive STIP") was approved by the Board of Directors of the Company on March
31, 1994 and by the stockholders of the Company at the 1994 Annual Meeting of
Stockholders. The Board of Directors of the Company adopted an amendment to the
Senior Executive STIP on March 27, 1996 (the "Senior Executive STIP Amendment"),
subject to the approval of the amendment by the affirmative vote of the holders
of the majority of the shares of Class A Common Stock represented in person or
by proxy and entitled to vote at the Annual Meeting. The Senior Executive STIP
Amendment, which is more fully described below, changes the maximum limit on
annual awards to any executive participating in the Senior Executive STIP to
eight (8) times such executive's base salary in effect on March 27, 1996.
SENIOR EXECUTIVE STIP GENERALLY
The following description of the material features of the Senior Executive
STIP is qualified in its entirety by the full text of the Senior Executive STIP,
as set forth in Exhibit A to this Proxy Statement. The Senior Executive STIP has
provided objective performance-based annual bonuses for selected senior
executives of the Company, subject to a maximum limit, starting with the 1994
calendar year, as described in more detail below. Amounts paid under the Senior
Executive STIP qualify as "performance-based compensation" which is excluded
from the $1,000,000 limit on deductible compensation set forth in Section 162(m)
of the Code. Awards under the Senior Executive STIP are determined by the
Compensation Committee. For this reason, it is not possible to determine the
amounts that will be received by senior executives participating in the Senior
Executive STIP in the future.
ADMINISTRATION
The Senior Executive STIP is administered by the Compensation Committee,
which is authorized to approve awards to selected executive officers (the
"Participants") at the level of Senior Vice President of the Company or above.
Approximately six officers have participated in the Senior Executive STIP
annually. The Compensation Committee must be comprised of at least three
directors, each of whom must be an "outside director" within the meaning of
Section 162(m) of the Code.
AWARDS
The Compensation Committee establishes performance criteria and target
awards for each Participant for each calendar year by the end of the first
quarter of such calendar year. The performance criteria relate to the
achievement of annual financial goals. Those goals are based on the attainment
of specified levels of operating income and/or cash flow for the Company as a
whole. The awards for Participants with exclusive corporate responsibilities are
based on achievement of the Company's financial performance criteria. The awards
for Participants with responsibilities for the Company's divisions and/or
subsidiaries is also based on the achievement of performance criteria
established by the Compensation Committee for such divisions and/or
subsidiaries. Such criteria relate to operating income and/or cash flow levels
for such divisions and/or subsidiaries. For this purpose, "operating income"
means revenues less operating expenses (other than depreciation and
amortization) and "cash flow" means "operating income" less cash capital
expenditures and increases or decreases in working capital and in other balance
sheet investments. Criteria relating to the performance of the Cable Division
which is being sold have been eliminated.
Shortly after the end of each performance year, the Compensation Committee
certifies whether the performance criteria have been achieved; if so, the awards
have been earned, subject to the Compensation Committee's right, in its sole
discretion, to reduce the amount of the award to any Participant to reflect the
Compensation Committee's assessment of the Participant's individual performance
or for any other reason. These awards are payable in cash as soon as practicable
thereafter.
23
To receive payment of an award, the Participant must have remained in the
continuous employ of the Company or its subsidiaries through the end of the
applicable performance period. If the Company or any subsidiary terminates a
Participant's employment other than for "cause" or a Participant becomes
"permanently disabled" or dies during a performance period, such Participant or
his estate shall be awarded, unless his employment agreement provides otherwise,
a pro rata portion of the award for such performance period, subject to the
Compensation Committee's right, in its sole discretion, to reduce the amount of
such award to reflect the Compensation Committee's assessment of such
Participant's individual performance prior to the termination of such
Participant's employment, such Participant's becoming permanently disabled or
such Participant's death, as the case may be, or for any other reason.
PROPOSED AMENDMENT
The Senior Executive STIP currently provides that the total of all awards to
any Participant for any calendar year shall not exceed the amount determined by
multiplying such Participant's base salary in effect on March 31, 1994 by a
factor of six (6). In the case of a Participant hired after March 31, 1994, the
Plan provides that the Participant's salary for this purpose would be the
Participant's base salary on the date of hire.
The Senior Executive STIP Amendment would increase the maximum annual award
to any Participant for any calendar year to the amount determined by multiplying
such Participant's base salary in effect on March 27, 1996 by a factor of eight
(8). The amendment would also provide that, in the case of any Participant hired
after March 27, 1996, the Participant's salary for this purpose would be the
Participant's base salary on the date of hire. This would adjust the maximum
bonus payable under the Senior Executive STIP to reflect the increased base
salaries of certain Participants due to promotions that became effective after
March 31, 1994. The current base salaries of the named executive officers are
disclosed under "Employment Agreements" above.
ADJUSTMENTS
In the event that, during a performance period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin off,
combination, liquidation, dissolution, sale of assets or other similar corporate
transaction or event, or any extraordinary event, or any other event which
distorts the applicable performance criteria occurs involving the Company or a
subsidiary or division thereof, the Compensation Committee shall adjust or
modify, as determined by the Compensation Committee in its sole and absolute
discretion, the calculation of operating income and/or cash flow, or the
applicable performance goals, to the extent necessary to prevent reduction or
enlargement of Participants' awards for such performance period attributable to
such transaction or event.
TRANSFER RESTRICTIONS, ETC.
The rights of a Participant with respect to awards under the Senior
Executive STIP are not transferable by the Participant other than by will or the
laws of descent and distribution. No award under the Senior Executive STIP will
be construed as giving any employee a right to continued employment with the
Company.
STIP AMENDMENT
The Board of Directors of the Company may at any time alter, amend, suspend
or terminate the Senior Executive STIP in whole or in part.
24
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends that the stockholders approve the
appointment of Price Waterhouse LLP as independent accountants to serve until
the Annual Meeting of Stockholders in 1997.
In connection with the audit function for 1995, Price Waterhouse 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.
Representatives of Price Waterhouse 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.
STOCKHOLDER PROPOSAL
Mrs. Evelyn Y. Davis, Editor, Highlights and Lowlights, Watergate Office
Building, 2600 Virginia Avenue, N.W., Suite 215, Washington, D.C. 20037, the
owner of 100 shares of Class A Common Stock, has submitted the following
proposal:
"RESOLVED: That the stockholders recommend that (a) the Board direct
management, after approval by the stockholders of this proposal, to
publish in newspapers of general circulation in the cities of New York,
Washington, D.C., Detroit, Chicago, San Francisco, Los Angeles, Dallas,
Houston and Miami, and in The Wall Street Journal and USA Today a
statement of each contribution made by the Company, either directly or
indirectly, within the immediately preceding fiscal year, in respect of
a political campaign, political party, referendum or citizens'
initiative, or attempts to influence legislation, specifying the date
and amount of each such contribution, and the person or organization to
whom the contribution was made, (b) subsequent to this initial
disclosure, the management cause like data to be included in each
succeeding annual report to stockholders and (c) if no such
disbursements were made, to have that fact publicized in the same
manner."
In support of this proposal, Mrs. Davis has submitted the following
statement:
"If adopted, the proposal would recommend that the stockholders be
advised how many corporate dollars are being spent for political
purposes and what political causes the management seeks to promote with
those funds. It is therefore no more than a recommendation that the
stockholders be given a more detailed accounting of these special
purpose expenditures than they now receive. These political
contributions are made with dollars that belong to the stockholders as a
group and they are entitled to know how they are being spent."
"IF YOU AGREE, PLEASE MARK YOUR PROXY FOR THIS RESOLUTION."
In the view of the Company's management, the disclosures required by this
proposal relate to funds that are immaterial to the Company from a financial
point of view and relate to matters that are fully disclosed in accordance with
applicable laws. Contributions with respect to federal elections are primarily
made by the Company's PAC; contributions by the PAC derive from voluntary
contributions by the Company's employees and not from Company funds. PAC
contributions to political candidates are determined by an independent PAC
Board. Information regarding all federal contributions is available to the
public and may be obtained by contacting the Federal Election Commission.
Additional disclosure is not necessary, and to the extent disclosure would be
more onerous than for the Company's competitors, it could be detrimental to the
Company's competitive position.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS
STOCKHOLDER PROPOSAL.
25
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 1997 Annual Meeting of Stockholders,
such proposals must be received at the principal executive offices of the
Company on or before December 13, 1996.
By Order of the Board of Directors,
/s/ Phillippe P. Dauman
PHILIPPE P. DAUMAN
Secretary
-------------------
THE COMPANY HAS SENT A COPY OF ITS REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1995, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, TO EACH
OF ITS STOCKHOLDERS OF RECORD ON APRIL 1, 1996 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.
26
EXHIBIT A
VIACOM INC.
SENIOR EXECUTIVE
SHORT-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED THROUGH MARCH 27, 1996)
ARTICLE I
GENERAL
SECTION 1.1 PURPOSE.
The purpose of the Viacom Inc. Senior Executive Short-Term Incentive Plan
(the "Plan") is to benefit and advance the interests of Viacom Inc., a Delaware
corporation (the "Company"), by rewarding selected senior executive officers of
the Company and its subsidiaries for their contributions to the Company's
financial success and thereby motivate them to continue to make such
contributions in the future by granting annual performance-based awards
("Awards").
SECTION 1.2 ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee ("Committee") which shall
adopt such rules as it may deem appropriate in order to carry out the purpose of
the Plan. The Committee shall be the Compensation Committee of the Company's
Board of Directors ("Board") (or such other Committee as may be appointed by the
Board) except that (i) the number of directors on the Committee shall not be
less than three (3) and (ii) each member of the Committee shall be an "outside
director" within the meaning of Section 162(m)(4) of the Internal Revenue code
of 1986, as amended (the "Code"). All questions of interpretation,
administration and application of the Plan shall be determined by a majority of
the members of the Committee then in office, except that the Committee may
authorize any one or more of its members, or any officer of the Company, to
execute and deliver documents on behalf of the Committee. The determination of
such majority shall be final and binding in all matters relating to the Plan.
The Committee shall have authority to determine the terms and conditions of the
Awards granted to eligible persons specified in Section 1.3 below
("Participants").
SECTION 1.3 ELIGIBLE PERSONS.
Awards may be granted only to employees of the Company or one of its
subsidiaries who are at the level of Senior Vice President of the Company or at
a more senior level. An individual shall not be deemed an employee for purposes
of the Plan unless such individual receives compensation from either the Company
or one of its subsidiaries for services performed as an employee of the Company
or any of its subsidiaries.
ARTICLE II
AWARDS
SECTION 2.1 AWARDS.
The Committee may grant Awards to eligible employees with respect to each
fiscal year of the Company, subject to the terms and conditions set forth in the
Plan.
A-1
SECTION 2.2 TERMS OF AWARDS.
Prior to the end of the first quarter of each fiscal year of the Company,
the Committee shall establish (i) performance goals and objectives ("Performance
Targets") for the Company and the subsidiaries and divisions thereof for such
fiscal year ("Performance Period") and (ii) target awards ("Target Awards") for
each Participant which shall be a percentage of the Participant's salary (as
defined in Section 2.3 below). Such Performance Targets shall relate to the
achievement of annual financial goals based on the attainment of specified
levels of Operating Income and/or Cash Flow (as such terms are defined below)
for the Company and the subsidiaries and divisions thereof. For purposes of the
Plan, "Operating Income" shall mean revenues less operating expenses (other than
depreciation and amortization) and "Cash Flow" shall mean Operating Income less
cash capital expenditures and increases or decreases in working capital and in
other balance sheet investments.
SECTION 2.3 LIMITATION ON AWARDS.
The aggregate amount of all Awards to any Participant for any Performance
Period shall not exceed the amount determined by multiplying such Participant's
Salary by a factor of eight (8). For purposes of the Plan, "Salary" shall mean
the base salary of the Participant on March 27, 1996 or, in the case of a
Participant hired after March 27, 1996, such Participant's base salary on the
date of hire.
SECTION 2.4 DETERMINATION OF AWARD.
The Committee shall, promptly after the date on which the necessary
financial or other information for a particular Performance Period becomes
available, certify whether the Performance Targets have been achieved in the
manner required by Section 162(m) of the Code. If the Performance Targets have
been achieved, the Awards for such Performance Period shall have been earned
except that the Committee may, in its sole discretion, reduce the amount of any
Award to reflect the Committee's assessment of the Participant's individual
performance or for any other reason. Subject to Section 2.5, such Awards shall
become payable in cash as promptly as practicable thereafter.
SECTION 2.5 EMPLOYMENT REQUIREMENT.
To be eligible to receive payment of an Award, the Participant must have
remained in the continuous employ of the Company or its subsidiaries through the
end of the applicable Performance Period. If the Company or any subsidiary
terminates a Participant's employment other than for "cause" or a Participant
becomes "permanently disabled" (in each case, as determined by the Committee in
its sole discretion) or a Participant dies during a Performance Period, such
Participant or his estate shall be awarded, unless his employment contract
provides otherwise, a pro rata portion of the amount of the Award for such
Performance Period except that the Committee may, in its sole discretion, reduce
the amount of such Award to reflect the Committee's assessment of such
Participant's individual performance prior to the termination of such
Participant's employment, such Participant's becoming permanently disabled or
such Participant's death, as the case may be, or for any other reason.
ARTICLE III
ADJUSTMENT OF AWARDS
In the event that, during a Performance Period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin off,
combination, liquidation, dissolution, sale of assets, or other similar
corporate transaction or event, or any extraordinary event, or any other event
which distorts the applicable performance criteria occurs involving the Company
or a subsidiary or division thereof, the Committee shall adjust or modify, as
determined by the Committee in its sole and absolute discretion, the calculation
of Operating Income and/or Cash Flow, or the applicable Performance Targets, to
the extent necessary to prevent reduction or enlargement of Participants' Awards
under the Plan for such Performance Period attributable to such transaction or
event. Such adjustments shall be conclusive and binding for all purposes.
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ARTICLE IV
MISCELLANEOUS
SECTION 4.1 NO RIGHTS TO AWARDS OR CONTINUED EMPLOYMENT.
No employee shall have any claim or right to receive Awards under the Plan.
Neither the Plan nor any action taken hereunder shall be construed as giving any
employee any right to be retained by the Company or any of its subsidiaries.
SECTION 4.2 RESTRICTION ON TRANSFER.
The rights of a Participant with respect to Awards under the Plan shall not
be transferable by the Participant to whom such Award is granted, otherwise than
by will or the laws of descent and distribution.
SECTION 4.3 TAX WITHHOLDING.
The Company or a subsidiary thereof, as appropriate, shall have the right to
deduct from all payments made under the Plan to a Participant or to a
Participant's beneficiary or beneficiaries any Federal, state or local taxes
required by law to be withheld with respect to such payments.
SECTION 4.4 NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CHANGES.
The Plan shall not affect in any way the right or power of the Company or
its stockholders to make or authorize any recapitalization, reorganization,
merger, acquisition, divestiture, consolidation, spin off, combination,
liquidation, dissolution, sale of assets, or other similar corporate transaction
or event involving the Company or a subsidiary thereof or any other event or
series of events, whether of a similar character or otherwise.
SECTION 4.5 SOURCE OF PAYMENTS.
The Company shall not have any obligation to establish any separate fund or
trust or other segregation of assets to provide for payments under the Plan. To
the extent any person acquires any rights to receive payments hereunder from the
Company, such rights shall be no greater than those of an unsecured creditor.
SECTION 4.6 AMENDMENT AND TERMINATION.
The Board may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part. No termination or amendment of the Plan
may, without the consent of the Participant to whom an Award has been made,
adversely affect the rights of such Participant in such Award.
SECTION 4.7 GOVERNMENTAL REGULATIONS.
The Plan, and all Awards hereunder, shall be subject to all applicable rules
and regulations of governmental or other authorities.
SECTION 4.8 HEADINGS.
The headings of sections and subsections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan.
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SECTION 4.9 GOVERNING LAW.
The Plan and all rights and Awards hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware.
SECTION 4.10 EFFECTIVE DATE.
The Plan became effective as of January 1, 1994. The amendment and
restatement thereof shall be effective as of March 27, 1996; provided, however,
that it shall be a condition to the effectiveness of the amendment and
restatement of the Plan, and any Awards made after March 27, 1996, that the
stockholders of the Company approve the amendment of the Plan at the 1996 Annual
Meeting of Stockholders. Such approval shall meet the requirements of Section
162(m) of the Code and the regulations thereunder. If such approval is not
obtained, then the amendment and restatement of the Plan shall not be effective
and any Award made after March 27, 1996 shall be void ab initio.
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1. Election of Directors
FOR all Nominees WITHHOLD Authority to vote for * Exceptions
listed below all nominees listed below
--- --- ---
Nominees: George S. Abrams, Philippe P. Dauman, Thomas E. Dooley, George D.
Johnson, Jr., Ken Miller, Brent D. Redstone, Shari Redstone, Sumner M. Redstone,
Frederic V. Salerno, William Schwartz, Ivan Seidenberg
*Exceptions.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
2. Approval of Amendment to the 3. Appointment of Price Waterhouse
Viacom Inc. Senior Executive Short- LLP to serve as independent accountants
Term Incentive Plan. for Viacom Inc. until the 1997 Annual
Meeting of Stockholders.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
--- --- --- --- --- ---
4. Approval of Stockholder Proposal. IF YOU PLAN TO ATTEND
THE ANNUAL MEETING,
FOR AGAINST ABSTAIN PLEASE CHECK THIS BOX
--- --- --- AND AN ADMISSION TICKET
WILL BE SENT TO YOU.
---
Please sign exactly as 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.
DATE , 1996
----------------------------
SIGNED
--------------------------------
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope)
Change of address and or VOTES MUST BE INDICATED
Comments, mark here (X) IN BLACK OR BLUE INK.
--- ---
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036
ANNUAL MEETING PROXY CARD
-------------------------
P The undersigned hereby appoints SUMNER M. REDSTONE and PHILIPPE P. DAUMAN,
and each of them, as proxies with full power of substitution, to represent
R and to vote on behalf of the undersigned all of the shares of Class A
Common Stock of Viacom Inc. which the undersigned is entitled to vote at
O the Annual Meeting of Stockholders to be held at the Equitable Center, 787
Seventh Avenue (at 51st Street), New York, New York on Thursday, May 23,
X 1996 at 10:00 a.m., and at any adjournments or postponements thereof, upon
the matters set forth on the reverse side as more fully described in the
Y Notice of 1996 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), (2) AND (3) AND AGAINST PROPOSAL (4). UNLESS
OTHERWISE SPECIFIED, THE VOTE REPRESENTED BY THIS PROXY WILL BE CAST FOR
PROPOSALS (1), (2) AND BY THIS PROXY WILL BE CAST FOR (3) AND AGAINST
PROPOSAL (4).
(Continued, and to be signed and
dated on the reverse side.)
VIACOM INC.
P.O. BOX
NEW YORK, NY 10203-0800
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK, 10036
ANNUAL MEETING TICKET REQUEST FORM
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 on
Thursday, May 23, 1996 at 10:00 a.m.
Only holders of shares of Viacom Inc. Class A Common Stock of record at the
close of business on April 1, 1996 are entitled to vote at the Annual Meeting or
any adjournment thereof; however, holders of Viacom Inc. Class B Common Stock
are invited to attend the Annual Meeting.
If you plan to attend the Annual Meeting in person and hold registered
shares of Viacom Inc. Class B Common Stock, you should mark the box and return
this card in the enclosed envelope and an admission ticket will be sent to you.
I PLAN TO ATTEND THE ANNUAL MEETING / /
PLEASE SIGN EXACTLY AS 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_____________________________, 1996
SIGNED__________________________________
________________________________________
