SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
VIACOM INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[LOGO]
April 16, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Viacom Inc., which will be held at the newly opened Blockbuster Operations
Center, 3000 Redbud Blvd., McKinney, Texas 75069 (in the Dallas, Texas
metropolitan area) at 11:00 a.m. (Central Daylight Time) on Thursday, May 28,
1998. Holders of Viacom Inc. Class A Common Stock are being asked to vote on the
matters listed on the enclosed Notice of 1998 Annual Meeting of Stockholders.
National Amusements, Inc., which owns approximately 67% 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. 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,
53RD 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 1998 ANNUAL MEETING
AND PROXY STATEMENT
---------------------
To Viacom Inc. Stockholders:
The Annual Meeting of Stockholders of Viacom Inc. will be held at the
Blockbuster Operations Center, 3000 Redbud Blvd., McKinney, Texas 75069 at 11:00
a.m. (Central Daylight Time) on Thursday, May 28, 1998. The principal business
of the meeting will be consideration of the following matters:
1. The election of 10 directors;
2. The approval of the appointment of Price Waterhouse LLP to serve as
independent accountants until the 1999 Annual Meeting of
Stockholders; and
3. 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 16, 1998
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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 28, 1998. 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 the instructions thereon or if no instructions are specified
thereon, then the Proxy will be voted as recommended by the Board of Directors.
The affirmative vote of 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 appointment of the independent accountants. 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, 1998 are entitled to notice of and to vote at the Annual Meeting.
The Company then had outstanding 69,797,272 shares of Class A Common Stock, each
of such shares being entitled to one vote, and 286,048,791 shares of non-voting
Class B Common Stock, $0.01 par value ("Class B Common Stock" and, together with
the Class A Common Stock, "Common Stock").
As of April 1, 1998, National Amusements, Inc. ("NAI") owned approximately
67% of the Class A Common Stock and approximately 28% 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 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 10 nominated directors and
the appointment of Price Waterhouse LLP to serve as the Company's independent
accountants until the 1999 Annual Meeting of Stockholders; such action by NAI is
sufficient to elect such directors and approve the appointment of independent
accountants without any action on the part of any other holder of Class A Common
Stock.
The complete mailing address of the principal executive offices of the
Company is 1515 Broadway, New York, New York 10036-5794. The Company intends to
commence its distribution of the Proxy Statement and the Proxy on or about April
16, 1998.
1
ELECTION OF DIRECTORS
The election of 10 directors of the Company is proposed, each to hold office
for one year and until his or her successor is elected and qualified. The
persons named in the enclosed Proxy will vote the shares of Class A Common Stock
covered by such Proxy for the election of the nominees set forth below, unless
instructed to the contrary. Each nominee is now a member of the Board of
Directors of the Company. If, for any reason, any of said nominees becomes
unavailable for election, the holders of the Proxies may exercise discretion to
vote for substitutes proposed by the Board. Management has no reason to believe
that the persons named will be unable to serve if elected or will decline to do
so.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Set forth below is certain information concerning each nominee for director
of the Company. All of the nominees are currently directors of the Company.
NOMINEE FOR COMPANY OFFICES AND
DIRECTOR* PRINCIPAL OCCUPATION**
- ------------------------------------------ ---------------------------------------------------------------------------------
George S. Abrams.......................... Attorney associated with the law firm of Winer and Abrams in Boston,
Age 66 Massachusetts since 1969. Mr. Abrams served as the General Counsel and Staff
Director since 1987 Director of the United States Senate Judiciary Subcommittee on Refugees from
1965 through 1968. He is currently a member of the Boards of Trustees and
Visiting Committees of a number of art museums, arts-related organizations and
educational institutions, including The European Fine Arts Foundation, the
Museum of Fine Arts in Boston, and the Harvard University Art Museums. Mr.
Abrams is a director of NAI and Sonesta International Hotels Corporation.
Philippe P. Dauman........................ Deputy Chairman of the Board of the Company since January 1996 and Executive Vice
Age 44 President, General Counsel, Chief Administrative Officer and Secretary of the
Director since 1987 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, Spelling
Entertainment Group Inc. ("Spelling") and Lafarge Corporation.
Thomas E. Dooley.......................... Deputy Chairman of the Board of the Company since January 1996 and Executive Vice
Age 41 President--Finance, Corporate Development and Communications of the Company
Director since 1996 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
held various positions in the Company's corporate and divisional finance areas.
Mr. Dooley is a director of Spelling.
Ken Miller................................ Vice Chairman of Credit Suisse First Boston Corporation since June 1994. Mr.
Age 55 Miller served as President, Chief Executive Officer of The Lodestar Group, an
Director since 1987 investment firm, from 1988 to June 1994. Prior to that, he was Vice Chairman of
Merrill Lynch Capital Markets.
2
NOMINEE FOR COMPANY OFFICES AND
DIRECTOR* PRINCIPAL OCCUPATION**
- ------------------------------------------ ---------------------------------------------------------------------------------
Brent D. Redstone......................... Attorney residing in Denver, Colorado. Mr. Redstone is a member of the Board of
Age 47 Directors of the American Prosecutors Research Institute, located in
Director since 1991 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 as Vice
Age 44 President, Corporate Planning and Development of NAI. Ms. Redstone practiced
Director since 1994 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 Philanthropies, 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 Officer since
Age 74 January 1996. Mr. Redstone has served as Chairman of the Board of NAI since
Director since 1986 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. Mr. Redstone was appointed by
President Clinton to the position of Chairman of the Corporate Commission on
Education Technology whose mission is to advance the quality of education in
the United States through the use of technology. The Commission comprises chief
executive officers from leading media and telecommunications companies. Since
1982, Mr. Redstone has been a member of the faculty of Boston University Law
School, where he has lectured on entertainment law, and since 1994, he has been
a Visiting Professor at Brandeis University. Mr. Redstone graduated from
Harvard University in 1944 and received an LL.B. from Harvard University School
of Law in 1947. Upon graduation, Mr. Redstone served as Law Secretary with the
United States Court of Appeals, and then as a Special Assistant to the United
States Attorney General. Mr. Redstone is Chairman of the Board of Spelling.
Frederic V. Salerno....................... Executive Vice President and Chief Financial Officer/Strategy and Business
Age 54 Development of Bell Atlantic Corporation ("Bell Atlantic") since August 1997.
Director since 1994 Prior to the merger of Bell Atlantic and NYNEX Corporation ("NYNEX"), Mr.
Salerno served as Vice Chairman and Chief Financial Officer of NYNEX since
March 1994. Mr. Salerno was Vice Chairman of the Board of NYNEX and President
of the Worldwide Services Group from 1991 to 1994 and President and Chief
Executive Officer of New York Telephone Company from 1987 to 1991. Mr. Salerno
is a director of Avnet, Inc., The Bear Stearns Companies Inc. and Orange and
Rockland Utilities, Inc.
3
NOMINEE FOR COMPANY OFFICES AND
DIRECTOR* PRINCIPAL OCCUPATION**
- ------------------------------------------ ---------------------------------------------------------------------------------
William Schwartz.......................... Vice President for Academic Affairs (the chief academic officer) of Yeshiva
Age 64 University since 1993 and University Professor of Law at Yeshiva University and
Director since l987 the Cardozo School of Law since 1991. Mr. Schwartz has been Counsel to
Cadwalader, Wickersham & Taft since 1988. He was Dean of the Boston University
School of Law from 1980 to 1988 and a professor of law at Boston University
from 1955 to 1991. Mr. Schwartz is Chairman of the Board of UST Corporation and
a member of the Advisory Board of WCI Steel, Inc. He is an honorary member of
the National College of Probate Judges. He served as Chairman of the Boston
Mayor's Special Commission on Police Procedures and was formerly a member of
the Legal Advisory Board of the New York Stock Exchange.
Ivan Seidenberg........................... Vice Chairman, President and Chief Operating Officer of Bell Atlantic since
Age 51 August 1997. Prior to the merger of Bell Atlantic and NYNEX, Mr. Seidenberg
Director since 1995 served as Chairman and Chief Executive Officer of NYNEX since April 1995 and
before that as President and Chief Executive Officer of NYNEX since January
1995. Previously, he served as President and Chief Operating Officer of NYNEX
from March 1994 to December 1994 and as Vice Chairman of NYNEX from April 1991
to January 1995. Mr. Seidenberg became a director of NYNEX in 1991. He is also
a director of AlliedSignal Inc., American Home Products Corporation, Boston
Properties, Inc. and CVS 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.
** 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 1997, the Board of Directors held nine (9) regular meetings.
Set forth below is certain information concerning the standing committees of
the Board of Directors.
NUMBER OF
MEETINGS
COMMITTEE MEMBERS OF COMMITTEE DURING 1997
- -------------------------------------------------------------- ------------------------------------------------ ---------------
Audit Committee............................................... Messrs. Abrams, Miller, Salerno*, Schwartz and 3
Seidenberg
Compensation Committee........................................ Messrs. Abrams, Miller, Brent Redstone, Salerno, 9
Schwartz** and Seidenberg and Ms. Shari
Redstone
Senior Executive Compensation Committee....................... Messrs. Salerno, Schwartz** and Seidenberg 9
- ------------------------
* Mr. Salerno became Chairman of the Audit Committee on May 29, 1997, when Mr.
Abrams' term as Chairman expired.
** Chairman
In addition, during 1997, the Board created a new Governance and Nominations
Committee, consisting of Messrs. Abrams, Dauman, Miller, Seidenberg and Sumner
Redstone, to address nominations to the Board and corporate governance issues.
Mr. Abrams is Chairman of this Committee, which met for the first time in
January 1998. The Governance and Nominations Committee will consider nominees
recommended by the stockholders of the Company; recommendations should be
submitted to the Company, to the attention of the Secretary.
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 Company's
general compensation strategy (except with respect to matters entrusted to the
Senior Executive Compensation Committee as described below), reviewing the terms
of employment agreements for executives earning over a specified amount and
administering the Company's annual bonus compensation plan and long-term
compensation plans (other than the stock option program), as well as its benefit
plans.
The functions of the Senior Executive Compensation Committee include
reviewing and approving executive compensation for executive officers if their
compensation is, or may become, subject to Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), including the terms of employment
agreements for such executives. The Senior Executive Compensation Committee also
administers the Senior Executive Short-Term Incentive Plan, determining the
executive officers who will participate in the plan, establishing performance
targets and determining specific bonuses for the participants. In addition, this
Committee administers the Company's stock option plans and approves individual
stock option grants.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below, as of April 1, 1998, 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 Mr.
Weinstein and (iii) current directors and executive officers of the Company as a
group. Also set forth below, as of April 1, 1998, 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 Series B
Preferred Stock of the Company held by Bell Atlantic.
BENEFICIAL OWNERSHIP EQUITY SECURITIES
---------------------------------------------------------------
TITLE OF EQUITY NUMBER OF OPTION PERCENT
NAME SECURITY EQUITY SHARES SHARES(1) OF CLASS
- ----------------------------------------------------- -------------------- --------------- ----------- -----------
George S. Abrams..................................... Class A Common 6,362(2) -- (6)
Class B Common 6,733(2) 19,500 (6)
Philippe P. Dauman................................... Class A Common 1,190(3) -- (6)
Class B Common 13,170(3) 303,333 (6)
Thomas E. Dooley..................................... Class A Common 2,433(3) 4,000 (6)
Class B Common 6,924(3) 294,333 (6)
Mario J. Gabelli..................................... Class A Common 6,723,932(4) -- 9.7%
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434
Ken Miller........................................... Class A Common 5,795(2) -- (6)
Class B Common 5,940(2) 19,500 (6)
National Amusements, Inc. ........................... Class A Common 46,829,414(5) -- 67.2%
200 Elm Street Class B Common 52,167,414(5) -- 18.3%
Dedham, MA 02026
Brent D. Redstone.................................... Class A Common (7) -- --
Class B Common (7) -- --
Shari Redstone....................................... Class A Common (7) -- --
Class B Common (7) -- --
Sumner M. Redstone................................... Class A Common 46,829,494(5) -- 67.2%
Class B Common 52,167,494(5) 333,333 18.3%
William A. Roskin.................................... Class A Common 642(3) 1,500 (6)
Class B Common 3,498(3) 68,500 (6)
Frederic V. Salerno.................................. Class B Common -- 9,500(8) (6)
William Schwartz..................................... Class A Common 6,058(2) -- (6)
Class B Common 6,198(2) 19,500 (6)
Ivan Seidenberg...................................... Class B Common -- 8,000(8) (6)
George S. Smith, Jr. ................................ Class A Common 5,320(3) 7,500 (6)
Class B Common 7,032(3) 151,500 (6)
Mark M. Weinstein**.................................. Class A Common 1,296(3) -- (6)
Class B Common 3,384(3) 50,000 (6)
Current directors and executive officers as a group
other than Mr. Sumner Redstone (18 persons)........
Class A Common 28,373(2)(3) 13,900 (6)
Class B Common 63,230(2)(3) 554,633 (6)
5 Year Warrant -- -- --
Spelling Common -- -- --
- ------------------------
* Other than shares of Spelling Common Stock owned by the Company and
attributed to NAI and Mr. Sumner Redstone.
** Prior to May 29, 1997, Senior Vice President, Government Affairs of the
Company.
6
NOTES:
(1) Reflects shares subject to options to purchase such shares which on April 1,
1998 were unexercised but were exercisable within a period of 60 days from
that date. These shares are excluded from the column headed "Number of
Equity Shares".
(2) Includes Class A Common Stock units and Class B Common Stock units credited
as of January 1, 1998 to Messrs. Abrams, Miller and Schwartz pursuant to the
Deferred Compensation Plan described below under which their directors' fees
are converted into stock units.
(3) Includes shares and share equivalents held through the Company's 401(k) and
Excess 401(k) Plans as of December 31, 1997.
(4) Mario J. Gabelli and various entities, including investment companies, which
he directly or indirectly controls or for which he acts as chief investment
officer, filed with the Securities and Exchange Commission Amendment No. 4
to their Statement on Schedule 13D (the "Statement"), dated December 22,
1997, reporting an aggregate beneficial ownership of 6,723,932 shares of
Class A Common Stock, representing approximately 9.7% of the outstanding
shares of such class. The Statement reported that the shares are generally
held for investment and that the entities reporting beneficial ownership
generally have sole investment and voting power over such shares.
(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) Brent Redstone and Shari Redstone are stockholders of NAI and, accordingly,
each has a significant indirect beneficial interest in the Company shares
owned by NAI.
(8) Held for the benefit of Bell Atlantic.
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, Schwartz and Seidenberg were Outside Directors for the entire 1997
calendar year. In 1997, only Outside Directors received any compensation for
services as a director.
DIRECTORS' FEES. Outside Directors received the following fees for 1997:
(i) a quarterly retainer of $10,000 for membership on the Board of Directors of
the Company, (ii) a per meeting attendance fee of $1,500 for each Board meeting
and $500 for each meeting of the Audit Committee, Compensation Committee and
Governance and Nominations Committee, and (iii) a $7,500 annual retainer fee for
the Chairman of the Audit Committee (currently Mr. Salerno), for the Chairman of
the Compensation Committee (currently Mr. Schwartz) and for the Chairman of the
Governance and Nominations Committee (currently Mr. Abrams). No additional fees
or retainers are paid for attendance at meetings of the Senior Executive
Compensation Committee or for the Chairman of that Committee. Compensation for
Messrs. Salerno's and Seidenberg's services as Outside Directors for 1997 was
paid to Bell Atlantic.
DEFERRED COMPENSATION PLAN. Since 1989, Messrs. Abrams, Miller and Schwartz
have deferred payment of their retainer and attendance fees pursuant to the
Company's unfunded Deferred Compensation Plan; these amounts are deemed invested
in the number of stock units equal to the number of shares of Common Stock such
amounts would have purchased when deferred. Payment will be made in a lump sum
or in three or five annual installments starting seven months after their
retirement, with the value of the stock units determined by reference to the
fair market values of the Class A Common Stock and Class B Common Stock at that
time and, in the case of installment payments, credited with interest. For 1997,
the stock unit accounts of Messrs. Abrams, Miller and Schwartz were credited
with 1,013, 906 and 997 Class A Common Stock units and 997, 891 and 982 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 retainer at the time of such retirement
(not including meeting attendance fees or the annual retainer for serving as
Chairman of the Audit, Compensation or Governance and Nominations Committee),
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.
7
1993 AND 1994 OUTSIDE DIRECTORS' STOCK OPTION PLANS. Each Outside Director
received a grant of non-qualified stock options to purchase 5,000 shares of
Class B Common Stock when the Company's Outside Directors' Stock Option Plan
(the "1993 Plan") was adopted in May 1993 or, for Outside Directors who joined
the Board after the Plan was adopted, when such person was elected or appointed
to the Board. In addition, each Outside Director has received an annual grant of
stock options to purchase 1,500 shares of Class B Common Stock since November
1994 when the Company's 1994 Outside Directors' Stock Option Plan (the "1994
Plan") was adopted. Each Outside Director who had served as an Outside Director
since 1989 also received a one-time grant under the 1994 Plan in November 1994
of stock options to purchase 10,000 shares of Class B Common Stock. The per
share exercise price of each grant under the 1993 and 1994 Plans has been the
closing price of a share of Class B Common Stock on the American Stock Exchange
("AMEX") on the date of grant. On August 1, 1997, Messrs. Abrams, Miller,
Salerno, Schwartz and Seidenberg each received an annual grant under the 1994
Plan to purchase 1,500 shares of Class B Common Stock, with a per share exercise
price of $30.50 (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, Brent Redstone, Salerno, Schwartz and Seidenberg and
Ms. Shari Redstone were members of the Compensation Committee for the entire
1997 calendar year.
Shari Redstone is an executive officer of NAI. Mr. Dauman, a director and
executive officer of the Company, is a director of NAI.
George S. Abrams, a director of the Company and NAI, 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, 1997, the Company made payments to Mr. Abrams for such services in the
aggregate amount of $120,000.
Ken Miller, a director of the Company, is Vice Chairman of Credit Suisse
First Boston Corporation. Credit Suisse First Boston Corporation has performed
and, in the future, is expected to perform from time to time investment banking
services for the Company.
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, 1997, NAI made payments to Paramount Pictures in the aggregate
amount of approximately $13,230,000 to license Paramount Pictures films. NAI
licenses films from a number of unaffiliated companies and the Company believes
that the terms of the licenses between NAI and Paramount Pictures were no less
favorable to Paramount Pictures 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.
Mr. Redstone and NAI own an aggregate of approximately 21.7% of the common
stock of Midway Games Inc. ("Midway"). During the fiscal year ended December 31,
1997, Blockbuster purchased approximately $12,456,000 of home video games from
Midway. The Company believes that the terms of these purchases are no less
favorable to the Company than it would have obtained from an unaffiliated party.
The Company expects to purchase video games from Midway in the future.
8
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE AND THE SENIOR EXECUTIVE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee and the Senior Executive Compensation Committee
(collectively, the "Committee") of the Board of Directors has furnished the
following report on executive compensation for fiscal 1997.
All members of the Compensation Committee and the Senior Executive
Compensation Committee are non-employee directors. The Compensation Committee
reviews and, with any changes it believes appropriate, approves the Company's
executive compensation. The Senior Executive Compensation Committee reviews and
approves compensation for executive officers, if their compensation is, or may
become, subject to Section 162(m) of the Internal Revenue Code of 1996, as
amended (the "Code"). Independent compensation consultants have advised the
Committee from time to time with respect to the Company's long-term incentive
compensation plans since 1987.
The objectives of the executive compensation package for the Company's
executive officers (other than the Chief Executive Officer) 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 reflects the executive officer's
individual contribution to that performance;
- Provide long-term compensation that is tied to the Company's stock price
so as to focus the attention of the executive officers on managing the
Company from the perspective of an owner with an equity stake; and
- Emphasize performance-based compensation, through annual bonus
compensation and long-term compensation, over fixed compensation.
The Committee 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.
EXECUTIVE COMPENSATION
Executive compensation (other than for the Chief Executive Officer) is
comprised of base salary, annual bonus compensation and long-term compensation
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 for senior
executive officers are set forth in their employment agreements and increases in
their base salary in 1997 were made in accordance with their agreements. The
employment agreements for the named executive officers are described below under
"Employment Agreements".
9
INCENTIVE COMPENSATION
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Code generally limits to $1 million the federal tax deductibility of
compensation (including stock options) paid to the Company's Chief Executive
Officer and the other four named executive officers. The tax law includes an
exception to the deduction limitation for performance-based compensation
(including 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 Company's stock
option plans (the "LTMIP") were designed to comply with this exception. The
Senior Executive STIP provides objective performance-based annual bonuses for
selected executive officers of the Company, subject to a maximum limit of eight
(8) times the executive's base salary in effect on March 27, 1996. Long-term
compensation for the Company's executive officers has been provided through
grants of LTMIP stock options. It is expected that long-term compensation for
future years will continue to be provided through grants of LTMIP stock options.
The stockholders of the Company have approved the Senior Executive STIP and the
LTMIP.
ANNUAL BONUS COMPENSATION. Annual bonus compensation for 1997 for the 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 Senior Executive 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 level of the Senior Executive STIP annual bonuses for 1997 for most of
the Company's executive officers, including the Deputy Chairmen and the other
named executive officers, was based on the determination of the Senior Executive
Compensation Committee that the performance criteria established for 1997 had
been achieved. As a result, under the terms of the Senior Executive STIP, the
maximum bonus payable to such executive officers was eight (8) times the
executive's base salary in effect on March 27, 1996. The Senior Executive
Compensation Committee considered a number of factors, including the active role
played by the Deputy Chairmen and the executive officers on their staff in
effectuating the change in management and operating and strategic direction at
the Company's Blockbuster unit, the successful resolution of the USA Networks
litigation and the resulting sale of USA Networks for approximately $1.7
billion, the sale of the Company's Radio unit for approximately $1.1 billion and
the direction and operational oversight of the Company's other divisions, and
awarded the annual bonuses set forth below in the Summary Executive Compensation
Table.
Annual bonus compensation for the Company's executive officers not
participating in the Senior Executive STIP was provided under the Company's
Short-Term Incentive Plan. Target levels of annual operating income (as defined
above) were established for 1997 for the Company as a whole (for the Company's
operating units, the 1997 target levels also related to cash flow). The level of
achievement of the applicable goals established the bench mark for the aggregate
amounts available for funding awards for these executives; the amounts,
expressed as a percentage, were subject to upward or downward adjustment based
for the most part on the level of achievement and could exceed 100% of targeted
amounts. The percentage was then multiplied by the individual target set for
each executive in his or her employment agreement. The result was then adjusted
to reflect individual performance.
LONG-TERM COMPENSATION. The Committee believes that the use of equity-based
long-term compensation plans appropriately links executive interests to
enhancing stockholder value.
Annual grants of LTMIP stock options for Class B Common Stock are generally
awarded to the Company's executive officers, effective August 1st of each year.
The grants of LTMIP stock options for Class B Common Stock awarded to the
Company's executive officers on August 1, 1997 represented such executives'
grants for 1997 and 1998; these stock options have an extended vesting period of
five years. The $30.50 exercise price of the 1997/1998 stock options grants was
set at the fair market value of the Class B Common Stock on the date of grant.
The stock options have a ten-year term.
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 Senior Executive Compensation Committee considered the amounts
awarded in prior years, as adjusted for changes in responsibility and the
provisions of executives' employment agreements.
10
CHIEF EXECUTIVE OFFICER'S COMPENSATION
In January 1996, Mr. Redstone, the Chairman of the Board and the controlling
stockholder of the Company, assumed the responsibilities of Chief Executive
Officer of the Company. Mr. Redstone has waived payment of any salary or bonus
compensation for his services as Chief Executive Officer of the Company.
Mr. Redstone was awarded a grant in January 1997 of stock options to
purchase 250,000 shares of Class B Common Stock on the same terms as the August
1, 1996 annual grant to the Company's executives (I.E., with a $35 per share
exercise price and vesting over a four-year period from August 1, 1996 with a
ten-year term). These options were granted in 1997 because the annual grant,
together with the special grant made in January 1996 to reflect Mr. Redstone's
assumption of duties as Chief Executive Officer, would have exceeded the
1,000,000 shares per year limitation in the 1994 LTMIP. The closing price of a
share of Class B Common Stock on the AMEX on January 30, 1997, the date of
grant, was $34.50.
Mr. Redstone was also awarded a grant in August 1997 of stock options to
purchase 500,000 shares of Class B Common Stock as of August 1, 1997,
representing his grant for 1997 and 1998. This was awarded on the same terms as
the August 1, 1997 grant to the Company's executives.
Members of the Members of the Senior Executive
Compensation Committee: Compensation Committee:
George S. Abrams Frederic V. Salerno
Ken Miller William Schwartz, Chairman
Brent D. Redstone Ivan Seidenberg
Shari Redstone
Frederic V. Salerno
William Schwartz, Chairman
Ivan Seidenberg
11
SUMMARY EXECUTIVE COMPENSATION TABLE
The following table sets forth information concerning total compensation for
the Chief Executive Officer, the four most highly compensated executive officers
of the Company who served in such capacities during 1997 and Mr. Weinstein for
services rendered to the Company during each of the last three fiscal years.
LONG-TERM COMPENSATION
----------------------
AWARDS
ANNUAL COMPENSATION (1) ---------- PAYOUTS
-------------------------------------------- SECURITIES ----------
NAME AND PRINCIPAL POSITION OTHER ANNUAL UNDERLYING LTIP ALL OTHER
AT END OF FISCAL 1997 YEAR SALARY BONUS COMPENSATION(2) OPTIONS(3) PAYOUTS(4) COMPENSATION(5)
- ----------------------------- --------- ------------ ------------ ---------------- ---------- ---------- ----------------
Sumner M. Redstone........... 1997 $ 0 $ 0 $ -- 750,000 $ 0 $ 0
CHAIRMAN, CHIEF EXECUTIVE 1996 0 0 -- 1,000,000 0 0
OFFICER
Philippe P. Dauman........... 1997 1,100,000 2,750,000 -- 300,000 0 73,530
DEPUTY CHAIRMAN AND 1996 1,000,000 2,250,000 -- 400,000 0 81,332
EXECUTIVE VICE PRESIDENT, 1995 860,000 2,200,000 -- 0 0 46,723
GENERAL COUNSEL AND CHIEF
ADMINISTRATIVE OFFICER
Thomas E. Dooley............. 1997 1,100,000 2,750,000 -- 300,000 0 73,530
DEPUTY CHAIRMAN AND 1996 1,000,000 2,250,000 -- 400,000 33,380 80,993
EXECUTIVE VICE 1995 860,000 2,200,000 -- 0 64,000 36,526
PRESIDENT-FINANCE,
CORPORATE DEVELOPMENT AND
COMMUNICATIONS
William A. Roskin............ 1997 500,000 300,000 -- 60,000 0 18,750
SENIOR VICE PRESIDENT, 1996 450,000 275,000 -- 25,000 12,518 19,999
HUMAN RESOURCES AND 1995 362,500 350,000 -- 0 24,000 16,534
ADMINISTRATION
George S. Smith, Jr. ........ 1997 562,500 300,000 -- 80,000 0 21,558
SENIOR VICE PRESIDENT, 1996 516,538 300,000 -- 35,000 61,549 21,562
CHIEF FINANCIAL OFFICER 1995 492,500 350,000 -- 0 117,903 21,433
Mark M. Weinstein*........... 1997 695,833 525,000 -- 0 0 25,828
1996 645,577 375,000 -- 0 61,549 27,918
1995 595,769 450,000 -- 0 117,903 24,852
- ------------------------
* Mr. Weinstein served as Senior Vice President, Government Affairs until May
27, 1997; for the balance of 1997, he served as a consultant to the Company.
12
NOTES:
(1) Mr. Redstone has waived payment of salary and bonus compensation for his
services as Chief Executive Officer during 1997 and 1996. Salary and bonus
for the other named executives includes the following amounts of
compensation deferred under the Company's 40l(k) and Excess 401(k) Plans
and, in the case of Messrs. Dauman and Dooley for 1997, pursuant to their
employment agreements: for Mr. Dauman for 1997 in the amount of $219,500,
for 1996 in the amount of $160,454 and for 1995 in the amount of $118,500;
for Mr. Dooley for 1997 in the amount of $449,270, for 1996 in the amount of
$472,512 and for 1995 in the amount of $115,467; for Mr. Roskin for 1997 in
the amount of $111,935, for 1996 in the amount of $96,000 and for 1995 in
the amount of $68,365; for Mr. Smith for 1997 in the amount of $43,115, for
1996 in the amount of $43,125 and for 1995 in the amount of $44,606; and for
Mr. Weinstein for 1997 in the amount of $51,656, for 1996 in the amount of
$55,058 and for 1995 in the amount of $51,445.
(2) In accordance with the rules of the Securities and Exchange Commission,
amounts totaling less than $50,000 have been omitted.
(3) The 1997 grants for Messrs. Redstone, Dauman, Dooley, Roskin and Smith
represent their entire annual grant for calendar years 1997 and 1998. Mr.
Redstone received a grant in January 1997 which represented his annual grant
for 1996. Mr. Redstone received a special one-time grant of 1,000,000
options for Class B Common Stock on January 29, 1996, when he became Chief
Executive Officer of the Company. Messrs. Dauman and Dooley each received
two stock option grants in 1996: a special one-time grant of 250,000 options
for Class B Common Stock on January 29, 1996, when they were appointed
Deputy Chairmen, and an annual grant of 150,000 options for Class B Common
Stock as of August 1, 1996.
(4) The 1996 payout represents the amount paid in cash for the phantom units
granted to the named executives in 1989 (the "1989 Phantom Shares") under
the Company's 1989 LTMIP with a December 1996 valuation date; the 1995
payout represents the amount paid in cash for the 1989 Phantom Shares 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 1997, the Company maintained for Messrs. Dauman and Dooley
certain supplemental life insurance benefits. All Other Compensation
includes premiums paid by the Company for this supplemental coverage for
1997 for each of Messrs. Dauman and Dooley of approximately $11,280; the
Company's matching contributions under its 401(k) Plan for 1997 for each of
Messrs. Dauman and Dooley of $3,500, for Mr. Roskin of $1,913 and for each
of Messrs. Smith and Weinstein of $4,000; credits for the Company's matching
contributions under its Excess 401(k) Plan for 1997 for each of Messrs.
Dauman and Dooley of $56,250, for Mr. Roskin of $16,837, for Mr. Smith of
$17,558 and for Mr. Weinstein of $21,828; and credits for the Company's
matching contributions for compensation deferred pursuant to their
employment agreements for 1997 for each of Messrs. Dauman and Dooley of
$2,500.
13
OPTION GRANTS IN FISCAL 1997
The following table sets forth certain information with respect to executive
stock options to purchase shares of Class B Common Stock awarded during 1997 to
the Chief Executive Officer, the named executive officers and Mr. Weinstein. The
table includes a column designated "Grant Date Present Value". The calculation
in that column is based on the Black-Scholes option pricing model adapted for
use in valuing executive stock options. There is no way to anticipate what the
actual growth rate of the Class B Common Stock will be.
INDIVIDUAL GRANTS
----------------------------------------------------------------------
% OF TOTAL
NUMBER OF SHARES OF OPTIONS GRANTED EXERCISE GRANT DATE
CLASS B COMMON STOCK TO EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME UNDERLYING OPTIONS FISCAL 1997 ($/SHARE) DATE VALUE(3)
- ------------------------------------------ --------------------- ------------------- ------------- ----------- ------------
Sumner M. Redstone........................ 250,000(1) 2.72% $ 35.00 1/30/2007 $ 3,687,125
500,000(2) 5.44% $ 30.50 8/01/2007 6,557,150
Philippe P. Dauman........................ 300,000(2) 3.26% $ 30.50 8/01/2007 3,934,290
Thomas E. Dooley.......................... 300,000(2) 3.26% $ 30.50 8/01/2007 3,934,290
William A. Roskin......................... 60,000(2) 0.65% $ 30.50 8/01/2007 786,858
George S. Smith, Jr....................... 80,000(2) 0.87% $ 30.50 8/01/2007 1,049,144
Mark M. Weinstein......................... 0 0 -- -- --
- ------------------------
NOTES:
(1) This grant was awarded to Mr. Redstone on the same terms as the August 1,
1996 annual grant to the Company's executives and will vest in one-third
increments on August 1, 1998, August 1, 1999 and August 1, 2000.
(2) These grants were awarded to Messrs. Redstone, Dauman, Dooley, Roskin and
Smith on August 1, 1997 for calendar years 1997 and 1998 and will vest in
one-fourth increments on August 1, 1999, August 1, 2000, August 1, 2001 and
August 1, 2002.
(3) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised. There is no assurance that value realized by
an executive will be at or near the value estimated by the Black-Scholes
model. The grant date values presented in the table were determined in part
using the following assumptions. No adjustments were made for
non-transferability or risk of forfeiture.
JANUARY 30, 1997 AUGUST 1, 1997
----------------- ---------------
Expected volatility........................................................... 30.53% 31.78%
Risk-free rate of return...................................................... 6.55% 6.01%
Dividend yield................................................................ 0.00% 0.00%
Time of exercise.............................................................. 6 years 6 years
The approach used in developing the assumptions upon which the Black-Scholes
valuation was done is consistent with the requirements of the Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation".
14
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND VALUE OF OPTIONS AT END OF FISCAL 1997
The following table sets forth as to the Chief Executive Officer, the named
executive officers and Mr. Weinstein information with respect to option
exercises during 1997 and the status of their options on December 31, 1997.
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES(1) IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
OPTIONS AT END OF FISCAL END OF FISCAL
NUMBER OF SECURITIES 1997 1997
ACQUIRED VALUE --------------------------- -------------
NAME ON EXERCISE REALIZED EXERCISABLE NONEXERCISABLE EXERCISABLE
- ----------------------------------------------- -------------------- ------------- ----------- -------------- -------------
Sumner M. Redstone............................. 0 0 0 1,750,000 $ 0
Philippe P. Dauman............................. 0 0 220,000 800,000 668,750
Thomas E. Dooley............................... 0 0 211,000 800,000 1,732,000
William A. Roskin.............................. 0 0 68,500 103,000 562,281
George S. Smith, Jr............................ 0 0 151,500 145,000 1,554,094
Mark M. Weinstein.............................. 7,500 A Shares $ 410,531 120,000 0 688,125
34,500 B Shares
NAME NONEXERCISABLE
- ----------------------------------------------- --------------
Sumner M. Redstone............................. $ 8,515,625
Philippe P. Dauman............................. 5,275,000
Thomas E. Dooley............................... 5,275,000
William A. Roskin.............................. 937,563
George S. Smith, Jr............................ 1,300,938
Mark M. Weinstein.............................. 0
- ------------------------------
NOTES:
(1) Options listed below are for shares of Class B Common Stock except that
exercisable options include for Mr. Dooley 4,000 options each for a share of
Class A Common Stock and a share of Class B Common Stock, for Mr. Roskin
1,500 of such options and for Mr. Smith 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
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
$ 50,000........................................................ $ 10,927 $ 14,570 $ 18,212 $ 21,854
100,000........................................................ 24,052 32,070 40,087 48,104
200,000........................................................ 50,302 67,070 83,837 100,604
300,000........................................................ 76,552 102,070 127,587 153,104
400,000........................................................ 102,802 137,070 171,337 205,604
500,000........................................................ 129,052 172,070 215,087 258,104
600,000........................................................ 155,302 207,070 258,837 310,604
700,000........................................................ 181,552 242,070 302,587 363,104
800,000........................................................ 207,802 277,070 346,337 415,604
900,000........................................................ 234,052 312,070 390,087 468,104
1,000,000....................................................... 260,302 347,070 433,837 520,604
1,100,000....................................................... 286,552 382,070 477,587 573,104
1,200,000....................................................... 312,802 417,070 521,337 625,604
1,300,000....................................................... 339,052 452,070 565,087 678,104
1,400,000....................................................... 365,302 487,070 608,837 730,604
1,500,000....................................................... 391,552 522,070 652,587 783,104
15
Under the terms of the Company's Pension Plan and the Company's Excess
Pension Plan (collectively, the "Pension Plans") for certain higher compensated
employees, an eligible employee will receive a benefit at retirement that is
based upon the employee's number of years of benefit service and average annual
compensation (salary and bonus) for the highest 60 consecutive months out of the
final 120 months. Such compensation is limited to 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 used to determine 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 Pension Plans upon retirement in 1997 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.
Dooley, Roskin, Smith and Weinstein are approximately 16, 10, 21 and 12,
respectively. Mr. Dauman has been credited with five 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 14 years of credited service.
16
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, 1997. 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,
1992 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, 1997.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING PERFORMANCE
GRAPHS AND THE REPORT OF THE COMPENSATION COMMITTEE AND THE SENIOR EXECUTIVE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION SET FORTH ABOVE SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
17
EXHIBIT I
TOTAL CUMULATIVE STOCKHOLDER RETURN FOR
TEN-YEAR PERIOD ENDING DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A COMMON CLASS B COMMON S&P 500 PEER GROUP
Dec 31, 1987 100.00 100.00 100.00
Dec 31, 1988 171.72 116.5 122.19
Dec 31, 1989 317.24 153.3 171.72
6/18/90 302.78
Dec 31, 1990 286.41 273.61 148.52 176.19
Dec 31, 1991 373.7 379.17 193.58 299.26
Dec 31, 1992 480.08 465.28 208.31 340.49
Dec 31, 1993 533.27 498.61 229.21 319.69
Dec 31, 1994 454.17 452.78 232.32 287.87
Dec 31, 1995 504.63 526.39 319.31 329.47
Dec 31, 1996 376.32 387.37 394.41 353.47
Dec 31, 1997 445.86 460.27 526.15 553.85
* The Peer Group consists of the following companies: BHC Communications, Inc.;
The Walt Disney Company; Gaylord Entertainment Co.; King World Productions
Inc.; McGraw Hill Companies Inc.; The Limited Inc.; The News Corp. Ltd.
(ADRs); Time Warner Inc.; Tribune Company and Wal-Mart Stores Inc.
18
EXHIBIT II
TOTAL CUMULATIVE STOCKHOLDER RETURN FOR
FIVE-YEAR PERIOD ENDING DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CLASS A COMMON CLASS B COMMON S&P 500 PEER GROUP
Dec 31, 1992 100.00 100.00 100.00 100.00
Dec 31, 1993 111.08 107.16 110.03 93.89
Dec 31, 1994 94.6 97.31 111.53 84.55
Dec 31, 1995 105.11 113.13 153.29 96.76
Dec 31, 1996 78.41 83.28 188.39 103.81
Dec 31, 1997 92.9 98.96 251.5 161.91
* The Peer Group consists of the following companies: BHC Communications,
Inc.; The Walt Disney Company; Gaylord Entertainment Co.; King World
Productions Inc.; McGraw Hill Companies Inc.; The Limited Inc.; The News
Corp. Ltd. (ADRs); Time Warner Inc.; Tribune Company and Wal-Mart Stores
Inc.
19
EMPLOYMENT AGREEMENTS
Mr. Redstone, the Chairman of the Board and controlling stockholder of the
Company, assumed the responsibilities of Chief Executive Officer of the Company
in January 1996. He has waived salary and bonus compensation for his services as
Chief Executive Officer and he does not have an employment agreement with the
Company.
Mr. Dauman's employment 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. His agreement provides that he will also
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 110% of his salary and deferred compensation for the preceding calendar
year, less his salary. Mr. Dauman's target bonus for each calendar year during
the employment term is set at 250% of his salary and deferred compensation for
such year. Mr. Dauman's agreement provides that he will receive annual grants of
stock options to purchase 150,000 shares of Class B Common Stock that vest over
a four to five year period and have a ten-year term. The agreement states that
Mr. Dauman will be provided with $5,000,000 of life insurance during the
employment term. In the event of the termination of his employment without
"cause" or voluntary termination for "good reason" during the employment term,
Mr. Dauman will 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 (most of which will have vested upon
termination of employment) will remain exercisable for six months following the
date of termination (but not beyond the expiration date of such stock options).
Mr. Dooley's employment 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. His agreement provides that he will also 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 110% of
his salary and deferred compensation for the preceding calendar year, less his
salary. Mr. Dooley's target bonus for each calendar year during the employment
term is set at 250% of his salary and deferred compensation for such year. Mr.
Dooley's agreement provides that he will receive annual grants of stock options
to purchase 150,000 shares of Class B Common Stock that vest over a four to five
year period and have a ten-year term. The agreement states that Mr. Dooley will
be provided with $5,000,000 of life insurance during the employment term. In the
event of the termination of his employment without "cause" or voluntary
termination for "good reason" during the employment term, Mr. Dooley will 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 (most of which will have vested upon termination of
employment) will remain exercisable for six months following the date of
termination (but not beyond the expiration date of such stock options).
Mr. Roskin's employment agreement provides that he will be employed as
Senior Vice President, Human Resources and Administration of the Company until
December 31, 2000 at a salary of $500,000 for calendar year 1997, with $50,000
annual increases. Mr. Roskin's target bonus is set at 50% of his base salary. In
the event of the termination of Mr. Roskin's employment without "cause" or
voluntary termination for "good reason" during the employment term, he will be
entitled to receive salary and target bonus for the balance of the employment
term, subject to mitigation after the first twelve (12) months, and his stock
options (including options that would have vested during the employment term)
shall remain exercisable for six (6) months following the date of termination
(but not beyond the expiration of such stock options).
20
Mr. Smith's employment agreement provides that he will be employed as Senior
Vice President, Chief Financial Officer of the Company until March 31, 2001 at a
salary of $575,000 for the twelve (12) month period ended March 31, 1998, and
$625,000 for the succeeding twelve (12) month period, subject to annual
increases to be determined by mutual agreement. Mr. Smith's target bonus is set
at 50% of his base salary. In the event of the termination of Mr. Smith's
employment without "cause" or voluntary termination for "good reason" during the
employment term, he will be entitled to receive salary and target bonus for the
balance of the employment term, subject to mitigation after the first twelve
(12) months, and his stock options (including options that would have vested
during the employment term) shall remain exercisable for six (6) months
following the date of termination (but not beyond the expiration of such stock
options).
Mr. Weinstein's employment as Senior Vice President, Government Affairs
terminated on May 27, 1997, and he was retained as a consultant to the Company
through January 1998. The term of his employment agreement expired on December
31, 1997. The Company does not have any further obligations to Mr. Weinstein
under his agreement.
RELATED TRANSACTION
In November 1995, the Company entered into an agreement with Gabelli Asset
Management Company ("GAMCO") providing that GAMCO would manage certain assets in
the Company's pension plan. For the fiscal year ended December 31, 1997, the
Company paid GAMCO approximately $281,600 for such investment management
services. GAMCO is expected to continue to provide such investment management
services in the future. The Company entered into the arrangement with GAMCO
prior to GAMCO's disclosure of its interest in the Company. The Company believes
that the terms of the agreement with GAMCO are no less favorable to the Company
than it could have obtained from an unaffiliated party.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the AMEX. Executive
officers, directors and greater than 10% stockholders are required by the
Exchange Act to furnish the Company with copies of all Section 16(a) forms they
file. Based upon the Company's compliance program, as well as a review of the
copies of such forms furnished to the Company, or written representations that
no Form 5s were required, the Company believes that during 1997, its executive
officers, directors and greater than 10% beneficial owners complied with all
applicable Section 16(a) filing requirements.
21
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 1999.
In connection with the audit function for 1997, 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.
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 1999 Annual Meeting of Stockholders,
such proposals must be received at the principal executive offices of the
Company on or before December 18, 1998 and should be submitted to the attention
of Philippe P. Dauman, Secretary.
By Order of the Board of Directors,
[LOGO]
Philippe P. Dauman
SECRETARY
------------------------
THE COMPANY HAS SENT A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1997, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO,
TO EACH OF ITS STOCKHOLDERS OF RECORD ON APRIL 1, 1998 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.
22
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
Blockbuster Operations Center, 3000 Redbud Blvd., McKinney, Texas 75069 on
Thursday, May 28, 1998 at 11:00 a.m. (Central Daylight Time).
Only holders of shares of Viacom Inc. Class A Common Stock of record at the
close of business on April 1, 1998 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 _______________________, 1998
SIGNED_____________________________
___________________________________
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036
ANNUAL MEETING PROXY CARD
The undersigned hereby appoints SUMNER M. REDSTONE and PHILIPPE P.
DAUMAN, and each of them, as proxies, with full power of substitution, to
represent and to vote on behalf of the undersigned all of the shares of Class A
Common Stock of Viacom Inc. which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held at the Blockbuster Operations Center,
3000 Redbud Blvd., McKinney, Texas 75069 on Thursday, May 28, 1998 at 11:00 a.m.
(Central Daylight Time), and at any adjournments or postponements, thereof upon
the matters set forth on the reverse side as more fully described in the Notice
of 1998 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 SIDE
HEREOF AND IN THEIR DISCRETION ON ALL OTHER MATTERS. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR PROPOSALS (1) AND (2). UNLESS OTHERWISE SPECIFIED, THE
VOTE REPRESENTED BY THIS PROXY WILL BE CAST FOR PROPOSALS (1) AND (2).
(Continued, and to be signed and dated on the reverse side.)
VIACOM INC.
P.O. BOX 11033
NEW YORK, N.Y. 10203-0033
1.Election of Directors FOR all nominees /X/ WITHHOLD authority to vote /X/ *EXCEPTIONS" /X/
listed below for all nominees listed below
NOMINEES: George S. Abrams, Philippe P. Dauman, Thomas E. Dooley, Ken Miller,
Brent D. Redstone, Shari Redstone, Sumner M. Redstone, Frederic V. Salerno,
William Schwartz, Ivan Seidenberg
(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.)
*Exceptions ___________________________________________________________________
2. Appointment of Price Waterhouse LLP to serve as independent accountants
for Viacom Inc. until the 1999 Annual Meeting of Stockholders.
FOR /X/ AGAINST /X/ ABSTAIN /X/ If you plan to attend the Annual Meeting,
please check this box and an admission
ticket will be sent to you. /X/
Change of Address and/or
Comments Mark Here /X/
Please sign exactly as your name(s) appear hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: _________________________ ,1998
SIGNED ________________________________
VOTES MUST BE INDICATED (X)
IN BLACK OR BLUE INK. /X/
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.)
