<PAGE> 1
As Filed with the SEC on November [ ], 1997
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-2
</TABLE>
King World Productions, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
King World Productions, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing the Information Statement)
Payment of filing fee (check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14c-5(g).
[ ] Fee computed on table below per Exchange Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
KING WORLD PRODUCTIONS INC.
12400 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90025
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 19, 1998
The Annual Meeting of Stockholders of King World Productions, Inc. ("King
World" or the "Company") will be held at the Hotel InterContinental, 444 St.
Charles Street, New Orleans, Louisiana 70130, on the 19th day of January, 1998,
at 2:00 p.m. (local time), for the following purposes:
1. to elect two directors to the Company's Board of Directors;
2. to approve the amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock;
3. to approve the amendment to the Company's 1996 Amended and Restated
Stock Option and Restricted Stock Purchase Plan;
4. to approve certain performance based compensation arrangements
under the Company's employment agreement with Mr. Jules Haimovitz;
5. to vote on a stockholder proposal relating to the declassification
of the Company's Board of Directors;
6. to ratify the selection of Arthur Andersen LLP, independent public
accountants, as the auditors for the Company for the fiscal year ending
August 31, 1998; and
7. to transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November 26, 1997
as the record date for the determination of the stockholders of the Company
entitled to notice and to vote at the Annual Meeting of Stockholders. Each share
of the Company's Common Stock is entitled to one vote on all matters presented
at the Annual Meeting.
ALL HOLDERS OF THE COMPANY'S COMMON STOCK (WHETHER THEY EXPECT TO ATTEND
THE ANNUAL MEETING OR NOT) ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN
PROMPTLY THE PROXY CARD ENCLOSED WITH THIS NOTICE.
By Order of the Board of Directors
DIANA KING
Corporate Secretary
December [ ], 1997
<PAGE> 3
KING WORLD PRODUCTIONS, INC.
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 19, 1998
INTRODUCTION
This Proxy Statement is being furnished to stockholders of record of King
World Productions, Inc. ("King World" or the "Company") as of November 26, 1997
in connection with the solicitation by the Board of Directors of King World of
proxies for the 1998 Annual Meeting of Stockholders to be held at the Hotel
InterContinental, 444 St. Charles Street, New Orleans, Louisiana 70130, on
January 19, 1998 at 2:00 p.m. (local time), or at any adjournments thereof, for
the purposes stated in the Notice of Annual Meeting. The approximate date of
mailing of this Proxy Statement and enclosed form of proxy to stockholders is
December [ ], 1997.
As of the close of business on November 26, 1997, the Company had
outstanding [ ] shares of Common Stock, $.01 par value ("Common Stock").
Each share of Common Stock is entitled to one vote on all matters presented at
the Annual Meeting. The presence, either in person or by properly executed
proxy, of the holders of a majority of the shares of Common Stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum at the Annual
Meeting.
If the enclosed proxy is signed and returned, it may, nevertheless, be
revoked at any time prior to the voting thereof at the pleasure of the
stockholder signing it, either by a written notice of revocation received by the
person or persons named therein or by voting the shares covered thereby in
person or by another proxy dated subsequent to the date thereof.
Proxies in the accompanying form will be voted in accordance with the
instructions indicated thereon, and, if no such instructions are indicated, will
be voted FOR the nominees for election as directors named below, FOR the
amendment to the Company's Restated Certificate of Incorporation, FOR the
amendment to the Company's 1996 Amended and Restated Stock Option and Restricted
Stock Purchase Plan, FOR the performance based compensation arrangements under
Mr. Haimovitz's employment agreement, AGAINST the stockholder proposal, FOR the
selection of Arthur Andersen & Co. as the auditors for the Company and, in the
discretion of the proxy holders, on any other matters that properly come before
the Annual Meeting.
The vote required for approval of each of the proposals before the
stockholders at the Annual Meeting is specified in the description of such
proposal below. For the purpose of determining whether a proposal has received
the required vote, abstentions, where permitted, will be included in the vote
total, with the result that an abstention will have the same effect as a
negative vote. Under the rules of the New York Stock Exchange, Inc. ("NYSE"),
brokers who hold shares in "street name" for customers have the authority to
vote on certain items in the absence of instructions from their customers, the
beneficial owners of the shares. Under these rules, brokers that do not receive
instructions are entitled to vote on the election of the two nominees for
director, the approval of the amendment to the Company's Restated Certificate of
Incorporation, the approval of the amendment to the 1996 Amended and Restated
Stock Option and Restricted Stock Purchase Plan, the performance based
compensation arrangements with Mr. Haimovitz, the stockholder proposal and the
selection of Arthur Andersen LLP as auditors for the Company.
1. ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a Board of
Directors classified into three classes, as nearly equal in number as possible,
each with a term of office of three years, expiring sequentially at successive
annual meetings of stockholders. The entire Board of Directors is comprised of
seven directors. Two directors will be elected at the Annual Meeting for terms
of three years each and until their respective successors are elected and
qualified. The two directors whose terms expire at the 1998 Annual Meeting of
Stockholders are Messrs. Ronald S. Konecky and James M. Rupp. Mr. Konecky served
as a director since 1984 and Mr. Rupp since 1986.
<PAGE> 4
The shares represented by proxies returned duly executed will be voted,
unless otherwise specified, in favor of the two nominees for the Board of
Directors named below. If, as a result of circumstances not known or unforeseen,
any of such nominees shall be unavailable to serve as a director, proxies will
be voted for the election of such other person or persons as the Board of
Directors may select. Each nominee for director will be elected by a plurality
of votes cast at the Annual Meeting of Stockholders. Proxies will be voted "for"
the election of the two nominees unless instructions to "withhold" votes are set
forth on the proxy card. Withholding votes will not influence voting results.
Abstentions may not be specified as to the election of directors. THE BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO ELECT THE TWO NOMINEES FOR THE
BOARD OF DIRECTORS NAMED BELOW.
The names of the nominees and directors whose terms of office will continue
after the Annual Meeting, their principal occupations and the dates since which
they have served as directors, are set forth below.
NOMINEES FOR ELECTION AS DIRECTOR
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME PRINCIPAL OCCUPATION SINCE
- -------------------------- --------------------------------------------------------- ---------
<S> <C> <C>
Ronald S. Konecky......... Of counsel, law firm of Frankfurt, Garbus, Klein & Selz 1984
James M. Rupp............. President and Chief Executive Officer, JR Communications,
Inc. 1986
CONTINUING DIRECTORS
Roger King................ Chairman of the Board, King World 1977
Michael King.............. Vice Chairman and Chief Executive Officer, King World 1973
Richard King.............. Real estate developer 1988
Diana King................ Vice President and Corporate Secretary, King World 1976
Joel Chaseman............. Chairman, Chaseman Enterprises International, Inc. 1990
</TABLE>
NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information with respect to each of the nominees
for the office of director, each director whose term of office will continue
after the Annual Meeting, and each other executive officer of King World:
NOMINEES
Ronald S. Konecky, 68, has been a director of the Company since August
1984. Since August 1985, Mr. Konecky has been of counsel to the law firm of
Frankfurt, Garbus, Klein & Selz, where he practices with emphasis on matters in
the entertainment field, including the representation of individuals and
companies in the television industry. Mr. Konecky's current term as a director
will expire in 1998.
James M. Rupp, 62, has been a director of the Company since 1986. Mr. Rupp
is President and Chief Executive Officer of JR Communications, Inc., which is
based in Minneapolis, Minnesota. JR Communications, Inc. was founded by him in
February 1992 after Midwest Communications, Inc. ("Midwest") was sold to CBS,
Inc. Mr. Rupp was, at the time of such sale, President and Chief Executive
Officer and one of the largest shareholders of Midwest. In that capacity, he was
responsible for all the operations of Midwest, which encompassed five television
stations, two radio stations and Midwest Cable & Satellite, Inc., which includes
Midwest Sports Channel. Mr. Rupp is a director of Zirchrom Inc. of
Minneapolis-St. Paul.
CONTINUING DIRECTORS
Roger King, 53, has been an executive officer and a director of the Company
since 1977 and has served as Chairman of the Board of the Company since August
1984. Roger King's current term as a director will expire in 2000.
2
<PAGE> 5
Michael King, 49, has been an executive officer and a director of the
Company since 1973. He served as President and Chief Executive Officer of the
Company from August 1984 through June 1997 and is currently Vice Chairman and
Chief Executive Officer. Mr. King served also as Interim Chief Operating Officer
from September 1996 through June 1997. Michael King's current term as a director
will expire in 2000.
Richard King, 56, is a major stockholder of King World and acted as a
consultant to the Company from 1984 through the end of the 1996 fiscal year. He
is principally engaged in real estate development. Mr. King has served as a
director of the Company since 1988. Richard King's current term as a director
will expire in 2000.
Diana King, 47, has been a director of the Company since 1976, has served
as Vice President -- Special Projects since March 1984 and as Corporate
Secretary of the Company since February 1986. Ms. King's current term as a
director will expire in 1999.
Joel Chaseman, 71, has served as a director since 1990. Mr. Chaseman is
currently Chairman of Chaseman Enterprises International, Inc. He was a Vice
President of The Washington Post Company from June 1973 until January 1991. From
June 1973 until January 1990, Mr. Chaseman also served as Chief Executive
Officer of Post-Newsweek Stations, Inc., a subsidiary of The Washington Post
Company that operated four television stations. In addition, from March 1988
until January 1990, Mr. Chaseman served as Chairman of Post-Newsweek Stations,
Inc. Mr. Chaseman's current term as a director will expire in 1999.
OTHER EXECUTIVE OFFICERS
King World's executive officers, in addition to Michael King, Roger King
and Diana King are as follows:
Jules Haimovitz, 46, was named President and Chief Operating Officer of
King World in June 1997. From April 1993 through June 1997 Mr. Haimovitz served
as the President and Chief Executive Officer of ITC Entertainment Group, a world
leader in the production and distribution of feature films and television
programming, and for the two years prior to his appointment by King World, he
oversaw the integration of ITC into Polygram N.V. (which acquired ITC in 1995).
Prior to joining ITC, Mr. Haimovitz had served as President and Chief Operating
Officer of Spelling Entertainment Group and had previously held senior executive
level positions with Aaron Spelling Productions and Viacom International.
Steven R. Hirsch, 48, was named President of the Company's wholly-owned
subsidiary, Camelot Entertainment Sales, Inc., in July 1987. He joined Camelot
in February 1984 as Vice President -- Sales.
Michael Spiessbach, 54, was named President of King World Ventures, a newly
formed division of the Company with responsibility for its investment and
acquisition program, in September 1996. For the two years prior to joining King
World, he had been Chairman of his own consulting firm, Marketing Financial
Services International, and for three years prior to that he was the President
of Printon Kane International, an affiliate of a broker dealer. Prior to these
appointments, he had been President of the entrepreneurial group that
established the first private regional satellite system in Asia.
Robert V. Madden, 49, was named Senior Vice President, Administration, of
the Company in September 1996. For more than five years prior to joining the
Company, Mr. Madden practiced law in his own law firm.
Jonathan Birkhahn, 44, joined the Company in 1988 as Vice President, Legal
and Business Affairs and was named Vice President, Business Affairs and General
Counsel in 1991 and Senior Vice President and General Counsel in 1993.
Steven A. LoCascio, 39, was named Senior Vice President and Chief Financial
Officer in June 1997. Prior thereto, he had been the Interim Chief Financial
Officer since May 1995 and a Vice President of the Company since May 1991. Mr.
LoCascio served as Controller since joining the Company in September 1989 until
his appointment as Chief Financial Officer.
Michael King, Roger King, Diana King and Richard King are children of the
late Charles and Lucille King, King World's founders.
3
<PAGE> 6
During the 1997 fiscal year, the Board of Directors of the Company held six
meetings. The only standing committees of the Board of Directors are the Audit
Committee and the Compensation Committee. The current members of the Audit
Committee and the Compensation Committee are Messrs. Chaseman, Konecky and Rupp.
The Audit Committee periodically consults with the Company's management and
independent public accountants on financial matters, including the Company's
internal financial controls and procedures. The Audit Committee held two
meetings in fiscal 1997. The Compensation Committee approves compensation
arrangements for the Company's executive officers and administers the Company's
1996 Amended and Restated Stock Option and Restricted Stock Purchase Plan. The
Compensation Committee held three meetings in fiscal 1997.
Each non-employee director of the Company is entitled to receive an annual
fee of $45,000, as well as $1,000 for each meeting of the Board of Directors or
any committee thereof attended by such director. In addition, pursuant to the
Company's 1996 Amended and Restated Stock Option and Restricted Stock Purchase
Plan, each non-employee director elected or appointed to fill a full three-year
term as a director is automatically granted an option to purchase 5,000 shares
of Common Stock having an exercise price equal to the fair market value of the
Common Stock on date of grant. Such options have a term of ten years and vest
ratably and on an annual basis over the director's term of office. A
non-employee director appointed or elected to serve less than a full three-year
term at the time of his or her election or appointment is granted an option
having the same terms, but for a number of shares that is proportionate to the
number of years or partial years remaining in the directorship to which he is
elected or appointed.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the Company's knowledge, except for Michael King, Roger King, Diana King
and Richard King, the only persons or groups that may be deemed to own
beneficially 5% or more of the Company's outstanding Common Stock are the
following:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED OF CLASS
------------------------------------------------------------- ------------ --------
<S> <C> <C>
The Capital Group Companies, Inc............................. 3,431,700(2) 9.3%
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071
FMR Corp..................................................... 2,558,488(4) 6.9%
Edward C. Johnson, 3rd
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
Oprah Winfrey................................................ 2,050,843(3) 5.3%
Jeffrey A. Jacobs
110 North Carpenter Street
Chicago, IL 60607
Mellon Bank Corporation...................................... 1,876,463(1) 5.1%
One Mellon Bank Center
Pittsburgh, PA 15258
</TABLE>
- ---------------
(1) As of September 30, 1997.
(2) As of November 17, 1997, according to information furnished to the Company
by Capital Research and Management Company.
(3) All such shares are issuable upon the exercise of presently exercisable
stock options, except for 843 shares of Common Stock owned by Mr. Jacobs.
According to the Schedule 13D filed by such beneficial owners
4
<PAGE> 7
on October 28, 1997, as of such date, Ms. Winfrey was the beneficial owner
of 1,845,000 of such shares and Mr. Jacobs was the beneficial owner of
205,843 of such shares. The shares reported for Mr. Jacobs exclude 843
shares owned by his wife.
(4) As of September 30, 1997, according to the Schedule 13F-E filed by FMR Corp.
on November 14, 1997.
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of November 7, 1997, by (i) each of
the Company's directors, (ii) each of the Company's executive officers named in
the compensation table below and (iii) the Company's executive officers and
directors as a group. Except as otherwise indicated, each nominee named in the
table has sole voting and investment power with respect to the shares shown as
beneficially owned by him or her.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF SHARES OF CLASS
------------------------------------------------------------- ------------ --------
<S> <C> <C>
Roger King................................................... 2,226,013(1) 5.9%
Michael King................................................. 2,558,150(2) 6.8%
Richard King................................................. 1,782,565(3) 4.9%
Diana King................................................... 1,765,428(4) 4.8%
Joel Chaseman................................................ 27,500(5) *
Ronald S. Konecky............................................ 7,500(3) *
James M. Rupp................................................ 18,230(3) *
Jonathan Birkhahn............................................ 79,000(6) *
Steven R. Hirsch............................................. 102,000(5) *
Robert V. Madden............................................. 22,706(7) *
Executive officers and directors as a group (13 persons)..... 8,639,092(8) 22.4%
</TABLE>
- ---------------
(1) Includes 840,000 shares issuable upon exercise of currently exercisable
stock options, and excludes 5,750 shares held by Mrs. Roger King.
(2) Includes 840,000 shares issuable upon exercise of currently exercisable
stock options.
(3) Includes 5,000 shares issuable upon the exercise of currently exercisable
stock options.
(4) Includes 60,000 shares held by a charitable foundation of which Ms. King is
a director. Ms. King disclaims beneficial ownership of such shares and
shares voting right with respect to such shares with the other directors of
the foundation.
(5) Shares issuable upon exercise of currently exercisable stock options.
(6) Includes 73,000 shares issuable upon the exercise of currently exercisable
stock options.
(7) Includes 20,000 shares issuable upon the exercise of currently exercisable
stock options. Also includes 1,305 shares held in Mr. Madden's IRA account,
997 shares held in his wife's IRA account and an aggregate 404 shares held
in two trust accounts for the benefit of Mr. Madden's minor daughters. Mr.
Madden disclaims beneficial ownership of the shares held by such trusts and
by his wife.
(8) Includes an aggregate 1,967,500 shares issuable upon exercise of currently
exercisable stock options.
* Less than 1%.
CERTAIN TRANSACTIONS
Robert King has served as Senior Vice President -- Strategic
Planning/Acquisitions of the Company since April 1994. Mr. King has an
employment agreement with the Company that provides for salary compensation at
the rate of $400,000 per annum through the year 2000, and an option under the
Company's 1996 Amended and Restated Stock Option and Restricted Stock Purchase
Plan to purchase 100,000 shares of Common Stock at an exercise price per share
equal to the closing price of the Common Stock on April 22,
5
<PAGE> 8
1994 ($34.25), the date of his employment agreement. Mr. King's right to
exercise such option is subject to vesting over a five-year period (at the rate
of 20% per year for the first three years and 40% in the fifth year). In fiscal
year 1997, Mr. King received $400,000 in compensation from the Company. Prior to
assuming his current position, Mr. King had been employed by the Company since
December 1991, assisting in strategic planning, and received salary compensation
at the rate of $400,000 per annum. Mr. King had formerly served as President of
television distribution for Orion Pictures, Coca Cola Telecommunications and
Columbia Pictures Television. He was President and a director of the Company
from 1973 until March 1984. Mr. King is a brother of Michael, Roger, Diana and
Richard King.
Ronald S. Konecky, a director of the Company, is of counsel to the law firm
of Frankfurt, Garbus, Klein & Selz, which has been retained by the Company in
connection with certain legal matters.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, all statements of beneficial ownership required
to be filed with the Securities and Exchange Commission in the fiscal year ended
August 31, 1997 were timely filed, except that Mr. Haimovitz filed one report
late.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information as to the
Chief Executive Officer and the four other highest paid executive officers of
the Company for the fiscal years ended August 31, 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
AWARDS
------------ PAYOUTS
ANNUAL COMPENSATION (G) ----------
-------------------------------------- SECURITIES (H) (I)
(A) (E) UNDERLYING LTIP ALL OTHER
NAME AND (B) (C) (D) OTHER ANNUAL OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION (#) ($) ($)
- -------------------------------- ----- ----------- ----------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael King
Vice Chairman and 1997 $ 1,200,000 $ 2,835,000 -- -- -- $ 11,619(2)
Chief Executive Officer....... 1996 $ 1,100,000 $ 5,627,000 -- 1,500,000/0 -- $159,000(3)(2)
$ 9,000(2)
1995 $ 1,050,000 $ 1,760,000 -- -- $4,228,000(1)
Roger King
Chairman of the Board......... 1997 $ 1,200,000 $ 2,835,000 -- -- -- $ 11,619(2)
$ 69,000(4)(2)
1996 $ 1,100,000 $ 5,627,000 -- 1,500,000/0 --
$ 9,000(2)
1995 $ 1,050,000 $ 1,760,000 -- -- $4,228,000(1)
Steven R. Hirsch
President, Camelot 1997 $ 500,000 $ 320,000 -- 150,000/0 -- $ 11,619(2)
Entertainment Sales, Inc. .... 1996 $ 475,000 $ 249,000 -- -- -- $ 9,000(2)
$ 9,000(2)
1995 $ 450,000 $ 280,000 -- -- --
Robert V. Madden
Senior Vice President, 1997 $ 400,000 $ 50,000 -- 100,000/0 -- --
Administration................ 1996 -- -- -- -- -- --
1995 -- -- -- -- --
Jonathan Birkhahn
Senior Vice President, 1997 $ 340,000 $ 40,000 -- 75,000/0 -- $ 11,619(2)
Business Affairs and 1996 $ 300,000 $ 25,000 -- -- -- $ 9,000(2)
General Counsel............... 1995 $ 285,000 $ 25,000 -- -- -- $ 9,000(2)
</TABLE>
- ---------------
(1) Represents the payout of 100,000 of the phantom stock units which were
redeemed on May 31, 1995. The phantom stock units were granted under
employment agreements that were entered into on December 21, 1993 and
terminated on August 31, 1995. All of the unredeemed phantom stock units
expired on August 31, 1995.
(2) Represents Company contributions to the King World Productions, Inc.
Retirement Savings Plan.
(3) Represents a $150,000 annual premium for life and disability insurance
coverage for which the Company is obligated to reimburse Michael King
pursuant to his Employment Agreement. See "Employment Agreements -- Michael
King and Roger King".
(4) Represents a $60,000 annual premium for life and disability insurance
coverage for which the Company is obligated to reimburse Roger King pursuant
to his Employment Agreement. See "Employment Agreements -- Michael King and
Roger King".
7
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options to the named executive officers during the fiscal year ended
August 31, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED EXERCISE FOR OPTION TERM
OPTIONS TO EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
(A) (B) (C) (D) (E) (F) (G)
- ------------------------------- ---------- --------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael King................... -- -- -- -- -- --
Roger King..................... -- -- -- -- -- --
Stephen R. Hirsch.............. 150,000(1) 10.15% 34.75 9/3/06 1,440,110 3,182,283
Robert V. Madden............... 100,000(2) 6.77% 34.75 9/3/06 960,073 2,121,522
Jonathan Birkhahn.............. 75,000(3) 5.08% 34.75 9/3/06 720,055 1,591,142
</TABLE>
- ---------------
(1) See "Employment Agreements -- Stephen R. Hirsch".
(2) See "Employment Agreements -- Robert V. Madden".
(3) See "Employment Agreements -- Jonathan Birkhahn".
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth the number of options exercised and the
value realized upon exercise by the named executive officers during the fiscal
year ended August 31, 1997 and the value of outstanding options held by such
executive officers as of August 31, 1997:
<TABLE>
<CAPTION>
(D)
----------------- (E)
(B) NUMBER OF --------------------
----------- SECURITIES UNDER- VALUE OF UNEXERCISED
NUMBER LYING UNEXERCISED IN-THE-MONEY
OF SHARES OPTIONS AT OPTIONS
(A) ACQUIRED (C) FISCAL YEAR END AT FISCAL YEAR END
- ------------------------------------- ON EXERCISE -------------- EXERCISABLE/ EXERCISABLE/
NAME OF OPTIONS VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- -------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Michael King......................... -- -- 840,000/900,000 6,618,300/225,000
Roger King........................... -- -- 840,000/900,000 6,618,300/225,000
Steven R. Hirsch..................... -- -- 102,000/160,000 489,540/635,000
Robert V. Madden..................... -- -- 20,000/80,000 100,000/400,000
Jonathan Birkhahn.................... -- -- 73,000/86,000 717,050/467,900
</TABLE>
The market value of the Company's Common Stock as of the close of business
on August 31, 1997, as reflected by the closing price of the Common Stock on the
NYSE, was $39 3/4 per share.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of the
executive officers named in the table above. The following describes those
employment agreements.
Michael King and Roger King
In December 1995, the Company entered into employment agreements with
Michael King and Roger King, the Company's Chief Executive Officer and then
President (now Vice Chairman), and its Chairman of the Board, respectively. The
agreements provide for the employment of each of Michael and Roger King by the
Company from December 1, 1995 through August 31, 2000, at a base salary in the
Company's 1997 fiscal year for each of the two executive officers of $1,200,000,
with an increase of $100,000 in each subsequent fiscal year.
8
<PAGE> 11
In addition, the employment agreements provide for a "Net Income Bonus" for
each of Michael and Roger King equal to 1.5% of the Company's first $50,000,000,
2.0% of the next $50,000,000 and 2.5% of the excess over $100,000,000, of the
Company's Modified Consolidated Net Income. The bonus is determined and paid for
each full fiscal year of the Company ending on or prior to August 31, 2000
(unless the employment agreements are earlier terminated).
For the purpose of determining the Net Income Bonus, "Modified Consolidated
Net Income" means the net income of King World and its consolidated subsidiaries
after taxes but before extraordinary items, except that, to the extent that any
revenues and expenses are includable in "New Show Profits" for purposes of
determining the "New Show Profits Bonus" for any fiscal period (as described
below), they will be excluded in the determination of the Net Income Bonus for
such fiscal period (whether or not a New Show Profits Bonus is in fact payable
with respect to such fiscal period).
At the end of each fiscal quarter of each fiscal year during the term of
the employment agreements, the Compensation Committee causes the Modified
Consolidated Net Income and the Net Income Bonus payable through the end of such
fiscal quarter to be determined. To the extent that the amount of the Net Income
Bonus payable through the end of such fiscal quarter exceeds the sum of all Net
Income Bonus payments theretofore made to Michael King or Roger King, as the
case may be, in respect of prior fiscal quarters of the fiscal year to which
such Net Income Bonus relates, the excess will be paid to such executive as soon
as practicable after such determination is made; and to the extent that the
amount of all payments theretofore made to Michael King or Roger King, as the
case may be, in respect of prior fiscal quarters of the fiscal year to which
such Net Income Bonus relates exceeds the amount of the Net Income Bonus payable
to such executive through the end of such fiscal quarter, such executive must
repay such excess to the Company promptly after such determination is made. To
the extent that either Michael King or Roger King is required to repay any such
amount to the Company, and he does not do so promptly, the Company may set off
or deduct such amount from any sum owed to him by the Company under his
employment agreement. The fact that the Company cannot or does not make such
set-offs or deductions will not relieve Michael or Roger King, as the case may
be, of any liability for the repayment of any amounts owed by him to the
Company.
The Company made a $2,000,000 bonus payment to each of Michael and Roger
King under the terms of their respective employment agreements upon their
execution thereof. If either Michael or Roger King terminates his employment
with the Company on his own initiative prior to September 1, 1998, he must
promptly repay a portion of the bonus equal to the product of $2,000,000 and a
fraction, the numerator of which is the number of months prior to September 1,
1998 following such termination (and including the month in which such
termination occurred) and the denominator of which is 36.
In addition, under their respective employment agreements, Michael King and
Roger King are each entitled to a "New Series Bonus" of $750,000 for each new
each first-run "strip" (i.e., Monday through Friday) syndicated series (each a
"New Series") that (i) is developed, or the distribution rights to which are
acquired, by King World during the term of the employment agreements, (ii)
premieres in a television season that commences after the 1995-1996 television
season but before eighteen months after the termination of the employment
agreements, (iii) is produced, co-produced or distributed by King World and (iv)
is cleared over the course of any such season in domestic television markets
covering at least 70% of the domestic television viewing households, based on
Nielsen ratings. The New Series Bonus will be payable, if at all, only one time
with respect to each New Series, no matter during how many television seasons
such New Series is aired. A New Series Bonus will be payable if the criteria set
forth above are satisfied, even if the New Series is canceled during the
television season in which it has been cleared in 70% of the domestic television
viewing households.
The employment agreements of Michael and Roger King also provide that the
Company shall pay each of Michael and Roger King a "New Show Profits Bonus" for
each new show (including, but not limited to, each show as to which a New Series
Bonus has been paid, if any) that is developed, or the distribution rights to
which are acquired, by King World during the term of the employment agreements,
premieres before eighteen months after the termination of the employment
agreements, and is produced, co-produced or distributed by King World (each, a
"New Show"). The New Show Profits Bonus payable to Michael and
9
<PAGE> 12
Roger King with respect to any New Show for any fiscal year of the Company shall
equal the excess, if any, of (i) 5% of the excess of the cumulative revenues
derived by the Company from such New Show (and from any and all ancillary rights
derived from such New Show, including merchandising, theatrical and other
commercial rights) through the end of the fiscal year for which the
determination is being made over the cumulative production and development
costs, including producers' fees, direct selling, marketing, promotional and
other distribution expenses, all third-party participations and other payments,
and all other direct out-of-pocket costs, in all cases to the extent
attributable to the New Show; over (ii) all payments of the New Show Profits
Bonus made with respect to such New Show for all prior fiscal years, provided
that the payment of a New Series Bonus with respect to such New Show (if any)
will be treated as an expense of such New Show but will not be an offset against
the New Show Profits Bonus. Any New Show Profits Bonus owed to Michael or Roger
King for any fiscal year will be paid as soon as practicable after such audited
financial statements for such fiscal year become available. The New Show Profits
Bonus for any New Show will be payable by the Company only for so long as the
Company or any of its consolidated subsidiaries derives any revenues from the
New Show, but the Company's profit realized upon any direct or indirect
disposition of a New Show will be subject to the New Show Profits Bonus. After
termination of Michael King's or Roger King's employment, the New Show Profits
Bonus will continue to be payable to such executive, but only with respect to
New Shows that were developed or produced primarily by the Company, unless the
former executive engages in certain specified competitive activities prior to
August 31, 2000.
The employment agreements also provide for a "Supplemental Bonus" to be
paid to each of Michael and Roger King each year of their respective employment
agreements, provided that the Compensation Committee determines that the average
daily closing price of the Common Stock for such fiscal year (the "Average
Yearly Price") exceeded $38.00. In no event may the total of all Supplemental
Bonus payments to either executive over the five year terms of their respective
employment agreements exceed $2.55 million.
If the Average Yearly Price for any such fiscal year equals or exceeds
$39.50, the fair market value of the Common Stock on December 20, 1995 (the date
the employment agreements were executed), the Supplemental Bonuses for such
fiscal year shall for each executive be equal to 1.0% of the Company's Modified
Consolidated Net Income for such fiscal year. If such Average Yearly Price
exceeds $38.00 but is less than $39.50, the Supplemental Bonuses for such year
shall for each executive be equal to 1.0% of Modified Consolidated Net Income
for such year multiplied by a fraction, the numerator of which is the excess of
such Average Yearly Price over $38.00, and the denominator of which is $1.50.
The full amount by which any Supplemental Bonus payments were so reduced
below 1.0% of Modified Consolidated Net Income for any fiscal year (after taxes
but before extraordinary items) will be payable if and only if the Average
Yearly Price for any subsequent fiscal year within the term of their respective
employment agreements equals or exceeds $39.50. A portion of the amount by which
any Supplemental Bonus payment was so reduced shall be payable to Michael or
Roger King, as applicable, if the Average Yearly Price for any subsequent fiscal
year or years during the term of their respective employment agreements is less
than $39.50 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 in
such fiscal year shall be equal to the full amount of such reduction (or the
portion thereof that was not previously recouped), 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 $39.50 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
by Michael or Roger King under the foregoing formula will remain available for
recoupment in subsequent years during the term of their respective employment
agreements. Any amounts not recouped by Michael or Roger King on or prior to the
making of the Supplemental Bonus payment in respect of the fiscal year ending
August 31, 2000 will no longer be subject to recoupment and will not be paid.
In accordance with their employment agreements, each of Michael and Roger
King has also been granted a non-qualified stock option to purchase 1,500,000
shares of Common Stock. The options vest at the rate of 20% per year on the last
day of each of the Company's 1996 through 2000 fiscal years (subject to the
conditions described below, except as otherwise noted). The exercise price of
such options is $39.50 per share,
10
<PAGE> 13
the fair market value on the date the employment agreements of Michael and Roger
King were executed and the options were granted. Each such option has a term of
ten years.
In the event that either Michael King's or Roger King's full-time
employment with the Company is terminated prior to the end of the term of his
employment agreement, other than after a "Change of Control" or on account of
his death, disability or incapacity, he will be entitled to exercise his option
with respect to all shares of Common Stock subject thereto which had vested as
of the date of such termination during the one-month period commencing on the
date his employment so terminated. In the event that either Michael King's or
Roger King's full-time employment with the Company terminates on account of his
death or disability (within the meaning of Section 22(e)(3) of the Internal
Revenue code of 1986, as amended (the "Code")), he (or his heirs, administrators
or legal representatives) will be entitled to exercise his option during the
one-year period commencing as of the date his employment so terminated to the
extent the option was vested at the time of his death or disability. In the
event that either Michael King's or Roger King's full-time employment with the
Company is terminated after a "Change in Control", all shares subject to his
option that were not then vested will immediately vest, and he will be entitled
to exercise such option during the one-year period commencing as of the date his
employment so terminated.
For this purpose, a "Change in Control" means the occurrence of any one of
the following events: (i) a majority of the Board of Directors of the Company
consists of individuals other than "Incumbent Directors", which term means the
members of the Board of Directors on December 20, 1995, provided, that any
person becoming a director subsequent to such date whose election or nomination
for election was approved by at least two-thirds of the directors who then
comprised the Incumbent Directors shall be considered to be an Incumbent
Director; (ii) the Company, without the approval of Michael or Roger King, as
applicable, adopts any plan of liquidation providing for the distribution of all
or substantially all of its assets; or (iii) all or substantially all of the
assets or business of the Company and its consolidated subsidiaries are disposed
of pursuant to a merger, consolidation, reorganization, share exchange or other
transaction (unless the stockholders of the Company immediately prior to such
merger, consolidation, reorganization, share exchange or other transaction,
beneficially own, directly or indirectly, more than 50% of all the voting stock
or other ownership interests of the entity or entities, if any, that succeed to
the business of the Company).
During the term of the employment agreements, the Company is also obligated
to provide Michael and Roger King with life insurance coverage, each in the face
amount of $15,000,000, and disability insurance, if such coverage is available
at standard rates, upon terms to be agreed upon by the executives and the
Company.
Steven R. Hirsch
Mr. Hirsch serves as the President of Camelot Entertainment Sales, Inc.,
the wholly-owned barter advertising subsidiary of the Company, under an
employment agreement having a term that commenced on September 1, 1996 and ends
on August 31, 1999, with an option for the Company to extend the term an
additional two years, and provides for a base salary of $500,000 per year in the
first year, $525,000 in the second year, $550,000 in the third year and $600,000
in each year the Company exercises its option to extend the agreement. In each
of the Company's fiscal years under the agreement, Mr. Hirsch is also entitled
to an annual cash bonus equal to 1% of Camelot's net revenues (not to exceed
$200,000 in any of the first three years of the agreement or $250,000 during
either year the Company exercises its option to extend the agreement), and a
supplemental cash bonus (not to exceed $150,000 per year or $250,000 over the
term of his employment agreement), subject to the satisfaction of an S&P return
on equity performance condition. Mr. Hirsch's supplemental cash bonus is fully
payable for any year during the term of his employment agreement only if the
Average Yearly Price is greater than or equal to $38.875. To the extent that the
Average Yearly Price is less than $38.875 in any such year, the supplemental
cash bonus payable to Mr. Hirsch is reduced by multiplying the full amount of
the supplemental cash bonus otherwise payable by a fraction, the numerator of
which is the excess, if any, of the Average Yearly Price over Mr. Hirsch's "Base
Price" ($32.625) and the denominator of which is the excess, if any, of $38.875
over his Base Price. No supplemental bonus is payable if the Average Yearly
Price is less than his Base Price.
11
<PAGE> 14
In addition, pursuant to the terms of his employment agreement, Mr. Hirsch
has been granted a non-qualified stock option to purchase 150,000 shares of
Common Stock, pursuant to the Company's 1996 Amended and Restated Stock Option
and Restricted Stock Purchase Plan at an exercise price equal to $34.75, the
closing price of the Common Stock on September 3, 1996, the date of grant. 20%
of the shares subject to such options will vest on each of August 31, 1997,
August 31, 1998 and August 31, 1999, and the remainder will vest on August 31,
2001, subject to Mr. Hirsch's continued employment with the Company on that
date. The term of such option is ten years. If Mr. Hirsch ceases to be a
full-time employee of the Company or any of its subsidiaries or affiliates, he
will have the right to exercise the unexercised portion of such option only
within the one-month period following the date on which he ceased to be a
full-time employee, and then only to the extent that it was exercisable on the
date his employment ceased, except that if his employment ceased by reason of
his death or disability (within the meaning of sec. 22(e)(3) of the Code), such
one month period will instead be the one year period following the cessation of
his full-time employment.
Robert V. Madden
Mr. Madden serves as the Senior Vice President -- Administration of King
World under an employment agreement having an initial term of one year,
commencing on September 1, 1996, and four successive, dependent one-year
extension options that are exercisable at the election of the Company. The
agreement provides for salary compensation at a rate of $400,000 per year.
In addition, Mr. Madden has been granted a non-qualified stock option to
purchase 100,000 shares of Common Stock, pursuant to the Company's 1996 Amended
and Restated Stock Option and Restricted Stock Purchase Plan, at an exercise
price equal to $34.75, the closing price of the Common Stock on September 3,
1996, the date of grant. 20% of the shares subject to such option will vest on
each of August 31, 1997, August 31, 1998 and August 31, 1999, and the remainder
will vest on August 31, 2001, subject to Mr. Madden's continued employment with
the Company on that date. The term of such option is ten years. If Mr. Madden
ceases to be a full-time employee of the Company or any of its subsidiaries or
affiliates, he will have the right to exercise the unexercised portion of such
option only within the one-month period following the date on which he ceased to
be a full-time employee, and then only to the extent that it was exercisable on
the date his employment ceased, except that if his employment ceased by reason
of his death or disability (within the meaning of sec. 22(e)(3) of the Code),
such one month period will instead be the one year period following the
cessation of his full-time employment. Pursuant to the agreement, Mr. Madden is
permitted to devote up to 20% of his business time to other pursuits, including
the private practice of law, provided, however, that such other pursuits do not,
in the reasonable judgement of the Board of Directors of the Company, conflict
with his duties and responsibilities to the Company.
Jonathan Birkhahn
Mr. Birkhahn serves as Senior Vice President, Business Affairs and General
Counsel of King World under an employment agreement having a term that commenced
on September 1, 1996 and ends on August 31, 2000, with an option for the Company
to extend the term an additional year, and provides for salary compensation at
the rate of $340,000 per year in the first year, $360,000 in the second year,
$380,000 in the third year and $400,000 in the fourth year. If the Company
exercises its option to extend the agreement for an additional year, Mr.
Birkhahn's salary compensation will be at the rate of $425,000 for such year. In
addition, pursuant to the terms of the employment agreement, Mr. Birkhahn has
been granted a non-qualified stock option to purchase 75,000 shares of Common
Stock pursuant to the Company's 1996 Amended and Restated Stock Option and
Restricted Stock Purchase Plan at an exercise price equal to $34.75, the closing
price of the Common Stock on September 3, 1996, the date of grant. 20% of the
shares subject to such option will vest on each of August 31, 1997, August 31,
1998 and August 31, 1999, and the remainder will vest on August 31, 2001,
subject to Mr. Birkhahn's continued employment with the Company on that date.
The term of such option is ten years. If Mr. Birkhahn ceases to be a full-time
employee of the Company or any of its subsidiaries or affiliates, he will have
the right to exercise the unexercised portion of such option only within the
one-month period following the date on which he ceased to be a full-time
employee, and then only to the extent that it was exercisable on the date his
employment ceased, except that if his employment ceased by
12
<PAGE> 15
reason of his death or disability (within the meaning of sec. 22(e)(3) of the
Code), such one month period will instead be the one year period following the
cessation of his full-time employment.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee recommends compensation arrangements for the
Company's executive officers and administers the Company's 1996 Amended and
Restated Stock Option and Restricted Stock Purchase Plan.
The Company's executive compensation program is structured to help the
Company achieve its business objectives by:
- setting levels of compensation designed to attract and retain superior
executives in a highly competitive environment;
- designing equity-related and other performance-based incentive
compensation programs to align the interests of management with the
ongoing interests of stockholders;
- providing incentive compensation that varies directly with both Company
financial performance and individual contributions to that performance;
and
- linking compensation to elements that affect short- and long-term stock
price performance.
The Company has used a combination of salary and incentive compensation,
including cash bonuses and equity-based incentives, to achieve its compensation
goals.
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY
For the 1997 fiscal year, the Company paid its executives and employees
several forms of compensation designed to motivate and reward executive
performance while aligning executive and shareholder interests. The primary
components of executive compensation in the 1997 fiscal year were salary,
performance-based compensation and stock options.
Salary
The salary levels of the Company's executive officers are intended to
reflect the duties and levels of responsibility inherent in the positions in
question. Comparisons of the salaries paid by other companies in the television
syndication industry and related industries to executives holding comparable
positions are considered in establishing the salary level for each position. The
particular qualifications of the individual holding the position, his or her
relevant experience and the importance to the Company of his or her expected
contribution are also considered in establishing salaries.
During fiscal 1997, the executives named in the table above earned
approximately $3.6 million, or approximately 37%, of their total cash
compensation, in the form of salary compensation. The remaining 63% was earned
pursuant to performance-based cash bonus arrangements.
Performance-Based Compensation
Net Income and Profit Bonuses. Arrangements for bonus compensation for the
Company's executive officers are also negotiated individually with each
executive officer and are generally fixed by contract. Bonus compensation
arrangements take various forms, but generally are based on factors such as the
Company's financial performance, as measured by net income in the fiscal year,
and individual performance.
Certain of the Company's executive officers have a direct participation in
the Company's net income or the profits of a particular part of the Company's
business, depending on the executive's particular responsibilities. (The Company
has similar profit sharing arrangements with independent producers of the
Company's programming.) In some cases, executive officers have been awarded
supplemental cash bonuses with
13
<PAGE> 16
maximum dollar limits, the payout of which varies depending on the average price
of the Common Stock relative to a negotiated base level.
Generally, the payment of cash bonuses is subject to performance conditions
designed to align the interests of the Company's executive officers with those
of its stockholders by ensuring that the amount of the bonuses paid to the
Company's executive officers is dependent upon the Company's achieving certain
performance conditions.
The Company has favored net income bonuses and profit participations, as
well as bonuses that vary with stock performance or are payable only if new
television series are developed and successfully launched in syndication,
because it believes that they encourage executives to work harder and afford
executives a direct pecuniary interest in the portion of the Company's business
for which they are responsible. It is the Committee's understanding that net
income and profit participations are commonly employed in the television
syndication and related entertainment industries to encourage performance of
talent and executive personnel; indeed, such arrangements have been a feature of
the Company's compensation arrangements with its senior executives for the past
several years.
In fiscal 1997, the persons named in the Summary Compensation Table above
earned approximately $6.1 million in cash bonus compensation, of which
approximately $5.7 million was paid pursuant to the net income bonuses of
Michael King and Roger King, and approximately $120,000 was paid pursuant to the
supplemental bonus arrangement with Steven R. Hirsch, the President of Camelot,
King World's barter advertising subsidiary. Mr. Hirsch was also paid $200,000
pursuant to a cash bonus based upon the net revenues of Camelot Entertainment
Sales, Inc., the wholly-owned barter subsidiary of the Company. Robert V.
Madden, King World's Senior Vice President in charge of administration, and
Jonathan Birkhahn, a Senior Vice President in charge of business and legal
affairs, were paid discretionary cash bonuses of $50,000 and $40,000,
respectively.
New Show and New Series Bonuses. The Company's Chairman of the Board of
Directors and its Vice Chairman and Chief Executive Officer also have
arrangements for bonuses to be paid upon the development or distribution of
certain new shows and series. These bonuses are designed to encourage the
continued development of new programming by the Company and are dependent upon
the success of such programming.
Equity-Related Incentives.
The Company's primary method of compensating senior executives has been
through the grant of stock options granted at the commencement of their
employment agreements. (To date, no mid-term grants have been made.) Stock
options granted to executive officers are generally long-term (10 years) and
vest over a five-year period in most cases. The Company has favored stock
options as a way of aligning management's interests with the long-term interests
of the Company's shareholders and inducing executives to remain with the Company
on a long-term basis. Individual awards for executives and employees, other than
the Company's Chairman of the Board of Directors and its Vice Chairman and Chief
Executive Officer, are initially proposed by the Company's senior management.
The ultimate size of each award is made by the Compensation Committee, and the
size of an award reflects the Committee's judgment as to the extent to which the
executive can contribute to the Company's performance. With respect to this
component of compensation, the focus is not on rewarding an executive for his or
her current or past contributions, but rather on the impact the executive is
expected to have on the Company's future performance.
During fiscal 1997, stock options were granted to three of the named
executive officers, Messrs. Hirsch, Madden and Birkhahn, whose employment
agreements commenced at the beginning of the 1997 fiscal year. The option grants
were for 150,000, 100,000 and 75,000 shares of Common Stock, respectively, had
exercise prices of $34.75, the fair market value of the Common Stock on the date
of grant, and contain the Company's standard five year vesting provisions.
14
<PAGE> 17
CHAIRMAN OF THE BOARD OF DIRECTORS AND VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Compensation arrangements for the Company's Chairman of the Board of
Directors, Roger King, and its Vice Chairman and Chief Executive Officer,
Michael King, for the 1997 fiscal year were governed by the employment
agreements entered into by the Company and such executives during fiscal 1996.
The employment agreements provide for the payment of higher levels of
compensation than previous arrangements. In negotiating and approving the terms
of the agreements, the Committee considered proposals submitted by the
executives, and its approval of the overall compensation packages was influenced
primarily by the success of the Company's distribution and production operations
over the past several years and the unique contribution of these two executives
to the Company's long- and short-term profitability, including the Company's
ability to obtain new distribution properties, to develop and produce new
programming and to successfully distribute new and existing programming. During
the course of its negotiations with the executives, the Committee considered the
previous levels of compensation paid to Messrs. King as well as compensatory
benefits paid to the chief executive officers and chairmen of other companies in
the television syndication and related entertainment industries whose
profitability was similar to that of the Company. The Committee also engaged an
independent compensation consultant.
The employment agreements provided for each of Michael and Roger King to
receive a base salary in the Company's 1997 fiscal year of $1.2 million, an
increase of 9% over the salary of each for the Company's 1996 fiscal year. Under
the terms of their respective employment agreements, each of Michael and Roger
King will receive a salary increase of $100,000 in each subsequent fiscal year
over the balance of the five-year term of such employment agreement.
Each of the employment agreements between the Company and Michael King and
Roger King provide for several forms of performance-based bonus compensation.
Under the agreements, Michael King, who is in charge of the Company's overall
programming acquisition, development and production activities, and Roger King,
the head of the Company's sales department, are each entitled to a cash bonus in
the form of a percentage of the Company's net income (after taxes but before
extraordinary items) ranging from 1.5 to 2.5%, depending on the level of such
net income. Each of Michael and Roger King earned approximately $2.8 million in
payment of such bonus in respect of fiscal year 1997, compared to $2.6 million
earned in fiscal 1996. (A portion of the net income bonus for fiscal 1996 was
based on a lower net profits bonus rate that had been in effect prior to the
effective date of the December 20, 1995 employment agreements.) Each of the
employment agreements also provides for the payment of a "Supplemental Bonus"
for each year that the average daily closing price of the Common Stock of the
Company exceeds $38, with an additional bonus paid each year such price exceeds
$39.50. Because the average daily closing price of the Common Stock did not
exceed the threshold Common Stock price in fiscal 1997, no supplemental bonus
was paid to either of them with respect to fiscal 1997. Each of Michael and
Roger King had received a Supplemental Bonus of approximately $1,063,000 for
fiscal 1996.
The employment agreements of each of Michael King and Roger King include a
"New Series Bonus" of $750,000 for each new first-run "strip" (i.e.,
Monday - Friday) syndicated series that premieres in a television season that
commences after the 1995 - 1996 television season and that is cleared in any
such season in domestic television markets covering at least 70% of the domestic
television viewing households. No New Series Bonus was paid to either Michael
King or Roger King in fiscal 1997 or 1996 as no new series of the Company
debuted in either year.
The employment agreements of each of Michael King and Roger King also
include a "New Show Profits Bonus" based on the revenues generated by each new
show that is developed, or the distribution rights to which are acquired, by the
Company during the term of the employment agreements and that is produced,
co-produced or distributed by King World. No New Show Profits Bonus was paid to
either Michael King or Roger King in fiscal 1997 or 1996 as no new qualifying
series were introduced by the Company during such periods.
Overall, the cash bonus compensation earned by Michael and Roger King in
fiscal 1997 was 41% less than that earned in fiscal 1996. The difference
reflects a one-time payment of $2 million to each of them in connection with the
fiscal 1996 renewal of their employment agreements, as well as the impact in
fiscal 1997
15
<PAGE> 18
of the generally lower average price of the Common Stock, to which certain of
their performance bonuses are tied.
Long Term Equity Incentives
In fiscal 1996, at the time their current employment agreements were
entered into, the Company issued to each of Michael and Roger King a
non-qualified stock option to purchase 1,500,000 shares of Common Stock. The
options vest at the rate of 20% per year on the last day of each of the
Company's 1996 through 2000 fiscal years (subject to certain conditions). The
exercise price of such options is $39.50 per share, the fair market value on the
date the employment agreements of Michael and Roger King were executed and the
options were granted. Each such option has a term of ten years.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code generally limits the Company's federal income
tax deduction for compensation paid in any year to its Chief Executive Officer
and to each of its four highest paid executive officers, other than the Chief
Executive Officer, to $1 million, to the extent that such compensation is not
"performance based compensation" within the meaning of sec. 162(m). Accordingly,
in structuring the Company's compensation arrangements with its Chairman of the
Board, its Vice Chairman and Chief Executive Officer and its other highly paid
executive officers, the Committee attempted to design incentive formulas that
may qualify as "performance based compensation" in order to decrease the
after-tax cost of such arrangements to the Company. However, there can be no
assurance that the various incentive and performance related elements of the
Company's compensation arrangements with its five highest paid executive
officers will in fact qualify as "performance based compensation" under sec.
162(m) of the Code or that the tax deductibility of compensation paid pursuant
thereto will not in fact be limited by the $1 million statutory cap on
deductible executive compensation.
Joel Chaseman
Ronald S. Konecky
James M. Rupp
16
<PAGE> 19
STOCK PERFORMANCE GRAPHS
The following graphs compare the cumulative total stockholder returns, over
the periods presented, on the Company's Common Stock, the Standard & Poor's
Composite Index of 500 Stocks and the capital stocks of a representative group
of companies(1) whose operations include television programming. The fiscal
year-end values of each investment are based on share price appreciation plus
reinvested dividends, and assume an initial investment of $100.
As indicated in the charts, the market price of the Company's Common Stock
(adjusted for stock splits and dividends) has increased from $1.11 in December
1984, the time of the Company's initial public offering of Common Stock, to
$24 5/8 on August 31, 1992 and $39 3/4 on August 31, 1997. This represents stock
price appreciation of almost 3100% since the initial public offering and 61%
over the Company's last five fiscal years. As of November 18, 1997, the closing
price of the Common Stock was $54 7/8.
- ---------------
(1) In calculating the returns for August 31, 1996 and 1997, the peer group of
companies includes the following: All American Communications, dick clark
productions, Kushner-Locke, Spelling Entertainment (for fiscal 1996 only),
Time-Warner, Inc., Tribune Co. and Viacom, Inc. For the group returns
calculated prior to August 31, 1996, Samuel Goldwyn Company and Multimedia
were also included in the peer group. For group returns calculated on and
prior to August 31, 1993, Paramount Communications, Pathe Communications and
RHI Communications were included in the peer group, but Viacom, Inc. was not
included.
17
<PAGE> 20
FIVE YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
8/31/92 8/31/93 8/31/94 8/31/95 8/31/96 8/31/97
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
King World $100 $151 $153 $154 $143 $171
S & P 500 $100 $115 $121 $148 $176 $248
Peer Group $100 $161 $138 $171 $129 $171
</TABLE>
CUMULATIVE TOTAL RETURNS SINCE THE COMPANY'S INITIAL PUBLIC OFFERING
<TABLE>
<CAPTION>
12/5/84 8/31/85 8/31/86 8/31/87 8/31/88 8/31/89 8/31/90 8/31/91
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
King World $100 $425 $936 $1,814 $1,291 $1,987 $1,802 $2,523
S & P 500 $100 $119 $166 $229 $183 $255 $242 $308
Peer Group $100 $146 $184 $247 $218 $351 $217 $289
8/31/92 8/31/93 8/31/94 8/31/95 8/31/96 8/31/97
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
King World $2,219 $3,345 $3,401 $3,423 $3,175 $3,581
S & P 500 $332 $382 $403 $490 $582 $1,001
Peer Group $301 $474 $408 $502 $380 $635
</TABLE>
The above report of the Compensation Committee and the Stock Performance
Graph will not be deemed to be soliciting material or to be filed with or
incorporated by reference into any filing by the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934 (the "Exchange Act"), except
to the extent that the Company specifically incorporates such report or graph by
reference.
18
<PAGE> 21
2. APPROVAL OF AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
INTRODUCTION
The Company's Restated Certificate of Incorporation currently authorizes
the issuance of seventy-five million (75,000,000) shares of Common Stock, par
value, and five million (5,000,000) shares of Preferred Stock, $.01 par value.
On October 28, 1997, the Board of Directors adopted a resolution proposing that
the Restated Certificate of Incorporation of the Company be amended to increase
the authorized number of shares of Common Stock to one hundred fifty million
(150,000,000), subject to stockholder approval of the amendment.
PROPOSED STOCK SPLIT
Subject to the approval of the proposed amendment to the Restated
Certificate of Incorporation, the Board of Directors has declared a two-for-one
stock split of the Company's Common Stock, which would be effected as a dividend
distribution of one additional share of Common Stock for each share of Common
Stock outstanding (the "Stock Split"). Stockholders are not being asked to vote
on the Stock Split, but the Stock Split will not take place unless the
authorized number of shares of Common Stock is increased as described in this
Proposal No. 2. Without this increase in authorized shares, the Company will not
have enough authorized but unissued shares of Common Stock to double the number
of its outstanding shares as contemplated by the Stock Split. Readers should
note that none of the share-related data in this Proxy Statement is adjusted to
take into account the proposed Stock Split.
CURRENT USE OF SHARES
As of November 7, 1997, the Company had approximately 36.7 million shares
of Common Stock outstanding and approximately 6.5 million shares reserved for
future issuance under the Company's employee stock plans, of which, currently,
approximately 6.1 million are covered by outstanding options and approximately
424,000 are available for grant or purchase. In addition, the Company had
approximately 2 million shares of Common Stock reserved for issuance upon the
exercise of options granted to Oprah Winfrey and Jeffrey D. Jacobs in connection
with various renewals of The Oprah Winfrey Show (the "Harpo Options"). In
addition, the Board of Directors has approved the reservation of an additional
1,000,000 shares for future issuance under the Company's 1996 Amended and
Restated Stock Option and Restricted Stock Purchase Plan, subject to stockholder
approval of Proposal No. 3 at the 1998 Annual Meeting of Stockholders.
Based upon the foregoing number of outstanding and reserved shares of
Common Stock, the Company currently has approximately 28.8 million shares
remaining available for other purposes, without taking into account the shares
required to effect the Stock Split.
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has adopted a resolution proposing, approving and
declaring the advisability of and amendment to Article IV of the Restated
Certificate of Incorporation. The following is the text of the first paragraph
of Article IV of the Restated Certificate of Incorporation of the Company, as
proposed to be amended:
The total number of shares of stock which the Corporation shall have
authority to issue is one hundred fifty-five million (155,000,000) shares,
consisting of five million (5,000,000) shares of Preferred Stock, par value
$.01 per share (hereinafter called "Preferred Stock"), and one hundred
fifty million (150,000,000) shares of Common Stock, par value $.01 per
share (hereinafter called "Common Stock").
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is in the Company's best interests
to increase the number of shares of Common Stock that King World is authorized
to issue in order to effectuate the Stock Split to give the
19
<PAGE> 22
Company additional flexibility to maintain a reasonable stock price. As of the
date of this Proxy Statement, the Company's shares trade at approximately
$[ ] per share, with relatively low trading volume. The Company believes
that increasing the number of shares outstanding and decreasing the price per
share may help facilitate trading in the Common Stock and make the Common Stock
a more affordable, attractive investment, particularly for individual investors.
As noted above, the Board of Directors has approved a Stock Split subject to the
approval of this amendment.
The Board of Directors also believes that the availability of additional
authorized but unissued shares will provide the Company with the flexibility to
issue Common Stock for future stock splits and stock dividends as well as other
proper corporate purposes which may be identified in the future, such as to
raise equity capital, to adopt additional employee benefit plans or reserve
additional shares for issuance under such plans, and to make acquisitions
through the use of stock. Other than with respect to the foregoing Stock Split
and as permitted or required under the Company's employee benefit plans and
under outstanding options, warrants and other securities convertible into Common
Stock, the Board of Directors has no current plans, understandings or agreements
to issue additional Common Stock for any purposes.
The Board of Directors believes that the proposed increase in the
authorized Common Stock will make available sufficient shares for use, taking
into account the Stock Split, should the Company decide to use its shares for
one or more of such previously mentioned purposes or otherwise. No additional
action or authorization by the Company's stockholders would be necessary prior
to the issuance of such additional shares, unless required by applicable law or
the rules of any stock exchange or national securities association trading
system on which the Common Stock is then listed or quoted. The Company reserves
the right to seek a further increase in authorized shares from time to time in
the future as considered appropriate by the Board of Directors.
Under the Company's Restated Certificate of Incorporation, the Company's
stockholders do not have preemptive rights with respect to Common Stock. Thus,
should the Board of Directors elect to issue additional shares of Common Stock,
existing stockholders would not have any preferential rights to purchase such
shares. In addition, if the Board of Directors elects to issue additional shares
of Common Stock, such issuance could have a dilutive effect on the earnings per
share and/or voting power of current stockholders.
The proposed amendment to increase the authorized number of shares of
Common Stock could, under certain circumstances, have the effect of impeding
unsolicited take-over attempts, although this is not the reason for the
proposal. For example, in the event of a hostile attempt to take over control of
the Company, it might be possible for the Company to endeavor to impede the
attempt by issuing shares of the Common Stock, thereby diluting the voting power
of the other outstanding shares and increasing the potential cost to acquire
control of the Company. The amendment therefore may have the effect of
discouraging unsolicited takeover attempts. The Board of Directors is not aware
of any attempt to take control of the Company and the Board of Directors has not
presented this proposal with the intent that it be utilized as a type of
anti-takeover device.
EFFECT OF THE STOCK SPLIT
No change in total stockholders' equity will result from the Stock Split.
The aggregate amount of capital represented by the outstanding shares of Common
Stock will be increased by $.01 for each share issued to effect the Stock Split
and the Company's retained earnings account will be reduced by the same amount.
After the Stock Split, purchases and sales of Common Stock by an individual
stockholder may be subject to higher brokerage charges and applicable stock
transfer taxes than on a pre-split transaction of equivalent market value, due
to the greater number of shares of Common Stock involved after the Stock Split.
In addition, the Company will incur certain expenses in connection with the
Stock Split, such as the cost of preparing and delivering to stockholders new
certificates representing additional shares.
In accordance with the terms of the Company's stock option and employee
benefit plans as well as the Harpo Options, appropriate adjustments will be made
upon the effectiveness of the Stock Split to the number of shares reserved for
issuance under such plans and the exercise prices and number of shares covered
by outstanding options.
20
<PAGE> 23
The Company has been advised that, based on current tax law, the Stock
Split should not result in any gain or loss for Federal income tax purpose. The
tax basis of every share held before the Stock Split will be allocated between
the two shares held as a result of the distribution, and the holding period of
the new shares will include the holding period of the shares with respect to
which they were issued. The laws of jurisdictions other than the United States
may impose income taxes on the issuance of the additional shares; stockholders
subject to such laws are thus urged to consult their tax advisers.
As noted above, the Stock Split is contingent on stockholder approval of
the amendment, but stockholders are not being asked to vote on the Stock Split.
VOTE REQUIRED TO APPROVE THE AMENDMENT
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Meeting, assuming a quorum is present,
is necessary for approval of the Amendment. Therefore, abstentions and broker
non-votes (which may occur if a beneficial owner of stock where shares are held
in a brokerage or bank account fails to provide the broker or the bank voting
instructions as to such shares) will effectively count as votes against the
Amendment.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote "FOR" the proposal to amend the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock. Unless a contrary choice is specified,
proxies solicited by the Board of Directors will be voted FOR approval of the
Amendment.
3. APPROVAL OF AMENDMENTS TO THE COMPANY'S 1996 AMENDED AND RESTATED STOCK
OPTION AND RESTRICTED STOCK PURCHASE PLAN
At the Annual Meeting, the stockholders will be asked to approve an
amendment to the Company's 1996 Amended and Restated Stock Option and Restricted
Stock Purchase Plan (the "Plan"). The Plan, adopted in fiscal 1989 and amended
in fiscal years 1994, 1995 and 1996, provides for the granting of "nonqualified
stock options" and "incentive stock options" to acquire Common Stock and/or the
granting of rights to purchase Common Stock on a "restricted stock" basis.
Subject to stockholder approval of the amendment described below, the Plan has
been amended to increase the number of shares of the Company's Common Stock
available for the grant of options or for issuance as restricted stock awards
under the Plan by 1,000,000 shares. Previously, an aggregate 8,300,000 shares of
Common Stock had been at various times authorized for issuance under the Plan
(and predecessor plans) and, in fiscal 1989, an aggregate 2,550,000 shares were
authorized for issuance (and were issued) to the Company's three most senior
executives under the Company's Incentive Equity Plan for Senior Executives. In
addition, in fiscal 1997, the Company also adopted a Salesforce Bonus Plan under
which 500,000 shares were reserved for issuance to certain members of the
Company's salesforce.
As of November 7, 1997, 89,031 shares of Common Stock remained available
for issuance under the Plan and 335,000 shares remained available for issuance
under the Salesforce Bonus Plan.
The Company has in the past used, and intends in the future to use, stock
options as an important incentive device to motivate and reward its employees.
Management believes that equity incentives represented by stock options enhance
the Company's ability to attract and retain needed personnel.
The amendment to increase the number of shares reserved under the Plan has
been unanimously adopted by the Board of Directors, subject to stockholder
approval.
The primary features of the Plan are summarized below.
DESCRIPTION OF THE PLAN
The Plan provides an opportunity for persons employed by, or performing
services for, the Company or any of its subsidiaries, including officers and
directors of the Company or any of its subsidiaries, to purchase Common Stock.
By encouraging such stock ownership, the Company seeks to attract, retain and
motivate
21
<PAGE> 24
such employees and persons and to encourage such employees and persons to devote
their best efforts to the business and financial success of the Company. The
approximate number of employees and directors who are eligible to receive grants
and awards under the Plan is 490.
The Plan provides for the granting of "non-qualified stock options" and
"incentive stock options" ("Options") to acquire Common Stock and/or the
granting of rights ("Awards") to purchase Common Stock on a "restricted stock"
basis. The terms and conditions of individual option agreements may vary,
subject to the following guidelines: (i) incentive stock options may only be
granted to full-time employees of the Company and its subsidiaries, the option
price of incentive stock options may not be less than market value on the date
of grant and the term of each incentive stock option may not exceed ten years
from the date of grant thereof; (ii) non-qualified stock options may be granted
to any person employed by, or performing services for, the Company of its
subsidiaries, the option price of non-qualified options may be less than market
value on the date of grant and the term of non-qualified stock options may
exceed ten years; and (iii) no Options may be granted after May 3, 1999.
The Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee's authority to administer the Plan
includes the authority to (i) select the persons to whom Options and Awards may
be granted thereunder, (ii) establish the number of shares of Common Stock that
may be issued under each Option and Award and establish the option or purchase
price therefor, (iii) determine the time and the conditions subject to which
Options may be exercised in whole or in part, (iv) determine the form of
consideration that may be used to purchase shares of Common Stock upon exercise
of any Option (including the circumstances under which the Company's issued and
outstanding shares of Common Stock may be used by an optionee to exercise an
Option) or pursuant to an Award, (v) determine the circumstances stock acquired
upon exercise under which shares of Common Stock acquired upon exercise of an
Option or pursuant to an Award may be subject to forfeiture to the Company, (vi)
accelerate the time when outstanding Options may be exercised or when shares
purchased pursuant to an Award become vested, (vii) interpret the Plan and
decide any matters arising thereunder, (viii) fix the term of all Options
granted under the Plan (including the date on which such Options will expire and
terminate) and (ix) establish any other terms and conditions applicable to any
Option or Award not inconsistent with the provisions of the Plan.
The Board of Directors has the authority to amend the Plan at any time,
provided that stockholder approval is required (i) to increase the aggregate
number of shares of Common Stock as to which Options or Awards may be granted
(except for increases due to certain adjustments), (ii) to decrease the minimum
exercise price specified by the Plan in respect of incentive stock options,
(iii) to change the class of employees eligible to receive incentive stock
options under the Plan or (iv) if necessary to comply with Section 422 of the
Code with respect to incentive stock options or Section 16 of the Securities
Exchange Act and the rules promulgated thereunder.
The Plan also provides for a formula based grant of options to the
Non-Employee Directors. The term "Non-Employee Director" means directors who are
not employees of the Company or any of its subsidiaries, including directors who
are non-employee directors within the meaning of Rule 16b-3. The options so
granted must be "non-qualified stock options", have a term of ten years (subject
to continued service as a director of the Company or any of its subsidiaries)
and have an exercise price equal to the fair market value of the Common Stock on
the date of grant. The granting formula provides that, three business days after
each annual meeting, each Non-Employee Director elected or re-elected at such
meeting automatically receives an option to purchase 5,000 shares of Common
Stock, which will vest ratably and on an annual basis over such Director's
three-year term. A Non-Employee Director who is initially appointed or elected
to serve out the remainder of an unexpired term, or to fill a newly created
directorship the initial term of which is less than three years, will receive
proportionately reduced grants that will vest ratably and on an annual basis
over the unexpired portion of the term. The Plan also provided for a one-time
grant of options to purchase 5,000 shares of Common Stock to persons who were
Non-Employee Directors at the time the Plan was amended to provide for
formula-based grants of options to Non-Employee Directors.
Options have been granted under the Plan (and its predecessor plans), since
inception in 1984, to Messrs. Michael and Roger King to purchase 1,500,000
shares of Common Stock each; to Messrs. Hirsch,
22
<PAGE> 25
Madden and Birkhahn to purchase 401,185, 185,000 and 100,000 shares of Common
Stock, respectively; to all current executive officers as a group (including
those mentioned elsewhere in this paragraph) to purchase an aggregate 4,191,185
shares of Common Stock; and to Messrs. Konecky, Rupp, Chaseman and Richard King,
to purchase 81,667, 36,667, 30,833 and 10,000 shares of Common Stock,
respectively. Except for Michael and Roger King, no other person has been
granted options to purchase more than 5% of the total number of shares that may
be granted or awarded under the Plan. Under the Company's Incentive Equity Plan
for Senior Executives, in fiscal year 1989 the Company granted options to
Michael King and Roger King to purchase 1,200,000 shares of Common Stock each
and options to purchase 150,000 shares to an executive who has since left the
Company.
FEDERAL INCOME TAX CONSEQUENCES
The tax consequences of incentive stock options, non-qualified stock
options and restricted stock awards are quite complex. Therefore, the
description of tax consequences set forth below is necessarily general in nature
and does not purport to be complete. Moreover, statutory provisions are subject
to change, as are their interpretations, and their application may vary in
individual circumstances. Finally, the tax consequences under applicable state
and local income tax laws may not be the same as under the federal income tax
laws.
Incentive stock options granted pursuant to the Plan are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Code. If an optionee does not dispose of the shares acquired pursuant to
exercise of an incentive stock option within one year after the transfer of such
shares to the optionee and within two years from grant of the option (the "ISO
holding period requirements"), such optionee will recognize no taxable income as
a result of the grant or exercise of such option. (However, for alternative
minimum tax purposes the optionee will recognize as an item of tax preference
the difference between the fair market value of the shares received upon
exercise and the exercise price.) Any gain or loss that is subsequently
recognized upon a sale or exchange of the shares may be treated by the optionee
as long-term capital gain or loss, as the case may be. The Company will not be
entitled to a deduction for federal income tax purposes with respect to the
issuance of an incentive stock option, the transfer of shares upon exercise of
the option or the ultimate disposition of such shares (provided the ISO holding
period requirements are satisfied).
If shares received upon exercise of an incentive stock option are disposed
of prior to satisfaction of the ISO holding period requirements, the optionee
generally will recognize taxable ordinary income in the year in which such
disqualifying disposition occurs, in an amount equal to the lesser of (i) the
excess of the fair market value of the shares on the date of exercise over the
exercise price, and (ii) the gain recognized on such disposition. Such amount
will ordinarily be deductible by the Company for federal income tax purposes in
the same year, provided that the Company satisfies certain federal income tax
information reporting requirements. In addition, the excess, if any, of the
amount realized by the optionee on such disqualifying disposition over the fair
market value of the shares on the date of exercise of the incentive stock option
will be treated as capital gain, long-term or short-term, depending on whether,
after exercise of the option, the shares were held for more than one year (the
applicable long-term capital gain holding period) prior to such disposition.
Non-qualified stock options may be granted under the Plan. An optionee
generally will not recognize any taxable income upon grant of a non-qualified
stock option. The optionee will recognize taxable ordinary income, at the time
of exercise of such option, in an amount equal to the excess of the fair market
value of the shares on the date of exercise over the exercise price. Such amount
will ordinarily be deductible by the Company in the same year, provided that the
Company satisfies certain federal income tax information reporting requirements.
Any gain or loss that is subsequently recognized by the optionee upon a sale or
exchange of the shares will be capital gain or loss, long-term or short-term,
depending on whether, after the exercise of the option, the shares were held for
more than one year prior to such sale or exchange.
Restricted stock purchase awards may also be granted pursuant to the Plan.
A recipient of a restricted stock purchase award generally will not recognize
taxable income upon the purchase of shares of restricted stock, unless he or she
makes a timely election under Section 83(b) of the Code. Such a recipient,
however, would recognize taxable ordinary income (and the holding period for
such shares would commence) at the time that such shares become vested, in an
amount equal to the excess of the fair market value of the shares at
23
<PAGE> 26
that time over the purchase price paid for such shares. If, on the other hand,
the recipient makes a timely election under Section 83(b), he or she would
recognize taxable ordinary income (and the holding period for such shares would
commence) at the time of purchase, in an amount equal to the excess of the fair
market value of the shares at that time (determined without regard to any
transfer restrictions imposed on the shares, vesting provisions or any
restrictions imposed by the securities laws) over the purchase price paid for
such shares. In either case, the Company should be entitled to a deduction in an
amount equal to the ordinary income recognized by the recipient in the same year
that the recipient recognized such income, provided that the Company satisfies
certain federal income tax information reporting requirements. Any gain or loss
that is subsequently recognized by the recipient upon a sale or exchange of the
shares will be capital gain or loss, long-term or short-term, depending on
whether the shares were held for more than one year prior to such sale or
exchange.
As a result of recent changes in the federal income tax law, long-term
capital gain recognized on a sale or exchange of shares received pursuant to a
stock option or restricted stock purchase award will be subject to a maximum
capital gain tax rate of 28% where the shares are held at least one year prior
to such sale or exchange, and will be subject to a maximum capital gain tax rate
of 20% where the shares are held at least 18 months prior to such sale or
exchange.
Section 162(m) of the Code generally limits the Company's federal income
tax deduction for compensation paid in any year to each of its chief executive
officer and its four highest paid executive officers, other than its chief
executive officer, to $1 million per year, to the extent that such compensation
is not "performance based". Under Treasury regulations, a stock option will, in
general, qualify as "performance based" compensation if (i) it has an exercise
price of not less than the fair market value of the underlying stock on the date
of grant, (ii) it is granted under a plan that limits the number of shares for
which options may be granted to any participant during a specified period, which
plan is approved by a majority of the stockholders entitled to vote thereon, and
(iii) it is granted by a compensation committee consisting solely of at least
two independent directors. If a stock option grant to an executive referred to
above is not "performance based," the amount that would otherwise be deductible
by the Company in respect of the grant of such option will be disallowed to the
extent that the executive's aggregate non-performance based compensation in the
relevant year exceeds $1 million.
VOTE REQUIRED FOR APPROVAL
The foregoing amendment to the Plan will be submitted to stockholders for
their approval at the 1998 Annual Meeting of Stockholders. Approval of the
amendment requires the vote of the holders of a majority of the shares of Common
Stock present or represented and entitled to vote at the 1998 Annual Meeting of
Stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO APPROVE THE
AMENDMENT TO THE 1996 AMENDED AND RESTATED STOCK OPTION AND RESTRICTED STOCK
PURCHASE PLAN.
4. APPROVAL OF PERFORMANCE BASED COMPENSATION ARRANGEMENTS WITH JULES HAIMOVITZ
As noted above, under the terms of Section 162(m) of the Code and the
Treasury Department regulations promulgated thereunder, the performance based
portions of the employment agreements with the Company's Chief Executive Officer
and the four other highest paid executive officers must be approved by the
Company's stockholders in order to qualify for the "performance based"
compensation exception to the $1 million cap on the Company's executive
compensation deduction for federal income tax purposes. Although Mr. Haimovitz
was not among the highest paid executive officers of the Company in fiscal 1997,
it is expected that he will be in subsequent fiscal years and therefore the
performance based bonus contained in his
24
<PAGE> 27
employment agreement is being submitted for approval by a majority of holders of
Common Stock present or represented and entitled to vote at the 1998 Annual
Meeting of Stockholders.
With respect to bonus compensation, the employment agreement of Mr.
Haimovitz provides for a cash bonus (the "Net Income Bonus") for each full
fiscal year of the Company entirely within the Employment Period beginning with
the fiscal year commencing on September 1, 1997 and ending within (or upon the
termination of) the Employment Period, equal to 1.0% of the Consolidated Net
Income of the Company in excess of $150 million for such fiscal year. For this
purpose, "Consolidated Net Income" means the net income, after taxes but before
all extraordinary items, of the Company and its consolidated subsidiaries, as
reported in its audited financial statements for such fiscal year filed with the
Securities and Exchange Commission. Payment of any such bonus will be made
within thirty (30) days of delivery to the Company of the determination thereof
by the Company's independent public accountants.
If the Employment Period terminates on a date other than the last day of a
fiscal year, Mr. Haimovitz will be entitled to a performance bonus if the
Consolidated Net Income for the period commencing on the September 1st of such
fiscal year and ending on the last day of the Company's most recent full fiscal
quarter, if any, within such fiscal year that falls upon or precedes the date on
which the Employment Period terminated exceeds the product of (A) $150 million
and (B) a fraction, the numerator of which is the number of full fiscal quarters
in the last period and the denominator of which is four (4). In such event, the
performance based bonus will be equal to 1% of such excess, and will be paid
within thirty (30) days of the filing by the Company of its Form 10-Q for such
most recent fiscal quarter. For this purpose, "Consolidated Net Income" will
mean the net income, after taxes but before all extraordinary items, of the
Company and its consolidated subsidiaries, as reported in the Company's
unaudited financial statements for such most recent fiscal quarter filed with
the Securities and Exchange Commission.
The Compensation Committee is responsible for the administration of the
performance based compensation arrangements contained in the employment
agreement and will make all determinations and appropriate certifications with
respect thereto.
No bonus was paid to Mr. Haimovitz under the foregoing provision of his
employment agreement for the fiscal year ended August 31, 1997. If the same
performance based bonus arrangement had been in effect and Mr. Haimovitz had
been employed by the Company from the beginning of the 1997 fiscal year, no
bonus would have been paid thereunder for such fiscal year.
If the performance based bonus of Mr. Haimovitz discussed above were not
"performance based", the amount that would otherwise be deductible by the
Company in respect of such bonus will be disallowed because Mr. Haimovitz's base
salary is at the $1 million level.
VOTE REQUIRED FOR APPROVAL
Approval of the performance based bonus for Mr. Haimovitz requires the vote
of the holders of a majority of the shares of Common Stock present or
represented and entitled to vote at the 1998 Annual Meeting of Stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO APPROVE THE
PERFORMANCE BASED BONUS FOR MR. HAIMOVITZ.
5. STOCKHOLDER PROPOSAL FOR DECLASSIFICATION OF BOARD
The Amalgamated Bank of New York LongView Collective Investment Fund, 11-15
Union Square, New York, New York 10003, the beneficial owner of 9,300 shares of
Common Stock of the Company, has submitted the following proposal:
RESOLVED, the stockholders of King World Productions, Inc. request that
the Board of Directors take the necessary steps in accordance with
Delaware law to declassify the Board of Directors so that
25
<PAGE> 28
all directors are elected annually, with such declassification to be
carried out in a manner that does not affect the unexpired terms of
directors previously elected.
PROPONENT'S STATEMENT IN SUPPORT
The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
its implementation of those policies. We believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of our Company and its stockholders.
The King World Board of Directors is divided into three classes serving
staggered, three-year terms. We believe that the Company's classified Board of
Directors maintains the incumbency of the current Board, and therefore of
current management, which in turn limits the Board's accountability to
stockholders.
The elimination of King World's classified Board would require each
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the Board collectively and each
director individually. We believe this is one of the best methods available to
stockholders to ensure that the Company will be managed in a manner that is in
the best interest of stockholders.
WE URGE YOU TO VOTE FOR THIS RESOLUTION!
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
Since 1984, the Company's Certificate of Incorporation and By-laws have
included provisions that divide the Board of Directors into three classes, with
approximately one-third of the directors elected each year for a three-year
term. The Board believes that a classified Board of Directors continues to
provide important benefits to the Company and its stockholders.
The Board believes that the Company's current election system enhances its
ability to plan for a reasonable period into the future and to maintain the
continuity of corporate strategies and policies. At the same time, the annual
election of approximately one-third of the Board of Directors gives stockholders
the opportunity to review corporate decision making, while avoiding the sudden
and disruptive changes in corporate policies that could arise if an entirely new
group of directors were elected in a single year.
The Board also believes that the staggered system of electing directors
affords the Company valuable protection against an unsolicited or unfriendly
proposal to take over the Company. A classified Board is intended to encourage a
person seeking to obtain control of the Company to negotiate with the Board.
Because at least two stockholders' meetings will generally be required to effect
a change in control of the Board, the classified system gives the incumbent
directors the time and leverage necessary to review any takeover proposal, to
negotiate a more favorable result, to consider alternative strategies and to
assure that stockholder value is maximized.
For the reasons set forth above, the Board of Directors opposes the
foregoing stockholder proposal.
If approved by the stockholders, the proposal would not in itself
declassify the Board. The proposal seeks to have the Board of Directors take the
necessary steps to provide for the annual election of directors. To declassify
the Board, it would be necessary to amend the relevant provisions of the King
World Certificate of Incorporation and By-laws. The amendment to the Certificate
of Incorporation would require adoption by the Board of Directors and the
approval of 66 2/3% of the outstanding shares of King World Common Stock, and
the amendment of the relevant portions of the By-laws would require the approval
of 66 2/3% of the outstanding shares of King World Common Stock.
VOTING ON THE PROPOSAL
If the stockholder proposal is properly presented at the meeting, it will
be submitted to the stockholders for a vote. In such event, the affirmative vote
of the holders of a majority of the Company's Common Stock represented in person
or by proxy at the Annual Meeting is required for adoption of the resolution.
26
<PAGE> 29
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE ADOPTION OF THIS
PROPOSAL.
6. APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP,
independent public accountants, as the auditors of the Company for the fiscal
year ending August 31, 1998, subject to the approval of such appointment by
stockholders at the Annual Meeting. Arthur Andersen LLP has audited the
Company's financial statements since the Company's 1982 fiscal year.
The ratification of the appointment of the firm of Arthur Andersen LLP will
be determined by the vote of the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting.
If the foregoing appointment of Arthur Andersen LLP is not ratified by
stockholders, the Board of Directors will appoint other independent accountants
whose appointment for any period subsequent to the 1998 Annual Meeting of
Stockholders will be subject to the approval of stockholders at that meeting. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting and will have an opportunity to make a statement should he so desire and
to respond to appropriate questions.
VOTE REQUIRED FOR APPROVAL
Approval of the appointment of Arthur Andersen LLP requires the vote of the
holders of a majority of the shares of Common Stock present or represented and
entitled to vote at the 1998 Annual Meeting of Stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO RATIFY THE
APPOINTMENT OF THE FIRM OF ARTHUR ANDERSEN LLP.
* * *
GENERAL
FINANCIAL STATEMENTS
The Company's financial statements for the year ended August 31, 1997 are
included in the Company's 1997 Annual Report to Stockholders and its Annual
Report on Form 10-K for the fiscal year ended August 31, 1997 and are hereby
incorporated by reference. The Company's Annual Report to Stockholders for the
fiscal year ended August 31, 1997 is being mailed to stockholders concurrently
with this Proxy Statement. The Annual Report on Form 10-K is available upon
request, as described below.
OTHER MATTERS
The Board of Directors does not know of any matters that are to be
presented at the Annual Meeting other than those stated in the Notice of Annual
Meeting and referred to in this Proxy Statement. If any other matters should
properly come before the Meeting, it is intended that the proxies in the
accompanying form will be voted as the persons named therein may determine in
their discretion.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the accompanying form will be borne
by the Company, including expenses in connection with preparing and mailing this
Proxy Statement. In addition to solicitation of proxies by mail, directors,
officers and employees of the Company (who will receive no additional
compensation therefor) may solicit the return of proxies by telephone, telegram
or personal interview. Arrangements have also been made with brokerage houses
and other custodians, nominees and fiduciaries for the forwarding of
27
<PAGE> 30
solicitation material to the beneficial owners of stock held of record by such
persons, and the Company will reimburse them for reasonable out-of-pocket
expenses incurred by them in connection therewith.
Each holder of the Company's Common Stock who does not expect to be present
at the Annual Meeting or who plans to attend but who does not wish to vote in
person is urged to fill in, date and sign the proxy and return it promptly in
the enclosed return envelope.
STOCKHOLDER PROPOSALS
In accordance with the Company's By-laws, for a matter to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given written notice thereof to the Secretary of the Company not more than 120
days not less than 90 days in advance of the anniversary date of the immediately
preceding annual meeting. Any such notice must contain certain information
specified in the By-laws.
Pursuant to applicable rules under the Securities and Exchange Act of 1934,
some stockholder proposals may be eligible for inclusion in the Company's proxy
statement and form of proxy for the 1999 Annual Meeting of Stockholders. In
order to be included, any such proposal must be received at the Company's
offices at 1700 Broadway, New York, New York 10019, Attention: Secretary, not
later than [ ], 1998.
28
<PAGE> 31
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED AUGUST 31, 1997, FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, WITHOUT EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY PERSON
REQUESTING A COPY THEREOF IN WRITING AND STATING THAT SUCH PERSON IS A
BENEFICIAL HOLDER OF SHARES OF COMMON STOCK OF THE COMPANY ON THE RECORD DATE
FOR THE ANNUAL MEETING OF STOCKHOLDERS. REQUESTS AND INQUIRIES SHOULD BE
ADDRESSED TO KING WORLD PRODUCTIONS, INC., C/O KING WORLD CORPORATION, 830
MORRIS TURNPIKE, SHORT HILLS, NEW JERSEY 07078, ATTENTION: SYLVESTER RUSSO,
CONTROLLER.
By Order of the Board of Directors
DIANA KING
Corporate Secretary
29
<PAGE> 32
KING WORLD PRODUCTIONS INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders, Monday, January 19, 1998
The undersigned stockholder of KING WORLD PRODUCTIONS, INC., a
Delaware corporation, hereby appoints Roger King, Michael King and Diana King,
or any of them, voting singly in the absence of the others, attorneys and
proxies, with full power of substitution and revocation, to vote, as designated
below, all shares of Common Stock of King World Productions, Inc., which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of said
Corporation to be held at the Hotel InterContinental, 444 St. Charles Street,
New Orleans, Louisiana 70130, on January 19, 1998 at 2:00 p.m. (local time) or
any adjournment thereof, in accordance with the instructions on the reverse
side.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THE
PROXY WILL BE VOTED "FOR" ALL NOMINEES IN PROPOSAL NO. 1., "FOR" PROPOSAL NOS.
2, 3, 4 AND 6, AND "AGAINST" PROPOSAL NO. 5. The proxies are authorized to vote
as they may determine in their discretion upon such other business as may
properly come before the meeting.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN
PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 33
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN PROPOSAL NO. 1,
AND "FOR" PROPOSAL NOS. 2, 3, 4 AND 6, AND "AGAINST PROPOSAL NO. 5.
1. Election of the following Nominees as Directors:
Ronald S. Konecky and James M. Rupp To withhold
authority to vote
for any individual
Nominee, write the
Nominee's name on
the space provided
below:
WITHHOLD
FOR ALL AUTHORITY to vote
NOMINEES for all nominees ___________________________
/ / / / / /
2. The proposal to approve the amendment of the Company's Restated
Certificate of Incorporation
FOR AGAINST ABSTAIN
/ / / / / /
3. The proposal to approve amendments to the Company's 1996
Amended and Restated Stock Option and Restricted Stock Purchase Plan
FOR AGAINST ABSTAIN
/ / / / / /
4. The proposal to approve the Performance Based Compensation arrangements
with Jules Haimovitz
FOR AGAINST ABSTAIN
/ / / / / /
5. Stockholder proposal for declassification of the Board of Directors
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE> 34
6. The appointment of Arthur Andersen LLP as auditors for the
fiscal year ending August 31, 1998
FOR AGAINST ABSTAIN
/ / / / / /
THE PROXIES ARE AUTHORIZED TO VOTE AS THEY MAY DETERMINE IN THEIR
DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
Date:_______________, 199_
_______________________________________
Signature
_______________________________________
Signature (if held jointly)
Please sign exactly as name appears
above.
WHEN SHARES ARE HELD IN NAME OF JOINT
HOLDERS, EACH SHOULD SIGN. WHEN SIGNING
AS ATTORNEY, EXECUTOR, TRUSTEE,
GUARDIAN, ETC., PLEASE SO INDICATE. IF
A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY AN AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AN AUTHORIZED
PERSON.
