-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Heb1yjmxPvnQk6EzEFuw7Q4dJ142+r5cegLIb8CzPt0mtRv+FkuDQgTzan8lTuqC iM2MjnadF7nt8IISEA8XzA== 0000904454-97-000108.txt : 19971125 0000904454-97-000108.hdr.sgml : 19971125 ACCESSION NUMBER: 0000904454-97-000108 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971124 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KING WORLD PRODUCTIONS INC CENTRAL INDEX KEY: 0000756764 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE DISTRIBUTION [7822] IRS NUMBER: 132565808 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09244 FILM NUMBER: 97727355 BUSINESS ADDRESS: STREET 1: 1700 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2123154000 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended August 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI- TIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For transition period from to Commission file number: 1-9244 KING WORLD PRODUCTIONS, INC. ______________________________________________________ (Exact name of registrant as specified in its charter) Delaware 13-2565808 _______________________________ _____________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12400 Wilshire Boulevard Suite 1200 Los Angeles, California 90025 ________________________ ____________ (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: 310-826-1108 ____________ Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ___________________ _______________________ Common Stock, New York Stock Exchange $.01 par value Securities registered pursuant to Section 12(g) of the Act: None ________________ (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of the Common Stock of the registrant held by non-affiliates as of November 7, 1997 was approximately $ 1.5 billion. As of November 7, 1997, there were 36,661,178 outstanding shares of the registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE The registrant's definitive proxy statement for its 1998 annual meeting of stockholders (which is to be filed pursuant to Regulation 14A not later than December 29, 1997) is incorporated by reference into Part III of this Form 10-K. PART I ______ Item 1. BUSINESS ________ GENERAL King World was founded in 1964 by the late Charles and Lucille King to distribute or syndicate feature length films and television programs to television stations. King World currently distributes program- ming to approximately 400 television stations in over 200 of the 211 designated television markets in the United States (as defined by A.C. Nielsen Co. ("Nielsen")) and in Canada and a number of other foreign countries directly and through sales agents and subdistributors. Three of Mr. and Mrs. King's children, namely Roger King, King World's Chairman of the Board, Michael King, King World's Vice Chairman and Chief Executive Officer, and Diana King, a Vice President and the Secretary of King World, are directors of the Company and are actively involved in its management. In addition, one other child of King World's founders, Richard King, serves as a director of the Company and another, Robert King, is Senior Vice President for Strategic Planning/Acquisitions. King World Productions, Inc., a Delaware corporation, was incorporated in October 1984 and is the successor to a corporation incorpo- rated in 1964 under the laws of the State of New Jersey. King World's corporate headquarters are located at 12400 Wilshire Boulevard, Suite 1200, Los Angeles, California 90025. Except as otherwise indicated or as implied by the context, references to "King World" or the "Company" include King World Productions, Inc., its consolidated subsidiaries and its predecessor corporation. The Company operates in only one business segment: production and distribution of television programming in the United States, Canada and a number of other foreign countries, and related operations. This Report contains certain forward-looking statements covering the Company's objectives, planned or expected activities and anticipated financial performance. These forward-looking statements may generally be identified by words such as "expects", "anticipates", "believes", "plans", "should", "will", "may", "projects" (or variants of these words or phras- es), or similar language indicating the expression of an opinion or view concerning the future with respect to the Company's financial position, results of operations, prospects or business. The Company's actual results may differ significantly from the results described in or suggested by such forward-looking statements. PROGRAMMING AND RELATED OPERATIONS First-run Television Syndication ________________________________ In general terms, television syndication is a process by which a company, such as King World, sells programming on a market-by-market basis to television stations (whether network affiliates or independents); "first-run" refers to programming that airs initially in syndication (in contrast to "off network programming, which airs initially on a network); and "strip" refers to programming that airs Monday through Friday at the same time of day. King World's revenues currently are derived primarily from the first-run strip syndication of the television series THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE, JEOPARDY! and INSIDE EDITION. These series are four of the top ten series in national syndication, as reported in the July 1997 Nielsen Designated Market Area Ranking Report. WHEEL OF FORTUNE and JEOPARDY! had the two highest ratings among all syndicated television shows and THE OPRAH WINFREY SHOW had the highest ratings among all national television talk shows. According to Nielsen, WHEEL OF FORTUNE has had the highest ratings among shows in national syndication for the last 55 consecutive sweeps periods, JEOPARDY! has had the second highest ratings among such shows for each of the last 48 consecutive sweeps periods and THE OPRAH WINFREY SHOW has had the third highest ratings among such shows for 36 of the last 43 sweeps periods. Based primarily on the success of THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE and JEOPARDY!, King World's revenues have grown from $80.6 million in fiscal 1985 to $671 million in fiscal 1997 and its net income has increased from $9.8 million in fiscal 1985 to $143 million in fiscal 1997. Revenues derived from THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE, JEOPARDY! and INSIDE EDITION (including revenues derived from the sale of retained advertising time) accounted for approximately 85% of King World's revenues for the fiscal year ended August 31, 1997. The United States market for television programming is currently comprised principally of four components: (i) the major broadcast televi- sion networks (ABC, CBS, NBC, FOX and two emerging networks, UPN and WB) in conjunction with their respective affiliated stations; (ii) independent broadcast television stations (that is, stations that are not affiliated with such networks); (iii) basic cable services (such as USA Networks, The Discovery Channel, MTV and Nickelodeon); and (iv) pay cable services (such as HBO and Showtime). This market currently is dominated by the broadcast networks, each of which has affiliations with television stations that enable such network to reach virtually all of the significant television markets in the United States. The most successful cable networks reach more than [60%] of all U.S. television households, and cable television networks as a whole have been achieving increasing ratings in recent years. Recently developed digital compression technology, combined with fiber optics or small-sized satellite dishes, may in coming years permit cable companies or direct broadcast satellite systems (which carry, among other programming, many cable television networks) to expand the domestic television market to hundreds of channels. During hours commonly referred to as "prime-time" (currently, with limited exceptions, 8 p.m. to 11 p.m. in the Eastern and Pacific time zones and 7 p.m. to 10 p.m. in the Central and Mountain time zones), stations owned and operated by the four major broadcast networks, and stations affiliated with those networks, broadcast schedules consisting primarily of programming produced for initial exhibition by the networks. In non-prime time, such stations broadcast network programming, off-network programming (reruns), programming produced by the local stations themselves or by independent producers and first-run syndicated programming (program- ming produced for initial distribution on a syndicated basis). Independent television stations, during both prime and non-prime time, broadcast their own programming, off-network programming and first-run syndicated program- ming; some of such stations are affiliated with the WB or the UPN, each of which currently supplies its respective affiliates with prime-time program- ming three evenings per week and with several hours per week of non-prime- time programming. Some cable operators, in addition to other services that they offer, telecast syndicated programming. At present, King World distributes television programming primarily to network-owned-and-operated stations and network-affiliated stations. First-run syndicated programming distributed by the Company competes for available time periods primarily with other first-run syndi- cated programming, network reruns and programming produced by local television stations. Nielsen divides the United States into 211 designated market areas and approximately 30 additional special market areas that, on the basis of size and the other Nielsen criteria, do not qualify as designated market areas. The 241 Nielsen designated and special market areas are referred to below as the "Nielsen market areas". In the 1983-1984 broadcast season, King World introduced a syndicated version of WHEEL OF FORTUNE, which had premiered on daytime network television in 1975. For the 1996-1997 broadcast season, WHEEL OF FORTUNE was licensed to television stations in 201 Nielsen market areas in the United States, covering approximately 99% of total domestic television households, and for the current broadcast season has been licensed to television stations in 204 Nielsen market areas, also covering approximate- ly 99% of total domestic television households. For the 1984-1985 broadcast season, the Company introduced JEOPARDY!, a remake of the successful game show originally broadcast on network television between 1964 and 1975. For the 1996-1997 broadcast season, JEOPARDY! was licensed to television stations in 195 Nielsen market areas in the United States, covering approximately 99% of total domestic television households, and for the current broadcast season has been licensed to television stations in 197 Nielsen market areas, also covering approximately 99% of total domestic television households. For the 1986-1987 broadcast season, King World introduced into national television syndication THE OPRAH WINFREY SHOW, a talk show hosted by Oprah Winfrey which, until October 1988, was produced by WLS-TV, an ABC owned-and-operated station. Commencing in October 1988, Harpo, Inc. ("Harpo"), an entity controlled by Ms. Winfrey, assumed production of the series. For both the 1996-1997 broadcast season and the current broadcast season, THE OPRAH WINFREY SHOW was licensed to television stations in 206 Nielsen market areas in the United States, covering more than 99% of total domestic television households, and for the current broadcast season has been licensed to television stations in 208 Nielsen market areas, also covering more than 99% of total domestic television households. INSIDE EDITION, a half-hour first-run syndicated newsmagazine series hosted by Deborah Norville that is produced and distributed by King World, premiered in January 1989. It is the first television series produced by King World. INSIDE EDITION is produced at the Company's production facility in New York and has a correspondent bureau in Los Angeles to enhance the ability of the program to provide nationwide coverage. For the 1996-1997 broadcast season, INSIDE EDITION was licensed to television stations in 155 Nielsen market areas, covering approximately 90% of total domestic television households, and for the current broadcast season, the series has been licensed to television stations in 147 Nielsen market areas, also covering approximately 90% of total domestic television households. AMERICAN JOURNAL, a half-hour first-run syndicated newsmagazine series that is also produced by King World in New York, premiered in September 1993. AMERICAN JOURNAL is anchored by Michele Dabney-Perez, a former correspondent on the show, and her brother Charles Perez. For the 1996-1997 broadcast season, AMERICAN JOURNAL was licensed to television stations in 122 Nielsen market areas, covering approximately 87% of total domestic television households, and for the current broadcast season, the series has been licensed to television stations in 102 Nielsen market areas, covering approximately 81% of total domestic television households. ROLONDA, a daytime talk show that was also produced by King World in New York, premiered in January 1994. It was hosted by Rolonda Watts, a popular broadcast journalist. For the 1996-1997 broadcast season, ROLONDA was licensed to television stations in 98 Nielsen market areas, covering approximately 76% of total domestic television households. The distribution of ROLONDA ceased at the end of that season. Each of THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE, JEOPARDY!, INSIDE EDITION, and AMERICAN JOURNAL has been licensed to television sta- tions for exhibition in the current and in future broadcast seasons, and THE ROSEANNE SHOW and HOLLYWOOD SQUARES have been licensed for exhibition in future seasons. The licenses for future seasons commence with the 1998- 1999 broadcast season and extend, in certain cases, as far into the future as the 2001-2002 broadcast season. Revenues and related expenses under such license agreements will not be recognized until the license periods thereunder have begun and certain other conditions are satisfied. As of October 21, 1997, the gross amount of license fees under such agreements approximated $1.8 billion, of which approximately $1 billion is payable to producers and others and is to be recognized as an expense. The recogni- tion of such amounts in the consolidated financial statements of the Company in fiscal years subsequent to August 31, 1997 is subject to several conditions, including the Company's continued distribution of such program- ming. Such amounts do not include sales of advertising time retained during the broadcast of such programming or foreign license fees and do not reflect the production costs to be incurred for programming produced by King World. There can be no assurance that any of these programs will be licensed for additional years through renewal of existing licenses or issuance of new licenses or, if so licensed, that the terms of the license agreements will be as favorable to King World as those of the existing licenses. There can be no assurance that the key personalities on such programs, such as Oprah Winfrey, Pat Sajak, Vanna White and Alex Trebek, will continue to participate in the production of their respective pro- grams. If for any reason they do not do so, there could be a material adverse effect on the Company's business. Acquisition and Development of Properties for Distribution __________________________________________________________ King World's business is dependent on obtaining new television programs and series for distribution. King World may acquire properties for domestic, foreign or worldwide television distribution by entering into distribution agreements with independent producers, by producing its own programs, by co-producing programs in association with others, or by purchasing distribution rights. The terms under which the Company obtains the right to distribute programming from independent producers vary in each instance. The Company distributes THE OPRAH WINFREY SHOW pursuant to an agreement with Harpo, the producer of the series. Under the terms of the agreement currently in effect, the Company has been granted the exclusive right, and has agreed, to distribute episodes of THE OPRAH WINFREY SHOW produced through the 1999- 2000 broadcast season, subject to Harpo's and Ms. Winfrey's right to decline to produce and host the series in any season after the 1995-1996 season. In October 1995, Harpo and Ms. Winfrey committed to produce and host the series through the 1997-1998 season, and in September 1997 Harpo and Ms. Winfrey committed to continue to produce and host the series through the 1999-2000 season. The Company's agreement with Harpo establishes, among other things, the production fees payable to Harpo through the 1996-1997 broad- cast season and commits the Company to guarantee payments to Harpo at levels which, commencing with the 1995-1996 season, are substantially higher than those previously in effect. In addition, at the conclusion of the 1996-1997 season, the profit-sharing arrangements between Harpo and the Company terminated; commencing with the 1997-1998 season through the termination of the agreement (at the conclusion of the 1999-2000 season), the Company will instead receive distribution fees based on a percentage of gross revenues derived from the series. As a result of these changes, the contribution of THE OPRAH WINFREY SHOW to the Company's net profits and cash flow can be expected to decline. After the 1999-2000 season, Harpo will not be obligated to distribute the series through the Company, if it elects to produce the series at all, and Ms. Winfrey will no longer be subject to any contractual restrictions with the Company on her ability to appear in television shows with the same or similar format as THE OPRAH WINFREY SHOW. See Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources". The Company's agreements with Columbia TriStar Television, the producer of WHEEL OF FORTUNE and JEOPARDY!, provide that King World will be the exclusive distributor for each such series so long as the Company has obtained sufficient broadcast commitments to cover the production and distribution costs of that series and that the Company may not, unless otherwise agreed by Columbia TriStar Television, distribute other game shows for first-run strip syndication so long as the Company is distribut- ing WHEEL OF FORTUNE or JEOPARDY!. In acquiring new programming, King World has attempted, based on research concerning television programs currently being broadcast, to identify programs and series that King World believes will have broad-based audience appeal and satisfy the programming needs of television stations for particular time periods. Historically, the Company had relied on independent producers for new programming. In recent years, however, in order to satisfy what King World believes to be audience demands and station programming needs, the Company has, for the most part, been developing and producing original programming on its own or in cooperation with others. For several years, the Company has been, and is now, in the process of developing new television shows for syndication that it hopes will gain widespread audience appeal and generate significant revenues and income for the Company. The Company has entered into an agreement with Full Moon & High Tide Productions, Inc., a company controlled by Roseanne, to co-produce THE ROSEANNE SHOW, an hour-long, strip talk show hosted by Roseanne and distributed by the Company in first-run syndication. The series is scheduled to premiere in the Fall of 1998. Under the terms of the agreement, the Company will have the exclusive right to distribute the show through the 2003-2004 television season. As of November 12, 1997, the series had been licensed for the 1998-1999 and 1999-2000 seasons to televisions stations covering approximately 80% of total domestic televi- sion viewing households. In addition, the Company has agreed with Columbia TriStar Televi- sion to co-produce a new strip version of HOLLYWOOD SQUARES for distribu- tion by the Company in first-run syndication. This series is also sched- uled to premiere in the Fall of 1998. As of November 12, 1997, the series had been licensed for the 1998-1999, 1999-2000 and 2000-2001 seasons to televisions stations covering approximately 60% of the total domestic television viewing households. The introduction of new television programs requires substantial capital investment to fund programming development costs, the production of pilot programs and the production, distribution and promotion of the initial episodes of programming for syndication. The Company has funded and intends to continue to fund such capital investments out of its internal cash resources. License and Distribution Fees _____________________________ For certain first-run syndicated programs produced by independent companies for distribution by King World, the Company earns distribution fees that are based on a percentage of the license fees paid by television stations for the right to broadcast the program and the amounts paid by national advertisers for advertising time retained by the Company and sold in connection with such program. The Company also recoups some or all of the distribution expenses that it incurs in connection with the distribu- tion of these series, which consist principally of advertising, promotion, satellite and tape costs and related expenses. Amounts remaining in excess of King World's distribution fees and recouped expenses are remitted to the producers of such series. In other cases, the Company's fees for distributing first-run syndicated programming produced by independent companies are based upon a negotiated percentage of the profits derived from the exploitation of the programming after recoupment of the production, advertising, promotion and other distribution fees and expenses of the programming. In such cases, the Company generally finances all or a substantial portion of the production costs and may commit itself to advancing the producer and/or talent fixed minimum amounts as advances against their participation fees, irrespective of the amount of license fees and other revenues that may actually be generated by the programming. In acquiring distribution rights for new programming from independent producers, King World has generally tried to limit its risk by not making major commitments to independent producers until it has obtained commit- ments from a substantial number of television station licensees. In recent years, the new shows introduced by the Company in first-run syndication have been developed and produced by the Company itself. In such cases, the Company hires a production team, leases production facilities, engages talent, assumes all of the costs and expenses of developing, producing, advertising, promoting and distributing the programming and, after any required payments to the production team and talent, retains the net profits derived from the exploitation of the programming. License fees payable by stations for the rights to broadcast television programs are payable in the form of cash, retained advertising time or both. A television station that enters into a license agreement for a particular program becomes obligated to pay the contracted license fee (which will often depend on the time period in which the program is aired by that station) and provide advertising time, if applicable, upon the delivery by the Company of the program in question. By licensing a program to television stations throughout the United States, the Company creates, in effect, an "ad hoc" network of stations that have agreed to carry the program. The creation of this ad hoc network, typically repre- senting a penetration of at least 70% of total U.S. television households, enables the Company to sell the resulting commercial inventory to sponsors desiring national coverage. (See "Sale of Advertising Time".) In the 1997 fiscal year, approximately 13% of the Company's revenues were derived from license fees under contracts with television stations owned by ABC, Inc. No other television station, broadcast group or advertiser accounted for ten percent or more of the Company's revenues in such fiscal year. Marketing _________ Sales to domestic television stations are made by the Company through a sales force that numbered eleven persons as of November 7, 1997. The Company's marketing strategy concentrates on a select number of programs that the Company considers to have good prospects for high audience ratings and expects will meet television stations' programming needs for specific time periods. Although the Company has been dependent upon the active partici- pation of members of the King family since its formation in 1964, the Company believes that it has significantly lessened its reliance on certain key executive officers by adding experienced executive, programming and marketing personnel. Nevertheless, the loss of key personnel might have an adverse effect on the Company's operations. Sale of Advertising Time ________________________ Camelot Entertainment Sales, Inc. ("Camelot"), a wholly-owned subsidiary of King World, sells advertising time within television pro- grams. As of November 7, 1997, Camelot employed seven salespersons. The value of advertising on any particular program varies significantly depending on the audience ratings and demographics for such program and conditions in the market for television advertising time in general. In order for advertising time on a particular syndicated televi- sion program to be valuable to national advertisers, the program must, as a general rule, be broadcast in television markets covering at least 70% of the total domestic television households. For the 1997-1998 broadcast season, THE OPRAH WINFREY SHOW has been licensed to stations covering more than 99% of the total domestic television households; WHEEL OF FORTUNE and JEOPARDY! have each been licensed to stations covering approximately 99% of the total domestic television households; INSIDE EDITION has been licensed to stations covering approximately 90% of the total domestic television households; and AMERICAN JOURNAL has been licensed to stations covering approximately 80% of the total domestic television households. Fees for advertising time are established on the basis of household audience ratings or, more frequently, on the basis of the delivery of a certain demographic category of the viewing audience. The desired household rating or demographic delivery, as the case may be, is negotiated in advance with the advertiser or its agency. If the television program does not deliver at least the agreed-upon audience coverage, Camelot is obligated either to make available, at no additional cost, additional advertising time within the same program or other programs that are expected to deliver at least the agreed-upon audience coverage, or to refund that portion of the advertising fee attributable to the underdelivery. Generally, a portion of the Company's contracts for the sale of its advertising time may be canceled by the advertiser upon 90 days' notice. Each television station is obligated to broadcast advertising time retained by King World even if the program or episode on which the time was retained is preempted by the station. Historically, Camelot has sold advertising time primarily on television programs distributed by King World. However, a portion of Camelot's revenues has in recent years been attributable to commissions earned on sales of advertising time on television programs distributed by companies other than King World. Camelot has agreements currently in effect with, among others, Western International Syndication and Allied Communications Incorporated to sell advertising time in IT'S SHOWTIME AT THE APOLLO, a variety program, and the "Film Leader" package of films, respectively. Foreign Sales _____________ The number of outlets for television programming outside the United States has been increasing with the worldwide proliferation of broadcast, cable and satellite delivery systems. In recent years, a number of European governments have privatized television systems. The Company believes that privatized systems are more likely to broadcast U.S. program- ming than government-owned networks. In addition, both the number of pay and satellite television systems in Europe and the number of subscribers to these systems have increased. Pay television and satellite distribution systems are also developing in other geographic areas, including many Asian and South American markets. In some international markets, suppliers of programming may, however, be subject to local content and quota require- ments that prohibit or limit the amount of U.S. programming that may be acquired. The Company licenses episodes of WHEEL OF FORTUNE, JEOPARDY!, THE OPRAH WINFREY SHOW and INSIDE EDITION in Canada and certain other English- speaking foreign territories. The Company also licenses the production of foreign versions of WHEEL OF FORTUNE and JEOPARDY! in a number of other major foreign territories. Under licenses from King World, Unilever, N.V. licenses the production of local versions of WHEEL OF FORTUNE and JEOPARDY! for broadcast in a number of Western European markets. In addition, the Company has recently become more active in acquiring rights for the distribution of television programming solely outside the United States. Revenues from foreign sales (including Canada) accounted for approximately 7% of King World's revenues in fiscal 1997. Merchandising and Film Library ______________________________ The Company has granted licenses to others to produce WHEEL OF FORTUNE and JEOPARDY! boxed board games and to exploit certain of its merchandising rights in THE LITTLE RASCALS. King World also distributes its own library of over 60 feature length films and over 200 television programs, including 14 Sherlock Holmes, 13 The East Side Kids, 9 Mr. Moto and 11 Charlie Chan feature length films and episodes from THE LITTLE RASCALS, TOPPER, BRANDED and THE GUNS OF WILL SONNETT television series. In acquiring feature length films and televi- sion programs for its own library, the Company has attempted to emphasize classic programming -- films and television series with broad and enduring audience appeal. King World holds long-term television and related distribution rights to the properties in its library. The Company is not generally required to make any material royalty or similar payments with respect to the properties in its library. Revenues from merchandising and the film library accounted for less than 1% of the Company's revenues in fiscal 1997. Direct Response Marketing _________________________ The Company operates King World Direct Inc., a direct response marketing subsidiary. King World Direct handles key aspects of direct response marketing campaigns, including production, order fulfillment and media placement. King World Direct has developed direct response telemarketing campaigns for, among others, the WILD AMERICA video series and Sears Craftsman Robogrip pliers. Revenue from direct response marketing activi- ties accounted for approximately 4% of the Company's revenues in fiscal 1997. Competition ___________ The production and distribution of television programming and the sale of associated advertising time is a highly competitive business. King World competes with many companies that have resources substantially greater than those of King World. The most important competitive factors in television program distribution are marketing, quality and variety of programming and research and promotional services. King World's success is highly dependent upon those factors as well as the continuing availability of writers, performers and other creative talent and the viewing preferences of television audiences. King World has attempted to concentrate on the distribution of programs that it believes will have broad or enduring audience appeal in order to reduce its exposure to changes in viewer preferences. King World has also developed an experienced television syndication sales organization as well as strong programming acquisition, research and advertising and promotion departments. See "Marketing" above. Regulation of the Television Industry _____________________________________ Prime-Time Access Rule/Financial Interest and Syndication Rule ______________________________________________________________ Until August 1996, a rule promulgated by the Federal Communica- tions Commission ("FCC") in the 1970's and known as the "prime-time access rule" prohibited (subject to certain significant exceptions) network-owned and network-affiliated television stations in the 50 largest television markets from broadcasting more than a total of three hours per day of programming supplied by or previously aired on a network during the prime- time period (defined under the rule as 7-11 p.m. Eastern and Pacific time and 6-10 p.m. Central and Mountain time). Due to the rule, network-owned and network-affiliated stations often acquired either one hour or one-half hour of program material for exhibition during the prime-time access period from independent television producers and syndicators such as the Company. In July 1995, following proceedings looking toward reconsidera- tion or modification of the prime-time access rule, the FCC issued a decision concluding that the rule no longer served the public interest because the networks no longer had market power sufficient to foreclose access by independent producers and syndicators of first-run programming to the prime-time access period. In order to permit an orderly transition, the FCC held that programming supplied by or previously aired on a network may not be aired during the prime-time access period for 12 months from the August 1995 effective date of its decision, but during such period stations subject to the rule were permitted to enter into contracts providing for the airing of such programming in the access period after August 1996. Pursuant to consent decrees entered into in the mid to late 1970's between the three largest television networks (the ABC Television Network, the CBS Television Network and the NBC Television Network) and the United States Department of Justice (the "Consent Decrees"), such networks were, until mid-November 1993 (when the Decrees were lifted), prohibited from domestically syndicating television programs and from acquiring financial interests in such programs or in network programming (other than the right to network exhibitions) produced by independent production companies. In the mid 1970's, the FCC implemented rules (the "Rules") that substantially paralleled the prohibitions of the Consent Decrees. The Rules enhanced the Company's ability to license its programs to stations owned and operated by the major television networks (licensees that are, in most instances, very important to the success of a series distributed through first-run syndication). In May 1991, the FCC issued a decision (the "1991 Decision") to modify, but not to repeal, the Rules. The modified Rules substantially relaxed the restrictions upon the ability of a network to acquire financial interests in, and to syndicate, television programs previously aired by that network (a sector of programming in which King World has not to date had substantial involvement). However, the 1991 Decision retained strin- gent limitations on network involvement in first-run syndication activi- ties, which remained in place after the FCC further relaxed the Rules in 1993. In August 1995, upon further review of the remaining Rules, the FCC held that the Rules, including the restrictions on network entry into first-run syndication activities, were no longer necessary. Under the resulting FCC order, the Rules expired in August 1995. As a result of the repeal of the prime-time access rule and the elimination of the remaining restrictions of the financial interest and syndication rules, the Company may have more difficulty licensing its programming to stations owned and operated by the three major television networks and anticipates that, even if the Company is able to so license its programming, the profitability of such programming to the Company may, as a result of terms imposed by such stations, be likely to be reduced. Legislation and Other FCC Rules and Proposals Affecting the Television Industry ___________________________________________________________ The Telecommunications Act of 1996 (the "1996 Act"), signed in February 1996, among other things, requires the FCC to relax its regulation (the "Multiple Ownership Rules") limiting the aggregate number of televi- sion stations that may be under common ownership. Prior to passage of the 1996 Act, the Multiple Ownership Rules permitted common ownership of, in most circumstances, up to twelve television stations, subject (in the case of station groups) to certain limitations based upon audience reach. As required by the 1996 Act, the FCC (in March 1996) eliminated the numerical limitation on common ownership and relaxed the audience reach limitation. The 1996 Act also requires the FCC to re-examine provisions of the Multiple Ownership Rules which prohibit the common ownership of stations serving the same market. In proceedings now pending before it, the FCC is considering relaxing the existing restrictions on common ownership of television stations serving the same market and permitting, subject to certain restrictions, joint venture (including joint program- ming) arrangements between independently owned stations in circumstances where common ownership would otherwise be prohibited. King World is unable to predict the outcome of these proceedings. King World believes that increases in the concentration of television station ownership by broadcast groups will tend to increase the relative power of the broadcast groups in the market for television programming and, consequently, could adversely affect King World's bargaining position vis-a-vis its principal customers. The 1996 Act requires that (not later than 1998) all television sets manufactured or imported into the United States be equipped with a device (the "V-chip") which will enable viewers to block display of certain programs based upon content. The 1996 Act afforded the program production and distribution industries a period of twelve months (until February 1997) within which to establish voluntary rules for identifying and rating video programming that contains sexual, violent or other indecent material and to agree to voluntarily transmit such ratings in a format capable of being read by the V-chip technology. If a voluntary code was not established (or if such a code was not acceptable to the FCC) within that time frame, then the FCC was to be required, in consultation with an advisory committee, to establish and enforce a rating code. In January 1997, the industry submitted to the FCC its proposal for a voluntary ratings system. In August 1997, the industry submitted a revised proposal, which added to the rating categories originally proposed. The revised proposal changed the descriptions used to identify certain age group categories and, in some instances, added symbols to indicate the nature of violence or sexual situations depicted, or language used, in certain programs. The FCC has requested public comments on the industry proposal. In September 1997, the FCC initiated a rulemaking to establish technical standards for the V-chip that would enable blocking of certain programs and ensure that any rating information provided with video programming is transmitted to viewers along with the programming itself. The Company has participated actively in industry efforts to establish the voluntary code. Moreover, the Company believes that none of its programming contains sexual, violent or indecent material. However, the Company is unable to predict the outcome of the pending FCC proceedings. To the extent that any program series (or episodes of such series) produced or distributed by King World are subject- ed to restrictive ratings, there may be an adverse effect on viewing of such program or series. In June 1995, the FCC initiated two proceedings in which it is considering repeal or relaxation of certain of its regulations restricting or forbidding certain contractual arrangements between a network and its affiliates. Among the matters under examination are: a rule that forbids a network from entering into a contract with any affiliate that either enables the network to reserve any time on the affiliate's station before the network has committed to use the time, or requires the station to make time available for network programming in substitution for programming already scheduled by the affiliate ("Time Optioning Rule"); a rule that forbids a network from penalizing affiliated stations for rejecting network programming and substituting programming deemed by the station to be of greater local or national interest; and a rule that forbids stations from affiliating with any network organization that operates more than one network. Separately, the FCC is re-examining a rule that prohibits a network from directly or indirectly controlling the advertising rates charged by an affiliate in connection with the broadcast of non-network programming ("Station Rates Rule") and a rule that forbids a network from acting as a sales representative for affiliated stations for the sale of advertising time in connection with non-network programming ("Station Rep Rule"). The Company is unable to predict the outcome of these proceed- ings. Although the Company believes that certain of the conduct prohibited by the FCC's rules, such as the Station Rates Rule, are proscribed or curtailed under the anti-trust laws, the Company anticipates that repeal or substantial relaxation of the Time Optioning Rule and the Station Rep Rule will tend to increase the relative power of the networks in the market for television programming and for the sale of advertising time and will conse- quently adversely affect King World's bargaining position vis-a-vis network-affiliated stations, and the sale of King World's barter time. Other Regulatory and Legislative Matters ________________________________________ In October 1992, Congress enacted legislation imposing certain new regulations on the cable television industry (the "1992 Cable Act"). The legislation includes provisions that require each local television station (as defined) to make an election between demanding carriage on any cable system within its service area on a "must-carry" basis (for which the station receives no compensation) or demanding that such cable system obtain the consent of the station and pay compensation (and/or furnish other consideration) to the station for the right to carry its signal. The election made by the station as to each such cable system remains in effect for three years. In March 1997, the United States Supreme Court, after protracted litigation and by a 5 to 4 vote, upheld the constitutionality of the "must carry" rules, against a First Amendment challenge initiated by cable interests. As a result, stations will be able to elect "must carry" status effective as of January 1, 1999. Further, since the advent of the "retransmission consent" provisions, which became operative in October 1993, a small number of cable systems have refused to or failed to reach carriage agreements with particular local television stations and conse- quently ceased the carriage of such stations, thus resulting in decreased audience for King World programming aired on those stations. The Company has suffered no discernible adverse impact to date from such provisions. In April 1997, the FCC adopted comprehensive regulations relating to the deployment of Advanced Television Technologies ("ATV"), as required by the 1996 Act. ATV technologies will, among other things, enable existing television stations to broadcast more than one program at the same time; and the FCC has concluded that stations will be permitted to use the additional channel capacity resulting from ATV for entertainment program- ming purposes, including subscription programming, so long as at least one of the additional channels is used for free, over-the-air broadcasting. The rules adopted by the FCC provide that stations owned by or affiliated with the four major broadcast networks (ABC, CBS, Fox and NBC) in each of the top ten markets must complete construction of ATV facilities by May 1, 1999, that stations in markets 11-30 affiliated with those four networks must complete construction of ATV facilities by November 1, 1999 and that all other commercial television stations must complete construction of ATV facilities by May 1, 2002. Under the FCC rules, television stations will not be required to simultaneously broadcast programming on both a conven- tional analog channel and any ATV channel until 2003; thereafter, each station will be required to simulcast on its analog channel specified percentages of programming carried on its ATV channel until the expected expiration of analog broadcasting, in 2006. The additional channels resulting from ATV technology will have "must carry"/retransmission consent rights. These rules and policies are the subject of various proceedings pending before the FCC and are under examination by both the United States House of Representatives and the Senate. Because the deployment of ATV technologies and of television receivers capable of delivering ATV channels to consumers remains uncertain, the Company is unable to predict the outcome of these developments or their impact upon the Company, if any. The 1996 Act repealed provisions of the Communications Act that prohibited any telephone company from acquiring financial interests in video programming and from distributing video programming in the same geographic area in which such telephone company provides telephone service. Under the 1996 Act, telephone companies are permitted, in most circumstanc- es, to own and operate cable television systems, in which event they are subject to all of the requirements applicable to such systems including the "must carry"/retransmission consent requirements of the 1992 Cable Act. Alternatively, the 1996 Act permits telephone companies to directly enter the multi-channel video distribution business on a quasi-common carrier basis ("Open Video Systems"), pursuant to which the Open Video System operator leases channel capacity to programmers on a non-discriminatory basis; each such operator is required to reserve, in cases where demand exceeds channel capacity, up to two-thirds of its channel capacity for programmers with which such operator is not affiliated. The statute also requires that Open Video System operators extend "must carry"/ retransmission consent rights to over-the-air television stations in the market served. The FCC has adopted rules to implement these requirements, but the Company cannot predict the extent or pace of telephone company entry into the program delivery market. However, to the extent that telephone company entry into the production and distribution of video programming weakens the position of over-the-air television stations in the video marketplace or increases the cost to such stations of access to audience, this could result in decreased audience for King World program- ming aired on those stations, or a reduction in the profitability to King World of such programming. The 1996 Act, among other requirements, directed the FCC to establish rules requiring that new programming be closed captioned for the hearing impaired, and to establish timetables for implementing those captioning obligations. The FCC adopted closed captioning rules in August 1997, which are scheduled to take effect January 1, 1998. The regulations will require that all video programming first aired after January 1, 1998, that is not exempt pursuant to the rules be closed captioned. Legal responsibility generally falls on the "video programming distributors," including television stations. Program producers and distributors, however, are expected to cooperate in the process, and distributors will be able to rely on certifications from programming sources indicating that the programming supplied is either captioned or exempt under the FCC rules. All of the programming currently produced or distributed by the Company, as well as all advertising programming produced by King World Direct that is more than five minutes in length, will be subject to the captioning requirements. However, the Company does not anticipate that compliance with these new rules will have a material adverse effect on the profitabil- ity of this programming to King World. Employees _________ As of November 7, 1997, the Company employed approximately 487 persons. Of this number, approximately 313 are involved in the production of INSIDE EDITION and AMERICAN JOURNAL. Approximately 22 of the Company's employees are covered by collective bargaining agreements. Item 2. DESCRIPTION OF PROPERTIES _________________________ The Company's corporate headquarters were recently moved to Los Angeles, where the Company has maintained executive offices, its advertis- ing and promotion department, programming development and direct response marketing operations and its Western U.S. sales staff. The Company leases office space in New York City for executive offices, the operations of Camelot and the Company's Eastern U.S. and foreign sales staff. The Com- pany's accounting and finance, contract administration and research depart- ments are located in leased offices in Short Hills, New Jersey. The Company also leases office space in Chicago, Boca Raton, Florida and Dallas for regional sales offices. The Company leases office and production facilities in New York and Los Angeles for its internally produced programming. Item 3. LEGAL PROCEEDINGS _________________ On September 15, 1997, the Company entered into a settlement agreement with Sony Pictures Entertainment Inc. terminating the lawsuit previously instituted by the Company to obtain a declaratory judgement with respect to its right, under the agreements by which the Company distributes WHEEL OF FORTUNE and JEOPARDY!, to produce or license others to produce strip game shows for distribution by others in first-run syndication. Under the terms of the settlement agreement, the Company and an affiliate of Sony will co-produce, and the Company will distribute, a new version of HOLLYWOOD SQUARES in first-run syndication, for launch as a strip series premiering in the Fall of 1998. The action had been brought by the Company in California Superior Court, Los Angeles County in March 1997. The defendants filed an answer and cross-complaint in May 1997, alleging breach of the distribution agreements by the Company and seeking damages in an unspecified amount, termination of the distribution agreements and reformation of the agree- ments to prohibit the Company from, among other things, producing any strip game show for first-run syndication. Pursuant to the settlement agreement, the parties' respective complaints and cross-complaints were dismissed. The Company is not a party to any legal proceedings other than routine litigation incidental to the conduct of its business. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ______________________________________ None. PART II Item 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS _____________________________________ King World's Common Stock is listed and traded on the New York Stock Exchange under the symbol KWP. The following table sets forth, for the fiscal periods indicated, the range of high and low closing sale prices for the Common Stock as reported by the New York Stock Exchange. High Low _______ ________ Fiscal 1996 First Quarter Ended November 30, 1995. . . . . . 39 7/8 34 3/8 Second Quarter Ended February 29, 1996. . . . . . 43 1/4 36 1/8 Third Quarter Ended May 31, 1996 . . . . . . . . 44 1/2 39 1/4 Fourth Quarter Ended August 31, 1996. . . . . . . 41 3/4 34 1/4 Fiscal 1997 First Quarter Ended November 30, 1996. . . . . . 38 3/4 34 3/4 Second Quarter Ended February 28, 1997. . . . . . 40 36 1/8 Third Quarter Ended May 31, 1997 . . . . . . . . 38 3/8 35 1/4 Fourth Quarter Ended August 31, 1997. . . . . . . 40 1/2 34 3/8 As of the close of business on October 20, 1997, there were 572 holders of record of the Company's Common Stock. On May 16, 1997, a special dividend distribution of $2.00 per share was paid to stockholders of record on April 25, 1997. The Company used approximately $74.8 million of its cash and liquid investments to pay the special dividend. The Company has no present plan to declare addition- al cash dividends in the foreseeable future. The Company requires capital resources to fund development, production and promotion costs for its programming, and intends to use its cash reserves and future earnings to finance such expenses and the development and expansion of its business. See Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources". Item 6. SELECTED FINANCIAL DATA _______________________ The following selected financial data have been derived from the consolidated financial statements of King World and its subsidiaries for the five years ended August 31, 1997, which have been audited and reported upon by Arthur Andersen LLP, independent public accountants. The unaudited 1995 and 1994 pro forma information presents selected financial data assuming that a change in accounting for revenue recognition adopted prospectively in the fourth quarter of fiscal 1994 had not been made. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Results of Operations and Finan- cial Condition" and the Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report. Statements of Income: Year Ended August 31, 1995 1997 1996 19951 Pro forma1 ____ ____ _____ __________ (unaudited) (Dollars in thousands except per share data) Revenues..................... $671,277 $663,426 $574,186 $575,732 Income from operations....... 192,281 191,585 162,416 162,736 Income before provision for income taxes........... 221,926 231,6102 183,258 183,578 Net income................... 143,382 150,0002 117,312 117,490 ======== ======== ======== ======== Primary earnings per share.................. $3.82 $3.982 $3.14 $3.15 ======== ======== ======== ======== Special dividend per share.................. $2.00 -- -- -- ======== ======== ======== ======== 1994 1994 Pro forma1 1993 ____ __________ ____ (unaudited) Revenues..................... $480,659 $541,390 $474,312 Income from operations....... 127,578 148,151 150,950 Income before provision for income taxes........... 140,839 161,412 162,592 Net income................... 88,300 101,196 101,936 ======== ======== ======== Primary earnings per share.................. $2.33 $2.67 $2.65 ======== ======== ======== Special dividend per share.................. -- -- -- ======== ======== ======== Balance Sheets: August 31, 1995 1997 1996 19951 Pro forma1 ____ ____ _____ __________ (unaudited) (Dollars in thousands) Cash and investments........ $730,049 $644,380 $529,025 $529,025 Working capital............. 586,075 519,613 477,794 477,972 Total assets................ 902,067 854,141 686,786 688,332 Stockholders' equity........ 784,082 737,885 575,737 575,915 ======== ======== ======== ======== 1994 19941 Pro forma1 1993 _____ __________ ____ (unaudited) Cash and investments........ $430,048 $430,048 $384,489 Working capital............. 294,336 307,232 286,348 Total assets................ 569,562 630,293 535,546 Stockholders'............... 459,077 471,973 394,173 ======== ======== ======== _______________________ 1. The results of operations for fiscal 1995 and 1994 reflect a change in accounting for revenue recognition adopted prospectively in the fourth quarter of fiscal 1994. The one-time impact of adopting such change was to cause revenues, income from operations, income before provision for income taxes, net income and primary earnings per share in the fourth quarter of fiscal 1994 to be approximately $60.7 million, $20.6 million, $20.6 million, $12.9 million and $.34 lower, respectively, than they would have been under the Company's prior revenue recogni- tion practice. Such revenues were recognized in fiscal 1995 under the modified accounting practice. The results of operations for fiscal 1995 would have been substantially the same as that actually reported if the Company's prior revenue recognition practice had been in effect for all of fiscal 1995. The unaudited 1995 and 1994 pro forma data are presented for comparison purposes only and represent the results of operations and balance sheet information assuming the Company's prior revenue recognition practice had been in effect in the fourth quarter of fiscal 1994 and in fiscal 1995. 2. Income before provision for income taxes, net income and primary earnings per share includes a nonrecurring gain of approximately $14.1 million, $10.3 million and $.27, respectively, as a result of the Company's sale of Buffalo Broadcasting Co. Inc. to LIN Television Corporation for $95 million in cash which closed in October 1995. See Note 8 of Notes to Consolidated Financial Statements. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION _______________________________________________ GENERAL The Company's revenues consist principally of fees from the licensing of syndicated television programs and series which may be in the form of cash, retained advertising time or both. In addition, revenues include fees from the sale of advertising time on programs distributed to television stations by others. The Company typically receives a portion of the fees derived from the licensing of syndicated television programming in the form of retained advertising time, which is sold to advertisers by Camelot Entertainment Sales, Inc. ("Camelot"), a wholly-owned subsidiary of the Company. Such revenues are recognized at the same time as the cash portion of the license fees derived from such programming is recognized, in amounts adjusted for expected ratings. See Note 1 of Notes to Consolidated Financial State- ments. The discussion herein contains certain forward-looking statements covering the Company's objectives, planned or expected activities and anticipated financial performance. These forward-looking statements may generally be identified by words such as "expects", "anticipates", "be- lieves", "plans", "should", "will", "may", "projects" (or variants of these words or phrases), or similar language indicating the expression of an opinion or view concerning the future with respect to the Company's financial position, results of operations, prospects or business. The Company's actual results may differ significantly from the results de- scribed in or suggested by such forward-looking statements. RESULTS OF OPERATIONS COMPARISON OF FISCAL 1997 AND FISCAL 1996 Revenues ________ Revenues for fiscal 1997 increased by approximately 1% compared to fiscal 1996. Such increase was primarily due to increased cash license fees from THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE and, to a lesser extent, JEOPARDY!, offset by lower revenues derived from the sale of retained advertising time on INSIDE EDITION, AMERICAN JOURNAL, another first-run syndicated newsmagazine produced and distributed by the Company and ROLONDA, a first-run syndicated talk-show produced and distributed by the Company. THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE, JEOPARDY! and INSIDE EDITION accounted for approximately 40%, 20%, 17% and 8%, respectively, of the Company's revenues for fiscal 1997 compared to 39%, 19%, 17% and 8%, respectively, for fiscal 1996. AMERICAN JOURNAL accounted for approxi- mately 4% of the Company's revenues for each of fiscal 1997 and fiscal 1996, and ROLONDA accounted for approximately 1% of the Company's revenues for fiscal 1997 and 2% for fiscal 1996. King World Direct, the Company's wholly-owned direct response subsidiary, accounted for approximately 4% of the Company's revenues for each of fiscal 1997 and fiscal 1996. Producers' fees, programming and other direct operating costs _____________________________________________________________ Producers' fees, programming and other direct operating costs include primarily the producers' share of both cash license fees from the sale of programming to television stations and revenues derived from the sale of retained advertising time to advertisers with respect to program- ming distributed by the Company; participation payments payable by the Company to producers and talent; production and distribution costs for first-run syndicated programming; and the direct operating costs of King World Direct. That portion of any recognized revenue that is to be paid to producers and owners of programming is accrued as such revenues are earned. The share of revenues payable by the Company to producers, talent and others is generally paid as cash license fees and revenues derived from the sale of retained advertising time are received from television stations and advertisers. Producers' fees, programming and other direct operating costs for fiscal 1997 were comparable to fiscal 1996, decreasing by less than 1%, primarily as a result of a significant decrease in operating costs of King World Direct, offset by a modest increase in revenues generated by THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE and, to a lesser extent, JEOPARDY! (a portion of which revenues is payable to the producer of each such series). Selling, general and administrative expenses ____________________________________________ The Company has entered into employment agreements with its Chairman of the Board, its Vice Chairman and Chief Executive Officer and certain other executive officers. Such agreements provide, among other things, for performance-based bonuses, including bonuses payable upon the introduction of new shows and bonuses which vary depending on the Company's net income and Common Stock price during preestablished measurement periods. As a result, the Company's compensation expense will increase if the Company introduces a new series in syndication, if the Company's net income increases or if the Company's Common Stock price exceeds the speci- fied levels during the applicable measurement periods. The Company has recognized the impact of certain of these bonuses in its operating results or fiscal 1997, which include all amounts payable in accordance with the terms of such employment agreements. Selling, general and administrative expenses for fiscal 1997 increased by approximately 12% from fiscal 1996. Such increase was primarily due to higher compensation costs associated principally with the hiring of new executives and additional personnel and a general increase in advertising and promotion costs. In addition, selling, general and administrative expenses for fiscal 1997 were impacted by increased activity with respect to programming under development. Net income and primary earnings per share _________________________________________ Due to the factors discussed above, the Company's operating income for fiscal 1997 was comparable to fiscal 1996, increasing by less than 1%. Reported net income for fiscal 1997 decreased by approximately $6.6 million compared to fiscal 1996 as a result of the Company recording a nonrecurring gain of approximately $14.1 million on the sale of Buffalo Broadcasting Co. Inc. ("Buffalo") to LIN Television Corporation during the first quarter of fiscal 1996. Reported primary earnings per share de- creased for fiscal 1997 to $3.82 per share from $3.98 per share for fiscal 1996 as a result of the nonrecurring gain from the sale of Buffalo. Absent the nonrecurring gain on the sale of Buffalo, net income increased by approximately $3.7 million, or 3%, for fiscal 1997 in compari- son to fiscal 1996, reflecting the slight increase in operating income, higher interest income earned on the Company's cash and investments and a marginally lower effective tax rate for fiscal 1997 compared with fiscal 1996. Absent the nonrecurring gain on the sale of Buffalo, primary earn- ings per share increased by $.11 per share, or approximately 3%, for fiscal 1997 compared to fiscal 1996, as a result of the increase in net income. The Company's results of operations are highly dependent upon the viewing preferences of television audiences and the Company's ability to acquire distribution rights to, or itself produce, television programming that achieves broad and enduring audience acceptance. The success of the Company's programming could be significantly affected by changes in viewer preferences or the unavailability of new programming or talent. Moreover, the amount of revenue derived from the sale of retained advertising time is dependent upon a large number of factors, such as household ratings, the demographic composition of the viewing audience and economic conditions in general and in the advertising business in particular. Due to the success of the shows distributed by the Company and in order to mitigate the influence of some of the factors referred to above, the Company has been obtaining multi-year licenses and license renewals from television stations for its principal distribution properties, extending as far into the future as the 2001-2002 broadcast season. In general, these licenses and renewals have been at rates as favorable or more favorable to the Company than the rates applicable to the 1996-1997 broadcast season. All such licenses and renewals are contingent upon the continued production of the series by their respective producers through the broadcast seasons for which the licenses and renewals run. The Company believes that the impact of inflation on its opera- tions has not been significant. COMPARISON OF FISCAL 1996 AND FISCAL 1995 Revenues ________ Revenues for fiscal 1996 increased by approximately 16% compared to fiscal 1995. Such increase was primarily due to increased cash license fees from THE OPRAH WINFREY SHOW and a general increase in revenues derived from the sale of retained advertising time primarily on THE OPRAH WINFREY SHOW, INSIDE EDITION and AMERICAN JOURNAL, as a result of a 50% increase in the number of 30-second advertising spots retained by the Company in each such series commencing with the 1995-1996 television season. In addition, revenues from King World Direct increased substantially in fiscal 1996 compared with fiscal 1995, due primarily to the successful telemarketing campaigns for the WILD AMERICA video series and the Sears Craftsman Robogrip pliers. THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE, JEOPARDY! and INSIDE EDITION accounted for approximately 39%, 19%, 17% and 8%, respectively, of the Company's revenues for fiscal 1996 compared to 37%, 21%, 18% and 8%, respectively, for fiscal 1995. AMERICAN JOURNAL accounted for approxi- mately 4% of the Company's revenues for each of fiscal 1996 and fiscal 1995, and ROLONDA accounted for approximately 2% of the Company's revenues for fiscal 1996 and 3% for fiscal 1995. King World Direct accounted for approximately 4% of the Company's revenues for fiscal 1996 and 1% for fiscal 1995. Producers' fees, programming and other direct operating costs _____________________________________________________________ Producers' fees, programming and other direct operating costs increased by approximately 16% in fiscal 1996 compared to fiscal 1995, primarily as a result of the higher level of revenues generated by THE OPRAH WINFREY SHOW (a portion of which is payable to the producer), increased production fees associated with THE OPRAH WINFREY SHOW in the 1995-1996 television season and increased operating expenses for King World Direct. Selling, general and administrative expenses ____________________________________________ In December 1995, the Company entered into new employment agreements with its Chairman of the Board and its President and Chief Executive Officer (who is now its Vice Chairman and Chief Executive Officer), as discussed above. The Company recognized the impact of certain of these bonuses in its operating results for fiscal 1996, which include all amounts payable in accordance with the terms of such employment agree- ments. Selling, general and administrative expenses for fiscal 1996 increased by approximately 6% from fiscal 1995, but decreased as a percent- age of revenues from 12% in fiscal 1995 to 11% in fiscal 1996. The increase in selling, general and administrative expenses was due to higher advertising and promotion costs for THE OPRAH WINFREY SHOW in the 1995-1996 broadcast season and an increase in executive compensation under the executive employment agreements discussed above. Net income and primary earnings per share _________________________________________ Due to the factors discussed above, the Company's operating income for fiscal 1996 increased by approximately 18% compared to fiscal 1995. In addition, during the first quarter of fiscal 1996, the Company recorded a nonrecurring gain of approximately $14.1 million on the sale of Buffalo. Net income increased by approximately $32.7 million, or 28%, for fiscal 1996 compared to fiscal 1995, reflecting the increase in operating income, the nonrecurring gain on the sale of Buffalo and higher interest income earned on the Company's cash and investments. In addition, the Company's effective tax rate for fiscal 1996 was slightly lower than in fiscal 1995, due principally to the nontaxability of a portion of the Buffalo gain. Primary earnings per share increased by $.84 per share, or approximately 27%, to $3.98 per share in fiscal 1996 compared to fiscal 1995, as a result of the increase in net income, offset slightly by the greater number of shares outstanding. Excluding the nonrecurring gain on the sale of Buffalo, net income increased by approximately $22.4 million, or 19%, for fiscal 1996 compared to fiscal 1995, and primary earnings per share increased by $.57 per share, or approximately 18%, for fiscal 1996 to $3.71 per share. LIQUIDITY AND CAPITAL RESOURCES The Company requires capital resources to fund development, production and promotion costs of independently produced programming, including, in some instances, advances to producers and talent, to produce its own programs and to acquire distribution rights to new programming. In acquiring distribution rights from independent producers, King World has tried to avoid making significant capital commitments to such producers until it has obtained broadcast commitments from a substantial number of television stations. As a result of this strategy and the success of its existing syndication properties, to date, King World has funded substan- tially all programming acquisition, development, production and promotion costs and advances from its operations. The Company is currently funding the development and production costs of a talk show hosted by Roseanne and a new version of the game show HOLLYWOOD SQUARES. Both shows are being distributed by the Company and are scheduled to debut in the Fall of 1998. The distribution of television programming is highly competitive and the Company may be obliged to offer, among other things, guarantees and cash advances to acquire, renew or extend distribution rights. Under the terms of the Company's agreement with Harpo, Inc. ("Harpo"), the producer of THE OPRAH WINFREY SHOW, the Company has the exclusive right, and has agreed, to distribute episodes of THE OPRAH WINFREY SHOW produced through the 1999-2000 television season. Pursuant to such agreement, Harpo and Ms. Winfrey have also committed to produce and host the show through the 1999-2000 broadcast season. Under the terms of its agreement with Harpo, the Company has agreed, among other things, to pay Harpo production fees and to guarantee participation payments to Harpo with respect to the 1995-1996 and 1996-1997 seasons at levels which are substantially higher than those that were in effect prior to the 1995-1996 season. In addition, following the 1996-1997 season, profit sharing arrangements between Harpo and the Company previous- ly in effect were terminated and, in the 1997-1998 season and thereafter, the Company will instead receive distribution fees based on a percentage of gross revenues derived from the series. These arrangements are less favor- able to the Company than those contained in prior agreements between the Company and Harpo. As a result of these changes, the contribution of THE OPRAH WINFREY SHOW to the Company's net profits and cash flow can be expected to decline. After the 1999-2000 television season, King World's right to distribute THE OPRAH WINFREY SHOW, if not renewed, will terminate. For several years, the Company has been, and is now, in the process of devel- oping new television shows for syndication that it hopes will gain wide- spread audience appeal and generate significant revenues and income for the Company. Two such shows, a talk show hosted by Roseanne and a new version of the game show HOLLYWOOD SQUARES, are scheduled to premiere in the 1998- 1999 television season. Although the Company hopes to renew its distri- bution arrangements with Harpo for television seasons following the 1999- 2000 season, there can be no assurance that (a) Harpo and Ms. Winfrey will continue to produce and host the show beyond that season; (b) even if they do continue to produce and host the show beyond that season, that the Company will be able to obtain the distribution rights for any such future season on terms favorable to the Company; or (c) that the revenues generat- ed by these or any other new shows will be sufficient to offset the loss of revenues and income that would result if such future distribution rights are not so obtained. The failure to renew such distribution rights on favorable terms, coupled with the failure of either or both of such new shows to gain widespread audience appeal, could be expected to have a material adverse effect on the Company's results of operations and finan- cial condition after the 1999-2000 television season. On January 2, 1996, the Company paid Harpo a $65 million advance against its minimum participation payments for the 1996-1997 broadcast season, which was fully recouped as of August 31, 1997. In addition, on January 2, 1996 the Company paid an advance to Harpo of $65 million against Harpo's minimum participation payments for the 1997-1998 broadcast season, none of which had been recouped as of August 31, 1997. Subsequent to August 31, 1997, the Company also made advances to Harpo in the aggregate amount of $130 million against Harpo's minimum participation payments for the 1998-1999 and 1999-2000 broadcast seasons. Based on the license agree- ments in place for such latter three broadcast seasons, the Company believes that revenues from the series will be sufficient to enable the Company to recoup the advances for such seasons. All of the advances paid to Harpo are refundable to the Company by Harpo and Ms. Winfrey if King World terminates its agreement with Harpo due to Harpo's failure to deliver episodes of THE OPRAH WINFREY SHOW. The Company has used its cash reserves to make acquisitions of and investments in broadcast and related properties in the entertainment field, to repurchase shares of its Common Stock and to fund the cost of development, production and promotion of new programming. The Company continues to evaluate opportunities in these areas, and may seek to raise capital in public or private securities markets to finance such activities if it considers it advantageous to do so. The Company recently formed a new division, King World Ventures, which has primary responsibility for the Company's investment and acquisition program including analysis of new business opportunities. On April 15, 1997, the Company announced that the Board of Directors had approved a program to repurchase up to 5,000,000 shares of its Common Stock from time to time in the open market and in privately negotiated transactions. Through August 31, 1997, 971,000 shares of Common Stock were repurchased in open market transactions for aggregate consider- ation of approximately $36.2 million or approximately $37.20 per share. The Company intends to continue to repurchase shares of Common Stock in the open market and in privately negotiated transactions if and when it deems it advantageous to do so. Purchases under the share repurchase program will be financed out of the Company's available cash and liquid invest- ments. On May 16, 1997, a special dividend distribution of $2.00 per share was paid to stockholders of record on April 25, 1997. The Company used approximately $74.8 million of its cash and liquid investments to pay the special dividend. The Company has no present plan to declare addition- al cash dividends in the foreseeable future. The Company has entered into agreements with television stations for the future distribution of programming commencing with the 1997-1998 broadcast season and extending as far into the future as the 2001-2002 broadcast season, under which the revenues and related expenses will not be recognized until the license periods thereunder have begun and certain other conditions are satisfied. As of October 21, 1997, the gross amount of license fees under such agreements approximated $1.8 billion, of which approximately $1.0 billion is payable to producers and others and is to be recognized as an expense. The recognition of such amounts in the consol- idated financial statements of the Company in fiscal years subsequent to August 31, 1997 is subject to the Company's continued distribution of such programming. Such amounts do not include sales of advertising time re- tained during the broadcast of such programming or foreign license fees and do not reflect the production costs to be incurred for programming produced by King World. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. __________________________________________________________ Not applicable. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ___________________________________________ See the Financial Statements listed in the accompanying Index to Consolidated Financial Statements which appear elsewhere in this Annual Report. Information required by the schedules called for under Regulation S-X is either not applicable or is included in the consolidated financial statements or notes thereto. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE _____________________________________________ None. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page ____ Report of Independent Public Accountants . . . . . . . . 31 Consolidated Balance Sheets as of August 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . 32 Consolidated Statements of Income for the years ended August 31, 1997, 1996 and 1995 . . . . . . . . . 34 Consolidated Statements of Stockholders' Equity for the years ended August 31, 1997, 1996 and 1995 . . . . 35 Consolidated Statements of Cash Flows for the years ended August 31, 1997, 1996 and 1995 . . . . . . . . . 36 Notes to Consolidated Financial Statements . . . . . . . 37 Report of Independent Public Accountants ________________________________________ To King World Productions, Inc.: We have audited the accompanying consolidated balance sheets of King World Productions, Inc. (a Delaware corporation) and subsidiaries as of August 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended August 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of King World Productions, Inc. and subsidiaries as of August 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1997, in conformity with generally accepted accounting principles. Arthur Andersen LLP New York, New York October 24, 1997 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS August 31, ______________________ 1997 1996 ________ ________ (Dollars in thousands) CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . $317,782 $344,766 Short-term investments. . . . . . . . . . . 234,677 153,969 Accounts receivable (net of allowance for doubtful accounts of $4,101 and $4,196 in 1997 and 1996, respectively) . . . . . . . . . 75,092 60,378 Producer advances and deferred costs. . . . . . . . . . . . . . 74,652 74,824 Other current assets. . . . . . . . . . . . 1,857 1,932 ________ ________ Total current assets. . . . . . . . . . . 704,060 635,869 ________ ________ LONG-TERM INVESTMENTS, at cost, which approximates market value . . . . . 177,590 145,645 ________ ________ FIXED ASSETS, at cost: Office and transportation equipment . . . . 12,522 4,893 Furniture, leaseholds and other improvements. . . . . . . . . . . . . . . 6,255 5,865 Film and videotape masters. . . . . . . . . 2,678 2,626 ________ ________ 21,455 13,384 Less-accumulated depreciation and amortization. . . . . . . . . . . . . . . (11,706) (10,503) ________ ________ 9,749 2,881 PRODUCER ADVANCES AND OTHER ASSETS. . . . . . . . . . . . . . 10,668 69,746 ________ ________ $902,067 $854,141 ======== ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) LIABILITIES AND STOCKHOLDERS' EQUITY August 31, ---------------------- 1997 1996 -------- -------- (Dollars in thousands) CURRENT LIABILITIES: Accounts payable and accrued liabilities . . . . . . . . . . . . . . . $ 18,014 $ 15,237 Payable to producers and others . . . . . . 69,599 71,920 Income taxes payable. . . . . . . . . . . . 30,372 29,099 ________ ________ Total current liabilities 117,985 116,256 ________ ________ COMMITMENTS AND CONTINGENCIES (Note 4) STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued . . . . . . . . . . . . . . . -- -- Common stock, $.01 par value; 75,000,000 shares authorized, 51,039,211 and 50,734,739 shares issued in 1997 and 1996, respectively. . . . . . . . . . . . . . . 510 507 Paid-in capital . . . . . . . . . . . . . . 124,497 110,666 Retained earnings . . . . . . . . . . . . . 1,001,190 932,651 Treasury stock, at cost; 14,413,594 and 13,442,594 shares in 1997 and 1996, respectively. . . . . . . . . . . . (342,115) (305,939) ________ ________ 784,082 737,885 ________ ________ $ 902,067 $854,141 ========= ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Year Ended August 31, ----------------------------- 1997 1996 1995 -------- -------- -------- (Dollars in thousands except per share data) REVENUES. . . . . . . . . . . . . . . $671,277 $663,426 $574,186 ________ ________ ________ EXPENSES: Producers' fees, programming and other direct operating costs. . . 395,489 397,494 341,536 Selling, general and admini- strative expenses . . . . . . . . 83,507 74,347 70,234 ________ ________ ________ 478,996 471,841 411,770 ________ ________ ________ Income from operations. . . . . . . 192,281 191,585 162,416 INTEREST AND DIVIDEND INCOME. . . . . 29,645 25,965 20,842 NONRECURRING GAIN - Sale of Buffalo Broadcasting Co. Inc. . . . -- 14,060 -- ________ ________ ________ Income before provision for income taxes. . . . . . . . . . . 221,926 231,610 183,258 PROVISION FOR INCOME TAXES. . . . . . 78,544 81,610 65,946 ________ ________ ________ Net income. . . . . . . . . . . . . $143,382 $150,000 $117,312 ======== ======== ======== PRIMARY EARNINGS PER SHARE. . . . . . $3.82 $3.98 $3.14 ======== ======== ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Paid-in Retained Treasury ________________ Shares $ Capital Earnings Stock __________ ____ _______ ________ ________ (Dollars in thousands) Balance - August 31, 1994 . . . 49,722,218 $497 $ 82,171 $ 665,339 $(288,930) Exercise of stock options . . . . . . 171,527 2 5,457 -- -- Purchase of treasury stock . . . . . . . -- -- -- -- (6,111) Net income. . . . . . -- -- -- 117,312 -- ___________ ____ ________ __________ _________ Balance - August 31, 1995 . . . 49,893,745 499 87,628 782,651 (295,041) Exercise of stock options . . . . . . 840,994 8 23,038 -- -- Purchase of treasury stock . . . . . . . -- -- -- -- (10,898) Net income. . . . . . -- -- -- 150,000 -- ___________ ____ ________ __________ _________ Balance - August 31, 1996 . . . 50,734,739 507 110,666 932,651 (305,939) Exercise of stock options . . . . . . 304,472 3 13,831 -- -- Purchase of treasury stock . . . . . . . -- -- -- -- (36,176) Special dividend. . . -- -- -- (74,843) -- Net income. . . . . . -- -- -- 143,382 -- ___________ ____ ________ __________ _________ Balance - August 31, 1997 . . . 51,039,211 $ 510 $124,497 $1,001,190 $(342,115) =========== ==== ======== ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended August 31, _____________________________ 1997 1996 1995 ___________ _________ ________ (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income. . . . . . . . . . . . . . . . .$143,382 $150,000 $117,312 Items not affecting cash: Gain on sale of Buffalo Broadcasting Co. Inc.. . . . . . . . -- (14,060) -- Depreciation and amortization. . . . . 1,203 800 606 Change in assets and liabilities: Accounts receivable. . . . . . . . . .(14,597) (9,022) (10,095) Producer advances and deferred costs . . . . . . . . . . . 60,173 (46,740) (6,271) Accounts payable and accrued liabilities. . . . . . . . . . . . . 2,777 4,167 (3,710) Payable to producers and others . . . . . . . . . . . . . . . (2,321) 1,829 4,702 Income taxes payable . . . . . . . . . 1,273 3,469 (428) Other, net . . . . . . . . . . . . . . (965) 3,391 (163) ________ ________ ________ Net cash provided by operating activities. . . . . . . . . . . . . . . . 190,925 93,834 101,953 ________ ________ ________ CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in investments. . . . .(112,653) (217,485) 6,062 Proceeds from sale of Buffalo Broadcasting Co. Inc. . . . . . . . . . . -- 9,802 -- Additions to fixed assets . . . . . . . . . (8,071) (429) (2,324) ________ ________ ________ Net cash (used in) provided by investing activities. . . . . . . . . . .(120,724) (208,112) 3,738 ________ ________ ________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . 13,834 23,046 5,459 Purchase of treasury stock. . . . . . . . . (36,176) (10,898) (6,111) Payment of special dividend . . . . . . . . (74,843) -- -- ________ ________ ________ Net cash (used in) provided by financing activities. . . . . . . . . . . (97,185) 12,148 (652) ________ ________ ________ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . .(26,984) (102,130) 105,039 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . . 344,766 446,896 341,857 ________ ________ ________ CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . . $317,782 $344,766 $446,896 ======== ======== ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies Principles of consolidation The accompanying consolidated financial statements include the accounts of King World Productions, Inc. and its subsidiaries. All significant intercompany transactions have been eliminated. Unless the context suggests otherwise, the "Company", as used herein, means King World Productions, Inc. ("King World") and its consolidated subsidiaries. Revenue recognition License fees from first-run syndicated television properties are recognized at the commencement of the license period pursuant to noncancel- able agreements and as each show is made available to the licensee via satellite transmission. Because transmission to the satellite takes place, on the average, no more than two to three days prior to the broadcast of the programming, revenues are recognized on or about the air date. The Company typically receives a portion of the fees derived from the licensing of syndicated television programming in the form of retained advertising time, which is sold to advertisers by Camelot Entertainment Sales, Inc. ("Camelot"), a wholly-owned subsidiary of the Company. Such revenues are recognized at the same time as the cash portion of the license fees derived from such programming is recognized, in amounts adjusted for expected ratings. License fees for non-first-run syndicated properties are recog- nized at the gross contract amount (net of discount to present value for license periods greater than one year) at the commencement of the license period and when certain other conditions are satisfied. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Principal properties ____________________ The Company's principal properties are licenses to distribute THE OPRAH WINFREY SHOW, WHEEL OF FORTUNE and JEOPARDY!; and INSIDE EDITION, a first-run syndicated series produced and distributed by the Company. THE OPRAH WINFREY SHOW accounted for approximately 40%, 39% and 37% of revenues in fiscal 1997, 1996 and 1995, respectively. WHEEL OF FORTUNE accounted for approximately 20%, 19% and 21% of revenues in fiscal 1997, 1996 and 1995, respectively. JEOPARDY! accounted for approximately 17%, 17% and 18% of revenues in fiscal 1997, 1996 and 1995, respectively. INSIDE EDITION accounted for approximately 8% of revenues in fiscal 1997, 1996 and 1995. The Company distributes THE OPRAH WINFREY SHOW pursuant to an agreement with Harpo, Inc. ("Harpo"), the producer of the series. Under the terms of the Company's agreement with Harpo, the Company has the exclusive right, and has agreed, to distribute episodes of THE OPRAH WINFREY SHOW produced through the 1999-2000 television season. Pursuant to such agreement, Harpo and Ms. Winfrey have also committed to produce and host the show through the 1999-2000 broadcast season. Under the terms of its agreement with Harpo, the Company has agreed, among other things, to pay Harpo production fees and to guarantee participation payments to Harpo at levels which are substantially higher than those that were in effect prior to the 1995-1996 season. In addition, in the 1997-1998 season and thereafter, profit sharing arrangements between Harpo and the Company currently in effect will terminate and the Company will instead receive distribution fees based on a percentage of gross revenues derived from the series. These arrangements are less favorable to the Company than those contained in prior agreements between the Company and Harpo. As a result of these changes, the contribution of THE OPRAH WINFREY SHOW to the Company's net profits and cash flow can be expected to decline. After the 1999-2000 television season, King World's right to distribute THE OPRAH WINFREY SHOW, if not renewed, will terminate. For several years, the Company has been, and is now, in the process of devel- oping new television shows for syndication that it hopes will gain wide- spread audience appeal and generate significant revenues and income for the Company. Two such shows, a talk show hosted by Roseanne and a new version of the game show HOLLYWOOD SQUARES, are scheduled to premiere in the 1998- 1999 television season. Although the Company hopes to renew its distri- bution arrangements with Harpo for television seasons following the 1999- 2000 season, there can be no assurance that (a) Harpo and Ms. Winfrey will continue to produce and host the show beyond that season; (b) even if they do continue to produce and host the show beyond that season, that the Company will be able to obtain the distribution rights for any such future season on terms favorable to the Company; or (c) that the revenues generat- ed by these or any other new shows will be sufficient to offset the loss of revenues and income that would result if such future distribution rights are not so obtained. The failure to renew such distribution rights on favorable terms, coupled with the failure of either or both of such new shows to gain widespread audience appeal, could be expected to have a KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) material adverse effect on the Company's results of operations and finan- cial condition after the 1999-2000 television season. The Company's agreements with Columbia TriStar Television provide that the Company shall be the exclusive distributor for WHEEL OF FORTUNE and JEOPARDY! so long as the Company has obtained sufficient broadcast commitments to cover such series' respective production and distribution costs and that the Company may not, unless otherwise agreed by Columbia TriStar Television, distribute game shows for "strip" first-run syndication so long as the Company is distributing WHEEL OF FORTUNE or JEOPARDY!. On September 16, 1997, the Company and Columbia TriStar Television announced their agreement to co-produce a new version of the game show HOLLYWOOD SQUARES, which will be distributed by the Company in first-run syndication for debut in the Fall of 1998. Producers' fees, programming and other direct operating costs _____________________________________________________________ Producers' fees, programming and other direct operating costs include primarily the producers' share of both cash license fees from the sale of programming to television stations and revenues derived from the sale of retained advertising time to advertisers with respect to program- ming distributed by the Company; participation fees payable by the Company to producers and talent; production and distribution costs for first-run syndicated programming; and the direct operating costs of King World Direct, the Company's direct response marketing subsidiary. That portion of any recognized revenue that is to be paid to producers and owners of programming is accrued as such revenues are earned. The share of revenues payable by the Company to such producers and others is generally paid as cash license fees and revenues derived from the sale of retained advertis- ing time are received from television stations and advertisers. Selling, general and administrative expenses ____________________________________________ Selling, general and administrative expenses include advertising and promotion costs associated with programming distributed by the Company, which amounted to $33,150,000, $31,329,000 and $28,084,000 in fiscal 1997, 1996 and 1995, respectively. These amounts include the producers' share of such costs. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Cash equivalents and short-term investments ___________________________________________ Cash equivalents and short-term investments are comprised princi- pally of municipal obligations, money market funds, money market preferred investments, commercial paper and United States Treasury and other agency obligations whose maturities are one year or less and are carried at amor- tized cost, which approximates market value. The Company considers its highly liquid short-term investments purchased with a maturity of three months or less to be cash equivalents. Producer advances and deferred costs ____________________________________ Producer advances and deferred costs include production and promotion costs, as well as talent and producer participation advances, in connection with certain first-run syndicated programs distributed by the Company for broadcast during seasons subsequent to August 31, 1997. Such costs are charged to expense as the revenues from such programs are earned. Advances are recouped from the share of revenues payable by the Company to producers, talent and others. On January 2, 1996, the Company paid Harpo a $65 million advance against its minimum participation payments for the 1996-1997 broadcast season, which was fully recouped as of August 31, 1997. In addition, on January 2, 1996 the Company paid an advance to Harpo of $65 million against Harpo's minimum participation payments for the 1997-1998 broadcast season, none of which had been recouped as of August 31, 1997. Subsequent to August 31, 1997, the Company also made advances to Harpo in the aggregate amount of $130 million against Harpo's minimum participation payments for the 1998-1999 and 1999-2000 broadcast seasons. Based on the license agree- ments in place for such latter three broadcast seasons, the Company believes that revenues from the series will be sufficient to enable the Company to recoup the advances for such seasons. All of the advances paid to Harpo are refundable to the Company by Harpo and Ms. Winfrey if King World terminates its agreement with Harpo due to Harpo's failure to deliver episodes of THE OPRAH WINFREY SHOW. Long-term investments _____________________ Long-term investments are comprised principally of intermediate- term municipal obligations and United States Treasury and other agency obligations whose maturities are between one and two years and are carried at amortized cost which approximates market value. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Fixed assets ____________ Fixed assets are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method for financial reporting purposes and accelerated methods for tax purposes, with estimated useful lives of 3 to 5 years for furniture, office and transportation equipment and 5 years for film and videotape masters. Leaseholds and other improvements are amortized over the shorter of their useful lives and the lease term. Depreciation and amortization expense was approximately $1,203,000, $800,000 and $606,000 in fiscal 1997, 1996 and 1995, respectively. Certain prior period amounts have been reclassified to conform with current year presentation. Stockholders' equity ____________________ Primary earnings per share has been computed using the weighted average number of common shares outstanding of 37,496,000, 37,684,000 and 37,343,000 for the fiscal years ended August 31, 1997, 1996 and 1995, respectively, which includes the dilative effect from the assumed exercise of vested and unvested stock options outstanding as of the end of each year reported. The difference between primary and fully diluted earnings per share for each such fiscal year was not significant. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 eliminates the presentation of primary earnings per share and requires the presentation of basic earnings per share, which excludes common stock equivalents and their related dilution and diluted earnings per share, which includes the potential dilution from all common stock equivalents including options, warrants and convertible securities. The Company will implement SFAS 128 beginning with the first quarter of fiscal 1998. The implementation of SFAS 128 is not anticipated to have a material effect on reported earnings per share of the Company. The Company is authorized to issue 5,000,000 shares of Preferred Stock, $.01 par value. The Board of Directors is empowered, without further stockholder approval, to establish from time to time one or more series of Preferred Stock and to determine the powers, preferences and special rights of any unissued series of Preferred Stock, including voting rights, dividend rights, terms of redemption, liquidation preferences, conversion rights and the designation of any such series. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Industry segments and customers _______________________________ The Company operates in one business segment, television program- ming. The Company's major customers and principal facilities are located within the United States. In the 1997, 1996 and 1995 fiscal years, approximately 13%, 12% and 14%, respectively, of the Company's revenues were derived from license fees under contracts with a single broadcast group. Use of estimates ________________ The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) Pension and profit sharing plans The Company maintains the King World Productions, Inc. Retirement Savings Plan with an employee pre-tax salary deferral contribution program under Section 401(k) of the Internal Revenue Code. Under the plan, employer matching contributions may not exceed 3% of annual compensation per employee and employer fixed contributions are limited to 3% of annual salary per employee, subject to a maximum total employer contribution of approximately $9,500 per employee for fiscal 1997. The plan covers substantially all of the Company's employees other than those involved in the production of programming produced by the Company. Contributions by the Company to the plan were approximately $576,000, $491,000 and $372,000 in fiscal 1997, 1996 and 1995, respective- ly. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (3) Income taxes The components of the Company's provision for income taxes are summarized as follows: Year Ended August 31, __________________________________ 1997 1996 1995 ____ ____ ____ (Dollars in thousands) Federal: Current . . . . . . . . . . . . . . . $64,824 $71,525 $56,741 Deferred. . . . . . . . . . . . . . . 1,562 (2,293) (858) _______ _______ _______ 66,386 69,232 55,883 _______ _______ _______ State and local: Current . . . . . . . . . . . . . . . 12,067 12,511 10,113 Deferred. . . . . . . . . . . . . . . 91 (133) (50) _______ _______ _______ 12,158 12,378 10,063 _______ _______ _______ Total . . . . . . . . . . . . . . $78,544 $81,610 $65,946 ======= ======= ======= Deferred income taxes and benefits are provided for any income and expense items that are recognized in different years for tax return and financial reporting purposes. No individual temporary difference gives rise to significant deferred tax assets or liabilities. The current provision in each period presented above does not include reductions to income taxes payable attributable to the exercise of stock options. See Note 5. Following is a reconciliation of the Company's provision for income taxes to the tax computed at the U.S. statutory rate: Year Ended August 31, _________________________________ 1997 1996 1995 (Dollars in thousands) Tax at U.S. statutory rate. . . . . . . . . . . . . . . . . $77,674 $81,064 $64,140 State tax provision, net of Federal benefit. . . . . . . . . . 7,903 8,046 6,541 Tax-exempt interest and dividend income . . . . . . . . . . . (6,892) (5,370) (4,799) Other, net. . . . . . . . . . . . . . . (141) (2,130) 64 _______ _______ _______ $78,544 $81,610 $65,946 ======= ======= ======= Income taxes paid approximated $73.3 million, $76.8 million and $64.6 million in fiscal 1997, 1996 and 1995, respectively. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) Commitments and contingencies License fees ____________ The Company has entered into agreements with television stations for the future distribution of programming in television seasons commencing with the 1997-1998 season and extending as far into the future as the 2001- 2002 broadcast season, under which the revenues and related expenses will not be recognized until the license periods thereunder have begun and certain other conditions are satisfied. As of October 21, 1997, the gross amount of license fees under such agreements approximated $1.8 billion, of which approximately $1.0 billion is payable to producers and others and is to be recognized as an expense. The recognition of such amounts in the consolidated financial statements of the Company in fiscal years subsequent to August 31, 1997 is subject to the Company's continued distribution of such programming. Such amounts do not include sales of advertising time retained during the broadcast of such programming or foreign license fees and do not reflect the production costs to be incurred for programming produced by King World. Operating leases ________________ Rent expense under operating leases covering office facilities, production studios and equipment amounted to approximately $2,849,000, $2,559,000 and $2,548,000 for fiscal 1997, 1996 and 1995, respectively. Office and studio leases are subject to price escalations for certain costs. Aggregate future minimum rental commitments for these leases as of August 31, 1997 were as follows: Year Ending August 31, ______________________ (Dollars in thousands) 1998 . . . . . . . . . . . . . $2,256 1999 . . . . . . . . . . . . . 1,496 2000 . . . . . . . . . . . . . 1,473 2001 . . . . . . . . . . . . . 1,487 2002 . . . . . . . . . . . . . 1,140 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) Commitments and contingencies (continued) Employment and production agreements ____________________________________ As of August 31, 1997, the Company had entered into employment agreements and agreements with independent contractors relating to program- ming being or to be produced by King World which provide for aggregate minimum annual compensation as follows: Year Ending August 31, ______________________ (Dollars in thousands) 1998 . . . . . . . . . . . . . $23,500 1999 . . . . . . . . . . . . . 8,670 2000 . . . . . . . . . . . . . 5,588 2001 . . . . . . . . . . . . . 0 2002 . . . . . . . . . . . . . 0 The Company has entered into employment agreements with its Chairman of the Board, its Vice Chairman and Chief Executive Officer and certain other executive officers. Such agreements provide, among other things, for performance-based bonuses, including bonuses payable upon the introduction of new shows and bonuses which vary depending on the Company's net income and Common Stock price during preestablished measurement periods. The Company has recognized the impact of certain of these bonuses in its operating results for fiscal 1997, which include all amounts payable in accordance with the terms of such employment agreements. Legal matters _____________ The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. In the opinion of manage- ment, the amount of ultimate liability, if any, with respect to such actions will not have a material adverse effect on the results of opera- tions and financial position of the Company. (5) Stock plans In fiscal 1997, the Company adopted the 1996 Amended and Restated Stock Option and Restricted Stock Purchase Plan (the "Option/Stock Plan"), which amended and restated the Company's 1995 Amended and Restated Stock Option and Restricted Stock Purchase Plan and reserved 500,000 additional shares for grants and awards thereunder. The Option/Stock Plan provides for grants of incentive stock options ("ISOs") and non-qualified stock options, as well as awards of shares of restricted stock, subject to certain conditions. The Option/Stock Plan is currently administered by KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) the Compensation Committee of the Board of Directors. For ISOs granted pursuant to the Option/Stock Plan, the exercise price of options may not be less than the fair market value of the shares on the date of grant and the options may not have a term in excess of ten years. The Compensation Committee has the power to determine the vesting periods for options granted under the Option/Stock Plan. Only full-time employees of the Company and its subsidiaries may be granted ISOs under the Option/Stock Plan. ISOs granted under the Option/Stock Plan are intended to qualify as "incentive stock options" within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). For non-qualified stock options granted pursuant to the Option/Stock Plan, the exercise price of options may be more than, less than or equal to the fair market value of the shares on the date of grant (in the discretion of the Compensation Committee), and the options may be immediately exercisable (in the discretion of the Compensation Committee) and may have a term in excess of ten years. Employees, directors and officers of, and consultants or suppliers to, the Company and its subsid- iaries may be granted non-qualified stock options under the Option/Stock Plan. Awards of restricted stock may be granted under the Option/Stock Plan to purchase shares of Common Stock for a price per share that may be more than, equal to or less than the fair market value of such shares on the date of the award. The Compensation Committee has the right to determine vesting provisions, transfer restrictions and other conditions or restrictions with respect to each award. To date, no awards of restricted stock have been granted under the Option/Stock Plan or its predecessor plans. In fiscal 1997, the Company also adopted the Salesforce Bonus Plan (the "Salesforce Plan"), and reserved 500,000 shares for grants of options thereunder. The Salesforce Plan provides for grants of non- qualified stock options and certain cash bonuses, subject to certain conditions. The Salesforce Plan is currently administered by the Board of Directors and by the Chairman of the Board of the Company, who is also the head of the Company's salesforce. Any person employed by, or performing services for, the sales department of the Company or any subsidiary of the Company on a full-time basis (excluding directors and officers of KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) the Company) is eligible to receive stock options and cash bonuses under the Salesforce Plan. The exercise price of options granted under the Salesforce Plan must be equal to the fair market value of the shares on the date of grant, and the options shall vest at a rate of 20% at the end of each of the first three years from the date of grant and 40% at the end of the fifth year from grant and shall expire on the date ten years from the date of grant. In fiscal 1989, the Company adopted the Incentive Equity Plan for Senior Executives, pursuant to which an aggregate 2,550,000 shares of Common Stock were reserved for issuance to the Company's Chairman of the Board, President and Chief Executive Officer (who is now its Vice Chairman and Chief Executive Officer), and Executive Vice President and Chief Operating Officer, upon the exercise of options granted thereunder. Each of the Chairman of the Board and the President and Chief Executive Officer was granted non-qualified stock options to purchase 1,200,000 shares of Common Stock, 975,000 at an exercise price of $15.75 (the approximate fair market value on the date of grant) and 225,000 at an exercise price of $.01; the Executive Vice President was granted non-qualified stock options to purchase 150,000 shares of Common Stock, 120,000 at an exercise price of $15.75 and 30,000 at an exercise price of $.01. No additional options may be granted under the Executive Plan. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) The following table summarizes stock option activity at August 31 and for the fiscal years then ended: 1997 1996 1995 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price _______ ________ ________ ________ _______ ________ Outstanding at beginning of year 5,120,987 $35.29 2,220,402 $27.34 2,498,529 $27.52 Granted 1,477,667 $36.10 3,427,500 $39.49 73,000 $36.89 Exercised (299,051) $38.86 (396,415) $40.29 (171,527) $36.89 Canceled (258,000) $40.04 (130,500) $38.05 (179,600) $39.39 _________ _________ _________ Outstanding at end of year 6,041,603 $35.41 5,120,987 $35.29 2,220,402 $27.34 ========= ========= ========= Exercisable at end of year 2,457,436 $31.82 1,898,687 $29.03 1,311,102 $22.42 ========= ========= ========= The following table summarizes stock options outstanding and exercisable at August 31, 1997: Options Outstanding Options Exercisable ___________________ ___________________ Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Life Exercise Exercise Prices Shares (in years) Price Shares Price ________ ___________ __________ ________ ___________ _________ $.01 to $15.75 494,436 1.5 $12.73 494,436 $12.73 $15.83 to $28.50 233,400 3.3 $23.59 232,400 $23.59 $28.63 to $38.88 2,241,767 8.4 $35.99 510,600 $35.65 $39.19 to $43.58 3,072,000 8.2 $39.53 1,220,000 $39.52 ___________ __________ 6,041,603 2,457,436 =========== ========== In addition, in connection with the extensions of the Company's rights to distribute THE OPRAH WINFREY SHOW for the 1993-1994, 1994-1995 and 1995-1996 broadcast seasons, the Company granted options to the princi- pals of Harpo to purchase an aggregate 1.5 million shares of Common Stock. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) All of such options were fully vested at the time of grant and have a term of ten years. An aggregate 450,000 options were exercised on March 27, 1996, at an exercise price of $25.50 per share, and as of August 31, 1997, 1.05 million options remained outstanding, of which 550,000 bear exercise prices of $25.50 per share and 500,000 bear exercise prices of $33.625 per share (the closing market prices of the Common Stock as of the respective dates of such grants). On October 6, 1995, in connection with Harpo's and Ms. Winfrey's commitment to continue to produce and host the show for the 1996-1997 and 1997-1998 broadcast seasons, the Company granted options to the principals of Harpo to purchase an additional 500,000 shares of Common Stock. All of such options were fully vested at the time of grant, have a term of ten years and have an exercise price of $36.00 per share (the closing market price of the Common Stock on the date of grant). None of such options have been exercised. On September 15, 1997, in connection with Harpo's and Ms. Winfrey's commitment to continue to produce and host the show for the 1998-1999 and 1999-2000 broadcast seasons, the Company granted options to the principals of Harpo to purchase an additional 500,000 shares of Common Stock. All of such options were fully vested at the time of grant, have a term of ten years and have an exercise price of $39.31 per share (the closing market price of the Common Stock on the date of grant). None of such options have been exercised. In October 1995, the Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). As permitted under SFAS 123, the Company accounts for employee stock compensation arrangements in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, compensation cost is recognized only when employee stock options are granted at an exercise price lower than that of the market price of the stock on the date of grant. The Company generally does not recognize compensation expense with respect to stock option grants. For stock options granted by the Company after August 31, 1995, SFAS 123 requires that pro forma information regarding net income and earnings per share be disclosed as if the Company had accounted for its options under the fair value method outlined in SFAS 123, which requires a compensation charge to earnings for all options granted during the period. The fair value of the Company's options was estimated using the Black- Scholes option valuation model. The Black-Scholes option valuation model requires the use of highly subjective assumptions, including the expected stock price volatility and expected life of such options. Because the Company's stock options granted to employees have characteristics signifi- cantly different from those of traded options (for which the Black-Scholes KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) model was created) and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of Company stock options granted to employees. The fair value of the Company's stock options granted to employ- ees was estimated using the following weighted average assumptions at August 31: 1997 1996 __________ __________ Expected life (in years) 6.5 6.5 Risk-free interest rate 6.5% 6.5% Volatility 30.0% 30.0% Dividend yield 0% 0% The weighted average estimated fair value of employee stock options granted during fiscal 1997 and fiscal 1996 was $16.25 and $17.59 per share, respectively. For purposes of the pro forma disclosures, the estimated fair value of the options is generally amortized to compensation expense over the options' vesting period. The Company's pro forma net income and earnings per share compared to that actually reported at August 31 are as follows: 1997 1996 ________ ________ Net income (in thousands) As reported $143,382 $150,000 Pro forma 134,720 139,762 Earnings per share As reported $3.82 $3.98 Pro forma 3.63 3.76 The effects on the pro forma disclosures of applying SFAS 123 to fiscal 1997 and fiscal 1996 are not likely to be representative of the effects on pro forma disclosures of future years. Because SFAS 123 is applicable only to options granted subsequent to August 31, 1995, and the estimated fair value of the options is generally amortized over the five- year vesting period of the Company's employee stock options, the pro forma effect will not be fully reflected until fiscal 2000. The Company realizes a tax benefit in respect of non-qualified stock options based on the difference between the exercise price of the Common Stock subject to the option and the market price thereof on the date KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) of exercise. Tax deductions related to compensation expense in excess of that taken for financial reporting purposes are added to paid-in capital in the period of the tax deduction. The amount of such tax deductions added to paid-in capital approximated $3,976,000, $1,342,000 and $1,758,000 in fiscal 1997, 1996 and 1995, respectively. (6) Special dividend and stock repurchases On May 16, 1997, a special dividend distribution of $2.00 per share was paid to stockholders of record on April 25, 1997. The Company used approximately $74.8 million of its cash and liquid investments to pay the special dividend. On April 15, 1997, the Company announced that the Board of Direc- tors had approved a program to repurchase up to 5,000,000 shares of its Common Stock from time to time in the open market and in privately negoti- ated transactions. Through August 31, 1997, 971,000 shares of Common Stock were repurchased in open market transactions for aggregate consideration of approximately $36.2 million or approximately $37.20 per share. The Company intends to continue to repurchase shares of Common Stock in the open market and in privately negotiated transactions if and when it deems it advan- tageous to do so. Purchases under the share repurchase program will be financed out of the Company's available cash and liquid investments. KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7) Quarterly financial summaries (unaudited) 1st 2nd 3rd 4th Fiscal Quarter Quarter Quarter Quarter Year _______ _______ _______ _______ ________ (Dollars in thousands except per share data) Fiscal 1997: ___________ Revenues. . . . $164,287 $175,169 $166,751 $165,070 $671,277 Revenues less direct costs. 65,481 71,405 69,006 69,896 275,788 Income before provision for income taxes . . . . 53,923 57,185 54,890 55,928 221,926 Net income. . . 34,967 36,677 35,705 36,033 143,382 Primary earnings per share . . $.93 $.97 $.95 $.97 $3.82 ====================================================== 1st 2nd 3rd 4th Fiscal Quarter Quarter Quarter Quarter Year _______ _______ _______ _______ ________ (Dollars in thousands except per share data) Fiscal 1996: ___________ Revenues. . . . $162,139 $176,784 $165,763 $158,740 $663,426 Revenues less direct costs. 64,048 68,744 67,115 66,025 265,932 Income before provision for income taxes . . . . 66,320(1) 55,393 55,227 54,670 231,610(1) Net income. . . 43,662(1) 35,162 35,186 35,990 150,000(1) Primary earnings per share . . $1.17(1) $.93 $.92 $.95 $3.98(1) ======================================================= ____________________________ (1) Income before provision for income taxes, net income and primary earnings per share include a nonrecurring gain of approximately $14.1 million, $10.3 million and $.27, respectively, as a result of the Company's sale of Buffalo Broadcasting Co. Inc. to LIN Television Corporation for $95 million in cash which closed in October 1995. See Note 8. (8) Buffalo Broadcasting Co. Inc. In October 1995 the Company closed its agreement to sell WIVB-TV, the CBS-affiliated VHF television station in Buffalo, New York, to LIN Television Corporation for $95 million in cash. As a result of this trans- action, the Company recorded a nonrecurring gain of approximately $14.1 million, of which approximately $9.8 million represents cash proceeds to the Company from the sale. The remaining $4.3 million of such gain repre- sents the reversal of previously recognized accounting losses (with no associated income tax effect) in excess of the Company's original invest- ment. The Company acquired Buffalo Broadcasting Co. Inc. ("Buffalo") in December 1988 in a highly leveraged transaction. In April 1992, the Company and Buffalo's lenders entered into an agreement providing for a financial restructuring of Buffalo effective August 4, 1992. As a result of such restructuring, Buffalo ceased to be a consolidated subsidiary of King World. The Company's investment in Buffalo subsequent to the restruc- turing was carried at cost. PART III ________ The information required by Part III of Form 10-K is incorporated by reference from the registrant's definitive proxy statement for its 1998 annual meeting of stockholders, which is to be filed pursuant to Regula- tion 14A not later than December 29, 1997. PART IV _______ Item 10. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K ______________________________ (a)(1 and 2) Financial Statements. See Index to Consolidated Financial Statements which appears on page 30 of this Annual Report. (3) Exhibits: ________ Exhibit Number Description _______ ___________ 3.1. Registrant's Restated Certificate of Incorporation (in- corporated by reference to Exhibit 3.1 to the Registrant's Registration Statement No. 2-93987). 3.2. Certificate of Amendment to the Registrant's Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Registrant's Registration State- ment No. 33-8357). 3.3. Registrant's By-laws, as amended through June 25, 1997. 10.1. Agreement dated July 12, 1984 between Leo A. Gutman, Inc. and the Registrant with exhibits (incorporated by reference to Exhibit 10.3 to the Registrant's Registra- tion Statement No. 2-93987). 10.2. Agreements dated August 6, 1970, July 31, 1970, and May 29, 1969, between Hal Roach Studios, Inc. and the Registrant, with amendment dated June 8, 1983 and exhibits (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement No. 2-93987). 10.3.* Distribution Agreement dated December 15, 1982, between Califon Productions, Inc. and the Registrant, with amendment dated July 8, 1983 (incorporated by reference ______________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. to Exhibit 10.7 to the Registrant's Registration State- ment No. 2-93987). 10.4.* Amendment, dated April 23, 1990, to the Distribution Agreement dated December 15, 1982, between Califon Pro- ductions, Inc. and the Registrant (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1995). 10.5.* Distribution Agreement dated November 1, 1983, between Califon Productions, Inc. and the Registrant, with amendment dated March 26, 1984 (incorporated by refer- ence to Exhibit 10.9 to the Registrant's Registration Statement No. 2-93987). 10.6. Employment Agreement, dated December 20, 1995, between Mr. Roger King and the Registrant (incorporated by ref- erence to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended Febru- ary 29, 1996). 10.7. Employment Agreement, dated December 20, 1995, between Mr. Michael King and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended Febru- ary 29, 1996). 10.8. Employment Agreement, date as of June 6, 1997 between Jules Haimovitz and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 1997). ______________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. 10.9. Employment Agreements between the Registrant and the individuals named below: Name of Employee or Consultant Date of Agreement ________________ _________________ Steven Hirsch . . . . . September 3, 1996 Jonathan Birkhahn . . . September 1, 1996 Michael Spiessbach. . . September 3, 1996 Robert V. Madden. . . . September 3, 1996 (incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1996). 10.10. King World Productions, Inc. Retirement Savings Plan dated September 17, 1992 (incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993). 10.11. 1996 Amended and Restated Stock Option and Restricted Stock Purchase Plan of the Registrant. 10.12. Incentive Equity Compensation Plan for Senior Exec- utives of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-30695). 10.13. Form of Indemnification Agreement between the Regis- trant and the Registrant's directors (incorporated by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1992). 10.14.* Agreement dated January 30, 1987 between the Registrant and Harpo, Inc. and amendment thereto dated July 29, 1988 (incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993). 10.15.* Amendment dated as of October 15, 1989 to the Agreement dated January 30, 1987 between the Registrant and Harpo, Inc. (incorporated by reference to Exhibit 10.13 to the Registrant's Annual report on Form 10-K for the fiscal year ended August 31, 1995). ______________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. 10.16.* Agreement dated as of March 17, 1994 between the Regis- trant and Harpo, Inc. (incorporated by reference to 8- K/A dated May 18, 1994). 10.17.* Agreement dated as of October 6, 1995 between the Registrant and Harpo, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q/A for the fiscal quarter ended February 29, 1996). 10.18. Stock Option Agreement dated as of January 28, 1991 between the registrant and Oprah Winfrey (incorporated by reference to Exhibit 10.2 to the Registrant's Regis- tration Statement No. 33-71696). 10.19. Stock Option Agreement dated as of January 28, 1991 between the registrant and Jeffrey D. Jacobs (incor- porated by reference to Exhibit 10.3 to the Registrant's Registration Statement No. 33-71696). 10.20. Form of Stock Option Agreement between the registrant and Oprah Winfrey (incorporated by reference to Exhibit 10.19 to the Registrant's Annual report on Form 10-K for the fiscal year ended August 31, 1995). 10.21. Form of Stock Option Agreement between the registrant and Jeffrey D. Jacobs (incorporated by reference to Exhibit 10.20 to the Registrant's Annual report on Form 10-K for the fiscal year ended August 31, 1995). 10.22.** Settlement Agreement, dated as of September 15, 1997, by and among Califon Productions, Inc. on Jeopardy Productions, Inc., Sony Pictures Entertainment Inc., The Game Show Network, L.P. and the Registrant. 10.23.* Letter Agreement, dated October 1, 1991, between Orion Pictures Corporation and the Registrant, under which Orion Picture Corporation transferred to the Registrant trademark, copyright and other property rights as more fully described therein to the television series enti- tled "Hollywood Squares" with accompanying Security Agreement and Assignment. 10.24** Agreement made and entered into on the 14th day of May, 1997, by and between K.W.M., Inc. and Full Moon & High Tide Productions, Inc., providing the services of Roseanne. __________________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. ** Certain information in this exhibit is deleted pursuant to a request to the Securities and Exchange Commission for confidential treatment. 10.25.* Agreement dated as of June 2, 1988 between King World F.S.C. Corporation and Unilever N.V. and amendment thereto dated as of June 13, 1989 (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994). 10.26.* Amendment dated as of September 19, 1991 to the Agree- ment dated as of June 2, 1988 between King World F.S.C. Corporation and Unilever N.V. 10.27** Amendment dated June 13, 1994 to the Agreement dated June 2, 1988, as amended as of June 13, 1989 and Sep- tember 19, 1991, between King World F.S.C. Corporation and Unilever N.V. (incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994). 10.28** Amendment dated as of July 11, 1995 to the Agreement dated June 2, 1988, as amended as of June 13, 1989, September 19, 1991 and as of June 13, 1994 between King World F.S.C. Corporation and Unilever N.V. (incorporat- ed by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1995). 10.29* Amendment dated as of September 1, 1996 to the Agree- ment dated June 2, 1988, as amended as of June 13, 1989, September 19, 1991, June 13, 1994 and July 11, 1995 between King World F.S.C. Corporation and Unilever N.V. (incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1996). 21.1. List of Subsidiaries of the Registrant. 23.1. Consent of Independent Public Accountants. __________________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. ** Certain information in this exhibit is deleted pursuant to a request to the Securities and Exchange Commission for confidential treatment. (b) Reports on Form 8-K filed during the last quarter of the fiscal year ended August 31, 1997: None. For the purposes of complying with the amendments to the rules governing Form S-8 under the Securities Act of 1933, as amended, the undersigned registrant hereby undertakes as follows, which under- taking shall be incorporated by reference into registrant's Registra- tion Statement on Form S-8 No. 33-30695 (filed August 24, 1990): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, offi- cers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforce- able. In the event that a claim for indemnification against such liabilities (other than for the payment by the regis- trant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemni- fication by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES __________ Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 24, 1997 KING WORLD PRODUCTIONS, INC. By /s/ Steven A. LoCascio Steven A. LoCascio Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date _________ _____ ____ /s/ Michael King Vice Chairman and November 24, 1997 Michael King Chief Executive Officer and Director (principal executive officer) /s/ Roger King Director November 18, 1997 Roger King /s/ Diana King Director November 18, 1997 Diana King /s/ Richard King Director November 18, 1997 Richard King /s/ Ronald S. Konecky Director November 21, 1997 Ronald S. Konecky /s/ James M. Rupp Director November 23, 1997 James M. Rupp /s/ Joel Chaseman Director November 19, 1997 Joel Chaseman /s/ Steven A. LoCascio Senior Vice President November 24, 1997 Steven A. LoCascio and Chief Financial Officer (principal financial and accounting officer) EXHIBIT INDEX _____________ Exhibit No. Description Page _______ ___________ ____ 3.1. Registrant's Restated Certificate of Incorporation (in- corporated by reference to Exhibit 3.1 to the Registrant's Registration Statement No. 2-93987). 3.2. Certificate of Amendment to the Registrant's Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Registrant's Registration State- ment No. 33-8357). 3.3. Registrant's By-laws, as amended through June 25, 1997. 10.1. Agreement dated July 12, 1984 between Leo A. Gutman, Inc. and the Registrant with exhibits (incorporated by reference to Exhibit 10.3 to the Registrant's Registra- tion Statement No. 2-93987). 10.2. Agreements dated August 6, 1970, July 31, 1970, and May 29, 1969, between Hal Roach Studios, Inc. and the Registrant, with amendment dated June 8, 1983 and exhibits (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement No. 2-93987). 10.3.* Distribution Agreement dated December 15, 1982, between Califon Productions, Inc. and the Registrant, with amendment dated July 8, 1983 (incorporated by reference to Exhibit 10.7 to the Registrant's Registration State- ment No. 2-93987). 10.4.* Amendment, dated April 23, 1990, to the Distribution Agreement dated December 15, 1982, between Califon Pro- ductions, Inc. and the Registrant (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1995). 10.5.* Distribution Agreement dated November 1, 1983, between Califon Productions, Inc. and the Registrant, with amendment dated March 26, 1984 (incorporated by refer- ence to Exhibit 10.9 to the Registrant's Registration Statement No. 2-93987). ___________________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. Exhibit No. Description Page _______ ___________ ____ 10.6. Employment Agreement, dated December 20, 1995, between Mr. Roger King and the Registrant (incorporated by ref- erence to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended Febru- ary 29, 1996). 10.7. Employment Agreement, dated December 20, 1995, between Mr. Michael King and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended Febru- ary 29, 1996). 10.8. Employment Agreement, date as of June 6, 1997 between Jules Haimovitz and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 1997). 10.9. Employment Agreements between the Registrant and the individuals named below: Name of Employee or Consultant Date of Agreement ________________ _________________ Steven Hirsch . . . . . September 3, 1996 Jonathan Birkhahn . . . September 1, 1996 Michael Spiessbach. . . September 3, 1996 Robert V. Madden. . . . September 3, 1996 (incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1996). 10.10. King World Productions, Inc. Retirement Savings Plan dated September 17, 1992 (incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993). 10.11. 1996 Amended and Restated Stock Option and Restricted Stock Purchase Plan of the Registrant. Exhibit No. Description Page _______ ___________ ____ 10.12. Incentive Equity Compensation Plan for Senior Exec- utives of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-30695). 10.13. Form of Indemnification Agreement between the Regis- trant and the Registrant's directors (incorporated by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1992). 10.14.* Agreement dated January 30, 1987 between the Registrant and Harpo, Inc. and amendment thereto dated July 29, 1988 (incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993). 10.15.* Amendment dated as of October 15, 1989 to the Agreement dated January 30, 1987 between the Registrant and Harpo, Inc. (incorporated by reference to Exhibit 10.13 to the Registrant's Annual report on Form 10-K for the fiscal year ended August 31, 1995). 10.16.* Agreement dated as of March 17, 1994 between the Regis- trant and Harpo, Inc. (incorporated by reference to 8- K/A dated May 18, 1994). 10.17.* Agreement dated as of October 6, 1995 between the Registrant and Harpo, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q/A for the fiscal quarter ended February 29, 1996). 10.18. Stock Option Agreement dated as of January 28, 1991 between the registrant and Oprah Winfrey (incorporated by reference to Exhibit 10.2 to the Registrant's Regis- tration Statement No. 33-71696). 10.19. Stock Option Agreement dated as of January 28, 1991 between the registrant and Jeffrey D. Jacobs (incor- porated by reference to Exhibit 10.3 to the Registrant's Registration Statement No. 33-71696). ___________________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. Exhibit No. Description Page _______ ___________ ____ 10.20. Form of Stock Option Agreement between the registrant and Oprah Winfrey (incorporated by reference to Exhibit 10.19 to the Registrant's Annual report on Form 10-K for the fiscal year ended August 31, 1995). 10.21. Form of Stock Option Agreement between the registrant and Jeffrey D. Jacobs (incorporated by reference to Exhibit 10.20 to the Registrant's Annual report on Form 10-K for the fiscal year ended August 31, 1995). 10.22.** Settlement Agreement, dated as of September 15, 1997, by and among Califon Productions, Inc. on Jeopardy Productions, Inc., Sony Pictures Entertainment Inc., The Game Show Network, L.P. and the Registrant. 10.23** Letter Agreement, dated October 1, 1991, between Orion Pictures Corporation and the Registrant, under which Orion Picture Corporation transferred to the Registrant trademark, copyright and other property rights as more fully described therein to the television series enti- tled "Hollywood Squares" with accompanying Security Agreement and Assignment. 10.24** Agreement made and entered into on the 14th day of May, 1997, by and between K.W.M., Inc. and Full Moon & High Tide Productions, Inc., providing the services of Roseanne. 10.25.* Agreement dated as of June 2, 1988 between King World F.S.C. Corporation and Unilever N.V. and amendment thereto dated as of June 13, 1989 (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994). ___________________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. ** Certain information in this exhibit is deleted pursuant to a request to the Securities and Exchange Commission for confidential treatment. Exhibit No. Description Page _______ ___________ ____ 10.26.* Amendment dated as of September 19, 1991 to the Agree- ment dated as of June 2, 1988 between King World F.S.C. Corporation and Unilever N.V. 10.27* Amendment dated June 13, 1994 to the Agreement dated June 2, 1988, as amended as of June 13, 1989 and Sep- tember 19, 1991, between King World F.S.C. Corporation and Unilever N.V. (incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994). 10.28* Amendment dated as of July 11, 1995 to the Agreement dated June 2, 1988, as amended as of June 13, 1989, September 19, 1991 and as of June 13, 1994 between King World F.S.C. Corporation and Unilever N.V. (incorporat- ed by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1995). 10.29* Amendment dated as of September 1, 1996 to the Agree- ment dated June 2, 1988, as amended as of June 13, 1989, September 19, 1991, June 13, 1994 and July 11, 1995 between King World F.S.C. Corporation and Unilever N.V. (incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1996). 21.1. List of Subsidiaries of the Registrant. 23.1. Consent of Independent Public Accountants. ___________________________ * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. EX-3.3 2 AMENDED AND RESTATED BYLAWS OF KING WORLD PRODUCTIONS Exhibit 3.3 BY-LAWS OF KING WORLD PRODUCTIONS, INC. (Amended and Restated as of June 25, 1997) ARTICLE I Stockholders Section 1.1 ANNUAL MEETINGS. (a) An annual meeting of stock- holders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. At any such annual meeting any business properly brought before the meeting may be transacted. (b) To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the chairman of the meeting or the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the chairman of the meeting or the Board of Direc- tors or (iii) otherwise properly brought before the meeting by a stockhold- er. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given written notice thereof, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation, not more than 120 days or less than 90 days in advance of the anniversary date of the immediately preceding annual meeting. Any such notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and in the event that such business includes a proposal to amend either the Certificate of incorporation or By- laws of the Corporation, the language of the proposed amendment, (ii) the name and address of the stockholder proposing such business, (iii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business, (iv) any material interest of the stockholder in such business and (v) if the stock- holder intends to solicit proxies in support of such stockholder's propos- al, a representation to that effect. No business shall be conducted at an annual meeting of stockholders except in accordance with this Section 1.1(b), and chairman of the meeting may refuse to permit any business to be brought before an annual meeting without compliance with the foregoing procedures or if the stockholder solicits proxies in support of such stockholder's proposal without such stockholder having made the representa- tion required by clause (v) of the preceding sentence." Section 1.2 SPECIAL MEETINGS. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquida- tion, special meetings of the stockholders for any purpose or purposes may be called only by the Chairman of the Board, the President, or a majority of the entire Board of Directors. Only such business as is specified in the notice of any special meeting of the stockholders shall come before such meeting. Section 1.3 NOTICE OF MEETINGS. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4 ADJOURNMENTS. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.5 QUORUM. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these By- laws, the holders of a majority of the outstanding shares of each class of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 1.4 of these By-laws until a quorum shall attend. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6 ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7 VOTING; PROXIES. Unless otherwise provided in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Unless required by law or determined by the chairman of the meeting to be advis- able, the vote on any matter, including the election of directors, need not be by written ballot. In the case of a vote by written ballot, each ballot shall be signed by the stockholder voting, or by such stockholder's proxy, and shall state the number of shares voted. Either the Board of Directors or, in the absence of a designation of inspectors by the Board, the chairman of any meeting of stockholders may, in its or such person's discretion, appoint two or more inspectors to act at any meeting of stockholders. Such inspectors shall perform such duties as shall be specified by the Board or the chairman of the meeting. Inspectors need not be stockholders. No director or nominee for the office of director shall be appointed such inspector. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. With respect to other matters, unless otherwise provided by law or by the Certificate of Incorporation or these By-laws, the affirmative vote of the holders of a majority of the shares of all classes of stock present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class is required, the affirmative vote of the holders of a majority of the shares of each class present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the Certificate of Incorporation or these By-laws. Section 1.8 ACTION BY WRITTEN CONSENT. (a) Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. (b) Consents to corporate action shall be valid for a maximum of 60 days after the date of the earliest dated consent delivered to the Corporation in the manner provided in Section 228(c) of the Delaware General Corporation Law. Consents may be revoked by written notice (i) to the Corporation, (ii) to the stockholder or stockholder soliciting consents or soliciting revocations in opposition to action by consent (the "Solicit- ing Stockholders"), or (iii) to a proxy solicitor or other agent designated by the Corporation or the Soliciting Stockholders. (c) Within ten business days after receipt of the earliest dated consent delivered to the Corporation in the manner provided in Section 228(c) of the Delaware General Corporation Law or the determination by the Board of Directors of the Corporation that the Corporation should seek corporate action by written consent, as the case may be, the Secretary of the Corporation shall engage nationally recognized independent inspectors of elections for the purpose of performing a ministerial review of the validity of the consents and revocations. The cost of retaining inspectors of elections shall be borne by the Corporation. (d) Following appointment of the inspectors, consents and revocations shall be delivered to the inspectors upon receipt by the Corporation, the Soliciting Stockholder or their proxy solicitors or other designated agents. As soon as practicable following the earlier of (i) the receipt by the inspectors, a copy of which shall be delivered to the Corporation, of any written demand by the Soliciting Stockholders, or (ii) 60 days after the date of the earliest dated consent delivered to the Corporation in the manner provided in Section 228(c) of the Delaware General Corporation Law, the inspectors shall issue a preliminary report to the Corporation and the Soliciting Stockholders stating the number of valid and unrevoked consents and whether, based on their preliminary count, the requisite number of valid and unrevoked consents has been obtained to authorize or take the action specified in the consents. (e) Unless the Corporation and the Soliciting Stockholders shall agree to a shorter or longer period, the Corporation and the Soliciting Stockholders shall have 48 hours to review the consents and revocations and to advise the inspectors and the opposing party in writing as to whether they intend to challenge the preliminary report of the inspectors. If no written notice of an intention to challenge the preliminary report is 5 received within 48 hours after the inspectors' issuance of the preliminary report, the inspectors shall issue to the Corporation and the Soliciting Stockholders their final report containing the information from the inspectors' determination with respect to whether the requisite number of valid and unrevoked consents was obtained to authorize and take the action specified in the consents. If the Corporation or the Soliciting Stockhold- ers issue written notice of an intention to challenge the inspectors' preliminary report within 48 hours after the issuance of that report, a challenge session shall be scheduled by the inspectors as promptly as practicable. Following completion of the challenge session, the inspectors shall as promptly as practicable issue their final report to the Soliciting Stockholders and the Corporation, which report shall contain the informa- tion included in the preliminary report, plus any change in the vote total as a result of the challenge and a certification of whether the requisite number of valid and unrevoked consents was obtained to authorize or take the action specified in the consents. Section 1.9 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed, (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Notwithstanding any inconsistent provision which may be contained in these By-Laws, in order that the Corporation may determine the stock- holders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date. The Board of Directors shall thereafter promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days of the date upon which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the Corporation having custody of the book in which proceedings of stockholders' meetings are recorded, to the attention of the Secretary of the Corporation. Delivery shall be by hand or by certified a or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action." Section 1.10 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secre- tary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockhold- er, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. ARTICLE II Board of Directors Section 2.1 GENERAL POWERS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by law or by the certificate of incorporation of the corporation directed or required to be exercised or done by the stockholders. Section 2.2 NUMBER, QUALIFICATION AND ELECTION. Except as otherwise fixed by or pursuant to the provisions of Article IV of the Certificate of Incorporation of the Corporation relating to the rights of the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, the number of the directors of the Corporation shall be seven (7), but, by vote of a majority of the entire Board of Directors, the number thereof may be increased without limit, or decreased to not less than three (3), by amendment to this Section 2.2. The directors, other than those who may be elected by the holders of shares of any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation pursuant to the terms of Article IV of the Certificate of Incorporation or any resolution or resolutions providing for the issuance of such stock adopted by the Board, shall be classified, with respect to the time for which they severally hold office, into three classes as follows: one class of two (2) directors shall be originally elected for a term expiring at the annual meeting of stockholders to be held in 1986, another class of two (2) directors shall be originally elected for a term expiring at the annual meeting of stockholders to be held in 1987 and another class of three (3) directors shall be originally elected for a term expiring at the annual meeting of stockholders to be held in 1988, with each class to hold office until its successors are elected and qualified. At each annual meeting of the stockholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Each director shall be a least 21 years of age. Directors need not be stockholders of the Corporation. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation, at each annual meeting of the stockholders there shall be elected the directors of the class the term of office of which shall then expire. Section 2.3 NOTIFICATION OF NOMINATIONS. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Any stockhold- er entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if written notice of such stockholders' intent to make such nomination is given, either by personal delivery or by United States mail, Postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, not more than 120 days or less than 90 days in advance of the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business an the seventh day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth (a) the name and address of the stockholder who intends to make the nomination and of the person or, persons to be nominated, (b) a representa- tion that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder, (d) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee be nominated, or intended to be nominated, by the Board of Directors; (e) the consent of each nominee to serve as a director of the corporation if so elected and (f) if the stockholder intends to solicit proxies in support of such stockholder's nominee(s), a representation to that effect. The chairman of the meeting may refuse to acknowledge the nomination of any person which was not made in accordance with the foregoing procedure or if the stock- holder solicits proxies in support of such stockholder's nominee(s) without such stockholder having made the representation required by clause (f) of the preceding sentence. Section 2.4 REGULAR MEETINGS. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given. Section 2.5 SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, by the President or by a majority of the members of the Board. Reasonable notice thereof shall be given by the person or persons calling the meeting. Section 2.6 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE PERMITTED. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participat- ing in the meeting can hear each other, and participation in a meeting pursuant to this By-law shall constitute presence in person at such meeting. Section 2.7 QUORUM; VOTE REQUIRED FOR ACTION. Except as other- wise provided by law, the Certificate of Incorporation or these By-laws, at any meeting of the Board of Directors a majority of the entire Board shall constitute a quorum for the transaction of business and, except as so provided, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall attend. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting originally called. Section 2.8 ORGANIZATION. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.9 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceed- ings of the Board or committee. Section 2.10 RESIGNATIONS. Any director of the Company may at any time resign by giving written notice to the Board of Directors, the Chairman of the Board, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and, unless otherwise speci- fied therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.11 VACANCIES. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation, any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall only be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, and newly created directorships resulting from any increase in the number of directors shall be filled by the Board, or if not so filled, by the stockholders at the next annual meeting thereof or at a special meeting called for that purpose in accordance with 1.2 of these By-laws. Any director elected in accor- dance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. Section 2.12 COMPENSATION OF DIRECTORS. The Board of Directors shall have the authority to fix the compensation of directors. ARTICLE III Committees Section 3.1 COMMITTEES. The Board of Directors may, by resolu- tion passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alter- nate members of any Committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recom- mending to the stockholders the sale, lease or exchange of all or substan- tially all the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolu- tion, removing or indemnifying directors or amending these By-laws; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. The Board shall have power at any time to change the membership of any committee, to fill all vacancies in it and to discharge it, either with or without cause. Section 3.2 COMMITTEE RULES. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these By-laws. ARTICLE IV Officers Section 4.1 OFFICERS; ELECTION. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person. Section 4.2 TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the first meeting of the Board after the annual meeting of stockholders next succeed- ing his or her election and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting. Section 4.3 CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board and as may be provided by law. Section 4.4 VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board and as may be provided by law. Section 4.5 PRESIDENT. In the absence of the Chairman of the Board and Vice Chairman of the Board, the President shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. The President shall be the chief executive officer and shall have general charge and supervision of the business of the Corporation and, in general, shall perform all duties incident to the office of president of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as may be provided by law. Section 4.6 VICE PRESIDENTS. The Vice President or Vice Presi- dents, at the request or in the absence of the President or during the President's inability to act, shall perform the duties of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall perform any of such duties; or if such determination is not made by the Board, the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties. The Vice President or Vice Presidents shall have such other powers and shall perform such other duties as may, from time to time, be assigned to him or her or them by the Board or the President or as may be provided by law. Section 4.7 SECRETARY. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose, shall see that all notices are duly given in accordance with the provisions of these By-laws or as required by law, shall be custodian of the records of the Corporation, may affix the corporate seal to any document the execution of which, on behalf of the Corporation, is duly authorized, and when so affixed may attest the same, and, in general, shall perform all duties incident to the office of secretary of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law. Section 4.8 TREASURER. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Board of Directors. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his or her duties, with such surety or sureties as the Board may determine. The Treasurer shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the Corporation, shall render to the President and to the Board, whenever requested, an account of the financial condition of the Corporation, and, in general, shall perform all the duties incident to the office of treasurer of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law. Section 4.9 OTHER OFFICERS. The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these By-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. ARTICLE V Stock Section 5.1 CERTIFICATES. Every holder of stock in the Corpora- tion shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such holder in the Corporation. Any of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond in such sum and with such surety or sureties as the Corporation may direct sufficient to indemnify the Corporation and its transfer agents or registrars against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certifi- cate. Section 5.3 TRANSFER OF SHARES. Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation by the holder thereof, or by such holder's attorney thereunto authorized by a power of attorney duly executed and filed with the Secre- tary of the Corporation or a transfer agent for such stock, if any, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. The person in whose name shares stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; provided, however, that whenever any transfer of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given to the Secretary or to such transfer agent, such fact shall be stated in the entry of the transfer. No transfer of shares shall be valid as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. ARTICLE VI Miscellaneous Section 6.1 FISCAL YEAR. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2 SEAL. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Direc- tors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these By- laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these By- laws. Section 6.4 INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a direc- tor, officer or employee. For purposes of this By-law, the term "Corpora- tion" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. Section 6.5 INTERESTED DIRECTORS; QUORUM. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partner- ship, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are dis- closed or are known to the Board or the committee, and the Board or commit- tee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transac- tion are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. Section 6.6 FORM OF RECORDS. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corpora- tion shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 6.7 AMENDMENT OF BY-LAWS. These By-laws may be amended or repealed, and new By-laws adopted, by the Board of Directors at any meeting thereof, provided that such proposed action in respect thereof shall be stated in the notice of such meeting. The stockholders entitled to vote shall have the power to adopt additional By-laws and may amend or repeal any By-law, whether or not adopted by them, only to the extent and in the manner provided in the Certificate of Incorporation. EX-10.11 3 1996 AMENDED AND RESTATED STOCK OPTION Exhibit 10.11 KING WORLD PRODUCTIONS, INC. 1996 AMENDED AND RESTATED STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN SECTION 1. PURPOSE. The purpose of the King World Productions, Inc. 1996 Amended and Restated Stock Option and Restricted Stock Purchase Plan (the "Plan") is to promote the interests of King World Productions, Inc., a Delaware corporation (the "Company"), and any Subsidiary thereof, and its stockholders, by providing an opportunity to selected employees, officers and directors of the Company or any Subsidiary thereof as of the date of the adoption of this Plan or at any time thereafter to purchase Common Stock of the Company. By encouraging such stock ownership, the Company seeks to attract, retain and motivate such employees and persons and to encourage such employees and persons to devote their best efforts to the business and financial success of the Company. It is intended that this purpose will be effected by the granting of "non-qualified stock options" and/or "incentive stock options" to acquire the common stock of the Company and/or by the granting of rights to purchase the common stock of the Company on a "restricted stock" basis. Under the Plan, the Board of Directors (or the Committee) shall have the authority (in its sole discre- tion) to grant "incentive stock options" within the meaning of Section 422(b) of the Code, "nonqualified stock options" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto, or "re- stricted stock" awards. The Plan amends and restates the Company's 1989 Amended and Restated Stock Option and Restricted Stock Purchase Plan (the "1989 Stock Plan"), adopted by the Company on May 4, 1989, as amended and restated by the Company on January 24, 1994 and January 19, 1996. The 1989 Stock Plan amended and restated, and incorporated into one document, the Incentive Stock Option Plan and the Non-Qualified Stock Option Plan, both adopted by the Company on October 24, 1984 (collectively, the "1985 Stock Plans"). SECTION 2. DEFINITIONS. For purposes of this Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context. "AWARD" shall mean an award of the right to purchase Common Stock granted under the provisions of Section 7 of the Plan. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COMMITTEE" shall mean the committee of the Board of Directors referred to in Section 5 hereof. "COMMON STOCK" shall mean the Common Stock, $.01 par value, of the Company. "EMPLOYEE" shall mean (i) with respect to an ISO, any person including an officer or director of the Company, who, at the time an ISO is granted to such person hereunder, is employed on a full-time basis by the Company or any Subsidiary of the Company, and (ii) with respect to a Non-Qualified Option and/or an Award, any person employed by, or performing services for, the Company or any Subsidiary of the Company, including, without limitation, directors and officers. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "ISO" shall mean an Option granted under the Plan which consti- tutes and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. "NON-EMPLOYEE DIRECTOR" shall mean any director who is not an employee of the Company or any of its subsidiaries, including any "non-employee director" within the meaning of Rule 16b-3 of the Exchange Act. "NON-QUALIFIED OPTION" shall mean an Option granted to a Partici- pant pursuant to the Plan which is intended to be, and qualifies as, a "non-qualified stock option" as described in Treasury Regulation Section 1.83-7 and which shall not constitute or be treated as an ISO. "OPTION" shall mean any ISO or Non-Qualified Option granted to a Participant pursuant to this Plan. "PARTICIPANT" shall mean any Employee (including a Non-Employee Director) to whom an Award and/or an Option is granted under this Plan. "PARENT OF THE COMPANY" shall have the meaning set forth in Section 424(e) of the Code. "SUBSIDIARY OF THE COMPANY" shall have the meaning set forth in Section 424(f) of the Code. SECTION 3. ELIGIBILITY. Awards and/or Options may be granted to any Employee. The Board of Directors (or the Committee) shall have the sole authority to select the persons to whom Awards and/or Options are to be granted hereunder, and to determine whether a person is to be granted a Non-Qualified Option, an ISO or an Award or any combination thereof. No person shall have any right to participate in the Plan. Any person selected by the Board of Directors (or the Committee) for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period. SECTION 4. COMMON STOCK SUBJECT TO THE PLAN. 4.1 The total number of shares of Common Stock for which Options and/or Awards may be granted under this Plan shall not exceed in the aggregate eight million three hundred thousand (8,300,000) shares of Common Stock, including shares of Common Stock reserved under the 1989 Stock Plan and the 1985 Stock Plans. 4.2 The shares of Common Stock that may be subject to Options and/or Awards granted under this Plan may be either authorized and unissued shares or shares reacquired at any time and now or hereafter held as treasury stock as the Board of Directors may determine. In the event that any outstanding Option or Award expires, is terminated or is forfeited for any reason, the shares allocable to the unexercised portion of such Option or Award may again be subject to an Option and/or Award granted under this Plan, except that the shares allocable to the forfeited portion of any such Award shall not again be subject to an Option and/or Award granted under this Plan if the Participant received any of the benefits of ownership of the Common Stock underlying the unexercised or forfeited portion of such Award. 4.3. SPECIAL ISO LIMITATIONS. (a) The aggregate fair market value (determined as of the date an ISO is granted) of the shares of Common Stock with respect to which ISOs are exercisable for the first time by an Employee during any calendar year (under all Incentive Stock Option Plans of the Company or any Parent or Subsidiary of the Company) shall not exceed $100,000. (b) No ISO shall be granted to an Employee who, at the time the ISO is granted, owns (actually or constructively under the provisions of Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, unless the option price is at least 110% of the fair market value (determined as of the time the ISO is granted) of the shares of Common Stock subject to the ISO and the ISO by its terms is not exercisable more than five years from the date it is granted. 4.4. Notwithstanding any other provision of the Plan, the provisions of Sections 4.3(a) and (b) shall not apply, nor shall they be construed to apply, to any Non-Qualified Option or Award granted under the Plan. 4.5. Notwithstanding any other provision of this Plan, no person shall be granted Options and/or Awards for more than 1,500,000 shares of Common Stock in any period of five fiscal years. SECTION 5. ADMINISTRATION OF THE PLAN. 5.1 The Plan shall be administered by (i) the Board of Directors or (ii) by a committee of two or more directors (the "Committee"), each of whom is a Non-Employee Director, established by the Board of Directors. The Committee shall be appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. 5.2. (a) OPTIONS. The Board of Directors (or the Committee) shall have the sole authority and discretion under this Plan (i) to select the Participants who are to be granted Options hereunder; (ii) to designate whether any Option to be granted hereunder is to be an ISO or a Non-Qualified Option; (iii) to establish the number of shares of Common Stock that may be issued under each Option; (iv) to determine the time and the conditions subject to which Options may be exercised in whole or in part; (v) to determine the form of the consideration that may be used to purchase shares of Common Stock upon exercise of any Option (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to exercise an Option); (vi) to impose restrictions and/or conditions with respect to shares of Common Stock acquired upon exercise of an Option; (vii) to determine the circum- stances under which shares of Common Stock acquired upon exercise of any Option may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which shares acquired upon exercise of an Option may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired upon exercise of an Option may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to establish a vesting provision for any Option relating to the time (or the circumstance) when the Option may be exercised by a Participant, including vesting provisions which may be contingent upon the Company meeting specified financial goals; (x) to accelerate the time when outstanding Options may be exercised, PROVIDED, HOWEVER, that any ISOs shall be "accelerated" within the meaning of Section 424(h) of the Code; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Option not inconsistent with the provisions of this Plan. (b) AWARDS. The Board of Directors (or the Committee) shall have the sole authority and discretion under this Plan (i) to select the Participants who are to be granted Awards hereunder; (ii) to determine the amount to be paid by a Participant to acquire shares of Common Stock pursuant to an Award, which amount may be equal to, more than or less than 100% of the fair market value of such shares on the date the Award is granted (but in no event less than the par value of such shares); (iii) to determine the time or times and the conditions subject to which Awards may be made; (iv) to determine the time or times and the conditions subject to which the shares of Common Stock subject to an Award are to become vested and no longer subject to repurchase by the Company; (v) to establish transfer restrictions and the terms and conditions on which any such transfer restrictions with respect to an Award shall lapse; (vi) to establish vesting provisions with respect to any shares of Common Stock subject to an Award, including vesting provisions which may be contingent upon the Company meeting specified financial goals; (vii) to determine the circumstances under which shares of Common Stock acquired pursuant to an Award may be subject to repurchase by the Company; (viii) to determine the time or times and the conditions subject to which any shares of Common Stock subject to an Award may be repurchased by the Company (as well as the terms and conditions of any such repurchase); (ix) to determine the circumstances and conditions subject to which a proposed sale of shares of Common Stock subject to an Award may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (x) to determine the form of consideration that may be used to purchase shares of Common Stock pursuant to an Award (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to purchase the Common Stock subject to an Award); (xi) to accelerate the time at which any or all restrictions imposed with respect to any shares of Common Stock subject to an Award will lapse or otherwise remove any and all such restrictions; and (xii) to establish any other terms, restrictions and/or conditions applica- ble to any Award not inconsistent with the provisions of this Plan. 5.3. The Board of Directors (or the Committee) shall be autho- rized to interpret the Plan and may, from time to time, adopt such rules and regulations, not inconsistent with the provisions of the Plan, as it may deem advisable to carry out the purpose of this Plan. 5.4. The interpretation and construction by the Board of Direc- tors (or the Committee) of any provision of the Plan, any Option and/or Award granted hereunder or any agreement evidencing any such Option and/or Award shall be final and conclusive upon all parties. 5.5. Directors (or members of the Committee, if established) may vote on any matter affecting the administration of the Plan or the granting of Options or Awards under the Plan. 5.6. All expenses and liabilities incurred by the Board of Directors (or the Committee) in the administration of the Plan shall be borne by the Company. The Board of Directors (or the Committee) may employ attorneys, consultants, accountants or other persons in connection with the administration of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. No member of the Board of Directors (or the Committee) shall be liable for any action, determination or interpretation taken or made in good faith with respect to the Plan or any Option and/or Award granted hereunder. SECTION 6. TERMS AND CONDITIONS OF OPTIONS. 6.1. ISOS. The terms and conditions of each ISO granted under the Plan shall be specified by the Board of Directors (or the Committee) and shall be set forth in an ISO agreement between the Company and the Participant in such form as the Board of Directors (or the Committee) shall approve. The terms and conditions of each ISO shall be such that each ISO issued hereunder shall constitute and shall be treated as an "incentive stock option" as defined in Section 422 of the Code. The terms and conditions of any ISO granted hereunder need not be identical to those of any other ISO granted hereunder. The terms and conditions of each ISO shall include the following: (a) The option price shall be fixed by the Board of Director (or the Committee) but shall in no event be less than 100% (or 110% in the case of an Employee referred to in Section 4.3(b) hereof) of the fair market value of the shares of Common Stock subject to the ISO on the date the ISO is granted. For purposes of this Plan, the fair market value per share of Common Stock as of any day shall mean the average of the closing prices of sales of shares of Common Stock on all national securities exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ system as of the 3:30 p.m., New York time, on such day, or, if on any day the Common Stock shall not be quoted in the NASDAQ system, the average of the high and low bid and asked prices on such day in the over-the-counter market as reported by National Quotation Bureau Incorporated, or any similar successor organization. If at any time the Common Stock is not listed on any national securities exchange or quoted in the NASDAQ system or the over-the-counter market, the fair market value of the shares of Common Stock subject to an Option on the date the ISO is granted shall be the fair market value thereof determined in good faith by the Board of Directors (or the Committee). (b) ISOs, by their terms, shall not be transferable otherwise than by will or the laws of descent and distribution, and, during an Optionee's lifetime, an ISO shall be exercisable only by the Optionee. (c) The Board of Directors (or the Committee) shall fix the term of all ISOs granted pursuant to the Plan (including the date on which such ISO shall expire and terminate), PROVIDED, HOWEVER, that such term shall in no event exceed ten years from the date on which such ISO is granted (or, in the case of an ISO granted to an Employee referred to in Section 4.3(b) hereof, such term shall in no event exceed five years from the date on which such ISO is granted). Each ISO shall be exercisable in such amount or amounts, under such condi- tions and at such times or intervals or in such installments as shall be determined by the Board of Directors (or the Committee) in its sole discretion. (d) In the event that the Company or any Parent or Subsidiary of the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Partici- pant as a result of any "disqualifying disposition" of any shares of Common Stock acquired upon exercise of an ISO granted hereunder, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, such Participant will be required to pay to the Company, or make other arrangements satis- factory to the Company regarding payment to the Company of, the aggre- gate amount of any such taxes. A Participant may use issued and outstanding Common Stock for the payment of taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. (e) In the sole discretion of the Board of Directors (or the Committee), the terms and conditions of any ISO may (but need not) include any of the following provisions: (i) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis for any reason other than as a result of his death or "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one month after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (ii) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis by reason of his "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one year after the date on which the Participant ceased to be so employed, and only to the extent that the Optionee could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (iii) In the event a Participant shall die while in the full-time employ of the Company or a Parent or Subsidiary of the Company (or within a period of one month after ceasing to be an Employee for any reason other than such "disability" or within a period of one year after ceasing to be an Employee by reason of such "disability"), the unexercised portion of any ISO held by such Participant at the time of his death may only be exercised within one year after the date of such Participant's death, and only to the extent that the Participant could have otherwise exercised such ISO at the time of his death. In such event, such ISO may be exercised by the executor or administrator of the Participant's estate or by any person or persons who shall have acquired the ISO directly from the Participant by bequest or inheritance. 6.2. NON-QUALIFIED OPTIONS. Except as otherwise provided in Section 8, the terms and conditions of each Non-Qualified Option granted under the Plan shall be specified by the Board of Directors (or the Committee), in its sole discretion, and shall be set forth in a written option agreement between the Company and the Participant in such form as the Board of Directors (or the Committee) shall approve. The terms and conditions of each Option will be such that each Option issued hereunder shall not constitute or be treated as an "incentive stock option", as defined in Section 422 of the Code, and will be a "non-qualified stock option" for Federal income tax purposes. The terms and conditions of any Option granted hereunder need not be identical to those of any other Option granted hereunder. The terms and conditions of each Non-Qualified Option Agreement shall include the following: (a) The option (exercise) price shall be fixed by the Board of Directors (or the Committee) and may be equal to more than or less than 100% of the fair market value of the shares of Common Stock subject to the Non-Qualified Option on the date such Non-Qualified Option is granted. (b) The Board of Directors (or the Committee) shall fix the term of all Non-Qualified Options granted pursuant to the Plan (in- cluding the date on which such Non-Qualified Option shall expire and terminate). Such term may be more than ten years from the date on which such Non-Qualified Option is granted. Each Non-Qualified Option shall be exercisable in such amount or amounts, under such conditions and at such times or intervals or in such installments as shall be determined by the Board of Directors (or the Committee) in its sole discretion. (c) Non-Qualified Options shall not be transferable otherwise than by will or the laws of descent and distribution, and during a Participant's lifetime a Non-Qualified Option shall be exercisable only by the Participant. (d) In the event that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Participant in respect of a Non-Qualified Option granted hereunder or in respect of any shares of Common Stock acquired upon exercise of a Non-Qualified Option, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggre- gate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Feder- al, state or local taxes, or if no such payments are due or to become due to such Participant then such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be deter- mined by the Board of Directors in its sole discretion. SECTION 7. TERMS AND CONDITIONS OF AWARDS. The terms and conditions of each Award granted under the Plan shall be specified by the Board of Directors (or the Committee), in its sole discretion, and shall be set forth in a written agreement between the Participant and the Company, in such form as the Board of Directors (or the Committee) shall approve. The terms and provisions of any Award granted hereunder need not be identical to those of any other Award granted hereunder. The terms and conditions of each Award shall include the follow- ing: (a) The amount to be paid by a Participant to acquire the shares of Common Stock pursuant to an Award shall be fixed by the Board of Directors (or the Committee) and may be equal to more than or less than 100% of the fair market value of the shares of Common Stock subject to the Award on the date the Award is granted. (b) Each Award shall contain such vesting provisions, such transfer restrictions and such other restrictions and conditions as the Board of Directors (or the Committee), in its sole discretion, may determine, including, without limitation, the circumstances under which the Company shall have the right and option to repurchase shares of Common Stock acquired pursuant to an Award. (c) Stock certificates representing Common Stock acquired pursuant to an Award shall bear a legend referring to the restrictions imposed on such Stock and such other matters as the Board of Directors may determine. (d) In the event that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Participant in respect of an Award granted hereunder, or in respect of any shares acquired pursuant to an Award, or in respect of the vesting of any such shares of Common Stock, then the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld, or, if such payments are insuffi- cient to satisfy such Federal, state or local taxes, or if no such payments are due or become due to such Participant, then such Partici- pant will be required to pay to the Company, or make other arrange- ments satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. SECTION 8. NON-EMPLOYEE DIRECTOR STOCK OPTIONS. (a) On the third business day following approval of this Plan by the stockholders of the Company at the 1997 Annual Meeting of Stockholders, each Non-Employee Director then serving as such (including but not limited to Non-Employee Directors elected or re-elected at such meeting) shall automatically, and without further action by the Board of Directors or the Committee, be granted (i) a Non-Qualified Option to purchase 5,000 shares of Common Stock, and (ii) a Non-Qualified Option to purchase a number of shares of the Common Stock equal to the product of (x) 5,000 and (y) a fraction, the numerator of which is the number of years remaining in such Non-Employee Director's then-current term as a director (counting as the first year the year commencing immediately after the 1997 Annual Meeting of Stockholders), and the denominator of which is three; (b) On the third business day following his or her first appointment or election as a director of the Company, each person who becomes a Non-Employee Director shall automatically, and without further action by the Board of Directors or the Committee, be granted (i) a Non-Qualified Option to purchase 5,000 shares of Common Stock and (ii) a Non-Qualified Option to purchase a number of shares of the Common Stock equal to the product of (x) 5,000 and (y) a fraction, the numerator of which is the number of years or partial years remaining in the term to which such Non-Employee Director was appointed or elected, and the denomi- nator of which is three; (c) On the third business day following the 1998 annual meeting of the stockholders of the Company and each Annual Meeting of Stockholders thereafter at which a Non-Employee Director is re-elected as a member of the Board of Directors, such Non-Employee Director shall automatically, and without further action by the Board of Directors or the Committee, be granted a Non-Qualified Option to purchase 5,000 shares of Common Stock; (d) Notwithstanding the provisions of Subsections 6.2 (a) and (b) hereof, the terms and conditions of each Non-Qualified Option granted pursuant to this Section 8 shall be as follows: (i) Each such Non-Qualified Option shall have an option price equal to 100% of the fair market value of the shares of Common Stock subject to such Non-Qualified Option on the date such Non- Qualified Option is granted. (ii) Subject to the provisions of Subsection (d) below, the term of each such Non-Qualified Option shall be ten years from the date on which such Non-Qualified Option is granted. (iii) Each Non-Employee Director will become entitled to exercise (x) each Non-Qualified Option granted pursuant to clause (a)(i) or (b)(i) hereof commencing six months after the date of grant, (y) each Non-Qualified Option granted pursuant to clause (c) hereof with respect to one-third (1/3) of the shares of Common Stock subject thereto on the first, second and third anniversaries of the grant thereof, and (z) each Option granted pursuant to clause (a)(ii) or (b)(ii) hereof shall become exercisable ratably over the remaining directorship term during which such Non-Qualified Option was granted, on the date of each Annual Meeting of Stockholders following such grant, but in any event not before the expiration of six months from the date of grant. (iv) In the event that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Non-Employee Director in respect of a Non- Qualified Option granted hereunder or in respect of any shares of Common Stock acquired upon exercise of any such Non-Qualified Option, the Company shall deduct from any payments of any kind otherwise due to such Non-Employee Director the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Non-Employee Direc- tor, then such Non-Employee Director will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be deter- mined by the Board of Directors in its sole discretion. (e) In the determination of the Board of Directors, exercised in its sole discretion (the Non-Employee Directors abstaining from participa- tion in any such determination), the terms and conditions of any Non-Quali- fied Option granted to Non-Employee Directors shall include the following provisions: (i) In the event a Non-Employee Director shall cease to serve as a director of the Company or any Parent or Subsidiary of the Company for any reason other than as a result of his death or "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any Non-Qualified Option held by such Non-Employee Director at that time may only be exercised within one month after the date on which such Non-Employee Director ceased to serve as a director of the Company or any Parent or Subsidiary of the Company, and only to the extent that such Non-Employee Director could have otherwise exercised such Non-Qualified Option as of the date on which he ceased to serve as such. (ii) In the event a Non-Employee Director shall cease to serve as a director of the Company or any Parent or Subsidiary of the Company by reason of his "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any Non-Qualified Option held by such Non-Employee Director at that time may only be exercised within one year after the date on which the Non-Employee Director ceased to serve as such, and only to the extent that the Non-Employee Director could have otherwise exercised such Non-Qualified Option as of the date on which he ceased to be so employed. (iii) In the event a Non-Employee Director shall die while serving as a Non-Employee Director of the Company or any Parent or Subsidiary of the Company (or within a period of one month after ceasing to serve as such for any reason other than such "disability" or within a period of one year after ceasing to be an Employee by reason of such "disability"), the unexercised portion of any Non-Qualified Option held by such Non-Employee Director at the time of his death may only be exercised within one year after the date of such Non-Employee Director's death, and only to the extent that such Non-Employee Director could have otherwise exercised such Non-Qualified Option at the time of his or her death. In such event, such Non-Qualified Option may be exercised by the executor or administrator of the Non-Employee Director's estate or by any person or persons who shall have acquired such Non-Qualified Option directly from such Non-Employ- ee Director by bequest or inheritance. (iv) Such Non-Qualified Options shall not be transferable otherwise than by will or the laws of descent and distribution, and during a Non-Employee Director's lifetime such Non-Qualified Option shall be exercisable only by such Non-Employee Director. (f) All Non-Qualified Options granted to a Non-Executive Direc- tor shall be confirmed by an agreement between the Company and such grantee. (g) Notwithstanding the appointment of a Committee to administer the Plan, all administrative, interpretive and discretionary powers with respect to the Non-Qualified Options granted pursuant to this Section 8 shall be exercised by the Board of Directors (the Non-Employee Directors abstaining). SECTION 9. ADJUSTMENTS. In the event that, after the adoption of the Plan by the Board of Directors, the outstanding shares of the Company's Common Stock shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation through reorganization, merger or consolidation, recapitalization, reclassification, stock split, split-up, combination or exchange of shares or declaration of any dividends payable in Common Stock or other corporate transaction, the Board of Directors shall appropriately adjust (i) the number of shares of Common Stock (and the option price per share) subject to the unexercised portion of any outstanding Option (to the nearest possible full share), PROVIDED, HOWEVER, that the limitations of Section 424 of the Code shall apply with respect to adjustments made to ISOs; (ii) the number of shares of Common Stock to be acquired pursuant to an Award; and (iii) the number of shares of Common Stock for which Options and/or Awards may be granted under this Plan, as set forth in Sections 4.1 and 4.5 hereof, and such adjustments shall be effective and binding for all purposes of this Plan. SECTION 10. EFFECT OF THE PLAN ON EMPLOYMENT RELATIONSHIP. Neither this Plan nor any Option and/or Award granted hereunder to a Participant shall be construed as conferring upon such Participant any right to continue in the employ of the Company or the service of the Company or any Subsidiary, as the case may be, or limit in any respect the right of the Company or any Subsidiary to terminate such Participant's employment or other relationship with the Company or any Subsidiary, as the case may be, at any time. SECTION 11. AMENDMENT OF THE PLAN. The Board of Directors may amend the Plan from time to time as it deems desirable; PROVIDED, HOWEVER, that, without the approval of the holders of a majority of the shares of Common Stock present or represented and entitled to vote thereon at a meeting of stockholders, the Board of Directors may not amend the Plan (i) to increase (except for increases due to adjustments in accordance with Section 9 hereof) the aggregate number of shares of Common Stock for which Options and/or Awards may be granted hereunder, (ii) to decrease the minimum exercise price specified by the Plan in respect of ISOs, or (iii) to change the class of Employees eligible to receive ISOs under the Plan. Notwithstanding the foregoing, if stockholder approval is required in order to comply with (a) Section 422 of the Code in respect of ISOs, or (b) rules promulgated under Section 16(b) of the Exchange Act, the Board of Directors may not amend the Plan without stockholder approval. SECTION 11. TERMINATION OF THE PLAN. The Board of Directors may terminate the Plan at any time. Unless the Plan shall theretofore have been terminated by the Board of Directors, the Plan shall terminate on May 3, 1999. No Option and/or Award may be granted hereunder after termination of the Plan. The termination or amendment of the Plan shall not alter or impair any rights or obligations under any Option and/or Award theretofore granted under the Plan. SECTION 12. EFFECTIVE DATE OF THE PLAN. This 1996 Amended and Restated Stock Option and Restricted Stock Plan, and any amendments thereof requiring stockholder approval, shall become effective as of the date on which the Plan is approved by affirmative vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at a meeting of stockholders of the Company at which the approval of the Plan (or of any such amendment) is considered. EX-10.13 4 INDEMNIFICATION AGREEMENT EXHIBIT 10.13 INDEMNIFICATION AGREEMENT THIS AGREEMENT is made this day of , 19 between KING WORLD PRODUCTIONS, INC., a Delaware corporation (the "Corporation"), and (the "Director"). WITNESSETH THAT: WHEREAS, the Director is a member of the Board of Directors of the Corporation and in such capacity is performing a valuable service for the Corporation; and WHEREAS, the stockholders of the Corporation have adopted the By- laws of the Corporation (the "By-laws") which provide for the indemnifica- tion of the officers, directors and employees of the Corporation to the full extent authorized by law; WHEREAS, Section 145(f) of the Delaware General Corporation Law (the "Delaware Statute") provides that the provisions of Section 145 empowering the Corporation to indemnify directors, officers, employees and agents of the Corporation in certain circumstances are not exclusive, and contemplates that agreements may be entered into between the Corporation and the members of its Board of Directors with respect to indemnification of such directors; WHEREAS, in accordance with the authorization provided by the Delaware Statute, the Corporation presently maintains a policy or policies of Directors' and Officers' Liability Insurance ("D & O Insurance"), covering certain liabilities which may be incurred by its directors and officers in the performance of their services for the Corporation; WHEREAS, recent developments with respect to the terms and availability of D&O Insurance and with respect to the application, amend- ment and enforcement of statutory and by-law indemnification provisions generally have raised questions concerning the adequacy and reliability of the protection afforded to directors thereby; and WHEREAS, in order to resolve such questions and thereby induce the Director to continue to serve as a member of the Board of Directors of the Corporation, the Corporation has determined and agreed to enter into this contract with the Director. NOW, THEREFORE, in consideration of the Director's continued service as a director of the Corporation (or continued service at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture trust of other enterprise), the parties hereto agree as follows: 11. MAINTENANCE OF INSURANCE AND SELF INSURANCE. (a) The Corporation represents that it presently maintains in force and effect policies of D&O Insurance written by the following insurance companies and in the following amounts (the "Insurance Poli- cies"): Insurer Amount Deductible ------- ------ ---------- The Chubb Group $2,000,000 $5,000* __________________ * $5,000 per director, per claim; $25,000 for all directors, per claim. _______________________ Subject to the provisions of Section 1(b) hereof, the Corporation hereby agrees that, so long as the Director shall continue to serve as a director of the Corporation (or shall continue at the request of the Corporation to serve as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and thereafter so long as the Director shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal or investigative by reason of the fact that the Director was a director of the Corporation (or served in any of said other capaci- ties), the Corporation will purchase and maintain in effect for the benefit of the Director one or more valid, binding and enforceable policy or policies of D&O Insurance providing coverage at least comparable to that currently provided pursuant to the Insurance Policies. (b) The Corporation shall not be required to maintain said policy or policies of D&O Insurance in effect if (i) said insurance is not reasonably available or (ii) in the reasonable business judgment of the then directors of the Corporation, either (x) the premium cost for such insurance is substantially disproportionate to the amount of coverage provided or (y) the coverage provided by such insurance is so limited by exclusions that there is insufficient benefit from such insurance. (c) In the event that the Corporation does not purchase and maintain in effect said policy of policies of D&O Insurance pursuant to the provisions of Section 1(b) hereof, the Corporation agrees to hold harmless and indemnify the Director to the full extent of the coverage which would otherwise have been required to be provided for the benefit of the Director pursuant to Section 1(a) hereof. 12. ADDITIONAL INDEMNITY OF THE DIRECTOR. To the extent of any losses incurred or suffered by the Director in excess of the amounts reim- bursed or indemnified pursuant to the provisions of Section 1 hereof, the Corporation further agrees to hold harmless and indemnify the Director to the full extent permitted by the provisions of the Delaware Statute, as in effect from time to time, or by any other statutory provisions authorizing or permitting such indemnification which are adopted after the date hereof. 13. LIMITATION OF INDEMNITIES. The Company shall not be obli- gated to pay any indemnify pursuant to Section 1 or Section 2 hereof or make payment or reimbursement to the Director pursuant to any of the provisions of this Agreement in the event and to the extent that it shall have been finally determined by a court of competent jurisdiction that the payment of such indemnity or the making of such other or payment or reimbursement by the Corporation is unlawful. 14. CONTINUATION OF INDEMNITY. All agreements and obligations of the Corporation contained herein shall continue during the period the Director is a director, officer, employee or agent of the Corporation (or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as the Director shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether, civil, criminal or investigative, by reason of the fact that the Director was a director of the Corporation or serving in any other capacity referred to herein. 15. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by the Director of notice of the commencement of any action, suit or proceeding, the Director will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation of the commencement thereof, but the failure so to notify the Corporation will not relieve it from any liability which it may have to the Director other wise than under this Agreement. With respect to any such action, suit or proceeding as to which the Director notifies the Corporation of the com- mencement thereof: (a) The Corporation will be entitled to participate therein at its own expense; and, (b) Except as otherwise provided below, to the extent that it may wish, the Corporation jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel satisfactory to the Director. After notice from the Corporation to the Director of its election so to assume the defense thereof, the Corporation will not be liable to the Director under this Agreement for any legal or other expenses subsequently incurred by the Director in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. The Director shall have the right to employ its own counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Director unless (i) the employment of counsel by the Director has been authorized by the Corporation, (ii) the Director shall have reasonably concluded that there may be a conflict of interest between the Corporation and the Direc- tor in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume the defense of the Director in any action, suit or proceeding brought by or on behalf of the Corporation or as to which the Director shall have made the conclusion provided for in (ii) above. (c) The Corporation shall not be liable to indemnify the Director under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Corporation shall not settle any action or claim in any manner which would impose any penalty or limitation on the Director without the Director's written consent. Neither the Corporation nor the Director will unreasonably withhold its consent to any proposed settlement. 16. REPAYMENT OF EXPENSES. The Director agrees that the Director will reimburse the Corporation for all reasonable expenses paid by the Corporation in defending any civil or criminal action, suit or pro- ceeding against the Director in the event and only to the extent that it shall be ultimately determined that the Director is not entitled to be indemnified by the Corporation for such expenses under the provisions of the Delaware Statute, the By-laws, this Agreement or otherwise. 17. ENFORCEMENT. (a) The Corporation expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on the Corporation hereby in order to induce the Director to continue as a director of the Corporation, and acknowledges that the Director is relying upon this Agreement in continuing in such capacity. (b) In the event the Director is required to bring any action to enforce rights or to collect moneys due under this Agreement and is successful in such action, the Corporation shall reimburse the Director for all of the Director's reasonable fees and expenses in bringing and pursuing such action. 18. SEVERABILITY. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others so that if any provision hereof shall be held to be valid or unenforceable, such invalidity or unenforceability shall not effect the validity or unenforcea- bility of the other provisions hereof. 19. GOVERNING LAW; BINDING EFFECT; AMENDMENT AND TERMINATION. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. (b) This Agreement shall be binding upon the Director and upon the Corporation, its successors and assigns, and shall inure to the benefit of the Director, the Director's heirs, personal representatives, executors and assigns and to the benefit of the Corporation, its successors and assigns. (c) No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. KING WORLD PRODUCTIONS, INC. By: __________________________ ______________________________ Director EX-10.22 5 SETTLEMENT AGREEMENT Exhibit 10.22 CONFIDENTIAL TREATMENT REQUESTED SETTLEMENT AGREEMENT dated as of September 15, 1997, by and among CALIFON PRODUCTIONS, INC. ("Califon") and JEOPARDY PRODUCTIONS, INC. ("Jeopardy") (collectively referred to hereinafter as "Owner"), SONY PICTURES ENTERTAINMENT INC. ("SPE"), THE GAME SHOW NETWORK, L.P. and KING WORLD PRODUCTIONS, INC. ("KW"). WHEREAS, there is an agreement between Califon and KW dated as of December 15, 1982, and amendments thereto (the "WOF Agreement"), relating to the television series entitled "Wheel of Fortune"; WHEREAS, there is an agreement between Califon and KW dated as of November 1, 1983, and amendments thereto (the "Jeopardy Agreement"), relating to the television series entitled "Jeopardy!"; WHEREAS, Califon has assigned and delegated its rights and obligations under the Jeopardy Agreement to Jeopardy and KW has consented to this assignment and delegation; WHEREAS, The Game Show Network, L.P. owns and operates a cable television network named "Game Show Network" ("GSN"); WHEREAS, there are certain disputes among the parties with respect to the WOF Agreement and the Jeopardy Agreement that have resulted in the filing of the pending action, King World Productions, Inc. v. Califon Productions, Inc., et al., Case No.: BC 168 059, in the Superior Court of the State of California for the County of Los Angeles (the "Court"), including a cross-complaint therein (the "Action"); and WHEREAS, the parties desire, subject to the terms and conditions set forth hereinafter, to settle and resolve the disputes raised in the Action and to discontinue the Action; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. KW shall dismiss, without prejudice, its complaint in the Action; Owner shall dismiss, with prejudice, its cross-complaint in the Action, it being understood that Owner does not hereby waive or abandon any of its defenses pled in its answer to KW's complaint. However, these dismissals shall not affect or limit KW's or Owner's rights or claims with respect to how the WOF Agreement and the Jeopardy Agreement are to be interpreted, including whether and the extent to which the WOF Agreement and the Jeopardy Agreement prohibit KW from producing and licensing for distribution by others a strip game show in first-run syndication. The parties shall, within one week of executing this Settlement Agreement, file the necessary requests for dismissal with the Court. 2. HOLLYWOOD SQUARES. Owner And KW disagree with respect to whether anything in the WOF Agreement or the Jeopardy Agreement prohibits KW from producing and licensing for distribution by others a strip game show in first-run syndication. Without waiving either party's rights or claims, if any, under the WOF Agreement or the Jeopardy Agreement with respect thereto, the parties agree, on a one-time non- precedential basis, to the following with respect to the television series "Hollywood Squares" (hereinafter referred to as the "Series"): (a) Owner hereby waives its rights, if any, to prohibit KW from producing or distributing a strip game show series for first-run syndication, solely and only to the extent necessary to allow KW to produce and distribute the Series in first-run strip syndication, for initial telecast no later than September 30, 1998, provided that said waiver shall expire upon the conclusion of the final consecutive broadcast season during which KW so distributes the Series. (b) KW has sole ownership and, as among the parties hereto, KW shall solely fund the production and distribution of the Series. Without limitation of the foregoing, KW shall have final and definitive control and authority with regard to all elements of the production and distribution of the Series. (c) SPE shall render services as a co-producer of the SPE Participation Episodes (as hereinafter defined), and SPE, or an affiliate designated by SPE, shall be entitled to a logo credit (animated, if KW's production credit is animated) to that effect and on a separate card, in the end credits of each such episode and similar credit, when KW receives credit, on all publicity, press releases (the press release announcing this Settlement Agreement to be mutually approved by SPE and KW) and advertising issued in connection with such episodes. Subject in all events to paragraph 2(b) of this Settlement Agreement, SPE may, in its sole discretion, but only at KW's request and in accordance with the production schedule as determined by KW, participate in the principal elements of the production of the SPE Participation Episodes, including significant creative decisions, casting and staffing, and SPE may, in its sole discretion, but only upon KW's request, assist, inter alia, in securing talent, writers and other creative personnel therefor. (d) [****] (e) SPE shall be entitled to a participation in the amount of [****] of all of the episodes of the Series produced (x) for initial distribution in first-run syndication in the United States, or (y) for initial first-run network broadcast in the United States, provided however, that sums from any such episodes produced for initial network broadcast shall be included within Gross Receipts only if such episodes are produced during a broadcast season in which the Series is distributed by KW in first-run strip syndication (the episodes described in clauses (x) and (y) are collectively referred to herein as the "SPE Participation Episodes"). (i) In the case of subdistribution of any of the rights hereunder on a percentage basis, the gross amount received by such subdistributor shall be included in Gross Receipts and there shall be no deduction for any subdistribution fees, commissions or expenses. Where subdistribution is on an outright basis, the actual amount received by KW shall be included in Gross Receipts. Advance payments and security deposits shall not be included in Gross Receipts until earned by, forfeited or otherwise applied to any of the SPE Participation Episodes (unless such advance payments or security deposits are nonrefundable, in which case such amounts shall be included in Gross Receipts upon receipt), nor shall Gross Receipts include receipts of radio or television broadcasters or others who actually use or exhibit to the public any of the SPE Participation Epi- sodes. (ii) SPE's participation in Gross Receipts shall be paid and accounted for as provided in the annexed Schedule A. (f) SPE shall be entitled to a one-time nonrefundable advance of its participation [****] payable upon execution of this Settle- ment Agreement, which amount shall be recoupable by KW from, [****] (g) [****] 3. This Settlement Agreement has been negotiated and executed, is made and is to be performed in the State of California, and shall be governed by and construed in accordance with the internal, substantive laws of the State of California. 4. This Settlement Agreement may be executed in any number of counterparts, each of which for all purposes shall be deemed to be original and all of which taken together shall constitute one and the same instru- ment. 5. All prior or contemporaneous agreements, contracts, promis- es, representations and statements, if any, among the parties hereto and their representatives as to the Series are merged into this Settlement Agreement, and this Settlement Agreement constitutes the entire agreement among the parties with respect thereto. This Settlement Agreement may not be modified, waived, changed, discharged or terminated, except by an agreement in writing signed by the party against which such modification, waiver, change, discharge or termination is sought to be enforced. 6. The parties agree that this Settlement Agreement shall be deemed to have been jointly drafted and composed by the parties hereto. The terms of this Settlement Agreement shall not be interpreted or con- strued in favor of or against any party on the ground that one party was the purported drafter hereof. 7. Except as specified herein, nothing in this Settlement Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Settlement Agreement on any persons other than the parties hereto and their respective successors and assigns, nor is anything in this Settlement Agreement intended to relieve or discharge the obligations or liabilities of any third parties to any party to this Settlement Agreement, nor shall any provision give any third parties any right of subrogation or action over or against any party to this Settlement Agreement. 8. The parties hereto shall keep confidential and shall not disclose to third parties the terms and provisions of sub-paragraphs 2(d), (e), (f) and (g) of this Settlement Agreement or that the waiver in sub- paragraph 2(a) of this Settlement Agreement is limited to an initial telecast of the Series no later than September 30, 1998, except as it may be required by law. IN WITNESS WHEREOF, the parties have executed this Settlement Agreement as of the date first above set forth. CALIFON PRODUCTIONS, INC. By:_____________________________ JEOPARDY PRODUCTIONS, INC. By:_____________________________ SONY PICTURES ENTERTAINMENT INC. By:_____________________________ THE GAME SHOW NETWORK, L.P. By: TGSC MANAGEMENT, INC. By:___________________________ KING WORLD PRODUCTIONS, INC. By:_____________________________ SCHEDULE A ACCOUNTINGS AND REMITTANCES 1. KW'S RECORDS: KW shall keep complete and accurate books of account and records with respect to the distribution of the SPE Participa- tion Episodes. SPE shall have the right, during reasonable business hours on reasonable advance written notice, to examine the same or cause the same to be examined and audited at its expense by any reputable firm of certi- fied public accountants or by SPE's internal audit department. 2. STATEMENTS AND REMITTANCES: Commencing three (3) months after the first domestic television exhibition of the Series pursuant to this Settlement Agreement, KW shall account to SPE for the Gross Receipts (a) on a monthly basis while KW is distributing the Series in first-run syndication and (b) on a quarterly basis thereafter. (a) Within twenty (20) days after the close of each applicable accounting period, KW shall submit to SPE a written statement showing the Gross Receipts in reasonable detail and shall pay SPE the amount, if any, shown in such statement to be due. (b) Accountings may be on a billings or collection basis. KW shall have the right to change the method from time to time, but each statement shall specify the basis. If statements are made on a billings basis, KW has the right to make adjustments in subsequent statements to reflect uncollected billings. EX-10.23 6 LETTER AGREEMENT [* Deleted pursuant to a request for confidential treatment] Exhibit 10.23 CONFIDENTIAL TREATMENT REQUESTED KING WORLD PRODUCTIONS, INC. 1700 BROADWAY NEW YORK, NEW YORK 10019 Dated as of October 1, 1991 Mr. William Bernstein, President Orion Pictures Corporation 1325 Avenue of the Americas New York, New York 10019 Re: "Hollywood Squares" _________________ Dear Bill: This letter, when executed on behalf of Orion Pictures Corpora- tion ("Orion") and King World Productions, Inc. ("KW"), shall constitute an agreement between Orion and KW in connection with the rights in and to the television series entitled "Hollywood Squares", on the following terms and conditions: 1. (a) As used herein, the "Rights" shall mean all trademarks, service marks, copyrights, underlying rights, and all right, title, and interest of any kind whatsoever in and to the property known as "Hollywood Squares" (the "Series"), including, without limitation, the content, format, title, set, set design, components, game rules, scripts, and all appearances and depictions thereof and all of such rights necessary or desirable to create and exploit new episodes and/or properties based in whole or in part thereon and to advertise, promote and market same, by any and all means, as well as all rights ancillary thereto, throughout the world in any and all media. (b) Orion hereby sells, grants and transfers to KW all of the Rights throughout the world exclusively and irrevocably (subject to the provisions of Paragraph 8 below). At KW's request, Orion shall execute a copyright assignment and such other documents as reasonably required to evidence the transfer hereunder and both parties shall execute whatever further instruments are reasonably necessary to effectuate the intent of this agreement including, without limitation, a security agreement in the form attached hereto as Exhibit A, granting Orion a security [* Deleted pursuant to a request for confidential treatment] interest in the Rights to the extent of (i) KW's obligations to pay Orion a share of Net Profits in accordance with Paragraph 3 below and (ii) the possible reversion of the Rights to Orion in accordance with Paragraph 8 below. Promptly upon execution of this agreement, Orion shall arrange, at its sole expense, to deliver to KW (at a place within the United States designated by KW) all existing elements of the Series necessary or desir- able for KW to exercise the Rights, including without limitation, all available promotional materials and scripts, relevant contracts, game questions, residual schedules, and the Series set. The Series set shall be made available to KW where it is presently stored and KW shall be responsi- ble for all costs of the transportation from such location, as well as, if KW so elects, insurance and rehabilitation of the Series set (which costs shall be recoupable by KW as a development cost pursuant to Paragraph 4(c) below). (c) Notwithstanding anything to the contrary contained herein, the Rights shall not include the rights to distribute, in whole or in part, the negatives and/or mastertapes (or copies made therefrom) of the television episodes of the Series existing as of the date hereof (the "Existing Episodes"), but such rights in and to the Existing Episodes shall not be exploited in any manner or media by Orion anywhere in the world except for Orion's issuance of licenses for the use of photographs from the Existing Episodes and except for an existing license from Orion to USA Network ("USA") for basic cable broadcast of the Existing Episodes in the United States for a term expiring December 31, 1992, subject to USA's options as set forth in those provisions of the USA license annexed hereto as Exhibit B. Orion warrants and represents that: (i) such license to USA is the only existing license agreement with respect to the Existing Episodes, and (ii) USA is not entitled, as a matter of contract, to injunctive relief of any nature in the event Orion, is in breach of the USA license. Orion shall use its best efforts to negotiate an agreement with USA giving Orion the option, in exchange for a reasonable payment consis- tent with industry standards (the "Option Payment"), to terminate USA's exclusivity (but not necessarily USA's telecast rights) with respect to telecasts of the Series, as of August 15, 1992 (the "USA Termination Option"). Orion shall consult with KW regarding such negotiations and agreement and, if such agreement is concluded, then at KW's election, Orion shall exercise the USA Termination Option; provided, however, that upon such exercise, KW shall reimburse Orion for the Option Payment. (d) Orion warrants and represents that it has entered into the following existing license agreements with respect to format rights in the Series (the "Existing Format [* Deleted pursuant to a request for confidential treatment] Licenses") and that such Existing Format Licenses are the only format licenses existing for the Series: (i) license to Fremantle International Inc. ("Fremantle") for television broadcast in Spain for a term expiring March 4, 1993; (ii) license to Fremantle for television broadcast in Italy for a term expiring September 30, 1993; and (iii) license to Reg Grundy Productions, Inc. ("RGP") as set forth in a letter from Irwin Moss of Orion to RGP's attorney, Richard Barovick, dated May 1, 1990 and a letter from Barovick to Moss dated June 13, 1990 (the "RGP Agreement") pursuant to which, inter alia, RGP is authorized for a period of two years from the date thereof to enter into format arrangements for the Series on behalf of Orion throughout the world excluding the United States, Canada, Spain and Italy. Notwithstanding anything to the contrary contained herein, the Rights shall not include the rights granted to Fremantle and RGP pursuant to the Existing Format Licenses during their respective terms set forth above. Upon termination of each such Existing Format License, the rights granted by Orion therein shall revert to KW and constitute part of the Rights hereunder; provided, however, that the Rights shall include all of Orion's rights with respect to the Series under the RGP Agreement as of the date hereof, and Orion hereby assigns to KW all of its right, title, and interest in the RGP Agreement to the extent relating to the series. (e) With respect to Series game questions, KW shall be entitled to utilize only game questions available to Orion from the Existing Episodes produced between 1986 through 1989 (the "Existing Questions"). The rights in and to all other Series game questions shall be frozen and shall not be exploited by Orion. KW acknowledges that its use of the Existing Questions might be subject to KW's payment of residuals (in no greater amounts than Writers Guild of America scale payments) in accor- dance with the residuals summary schedule prepared by Orion and annexed as Exhibit C hereto. KW further acknowledges that pursuant to the IJE License (as defined in Paragraph 1(g) below), Orion has made certain Series game questions available to IJE. (f) KW acknowledges that in the event it produces new episodes of the Series for exploitation in the United States, KW shall pay a royalty in the amount of [****] per strip of five original new Series [* Deleted pursuant to a request for confidential treatment] episodes to Four Star International ("Four Star"), pursuant to an agreement between Four Star and Orion dated March 11, 1970 and annexed as Exhibit D hereto. (g) With respect to merchandising rights in and to the Series, Orion warrants and represents that its exclusive merchandising agent, Creative Licensing Corporation ("CLC"), has entered into an existing license agreement for electronic games with I.J.E. (the "IJE License", a copy of which is annexed as Exhibit E hereto), that the IJE License is the only existing license with respect to merchandising of any rights in the Series, and that the IJE License expires in September 1993. The Rights shall include, without limitation, all of Orion's rights with respect to the IJE License as of the date hereof, and Orion hereby assigns to KW all of its right, title and interest in the IJE License. KW accepts such assignment and agrees to assume Orion's obligations commencing on the date hereof pursuant to the IJE License. KW acknowledges that pursuant to an oral agreement between CLC and Orion, CLC is entitled to a commission equal to [30%] of Orion's revenue pursuant to the IJE License, and KW agrees that CLC shall be entitled to deduct such commission from the revenues it receives pursuant to the IJE License, prior to remittance to KW of the balance of such revenues. (h) With respect to the theme music for the Existing Episodes produced between 1986 through 1989 (the "Theme"), Orion warrants and represents that the Theme was composed by Stormy Sacks ("Composer") as a work-for-hire for Orion, and that pursuant to the agreement between Orion and Composer (the "Theme Agreement", a copy of which is attached hereto as Exhibit F), in the event KW utilizes the Theme in the production of new episodes of the Series, Composer is entitled to receive credit for such use, public performance fees (payable through the applicable performing rights society from the telecaster), and the composer's share (fifty percent) of a fair and reasonable synchronization fee for such use. The publisher's share (fifty percent) of such synchronization fee is owned by Orion Music Publishing ("OMP"). The Rights shall include, without limita- tion, all of OMP's rights in the Theme and Orion hereby assigns same to KW, along with all of Orion's and OMP's right, title and interest in the Theme Agreement. 2. Orion acknowledges, warrants and represents that the Rights transferred hereunder shall include, without limitation, all rights (except as otherwise specifically excluded from the Rights and/or subject to restriction, all as set forth in Paragraph 1 above) in and to the Series necessary for KW, as it determines in its sole discretion, (a) based on the Series and/or the elements thereof, to create, produce, and/or manufacture new Series episodes and/or productions, programs, merchandising, [* Deleted pursuant to a request for confidential treatment] commercial tie-ins, and properties, as well as advertising, marketing and promotion thereof, in any and all media now known or hereafter existing throughout the world (individually and collectively, the "Series Product"), and (b) to exploit the Series Product, including without limitation, selling, licensing, exhibiting and/or arranging for the exploitation of any and all Series Product in any territories throughout the world in any manner or media now known or hereafter existing, including, without limitation, on all forms of television or similar transmissions, video disc, cassette, theatrically, non-theatrically and through merchandising (the "Distribution Rights"). 3. As full consideration for the rights granted, agreements, warranties and representations made, and the full performance hereof by Orion, KW shall pay Orion an amount equal to [****] of KW's "Net Profits" (as defined below) from its exploitation of the Rights. KW shall pay Orion, as a non-refundable advance against Orion's share of KW's Net Profits, the amount of [****], which shall be payable on full execution of this agreement (the "Advance"). Orion warrants and represents that it has negotiated this agreement as an arm's-length transaction and that, to the best of its knowledge after a thorough assessment of the market for the Rights, the consideration to be paid by KW hereunder represents at least the fair market value of the Rights. 4. "Net Profits" as used herein shall mean all sums or other consideration actually received by or credited to KW (or its subdistributors and subsidiaries) from the exploitation of the Rights from all sources (including, without limitation, recoveries from claims, lawsuits or proceedings against third parties, net of the costs and expenses thereof), less refunds and security or deposits subject to refund ("Gross Receipts") and after deduction of the following: (a) the amount of [****] of such receipts as a distribution fee to KW in all media (except that if KW engages a non-affiliated subdistributor with respect to home video distribution, the distribution fee shall be the distribution fee charged by such subdistributor plus an override to KW of [****] of the applicable receipts on which such subdistributor's fees is calculated), which distribution fee shall be inclusive of fees payable to any subdistributors engaged by KW, (b) the amount of direct out-of-pocket distribution expenses paid by KW or incurred by KW and which KW reasonably anticipates to be paid within six months following the issuance of the accounting statement on which such expense is deducted, including, without limitation, direct out-of-pocket advertising, promotion and other third party distribution expenses and residuals, reuse fees, royalties or other compensation payable by KW to third parties on account of such [* Deleted pursuant to a request for confidential treatment] exploitation, and (c) the amount of the development and production costs paid by KW to produce Series Product in any format (but not including any overhead or production fees to KW), together with interest thereon from the time expended, at the prime rate from time to time in effect at The Bank of New York, New York, all applied on a cross-collateralized basis among Distribution Rights for all Series Product hereunder. In no event shall KW be required to include in Gross Receipts any revenue of its subdistributors unless and until KW is actually paid with respect thereto. With respect to revenue received by KW's subdistributors, the amount of KW's distribution fee shall be based on revenues collected by such subdistributors at their source. 5. Within sixty (60) days after the close of each quarterly period in which KW receives Gross Receipts ending on November 30, February 28, May 31, and August 31 of each year, commencing with the first exploita- tion by KW of the Rights hereunder, KW shall furnish to Orion a written statement which reflects in reasonable detail the amounts, if any, payable to Orion pursuant to Paragraph 4 above, and following recoupment by KW of the Advance from Orion's share of such Net Profits, KW shall send Orion with such statements a check payable to Orion in the appropriate amount of any such share of Net Profits. Each statement shall be deemed accepted by Orion unless Orion notifies KW in writing within two years from the date of such statement setting forth its specific objections thereto. Any such objections shall be deemed waived unless within three years following the date of the applicable statement such objections are settled or Orion commences a lawsuit to contest such statement. Orion or its designated representative shall have the right, at KW's usual place of business, during business hours and on reasonable notice to KW (but in no event more than once annually), to audit KW's books and records to confirm the accuracy of any such statements not otherwise deemed accepted or with respect to which any objections are not waived as set forth above. Orion shall promptly furnish KW with a copy of any audit report and KW shall pay the reasonable costs of such audit if such audit reveals an error of at least 10% in KW's favor. 6. Orion warrants and represents that: (a) it is duly autho- rized, and it has the requisite right, power, and authority, to enter into and to perform this agreement, and it owns or controls all of the Rights hereunder; (b) to the extent of KW's rights in the elements thereof, the Existing Episodes were produced in accordance with all applicable laws and agreements, and all contracts, and rules and regulations of labor organiza- tions having jurisdiction thereover; (c) except as specifically provided herein, no residuals, reuse fees, or other payments or compensation shall [* Deleted pursuant to a request for confidential treatment] be due or payable, arising out of the exploitation by KW of the Rights hereunder; (d) the exploitation of the Rights by KW hereunder shall not violate or infringe the copyright, trademark, patent, literary, intellec- tual or similar rights, or rights of privacy or publicity, or any other rights whatsoever, of any party; (e) there are no existing claims or, to the best of its knowledge, threatened claims by any party affecting the Rights hereunder; (f) except as specifically set forth in Paragraph 1 above, there are no liens or encumbrances to the Rights hereunder; (g) except as specifically set forth in Paragraph 1 above, it has not taken any action or granted any rights adversely affecting and/or in any way encum- bering the Rights hereunder and it will not take any action or grant any rights inconsistent with the grant of rights hereunder; and (h) except as specifically excluded from the Rights pursuant to Paragraph 1 above, the Rights hereunder constitute all rights, title and interest in and to the Series. Without limitation of the warranties and representations made above, Orion has advised KW that Orion granted Manufacturers Hanover Trust Company ("MHTC"), as agent for Hanover Trust Co. ("HTC"), a security interest (the "Security Interest") on various properties of Orion including the Series pursuant to, without limitation, a security agreement dated December 17, 1987 and a so-called "Second Amended and Restated Credit Agreement" dated as of July 27, 1990 (such documents, together with any other documents relating to the Security Interest, to be referred to collectively as the "MHTC Security Agreement"). Orion represents and warrants to KW that pursuant to the MHTC Security Agreement (i) Orion has the right to sell and transfer the Rights to KW as provided in this agree- ment, free and clear of the Security Interest, (ii) upon the sale and transfer of the Rights to KW pursuant to this Agreement, the Security Interest will attach solely to Orion's rights pursuant to this agreement and the proceeds herefrom payable to Orion, and (iii) MHTC's and HTC's rights thereunder, even in the event of a default by Orion of its obliga- tions to MHTC and/or HTC, shall not adversely affect or in any way encumber KW's rights pursuant to this agreement. 7. KW warrants and represents that: (a) it is duly authorized, and it has the requisite right, power and authority to enter into and to perform this agreement, (b) with respect to its production and exploitation of Series Product, it shall assure compliance with those obligations as specifically set forth in Paragraphs 1(e), 1(f), 1(g), and 1(h) above and (c) as between it and Orion, it shall be solely responsible for all costs and obligations in connection with its production and/or exploitation of Series Product; provided, however, that such costs and obligations shall not include any costs or obligations assumed or created by or under the authority of Orion, unless KW has specifically agreed to same in this agreement. [* Deleted pursuant to a request for confidential treatment] 8. KW shall use its best endeavors in accordance with its sole business judgment to exploit the Rights. Nothing contained in this agreement, however, shall require KW to exploit the Rights or to create any Series Product and KW makes no guarantee as to the amount of Net Profits, if any, payable to Orion hereunder. Notwithstanding the foregoing, in the event KW does not exploit any Series Product in the television medium prior to the date seven years following the date hereof, or following such initial exploitation, during any consecutive six year period thereafter, then upon written notice from Orion, and provided that at the time of such written notice KW has not commenced or resumed the exploitation of any Series Product in the television medium, Orion shall have the right to terminate KW's rights hereunder. In the event of such termination, KW shall not produce any new Series Product nor shall KW engage in any further exploitation of Distribution Rights, and the Rights shall revert to Orion; provided, however, that such termination shall not affect KW's rights to collect and retain revenue in accordance with this agreement (and subject to KW's obligation to account to Orion pursuant to Paragraph 5 above) from any prior existing exploitation of Distribution Rights (so long as the duration of the terms thereof are within customary industry parameters) and Orion shall not thereby acquire any rights in or to any Series Product produced or created by KW pursuant to this agreement. 9. Each party hereto (the "indemnitor") shall indemnify and hold harmless the other (the "indemnitee") from and against any and all loss, damage, liability, cost and expense (including reasonable attorneys' fees and court costs) incurred by the indemnitee as a result of, arising out of, or in connection with a breach by the indemnitor of any representa- tion or warranty contained in this agreement or the failure by the indemni- tor to perform any agreement, act or other obligation, required to be performed by the indemnitor pursuant to this agreement. KW's indemnifica- tion of Orion shall extend, without limitation, (i) to any new materials added to the Series or the Rights hereunder, and (ii) to breaches by KW of the third party obligations it is assuming pursuant to Paragraphs 1(e), 1(f), 1(g) and 1(h) above. 10. This agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements to be wholly performed therein, and the parties hereby submit to the exclusive jurisdiction of the Federal and State courts located in New York City to adjudicate any dispute hereunder. Orion acknowledges that the rights granted to KW hereunder are of a unique and special nature, such that orion's breach of this agreement would cause irreparable harm to KW [* Deleted pursuant to a request for confidential treatment] which could not be compensated solely by money damages and, therefore, without limitation of any rights or remedies otherwise available, KW shall have the right to obtain injunctive and other equitable relief to prevent such breach by Orion. In the event of a breach of the agreement by KW, other than a breach following termination by Orion pursuant to Paragraph 8 above, Orion agrees that it shall be limited to recovery of money damages. 11. This agreement constitutes the full and binding agreement of the parties and may not be amended or modified without a writing signed by the party to be charged. Nothing contained herein shall be deemed to create a partnership or joint venture between the parties, their relation- ship being independent contractors. Neither Orion nor KW shall disclose to any third party (other than its respective employees, directors, and officers, in their capacity as such, on a need-to-know basis), any informa- tion with respect to the financial terms and conditions of this agreement except: (i) to the extent necessary to comply with law, public reporting obligations, or the valid order of a court of competent jurisdiction, in which event the party making such disclosure shall so notify the other as promptly as practicable (if possible, prior to making such disclosure) and shall seek confidential treatment of such information, (ii) as part of its normal reporting or review procedure to its parent company, auditors and its attorneys, provided, however, that such parent company, auditors and attorneys agree to be bound by the provisions of this paragraph, (iii) in order to enforce its rights pursuant to this agreement, (iv) to banks making loans or actively considering making loans to such party provided that such party instructs each such bank not to disseminate such informa- tion unless required by law or regulatory authorities, or in order to enforce its rights against such party, and (v) to prospective financiers of such party and their respective investment bankers, attorneys, accountants and other experts (as said term is commonly used for U.S. securities law purposes) provided that such financiers, investment bankers, attorneys, accountants and other experts have agreed in writing to be bound by these provisions. 12. All notices hereunder shall be sent by telecopy, personal delivery, receipted overnight or certified mail to the parties at the address first set forth above or to such other addresses as the parties so designate. Copies of notices to KW shall be sent to the attention of Vice President, Business Affairs and General Counsel. Copies of notices to Orion shall be sent to the attention of Senior Vice President of Business Affairs, Home Entertainment and copies of accounting statements to Orion [* Deleted pursuant to a request for confidential treatment] shall be sent as well to the attention of Vice President, Producer Account- ing; the address for such copies to Orion being 1888 Century Park East, Los Angeles, California 90067. Very truly yours, KING WORLD PRODUCTIONS, INC. By:__________________________ ACCEPTED AND AGREED TO: ORION PICTURES CORPORATION By:__________________________ [* Deleted pursuant to a request for confidential treatment] EXHIBIT A SECURITY AGREEMENT SECURITY AGREEMENT dated as of October __, 1991 (the "Security Agreement") between King World Productions, Inc., a Delaware corporation (the "Debtor"), and Orion Pictures Corporation, a Delaware corporation (the "Secured Party"). W I T N E S S E T H: WHEREAS, the Secured Party and the Debtor have entered into that certain letter agreement dated as of October 1, 1991 (the "King World Production Agreement"), under which the Secured Party has agreed to transfer to the Debtor certain trademark, copyright and other property rights as more fully described in the King World Production Agreement (the "Rights") in and to the television series entitled "Hollywood Squares" (the "Series") to enable the Debtor to create and exploit new episodes of the Series; WHEREAS, pursuant to Section 3 of the King World Production Agreement, the Secured Party will receive [****] of the Debtor's "Net Profits" (as defined therein) from its exploitation of the Rights, and pursuant to Section 8 of the King World Production Agreement, the Secured Party has retained an automatic reversion right in the Rights; WHEREAS, pursuant to the King World Production Agreement, the Debtor has agreed to grant to the Secured Party a security interest in the Rights, as provided herein, to secure the Secured Party's payment and reversion rights under Sections 3 and 8 of the King World Production Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, as a condition to the effec- tiveness of, and in order to induce the Secured Party to enter into, the King World Production Agreement, the parties hereto hereby agree as follows: [* Deleted pursuant to a request for confidential treatment] 1. GRANT OF SECURITY INTEREST. __________________________ (a) GRANT: The Debtor hereby mortgages, hypothecates, grants and assigns to the Secured Party as security for the Secured obligations (as such term is defined in subparagraph 1(b) below) a continuing first priority security interest in and to all of the Debtor's rights, title, and interest of every kind and nature in and to (but none of the Debtor's obligations with respect to) all of the items listed in subparagraph 1(c) below, which items are hereinafter collectively referred to as the "Collat- eral". (b) PURPOSE OF GRANT: The security interest in the Collateral granted to the Secured Party pursuant hereto is being granted to secure the Secured Obligations. The term "Secured Obligations" shall mean and include the Debtor's obligation to (A) assign to the Secured Party the Rights in accordance with the terms of the reversion right retained by the Secured Party under Section 8 of the King World Production Agreement, (B) pay the Secured Party the amounts required to be paid by the Debtor pursuant to Section 3 of the King World Production Agreement and (C) fully and timely pay to the Secured Party all damages incurred by Secured Party arising from the Debtor's failure to perform its agreements, obligations, representa- tions, warranties and covenants hereunder and under the King World Produc- tion Agreement. (c) COLLATERAL: The term "Collateral" as used herein shall mean all the Debtor's right, title and interest of every kind and nature in and to the Rights granted to the Debtor under Section 1(a) of the King World Production Agreement. (d) RIGHTS OF SECURED PARTY: With respect to the security interest hereby granted to the Secured Party and granted to the Secured Party pursuant to the other Security Documents (as hereinafter defined), the Secured Party and any of its successors or assigns shall at all times be entitled to exercise in respect of the Collateral all the rights, remedies, powers and privileges available to a secured party under all applicable laws, including, without limitation, the United States Copyright Act and the New York Uniform Commercial Code in effect at the time, which shall be applicable for the purpose of establishing the relative rights of the Secured Party and of the Debtor, and to those procedures to be followed thereunder in the event this subparagraph 1(d) shall become operative, including the right to sell the Collateral or any portion thereof, and, in addition thereto, to the rights and remedies provided for herein and under the King World Production Agreement and to such other rights and remedies [* Deleted pursuant to a request for confidential treatment] as may be provided by law or in equity. Any proceeds received by the Secured Party in respect of any sale of, collection from or other realiza- tion upon all or any part of the Collateral pursuant to the exercise of its remedies as a secured creditor shall be held by the Secured Party and applied first to the payment of the costs and expenses, of such sale, collection or other realization, including the expenses, liabilities and advances made or incurred by the Secured Party in connection therewith, and second to the payment of the Secured Obligations. (e) EXERCISE OF RIGHTS; EVENTS OF DEFAULT. The Secured Party or any of its successors or assigns shall be entitled to exercise all or any of the rights granted hereunder with respect to the Collateral in the event the Debtor or its successors or assigns (i) breaches or defaults in the Debtor's obligation to make payments to the Secured Party under Section 3 of the King World Production Agreement, and such breach or default contin- ues for five business days after written notice thereof to the Debtor specifying such breach or default, (ii) breaches or defaults in the Debtor's obligation to assign to the Secured Party the Rights pursuant to Section 8 of the King World Production Agreement, or (iii) breaches or defaults, in any material respect, in the performance of any of the Debtor's obligations hereunder, and such breach or default continues for 20 days after written notice thereof to the Debtor specifying such breach or default. Any of such breaches or defaults shall constitute an "Event of Default" hereunder. After and during the continuance of an Event of Default, the Secured Party, after giving notice of its intention to do so, may take any reasonable action which it may deem necessary for the mainte- nance, preservation and protection of any of the Collateral or its security interest therein. (f) FURTHER DOCUMENTS. The Debtor hereby agrees to execute and deliver to the Secured Party all such financing statements or similar documentation for all jurisdictions designated by the Secured Party (collectively, the "Financing Statements"), one or more copyright mortgages and assignments in form reasonably satisfactory to the Secured Party (including the Copyright Mortgage, as hereinafter defined) and such other documents, agreements or instruments as the Secured Party shall reasonably request and are reasonably required to better perfect, protect, evidence, renew and/or continue the security interest in the Collateral granted hereunder and/or to effectuate the purposes and intents of this Security Agreement (collectively, the "Security Documents"), and to file, register and/or record the same under the Uniform Commercial Code and all other similar applicable laws of the States of California and New York and under the laws of any other jurisdiction where such filing, [* Deleted pursuant to a request for confidential treatment] registration and/or recordation may reasonably be required by the Secured Party concurrently with the execution and delivery of this Security Agreement and under the United States Copyright Act. Concurrently with the execution hereof, the Debtor will deliver to the Secured Party a copyright mortgage (the "Copyright Mortgage") in form and substance satisfactory to the Secured Party, duly executed and notarized and in proper form for recordation in the United States Copyright Office or other applicable governmental authority. If after the occurrence and during the continuance of an Event of Default, the Debtor fails to execute and deliver to the Secured Party any of the Financing Statements or any other Security Document on request of the Secured Party, the Debtor hereby appoints the Secured Party its irrevocable attorney-in-fact to sign any such document for the Debtor, and agrees that such appointment constitutes a power coupled with an interest and is irrevocable throughout the term of the King World Production Agreement and this Security Agreement. Whether or not an Event of Default has occurred, the Debtor hereby authorizes the Secured Party to file one or more continuation statements, and amendments to previously filed financing statements of a technical nature (other than a description of the Collateral), relative to all or any part of the Collat- eral without the signature of the Debtor where permitted by law. A carbon, photographic or other reproduction of this Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (g) TERM OF SECURITY INTEREST. The security interest created hereunder and under the Copyright Mortgage shall commence as of the date of this Security Agreement and shall terminate upon the expiration of the last to expire of Secured Party's rights under the King World Production Agreement and payment and performance by the Debtor of all of its obliga- tions thereunder, at which time the Secured Party, on the Debtor's request and at the Secured Party's expense, shall execute and deliver to the Debtor termination statements releasing and terminating the Financing Statements, and the other Security Documents, and with filing thereof at the sole cost and expense of the Secured Party. (h) PRIORITY OF SECURITY INTEREST. The security interest granted by the Debtor to the Secured Party in and to the Collateral shall be a first priority security interest. (i) CONTINUING SECURITY INTEREST. This Security Agreement shall create a continuing security interest in the Collateral and shall (a) be binding upon the Debtor, its succes- [* Deleted pursuant to a request for confidential treatment] sors and assigns, and (b) inure to the benefit of the Secured Party and its successors, transferees and assigns. 2. DEBTOR'S CONFIRMATIONS, REPRESENTATIONS, WARRANTIES AND COVE- NANTS: The Debtor warrants and represents that it is duly authorized, and it has the requisite right, power and authority to enter into and perform, this Security Agreement. Without the Secured Party's prior written consent, the Debtor may not during the term hereof (a) grant any first priority security interest in or lien on all or any of the Collateral, or (b) convey, transfer or otherwise dispose of an interest in all or any of the Collateral except to a transferee who shall acknowledge in writing in advance, and agree to be bound by, this Security Agreement and the terms and conditions hereof and the security interest provided for herein. Anything herein to the contrary notwithstanding, the Rights shall be as- signable to the Secured Party, and shall automatically revert to the Secured Party as provided in Section 8 of the King World License Agreement. 3. GOVERNING LAW: THIS SECURITY AGREEMENT AND EACH OTHER SECURITY DOCUMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS WHOLLY EXECUTED AND PERFORMED THEREIN, AND WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OR CHOICE OF LAWS THEREOF. 4. ANY LEGAL ACTION: THE DEBTOR AND THE SECURED PARTY (A) WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY AGREEMENT OR ANY OTHER SECURITY DOCUMENT, (B) AGREE THAT ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER SECURITY DOCUMENT SHALL BE INSTITUTED IN A STATE OR FEDERAL COURT IN THE CITY OF NEW YORK, STATE OF NEW YORK, (C) WAIVE ANY OBJECTION WHICH THEY MAY HAVE NOW OR HEREAFTER TO THE COUNTY OF NEW YORK AS THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND (D) IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OR ANY COURT OF THE STATE OF NEW YORK LOCATED IN THE CITY OF NEW YORK IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND ANY SUMMONS, ORDER TO SHOW CAUSE, WRIT, JUDGMENT, DECREE, OR OTHER PROCESS WITH RESPECT TO ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE DELIVERED TO THE DEBTOR PERSONALLY OUTSIDE THE STATE OF NEW YORK, AND WHEN SO DELIVERED, THE DEBTOR SHALL BE SUBJECT TO THE JURISDICTION OF SUCH COURT, AND AMENABLE TO THE PROCESS SO DELIVERED AS THOUGH THE SAME HAD BEEN SERVED WITHIN THE STATE OF NEW YORK, BUT OUTSIDE THE COUNTY IN WHICH SUCH SUIT, ACTION OR PROCEEDING IS PENDING. 5. NOTICES: Any notice or other communication herein required, permitted or desired to be given hereunder shall be [* Deleted pursuant to a request for confidential treatment] given in the manner provided in Section 12 of the King World Production Agreement. 6. AMENDMENTS AND WAIVERS: No amendment or waiver of any provision of this Security Agreement nor consent to any departure by the Debtor herefrom shall in any event be effective unless the same shall be in writing and signed by the Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 7. DEBTOR'S OFFICES: The Debtor's chief executive office and chief place of business is located at 830 Morris Turnpike, Short Hills, New Jersey 07078. The Debtor shall give Secured Party prompt written notice (and shall use its best efforts to give 30 days' advance notice) of any change in the location of its principal place of business and its books and records. 8. SECURED PARTY'S DUTIES AND LIABILITIES: Except as provided in the Uniform Commercial Code, the Secured Party shall have no duties as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collat- eral. 9. INDEMNITY AND EXPENSES: The Debtor agrees to indemnify the Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except for claims, losses or liabilities resulting from the Secured Party's gross negligence or willful misconduct. Upon the occurrence of an Event of Default, the Debtor agrees to pay to the Secured Party the amount of any and all expenses, including the reasonable fees and disbursements of its counsel, and of any experts and agents, that the Secured Party may incur in connection with, (i) the sale of, collection from, or other realization upon any of the Collateral, (ii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iii) the failure by the Debtor to perform or observe any of the material provisions hereof. The Secured Party agrees to indemnify the Debtor for the Debtor's claims, losses and liabilities arising from the gross negligence or willful misconduct of the Secured Party in the exercise or enforcement other than in a commercially reasonable manner of any of the rights of the Secured Party hereunder. 10. ENTIRE AGREEMENT; AMENDMENT; HEADINGS: This Agreement and the King World Production Agreement contain the entire understanding of the parties with respect to the subject matter hereof. This Agreement super- sedes all prior agreements [* Deleted pursuant to a request for confidential treatment] and may only be modified by a writing signed by all of the parties hereto. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. By signing in the spaces provided below, the parties hereto have agreed to all of the terms and conditions of this Security Agreement. ORION PICTURES CORPORATION Secured Party By:_________________________ Title:___________________ Address:_________________ KING WORLD PRODUCTIONS, INC. Debtor By:_________________________ Title:___________________ Address:_________________ [* Deleted pursuant to a request for confidential treatment] STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On ________________, 19__, before me, the undersigned, a Notary Public in and for said State, personally appeared ________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the within instrument as _______________ on behalf of King World Productions, Inc., the corporation therein named, and acknowledged to me that the corporation executed it. Witness my hand and official seal. ____________________________ [*Deleted pursuant to a request for confidential treatment] ASSIGNMENT __________ The undersigned, Orion Pictures Corporation ("Orion"), for One Dollar in hand paid and for other valuable consideration received, hereby sells forever, to King World Productions, Inc. ("KWP") all right, title, and interest of any kind whatsoever in and to the original property known as "Hollywood Square" (the Property"), including, without limitation, all trademarks, service marks, copyrights (and any renewals or extensions thereof), underlying rights, content, format, title, set design, compo- nents, game rules, scripts, and all appearances and depictions thereof, and all of such sole and exclusive rights necessary or desirable to create and exploit new episodes and/or properties based in whole or in part thereon, to copyright same in KWP's name, and to advertise, promote and market same, by any and all means, as well as all rights ancillary thereto and deriva- tive therefrom, throughout the world in any and all media (the "Rights"). This Assignment is subject to the terms and conditions of that certain agreement between the parties dated as of October 1, 1991 (the "Agreement"), including, without limitation, the exclusion from the Rights of distribution rights in and to the television episodes of the Property existing as of October 1, 1991. Orion agrees, insofar as it now or later may have the power or authority to do so, to cause renewals or extensions of any copyrights in the Property duly to be obtained, and the Rights herein granted are now assigned to KWP for the current term and the renewal or extended term of copyright and after such renewal or extension, further or like documents of confirmation of assignment will be given to KWP, if requested. Orion appoints KWP as its irrevocable attorney-in-fact, with the right, but not the obligation, to execute and file all such documents and to do all acts necessary for the obtaining of such extensions or renewals and evidencing the continuation of the Rights in KWP for such renewal or extended terms as are now vested in KWP. KWP, and its successors and assigns, are hereby empowered to bring, prosecute, defend and appear in suits, actions and proceedings of any kind or nature under or concerning the Rights, including without limitation, said copyrights or their renewals or extensions, or concerning any infringement thereof, and particularly infringement of or interference with any of the [*Deleted pursuant to a request for confidential treatment] Rights now granted under said copyrights or renewals or extensions, in KWP's name. Dated: As of October 1, 1991 ORION PICTURES CORPORATION By:___________________________ Its:__________________________ STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of October, 1991, before me personally came ___________________________, to me known, who, being by me duly sworn, did depose and say that he is the __________________ of Orion Pictures Corpora- tion, the corporation described in and which executed the foregoing Assignment; that he knows the seal of said corporation; that the seal affixed to said Assignment is such corporate seal; that it was so affixed pursuant to authorization of the board of directors of said corporation, and that he signed his name thereto by like authority. _________________________________ Notary Public EX-10.24 7 FULL MOON AGREEMENT [* Deleted pursuant to a request for confidential treatment] Exhibit 10.24 CONFIDENTIAL TREATMENT REQUESTED THIS AGREEMENT is made and entered into this ____ day of May, 1997, by and between K.W.M., Inc., 1700 Broadway, New York, New York 10019 ("KW") and Full Moon & High Tide Productions, Inc. ("Lender"), c/o Michael Adler, Esq., Lichter, Grossman, Nichols & Adler, 90200 Sunset Boulevard, Suite 530, Los Angeles, California 90069, providing the services of Roseanne ("Roseanne"). 1. The Series: The "Series" shall mean a possible strip (Monday - Friday) entertainment/talk show television series presently intended to be telecast initially in one-hour episodes in first-run syndication commencing with the 1998-1999 broadcast season (i.e., the 12- month period commencing on or about September 1, 1998, but in any event commencing between August 15 and September 20, 1998) (the "'98-'99 Broad- cast Season") and featuring Roseanne as the host. Commencing on the date hereof, KW shall attempt to license the Series to television stations in the U.S. and elsewhere throughout the world for telecast commencing with the '98-'99 Broadcast Season. The Series shall be co-produced by KW and Lender and distributed by KW, all in accordance with the terms of this Agreement. 2. Series Production and Distribution: (a) In the event that KW elects to produce the Series, KW shall co-produce and fund production of the Series and shall have the exclusive distribution rights in and to the episodes of the Series produced during the Employment Period (as defined below), forever and throughout the world in all media now or hereafter known, all in accordance with this Agreement. KW will consult with Lender regarding KW's distribution activities with respect to the Series, but, except as otherwise set forth herein, KW shall have the sole right to make all business decisions with respect to the Series, including without limitation regarding the annual Series budget (and any changes therein) and all distribution decisions with respect to the Series (including, without limitation, the right at any time to abandon the effort to license the Series). Notwithstanding the foregoing, KW acknowledges that it shall supply production funding for the Series in an amount commensurate with the production values of other nationally distrib- uted first-run syndicated series similar to the Series. Lender acknowledg- es that KW may simultaneously act as the producer or co-producer and/or distributor of any other productions. Lender acknowledges that KW distrib- utes "The Oprah Winfrey Show", and that, without limiting the generality of the foregoing sentence, KW shall have the right, in its sole discretion, not to license the Series for telecast in any market or territory in a time [* Deleted pursuant to a request for confidential treatment] period against the telecast of "The Oprah Winfrey Show" in that market or territory, and Lender specifically waives any claims that it might have based on any exercise of such right by KW. Nothing contained herein shall require KW to produce or distribute the Series or to continue such produc- tion or distribution if commenced; KW's only obligation to Lender and Roseanne shall be payment of the compensation set forth herein, in accor- dance with and subject to the terms contained herein with respect to such payment. (b) KW and Lender shall consult with each other on a regular and meaningful basis with respect to all creative elements of the Series and shall have mutual approval of all such creative elements, such approvals to be exercised by each of KW and Lender in a reasonable and timely fashion, in a manner consistent with the budget for the Series, and so as not to frustrate the production, distribution or promotion of the Series. Notwithstanding the foregoing, KW acknowledges that Lender shall have the right to designate Jeff Wald ("Wald") to be an executive producer of the Series. If Lender so designates Wald to be an executive producer, KW and Lender shall negotiate with Wald on an arm's length basis with respect to the terms of Wald's executive producing agreement, including without limitation Wald's compensation, it being agreed that Wald's specific duties shall be commensurate with his title and compensation. KW and Lender agree that, if the Series is produced, it will be produced in Los Angeles. 3. Services: In the event that the Series is produced, then: (a) Lender shall co-produce the Series and shall cause Roseanne to render her services as a day-to-day senior production executive and the host of all Series episodes produced pursuant to this Agreement during the period commencing on the date hereof and continuing through the date of completion of production of the last Series episode produced for initial telecast during the '98-'99 Broadcast Season (the "Initial Period"), unless such period is extended by KW pursuant to Paragraph 3(c) below (the Initial Period, as it may be extended, is sometimes referred to hereinafter as the "Employment Period"). The parties acknowledge that, unless otherwise agreed upon by the parties, the production schedule for each broadcast season of the Series will consist of [****] Series episodes. Lender shall cause Roseanne to perform diligently, faithfully and competently such services as are customarily and reasonably rendered by a host and a senior production executive of an entertainment/talk show series and to devote diligently and faithfully her time, skill and attention to the performance of such services, including, without limitation, and for no additional compensation, the rendering of her services, from time to time, in promo- [* Deleted pursuant to a request for confidential treatment] tional activities for the Series (including, without limitation, attending NATPE during January, 1998 and the subsequent NATPEs preceding each subsequent broadcast season for which KW extends the Employment Period pursuant to Paragraph 3(c) below). Lender shall cause Roseanne to be available, consistent with her first priority services to KW hereunder and with customary requirements for promotional activities for stars of series similar to the Series, to render such promotional activities. As a condition to Lender's and Roseanne's engagement hereunder, Lender hereby affirms and represents that neither Lender nor Roseanne is under any obligation to any current or former employer or other party which is in any way inconsistent with, or which imposes any restriction upon, any of Lender's and Roseanne's services and obligations hereunder, or any of Lender's and Roseanne's undertakings under this Agreement. Notwithstanding any other provision of this Agreement to the contrary, Lender and KW acknowledge that Lender and Roseanne have granted to ABC a "first look" at the next prime time Roseanne-starring television series, which option shall run for an 18-month period, commencing upon the broadcast of the final episode of the "Roseanne" series for the 1996/97 broadcast season. Accordingly, the terms, conditions and rights of KW's Sitcom Option (as defined in Paragraph 16 below) will be subject to compliance by Lender and Roseanne with the aforesaid ABC first-look option. (b) During the Initial Period, if KW requests, Lender and KW shall co-produce either a presentation tape or a pilot for the Series, and Lender shall cause Roseanne to render her on-camera services as a host thereof, for no additional compensation. (c) KW shall have a series of five (5) successive, dependent options, each to extend the Employment Period for an additional period of one (1) subsequent broadcast season (each, a "One Year Option Period"). KW shall exercise each such option, if at all, to extend the Employment Period for the subsequent One Year Option Period by written notice to Lender no later than May 1 of the then-current Employment Period (for purposes of clarification, the first option exercise date shall be May 1, 1999, for the 1999/2000 broadcast season (the "'99-'00 Broadcast Season"). In the event KW elects to so extend the Employment Period, the terms and provisions of this Agreement shall remain in effect and shall apply during the Employment Period, which shall be deemed so extended. 4. Fixed Compensation: (a) KW shall pay Lender, and Lender shall accept from KW, for Lender's and Roseanne's services during the Initial [* Deleted pursuant to a request for confidential treatment] Period, an amount equal to [****], payable upon the complete execution hereof, [****]. (b) If and to the extent KW exercises its option to extend the Employment Period for any One Year Option Period, KW shall pay Lender, and Lender shall accept from KW, for Lender's and Roseanne's services during the applicable One Year Option Period, the following amounts: (i) [****] with respect to the first such One Year Option Period; (ii) [****] with respect to the second such One Year Option Period; and (iii) [****] which amounts shall be payable on commencement of production of the Series episodes produced for initial telecast during the broadcast season (i.e., the 12-month period commencing on or about September 1) to which the applicable option relates, [****]. (c) For purposes of any applicable collective bargaining agreements, including, without limitation, AFTRA, all compensation payable to Lender hereunder shall be at the minimum rates, and to the extent that the compensation payable hereunder exceeds (i) [****] during each of the Initial Period and the first One Year Option Period (if any), (ii) [****] during the second One Year Option Period (if any); or (iii) [****] during each of the third, fourth and fifth One Year Option Periods (if any), KW shall be entitled to credit such excess against any additional fees to which Lender may become entitled for all services rendered by Roseanne hereunder, including entitlements by virtue of any applicable collective bargaining agreements, and the balance of any payments hereunder shall be allocated to Lender's co-production services and Roseanne's services as a senior production executive. All such additional fees shall be determined at minimum rates in accordance with the applicable collective bargaining agreement. (d) If Roseanne delivers promotional announcements (whether live or by means of recording) on behalf of the Series or participates in "lead ins" or "lead outs" of commercial announcements, Lender shall cause Roseanne to perform said services at no additional compensation. (e) KW shall pay directly to the AFTRA health, pension and welfare funds the amounts required to be paid with respect to Roseanne's AFTRA-covered services hereunder based on payment to Lender for AFTRA- covered services in the amount, notwithstanding any other provision of this Agreement, of (i) [****] during each of the Initial Period and the first One Year Option Period (if any), (ii) [****] during the second One Year Option Period (if any); and (iii) [****] during each of the third, fourth and fifth One Year Option Periods (if any). [* Deleted pursuant to a request for confidential treatment] (f) Subject to the provisions of this Paragraph 4(f), as soon as practicable after the execution of this Agreement, Lender will be granted a "non-qualified stock option" (the "Stock Option"), under the 1996 Amended and Restated Stock Option and Restricted Stock Purchase Plan (the "Plan") of KW, to purchase 100,000 shares of KW's Common Stock, $.01 par value (the "Common Stock"), at an exercise price per share equal to the price per share of the Common Stock on the New York Stock Exchange at the close of trading on the date of this Agreement. Lender's right to exercise the Stock Option shall vest 100% on September 7, 1999. Lender agrees to limit its sales of shares of Common Stock purchased pursuant to its exercise of the Stock Option so that its sales of such shares do not exceed 10,000 shares in any consecutive 30-day period. The foregoing terms shall be set forth in a definitive stock option agreement in KW's standard form which shall be entered into by Lender and KW. Lender's rights as an optionee shall be governed by the terms and conditions of such agreement and the Plan. (g) During the Employment Period, whenever KW requests Roseanne to travel to a place beyond fifty (50) miles from her residence in Los Angeles (or her then-current location if closer to the place for which KW requests her services), (i) KW shall provide Roseanne, her husband and up to four (4) other companions with, or reimburse such persons for (provided KW is furnished with evidence of expenses reasonably satisfactory to KW), first-class hotel accommodations during the period Roseanne is requested by KW to remain at such place and (ii) KW shall provide Roseanne, her husband and up to four (4) other companions with air transportation to and from such place and Roseanne's Los Angeles residence (or her then-current location if closer) on KW's corporate jet if KW owns a corporate jet at such time; otherwise KW will provide such persons with a charter jet air- plane (G-2 or better) for such purposes. (h) All payments hereunder are subject to any and all withhold- ings and deductions required by law. 5. Contingent Compensation: [****] of the Net Profits of the Series as defined herein. For purposes of this Paragraph 5 and Paragraph 6 below, KW shall include King World Productions, Inc. (a) "Gross Receipts" shall mean all sums actually received by or credited to KW and the subsidiaries of KW at any time from the following: (i) all exploitation of any and all episodes of the Series in perpetuity, any format rights in the Series, or any other rights whatsoever in or to the Series (e.g., subsidiary and ancillary rights, such as literary publishing rights and sound recordings and music publishing); (ii) all [* Deleted pursuant to a request for confidential treatment] recoveries for the unauthorized use or exploitation of any of KW's rights in the Series or the infringement of any of KW's rights in the Series (it being agreed that, notwithstanding anything to the contrary in Paragraph 5(b) below, KW shall not be entitled to any distribution fee on any Gross Receipts pursuant to this subdivision (ii)); and (iii) all net insurance recoveries from the Series. Advertising or other rebates or discounts obtained by KW or its subsidiaries and affiliated subdistributors with respect to the advertising and promotion of the Series shall be credited against the "Distribution Expenses" (as defined below) incurred with respect to such advertising and promotion. In the case of subdistribution of any of the rights hereunder on a percentage basis, the gross amount received by such subdistributor shall be included in Gross Receipts and there shall be no deduction for any subdistribution fees or commissions. Where subdistribution is on an outright basis, the actual amount received by KW shall be included in Gross Receipts. Advance payments and security deposits shall not be included in Gross Receipts until earned by, forfeited or otherwise applied to the Series (unless such advance payments or security deposits are non-refundable, in which case such amounts shall be included in Gross Receipts upon receipt), and interest on any such advance payments and security deposits shall also be included in Gross Receipts (calculated at the prime rate from time to time in effect at the Bank of New York, New York, New York, from the date of KW's receipt of any such advance or security deposit until the date of its inclusion in Gross Receipts (if ever)), nor shall Gross Receipts include receipts of radio or television broadcasters or others who actually use or exhibit to the public any of the Series programs (it being agreed that any agreement with a broadcaster or any other company owning or controlling KW, owned or controlled by KW, or under common ownership or control with KW, shall be on an arm's-length basis). (b) "KW's Distribution Fee" shall mean an amount equal to [****] of Gross Receipts; [****] "KW's Distribution Fee" shall mean an amount equal to [****] of Gross Receipts from that territory. In the event that KW engages a third-party distributor anywhere in the world, KW shall absorb within the applicable KW Distribution Fee any distribution fees payable to such third party. (c) "Distribution Expenses": KW will advance all marketing, promotional and other distribution expenses relating to the Series. Marketing, promotional and other distribution expenses ("Distribution Expenses") shall mean all direct (i.e., non-overhead), out-of-pocket costs and expenses paid in connection with the exhibition, distribution, adver- tising, promotion, marketing, turning to account and other exploitation of the Series, including, without limiting the generality of any of the [* Deleted pursuant to a request for confidential treatment] foregoing, any costs or expenses paid in connection with any of the following: (i) The making or obtaining of prints, negatives, preprint material, sound records, and storage and shipment of prints, satellite charges, transportation charges, costs of reels, containers, screening expenses and censorship charges; all costs of trailers, transcriptions, still photographs and the like; and insurance premiums on distributor's errors and omissions insurance policies; (ii) Advertising, publicizing, promoting and otherwise exploiting the Series by such means and to such extent as KW may deem appropriate; (iii) Making foreign language versions, cut-in versions, superimposed versions, synchronized versions, and manufacturing home video versions; (iv) All royalties and similar payments for the recording, synchronizing or performing of music in any Series programs or the sound- tracks thereof (including all royalties and similar payments to manufactur- ers of sound equipment, cartridges, cassettes and the like) to the extent not included in the cost of production of any Series programs; (v) Sales, use, receipts, income, excise, remittance, value added and other taxes (however denominated) to any governmental or taxing authority assessed upon, or with respect to, the negatives, dupli- cate negatives, prints or sound recordings of any Series programs, or upon the use or distribution of any Series programs, or upon the revenues derived therefrom, or any part thereof, or upon the remittance of such revenues, or any part thereof; any and all sums paid or accrued on account of duties, customs, imposts or permits required or imposed by any authority to secure the entry, licensing, exhibition, performance, use or televising of any Series programs in any country or part thereof, regardless of whether such payments or accruals are in the form of an assessment against any Series programs, or the proceeds thereof, or against a group of televi- sion programs in which any Series programs may be included or the proceeds thereof. Notwithstanding the foregoing, neither KW nor Lender shall be required to pay or participate in any other party's own United States federal, state or local income taxes or franchise taxes based on that other party's net income; provided, however, that to the extent that KW or any of its subsidiaries or affiliates receives a benefit (hereinafter referred to as "Tax Benefit"), in the form of a tax refund, tax deduction or tax credit with respect to its (or any of its subsidiaries' or affiliates') United [* Deleted pursuant to a request for confidential treatment] States Federal income taxes with respect to any payment to any government or taxing authority, in any territory outside the United States, of any income or similar taxes, including foreign withholding taxes, relating to the use, distribution or other exploitation of the Series, then the amount of such Tax Benefit will be added to Gross Receipts as defined herein below; further provided that, if such Tax Benefit is subsequently disal- lowed in whole or in part, for any reason whatsoever, KW shall be reim- bursed from Gross Receipts in the amount of the Tax Benefit so disallowed; provided further that Lender acknowledges that, notwithstanding any other provision of this Agreement that may be to the contrary, in no event shall Lender be entitled to examine, or otherwise have any access to, any of KW's tax returns; (vi) Transmitting to the United States any funds accruing to KW from any Series programs in foreign countries, such as wire transfer expenses, or any discounts from such funds taken to convert such funds directly or indirectly into the United States dollars; all costs of contesting any of the matters described in this subparagraph (vi) with a view to reducing the same, which costs shall be fairly apportioned to any Series programs if done on an industry-wide basis (e.g., through AGICOA) or with respect to television programs distributed by KW generally; (vii) Claims and lawsuits involving any Series programs, and protection thereof; costs of copyright searches and registrations, and the investigation, prosecution and defense of such claims and lawsuits, including reasonable outside counsel fees, subject to the provisions of Paragraph 13(c) below; (viii) Collecting Gross Receipts (including reasonable outside attorneys' fees), auditing and checking costs; costs incurred in preventing unauthorized exhibitions or other uses of any Series programs and collecting damages for copyright or other infringements thereof (the net collections therefrom to be included in Gross Receipts hereunder); (ix) To the extent not included in the production budget, all residual (and associated pension and health) and other payments made pursuant to collective bargaining agreements or other agreements by reason of the exhibition of any of the programs produced hereunder by television or otherwise or by the exercise of any rights therein; and (x) All other out-of-pocket distribution, marketing and promotional expenses for which distributors of television programs are customarily reimbursed. [* Deleted pursuant to a request for confidential treatment] (d) "Production Costs" shall mean the direct out-of-pocket costs of production of the Series actually paid by KW, including, without limitation, all development costs and the costs of producing a pilot or presentation tape, if KW produces same. (e) "Net Profits" shall mean Gross Receipts, less the following amounts deducted in the following order: (i) KW's Distribution Fee, (ii) Distribution Expenses and Production Costs (and interest on all the foregoing from the time actually paid, calculated at the prime rate from time to time in effect at the Bank of New York, New York, New York) and (iii) any contingent compensation of any nature payable on account of the exploitation of the Series to any person or entity. For purposes of calculating Net Profits, all episodes of the Series and all worldwide exploitation of the Series in all media shall, notwithstanding any provi- sion of this agreement that may be to the contrary, be cross-collateralized and form a single accounting unit on a cumulative basis from inception forward. 6. Accounting and Audit Rights: (a) KW shall render to Lender periodic statements pursuant to this Agreement prepared in accordance with KW's customary format showing in reasonable detail Gross Receipts, Production Costs, Distribution Fees and Distribution Expenses permitted by this Agreement. Statements shall be rendered quarterly through the conclusion of the broadcast season following the final broadcast season during which KW distributes the Series on a first-run syndication strip basis and thereafter on a semi-annual basis, provided that no statement need be rendered by KW for any period in which no receipts are received or charges incurred by KW. Each statement shall be rendered within forty-five (45) days after the close of the period for which the statement is rendered. Statements rendered may be amended from time to time to give effect to items overlooked, to correct errors and for similar purposes. Any United States dollars due and payable pursuant to any statement shall be paid simultaneously with the rendering of such statement. (b) KW shall keep full and complete records of all transactions had by it in connection with the production, distribution and exploitation of the Series, including without limitation any subdistributor accountings (hereinafter referred to as "records"). Lender may, at its own expense, audit KW's applicable records to verify statements rendered hereunder. Any such audit shall be conducted only at the offices of KW during normal business hours by a firm of certified public accountants. Lender shall not have the right to examine any matters or items after the expiration of [* Deleted pursuant to a request for confidential treatment] three (3) years from and after the date of the rendition of the statement in which such matters or items are first accounted for, it being understood that statements not questioned by Lender by notice in writing within said three (3) year period shall be final and conclusive upon Lender, and shall constitute a final and conclusive account stated even though the material therein may later be contained or referred to in a subsequent statement. Lender shall be forever barred from maintaining or instituting any action or proceeding based upon or concerning any transactions had by KW, its divisions, subsidiary corporations or other affiliates in connection with the production, distribution and/or exploitation of the Series and the accounting embraced in any statement delivered hereunder or the accuracy of any item appearing therein, unless a written objection to such statement (whether or not as a result of a formal audit) shall have been delivered to KW within the three (3) year period above referred to and unless such action or proceeding is commenced within one (1) year after delivery of such written objection to KW, time being of the essence to the time periods set forth in this paragraph. The aforesaid right to examine records is limited to the production, distribution and/or exploitation of the Series, and under no circumstances shall Lender have the right to examine records relating to KW's business or television programs generally or with respect to any other television program for the purposes of comparison or other- wise. In the event that any audit hereunder reveals that KW has under- reported any payment due to Lender by two and one-half percent (2-1/2%) or more for the audit period in question, then, in addition to the payment of the appropriate amount due, KW shall reimburse Lender for all of its reasonable audit costs for that audit (but not in an amount exceeding the amount of the recovery) and any and all reasonable collection costs to recover the unpaid amounts. (c) As to monies not freely remittable to the United States by reason of governmental restriction, such monies as may be due to Lender shall be segregated from other monies of KW and shall, to the extent permitted by law, and, at the request of Lender, be transferred to such accounts in the applicable country as Lender may designate or be deposited in an interest-bearing account. (d) Any Gross Receipts, net proceeds, working capital, deferred payments or other sums received or held by KW may be commingled with KW's general funds and Lender shall not have any right to interest thereon nor any right to participate in any profit or other income derived from use of the sums so received or held. 7. Grant of Rights: [* Deleted pursuant to a request for confidential treatment] (a) KW and Lender shall jointly own the copyright and all other proprietary rights in the Series (it being acknowledged that KW shall not own any right in Roseanne's persona), subject to KW's distribution rights as set forth in Paragraph 2(a) above. All ideas, creations, improvements and other works of authorship created, performed, developed, written or conceived by Lender and/or Roseanne in connection with the production of the Series and/or the Hollywood Squares Series (as defined in Paragraph 15 below) ("Materials") are works for hire within the scope of their services for the Series and/or the Hollywood Squares Series, as applicable, specifi- cally commissioned by KW for an audiovisual work for copyright purposes. Without limitation of the foregoing, KW shall have the right to exploit such Materials in connection with the Series and/or the Hollywood Squares Series, as applicable, throughout the world in perpetuity in any and all media now known or hereafter developed without payment of any additional compensation or other consideration of any kind except as set forth herein. Lender and Roseanne acknowledge that, in the event that said work-for-hire status is deemed unenforceable for any reason, they have assigned all Materials, upon their creation, to KW for use in connection with the Series and/or the Hollywood Squares Series, as applicable, all to the full extent set forth above. [****] (b) Lender grants KW and its authorized representatives the right to photograph, film and otherwise record Roseanne (the "Recordings"), alone or together with others, to exclusively own such Recordings, and to utilize, edit, add to, arrange and exploit such Recordings and Roseanne's name, likeness and biography (which biography and any likeness not taken from the Recordings shall be subject to Roseanne's reasonable approval) in perpetuity in any media now known or hereafter devised desired by KW throughout the world in connection with publicity, promotion, advertising, marketing and other distribution in any and all media of the Series and/or the Hollywood Squares Series, as applicable, and KW, so long as no such use constitutes a direct endorsement by Lender or Roseanne of any other product or service. KW shall have the sole right to issue any and all such publicity, but KW shall consult with Roseanne regarding the use of her name or likeness in connection with such publicity, provided that Roseanne shall have the right to mention the Series and/or the Hollywood Squares Series in interviews, talk-show appearances and the like. 8. Exclusivity: During the Employment Period, Lender shall cause Roseanne to render her services on a first priority basis to KW with respect to all media and to be exclusive to KW as a recurring perform- er in all reality-based programming, and in a recurring role in all fictional (as opposed to reality-based) series, produced for any form of [* Deleted pursuant to a request for confidential treatment] television now or hereafter known (including, without limitation, broadcast and cable television). The parties acknowledge and agree that (i) Roseanne's role as a day-to-day senior production executive and the host of the Series will preclude her from rendering regular services during the Employment Period as a recurring on-camera performer or day-to-day produc- tion executive for any other television series, and (ii) subject to the scheduling of Series production and related Series activities requiring Roseanne's services hereunder, as well as to Roseanne's other obligations to KW hereunder, Roseanne shall be entitled to render services on an occasional basis for non-recurring guest appearances on other television series, as an on-camera performer in, without limitation, mini-series or movies-of-the-week, or as a non-day-to-day executive or other producer of a mini-series, movie-of-the-week or series, so long as none of the foregoing services in any way interferes with the rendition of Roseanne's services to KW on a first priority basis. 9. AFTRA: Lender shall cause Roseanne to become and to remain a member of any applicable labor organization with which KW has entered into a collective bargaining agreement having jurisdiction over her services hereunder. Lender acknowledges that Roseanne is a member of AFTRA and that KW shall be entitled to the maximum benefits available to KW from Roseanne's services with respect to the Series and the Hollywood Squares Series and the engagement hereunder arising out of the AFTRA basic agree- ment (the "Basic Agreement"). Without limiting the generality of any other provisions of this Agreement, insofar as AFTRA-covered services hereunder are concerned, KW shall have the right to use and reuse recordings of the Series and the Hollywood Squares Series or portions thereof throughout the world to the fullest extent permitted (or not forbidden) by the Basic Agreement, including, without limitation, in connection with free televi- sion replays, foreign exhibition, video cassette and other supplemental markets exploitation, and use of excerpts pursuant to Paragraphs 73(d)(8) and 73(d)(10) of the Basic Agreement, no payments shall be due to Lender in connection therewith unless required by the Basic Agreement, and such payments shall be at the minimum rates applicable, as the case may be, and, to the extent permitted (or not forbidden) by the Basic Agreement, KW shall have the right to credit any such payments as set forth in Paragraph 4(c) above. In the event that KW is required by the terms of any applicable collective bargaining agreement to pay Lender on a basis other than that set forth herein, Lender agrees, to the extent permissible, that such payments shall be credited against the compensation payable to Lender hereunder. 10. Confidentiality: Except as required in connection with the performance of Lender's and Roseanne's services hereunder, neither Lender [* Deleted pursuant to a request for confidential treatment] nor Roseanne shall, during or after the termination of the Employment Period, use or disclose to any party any confidential business information or trade secrets of KW's obtained or learned by Lender or Roseanne during the Employment Period. 11. Non-Compete: Neither Lender nor Roseanne shall, for a period of one (1) year following the termination of the Employment Period, (a) induce, directly or indirectly, any person, partnership or corporation from whom or from which KW (which for purposes of this paragraph shall include KW's subsidiary and affiliated companies) acquires television programming during the Employment Period, to terminate its agreement with KW with respect to such programming or to refuse to enter into any agreement with KW with respect to the development or production of any programming, (b) induce, directly or indirectly, any employee of KW's to terminate his or her employment. 12. Force Majeure; Death or Disability: (a) In the event of Roseanne's death, the Employment Period shall automatically terminate, effective upon the date of Roseanne's death. (b) In the event that by reason of disability, Roseanne is unable to fully perform hereunder for a period in excess of (i) [****] consecutive days at any time during the Employment Period or (ii) [****] in the aggregate during (x) the Initial Period or (y) any One Year Option Period, KW shall have the right to terminate the Employment Period forth- with. For purposes of this subparagraph (b), the term "disability" shall mean any physical, mental or other impairment (including, without limita- tion, illness) rendering Roseanne incapable of performing all the material services required to be performed by Roseanne pursuant to the terms of this Agreement. (c) In the event KW is unable to utilize Roseanne's services due to any of the following reasons: act of God; unavoidable accident; fire; blackout; act of public enemy; war, riot or civil commotion; enactment, rule, order or act of government or governmental instrumentality; strike, lockout or other labor dispute; failure of technical facilities; or other similar or dissimilar cause beyond KW's control, KW may suspend the Employment Period during the continuation of such inability to use Roseanne's services, the Employment Period and all option exercise dates shall be deemed extended by all such periods of suspension (but in no event shall the Employment Period be extended past the date seven (7) years after the date hereof), and KW shall not be obligated to make any payment to Lender with respect to any period of any such suspension. Either KW or Lender shall have the right upon written notice to the other to [* Deleted pursuant to a request for confidential treatment] terminate the Employment Period if any such suspension period continues beyond [****]; provided, however, that in the event that Lender so elects to terminate the Employment Period, such termination shall not be effective if, within three (3) business days following KW's receipt of such termina- tion notice from Lender, KW ends such suspension period and reinstates the Employment Period. 13. Representations, Warranties and Indemnification: (a) Each of KW and Lender separately warrants and represents to the other party that it has the right to enter into and to perform this Agreement. (b) Lender further warrants and represents that, except as based on materials KW assigns Roseanne or as are in the public domain, all Materials created by Lender and/or Roseanne hereunder shall, to the best of her knowledge, be original and not violative of any third party's rights. (c) Each of KW and Lender (the "indemnifying Party") shall indemnify the other party as follows: (i) The Indemnifying Party shall indemnify the other party (and its shareholders, directors, officers, employees, agents, affiliates, subsidiaries, licensees, successors and assigns), its licensees and its sponsors and their advertising agencies, against and hold them harmless from all loss, costs, liabilities and expense (including judg- ments, settlements and reasonable attorneys' fees) (collectively, "Expens- es") suffered, incurred or imposed by reason of any breach, or any claim of breach (but with respect to Lender, only claims which are reduced to a final non-appealable judgment in a court of competent jurisdiction or settled with Lender's written consent (provided that if Lender refuses to approve any settlement, Lender shall post a bond for the benefit of KW in an amount reasonably related to KW's potential liability), by the Indemni- fying Party of any of its representations, warranties or undertakings hereunder. KW's indemnification of Lender shall extend to any and all Expenses incurred by Lender by reason of a third-party claim in connection with the production, distribution or other exploitation of the Series or the Hollywood Squares Series, other than a claim covered by Lender's indemnification pursuant to this Paragraph 13. (ii) The party seeking indemnification shall give the Indemnifying Party prompt written notice of any claim or action which is or may be covered by this Paragraph and which comes to the indemnitee's attention; provided, however, failure to provide notification as required [* Deleted pursuant to a request for confidential treatment] by this paragraph shall limit the applicable indemnity solely to the extent that such failure prejudices the Indemnifying Party. (iii) On the Indemnifying Party's request, the indemnified party shall from time to time advise the Indemnifying Party or its counsel of any developments as to any claim or action which is or may be covered by this section and shall consult with the Indemnifying Party or its counsel as to the determination of major decisions of defense and settlement, but the Indemnifying Party shall have dispositive control over the defense of and the right to settle any such claim, although the indemnified party may cooperate in the defense thereof at its own expense. It is agreed, however, that the Indemnifying Party may not settle any claim or action without the indemnified party's prior written consent, if such settlement would result in any manner of injunctive-like relief against the indemni- fied party or would in any way impair the indemnified party's rights hereunder. The Indemnifying Party shall not be in default hereunder if a given action or claim is being defended in good faith and/or if an insur- ance carrier has assumed the defense of such claim (whether or not with reservations). (d) Notwithstanding the foregoing indemnification, each of Roseanne and Lender shall be included as additional insureds on any errors and omissions and general liability insurance policies obtained by KW with respect to the Series. 14. Credits: With respect to the Series, (i) Roseanne shall be accorded an "Executive Producer" credit (a) on a separate card on the screen (unless credits are in the form of a crawl), followed by executive producer credits accorded to up to two individuals designated by KW, including, if KW so elects, Roger King and/or Michael King, in a size of type not less than the size of type of the credit accorded to any other producer or executive producer and (b) in all paid advertising issued by KW or under KW's control in which any other executive producer or producer receives credit, and (ii) Lender shall be accorded a "produced in associa- tion with" credit (a) on a separate card on the screen immediately before or after, in KW's discretion, any production credit accorded to KW, such credit to be in a size of type not less than the size of type of any other institutional production credit and (b) in all paid advertising issued by KW's or under KW's control in which KW's production credit appears (it being acknowledged that KW shall be entitled to production and distribution credits in connection with the Series). No casual or inadvertent failure by KW to accord Lender or Roseanne such credits in accordance with this provision, and no breach by any third party, shall be deemed a breach of this Agreement. Upon KW's receipt of written notice from Lender or Roseanne of any failure by KW to comply with these credit provisions, KW [* Deleted pursuant to a request for confidential treatment] shall use reasonable efforts to cure prospectively any such failure to comply with respect to Series episodes produced after receipt of such notice. 15. Hollywood Squares: In addition to Roseanne's services described in Paragraph 3 above, Lender shall, if KW so requests, cause Roseanne to render her on-camera services for up to [****] days during each broadcast season (if any) during the period commencing with the '98-'99 Broadcast Season and ending the later of (i) the end of the '99-'00 Broadcast Season and (ii) the expiration of the Employment Period, as a "square" (but not the "center square") on a "Hollywood Squares" series (the "Hollywood Squares Series") possibly to be produced by KW or an affiliate thereof, if and to the extent that KW or any such affiliate actually produces the Hollywood Squares Series. Lender shall cause Roseanne to render such services for the Hollywood Squares Series in accordance with a schedule reasonably determined by KW in consultation with Roseanne and subject to her reasonable professional availability, it being acknowledged and agreed that the episodes in which Roseanne appears are intended to be telecast initially during so-called "ratings sweeps" periods. KW shall pay Lender the minimum scale amounts required by the Basic Agreement for Roseanne's services on the Hollywood Squares Series. 16. KW Option: Subject to the ABC first-look option referred to in Paragraph 3(a) above, KW shall have the exclusive option (the "KW Sitcom Option") to co-produce with Lender and Roseanne, to co-own the copyright in equal shares with Lender/Roseanne (to the extent Lender/Roseanne will own or co-own the copyright) and to obtain exclusive distribution rights in the next (that is, following "Roseanne") fictional (as opposed to reality- based) television series (the "Sitcom") in which Roseanne is proposed to be a principal on-camera performer and which is proposed to be telecast initially at any time during the period commencing upon the conclusion of the Employment Period and ending eighteen (18) months following the end of the final broadcast season during which KW distributes the Series in first- run syndication (the "18 Month End Date"). If the Series is not produced for any reason, then, for purposes of the foregoing sentence, the final broadcast season during which KW distributes the Series shall be deemed to have ended on April 30, 1998. If Roseanne elects to be a principal on- camera performer in a Sitcom, Lender shall send written notice thereof to KW, whereupon KW shall have 30 business days to exercise its option, if at all, by written notice to Lender thereof within such 30 business day period. If KW exercises such option, KW and Lender shall negotiate with each other (and with any network, if applicable) with respect to mutually agreeable terms and conditions regarding the production and distribution of [* Deleted pursuant to a request for confidential treatment] the Sitcom ("KW Sitcom Negotiations"), which shall in any event include the following terms: (i) Roseanne shall render services as a principal on- camera performer for all episodes produced of the Sitcom; (ii) Roseanne shall receive a fee equal to [****] per episode for the first broadcast season of the Sitcom (reducible, in good faith, to accommodate the fee payable to any other co-star of comparable stature to Roseanne), which fee shall be increased for each subsequent broadcast season of the Sitcom on a cumulative basis by [****]; and (iii) [****] of the "net profits" of the Sitcom (the definition of which shall be the same as that used to determine "Net Profits" from the Series (provided that "Series" as used in that definition shall be deemed replaced with "Sitcom"), with the exceptions that (x) KW shall not be entitled to any Distribution Fee from the initial network television broadcast of the Sitcom, and (y) no Distribution Expenses (other than KW's out-of-pocket costs of manufacturing home video versions) shall be deducted by KW before the determination of such "net profits." KW's and Lender's/Roseanne's participation in "net profits" from any Sitcom shall be measured separately from, and shall not be cross- collateralized with, any revenue from the Series or any Development Project (as defined below). If the KW Sitcom Negotiations result in an agreement, the parties hereto will endeavor to adapt this Agreement as it relates to the Series (other than with respect to Paragraphs 4(a) and 4(b) of this Agreement) to fit the agreed-upon terms with respect to the Sitcom. If for any reason the KW Sitcom Negotiations for any proposed Sitcom do not result in an agreement, or the Sitcom that is the subject of such Negotiations is for any reason not produced, the provisions of this Paragraph 16 shall continue to apply to the next proposed Sitcom. Notwithstanding anything to the contrary in this Paragraph 16, KW shall not be entitled to exercise the KW Sitcom Option if KW has exercised all five (5) of its options pursuant to Paragraph 3(c) above to extend the Employment Period through the 2003/2004 broadcast season. 17. First Look Option: (a) During the Employment Period, Lender shall submit exclusive- ly to KW all ideas, literary material and/or proposed projects, other than the Sitcom (which shall be governed by the terms of the KW Sitcom Option) and the "Packaged Projects" (as defined in Paragraph 18(c) below), that Lender and Roseanne are interested in developing for Lender and/or Roseanne as an on-air performer, producer or both, for initial exploitation on any form of television now or hereafter known (including, without limitation, broadcast or cable television) ("Development Projects") prior to submitting such Development Projects to any other party. KW will have an exclusive period of fifteen (15) days after submission to KW of any Development Project to consider such Development Project (provided, however, that such [* Deleted pursuant to a request for confidential treatment] period shall be reduced to five (5) days if there is active interest from one or more third parties in developing and/or acquiring such Development Project (a "Hot Development Project") and the circumstances reasonably require such reduced period). If KW is interested in pursuing such Development Project, KW shall send written notice thereof to Lender within such fifteen (15) day (or five (5) day, if applicable) period, whereupon KW and Lender shall negotiate for a period of twenty (20) days (provided, however, that such period shall be reduced to five (5) days with respect to any Hot Development Project) with respect to mutually agreeable terms and conditions regarding the development, production and exploitation of such Development Project, which will in any event include the following terms: (i) KW shall have the exclusive distribution rights in such Development Project, if produced, in all media now or hereafter known throughout the world in perpetuity, (ii) KW will co-own the copyright in such Development Project [****] Lender/Roseanne (to the extent Lender/ Roseanne will own or co-own the copyright in such Development Project); (iii) as between KW and Lender, KW shall be responsible for advancing any required funding of such Development Project and KW will co-produce with Lender and Roseanne such Development Project (if produced); (iv) fees to Lender/Roseanne for producer and on-camera services shall be set on an arm's-length basis commensurate with their duties and the budget of such Development Project; (v) [****] of the "net profits" of the Development Project, if produced (the definition of which shall be the same as that used to determine "Net Profits" from the Series (provided that "Series" as used in that definition shall be deemed replaced with "Development Project"), [****] KW's and Lender's/Roseanne's participation in "net profits" from any Development Project shall be measured separately from, and shall not be cross-collater- alized with, any revenue from the Series or any other Development Project. If the negotiations regarding a Development Project result in an agreement, the parties hereto will endeavor to adapt this Agreement as it relates to the Series (other than with respect to Paragraphs 4(a) and 4(b) of this Agreement) to fit the agreed-upon terms with respect to such Development Project. (b) If KW does not notify Lender of its interest in pursuing a Development Project within the fifteen (15) day (or five (5) day, if applicable) period referred to in subdivision (a) above, or if KW and Lender are unable to agree to mutually agreeable terms (other than those agreed upon terms as set forth in Paragraph 17 (a) above) regarding the development, production and exploitation of such Development Project within the twenty (20) day (or five (5) day, if applicable) period referred to in subdivision (a) above (in either event, such Development Project shall be deemed a "Passed Project"), then Lender shall have the right to negotiate with third parties with respect to the development, production and exploi- tation of the Passed Project; [* Deleted pursuant to a request for confidential treatment] provided, however, that with respect to any Passed Project for which KW and Lender negotiated but were unable to agree to mutually agreeable terms, Lender shall not enter into an agreement with any such third party on terms equal to or less favorable to Lender than the terms last offered by Lender to KW unless Lender first re-offers such Passed Project to KW, for a period of three (3) business days, on the terms and conditions which Lender is then prepared to accept from such third party (it being agreed that the terms required to be accepted by KW shall not include any term which cannot be reasonably and readily performed by KW and that any such financial terms shall be expressed as determinable sums of money or as a percentage of net profits or gross receipts in a readily calculable manner). If KW does not within such five (5) business days period notify Lender that it wishes to enter into an agreement on such terms and conditions (with silence being deemed a rejection), Lender shall be free to enter into an agreement with such third party on such terms and conditions. If Lender does not accept such third party offer, the last refusal provisions of this paragraph shall continue to apply to any third party offers on terms equal to or less favorable to Lender than the terms last offered by Lender to KW which Lender wishes to accept with respect to such Passed Project. Furthermore, in the event there is any material change to the basic creative elements of any Passed Project prior to Lender's entering into an agreement with a third party with respect to such Passed Project in accordance with the terms of this paragraph, Lender shall resubmit such Passed Project with such changes to KW, and KW shall again have the right of first negotia- tion/last refusal with respect thereto in accordance with the provisions of this paragraph. If Lender enters into an agreement with a third party with respect to a Passed Project, Lender will pay to KW, over the course of the first broadcast season of such Passed Project, an amount equal to the aggregate amount of all KW's direct, out-of-pocket expenses (other than as part of the Development Fund, as defined below) incurred by KW in connec- tion with developing such Passed Project, plus interest on the total amount thereof at the prime rate charged from time to time by the Bank of New York, New York, New York, computed from the date such payments were made through the date of repayment to KW. (c) During the Employment Period, KW shall either furnish Lender and Roseanne with [****] at KW's offices in Los Angeles, or, if no office space is available there, arrange for Lender and Roseanne to have such exclusive offices at other office space in Los Angeles. During each year of the Employment Period and continuing each year thereafter until the 18 Month End Date, KW shall provide a development and related overhead fund from which KW shall fund Lender's and Roseanne's development and related overhead activities under this Paragraph 17 on an "as used" basis, not to [* Deleted pursuant to a request for confidential treatment] exceed [****] (the "Development Fund"), including without limitation for the salaries of a development executive and a secretary, rent for office space outside of KW's offices (or, if office space is provided in KW's offices, a reasonable allocation of KW's rent and overhead) and use in acquiring options and/or engaging writers. The Development Fund shall, in determining the "net profits" from Development Projects, be allocated by KW, as appropriate, to particular Development Projects. Any portion of the Development Fund that is not so allocated and recouped by KW from a particular Development Project shall be recoupable by KW from any other Development Projects. 18. Miscellaneous: (a) Any and all notices or other papers which either party shall be required or shall desire to give to or serve upon the other party shall be in writing and shall be served by mail, by overnight delivery or by telecopier. Service of any notice or other paper shall be deemed complete if and when the same is deposited in the mail, or with an overnight delivery company, postage or toll prepaid, addressed to (i) KW at 1700 Broadway, New York, New York 10019 or telecopied to (212) 974-0310, or (ii) Lender at Lichter, Grossman, Nichols & Adler, 90200 Sunset Boulevard, Suite 530, Los Angeles, California 90069, Attn: Michael Adler, Esq., telecopier (310) 205-6999, or to such other address as may be designated in writing by either party hereto in a notice to the other. (b) Nothing herein contained shall constitute a partnership among, or joint venture by, the parties hereto or constitute any party the agent, trustee or pledgeholder of the other or place any party in the position of fiduciary with respect to the other party. No party shall hold itself out contrary to the terms of this Agreement as respecting the distribution and other exploitation of the Series and no party shall become liable by reason of any representation, act or omission of the contrary to the provisions hereof. This Agreement is not for the benefit of any third party and shall not be deemed to give any right or remedy to any such party whether referred to herein or not. (c) Lender and Roseanne warrant and represent that they have not entered into, and that they will not enter into, any agreement with a talent agency or other representative applicable to the Series, the Sitcom or, except to the extent that Lender otherwise advises KW within thirty (30) days following the execution of this Agreement (the "Packaged Pro- jects"), any Development Project that would require payment of any package commission (or other payment of a similar nature) to such agency [* Deleted pursuant to a request for confidential treatment] or other representative (a "Package Commission"), and Lender's/Roseanne's indemnification of KW as set forth in Paragraph 13 above shall extend to the payment of any such Package Commission. (d) Each party shall from time to time, upon request, execute, acknowledge and deliver such documents as may, in the reasonable judgment of the requesting party, be necessary and proper to evidence, maintain, effectuate or defend any and all of the rights of such requesting party under any provision of this Agreement. In the event the party receiving such a request should fail to execute and deliver the requested document within a reasonable period of time (allowing for review by legal counsel), then the requesting party shall be authorized as the attorney-in-fact of the other party to execute, deliver, record and file any such document. (e) The headings of the paragraphs of this agreement are for convenience only, and they shall not be of any effect in construing the contents hereof. (f) If any party hereto (a "Breaching Party") shall breach any of the material terms of this Agreement, including, without limitation, a failure or refusal by such Breaching Party to perform any of her or its obligations hereunder, then the party affected by such breach (the "Non- Breaching Party") shall have the right, upon written notice to the Breach- ing Party, to suspend such Non-Breaching Party's obligations to the Breaching Party until such Breaching Party has cured such breach (and if Lender and/or Roseanne are the Breaching Party, KW shall have the right, without limitation, to suspend the Employment Period during the period of such breach and the Employment Period and all option exercise dates shall be deemed extended by all such periods of suspension, but in no event shall the Employment Period be extended past the date seven (7) years after the date hereof. In addition to the foregoing rights, the Non-Breaching Party shall have the right to terminate the Employment Period and its obligations hereunder to the Breaching Party following the occurrence of such breach, if the Breaching Party has not cured such breach within ten (10) days following the Non-Breaching Party's written notice of same to the Breaching Party; provided, however, that if by the nature of such breach, such breach is incurable, the Non-Breaching Party shall not be required to accord the Breaching Party any cure period prior to exercising its right to terminate its obligations to the Breaching Party hereunder. Any such actions taken by the Non-Breaching Party pursuant to this provision shall be without prejudice to any and all remedies to which the Non-Breaching Party is entitled, in law or in equity, for breach of this Agreement. No waiver of any breach of any provision hereof shall be deemed a waiver of any preced- [* Deleted pursuant to a request for confidential treatment] ing or succeeding breach of such provision. This Agreement expresses the entire understanding of the parties hereto with respect to the subject matter hereof and any and all prior agreements, understandings or represen- tations relating in any way to the subject matter hereof have been merged herein. No modification, alteration or amendment of this Agreement shall be valid or binding unless in writing and signed by the party to be charged therewith. (g) This agreement shall be interpreted and construed under the laws of the State of California applicable to contracts to be wholly performed therein. Any controversy, dispute or claim under, arising out of, or in connection with or relating to, this Agreement, including, but not limited to, the negotiation, execution, interpretation, construction, coverage, scope, performance, breach, termination, validity or enforceabil- ity of this Agreement shall be settled, at the request of any party, by reference to a judge in accordance with the procedures of SECTION 638 et seq. of the California Code of Civil Procedure. The site of any such proceeding shall be in Los Angeles County. (h) Lender and Roseanne agree that the services to be furnished by them hereunder and the rights granted by them hereunder are of a special, unique, extraordinary, artistic and intellectual character which gives them a peculiar value, the loss of which cannot reasonably or adequately be compensated for in damages in an action at law, and that the breach by either of them of the provisions contained in this Agreement will cause KW irreparable injury and damage. KW shall be entitled to seek injunctive and other equitable relief to prevent the violation of any of the provisions of this Agreement in addition to any other rights which it may have to damages or otherwise. Roseanne's and Lender's only remedy for a breach of any provision of this Agreement by KW shall be an action for damages, if any, incurred as a result of such breach, and in no event shall Roseanne or Lender have the right to injunctive or other equitable relief or to enjoin or otherwise interfere with the distribution, broadcast or other exploitation of the Series. (i) Neither KW, Roseanne nor Lender shall have the right to delegate her or its obligations under this Agreement, except that (i) to the extent that such obligations are not personal in nature, such obliga- tions may be delegated to an entity that is wholly owned by the assignor or that acquires all or substantially all of the assignor's assets and (ii) KW shall have the right to assign this Agreement to a subsidiary or parent of KW which is controlling production of the Series. (ii) Nothing contained in this Agreement shall be con- strued so as to require the commission of any act contrary to law, and whenever there is any conflict between any provision [* Deleted pursuant to a request for confidential treatment] of this Agreement and any statute, law, ordinance, order or regulation contrary to which the parties have no legal right to contract, the latter shall prevail, but in such event any provision of this Agreement so affected shall be curtailed and limited only to the extent necessary to bring it within the legal requirements (and if such modification is not possible, such clause shall be deemed deleted); provided, however, that no other provision of this Agreement shall be affected thereby and such other provisions shall continue in full force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above. K.W.M., INC. By:_______________________________ FULL MOON & HIGH TIDE PRODUCTIONS, INC. By:_______________________________ [* Deleted pursuant to a request for confidential treatment] In order to induce K.W.M., Inc. to enter into the foregoing Agreement, I agree that Full Moon & High Tide Productions, Inc. ("Lender") has the right to enter into the Agreement and to perform and grant the rights therein on my behalf. I agree to be personally bound by all terms and conditions of the Agreement as they relate to me; I hereby join jointly and severally in all warranties, representations and indemnities made by Lender therein; and I agree to perform to the best of my ability all services that the Agreement requires to be performed by me. I agree that I will look solely to Lender for payment of all compensation and other consideration to me. In the event Lender or I fail to perform pursuant to the Agreement, I agree to be personally bound as if I were a direct party to the Agreement in the first instance, and you shall not be required to exhaust your remedies against Lender prior to commencing an action against me. __________________________________ Roseanne [* Deleted pursuant to a request for confidential treatment] As an inducement to Full Moon & High Tide Productions, Inc. ("Lender") to enter into and perform the foregoing Agreement, King World Productions, Inc. ("KWP") agrees (i) to guarantee the performance by K.W.M., Inc. ("K.W.") of all of the duties to Lender under the Agreement, including the payment of all fixed and contingent compensation thereunder, and (ii) that in the event of any breach by KW of any of the terms which are the subject of this guarantee, Lender shall have the right to proceed directly against KWP without first exhausting its remedies against KW prior to commencing an action against KWP. KING WORLD PRODUCTIONS, INC. By:______________________________ EX-10.26 8 AMENDMENT TO ORIGINAL AGREEMENT [* Deleted pursuant to a request for confidential treatment] Exhibit 10.26 CONFIDENTIAL TREATMENT REQUESTED KING WORLD F.S.C. CORPORATION 830 Morris Turnpike Short Hills, New Jersey 07078 Dated as of September 19, 1991 Unilever NV c/o Mr. Doug Gluck Senior Vice President E.C. Television Inc. Greendon House 7 C-D Bayham Street London NW1 OEY England Dear Doug: Reference is made to the agreement between Unilever NV ("Unilever"), through its then agent Lintas International Limited ("Lintas"), and King World F.S.C. Corporation ("KW") through its then agent Buena Vista International, Inc. ("BVI"), dated June 2, 1988, as amended as of June 13, 1989 (the "Original Agreement"). KW and Unilever acknowledge that E.C. Television Inc. ("ECTV") has replaced Lintas as Unilever's agent and liaison with KW in this matter and that BVI no longer is acting as KW's agent in the matter of the renewal. Unless otherwise specified, all defined terms herein shall have the meanings set forth in the Original Agreement. Except as otherwise specified herein, the amendments to the Original Agreement hereunder shall become effective on the commencement of the Renewal Period (as defined in Paragraph A below). Unilever and KW agree to amend the Original Agreement as follows: A. The License Term shall be extended for the period January 1, 1993 through December 31, 1994 (the "Renewal Period"). B. As used herein, the "Eastern European Territories" shall mean Albania, Bulgaria, Czechoslovakia, Hungary, Poland, Romania, Union of Soviet Socialist Republics, and Yugoslavia (including all of the constitu- ent republics of the foregoing countries as of January 1, 1991). The Eastern European Territories shall not be included in Territory A, and all rights in such Eastern European Territories shall revert to KW. [* Deleted pursuant to a request for confidential treatment] C. The guaranteed minimum license fee during each calendar year of the Renewal Period shall be [****] (the "Minimum License Fee"). To the extent that during each year of the Renewal Period, the royalty payments to KW for such year hereunder do not at least equal the Minimum License Fee, the difference between the Minimum License Fee and such royalty payments to KW with respect to such year shall be paid to KW (the "Shortfall Payment") on or before the first January 31 following the end of such year. The second sentence of Paragraph 4(d) of the Original Agreement shall be deleted and the parties acknowledge that during the Renewal Period, Unilever shall not be entitled to credit any cumulative excess in royalty payments from any one year against the Minimum License Fee for any other year. D. In place of the basic royalty rates and adjustments referred to in Paragraphs 4(c), 9 and 10 of the Original Agreement, the royalties payable to KW by Unilever for each episode per telecast of each of the Series shall be at the base rates in each country set forth on Schedule A attached hereto (each, a "Royalty Rate"), subject to the following adjust- ments: (i) The Royalty Rate shall be increased by [****] for any episode telecast in which [****.] (ii) The Royalty Rate shall be increased by [****] for any episode [****]. The method, time and source used to determine the [****] shall be determined on a country-by-country basis and by using local customary audience measurement methods subject to KW's and Unilever's mutual approval. (The escalations pursuant to this clause (ii) and the foregoing clause (i) are additive and not cumulative.) (iii) With respect to repeat telecasts of an episode [****], the royalty for each such repeat telecast shall be [****] of the otherwise applicable Royalty Rate. (iv) With respect to repeat telecasts of an episode [****], the otherwise applicable Royalty Rate shall be [****] (the basis of calculation for which Unilever shall promptly furnish to KW); provided, however, that such adjusted royalty shall in no event be less than [****] of such otherwise applicable Royalty Rate. (v) With respect to telecasts of the Series in Italy, [****]. E. In calculating royalties to KW hereunder, (i) Unilever shall allocate license fees for each Series for [****]. [* Deleted pursuant to a request for confidential treatment] F. The Accounting Periods set forth in Paragraph 6 of the Original Agreement shall be calendar months rather than calendar quarters. G. As of the date hereof, Paragraph 16 of the Original Agree- ment is deleted in its entirety and replaced with the following: "16. CREDITS. The Series shall be _______ exploited with a separate credit reading: "Based upon WHEEL OF FORTUNE (or JEOPARDY! as the case may be) produced in the United States by MERV GRIFFIN ENTERPRISES, a unit of SONY PICTURES ENTERTAINMENT, INC. and Distributed by KING WORLD in association with BUENA VISTA INTERNATIONAL, INC." (or such other similar legend as KW may from time to time advise Unilever), in an adequate translation." H. As of the date hereof, Paragraph 26 of the Original Agree- ment is deleted in its entirety and replaced with the following: "26. RENEWAL. Following the expiration _______ of the Renewal Period, and provided that KW then re- tains the right to distribute the Series, Unilever shall have a series of successive dependent, annual options to extend the License Term hereunder for peri- ods each of one calendar year (each, a "Renewal Year"), which options Unilever shall exercise, if at all, by written notice to KW on or before the March 31st imme- diately preceding the applicable Renewal Year. In the event Unilever exercises its option with respect to each Renewal Year, the terms and conditions of this agreement, as amended, shall apply to such Renewal Year, subject to the following: (a) The Minimum License Fee for such Renewal Year shall be equal to the greater amount of [****]. (b) The base Royalty Rate for each Series for each Renewal Year (i.e., prior to any adjustment pursuant to this agreement, as amended) shall be [* Deleted pursuant to a request for confidential treatment] increased on a per episode basis in each country within Territory A by the greatest of: [****] In the event Unilever does not exercise its option to extend the License Term for any Renewal Year as set forth herein, KW shall have the right to license such rights to any third party without any further obligation of any nature to Unilever; provided, however, that KW shall offer Unilever the right to match, by written notice to KW within five (5) business days following Unilever's receipt of notice from KW to such effect, any third- party offer that is less favorable to KW than the terms hereunder as applied to such Renewal Year. The parties specifically acknowledge that the foregoing option and matching right shall be exercisable as to the entire Territory only and not on a country- by-country basis." I. Unilever acknowledges that, because BVI will no longer be KW's agent in this matter, the following provisions of the Original Agreement shall be modified: (i) Accounting Statements pursuant to Paragraph 6 shall be sent directly to KW, with no copy to BVI; (ii) Paragraph 13(a)(ii) is deleted; (iii) The phrase "in association with BUENA VISTA INTERNA- TIONAL, INC." shall be deleted from the credit provision set forth in Paragraph 16; and (iv) Notices to KW pursuant to Paragraph 22 shall be sent directly to KW, with no copy to BVI. In the event KW so notifies Unilever in writing prior to the commencement of the Renewal Period, the provisions of clause (i) above shall be effective as of the date set forth in such notice; provided, however, that in the event KW so notifies Unilever, KW shall indemnify Unilever and ECTV from and against any claim by BVI that Unilever has breached the Original Agreement by failing to send Accounting Statements to BVI following the date of the KW notice. Unilever shall immediately notify KW of any such claim or threatened claim by BVI and KW shall have the right to control the defense and settlement of any claim to which this indemnity applies. [* Deleted pursuant to a request for confidential treatment] J. The parties acknowledge that, without limitation, the royalty payments paid by Unilever to KW hereunder are in consideration of the copyright licenses granted to Unilever hereunder. Except as modified hereunder, the Original Agreement shall remain in full force and effect. Very truly yours, KING WORLD F.S.C. CORPORATION By:__________________________ ACCEPTED AND AGREED TO: UNILEVER NV By: E.C. TELEVISION INC. By:______________________ [* Deleted pursuant to a request for confidential treatment] ATTACHMENT A WHEEL OF FORTUNE AND JEOPARDY! LICENSE FEE SCHEDULE (Royalty Payment in U.S. Dollars Per Episode Per Telecast) Per Calendar Year TERRITORIES 1993 1994 ____ ____ WHEEL JEOPARDY! WHEEL JEOPARDY! _____ _________ _____ _________ Belgium [****] [****] [****] [****] Denmark [****] [****] [****] [****] Finland [****] [****] [****] [****] France [****] [****] [****] [****] German-speaking [****] [****] [****] [****] Greece [****] [****] [****] [****] Italy [****] [****] [****] [****] Netherlands [****] [****] [****] [****] Portugal [****] [****] [****] [****] Spain [****] [****] [****] [****] Sweden & Norway [****] [****] [****] [****] United Kingdom [****] [****] [****] [****] TBD TERRITORIES _______________ Andorra Iceland Ireland Liechtenstein Luxembourg Malta Monaco Switzerland EX-21.1 9 LIST OF SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 List of Subsidiaries of the Registrant ______________________________________ American Journal Inc., a New York corporation Camelot Entertainment Sales, Inc., a Delaware corporation Four Crowns Inc., a Delaware corporation Inside Edition Inc., a New York corporation K.W.M., Inc., a Delaware corporation King World Corporation, a Delaware corporation King World Direct Inc., a Delaware corporation King World FSC Corporation, a Virgin Islands corporation King World/GSN Inc., a Delaware corporation King World/LR Inc., a California corporation King World/LBS Inc., a New York corporation King World Merchandising, Inc., a Delaware corporation King World/RWS Inc., a New York corporation Quickstead Inc., a California corporation Topper Productions Inc., a California corporation EX-23.1 10 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated October 24, 1997 included in this Form 10-K, into the Company's previously filed Registration Statements File No. 33-30695, No. 333-8969 and No. 333-11363. /s/ARTHUR ANDERSEN LLP New York, New York November 24, 1997 EX-27.1 11 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Statements of Operations and Consolidated Balance Sheets of King World Productions, Inc. and its Subsidiaries and is qualified in its entirety by reference to such financial statements. 1,000 YEAR AUG-31-1997 SEP-01-1996 AUG-31-1997 317,782 0 79,193 4,101 0 704,060 21,455 (11,706) 902,067 117,985 0 0 0 510 783,572 902,067 0 671,277 0 395,489 83,507 0 0 221,926 78,544 143,382 0 0 0 143,382 3.82 3.82
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