-----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, OH/wWrwEXd1qloTmbwx7LtbJf3oowLGg8EOf/ZN9JbBQHgFkOpYOR1oL8g1AYRvF +9AETt5C0INkWKT1wSp+yA== 0000950123-96-006545.txt : 19961118 0000950123-96-006545.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950123-96-006545 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961114 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: 1934 Act SEC FILE NUMBER: 001-09244 FILM NUMBER: 96663069 BUSINESS ADDRESS: STREET 1: 1700 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2123154000 10-K 1 FORM 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, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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.) 1700 Broadway New York, New York 10019 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: 212-315-4000 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 ____ 2 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 1, 1996 was approximately $1.1 billion. As of November 1, 1996, there were 37,344,545 outstanding shares of the registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE The registrant's definitive proxy statement for its 1997 annual meeting of stockholders (which is to be filed pursuant to Regulation 14A not later than December 29, 1996) is incorporated by reference into Part III of this Form 10-K. 3 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 programming 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 President, Chief Executive Officer and Interim Chief Operating Officer, and Diana King, a Vice President and the Secretary of King World, are actively involved in the management of King World. 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 incorporated in 1964 under the laws of the State of New Jersey. King World's corporate headquarters are located at 1700 Broadway, New York, New York 10019 ((212) 315-4000). 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. PROGRAMMING AND RELATED OPERATIONS First-run Television Syndication 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 1996 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 51 consecutive sweeps periods, Jeopardy! has had the 4 second highest ratings among such shows for each of the last 44 consecutive sweeps periods and The Oprah Winfrey Show has had the third highest ratings among such shows for 31 of the last 39 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 $663.4 million in fiscal 1996 and its net income has increased from $9.8 million in fiscal 1985 to $150.0 million in fiscal 1996. 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 83% of King World's revenues for the fiscal year ended August 31, 1996. At present, King World distributes television programming primarily to network-owned-and-operated stations and net-work-affiliated stations. First-run syndicated programming distributed by the Company competes primarily with other first-run syndicated programming, network reruns and programming produced by local television stations. The United States television market is served primarily by network-owned-and-operated stations, network-affiliated stations, independent stations and cable operators. 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 (the ABC Television Network, the CBS Television Network, the NBC Television Network and the Fox Broadcasting Company), 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 (programming 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 programming; some of such stations are affiliated with the WB or the United Paramount Network, each of which currently supplies its respective affiliates with prime-time programming 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. Nielsen divides the United States into 211 designated market areas and approximately 29 additional special market areas that, on the basis of size and the other Nielsen criteria, do not qualify as designated market areas. The approximately 240 2 5 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 both the 1995-1996 broadcast season and the current broadcast season, Wheel of Fortune was licensed to television stations in 203 Nielsen market areas in the United States, covering approximately 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 1995-1996 broadcast season, Jeopardy! was licensed to television stations in 196 Nielsen market areas in the United States, covering approximately 98% of total domestic television households, and for the current broadcast season has been licensed to television stations in 196 Nielsen market areas, 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 1995-1996 broadcast season and the current broadcast season, The Oprah Winfrey Show was licensed to television stations in 207 Nielsen market areas in the United States, 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 1995-1996 broadcast season, Inside Edition was licensed to television stations in 162 Nielsen market areas, covering approximately 93% of total domestic television households, and for the current broadcast season, the series has been licensed to television stations in 122 Nielsen market areas, covering approximately 81% 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 Nancy Glass, the Emmy Award-winning former senior correspondent of Inside Edition. For the 1995-1996 broadcast season, American Journal was licensed to television stations in 125 3 6 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 118 Nielsen market areas, covering approximately 85% of total domestic television households. Rolonda, a daytime talk show that is also produced by King World in New York, premiered in January 1994. It is hosted by Rolonda Watts, a popular broadcast journalist. For the 1995-1996 broadcast season, Rolonda was licensed to television stations in 86 Nielsen market areas, covering approximately 73% of total domestic television households. For the current broadcast season, Rolonda has been licensed to television stations in 95 Nielsen market areas, covering approximately 75% of total domestic television households. Each of The Oprah Winfrey Show, Wheel of Fortune, Jeopardy!, Inside Edition, and American Journal has been licensed to television stations for exhibition in the current and in future broadcast seasons, commencing with the 1997-1998 broadcast season and extending, in certain cases, as far into the future as the 1999-2000 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 17, 1996, the gross amount of license fees under such agreements approximated $1.4 billion, of which approximately $850 million 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, 1996 is subject to the satisfaction of several conditions, including, with respect to amounts attributable to The Oprah Winfrey Show, the commitment of the producer and Ms. Winfrey to continue to produce and host the show after the 1997-1998 television season (which they are not contractually obligated to do). Such amounts do not include sales of advertising time retained during the broadcast of such program material 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 programs. If for any reason they do not do so, there could be a material adverse effect on the Company's business. 4 7 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. It is uncertain whether Harpo and Ms. Winfrey will elect to produce and host the series for seasons beyond the 1997-1998 season. Their failure to do so would have a material adverse effect on the Company's results of operations. The Company's agreement with Harpo establishes, among other things, the production fees payable to Harpo through the 1996-1997 broadcast 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, 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. After the 1999-2000 television season, Harpo will not be obligated to distribute the series through the Company, if it elects to produce the series at all. Under the terms of the agreement with Harpo, Ms. Winfrey is subject until the 2000-2001 television season to certain restrictions on her ability to appear in television shows with the same or similar format as The Oprah Winfrey Show. In the event of certain corporate transactions constituting a "change in control" of the Company under the amended agreement, Harpo has the right to terminate such restrictions and, under certain circumstances, receive additional consideration for continuing to produce the series. The financial arrangements in the amended agreement with Harpo are less favorable to the Company than those contained in prior agreements between the Company and Harpo and, unless 5 8 offset by significant increases in license fees paid by television stations for the series in forthcoming seasons, increased barter revenues from the series, or both, the Company's net profits derived from The Oprah Winfrey Show will decline in the coming years. 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 game shows for first-run strip syndication so long as the Company is distributing 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. 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 distribution 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. 6 9 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 commitments 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. Advertising time retained by King World in connection with program distribution is sold to national advertisers by a wholly-owned subsidiary of the Company. See "Sale of Advertising Time". In the 1996 fiscal year, approximately 12% 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 the fiscal year. Marketing Sales to domestic television stations are made by the Company through a sales force that numbered 11 persons as of November 1, 1996. The Company's marketing strategy concentrates on a select number of programs that the Company considers to have 7 10 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 participation 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 programs. As of November 1, 1996, Camelot employed eight 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 television 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 1996-1997 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 81% of the total domestic television households; American Journal has been licensed to stations covering approximately 85% of the total domestic television households; and Rolonda has been licensed to stations covering approximately 75% 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 cancelled by the advertiser 8 11 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 to sell advertising time in It's Showtime at the Apollo, a variety program. Foreign Sales 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 1996. 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 television 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 1996. 9 12 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 activities accounted for approximately 4% of the Company's revenues in fiscal 1996. 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 Syndica- tion Rule Until August 1996, a rule promulgated by the Federal Communications 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 10 13 the prime-time access period from independent television producers and syndicators such as the Company. In July 1995, following proceedings looking toward reconsideration 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 stringent limitations on network involvement in first-run syndication activities, 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. 11 14 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 will 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 will, 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 television 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 programming) 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 affords 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 12 15 voluntary code is not established (or if such a code is not acceptable to the FCC) within that time frame, then the FCC is required, in consultation with an advisory committee, to establish and enforce a rating code. Although the Company believes that none of its programming contains sexual, violent or other indecent material, it is actively participating in industry efforts to establish a voluntary code. However, the Company is unable to predict the outcome of these industry deliberations or of any alternative FCC proceedings. To the extent that program series (or episodes of such series) produced or distributed by King World are subjected to restrictive ratings, whether voluntary or FCC-imposed, 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 reexamining 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 proceedings. 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 consequently 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 13 16 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. Since the advent of these "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 consequently ceased the carriage of such stations, thus resulting in decreased audience for King World programming aired on those stations, and in the future other cable systems could refuse or fail to reach such agreements. The Company has suffered no discernible adverse impact to date. Litigation concerning the constitutionality of the "must carry" provisions of the 1992 Cable Act is pending in the United States Supreme Court. In April 1993, a three-judge district court, by a divided vote, upheld the must carry requirements, against a First Amendment challenge initiated by Turner Broadcasting System and other cable interests. In June 1994, the United States Supreme Court overturned that decision and remanded the case to the district court for further proceedings. In December 1995, the three-judge district court held that the government has a substantial interest in compelling cable systems to carry television stations in order to protect the viability of over-the-air television service in the United States, that the must-carry rules therefore do not substantially burden the rights of cable operators and that such rules do not violate the First Amendment. Cable interests have appealed this second determination to the Supreme Court, which heard oral argument in October 1996; a decision is expected in early 1997. In a lawsuit that is related to, but separate from, the litigation concerning must carry, the retransmission consent provisions of the 1992 Act have been held to be constitutional. The Company is unable to predict the outcome of the litigation with respect to the must carry rules. However, if those rules are held unconstitutional, stations which fail to reach carriage agreements with cable systems (under the retrans- mission consent procedures) will very likely be deleted from such systems, thus resulting in decreased audience for King World programming aired on such stations. The FCC has initiated proceedings relating to the deployment of Advanced Television Technologies ("ATV"). These 14 17 technologies would, among other things, enable television stations to simultaneously broadcast more than one program at the same time; and the FCC has tentatively concluded that it will permit the use of the additional channel capacity resulting from ATV to be used for entertainment programming purposes. Because the evolution of ATV technology and the formulation of regulations governing its deployment and uses is in formative stages, 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 circumstances, 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 retransmission consent/must-carry rights to over-the-air television stations in the market served. The FCC has initiated proceedings looking toward implementation of, among other things, the must-carry and retransmission consent requirements as applicable to Open Video Systems. King World is unable to predict the outcome of these proceedings. 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 programming aired on those stations, or a reduction in the profitability to King World of such programming. Employees As of November 1, 1996, the Company employed approximately 490 persons. Of this number, approximately 340 are involved in the production of Inside Edition, American Journal and Rolonda. Twenty-nine of the Company's employees are covered by collective bargaining agreements. Item 2. DESCRIPTION OF PROPERTIES 15 18 The Company's corporate headquarters are located in New York, New York, where it leases office space for executive offices, the operations of Camelot and the Company's eastern U.S. and foreign sales staff. The Company's accounting, contract administration and research departments are located in leased offices in Short Hills, New Jersey. The Company also leases office space in Los Angeles for executive offices, its advertising and promotion department, program development and direct response marketing operations and its western U.S. sales staff, and 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 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. 16 19 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 1995 First Quarter Ended November 30, 1994......................... 39 1/8 34 5/8 Second Quarter Ended February 28, 1995......................... 36 7/8 32 3/4 Third Quarter Ended May 31, 1995.............................. 43 35 1/8 Fourth Quarter Ended August 31, 1995........................... 43 3/8 37 1/2 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
As of the close of business on October 17, 1996, there were 641 holders of record of the Company's Common Stock. The Company has no present intention to pay dividends on its Common Stock. 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 "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources". On March 27, 1996, the Company issued 450,000 shares of Common Stock to Ms. Oprah Winfrey and Mr. Jeffrey D. Jacobs in connection with the exercise of options granted to Ms. Winfey and Mr. Jacobs pursuant to Option Agreements, each dated January 25, 1996, between the Company and each of Ms. Winfrey and Mr. Jacobs. The exercise price of the options so exercised was $25.50 per share. See Note 5 of Notes to Consolidated Financial Statements. Such issuance was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1993. 17 20 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, 1996, 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 Financial Condition" and the Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report.
Statements of Income: Year Ended August 31, ----------------------------------------------------------------------------------------------------- 1995 1994 Pro Pro 1996 1995(1) forma(1) 1994(1) forma(1) 1993 1992 ---- ---- ----- ---- ----- ---- ---- (unaudited) (unaudited) (Dollars in thousands except per share data) Revenues $ 663,426 $574,186 $575,732 $480,659 $541,390 $474,312 $503,174 Income from operations 191,585 162,416 162,736 127,578 148,151 150,950 152,481 Income before provision for income taxes 231,610(3) 183,258 183,578 140,839 161,412 162,592 164,725 Net income 150,000(3) 117,312 117,490 88,300 101,196 101,936 94,880(2) ========== ======== ======== ======== ======== ======== ======== Primary earnings per share $ 3.98(3) $ 3.14 $ 3.15 $ 2.33 $ 2.67 $ 2.65 $ 2.432 ========== ======== ======== ======== ======== ======== ======== Balance Sheets: August 31, ----------------------------------------------------------------------------------------------------- 1995 1994 Pro Pro 1996 1995(1) forma(1) 1994(1) forma(1) 1993 1992 ---- ---- ----- ---- ----- ---- ---- (unaudited) (unaudited) (Dollars in thousands) Cash and investments $644,380 $529,025 $529,025 $430,048 $430,048 $384,489 $355,612 Working capital 519,613 477,794 477,972 294,336 307,232 286,348 273,086 Total assets 854,141 686,786 688,332 569,562 630,293 535,546 498,240 Stockholders' equity 737,885 575,737 575,915 459,077 471,973 394,173 342,919 ======== ======== ======== ======== ======== ======== ========
18 21 - ----------------------- 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 recognition 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. See Note 1 of Notes to Consolidated Financial Statements. 2. Net income and primary earnings per share include the effect of a net loss from the deconsolidated operations of Buffalo Broadcasting Co. Inc. ("Buffalo"), a former subsidiary of the Company, of approximately $7.7 million and $.20, respectively. See Note 8 of Notes to Consolidated Financial Statements. 3. 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 to LIN Television Corporation for $95 million in cash which closed in October 1995. See Note 8 of Notes to Consolidated Financial Statements. 19 22 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 Statements. RESULTS OF OPERATIONS 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, the Company's direct response marketing subsidiary, 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 approximately 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. 20 23 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 programming distributed by the Company; participation payments payable by the Company to producers and talent; and production and distribution costs for first-run syndicated programming. 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 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 President and Chief Executive Officer and its Chairman of the Board. The 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 Common Stock price exceeds the specified levels during the applicable measurement periods. The Company has recognized the impact of certain of these bonuses in its operating results for fiscal 1996 which includes all amounts payable in accordance with the terms of such employment agreements. Selling, general and administrative expenses for fiscal 1996 increased by approximately 6% from fiscal 1995, but decreased as a percentage 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. 21 24 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 Broadcasting Co. Inc. ("Buffalo") to LIN Television Corporation. 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. 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 1999-2000 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 1995-1996 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 run. 22 25 The Company believes that the impact of inflation on its operations has not been significant. COMPARISON OF FISCAL 1995 AND FISCAL 1994 Revenues Revenues for fiscal 1995 increased by approximately 19% compared to fiscal 1994 due to the adoption of a change in accounting for revenue recognition on a prospective basis in the fourth quarter of fiscal 1994. See Note 1 of Notes to Consolidated Financial Statements. Had revenues been recognized in fiscal 1995 and the fourth quarter of fiscal 1994 on a basis comparable to that of the first nine months of fiscal 1994, revenues in fiscal 1995 would have been approximately 6% higher than the prior year, due primarily to increased cash license fees from The Oprah Winfrey Show and, to a lesser extent, an increase in revenues derived from the sale of retained advertising time in Wheel of Fortune and Jeopardy! as a result of the retention of one additional 30-second advertising spot per episode commencing with the 1994-1995 television season. The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for approximately 37%, 21%, 18% and 8%, respectively, of the Company's revenues for fiscal 1995 compared to 41%, 17%, 15% and 9%, respectively, for fiscal 1994. American Journal accounted for approximately 4% of the Company's revenues for fiscal 1995 and 5% for fiscal 1994. Rolonda, which debuted in January 1994, accounted for approximately 3% of the Company's revenues for fiscal 1995 and 2% for fiscal 1994. The Les Brown Show, which was canceled in January 1994, accounted for approximately 2% of the Company's revenues for fiscal 1994. Had the prior method of revenue recognition been employed in fiscal 1995 and the fourth quarter of fiscal 1994, The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition would have accounted for approximately 37%, 21%, 18% and 8%, respectively, of the Company's revenues for fiscal 1995, and 36%, 21%, 18% and 8%, respectively, for fiscal 1994. American Journal and Rolonda would have accounted for approximately 4% and 3%, respectively, of the Company's revenues for fiscal 1995 and 4% and 2%, respectively, for fiscal 1994. The Les Brown Show would have accounted for approximately 1% of the Company's revenues in fiscal 1994. Producers' fees, programming and other direct operating costs Producers' fees, programming and other direct operating costs increased by approximately 22% in fiscal 1995 compared to fiscal 1994. Because the recognition of these costs generally coincides with the recognition of the revenues with which they are associated, the adoption of the modified accounting practice in the fourth quarter of fiscal 1994 caused such costs to be substantially lower in the fourth quarter of fiscal 1994 than 23 26 they would have been under the prior revenue recognition practice. On a basis of accounting comparable to that employed prior to the fourth quarter of fiscal 1994, producers' fees, programming and other direct operating costs would have increased by approximately 7% in fiscal 1995 over the prior fiscal year, primarily as a result of the higher level of revenues generated by The Oprah Winfrey Show, Wheel of Fortune and Jeopardy! (a portion of which is payable to the producers of such series) and, to a lesser extent, increased production costs associated with Inside Edition, American Journal and Rolonda. Selling, general and administrative expenses Selling, general and administrative expenses decreased by approximately 5% in fiscal 1995 from the prior fiscal year primarily due to lower advertising and promotion costs. On a basis of accounting comparable to that employed prior to the fourth quarter of fiscal 1994, such expenses would have been substantially the same as that actually reported. In December 1993, the Company entered into new employment agreements with four executive officers. The agreements provide, among other things, for new bonuses intended to qualify as "performance based compensation" (within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended), including bonuses payable upon the introduction of new shows and bonuses contingent upon the Company's Common Stock achieving specified target prices during pre-established measurement periods. As of May 31, 1995, the performance targets associated with certain stock and stock appreciation units granted in December 1993 to Roger King, the Company's Chairman of the Board, and Michael King, the Company's President and Chief Executive Officer, were achieved, resulting in the payment by the Company subsequent to May 31 of a lump-sum pre-tax cash bonus to each of them of approximately $5 million. These units had become eligible for redemption on August 31, 1994 and each of the subsequent fiscal quarters through the third quarter of fiscal 1995, subject to the achievement of the specified performance goals. The performance goals specified for the units that became eligible for redemption on August 31, 1995 were not achieved and the units expired on such date. Net income and primary earnings per share The Company's operating income for fiscal 1995 increased by approximately 27% compared to the prior year, primarily due to the change in accounting for revenue recognition. Had the prior method of revenue recognition been employed in fiscal 1995 and the fourth quarter of fiscal 1994, the Company's operating income would have been approximately 10% higher in fiscal 24 27 1995 than in fiscal 1994. Reported net income for fiscal 1995 increased by 33% compared to the prior year. Absent the accounting change, net income would have been approximately $16.3 million (or 16%) higher than fiscal 1994, reflecting higher operating income, higher interest income earned on the Company's cash and investments (due primarily to an increase in interest rates over the prior year), and a lower effective tax rate for fiscal 1995. Primary earnings per share, which were $.81 higher in fiscal 1995 compared to fiscal 1994, would have been $.48 (or 18%) higher in fiscal 1995 compared with fiscal 1994 had the prior method of revenue recognition been employed, due to the increase in net income and a smaller number of shares outstanding as a result of the Company's ongoing stock repurchase program. 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 substantially all programming acquisition, development, production and promotion costs and advances from its operations. 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, subject to Harpo's and Ms. Winfrey's right to decline to produce and host the show in any season after the 1995-1996 season. To date, Harpo and Ms. Winfrey have committed to produce and host the show through the 1997-1998 broadcast season. Under the agreement, the Company has, among other things, agreed to pay Harpo production fees and to guarantee participation payments to Harpo at levels which, commencing with the 1995-1996 season, are substantially higher than those previously in effect. In addition, in the 1997-1998 season and thereafter, the 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 25 28 in prior agreements between the Company and Harpo and, unless offset by significant increases in license fees paid by television stations for the series in forthcoming seasons, increased barter revenues from the series, or both, the Company's net profits and cash flow derived from The Oprah Winfrey Show will decline in the coming years. In fiscal 1994, the Company paid Harpo a $60 million advance against its minimum participation payments for the 1995-1996 broadcast season, all of which was recouped during fiscal 1996. In addition, on January 2, 1996, the Company paid Harpo two advances of $65 million each against its aggregate minimum participation payments for the 1996-1997 and 1997-1998 broadcast seasons. Based on the license agreements in place for the seasons covered by such advances, the Company believes that revenues from the series will be sufficient to enable the Company to recoup such advances. Such advances are refundable to the Company by Harpo and Ms. Winfrey if King World terminates the agreement due to Harpo's failure to deliver episodes of the series. From time to time, the Company has used cash reserves and/or borrowed funds to make acquisitions of and investments in properties in the media field, to repurchase shares of its Common Stock and to fund the development, production and promotion costs 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 will have primary responsibility for the Company's investment and acquisition program including analysis of business opportunities. In December 1992, the Company announced that the Board of Directors had approved a program to repurchase up to 2,000,000 shares of its Common Stock from time to time in the open market and in privately negotiated transactions. By August 31, 1996, the Company had repurchased all 2,000,000 shares authorized to be repurchased under such program. In the fiscal years ended August 31, 1996, 1995 and 1994, 301,200, 180,500 and 753,100 shares, respectively, of Common Stock were repurchased in open market transactions for aggregate consideration of approximately $10.9 million (or approximately $36.20 per share), $6.1 million (or approximately $33.80 per share), and $28.9 million (or approximately $38.40 per share), respectively. The Company has entered into agreements with television stations for the future distribution of program material in television seasons commencing with the 1996-1997 season and extending as far into the future as the 1999-2000 broadcast season, under which the revenues and related expenses will not be recognized until the license periods thereunder have begun and 26 29 certain other conditions are satisfied. As of October 17, 1996, the gross amount of license fees under such agreements approximated $1.4 billion, of which approximately $850 million 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, 1996 is subject to the satisfaction of several conditions, including, with respect to amounts attributable to The Oprah Winfrey Show, the agreement of the producer and Ms. Winfrey to continue to produce and host the show after the 1997-1998 television season (which they are not contractually obligated to do). Such amounts do not include sales of advertising time retained during the broadcast of such program material or foreign license fees and do not reflect the production costs to be incurred for programming produced by King World. 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 transaction, 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 represents the reversal of previously recognized accounting losses (with no associated income tax effect) in excess of the Company's original investment. 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. 27 30 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Report of Independent Public Accountants . . . . . . . . 29 Consolidated Balance Sheets as of August 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . 30 Consolidated Statements of Income for the years ended August 31, 1996, 1995 and 1994 . . . . . . . . . 32 Consolidated Statements of Stockholders' Equity for the years ended August 31, 1996, 1995 and 1994 . . . . 33 Consolidated Statements of Cash Flows for the years ended August 31, 1996, 1995 and 1994 . . . . . . . . . 34 Notes to Consolidated Financial Statements . . . . . . . 35
28 31 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, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended August 31, 1996. 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, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1996, in conformity with generally accepted accounting principles. Arthur Andersen LLP New York, New York October 24, 1996 29 32 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
August 31, ---------------------------- 1996 1995 --------- --------- (Dollars in thousands) CURRENT ASSETS: Cash and cash equivalents $ 344,766 $ 446,896 Short-term investments 153,969 -- Accounts receivable (net of allowance for doubtful accounts of $4,196 in 1996 and 1995) 60,378 51,356 Producer advances and deferred costs 74,824 90,085 Other current assets 1,932 506 --------- --------- Total current assets 635,869 588,843 --------- --------- LONG-TERM INVESTMENTS, at cost, which approximates market value 145,645 82,129 --------- --------- FIXED ASSETS, at cost: Furniture and office equipment 7,926 7,558 Leasehold improvements 2,832 2,775 Film and videotape masters 2,626 2,622 --------- --------- 13,384 12,955 Less-accumulated depreciation and amortization (10,503) (9,703) --------- --------- 2,881 3,252 --------- --------- PRODUCER ADVANCES AND OTHER ASSETS 69,746 12,562 --------- --------- $ 854,141 $ 686,786 ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 30 33 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) LIABILITIES AND STOCKHOLDERS' EQUITY
August 31, -------------------------- 1996 1995 --------- --------- (Dollars in thousands) CURRENT LIABILITIES: Accounts payable and accrued liabilities ..................... $ 15,237 $ 11,070 Payable to producers and others ... 71,920 74,349 Income taxes payable: Current ......................... 29,099 23,986 Deferred ........................ -- 1,644 --------- --------- Total current liabilities ..... 116,256 111,049 --------- --------- 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, 50,734,739 shares and 49,893,745 shares issued in 1996 and 1995, respectively .................... 507 499 Paid-in capital ................... 110,666 87,628 Retained earnings ................. 932,651 782,651 Treasury stock, at cost; 13,442,594 and 13,141,394 shares in 1996 and 1995, respectively .............. (305,939) (295,041) --------- --------- 737,885 575,737 $ 854,141 $ 686,786 ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 31 34 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Year Ended August 31, -------------------------------------- 1996 1995(1) 1994(1) -------- -------- -------- (Dollars in thousands except per share data) REVENUES ......................... $663,426 $574,186 $480,659 -------- -------- -------- EXPENSES: Producers' fees, programming and other direct operating costs . 397,494 341,536 279,465 Selling, general and admini- strative expenses ............ 74,347 70,234 73,616 -------- -------- -------- 471,841 411,770 353,081 -------- -------- -------- Income from operations ......... 191,585 162,416 127,578 INTEREST AND DIVIDEND INCOME ..... 25,965 20,842 13,261 NONRECURRING GAIN - Sale of Buffalo Broadcasting Co. Inc. .. 14,060 -- -- -------- -------- -------- Income before provision for income taxes ................. 231,610 183,258 140,839 PROVISION FOR INCOME TAXES ....... 81,610 65,946 52,539 -------- -------- -------- Net income ..................... $150,000 $117,312 $ 88,300 ======== ======== ======== PRIMARY EARNINGS PER SHARE ....... $ 3.98 $ 3.14 $ 2.33 ======== ======== ========
(1) The results of operations for fiscal 1995 and fiscal 1994 reflect a change in accounting for revenue recognition adopted prospectively in the fourth quarter of fiscal 1994. See Note 1. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 32 35 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, 1993 .......... 49,505,363 $495 $ 76,647 $577,039 $(260,008) Exercise of stock options 216,855 2 5,524 -- -- Purchase of treasury stock -- -- -- -- (28,922) Net income ............... -- -- -- 88,300 -- ---------- ---- -------- -------- --------- 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) ========== ==== ======== ======== =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 33 36 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended August 31, ------------------------------------------- 1996 1995 1994 --------- --------- --------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ........................ $ 150,000 $ 117,312 $ 88,300 Items not affecting cash: Gain on sale of Buffalo Broadcasting Co. Inc. ...... (14,060) -- -- Depreciation and amortization 800 606 577 Change in assets and liabilities: Accounts receivable .......... (9,022 (10,095) 60,298 Producer advances and deferred costs ............. (46,740) (6,271) (49,589) Accounts payable and accrued liabilities ................ 4,167 (3,710) 6,948 Payable to producers and others ..................... 1,829 4,702 (39,369) Income taxes payable ......... 3,469 (428) 1,533 Other, net ................... 3,391 (163) 824 --------- --------- --------- Net cash provided by operating activities ...................... 93,834 101,953 69,522 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in investments (217,485) 6,062 (3,921) Proceeds from sale of Buffalo Broadcasting Co. Inc. ........... 9,802 -- -- Additions to fixed assets ......... (429) (2,324) (567) --------- --------- --------- Net cash (used in) provided by investing activities ............ (208,112) 3,738 (4,488) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock ........................... 23,046 5,459 5,526 Purchase of treasury stock ........ (10,898) (6,111) (28,922) --------- --------- --------- Net cash provided by (used in) financing activities ............ 12,148 (652) (23,396) --------- --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .................. (102,130) 105,039 41,638 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................. 446,896 341,857 300,219 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR ....................... $ 344,766 $ 446,896 $ 341,857 ========= ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 34 37 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 Historically, King World had followed a practice of recognizing license fees from the distribution of first-run syndicated television properties at the commencement of the license period and as each show was produced (even though the particular show may not have been broadcast by a television station for several months). This practice had the effect of creating variations in the Company's reported revenues and earnings from quarter to quarter, corresponding to the greater or smaller number of shows that were produced in a particular quarter, which were not necessarily indicative of longer term trends in the Company's business. In the fourth quarter of the 1994 fiscal year, the Company adopted a change in accounting for revenue recognition which was accounted for prospectively as a change in accounting estimate. Under the modified practice, license fees from first- run syndicated television properties are recognized at the commencement of the license period pursuant to noncancelable agreements and as each show is made available to the licensee via satellite transmission, rather than at the time the show is produced. Because transmission to the satellite takes place, on the average, no more than two to three days prior to the broadcast of the programming and in some cases up to three months after the programming is produced, the effect of adopting the modified practice is to cause revenues from certain series to be recognized closer to the air date than under the prior practice. In addition, the accounting change eliminates the quarterly revenue and earnings fluctuations that were attributable to variations in production schedules. The one-time impact of adopting the change was to cause fourth quarter fiscal 1994 revenues, net income and earnings per share to be approximately $60.7 million, $12.9 million and $.34 lower, respectively, than they would have been under the prior practice, with no impact on cash flow. Such revenues were recognized in fiscal 1995 under the modified accounting practice. The 35 38 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) 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 following pro forma financial information assumes the Company's prior revenue recognition practice was in effect for the fourth quarter of fiscal 1994 and in fiscal 1995:
Year Ended August 31, ----------------------------------------- 1995 Pro forma 1994 Pro forma -------------- -------------- (unaudited) (unaudited) (Dollars in thousands except per share data) Revenues .................. $575,732 $541,390 Income from operations .... 162,736 148,151 Income before provision for income taxes ............ 183,578 161,412 Net income ................ 117,490 101,196 ======== ======== Primary earnings per share ................... $ 3.15 $ 2.67 ======== ========
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 recognized 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. 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 39%, 37% and 41% of revenues in fiscal 1996, 1995 and 1994, respectively. Wheel of Fortune accounted for approximately 19%, 21% and 17% of revenues in fiscal 1996, 1995 and 1994, respectively. Jeopardy! accounted for approximately 17%, 18% and 15% of revenues in fiscal 1996, 1995 and 1994, respectively. Inside Edition accounted for approximately 8%, 8% and 9% of revenues in fiscal 1996, 1995 and 1994, respectively. American Journal accounted for approximately 4%, 4% and 5% of 36 39 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) revenues in fiscal 1996, 1995 and 1994, respectively. Rolonda, which debuted in January 1994, accounted for approximately 2%, 3% and 2% of revenues for fiscal 1996, 1995 and 1994, respectively. On a basis of accounting comparable to that employed prior to the fourth quarter of fiscal 1994, The Oprah Winfrey Show, Wheel of Fortune, Jeopardy!, and Inside Edition would have accounted for approximately 37%, 21%, 18% and 8%, respectively, of the Company's revenues for fiscal 1995 and 36%, 21%, 18% and 8%, respectively, of the Company's revenues for fiscal 1994. American Journal and Rolonda would have accounted for approximately 4% and 3%, respectively, of the Company's revenues for fiscal 1995, and 4% and 2%, respectively, of the Company's revenues for fiscal 1994. 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, subject to Harpo's and Ms. Winfrey's right to decline to produce and host the show in any season after the 1995-1996 season. To date, Harpo and Ms. Winfrey have committed to produce and host the show through the 1997-1998 broadcast season. Under the agreement, the Company has, among other things, agreed to pay Harpo production fees and to guarantee participation payments to Harpo at levels which, commencing with the 1995-1996 season, are substantially higher than those previously in effect. In addition, in the 1997-1998 season and thereafter, the 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 and, unless offset by significant increases in license fees paid by television stations for the series in forthcoming seasons, increased barter revenues from the series, or both, the Company's net profits and cash flow derived from The Oprah Winfrey Show will decline in the coming years. 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!. 37 40 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) 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 programming 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 recognized revenue that is to be paid to producers and owners of programming is accrued as the license fees are earned. The share of license fees payable by the Company to such producers 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. 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 $31,329,000, $28,084,000 and $29,824,000 in fiscal 1996, 1995 and 1994, respectively. Had the prior method of revenue recognition been employed in fiscal 1995 and the fourth quarter of fiscal 1994, such costs would have amounted to $27,831,000 and $31,184,000 in fiscal 1995 and 1994, respectively. These amounts include the producers' share of such costs. Cash equivalents and short-term investments Cash equivalents and short-term investments are comprised principally 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 amortized 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 includes production and promotion costs, as well as talent and producer participation advances, in connection with certain first-run syndicated 38 41 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) programs distributed by the Company for broadcast during seasons subsequent to August 31, 1996. 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. In connection with the extension of Harpo's commitment to produce The Oprah Winfrey Show for the 1995-1996 broadcast season, in fiscal 1994 the Company paid Harpo an advance against its minimum participation payments for such season in the amount of $60 million, all of which was recouped during fiscal 1996. In addition, on January 2, 1996, the Company paid Harpo two advances of $65 million each against its minimum participation payments for each of the 1996-1997 and 1997-1998 broadcast seasons. Based on license agreements in place for the seasons covered by such advances, the Company believes that revenues from the series will be sufficient to enable the Company to recoup such advances. Such advances are refundable to the Company by Harpo and Ms. Winfrey if King World terminates the agreement due to Harpo's failure to deliver episodes of the series. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The Company believes that the impact of adopting SFAS No. 121 will not be significant. 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. In fiscal 1995, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Under the provisions of SFAS No. 115, the Company's investments have been classified as "held to maturity" and, accordingly, are recorded at amortized cost, which approximates market value. The effect of adopting SFAS No. 115 was not material. 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 39 42 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) purposes and accelerated methods for tax purposes, with estimated useful lives of 3 to 5 years for furniture and office equipment and 5 years for film and videotape masters. Leasehold improvements are amortized over the shorter of their useful lives and the lease term. Depreciation and amortization expense was approximately $800,000, $606,000 and $527,000 in fiscal 1996, 1995 and 1994, respectively. Stockholders' equity Primary earnings per share has been computed using the weighted average number of common shares outstanding of 37,684,000, 37,343,000 and 37,862,000 for the fiscal years ended August 31, 1996, 1995 and 1994, respectively, which includes the dilutive 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. 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. Industry segments and customers The Company operates in one business segment, television programming. The Company's major customers and principal facilities are located within the United States. In the 1996, 1995 and 1994 fiscal years, approximately 12%, 14% and 11%, 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. 40 43 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 $9,000 per employee for fiscal 1996. The plan covers substantially all of the Company's employees. Contributions by the Company to the plan were approximately $491,000, $372,000 and $576,000 in fiscal 1996, 1995 and 1994, respectively. (3) Income taxes The components of the Company's provision for income taxes are summarized as follows:
Year Ended August 31, ---------------------------------------- 1996 1995 1994 -------- -------- -------- (Dollars in thousands) Federal: Current ................ $ 71,525 $ 56,741 $ 51,176 Deferred ............... (2,293) (858) (7,867) -------- -------- -------- 69,232 55,883 43,309 -------- -------- -------- State and local: Current ................ 12,511 10,113 9,777 Deferred ............... (133) (50) (547) -------- -------- -------- 12,378 10,063 9,230 -------- -------- -------- Total .............. $ 81,610 $ 65,946 $ 52,539 ======== ======== ========
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. For fiscal years prior to 1994, such deferred income taxes arose primarily due to differences in the revenue recognition methods employed by the Company with respect to license fee income. As discussed in Note 1, in the fourth quarter of fiscal 1994 the Company prospectively adopted a change in accounting for revenue recognition. As a result of such change, license fees are now recognized in the same year for tax return and financial reporting purposes. Accordingly, as of August 31, 1994, no temporary difference existed with respect to this item. No other individual temporary difference gives rise to significant deferred tax assets or liabilities. 41 44 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 provi- sion for income taxes to the tax computed at the U.S. statutory rate:
Year Ended August 31, ---------------------------------------- 1996 1995 1994 -------- -------- -------- (Dollars in thousands) Tax at U.S. statutory rate ............................................ $ 81,064 $ 64,140 $ 49,293 State tax provision, net of Federal benefit .............................. 8,046 6,541 6,000 Tax-exempt interest and dividend income ................................. (5,370) (4,799) (3,367) Other, net ........................................ (2,130) 64 613 -------- -------- -------- $ 81,610 $ 65,946 $ 52,539 ======== ======== ========
Income taxes paid approximated $76.8 million, $64.6 million and $49.8 million in fiscal 1996, 1995 and 1994, respectively. (4) Commitments and contingencies License fees The Company has entered into agreements with television stations for the future distribution of program material in television seasons commencing with the 1996-1997 season and extending as far into the future as the 1999-2000 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 17 1996, the gross amount of license fees under such agreements approximated $1.4 billion, of which approximately $850 million 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, 1996 is subject to the satisfaction of several conditions, including, with respect to amounts attributable to The Oprah Winfrey Show, the commitment of the producer and Ms. Winfrey to continue to produce and host the show after the 1997-1998 television season (which they are not contractually obligated to do). Such amounts do not include sales of advertising time retained during the broadcast of such program material or foreign 42 45 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) Commitments and contingencies (continued) 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 $2,559,000, $2,548,000 and $2,599,000 for fiscal 1996, 1995 and 1994, 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, 1996 were as follows:
Year Ending August 31, ---------------------- (Dollars in thousands) 1997............................... $2,220 1998............................... 1,217 1999............................... 1,032 2000............................... 1,011 2001............................... 1,044
Employment and production agreements As of August 31, 1996, the Company had entered into employment agreements and agreements with independent contractors relating to programming being or to be produced by King World which provide for aggregate minimum annual compensation as follows:
Year Ending August 31, ---------------------- (Dollars in thousands) 1997.............................. $22,032 1998.............................. 6,554 1999.............................. 5,269 2000.............................. 3,800 2001.............................. --
In December 1995, the Company entered into new employment agreements with its President and Chief Executive Officer and its Chairman of the Board. The 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 1996, which includes all amounts payable in accordance with the terms of such employment agreements. 43 46 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) Commitments and contingencies (continued) Legal matters The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a material adverse effect on the financial position of the Company. (5) Stock plans In fiscal 1996, the Company adopted the 1995 Amended and Restated Stock Option and Restricted Stock Purchase Plan (the "Option/Stock Plan"), which amended and restated the Company's Amended and Restated Stock Option and Restricted Stock Purchase Plan and reserved 3,000,000 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 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 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 not have a term in excess of ten years and one day. Employees, directors and officers of, and consultants or suppliers to, the Company and its subsidiaries may be granted non-qualified options under the Option/Stock Plan. Awards of restricted stock may be granted under the Op- tion/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 44 47 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) 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 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, 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. The following tables set forth options outstanding as well as options exercisable and available for grant at August 31, 1995 and 1996, and options forfeited and exercised during fiscal 1995 and 1996, together with the related option prices: 45 48 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued)
Option/Stock Plan ---------------------------- Non-Qualified Executive Fiscal 1995 ISOs Options Plan ----------- ---------------------------- ------- Granted .............. -- 91,000 -- Prices ranging: From ............. -- $ 35.50 -- To ............... -- $ 40.13 -- Forfeited ............ -- 170,600 -- Exercised ............ 9,000 162,527 -- Prices ranging: From ............. $ 15.75 $ 10.00 -- To ............... $ 26.59 $ 36.38 -- Outstanding at August 31, 1995 .... 92,800 1,621,602 510,000 Prices ranging: From ............. $ 7.05 $ .01 $ .01 To ............... $ 37.25 $ 40.88 $ 15.75 Exercisable at August 31, 1995 .... 50,237 746,865 510,000 Prices ranging: From ............. $ 7.05 $ .01 $ .01 To ............... $ 37.25 $ 40.88 $ 15.75 Available for grant at August 31, 1995...... 1,047,698 -- --------------------------- -------- Option/Stock Plan ----------------------------- Non-Qualified Executive Fiscal 1996 ISOs Options Plan ----------- ----------------------------- ------- Granted .............. -- 3,432,500 -- Prices ranging: From ............. -- $ 35.38 -- To ............... -- $ 43.59 -- Forfeited ............ 40,563 98,937 -- Exercised ............ 35,454 355,540 -- Prices ranging: From ............. $ 7.05 $ .01 -- To ............... $ 24.17 $ 40.88 -- Outstanding at August 31, 1996 .... 16,783 4,599,625 510,000 Prices ranging: From ............. $ 7.06 $ 8.55 $ .01 To ............... $ 37.25 $ 43.59 $ 15.75 Exercisable at August 31, 1996 .... 15,283 1,374,325 510,000 Prices ranging: From ............. $ 7.06 $ 8.55 $ .01 To ............... $ 37.25 $ 40.88 $ 15.75 Available for grant at August 31, 1996..... 754,698 -- --------------------------- ----------
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 principals of Harpo to purchase an aggregate 1.5 million shares of Common Stock. During fiscal 1996, options to purchase 450,000 shares of Common Stock were exercised at an exercise price of $25.50 per share. As of August 31, 1996, options to purchase 1.05 million shares of Common Stock remained outstanding, all of which were fully vested. Options to purchase 550,000 such shares bear exercise prices of $25.50 per share and 46 49 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) the remainder bear exercise prices of $33.625 per share. 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 aggregate 500,000 shares of Common Stock, which options are exercisable at a price of $36.00 per share (the closing market price of the Common Stock on the date of grant). The Company has agreed to grant the principals of Harpo options to purchase 250,000 additional shares of Common Stock if Harpo and Ms. Winfrey elect to produce and host The Oprah Winfrey Show for distribution by the Company in the 1998-1999 broadcast season, and 250,000 additional shares if they elect to produce and host the show for distribution by the Company in the 1999-2000 broadcast season. The exercise prices of such options will be the closing market prices of the Common Stock on the date on which the election to produce and host the series for the additional season in question is made. 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 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 $1,342,000, $1,758,000 and $1,162,000 in fiscal 1996, 1995 and 1994, respectively. (6) Stock repurchases In December 1992, the Company announced that the Board of Directors had approved a program to repurchase up to 2,000,000 shares of its Common Stock from time to time in the open market and in privately negotiated transactions. By August 31, 1996, the Company had purchased all 2,000,000 shares authorized to be purchased under such program. In the fiscal years ended August 31, 1996, 1995 and 1994, 301,200, 180,500 and 753,100 shares, respectively, of Common Stock were repurchased in open market transactions for aggregate consideration of approximately $10.9 million (or approximately $36.20 per share), $6.1 million (or approximately $33.80 per share), and $28.9 million (or approximately $38.40 per share), respectively. 47 50 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 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 to LIN Television Corporation for $95 million in cash which closed in October 1995. See Note 8.
1st 2nd 3rd 4th Fiscal Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- ---- (Dollars in thousands except per share data) Fiscal 1995: Revenues ....... $147,084 $143,732 $142,632 $140,738 $574,186 Revenues less direct costs . 58,646 58,398 58,368 57,238 232,650 Income before provision for income taxes ........ 44,555 45,716 45,600 47,387 183,258 Net income ..... 27,868 29,891 29,221 30,332 117,312 Primary earnings per share .... $ .75 $ .80 $ .78 $ .81 $ 3.14 ======== ======== ======== ======== ========
(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 transaction, 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 represents the reversal of previously recognized accounting losses (with no associated income tax effect) in excess of the Company's original investment. 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. 48 51 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company's investment in Buffalo subsequent to the restructuring was carried at cost. 49 52 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 1997 annual meeting of stockholders, which is to be filed pursuant to Regulation 14A not later than December 29, 1996. 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 28 of this Annual Report. (3) Exhibits:
Exhibit Number Description - ------ ----------- 3.1. Registrant's Restated Certificate of Incorpo- ration (incorporated by reference to Exhib- it 3.1 to the Registrant's Registration Statement No. 2-93987). 3.2. Certificate of Amendment to the Registrant's Restated Certificate of Incorporation (incor- porated by reference to Exhibit 3.3 to the Registrant's Registration Statement No. 33- 8357). 3.3. Registrant's By-laws, as amended April 28, 1988 and October 10, 1996. 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 Registration 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 amend- ment dated June 8, 1983 and exhibits (incor- porated by reference to Exhibit 10.5 to the Registrant's Registration Statement No. 2- 93987).
50 53
Exhibit Number Description - ------ ----------- 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 Statement No. 2-93987). 10.4.** Amendment, dated April 23, 1990, to the Dis- tribution Agreement dated December 15, 1982, between Califon Productions, Inc. and the Registrant (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Re- port 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 reference 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 Regis- trant (incorporated by reference 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 Regis- trant (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 or consulting agreements, date De- cember 23, 1993, between the Registrant and Stephen W. Palley (incorporated by reference to Exhibit 10.6 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 Comission for confidential treatment. 51 54
Exhibit Number Description - ------ ----------- 10.9. Employment 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 10.10. King World Productions, Inc. Retirement Sav- ings Plan dated September 17, 1992 (incorpo- rated 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. Amended and Restated Stock Option and Restricted Stock Purchase Plan of the Registrant (incorporated by reference to the Registrant's Registration Statement No. 33-54691). 10.12. Incentive Equity Compensation Plan for Senior Executives of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-30695). 10.13. Agreement dated as of May 1, 1991, among the Registrant and the stockholders named there- in. 10.14. Form of Indemnification Agreement between the Registrant 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). 10.15.** 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
- ----------------------- * 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 Comission for confidential treatment. 52 55
Exhibit Number Description - ------ ----------- Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993) 10.16.** 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). 10.17.* Agreement dated as of January 28, 1991 be- tween the Registrant and Harpo, Inc. 10.18.** Agreement dated as of March 17, 1994 between the Registrant and Harpo, Inc. (incorporated by reference to 8-K/A dated May 18, 1994). 10.19.* 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). 10.20. 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 Registration Statement No. 33-71696). 10.21. Stock Option Agreement dated as of January 28, 1991 between the registrant and Jeffrey D. Jacobs (incorporated by reference to Exhibit 10.3 to the Registrant's Registra- tion Statement No. 33-71696). 10.22. 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).
- ----------------------- * 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 Comission for confidential treatment. 53 56
Exhibit Number Description - ------ ----------- 10.23. 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). 10.24.* 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 Exhib- it 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994). 10.25.* Amendment dated as of September 19, 1991 to the Agreement dated as of June 2, 1988 be- tween King World F.S.C. Corporation and Unilever N.V. (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1992). 10.26* Amendment dated June 13, 1994 to the Agreement dated June 2, 1988, as amended as of June 13, 1989 and September 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). 10.27* 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. (incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1995). 10.28** Amendment dated as of September 1, 1996 to the Agreement dated June 2, 1988, as amended as of June 13, 1989, September 19, 1991, June
- ----------------------- * 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 Comission for confidential treatment. 54 57
Exhibit Number Description - ------ ----------- 13, 1994 and July 11, 1995 between King World F.S.C. Corporation and Unilever N.V. 10.29. Restructuring Agreement dated as of April 30, 1992 among Buffalo Broadcasting Co. Inc., the Holders named therein and Buffalo Management Enterprises Co., Inc., together with Exhibits thereto. 10.30. Letter Agreements dated December 18, 1992 be- tween the Registrant and each of Roger King and Michael King and Cross Receipt dated December 18, 1992 (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993). 21.1. List of Subsidiaries of the Registrant. 23.1. Consent of Independent Public Accountants.
(b) Reports on Form 8-K filed during the last quarter of the fiscal year ended August 31, 1996: None. 55 58 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 undertaking shall be incorporated by reference into registrant's Registration Statements on Form S-8 Nos. 33-30694 and 33-30695 (filed August 24, 1990), No. 33-54691 (filed on July 22, 1994) and No. 333-11363 (filed on September 4, 1996): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers 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, unenforceable. In the event that a claim for indemnification against such liabilities (other than for the payment by the registrant 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 indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 56 59 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 14, 1996 KING WORLD PRODUCTIONS, INC. By /s/ Michael King ------------------------------ Michael King President and Interim Chief Operating 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 - --------- ----- ---- President and November 14, 1996 Director (principal /s/ Michael King executive officer) - --------------------- Michael King /s/ Roger King Director November 14, 1996 - --------------------- Roger King /s/ Diana King Director November 14, 1996 - --------------------- Diana King /s/ Richard King Director November 14, 1996 - --------------------- Richard King /s/ Ronald S. Konecky Director November 14, 1996 - --------------------- Ronald S. Konecky /s/ James M. Rupp Director November 14, 1996 - --------------------- James M. Rupp
57 60
Signature Title Date - --------- ----- ---- /s/ Joel Chaseman Director November 14, 1996 - --------------------- Joel Chaseman /s/ Steven A. LoCascio - --------------------- Interim Chief Financial November 14, 1996 Steven A. LoCascio Officer (principal financial officer) /s/ Steven A. Locascio - --------------------- Vice President and November 14, 1996 Steven A. LoCascio Controller (principal accounting officer)
58 61 EXHIBIT INDEX
Exhibit No. Description - --- ----------- 3.1. Registrant's Restated Certificate of Incorpora- tion (incorporated 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 (incorpo- rated by reference to Exhibit 3.3 to the Regi- strant's Registration Statement No. 33-8357). 3.3. Registrant's By-laws, as amended April 28, 1988 and October 10, 1996. 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 Registration 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 Reg- istrant, with amendment dated July 8, 1983 (incorporated by reference to Exhibit 10.7 to the Registrant's Registration Statement No. 2-93987). 10.4.** Amendment, dated April 23, 1990, to the Distribu- tion Agreement dated December 15, 1982, between Califon Productions, Inc. and the Registrant (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form
- ----------------------- * 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. 62
Exhibit No. Description - --- ----------- 10-K for the fiscal year ended August 31, 1995). 10.5.** Distribution Agreement dated November 1, 1983, between Califon Productions, Inc. and the Reg- istrant, with amendment dated March 26, 1984 (incorporated by reference 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 reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended February 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 February 29, 1996). 10.8. Employment or consulting agreements, date De- cember 23, 1993, between the Registrant and Stephen W. Palley (incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994). 10.9. Employment between the Registrant and the indi- viduals 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
- ----------------------- * 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. 2 63
Exhibit No. Description - --- ----------- 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. Amended and Restated Stock Option and Re- stricted Stock Purchase Plan of the Registrant (incorporated by reference to the Registrant's Registration Statement No. 33-54691). 10.12. Incentive Equity Compensation Plan for Senior Executives of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-30695). 10.13. Agreement dated as of May 1, 1991, among the Registrant and the stockholders named therein. 10.14. Form of Indemnification Agreement between the Registrant 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). 10.15.** 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) 10.16.** 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. ** Certain information in this exhibit is deleted pursuant to a request to the Securities and Exchange Commission for confidential treatment. 3 64
Exhibit No. Description - --- ----------- 10.17.* Agreement dated as of January 28, 1991 between the Registrant and Harpo, Inc. 10.18.** Agreement dated as of March 17, 1994 between the Registrant and Harpo, Inc. (incorporated by reference to 8-K/A dated May 18, 1994). 10.19.* 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). 10.20. 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 Registration Statement No. 33-71696). 10.21. Stock Option Agreement dated as of January 28, 1991 between the registrant and Jeffrey D. Jacobs (incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement No. 33-71696). 10.22. 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). 10.23. 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). 10.24.* 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
- ----------------------- * 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. 4 65
Exhibit No. Description - --- ----------- (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). 10.25.* Amendment dated as of September 19, 1991 to the Agreement dated as of June 2, 1988 between King World F.S.C. Corporation and Unilever N.V. (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1992). 10.26* Amendment dated June 13, 1994 to the Agreement dated June 2, 1988, as amended as of June 13, 1989 and September 19, 1991, between King World F.S.C. Corporation and Unilever N.V. (incorpo- rated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994). 10.27* 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. Corpo- ration and Unilever N.V. (incorporated by ref- erence to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1995). 10.28** Amendment dated as of September 1, 1996 to the Agreement 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. 10.29. Restructuring Agreement dated as of April 30, 1992 among Buffalo Broadcasting Co. Inc., the Holders named therein and Buffalo Management Enterprises Co., Inc., together with Exhibits thereto.
- ----------------------- * 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. 5 66
Exhibit No. Description - --- ----------- 10.30. Letter Agreements dated December 18, 1992 be- tween the Registrant and each of Roger King and Michael King and Cross Receipt dated Decem- ber 18, 1992 (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993). 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. 6 EX-3.3 2 REGISTRANTS BY-LAWS 1 EXHIBIT 3.3 BY-LAWS OF KING WORLD PRODUCTIONS, INC. ARTICLE I Stockholders Section 1.1 Annual Meetings. An annual meeting of stockholders 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. Any other proper business may be transacted at the annual meeting. 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 liquidation, 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 2 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 2 3 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 advisable, 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 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 3 4 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. Section 1.9 List of Stockholders Entitled to Vote. The Secretary 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 stockholder, 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. 4 5 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 5 6 be made by the Board of Directors or by any stockholder entitied to vote for the election of directors. Any stockholder 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's 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, 45 days in advance of such 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 on 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 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 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; and (e) the consent of each nominee to serve as a director of the Corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person which was not made in accordance with the foregoing procedure. 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. 6 7 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 participating 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 otherwise 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 proceedings 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 7 8 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 specified 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 accordance 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 resolution 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 alternate 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 8 9 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, recommending to the stockholders the sale, lease or exchange of all or substantially all the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, 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. 9 10 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 succeeding 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. 10 11 Section 4.6 Vice Presidents. The Vice President or Vice Presidents, 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. 11 12 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 Corporation 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 certificate. 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 12 13 holder's attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary 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 Directors. 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, 13 14 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 5 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 director, officer or employee. For purposes of this By-law, the term "Corporation" 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, partnership, 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 disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though 14 15 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 transaction 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 Corporation 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. 15 EX-10.9 3 EMPLOYMENT AGREEMENTS 1 EXHIBIT 10.09 KING WORLD PRODUCTIONS, INC. 1700 Broadway New York, New York 10019 September 3, 1996 Mr. Steven R. Hirsch c/o Camelot Entertainment Sales, Inc. 1700 Broadway New York, New York 10019 Dear Steve: This letter, when accepted by you, shall constitute an agreement between you and King World Productions, Inc. ("King World" or the "Company") with respect to the terms upon which you will be employed by King World during the Employment Period (as hereinafter defined). 1. (a) During the Employment Period, King World shall employ you, and you hereby accept employment by King World, in the capacity of President of King World's barter advertising sales subsidiary, Camelot Entertainment Sales, Inc. ("Camelot"), on the terms and subject to the conditions set forth in this Agreement. The "Employment Period" shall mean the period commencing on September 1, 1996 and ending on the earlier to occur of the following: (i) August 31, 1999 (or August 31, 2001, if the Company exercises the option provided in Section 1(b) hereof); and (ii) the date on which this Agreement is terminated pursuant to the provisions of Section 7(a) hereof. During the Employment Period, you shall perform such services as shall from time to time be reasonably assigned to you by King World's Chief Executive Officer, Chairman or Chief Operating Officer, or by or pursuant to resolution of Camelot's Board of Directors, and you shall diligently devote your entire business time, skill and attention to the performance of such services and your duties and obligations hereunder. (b) You hereby grant to the Company an option to extend the Employment Period for one additional twenty-four month period ending on August 31, 2001 (hereinafter referred to as the "Option Period"). The Company may exercise the option by written notice to you on or before May 1, 1999. If the Company exercises 2 said option, the terms and provisions of this Agreement shall remain in effect and shall apply during the Option Period. Except as otherwise expressly provided herein, as used herein, the term "Employment Period" shall include the Option Period if said option has been exercised; and shall exclude the Option Period if said option has not been exercised. 2. As a consideration for the services rendered by you hereunder, you shall be entitled to the following: (a) Salary compensation at the following annual rates: $500,000 during the first twelve months of the Employment Period; $525,000 during the second twelve months of the Employment Period; $550,000 during the third twelve months of the Employment Period; and $600,000 during the Option Period (if any). Your salary compensation shall be payable in accordance with King World's standard payroll policy from time to time in effect. (b) As further consideration for the services rendered by you pursuant to this Agreement, and in order to induce you to accept employment with King World on the terms and conditions set forth herein, the Compensation Committee of King World's Board of Directors (the "Compensation Committee") has granted to you, subject to your acceptance of this Agreement, a stock option (herein called the "Option") under the Company's 1995 Amended and Restated Stock Option and Restricted Stock Purchase Plan (the "Plan") to purchase 150,000 shares of Common Stock, $.01 par value, of the Company ("Common Stock"), at an option exercise price equal to $34.75 per share, the closing price of the Common Stock on the date hereof, subject to vesting as provided in paragraph (c) below. (c) The Option shall have a term of ten years and shall become exercisable with respect to 20% of the total number of shares subject thereto on August 31, 1997 and each of the two immediately succeeding anniversaries of that date, and with respect to the remaining 40% of the total number of shares subject thereto on August 31, 2001, provided that if you should cease to be a full-time employee of King World or any of its subsidiaries or affiliates, you will have the right to exercise the unexercised portion of the option only within the thirty (30) day period following the date on which you ceased to be a full-time employee, and then only to the extent that such unexercised portion of the option was vested on the date your full-time employment ceased, except that if your full-time employment ceased by reason of your death or disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended), such thirty (30) day period will instead be the 3 one-year period following the cessation of your full-time employment. (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 you in respect of the Option granted hereunder or in respect of any shares acquired upon exercise of the Option, the Company shall deduct 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, you will be required to pay to the Company, or to make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of such taxes. (e) The terms of the Option are more fully set forth in a definitive stock option agreement under the Plan, a copy of which is attached to this Agreement. Such stock option agreement and the Plan shall govern your rights as an optionee. The Company shall cause the shares of Common Stock issuable upon the exercise of the Option to be registered on Form S-8 (or any successor form) under the Securities Act of 1933, as amended, and listed on the New York Stock Exchange. 3. With respect to each fiscal year of the Company ending within (or upon the termination of) the Employment Period, you shall be entitled to a bonus, payable annually, equal to 1% of the net revenues of Camelot for such fiscal year, such bonus not to exceed $200,000 with respect to any of the first three fiscal years during the Employment Period, and $250,000 with respect to either fiscal year of the Option Period. The "net revenues of Camelot" shall mean, for the purposes of this Agreement, the net revenues of Camelot which are included in the Company's consolidated financial statements filed with the Securities and Exchange Commission. 4. (a) In addition to the bonus payable to you pursuant to Section 3, with respect to each fiscal year of the Company ending within (or upon the termination of) the Employment Period, you shall be entitled to a supplemental bonus as described in this Section 4, not to exceed $150,000 in any fiscal year of the Company (excluding, for the purpose of such $150,000 per year limitation, any amounts subsequently recouped pursuant to paragraph (c) below), provided that (i) the Committee determines that the average daily closing price of the Common Stock for such year (the "Average Yearly Price") exceeds $32.625 and (ii) the Company's return on equity for such fiscal year exceeds the S&P Average Return on Equity. (b) If the Average Yearly Price for any such fiscal year equals or exceeds $38.875, the closing price of the Common 4 Stock on December 21, 1993, the supplemental bonus for such year shall be equal to the lesser of 1% of the net revenues of Camelot for such year or $150,000. If such Average Yearly Price exceeds $32.625, but is less than $38.875, the supplemental bonus for such year shall be equal to the lesser of 1.0% of the net revenues of Camelot for such year or $150,000, multiplied by a fraction, the numerator of which is the excess of such Average Yearly Price over $32.625, and the denominator of which is $6.25. (c) The full amount by which any supplemental bonus payment was reduced below 1.0% of the net revenues of Camelot for any year or $150,000, whichever is less, pursuant to the second sentence of paragraph (b) above shall be payable to you if the Average Yearly Price for any subsequent fiscal year within the Employment Period equals or exceeds $38.875. A portion of the amount by which any supplemental bonus payment was reduced pursuant to the second sentence of paragraph (b) above (and was not previously recouped by you pursuant to this paragraph (c)) shall be payable to you if the Average Yearly Price for any subsequent fiscal year or years during the Employment Period is less than $38.875 but greater than the Average Yearly Price for the year in which such reduction was made, and the portion of such reduction that shall be payable to you shall be equal to the full amount of such reduction (or the portion thereof that was not previously recouped by you pursuant to this paragraph (c)), multiplied by a fraction, the numerator of which is the excess of the Average Yearly Price for such subsequent year over the Average Yearly Price for the year in which such reduction was made and the denominator of which is the excess of $38.875 over the Average Yearly Price for the year in which such reduction was made. To the extent that a partial recoupment is made in a subsequent fiscal year, any amounts not recouped under the foregoing formula shall remain available for recoupment in subsequent years during the term of this Agreement. Any amounts not recouped by you pursuant to this paragraph (c) on or prior to the making of the supplemental bonus payment in respect of the fiscal year ending on August 31, 1999 shall no longer be subject to recoupment and shall not be paid to you. (d) Notwithstanding any other provision of this Agreement, in no event shall aggregate supplemental bonus payments payable pursuant to this Section 4 exceed $250,000. (e) Payments of the supplemental bonus amounts provided herein shall be made annually, in arrears, as soon as practicable after the after the end of each fiscal year in which you are eligible for a bonus hereunder. 5. You shall be entitled to participate, on the same basis and subject to the same qualifications as King World's other executive officers, in any pension, life insurance, health insurance or hospitalization plan or other similar plan from time 5 to time in effect with respect to King World's executive officers or employees generally. 6. The Company shall, during the Employment Period, reimburse you for such expenses as shall be incurred by you in connection with the performance of your duties hereunder, provided that you furnish to the Company evidence of such expenses reasonably satisfactory to it. 7. (a) The Employment Period shall terminate (i) upon your death, (ii) thirty (30) days after written notice to you from King World's Board of Directors in the event that you have been unable to perform the duties required of you pursuant to this Agreement for ninety (90) days during any twelve-month period during the Employment Period (whether or not such ninety (90) days are consecutive) by reason of illness or other incapacity and King World's Board of Directors determines to terminate the Employment Period for such reason or (iii) immediately upon written notice to you in the event that King World's Board of Directors determines to terminate the Employment Period for cause. (b) Termination of the Employment Period shall terminate all of your rights hereunder from and after the effective date of termination except for your rights to salary and benefits which have accrued but are unpaid at the effective date of termination, and your rights with respect to the Option (which shall be governed by the terms of the Plan and the stock option agreement relating to the Option), and except that in the event that your full-time employment with the Company is terminated on account of your death, disability or incapacity, the cash bonus provided for in Section 3 shall continue to be payable as provided therein through the end of the fiscal year in which your death, disability or incapacity occurred. (The foregoing is not intended to relieve or release the Company from any liability for damages to you if the Company wrongfully terminates the Employment Period.) In no event shall termination of this Agreement for any reason terminate any of your obligations under Sections 8, 9, 10 or 11 hereof. 8. Except as required in connection with the performance of services hereunder, you shall not, during or after the termination of the Employment Period, use or disclose to any person any confidential business information or trade secrets of King World or any of its affiliates or business associates that you obtained or learned during the Employment Period or in the course of your employment by the Company, including, but not limited to, confidential business information regarding the type and nature of the contracts entered into by the Company or its affiliates for the acquisition or distribution of television programming (including, without limitation, advertising time within any television programming irrespective of whether King 6 World or any of its affiliates distributes such programming to television stations ("Advertising Time")), the sale or other distribution of television programming (including, without limitation, Advertising Time), or the basis upon which King World or any of its affiliates elects to acquire television programming (including, without limitation, Advertising Time) for sale or other distribution. (b) You also agree that during the Employment Period and for a period of two (2) years following the termination of the Employment Period, you will not work for, or render services to or for the benefit of, or otherwise be interested in (whether as an employee, consultant, proprietor or otherwise howsoever), any business or portion of a business of any person, firm, partnership or corporation which supplied television programming (including, without limitation, Advertising Time) to King World or any of its affiliates at any time within the two (2) year period preceding the termination of the Employment Period. 9. You hereby agree that you shall not (a) during the Employment Period and for a period of two (2) years following the termination of the Employment Period, induce, directly or indirectly, any person from whom or from which King World or any of its affiliates acquired television programming (including without limitation Advertising Time) to terminate his or its agreement with King World or such affiliate with respect to such programming, to refuse to renew any such agreement or to refuse to furnish King World or any of its affiliates with any other television programming (including without limitation Advertising Time), or (b) induce, directly or indirectly, any employee of King World or any affiliate thereof to terminate his or her employment with King World or such affiliate. 10. You hereby agree that all ideas, creations, improvements and other works of authorship created, developed, written or conceived by you at any time during the Employment Period are works for hire within the scope of your employment and shall be the property of King World and/or Camelot, free of any claim whatever by you or any person claiming any rights or interests through you. 11. Each of you and King World (the "Indemnitor"), agrees to indemnify and hold harmless the other from and against any and all loss, damage, claim, liability, cost and expense, including reasonable attorneys' fees, incurred by the other as a result of, or arising out of or in connection with, a violation by the Indemnitor of any term, covenant or condition required by this Agreement to be performed or observed by the Indemnitor. 12. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York and constitutes the entire understanding between the parties hereto with 7 respect to the subject matter hereof. No waiver or modification of any terms hereof shall be valid unless in writing signed by the party against whom such waiver is sought to be enforced, and then only to the extent set forth in such writing. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, assigns, heirs, administrators and executors. Yours very truly, KING WORLD PRODUCTIONS, INC. By/s/ Michael King ------------------------------------ Accepted as of the date first above written: /s/ Steven R. Hirsch - ------------------------- Steven R. Hirsch 8 KING WORLD PRODUCTIONS, INC. 1700 BROADWAY NEW YORK, NEW YORK 10019 As of September 1, 1996 Mr. Jonathan Birkhahn King World Productions, Inc. 1700 Broadway New York, New York 10019 Dear Jonathan: This letter, when accepted by you, shall amend and restate the existing employment agreement between King World Productions, Inc. (the "Company") and you. The Company and you hereby agree as follows: 1. (a) The Company hereby agrees to employ you as Senior Vice President, Business Affairs and General Counsel for the period (herein called the "Employment Period") commencing on September 1, 1996 and terminating on August 31, 2000. You accept such employment and agree to diligently and faithfully perform such services as shall from time to time be reasonably assigned to you by, or pursuant to a resolution of, the Company's Board of Directors or senior management, and diligently and faithfully devote your entire business time, skill and attention to the performance of such services. The Company agrees that during the Employment Period you will be required to report only to its Chairman of the Board, President and Chief Executive Officer and Executive Vice President and Chief Operating Officer. During the Employment Period, your base of operations shall be New York City. (b) You hereby grant to the Company an option (the "Option") to extend the Employment Period for an additional twelve-month period to commence on September 1, 2000 and to end on August 31, 2001. The Company may exercise the Option by giving you written notice to such effect not later than April 1, 2000. In the event that the Company elects to exercise the Option, the terms and provisions of this Agreement shall remain in effect and shall apply during the Employment Period as extended by the exercise of the Option. 9 2. (a) Your salary compensation for the period (a) from September 1, 1996 through August 31, 1997 shall be payable at the annual rate of $340,000, (b) from September 1, 1997 through August 31, 1998 shall be payable at the annual rate of $360,000, (c) from September 1, 1998 through August 31, 1999 shall be payable at the annual rate of $380,000 and (d) from September 1, 1999 through August 31, 2000 shall be payable at the annual rate of $400,000. If the Company shall exercise the Option, the Company shall pay to you, and you shall accept from the Company, salary compensation at the annual rate of $425,000 for the period from September 1, 2000 through August 31, 2001. Any compensation payable pursuant to this paragraph 2(a) shall be paid in accordance with the Company's normal payroll policy at the time in effect. (b) During each year of the Employment Period, you may also be entitled to a bonus if the Company's Board of Directors, in its sole and absolute discretion, shall so determine. (c) Subject to the provisions of this paragraph (c), the Company will grant to you a "non-qualified stock option" under the Company's Amended and Restated Stock Option and Restricted Stock Purchase Plan (the "Plan") to purchase 75,000 shares of the Company's Common Stock, $.01 par value (the "Common Stock"), at an exercise price equal to the closing price of the Common Stock on the New York Stock Exchange on September 3, 1996. You understand and agree with respect to such option that: (i) your right to exercise such option shall vest as follows: 20% on August 31, 1997; 20% on August 31, 1998; 20% on August 31, 1999; and 40% on August 31, 2001; and (ii) if you shall cease to be a full-time employee of the Company and any of its subsidiaries or affiliates, then you shall only have the right to exercise the unexercised portion of such option within one month after the date on which you ceased to be so employed and then only to the extent that such portion was vested (pursuant to the foregoing vesting schedule) on the date you ceased to be so employed, and you shall forfeit all other rights to and under such option, provided, however, that if your full-time employment ceases by reason of your death or "disability" (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended), then such one month period shall instead be a one-year period from the cessation of your employment. The foregoing, as well as such other terms and conditions as the Company shall deem appropriate, shall be set forth in a definitive stock option agreement. Your rights as an optionee shall be governed by the terms of such agreement and the Plan. (d) You shall be entitled to participate or continue to participate, as the case may be, on the same basis as the other employees of the Company, in any -2- 10 pension, profit-sharing, life insurance, health insurance or hospitalization plan in effect with respect to such employees. You shall be entitled to reimbursement of expenses reasonably incurred by you in connection with the performance of your duties hereunder, provided that you promptly furnish documentation therefor reasonably satisfactory to the Company. (e) You shall be entitled to utilize first-class travel (if available and if used) for all plane trips with scheduled flying times greater than three hours and, if applicable, business class air travel for all plane trips with scheduled flying times of three hours or less. 3. (a) In the event of your death, this Agreement shall automatically terminate, effective upon the date of your death. (b) In the event that you are unable to perform the duties required of you pursuant to this Agreement for ninety (90) days during the Employment Period (whether or not such ninety (90) days are consecutive) by reason of illness or other physical incapacity, the Company may, after the expiration of such ninety (90) days, terminate this agreement on thirty (30) days written notice to you. 4. Except as required in connection with the performance of your services to the Company, you shall not, during or after the termination of the Employment Period, use or disclose to any person, partnership or corporation any confidential business information or trade secrets of the Company obtained or learned by you during the Employment Period, including, without limitation, information as to the type and nature of the contracts entered into by the Company in connection with the acquisition of television programming and the distribution of television programming, or the basis upon which the Company elects to acquire television programming for distribution. 5. You hereby agree that you shall not, for a period of two (2) years following the termination of the Employment Period, (a) induce, directly or indirectly, any person, partnership or corporation from whom or from which the Company acquired television programming during the Employment Period, to terminate its agreement with the Company with respect to such programming, to refuse to renew any such agreement or to refuse to furnish to the Company any other television programming or (b) induce, directly or indirectly, any employee of the Company to terminate his or her employment with the Company. 6. You hereby agree that all ideas, creations, improvements and other works of authorship created, developed, written or conceived by you at any time during the Employment Period are works for hire within the scope of your employment and shall be the property of the Company free of any claim whatever by you or any person claiming any rights or interests through you. -3- 11 7. You hereby agree to indemnify and hold the Company harmless from and against any and all loss, damage, liability, cost and expense, including reasonable attorneys' fees, incurred by the Company as a result of, arising out of or in connection with a violation of any term or condition of this Agreement required to be performed or observed by you. The Company hereby agrees to indemnify and hold you harmless from and against any and all loss, damage, liability, cost and expense, including reasonable attorneys' fees, incurred by you as a result of, arising out of or in connection with a violation of any term or condition of this Agreement required to be performed or observed by the Company. 8. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York and constitutes the entire agreement, and shall supersede any prior agreement, between the parties hereto on the subject matter hereof. No waiver or modification of the terms or conditions hereof shall be valid unless in writing signed by the party to be charged and only to the extent therein set forth. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, assigns, heirs, administrators and executors. Yours very truly, KING WORLD PRODUCTIONS, INC. By /s/ Robert Madden --------------------------- ACCEPTED: By: /s/ Jonathan Birkhahn -------------------------- Jonathan Birkhahn -4- 12 KING WORLD CORPORATION 830 Morris Turnpike Short Hills, New Jersey 07078 September 3, 1996 Mr. Michael F. Spiessbach 38 Far View Road Millburn, New Jersey 07041 Dear Mike: This letter, when accepted by you, shall constitute an agreement between you and King World Corporation, a New Jersey corporation (the "Company"), with respect to your employment by the Company for the Employment Period (as hereinafter defined). As used herein, the term "King World Group" refers collectively to King World Productions, Inc. ("King World") and its consolidated subsidiaries (including the Company). 1. (a) The Company hereby employs you for a term commencing on September 1, 1996 and terminating at midnight on August 31, 1997, or, if the option provided in Section 1(b) hereof is exercised in whole or in part, on the Extension Termination Date determined pursuant to Section 1(b), or such earlier date on which such term is terminated pursuant to Section 6 hereof (the "Employment Period"). During the Employment Period, you shall serve as, and perform the duties of, President--King World Ventures, a newly created division of King World, and, in such capacity, (i) you shall be responsible for managing the King World Group's domestic and international acquisitions and investments, subject to the direction of King World's Board of Directors; and (ii) you shall report directly to King World's President and Chief Executive Officer, Chairman and Chief Operating Officer. The implementation of all recommendations made by you for acquisitions and investments shall be subject to the prior approval of King World's President and Chief Executive Officer and Chairman. During the Employment Period, you shall perform such services as shall be reasonably assigned to you from time to time by King World's Chief Executive Officer, Chairman or Chief Operating Officer, or by or pursuant to resolution of its Board of Directors, and you shall diligently devote your entire business time, skill and attention (except as provided in Section 1(c) below) to the performance of your duties and obligations hereunder. (b) You hereby grant to the Company four successive dependent options to extend the Employment Period for one 13 additional twelve-month period each (each such period being hereinafter called an "Option Period"). The Company may exercise each option by giving you written notice to such effect on or before the 30th day of June immediately prior to the date on which the Employment Period would otherwise terminate. If the Company does not exercise such option for the next following Option Period, the remaining options shall automatically terminate. If the Company exercises such option for a particular Option Period, the terms and provisions of this Agreement shall remain in effect and shall apply during such Option Period. Except as otherwise expressly provided herein, as used herein, the term "Employment Period" shall include any Option Period as to which an option to extend the Employment Period has been exercised, and shall exclude any Option Period as to which an option to extend the Employment Period has not been exercised or was terminated; and the term "Extension Termination Date" shall mean the last day of the last Option Period for which the Company's option pursuant to this Section 1(b) has been exercised. (c) During the Employment Period, you may serve as a director of one or more corporations that are not members of the King World Group, provided that (i) the total number of directorships in which you serve at any one time shall not exceed three; and (ii) you shall not serve as a director of any corporation or other entity to which the Company objects in writing, on the ground that (a) in the reasonable judgement of King World's Board of Directors, such corporation or other entity, or any of its affiliates, conducts a business that competes with any business in which any King World Group company is engaged or proposes to engage, or otherwise detrimentally affects the King World Group companies, or (b) your service as such a director would conflict with or detract from the performance of your duties and responsibilities to the Company and King World. You shall not devote a material amount of your business time to service on such directorships. In addition, you shall not serve as a director of any corporation if to do so would violate any law or regulation. 2. You agree to render services to the Company at such locations as your duties require; provided that you shall not be required to relocate your residence. The Company shall provide you with an office and secretarial services at its offices in Short Hills, New Jersey (or a successor location), which shall be your home base of operations; shall also make available to you office facilities in its New York offices when such duties require you to work out of King World's New York office; and shall provide you with such support personnel as are necessary to enable you to carry out your duties hereunder. 3. (a) The Company shall pay to you, and you shall accept, for your services performed during the Employment Period, 14 salary compensation at the annual rate of $350,000, which rate shall be increased by $25,000 over the rate in effect for the prior fiscal year for each Option Period during the Employment Period. Such salary compensation shall be paid in accordance with the Company's normal payroll policy at the time in effect. Any bonus to you shall be payable in the sole discretion of the Company. (b) Subject to your acceptance of this Agreement, the Compensation Committee of the Board of Directors of King World has granted to you a "non-qualified stock option" under the King World Productions, Inc. 1995 Amended and Restated Stock Option and Restricted Stock Purchase Plan ("Plan") to purchase 100,000 shares of King World Common Stock, $.01 par value ("Common Stock"), at an exercise price equal to the closing price of the Common Stock on the New York Stock Exchange on the date hereof. You understand and agree, with respect to such stock option, that: (i) subject to the provisions of clause (ii) below, your right to exercise such option shall vest over a five year period as follows: 20% on August 31, 1997; 20% on August 31, 1998; 20% on August 31, 1999; and 40% on August 31, 2001; and (ii) if you cease for any reason to be employed full time by the Company (or one or more of the other King World Group companies), then you shall only have the right to exercise the unexercised portion of such option within one month after the date on which you ceased to be so employed and then only to the extent that such portion was vested (pursuant to the foregoing vesting schedule) on the date you ceased to be so employed, and you shall forfeit all other rights to and under such option, except that if your full-time employment ceases by reason of your death or "disability" (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended), then such one month period shall instead be a one-year period following the cessation of your employment. The foregoing, as well as such other terms and conditions as the Company shall deem appropriate, shall be set forth in a definitive stock option agreement. Your rights as an optionee shall be governed by the terms and conditions of such agreement and the Plan. 4. The Company shall, during the Employment Period, reimburse you for such business expenses as are reasonably incurred by you in connection with the performance of your duties hereunder, provided that you promptly furnish documentation therefor reasonably satisfactory to the Company. 15 5. During the Employment Period, you shall be entitled to participate, on the same basis and subject to the same qualifications as the executive officers of King World, in any pension, profit-sharing, life insurance, health insurance or hospitalization plan or other similar plan from time to time in effect with respect to all executive officers of King World. 6. (a) In the event of your death, the Employment Period shall automatically terminate, effective upon the date of your death. (b) In the event that you are unable to perform the duties required of you pursuant to this Agreement for any period of ninety (90) days during any consecutive 12-month period during the Employment Period (whether or not such ninety (90) days are consecutive) by reason of illness or other physical or mental incapacity, the Company may, after the expiration of such ninety (90) days, terminate the Employment Period on thirty (30) days written notice to you. 7. Except as required in connection with the performance of your services for the King World Group companies, you shall not, during or after the termination of the Employment Period, use or disclose to any person, firm, partnership or corporation any confidential or proprietary information or trade secrets of King World or any of its subsidiaries or affiliates obtained or learned by you or at any time during or prior to the Employment Period, including, without limitation, the type and nature of the contracts entered into by King World or any of its subsidiaries or affiliates in connection with the acquisition of television programming (including, without limitation, the acquisition of advertising time within any television programming irrespective of whether the Company or any of its subsidiaries or affiliates distributes such programming to television stations ("Advertising Time")), the sale or other distribution of television programming (including, without limitation, Advertising Time), or the basis upon which King World or any of its subsidiaries or affiliates elects to acquire television programming (including, without limitation, Advertising Time) for sale or other distribution. Notwithstanding the foregoing, the following shall not be considered confidential or proprietary information or trade secrets under this provision: information that (i) is published or otherwise in the public domain, or (ii) becomes lawfully available from a third party without restriction on its disclosure. 8. You hereby agree that during and for a period of two (2) years following the termination of the Employment Period, you shall not (a) induce, directly or indirectly, any person, firm, partnership or corporation from whom or from which the Company or any of its subsidiaries or affiliates acquired television programming (including, without limitation, Advertising 16 Time) during the Employment Period, to terminate its agreement with the Company or such subsidiary or affiliate with respect to such programming (including any such Advertising Time), to elect not to renew any such agreement or not to furnish to the Company or any such subsidiary or affiliate any other television programming (including, without limitation, Advertising Time) or (b) induce, directly or indirectly, any employee of the Company or any of its subsidiaries or affiliates to terminate his or her employment with the Company or any such subsidiary or affiliate. 9. You hereby agree that all ideas, creations, improvements and other works of authorship created, developed, written or conceived, individually or jointly, by you at any time during the Employment Period for any King World Group company or otherwise in connection with your duties hereunder, and which are within the scope of your duties for the Company or any of its subsidiaries or affiliates are works for hire within the scope of your employment and shall be the property of the Company (or the appropriate subsidiary or affiliate) free of any claim whatever by you or any person claiming any rights or interests through you. 10. You and the Company (each an "Indemnitor") hereby agree to indemnify and hold harmless the other from and against any and all loss, damage, liability, cost and expense, including reasonable attorneys' fees, incurred by the other as a result of, or arising out of or in connection with, a violation by the Indemnitor of any material term or condition of this Agreement required to be performed or observed by him or it, as determined by a court of competent jurisdiction. 11. All notices hereunder shall be in writing and shall be mailed by first class mail, postage prepaid, Return Receipt Requested or sent by recognized courier service, addressed, if to the Company, at 830 Morris Turnpike, Short Hills, New Jersey 07078, Attn. Vice President--Finance, with a copy to King World Productions, Inc, 1700 Broadway, New York, New York 10019, Attn. Chief Operating Officer, or if to you, at your address as it appears at the time on the books and records of the Company. All notices shall be deemed to have been given three business days after mailing in the manner described above, or one business day after sending by recognized courier service. 12. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, and constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. No waiver or modification of the terms or conditions hereof shall be valid unless in writing signed by the party against whom such waiver is sought to be enforced, and then only to the extent set forth in such writing. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, assigns, 17 heirs, administrators and executors. You may not assign or delegate any of your rights or obligations hereunder without the express, written consent of the Company in each instance. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed an original but both of which together shall constitute one and the same settlement. Yours very truly, KING WORLD CORPORATION By/s/ Michael King ------------------------------- AGREED TO AND ACCEPTED: /s/ Michael F. Spiessbach - ------------------------- Michael F. Spiessbach 18 KING WORLD PRODUCTIONS, INC. 1700 Broadway New York, New York 10019 September 3, 1996 Mr. Robert Madden 12400 Wilshire Boulevard West Los Angeles, California 90025 Dear Bob: This letter, when accepted by you, shall constitute an agreement between you and King World Productions, Inc. ("King World" or the "Company"), with respect to your employment by the Company for the Employment Period (as hereinafter defined). 1. (a) The Company hereby employs you for a term commencing on September 1, 1996 and terminating at midnight on August 31, 1997, or, if the option provided in Section 1(d) hereof is exercised in whole or in part, on the Extension Termination Date determined pursuant to Section 1(d), or such earlier date on which such term is terminated pursuant to Section 4 hereof (the "Employment Period"). During the Employment Period, you shall serve as, and perform the duties of, Senior Vice President--Administration of the Company, with responsibility for general administrative matters of King World and its consolidated subsidiaries. In such capacity, you shall undertake and perform such projects and assignments from time to time assigned to you by the Board of Directors of King World or its senior management. You hereby agree to accept such employment and to diligently and faithfully perform the responsibilities and obligations hereunder. (b) You agree to render services to the Company at such locations as your duties require; provided that your home base of operations shall be Los Angeles. (c) You shall devote at least 80% of your business time to the performance of your duties hereunder. The remainder of your business time may be devoted to your other pursuits, including but not limited to the private practice of law, provided, however, that such other pursuits do not, in the reasonable judgement of the Board of Directors of the Company, conflict with your duties and responsibilities to the Company and King World. 19 (d) You hereby grant to the Company four successive, dependent options to extend the Employment Period for one additional twelve-month period each (each such period being hereinafter called an "Option Period"). The Company may exercise each option by giving you written notice to such effect on or before the 30th day of June immediately prior to the date on which the Employment Period would otherwise terminate. If the Company does not exercise such option for the next following Option Period, the remaining options shall automatically terminate. If the Company exercises such option for a particular Option Period, the terms and provisions of this Agreement shall remain in effect and shall apply during such Option Period. Except as otherwise expressly provided herein, as used herein, the term "Employment Period" shall include any Option Period as to which an option to extend the Employment Period has been exercised, and shall exclude any Option Period as to which an option to extend the Employment Period has not been exercised or was terminated; and the term "Extension Termination Date" shall mean the last day of the last Option Period for which the Company's option pursuant to this Section 1(d) has been exercised. 2. (a) The Company shall pay to you, and you shall accept, for your services performed during the Employment Period, salary compensation at the annual rate of $400,000. Such salary compensation shall be paid in accordance with the Company's normal payroll policy at the time in effect. (b) The Compensation Committee of the Board of Directors of King World has granted to you, subject to your acceptance of this Agreement, a "non-qualified stock option" under the King World Productions, Inc. 1995 Amended and Restated Stock Option and Restricted Stock Purchase Plan ("Plan") to purchase 100,000 shares of King World Common Stock, $.01 par value ("Common Stock"), at an exercise price equal to the closing price of the Common Stock on the New York Stock Exchange on the date hereof. You understand and agree, with respect to such stock option that: (i) subject to the provisions of clause (ii) below, your right to exercise such option shall vest over a five year period as follows: 20% on August 31, 1997; 20% on August 31, 1998; 20% on August 31, 1999; and 40% on August 31, 2001; and (ii) if you should cease for any reason to be an employee of the Company or any of its subsidiaries or affiliates, then you shall only have the right to exercise the unexercised portion of such option within one month after the date on which you ceased to be so employed and then only to the extent that such portion was vested (pursuant to the foregoing vesting schedule) 20 on the date you ceased to be so employed, and you shall forfeit all other rights to and under such option, except that if your full-time employment ceases by reason of your death or "disability" (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended), then such one month period shall instead be a one-year period following the cessation of your employment. The foregoing, as well as such other terms and conditions as the Company shall deem appropriate, shall be set forth in a definitive stock option agreement. Your rights as an optionee shall be governed by the terms and conditions of such agreement and the Plan. 3. You shall be entitled to participate, on the same basis as the other employees of the Company and King World, in any pension, profit-sharing, life insurance, health insurance or hospitalization plan in effect with respect to such other employees. You shall be entitled to reimbursement of expenses reasonably incurred by you in connection with the performance of your duties hereunder, provided that you promptly furnish documentation therefor reasonably satisfactory to the Company and King World. 4. (a) In the event of your death, the Employment Period shall automatically terminate, effective upon the date of your death. (b) In the event that you are unable to perform the duties required of you pursuant to this Agreement for any period of ninety (90) days during any consecutive 12-month period during the Employment Period (whether or not such ninety (90) days are consecutive) by reason of illness or other physical or mental incapacity, the Company may, after the expiration of such ninety (90) days, terminate the Employment Period on thirty (30) days written notice to you. 5. (a) Except as required in connection with the performance of your services for the Company, you shall not, during or after the termination of the Employment Period, use or disclose to any person, firm, partnership or corporation any confidential or proprietary information or trade secrets of the Company or any of its subsidiaries or affiliates obtained or learned by you or at any time during or prior to the Employment Period, including, without limitation, the type and nature of the contracts entered into by the Company or any of its subsidiaries or affiliates in connection with the acquisition of television programming (including, without limitation, the acquisition of advertising time within any television programming irrespective of whether the Company or any of its subsidiaries or affiliates distributes such programming to television stations ("Advertising 21 Time")), the sale or other distribution of television programming (including, without limitation, Advertising Time), or the basis upon which the Company or any of its subsidiaries or affiliates elects to acquire television programming (including, without limitation, Advertising Time) for sale or other distribution. (b) You also agree that during and for a period of two (2) years following the termination of the Employment Period, you will not work for, or render services to or for the benefit of, or otherwise be interested in (whether as an employee, consultant, independent contractor, proprietor, investor, lender or in any other manner), any business or portion of a business of any person, firm, partnership or corporation which supplied television programming (including, without limitation, Advertising Time) to the Company or any of its subsidiaries or affiliates at any time within the two (2) year period preceding the termination of the Employment Period. 6. You hereby agree that during and for a period of two (2) years following the termination of the Employment Period, you shall not (a) induce, directly or indirectly, any person, firm, partnership or corporation from whom or from which the Company or any of its subsidiaries or affiliates acquired television programming (including, without limitation, Advertising Time) during the Employment Period, to terminate its agreement with the Company or such subsidiary or affiliate with respect to such programming (including any such Advertising Time), to elect not to renew any such agreement or not to furnish to the Company or any such subsidiary or affiliate any other television programming (including, without limitation, Advertising Time) or (b) induce, directly or indirectly, any employee of the Company or any of its subsidiaries or affiliates to terminate his or her employment with the Company or any such subsidiary or affiliate. 7. You hereby agree that all ideas, creations, improvements and other works of authorship created, developed, written or conceived by you at any time during the Employment Period and which are within the scope of your duties for the Company or any of its subsidiaries or affiliates are works for hire within the scope of your employment and shall be the property of the Company (or the appropriate subsidiary or affiliate) free of any claim whatever by you or any person claiming any rights or interests through you. 8. You hereby agree to indemnify and hold the Company and its subsidiaries and affiliates harmless from and against any and all loss, damage, liability, cost and expense, including reasonable attorneys' fees, incurred by them as a result of, arising out of or in connection with a violation of any term or condition of this Agreement required to be performed or observed by you. The Company hereby agrees to indemnify and hold you harmless from and against any and all loss, damage, liability, 22 cost and expense, including reasonable attorneys' fees, incurred by you in connection with a violation by the Company of any term or condition of this Agreement required to be performed or observed by it. 9. All notices hereunder shall be in writing and shall be mailed by first class mail, postage prepaid, or sent by recognized courier service addressed, if to the Company, at 830 Morris Turnpike, Short Hills, New Jersey 07078, Attn. Vice President--Finance, with a copy to King World Productions, Inc., 1700 Broadway, New York, New York 10019, Attn. Chief Operating Officer, or if to you, at your address as it appears at the time on the books and records of the Company. All notices shall be deemed to have been given three business days after mailing in the manner described above, or one business day after sending by recognized courier service. 10. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, and constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. No waiver or modification of the terms or conditions hereof shall be valid unless in writing signed by the party to be charged and only to the extent therein set forth. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, assigns, heirs, administrators and executors. You may not assign or 23 delegate any of your rights or obligations hereunder without the express, written consent of the Company in each instance. Yours very truly, KING WORLD PRODUCTIONS, INC. By/s/ Michael King ---------------------------- AGREED TO AND ACCEPTED: /s/ Robert V. Madden - ------------------------- Robert V. Madden EX-10.13 4 STOCKHOLDERS AGREEMENT 1 EXHIBIT 10.13 STOCKHOLDERS AGREEMENT, dated as of May 1, 1991, among ROGER KING, an individual residing at 1301 Spanish River Road, Boca Raton, Florida 33432, MICHAEL KING, an individual residing at 28026 Sea Lane, Malibu, California 90265, RICHARD KING, an individual residing at 21 Compass Island, Fort Lauderdale, Florida 33308 and DIANA KING, an individual residing at Lee's Hill Road, New Vernon, New Jersey 07920 (said individuals, together with any transferees thereof who execute and deliver the agreement required by Section 3(d) hereof and any executor, administrator or personal representative of any of the foregoing, being sometimes hereinafter referred to individually as a "Stockholder" and, collectively, as the "Stockholders") and KING WORLD PRODUCTIONS, INC., a Delaware corporation (the "Company"). WHEREAS, the Stockholders and the Company, together with certain other individuals no longer stockholders of record of the Company, were parties to that certain Stockholders Agreement, dated as of October 25, 1984 (the "Original Stockholders Agreement"), pursuant to which restrictions were placed on the resale by the individual parties of shares of Common Stock, $.01 par value, of the Company ("Common Stock") held by them; and WHEREAS, the Company and the individual parties to such agreement who remain stockholders of record of the Company desire to terminate the Original Stockholders Agreement; and WHEREAS, each of the Stockholders owns such number of shares of Common Stock, and such number of shares of Common Stock subject to an option to purchase ("Option Shares"), as is set forth opposite his or her respective name under the appropriate caption on Schedule I hereto; and WHEREAS, the Company and the Stockholders believe that it is in the best interests of the Company and the Stockholders that provision be made for the orderly disposition of shares of Common Stock that individual Stockholders may wish to sell in the public securities markets, while preserving the ability of each Stockholder to make independent decisions regarding the amount and timing of any such sales; and for the grant to the Company of a right of first refusal to purchase any shares of Common Stock that individual Stockholders may wish to sell; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereby agree as follows: SECTION 1. Restrictions on Transfer of Common Stock. The Stockholders severally agree with each other and with the Company that they will not, so long as this Agreement is in effect, directly or indirectly sell, pledge, give, bequeath, 2 transfer, assign, or in any other way whatsoever encumber or dispose of (hereinafter collectively called "transfer") any of the shares of Common Stock, or any interest therein, or any stock certificate or certificates representing the same, or any voting trust certificate or certificates issued in respect of any such shares, now or hereafter at any time owned by them, in violation of the restrictions imposed by this Agreement. The term "Common Stock" as used in this Agreement shall include Common Stock certificates, scrip representing fractional shares of Common Stock, Vested Option Shares (as hereinafter defined) and presently exercisable warrants or other presently exercisable rights to purchase Common Stock, and Common Stock received by way of dividend or upon an increase, reduction, substitution or reclassification of stock of the Company or upon any merger, consolidation or reorganization of the Company. References to numbers of shares of Common Stock, as constituted on the date hereof, shall be automatically adjusted to take into account any such dividend, increase, reduction, substitution, reclassification, merger, consolidation or reorganization. SECTION 2. Limit on Sales by Stockholders. (a) Each of the Stockholders agrees that in the 1991 calendar year, including that portion of the 1991 calendar year preceding the date hereof, he or she will not sell in transactions effected on national or foreign securities exchanges or in the over-the-counter market (hereinafter referred to as "Public Sales"), more than the greater of (i) 1% of the number of shares of Common Stock outstanding on the date of the Agreement, and (ii) the average weekly reported volume of trading in the Common Stock on the New York Stock Exchange during the four calendar week period ending on May 3, 1991. (b) Each of the Stockholders agrees that subsequent to the 1991 calendar year, he or she will not sell in Public Sales (i) in any calendar year, more than the greater of (x) 200,000 shares and (y) 10% of his or her aggregate holdings of Common Stock as of January 1 of such year (including, for the purpose of calculating such aggregate holdings, any Option Shares subject to an option that is exercisable as of such date ("Vested Option Shares")) and (ii) in any consecutive three month period, more than 250,000 shares of Common Stock. (c) Notwithstanding the foregoing, the executor or administrator of the estate of a Stockholder or a trustee of a trust includible in the gross estate of a deceased Stockholder for federal estate or state inheritance tax purposes may sell a number of shares of Common Stock not to exceed the aggregate amount of the federal estate and state inheritance taxes payable on account of the death of such Stockholder. SECTION 3. Right of First Refusal. (a) Subject to the limitations of Section 2 hereof, any Stockholder (a "Selling 3 Stockholder") who wishes to sell any shares of Common Stock shall promptly deliver to the Company a notice of intention to sell (a "Notice of Intention to Sell") setting forth the securities to be sold ("Subject Shares"), the proposed date of sale and, if the proposed sale is not by way of Public Sale, the proposed purchase price and terms of sale, which shall be for cash or obligations to pay cash. In the case of a proposed sale other than a Public Sale, upon receipt of the Notice of Intention to Sell the Company shall have the right to elect to purchase all (but not less than all) of the Subject Shares at the Offering Price (as hereinafter defined), and upon such other terms and conditions as are stated in the Notice of Intention to Sell. In the case of a proposed Public Sale, upon receipt of the Notice of Intention to Sell the Company shall have the right to elect to purchase all or any portion of the Subject Shares at the Offering Price. The Company's election hereunder shall be made (if at all) by notice in accordance with Section 6 hereof (a "Notice of Election") to the Selling Stockholder within five (5) business days after receipt by the Company of the Notice of Intention to Sell (the "Acceptance Period"). For the purpose of this paragraph 3(a), "Offering Price" shall mean (i) in the case of a sale other than by way of a Public Sale, the price stated in the Notice of Intention to Sell, and (ii) in the case of a Public Sale, the highest closing price of the Common Stock on any national securities exchange on which the Common Stock is listed on the day on which the Notice of Intention to Sell is given to the Company (or, if such day is not a trading day, on the trading day preceding such day), or, if the Common Stock is no longer listed on any national securities exchange, the closing price (or, in the absence of a closing price, the closing bid price) for the Common Stock in the over-the-counter market on such day. (b) If an effective acceptance is timely received with respect to all the Subject Shares, then the Selling Stockholder shall sell the Subject Shares to the Company at the Offering Price and upon the other terms specified in the Notice of Intention to Sell. If an effective acceptance shall not be received in respect of all the Subject Shares, then the Selling Stockholder (i) if the proposed sale is other than a Public Sale, may sell the Subject Shares to its proposed buyer(s) at a price not less than the Offering Price and on other terms and conditions not more favorable to such buyer(s) than those stated in the Notice of Intention to Sell, or (ii) if the proposed sale is a Public Sale, shall sell to the Company at the Offering Price the number of Subject Shares specified in the Notice of Election, in either case as soon as practicable following the receipt of the Notice of Election. Any Subject Shares which the Company shall not have elected to purchase in a timely Notice of Election may be sold by the Selling Stockholder in accordance with the method and upon the terms and conditions specified in the Notice of Intention to Sell, provided, however, that any Subject Shares that are not sold within ninety (90) days following the end of 4 the Acceptance Period shall once again become subject to the provisions of this Section 3. (c) No sale of Common Stock may be effected by a Stockholder except in accordance with paragraphs (a) and (b) of this Section 3. No transfer of Common Stock other than by way of sale may be effected by a Stockholder unless and until the transferee shall have executed and delivered to the Company and to each other Stockholder a written instrument whereby such transferee becomes a party to this Agreement, and agrees to comply with all of the terms and conditions of this Agreement with respect to all shares of Common Stock at any time owned by such transferee; provided, however, that any Stockholder may transfer by gift up to 200,000 shares of Common Stock in any consecutive twelve-month period free of the provisions of this sentence. (d) No transfer of Common Stock may be effected by a Stockholder, unless and until the transferring Stockholder shall have furnished to the Company, if requested, an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act of 1933, as amended. SECTION 4. Legend on Stock Certificates. Each certificate representing shares of Common Stock held by any Stockholder shall bear the following legend until such time as the shares represented thereby are no longer subject to the provisions hereof: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS AGREEMENT, DATED AS OF MAY 1, 1991, AMONG KING WORLD PRODUCTIONS, INC. (THE "CORPORATION") AND CERTAIN HOLDERS OF SHARES OF THE OUTSTANDING CAPITAL STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE CORPORATION. SECTION 5. Duration of Agreement. The rights and obligations of the parties under this Agreement shall terminate as to each Stockholder upon the earlier to occur of (i) the date on which the aggregate ownership of shares of Common Stock of such Stockholder is reduced below 200,000 shares (including Vested Option Shares) and (ii) the date on which the Common Stock ceases to be listed on a national securities exchange or quoted on the NASDAQ automated quotation system. SECTION 6. Representations and Warranties. Each Stockholder represents and warrants, severally and not jointly, to the Company and to the other Stockholders as follows: 5 (a) The execution, delivery and performance of this Agreement by such Stockholder will not violate any provision of law, any order of any court or other agency of government, or any provision of any indenture, agreement or other instrument to which such Stockholder or any of his or her properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of such Stockholder. (b) This Agreement has been duly executed and delivered by such Stockholder and constitutes the legal, valid and binding obligation of such Stockholder, enforceable in accordance with its terms. (c) As of the date hereof, the shares of Common Stock listed on Schedule I hereto opposite the name of such Stockholder constitute all the shares of Common Stock of the Company owned by such Stockholder, and the Option Shares listed on Schedule I hereto opposite the name of such Stockholder constitute all the shares of Common Stock which such Stockholder has a right to acquire; such shares of Common Stock are owned by such Stockholder free and clear of any security interest, pledge, lien, claim, encumbrance or interest whatsoever and may be voted by such Stockholder at his or her discretion without hindrance of any person, and such Stockholder does not have any right or obligation to acquire any additional shares of the capital stock of the Company. SECTION 7. Notices. Except as otherwise expressly provided herein, any and all notices, designations, consents, offers, acceptances or other communications provided for herein shall be given (i) in writing transmitted by telecopier, delivered personally or sent by a nationally recognized overnight courier service, or (ii) orally in person or by telephone, with written confirmation by one of the means described in (i) above, in either case, if to the Company, at: 1700 Broadway New York, New York 10019 Attention: Chief Operating Officer (telecopier number: (212) 247-7674) or 830 Morris Turnpike Short Hills, New Jersey 07078 Attention: Controller (telecopier number: (201) 376-7787) 6 or, if to any Stockholder, at Roger King: 1301 Spanish River Road Boca Raton, Florida 33432 Michael King: 3200 Retreat Court Malibu, California 90265 Richard King: 21 Compass Island Fort Lauderdale, Florida 33308 Diana King: Lee's Hill Road New Vernon, New Jersey 07920 Notice shall be deemed given, for all purposes, when received. SECTION 8. Benefits of Agreement. This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and permitted transferees. SECTION 9. Amendment of Agreement. This Agreement may be amended, modified or revoked in whole or in part, but only by a written instrument that specifically refers to this Agreement and expressly states that it constitutes an amendment, modification or revocation hereof, as the case may be, and only if such written instrument has been signed by each of the Stockholders and the Company. SECTION 10. Interpretation of Agreement. The provisions of this Agreement shall be applied and interpreted in a manner consistent with each other so as to carry out the purposes and intent of the parties hereto, but if for any reason any provision hereof is determined to be unenforceable or invalid, such provision or such part thereof as may be unenforceable or invalid shall be deemed severed from this Agreement and the remaining provisions carried out with the same force and effect as if the severed provision or part thereof had not been a part of this Agreement. SECTION 11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. SECTION 12. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes the Original Stockholders Agreement, which is hereby terminated, and all other previous agreements with respect to the subject matter hereof. 7 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Stockholders Agreement as of the date first above written. KING WORLD PRODUCTIONS, INC. By /s/ Stephen W. Palley ------------------------------------------ Executive Vice President [Corporate Seal] Attest: - ------------------------ Secretary /s/ Roger King -------------------------------------------- Roger King /s/ Michael King -------------------------------------------- Michael King /s/ Richard King -------------------------------------------- Richard King /s/ Diana King -------------------------------------------- Diana King 8 Schedule I
Name of Common Option Stockholder Stock Shares - ----------- --------- --------- Roger King 3,122,259 1,200,000 Michael King 3,347,259 1,200,000 Richard King 3,131,506 -- Diana King 3,147,259 --
EX-10.17 5 HARPO INC. AGREEMENT 1 EXHIBIT 10.17 [*Deleted pursuant to a request for confidential treatment.] HARPO, INC. [HARPO LOGO] 110 North Carperman Street Chicago, Illinois 60607 312.633.1030 Fax 312.633.1141 Jeffrey D. Jacobs President January 28, 1991 Mr. Steve Palley King World 1700 Broadway 35th Floor New York, NY 10019 Dear Steve: Pursuant to our conversations, may the following serve as a deal memorandum for the services of Oprah Winfrey and HARPO Productions for an extension of The Oprah Winfrey Show for the 1993/94 and 1994/95 television seasons, expiring on August 31, 1995. 1. HARPO will produce and Oprah Winfrey will host 200 episodes in each of the two additional television seasons. 2. The production costs for The Oprah Winfrey Show shall be as follows: 1990/1991 season ***** 1991/1992 season ***** 1992/1993 season ***** 1993/1994 season ***** 1994/1995 season ***** 3. King World to lend HARPO ***** interest free; loan repayable by HARPO ***** on ***** and ***** on *****. The loan will be secured by all revenues payable to HARPO at any time under the HARPO/King World agreement, as well as by the stock issuable under the options set forth in paragraph 5 below. 4. For the 1993/1994 and 1994/1995 broadcast season extensions, King World guarantees that HARPO will receive payments of gross revenues of not less than ***** in the aggregate for both seasons. At least ***** of such guarantee shall be payable not later than December 31, 1994 and the balance not later than December 31, 1995. 2 [*Deleted pursuant to a request for confidential treatment.] Mr. Steve Palley January 28, 1991 Page 2 5. King World to grant to HARPO options for one million shares of King World stock exercisable at the lowest closing price the week of January 28, 1991, and which will vest as follows: August 31, 1991 12.5% August 31, 1992 ***** August 31, 1993 ***** August 31, 1994 ***** August 31, 1995 ***** August 31, 1996 ***** a) HARPO has the right to pay the exercise price in cash or in King World stock if permitted by King World's stock option plan. b) The shares subject to the option will be publicly registered. HARPO and King World shall negotiate in good faith towards establishing volume limitations on sales by HARPO of such shares commensurate with the size of its holdings of King World stock. 6. ***** 7. The ***** for The Oprah Winfrey Show for the two additional seasons shall be split ***** between King World and HARPO *****. Payment provisions shall be the same as outlined in paragraph 16 of the July 29, 1988 amendment modifying paragraph 11 to the January 30, 1987 agreement. 3 [*Deleted pursuant to a request for confidential treatment.] Mr. Steve Palley January 28, 1991 Page 3 8. King World agrees that, except for its worldwide first run television distribution efforts during the extended term ending August 31, 1995 (August 31, 1997 for territories outside the United States), it cannot distribute or license for distribution the produced episodes of The Oprah Winfrey Show in any medium without the express written permission of HARPO. Such restrictions shall reciprocally apply to HARPO if HARPO acquires any of the episodes of The Oprah Winfrey Show produced by WLS-TV. If HARPO and King World mutually agree to distribute shows produced during the term after August 31, 1995 (August 31, 1997 for territories outside the United States), or in other media; then ***** shall be paid from ***** and *****. 9. HARPO, Inc. shall continue in its role as provider of services to the show in the affiliate relations, public and media relations, fan mail and on-air promotion services areas. 10. HARPO and King World agree to increase the on-air promotion and co-op budget in an amount to be negotiated in good faith to prepare for the additional talk show competition. 11. There will be no further syndicated HARPO specials following "Nine". 12. The references to the "Seventh Period" in paragraph 8(b) of the existing HARPO/King-World agreement shall be amended to refer to the 1994/1995 television season (with the exception to such paragraph being deleted). Developments 1. HARPO grants the right of first look/first negotiation to King World for the period ending August 31, 1995 In the area of syndicated first-run products produced by HARPO. If HARPO and King World fail to reach agreement on business terms following any such negotiation, then HARPO shall not enter into an agreement with any third party with respect to the rights in question unless King 4 [*Deleted pursuant to a request for confidential treatment.] Mr. Steve Palley January 28, 1991 Page 4 World has failed, within two business days following its receipt of notice of the material financial barriers of the offer made by such third party, to match such offer. Except as set forth in the first sentence of this paragraph, all retroactive and prospective obligations relating to project development and submissions and development fund recoupment and payment shall end, except that HARPO agrees that syndicated first run and home video development costs will come out of existing development fund money and that, if HARPO produces a syndicated first run or home video project with a third party, King World shall recoup the portion of such money allocable to develop or produce such project. 2. Provided that such rights are available, HARPO grants the worldwide off-network distribution rights (including home video rights for territories outside the United States when King World deems necessary) for up to four (4) HARPO-produced network television films designated by HARPO to be produced on or before December 1, 1995. King World shall pay distribution advances on a cross-collateralized basis among all such films distributed, payable by the completion of principal photography of ***** for the first television film, ***** for the second, ***** for the third, and ***** for the fourth. King World shall receive a ***** distribution fee for U.S. distribution and ***** for all other territories throughout the world. 3. HOME VIDEO King World and HARPO shall mutually agree on the exploitation and distribution of Oprah Winfrey Show videos, best of, anthologies and the like, using actual footage. King World and HARPO shall split said revenue *****. HARPO shall receive a reasonable production fee when shows are edited or re-produced and/or a talent fee when Oprah Winfrey appears in new on-camera footage. Other home video production will be subject to good faith negotiation. 5 Mr. Steve Palley January 28, 1991 Page 5 King World will promptly prepare and submit a document that will endeavor to combine all previous documents and agreements into one document that includes all the operative language of previous documents and incorporate the terms, conditions and amendments contained in this deal memorandum, while removing any ambiguities identified by HARPO that exist in the boilerplate. Except as expressly modified by this letter, the agreement between King World and HARPO, as amended to date, shall remain in full force and effect unless and until superseded by such combining document. If the foregoing meets with your approval, please sign a copy of this document and return it to me. Thank you for your cooperation in this matter. Very truly yours, HARPO, INC. /s/ Jeffrey D. Jacobs Jeffrey D. Jacobs President ACCEPTED AND APPROVED King World Productions, Inc. By: /s/ Jonathan Birkhahn I hereby confirm that all of the representations, warranties and agreements made by me in the acknowledgement, dated January 30, 1987, apply to the foregoing letter agreement. Dated: Jan. 29, 1991 /s/ Oprah Winfrey -------------------- ------------------------ Oprah Winfrey EX-10.28 6 AMENDMENT TO AGREEMENT KING WORLD & UNILEVER 1 [*Deleted pursuant to a request for confidential treatment] KING WORLD F.S.C. CORPORATION 830 Morris Turnpike EXHIBIT 10.28 Short Hills, New Jersey 07078 Dated as of September 1, 1996 Unilever NV c/o Mr. Pierre-Marie Guiollot President - Director General Initiative Media/E.C. Television Paris 131 rue de Bac 75007 Paris France Dear Pierre-Marie: 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, as of September 19, 1991, as of June 13, 1994 and as of July 11, 1995 (the "Original Agreement"). Unless otherwise specified herein, all defined terms herein shall have the meanings set forth in the Original Agreement. All Dollar amounts shall mean United States Dollars. The amendments set forth hereunder to the Original Agreement shall become effective on the commencement of the Third Extended 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, 1997 through December 31, 1997 (the "Third Extended Renewal Period"). B. The guaranteed minimum license fee during the Third Extended Renewal Period shall be equal to the greater of (i) [*****] and (ii) [*****] of the actual royalties payable by Unilever under the Original Agreement for calendar year 1996. C. With respect to telecasts of Wheel in France, the royalty payable to KW by Unilever (the "French Royalty") for each telecast of each episode of Wheel during the Third Extended Renewal Period shall be the applicable rate set forth on Schedule A attached hereto, which rate is [*****] of the base rate applicable for France for calendar year 1996; provided, however, that if Unilever presents evidence to KW that is sufficient (as determined by KW in its sole discretion) to demonstrate that the value to Unilever of the license for Wheel in France for the Third Extended Renewal Period, determined as set forth below, has not increased 2 [*Deleted pursuant to a request for confidential treatment] over the value to Unilever of the license for Wheel in France for calendar year 1996, then the Royalty Rate for Wheel in France for the Third Extended Renewal Period shall, in lieu of the applicable rate set forth on Schedule A, be adjusted to the applicable rate for calendar year 1996. If Unilever chooses to present evidence to KW regarding the value of the license, it shall present such evidence to KW by the end of each calendar quarter during the Third Extended Renewal Period, and, if KW determines that the value to Unilever of the license for such quarter has not increased, then the Royalty Rate for such quarter shall be adjusted to the applicable rate for calendar year 1996. In addition, prior to the commencement of the Third Extended Renewal Period, Unilever shall provide KW with detailed terms of the proposed license for Wheel in France for such Period; provided, however, that it is understood that if Unilever chooses not to present the terms of such license to KW, then the Royalty Rate for Wheel in France for the Third Extended Renewal Period shall be the applicable rate set forth on Schedule A. The French Royalty for Wheel shall not be subject to any other increases, adjustments or premiums. D. With respect to telecasts of Wheel and Jeopardy in Belgium, The Netherlands and Sweden, the royalty payable to KW by Unilever for each telecast of each episode of the applicable program in the applicable country during the Third Extended Renewal Period shall be the applicable rate set forth on Schedule A attached hereto, which rate is [*****] of the base rate applicable for such program in such country for calendar year 1996; provided, however, that if Unilever presents evidence to KW that is sufficient (as determined by KW in its sole discretion) to demonstrate that the value to Unilever of the license for the Third Extended Renewal Period for a particular program in a particular country, determined quarterly as set forth below, has not increased over the value to Unilever of the license for such program in such country for calendar year 1996, then the Royalty Rate for such program in such country for the Third Extended Renewal Period shall, in lieu of the applicable rate set forth on Schedule A, be adjusted to the applicable rate for calendar year 1996. If Unilever chooses to present evidence to KW regarding the value of the license, it shall present such evidence to KW by the end of each calendar quarter during the Third Extended Renewal Period, and, if KW determines that the value to Unilever of the license for such quarter has not increased, then the Royalty Rate for such quarter shall be adjusted to the applicable rate for calendar year 1996. In addition, prior to the commencement of the Third Extended Renewal Period, Unilever shall provide KW with detailed terms of the proposed license for Wheel in each of Belgium, The Netherlands and Sweden for such Period; provided, however, that it is understood that if Unilever chooses not to present the terms of any such license to KW, then the Royalty Rate for the applicable program in the applicable country for the Third Extended Renewal Period shall be the applicable rate set forth on Schedule A. The royalty payable to KW by Unilever with respect to telecasts of Wheel and Jeopardy in Belgium, The Netherlands and Sweden shall in any event be subject to the [*****] premiums for barter and number one position payable under the Original Agreement. E. With respect to telecasts of Wheel in Spain, the royalty payable to KW by Unilever shall be an amount equal to the greater of (i) [*****] of the license fees for Wheel payable by the applicable Spanish telecaster to Unilever and (ii) [*****] for each telecast of each episode, with no increases, adjustments or premiums. -2- 3 [* Deleted pursuant to a request for confidential treatment] F. With respect to telecasts of Wheel in Italy, the royalty payable to KW by Unilever shall be an amount equal to the greater of (i) [*****] of the license fees for Wheel payable by the applicable Italian telecaster to Unilever and (ii) [*****] for each telecast of each episode, with no increases, adjustments or premiums. G. (a) With respect to telecasts of Jeopardy in the German Speaking Territories: (a) if Unilever enters into a cash license agreement, the royalty payable to KW by Unilever shall be an amount equal to the greater of (i) [*****] of the license fees for Jeopardy payable by the applicable telecaster to Unilever and (ii) [*****] for each telecast of each episode; or (b) if Unilever enters into a barter license agreement, the royalty payable to KW by Unilever for each telecast of each episode shall be [*****]; provided that, if the value to Unilever of any such barter license exceeds [*****] for any episode, then Unilever shall also pay to KW the [*****] barter premium for that episode otherwise payable under the Original Agreement. Standard German advertising industry practices shall be used to determine the value of barter to Unilever. (b) The royalty with respect to telecasts of Jeopardy in the German Speaking Territories shall not be subject to any other increases, adjustments or premiums: provided, however, that in the event that Unilever's licensee receives any advertising revenue from Jeopardy telecasts in any of the German Speaking Territories (other than Germany), then, in addition to the applicable German Royalty, Unilever shall pay an additional royalty to KW calculated as follows: [*****]. Unilever shall provide KW with full and accurate information regarding any cash or barter license agreement for each of the German Speaking Territories. H. The per-episode license fee for repeat broadcasts in any country within the Territory shall be payable by Unilever in accordance with the following guidelines: (a) With respect to repeat telecasts of an episode during the summer, the otherwise applicable Royalty Rate shall be reduced proportionately with the reduction, if any, in the barter and/or cash revenue, as applicable, payable to Unilever with respect to such telecast (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. (b) With respect to repeat telecasts of an episode on the same day or prior to noon on the following day, other than repeat telecasts of Jeopardy in Germany and Wheel in Spain, the royalty for each such repeat telecast shall be [*****] of the otherwise applicable Royalty Rate. (c) With respect to repeat fees for Jeopardy in Germany, [*****] of each episode between midnight and noon of any day within [*****] of the original broadcast of such episode is included at the base license fee, at no additional cost. -3- 4 [* Deleted pursuant to a request for confidential treatment] (d) With respect to repeat fees for Wheel in Spain, [*****] of each episode will be permitted within [*****] the original broadcast of that episode. The license fees for such repeats are as follows: Time Period of Repeat License Fee --------------------- ----------- [*****]:00-[*****]:00 [*****] of original per-episode license fee [*****]:00-[*****]:00 [*****] of original per-episode license fee [*****]:00-[*****]:00 [*****] of original per-episode license fee I. Except with respect to telecasts of Wheel in Spain (the royalties for which are set forth in Paragraph E above), telecasts of Wheel in Italy (the royalties for which are set forth in Paragraph F above), and telecasts of Jeopardy in the German Speaking Territories (the royalties for which are set forth in Paragraph G above), with respect to all countries within Territory A, the Royalty Rate for each such country during the Third Extended Renewal Period shall be applicable rate set forth on Schedule A attached hereto, which rate, in the case of all countries other than Finland, Denmark and the United Kingdom, is [*****] of the base rate applicable for such country for calendar year 1996, in the case of Finland and Denmark is [*****] of the base rate applicable for such country for calendar year 1996 and in the case of the United Kingdom is (i) for episodes [*****] of the base rate applicable for the United Kingdom for calendar year 1996, (ii) for episodes [*****] of the base rate applicable for the United Kingdom for calendar year 1996, and (iii) for episodes [*****] and above, [*****] of the base rate applicable for the United Kingdom for calendar year 1996; provided, however, that each such Royalty Rate shall be subject to the adjustments to such Royalty Rate set forth in subparagraphs (i) and (ii) of Paragraph D of the September 19, 1991 amendment constituting part of the Original Agreement. J. Unilever shall, during the Third Extended Renewal Period and any further extension of the License Term, consult with KW on a meaningful basis on any and all sales presentations made by Unilever, and KW shall be informed by Unilever of any and all discussions regarding the launch or license renewal of either Series. Without limitation of the foregoing, in the event that Unilever licenses either Series in any country in the Territory to a new telecaster-licensee for a new production, or that the production entity of any existing production of either Series is proposed to be changed, then, Unilever shall cause KW to be afforded a right of first negotiation to produce or co-produce such production. In the event that KW does not itself produce or co-produce such production. KW shall have the right to approve the production entity for such production, which approval shall not be unreasonably withheld or delayed (any failure by KW to respond within ten (10) business days to a request by Unilever for such approval to be deemed approval of such request by KW). -4- 5 Except as modified hereunder, the Original Agreement shall remain in full force and effect. Very truly yours, KING WORLD F.S.C. CORPORATION By: /s/ Jonathan Birkhahn --------------------------- ACCEPTED AND AGREED TO: UNILEVER NV By: E.C. TELEVISION INC. By: /s/ Pierre-Marie Guiollot ---------------------------- -5- 6 [* Deleted pursuant to a request for confidential treatment] SCHEDULE A WHEEL OF FORTUNE and JEOPARDY! LICENSE FEE SCHEDULE FOR CALENDAR YEAR 1997 (ROYALTY PAYMENT IN US DOLLARS PER EPISODE PER TELECAST)
TERRITORIES WHEEL JEOPARDY - ----------- ----- -------- Belgium [*****] [*****] Denmark [*****] [*****] Finland [*****] [*****] France [*****] [*****] German Speaking Territories [*****] [*****] Greece [*****] [*****] Italy [*****] [*****] Netherlands [*****] [*****] Portugal [*****] [*****] Spain [*****] [*****] Sweden & Norway [*****] [*****] United Kingdom [*****] [*****]
TBD Territories - --------------- Andorra Iceland Ireland Lichtenstein Luxembourg Malta Monaco EX-10.29 7 RESTRUCTURING AGREEMENT 1 EXHIBIT 10.29 CONFORMED COPY RESTRUCTURING AGREEMENT dated as of April 30, 1992, among BUFFALO BROADCASTING CO. INC., a New York corporation (the "Company"), the holders of notes evidencing indebtedness of the Company listed on the signature pages hereof (each a "Holder" and collectively the "Holders") and BUFFALO MANAGEMENT ENTERPRISES CO. INC., a New York corporation (the "Manager"). Reference is made to the Trust Indenture dated as of December 1, 1988, as amended (the "Indenture"), from the Company to State Street Bank and Trust Company, National Association (as successor to The Connecticut Bank and Trust Company, National Association), as Trustee. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture. The Company and the Holders are entering into this Agreement in order to set forth their agreement regarding the terms and conditions of a capital restructuring of the Company and related matters (such capital restructuring, including the consummation of the transactions contemplated hereby, being referred to herein as the "Restructuring"). Accordingly, in consideration of the mutual agreements of the parties hereto and other good and valuable consideration, the parties hereto agree as follows: SECTION 1. Actions Prior to Closing. The Manager has been incorporated as a wholly-owned subsidiary of King World, with a certificate of incorporation and other organizational documentation substantially in the form of Exhibit A hereto. Prior to the Closing (as defined below), (a) the Company shall amend and restate its certificate of incorporation substantially in the form of Exhibit B hereto (the "Restated Certificate of Incorporation") and amend and restate its by-laws substantially in the form of Exhibit C hereto (the "Restated By-laws") and (b) the Company shall exercise its best efforts to obtain the approval of the FCC for the Restructuring. SECTION 2. Restructuring Transactions. Upon obtaining FCC approval for the Restructuring, the Company will promptly notify the Holders thereof and of the date (the "Closing Date") upon which the Restructuring shall be consummated. The consummation of the Restructuring, including the transactions contemplated by this Section and 2 2 the actions to be taken by the parties hereto in connection therewith, are referred to herein as the "Closing". Unless otherwise agreed, the Closing shall take place at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York. Subject to the terms and conditions of this Agreement, each of the parties hereto hereby agrees, on the Closing Date, to take the actions specified below to be taken by such party in connection with the Closing (it being understood that the Holders shall be responsible for causing the Trustee to take actions to be taken by it): (a) Amendment of Indenture. The Company and the Trustee shall execute and deliver an amendment to the Indenture (the "First Supplemental Indenture") substantially in the form attached as Exhibit D hereto, and the Holders shall instruct the Trustee to execute and deliver such amendment in accordance with the Indenture. The Holders of the Senior Secured Notes shall surrender such Notes for cancelation in exchange for, and the Company shall execute and deliver to such Holders, new Senior Secured Notes in the form contemplated by such amendment and in the same principal amount, and registered in the same names, as the Senior Secured Notes so surrendered. (b) Issuance of Preferred Stock. The Company shall issue shares of its Preferred Stock (such term, and other capitalized terms used in this Section 2(b) and not otherwise defined in the Indenture, being used as defined in the Restated Certificate of Incorporation) to the Holders and the Manager, as follows: (i) the Company shall issue to the Holders of the Senior Secured Notes all the authorized shares of its Series A Preferred Stock, such shares to be issued to such Holders pro rata in accordance with the respective outstanding principal amounts of their Senior Secured Notes; (ii) the Company shall issue to the Holders of the Series I Subordinated Notes and related Warrants all the authorized shares of its Series B Preferred Stock, such shares to be issued to such Holders pro rata in accordance with the respective outstanding principal amounts of their Series I Subordinated Notes; (iii) the Company shall issue to the Holders of the Series II Subordinated Notes and the related Warrants all the authorized shares of its Series C Preferred 3 3 Stock, such shares to be issued to such Holders pro rata in accordance with the respective outstanding principal amounts of their Series II Subordinated Notes; and (iv) the Company shall issue to the Manager all the authorized shares of its Series D Preferred Stock. The shares of Preferred Stock to be issued as provided above shall be represented by stock certificates (bearing appropriate legends regarding transfer restrictions and the special powers applicable to the Series D Preferred Stock) duly executed and delivered on behalf of the Company and registered in the name of the applicable Holder or the Manager, as the case may be. In consideration of the foregoing, (A) the Holders of the Senior Secured Notes shall exchange their Senior Secured Notes for new Senior Secured Notes as provided in Section 2(a) above, (B) the Holders of the Subordinated Secured Notes and the Warrants shall surrender the same for cancelation and (C) the Manager shall enter into the Management Agreement as provided in Section 2(g) below. (c) Voting Trust Agreement. The Manager shall enter into a voting trust agreement (the "Voting Trust Agreement") substantially in the form of Exhibit E hereto with the person identified therein as the voting trustee (the "Voting Trustee") and the Company. King World shall transfer to the Manager all outstanding shares of the Company's Common Stock, and the Manager shall transfer such shares to the Voting Trustee in accordance with the Voting Trust Agreement, in each case subject to the Initial Pledge Agreement. The Security Agent (as defined in the Initial Pledge Agreement) shall surrender to the Company the stock certificate evidencing such shares in exchange for a new stock certificate to be held by the Security Agent evidencing such shares (bearing appropriate legends, as described above with respect to the Preferred Stock) duly executed and delivered on behalf of the Company and registered in the name of the Voting Trustee. The Voting Trustee shall issue to the Manager a Voting Trust Certificate (as defined in the Voting Trust Agreement) representing such shares. (d) Restated Pledge Agreement. The Voting Trustee, the Manager and the Agent and Secured Party (the "Security Agent") under the Initial Pledge Agreement shall enter into an amended and restated pledge agreement (the "Assumption, Amendment and Restatement of Pledge Agreement") 4 4 substantially in the form of Exhibit F hereto, amending and restating the Initial Pledge Agreement. The Voting Trustee shall deliver to the Security Agent a stock power relating to the shares of the Company's Common Stock pledged under the Assumption, Amendment and Restatement of Pledge Agreement, duly executed by the Voting Trustee in blank. The Manager shall deliver to the Security Agent a stock power relating to the shares of the Company's Preferred Stock pledged under the Assumption, Amendment and Restatement of Pledge Agreement, duly executed by the Manager in blank. (e) Manager Pledge Agreement. King World and the Trustee, as security agent, shall enter into a pledge agreement (the "Manager Pledge Agreement") substantially in the form of Exhibit G hereto. King World shall deliver to the Trustee, as security agent under the Manager Pledge Agreement, a stock certificate evidencing all outstanding shares of capital stock of the Manager, together with a stock power relating thereto duly executed by King World in blank. (f) Shareholders Agreement. The Company, the Manager, King World, the Voting Trustee and the Holders shall enter into a shareholders agreement (the "Shareholders Agreement") substantially in the form of Exhibit H hereto. (g) Management Agreement. The Company and the Manager shall enter into a management agreement (the "Management Agreement") substantially in the form of Exhibit I hereto. (h) Other Security Documents. The Company and the Trustee, as security agent, shall enter into an amendment to the Security Agreement (the "First Amendment to Security Agreement") substantially in the form of Exhibit J hereto, providing (among other things) for the assignment by the Company to the Trustee, as security agent thereunder, of the rights of the Company under the Management Agreement as security for the Senior Secured Notes. The Company and the Trustee, as agent and secured party, shall enter into an amendment to the Subsidiary Stock Pledge Agreement (the "First Amendment to Subsidiary Pledge Agreement") substantially in the form of Exhibit K hereto. The Company and the Trustee, as mortgagee, shall enter into an amendment to the Initial Mortgage (the "First Amendment to Mortgage") substantially in the form of Exhibit L hereto. 5 5 (i) Prepayment of Senior Secured Notes. On the Closing Date, the Company shall make a prepayment of principal in respect of the Senior Secured Notes in an amount equal to the excess of (i) all available cash of the Company on the Closing Date, over (ii) the sum of the transaction costs (including the fees and expenses of counsel to all parties) to be paid by the Company in connection with the Restructuring plus $1,500,000. For purposes of the foregoing, the Company's available cash on the Closing Date and the transaction costs to be paid by the Company in connection with the Restructuring shall be calculated by the Company (which calculation shall be reasonably satisfactory to the Holders of the Senior Secured Notes) and certified to the Holders of the Senior Secured Notes at the Closing, and the amount of such transaction costs may be reasonably estimated by the Company to the extent that invoices have not been submitted. SECTION 3. Conditions. (a) The obligations of each party hereto to take the actions to be taken by it at the Closing as provided in Section 2 hereof shall be subject to the performance by the other parties hereto of the actions to be taken by such other parties in connection with the Restructuring, it being understood that the actions to be taken at the Closing pursuant to Section 2 hereof are mutually dependent and shall be taken substantially simultaneously. (b) In addition, the obligations of each Holder to take the actions to be taken by such Holder at the Closing as provided in Section 2 hereof shall be subject to the following conditions: (i) the representations and warranties of the Company contained herein shall be true and correct on the Closing Date with the same effect as though made on and as of the Closing Date; (ii) the Company shall have delivered to such Holder (A) certified copies of its Restated Certificate of Incorporation and Restated By-laws, (B) certified copies of resolutions evidencing the due authorization of all actions to be taken by the Company in connection with the Restructuring and (C) a certificate regarding the incumbency of all officers of the Company executing any agreement or instrument to be executed by the Company as provided in Section 2 hereof; 6 6 (iii) the Manager shall have delivered to such Holder (A) certified copies of its certificate of incorporation and other organizational documentation, which shall be substantially in the form of Exhibit A hereto (including the resolutions provided for therein authorizing the actions to be taken by the Manager in connection with the Restructuring) and (B) a certificate regarding the incumbency of all officers of the Manager executing any agreement or instrument to be executed by the Manager as provided in Section 2 hereof; (iv) the Company shall have delivered to such Holder evidence reasonably satisfactory to such Holder that any required consent or approval of the FCC to the Restructuring has been obtained and that such consent or approval has become final on or before the Closing Date (such consent, including consent duly granted by the FCC staff pursuant to delegated authority, shall be deemed to have become final if (i) it has not been reversed, stayed, enjoined or set aside, (ii) no timely request for stay, rehearing or reconsideration of, or appeal from, that consent is pending before the FCC or any court of competent jurisdiction and (iii) the time for filing any such request, petition or appeal, or for sua sponte review by the FCC, has expired); (v) such Holder shall have received from Cravath, Swaine & Moore, counsel to the Company, and Wilmer, Cutler & Pickering, special FCC counsel to the Company, their respective opinions, dated the Closing Date, substantially in the forms attached hereto as Exhibits M-1 and M-2, respectively; (vi) the Company shall have duly paid all expenses incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the Restructuring Documents (as hereinafter defined), including, but not limited to, all fees and expenses referred to in Section 6 hereof; (vii) such Holder shall have received written confirmation, in form and substance reasonably satisfactory to it, that the title insurance insuring the lien of the Mortgage remains in full force and effect after giving effect to the First Amendment to Mortgage; 7 7 (viii) a Private Placement Number relating to each series of Preferred Stock shall have been duly ordered from Standard & Poor's Corporation; and (ix) all documents and instruments to be executed and delivered in connection with the Restructuring, the forms and terms of which are not otherwise provided for herein, shall be reasonably satisfactory in form and substance to such Holder and its counsel. SECTION 4. Representations. (1) The Company hereby represents and warrants to each Holder as follows: (a) The Company: (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of New York; (ii) has all requisite power and authority and all necessary licenses and permits to carry on its business as now conducted and as presently proposed to be conducted; (iii) is duly licensed or qualified and is authorized to do business and is in good standing as a foreign corporation in each jurisdiction where the character of its properties or the nature of its activities makes such qualification or licensing necessary; and (iv) has no Subsidiaries except for Satellite Signals Unlimited, Inc., a New York corporation, and owns no equity interests in any other Person. (b) Since the date of the latest balance sheet provided by the Company, there has been no material change in the business, operations, or condition, financial or otherwise, of the Company as shown on the balance sheet as of such date or the income statement for the period then ended, except changes in the ordinary course of business, none of which, individually or in the aggregate, has been materially adverse. (c) The financial statements referred to in paragraph (b) above do not, nor does this Agreement, the First Supplemental Indenture or any other document or written statement furnished by the Company to the Holders in connection with the negotiation of the Restructuring, this 8 8 Agreement or the First Supplemental Indenture, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading. Except for generally prevailing economic and industry conditions, there is no fact peculiar to the Company (whether or not in connection with the Restructuring) which the Company has not disclosed to the Holders which materially adversely affects nor, so far as the Company can now foresee, will materially adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Company or the ability of the Company to enter into and perform this Agreement and the First Supplemental Indenture. (d) There are no proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or the Station in any court or before any governmental authority or arbitration board or tribunal which, either individually or in the aggregate, could reasonably be expected to materially and adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Company or the Station, or the ability of the Company to consummate the transactions or perform and carry out its obligations contemplated by this Agreement. The Company is not in default with respect to any order of any court or governmental authority or arbitration board or tribunal. (e)(i) The execution and delivery of this Agreement, the First Supplemental Indenture, the voting Trust Agreement, the Shareholders Agreement, the Management Agreement, the Assumption, Amendment and Restatement of Pledge Agreement, the Manager Pledge Agreement, the First Amendment to Security Agreement, the First Amendment to Mortgage and the First Amendment to Subsidiary Pledge Agreement (collectively referred to herein as the "Restructuring Documents"), in each case to which the Company is or is to be a party: (A) are within the corporate powers of the Company and have been duly authorized by proper corporate action on the part of the Company; and (B) will not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the Restated Certificate of Incorporation or By-laws of the Company 9 9 or any loan agreement, indenture or other material agreement to which the Company is a party or by which it may be bound on the Closing Date or result in the imposition of any Lien on any property of the Company (other than the Liens to be created pursuant to the Restructuring Documents as contemplated hereby). (ii) This Agreement is, and, on the Closing Date, each of the other Restructuring Documents to which the Company is to be a party shall be, a legal, valid and binding agreement and obligation of the Company, enforceable against the Company in accordance with its terms. (f) After giving effect to the Restructuring Documents and the transactions contemplated thereby, no Default or Event of Default has occurred and is continuing. After giving effect to each of the Restructuring Documents, the Company is not in default in the payment of principal or interest on any Indebtedness for borrowed money and is not in default under any instrument or instruments or agreements under and subject to which any Indebtedness for borrowed money has been issued and no event has occurred and is continuing under the provisions of any such instrument or agreement which with the lapse of time or the giving of notice, or both, would constitute an event of default thereunder. The Company is not in violation of any term of any agreement, charter instrument, regulation or other instrument to which it is a party or by which it may be bound which violation would have a material adverse effect on the business or the financial condition of the Company. (g) Except for the consent of the FCC, no approval, consent or withholding of objection on the part of any regulatory body, state, Federal or local, is necessary in connection with the execution and delivery by the Company of any Restructuring Document or compliance by the Company with any of the provisions thereof. (h) After giving effect to the Restructuring, the authorized capital stock of the Company shall be as set forth in the Restated Certificate of Incorporation. All outstanding shares of the Company's Common Stock are duly authorized, validly issued, fully paid and non-assessable and, after giving effect to the Restructuring, shall be owned by the Voting Trustee pursuant to the terms of the Voting Trust Agreement. After giving effect to the Restructuring, the Company does not have outstanding any warrants, options, convertible securities, or other rights for the purchase or acquisition of shares of its Common 10 10 Stock or Preferred Stock. The shares of Preferred Stock, which are on the Closing Date being issued to the Holders, have the voting powers, designations, preferences, special rights, qualifications, limitations and restrictions thereof set forth in the Restated Certificate of Incorporation, this Agreement and the laws of the State of New York. Upon the issuance and delivery of the Preferred Stock as contemplated in this Agreement, all shares of the Preferred Stock will be validly issued, fully paid and nonassessable shares and will not be the subject of any restrictive voting agreement, other than the Voting Trust Agreement and the Shareholders Agreement. (2) The Manager hereby represents and warrants to each Holder as follows: (a) The Manager: (1) is a corporation duly organized, validly existing and in good standing under the laws of the State of New York; (2) has all requisite power and authority and (after giving effect to the Restructuring) all necessary licenses and permits to carry on its business as now conducted and as presently proposed to be conducted; (3) is duly licensed or qualified and is authorized to do business and is in good standing as a foreign corporation in each jurisdiction where the character of its properties or the nature of its activities makes such qualification or licensing necessary; and (4) has no Subsidiaries. (b) There are no proceedings pending or, to the knowledge of the Manager, threatened against or affecting the Manager in any court or before any governmental authority or arbitration board or tribunal which, either individually or in the aggregate, could reasonably be expected to materially and adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Manager, or the ability of the Manager to consummate the transactions or perform and carry out its obligations contemplated by this Agreement. The Manager is not in default with respect to any order of any court or governmental authority or arbitration board or tribunal. 11 11 (c)(i) The execution and delivery of this Agreement and the other Restructuring Documents to which it is to be a party: (A) are within the corporate powers of the Manager and have been duly authorized by proper corporate action on the part of the Manager; and (B) will not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the certificate of incorporation or by-laws of the Manager or any loan agreement, indenture or other agreement to which the Manager will be a party or by which it may be bound on the Closing Date or result in the imposition of any Lien on any property of the Manager (other than the Liens to be created pursuant to the Restructuring Documents as contemplated hereby). (ii) This Agreement is, and, on the Closing Date, each of the other Restructuring Documents to which the Manager is to be a party shall be, a legal, valid and binding agreement and obligation of the Manager, enforceable against the Manager in accordance with its terms. (d) After giving effect to each of the Restructuring Documents and the transactions contemplated thereby, the Manager will not be in default in the payment of principal or interest on any Indebtedness for borrowed money and will not be in default under any instrument or instruments or agreements under and subject to which any Indebtedness for borrowed money has been issued and no event will have occurred and be continuing under the provisions of any such instrument or agreement which with the lapse of time or the giving of notice, or both, would constitute an event of default thereunder. The Manager is not in violation of any term of any agreement, charter instrument, regulation or other instrument to which it is a party or by which it may be bound which violation would have a material adverse effect on the business or the financial condition of the Manager. (e) Except for the consent of the FCC, no approval, consent or withholding of objection on the part of any regulatory body, state, Federal or local, is necessary 12 12 in connection with the execution and delivery by the Manager of any Restructuring Document or compliance by the Manager with any of the provisions thereof. (3) Each party to this Agreement to whom shares of Preferred Stock are to be issued hereby represents and warrants to the Company that it is an "accredited investor" as that term is defined and used in Regulation D promulgated under the Securities Act of 1933, and will acquire such Preferred Stock for its own account or a sub-account maintained by it, or both, for investment, but without prejudice to its right at all times to sell or otherwise dispose of such Preferred Stock in a transaction exempt from the registration requirements of such Securities Act and subject, however, to the condition that the disposition of its property shall at all times be in its control (subject to compliance with applicable Federal and state securities laws and the Shareholders Agreement). SECTION 5. Consent of Holders; Direction to Trustee. By the execution and delivery of this Agreement, each of the Holders hereby consents to (i) the Restructuring on the terms set forth in this Agreement, and (ii) the execution and delivery by the parties thereto, including without limitation State Street Bank and Trust Company, National Association ("State Street Bank"), as Trustee, Agent or Secured Party, of each of the Restructuring Documents. Further, by execution and delivery of this Agreement, each of the Holders authorizes and directs said State Street Bank, in its capacity as Trustee, Agent or Secured Party, to execute and deliver all such documents to which it is a party. State Street Bank shall be entitled to the benefits of, and may rely upon, this Section 5 as though it were a party to this Agreement. SECTION 6. Expenses. The Company agrees to pay the reasonable fees and expenses of Messrs. Chapman and Cutler, Messrs. Kaye, Scholer, Fierman, Hays & Handler, Messrs. Cravath, Swaine & Moore and Messrs. Wilmer, Cutler & Pickering, in connection with the Restructuring. SECTION 7. Miscellaneous. (a) This Agreement constitutes the entire understanding among the parties hereto and no modification, amendment or waiver of any of the provisions hereof shall be valid unless in writing and signed by the party against whom enforcement thereof is sought. 13 13 (b) Subject to paragraph (e) below, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their successors. (c) This Agreement shall be construed in accordance with and governed by the laws of the State of New York. (d) This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument. (e) This Agreement shall not be valid or effective for any purpose until counterparts hereof bearing the signatures of each of the parties hereto have been delivered to the Company. (f) The obligations of each Holder hereunder are several and not joint. (g) This Agreement constitutes a subscription agreement pursuant to which each Holder and the Manager, subject to the terms and conditions set forth herein, subscribes for the shares of Preferred Stock to be issued to it as provided in Section 2(b) hereof, and the Company hereby accepts such subscription. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. BUFFALO BROADCASTING CO., INC., by /s/ Jeffrey E. Epstein ---------------------------- Name: Title: President BUFFALO MANAGEMENT ENTERPRISES CO. INC., by /s/ Jeffrey E. Epstein ----------------------------- Name: Title: President 14 14 KING WORLD PRODUCTIONS, INC., by /s/ Jeffrey E. Epstein ----------------------------------- Name: Title: Chief Financial Officer CIG & CO. (as nominee for CIGNA Property and Casualty Insurance Company), by /s/ James R. Kuzemchak ----------------------------------- Name: Title: Partner CIG & CO. (as nominee for Connecticut General Life Insurance Company), by /s/ James R. Kuzemchak ----------------------------------- Name: Title: Partner INSURANCE COMPANY OF NORTH AMERICA, by /s/ James R. Kuzemchak ----------------------------------- Name: Title: Managing Director LIFE INSURANCE COMPANY OF NORTH AMERICA, by /s/ James R. Kuzemchak ----------------------------------- Name: Title: Managing Director 15 15 BARCLAYSAMERICAN/BUSINESS CREDIT, INC., by /s/ David Harrington ----------------------------------- Name: Title: Vice President CHRYSLER CAPITAL CORPORATION, by /s/ Joseph Skaferowsky ----------------------------------- Name: Title: Business Operations Manager OPRAH WINFREY, by /s/ Oprah Winfrey ----------------------------------- JEFFREY D. JACOBS, by /s/ Jeffrey D. Jacobs ----------------------------------- C. F. FINANCE CORPORATION, by /s/ G. John Krediet ----------------------------------- Name: Title: President EX-21.1 8 LIST OF SUBSIDIARIES OF THE REGISTRANT 1 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/RWS Inc., a New York corporation King World/LBS Inc., a New York corporation King World Merchandising, Inc., a Delaware corporation. Quickstead Inc., a California corporation. Topper Productions Inc., a California corporation EX-23.1 9 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incor- poration of our report dated October 24, 1996 included in this Form 10-K, into the Company's previously filed Registration Statements File No. 33-30694, No. 33-30695, No. 33-71696, No. 33-54691, No. 333-8969 and No. 333-11363. /s/ ARTHUR ANDERSEN LLP New York, New York November 13, 1996 EX-27 10 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-31-1996 SEP-01-1995 AUG-31-1996 344,766 0 64,574 4,196 0 635,869 13,384 (10,503) 854,141 116,256 0 0 0 507 737,378 854,141 0 663,426 0 397,494 74,347 0 0 231,610 81,610 150,000 0 0 0 150,000 3.98 3.98
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