-----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, RaeMmgSWHBMTfq3b2hfkU+ma9a/XOS8rkFf+nxj082x9LuKiq/RwE79plbSyNQPy H6vKdu65+zZObO2xGgDPaw== 0000950123-95-003401.txt : 19951120 0000950123-95-003401.hdr.sgml : 19951120 ACCESSION NUMBER: 0000950123-95-003401 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951116 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: 95593999 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, 1995 / / 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. / / The aggregate market value of the Common Stock of the registrant held by non-affiliates as of November 8, 1995 was approximately $1.0 billion. As of November 8, 1995, there were 36,872,613 outstanding shares of the registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE The registrant's definitive proxy statement for its 1996 annual meeting of stockholders (which is to be filed pursuant to Regulation 14A not later than December 29, 1995) 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 and Chief Executive 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 1995 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 47 consecutive sweeps periods, Jeopardy! has had the 4 second highest ratings among such shows for each of the last 40 consecutive sweeps periods and The Oprah Winfrey Show has had the third highest ratings among such shows for 28 of the last 36 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 $574.2 million in fiscal 1995 and its net income has increased from $9.8 million in fiscal 1985 to $117.3 million in fiscal 1995. 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 84% of King World's revenues for the fiscal year ended August 31, 1995. 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 as opposed to a change in accounting principle. 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. The results of operations set forth herein relating to the Company's 1995 fiscal year and the fourth quarter of fiscal 1994 are presented on the modified basis. See Note 1 of Notes to Consolidated Financial Statements. At present, King World distributes television programming primarily to network-owned-and-operated stations and network-affiliated stations. First-run syndicated programming distributed by the Company competes 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 2 5 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 two 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 Nielsen designated and special market areas are referred to below as the "Nielsen market areas". In the 1983-1984 broadcast season, King World introduced a syndicated version of Wheel of Fortune, which had premiered on daytime network television in 1975. For the 1994-1995 broadcast season, Wheel of Fortune was licensed to television stations in 201 Nielsen market areas in the United States, covering approximately 99% of total domestic television households, and for the current broadcast season has been licensed to television stations in 202 Nielsen market areas, 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 both the 1994-1995 broadcast season and the current broadcast season, Jeopardy! was licensed to television stations in 195 Nielsen market areas in the United States, covering approximately 98% 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 the 1994-1995 broadcast season, The Oprah Winfrey Show was licensed to television stations in 210 Nielsen market areas in the United States, covering more than 99% of total domestic television households, and for the current broadcast season has been licensed to stations in 207 Nielsen market areas, 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 3 6 York and has a correspondent bureau in Los Angeles to enhance the ability of the program to provide nationwide coverage. For the 1994-1995 broadcast season, Inside Edition was licensed to television stations in 163 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 158 Nielsen market areas, covering approximately 92% 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 1994-1995 broadcast season, American Journal was licensed to television stations in 127 Nielsen market areas, covering approximately 88% 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 86% 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 1994-1995 broadcast season, Rolonda was licensed to television stations in 88 Nielsen market areas, covering approximately 74% of total domestic television households. For the current broadcast season, Rolonda has been licensed to television stations in 72 Nielsen market areas, covering approximately 67% 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 1996-1997 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 24, 1995, the gross amount of license fees under such agreements approximated $1.8 billion, of which approximately $1.04 billion is payable to producers and others and is to be recognized as an expense. The recognition of such amounts in the consolidated financial statements of the Company in fiscal years subsequent to August 31, 1995 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 4 7 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. 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 guaranty 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. 5 8 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 producing 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 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 (formerly Merv Griffin Enterprises), the producer of Wheel of Fortune and Jeopardy!, provide that King World shall 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. In addition to Inside Edition, the Company is currently producing American Journal and Rolonda for first-run strip syndication. 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 6 9 to fund such capital investments out of its internal cash resources. License and Distribution Fees For certain first-run syndicated programming 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 programs and the amounts paid by national advertisers for advertising time retained by the Company and sold in connection with such programs. The Company also recoups certain 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 expenses are remitted to the producers of such series. In other cases, the Company's fees for distributing first-run syndicated programming produced by independent companies are based upon a negotiated percentage of the profits derived from the exploitation of the programming after recoupment of the production, advertising, promotion and other distribution fees and expenses of the programming. In such cases, the Company generally finances all or a substantial portion of the production costs and may commit itself to advancing the producer and/or talent fixed minimum amounts as advances against their participation fees, irrespective of the amount of license fees and other revenues that may actually be generated by the programming. In acquiring distribution rights for new programming from independent producers, King World has generally tried to limit its risk by not making major commitments to independent producers until it has obtained 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 and series 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 or series becomes obligated to pay the contracted license fee (which will often depend on the time period in which the program is 7 10 aired by that station) and provide advertising time, if applicable, upon the delivery by the Company of the programming 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 1995 fiscal year, approximately 14% of the Company's revenues were derived from license fees under contracts with television stations owned by Capital Cities/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 In the United States, there are approximately 240 Nielsen designated and special market areas containing commercial and/or public television stations. Sales to domestic television stations are made by the Company through a sales force that numbered 11 persons as of November 1, 1995. The Company's marketing strategy concentrates on a select number of programs that the Company considers to have good prospects for high audience ratings and expects will meet television stations' programming needs for specific time periods. Although the Company has been dependent upon the active 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, 1995, 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 1995-1996 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 been licensed to 8 11 stations covering approximately 99% and 98%, respectively, of the total domestic television households; Inside Edition has been licensed to stations covering approximately 92% of the total domestic television households; American Journal has been licensed to stations covering approximately 86% of the total domestic television households; and Rolonda has been licensed to stations covering approximately 67% 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 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, including, among others, Australia, Germany and Poland. 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 (includ- 9 12 ing Canada) accounted for approximately 8% of King World's revenues in fiscal 1995. 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 1995. 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 1% of the Company's revenues in fiscal 1995. 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 pro- 10 13 grams that it believes will have broad or enduring audience appeal in order to reduce its exposure to changes in viewer preferences. King World has also developed an experienced television syndication sales organization as well as strong programming acquisition, research and advertising and promotion departments. See "Marketing" above. Regulation of the Television Industry Prime-Time Access Rule/Financial Interest and Syndication Rule A rule promulgated by the Federal Communications Commission ("FCC") in the 1970's and known as the "prime-time access rule" prohibits (subject to certain significant exceptions) network-owned and network-affiliated television stations in the 50 largest television markets from broadcasting more than a total of three hours per day of programming supplied by or previously aired on a network during the prime-time period (defined under the rule as 7-11 p.m. Eastern and Pacific time and 6-10 p.m. Central and Mountain time). Due to the rule, network-owned and network-affiliated stations often acquired either one hour or one-half hour of program material for exhibition during the prime-time access period from independent television producers and syndicators such as the Company. On October 20, 1994, the FCC initiated proceedings looking toward reconsideration or modification of the prime-time access rule. On July 29, 1995, the FCC issued a decision concluding that the prime-time access rule no longer serves the public interest because the networks now lack 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 are 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 11 14 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 (as defined under the Rules) 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). The 1991 Decision retained stringent limitations on network involvement in first-run syndication activities. In April 1993, after further proceedings, the FCC voted to further modify the Rules (the "1993 Decision"), but to retain the 1991 restrictions on network involvement in first-run syndication activities. In the 1993 Decision, the FCC stated that it would conduct a review of the remaining Rules 18 months after the lifting of Consent Decrees (which in fact occurred in November 1993). On August 6, 1995, the FCC concluded its review of the remaining Rules, holding that the Rules, including the restrictions on network entry into first-run syndication activities, are no longer necessary. By the terms of the FCC order, the Rules expired in August 1995. As a result of the repeal of the prime-time access rule and the elimination of the remaining restrictions of the financial interest and syndication rules, the Company anticipates that it will have more difficulty licensing its programming to stations owned and operated by the three major television networks and 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. Other FCC Rules and Legislative Proposals Affecting the Television Industry FCC rules currently permit the common ownership of, in most circumstances, up to twelve television stations, subject (in the case of station groups) to certain limitations based on audience reach. The rules also prohibit the common ownership of stations if certain defined service contours overlap. In May 1992, the FCC initiated proceedings requesting comments on various proposals to relax the ownership restrictions placed on television broadcasters and networks. The FCC is considering proposals to increase the number of stations that a network or station group may control and/or to relax the audience reach limitations; it is also considering relaxing the limitations on 12 15 the number of stations with overlapping service contours that may be under common ownership. The United States Congress is also considering legislative proposals for repeal, or substantial relaxation, of these ownership limitations. King World is unable to predict the outcome of any of these proposals. King World believes that increases in the concentration of television station ownership, either by the networks or by broadcast groups, will tend to increase the power of the networks and the broadcast groups in the market for television programming and, consequently, could adversely affect King World's bargaining position vis-a-vis its customers. A federal district court has held unconstitutional, on First Amendment grounds, provisions of the 1992 Cable Act that require the FCC to prescribe rules and regulations establishing "reasonable limits on the number of cable subscribers" that a cable operator is authorized to reach through cable systems it owns or controls. The U.S. Justice Department has appealed this determination. However, the rationale for this decision (if ultimately affirmed) may implicate the constitutionality of other FCC structural regulations, including the rules that limit the number of television stations that a television network or station group may own. In June 1995, the FCC initiated two proceedings in which it is considering repeal or relaxation of certain of its regulations restricting or forbidding certain contractual arrangements between a network and its affiliates. Among the matters under examination are: a rule that forbids a network from entering into a contract with any affiliate that either enables the network to reserve any time on the affiliate's station before the network has committed to use the time, or requires the station to make time available for network programming in substitution for programming already scheduled by the affiliate ("Time Optioning Rule"); a rule that forbids a network from penalizing affiliated stations for rejecting network programming and substituting programming deemed by the station to be of greater local or national interest; and a rule that forbids stations from affiliating with any network organization that operates more than one network. Separately, the FCC is re-examining a rule that prohibits a network from directly or indirectly controlling the advertising rates charged by an affiliate in connection with the broadcast of non-network programming ("Station Rates Rule") and a rule that forbids a network from acting as a sales representative for affiliated stations for the sale of advertising time in connection with non-network programming ("Station Rep Rule"). The Company is unable to predict the outcome of these 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 13 16 Company anticipates that repeal or substantial relaxation of the Time Optioning Rule and the Station Rep Rule will tend to increase the 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 In October 1992, Congress enacted legislation imposing certain new regulations on the cable television industry. 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. Turner Broadcasting System and a number of cable television networks and cable systems have brought or joined in lawsuits challenging the constitutionality of the retransmission consent and "must carry" provisions of the legislation. In April 1993, a three-judge district court, by a divided vote, upheld the must-carry provisions of the 1992 Cable Act. In June 1994, the United States Supreme Court overturned that decision and remanded the case to the District Court for a trial. The burden of proving that the must-carry rules do not infringe upon cable operators' rights under the First Amendment has been placed upon those who seek to justify the rules. The must-carry rules will remain in effect during the pendency of the trial. In a lawsuit that is related to, but separate from, the litigation concerning must-carry, the retransmission consent provisions of the 1992 Cable Act were upheld by the United States Court of Appeals for the District of Columbia; this decision was not disturbed by the United States Supreme Court. Legislation governing the cable television industry, and FCC implementing regulations, impose significant limits on the ability of a local telephone company to enter into the business of creating and of distributing video programming within 14 17 its franchised telephone service area. In August 1993, a federal district court in Virginia held that these restrictions are unconstitutional on First Amendment grounds. The Department of Justice, which is responsible for the defense of this action, has appealed this determination. The United States Congress is considering legislative proposals to allow telephone companies to engage in the production, packaging and distribution of television programming over facilities owned by such companies, subject to certain regulatory restrictions. Also, in 1992, the FCC adopted regulations which permit telephone companies to make their common carrier facilities available for the carriage of video programming ("video dialtone"). As promulgated, the rules severely limited the ability of a local telephone company to acquire financial interests in video programming distributed over its own telephone facilities. In October of 1994, the FCC revised its video dialtone rules but retained the restrictions on a telephone company's acquisition of financial interests in programming transmitted over its own telephone facilities. Judicial appeals of this determination are pending. King World is unable to predict the outcome of any of these proposals or proceedings. However, to the extent that telephone companies are permitted to engage in the production and distribution of video programming (or to acquire financial interests in video programming distributed over telephone company facilities), the position of over-the-air television stations in the video marketplace could be substantially weakened, thus resulting in decreased audiences for King World programming aired on those stations. The FCC has initiated proceedings, and the United States Congress is considering legislative proposals, relating to the deployment of Advanced Television Technologies ("ATV"). These 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. Employees As of November 1, 1995, the Company employed approximately 430 persons. Of this number, approximately 300 are involved in the production of Inside Edition, American Journal and Rolonda. Twenty-four of the Company's employees are covered by collective bargaining agreements. 15 18 Item 2. DESCRIPTION OF PROPERTIES 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 creative services department, program development and direct response marketing operations and its western U.S. sales staff, and in Chicago, West Palm Beach 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 1994 First Quarter Ended November 30, 1993 . . . . . . . . . . 42 5/8 36 1/4 Second Quarter Ended February 28, 1994 . . . . . . . . . . 42 3/8 37 Third Quarter Ended May 31, 1994 . . . . . . . . . . . . . 42 33 5/8 Fourth Quarter Ended August 31, 1994 . . . . . . . . . . . 44 37 1/4 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
As of the close of business on October 24, 1995, there were 748 holders of record of the Company's Common Stock. The Company has not paid cash dividends since 1979. The Company has no present intention to pay dividends on its Common Stock. The Company requires substantial amounts 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". 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, 1995, which have been audited and reported upon by Arthur Andersen LLP, independent public accountants. The unaudited 1995 and 1994 pro forma data 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 1995(1) Pro forma(1) 1994(1) Pro forma(1) 1993 1992 1991 ---- --------- ---- --------- ---- ---- ---- (unaudited) (unaudited) (Dollars in thousands except per share data) Revenues . . . . . . . . $574,186 $575,732 $480,659 $541,390 $474,312 $503,174 $475,909 Income from opera- tions . . . . . . . . 162,416 162,736 127,578 148,151 150,950 152,481 154,084 Income before provi- sion for income taxes . . . . . . . . . 183,258 183,578 140,839 161,412 162,592 164,725 154,028 Net income . . . . . . . 117,312 117,490 88,300 101,196 101,936 94,880(2) 90,591(3) ======== ======== ======== ======== ======== ======= ======== Primary earnings per share . . . . . . . . . $3.14 $3.15 $2.33 $2.67 $2.65 $2.43(2) $2.31(3) ======== ======== ======== ======== ======== ======== ========
Balance Sheets: August 31, ------------------------------------------------------------------------------------------------ 1995 1994 1995(1) Pro forma(1) 1994(1) Pro forma(1) 1993 1992 1991 ---- --------- ---- --------- ---- ---- ---- (unaudited) (unaudited) (Dollars in thousands except per share data) Cash and invest- ments . . . . . . . . . $529,025 $529,025 $430,048 $430,048 $384,489 $355,612 $241,915 Working capital . . . . . 477,794 477,972 294,336 307,232 286,348 273,086 126,489(4) Total assets . . . . . . 686,786 688,332 569,562 630,293 535,546 498,240 500,834 Long-term debt . . . . . -- -- -- -- -- -- 97,238(4) Stockholders' equity . . . . . . . . 575,737 575,915 459,077 471,973 394,173 342,919 241,655 ======== ======== ======== ======== ======== ======== ========
18 21 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. 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. Net income and primary earnings per share include the effect of an extraordinary loss of approximately $2.6 million and $.07, respectively, in fiscal 1991, as a result of the write-off of King World's investment in Financial News Network, Inc. 4. Working capital in fiscal 1991 reflects the reduction of $97.2 million of long-term debt, which was reclassified as a current liability. Such long-term debt was collateralized by all of the assets of Buffalo and King World's stock in Buffalo. Such long-term debt was restructured in fiscal 1992, as a result of which Buffalo was deconsolidated from King World's financial statements. 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. 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 as opposed to a change in accounting principle. 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 several 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 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. 20 23 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. That portion of recognized revenue that is to be paid to the producers and owners of the licensed program material is accrued as the license fees are earned. See Note 1 of Notes to Consolidated Financial Statements. RESULTS OF OPERATIONS 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. 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 cancelled 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%, respec- 21 24 tively, 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 primarily include 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 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 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 22 25 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 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. 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. 23 26 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 1993-1994 and 1994-1995 broadcast seasons. 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. The Company believes that the impact of inflation on its operations has not been significant. COMPARISON OF FISCAL 1994 AND FISCAL 1993 Revenues Due to the adoption of the accounting change referred to above, the Company's revenues for the fiscal year ended August 31, 1994 increased by 1% over the prior year. Had revenues in the fourth quarter of fiscal 1994 been recognized on a basis comparable to prior periods, revenues for fiscal 1994 would have been approximately 14% higher than fiscal 1993, due primarily to the introduction of new shows produced and distributed by the Company (American Journal, which debuted in September 1993, Rolonda, which debuted in January 1994, and The Les Brown Show, which debuted in September 1993 and was cancelled in January 1994), increased cash license fees from The Oprah Winfrey Show and Inside Edition and, to a lesser extent, an increase in revenues derived from the sale of retained advertising time on Wheel of Fortune, Jeopardy! and Inside Edition. The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for approximately 41%, 17%, 15% and 9%, respectively, of the Company's revenues for fiscal 1994, compared to 39%, 24%, 20% and 8%, respectively, for the prior year. American Journal, Rolonda and The Les Brown Show accounted for approximately 5%, 2% and 2%, respectively, of the Company's revenues for fiscal 1994. The decreases in the relative contributions of Wheel of Fortune and Jeopardy! to the Company's fiscal 1994 revenues are primarily attributable to the impact of the accounting change, which had the effect of decreasing fourth quarter revenues derived from these two series. 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 36%, 21%, 18% and 8%, respectively, of the Company's revenues for fiscal 1994. American Journal, Rolonda and The Les 24 27 Brown Show would have accounted for approximately 4%, 2%, and 1%, respectively, of the Company's revenues for fiscal 1994. Producers' fees, programming and other direct operating costs Producers' fees, programming and other direct operating costs increased by approximately 5% for fiscal 1994 compared with fiscal 1993. Because the recognition of these costs and expenses 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 the increase in producers' fees, programming and other direct operating costs in fiscal 1994 to be substantially lower than it 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 20% in fiscal 1994 over the prior year, primarily as a result of production costs associated with American Journal, Rolonda and The Les Brown Show, and as a result of the higher level of revenues generated by The Oprah Winfrey Show, of which the producer was entitled to a greater percentage in the 1993-1994 broadcast season compared with the prior season. Selling, general and administrative expenses Selling, general and administrative expenses for fiscal 1994 increased by approximately 27% over the prior year. The increase is primarily attributable to advertising and promotion costs associated with American Journal, Rolonda and The Les Brown Show and higher promotion expenditures for The Oprah Winfrey Show. (During fiscal 1993, no new shows were introduced.) To a lesser extent, the increase is attributable to payment of the new show bonuses and reserves for the performance-based executive bonuses discussed above. As of August 31, 1994, the first measurement date for the performance-based executive bonuses, the applicable target prices of the Company's Common Stock for certain of such bonuses had not been met. However, as of such date, the Company provided for the probability that such target prices would be met in future measurement periods and that such bonuses would eventually be paid. Net income and primary earnings per share The Company's operating income for fiscal 1994 decreased by approximately 15% compared to the prior year, primarily due to the change in accounting practice adopted by the Company in the fourth quarter of fiscal 1994. But for such change, the Company's operating income would have been slightly less than 2% below the prior year. The accounting change further 25 28 resulted in a 13% decrease in net income, which, but for the accounting change, would have been approximately equal to that of the prior year, reflecting higher interest income earned on the Company's cash and investments due to a higher level of investments in fiscal 1994 and moderate increases in interest rates over the prior year, offset by a slight decrease in operating income. Primary earnings per share, which decreased by $.34 due to the accounting change, would have been slightly higher than fiscal 1993 had the prior method of revenue recognition been employed in the fourth quarter of fiscal 1994, due to 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 and production costs and advances from its operations. As King World has developed and produced its own programming for syndication, it has assumed a greater portion of the risk associated with the introduction of new series. The introductions of American Journal and The Les Brown Show at the commencement of the 1993-1994 broadcast season, and Rolonda, which premiered in January 1994, have necessitated the expenditure by King World of substantial amounts to fund development, production and promotion costs. The Company has funded and intends to continue to fund such costs out of its internal cash resources. 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. In connection with the extension for the 1993-1994 and 1994-1995 broadcast seasons of the commitment by Harpo, Inc. ("Harpo"), the producer of The Oprah Winfrey Show, to produce The Oprah Winfrey Show for those seasons, the Company made an interest-free loan to Harpo and became obligated to pay Harpo certain minimum amounts against its participation payments for such periods, irrespective of the amount of revenues generated by the series in such periods. Harpo's participation payments for the 1993-1994 broadcast season exceeded such minimum amounts 26 29 for the 1993-1994 and 1994-1995 broadcast seasons. The loan was repayable in two installments of $8,625,000 each, one of which was paid in July 1994 and the other of which was paid in June 1995. 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 guaranty 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, 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. The Company has paid Harpo a $60 million advance against its minimum participation payments for the 1995-1996 broadcast season, and, subsequent to August 31, 1995, will be obligated to pay advances of $65 million against its minimum participation payments for each of 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 broadcast and related properties in the entertainment field, to repurchase shares of its Common Stock and to fund development and production 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. 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. In the fiscal years ended August 31, 1994 and 1993, 753,100 and 765,200 shares, respectively, of Common Stock were repurchased in open market transactions, for aggregate consideration of approximately $28.9 million (or approximately $38.40 per share) and $24.8 million (or approximately $32.40 per share), respectively. In the first quarter of fiscal 1995, the Company repurchased an aggregate 27 30 40,000 shares for aggregate consideration of approximately $1.4 million (or approximately $36.00 per share), and in the second quarter of fiscal 1995, the Company repurchased an additional 140,500 shares for aggregate consideration of approximately $4.7 million (or approximately $33.25 per share). No repurchases were made by the Company in either the third or fourth quarters of fiscal 1995. As of October 24, 1995, there remained 301,200 shares available for repurchase under such program. The Company intends to continue to repurchase shares of Common Stock in the open market and in privately negotiated transactions if and when it deems it advantageous to do so. The Company has entered into agreements with television stations for the future distribution of program material in television seasons commencing with the 1995-1996 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 24, 1995, the gross amount of license fees under such agreements approximated $1.8 billion, of which approximately $1.04 billion is payable to producers and others and is to be recognized as an expense. The recognition of such amounts in the consolidated financial statements of the Company in fiscal years subsequent to August 31, 1995 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. On May 25, 1995, the Company announced 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, which closed in October 1995, the Company will realize a pre-tax gain of approximately $9 million in fiscal 1996. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the Financial Statements and Supplementary Data 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. 28 31 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 29 32 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Report of Independent Public Accountants . . . . . . . . 31 Consolidated Balance Sheets as of August 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 32 Consolidated Statements of Income for the years ended August 31, 1995, 1994 and 1993 . . . . . . . . . 34 Consolidated Statements of Stockholders' Equity for the years ended August 31, 1995, 1994 and 1993 . . . . 35 Consolidated Statements of Cash Flows for the years ended August 31, 1995, 1994 and 1993 . . . . . . . . . 36 Notes to Consolidated Financial Statements . . . . . . . 37
30 33 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, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended August 31, 1995. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1995, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Arthur Andersen LLP New York, New York October 24, 1995 31 34 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
August 31, ---------------------- 1995 1994 -------- -------- (Dollars in thousands) CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $446,896 $341,857 Accounts receivable (net of allowance for doubtful accounts of $4,196 and $4,412 in 1995 and 1994, respectively) . . . . . . . . . . . . . . . . . . . . . 51,356 41,231 Producer loans, advances and deferred costs . . . . . . . . . . . . . . . . . . . . . . . 90,085 21,314 Other current assets . . . . . . . . . . . . . . . . . . . . . 506 419 -------- -------- Total current assets . . . . . . . . . . . . . . . . . . . . 588,843 404,821 -------- -------- LONG-TERM INVESTMENTS, at cost, which approximates market . . . . . . . . . . . . . . . 82,129 88,191 -------- -------- FIXED ASSETS, at cost: Furniture and office equipment . . . . . . . . . . . . . . . . 7,558 7,028 Leasehold improvements . . . . . . . . . . . . . . . . . . . . 2,775 1,959 Film and videotape masters . . . . . . . . . . . . . . . . . . 2,622 1,644 -------- -------- 12,955 10,631 Less-accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . (9,703) (9,099) -------- -------- 3,252 1,532 -------- -------- PRODUCER ADVANCES AND OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . 12,562 75,018 -------- -------- $686,786 $569,562 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 32 35 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) LIABILITIES AND STOCKHOLDERS' EQUITY
August 31, ---------------------- 1995 1994 -------- -------- (Dollars in thousands) CURRENT LIABILITIES: Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,070 $ 14,780 Payable to producers and others . . . . . . . . . . . . . . . . 74,349 69,647 Income taxes payable: Current . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,986 23,506 Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . 1,644 2,552 -------- -------- Total current liabilities . . . . . . . . . . . . . . . . . 111,049 110,485 -------- -------- 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, 49,893,745 shares and 49,722,218 shares issued in 1995 and 1994, respectively . . . . . . . . . . . . . . . . . . . . . . . . 499 497 Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 87,628 82,171 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 782,651 665,339 Treasury stock, at cost; 13,141,394 and 12,960,894 shares in 1995 and 1994, respectively . . . . . . . . . . . . . . . . . . . . . (295,041) (288,930) -------- -------- 575,737 459,077 -------- -------- $686,786 $569,562 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 33 36 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Year Ended August 31, ------------------------------------------ 1995(1) 1994(1) 1993 -------- -------- -------- (Dollars in thousands except per share data) REVENUES . . . . . . . . . . . . . . . . . . . $574,186 $480,659 $474,312 -------- -------- -------- EXPENSES: Producers' fees, programming and other direct operating costs . . . . . . . 341,536 279,465 265,357 Selling, general and administrative expenses . . . . . . . . . . . . . . . . . 70,234 73,616 58,005 -------- -------- -------- 411,770 353,081 323,362 -------- -------- -------- Income from operations . . . . . . . . . . . 162,416 127,578 150,950 INTEREST AND DIVIDEND INCOME . . . . . . . . . 20,842 13,261 11,642 -------- -------- -------- Income before provision for income taxes . . . . . . . . . . . . . . . 183,258 140,839 162,592 PROVISION FOR INCOME TAXES . . . . . . . . . . 65,946 52,539 60,656 -------- -------- -------- Net income . . . . . . . . . . . . . . . . . $117,312 $ 88,300 $101,936 ======== ======== ======== PRIMARY EARNINGS PER SHARE . . . . . . . . . . $3.14 $2.33 $2.65 ======== ======== ========
- -------------------- (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. 34 37 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, 1992 . . . . . . . . . . . . . . . 47,373,692 $ 474 $ 29,396 $ 475,103 $ (162,054) Amortization of deferred compensation . . . . . . . . . . . . . . . -- -- 2,898 -- -- Exercise of stock options . . . . . . . . . . . . . . . . . . 2,131,671 21 44,353 -- -- Purchase of treasury stock . . . . . . . . . -- -- -- -- (97,954) Net income . . . . . . . . . . . . . . . . . -- -- -- 101,936 -- ---------- ---------- ---------- ---------- ---------- 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) ========== ========== ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 35 38 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended August 31, --------------------------------------- 1995 1994 1993 --------- --------- --------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 117,312 $ 88,300 $ 101,936 Items not affecting cash: Depreciation and amortization . . . . . . . . . . . . . . . . . 606 577 1,845 Non-current deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 2,001 Amortization of deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . -- -- 2,898 Change in assets and liabilities: Accounts receivable . . . . . . . . . . . . . . . . . . . . . (10,095) 60,298 (2,862) Producer loans, advances and deferred costs . . . . . . . . . . . . . . . . . . . . (6,271) (49,589) (1,092) Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . (3,710) 6,948 466 Payable to producers and others . . . . . . . . . . . . . . . . . . . . . . . . . . 4,702 (39,369) 1,733 Income taxes payable . . . . . . . . . . . . . . . . . . . . (428) 1,533 (16,147) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . (163) 824 867 --------- --------- --------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,953 69,522 91,645 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in investments . . . . . . . . . . . . . . . . 6,062 (3,921) (47,240) Additions to fixed assets . . . . . . . . . . . . . . . . . . . . . (2,324) (567) (1,688) --------- --------- --------- Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . 3,738 (4,488) (48,928) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,459 5,526 44,374 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . (6,111) (28,922) (97,954) --------- --------- --------- Net cash used in financing activities . . . . . . . . . . . . . . . (652) (23,396) (53,580) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . 105,039 41,638 (10,863) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . 341,857 300,219 311,082 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 446,896 $ 341,857 $ 300,219 ========= ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 36 39 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 as opposed to a change in accounting principle. 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 37 40 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) practice, with no impact on cash flow. 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 following pro forma financial information assumes the Company's prior revenue recognition practice was in effect for fiscal 1995 and the fourth quarter of fiscal 1994:
Year Ended August 31, ----------------------------------------------------- 1995 Pro forma 1994 Pro forma 1993 -------------- -------------- -------- (unaudited) (unaudited) (Dollars in thousands except per share data) Revenues . . . . . . . . . . . . . . . . $575,732 $541,390 $474,312 Income from operations . . . . . . . . . 162,736 148,151 150,950 Income before provision for income taxes . . . . . . . . . . . . . 183,578 161,412 162,592 Net income . . . . . . . . . . . . . . . 117,490 101,196 101,936 ======== ======== ======== Primary earnings per share . . . . . . . . . . . . . . . . . $3.15 $2.67 $2.65 ======== ======== ========
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. That portion of recognized revenue that is to be paid to the producers and owners of the licensed program material is accrued as the license fees are earned. 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 37%, 41% and 39% of revenues in fiscal 1995, 1994 and 1993, respectively. Wheel of Fortune accounted for approximately 21%, 17% and 24% of revenues in fiscal 1995, 1994 38 41 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) and 1993, respectively. Jeopardy! accounted for approximately 18%, 15% and 20% of revenues in fiscal 1995, 1994 and 1993, respectively. Inside Edition accounted for approximately 8%, 9% and 8% of revenues in fiscal 1995, 1994 and 1993, respectively. American Journal, which debuted in September 1993, and Rolonda, which debuted in January 1994, accounted for approximately 4% and 3%, respectively, of the Company's revenues for fiscal 1995 and 5% and 2%, respectively, of the Company's revenues for fiscal 1994. The Les Brown Show accounted for approximately 2% of the Company's revenues in fiscal 1994. 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 Les Brown Show would have accounted for approximately 1% of the Company's revenues in 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 guaranty 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, 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. The Company's agreements with Columbia TriStar Television (formerly Merv Griffin Enterprises) 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 39 42 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) 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!. Producers' fees, programming and other direct operating costs Producers' fees, programming and other direct operating costs primarily include 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 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. 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 $28,084,000, $29,824,000 and $22,783,000 in fiscal 1995, 1994 and 1993, 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 Cash equivalents are comprised principally of short-term municipal obligations, money market funds, money market preferred investments, commercial paper and United States Treasury and other agency obligations, and are carried at amortized cost, which approximates market. For purposes of the consolidated statements of cash flows, the Company considers its highly liquid short-term investments purchased with a maturity of generally three months or less to be cash equivalents. Producer loans, 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 40 43 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, 1995. 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 for the 1993-1994 and 1994-1995 broadcast seasons of the commitment by Harpo to produce The Oprah Winfrey Show for those seasons, the Company made an interest-free loan to Harpo and became obligated to pay Harpo certain minimum amounts against its participation payments for such periods, irrespective of the amount of revenues generated by the series in such periods. Harpo's participation fees for the 1993-1994 broadcast season exceeded such minimum amounts for the 1993-1994 and 1994-1995 broadcast seasons. The loan was repayable in two installments of $8,625,000 each, one of which was paid in July 1994 and the other of which was paid in June 1995. In connection with the extension of Harpo's commitment to produce The Oprah Winfrey Show for the 1995-1996 broadcast season, the Company paid Harpo an advance against its minimum participation payments for such season in the amount of $60 million. Based on the license agreements in place for such broadcast season, the revenues from the series will be sufficient to enable the Company to recoup such advance. Such advance will be recouped by the Company during fiscal 1996 and, accordingly, was reclassified to current assets as of August 31, 1995. Subsequent to August 31, 1995, the Company will be obligated to pay Harpo advances of $65 million against its minimum participation payments for each of the 1996-1997 and 1997-1998 broadcast seasons and believes, based on license agreements in place for such seasons, that the 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 recently 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 Trea- 41 44 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) sury and other agency obligations whose maturities are in excess of one year. 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. 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 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 $606,000, $527,000 and $1,437,000 in fiscal 1995, 1994 and 1993, respectively. Stockholders' equity Primary earnings per share has been computed using the weighted average number of common shares outstanding of 37,343,000, 37,862,000 and 38,408,000 for the fiscal years ended August 31, 1995, 1994 and 1993, 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. 42 45 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Industry segments and customers The Company operates in one business segment, television programming. The Company's major customers and principal facilities are located within the United States. In the 1995, 1994 and 1993 fiscal years, approximately 14%, 11% and 13%, respectively, of the Company's revenues were derived from license fees under contracts with a single broadcast group. (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 1995. The plan covers substantially all of the Company's employees. Contributions by the Company to the plan were approximately $650,000, $576,000 and $516,000 in fiscal 1995, 1994 and 1993, respectively. (3) Income taxes The components of the Company's provision for income taxes are summarized as follows:
Year Ended August 31, ----------------------------------- 1995 1994 1993 -------- -------- ------- (Dollars in thousands) Federal: Current . . . . . . . . . . . . . $ 56,741 $ 51,176 $47,480 Deferred . . . . . . . . . . . . (858) (7,867) 1,939 -------- -------- ------- 55,883 43,309 49,419 -------- -------- ------- State and local: Current . . . . . . . . . . . . . 10,113 9,777 11,091 Deferred . . . . . . . . . . . . (50) (547) 146 -------- -------- ------- 10,063 9,230 11,237 -------- -------- ------- Total . . . . . . . . . . . . $ 65,946 $ 52,539 $60,656 ======== ======== =======
The Company reports income tax data in accordance with SFAS No. 109, "Accounting for Income Taxes". The impact of the Company's adopting this Statement in fiscal 1993 on the consolidated financial statements was not significant. 43 46 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 of August 31, 1993, the tax effect of this temporary difference, which gives rise to a deferred tax liability, amounted to approximately $7.3 million. 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. 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. As part of the Revenue Reconciliation Act of 1993, the Federal tax rate on large corporations was increased from 34% to 35% effective retroactively as of January 1, 1993. For fiscal 1993, this resulted in a blended rate for the Company of 34.67%. Following is a reconciliation of the Company's provision for income taxes to the tax computed at the U.S. statutory rate:
Year Ended August 31, ------------------------------------ 1995 1994 1993 -------- -------- -------- (Dollars in thousands) Tax at U.S. statutory rate . . . . . . $ 64,140 $ 49,293 $ 56,371 State tax provision, net of Federal benefit . . . . . . . . . 6,541 6,000 7,341 Tax-exempt interest and dividend income . . . . . . . . . . (4,799) (3,367) (2,723) Other, net . . . . . . . . . . . . . . 64 613 (333) -------- -------- -------- $ 65,946 $ 52,539 $ 60,656 ======== ======== ========
Income taxes paid approximated $64.6 million, $49.8 million and $62.1 million in fiscal 1995, 1994 and 1993, respectively. 44 47 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) Commitments and contingencies License fees The Company has entered into agreements with television stations for the future distribution of program material in television seasons commencing with the 1995-1996 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 24, 1995, the gross amount of license fees under such agreements approximated $1.8 billion, of which approximately $1.04 billion is payable to producers and others and is to be recognized as an expense. The recognition of such amounts in the consolidated financial statements of the Company in fiscal years subsequent to August 31, 1995 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. Operating leases Rent expense under operating leases covering office facilities, production studios and equipment amounted to $2,548,000, $2,599,000 and $2,908,000 for fiscal 1995, 1994 and 1993, 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, 1995 were as follows:
Year Ending August 31, ---------------------- (Dollars in thousands) 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,120 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,287 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 968 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 933 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 932
Employment and production agreements As of August 31, 1995, the Company had entered into employment agreements and agreements with independent contractors relating to programming being or to be produced by King World 45 48 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) Commitments and contingencies (continued) which provide for aggregate minimum annual compensation as follows:
Year Ending August 31, ---------------------- (Dollars in thousands) 1996 . . . . . . . . . . . . . . . . . . . . . . . $15,067 1997 . . . . . . . . . . . . . . . . . . . . . . . 2,081 1998 . . . . . . . . . . . . . . . . . . . . . . . 570 1999 . . . . . . . . . . . . . . . . . . . . . . . 120 2000 . . . . . . . . . . . . . . . . . . . . . . . --
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 preestablished 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. The employment agreements for Roger King and Michael King, the Company's Chairman of the Board and President and Chief Executive Officer, respectively, terminated on August 31, 1995, but each such officer has, pending the negotiation and execution of an agreement extending the term of his respective employment agreement, continued in the employ of the Company on substantially the same terms and conditions in effect during the last year of such employment agreement (excluding stock price-based bonuses). 46 49 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 1994, the Company adopted the Amended and Restated Stock Option and Restricted Stock Purchase Plan (the "Option/Stock Plan"), which amended and restated the Company's 1989 Stock Option and Restricted Stock Purchase Plan and reserved 1,500,000 additional shares for grants and awards thereunder. The Option/Stock Plan provides for grants of incentive stock options ("ISOs") and non-qualified stock options, as well as awards of shares of restricted stock, subject to certain conditions. The Option/Stock Plan is currently administered by 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 Option/Stock Plan to purchase shares of Common Stock for a price per share that may be more than, equal to or less than the fair 47 50 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, 1994 and 1995, and options forfeited and exercised during fiscal 1994 and 1995, together with the option prices:
Option/Stock Plan --------------------------------- Non-Qualified Executive Fiscal 1994 ISOs Options Plan ----------- --------------------------------- --------- Granted . . . . . . . . . . . . . . . . 2,500 1,111,250 -- Prices ranging: From . . . . . . . . . . . . . . . $ 37.25 $ 25.38 -- To . . . . . . . . . . . . . . . . $ 37.25 $ 41.38 -- Forfeited . . . . . . . . . . . . . . . 2,250 259,400 -- Exercised . . . . . . . . . . . . . . . 9,000 207,855 -- Prices ranging: From . . . . . . . . . . . . . . . $ 15.75 $ 10.17 -- To . . . . . . . . . . . . . . . . $ 33.63 $ 34.50 -- Outstanding at August 31, 1994 . . . . . . . . . . . 101,800 1,863,729 510,000 Prices ranging: From . . . . . . . . . . . . . . . $ 7.05 $ .01 $ .01 To . . . . . . . . . . . . . . . . $ 37.25 $ 41.38 $ 15.75 Exercisable at August 31, 1994 . . . . . . . . . . . 42,237 527,892 510,000 Prices ranging: From . . . . . . . . . . . . . . . $ 7.05 $ .01 $ .01 To . . . . . . . . . . . . . . . . $ 24.17 $ 36.38 $ 15.75 Available for grant at August 31, 1994 . . . . . . . . . . . 968,098 -- ------------------------------- --------
48 51 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 -- ------------------------------- --------
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, all of which were fully vested as of August 31, 1994. Options to purchase one million such shares bear exercise prices of $25.50 per share and 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. For non-qualified options, the difference between the market price of the Common Stock at the date of grant and the exercise price is treated as deferred compensation and amortized to expense generally over a five year vesting period. Deferred 49 52 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) Stock plans (continued) compensation is classified as a component of paid-in capital and is recorded at the date of the grant of the option(s). The amount of deferred compensation arising from such grants and included in paid-in capital at August 31, 1995 and 1994 was not significant. Compensation expense relating to stock option grants of $2,898,000 was recorded in fiscal 1993. The Company realizes a tax benefit in respect of non-qualified stock options based on the difference between the market price of the Common Stock and the exercise price 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 $1,758,000, $1,162,000 and $12,765,000 in fiscal 1995, 1994 and 1993, respectively. (6) Stock repurchases On December 18, 1992, the Company purchased an aggregate 2,252,000 shares of Common Stock from certain executive officers of the Company at a price per share of $32.50, the closing price of the Common Stock on the New York Stock Exchange on December 17, 1992. The aggregate consideration paid by the Company to such officers (net of the proceeds from option exercises) was approximately $47.1 million. Such purchases were financed out of the Company's available cash and liquid investments. 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. In the fiscal years ended August 31, 1994 and 1993, 753,100 and 765,200 shares, respectively, of Common Stock were repurchased in open market transactions, for aggregate consideration of approximately $28.9 million (or approximately $38.40 per share) and $24.8 million (or approximately $32.40 per share), respectively. In the first quarter of fiscal 1995, the Company repurchased an aggregate 40,000 shares for aggregate consideration of approximately $1.4 million (or approximately $36.00 per share), and in the second quarter of fiscal 1995, the Company repurchased an additional 140,500 shares for aggregate consideration of approximately $4.7 million (or approximately $33.25 per share). No repurchases were made by the Company in either the third or fourth quarters of fiscal 1995. As of October 24, 1995, there remained 301,200 shares available for repurchase under such program. The Company 50 53 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (6) Stock repurchases (continued) intends to continue to repurchase shares of Common Stock in the open market and in privately negotiated transactions if and when it deems it advantageous to do so. (7) Quarterly financial summaries (unaudited)
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 . . . . . . . . $0.75 $0.80 $0.78 $0.81 $3.14 ======== ======== ======== ======== ========
1st 2nd 3rd 4th Fiscal Quarter Quarter Quarter Quarter Year -------- -------- -------- -------- -------- (Dollars in thousands except per share data) Fiscal 1995 Pro forma: - --------- Revenues . . . . . . . . . $202,429 $145,069 $117,326 $110,908 $575,732 Revenues less direct costs . . . . . . 83,803 57,943 48,415 43,177 233,338 Income before provision for income taxes . . . . . . . . . . 66,216 45,330 36,258 35,774 183,578 Net income . . . . . . . . 41,385 29,646 23,563 22,896 117,490 Primary earnings per share . . . . . . . . $1.11 $0.80 $0.63 $0.61 $3.15 ======== ======== ======== ======== ========
1st 2nd 3rd 4th Fiscal 4th Quarter Fiscal Year Quarter Quarter Quarter Quarter Year Pro forma Pro forma ------- ------- ------- ------- -------- ----------- ----------- (Dollars in thousands except per share data) Fiscal 1994: - ----------- Revenues . . . . . . . . . $193,045 $137,138 $111,861 $38,615 $480,659 $99,346 $541,390 Revenues less direct costs . . . . . . 81,202 55,841 46,197 17,954 201,194 39,230 222,470 Income before provision for income taxes . . . . . . . . . . 61,463 39,237 31,331 8,808 140,839 29,381 161,412 Net income . . . . . . . . 38,722 24,287 19,511 5,780 88,300 18,676 101,196 Primary earnings per share . . . . . . . . $1.02 $.64 $.52 $.15 $2.33 $.50 $2.67 ======== ======== ======== ======== ======== ======= ========
Commencing with the fourth quarter of fiscal 1994, the Company's results of operations employ a modified revenue recognition practice pursuant to which license fees from first-run syndicated television properties are recognized at the commence- 51 54 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7) Quarterly financial summaries (unaudited) (continued) ment 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. The results of operations for the first three quarters of fiscal 1994 employ the 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). The unaudited 1994 and 1995 pro forma data are presented for comparison purposes only and represent the results of operations assuming the Company's prior revenue recognition practice had been in effect in fiscal 1995 and the fourth quarter of fiscal 1994. See Note 1. The one-time impact of adopting the accounting 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. 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. (8) Buffalo Broadcasting Co. Inc. On May 25, 1995, the Company announced 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, which closed in October 1995, the Company will realize a pre-tax gain of approximately $9 million in fiscal 1996. The Company acquired Buffalo Broadcasting Co. Inc. ("Buffalo") in December 1988 in a highly leveraged transaction. In April 1992, the Company and Buffalo's lenders entered into an agreement providing for a financial restructuring of Buffalo effective August 4, 1992. As a result of such restructuring, Buffalo ceased to be a consolidated subsidiary of King World. The Company's investment in Buffalo subsequent to the restructuring was carried at cost. 52 55 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 1996 annual meeting of stockholders, which is to be filed pursuant to Regulation 14A not later than December 29, 1995. PART IV Item 10. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K (a)(1 and 2) Financial Statements. See Index to Consolidated Financial Statements which appears on page 30 of this Annual Report. (3) Exhibits: Exhibit Number Description - ------ ----------- 3.1. Registrant's Restated Certificate of Incorporation (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 (incorporated 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 (incorporated by reference to Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993). 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 53 56 Registrant's Registration Statement No. 2-93987). 10.3.* Distribution Agreement dated December 15, 1982, between Califon Productions, Inc. and the Registrant, with amendment dated July 8, 1983 (incorporated by reference to Exhibit 10.7 to the Registrant's Registration Statement No. 2-93987). 10.4.* Amendment, dated April 23, 1990, to the Distribution Agreement dated December 15, 1982, between Califon Productions, Inc. and the Registrant. 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 or consulting agreements between the Registrant and the individuals named below (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):
Name of Employee or Consultant Date of Agreement ---------------- ----------------- Roger King. . . . . . . . . . . . . . . December 23, 1993 Michael King. . . . . . . . . . . . . . December 23, 1993 Stephen W. Palley . . . . . . . . . . . December 23, 1993 Steven Hirsch . . . . . . . . . . . . . December 23, 1993
10.7. 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). 10.8. Amended and Restated Stock Option and Restricted Stock Purchase Plan of the Registrant (incorporated by reference to the - -------------------- * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. 54 57 Registrant's Registration Statement No. 33-54691). 10.9. 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). 10.10. Agreement dated as of May 1, 1991, among the Registrant and the stockholders named therein (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated May 6, 1991). 10.11. 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). 10.12.* 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) 10.13.* Amendment dated as of October 15, 1989 to the Agreement dated January 30, 1987 between the Registrant and Harpo, Inc. 10.14.* Agreement dated as of January 28, 1991 between the Registrant and Harpo, Inc. (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1991). 10.15.* Agreement dated as of March 17, 1994 between the Registrant and Harpo, Inc. (incorporated by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K/A dated May 18, 1994). - -------------------- * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. 55 58 10.16.** Agreement dated as of October 6, 1995 between the Registrant and Harpo, Inc. 10.17. 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). 10.18. 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). 10.19. Form of Stock Option Agreement between the registrant and Oprah Winfrey. 10.20. Form of Stock Option Agreement between the registrant and Jeffrey D. Jacobs. 10.21.* Agreement dated as of June 2, 1988 between King World F.S.C. Corporation and Unilever N.V. and amendment thereto dated as of June 13, 1989 (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10- K for the fiscal year ended August 31, 1994). 10.22.* 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). 10.23* 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). 10.24** 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. 56 59 10.25. 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 (incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K dated August 18, 1992). 10.26. Letter Agreements dated December 18, 1992 between 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. - ------------------- * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. ** Certain information in this exhibit is deleted pursuant to a request to the Securities and Exchange Commission for confidential treatment. (b) Reports on Form 8-K filed during the last quarter of the fiscal year ended August 31, 1995: None. 57 60 For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) 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) and No. 33-54691 (filed on July 22, 1994): 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. 58 61 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 16, 1995 KING WORLD PRODUCTIONS, INC. By /s/ Stephen W. Palley -------------------------------------- Stephen W. Palley Executive Vice President and 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 16, 1995 Director (principal /s/ Michael King executive officer) - ---------------------- Michael King /s/ Roger King Director November 16, 1995 - ---------------------- Roger King /s/ Stephen W. Palley Director November 16, 1995 - ---------------------- Stephen W. Palley /s/ Diana King Director November 16, 1995 - ---------------------- Diana King /s/ Richard King Director November 16, 1995 - ---------------------- Richard King /s/ Ronald S. Konecky Director November 16, 1995 - ---------------------- Ronald S. Konecky /s/ James M. Rupp Director November 16, 1995 - ---------------------- James M. Rupp
59 62
/s/ Joel Chaseman Director November 16, 1995 - ---------------------- Joel Chaseman /s/ Steven A. LoCascio Interim Chief Financial November 16, 1995 - ---------------------- Officer (principal Steven A. LoCascio financial officer) /s/ Steven A. LoCascio Vice President and November 16, 1995 - ---------------------- Controller Steven A. LoCascio (principal accounting officer)
60 63 EXHIBIT INDEX
Exhibit No. Description Page - ------- ----------- ---- 3.1. Registrant's Restated Certificate of Incorporation (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 (incorporated 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 (incorporated by reference to Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993) 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 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 Distribution Agreement dated December 15, 1982, between Califon Productions, Inc. and the Registrant.
- ---------------------------------- * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. 64
Exhibit No. Description Page - ------- ----------- ---- 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 or consulting agreements between the Registrant and the individuals named below (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):
Name of Employee or Consultant Date of Agreement ---------------- ----------------- Roger King. . . . . . . December 23, 1993 Michael King. . . . . . December 23, 1993 Stephen W. Palley . . . December 23, 1993 Steven Hirsch . . . . . December 23, 1993
10.7. 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). 10.8. 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). 10.9. 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). 10.10. Agreement dated as of May 1, 1991, among the Registrant and the stockholders named therein (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated May 6, 1991).
- ------------------------------------- * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. 2 65
Exhibit No. Description Page - ------- ----------- ---- 10.11. 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). 10.12.* 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) 10.13.* Amendment dated as of October 15, 1989 to the Agreement dated January 30, 1987 between the Registrant and Harpo, Inc. 10.14.* Agreement dated as of January 28, 1991 between the Registrant and Harpo, Inc. (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1991). 10.15.* Agreement dated as of March 17, 1994 between the Registrant and Harpo, Inc. (incorporated by reference to 8-K/A dated May 18, 1994). 10.16.** Agreement dated as of October 6, 1995 between the Registrant and Harpo, Inc. 10.17. 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). 10.18. 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).
- --------------------------------- * Certain information in this exhibit is deleted pursuant to an order of the Securities and Exchange Commission granting confidential treatment. 3 66
Exhibit No. Description Page - ------- ----------- ---- 10.19. Form of Stock Option Agreement between the registrant and Oprah Winfrey. 10.20. Form of Stock Option Agreement between the registrant and Jeffrey D. Jacobs. 10.21.* Agreement dated as of June 2, 1988 between King World F.S.C. Corporation and Unilever N.V. and amendment thereto dated as of June 13, 1989 (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994). 10.22.* 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). 10.23* 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). 10.24** 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. 10.25. 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 (incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K dated August 18, 1992). 10.26. Letter Agreements dated December 18, 1992 between 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).
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Exhibit No. Description Page - ------- ----------- ---- 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. 5 EX-10.4 2 AMENDMENT TO DISTRIBUTION AGREEMENT 1 EXHIBIT 10.04 [KINGWORLD LOGO] This agreement, made as of this April 23, 1990, between Califon Productions, Inc. (herein referred to as the "Owner") and King World Productions, Inc. (herein referred to as the "Distributor") with respect to the television game show program produced for initial telecast in syndication entitled "WHEEL OF FORTUNE" (herein referred to as the "Program"). Reference is hereby made to the agreement between the Owner and Distributor dated as of December 15, 1982, as amended (herein referred to as the "Distribution Agreement"). For good and valuable consideration, the parties have agreed to amend and modify the Distribution Agreement as hereinbelow set forth. In all other respects all of the provisions of the Distribution Agreement shall continue in full force and effect as therein set forth. *** *** IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the day and year first above written. KING WORLD PRODUCTIONS, INC. CALIFON PRODUCTIONS, INC. By: /s/ Stephen W. Palley By: /s/ Robert Murphy ______________________________ ____________________________ Chief Operating Officer President EX-10.13 3 AMENDMENT TO AGREEMENT BET. REGISTRANT AND HARPO 1 EXHIBIT 10.13 [KINGWORLD LETTERHEAD] As of October 15, 1989 Harpo, Inc. 110 N. Carpenter Chicago, Illinois 60607 Gentlemen: This letter, when accepted by you, shall constitute an amendment to the agreement, dated as of January 20, 1987, as amended on July 29, 1988, between you and us (the "Agreement"). Unless otherwise expressly defined in this letter, each capitalized term herein shall have the meaning ascribed to such term in the Agreement. 1. Paragraph 13 of the Agreement is amended by adding the following provisions thereto as subparagraph (d) thereof: "(d) Notwithstanding any other provisions of paragraph 13 of this Agreement, ******************** to which Harpo is entitled with respect to the Episodes of the Series produced during the Fourth Period ("Fourth Period Episodes") shall be payable to Harpo as follows: (i) ******************** ************************ (ii) ******************* ************************ 2 (iii) ******************** ******************** (iv) (A) The payments contemplated by this subparagraph (d) shall be in lieu of the payments **** that would otherwise have been required to be made by KW with respect to all periods through and including the period ending August 31, 1990, attributable to the Fourth Period Episodes. Any amount of ***************** attributable to Fourth Period Episodes to which Harpo remains entitled in excess of the payments referred to in clauses (d)(i), (ii) and (iii) above shall be payable to Harpo in accordance with paragraph 13(a) of this Agreement. (B) Notwithstanding any other provision of this subparagraph (d), either KW or Harpo may, if it so elects, terminate KW's prospective obligations to make the payments required under clauses (i), (ii) or (iii) above, effective on not less than 30 days' prior written notice. In such event, KW shall, notwithstanding the provisions of the first sentence of clause (iv)(A) above, resume payments of Harpo's *************** following the effective date of such termination in accordance with paragraph 13(a) of this Agreement, subject to KW's rights of recoupment as set forth in this Agreement. (v) In the event of Winfrey's death, or if there occurs an incapacity or refusal or other failure by Winfrey to perform in the Series that entitles KW to invoke its rights under paragraph 18 of this Agreement, *************** ********* Alternatively, if, after giving effect to the accounting of with respect to Fourth ******************* 2 3 Period Episodes rendered by KW with respect to all periods through and including the period ending August 31, 1990, KW has recouped less than the entire amount of *********** to the extent so unrecouped, shall be payable by Harpo within ten (10) days following Harpo's receipt of such accounting." 2. Harpo hereby confirms that the provisions of paragraph 11 of the Agreement fully apply to the payments contemplated by this amendment. 3. Except as modified hereby, the Agreement remains in full force and effect. Very truly yours, KING WORLD PRODUCTIONS, INC. By: /s/ Stephen W. Palley ------------------------ Stephen W. Palley Chief Operating Officer ACCEPTED AND AGREED: HARPO, INC. By: /s/ Oprah Winfrey ------------------------ Oprah Winfrey, President 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: 11/8/89 /s/ Oprah Winfrey --------------------------- -------------------------------- 3 EX-10.16 4 AGREEMENT BETWEEN REGISTRANT AND HARPO 1 EXHIBIT 10.16 HARPO, INC. [HARPO LOGO] 110 North Carpenter Street Chicago, Illinois 60607 312.633.1000 Fax 312.633.1111 Oprah Winfrey Chairman of the Board October 6, 1995 Mr. Steve Palley King World Productions, Inc. 1700 Broadway New York, NY 10019 Dear Steve: As you know, today is the mutually agreed upon extended deadline for HARPO's decision to elect to continue to produce and host The Oprah Winfrey Show for the upcoming television season. I am pleased to inform you that, after great personal deliberation, I have decided to continue to produce and host The Oprah Winfrey Show for Year 11 (the 1996/97 television season) and Year 12 (the 1997/98 television season). ******************************************************************************* ******************************************************************************* This option exercise for Years 11 and 12 involves certain issues pursuant to Paragraphs 4 and 5(b) of the March 17, 1994 amendment which you should discuss with Jeff Jacobs at your earliest convenience. The price of King World for the purpose of options to which we are entitled pursuant to this exercise shall be at the closing market price of King World as of October 6, 1995. Very truly yours, ACCEPTED AND APPROVED HARPO, INC. King World Productions, Inc. By: /s/ Oprah Winfrey By: /s/ Stephen W. Palley -------------------- --------------------- Oprah Winfrey Steve Palley, VP & COO Date: 10/6/95 Date: 10/6/95 ----------- ----------- cc: Jeffrey D. Jacobs EX-10.19 5 FORM OF STOCK OPTION AGREEMENT REGISTRANT/WINFREY 1 EXHIBIT 10.19 THE TRANSFER OF THE OPTION EVIDENCED BY THIS AGREEMENT IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN. THE OPTION HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARDS THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THE OPTION NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THE OPTION HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS OPTION, AND THE OPTION SHARES ISSUABLE UPON EXERCISE IN ACCORDANCE WITH THE TERMS CONTAINED HEREIN, ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A LIEN IN FAVOR OF KING WORLD PRODUCTIONS, INC. (THE "COMPANY") TO SECURE CERTAIN OBLIGA- TIONS OF HARPO, INC. ("HARPO") TO THE COMPANY PURSUANT TO AN AGREEMENT DATED AS OF JANUARY 30, 1987, AS AMENDED THROUGH _______________ BETWEEN THE COMPANY AND HARPO. KING WORLD PRODUCTIONS, INC. 1700 Broadway New York, New York 10019 Ms. Oprah Winfrey As of _______________ c/o Harpo, Inc. 110 North Carpenter Street Chicago, Illinois 60607 Dear Ms. Winfrey: This is the stock option agreement referred to in the amendment (the "Harpo Amendment") dated as of March 17, 1994, to the Agreement dated as of January 30, 1987 (the "Original Agreement"), as previously amended to the date hereof (the Original Agreement, as amended to the date hereof and by the Harpo Amendment, being herein called the "Harpo Agreement") between Harpo, Inc. ("Harpo") and the undersigned (the "Company"). As partial consideration for Harpo to enter into the Harpo Amendment, and as an inducement for you to render services with respect to the production of the Show (as such term is defined in the Harpo Amendment), the Company hereby grants to you an option (the "Option") to purchase __________________ thousand (___,000) shares of the Company's Common Stock, $.01 par value ("Common Stock"; such shares of Common Stock, as the same may be adjusted as described in Section 6 below, being herein referred to as the "Option Shares"). The terms and conditions of the Option are set out below. 2 The Option will be treated as and shall constitute a "non-qualified stock option" for Federal income tax purposes. The Option will not constitute or be treated either by you or by the Company as an "incentive stock option" as defined under Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). 1. Date of Grant. The Option is granted to you on the date hereof. 2. Termination of the Option. Your right to exercise the Option (and to purchase the Option Shares) shall expire and terminate in all events on (i) _______________, or (ii) such earlier date provided in Section 7 below. 3. Option Price. The purchase price to be paid upon the exercise of the Option (the "Option Price") will be $_____ per Option Share. 4. Vesting Provisions -- Entitlement to Exercise the Option and Purchase Option Shares.The Option shall be exercisable by you, in whole or part, at any time prior to expiration and termination pursuant to Section 2 above. 5. Exercise of Option. (a) To exercise the Option, you must deliver a completed copy of the attached Option Exercise Form to the address indicated on the Form, specifying the number of Option Shares being purchased as a result of such exercise, together with payment of the full Option Price for the Option Shares being purchased. (b) Payment of the Option Price must be made in cash. (c) In the event of any exercise of the Option, a certificate or certificates representing the Option Shares so purchased, registered in your name, shall be delivered to you within a reasonable time. (d) You agree that Option Shares shall be held by you for investment and may not be resold unless registered under the Securities Act of 1933, as amended (the "Securities Act"), or an exemption from registration is available, and that the Option Shares will bear a legend referring to such limitation, to the restrictions on transfer of the Option Shares referred to elsewhere in this Agreement and to any security interests encumbering the Option Shares. 6. Adjustments. If the total outstanding shares of Common Stock of the Company shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corpora- 2 3 tion through reorganization, merger or consolidation, recapitalization, stock split, combination or exchange of shares or declaration of any dividends payable in stock or other corporate transaction, then the number of Option Shares subject to the unexercised portion of the Option (and the Option Price per share) shall be appropriately adjusted (to the nearest possible full share) by the Board of Directors of the Company. 7. Default under the Harpo Agreement. (a) In the event that you die, or the term of the Harpo Agreement terminates for any other reason except a material breach by Harpo, then the Option may be exercised by you or your estate only within the nine (9) month period following your death or the termination of the term of the Harpo Agreement. (b) In the event that the term of the Harpo Agreement terminates by reason of a material breach thereof by Harpo, then your right to exercise the Option as to any and all Option Shares that have not theretofore been issued shall terminate simultaneously with the termination of such term. (c) In the event that the Company exercises its rights pursuant to paragraph 17 or 18 of the Original Agreement and the term of the Harpo Agreement is suspended, then your right to exercise the Option pursuant to Section 4 hereof shall be sus- pended during the period that the term of the Harpo Agreement is suspended. (d) Notwithstanding any provision contained herein to the contrary, in no event may the Option be exercised to any extent after _______________. 8. Representations. (a) You represent and warrant that you are acquiring the Option and the Option Shares for investment purposes only and not with a view towards the public distribution thereof. (b) You understand that neither the Options nor the Option Shares have been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements thereof pursuant to Section 4(2) of the Securities Act. (c) You represent and warrant that (i) you have the financial ability to bear the economic risk of investment in the Option and the Option Shares and (ii) you, together with the financial advisers who have assisted you in acquiring the Option, have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Option and the Option Shares and have had suffi- 3 4 cient opportunity to obtain, and have obtained, all information regarding the Company as you have deemed relevant in order to evaluate the merits and risks of such investment. (d) You represent and warrant that you understand the Federal, state and local income tax consequences of the granting of the Option to you, the exercise of the Option and purchase of Option Shares, and the subsequent sale or other disposition of any Option Shares. 9. Covenants of the Company. The Company will at all times reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of issue upon the exercise of the Option, such number of shares of Common Stock as shall then be issuable upon the exercise of the Option. The Company covenants that all Option Shares, when issued in accordance with the terms hereof, shall be duly and validly issued, fully paid and nonassessable. The Company will take all such action as may be necessary to assure that all Option Shares may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock of the Company may then be listed. The Company will not take any action which results in any adjustment of the Option Price if the total number of Option Shares issued and issuable after such action would exceed the total number of shares of Common Stock then authorized by the Company's Certificate of Incorporation. The Company has not granted and will not grant any right of first refusal with respect to the Option Shares, and there are no preemptive rights associated with such shares. 10. Required Registration. (a) At any time you may by notice to the Company (the "Registration Notice") request that it register for sale under the Securities Act, in the manner specified in your Registration Notice, all or any portion of the Option Shares and any other shares of Common Stock that have been issued or are issuable to you and/or Jeffrey D. Jacobs upon the exercise of stock options granted or to be granted pursuant to the Harpo Agreement, including any prior or subsequent amendment to that agreement (collectively, together with the Option Shares, the "Agreement Shares"), and that have been purchased, or will be purchased on or before the effective date of such registration statement, or, provided that deferral of the date of purchase to the closing date of sale of such shares in the manner contemplated by the proposed registration will not disqualify the offering from registration on Form S-3 (or any successor to such form), then on such closing date pursuant to such exercise. (b) Promptly following receipt of your Registration Notice, the Company shall commence to prepare and, unless it 4 5 elects to purchase all of the Agreement Shares specified in such Registration Notice through the procedures specified in Section 10(f) below, shall file a registration statement under the Securities Act for the sale of the Agreement Shares specified in such Registration Notice (less any shares to be purchased pursuant to Section 10(f) below) and shall use its best efforts to cause such registration statement to become effective and remain in effect for the Required Effective Period for public sale in accordance with the method of disposition specified by you, provided, however, that the Company shall not be required to file a "shelf" registration except on Form S-3 (or any successor to such Form). The "Required Effective Period" shall be the greater of (A) the 180-day period following the effective date of such registration statement; and (B) unless the proposed plan of distribution involves a firm commitment underwritten public offering, the period required to dispose of all of the shares included in such registration statement assuming the sale in each three-month period of the maximum number of shares permitted to be sold under the limitations of Section 14 of this Agreement. If such method of disposition shall be an underwritten public offering, the Company may designate the managing underwriter of such offering. If, in the good faith opinion of the Board of Directors of the Company, registration would materially interfere with pre-existing contractual obligations to which the Company is then subject or financing arrangements or other material transactions involving the Company or any of its subsidiaries are pending at the time the Registration Notice is given, or are under active consideration by the Company, the Company may elect to defer registration for such period of time, in no event in excess of one hundred twenty (120) days from the date on which the Registration Notice was given, as in the good faith judgment of the Board of Directors of the Company is necessary in order to preclude adverse impact upon such financing or other transaction. In the event of such deferral, if the shares to be registered are to be acquired on exercise of this Option following the date of such Registration Notice, the date on which the Option was exercised shall, for purposes of Section 2 and 7(d) hereof, be deemed to be the date on which the Registration Notice was given. The obligation of the Company under this Section 10 shall be deemed satisfied only when a registration statement covering all Agreement Shares specified in your Registration Notice and not purchased by the Company pursuant to Section 10(f) below shall have become effective and, (X) if the method of disposition you specify is a firm commitment underwritten public offering, all such Agreement Shares shall have been sold pursuant thereto; or (Y) if it is not such an offering, has remained in effect for the Required Effective Period specified herein or until the distribution of the Agreement Shares covered thereby is completed, whichever is shorter. 5 6 (c) The Company shall not be obligated to register Agreement Shares pursuant to this Section 10 (i) more than once; (ii) in any period of twelve consecutive months in which any Agreement Shares have been registered pursuant to the exercise of a demand registration right granted pursuant to any other agreement between the Company and you or Jeffrey D. Jacobs; or (iii) at any time when the registration, offering or sale of Option Shares would violate any law, rule or regulation. For purposes of the foregoing sentence, (X) a registration under this Option or the corresponding provisions of the option agreement issued to Jeffrey D. Jacobs on the date hereof shall be aggregated (so that a registration initiated by you pursuant to this Section 10 shall decrease by one the number of demand registrations available to each of you and Jeffrey D. Jacobs pursuant said corresponding provisions, and vice versa) and (Y) any request for registration given by Jeffrey D. Jacobs pursuant the corresponding provisions of the option agreement issued to him shall, as a condition to its effectiveness, be confirmed in writing by you (provided that you are then competent to give such confirmation). If any Agreement Shares included in a registration statement filed pursuant to this Section 10 were issued upon the exercise of any other stock option granted to you or Jeffrey D. Jacobs pursuant to the Harpo Agreement, the number of "demand" registration rights granted to you and to Jeffrey D. Jacobs pursuant to such stock option or stock options shall each be reduced by one. (d) The Company shall be entitled to include in any registration statement referred to in this Section 10, for sale in accordance with the method of disposition you specify, shares of Common Stock to be sold by the Company for its own account or by other security holders of the Company for their accounts, or both, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Agreement Shares to be sold. (e) The procedures for registration of Agreement Shares under this Section 10 shall conform to the following: (1) Obligations of the Company. If and whenever the Company is required by the provisions of Section 10 or 11 to effect the registration of Agreement Shares, the Company will: (i) Prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the Required Effective Period or until the securities covered by such registration statement 6 7 have been sold in accordance with the method of disposition specified by you in your Registration Notice, whichever is shorter, and prepare and file with the Commission such amendments or supplements to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective for the Required Effective Period or until the shares covered by such registration statement have been sold in accordance with such method of disposition, whichever is shorter; (ii) If the offering is to be underwritten in whole or in part, enter into a written underwriting agreement in form and substance reasonably satisfactory to the managing underwriter or underwriters of the public offering of such securities; (iii) Furnish to the shareholders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities; (iv) Use its best efforts to register or qualify the shares covered by such registration statement under such state securities or blue sky laws of such jurisdictions as you may reasonably request within 20 days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified; (v) Notify you promptly after it shall receive notice thereof, of the time when such registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed; (vi) Notify you promptly of any request by the Commission for the amending or supplementing of such registration statement or prospectus or for additional information; (vii) Prepare and file with the Commission, promptly upon your request, any amendments or supplements to such registration statement or prospectus which, in the opinion of your counsel, are required under the Securities Act or the rules and regulations thereunder in connection with the distribution of the Option Shares by you; (viii) Prepare and promptly file with the Commission and promptly notify you of the filing of such 7 8 amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such shares is required to be delivered under the Securities Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; (ix) In case you or any underwriters for you is required to deliver a prospectus at a time when the prospectus then in effect may no longer be used under the Securities Act, prepare promptly upon request such amendment or amendments to such registration statement and such prospectus or prospectus as may be necessary to permit compliance with the requirements of the Securities Act; (x) Advise you, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement; or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; (xi) If such registration is by way of an underwritten public offering and if you so request, use its best efforts to cause counsel and the independent certified public accountants to the Company to furnish on the effective date of the registration statement and at the closing provided for in the underwriting agreement, (i) an opinion dated such date, of the counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to you, covering such matters with respect to the registration statement and prospectus and each amendment or supplement thereto, proceedings under state and federal securities laws and other matters relating to the Company, the securities included in the registration statement and the offer and sale of such securities as are customarily the subject of opinions of issuer's counsel provided to underwriters at or about the time such registration statement becomes effective and the sale is closed; and (ii) a letter dated each such date, from the independent certified public accountants of the Company, addressed to the underwriters, if any, and to you, stating that they are independent certified public accountants within the meaning of the Securities Act and providing such assurances as are customarily provided by the independent certified public accountants for an issuer in connection with the registration of securities, including information as to the period ending not more than five business days prior to the 8 9 date of such letter with respect to the registration statement and prospectus, as the underwriters or you may reasonably request. If the furnishing of such opinion and/or letter causes Company to incur any additional cost or expense, you agree to reimburse Company therefor at the closing provided for in the underwriting agreement. (2) Obligations of Option Holder. It shall be a condition to the inclusion of any Agreement Shares in a registration statement that the holder thereof shall cooperate in the execution and filing of the registration statement and any necessary state securities law filings, and if the offering is to be underwritten, that such holder become a party to the underwriting agreement and, if so requested by the managing underwriter, execute and deliver Powers of Attorney and/or custodial agreements or other suitable arrangements as the managing underwriter deems reasonably necessary in order to insure orderly sale of the shares. As among the holders of shares included in any registration statement, decisions respecting the terms and conditions of any underwriting agreements shall be made by the party initiating the registration; so that in the case of a registration required pursuant to a request by you under Section 10, determinations with respect to the underwriting agreement shall be made by you, in your reasonable judgment, after appropriate consultation with the Company and with other persons whose shares are to be included in such offering; and if you are party to a registration statement pursuant to Section 11, you shall not have the right to make such determinations, but shall be informed of them, and consulted with respect thereto. (f) Within ten (10) business days following receipt of a Registration Notice, the Company may elect, by written notice to you, to purchase all or any portion of the Agreement Shares specified by you in such Registration Notice for a purchase price equal to the closing price of the Common Stock on the date such notice was given. In the event that the Company elects to purchase any of the Agreement Shares specified by you in such notice, the delivery of such Agreement Shares against payment therefor shall take place on the fifth business day following receipt by you of the Company's election notice. In the event that the Company does not elect to purchase all of the Agreement Shares specified by you in such Registration Notice, the Company shall register under the Securities Act all the Agreement Shares not so purchased, in the manner provided above. 11. Incidental Registration. If the Company at any time (other than pursuant to Section 10 hereof) proposes to register any of its Common Stock under the Securities Act for sale to the 9 10 public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4 or S-8 or another form not available for registering the Option Shares for sale to the public), it will give written notice at such time to you of its intention to do so. Upon your written request, given within 30 days after receipt of any such notice by the Company, to register any of the Option Shares that you have purchased, or will purchase on or before the effective date of such registration statement, pursuant to the exercise of the Option (which request shall state the intended method of disposition thereof), the Company will use its best efforts to cause such Option Shares to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by you of the Option Shares so registered. In the event that any registration pursuant to this Section 11 shall be, in whole or in part, an underwritten public offering of Common Stock, any request by you pursuant to this Section 11 to register Option Shares shall specify that either (i) such Option Shares are to be included in the underwriting on the same terms and conditions as the shares of Common Stock otherwise being sold through underwriters under such registration; or (ii) such Option Shares are to be sold in the open market without any underwriting, on terms and conditions comparable to those normally applicable to offerings of common stock in reasonably similar circumstances. The number of Option Shares to be included in such an underwriting may be reduced if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold therein by the Company or other security holders of the Company. Notwithstanding anything to the contrary contained in this Section 11, in the event that there is a firm commitment underwritten public offering of securities of the Company pursuant to a registration covering Option Shares and you do not elect to sell any Option Shares to the underwriters of the Company's securities in connection with such offering, you agree to refrain from selling any Option Shares during the period of distribution of the Company's securities by such underwriters and the period in which the underwriting syndicate participates in the after market; provided, however, that you shall, in any event, be entitled to sell Option Shares commencing on the 150th day after the effective date of such registration statement. 12. Expenses. (a) The expenses incurred by the Company in complying with the registration pursuant to Section 10 and all registrations pursuant to Section 11 hereof shall be paid as follows: (i) all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public 10 11 accountants for the Company, fees of the National Association of Securities Dealers, Inc. and/or the New York Stock Exchange, transfer taxes, fees of transfer agents and registrars, costs of insurance and other costs not described in (ii) below shall be paid by the Company; and (ii) fees and expenses of your counsel, and all underwriting discounts and selling commissions applicable to the sale of Agreement Shares sold by you, and any additional cost or expense incurred by the Company pursuant to your request under Section (10)(e)(1)(xi), shall be paid by you. 13. Indemnification. In the event of a registration of Agreement Shares under the Securities Act pursuant to Section 10 or 11 hereof, the Company will indemnify and hold you harmless against any losses, claims, damages or liabilities, joint or several, to which you may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Option Shares were registered under the Securities Act pursuant to Section 10 or 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse you for any legal or other expenses reasonably incurred in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished in writing by you for inclusion in such registration statement. In the event of a registration of any of the Agreement Shares under the Securities Act pursuant to Section 10 or 11 hereof, you will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer or director or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Agreement Shares were registered under the Securities Act pursuant to Section 10 or 11, any preliminary prospectus or 11 12 final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that you will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information furnished to the Company by you in writing for inclusion in such registration statement. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under this Section 13. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 13 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding the foregoing, any indemnified party shall have the right to retain its own counsel in any such action, but the fees and disbursements of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party 12 13 shall have failed to retain counsel for the indemnified person as aforesaid or (ii) the indemnifying party and such indemnified party shall have mutually agreed to the retention of such counsel. It is understood that the indemnifying party shall not, in connection with any action or related actions in the same jurisdiction, be liable for the fees and disbursements of more than one separate firm qualified in such jurisdiction to act as counsel for the indemnified party. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. If the indemnification provided for in the first two paragraphs of this Section 13 is unavailable or insufficient to hold harmless an indemnified party under such paragraphs in respect of any losses, claims, damages or liabilities or actions in respect thereof referred to therein, then each indemnifying party shall in lieu of indemnifying such indemnified party contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or actions in such proportion as appropriate to reflect the relative fault of the Company, on the one hand, and you, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or actions as well as any other relevant equitable considerations, including the failure to give any notice under the third paragraph of this Section 13. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the Company, on the one hand, or you, on the other, and to the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and you agree that it would not be just and equitable if contributions pursuant to this paragraph were determined by pro rata allocation or by any other method of allocation which did not take account of the equitable considerations referred to above in this paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or action in respect thereof, referred to above in this paragraph, shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. The indemnification of underwriters provided for in this Section 13 shall be on such other terms and conditions as are at the time customary and reasonably required by such underwriters. Upon your reasonable request, or upon the reasonable request of any 13 14 underwriter of Agreement Shares, the Company shall obtain, if reasonably available, an insurance policy covering the risks described above in this Section 13 in an amount and with a deductible reasonably requested by you or such underwriter and naming you, any underwriter of such stock and any person controlling you or such underwriter as beneficiaries. The costs of obtaining and maintaining any such insurance shall be borne by the Company. 14. Sale of Option Shares. (a) You hereby agree to limit your sales of Agreement Shares so that, except for sales pursuant to underwritten, firm commitment public offerings, your sales of Agreement Shares, aggregated with sales of Agreement Shares by Jeffrey D. Jacobs, shall not exceed in any three-month period the greater of (i) one percent of the outstanding shares of Common Stock of the Company, as disclosed in its public report most recently filed with the Securities and Exchange Commission before the date of any sale and (ii) the average weekly reported volume of trading in Common Stock of the Company on the New York Stock Exchange and all other national securities exchanges during the four calendar weeks preceding the date of any sale; provided however, that upon any "Change in Control" (as such term is defined in Exhibit B of the Harpo Amendment) of the Company, the foregoing restriction shall be reduced or eliminated to the extent that any volume restrictions on resales of Common Stock that then apply to Roger King and/or any other person who was an executive officer of the Company prior to such Change in Control are more favorable than those afforded to you pursuant to this Option. Notwithstanding anything to the contrary contained in this Agreement, you shall not be entitled to register, sell or dispose of any Agreement Shares that are subject to any liens, claims, security interests and other encumbrances of any kind, unless and until the same are removed (or will be removed in conjunction with their sale). (b) In order to secure the repayment to the Company of the Secured Amount (as defined in the Harpo Amendment) pursuant to the Harpo Agreement, you hereby grant to the Company a first priority lien and security interest (the "Security Interest") in (i) your rights under this Option, (ii) all Option Shares now or hereafter issuable or issued pursuant to the exercise of the Option and (iii) all proceeds thereof (collectively, the "Stock Option Collateral"), provided that, unless and until the Company notifies you that the amount of Harpo's Share of Revenues (as defined in the Harpo Amendment) which the Company reasonably projects at the time of such notice will be payable to Harpo would be inadequate to fully secure the Secured Amount (an "Additional Security Notice"; such notice specifying, in reasonable detail, the amount of such inadequacy (the "Security Shortfall")), you may exercise the Option, sell the Option Shares issued to you upon such exercise and retain the proceeds thereof without restriction. The Security Interest shall, in any event, be limited to such number of shares 14 15 of Common Stock (and to the Option to the extent corresponding to such shares) that, as of the date of such Additional Security Notice, would, upon sale at a price per share equal to the closing price of the Common Stock on the New York Stock Exchange, generate Net Realizable Value equal to the projected amount of the Security Shortfall. The Net Realizable Value of an Option Share at any time shall be the fair market value of such share at such time less the sum of (i) the Option Price for such Option Share, and (ii) a provision for taxes equal to the difference between such fair market value and such Option Price (the "Option Gain") multiplied by the highest rate of federal and state income tax to which the Option Gain will be subject (with offset for deductibility of such state taxes). At any time that any Stock Option Collateral is subject to the Security Interest, you may obtain its release from the Security Interest by substituting alternate collateral, as more fully set forth in the Security and Pledge Agreement dated as of ______________ among you, the Company, Harpo, Jacobs & Company and Jeffrey D. Jacobs (the "Security and Pledge Agreement"). You hereby agree to take such steps as are reasonably requested by the Company to perfect the Security Interest, including the execution and filing of UCC-1 financing statements in such form as reasonably requested by the Company, the delivery to the Company of the certificates evidencing the Option Shares, the delivery to such third-party financial intermediaries as may from time to time be requested by the Company of written notice confirming the Security Interest and obtaining the written confirmation and agreement of any such financial intermediaries that such Option Shares and the proceeds thereof are subject to the Security Interest, and that such financial intermediaries shall hold the Option Shares and the proceeds thereof as agent for the Company, as pledgee, subject to such written confirmation and agreement. Upon the occurrence of an Event of Default (as such term is defined in the Security and Pledge Agreement), the Company shall have all of the rights and remedies of a secured party under the Uniform Commercial Code in all relevant jurisdictions with respect to the Stock Option Collateral. 15. Defaults. It shall constitute a breach of this Agreement by either party if such party shall fail or refuse to fully perform any of its obligations under this Agreement and shall not have cured such failure or refusal within 30 days after receipt from the other party of written notice advising it of such failure or refusal, or, in the event that such failure or refusal is of a nature that cannot be cured within 30 days, then if such party shall not begin to cure the same within such 30-day period and thereafter diligently prosecute such cure to completion. 16. Successors; No Assignment. Each of the covenants, terms, provisions and agreements contained herein shall be binding upon and inure to the benefit of the parties' successors and assigns. Neither the Option, nor any of the rights granted to you pursuant hereto, may be transferred or assigned (including, without 15 16 limitation, by operation of law), except by will or the laws of descent and distribution. 17. Withholding Taxes. In the event that the Company is required to withhold any Federal, state or local taxes in respect of the grant of the Option or in respect of the acquisition of any Option Shares, the Company may deduct from any payments of any kind otherwise due to you under the Harpo Agreement the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes or if no such payments are due or to become due, then, 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 any such taxes. All matters with respect to the total amount of taxes to be withheld shall be determined by the Company in its sole discretion. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. If any one or more provisions of this Agreement shall be found to be illegal or unenforceable in any respect, the validity and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. 16 17 Please acknowledge receipt of this Option Agreement and agreement with the terms hereof by signing the enclosed copy of this Option Agreement in the space provided below. KING WORLD PRODUCTIONS, INC. By__________________________ Accepted and Agreed: ___________________________ Oprah Winfrey 17 18 King World Productions, Inc. OPTION EXERCISE FORM Oprah Winfrey hereby exercises her right to purchase ________ shares of Common Stock, $.01 par value, of King World Productions, Inc. pursuant to the option granted to her on March 17, 1994, memorialized in the Option Agreement, dated as of _______________, between her and King World Productions, Inc. Date:__________________ __________________________ Oprah Winfrey Send a completed copy of this Option Exercise Form to: Vice President - Finance King World Productions, Inc. c/o King World Corporation 830 Morris Turnpike Short Hills, New Jersey 07078 18 EX-10.20 6 FORM OF STOCK OPTION AGREEMENT REGISTRANT/JACOBS 1 EXHIBIT 10.20 THE TRANSFER OF THE OPTION EVIDENCED BY THIS AGREEMENT IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN. THE OPTION HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARDS THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THE OPTION NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THE OPTION HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS OPTION, AND THE OPTION SHARES ISSUABLE UPON EXERCISE IN ACCORDANCE WITH THE TERMS CONTAINED HEREIN, ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A LIEN IN FAVOR OF KING WORLD PRODUCTIONS, INC. (THE "COMPANY") TO SECURE CERTAIN OBLIGA- TIONS OF HARPO, INC. ("HARPO") TO THE COMPANY PURSUANT TO AN AGREEMENT DATED AS OF JANUARY 30, 1987, AS AMENDED THROUGH _______________ BETWEEN THE COMPANY AND HARPO. KING WORLD PRODUCTIONS, INC. 1700 Broadway New York, New York 10019 Mr. Jeffrey D. Jacobs As of _______________ c/o Harpo, Inc. 110 North Carpenter Street Chicago, Illinois 60607 Dear Mr. Jacobs: This is the stock option agreement referred to in the amendment (the "Harpo Amendment") dated as of March 17, 1994, to the Agreement dated as of January 30, 1987 (the "Original Agreement"), as previously amended to the date hereof (the Original Agreement, as amended to the date hereof and by the Harpo Amendment, being herein called the "Harpo Agreement") between Harpo, Inc. ("Harpo") and the undersigned (the "Company"). As partial consideration for Harpo to enter into the Harpo Amendment, and as an inducement for you to render services with respect to the production of the Show (as such term is defined in the Harpo Amendment), the Company hereby grants to you an option (the "Option") to purchase _____ thousand (__,000) shares of the Company's Common Stock, $.01 par value ("Common Stock"; such shares of Common Stock, as the same may be adjusted as described in Section 6 below, being herein referred to as the "Option Shares"). The terms and conditions of the Option are set out below. 1 2 The Option will be treated as and shall constitute a "non-qualified stock option" for Federal income tax purposes. The Option will not constitute or be treated either by you or by the Company as an "incentive stock option" as defined under Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). 1. Date of Grant. The Option is granted to you on the date hereof. 2. Termination of the Option. Your right to exercise the Option (and to purchase the Option Shares) shall expire and terminate in all events on (i) _______________, or (ii) such earlier date provided in Section 7 below. 3. Option Price. The purchase price to be paid upon the exercise of the Option (the "Option Price") will be $_____ per Option Share. 4. Vesting Provisions -- Entitlement to Exercise the Option and Purchase Option Shares.The Option shall be exercisable by you, in whole or part, at any time prior to expiration and termination pursuant to Section 2 above. 5. Exercise of Option. (a) To exercise the Option, you must deliver a completed copy of the attached Option Exercise Form to the address indicated on the Form, specifying the number of Option Shares being purchased as a result of such exercise, together with payment of the full Option Price for the Option Shares being purchased. (b) Payment of the Option Price must be made in cash. (c) In the event of any exercise of the Option, a certificate or certificates representing the Option Shares so purchased, registered in your name, shall be delivered to you within a reasonable time. (d) You agree that Option Shares shall be held by you for investment and may not be resold unless registered under the Securities Act of 1933, as amended (the "Securities Act"), or an exemption from registration is available, and that the Option Shares will bear a legend referring to such limitation, to the restrictions on transfer of the Option Shares referred to elsewhere in this Agreement and to any security interests encumbering the Option Shares. 6. Adjustments. If the total outstanding shares of Common Stock of the Company shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corpora- 2 3 tion through reorganization, merger or consolidation, recapitalization, stock split, combination or exchange of shares or declaration of any dividends payable in stock or other corporate transaction, then the number of Option Shares subject to the unexercised portion of the Option (and the Option Price per share) shall be appropriately adjusted (to the nearest possible full share) by the Board of Directors of the Company. 7. Default under the Harpo Agreement. (a) In the event that you die, or the term of the Harpo Agreement terminates for any other reason except a material breach by Harpo, then the Option may be exercised by you or your estate only within the nine (9) month period following your death or the termination of the term of the Harpo Agreement. (b) In the event that the term of the Harpo Agreement terminates by reason of a material breach thereof by Harpo, then your right to exercise the Option as to any and all Option Shares that have not theretofore been issued shall terminate simultaneously with the termination of such term. (c) In the event that the Company exercises its rights pursuant to paragraph 17 or 18 of the Original Agreement and the term of the Harpo Agreement is suspended, then your right to exercise the Option pursuant to Section 4 hereof shall be suspended during the period that the term of the Harpo Agreement is suspended. (d) Notwithstanding any provision contained herein to the contrary, in no event may the Option be exercised to any extent after _______________. 8. Representations. (a) You represent and warrant that you are acquiring the Option and the Option Shares for investment purposes only and not with a view towards the public distribution thereof. (b) You understand that neither the Options nor the Option Shares have been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements thereof pursuant to Section 4(2) of the Securities Act. (c) You represent and warrant that (i) you have the financial ability to bear the economic risk of investment in the Option and the Option Shares and (ii) you, together with the financial advisers who have assisted you in acquiring the Option, 3 4 have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Option and the Option Shares and have had sufficient opportunity to obtain, and have obtained, all information regarding the Company as you have deemed relevant in order to evaluate the merits and risks of such investment. (d) You represent and warrant that you understand the Federal, state and local income tax consequences of the granting of the Option to you, the exercise of the Option and purchase of Option Shares, and the subsequent sale or other disposition of any Option Shares. 9. Covenants of the Company. The Company will at all times reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of issue upon the exercise of the Option, such number of shares of Common Stock as shall then be issuable upon the exercise of the Option. The Company covenants that all Option Shares, when issued in accordance with the terms hereof, shall be duly and validly issued, fully paid and nonassessable. The Company will take all such action as may be necessary to assure that all Option Shares may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock of the Company may then be listed. The Company will not take any action which results in any adjustment of the Option Price if the total number of Option Shares issued and issuable after such action would exceed the total number of shares of Common Stock then authorized by the Company's Certificate of Incorporation. The Company has not granted and will not grant any right of first refusal with respect to the Option Shares, and there are no preemptive rights associated with such shares. 10. Required Registration. (a) At any time you may by notice to the Company (the "Registration Notice") request that it register for sale under the Securities Act, in the manner specified in your Registration Notice, all or any portion of the Option Shares and any other shares of Common Stock that have been issued or are issuable to you and/or Oprah Winfrey upon the exercise of stock options granted or to be granted pursuant to the Harpo Agreement, including any prior or subsequent amendment to that agreement (collectively, together with the Option Shares, the "Agreement Shares"), and that have been purchased, or will be purchased on or before the effective date of such registration statement, or, provided that deferral of the date of purchase to the closing date of sale of such shares in the manner contemplated by the proposed registration will not disqualify 4 5 the offering from registration on Form S-3 (or any successor to such form), then on such closing date pursuant to such exercise. (b) Promptly following receipt of your Registration Notice, the Company shall commence to prepare and, unless it elects to purchase all of the Agreement Shares specified in such Registration Notice through the procedures specified in Section 10(f) below, shall file a registration statement under the Securities Act for the sale of the Agreement Shares specified in such Registration Notice (less any shares to be purchased pursuant to Section 10(f) below) and shall use its best efforts to cause such registration statement to become effective and remain in effect for the Required Effective Period for public sale in accordance with the method of disposition specified by you, provided, however, that the Company shall not be required to file a "shelf" registration except on Form S-3 (or any successor to such Form). The "Required Effective Period" shall be the greater of (A) the 180-day period following the effective date of such registration statement; and (B) unless the proposed plan of distribution involves a firm commitment underwritten public offering, the period required to dispose of all of the shares included in such registration statement assuming the sale in each three- month period of the maximum number of shares permitted to be sold under the limitations of Section 14 of this Agreement. If such method of disposition shall be an underwritten public offering, the Company may designate the managing underwriter of such offering. If, in the good faith opinion of the Board of Directors of the Company, registration would materially interfere with pre-existing contractual obligations to which the Company is then subject or financing arrangements or other material transactions involving the Company or any of its subsidiaries are pending at the time the Registration Notice is given, or are under active consideration by the Company, the Company may elect to defer registration for such period of time, in no event in excess of one hundred twenty (120) days from the date on which the Registration Notice was given, as in the good faith judgment of the Board of Directors of the Company is necessary in order to preclude adverse impact upon such financing or other transaction. In the event of such deferral, if the shares to be registered are to be acquired on exercise of this Option following the date of such Registration Notice, the date on which the Option was exercised shall, for purposes of Section 2 and 7(d) hereof, be deemed to be the date on which the Registration Notice was given. The obligation of the Company under this Section 10 shall be deemed satisfied only when a registration statement covering all Agreement Shares specified in your Registration 5 6 Notice and not purchased by the Company pursuant to Section 10(f) below shall have become effective and, (X) if the method of disposition you specify is a firm commitment underwritten public offering, all such Agreement Shares shall have been sold pursuant thereto; or (Y) if it is not such an offering, has remained in effect for the Required Effective Period specified herein or until the distribution of the Agreement Shares covered thereby is completed, whichever is shorter. (c) The Company shall not be obligated to register Agreement Shares pursuant to this Section 10 (i) more than once; (ii) in any period of twelve consecutive months in which any Agreement Shares have been registered pursuant to the exercise of a demand registration right granted pursuant to any other agreement between the Company and you or Oprah Winfrey; or (iii) at any time when the registration, offering or sale of Option Shares would violate any law, rule or regulation. For purposes of the foregoing sentence, (X) a registration under this Option or the corresponding provisions of the option agreement issued to Oprah Winfrey on the date hereof shall be aggregated (so that a registration initiated by you pursuant to this Section 10 shall decrease by one the number of demand registrations available to each of you and Oprah Winfrey pursuant said corresponding provisions, and vice versa) and (Y) any request for registration given by you shall, as a condition to its effectiveness, be confirmed in writing by Oprah Winfrey (provided that she is then competent to give such confirmation). If any Agreement Shares included in a registration statement filed pursuant to this Section 10 were issued upon the exercise of any other stock option granted to you or Oprah Winfrey pursuant to the Harpo Agreement, the number of "demand" registration rights granted to you and to Oprah Winfrey pursuant to such stock option or stock options shall each be reduced by one. (d) The Company shall be entitled to include in any registration statement referred to in this Section 10, for sale in accordance with the method of disposition you specify, shares of Common Stock to be sold by the Company for its own account or by other security holders of the Company for their accounts, or both, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Agreement Shares to be sold. (e) The procedures for registration of Agreement Shares under this Section 10 shall conform to the following: 6 7 (1) Obligations of the Company. If and whenever the Company is required by the provisions of Section 10 or 11 to effect the registration of Agreement Shares, the Company will: (i) Prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the Required Effective Period or until the securities covered by such registration statement have been sold in accordance with the method of disposition specified by you in your Registration Notice, whichever is shorter, and prepare and file with the Commission such amendments or supplements to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective for the Required Effective Period or until the shares covered by such registration statement have been sold in accordance with such method of disposition, whichever is shorter; (ii) If the offering is to be underwritten in whole or in part, enter into a written underwriting agreement in form and substance reasonably satisfactory to the managing underwriter or underwriters of the public offering of such securities; (iii) Furnish to the shareholders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities; (iv) Use its best efforts to register or qualify the shares covered by such registration statement under such state securities or blue sky laws of such jurisdictions as you may reasonably request within 20 days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified; (v) Notify you promptly after it shall receive notice thereof, of the time when such registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed; 7 8 (vi) Notify you promptly of any request by the Commission for the amending or supplementing of such registration statement or prospectus or for additional information; (vii) Prepare and file with the Commission, promptly upon your request, any amendments or supplements to such registration statement or prospectus which, in the opinion of your counsel, are required under the Securities Act or the rules and regulations thereunder in connection with the distribution of the Option Shares by you; (viii) Prepare and promptly file with the Commission and promptly notify you of the filing of such amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such shares is required to be delivered under the Securities Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; (ix) In case you or any underwriters for you is required to deliver a prospectus at a time when the prospectus then in effect may no longer be used under the Securities Act, prepare promptly upon request such amendment or amendments to such registration statement and such prospectus or prospectus as may be necessary to permit compliance with the requirements of the Securities Act; (x) Advise you, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement; or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; (xi) If such registration is by way of an underwritten public offering and if you so request, use its best efforts to cause counsel and the independent certified public accountants to the Company to furnish on the effective date of the registration statement and at the closing provided for in the underwriting agreement, (i) an opinion dated such date, of the counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to you, covering such matters with respect to the regis- 8 9 tration statement and prospectus and each amendment or supplement thereto, proceedings under state and federal securities laws and other matters relating to the Company, the securities included in the registration statement and the offer and sale of such securities as are customarily the subject of opinions of issuer's counsel provided to underwriters at or about the time such registration statement becomes effective and the sale is closed; and (ii) a letter dated each such date, from the independent certified public accountants of the Company, addressed to the underwriters, if any, and to you, stating that they are independent certified public accountants within the meaning of the Securities Act and providing such assurances as are customarily provided by the independent certified public accountants for an issuer in connection with the registration of securities, including information as to the period ending not more than five business days prior to the date of such letter with respect to the registration statement and prospectus, as the underwriters or you may reasonably request. If the furnishing of such opinion and/or letter causes Company to incur any additional cost or expense, you agree to reimburse Company therefor at the closing provided for in the underwriting agreement. (2) Obligations of Option Holder. It shall be a condition to the inclusion of any Agreement Shares in a registration statement that the holder thereof shall cooperate in the execution and filing of the registration statement and any necessary state securities law filings, and if the offering is to be underwritten, that such holder become a party to the underwriting agreement and, if so requested by the managing underwriter, execute and deliver Powers of Attorney and/or custodial agreements or other suitable arrangements as the managing underwriter deems reasonably necessary in order to insure orderly sale of the shares. As among the holders of shares included in any registration statement, decisions respecting the terms and conditions of any underwriting agreements shall be made by the party initiating the registration; so that in the case of a registration required pursuant to a request by you under Section 10, determinations with respect to the underwriting agreement shall be made by you, in your reasonable judgment, after appropriate consultation with the Company and with other persons whose shares are to be included in such offering; and if you are party to a registration statement pursuant to Section 11, you shall not have the right to make such determinations, but shall be informed of them, and consulted with respect thereto. 9 10 (f) Within ten (10) business days following receipt of a Registration Notice, the Company may elect, by written notice to you, to purchase all or any portion of the Agreement Shares specified by you in such Registration Notice for a purchase price equal to the closing price of the Common Stock on the date such notice was given. In the event that the Company elects to purchase any of the Agreement Shares specified by you in such notice, the delivery of such Agreement Shares against payment therefor shall take place on the fifth business day following receipt by you of the Company's election notice. In the event that the Company does not elect to purchase all of the Agreement Shares specified by you in such Registration Notice, the Company shall register under the Securities Act all the Agreement Shares not so purchased, in the manner provided above. 11. Incidental Registration. If the Company at any time (other than pursuant to Section 10 hereof) proposes to register any of its Common Stock under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4 or S-8 or another form not available for registering the Option Shares for sale to the public), it will give written notice at such time to you of its intention to do so. Upon your written request, given within 30 days after receipt of any such notice by the Company, to register any of the Option Shares that you have purchased, or will purchase on or before the effective date of such registration statement, pursuant to the exercise of the Option (which request shall state the intended method of disposition thereof), the Company will use its best efforts to cause such Option Shares to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by you of the Option Shares so registered. In the event that any registration pursuant to this Section 11 shall be, in whole or in part, an underwritten public offering of Common Stock, any request by you pursuant to this Section 11 to register Option Shares shall specify that either (i) such Option Shares are to be included in the underwriting on the same terms and conditions as the shares of Common Stock otherwise being sold through underwriters under such registration; or (ii) such Option Shares are to be sold in the open market without any underwriting, on terms and conditions comparable to those normally applicable to offerings of common stock in reasonably similar circumstances. The number of Option Shares to be included in such an underwriting may be reduced if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold therein by the Company or other security holders of the Company. 10 11 Notwithstanding anything to the contrary contained in this Section 11, in the event that there is a firm commitment underwritten public offering of securities of the Company pursuant to a registration covering Option Shares and you do not elect to sell any Option Shares to the underwriters of the Company's securities in connection with such offering, you agree to refrain from selling any Option Shares during the period of distribution of the Company's securities by such underwriters and the period in which the underwriting syndicate participates in the after market; provided, however, that you shall, in any event, be entitled to sell Option Shares commencing on the 150th day after the effective date of such registration statement. 12. Expenses. (a) The expenses incurred by the Company in complying with the registration pursuant to Section 10 and all registrations pursuant to Section 11 hereof shall be paid as follows: (i) all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees of the National Association of Securities Dealers, Inc. and/or the New York Stock Exchange, transfer taxes, fees of transfer agents and registrars, costs of insurance and other costs not described in (ii) below shall be paid by the Company; and (ii) fees and expenses of your counsel, and all underwriting discounts and selling commissions applicable to the sale of Agreement Shares sold by you, and any additional cost or expense incurred by the Company pursuant to your request under Section (10)(e)(1)(xi), shall be paid by you. 13. Indemnification. In the event of a registration of Agreement Shares under the Securities Act pursuant to Section 10 or 11 hereof, the Company will indemnify and hold you harmless against any losses, claims, damages or liabilities, joint or several, to which you may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Option Shares were registered under the Securities Act pursuant to Section 10 or 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse you for any legal or other expenses reasonably incurred in connection with 11 12 investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished in writing by you for inclusion in such registration statement. In the event of a registration of any of the Agreement Shares under the Securities Act pursuant to Section 10 or 11 hereof, you will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer or director or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Agreement Shares were registered under the Securities Act pursuant to Section 10 or 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that you will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information furnished to the Company by you in writing for inclusion in such registration statement. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under this Section 13. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, 12 13 the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 13 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding the foregoing, any indemnified party shall have the right to retain its own counsel in any such action, but the fees and disbursements of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party shall have failed to retain counsel for the indemnified person as aforesaid or (ii) the indemnifying party and such indemnified party shall have mutually agreed to the retention of such counsel. It is understood that the indemnifying party shall not, in connection with any action or related actions in the same jurisdiction, be liable for the fees and disbursements of more than one separate firm qualified in such jurisdiction to act as counsel for the indemnified party. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. If the indemnification provided for in the first two paragraphs of this Section 13 is unavailable or insufficient to hold harmless an indemnified party under such paragraphs in respect of any losses, claims, damages or liabilities or actions in respect thereof referred to therein, then each indemnifying party shall in lieu of indemnifying such indemnified party contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or actions in such 13 14 proportion as appropriate to reflect the relative fault of the Company, on the one hand, and you, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or actions as well as any other relevant equitable considerations, including the failure to give any notice under the third paragraph of this Section 13. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the Company, on the one hand, or you, on the other, and to the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and you agree that it would not be just and equitable if contributions pursuant to this paragraph were determined by pro rata allocation or by any other method of allocation which did not take account of the equitable considerations referred to above in this paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or action in respect thereof, referred to above in this paragraph, shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. The indemnification of underwriters provided for in this Section 13 shall be on such other terms and conditions as are at the time customary and reasonably required by such underwriters. Upon your reasonable request, or upon the reasonable request of any underwriter of Agreement Shares, the Company shall obtain, if reasonably available, an insurance policy covering the risks described above in this Section 13 in an amount and with a deductible reasonably requested by you or such underwriter and naming you, any underwriter of such stock and any person controlling you or such underwriter as beneficiaries. The costs of obtaining and maintaining any such insurance shall be borne by the Company. 14. Sale of Option Shares. (a) You hereby agree to limit your sales of Agreement Shares so that, except for sales pursuant to underwritten, firm commitment public offerings, your sales of Agreement Shares, aggregated with sales of Agreement Shares by Oprah Winfrey, shall not exceed in any three-month period the greater of (i) one percent of the outstanding shares of Common Stock of the Company, as disclosed in its public report most recently filed with the Securities and Exchange Commission before the date of any sale and (ii) the average weekly reported volume of trading in Common Stock of the 14 15 Company on the New York Stock Exchange and all other national securities exchanges during the four calendar weeks preceding the date of any sale; provided however, that upon any "Change in Control" (as such term is defined in Exhibit B of the Harpo Amendment) of the Company, the foregoing restriction shall be reduced or eliminated to the extent that any volume restrictions on resales of Common Stock that then apply to Roger King and/or any other person who was an executive officer of the Company prior to such Change in Control are more favorable than those afforded to you pursuant to this Option. Notwithstanding anything to the contrary contained in this Agreement, you shall not be entitled to register, sell or dispose of any Agreement Shares that are subject to any liens, claims, security interests and other encumbrances of any kind, unless and until the same are removed (or will be removed in conjunction with their sale). (b) In order to secure the repayment to the Company of the Secured Amount (as defined in the Harpo Amendment) pursuant to the Harpo Agreement, you hereby grant to the Company a first priority lien and security interest (the "Security Interest") in (i) your rights under this Option, (ii) all Option Shares now or hereafter issuable or issued pursuant to the exercise of the Option and (iii) all proceeds thereof (collectively, the "Stock Option Collateral"), provided that, unless and until the Company notifies you that the amount of Harpo's Share of Revenues (as defined in the Harpo Amendment) which the Company reasonably projects at the time of such notice will be payable to Harpo would be inadequate to fully secure the Secured Amount (an "Additional Security Notice"; such notice specifying, in reasonable detail, the amount of such inadequacy (the "Security Shortfall")), you may exercise the Option, sell the Option Shares issued to you upon such exercise and retain the proceeds thereof without restriction. The Security Interest shall, in any event, be limited to such number of shares of Common Stock (and to the Option to the extent corresponding to such shares) that, as of the date of such Additional Security Notice, would, upon sale at a price per share equal to the closing price of the Common Stock on the New York Stock Exchange, generate Net Realizable Value equal to the projected amount of the Security Shortfall. The Net Realizable Value of an Option Share at any time shall be the fair market value of such share at such time less the sum of (i) the Option Price for such Option Share, and (ii) a provision for taxes equal to the difference between such fair market value and such Option Price (the "Option Gain") multiplied by the highest rate of federal and state income tax to which the Option Gain will be subject (with offset for deductibility of such state taxes). At any time that any Stock Option Collateral is subject to the Security Interest, you may obtain its release from the Security Interest by substituting alternate collateral, as more fully set forth in the Security and Pledge Agreement dated as of 15 16 ______________ among you, the Company, Harpo, Jacobs & Company and Oprah Winfrey (the "Security and Pledge Agreement"). You hereby agree to take such steps as are reasonably requested by the Company to perfect the Security Interest, including the execution and filing of UCC-1 financing statements in such form as reasonably requested by the Company, the delivery to the Company of the certificates evidencing the Option Shares, the delivery to such third-party financial intermediaries as may from time to time be requested by the Company of written notice confirming the Security Interest and obtaining the written confirmation and agreement of any such financial intermediaries that such Option Shares and the proceeds thereof are subject to the Security Interest, and that such financial intermediaries shall hold the Option Shares and the proceeds thereof as agent for the Company, as pledgee, subject to such written confirmation and agreement. Upon the occurrence of an Event of Default (as such term is defined in the Security and Pledge Agreement), the Company shall have all of the rights and remedies of a secured party under the Uniform Commercial Code in all relevant jurisdictions with respect to the Stock Option Collateral. 15. Defaults. It shall constitute a breach of this Agreement by either party if such party shall fail or refuse to fully perform any of its obligations under this Agreement and shall not have cured such failure or refusal within 30 days after receipt from the other party of written notice advising it of such failure or refusal, or, in the event that such failure or refusal is of a nature that cannot be cured within 30 days, then if such party shall not begin to cure the same within such 30-day period and thereafter diligently prosecute such cure to completion. 16. Successors; No Assignment. Each of the covenants, terms, provisions and agreements contained herein shall be binding upon and inure to the benefit of the parties' successors and assigns. Neither the Option, nor any of the rights granted to you pursuant hereto, may be transferred or assigned (including, without limitation, by operation of law), except by will or the laws of descent and distribution. 17. Withholding Taxes. In the event that the Company is required to withhold any Federal, state or local taxes in respect of the grant of the Option or in respect of the acquisition of any Option Shares, the Company may deduct from any payments of any kind otherwise due to you under the Harpo Agreement the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes or if no such payments are due or to become due, then, you will be required to pay to the Company, or to make other arrangements satisfactory to the Company regarding payment to 16 17 the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld shall be determined by the Company in its sole discretion. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. If any one or more provisions of this Agreement shall be found to be illegal or unenforceable in any respect, the validity and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. 17 18 Please acknowledge receipt of this Option Agreement and agreement with the terms hereof by signing the enclosed copy of this Option Agreement in the space provided below. KING WORLD PRODUCTIONS, INC. By__________________________ Accepted and Agreed: ___________________________ Jeffrey D. Jacobs 18 19 King World Productions, Inc. OPTION EXERCISE FORM Jeffrey D. Jacobs hereby exercises his right to purchase ________ shares of Common Stock, $.01 par value, of King World Productions, Inc. pursuant to the option granted to him on March 17, 1994, memorialized in the Option Agreement, dated as of _______________, between him and King World Productions, Inc. Date:__________________ __________________________ Jeffrey D. Jacobs Send a completed copy of this Option Exercise Form to: Vice President - Finance King World Productions, Inc. c/o King World Corporation 830 Morris Turnpike Short Hills, New Jersey 07078 19 EX-10.24 7 AMENDMENT TO AGREEMENT BET. KING WORLD & UNILEVER 1 EXHIBIT 10.24 KING WORLD F.S.C. CORPORATION 830 Morris Turnpike Short Hills, New Jersey 07078 Dated as of July 11, 1995 Unilever NV c/o Mr. Pierre-Marie Guiollot President - Director General E.C. Television Paris 115 rue de Bac 75007 Paris France Dear Pierre: 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 and as of June 13, 1994 (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 to the Original Agreement hereunder shall become effective on the commencement of the Second 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, 1996 through December 31, 1996 (the "Second Extended Renewal Period"). B. The guaranteed minimum license fee during the Second Extended Renewal Period shall be equal to ********************************************* ****************************************************************************** . C. With respect to telecasts of Wheel in France, the royalty payable to KW by Unilever for each telecast of each episode of Wheel during the Second Extended Renewal Period shall be ********************************************* . 2 D. With respect to telecasts of Wheel in Spain, the royalty payable to KW by Unilever shall be an amount equal to ************************************ E. With respect to telecasts of Wheel in Italy, the royalty payable to KW by Unilever shall be an amount equal to ************************************ F. (a) With respect to telecasts of Jeopardy in Germany, Austria, Lichtenstein and Alto Adige, as well as German-speaking Luxembourg and German-speaking Switzerland (collectively, the "German Speaking Territories"), the royalty payable to KW by Unilever for each telecast of each episode of Jeopardy during the Second Extended Renewal Period (the "German Royalty") shall be ********************************************************************** (b) The German Royalty shall not be subject to any other increases, adjustments or premiums; provided, however, that in the event that Unilever's licensee receives any advertising 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: ****************************************************** G. Except with respect to telecasts of Wheel in France (the royalties for which are set forth in Paragraph C above), telecasts of Wheel in Spain (the royalties for which are set forth in Paragraph D above), telecasts of Wheel in Italy (the royalties for which are set forth in Paragraph E above), and telecasts of Jeopardy in the German Speaking Territories (the royalties for which are set forth in Paragraph F above), with respect to all countries within Territory A, the Royalty Rate for each such country during the Second Extended Renewal Period shall be ****************************************************** - 2 - 3 ******************************************************************************* ******************************************************************************* H. Unilever shall 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 10 business days to a request by Unilever for such approval to be deemed approval of such request by KW). 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 ------------------------------ - 3 - 4 SCHEDULE A WHEEL OF FORTUNE and JEOPARDY! License Fee Schedule For Calendar Year 1996 (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 Luxembourg Malta Monaco 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. Buffalo Management Enterprises Co. Inc., a New York corporation Camelot Entertainment Sales of Delaware, 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 incorporation of our report dated October 31, 1995 included in this Form 10-K, into the Company's previously filed Registration Statements File No. 33-30694, No. 33-30695, No. 33-71696 and No. 33-54691. ARTHUR ANDERSEN LLP New York, New York /s/ Arthur Andersen LLP November , 1995 EX-27 10 FINANCIAL DATA SCHEDULE
5 1,000 YEAR AUG-31-1995 SEP-01-1994 AUG-31-1995 46,896 0 55,552 4,196 0 588,843 12,955 (9,703) 686,786 111,049 0 499 0 0 575,238 686,786 0 574,186 0 341,536 70,234 0 0 183,258 65,946 117,312 0 0 0 117,312 3.14 3.14
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