EXHIBIT 99.5
THE TRANSFER OF THE OPTION EVIDENCED BY THIS AGREEMENT
IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN. THE OPTION
HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF
THE HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TOWARDS THE RESALE OR OTHER DISTRIBUTION
THEREOF. NEITHER THE OPTION NOR THE SHARES ISSUABLE UPON
THE EXERCISE OF THE OPTION HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933.
THIS OPTION, AND THE OPTION SHARES ISSUABLE UPON EXERCISE
IN ACCORDANCE WITH THE TERMS CONTAINED HEREIN, ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AND A LIEN IN FAVOR OF KING WORLD
PRODUCTIONS, INC. (THE "COMPANY") TO SECURE CERTAIN OBLIGATIONS OF HARPO,
INC. ("HARPO") TO THE COMPANY PURSUANT TO AN AGREEMENT DATED AS OF JANUARY
30, 1987, AS AMENDED THROUGH MARCH 17, 1994 BETWEEN THE COMPANY AND HARPO.
KING WORLD PRODUCTIONS, INC.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ms. Xxxxx Xxxxxxx As of March 17, 1994
c/o Harpo, Inc.
000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxxxx:
This is the stock option agreement referred to in the amendment
(the "Harpo Amendment") dated as of March 17, 1994, to the Agreement dated
as of January 30, 1987 (the "Original Agreement"), as previously amended to
the date hereof (the Original Agreement, as amended to the date hereof and
by the Harpo Amendment, being herein called the "Harpo Agreement") between
Harpo, Inc. ("Harpo") and the undersigned (the "Company"). As partial
consideration for Harpo to enter into the Harpo Amendment, and as an
inducement for you to render services with respect to the production of the
Show (as such term is defined in the Harpo Amendment), the Company hereby
grants to you an option (the "Option") to purchase four hundred fifty
thousand (450,000) shares of the Company's Common Stock, $.01 par value
("Common Stock"; such shares of Common Stock, as the same may be adjusted
as described in Section 6 below, being herein referred to as the "Option
Shares"). The terms and conditions of the Option are set out below.
The Option will be treated as and shall constitute a "non-
qualified stock option" for Federal income tax purposes. The Option will
not constitute or be treated either by you or by the Company as an
"incentive stock option" as defined under Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code").
1. Date of Grant. The Option is granted to you on the date
hereof.
Page 60 of 124 Pages
2. Termination of the Option. Your right to exercise the
Option (and to purchase the Option Shares) shall expire and terminate in
all events on (i) March 18, 2004, or (ii) such earlier date provided in
Section 7 below.
3. Option Price. The purchase price to be paid upon the
exercise of the Option (the "Option Price") will be $33-5/8 per Option
Share, the closing price of the Common Stock on the New York Stock Exchange
on March 8, 1994, the date on which the parties reached an agreement in
principle with respect to the Harpo Amendment.
4. Vesting Provisions -- Entitlement to Exercise the Option
and Purchase Option Shares. The Option shall be exercisable by you, in
whole or part, at any time prior to expiration and termination pursuant to
Section 2 above.
5. Exercise of Option.
(a) To exercise the Option, you must deliver a completed copy
of the attached Option Exercise Form to the address indicated on the Form,
specifying the number of Option Shares being purchased as a result of such
exercise, together with payment of the full Option Price for the Option
Shares being purchased.
(b) Payment of the Option Price must be made in cash.
(c) In the event of any exercise of the Option, a certificate
or certificates representing the Option Shares so purchased, registered in
your name, shall be delivered to you within a reasonable time.
(d) You agree that Option Shares shall be held by you for
investment and may not be resold unless registered under the Securities Act
of 1933, as amended (the "Securities Act"), or an exemption from
registration is available, and that the Option Shares will bear a legend
referring to such limitation, to the restrictions on transfer of the Option
Shares referred to elsewhere in this Agreement and to any security
interests encumbering the Option Shares.
6. Adjustments. If the total outstanding shares of Common
Stock of the Company shall be increased or decreased or changed into or
exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation through reorganization,
merger or consolidation, recapitalization, stock split, combination or
exchange of shares or declaration of any dividends payable in stock or
other corporate transaction, then the number of Option Shares subject to
the unexercised portion of the Option (and the Option Price per share)
shall be appropriately adjusted (to the nearest possible full share) by the
Board of Directors of the Company.
7. Default under the Harpo Agreement.
(a) In the event that you die, or the term of the Harpo
Agreement terminates for any other reason except a material breach by
Harpo, then the Option may be exercised by you or your estate only within
the nine (9) month period following your death or the termination of the
term of the Harpo Agreement.
Page 61 of 124 Pages
(b) In the event that the term of the Harpo Agreement
terminates by reason of a material breach thereof by Harpo, then your right
to exercise the Option as to any and all Option Shares that have not
theretofore been issued shall terminate simultaneously with the termination
of such term.
(c) In the event that the Company exercises its rights
pursuant to paragraph 17 or 18 of the Original Agreement and the term of
the Harpo Agreement is suspended, then your right to exercise the Option
pursuant to Section 4 hereof shall be suspended during the period that the
term of the Harpo Agreement is suspended.
(d) Notwithstanding any provision contained herein to the
contrary, in no event may the Option be exercised to any extent after March
18, 2004.
8. Representations.
(a) You represent and warrant that you are acquiring the
Option and the Option Shares for investment purposes only and not with a
view towards the public distribution thereof.
(b) You understand that neither the Options nor the Option
Shares have been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements thereof
pursuant to Section 4(2) of the Securities Act.
(c) You represent and warrant that (i) you have the financial
ability to bear the economic risk of investment in the Option and the
Option Shares and (ii) you, together with the financial advisers who have
assisted you in acquiring the Option, have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of an investment in the Option and the Option Shares and have had
sufficient opportunity to obtain, and have obtained, all information
regarding the Company as you have deemed relevant in order to evaluate the
merits and risks of such investment.
(d) You represent and warrant that you understand the
Federal, state and local income tax consequences of the granting of the
Option to you, the exercise of the Option and purchase of Option Shares,
and the subsequent sale or other disposition of any Option Shares.
9. Covenants of the Company. The Company will at all times
reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of issue upon the exercise of the
Option, such number of shares of Common Stock as shall then be issuable
upon the exercise of the Option. The Company covenants that all Option
Shares, when issued in accordance with the terms hereof, shall be duly and
validly issued, fully paid and nonassessable. The Company will take all
such action as may be necessary to assure that all Option Shares may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common
Stock of the Company may then be listed. The Company will not take any
action which results in any adjustment of the Option Price if the total
number of Option Shares issued and issuable after such action would exceed
the total number of shares of Common Stock then authorized by the Company's
Page 62 of 124 Pages
Certificate of Incorporation. The Company has not granted and will not
grant any right of first refusal with respect to the Option Shares, and
there are no preemptive rights associated with such shares.
10. Required Registration.
(a) At any time you may by notice to the Company (the
"Registration Notice") request that it register for sale under the
Securities Act, in the manner specified in your Registration Notice,
all or any portion of the Option Shares and any other shares of
Common Stock that have been issued or are issuable to you and/or
Xxxxxxx X. Xxxxxx upon the exercise of stock options granted or to be
granted pursuant to the Harpo Agreement, including any prior or
subsequent amendment to that agreement (collectively, together with
the Option Shares, the "Agreement Shares"), and that have been pur-
chased, or will be purchased on or before the effective date of such
registration statement, or, provided that deferral of the date of
purchase to the closing date of sale of such shares in the manner
contemplated by the proposed registration will not disqualify the
offering from registration on Form S-3 (or any successor to such
form), then on such closing date pursuant to such exercise.
(b) Promptly following receipt of your Registration Notice,
the Company shall commence to prepare and, unless it elects to
purchase all of the Agreement Shares specified in such Registration
Notice through the procedures specified in Section 10(f) below, shall
file a registration statement under the Securities Act for the sale
of the Agreement Shares specified in such Registration Notice (less
any shares to be purchased pursuant to Section 10(f) below) and shall
use its best efforts to cause such registration statement to become
effective and remain in effect for the Required Effective Period for
public sale in accordance with the method of disposition specified by
you, provided, however, that the Company shall not be required to
file a "shelf" registration except on Form S-3 (or any successor to
such Form). The "Required Effective Period" shall be the greater of
(A) the 180-day period following the effective date of such
registration statement; and (B) unless the proposed plan of
distribution involves a firm commitment underwritten public offering,
the period required to dispose of all of the shares included in such
registration statement assuming the sale in each three-month period
of the maximum number of shares permitted to be sold under the
limitations of Section 14 of this Agreement. If such method of
disposition shall be an underwritten public offering, the Company may
designate the managing underwriter of such offering. If, in the good
faith opinion of the Board of Directors of the Company, registration
would materially interfere with pre-existing contractual obligations
to which the Company is then subject or financing arrangements or
other material transactions involving the Company or any of its
subsidiaries are pending at the time the Registration Notice is
given, or are under active consideration by the Company, the Company
may elect to defer registration for such period of time, in no event
in excess of one hundred twenty (120) days from the date on which the
Registration Notice was given, as in the good faith judgment of the
Board of Directors of the Company is necessary in order to preclude
adverse impact upon such financing or other transaction. In the
event of such deferral, if the shares to be registered are to be
acquired on exercise of this Option following the date of such
Registration Notice, the date on which the Option was exercised
Page 63 of 124 Pages
shall, for purposes of Section 2 and 7(d) hereof, be deemed to be the
date on which the Registration Notice was given. The obligation of
the Company under this Section 10 shall be deemed satisfied only when
a registration statement covering all Agreement Shares specified in
your Registration Notice and not purchased by the Company pursuant to
Section 10(f) below shall have become effective and, (X) if the
method of disposition you specify is a firm commitment underwritten
public offering, all such Agreement Shares shall have been sold
pursuant thereto; or (Y) if it is not such an offering, has remained
in effect for the Required Effective Period specified herein or until
the distribution of the Agreement Shares covered thereby is
completed, whichever is shorter.
(c) The Company shall not be obligated to register Agreement
Shares pursuant to this Section 10 (i) more than once; (ii) in any
period of twelve consecutive months in which any Agreement Shares
have been registered pursuant to the exercise of a demand regis-
tration right granted pursuant to any other agreement between the
Company and you or Xxxxxxx X. Xxxxxx; or (iii) at any time when the
registration, offering or sale of Option Shares would violate any
law, rule or regulation. For purposes of the foregoing sentence, (X)
a registration under this Option or the corresponding provisions of
the option agreement issued to Xxxxxxx X. Xxxxxx on the date hereof
shall be aggregated (so that a registration initiated by you pursuant
to this Section 10 shall decrease by one the number of demand
registrations available to each of you and Xxxxxxx X. Xxxxxx pursuant
said corresponding provisions, and vice versa) and (Y) any request
for registration given by Xxxxxxx X. Xxxxxx pursuant the correspond-
ing provisions of the option agreement issued to him shall, as a
condition to its effectiveness, be confirmed in writing by you (pro-
vided that you are then competent to give such confirmation). If any
Agreement Shares included in a registration statement filed pursuant
to this Section 10 were issued upon the exercise of any other stock
option granted to you or Xxxxxxx X. Xxxxxx pursuant to the Harpo
Agreement, the number of "demand" registration rights granted to you
and to Xxxxxxx X. Xxxxxx pursuant to such stock option or stock
options shall each be reduced by one.
(d) The Company shall be entitled to include in any
registration statement referred to in this Section 10, for sale in
accordance with the method of disposition you specify, shares of
Common Stock to be sold by the Company for its own account or by
other security holders of the Company for their accounts, or both,
except as and to the extent that, in the opinion of the managing
underwriter (if such method of disposition shall be an underwritten
public offering), such inclusion would adversely affect the marketing
of the Agreement Shares to be sold.
(e) The procedures for registration of Agreement Shares under
this Section 10 shall conform to the following:
(1) Obligations of the Company. If and whenever the
Company is required by the provisions of Section 10 or 11 to effect
the registration of Agreement Shares, the Company will:
Page 64 of 124 Pages
(i) Prepare and file with the Commission a
registration statement with respect to such securities and use its
best efforts to cause such registration statement to become and
remain effective for the Required Effective Period or until
thesecurities covered by such registration statement have been sold
in accordance with the method of disposition specified by you in your
Registration Notice, whichever is shorter, and prepare and file with
the Commission such amendments or supplements to such registration
statement and supplements to the prospectus contained therein as may
be necessary to keep such registration statement effective for the
Required Effective Period or until the shares covered by such regis-
tration statement have been sold in accordance with such method of
disposition, whichever is shorter;
(ii) If the offering is to be underwritten in
whole or in part, enter into a written underwriting agreement in form
and substance reasonably satisfactory to the managing underwriter or
underwriters of the public offering of such securities;
(iii) Furnish to the shareholders participating in
such registration and to the underwriters of the securities being
registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(iv) Use its best efforts to register or qualify
the shares covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as you may
reasonably request within 20 days following the original filing of
such registration statement, except that the Company shall not for
any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(v) Notify you promptly after it shall receive
notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(vi) Notify you promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) Prepare and file with the Commission,
promptly upon your request, any amendments or supplements to such
registration statement or prospectus which, in the opinion of your
counsel, are required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of the
Option Shares by you;
(viii) Prepare and promptly file with the
Commission and promptly notify you of the filing of such amendment or
supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when
a prospectus relating to such shares is required to be delivered
under the Securities Act, any event shall have occurred as the result
of which any such prospectus or any other prospectus as then in
Page 65 of 124 Pages
effect would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein,
in the light of the circumstances in which they were made, not
misleading;
(ix) In case you or any underwriters for you is
required to deliver a prospectus at a time when the prospectus then
in effect may no longer be used under the Securities Act, prepare
promptly upon request such amendment or amendments to such registra-
tion statement and such prospectus or prospectus as may be necessary
to permit compliance with the requirements of the Securities Act;
(x) Advise you, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration
statement; or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop
order should be issued;
(xi) If such registration is by way of an
underwritten public offering and if you so request, use its best
efforts to cause counsel and the independent certified public
accountants to the Company to furnish on the effective date of the
registration statement and at the closing provided for in the
underwriting agreement, (i) an opinion dated such date, of the
counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to you,
covering such matters with respect to the registration statement and
prospectus and each amendment or supplement thereto, proceedings
under state and federal securities laws and other matters relating to
the Company, the securities included in the registration statement
and the offer and sale of such securities as are customarily the
subject of opinions of issuer's counsel provided to underwriters at
or about the time such registration statement becomes effective and
the sale is closed; and (ii) a letter dated each such date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to you, stating that they are
independent certified public accountants within the meaning of the
Securities Act and providing such assurances as are customarily
provided by the independent certified public accountants for an
issuer in connection with the registration of securities, including
information as to the period ending not more than five business days
prior to the date of such letter with respect to the registration
statement and prospectus, as the underwriters or you may reasonably
request. If the furnishing of such opinion and/or letter causes
Company to incur any additional cost or expense, you agree to
reimburse Company therefor at the closing provided for in the under-
writing agreement.
(2) Obligations of Option Holder. It shall be a
condition to the inclusion of any Agreement Shares in a registration
statement that the holder thereof shall cooperate in the execution
and filing of the registration statement and any necessary state
securities law filings, and if the offering is to be underwritten,
that such holder become a party to the underwriting agreement and, if
so requested by the managing underwriter, execute and deliver Powers
Page 66 of 124 Pages
of Attorney and/or custodial agreements or other suitable
arrangements as the managing underwriter deems reasonably necessary
in order to insure orderly sale of the shares.
As among the holders of shares included in any registration
statement, decisions respecting the terms and conditions of any
underwriting agreements shall be made by the party initiating the
registration; so that in the case of a registration required pursuant
to a request by you under Section 10, determinations with respect to
the underwriting agreement shall be made by you, in your reasonable
judgment, after appropriate consultation with the Company and with
other persons whose shares are to be included in such offering; and
if you are party to a registration statement pursuant to Section 11,
you shall not have the right to make such determinations, but shall
be informed of them, and consulted with respect thereto.
(f) Within ten (10) business days following receipt of a
Registration Notice, the Company may elect, by written notice to you, to
purchase all or any portion of the Agreement Shares specified by you in
such Registration Notice for a purchase price equal to the closing price of
the Common Stock on the date such notice was given. In the event that the
Company elects to purchase any of the Agreement Shares specified by you in
such notice, the delivery of such Agreement Shares against payment therefor
shall take place on the fifth business day following receipt by you of the
Company's election notice. In the event that the Company does not elect to
purchase all of the Agreement Shares specified by you in such Registration
Notice, the Company shall register under the Securities Act all the
Agreement Shares not so purchased, in the manner provided above.
11. Incidental Registration. If the Company at any time
(other than pursuant to Section 10 hereof) proposes to register any of its
Common Stock under the Securities Act for sale to the public, whether for
its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4 or S-8 or
another form not available for registering the Option Shares for sale to
the public), it will give written notice at such time to you of its inten-
tion to do so. Upon your written request, given within 30 days after
receipt of any such notice by the Company, to register any of the Option
Shares that you have purchased, or will purchase on or before the effective
date of such registration statement, pursuant to the exercise of the Option
(which request shall state the intended method of disposition thereof), the
Company will use its best efforts to cause such Option Shares to be
included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite to permit
the sale or other disposition by you of the Option Shares so registered.
In the event that any registration pursuant to this Section 11 shall be, in
whole or in part, an underwritten public offering of Common Stock, any
request by you pursuant to this Section 11 to register Option Shares shall
specify that either (i) such Option Shares are to be included in the
underwriting on the same terms and conditions as the shares of Common Stock
otherwise being sold through underwriters under such registration; or (ii)
such Option Shares are to be sold in the open market without any under-
writing, on terms and conditions comparable to those normally applicable to
offerings of common stock in reasonably similar circumstances. The number
of Option Shares to be included in such an underwriting may be reduced if
and to the extent that the managing underwriter shall be of the opinion
that such inclusion would adversely affect the marketing of the securities
to be sold therein by the Company or other security holders of the Company.
Page 67 of 124 Pages
Notwithstanding anything to the contrary contained in this
Section 11, in the event that there is a firm commitment underwritten
public offering of securities of the Company pursuant to a registration
covering Option Shares and you do not elect to sell any Option Shares to
the underwriters of the Company's securities in connection with such
offering, you agree to refrain from selling any Option Shares during the
period of distribution of the Company's securities by such underwriters and
the period in which the underwriting syndicate participates in the after
market; provided, however, that you shall, in any event, be entitled to
sell Option Shares commencing on the 150th day after the effective date of
such registration statement.
12. Expenses.
(a) The expenses incurred by the Company in complying with
the registration pursuant to Section 10 and all registrations pursuant to
Section 11 hereof shall be paid as follows:
(i) all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for
the Company, fees of the National Association of Securities Dealers,
Inc. and/or the New York Stock Exchange, transfer taxes, fees of
transfer agents and registrars, costs of insurance and other costs
not described in (ii) below shall be paid by the Company; and
(ii) fees and expenses of your counsel, and all underwriting
discounts and selling commissions applicable to the sale of Agreement
Shares sold by you, and any additional cost or expense incurred by
the Company pursuant to your request under Section (10)(e)(1)(xi),
shall be paid by you.
13. Indemnification. In the event of a registration of
Agreement Shares under the Securities Act pursuant to Section 10 or 11
hereof, the Company will indemnify and hold you harmless against any
losses, claims, damages or liabilities, joint or several, to which you may
become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement
under which such Option Shares were registered under the Securities Act
pursuant to Section 10 or 11, any preliminary prospectus or final prospec-
tus contained therein, or any amendment or supplement thereof, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse you for any legal or
other expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished in
writing by you for inclusion in such registration statement.
In the event of a registration of any of the Agreement Shares
under the Securities Act pursuant to Section 10 or 11 hereof, you will
indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of the Securities Act, each officer
Page 68 of 124 Pages
of the Company who signs the registration statement, each director of the
Company, each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses, claims,
damages or liabilities, joint or several, to which the Company or such
officer or director or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Agreement
Shares were registered under the Securities Act pursuant to Section 10 or
11, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
you will be liable hereunder in any such case if and only to the extent
that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information furnished
to the Company by you in writing for inclusion in such registration
statement.
Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party other than under this
Section 13. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake
the defense thereof with counsel satisfactory to such indemnified party,
and, after notice from the indemnifying party to such indemnified party of
its election so to assume and undertake the defense thereof, the indemnify-
ing party shall not be liable to such indemnified party under this Sec-
tion 13 for any legal expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected; provided, however,
that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the
indemnifying party, or if the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
Notwithstanding the foregoing, any indemnified party shall have
the right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified
Page 69 of 124 Pages
party unless (i) the indemnifying party shall have failed to retain counsel
for the indemnified person as aforesaid or (ii) the indemnifying party and
such indemnified party shall have mutually agreed to the retention of such
counsel. It is understood that the indemnifying party shall not, in
connection with any action or related actions in the same jurisdiction, be
liable for the fees and disbursements of more than one separate firm
qualified in such jurisdiction to act as counsel for the indemnified party.
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss
or liability by reason of such settlement or judgment.
If the indemnification provided for in the first two paragraphs
of this Section 13 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein,
then each indemnifying party shall in lieu of indemnifying such indemnified
party contribute to the amount paid or payable by such indemnified party as
a result of such losses, claims, damages, liabilities or actions in such
proportion as appropriate to reflect the relative fault of the Company, on
the one hand, and you, on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
actions as well as any other relevant equitable considerations, including
the failure to give any notice under the third paragraph of this
Section 13. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact relates to information supplied by the Company, on the one hand, or
you, on the other, and to the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company and you agree that it would not be just and
equitable if contributions pursuant to this paragraph were determined by
pro rata allocation or by any other method of allocation which did not take
account of the equitable considerations referred to above in this
paragraph. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, liabilities or action in respect thereof,
referred to above in this paragraph, shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connec-
tion with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Sec-
tion 13 shall be on such other terms and conditions as are at the time
customary and reasonably required by such underwriters. Upon your reason-
able request, or upon the reasonable request of any underwriter of
Agreement Shares, the Company shall obtain, if reasonably available, an
insurance policy covering the risks described above in this Section 13 in
an amount and with a deductible reasonably requested by you or such
underwriter and naming you, any underwriter of such stock and any person
controlling you or such underwriter as beneficiaries. The costs of
obtaining and maintaining any such insurance shall be borne by the Company.
Page 70 of 124 Pages
14. Sale of Option Shares.
(a) You hereby agree to limit your sales of Agreement Shares
so that, except for sales pursuant to underwritten, firm commitment public
offerings, your sales of Agreement Shares, aggregated with sales of
Agreement Shares by Xxxxxxx X. Xxxxxx, shall not exceed in any three-month
period the greater of (i) one percent of the outstanding shares of Common
Stock of the Company, as disclosed in its public report most recently filed
with the Securities and Exchange Commission before the date of any sale and
(ii) the average weekly reported volume of trading in Common Stock of the
Company on the New York Stock Exchange and all other national securities
exchanges during the four calendar weeks preceding the date of any sale;
provided however, that upon any "Change in Control" (as such term is
defined in Exhibit B of the Harpo Amendment) of the Company, the foregoing
restriction shall be reduced or eliminated to the extent that any volume
restrictions on resales of Common Stock that then apply to Xxxxx Xxxx
and/or any other person who was an executive officer of the Company prior
to such Change in Control are more favorable than those afforded to you
pursuant to this Option. Notwithstanding anything to the contrary con-
tained in this Agreement, you shall not be entitled to register, sell or
dispose of any Agreement Shares that are subject to any liens, claims,
security interests and other encumbrances of any kind, unless and until the
same are removed (or will be removed in conjunction with their sale).
(b) In order to secure the repayment to the Company of the
Secured Amount (as defined in the Harpo Amendment) pursuant to the Harpo
Agreement, you hereby grant to the Company a first priority lien and
security interest (the "Security Interest") in (i) your rights under this
Option, (ii) all Option Shares now or hereafter issuable or issued pursuant
to the exercise of the Option and (iii) all proceeds thereof (collectively,
the "Stock Option Collateral"), provided that, unless and until the Company
notifies you that the amount of Harpo's Share of Revenues (as defined in
the Harpo Amendment) which the Company reasonably projects at the time of
such notice will be payable to Harpo would be inadequate to fully secure
the Secured Amount (an "Additional Security Notice"; such notice
specifying, in reasonable detail, the amount of such inadequacy (the
"Security Shortfall")), you may exercise the Option, sell the Option Shares
issued to you upon such exercise and retain the proceeds thereof without
restriction. The Security Interest shall, in any event, be limited to such
number of shares of Common Stock (and to the Option to the extent corre-
sponding to such shares) that, as of the date of such Additional Security
Notice, would, upon sale at a price per share equal to the closing price of
the Common Stock on the New York Stock Exchange, generate Net Realizable
Value equal to the projected amount of the Security Shortfall. The Net
Realizable Value of an Option Share at any time shall be the fair market
value of such share at such time less the sum of (i) the Option Price for
such Option Share, and (ii) a provision for taxes equal to the difference
between such fair market value and such Option Price (the "Option Gain")
multiplied by the highest rate of federal and state income tax to which the
Option Gain will be subject (with offset for deductibility of such state
taxes). At any time that any Stock Option Collateral is subject to the
Security Interest, you may obtain its release from the Security Interest by
substituting alternate collateral, as more fully set forth in the Security
and Pledge Agreement dated as of March 17, 1994 among you, the Company,
Harpo, Xxxxxx & Company and Xxxxxxx X. Xxxxxx (the "Security and Pledge
Agreement"). You hereby agree to take such steps as are reasonably
requested by the Company to perfect the Security Interest, including the
Page 71 of 124 Pages
execution and filing of UCC-1 financing statements in such form as
reasonably requested by the Company, the delivery to the Company of the
certificates evidencing the Option Shares, the delivery to such third-party
financial intermediaries as may from time to time be requested by the
Company of written notice confirming the Security Interest and obtaining
the written confirmation and agreement of any such financial intermediaries
that such Option Shares and the proceeds thereof are subject to the Securi-
ty Interest, and that such financial intermediaries shall hold the Option
Shares and the proceeds thereof as agent for the Company, as pledgee,
subject to such written confirmation and agreement. Upon the occurrence of
an Event of Default (as such term is defined in the Security and Pledge
Agreement), the Company shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code in all relevant jurisdic-
tions with respect to the Stock Option Collateral.
15. Defaults. It shall constitute a breach of this
Agreement by either party if such party shall fail or refuse to fully
perform any of its obligations under this Agreement and shall not have
cured such failure or refusal within 30 days after receipt from the other
party of written notice advising it of such failure or refusal, or, in the
event that such failure or refusal is of a nature that cannot be cured
within 30 days, then if such party shall not begin to cure the same within
such 30-day period and thereafter diligently prosecute such cure to comple-
tion.
16. Successors; No Assignment. Each of the covenants, terms,
provisions and agreements contained herein shall be binding upon and inure
to the benefit of the parties' successors and assigns. Neither the Option,
nor any of the rights granted to you pursuant hereto, may be transferred or
assigned (including, without limitation, by operation of law), except by
will or the laws of descent and distribution.
17. Withholding Taxes. In the event that the Company is
required to withhold any Federal, state or local taxes in respect of the
grant of the Option or in respect of the acquisition of any Option Shares,
the Company may deduct from any payments of any kind otherwise due to you
under the Harpo Agreement the aggregate amount of such Federal, state or
local taxes required to be so withheld or, if such payments are insuffi-
cient to satisfy such Federal, state or local taxes or if no such payments
are due or to become due, then, you will be required to pay to the Company,
or to make other arrangements satisfactory to the Company regarding payment
to the Company of, the aggregate amount of any such taxes. All matters
with respect to the total amount of taxes to be withheld shall be
determined by the Company in its sole discretion.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. If any one
or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby.
Page 72 of 124 Pages
Please acknowledge receipt of this Option Agreement and
agreement with the terms hereof by signing the enclosed copy of this Option
Agreement in the space provided below.
KING WORLD PRODUCTIONS, INC.
By/s/ Xxxxxxx X. Xxxxxx
Accepted and Agreed:
/s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx
Page 73 of 124 Pages
King World Productions, Inc.
OPTION EXERCISE FORM
Xxxxx Xxxxxxx hereby exercises her right to purchase ________
shares of Common Stock, $.01 par value, of King World Productions, Inc.
pursuant to the option granted to her on March 17, 1994, memorialized in
the Option Agreement, dated as of March 17, 1994, between her and King
World Productions, Inc.
Date:__________________ __________________________
Xxxxx Xxxxxxx
Send a completed copy of this Option Exercise Form to:
Vice President - Finance
King World Productions, Inc.
c/o King World Corporation
000 Xxxxxx Xxxxxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Page 74 of 124 Pages
