UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 8, 2005
VIACOM INC.
(Exact name of registrant as specified in its charter)
Delaware 001-09553 04-2949533
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
1515 Broadway, New York, NY 10036
(Address of principal executive offices) (Zip Code)
(212) 258-6000
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
Acceleration of Vesting of Stock Option Awards
On March 8, 2005, the Compensation Committee (the "Committee") of
the Board of Directors of Viacom Inc. (the "Company") approved the acceleration
of the vesting of unvested stock options having an exercise price of $38 or
greater (other than options under the Company's "Fund the Future" program)
granted under the Company's 2000 Long-Term Management Incentive Plan, as amended
and restated (the "2000 LTMIP"), that are held by current employees, including
all executive officers. Also accelerated were a small number of unvested stock
options having an exercise price of $38 or greater granted under the Company's
1997 Long-Term Management Incentive Plan, as amended and restated (the "1997
LTMIP"). Stock option awards granted from 1999 through 2004 with respect to
approximately 29 million shares of the Company's Class B Common Stock ("Class B
Shares"), including options with respect to approximately 5 million Class B
Shares that are held by the executive officers, are subject to this acceleration
which is effective as of March 8, 2005. The Committee also imposed a holding
period that will require all executive officers to refrain from selling Class B
Shares acquired upon the exercise of these options (other than shares needed to
cover the exercise price and satisfying withholding taxes) until the date on
which the exercise would have been permitted under the option's original vesting
terms or, if earlier, the executive officer's last day of employment.
Because these options had exercise prices in excess of the current
market value of the Class B Shares based on the closing price of $34.74 per
share on March 8, 2005 (they were "underwater"), and were not fully achieving
their original objectives of incentive compensation and employee retention, the
Company expects the acceleration to have a positive effect on employee morale,
retention and perception of option value. The acceleration also eliminates
future compensation expense the Company would otherwise recognize in its
consolidated statement of operations with respect to these options once the
Statement of Financial Accounting Standards No. 123 (revised 2004) "Share-Based
Payment", issued by the Financial Accounting Standards Board, becomes effective
for reporting periods beginning after June 15, 2005. The future expense that is
eliminated as a result of the acceleration of the vesting of these options is
approximately $400 million, or $242 million net of tax (of which approximately
$58 million, or $35 million net of tax, is attributable to options held by
executive officers). This expense will be reflected in pro forma footnote
disclosure to the first quarter 2005 financial statements.
The form of agreement for stock options granted for the years 1999
through 2000 under the 1997 LTMIP and the form of certificate and terms and
conditions of stock options granted for the years 2001 through 2004 under the
2000 LTMIP, including, in each case, options awarded to the Company's executive
officers, and the form of notice to executive officers regarding the
acceleration of vesting are attached hereto as exhibits and their terms are
incorporated herein by reference. Copies of the 1997 LTMIP and 2000 LTMIP have
been filed with the Securites and Exchange Commission as Exhibit B to the
Company's Proxy Statement dated June 5, 2000 and Exhibit 10(d) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001,
respectively, in each case as amended by the Amendment to Viacom Stock Option
Plans filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002.
Compensation Committee Determination Concerning Awards under the Senior
Executive Short-Term Incentive Plan
As previously disclosed in the Company's report on Form 8-K dated
February 1, 2005, the Committee has established performance criteria and target
awards for participants in the Company's Senior Executive Short-Term Incentive
Plan, as amended and restated (the "Senior Executive STIP"), for the 2005 fiscal
year. The performance criteria relates to the achievement over a one-year
performance period ending December 31, 2005 of a specified level of the
Company's operating income (determined in accordance with generally accepted
accounting principles in the United States) before depreciation, amortization
and intercompany eliminations, as set forth in the Senior Executive STIP.
Pursuant to Section 2.4 of the Senior Executive STIP, if the Committee certifies
that the performance goals for fiscal 2005 have been achieved, the Committee may
reduce the amount of any award in its sole discretion to reflect the Committee's
assessment of a participant's individual performance or for any other reason.
On March 8, 2005, the Committee determined that, in exercising its
discretion to reduce the amount of any award (assuming the performance goals for
2005 are achieved), the actual award paid would be based principally on the
financial performance of the Company weighted (i) 75% on the achievement of
specified levels of operating income (determined in accordance with generally
accepted accounting principles in the United States) before depreciation,
amortization and intercompany eliminations and (ii) 25% on free cash flow, in
each case including any adjustments deemed necessary pursuant to Article III of
the Senior Executive STIP. The Committee also determined that it would consider
other factors in utilizing this discretion, including, but not limited to,
certain strategic non-financial goals such as diversity in the workplace, legal
compliance and ethical behavior and may also consider the nature of unusual
expenses or contributors to financial results. A copy of the Senior Executive
STIP has been filed with the Securities and Exchange Commission as Exhibit C to
the Company's Proxy Statement dated April 21, 2003.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Number Description of Exhibit
-------------- ----------------------
10.1 Form of Agreement for Stock Options granted under the
1997 LTMIP
10.2 Form of Certificate and Terms and Conditions for
Stock Options granted under the 2000 LTMIP
10.3 Form of Notice to Executive Officers regarding
Acceleration of Vesting of "Underwater" Options
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VIACOM INC.
(Registrant)
By: /s/ MICHAEL D. FRICKLAS
------------------------------------------
Michael D. Fricklas
Executive Vice President, General Counsel
and Secretary
Date: March 14, 2005
Exhibit Index
Exhibit Number Description of Exhibit
-------------- ----------------------
10.1 Form of Agreement for Stock Options granted under the
1997 LTMIP
10.2 Form of Certificate and Terms and Conditions for
Stock Options granted under the 2000 LTMIP
10.3 Form of Notice to Executive Officers regarding
Acceleration of Vesting of "Underwater" Options