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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, 1994
[ ] 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.
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(Exact name of registrant as specified in its charter)
Delaware 13-2565808
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 Broadway
New York, New York 10019
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 212-315-4000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, New York Stock Exchange
$.01 par value
Securities registered pursuant to Section 12(g) of the Act:
None
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(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
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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 15, 1994 was approximately
$1.008 billion.
As of November 15, 1994, there were 36,768,874 outstanding
shares of the registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's definitive proxy statement for its 1995
annual meeting of stockholders (which is to be filed pursuant to Regulation 14A
not later than December 29, 1994) is incorporated by reference into Part III of
this Form 10-K.
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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.
As a result of the deconsolidation of Buffalo Broadcasting Co.
Inc. from the financial statements of King World as of August 4, 1992 (see Note
2 of Notes to Consolidated Financial Statements), 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 1994 Nielsen
Designated Market Area Ranking Report: Wheel of Fortune and Jeopardy! had the
two highest ratings among all syndicated television shows;
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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 43 consecutive
sweeps periods, Jeopardy! has had the second highest ratings among such shows
for each of the last 36 consecutive sweeps periods and The Oprah Winfrey Show
has had the third highest ratings among such shows for 24 of the last 32 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 $480.7 million in fiscal 1994 and its net income has increased
from $9.8 million in fiscal 1985 to $88.3 million in fiscal 1994. 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 82% of King World's revenues for the fiscal year
ended August 31, 1994. Information for the 1994 fiscal year gives effect to a
change in accounting for revenue recognition adopted by the Company on a
prospective basis in the fourth quarter of fiscal 1994. 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 time,
broadcast their own programming, off-network programming and first-run
syndicated 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
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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 1993-1994 broadcast season, Wheel of Fortune was
licensed to television stations in 200 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
198 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 the 1993-1994 broadcast season,
Jeopardy! was licensed to television stations in 192 Nielsen market areas in
the United States, covering approximately 98% of total domestic television
households, and for the current broadcast season has been licensed to
television stations in 192 Nielsen market areas, 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
1993-1994 broadcast season, The Oprah Winfrey Show was licensed to television
stations in 206 Nielsen market areas in the United States, covering more than
99% of total domestic television households, and for the current broadcast
season has been licensed to stations in 210 Nielsen market areas, covering more
than 99% of total domestic television households.
Inside Edition, a half-hour first-run syndicated newsmagazine
series that is produced and distributed by King World, premiered in January
1989. It is the first television series produced by King World. Inside
Edition is produced at the Company's production facility in New York and has a
correspondent bureau in Los Angeles to enhance the ability of the program to
provide nationwide coverage. For the 1993-1994 broadcast season, Inside
Edition was licensed to television stations in 154 Nielsen market areas,
covering approximately 92% of total domestic television households, and for the
current broadcast season, the series has been licensed to television stations
in 151 Nielsen market areas, covering approximately 91% of total domestic
television households.
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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 1993-1994
broadcast season, American Journal was licensed to television stations in 111
Nielsen market areas, covering approximately 83% of total domestic television
households, and for the current broadcast season, the series has been licensed
to television stations in 120 Nielsen market areas, covering approximately 85%
of total domestic television households.
Rolonda, a daytime talk show that is also produced by King
World in New York, premiered in January 1994 following the cancellation of The
Les Brown Show. It is hosted by Rolonda Watts, a popular broadcast journalist.
For the 1993-1994 broadcast season, Rolonda was licensed to television stations
in 96 Nielsen market areas, covering approximately 77% of total domestic
television households. For the current broadcast season, Rolonda has been
licensed to television stations in 79 Nielsen market areas, covering
approximately 70% 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 future broadcast seasons, commencing with the 1995-1996
broadcast season and extending, in certain cases, as far into the future as the
1999-2000 broadcast season. Revenues and related expenses under license
agreements with respect to future broadcast seasons will not be recognized
until the license periods thereunder have begun and certain other conditions
are satisfied. As of October 31, 1994, the gross amount of license fees under
such agreements approximated $2.1 billion, of which approximately $1.2 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, 1994 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 1995-1996 television
season (which they are not contractually obligated to do). Such amounts do not
include sales of advertising time retained during the broadcast of such program
material or foreign license fees and do not reflect the production costs to be
incurred for programming produced by King World.
There can be no assurance that any of these programs will be
licensed for additional years through renewal of existing licenses or issuance
of new licenses or, if so licensed, that the terms of the license agreements
will be as favorable to King World as those of the existing licenses. There
can be no assur-
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ance 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 most recent amendment to
such agreement, 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 show in any season after the 1995-1996 season.
Such agreement, among other things, establishes the production fees payable to
Harpo in the first two subject seasons and commits the Company to guaranty
payments to Harpo at levels which, commencing with the 1995-1996 season, will
be substantially higher than those currently 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.
Under the terms of the amended 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
modified 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 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. However, the Company
believes that the modified arrangements provide Harpo and Ms. Winfrey
additional incentives to continue to produce and host the series for the
1996-1997 and subsequent broadcast seasons and that the series will continue
to be an important and profitable distribution property for the Company.
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 such
series so long as the Company has obtained sufficient broadcast commitments to
cover production and distribution costs 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
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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 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.
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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 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 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 1994 fiscal year, approximately 11% 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 13 persons as of November 15, 1994.
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.
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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 15, 1994, 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 1994-1995 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 stations covering approximately 99% and 98%, respectively, of the
total domestic television households; Inside Edition has been licensed to
stations covering approximately 91% of the total domestic television
households; American Journal has been licensed to stations covering
approximately 85% of the total domestic television households; and Rolonda has
been licensed to stations covering approximately 70% 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 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
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World. Camelot has agreements currently in effect with, among others,
Metro-Goldwyn-Mayer, Inc. to sell advertising time in Pink Panther, an animated
children's series, and 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, EC-TV, on behalf of Unilever, N.V.,
licenses the production of local versions of Wheel of Fortune and Jeopardy! for
broadcast in a number of Western European markets. In addition, the Company
has recently become more active in acquiring rights for the distribution of
television programming solely outside the United States. Revenues from foreign
sales (including Canada) accounted for approximately 8% of King World's
revenues in fiscal 1994.
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 68 feature length films and 210 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
1994.
Direct Response Marketing
The Company has launched King World Direct Inc., a new 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 the Wild America video series and
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Sears Craftsman Robogrip pliers. Revenue from direct response marketing
activities accounted for approximately 1% of the Company's revenues in fiscal
1994.
Competition
The production and distribution of television programming and
the sale of associated advertising time is a highly competitive business. King
World competes with many companies that have resources substantially greater
than those of King World.
The most important competitive factors in television program
distribution are marketing, quality and variety of programming and research and
promotional services. King World's success is highly dependent upon those
factors as well as the continuing availability of writers, performers and other
creative talent and the viewing preferences of television audiences. King
World has attempted to concentrate on the distribution of programs that it
believes will have broad or enduring audience appeal in order to reduce its
exposure to changes in viewer preferences. King World has also developed an
experienced television syndication sales organization as well as strong
programming acquisition, research and advertising and promotion departments.
See "Marketing" above.
Regulation of the Television Industry
Prime-Time Access Rule
A rule promulgated by the Federal Communications Commission
("FCC") 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 acquire either one
hour or one-half hour of program material for exhibition during the prime-time
access period from independent television producers and syndicators.
On October 20, 1994, the FCC initiated proceedings looking
toward reconsideration or modification of the prime-time access rule. These
proceedings were begun in response to petitions filed by a television station
in Orlando, Florida, seeking a determination that the prime-time access rule is
unconstitutional and a petition filed by a station group owner urging that the
rule be modified to permit the network-owned and -affiliated stations now
subject to the rule to broadcast, during the prime-
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time access period, programming that has previously aired on a network.
Proposals for modification or repeal are vigorously supported by the television
networks and certain major producers of programming intended for initial airing
on network television; such proposals are opposed by other station groups, by
organizations representing independent broadcasters (that is, those
unaffiliated with television networks) and by producers and distributors of
first-run syndicated programming, including the Company.
King World believes that the prime-time access rule is an
important counter-balance to the market power of the networks and that any rule
change that alters the prime-time access period, or that permits the prime-time
access period to be used for the exhibition of programming supplied by or
previously aired on the networks, probably will have a negative impact on
independently produced television programming broadcast in the prime-time
access period, such as Wheel of Fortune, Jeopardy! and Inside Edition.
The FCC is expected to conclude its reexamination of the
prime-time access rule during the first half of 1995. King World intends to
participate vigorously in the proceedings regarding such reexamination and to
urge that the rule be retained in its present form. However, King World is
unable to predict the outcome of such proceedings.
Syndication and Financial Interest Rules
Pursuant to consent decrees entered into in the mid to late
1970's between the three largest television networks (the ABC Television
Network, the CBS Television Network and the NBC Television Network) and the
United States Department of Justice (the "Consent Decrees"), such networks
were, until mid-November 1993 (when the Decrees were lifted), prohibited from
domestically syndicating television programs and from acquiring financial
interests in such programs or in network programming (other than the right to
network exhibitions) produced by independent production companies. In the mid
1970's, the FCC implemented rules (the "Rules") that substantially paralleled
the prohibitions of the Consent Decrees. The Rules enhanced the Company's
ability to license its programs to stations owned and operated by the major
television networks (licensees that are, in most instances, very important to
the success of a series distributed through first-run syndication).
In May 1991, the FCC issued a decision (the "1991 Decision")
to modify, but not to repeal, the Rules. The modified Rules substantially
relaxed the restrictions upon the ability of a network (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
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World has not to date had substantial involvement). The 1991 Decision retained
stringent limitations on network involvement in first-run syndication
activities. Under the Rules as revised in 1991, a network could retain a
continuing financial interest in a first-run program or series only if the
program or series were produced solely by such network; any such first-run
syndicated programming could be syndicated domestically only through a
syndicator that was not owned or controlled by the network. The 1991 Decision
defined a network as an entity regularly providing more than 15 hours per week
of programming during prime-time hours to interconnected affiliated stations
that reached, in the aggregate, at least 75 percent of television households
nationwide. Under this definition, each of ABC, CBS and NBC was subject to the
1991 Rules as a network unless such entity reduced the amount of prime-time
programming it provided to less than 15 hours per week; Fox Broadcasting
Company was not a network for purposes of the Rules because it did not meet the
15 hour per week threshold.
The 1991 Decision was appealed to the United States Court of
Appeals for the Seventh Circuit, which, in early November 1992, overturned the
1991 Decision and remanded the matter to the FCC for further proceedings. In
April 1993, after further proceedings, the FCC voted to further modify the
Rules (the "1993 Decision"), in the following principal respects:
(a) The restrictions contained in the 1991 Decision with
respect to network involvement in first- run syndicated programming within the
United States have been retained. Accordingly, networks (as defined) continue
to be prohibited from acquiring any financial interests in, or actively
syndicating, any first-run syndicated programming within the United States;
provided that networks continue to be permitted to own financial interests and
syndication rights in first-run syndicated programming produced solely
in-house, subject to the active syndication prohibition. That is, networks
must engage independent syndicators to effect the actual distribution of such
programming.
(b) The definition of a network has been retained.
However, the 1993 Decision permanently excludes from the application of the
Rules any entity that did not fall within the definitional criteria as of June
1993. As a result, the Fox Broadcasting Company and other emerging networks
are not and will not be subject to the Rules even if and when they reach the 15
hour per week threshold.
(c) The prohibition contained in the 1991 Decision on
active network syndication in the United States of certain off-network
programming has been made applicable to all network programming, regardless of
whether the program in question was
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produced by a network in-house or when the network came to acquire the
syndication rights.
(d) All other restrictions (except for certain
anti-warehousing rules applicable to off-network programming and reporting
requirements) on network acquisition of financial interest and syndication
rights in United States network programming have been eliminated.
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). In such review proceeding, the burden of proof
will be placed on those (such as the Company) who seek to retain the remaining
restrictions. If, within six months after the launching of such review, the
proponents of retention have failed to persuade the FCC that retention is
justified, the remaining Rules will automatically expire.
The 1993 Decision was appealed to the United States Court of
Appeals for the Seventh Circuit and, in July 1994, it was upheld. However, the
Court's affirmance of the 1993 Decision rested significantly on the procedures
described above, which provide for automatic expiration of the remaining Rules
unless proponents of retention successfully persuade the FCC that retention is
justified.
As a result of these decisions (and the November 1993 decision
by the Federal District Court lifting the Consent Decrees), further proceedings
before the FCC by those (including the Company) that believe the remaining
Rules should be retained must be initiated not later than May 8, 1995. The
Company is unable to predict the outcome of such further proceedings. In any
event, under the terms of the 1993 Decision, network entry into the syndication
business will continue to be governed by the Rules, as modified by the 1993
Decision, for at least six months from the initiation of such proceedings (that
is, at least until November 1995).
The Company anticipates that, if the Rules are permitted to
expire as described above, the Company will have more difficulty licensing its
programming to stations owned and operated by the three major television
networks and that, even if the Company were able to so license its programming,
the profitability of such programming to the Company would, as a result of
terms imposed by such stations, be likely to be reduced. To the extent,
however, that the restrictions on network acquisition of financial interests
in, and active syndication of, first-run syndicated programming within the
United States continue beyond the above-described period, such Rules should not
have a material adverse effect on the Company's first-run syndication
activities.
13
<PAGE> 16
Other FCC Rules
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 the number of stations with overlapping service contours that may be under
common ownership. King World is unable to predict the outcome of these
proceedings. 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 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. Although the Company
has suffered
14
<PAGE> 17
no discernible adverse impact to date, any such future decreases in audience
could come to adversely affect the license fees and revenues from the sale of
retained advertising time received by the Company from its programming. 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 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.
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, and legislation addressing the question of telephone company
entry into the television programming business, are expected. King World is
unable to predict the outcome of any of these 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.
15
<PAGE> 18
BROADCASTING
In December 1988, the Company acquired Buffalo Broadcasting
Co. Inc. ("Buffalo"), which owns and operates WIVB-TV, Channel 4, a VHF
television station in Buffalo, New York. WIVB-TV is affiliated with the CBS
Television Network.
Buffalo entered into a Restructuring Agreement dated as of
April 30, 1992, with its lenders and a newly formed subsidiary of King World,
Buffalo Management Enterprises Co. Inc., providing for a restructuring of
Buffalo's debt and substantial modifications to Buffalo's equity and governance
structure. As a result of such restructuring, Buffalo ceased to be a
consolidated subsidiary of King World. See Note 2 of Notes to Consolidated
Financial Statements.
Employees
As of November 15, 1994, the Company employed 430 persons. Of
this number, 292 are involved in the production of Inside Edition, American
Journal and Rolonda. Thirty-two of the Company's employees are covered by
collective bargaining agreements.
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.
16
<PAGE> 19
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
17
<PAGE> 20
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.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
Fiscal 1993
First Quarter Ended
November 30, 1992 . . . . . . . . . . 33 24 1/4
Second Quarter Ended
February 28, 1993 . . . . . . . . . . 36 32 1/4
Third Quarter Ended
May 31, 1993 . . . . . . . . . . . . . 35 3/4 32
Fourth Quarter Ended
August 31, 1993 . . . . . . . . . . . 38 3/8 32 5/8
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
</TABLE>
As of the close of business on October 31, 1994, there were
835 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".
18
<PAGE> 21
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, 1994, which have been audited and reported upon
by Arthur Andersen LLP, independent public accountants. The unaudited 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.
<TABLE>
<CAPTION>
Statements of Income: Year Ended August 31,
--------------------------------------------------------------------------------------
1994(1) 1994 Pro forma(1) 1993 1992 1991 1990
---- -------------- ---- ---- ---- ----
(unaudited)
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . $480,659 $541,390 $474,312 $503,174 $475,909 $453,749
Income from opera-
tions . . . . . . . . . . . . . . . 127,578 148,151 150,950 152,481 154,084 142,828
Income before provi-
sion for income
taxes . . . . . . . . . . . . . . . . 140,839 161,412 162,592 164,725 154,028 139,651
Net income . . . . . . . . . . . . . . 88,300 101,196 101,936 94,880(2) 90,591(3) 84,100
======== ======== ======== ======= ======== ========
Primary earnings per
share . . . . . . . . . . . . . . . . $ 2.33 $ 2.67 $ 2.65 $ 2.43(2) $ 2.31(3) $ 2.15
======== ======== ======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Balance Sheets: August 31,
--------------------------------------------------------------------------------------
1994(1) 1994 Pro forma(1) 1993 1992 1991 1990
---- -------------- ---- ---- ---- ----
(unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash and invest-
ments . . . . . . . . . . . . . . . . $430,048 $430,048 $384,489 $355,612 $241,915 $153,201
Working capital . . . . . . . . . . . . 294,336 307,232 286,348 273,086 126,489(4) 125,119
Total assets . . . . . . . . . . . . . 569,562 630,293 535,546 498,240 500,834 406,950
Long-term debt . . . . . . . . . . . . -- -- -- -- 97,238(4) 90,683
Stockholders'
equity . . . . . . . . . . . . . . . 459,077 471,973 394,173 342,919 241,655 146,402
======== ======== ======== ======== ======== ========
</TABLE>
19
<PAGE> 22
___________________________
(1) The results of operations for 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 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 will
be recognized in subsequent periods under the modified accounting
practice. The unaudited 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 fiscal quarter
of 1994. 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 2 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 2 of
Notes to Consolidated Financial Statements.
20
<PAGE> 23
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 has 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 has 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 has been
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
will be to cause revenues from certain series to be recognized closer to
the air date than under the prior practice. This effect is greater for
Wheel of Fortune and Jeopardy!, which have a longer lag time between
production and satellite transmission, and less for The Oprah Winfrey Show,
Inside Edition, American Journal and Rolonda, which are produced closer to
the time the shows are transmitted to the licensee. In addition, the
accounting change will eliminate the quarterly revenue and earnings
fluctuations that resulted from 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 will be
21
<PAGE> 24
recognized in subsequent periods under the modified accounting practice.
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 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, and 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 contri-
butions 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 approxi-
mately 36%, 21%, 18% and 8%, respectively, of the Company's
22
<PAGE> 25
revenues for fiscal 1994. American Journal, Rolonda and The Les 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
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 fees payable by the
Company to producers and talent; and production and distribution costs for
first-run syndicated programming. The share of license fees 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 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 other executive
bonuses referred to below.
In December 1993, the Company entered into new employment
agreements with four executive officers. The agreements
23
<PAGE> 26
provide, among other things, for new bonuses that are 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 a result, the Company's
compensation expense will increase if the Common Stock price exceeds the
specified target prices during the applicable measurement periods.
As of August 31, 1994, the first measurement date for such
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 will be met in
future measurement periods and such bonuses will be paid pursuant to the
terms of such employment agreements.
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 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.
COMPARISON OF FISCAL 1993 AND FISCAL 1992
Revenues
The Company's revenues for the year ended August 31, 1993
decreased by approximately 6% over the prior year. The reduction was
primarily due to reduced cash license fees from Wheel of Fortune and, to a
lesser extent, Jeopardy!, reflecting lower license fees per show and the
production of a smaller number of Wheel of Fortune and Jeopardy! shows in
fiscal 1993 as compared to the prior year. Revenues were further reduced
due to the cancellation of Candid Camera, which was not renewed for the
1992-1993 broadcast season. These decreases were partially
24
<PAGE> 27
offset by increases in cash license fees from The Oprah Winfrey Show and
Inside Edition, due to higher license fees per show. In addition, revenues
derived from the sale of retained advertising time on all shows increased
on a per show basis, reflecting a general improvement in the market for
television advertising time.
The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside
Edition accounted for approximately 39%, 24%, 20% and 8%, respectively, of
the Company's revenues for fiscal 1993, compared to 34%, 28%, 20% and 7%,
respectively, for the prior year. Revenues from Candid Camera accounted
for approximately 4% of the Company's revenues for fiscal 1992.
Producers' fees, programming and other direct operating costs
Producers' fees, programming and other direct operating costs
decreased for fiscal 1993, primarily as a result of decreased revenues from
Wheel of Fortune and Jeopardy!, a portion of which is payable to the
producer of such programming, and the elimination of production costs
associated with Candid Camera. This decrease was partially offset by
increased participation fees paid to the producer of The Oprah Winfrey
Show, due to the higher level of revenues generated by the show.
Selling, general and administrative expenses
Selling, general and administrative expenses for fiscal 1993 were
comparable to fiscal 1992. Advertising and promotion expenditures
decreased in fiscal 1993 compared to fiscal 1992, primarily as a result of
substantially higher advertising and promotion expenditures in fiscal 1992
associated with the introduction of Candid Camera and higher advertising
and promotion expenditures for the 1991-1992 season of The Oprah Winfrey
Show. However, such decrease was offset by increases in other areas,
primarily increased costs associated with the development of American
Journal and The Les Brown Show, two new programs produced and distributed
by King World that debuted in first-run syndication in September 1993.
Net income and primary earnings per share
The Company's income before provision for income taxes decreased
slightly in fiscal 1993 compared to the prior year. This was due to the
factors discussed above and slightly lower interest income, reflecting
lower interest rates in fiscal 1993, increased levels of tax-exempt
investments by the Company (which generally have lower yields than taxable
investments of a similar nature) and the use of cash (which had been
invested in interest-bearing instruments) to repurchase Common Stock. The
Company's 1993 financial statements also reflect a slightly lower effective
tax rate, which resulted, despite an increase in the Federal tax
25
<PAGE> 28
rate (enacted in the Company's fourth fiscal quarter but effective
retroactively as of January 1, 1993), primarily from the increased levels
of tax-exempt investments.
In addition, the Company's 1993 financial statements reflect the
absence of the results of operations of Buffalo Broadcasting Co. Inc.
("Buffalo"), formerly a wholly-owned subsidiary of the Company, which was
deconsolidated from the Company's financial statements as a result of a
financial restructuring of Buffalo effective August 4, 1992. The results
of operations of Buffalo decreased net income by $7.7 million and primary
earnings per share by $.20 in fiscal 1992.
Overall, net income for fiscal 1993 increased by $7.1 million or
approximately 7% over the prior year. As a result of such increase in net
income and the smaller weighted average number of shares outstanding
following the Company's repurchases of Common Stock in fiscal 1993, primary
earnings per share increased by $.22, or approximately 9%, in fiscal 1993
compared to the prior year.
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. In the recent past,
the advertising market has been somewhat depressed, although conditions
generally improved in fiscal 1993 compared to fiscal 1992 and the improve-
ment continued into fiscal 1994.
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.
26
<PAGE> 29
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 in 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 fees for such
periods, irrespective of the amount of license fees 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 is due in two installments of $8,625,000 each,
one of which was paid in July 1994 and the other of which is due in July
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. Under the agreement,
the Company has, among other things, agreed to pay Harpo production fees
and to guaranty payments to Harpo at levels which, commencing with the
1995-1996 season, will be substantially higher than those cur-
27
<PAGE> 30
rently 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 $60,000,000 advance against its minimum
participation fees for the 1995-1996 broadcast season. Based on the
license agreements in place for the 1995-1996 broadcast season, the
revenues from the series will be sufficient to cover such amount.
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. As of October
31, 1994, the Company had repurchased an aggregate 40,000 shares in fiscal
1995 for aggregate consideration of approximately $1.44 million (or
approximately $36.00 per share), and as a result, as of such date, there
were 441,700 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.
Commitments and receivables
The Company has entered into agreements with television stations
for the future distribution of program material in television seasons
commencing with the 1994-1995 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 31, 1994,
the gross amount of license fees under such agreements approximated
$2.1 billion, of which approximately $1.2 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, 1994 is subject to the satisfaction of
several condi-
28
<PAGE> 31
tions, 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 1995-1996 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.
As of August 31, 1994 and 1993, the Company's accounts receivable
amounted to approximately $41.4 million and $102.2 million, respectively
(net of allowance for doubtful accounts and unamortized discount to present
value), substantially all of which was due within one year. The lower
level of receivables as of August 31, 1994 compared with August 31, 1993 is
attributable to the change in revenue recognition practice adopted in the
fourth quarter of fiscal 1994. See Note 1 of Notes to Consolidated
Financial Statements.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Financial Statements and Supplementary Data listed in the
accompanying Index to Consolidated Financial Statements and Schedules which
appear elsewhere in this Annual Report. Information required by other
schedules called for under Regulation S-X is either not applicable or is
included in the consolidated financial statements or notes thereto.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
29
<PAGE> 32
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants . . . . . . . . 31
Consolidated Balance Sheets as of August 31, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . 32
Consolidated Statements of Income for the years
ended August 31, 1994, 1993 and 1992 . . . . . . . . . 34
Consolidated Statements of Stockholders' Equity for
the years ended August 31, 1994, 1993 and 1992 . . . . 35
Consolidated Statements of Cash Flows for the years
ended August 31, 1994, 1993 and 1992 . . . . . . . . . 36
Notes to Consolidated Financial Statements . . . . . . . 37
Schedule I - Long-term Investments as of
August 31, 1994 and 1993 . . . . . . . . . . . . . . . 53
</TABLE>
30
<PAGE> 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, 1994 and 1993, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in
the period ended August 31, 1994. These financial statements and the
schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the schedule 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, 1994 and 1993,
and the results of their operations and their cash flows for each of the
three years in the period ended August 31, 1994, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in the
Index to Consolidated Financial Statements and Schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. The schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
Arthur Andersen LLP
New York, New York
October 31, 1994
31
<PAGE> 34
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31,
----------------------
1994 1993
-------- --------
(Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . $341,857 $300,219
Accounts receivable (net of
allowance for doubtful accounts
of $4,412 and $4,212 in 1994 and
1993, respectively) . . . . . . . . 41,231 101,667
Producer loans, advances and
deferred costs . . . . . . . . . . 21,314 25,600
Other current assets . . . . . . . . 419 235
-------- --------
Total current assets . . . . . . . 404,821 427,721
-------- --------
LONG-TERM INVESTMENTS, at
cost, which approximates market . . 88,191 84,270
-------- --------
FIXED ASSETS, at cost:
Furniture and office equipment . . . 7,028 6,766
Leasehold improvements . . . . . . . 1,959 2,195
Film and videotape masters . . . . . 1,644 1,423
-------- --------
10,631 10,384
Less-accumulated depreciation and
amortization . . . . . . . . . . . (9,099) (8,573)
-------- --------
1,532 1,811
-------- --------
OTHER ASSETS:
Producer loans and advances . . . . . 65,500 11,625
Other non-current assets . . . . . . 9,518 10,119
-------- --------
75,018 21,744
-------- --------
$569,562 $535,546
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of these balance sheets.
32
<PAGE> 35
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
August 31,
-------------------
1994 1993
-------- --------
(Dollars in thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities . . . . . . . . . . . . $ 14,780 $ 7,832
Payable to producers and others . . . 69,647 109,016
Income taxes payable:
Current . . . . . . . . . . . . . . 23,506 13,559
Deferred . . . . . . . . . . . . . 2,552 10,966
--------- ---------
Total current liabilities . . . . 110,485 141,373
--------- ---------
COMMITMENTS AND CONTINGENCIES
(Note 5)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
none issued . . . . . . . . . . . . -- --
Common stock, $.01 par value;
75,000,000 shares authorized,
49,722,218 shares and 49,505,363
shares issued in 1994 and 1993,
respectively . . . . . . . . . . . 497 495
Paid-in capital . . . . . . . . . . . 82,171 76,647
Retained earnings . . . . . . . . . . 665,339 577,039
Treasury stock, at cost; 12,960,894
and 12,207,794 shares in 1994 and
1993, respectively . . . . . . . . . (288,930) (260,008)
--------- --------
459,077 394,173
--------- ---------
$ 569,562 $ 535,546
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of these balance sheets.
33
<PAGE> 36
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended August 31,
-----------------------------
1994(1) 1993 1992
-------- -------- --------
(Dollars in thousands except
per share data)
<S> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . $480,659 $474,312 $503,174
-------- -------- --------
EXPENSES:
Producers' fees, programming and
other direct operating costs . . . 279,465 265,357 291,976
Selling, general and admini-
strative expenses . . . . . . . . . 73,616 58,005 58,717
-------- -------- --------
353,081 323,362 350,693
-------- -------- --------
Income from operations . . . . . . . 127,578 150,950 152,481
INTEREST AND DIVIDEND INCOME . . . . . 13,261 11,642 12,244
-------- -------- --------
Income before provision for
income taxes . . . . . . . . . . . 140,839 162,592 164,725
PROVISION FOR INCOME TAXES . . . . . . 52,539 60,656 62,178
NET LOSS FROM DECONSOLIDATED
OPERATION (Note 2) . . . . . . . . . -- -- (7,667)
-------- -------- --------
Net income . . . . . . . . . . . . . $ 88,300 $101,936 $ 94,880
======== ======== ========
PRIMARY EARNINGS PER SHARE . . . . . . $ 2.33 $ 2.65 $ 2.43
======== ======== ========
</TABLE>
____________________
(1) The results of operations for 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
<PAGE> 37
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
----------------------- Paid-in Retained Treasury
Shares $ Capital Earnings Stock
---------- ---- ------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance -
August 31, 1991 . . . . . . 47,254,921 $473 $23,013 $380,223 $ (162,054)
Amortization of deferred
compensation . . . . . . -- -- 3,390 -- --
Exercise of stock options . 118,771 1 2,993 -- --
Net income . . . . . . . . -- -- -- 94,880 --
---------- ---- ------- -------- ----------
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)
Amortization of deferred
compensation . . . . . . -- -- 152 -- --
Exercise of stock options . 216,855 2 5,372 -- --
Purchase of Treasury Stock -- -- -- -- (28,922)
Net income . . . . . . . . -- -- -- 88,300 --
---------- ---- ------- -------- ----------
Balance -
August 31, 1994 . . . . . . 49,722,218 $497 $82,171 $665,339 $ (288,930)
========== ==== ======= ======== ==========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of these statements.
35
<PAGE> 38
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 31,
---------------------------------------
1994 1993 1992
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . $ 88,300 $101,936 $ 94,880
Items not affecting cash:
Net loss from deconsolidated
operation . . . . . . . . . . . -- -- 7,667
Depreciation and amortization . . 577 1,845 1,701
Non-current deferred income
taxes . . . . . . . . . . . . . -- 2,001 1,372
Amortization of deferred
compensation . . . . . . . . . 152 2,898 3,390
Effect of deconsolidated
operation . . . . . . . . . . . -- -- (10,734)
Change in assets and liabilities,
net of deconsolidated operation:
Accounts receivable . . . . . . 60,298 (2,862) (4,067)
Producer loans, advances
and deferred costs . . . . . (49,589) (1,092) 8,836
Accounts payable and accrued
liabilities . . . . . . . . . 6,948 466 2,183
Payable to producers and
others . . . . . . . . . . . (39,369) 1,733 (1,799)
Income taxes payable . . . . . 1,533 (16,147) 8,890
Other, net . . . . . . . . . . . 554 867 (1,290)
-------- -------- --------
Net cash provided by operating
activities . . . . . . . . . . . . 69,404 91,645 111,029
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in investments . . . . . . . (3,921) (47,240) (44,530)
Additions to fixed assets . . . . . . (567) (1,688) (263)
Other . . . . . . . . . . . . . . . . 270 -- (63)
-------- -------- --------
Net cash used in investing
activities . . . . . . . . . . . . (4,218) (48,928) (44,856)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock . . . . . . . . . . . . . . . 5,374 44,374 2,994
Purchase of treasury stock . . . . . (28,922) (97,954) --
-------- -------- --------
Net cash (used in) provided by
financing activities . . . . . . . (23,548) (53,580) 2,994
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS . . . . . . . . 41,638 (10,863) 69,167
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR . . . . . . . . . . 300,219 311,082 241,915
-------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR . . . . . . . . . . . . . $341,857 $300,219 $311,082
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of these statements.
36
<PAGE> 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, including, prior
to the fiscal year ended August 31, 1992, Buffalo Broadcasting Co. Inc.
("Buffalo"), the operator of WIVB-TV, the CBS-affiliated VHF television station
in Buffalo, New York, which the Company acquired on December 5, 1988. 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 has 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 has 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 has been 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 pro-
gramming and in some cases up to three months after the programming is produced,
the effect of adopting the modified practice will be to cause revenues from
certain series to be recognized closer to the air date than under the prior
practice. This effect is greater for Wheel of Fortune and Jeopardy!, which have
a longer lag time between production and satellite transmission, and less for
The Oprah Winfrey Show, Inside Edition, American Journal and Rolonda, which are
produced closer to the time the shows are transmitted to the licensee. In
addition, the account-
37
<PAGE> 40
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of significant accounting policies (continued)
ing change will eliminate the quarterly revenue and earnings fluctuations that
resulted from 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 will
be recognized in subsequent periods under the modified accounting practice.
The following pro forma financial information assumes the Company's
prior revenue recognition practice was in effect for the fourth quarter of
fiscal 1994:
<TABLE>
<CAPTION>
Year Ended August 31,
------------------------------------------
1994 Pro forma 1993 1992
-------------- -------- -------
(unaudited)
(Dollars in thousands except per share data)
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . $541,390 $474,312 $503,174
Income from operations . . . . . . . 148,151 150,950 152,481
Income before provision for
income taxes . . . . . . . . . . . 161,412 162,592 164,725
Net income . . . . . . . . . . . . . 101,196 101,936 94,880
======== ======== ========
Primary earnings per
share . . . . . . . . . . . . . . . $ 2.67 $ 2.65 $ 2.43
======== ======== ========
</TABLE>
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 Jeopar-
38
<PAGE> 41
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of significant accounting policies (continued)
dy!; and Inside Edition, a first-run syndicated series produced and distributed
by the Company. The Oprah Winfrey Show accounted for approximately 41%, 39% and
34% of revenues in fiscal 1994, 1993 and 1992, respectively. Wheel of Fortune
accounted for approximately 17%, 24% and 28% of revenues in fiscal 1994, 1993
and 1992, respectively. Jeopardy! accounted for approximately 15%, 20% and 20%
of revenues in fiscal 1994, 1993 and 1992, respectively. Inside Edition
accounted for approximately 9%, 8% and 7% of revenues in fiscal 1994, 1993 and
1992, respectively. American Journal, which debuted in September 1993, Rolonda,
which debuted in January 1994, and The Les Brown Show, which debuted in
September 1993 but was cancelled in January 1994, accounted for approximately
5%, 2% and 2%, respectively, of the Company's revenues for 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 36%, 21%, 18% and 8%,
respectively, of the Company's revenues for fiscal 1994. American Journal,
Rolonda and The Les Brown Show would have accounted for approximately 4%, 2% and
1%, respectively, of the Company's revenues for fiscal 1994.
The Company distributes The Oprah Winfrey Show pursuant to an
agreement with Harpo, Inc. ("Harpo"), the producer of the series. Under the
terms of the agreement, 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. Under the
agreement, the Company has, among other things, agreed to pay Harpo production
fees and to guaranty payments to Harpo at levels which, commencing with the
1995-1996 season, will be substantially higher than those currently 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 production and distribution
costs and that the Company may not, unless otherwise agreed by Columbia TriStar
Television, distribute game shows for "strip" first-run
39
<PAGE> 42
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of significant accounting policies (continued)
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 fees payable to producers and talent; and
production and distribution costs for first-run syndicated programming. The
share of license fees 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 $29,824,000, $22,783,000 and $25,249,000 in fiscal 1994, 1993 and
1992, respectively.
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 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 three months or less to be cash equivalents.
Accounts receivable
A provision for doubtful accounts of $200,000, $500,000 and $391,000
was recorded in fiscal 1994, 1993 and 1992, respectively. No material write-
offs to the reserve have been made.
Producer loans, advances and deferred costs
Producer advances and deferred costs includes production and promotion
costs, as well as talent and producer partici-
40
<PAGE> 43
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of significant accounting policies (continued)
pation advances, in connection with certain first-run syndicated programs
distributed by the Company for broadcast during seasons subsequent to August 31,
1994. 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 fees
for such periods, irrespective of the amount of license fees 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 is due in two installments of $8,625,000 each, one of which
was paid in July 1994 and the other of which is due in July 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 a
$60,000,000 advance against its minimum participation fees for such season.
Based on the license agreements in place for the 1995-1996 broadcast season, the
revenues from the series will be sufficient to cover such amount.
Long-term investments
Long-term investments are comprised principally of intermediate-term
municipal obligations and United States Treasury and other agency obligations
whose maturities are in excess of one year, and are carried at cost, which
approximates market.
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 $527,000, $1,437,000 and
$1,130,000 in fiscal 1994, 1993 and 1992, respectively.
41
<PAGE> 44
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of significant accounting policies (continued)
Stockholders' equity
Primary earnings per share has been computed using the weighted
average number of common shares outstanding of 37,862,000, 38,408,000 and
39,017,000 for the fiscal years ended August 31, 1994, 1993 and 1992,
respectively, which includes the dilutive effect from the assumed exercise of
vested and unvested stock options outstanding as of the end of the year. The
difference between primary and fully diluted earnings per share for each such
fiscal year was not significant.
The Company is authorized to issue 5,000,000 shares of Preferred
Stock, $.01 par value. The Board of Directors is empowered, without further
stockholder approval, to establish from time to time one or more series of
Preferred Stock and to determine the powers, preferences and special rights of
any unissued series of Preferred Stock, including voting rights, dividend
rights, terms of redemption, liquidation preferences, conversion rights and the
designation of any such series.
Industry segments and customers
As discussed in Note 2, as a result of the deconsolidation of Buffalo
from the Company's financial statements, 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 1994, 1993 and 1992
fiscal years, approximately 11%, 13% and 11%, respectively, of the Company's
revenues were derived from license fees under contracts with a single broadcast
group.
(2) Buffalo Broadcasting Co. Inc.
Buffalo entered into a Restructuring Agreement dated as of April 30,
1992 with its lenders and a newly formed subsidiary of King World, Buffalo
Management Enterprises Co. Inc., providing for a financial restructuring of
Buffalo (the "Restructuring"). The Restructuring became effective on August 4,
1992. Buffalo's lenders and equity holders have indicated their intention to
consummate a sale of Buffalo or its assets before June 30, 1998.
As a result of the Restructuring, Buffalo ceased to be a consolidated
subsidiary of King World. The net losses of Buffalo for the period ended
August 4, 1992, including related tax effects of the deconsolidation, have been
separately classified in the accompanying statement of income for the 1992
fiscal year. Buffalo's net losses amounted to approximately $7.7
42
<PAGE> 45
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
million in fiscal 1992, which had the effect of decreasing primary earnings per
share by $.20 for such fiscal year. King World's remaining investment in the
equity of Buffalo is carried at cost.
(3) Pension and profit sharing plans
Effective September 1992, the King World Productions, Inc. Money
Purchase Pension Plan was renamed the King World Productions, Inc. Retirement
Savings Plan and was modified to include an employee pre-tax salary deferral
contribution program under Section 401(k) of the Internal Revenue Code, with an
employer matching contribution not to exceed 3% of annual compensation per
employee, and a revised employer fixed contribution equal to 3% of annual salary
per employee, subject to a maximum total employer contribution of approximately
$10,000 per employee for fiscal 1994. The plan covers substantially all of the
Company's employees.
Contributions by the Company to the plan and its predecessor plan were
approximately $576,000, $516,000 and $400,000 in fiscal 1994, 1993 and 1992,
respectively.
(4) Income taxes
The components of the Company's provision for income taxes are
summarized below:
<TABLE>
<CAPTION>
Year Ended August 31,
-------------------------------------
1994 1993 1992
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Federal:
Current . . . . . . . . . . . . $51,176 $47,480 $50,382
Deferred . . . . . . . . . . . (7,867) 1,939 232
------- ------- -------
43,309 49,419 50,614
------- ------- -------
State and local:
Current . . . . . . . . . . . . 9,777 11,091 11,546
Deferred . . . . . . . . . . . (547) 146 18
------- ------- -------
9,230 11,237 11,564
------- ------- -------
Total . . . . . . . . . . . $52,539 $60,656 $62,178
======= ======= =======
</TABLE>
The Company reports income tax data in accordance with Statement of
Financial Accounting Standards 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.
Deferred income taxes and benefits are provided for income and expense
items recognized in different years for tax return and
43
<PAGE> 46
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Income taxes (continued)
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. No other
temporary differences give rise to significant deferred tax assets or
liabilities.
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.
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 6.
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:
<TABLE>
<CAPTION>
Year Ended August 31,
---------------------------
1994 1993 1992
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Tax at U.S. statutory
rate . . . . . . . . . . . . . $49,293 $56,371 $56,006
State tax provision, net
of Federal benefit . . . . . . 6,000 7,341 7,632
Tax-exempt interest and
dividend income . . . . . . . . (3,367) (2,723) (1,774)
Other, net . . . . . . . . . . . 613 (333) 314
------- ------- -------
$52,539 $60,656 $62,178
======= ======= =======
</TABLE>
As discussed in Note 2, Buffalo completed a financial restructuring on
August 4, 1992. As a result, Buffalo was deconsolidated from the Company's
financial statements and is no longer included in the Company's consolidated
Federal income tax return.
Income taxes paid approximated $49.8 million, $62.1 million and $56.1
million in fiscal 1994, 1993 and 1992, respectively.
44
<PAGE> 47
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) 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 1994-1995 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 31, 1994, the gross amount of license
fees under such agreements approximated $2.1 billion, of which approximately
$1.2 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, 1994 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 1995-1996
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 $2,599,000, $2,908,000 and
$2,883,000 for fiscal 1994, 1993 and 1992, 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, 1994 were as
follows:
Year Ending August 31,
----------------------
(Dollars in thousands)
1995 . . . . . . . . . $2,175
1996 . . . . . . . . . 1,397
1997 . . . . . . . . . 982
1998 . . . . . . . . . 691
1999 . . . . . . . . . --
Employment and production agreements
As of August 31, 1994, the Company had entered into employment
agreements and agreements with independent contractors relating to programming
being or to be produced by King World
45
<PAGE> 48
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Commitments and contingencies (continued)
which provide for aggregate minimum annual compensation as follows:
Year Ending August 31,
----------------------
(Dollars in thousands)
1995 . . . . . . . . . $18,051
1996 . . . . . . . . . 2,863
1997 . . . . . . . . . 175
1998 . . . . . . . . . --
1999 . . . . . . . . . --
In December 1993, the Company entered into new employment agreements
with four executive officers. The agreements provide, among other things, for
new bonuses that are 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 a result, the Company's
compensation expense will increase if the Common Stock price exceeds the
specified target prices during the applicable measurement periods.
As of August 31, 1994, the first measurement date for such 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 will be met in future measurement
periods and such bonuses will be paid pursuant to the terms of such employment
agreements.
Legal matters
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of 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.
(6) 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
46
<PAGE> 49
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Stock plans (continued)
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 market value of such shares on the date of the
award. The Compensation Committee has the right to determine vesting provi-
sions, transfer restrictions and other conditions or restrictions with respect
to each award, including a condition that under certain circumstances the
Company may, but is not required to, purchase any shares that have not become
vested. 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
and the President was granted non-qualified stock
47
<PAGE> 50
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Stock plans (continued)
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, 1993 and 1994, and options
forfeited and exercised during fiscal 1993 and 1994, together with the option
prices:
<TABLE>
<CAPTION>
Option/Stock
Plan
---------------------------
Non-Qualified Executive
Fiscal 1993 ISOs Options Plan
----------- --------------------------- ----------
<S> <C> <C> <C>
Granted . . . . . . . . -- 276,750 --
Prices ranging:
From . . . . . . . -- $ 24.25 --
To . . . . . . . . -- $ 34.75 --
Forfeited . . . . . . . -- 47,600 --
Exercised . . . . . . . 34,814 299,857 1,797,000
Prices ranging:
From . . . . . . . $ 1.45 $ .01 $ .01
To . . . . . . . . $ 26.59 $ 28.50 $ 15.75
Outstanding at
August 31, 1993 . . . 110,550 1,219,734 510,000
Exercisable at
August 31, 1993 . . . 58,800 482,284 510,000
Prices ranging:
From . . . . . . . $ 7.05 $ .01 $ .01
To . . . . . . . . $ 33.63 $ 31.63 $ 15.75
Available for
grant at
August 31, 1993 . . . 320,198 --
--------------------------- ----------
</TABLE>
<TABLE>
Option/Stock
Plan
---------------------------
Non-Qualified Executive
Fiscal 1994 ISOs Options Plan
----------- --------------------------- ----------
<S> <C> <C> <C>
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
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 --
--------------------------- ----------
</TABLE>
48
<PAGE> 51
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Stock plans (continued)
In addition, in connection with the two most recent extensions of the
Company's rights to distribute The Oprah Winfrey Show, 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 $33.375 per share. The Company has also
agreed to grant the principals of Harpo additional options to purchase an
aggregate 250,000 shares of Common Stock with respect to each broadcast season
from the 1996-1997 season through the 1999-2000 season for which The Oprah
Winfrey Show is produced for distribution by the Company, at a per share
exercise price equal to the closing price of the Common Stock on the date Harpo
elects to produce such series for such additional season.
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 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, 1994 and 1993 was not significant. Compensation expense
relating to stock option grants of $152,000, $2,898,000 and $3,390,000 was
recorded in fiscal 1994, 1993 and 1992, respectively.
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 reductions 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 reductions added to paid-in capital approximated $1,162,000,
$12,765,000 and $2,172,000 in fiscal 1994, 1993 and 1992, respectively.
(7) 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
49
<PAGE> 52
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) Stock repurchases (continued)
financed out of the Company's available cash and liquid investments.
Also on December 18, 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. As of October 31, 1994, the Company had repurchased an
aggregate 40,000 shares in fiscal 1995 for aggregate consideration of
approximately $1.44 million (or approximately $36.00 per share), and as a
result, as of such date, there were 441,700 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.
50
<PAGE> 53
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) Quarterly financial summaries (unaudited)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th Fiscal 4th Quarter Fiscal Year
Quarter Quarter Quarter Quarter(1) Year(1) Pro forma(1) Pro forma(1)
-------- -------- -------- ---------- -------- ------------ ------------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
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
======== ======== ======== ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
1st 2nd 3rd 4th Fiscal
Quarter Quarter Quarter Quarter Year
-------- -------- -------- ------- ------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . $169,714 $113,079 $ 87,939 $103,580 $474,312
Revenues less
direct costs . . . . . . . 75,891 50,999 40,958 41,107 208,955
Income before
provision
for income
taxes . . . . . . . . . . . 61,114 38,997 29,820 32,661 162,592
Net income . . . . . . . . . 38,502 24,053 18,649 20,732 101,936
Primary earnings
per share . . . . . . . . . $ .98 $ .62 $ .49 $ .55 $ 2.65
======== ======== ======== ======== ========
</TABLE>
______________________
(1) Reflects 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 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 unaudited 1994 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 the
fourth fiscal quarter of 1994. See Note 1.
The results of operations for the first three quarters of fiscal 1994,
and all four quarters of fiscal 1993, 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). 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. Commencing
with the fourth quarter of fiscal 1994, the results of operations employ a
modified revenue recognition practice pursuant to which 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
51
<PAGE> 54
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) Quarterly financial summaries (unaudited) (continued)
the licensee via satellite transmission, rather than at the time the show
is produced.
52
<PAGE> 55
SCHEDULE I
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
LONG-TERM INVESTMENTS
August 31, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
Name of Issuer Aggregate
and Number of Aggregate Market Balance Sheet
Title of Issue Shares or Units Cost Value Carrying Value
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
August 31, 1993
State and Municipal
Obligations (1) 77.441 $79,270 $79,537 $79,270
U.S. Government Agency
Obligations 5.000 5,000 5,028 5,000
------ ------- ------- -------
82.441 $84,270 $84,565 $84,270
====== ======= ======= =======
August 31, 1994
State and Municipal
Obligations (1) 79.69 $82,833 $82,387 $82,833
U.S. Government Agency
Obligations 4.40 4,358 4,370 4,358
Certificates of Deposit 1.00 1,000 1,000 1,000
------ ------- ------- -------
85.09 $88,191 $87,757 $88,191
====== ======= ======= =======
</TABLE>
____________________
(1) Represents obligations of various states and municipalities, none of which
individually exceeds 2% of the Company's total assets.
53
<PAGE> 56
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 1995 annual
meeting of stockholders, which is to be filed pursuant to Regulation 14A not
later than December 29, 1994.
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 and Schedule 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 Registrant's Registration Statement No. 2-93987).
54
<PAGE> 57
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 (incorporated by reference to Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1990).
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:
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
Anthony E. Hull . . . . May 20, 1994
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).
____________________
* Certain information in this exhibit is deleted pursuant to an order of
the Securities and Exchange Commission granting confidential treatment.
55
<PAGE> 58
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. (incorporated by
reference to Exhibit 10.17 to the Registrant's Annual Report on Form
10-K for the fiscal year ended August 31, 1990).
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).
10.16. 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).
10.17. 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).
10.18. Stock Option Agreement dated as of March 17, 1994 between the
registrant and Oprah Winfrey.
____________________
* Certain information in this exhibit is deleted pursuant to an order of
the Securities and Exchange Commission granting confidential treatment.
56
<PAGE> 59
10.19. Stock Option Agreement dated as of March 17, 1994 between the
registrant and Jeffrey D. Jacobs.
10.20.* 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.
10.21.* 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).
10.22** Amendment dated June 13, 1994 to the Agreement dated June 2, 1998,
as amended as of June 13, 1989 and September 19, 1991, between King
World F.S.C. Corporation and Unilever N.V.
10.23. 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).
10.24. 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, 1993:
None.
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 under-
takes as follows, which undertaking shall
57
<PAGE> 60
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
<PAGE> 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 28, 1994 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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
President and November 28, 1994
Director (principal
/s/ Michael King executive officer)
- -----------------------
Michael King
/s/ Roger King Director November 28, 1994
- -----------------------
Roger King
/s/ Stephen W. Palley Director November 28, 1994
- -----------------------
Stephen W. Palley
/s/ Diana King Director November 28, 1994
- -----------------------
Diana King
/s/ Richard King Director November 28, 1994
- -----------------------
Richard King
/s/ Ronald Konecky Director November 28, 1994
- -----------------------
Ronald S. Konecky
/s/ James M. Rupp Director November 28, 1994
- -----------------------
James M. Rupp
</TABLE>
59
<PAGE> 62
<TABLE>
<S> <C> <C>
/s/ Joel Chaseman Director November 28, 1994
- ----------------------
Joel Chaseman
/s/ Anthony E. Hull Chief Financial November 28, 1994
- ---------------------- Officer (principal
Anthony E. Hull financial officer)
/s/ Steven A. LoCascio Vice President and November 28, 1994
- ---------------------- Controller
Steven A. LoCascio (principal accounting
officer)
</TABLE>
60
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------- ----------- ----
<S> <C> <C>
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 (incorporated by
reference to Exhibit 10.5 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended August 31, 1990).
</TABLE>
____________________
* Certain information in this exhibit is deleted pursuant to an order of
the Securities and Exchange Commission granting confidential treatment.
<PAGE> 64
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------- ----------- ----
<S> <C> <C>
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:
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
Anthony E. Hull . . . . May 20, 1994
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).
10.11. Form of Indemnification Agreement between the Registrant and
the Registrant's directors (incorporated by reference
to Exhibit 10.15 to the
</TABLE>
____________________
* Certain information in this exhibit is deleted pursuant to an order of
the Securities and Exchange Commission granting confidential treatment.
2
<PAGE> 65
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------- ----------- ----
<S> <C> <C>
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. (incorporated by reference to Exhibit 10.17 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1990).
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. 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).
10.17. 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).
10.18. Stock Option Agreement dated as of March 17, 1994 between
the registrant and Oprah Winfrey.
</TABLE>
____________________
* Certain information in this exhibit is deleted pursuant to an order of
the Securities and Exchange Commission granting confidential treatment.
3
<PAGE> 66
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------- ----------- ----
<S> <C> <C>
10.19. Stock Option Agreement dated as of March 17, 1994 between
the registrant and Jeffrey D. Jacobs.
10.20.* 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.
10.21.* 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).
10.22** 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.
10.23. 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).
10.24. 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.
</TABLE>
____________________
* Certain information in this exhibit is deleted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment.
** Certain information in this exhibit is deleted pursuant to a request to
the Securities and Exchange Commission for confidential treatment.
4
<PAGE> 1
EXHIBIT 10.6
KING WORLD PRODUCTIONS, INC.
1700 Broadway
New York, New York 10019
December 21, 1993
Mr. Roger King
c/o King World Productions, Inc.
Phillips Point West Tower
777 South Flager Drive, Suite 702
West Palm Beach, Florida 33401
Dear Roger:
This letter, when accepted by you, shall constitute an
agreement between you and King World Productions, Inc. ("King World" or the
"Company") with respect to the terms upon which you will be employed by King
World during the Employment Period (as hereinafter defined).
1. During the Employment Period, King World shall employ
you, and you hereby accept employment by King World, in the capacity of
Chairman of the Board and head of the Company's sales department, on the terms
and subject to the conditions set forth in this Agreement. The "Employment
Period" shall mean the period commencing on September 1, 1993 and ending on
August 31, 1995 or such earlier date on which this Agreement is terminated
pursuant to the provisions of Section 9 hereof. During the Employment Period,
you shall perform such services as shall from time to time be reasonably
assigned to you by, or pursuant to resolution of, King World's Board of
Directors and diligently devote your entire business time, skill and attention
to the performance of such services and your duties and obligations hereunder.
2. As consideration for the services rendered by you
hereunder, you shall be entitled to salary compensation at the annual rate of
$1,000,000 for the Company's fiscal year ending August 31, 1994 and $1,050,000
for the Company's fiscal year ending August 31, 1995. Your salary compensation
shall be payable in accordance with King World's standard payroll policy from
time to time in effect.
3. (a) As further consideration for the services
rendered by you hereunder, and in order to induce you to accept employment with
King World on the terms and conditions set forth
<PAGE> 2
2
herein, King World shall grant to you, as soon as practicable after the
commencement of the Employment Period, an aggregate 120,000 phantom stock units
(the "Stock Units"), of which 40,000 will become eligible for redemption on
August 31, 1994 and an additional 20,000 will become eligible for redemption on
the last day of each succeeding fiscal quarter during the Employment Period
(August 31, 1994 and each such quarterly date being herein called a "Redemption
Date"); and an aggregate 270,000 Stock Appreciation Units (the "Stock
Appreciation Units"), of which 90,000 will become eligible for redemption on
August 31, 1994 and an additional 45,000 will become eligible for redemption on
each remaining Redemption Date. The Stock Units and the Stock Appreciation
Units (together, the "Units") will be redeemable only in cash, and the
Compensation Committee of the Board of Directors (the "Compensation Committee")
will be responsible for determining the amounts received upon redemption in the
manner described below.
(b) If on a Redemption Date, the average of the daily
closing prices of the Common Stock, $.01 par value, of the Company (the "Common
Stock"), during the ten (10) business days ending on the Redemption Date
("Average Price") is equal to or greater than the Minimum Redemption Price (as
hereinafter defined) applicable to such Redemption Date, then each Stock Unit
that became eligible for redemption on such Redemption Date will be redeemed
for a cash amount per Unit equal to the Average Price for such Redemption Date.
The "Minimum Redemption Price" for each successive Redemption Date will be
$38.875, the closing price of King World Common Stock on the New York Stock
Exchange (the "NYSE") on the date of this Agreement (the "Contract Date"),
increased for each successive Redemption Date by an appreciation factor
calculated at the rate of 5% per annum (determined on a non-cumulative basis
and pro rated for partial fiscal years) over the closing price of the Common
Stock on the Contract Date. If, on any Redemption Date, the applicable Average
Price is less than the applicable Minimum Redemption Price, then Stock Units
that became eligible for redemption on such Redemption Date will be carried
forward, will continue to be eligible for redemption and will be redeemed on
the next succeeding Redemption Date on which the then-applicable Average Price
equals or exceeds the Minimum Redemption Price on the Redemption Date on which
such Stock Units first became eligible for redemption. If and to the extent
that any Stock Units have not been redeemed on or before the redemption
associated with the August 31, 1995 Redemption Date, they will expire.
(c) If on a Redemption Date, the Average Price
(determined in same manner as described above) is greater than $38.875,
<PAGE> 3
3
the closing price of King World Common Stock on the NYSE on the Contract Date
(the "Appreciation Unit Base Price"), then each Stock Appreciation Unit that
became eligible for redemption on such Redemption Date will be redeemed for a
cash amount equal to the excess of such Average Price over the Appreciation
Unit Base Price. If on any Redemption Date, the applicable Average Price is
not greater than the Appreciation Unit Base Price, then all Stock Appreciation
Units that became eligible for redemption on such Redemption Date (or were not
previously redeemed and were carried forward from a prior Redemption Date) will
be carried forward to the next Redemption Date, will again be eligible for
redemption and will be redeemed on the next succeeding Redemption Date on which
the then-applicable Average Price exceeds the Appreciation Unit Base Price. If
and to the extent that any Stock Appreciation Units have not been redeemed on
or before the redemption associated with the August 31, 1995 Redemption Date,
they will expire.
(d) In the event that the Company is required to withhold
any Federal, state or local taxes in respect of any compensation income
realized by you in respect of the redemption of Units as provided herein, the
Company shall deduct the aggregate amount of such Federal, state or local taxes
you will be required to pay to the Company, or to make other arrangements
satisfactory to the Company regarding payment to the Company of, the aggregate
amount of such taxes.
4. (a) With respect to each fiscal year of the Company
ending within (or upon the termination of) the Employment Period, you shall be
entitled to a bonus equal to 1.5% of the Consolidated Net Income of the Company
for such fiscal year, provided that the Compensation Committee determines that
the Company's return on equity exceeds the average annual return on equity of
the companies comprising the Standard and Poor's Composite Index of 500 Stocks
for the most recent comparable period for which published information is
available to the Compensation Committee at the time such determination is made
(the "S&P Average Return on Equity"). "Consolidated Net Income" shall mean,
for the purposes of this Agreement, the Company's net income after taxes but
before all extraordinary items of the Company and its consolidated subsidiaries
as reported in its financial statements filed with the Securities and Exchange
Commission.
(b) At the end of each of the first three fiscal quarters of
each fiscal year in which you are eligible for a bonus hereunder, the
Compensation Committee shall make an interim determination as to whether the
Company's return on equity from
<PAGE> 4
4
the beginning of such fiscal year through the end of such quarter exceeded the
S&P Average Return on Equity for the most recent comparable period for which
published information is available to the Compensation Committee and, if the
Compensation Committee so determines, an interim bonus payment will be made to
you in an amount equal to 1.5% of Consolidated Net Income for such quarter;
provided, however, that if, in the sole judgment of the Compensation Committee,
it is more likely than not that you will not entitled to a bonus in respect of
such year (because the Company's return on equity for the full fiscal year will
not exceed the S&P Average Return on Equity for such year), then such interim
bonus payment shall be deferred until such time as the Compensation Committee
determines that you are, or are reasonably certain to be, entitled to a bonus
in respect of such year.
(c) At the end of each fiscal year in which you are eligible
for a bonus hereunder, the Compensation Committee shall make a final
determination as to whether the Company's return on equity for such year
exceeded the S&P Average Return on Equity and, if the Compensation Committee so
determines, a final bonus payment shall be made such that the sum of all
interim bonus payments due in such year plus such final payment shall be equal
to 1.5% of Consolidated Net Income for such year. In the event that interim
bonus payments have been made in any fiscal year as to which the Compensation
Committee finally determines that the Company's return on equity did not exceed
the S&P Average Return on Equity, then such interim payments shall be deemed to
be indebtedness to the Company incurred by you as of the respective dates of
payment to you and shall be offset against amounts otherwise payable to you
pursuant to Sections 2, 3, 4 and 5 hereof. If such indebtedness has not been
repaid in full on or prior to the termination of the Employment Period, any
amounts remaining outstanding shall be repaid in full within thirty days after
the termination of the Employment Period.
5. (a) In addition to the bonus payable pursuant to
Section 4 hereof, you shall be entitled to a "New Show Bonus" for new first-run
"strip" (i.e., Monday-Friday) syndicated series that are first broadcast in any
of the 1993-1994, 1994-1995 or 1995-1996 television seasons and cleared at any
time over the course of any such season in domestic television markets covering
at least 70% of the domestic television viewing households (each of which
series is hereinafter referred to as a "New Show"). It is understood and
agreed that no series currently being aired is a New Show, but that Rolonda,
which is scheduled to premiere on January 17, 1994, is a New Show.
<PAGE> 5
5
(b) The New Show Bonus shall be equal to $750,000 in the
case of the first New Show, $500,000 in the case of the second New Show, and
$250,000 in the case of the third New Show. In addition, you shall be
entitled to a New Show Bonus in the amount of $250,000 upon the Company's
receipt of orders for at least thirteen weeks of a series developed by the
Company from an over-the-air television network for broadcast in any of the
1993-1994, 1994-1995 or 1995-1996 television seasons. Notwithstanding the
foregoing, in no event will you be entitled to a New Show Bonus in any fiscal
year in excess of $1.5 million. The Compensation Committee will be responsible
for determining whether the criteria for the granting of a New Show Bonus have
been satisfied and for determining the amount of such bonus. New Show Bonuses
will be paid, if at all, in cash, promptly after such determinations are made.
6. Notwithstanding anything to the contrary contained
herein, the grant of the Stock Units and Stock Appreciation Units described in
Section 3 hereof, the bonus described in Section 4 hereof and the New Show
Bonus described in Section 5 hereof are subject to approval of the stockholders
of the Company and any additional approvals or consents that may, in the
reasonable opinion of counsel to the Company, be necessary or desirable for the
Company to obtain. In the event that such approvals are not obtained on or
prior to August 31, 1994, then you and the Company shall negotiate in good
faith for the purpose of agreeing upon a mutually acceptable cash substitute of
equivalent value for the Stock Units and Stock Appreciation Units, the bonus
and the New Show Bonus (which may also be subject to stockholder and other
approvals). If, after good-faith negotiation, you and the Company cannot so
agree, then you may, in your sole discretion, terminate this Agreement.
7. You shall be entitled to participate, on the same
basis and subject to the same qualifications as King World's other executive
officers, in any pension, life insurance, health insurance or hospitalization
plan or other similar plan from time to time in effect with respect to King
World's executive officers or employees generally.
8. The Company shall, during the Employment Period,
reimburse you for such expenses as shall be incurred by you in connection with
the performance of your duties hereunder, provided that you furnish to us
evidence of such expenses reasonably satisfactory to us.
9. (a) This Agreement shall terminate (i) upon your
death, (ii) thirty (30) days' after written notice to you from
<PAGE> 6
6
King World's Board of Directors in the event that you have been unable to
perform the duties required of you pursuant to this Agreement for ninety (90)
days during any twelve month period during the Employment Period (whether or
not such ninety (90) days are consecutive) by reason of illness or other
incapacity and King World's Board of Directors determines to terminate this
Agreement for such reason or (iii) immediately upon written notice to you in
the event that King World's Board of Directors determines to terminate this
Agreement for Cause. For the purposes of this Agreement, "Cause" shall mean
(1) the habitual failure of you, or the habitual neglect by you, to
substantially perform your duties under this Agreement, other than any such
failure or neglect resulting from your physical or mental incapacity or (2) the
engaging by you in an act or acts of dishonesty intended to result directly or
indirectly in gain or personal enrichment at the expense of the Company.
(b) Termination of this Agreement shall terminate all of
your rights hereunder from and after the effective date of termination except
for your rights to salary and benefits which have accrued but are unpaid at the
effective date of termination, and except that in the event that your full-time
employment with the Company is terminated on account of your death, disability
or incapacity, the cash bonus provided for in Section 4 shall continue to be
payable as provided therein, and the Units granted pursuant to Section 3 hereof
shall continue to be eligible for redemption and shall be redeemed (if at all)
as provided therein, in each case through the end of the fiscal year in which
your death, disability or incapacity occurred. (The foregoing is not intended
to relieve or release the Company from any liability for damages to you if the
Company wrongfully terminates this Agreement.) In no event shall termination
of this Agreement for any reason terminate any of your obligations under
paragraphs 10, 11, 12 and 13 hereof.
10. Except as required in connection with the performance
of services hereunder, you shall not, during or after the termination of the
Employment Period, use of disclose to any person any confidential business
information or trade secrets of King World or any of its affiliates or business
associates that you obtained or learned during the Employment Period or in the
course of your employment by the Company, including, but not limited to,
confidential business information regarding the type and nature of the
contracts entered into by the Company or its affiliates for the acquisition or
distribution of television programming.
<PAGE> 7
7
11. You hereby agree that you shall not, during the
Employment Period and for a period of two (2) years following the termination
of the Employment Period, (i) induce, directly or indirectly, any person from
whom or from which King World or any of its affiliates acquired television
programming to terminate his or its agreement with King World or such affiliate
with respect to such programming, to refuse to renew any such agreement or to
refuse to furnish to King World or its affiliates with any other television
programming or (ii) induce, directly or indirectly, any employee of King World
or any affiliate thereof to terminate his or her employment with King World or
such affiliate.
12. You hereby agree that all ideas, creations,
improvements and other works of authorship created, developed, written or
conceived, individually or jointly by you, at any time during the Employment
Period are works for hire within the scope of your employment and shall be our
property free of any claim whatever by you or any person claiming any rights or
interests through you.
13. Each of you and King World (the "Indemnitor"), agrees
to indemnify and hold harmless the other from and against any and all loss,
damage, claim, liability, cost and expense, including reasonable attorneys
fees, incurred by the other as a result of, or arising out of or in connection
with, a violation by the Indemnitor of any term, covenant or condition required
by this Agreement to be performed or observed by the Indemnitor.
14. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York and constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof. No waiver or modification of any terms hereof shall be valid unless in
writing signed by the party against whom such waiver is sought to be enforced,
and
<PAGE> 8
8
then only to the extent set forth in such writing. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
successors, assigns, heirs, administrators and executors.
Yours very truly,
KING WORLD PRODUCTIONS, INC.
By /s/ STEPHEN W. PALLEY
-------------------------
Accepted as of the date
first above written:
/s/ ROGER KING
- -------------------
Roger King
<PAGE> 9
EXHIBIT 10.6
KING WORLD PRODUCTIONS, INC.
1700 Broadway
New York, New York 10019
December 21, 1993
Mr. Michael King
c/o King World Productions, Inc.
12400 Wilshire Boulevard, Suite 1200
Los Angeles, California 90025
Dear Michael:
This letter, when accepted by you, shall constitute an
agreement between you and King World Productions, Inc. ("King World" or the
"Company") with respect to the terms upon which you will be employed by King
World during the Employment Period (as hereinafter defined).
1. During the Employment Period, King World shall employ
you, and you hereby accept employment by King World, in the capacity of
President and Chief Executive Officer of King World, on the terms and subject
to the conditions set forth in this Agreement. The "Employment Period" shall
mean the period commencing on September 1, 1993 and ending on August 31, 1995
or such earlier date on which this Agreement is terminated pursuant to the
provisions of Section 9 hereof. During the Employment Period, you shall
perform such services as shall from time to time be reasonably assigned to you
by, or pursuant to resolution of, King World's Board of Directors and
diligently devote your entire business time, skill and attention to the
performance of such services and your duties and obligations hereunder.
2. As consideration for the services rendered by you
hereunder, you shall be entitled to salary compensation at the annual rate of
$1,000,000 for the Company's fiscal year ending August 31, 1994 and $1,050,000
for the Company's fiscal year ending August 31, 1995. Your salary compensation
shall be payable in accordance with King World's standard payroll policy from
time to time in effect.
3. (a) As further consideration for the services
rendered by you hereunder, and in order to induce you to accept employment with
King World on the terms and conditions set forth
<PAGE> 10
2
herein, King World shall grant to you, as soon as practicable after the
commencement of the Employment Period, an aggregate 120,000 phantom stock units
(the "Stock Units"), of which 40,000 will become eligible for redemption on
August 31, 1994 and an additional 20,000 will become eligible for redemption on
the last day of each succeeding fiscal quarter during the Employment Period
(August 31, 1994 and each such quarterly date being herein called a "Redemption
Date"); and an aggregate 270,000 Stock Appreciation Units (the "Stock
Appreciation Units"), of which 90,000 will become eligible for redemption on
August 31, 1994 and an additional 45,000 will become eligible for redemption on
each remaining Redemption Date. The Stock Units and the Stock Appreciation
Units (together, the "Units") will be redeemable only in cash, and the
Compensation Committee of the Board of Directors (the "Compensation Committee")
will be responsible for determining the amounts received upon redemption in the
manner described below.
(b) If on a Redemption Date, the average of the daily
closing prices of the Common Stock, $.01 par value, of the Company (the "Common
Stock"), during the ten (10) business days ending on the Redemption Date
("Average Price") is equal to or greater than the Minimum Redemption Price (as
hereinafter defined) applicable to such Redemption Date, then each Stock Unit
that became eligible for redemption on such Redemption Date will be redeemed
for a cash amount per Unit equal to the Average Price for such Redemption Date.
The "Minimum Redemption Price" for each successive Redemption Date will be
$38.875, the closing price of King World Common Stock on the New York Stock
Exchange (the "NYSE") on the date of this Agreement (the "Contract Date"),
increased for each successive Redemption Date by an appreciation factor
calculated at the rate of 5% per annum (determined on a non-cumulative basis
and pro rated for partial fiscal years) over the closing price of the Common
Stock on the Contract Date. If, on any Redemption Date, the applicable Average
Price is less than the applicable Minimum Redemption Price, then Stock Units
that became eligible for redemption on such Redemption Date will be carried
forward, will continue to be eligible for redemption and will be redeemed on
the next succeeding Redemption Date on which the then-applicable Average Price
equals or exceeds the Minimum Redemption Price on the Redemption Date on which
such Stock Units first became eligible for redemption. If and to the extent
that any Stock Units have not been redeemed on or before the redemption
associated with the August 31, 1995 Redemption Date, they will expire.
(c) If on a Redemption Date, the Average Price
(determined in same manner as described above) is greater than $38.875,
<PAGE> 11
3
the closing price of King World Common Stock on the NYSE on the Contract Date
(the "Appreciation Unit Base Price"), then each Stock Appreciation Unit that
became eligible for redemption on such Redemption Date will be redeemed for a
cash amount equal to the excess of such Average Price over the Appreciation
Unit Base Price. If on any Redemption Date, the applicable Average Price is
not greater than the Appreciation Unit Base Price, then all Stock Appreciation
Units that became eligible for redemption on such Redemption Date (or were not
previously redeemed and were carried forward from a prior Redemption Date) will
be carried forward to the next Redemption Date, will again be eligible for
redemption and will be redeemed on the next succeeding Redemption Date on which
the then-applicable Average Price exceeds the Appreciation Unit Base Price. If
and to the extent that any Stock Appreciation Units have not been redeemed on
or before the redemption associated with the August 31, 1995 Redemption Date,
they will expire.
(d) In the event that the Company is required to withhold
any Federal, state or local taxes in respect of any compensation income
realized by you in respect of the redemption of Units as provided herein, the
Company shall deduct the aggregate amount of such Federal, state or local taxes
you will be required to pay to the Company, or to make other arrangements
satisfactory to the Company regarding payment to the Company of, the aggregate
amount of such taxes.
4. (a) With respect to each fiscal year of the Company
ending within (or upon the termination of) the Employment Period, you shall be
entitled to a bonus equal to 1.5% of the Consolidated Net Income of the Company
for such fiscal year, provided that the Compensation Committee determines that
the Company's return on equity exceeds the average annual return on equity of
the companies comprising the Standard and Poor's Composite Index of 500 Stocks,
based on the most recent published information available to the Compensation
Committee at the time such determination is made (the "S&P Average Return on
Equity"). "Consolidated Net Income" shall mean, for the purposes of this
Agreement, the Company's net income after taxes but before all extraordinary
items of the Company and its consolidated subsidiaries as reported in its
financial statements filed with the Securities and Exchange Commission.
(b) At the end of each of the first three fiscal quarters of
each fiscal year in which you are eligible for a bonus hereunder, the
Compensation Committee shall make an interim determination as to whether the
Company's return on equity from the beginning of such fiscal year through the
end of such quarter
<PAGE> 12
4
exceeded the S&P Average Return on Equity for the most recent comparable period
for which published information is available to the Compensation Committee and,
if the Compensation Committee so determines, an interim bonus payment will be
made to you in an amount equal to 1.5% of Consolidated Net Income for such
quarter; provided, however, that if, in the sole judgment of the Compensation
Committee, it is more likely than not that you will not entitled to a bonus in
respect of such year (because the Company's return on equity for the full
fiscal year will not exceed the S&P Average Return on Equity for such year),
then such interim bonus payment shall be deferred until such time as the
Compensation Committee determines that you are, or are reasonably certain to
be, entitled to a bonus in respect of such year.
(c) At the end of each fiscal year in which you are eligible
for a bonus hereunder, the Compensation Committee shall make a final
determination as to whether the Company's return on equity for such year
exceeded the S&P Average Return on Equity and, if the Compensation Committee so
determines, a final bonus payment shall be made such that the sum of all
interim bonus payments due in such year plus such final payment shall be equal
to 1.5% of Consolidated Net Income for such year. In the event that interim
bonus payments have been made in any fiscal year as to which the Compensation
Committee finally determines that the Company's return on equity did not exceed
the S&P Average Return on Equity, then such interim payments shall be deemed to
be indebtedness to the Company incurred by you as of the respective dates of
payment to you and shall be offset against amounts otherwise payable to you
pursuant to Sections 2, 3, 4 and 5 hereof. If such indebtedness has not been
repaid in full on or prior to the termination of the Employment Period, any
amounts remaining outstanding shall be repaid in full within thirty days after
the termination of the Employment Period.
5. (a) In addition to the bonus payable pursuant to
Section 4 hereof, you shall be entitled to a "New Show Bonus" for new first-run
"strip" (i.e., Monday-Friday) syndicated series that are first broadcast in any
of the 1993-1994, 1994-1995 or 1995-1996 television seasons and cleared at any
time over the course of any such season in domestic television markets covering
at least 70% of the domestic television viewing households (each of which
series is hereinafter referred to as a "New Show"). It is understood and
agreed that no series currently being aired is a New Show, but that Rolonda,
which is scheduled to premiere on January 17, 1994, is a New Show.
(b) The New Show Bonus shall be equal to $750,000 in the
case of the first New Show, $500,000 in the case of the
<PAGE> 13
5
second New Show, and $250,000 in the case of the third New Show. In
addition, you shall be entitled to a New Show Bonus in the amount of $250,000
upon the Company's receipt of orders for at least thirteen weeks of a series
developed by the Company from an over-the-air television network for broadcast
in any of the 1993-1994, 1994-1995 or 1995-1996 television seasons.
Notwithstanding the foregoing, in no event will you be entitled to a New Show
Bonus in any fiscal year in excess of $1.5 million. The Compensation Committee
will be responsible for determining whether the criteria for the granting of a
New Show Bonus have been satisfied and for determining the amount of such
bonus. New Show Bonuses will be paid, if at all, in cash, promptly after such
determinations are made.
6. Notwithstanding anything to the contrary contained
herein, the grant of the Stock Units and Stock Appreciation Units described in
Section 3 hereof, the bonus described in Section 4 hereof and the New Show
Bonus described in Section 5 hereof are subject to approval of the stockholders
of the Company and any additional approvals or consents that may, in the
reasonable opinion of counsel to the Company, be necessary or desirable for the
Company to obtain. In the event that such approvals are not obtained on or
prior to August 31, 1994, then you and the Company shall negotiate in good
faith for the purpose of agreeing upon a mutually acceptable cash substitute of
equivalent value for the Stock Units and Stock Appreciation Units, the bonus
and the New Show Bonus (which may also be subject to stockholder and other
approvals). If, after good-faith negotiation, you and the Company cannot so
agree, then you may, in your sole discretion, terminate this Agreement.
7. You shall be entitled to participate, on the same
basis and subject to the same qualifications as King World's other executive
officers, in any pension, life insurance, health insurance or hospitalization
plan or other similar plan from time to time in effect with respect to King
World's executive officers or employees generally.
8. The Company shall, during the Employment Period,
reimburse you for such expenses as shall be incurred by you in connection with
the performance of your duties hereunder, provided that you furnish to us
evidence of such expenses reasonably satisfactory to us.
9. (a) This Agreement shall terminate (i) upon your
death, (ii) thirty (30) days' after written notice to you from King World's
Board of Directors in the event that you have been unable to perform the duties
required of you pursuant to this
<PAGE> 14
6
Agreement for ninety (90) days during any twelve month period during the
Employment Period (whether or not such ninety (90) days are consecutive) by
reason of illness or other incapacity and King World's Board of Directors
determines to terminate this Agreement for such reason or (iii) immediately
upon written notice to you in the event that King World's Board of Directors
determines to terminate this Agreement for Cause. For the purposes of this
Agreement, "Cause" shall mean (1) the habitual failure of you, or the habitual
neglect by you, to substantially perform your duties under this Agreement,
other than any such failure or neglect resulting from your physical or mental
incapacity or (2) the engaging by you in an act or acts of dishonesty intended
to result directly or indirectly in gain or personal enrichment at the expense
of the Company.
(b) Termination of this Agreement shall terminate all of
your rights hereunder from and after the effective date of termination except
for your rights to salary and benefits which have accrued but are unpaid at the
effective date of termination, and except that in the event that your full-time
employment with the Company is terminated on account of your death, disability
or incapacity, the cash bonus provided for in Section 4 shall continue to be
payable as provided therein, and the Units granted pursuant to Section 3 hereof
shall continue to be eligible for redemption and shall be redeemed (if at all)
as provided therein, in each case through the end of the fiscal year in which
your death, disability or incapacity occurred. (The foregoing is not intended
to relieve or release the Company from any liability for damages to you if the
Company wrongfully terminates this Agreement.) In no event shall termination
of this Agreement for any reason terminate any of your obligations under
paragraphs 10, 11, 12 and 13 hereof.
10. Except as required in connection with the performance
of services hereunder, you shall not, during or after the termination of the
Employment Period, use of disclose to any person any confidential business
information or trade secrets of King World or any of its affiliates or business
associates that you obtained or learned during the Employment Period or in the
course of your employment by the Company, including, but not limited to,
confidential business information regarding the type and nature of the
contracts entered into by the Company or its affiliates for the acquisition or
distribution of television programming.
11. You hereby agree that you shall not, during the
Employment Period and for a period of two (2) years following the termination
of the Employment Period, (i) induce, directly or
<PAGE> 15
7
indirectly, any person from whom or from which King World or any of its
affiliates acquired television programming to terminate his or its agreement
with King World or such affiliate with respect to such programming, to refuse
to renew any such agreement or to refuse to furnish to King World or its
affiliates with any other television programming or (ii) induce, directly or
indirectly, any employee of King World or any affiliate thereof to terminate
his or her employment with King World or such affiliate.
12. You hereby agree that all ideas, creations,
improvements and other works of authorship created, developed, written or
conceived, individually or jointly by you, at any time during the Employment
Period are works for hire within the scope of your employment and shall be our
property free of any claim whatever by you or any person claiming any rights or
interests through you.
13. Each of you and King World (the "Indemnitor"), agrees
to indemnify and hold harmless the other from and against any and all loss,
damage, claim, liability, cost and expense, including reasonable attorneys
fees, incurred by the other as a result of, or arising out of or in connection
with, a violation by the Indemnitor of any term, covenant or condition required
by this Agreement to be performed or observed by the Indemnitor.
14. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York and constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof. No waiver or modification of any terms hereof shall be valid unless in
writing signed by the party against whom such waiver is sought to be enforced,
and
<PAGE> 16
8
then only to the extent set forth in such writing. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
successors, assigns, heirs, administrators and executors.
Yours very truly,
KING WORLD PRODUCTIONS, INC.
By /s/ STEPHEN W. PALLEY
-------------------------
Accepted as of the date
first above written:
/s/ MICHAEL KING
- ----------------------
Michael King
<PAGE> 17
EXHIBIT 10.6
KING WORLD PRODUCTIONS, INC.
1700 Broadway
New York, New York 10019
December 21, 1993
Stephen W. Palley, Esq.
45 East End Avenue
New York, New York 10028
Dear Steve:
This letter, when accepted by you, shall constitute an
agreement between you and King World Productions, Inc. ("King World" or the
"Company") with respect to the terms upon which you will be employed by King
World during the Employment Period (as hereinafter defined).
1. During the Employment Period, King World shall employ
you, and you hereby accept employment by King World, in the capacity of
Executive Vice President and Chief Operating Officer of King World, on the
terms and subject to the conditions set forth in this Agreement. The
"Employment Period" shall mean the period commencing on September 1, 1993 and
ending on August 31, 1996, or such earlier date on which this Agreement is
terminated pursuant to the provisions of Section 8 hereof. During the
Employment Period, you shall perform such services as shall from time to time
be reasonably assigned to you by King World's Chief Executive Officer or
Chairman, or pursuant to resolution of King World's Board of Directors, and
diligently devote your entire business time, skill and attention to the
performance of such services and your duties and obligations hereunder.
2. As a consideration for the services rendered by you
hereunder, you shall be entitled to the following:
(a) Salary compensation at the annual rate of $500,000
for each fiscal year of the Company during the Employment Period.
Your salary compensation shall be payable in accordance with King
World's standard payroll policy from time to time in effect.
<PAGE> 18
2
(b) As further consideration for the services rendered by
you pursuant to this Agreement, and in order to induce you to accept
employment with King World on the terms and conditions set forth
herein, the Compensation Committee of King World's Board of Directors
(the "Compensation Committee") has granted to you, subject to your
acceptance of this Agreement and the conditions set forth below, a
stock option (herein called the "Option") under the Company's Amended
and Restated Stock Option and Restricted Stock Purchase Plan (the
"Plan") to purchase 250,000 shares of Common Stock, $.01 par value, of
the Company ("Common Stock"), at an option exercise price equal to
$38.875 per share, the closing price of the Common Stock on the date
hereof, subject to vesting as provided in paragraph (c) below. The
grant of the Option shall be subject to approval of the stockholders
of the Company and any additional approvals or consents that may, in
the reasonable opinion of counsel to the Company, be necessary or
desirable for the Company to obtain, including, without limitation,
stockholder approval of currently proposed amendments to the Plan.
(c) The Option shall have a term of ten years and shall
become exercisable with respect to 20% of the total number of shares
subject thereto on August 31, 1994 and each of the two immediately
succeeding anniversaries of that date, and with respect to the
remaining 40% of the total number of shares subject thereto on August
31, 1998. Except to the extent otherwise provided in this paragraph
(c), if your full-time employment with the Company terminates during
the Employment Period, any shares subject to the Option that have not
vested at the time of such termination shall not vest.
You and King World agree that, notwithstanding anything herein
or in any other agreement between you and the Company prior to this
Agreement:
(i) In the event that your full-time employment
with the Company is terminated by the Company prior to the end
of the Employment Period without "Cause" (as defined below)
and other than on account of your death, disability or
incapacity, then during the one-year period commencing as of
the date your employment is so terminated, to the extent that
the Option had not previously been exercised, you shall be
entitled to exercise the Option with respect to all shares of
Common Stock subject thereto (whether or not vested as of the
date of such termination).
<PAGE> 19
3
(ii) In the event that your full-time employment
with the Company terminates on account of your death,
disability or incapacity, then, during the twelve-month period
commencing as of the date your employment so terminates, to
the extent that the Option had not been exercised, you (or
your heirs, administrators or legal representatives) shall be
entitled to exercise the Option with respect to all the shares
that had vested thereunder as of the date of such termination
and with respect to 50% of the remaining shares of Common
Stock subject to the Option.
(iii) Except as set forth in clauses (i) and (ii)
above, should your full-time employment with the Company be
terminated or cease for any reason, then the unexercised
portion of the Option held by you on the date your full-time
employment ceased may only be exercised within one year after
such date, and only to the extent that your right to exercise
such portion of the Option had vested on the date your
full-time employment ceased.
(iv) In the event that stockholder approvals, or
any approvals or consents that are reasonably necessary for
the grant of the Option, are not obtained on or prior to
August 31, 1994, then you and the Company shall negotiate in
good faith for the purpose of agreeing upon a mutually
acceptable cash substitute of equivalent value for the Option.
If, after good-faith negotiation, you and the Company cannot
so agree, then you may, in your sole discretion, terminate
this Agreement.
(v) For purposes of this Agreement, "Cause" shall
mean (1) the habitual failure of you, or the habitual neglect
by you, to substantially perform your duties under this
Agreement, other than any such failure or neglect resulting
from your physical or mental incapacity, or (2) the engaging
by you in an act or acts of dishonesty intended to result
directly or indirectly in gain or personal enrichment at the
expense of the Company.
(d) In the event that after the date hereof, the
outstanding shares of the Company's Common Stock shall be increased or
decreased or changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another
corporation through reorganization, merger or consolidation,
recapitalization, reclassification, stock split, split-up, combination
or
<PAGE> 20
4
exchange of shares or declaration of any dividends payable in Common
Stock, appropriate adjustment shall be made for (i) the number of
shares of Common Stock for which the Option shall be granted hereunder
and (ii) the number of shares of Common Stock (and the exercise price
per share) subject to the unexercised portion of the outstanding
Option (to the nearest possible full share).
(e) In the event that the Company is required to withhold
any Federal, state or local taxes in respect of any compensation
income realized by you in respect of the Option granted hereunder or
in respect of any shares acquired upon exercise of the Option, the
Company shall deduct the aggregate amount of such Federal, state or
local taxes required to be so withheld or, if such payments are
insufficient to satisfy such Federal, state or local taxes, you will
be required to pay to the Company, or to make other arrangements
satisfactory to the Company regarding payment to the Company of, the
aggregate amount of such taxes.
(f) The terms of the Option are more fully set forth in a
definitive stock option agreement under the Plan, a copy of which is
attached to this Agreement. Such stock option agreement and the Plan
shall govern your rights as an optionee. The Company shall cause the
shares of Common Stock issuable upon the exercise of the Option to be
registered on Form S-8 and/or Form S-3 (or any successor form) under
the Securities Act of 1933, as amended, and listed on the New York
Stock Exchange.
3. (a) With respect to each fiscal year of the Company
ending within (or upon the termination of) the Employment Period, you shall be
entitled to a bonus equal to 0.4% of the Consolidated Net Income of the Company
for such fiscal year, provided that the Compensation Committee determines that
Company's return on equity exceeds the average annual return on equity of the
companies comprising the Standard and Poor's Composite Index of 500 Stocks for
the most recent comparable period for which published information is available
to the Compensation Committee at the time such determination is made (the "S&P
Average Return on Equity"). "Consolidated Net Income" shall mean, for the
purposes of this Agreement, the net income after taxes but before all
extraordinary items of the Company and its consolidated subsidiaries, as
reported in its financial statements filed with the Securities and Exchange
Commission.
(b) At the end of each of the first three fiscal quarters of
each fiscal year in which you are eligible for a bonus hereunder, the
Compensation Committee shall make an interim determination as to whether the
Company's return on equity from
<PAGE> 21
5
the beginning of such fiscal year through the end of such quarter exceeded the
S&P Average Return on Equity for the most recent comparable period for which
published information is available to the Compensation Committee, and, if the
Compensation Committee so determines, an interim bonus payment will be made in
an amount equal to 0.4% of Consolidated Net Income for such quarter; provided,
however, that if, in the sole judgment of the Compensation Committee, it is
more likely than not that you will not be entitled to a bonus in respect of
such year (because the Company's return on equity for the full fiscal year will
not exceed the S&P Average Return on Equity for such year), then such interim
bonus payment shall be deferred until such time as the Compensation Committee
determines that you are, or are reasonably certain to be, entitled to a bonus
in respect of such year.
(c) As soon as practicable after the end of each fiscal year
in which you are eligible for a bonus hereunder, the Compensation Committee
shall make a final determination as to whether the Company's return on equity
for such year exceeded the S&P Average Return on Equity and, if the
Compensation Committee so determines, a final bonus payment shall be made such
that the sum of all interim bonus payments due in such year plus such final
payment shall be equal to 0.4% of Consolidated Net Income for such year. In
the event that interim bonus payments have been made in any fiscal year as to
which the Compensation Committee finally determines that the Company's return
on equity did not exceed the S&P Average Return on Equity, then such interim
payments shall be deemed to be indebtedness to the Company incurred by you as
of the respective dates of payment to you and shall be offset against amounts
otherwise payable to you pursuant to Sections 2(a), 3 and 4 hereof. If such
indebtedness has not been repaid in full on or prior to the termination of the
Employment Period, any amounts remaining outstanding shall be repaid in full
within thirty days after the termination of the Employment Period.
4. (a) In addition to the bonus payable to you pursuant to
Section 3, with respect to each fiscal year of the Company ending within (or
upon the termination of) the Employment Period, you shall be entitled to a
supplemental bonus as described in this Section 4, provided that the
Compensation Committee determines that (i) the average daily closing price of
the Common Stock for such year (the "Average Yearly Price") exceeds $30 and
(ii) the Company's return on equity for such fiscal year exceeds the S&P 500
Average Return on Equity.
(b) If the Average Yearly Price for any such fiscal year
equals or exceeds $38.875, the closing price of the Common Stock on December
21, 1993, the supplemental bonus for such year shall be equal to 0.4% of
Consolidated Net Income for such year.
<PAGE> 22
6
If such Average Yearly Price exceeds $30, but is less than $38.875, the
supplemental bonus for such year shall be equal to 0.4% of Consolidated Net
Income for such year multiplied by a fraction, the numerator of which is the
excess of such Average Yearly Price over $30, and the denominator of which is
$8.875.
(c) The full amount by which any supplemental bonus payment
was reduced below 0.4% of Consolidated Net Income for any year pursuant to the
second sentence of paragraph 4(b) shall be payable to you if the Average Yearly
Price for any subsequent fiscal year within the term of this Agreement equals
or exceeds $38.875. A portion of the amount by which any supplemental bonus
payment was reduced pursuant to the second sentence of paragraph 4(b) above
(and was not previously recouped by you pursuant to this paragraph (c)) shall
be payable to you if the Average Yearly Price for any subsequent fiscal year or
years during the term of this Agreement is less than $38.875 but greater than
the Average Yearly Price for the year in which such reduction was made, and the
portion of such reduction that shall be payable to you shall be equal to the
full amount of such reduction (or the portion thereof that was not previously
recouped by you pursuant to this paragraph (c)), multiplied by a fraction, the
numerator of which is the excess of the Average Yearly Price for such
subsequent year over the Average Yearly Price for the year in which such
reduction was made and the denominator of which is the excess of $38.875 over
the Average Yearly Price for the year in which such reduction was made. To the
extent that a partial recoupment is made in a subsequent fiscal year, any
amounts not recouped under the foregoing formula shall remain available for
recoupment in subsequent years during the term of this Agreement. Any amounts
not recouped by you pursuant to this paragraph (c) on or prior to the making of
the supplemental bonus payment in respect of the August 31, 1996 fiscal year
shall no longer be subject to recoupment and shall not be paid to you.
(d) Notwithstanding the foregoing, in no event shall
aggregate supplemental bonus payments payable pursuant to this Section 4 exceed
$1,333,000.
(e) Payments of the supplemental bonus amounts provided
herein shall be made annually, in arrears, as soon as practicable after the end
of each fiscal year in which you are eligible for a bonus hereunder.
5. Notwithstanding anything to the contrary contained
herein, the grant of the Option described in Section 2(b) hereof, the bonus
described in Section 3 hereof and the supplemental bonus described in Section 4
hereof are subject to approval of the stockholders of the Company and any
additional approvals or consents that may, in the reasonable opinion of counsel
to the
<PAGE> 23
7
Company, be necessary or desirable for the Company to obtain. In the event
that such approvals are not obtained on or prior to August 31, 1994, then you
and the Company shall negotiate in good faith for the purpose of agreeing upon
a mutually acceptable cash substitute of equivalent value for the Option, the
bonus and the supplemental bonus (which may also be subject to stockholder and
other approvals). If, after good-faith negotiation, you and the Company cannot
so agree, then you may, in your sole discretion, terminate this Agreement.
6. You shall be entitled to participate, on the same
basis and subject to the same qualifications as King World's other executive
officers, in any pension, life insurance, health insurance or hospitalization
plan or other similar plan from time to time in effect with respect to King
World's executive officers or employees generally.
7. The Company shall, during the Employment Period,
reimburse you for such expenses as shall be incurred by you in connection with
the performance of your duties hereunder, provided that you furnish to us
evidence of such expenses reasonably satisfactory to us.
8. This Agreement shall terminate (i) upon your death,
(ii) thirty (30) days after written notice to you from King World's Board of
Directors in the event that you have been unable to perform the duties required
of you pursuant to this Agreement for ninety (90) days during any twelve-month
period during the Employment Period (whether or not such ninety (90) days are
consecutive) by reason of illness or other incapacity and King World's Board of
Directors determines to terminate this Agreement for such reason or (iii)
immediately upon written notice to you in the event that King World's Board of
Directors determines to terminate this Agreement for Cause (as such term is
defined in Section 2(c)(v) hereof).
(b) Termination of this Agreement shall terminate all of your
rights hereunder from and after the effective date of termination except for
your rights to salary and benefits which have accrued but are unpaid at the
effective date of termination, your rights with respect to the Option (which
shall be governed by the terms of Section 2, the stock option agreement and the
Plan) and except that in the event that your full-time employment with the
Company is terminated on account of your death, disability or incapacity, the
cash bonuses provided for in Sections 3 and 4 shall continue to be payable as
provided therein through the end of the fiscal year in which your death,
disability or incapacity occurred. (The foregoing is not intended to relieve or
release the Company from any liability for damages to you if the Company
wrongfully terminates this Agreement.) In no event shall
<PAGE> 24
8
termination of this Agreement for any reason terminate any of your obligations
under paragraphs 9, 10, 11 and 12 hereof.
9. Except as required in connection with the performance
of services hereunder, you shall not, during or after the termination of the
Employment Period, use or disclose to any person any confidential business
information or trade secrets of King World or any of its affiliates or business
associates that you obtained or learned during the Employment Period or in the
course of your employment by the Company, including, but not limited to,
confidential business information regarding the type and nature of the
contracts entered into by the Company or its affiliates for the acquisition or
distribution of television programming.
10. You hereby agree that you shall not (a) during the
Employment Period and for a period of two (2) years following the termination
of the Employment Period, induce, directly or indirectly, any person from whom
or from which King World or any of its affiliates acquired television
programming to terminate his or its agreement with King World or such affiliate
with respect to such programming, to refuse to renew any such agreement or to
refuse to furnish to King World or its affiliates with any other television
programming, or (b) induce, directly or indirectly, any employee of King World
or any affiliate thereof to terminate his or her employment with King World or
such affiliate.
11. You hereby agree that all ideas, creations,
improvements and other works of authorship created, developed, written or
conceived, individually or jointly, by you at any time during the Employment
Period are works for hire within the scope of your employment and shall be our
property free of any claim whatever by you or any person claiming any rights or
interests through you.
12. Each of you and King World (the "Indemnitor"), agrees
to indemnify and hold harmless the other from and against any and all loss,
damage, claim, liability, cost and expense, including reasonable attorneys
fees, incurred by the other as a result of, or arising out of or in connection
with, a violation by the Indemnitor of any term, covenant or condition required
by this Agreement to be performed or observed by the Indemnitor.
13. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York and constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof. No waiver or modification of any terms hereof shall be valid unless in
writing signed by the party against whom such waiver is sought to be enforced,
and then only to the extent set forth in such writing. This Agree-
<PAGE> 25
9
ment shall be binding upon and inure to the benefit of the parties hereto and
their successors, assigns, heirs, administrators and executors.
Yours very truly,
KING WORLD PRODUCTIONS, INC.
By /s/ MICHAEL KING
---------------------------
Accepted as of the date
first above written:
/s/ STEPHEN W. PALLEY
- -----------------------
Stephen W. Palley
<PAGE> 26
EXHIBIT 10.6
KING WORLD PRODUCTIONS, INC.
1700 Broadway
New York, New York 10019
December 21, 1993
Mr. Steven R. Hirsch
c/o Camelot Entertainment Sales, Inc.
1700 Broadway
New York, New York 10019
Dear Steve:
This letter, when accepted by you, shall constitute an
agreement between you and King World Productions, Inc. ("King World" or the
"Company") with respect to the terms upon which you will be employed by King
World during the Employment Period (as hereinafter defined).
1. During the Employment Period, King World shall employ
you, and you hereby accept employment by King World, in the capacity of
President of King World's barter advertising sales subsidiary, Camelot
Entertainment Sales, Inc. ("Camelot"), on the terms and subject to the
conditions set forth in this Agreement. The "Employment Period" shall mean the
period commencing on September 1, 1993 and ending on August 31, 1996, or such
earlier date on which this Agreement is terminated pursuant to the provisions
of Section 8 hereof. During the Employment Period, you shall perform such
services as shall from time to time be reasonably assigned to you by King
World's Chief Executive Officer, Chairman or Chief Operating Officer, or by or
pursuant to resolution of Camelot's Board of Directors, and diligently devote
your entire business time, skill and attention to the performance of such
services and your duties and obligations hereunder.
2. As a consideration for the services rendered by you
hereunder, you shall be entitled to the following:
(a) Salary compensation at the annual rate of $450,000
for each of the Company's first two fiscal years during the Employment
Period and at the annual rate of $475,000 for the Company's third
fiscal year during the Employment Period. Your salary compensation
shall be payable in accordance with
<PAGE> 27
2
King World's standard payroll policy from time to time in effect.
(b) As further consideration for the services rendered by
you pursuant to this Agreement, and in order to induce you to accept
employment with King World on the terms and conditions set forth
herein, the Compensation Committee of King World's Board of Directors
(the "Compensation Committee") has granted to you, subject to your
acceptance of this Agreement and the conditions set forth below, a
stock option (herein called the "Option") under the Company's Amended
and Restated Stock Option and Restricted Stock Purchase Plan (the
"Plan") to purchase 100,000 shares of Common Stock, $.01 par value, of
the Company ("Common Stock"), at an option exercise price equal to
$38.875 per share, the closing price of the Common Stock on the date
hereof, subject to vesting as provided in paragraph (c) below. The
grant of the Option shall be subject to approval of the stockholders
of the Company and any additional approvals or consents that may, in
the reasonable opinion of counsel to the Company, be necessary or
desirable for the Company to obtain, including, without limitation,
stockholder approval of currently proposed amendments to the Plan.
(c) The Option shall have a term of ten years and shall
become exercisable with respect to 20% of the total number of shares
subject thereto on August 31, 1994 and each of the two immediately
succeeding anniversaries of that date, and with respect to the
remaining 40% of the total number of shares subject thereto on August
31, 1998, provided that if you should cease to be a full-time employee
of King World or any of its subsidiaries or affiliates, you will have
the right to exercise the unexercised portion of the option only
within the one month period following the date on which you ceased to
be a full-time employee, and then only to the extent that such
unexercised portion of the option was vested on the date your
full-time employment ceased, except that if your full-time employment
ceased by reason of your death or disability (within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended),
such one-month period will instead be the one-year period following
the cessation of your full-time employment.
(d) In the event that after the date hereof, the
outstanding shares of the Company's Common Stock shall be increased or
decreased or changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another
corporation through reorganization, merger or consolidation,
recapitalization, reclassification, stock split, split-up, combination
or
<PAGE> 28
3
exchange of shares or declaration of any dividends payable in Common
Stock, appropriate adjustment shall be made for (i) the number of
shares of Common Stock for which the Option shall be granted hereunder
and (ii) the number of shares of Common Stock (and the exercise price
per share) subject to the unexercised portion of the outstanding
Option (to the nearest possible full share).
(e) In the event that the Company is required to withhold
any Federal, state or local taxes in respect of any compensation
income realized by you in respect of the Option granted hereunder or
in respect of any shares acquired upon exercise of the Option, the
Company shall deduct the aggregate amount of such Federal, state or
local taxes required to be so withheld or, if such payments are
insufficient to satisfy such Federal, state or local taxes, you will
be required to pay to the Company, or to make other arrangements
satisfactory to the Company regarding payment to the Company of, the
aggregate amount of such taxes.
(f) The terms of the Option are more fully set forth in a
definitive stock option agreement under the Plan, a copy of which is
attached to this Agreement. Such stock option agreement and the Plan
shall govern your rights as an optionee. The Company shall cause the
shares of Common Stock issuable upon the exercise of the Option to be
registered on Form S-8 and/or Form S-3 (or any successor form) under
the Securities Act of 1933, as amended, and listed on the New York
Stock Exchange.
3. With respect to each fiscal year of the Company
ending within (or upon the termination of) the Employment Period, you shall be
entitled to a bonus, payable annually, equal to 1% of the net revenues of
Camelot for such fiscal year, such bonus not to exceed $150,000 in any fiscal
year of the Company, provided that the Compensation Committee determines that
the Company's return on equity for such fiscal year exceeds the average annual
return on equity of the companies comprising the Standard and Poor's Composite
Index of 500 Stocks for the most recent comparable period for which published
information is available to the Committee at the time such determination is
made (the "S&P Average Return on Equity"). The "net revenues of Camelot" shall
mean, for the purposes of this Agreement, the net revenues of Camelot which are
included in the Company's consolidated financial statements filed with the
Securities and Exchange Commission.
4. (a) In addition to the bonus payable to you pursuant to
Section 3, with respect to each fiscal year of the Company ending within (or
upon the termination of) the Employment
<PAGE> 29
4
Period, you shall be entitled to a supplemental bonus as described in this
Section 4, not to exceed $150,000 in any fiscal year of the Company (excluding,
for the purpose of such $150,000 per year limitation, any amounts subsequently
recouped pursuant to paragraph (c) below), provided that (i) the Committee
determines that the average daily closing price of the Common Stock for such
year (the "Average Yearly Price") exceeds $32.625 and (ii) the Company's return
on equity for such fiscal year exceeds the S&P Average Return on Equity.
(b) If the Average Yearly Price for any such fiscal year
equals or exceeds $38.875, the closing price of the Common Stock on December
21, 1993, the supplemental bonus for such year shall be equal to the lesser of
1% of the net revenues of Camelot for such year or $150,000. If such Average
Yearly Price exceeds $32.625, but is less than $38.875, the supplemental bonus
for such year shall be equal to the lesser of 1.0% of net revenues of Camelot
for such year or $150,000, multiplied by a fraction, the numerator of which is
the excess of such Average Yearly Price over $32.625, and the denominator of
which is $6.25.
(c) The full amount by which any supplemental bonus payment
was reduced below 1.0% of net revenues of Camelot for any year or $150,000,
whichever is less, pursuant to the second sentence of paragraph 4(b) shall be
payable to you if the Average Yearly Price for any subsequent fiscal year
within the term of this Agreement equals or exceeds $38.875. A portion of the
amount by which any supplemental bonus payment was reduced pursuant to the
second sentence of paragraph 4(b) above (and was not previously recouped by you
pursuant to this paragraph (c)) shall be payable to you if the Average Yearly
Price for any subsequent fiscal year or years during the term of this Agreement
is less than $38.875 but greater than the Average Yearly Price for the year in
which such reduction was made, and the portion of such reduction that shall be
payable to you shall be equal to the full amount of such reduction (or the
portion thereof that was not previously recouped by you pursuant to this
paragraph (c)), multiplied by a fraction, the numerator of which is the excess
of the Average Yearly Price for such subsequent year over the Average Yearly
Price for the year in which such reduction was made and the denominator of
which is the excess of $38.875 over the Average Yearly Price for the year in
which such reduction was made. To the extent that a partial recoupment is made
in a subsequent fiscal year, any amounts not recouped under the foregoing
formula shall remain available for recoupment in subsequent years during the
term of this Agreement. Any amounts not recouped by you pursuant to this
paragraph (c) on or prior to the making of the supplemental bonus payment in
respect of the August 31, 1996 fiscal year shall no longer be subject to
recoupment and shall not be paid to you.
<PAGE> 30
5
(d) Notwithstanding the foregoing, in no event shall
aggregate supplemental bonus payments payable pursuant to this Section 4 exceed
$375,000.
(e) Payments of the supplemental bonus amounts provided
herein shall be made annually, in arrears, as soon as practicable after the
after the end of each fiscal year in which you are eligible for a bonus
hereunder.
5. Notwithstanding anything to the contrary contained
herein, the grant of the Option described in Section 2(b) hereof, the bonus
described in Section 3 hereof and the supplemental bonus described in Section 4
hereof are subject to approval of the stockholders of the Company and any
additional approvals or consents that may, in the reasonable opinion of counsel
to the Company, be necessary or desirable for the Company to obtain. In the
event that such approvals are not obtained on or prior to August 31, 1994, then
you and the Company shall negotiate in good faith for the purpose of agreeing
upon a mutually acceptable cash substitute of equivalent value for the Option,
the bonus and the supplemental bonus (which may also be subject to stockholder
and other approvals). If, after good-faith negotiation, you and the Company
cannot so agree, then you may, in your sole discretion, terminate this
Agreement.
6. You shall be entitled to participate, on the same
basis and subject to the same qualifications as King World's other executive
officers, in any pension, life insurance, health insurance or hospitalization
plan or other similar plan from time to time in effect with respect to King
World's executive officers or employees generally.
7. The Company shall, during the Employment Period,
reimburse you for such expenses as shall be incurred by you in connection with
the performance of your duties hereunder, provided that you furnish to us
evidence of such expenses reasonably satisfactory to us.
8. This Agreement shall terminate (i) upon your death,
(ii) thirty (30) days after written notice to you from King World's Board of
Directors in the event that you have been unable to perform the duties required
of you pursuant to this Agreement for ninety (90) days during any twelve-month
period during the Employment Period (whether or not such ninety (90) days are
consecutive) by reason of illness or other incapacity and King World's Board of
Directors determines to terminate this Agreement for such reason or (iii)
immediately upon written notice to you in the event that King World's Board of
Directors determines to terminate this Agreement for cause.
<PAGE> 31
6
(b) Termination of this Agreement shall terminate all of your
rights hereunder from and after the effective date of termination except for
your rights to salary and benefits which have accrued but are unpaid at the
effective date of termination, your rights with respect to the Option (which
shall be governed by the terms of Section 2, the stock option agreement and the
Plan) and except that in the event that your full-time employment with the
Company is terminated on account of your death, disability or incapacity, the
cash bonuses provided for in Sections 3 and 4 shall continue to be payable as
provided therein through the end of the fiscal year in which your death,
disability or incapacity occurred. (The foregoing is not intended to relieve or
release the Company from any liability for damages to you if the Company
wrongfully terminates this Agreement.) In no event shall termination of this
Agreement for any reason terminate any of your obligations under paragraphs 9,
10, 11 and 12 hereof.
9. Except as required in connection with the performance
of services hereunder, you shall not, during or after the termination of the
Employment Period, use or disclose to any person any confidential business
information or trade secrets of King World or any of its affiliates or business
associates that you obtained or learned during the Employment Period or in the
course of your employment by the Company, including, but not limited to,
confidential business information regarding the type and nature of the
contracts entered into by the Company or its affiliates for the acquisition or
distribution of television programming (including, without limitation,
advertising time within any television programming irrespective of whether King
World or any of its affiliates distributes such programming to television
stations ("Advertising Time")), the sale or other distribution of television
programming (including, without limitation, Advertising Time), or the basis
upon which King World or any of its affiliates elects to acquire television
programming (including, without limitation, Advertising Time) for sale or other
distribution.
(b) You also agree that during the Employment Period and
for a period of two (2) years following the termination of the Employment
Period, you will not work for, or render services to or for the benefit of, or
otherwise be interested in (whether as an employee, consultant, proprietor or
otherwise howsoever), any business or portion of a business of any person,
firm, partnership or corporation which supplied television programming
(including, without limitation, Advertising Time) to King World or any of its
affiliates at any time within the two (2) year period preceding the termination
of the Employment Period.
10. You hereby agree that you shall not (a) during the
Employment Period and for a period of two (2) years following the
<PAGE> 32
7
termination of the Employment Period, induce, directly or indirectly, any
person from whom or from which King World or any of its affiliates acquired
television programming (including without limitation Advertising Time) to
terminate his or its agreement with King World or such affiliate with respect
to such programming, to refuse to renew any such agreement or to refuse to
furnish King World or any of its affiliates with any other television
programming (including without limitation Advertising Time), or (b) induce,
directly or indirectly, any employee of King World or any affiliate thereof to
terminate his or her employment with King World or such affiliate.
11. You hereby agree that all ideas, creations,
improvements and other works of authorship created, developed, written or
conceived by you at any time during the Employment Period are works for hire
within the scope of your employment and shall be the property of King World
and/or Camelot, free of any claim whatever by you or any person claiming any
rights or interests through you.
12. Each of you and King World (the "Indemnitor"), agrees
to indemnify and hold harmless the other from and against any and all loss,
damage, claim, liability, cost and expense, including reasonable attorneys
fees, incurred by the other as a result of, or arising out of or in connection
with, a violation by the Indemnitor of any term, covenant or condition required
by this Agreement to be performed or observed by the Indemnitor.
13. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York and constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof. No waiver or modification of any terms hereof shall be valid unless in
writing signed by the party against whom such waiver is sought to be enforced,
and
<PAGE> 33
8
then only to the extent set forth in such writing. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
successors, assigns, heirs, administrators and executors.
Yours very truly,
KING WORLD PRODUCTIONS, INC.
By /s/ STEPHEN W. PALLEY
----------------------------
Accepted as of the date
first above written:
/s/ STEVEN R. HIRSCH
- ----------------------
Steven R. Hirsch
<PAGE> 34
EXHIBIT 10.6
KING WORLD PRODUCTIONS, INC.
1700 BROADWAY
NEW YORK, NEW YORK 10019
May 20, 1994
Mr. Anthony E. Hull
9 Woody Lane
Larchmont, New York 10538
Dear Tony:
This letter, when accepted by you, shall constitute an
agreement between you and King World Productions, Inc. (the "Company") with
respect to your employment by the Company for the Employment Period (as
hereinafter defined).
1. (a) The Company hereby agrees to employ you as Chief
Financial Officer for the period commencing on June 13, 1994 and terminating on
June 12, 1996 (the "Employment Period"). You hereby agree to accept such
employment, to diligently, faithfully and competently perform such services as
shall from time to time be reasonably assigned to you by the Company's Board of
Directors or its management, and to diligently, faithfully and competently
devote your entire business time, skill and attention to the performance of
your duties and responsibilities to the Company. During the Employment Period,
your base of operations shall be located in the New York City metropolitan
area.
(b) You hereby grant to the Company an option to
extend the Employment Period for one additional 24 month period (the "Option
Period") to commence on June 13, 1996 and to end on June 12, 1998. The Company
may exercise such option by giving you written notice to such effect not later
than 120 days prior to the expiration of the Employment Period (the "Option
Notice Date"). In the event that the Company elects to exercise such option,
the terms and provisions of this Agreement shall remain in effect and shall
apply during the Employment Period as so extended.
2. (a) The Company shall pay to you, and you shall
accept, for your services performed for the Company and its subsidiaries and
affiliates during the Employment Period, salary compensation at the annual
rate of (i) $300,000 for the period from June 13, 1994 through and including
June 12, 1995; (ii) $310,000 for the period from June 13, 1995 through and
including June 12, 1996; and (iii) subject to the Company's exercising the
option for the Option Period, $325,000 for the period commencing June 13, 1996
and ending June 12, 1997 and $350,000 for the period commencing June 13, 1997
and ending June 12, 1998. Any compensation payable
<PAGE> 35
pursuant to this paragraph 2(a) shall be paid in accordance with the Company's
normal payroll policy at the time in effect for its senior executives.
(b) You shall be entitled to such discretionary
bonuses as may be from time to time determined by the Board of Directors of the
Company.
(c) Subject to the provisions of this paragraph
(c), as soon as practicable after the commencement of the Employment Period,
the Company will grant to you a "non-qualified stock option" under the
Company's 1989 Stock Option and Restricted Stock Purchase Plan (the "Plan") to
purchase 100,000 shares of the Company's Common Stock, $.01 par value (the
"Common Stock"), at an exercise price per share equal to the closing price of
the Common Stock on the New York Stock Exchange on the date of your
commencement of employment hereunder (the "Option Exercise Price"). You
understand and agree with respect to such stock option that:
(i) your right to exercise such option shall vest over a
five year period as follows: 20% on June 12, 1995; 20% on June 12, 1996; 20%
on June 12, 1997; and 40% on June 12, 1999; and
(ii) if you should cease to be a full-time employee of the
Company and any of its subsidiaries or affiliates, then you shall only have the
right to exercise the unexercised portion of such option within one month after
the date on which you ceased to be so employed and then only to the extent that
such portion was vested (pursuant to the foregoing vesting schedule) on the
date you ceased to be so employed, and you shall forfeit all other rights to
and under such option, provided, however, that if your full-time employment
ceases by reason of your death or "disability" (within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986, as amended), then such one month
period shall instead be a one-year period following the cessation of your
employment.
(d) In the event that the Company does not
exercise its option to extend the Employment Period for the Option Period, the
Company shall pay you, within 15 days following the expiration of the
Employment Period, additional compensation in an amount equal to the product of
(i) 10,000 and (ii) the excess, if any, of (A) the closing price of the Common
Stock on the New York Stock Exchange on the Option Notice Date over (B) the
Option Exercise Price.
The foregoing, as well as such other terms and conditions as
the Company shall deem appropriate, shall be set forth in a definitive stock
option agreement. Your rights as an optionee shall be governed by the terms
and conditions of such agreement and the Plan.
3. You shall be entitled to participate, on the same
basis as the other senior executives of the Company, in any pension,
profit-sharing, life insurance, health insurance or hospitalization plan in
effect with respect to such other senior executives. You shall be entitled to
reimbursement of expenses reasonably incurred by you in
-2-
<PAGE> 36
connection with the performance of your duties hereunder, provided that you
promptly furnish documentation therefor reasonably satisfactory to the Company.
4. (a) In the event of your death, the Employment
Period shall automatically terminate, effective upon the date of your death.
(b) In the event that you are unable to perform
the duties required of you pursuant to this Agreement for ninety (90) days
during the Employment Period (whether or not such ninety (90) days are
consecutive) by reason of illness or other physical incapacity, the Company
may, after the expiration of such ninety (90) days, terminate the Employment
Period on thirty (30) days written notice to you.
5. Except as required in connection with the performance
of your services for the Company, you shall not, during or after the
termination of the Employment Period, use or disclose to any person, firm,
partnership or corporation any confidential or proprietary information or trade
secrets of the Company or any of its subsidiaries or affiliates obtained or
learned by you during the Employment Period, including, without limitation, the
type and nature of the contracts entered into by the Company or any of its
subsidiaries or affiliates in connection with the acquisition of television
programming or the acquisition of distribution rights with respect to any such
programming (including, without limitation, the acquisition of advertising time
within any television programming or acting as sales agent for any such
advertising time, irrespective of whether the Company or any of its
subsidiaries or affiliates distributes such programming to television stations
("Advertising Time")), the sale or other distribution of television
programming (including, without limitation, Advertising Time), or the basis
upon which the Company or any of its subsidiaries or affiliates elects to
acquire television programming or distribution rights with respect to any such
programming (including, without limitation, Advertising Time) for sale or
other distribution.
6. You hereby agree that during and for a period of two
(2) years following the termination of the Employment Period, you shall not (a)
induce, directly or indirectly, any person, firm, partnership, corporation or
other entity from whom or from which the Company or any of its subsidiaries or
affiliates acquired television programming or distribution (including, without
limitation, sales agency) rights with respect thereto (including, without
limitation, Advertising Time) during the Employment Period to terminate its
agreement with the Company or such subsidiary or affiliate with respect to such
programming or distribution rights (including any such Advertising Time), to
elect not to renew any such agreement or not to furnish to the Company or any
such subsidiary or affiliate any other television programming or distribution
rights (including, without limitation, Advertising Time) or (b) induce,
directly or indirectly, any employee of the Company or any of its subsidiaries
or affiliates to terminate his or her employment with the Company or any such
subsidiary or affiliate.
-3-
<PAGE> 37
7. You hereby agree that all ideas, creations,
improvements and other works of authorship created, developed, written or
conceived by you at any time during the Employment Period are works for hire
within the scope of your employment and shall be the property of the Company
free of any claim whatever by you or any person claiming any rights or
interests through you.
8. (a) You hereby agree to indemnify and hold the
Company harmless from and against any and all loss, damage, liability, cost and
expense, including reasonable attorneys' fees, incurred by the Company as a
result of, arising out of or in connection with a violation of any term or
condition of this Agreement required to be performed or observed by you.
(b) The Company hereby agrees to indemnify and
hold you harmless from and against any and all loss, damage, liability, cost
and expense, including reasonable attorneys' fees, incurred by you as a result
of, arising out of or in connection with a violation of any term or condition
of this Agreement required to be performed or observed by the Company.
9. Any notice or other communication under this
Agreement shall be in writing and shall be considered given when delivered
personally or mailed by certified mail, return receipt requested, to the
relevant party at the address set forth above or at such other address as a
party may specify by notice to the other in the manner herein provided.
10. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. This Agreement constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof. The failure of a party to insist upon strict compliance with
any provision of this Agreement shall not be deemed to be a waiver of such
provision or of any other provision of this Agreement. No waiver or
modification of the terms or conditions hereof shall be valid unless in writing
signed by the party to be charged and only to the extent therein set
-4-
<PAGE> 38
forth. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors, assigns, heirs, administrators and
executors.
Yours very truly,
KING WORLD PRODUCTIONS, INC.
By: /s/ STEPHEN W. PALLEY
---------------------------
ACCEPTED:
/s/ ANTHONY E. HULL
- -------------------------
Anthony E. Hull
-5-
<PAGE> 1
EXHIBIT 10.18
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
MARCH 17, 1994 BETWEEN THE COMPANY AND HARPO.
KING WORLD PRODUCTIONS, INC.
1700 Broadway
New York, New York 10019
Ms. Oprah Winfrey As of March 17, 1994
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 four hundred fifty thousand (450,000) 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.
<PAGE> 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) March 18, 2004, 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 $33-5/8 per Option Share,
the closing price of the Common Stock on the New York Stock Exchange on March
8, 1994, the date on which the parties reached an agreement in principle with
respect to the Harpo Amendment.
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
else-
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<PAGE> 3
where 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 corporation 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 March 18,
2004.
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 regis-
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<PAGE> 4
tration 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
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 Jeffrey D. Jacobs upon the
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<PAGE> 5
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 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
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<PAGE> 6
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 Sections 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.
(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
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<PAGE> 7
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 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
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<PAGE> 8
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 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 prospectuses 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
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<PAGE> 9
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 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
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<PAGE> 10
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 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
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<PAGE> 11
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 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
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<PAGE> 12
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
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
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<PAGE> 13
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 indemni-
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<PAGE> 14
fying 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 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.
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<PAGE> 15
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 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
15
<PAGE> 16
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 March 17, 1994 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
16
<PAGE> 17
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 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
<PAGE> 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 /s/ STEPHEN W. PALLEY
-------------------------
Accepted and Agreed:
/s/ OPRAH WINFREY
- --------------------------
Oprah Winfrey
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<PAGE> 19
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 March 17, 1994, 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
<PAGE> 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
MARCH 17, 1994 BETWEEN THE COMPANY AND HARPO.
KING WORLD PRODUCTIONS, INC.
1700 Broadway
New York, New York 10019
Mr. Jeffrey D. Jacobs As of March 17, 1994
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 fifty thousand (50,000) 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.
<PAGE> 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) March 18, 2004, 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 $33-5/8 per Option Share,
the closing price of the Common Stock on the New York Stock Exchange on March
8, 1994, the date on which the parties reached an agreement in principle with
respect to the Harpo Amendment.
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
else-
2
<PAGE> 3
where 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 corporation 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 March 18,
2004.
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 regis-
3
<PAGE> 4
tration 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
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 exer-
4
<PAGE> 5
cise 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 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
5
<PAGE> 6
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.
(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
6
<PAGE> 7
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 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 fol-
7
<PAGE> 8
lowing 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 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
8
<PAGE> 9
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 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
9
<PAGE> 10
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 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
10
<PAGE> 11
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 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
11
<PAGE> 12
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
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
12
<PAGE> 13
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 indemni-
13
<PAGE> 14
fying 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 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.
14
<PAGE> 15
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 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
15
<PAGE> 16
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 March 17, 1994 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
16
<PAGE> 17
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 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
<PAGE> 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 /s/ STEPHEN W. PALLEY
---------------------------
Accepted and Agreed:
/s/ JEFFREY D. JACOBS
- ---------------------------
Jeffrey D. Jacobs
18
<PAGE> 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 March 17, 1994, 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
<PAGE> 1
CONFIDENTIAL TREATMENT
(LOGO) Buena Vista International, Inc. EXHIBIT 10.20
June 2, 1988
Lintas International Limited
One Dag Hammarskjold Plaza
New York, New York 10017
RE: LICENSE TO PRODUCE AND TELECAST TELEVISION SERIES
BASED ON "WHEEL OF FORTUNE" AND "JEOPARDY!"
Ladies/Gentlemen:
This letter will confirm the terms and conditions of the agreement between you,
Lintas International Limited (hereinafter referred to as "Lintas"), with
offices at One Dag Hammarskjold Plaza, New York, New York 10017, acting as
agent for "UNILEVER" (hereinafter referred to as "UNILEVER"), with offices at
Burgemaster, S'Jacobplain #1, 3015 CA, Rotterdam, The Netherlands and Buena
Vista International, Inc. (hereinafter referred to as "BVI"), with a head
office at the address noted above, acting as agent for KING WORLD F.S.C.
CORPORATION (hereinafter referred to as "KING WORLD"), with its head office at
830 Morris Turnpike, Short Hills, New Jersey 07078, to enter into a licensing
agreement for certain rights in the television game show properties known in
the United States of America as "WHEEL OF FORTUNE" (hereinafter referred to as
"WHEEL") and "JEOPARDY!" (hereinafter referred to as "JEOPARDY").
1. GRANT OF RIGHTS
(a) KING WORLD hereby grants to UNILEVER the sole and exclusive
right to produce and to exhibit on free television only, whether by way of
over-the-air broadcast television, cable television and/or satellite
television, in the Territory (as defined below) during the License Term of this
Agreement, television series based on the formats of WHEEL and JEOPARDY
(hereinafter referred to as "a Series" and collectively "the Series").
(b) UNILEVER shall have the right to produce such number of thirty
(30) minute episodes of each of the Series, for telecast once in such countries
of the Territory, as it may determine, and may cause each such episode to be
telecast such additional number of times in such country as KING WORLD and
UNILEVER may agree.
(c) UNILEVER shall have the right, subject to third party
restrictions, to advertise and promote the Series in the press and other media
of communications; provided, however, that no clip of the Series shall exceed
four (4) minutes in length.
(d) The grant of rights to JEOPARDY and WHEEL is limited to the
use
<PAGE> 2
CONFIDENTIAL TREATMENT
Page 2
June 2, 1988
Lintas International
of the title, names, set designs, lighting designs, graphic designs,
decorations, colors, equipment and the rules of the games for JEOPARDY and
WHEEL (the "Proprietary Elements"), as these television series are distributed
by KING WORLD in the United States of America. KING WORLD hereby advises
UNILEVER that the title "WHEEL OF FORTUNE" (in Italian translation) is
currently registered to Rete Italia; the use of the title "WHEEL OF FORTUNE" in
the French translation is subject to possible restrictions which have been
addressed in the license agreement referred to in Paragraph 8 of this Agreement
and a third party has registered the name WHEEL OF FORTUNE (in Spanish
translation) in international class 41 in Spain. KING WORLD is not aware of
any other possible legal restrictions on the use of such titles in any other
countries of the Territory. KING WORLD represents and warrants that its
licensor has registered the trademark for the name "WHEEL OF FORTUNE" for
television programming in the following territories: France (in English
translation) and United Kingdom (applied for only).
(e) The Proprietary Elements in the format of the Series produced
by UNILEVER shall at all times conform to the analogous elements of the United
States versions of WHEEL and JEOPARDY. In order to enable KING WORLD to ensure
such conformity, prior to UNILEVER's initial telecast of the Series in any
country of the Territory, UNILEVER shall submit to KING WORLD, for KING WORLD's
licensor's approval, photographs or artist's renditions, pictures and script of
the prototype episode of the Series. UNILEVER shall make such modifications to
its prototype as KING WORLD may require to achieve such conformity. Following
approval of such prototype, UNILEVER shall not depart from such prototype in
its production of subsequent episodes of the Series in that country.
(f) KING WORLD expressly reserves all rights that are not
expressly granted herein, including without limitation all television rights
not referred to in Paragraph 1(a), all subsidiary and ancillary rights, all
merchandising rights, and all other right, title and interest, in and to the
names of WHEEL, JEOPARDY and the Series and the Proprietary Elements, and KING
WORLD and/or its licensor shall be free to exploit these rights in any fashion
it shall deem appropriate. KING WORLD and/or its licensor may, or may authorize
any third parties to, reproduce any of the Proprietary Elements without any
compensation to UNILEVER therefor.
(g) UNILEVER may produce the Series in any language of the country
in which the Series will be telecast. Unilever shall notify KING WORLD in
writing of any translation of the titles WHEEL and JEOPARDY. KING WORLD shall
have the right to approve any translation of the titles WHEEL and JEOPARDY
prior to their use in the Territory and KING WORLD's licensor shall own the
rights to such translations and shall have the right to register and protect
all involved trademarks and service marks. UNILEVER shall not dub or subtitle
any episodes of the Series into other languages for telecast purposes. UNILEVER
shall not telecast any version of either of the Series in any language in a
country other than the country where it
<PAGE> 3
CONFIDENTIAL TREATMENT
Page 3
June 2, 1988
Lintas International
had its original telecast (including for these purposes contiguous countries
that are functionally part of the same market) without KING WORLD's prior
written consent.
(h) UNILEVER may sublicense the right to produce and to exhibit
the Series; provided, however, any such agreement must preserve all of KING
WORLD's and its licensor's rights as set forth herein and in no way may such
sublicense contravene the terms and conditions of this Agreement. Subject to
the preceding sentence, UNILEVER may not assign this Agreement or any of its
rights or obligations hereunder.
2. TERRITORY
The rights granted hereunder shall include all countries specified in Territory
A and if UNILEVER exercises its option pursuant to Paragraph 11 below, the
countries included in Territory B. Territory A shall include Albania, Andorra,
Austria, Belgium, Bulgaria, Czechoslovakia, Denmark, Finland, France, German
Democratic Republic (GDR), Federal Republic of Germany (FRG) (only for
JEOPARDY; the rights to WHEEL are specifically excluded), Greece, Hungary,
Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Malta, Monaco, Netherlands,
Norway, Poland, Portugal, Romania, San Marino, Spain, Sweden, Switzerland,
Union of Soviet Socialist Republics (USSR), United Kingdom (only for WHEEL; the
rights to JEOPARDY are specifically excluded), Vatican and Yugoslavia.
Territory B shall include the entire world excluding the Territory A countries,
Australia and New Zealand (for WHEEL only), Canada, the United States of
America including the Commonwealth of Puerto Rico (but excluding its other
territories and possessions) and Bermuda.
3. LICENSE TERM
The License Term shall be for a period of five (5) years. The License Term
commenced on January 1, 1988, except where there is a delayed availability of
the rights as indicated below, and will expire on December 31, 1992 for the
Territory A countries. The License Term will commence on January 1, 1989 and
will expire on December 31, 1993 for the Territory B countries, if the relevant
option is exercised.
UNILEVER acknowledges that KING WORLD has previously licensed the rights to
WHEEL and JEOPARDY in, among other countries, the United Kingdom and Italy. Due
to this prior grant of rights in these Territory A countries, the License Terms
in those countries will commence as follows: a) Italy for WHEEL and JEOPARDY,
the License Term will commence on January 1, 1989 and b) United Kingdom for
WHEEL, the License Term will commence on August 1, 1991. Notwithstanding the
delayed availability of the rights in the foregoing countries, the License
Terms in these countries will still expire on December 31, 1992.
<PAGE> 4
CONFIDENTIAL TREATMENT
Page 4
June 2, 1988
Lintas International
In addition, UNILEVER acknowledges that by a grant of rights to it by
Television Francaise 1 pursuant to an agreement specified in Paragraph 8 below,
UNILEVER has acquired the rights to WHEEL in France.
4. LICENSE FEE
(a) The Total License Fee for the rights herein granted is the
greater of the guaranteed minimum license fee of [*] or a sum which equals the
amount of all monies derived from the royalty payments which become due and
owing according to the schedule as specified in the attached Exhibit A, which
is incorporated herein by this reference, during the License Term.
(b) UNILEVER shall remit to KING WORLD, unless previously paid as
provided in Paragraphs 4(c) and (d) below, the minimum guaranteed license fee
as follows:
[*]
(c) Subject to the other provisions of this Agreement, UNILEVER
will pay KING WORLD a royalty in accordance with the attached Exhibit A for
each episode per telecast (i.e., initial telecast and each repeat telecast,
however, UNILEVER shall pay [*] of the original royalty rate for such repeat
telecast if UNILEVER loses its barter advertising in such repeat telecast) of
each of the Series, on a [*] basis, with respect to each year of the License
Term in each country in Territory A.
(d) The royalty payments specified above shall be applied against
the guaranteed minimum payments as set forth in subparagraph (b) hereof during
each year of the License Term. The guaranteed annual minimum payments are
cumulative; therefore, in the event the amount of the royalty payments due to
KING WORLD, when calculated using the schedule outlined in Exhibit A for a
specific year of the License Term, exceeds the guaranteed minimum
* Omitted pursuant to a request for confidential treatment.
<PAGE> 5
CONFIDENTIAL TREATMENT
Page 5
June 2, 1988
Lintas International
payment due in that year, UNILEVER shall have the right to credit any
cumulative excess against the future minimum guaranteed payments in reverse
order (i.e., reduce the 1992 payment first, then the 1991 payment, etc.)
5. COMMENCEMENT OF PRODUCTION
UNILEVER shall notify KING WORLD upon UNILEVER's determination to commence
production of each of the Series in any particular country of the Territory.
6. ACCOUNTING STATEMENTS
For each [*] of the License Term ("Accounting Period"), Licensee shall, by the
[*] day after the end thereof, send to BVI a detailed Accounting Statement
containing the aggregate Total Number of Episodes Telecast and the Total Number
of Episodes Produced in each country in Territory A for each of the Series,
which Statements shall include excerpts from UNILEVER's (or the appropriate
sublicensees') telecast logs or affidavits of performance, together with any
payment due with respect to such accounting period. The form of Accounting
Statement submitted by UNILEVER shall be subject to the reasonable approval of
BVI. All sums specified herein refer to United States dollars and all
currencies received by UNILEVER must be converted to United States dollars
before remittance to BVI. UNILEVER agrees to pay all conversion fees. Time is
of the essence in the performance by UNILEVER of its accounting and payment
obligations hereunder. All Accounting Statements shall be addressed to John
Elia, Director of Finance Administration, Buena Vista International, Inc., 350
South Buena Vista Street, Burbank, California 91521 with an additional copy
sent to Jonathan Birkhahn, Vice President, King World, 1700 Broadway, 35th
Floor, New York, New York 10019. In the event a discrepancy is discovered
regarding the number of episodes telecast during a particular year of the
License Term, UNILEVER agrees to recompute and make immediate payment of any
amounts, including interest charges, then due based on the actual and true
telecasts of the episodes and in the event of a deficiency of [*] or more, to
pay all reasonable costs and expenses incurred by BVI in the checking of such
telecast usage by UNILEVER and any reasonable attorneys' fees incurred by BVI
in enforcing the collection thereof. UNILEVER shall have the right to satisfy
its obligations under this Paragraph by causing LINTAS to provide same,
providing UNILEVER remains primarily obligated.
7. AUDIT
UNILEVER shall keep accurate and complete books and records of all transactions
relating to this Agreement. KING WORLD, at any time during the License Term and
for a period of [*] thereafter, may by its representatives and/or designees,
during regular business hours, have full access to audit all such books and
records (but no more than [*]
* Omitted pursuant to a request for confidential treatment.
<PAGE> 6
CONFIDENTIAL TREATMENT
Page 6
June 2, 1988
Lintas International
and to make any copies thereof it may desire. The exercise by KING WORLD of any
right to audit or the acceptance by KING WORLD of any Accounting Statement or
payment shall be without prejudice to any of KING WORLD's rights or remedies
and shall not bar KING WORLD from thereafter disputing the accuracy of any such
Accounting Statement or payment and UNILEVER shall remain fully liable for any
balance due under the provisions hereof; provided, however, any Accounting
Statement or audit shall be deemed conclusive and no longer subject to
challenge by KING WORLD, its representatives and/or designees [*] years from
the date of its receipt by KING WORLD (except with respect to any challenges
which are begun but not concluded prior to that date, which shall remain in
effect until they are concluded). If an audit or checking reveals that UNILEVER
has underreported or has misrepresented any item bearing upon the computation
of the amounts payable to KING WORLD, UNILEVER agrees, in addition to
recomputing and making immediate payment of the amounts due based on the actual
and true items, to pay all costs and expenses incurred by KING WORLD for the
audit checking and any attorneys' fees incurred by KING WORLD in enforcing the
collection thereof. UNILEVER shall have the right to satisfy its obligations
under this Paragraph by causing LINTAS to provide same, providing UNILEVER
remains primarily obligated. KING WORLD acknowledges that any audit conducted
under this Paragraph shall be limited to LINTAS so long as LINTAS maintains
the books and records pertaining to such audit and further that if UNILEVER is
to be the subject of a direct audit, such audit shall be conducted by Coopers
and Lybrand (or UNILEVER's then principal accounting firm), which firm shall
deliver to KING WORLD a certificate to the effect that the accountings in
question are accurate with such exceptions as may be required.
8. INTERNATIONAL BARTER
Reference is hereby made to that license agreement between KING WORLD and
Television Francaise 1 ("TF1") signed by KING WORLD on April 13, 1988 and by
TF1 on March 23, 1988, in which KING WORLD granted to TF1 the sole and
exclusive right to produce and to exhibit on television in the Territory (as
defined in the agreement) during the term of the agreement, a television series
based upon the format of "WHEEL OF FORTUNE" ("LA ROUE DE LA FORTUNE") in the
French language and which right has been assigned by TF1 to Unilever France
Services, a corporation controlled by UNILEVER. That agreement is incorporated
herein by this reference. Said agreement shall be treated as if it were a
license agreement entered into under this Agreement.
9. RATINGS
If an episode of either or both of the Series is telecast in a country and 1)
UNILEVER receives any barter advertising time therein and 2) if such episode of
the Series [*] then:
* Omitted pursuant to a request for confidential treatment.
<PAGE> 7
CONFIDENTIAL TREATMENT
Page 7
June 2, 1988
Lintas International
i. if the telecast occurs [*], the royalty payment due as indicated on
the schedule in Exhibit A will be increased by [*]; and
ii. if the telecast occurs [*], the royalty payment due as indicated on the
schedule in Exhibit A will be increased by [*].
Notwithstanding the above, the royalty increases will not be applicable for the
episodes of WHEEL in France broadcast through [*].
The method, time and source used to determine the ratings of each episode of
the Series will be determined on a country-by-country basis and by using the
local customary audience measurement methods subject to KING WORLD's and
UNILEVER's mutual approval.
10. INCREASE IN ROYALTY PAYMENTS
If by the Accounting Period ending December 31, 1990, the total guaranteed
minimum amount as set forth in Paragraph 4 above is exceeded by the royalty
payments due under Exhibit A, the royalty payments due for episodes of WHEEL in
France will be increased from [*] to [*] per episode telecast during 1991 and
from [*] to [*] per episode telecast during 1992. The increases in royalty
payments for telecasts of episodes of WHEEL in countries in Territory A other
than France will be increased by [*] per episode telecast in 1991 and [*] per
episode telecast in 1992.
11. OPTION
Prior to January 1, 1989, KING WORLD shall refrain from licensing the rights
set forth in Paragraph 1 for Territory B to a third party, and UNILEVER shall
have an exclusive option to license such rights for Territory B (and for the
entire Territory B only) exercisable upon prior written notice received by KING
WORLD no later than December 31, 1988; provided that the negotiations regarding
the amount of the royalty payments for each country in Territory B and the
guaranteed minimum license fee must be completed to the mutual satisfaction of
KING WORLD and UNILEVER as a condition to UNILEVER's right to exercise the
option. If such negotiations are not completed and UNILEVER has not exercised
the option by December 31, 1988, then KING WORLD shall be free to enter into
such licenses with any third parties in Territory B without any further
obligation to UNILEVER whatsoever.
12. TAXES
UNILEVER shall pay and hold KING WORLD harmless from, all taxes (excluding KING
WORLD's income and franchise taxes), censorship charges, or other
* Omitted pursuant to a request for confidential treatment.
<PAGE> 8
CONFIDENTIAL TREATMENT
Page 8
June 2, 1988
Lintas International
charges now or hereafter imposed or based upon the production, rental,
delivery, license, exhibition, possession or use by UNILEVER hereunder of any
materials furnished by KING WORLD or the materials produced by UNILEVER
hereunder. Payment withholding or deduction by UNILEVER of the foregoing shall
in no way reduce the payments due KING WORLD hereunder. To the extent that
payment of any of the foregoing is advanced by KING WORLD, UNILEVER shall
reimburse KING WORLD on demand, and upon the failure of UNILEVER to do so, KING
WORLD shall have all the remedies available to it in law or equity for the
collection of unpaid License Fees, as well as all other remedies provided by
law or equity, including any offset rights.
13. WARRANTIES
(a) KING WORLD represents and warrants that (i) it has not previously
granted to any other party any of the rights herein conveyed except as
expressly set forth in Paragraph 3 and (ii) BVI is duly authorized and acting
agent of KING WORLD, with all authority to receive payments and conduct all
other acts contemplated by this Agreement.
(b) UNILEVER represents and warrants that no part of the Series produced
by it will infringe upon or violate the rights or interest of any person, nor
will such Series defame, libel, or slander or invade the privacy of any person
and the Series will be produced in accordance with all applicable laws,
requirements, contracts, rules and regulations.
14. DROIT MORAL
It is agreed that in the adaption of the productions the "Droit Moral" of the
creators of the formats may not be violated, provided however, that no
interruption of the program solely for advertising and promotion purposes shall
be deemed to be such a violation and that KING WORLD hereby consents to any
such interruptions decided in UNILEVER's sole discretion.
15. GOODWILL, TRADEMARK, COPYRIGHT
(a) UNILEVER hereby acknowledges and agrees that (i) the names of WHEEL
and JEOPARDY and of the Series and the Proprietary Elements are unique and
original and have acquired a secondary meaning and that KING WORLD and/or its
licensors are the owners and/or controllers thereof and of the substantial and
valuable good will associated therewith; (ii) UNILEVER shall not at any time
dispute or contest, directly or indirectly, the exclusive right, title and
interest of KING WORLD and/or its licensors in and to WHEEL, JEOPARDY, the
Series or the Proprietary Elements or the copyrights, trade names or trademarks
with respect thereto except to the extent of the rights expressly granted to
UNILEVER under this Agreement; and (iii) UNILEVER shall, at any time, whether
during or after the License Term, execute any documents reasonably required by
KING WORLD to confirm KING WORLD's (or its licensors') ownership rights as set
forth herein.
<PAGE> 9
CONFIDENTIAL TREATMENT
Page 9
June 2, 1988
Lintas International
The provisions of this Paragraph 15(a) shall not apply except to the extent
that such provisions do not infringe European Community Law from time to time
in effect, provided that if at a given time such provisions are so
inapplicable, then in the event that UNILEVER shall take any action
inconsistent with any of the acknowledgements and agreements that would have
been made by UNILEVER but for such inapplicability, KING WORLD shall, at its
option, have the right to terminate the License Term by giving UNILEVER not less
than 60 days' prior written notice to such effect. In the event of such a
termination, the minimum guaranteed licensee fee payable by UNILEVER pursuant
to Paragraph 5(b) with respect to the calendar year of the License Term during
which such termination takes effect shall be directly prorated.
(b) Whether or not there is a change in European Community law as
described above, UNILEVER shall cooperate with KING WORLD in the execution,
filing and prosecution of any trademark, copyright or design application that
KING WORLD may desire to file, relating to WHEEL, JEOPARDY, the Series or the
Proprietary Elements.
(c) The parties hereby agree that (i) KING WORLD and its licensors may, in
their sole and absolute discretion, take such action (including without
limitation the commencement of litigation) to stop any infringement of any of
their rights in or to WHEEL, JEOPARDY, the Series or the Proprietary Elements,
as they deem appropriate; and (ii) UNILEVER shall fully cooperate with KING
WORLD and its licensors to prevent such infringement and, if requested by any
of them, shall at KING WORLD's expense join with KING WORLD or such licensor as
a party to any action brought by KING WORLD or such licensor for such purpose.
16. CREDITS
The Series shall be exploited with a separate credit reading: "Based upon WHEEL
OF FORTUNE (or JEOPARDY! as the case may be) produced in the United States by
MERV GRIFFIN ENTERPRISES, a unit of COLUMBIA PICTURES ENTERTAINMENT, INC. and
Distributed in association with KING WORLD and BUENA VISTA INTERNATIONAL,
INC.", in an adequate translation.
17. CREATIVE APPROVALS
MERV GRIFFIN ENTERPRISES, the licensor of KING WORLD, shall have prior approval
over the principle creative elements of the production of either of the Series
in each country in Territory A and/or Territory B and no material changes to
the television format rights, including but limited to the title, host, set
designs, lighting designs, graphic designs, decorations, colors, equipment and
rules of WHEEL and JEOPARDY shall be
<PAGE> 10
CONFIDENTIAL TREATMENT
Page 10
June 2, 1988
Lintas International
made without MERV GRIFFIN ENTERPRISES' prior approval in writing. MERV GRIFFIN
ENTERPRISES shall exercise its rights of approval in a good faith manner. KING
WORLD will act as an intermediary for UNILEVER in obtaining the foregoing
approvals.
18. OWNERSHIP
Title in and to all or part of the rights licensed to UNILEVER hereunder shall
at all times remain in KING WORLD and/or its licensor, and the trademarks and
other intellectual property embodied in all of such rights shall at all times
remain vested in KING WORLD and/or its licensor, subject only to the uses
granted herein. Possession of any of the above by UNILEVER shall be solely for
the purpose of exercising its rights hereunder. UNILEVER shall not and agrees
not to impair KING WORLD's and/or its licensor's title, interest or rights
therein or to create a lien or encumbrance thereon or to in any manner perform
any act in derogation of such rights, interests and title in KING WORLD and/or
its licensor.
19. OWNERSHIP OF MATERIALS PRODUCED OR CREATED BY UNILEVER
Any and all materials produced by UNILEVER for the telecast of either of the
Series will become the exclusive property of KING WORLD and/or its licensor,
including without limitation, all videotapes, any advertising and/or
promotional meterials (e.g., trailers, print advertising) and any and all other
materials related to the Series. UNILEVER shall promptly furnish and/or execute
any document requested by KING WORLD in evidence of such exclusive ownership
rights and interest in KING WORLD. Any and all materials relating to each of
the Series (including, without limitation, videotapes, sound tracks and
advertising and promotional materials) remaining in UNILEVER's possession at
the expiration or other termination of the License Term shall be returned by
UNILEVER, shipping or delivery charges prepaid, immediately following such
expiration or other termination, unless otherwise provided, either directly to
KING WORLD or to such address as KING WORLD may designate. KING WORLD may
elect, at its sole option, to require UNILEVER by written notice to destroy or
erase any material and to furnish an affidavit certifying that such destruction
or erasure has occurred executed by senior executive officers of UNILEVER.
20. INDEMNIFICATION
Each party agrees to indemnify and hold harmless the other (including, in the
case of KING WORLD, its licensors) from and against any and all loss,
<PAGE> 11
CONFIDENTIAL TREATMENT
Page 11
June 2, 1988
Lintas International
damage, liability, cost and expenses, including reasonable attorneys' fees,
incurred by the other as a result of, or arising out of, or in connection with
a breach or an alleged breach of any representation or warranty or the failure
or the alleged failure to perform any agreement to be performed pursuant to
this Agreement.
21. DEFAULT/BREACH: If UNILEVER (1) fails or refuses to perform any of
its obligations hereunder or breaches any provision hereof, and if such default
or breach is not cured within fourteen (14) days after written notice thereof
to UNILEVER from KING WORLD, of (2) becomes insolvent or a petition under any
Bankruptcy Act shall be filed by or against UNILEVER or if any property of
UNILEVER is attached and such attachment is not released within ten (10) days
after the date of attachment or if UNILEVER executes an assignment for the
benefit of creditors or if a receiver, custodian, liquidator or trustee is
appointed for UNILEVER or (3) attempts to make or makes any assignment,
transfer or sublicense of the Agreement without KING WORLD's prior written
consent, KING WORLD, in addition to its other rights and remedies under law or
equity, may, at its option, declare this Agreement breached, make all License
Fees and any other monies then due or to become due hereunder immediately due
and payable plus interest on any late payments at the rate of two percent (2%)
over the prime interest rate charged by the Bank of America from time to time
(but in no event higher than the maximum rate of interest then permitted by
law), suspend the license granted in this Agreement, suspend the right to
telecast the Series until such default is cured and/or terminate this
Agreement.
In the event this Agreement is terminated under any of the provisions contained
in this paragraph, all rights herein granted to UNILEVER shall terminate and
automatically revert to KING WORLD.
The exercise of any or all of the foregoing remedies by KING WORLD shall not
operate as a waiver on the part of KING WORLD of its right to exercise any
other remedies available to KING WORLD under this Agreement, at law or equity,
and all of the foregoing remedies shall be deemed cumulative.
22. NOTICES
Except as may be specifically provided to the contrary elsewhere in this
Agreement, all notices and communications required or appropriate hereunder
shall be deemed given when deposited, postage or toll charges prepaid, in any
post office or post office box or telegraph office in the United States or in
the Territory, addressed to BVI, attention: John Reagan, Senior Vice President,
Business and Legal Affairs at the address specified on page one (1) hereof with
an additional copy to KING WORLD, attention: Jon Birkhahn, Vice President,
Business and Legal Affairs at
<PAGE> 12
CONFIDENTIAL TREATMENT
Page 12
June 2, 1988
Lintas International
1700 Broadway, New York, New York 10019 or LINTAS at the addresses appearing
above or at such other addresses as may hereafter be designated in writing to
the other party.
23. ILLEGALITY
If any provision hereof is held to be illegal or unenforceable, this Agreement
shall remain in full force and effect, except that such provision shall be
deemed deleted or modified, as may be appropriate, in order to remove such
illegality or unenforceability.
24. RELATIONSHIP OF THE PARTIES
Nothing herein contained shall be construed to create a partnership or joint
venture among the parties hereto or to make any of the parties the agent of the
other, except as expressly stated herein. None of the parties shall be or
become liable or bound by any representation, act, omission or agreement
whatsoever of the other which may be contrary to the provisions of this
Agreement.
25. WAIVER
No waiver by any of the parties hereto of any failure by any of the parties to
keep or perform any covenants or conditions of this Agreement shall be deemed
to be a waiver of any preceding or succeeding breach of the same or any other
covenant or condition.
26. RENEWAL
If during the License Term, or for a period of [*] thereafter, KING WORLD
elects to grant to other parties for an additional license period, for
Territory A (or any country constituting a part of that Territory) and/or (if
the option referred to in Paragraph 11 above has been exercised) Territory B
(or any country constituting a part of that Territory), any of the rights
granted herein to UNILEVER, KING WORLD shall negotiate exclusively with
UNILEVER in good faith for a period of up to [*] regarding the terms for such a
renewal. If such a renewal agreement is not reached within [*], KING WORLD shall
have the right to grant such rights for such additional period and for such
country to any third party without any further obligation to UNILEVER. KING
WORLD acknowledges and agrees that UNILEVER's rights under this Paragraph 26
shall extend to such rights to the Series as KING WORLD may hereafter acquire
from its licensor if KING WORLD in fact elects to grant such rights to other
parties.
27. PREMIUM RIGHTS
In the event that, during the License Term or any extension thereof in
Territory A and/or, if the relevant option is exercised, Territory B, KING
* Omitted pursuant to a request for confidential treatment.
<PAGE> 13
CONFIDENTIAL TREATMENT
Page 13
June 2, 1988
Lintas International
WORLD elects to grant merchandising rights in the nature of premium rights in
connection with WHEEL and/or JEOPARDY to any other advertising agency in its
capacity as such, it will first offer any such opportunity to UNILEVER by
notice to Mr. Lawrence E. Lamattina of LINTAS at the address noted on page one
hereof and Mr. Lamattina will within two (2) business days of receipt respond
to KING WORLD, as appropriate, by either accepting or rejecting such offer,
provided that UNILEVER shall be entitled to its rights under this Paragraph 27
only so long as Mr. Lamattina is employed as a senior executive of LINTAS.
28. BI-WEEKLY UPDATES ON LICENSING ACTIVITIES
UNILEVER agrees to designate a representative at LINTAS to give bi-weekly
updates to a representative designated by KING WORLD regarding the status of
all licensing activities undertaken pursuant to this Agreement.
29. HEADINGS
The headings of this Agreement or any paragraph hereof are inserted only for
the purpose of convenient reference and it is recognized that they may not
accurately or adequately describe the contents of the paragraphs which they
head. Such headings shall not be deemed to limit, cover, or in any way affect
the scope, meaning, or intent of this Agreement or any part thereof, nor shall
they otherwise be given any legal effect.
30. AMENDMENTS AND MODIFICATIONS
This Agreement may not be modified or waived in whole or in part except in
writing signed by or on behalf of KING WORLD and UNILEVER.
31. GOVERNING LAW
This Agreement shall be construed and interpreted in accordance with the laws
of the State of New York applicable to contracts made and fully to be performed
therein, independent of the forum in which this Agreement or any part thereof
may come up for construction, interpretation or enforcement.
All actions, proceedings or litigation brought by the parties hereto against
the others relating to this Agreement shall be instituted and prosecuted within
the State of New York and the parties hereby agree and submit to the
jurisdiction of its courts solely for such purposes.
32. ENTIRE AGREEMENT
This Agreement is complete and embraces the entire understanding of and among
the parties, all prior understandings in connection with the subject matter
herein contained, either oral or written, having been merged herein or
cancelled. No representations have been made by the parties hereto except those
expressly set forth herein.
<PAGE> 14
CONFIDENTIAL TREATMENT
Page 14
June 2, 1988
Lintas International
If the foregoing correctly sets forth your understanding, please sign in the
space provided below.
Very truly yours,
BUENA VISTA INTERNATIONAL INC. KING WORLD F.S.C. CORPORATION
(as agent FOR KING WORLD F.S.C. CORPORATION)
By /s/ Signed By /s/ STEPHEN W. PALLEY
Date 1/25/89 Date 1/25/89
ACCEPTED AND AGREED TO:
LINTAS INTERNATIONAL LIMITED UNILEVER NV
(as agent FOR UNILEVER NV)
By /s/ LAWRENCE LAMATTINA By_______________________
Date Jan. 17, 1989 Date_____________________
<PAGE> 15
CONFIDENTIAL TREATMENT
EXHIBIT A
Attached to and forming a part of the June 2, 1988 Letter of Agreement between
LINTAS INTERNATIONAL LIMITED
and
BUENA VISTA INTERNATIONAL, INC.
WHEEL OF FORTUNE and JEOPARDY LICENSE FEE SCHEDULE
(Royalty Payment in U.S. Dollars Per Episode Per Telecast)
Per Calendar Year
<PAGE> 16
[KING WORLD LOGO]
As of June 13, 1989
UNILEVER BV
c/o Lintas International Limited
One Dag Hammarskjold Plaza
New York, New York 10017
RE: LICENSE TO PRODUCE AND TELECAST TELEVISION SERIES BASED ON
"WHEEL OF FORTUNE" AND "JEOPARDY!"
Ladies/Gentlemen:
This letter, when accepted by you, shall constitute an amendment to the
agreement dated June 2, 1988 (the "Agreement") between King World F.S.C.
Corporation ("King World") and UNILEVER BV.
1. Notwithstanding paragraph 1(b) of the Agreement, KING WORLD authorizes
UNILEVER to sublicense the production by Canale 5 of episodes of WHEEL of
forty-five (45) minutes in duration for broadcast in Italy, San Marino and
Vatican.
2. Paragraph 2 of the Agreement is amended to read in its entirety as
follows:
"2. TERRITORY
The rights granted hereunder shall include all countries specified in
Territory A and if UNILEVER exercises its option pursuant to Paragraph 11
below, the countries included in Territory B. Territory A shall include
Albania, Andorra, Austria, Belgium, Bulgaria, Czechoslovakia, Denmark,
Finland, France, German Democratic Republic (GDR) (including East Berlin),
Federal Republic of Germany (FRG) (including West Berlin), Greece, Hungary,
Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Malta, Monaco,
Netherlands, Norway, Poland, Portugal, Romania, San Marino, Spain, Sweden,
Switzerland, Union of Soviet Socialist Republics (USSR), United Kingdom
(only for WHEEL; the rights to JEOPARDY are specifically excluded), Vatican
and Yugoslavia. Notwithstanding the foregoing, the rights granted
hereunder with respect to WHEEL in German Democratic Republic, Federal
Republic of Germany, Austria, Switzerland, Luxembourg,
<PAGE> 17
Page 2
June 13, 1989
Lintas International
Liechtenstein, South Tirol, Czechoslovakia, Hungary, Romania and Poland
shall be limited to versions of such Series in languages other than German.
Territory B shall include the entire world excluding the Territory A
countries, Australia and New Zealand (for WHEEL only), Canada, the United
States of America including the Commonwealth of Puerto Rico (but excluding
its other territories and possessions) and Bermuda."
3. The episodic royalties set forth in Exhibit A with respect to productions
of WHEEL in Ireland during 1988, 1989 and 1990 are replaced by the phrase "NA."
4. The phrase "the United Kingdom" appearing on the second and sixth lines of
the second paragraph of Paragraph 3 of the Agreement is amended to read "the
United Kingdom and Ireland," and the word "August" appearing in such sixth line
is amended to read "January."
5. UNILEVER acknowledges that is has not exercised the option contemplated by
paragraph 11 of the Agreement.
6. UNILEVER may satisfy its obligations under paragraph 17 of the Agreement by
complying with the following procedures:
(a) A production "bible" for each WHEEL and JEOPARDY! shall be created by
UNILEVER for the approval of MGE. KING WORLD confirms that the "bible"
created for the French (TF-1) version of WHEEL is pre-approved for use in
the production of such Series in the other countries of the Territory.
(b) MGE shall have prior approval over each of the following elements of each
Series in each country of the Territory:
i. Title
ii. Rules
iii. The use and role of the hosts(s) in the Series; UNILEVER need not
obtain MGE's approval over the actual identity of the host in
any version of either Series.
iv. Photos or artists' renditions of:
Set Design
Lighting Design
Graphic Design
Decorations
Colors
Equipment
<PAGE> 18
Page 3
June 13, 1989
Lintas International
Elements prepared for approval by MGE shall be sent by UNILEVER to KING
WORLD, Attention: Fred M. Cohen (or such other individual as may be
designated by KING WORLD) for forwarding to the appropriate persons at MGE.
Upon MGE's approval or KING WORLD'S receipt from MGE of requested changes,
KING WORLD shall directly contact Larry Lamattina, Doug Gluck or any other
individual designated by UNILEVER to relay such approval or changes. A
production of either Series produced consistent with such elements, in the
form approved by MGE, shall be deemed a "prototype" for purposes of
paragraph 1(a) of the Agreement.
(c) UNILEVER shall furnish KING WORLD with a VHS cassette (any format) of the
pilot show for each Series in each country of the Territory, as well as one
cassette of each such Series during each calendar quarter that such Series
is in production.
7. UNILEVER acknowledges that, as members of the Interpublic Group of
Companies, Lintas: Worldwide and E.C. Television may act as UNILEVER'S
administrators and as UNILEVER'S agents in UNILEVER'S performance of this
agreement.
8. E.C. Television is designated as UNILEVER'S direct liaison with KING WORLD
and its licensors. KING WORLD, on behalf of itself and its licensors, agrees
that all approvals called for in paragraphs 1(e), 1(g), and 17 of the Agreement
and of paragraph 6(c) of this letter of amendment dated June 13, 1989 shall be
given within 20 business days following receipt by KING WORLD of the applicable
request for approvals and all accompanying materials (or 20 business days
following the complete execution of this letter, if later); UNILEVER shall, in
this connection, cause a copy of each such request and materials to be sent
simultaneously to Merv Griffin Enterprises. KING WORLD'S failure to respond
within such 20-day period shall constitute its consent.
<PAGE> 19
9. Except as expressly modified hereby, the Agreement remains in full force and
effect.
Very truly yours,
KING WORLD F.S.C. CORPORATION
By:
-----------------------
Dated:
-----------------------
ACCEPTED:
UNILEVER BV
By: LINTAS INTERNATIONAL LIMITED
By:
-------------------------------
Date:
-----------------------------
<PAGE> 1
CONFIDENTIAL TREATMENT
EXHIBIT 10.22
KING WORLD F.S.C. CORPORATION
830 Morris Turnpike
Short Hills, New Jersey 07078
Dated as of June 13, 1994
Unilever NV
c/o Mr. Doug Gluck
Senior Vice President
E.C. Television Inc.
Greendon House
7 C-D Bayham Street
London NW1 OEY
England
Dear Doug:
Reference is made to the agreement between Unilever NV ("Unilever"),
through its then agent Lintas International Limited ("Lintas"), and King World
F.S.C. Corporation ("KW") through its then agent Buena Vista International, Inc.
("BVI"), dated June 2, 1988, as amended as of June 13, 1989 and as of September
19, 1991 (the "Original Agreement"). Unless otherwise specified, all defined
terms herein shall have the meanings set forth in the Original Agreement.
Except as otherwise specified herein, the amendments to the Original Agreement
hereunder shall become effective on the commencement of the 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,
1995 through December 31, 1995 (the "Extended Renewal Period").
B. The guaranteed minimum license fee during the Extended Renewal
Period shall be equal to [*].
C. With respect to telecasts of the Series [*] the royalty
payable to KW by Unilever for each telecast of each of the Series during the
Extended Renewal Period shall be [*].
* Confidential treatment requested.
<PAGE> 2
CONFIDENTIAL TREATMENT
D. With respect to all countries within Territory A [*]
(the royalities for which are set forth in Paragraph C above), the Royalty Rate
for each such country during the Extended Renewal Period shall be [*].
E. As of the date hereof, Paragraph 16 of the Original Agreement
is deleted in its entirety and replaced with the following:
"16. CREDITS. The Series shall be exploited
with a separate credit reading: "Based upon WHEEL OF
FORTUNE (or JEOPARDY! as the case may be) produced in
the United States by COLUMBIA TRISTAR TELEVISION, a
SONY PICTURES ENTERTAINMENT COMPANY, and Distributed
by KING WORLD PRODUCTIONS, INC." (or such other
similar legend as KW may from time to time advise
Unilever), in an adequate translation."
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/ LAWRENCE LAMATTINA
------------------------
* Confidential treatment requested.
-2-
<PAGE> 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, Inc., a New Jersey 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
5
<PAGE> 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, 1994 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
November 22, 1994
6
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<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-START> SEP-01-1993
<PERIOD-END> AUG-31-1994
<CASH> 341,857
<SECURITIES> 0
<RECEIVABLES> 45,643
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<CURRENT-ASSETS> 404,821
<PP&E> 10,631
<DEPRECIATION> (9,099)
<TOTAL-ASSETS> 569,562
<CURRENT-LIABILITIES> 110,485
<BONDS> 0
<COMMON> 497
0
0
<OTHER-SE> 458,580
<TOTAL-LIABILITY-AND-EQUITY> 569,562
<SALES> 477,615
<TOTAL-REVENUES> 480,659
<CGS> 279,465
<TOTAL-COSTS> 353,081
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