EXHIBIT 99.2
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 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 JANUARY 28, 1991
BETWEEN THE COMPANY AND HARPO.
KING WORLD PRODUCTIONS, INC.
000 Xxxxxx Xxxxxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Ms. Xxxxx Xxxxxxx As of January 28, 1991
c/o Harpo, Inc.
000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxxxx:
This is the stock option agreement referred to in the Agreement (the
"Harpo Agreement"), dated as of January 30, 1987, as amended to date, between
Harpo, Inc. ("Harpo") and the undersigned (the "Company"). As partial
consideration for your causing Harpo to enter into the January 28, 1991
amendment to the Harpo Agreement, and as an inducement for you to render
services with respect to certain Episodes (as such term is defined in the
Harpo Agreement) that are to be distributed under the Harpo Agreement, the
Company hereby grants to you an option (the "Option") to purchase nine hundred
thousand (900,000) 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 422A of the Internal Revenue Code of 1986, as amended
(the "Code").
1. Date of Grant. The Option is granted to you on the date hereof.
2. Termination of the Option. Your right to exercise the option (and
to purchase the Option Shares) shall expire and terminate in all events on (i)
January 28, 2001, or (ii) such earlier date provided in Section 7 below.
Page 10 of 124 Pages
3. Option Price. The purchase price to be paid upon the exercise of
the Option (the "Option Price") will, subject to adjustment under Section 6
below, be $25.50 per Option Share, the lowest closing price of the Common
Stock on the New York Stock Exchange during the week ended February 1, 1991.
4. Vesting Provisions--Entitlement to Exercise the Option and
Purchase Option Shares.
(a) Except as otherwise provided in Section 7, you will become
entitled to exercise the Option with respect to 12.5% of the Option Shares
beginning on August 31, 1991, and with respect to an additional 12.5% of the
Option Shares beginning on August 31, 1992. You will become entitled to
exercise the Option with respect to an additional 20% of the Option Shares
beginning on each of August 31, 1993 and August 31, 1994, and with respect to
an additional 17.5% of the Option Shares beginning on each of August 31, 1995
and August 31, 1996.
(b) The Board of Directors of the Company, in its sole
discretion, may at any time accelerate the time at which the Option may be
exercised by you with respect to any Option Shares.
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 may be made, at your option, (i)
in cash; (ii) by delivery, together with a properly executed Option Exercise
Form, of irrevocable instructions to a broker to promptly deliver to the
Company the amount of proceeds from the sale of option Shares required to pay
the Option Price; (iii) by delivery to the Company of a number of shares of
Common Stock, free and clear of all liens, claims, security interests and
other encumbrances of any kind, having a fair market value equal to the Option
Price of the Option Shares to be issued to you upon such exercise; or (iv) by
any combination of the foregoing methods of payment. For the purpose of clause
(iii), the "fair market value" of the Common Stock shall be the closing price
of the Common Stock on the last business day prior to the day on which the
shares of Common Stock are delivered to the Company, as reported on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or on the NASDAQ National Market System or, if the Common
Stock is not then listed on a national securities exchange or quoted on the
NASDAQ National Market System, the last reported bid price of the Common Stock
on the NASDAQ inter-dealer quotation system or any other recognized quotation
or reporting system at the close of business on the last business day prior
to the day on which the shares of Common Stock are delivered to the Company.
(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
Page 11 of 124 Pages
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 (and the Option Price per share)
subject to the unexercised portion of the Option 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, and only to the extent that you were entitled to exercise the
Option on the date of your death or such termination.
(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 Harpo Agreement and the term of the Harpo
Agreement is suspended, then your rights to exercise the Option pursuant to
Section 4 shall be suspended and, upon the revocation of such suspension, each
of the dates set forth in Section 4 with respect to any portion of the Option
Shares that has not theretofore become exercisable shall be postponed by a
number of days equal to the number of days during which the operation of the
Harpo Agreement was suspended.
(d) Notwithstanding any provision contained herein to the
contrary, in no event may the Option be exercised to any extent after January
28, 2001.
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 resale or 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
Page 12 of 124 Pages
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 merit and risks of an
investment in the Option and the option Shares and have had sufficient
opportunity to obtain, and have obtained, all information regarding the
Company as you have deemed relevant in order to evaluate the merits and risks
of such investment.
(d) You represent and warrant that you understand the Federal,
state and local income tax consequences of the granting of the Option to you,
the exercise of the Option and purchase of Option Shares, and the subsequent
sale or other disposition of any Option Shares.
9. Covenants of the Company. The Company will at all times reserve
and keep available out of its authorized and unissued shares of Common Stock,
solely for the purpose of issue upon the exercise of the Option, such number
of shares of Common Stock as shall then be issuable upon the exercise of the
Option. The Company covenants that all Option Shares, when issued in
accordance with the terms hereof, shall be duly and validly issued, fully paid
and nonassessable. The Company will take all such action as may be necessary
to assure that all Option Shares may be so issued without violation of any
applicable law or regulation, or of any requirements of any national
securities exchange upon which the Common Stock of the Company may then be
listed. The Company will not take any action which results in any adjustment
of the Option Price if the total number of Option Shares issued and issuable
after such action would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation. The Company has not
granted and will not grant any right of first refusal with respect to the
Option Shares, and there are no preemptive rights associated with such shares.
10. Required Registration.
(a) At any time you may, by notice to the Company (the
"Registration Notice") request that it register for sale under the Securities
Act, in the manner specified in your Registration Notice, all or any portion
of the Option Shares that you have purchased, or will purchase 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
Option Shares specified in such Registration Notice through the procedures
specified in Section 10(e) below, shall file a registration statement under
the Securities Act for the sale of the Option Shares specified in such
Registration Notice (less any shares to be purchased pursuant to Section 10(e)
below) and shall use its best efforts to cause such registration statement to
become effective and to remain in effect for the Required Effective Period for
public sale in accordance with the method of disposition specified by you, the
number of Option Shares specified in such Registration Notice, 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
Page 13 of 124 Pages
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.
The Company shall not be obligated to register Option Shares pursuant to this
Section 10 (i) on more than three occasions in the aggregate; (ii) on more
than one occasion in any period of twelve consecutive months with respect to
shares acquired on exercise of any options acquired by any person at any time
under the Harpo Agreement (including any existing or subsequent amendments to
that agreement); 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, a registration under this Option or under the option
agreement issued on this same date to Xxxxxxx X. Xxxxxx shall be aggregated
and any request for registration given by Xxxxxxx X. Xxxxxx pursuant to this
Section 10 shall, as a condition to its effectiveness, be confirmed in writing
by Xxxxx Xxxxxxx (if she is then competent to give such confirmation). In
addition, 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 material
subsidiaries are pending at the time the Registration Notice is given, or are
under active consideration by the Company, the Company may elect to defer
registration for such period of time, in no event in excess of one hundred
twenty (120) days from the date on which the Registration Notice was given,
as in the good faith judgment of the Board of Directors of the Company is
necessary in order to preclude adverse impact upon such financing or other
transaction. In the event of such deferral, if the shares to be registered
are to be acquired on exercise of this Option following the date of such
Registration Notice, the date on which the Option was exercised shall, for
purposes of Section 2 and 7(d) hereof, be deemed to be the date on which the
Registration Notice was given. The obligation of the Company under this
Section 10 shall be deemed satisfied only when a registration statement
covering all option Shares specified in your Registration Notice and not
purchased by the Company pursuant to Section 10(e) below shall have become
effective and, (X) if the method of disposition you specify is a firm
commitment underwritten public offering, all such Option 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 shares covered thereby is completed, whichever is shorter.
(c) 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 Option Shares to be sold.
(d) The procedures for registration of shares under this Section
10 shall conform to the following:
Page 14 of 124 Pages
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 shares the Company will:
1.1 Prepare and file with the Commission a
registration statement with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective
for the required Effective Period or until the securities covered by such
registration statement have been sold in accordance with the method of
disposition specified by the Optionee, whichever is shorter, and prepare and
file with the Commission such amendments or supplements to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective for the required
Effective Period or until the shares covered by such registration statement
have been sold in accordance with such method of disposition, whichever is
shorter;
1.2 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;
1.3 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;
1.4 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 such Optionee 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;
1.5 Notify the Optionee 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;
1.6 Notify such Optionee promptly of any request by
the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
1.7 Prepare and file with the Commission, promptly
upon the request of any such Optionee, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel for such
Optionee, is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Option Shares by such
Optionee;
Page 15 of 124 Pages
1.8 Prepare and promptly file with the Commission
and promptly notify such Optionee of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such shares is required to be delivered under the Securities Act,
any event shall have occurred as the result of which any such prospectus or
any other prospectus as then in effect would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
1.9 In case any of such Optionee or any underwriters
for any such Optionee is required to deliver a prospectus at a time when the
prospectus then in effect may no longer be used under the Securities Act,
prepare promptly upon request such amendment or amendments to such
registration statement and such prospectus or prospectus as may be necessary
to permit compliance with the requirements of the Securities Act;
1.10 Advise such Optionee, 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;
1.11 If such registration is by way of an
underwritten public offering and if the Optionee so requests, 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 the Optionee,
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 the Optionee, 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 the
Optionee may reasonably request. If the furnishing of such opinion and/or
letter causes Company to incur any additional cost or expense, you agree to
reimburse Company therefor at the closing provided for in the underwriting
agreement.
2. Obligations of Optionee. It shall be a condition to
the inclusion of any shares of Optionee in a registration statement that the
Optionee cooperate in the execution and filing of the registration statement
and any necessary state securities law filings, and if the offering is to be
Page 16 of 124 Pages
underwritten, that such holder become a party to the underwriting agreement
and, if so requested by the managing underwriter, to Powers of Attorney and/or
custodial agreements or other suitable arrangements as the managing under
writer 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 the Optionee under Section
10, determinations with respect to the under writing agreement shall be made
by the Optionee in his or her reasonable judgment after appropriate
consultation with the Company and with other persons whose shares are to be
included in such offering; and if the Optionee is party to a registration
statement pursuant to Section 11, the Option Shall not have the right to make
such determinations, but shall be informed of them, and consulted with respect
thereto.
11. Incidental Registration. If the Company at any time (other than
pursuant to Section 10 hereof) proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account
or for the account of other security holders or both (except with respect to
registration statements on Forms S-4 or S-8 or another form not available for
registering the Option Shares for sale to the public), it will give written
notice at such time to you of its intention to do so. Upon your written
request, given within 30 days after receipt of any such notice by the Company,
to register any of the Option Shares that you have purchased, or will purchase
on or before the effective date of such registration statement, pursuant to
the exercise of the Option (which request shall state the intended method of
disposition thereof), the Company will use its best efforts to cause such
Option Shares to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by you of the Option Shares
so registered. In the event that any registration pursuant to this Section
11 shall be, in whole or in part, an underwritten public offering of Common
Stock, any request by you pursuant to this Section 11 to register Option
Shares shall specify that either (i) such Option Shares are to be included in
the underwriting on the same terms and conditions as the shares of Common
Stock otherwise being sold through underwriters under such registration; or
(ii) such Option Shares are to be sold in the open market without any
underwriting, on terms and conditions comparable to those normally applicable
to offerings of common stock in reasonably similar circumstances. The number
of Option Shares to be included in such an underwriting may be reduced if and
to the extent that the managing underwriter shall be of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold
therein by the Company or other security holders of the Company.
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.
Page 17 of 124 Pages
12. Expenses.
(a) The expenses incurred by the Company in
complying with the first two registrations 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., 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, all
underwriting discounts and selling commissions
applicable to the sale of Option Shares, and any
additional cost or expense incurred by Company
pursuant to your request under Section 10(d)1.11
shall be paid by you.
(b) All expenses of the third registration pursuant to Section
10 shall be paid for by you.
13. Indemnification. In the event of a registration of Option Shares
under the Securities Act pursuant to Section 10 or 11 hereof, the Company will
indemnify and hold you harmless against any losses, claims, damages or
liabilities, joint or several, to which you may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such Option Shares were registered
under the Securities Act pursuant to Section 10 or 11, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplemental 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 any 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 Option Shares under the
Securities Act pursuant to Section 10 or 11 hereof, you will indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of the Securities Act, each officer of the Company who
signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning
of the Securities Act, against all losses, claims, damages or liabilities,
Page 18 of 124 Pages
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 Option Shares were registered under
the Securities Act pursuant to Section 10 or ll, 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
indemnifying party shall not be liable to such indemnified party under this
Section 13 for any legal expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected; provided, however,
that, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party, or
if the interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, the indemnified party shall have
the right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party shall have failed to retain counsel
for the indemnified person as aforesaid or (ii) the indemnifying party and
such indemnified party shall have mutually agreed to the retention of such
counsel. It is understood that the indemnifying party shall not, in
connection with any action or related actions in the same jurisdiction, be
liable for the fees and disbursements of more than one separate firm qualified
Page 19 of 124 Pages
in such jurisdiction to act as counsel for the indemnified party. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
Section 13 is unavailable or insufficient to hold harmless an indemnified
party under such paragraphs in respect of any losses, claims, damages or
liabilities or actions in respect thereof referred to therein, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
you, on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well as
any other relevant equitable considerations, including the failure to give any
notice under the third paragraph of this Section 13. The relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information supplied
by the Company, on the one hand, or you, on the other, and to the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and you agree that it
would not be just and equitable if contributions pursuant to this paragraph
were determined by pro rata allocation or by any other method of allocation
which did not take account of the equitable considerations referred to above
in this paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or action in respect
thereof, referred to above in this paragraph, shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentations (within the meaning of Section ll(f)
of the Securities Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 13
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters. Upon your reasonable request, or
upon the reasonable request of any underwriter of Option Shares, the Company
shall obtain, if reasonably available, an insurance policy covering the risks
described above in this Section 13 in an amount and with a deductible
reasonably requested by you or such underwriter and naming you, any
underwriter of such stock and any person controlling you or such underwriter
as beneficiaries. The costs of obtaining and maintaining any such insurance
shall be borne by the Company.
14. Sale of Option Shares. (a) You hereby agree to limit your sales
of Option Shares, except for sales pursuant to an underwritten, firm
commitment public offering under Section 10 or ll, in any three month period
to a number of shares not exceeding 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. Notwithstanding anything to the contrary contained in this
Page 20 of 124 Pages
Agreement, you shall not be entitled to register, sell or dispose of any
Option 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) or substitute collateral provided
as hereinafter provided.
(b) In order to secure payment of the loans made by the Company to
Harpo pursuant to the Harpo Agreement (the "Loans"), you hereby grant to the
Company a first lien and security interest (the "Security Interest") in (i)
your rights under this Option, (ii) all shares of Common Stock hereafter
issuable or issued pursuant to the exercise of the Option and (iii) all
proceeds thereof, provided that unless and until the Company notifies you that
the share of adjusted gross profits (determined pursuant to the Harpo
Agreement) which the Company reasonably projects at the time of such notice
that will be payable to Harpo would be inadequate to fully secure the Loans
(an "Additional Security Notice"), and 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 or retain the
proceeds thereof without restriction, provided that the Security Interest
shall be limited to such number of shares of Common Stock (and to the Option
to the extent corresponding to such shares) that, as of the date of such
Additional Security Notice, would upon sale at a price per share equal to the
closing price of the Common Stock on the New York Stock Exchange, generate Net
Realizable Value equal to the projected amount of the Security Shortfall. The
Net Realizable Value of the 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 the deductibility of such state taxes). You
hereby agree to take such steps as are necessary to perfect the Security
Interest, including the execution and filing of UCC-1 financing statements in
such form as reasonably requested by the Company, the delivery to the Company
of 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
confirmation of any such financial intermediary that such Option Shares are
subject to the Security Interest.
15. Defaults. It shall constitute a breach of this Agreement by
either party if such party shall fail or refuse to fully perform any of its
obligations under this Agreement and shall not have cured such failure or
refusal within 30 days after receipt from the other party of written notice
advising it of such failure or refusal, or, in the event that such failure or
refusal is of a nature that cannot be cured within 30 days, then if such party
shall not begin to cure the same within such 30 day period and thereafter
diligently prosecute such cure to completion.
16. Successors; No Assignment. Each of the covenants, terms, provisions
and agreements contained herein shall be binding upon and inure to the benefit
of the parties' successors and assigns. Neither the Option, nor any of the
rights granted to you pursuant hereto, may be transferred to assigned
(including, without limitation, by operation of law), except by will or the
laws of descent and distribution.
Page 21 of 124 Pages
17. Withholding Taxes. In the event that the Company is required to
withhold any Federal, state or local taxes in respect of the grant of the
Option or in respect of the acquisition of any Option Shares, the Company may
deduct from any payments of any kind otherwise due to you under the Harpo
Agreement the aggregate amount of such Federal, state or local taxes required
to be so withheld or, if such payments are insufficient to satisfy such
Federal, state or local taxes or if no such payments are due or to become due,
then, you will be required to pay to the Company, or to make other
arrangements satisfactory to the Company regarding payment to the Company of,
the aggregate amount of any such taxes. All matters with respect to the total
amount of taxes to be withheld shall be determined by the Company in its sole
discretion.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. If any one or more
provisions of this Agreement shall be found to be illegal or unenforceable in
any respect, the validity and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired thereby.
Please acknowledge receipt of this Option Agreement and agreement
with the terms hereof by signing the enclosed copy of this Option Agreement
in the space provided below.
KING WORLD PRODUCTIONS, INC.
By:__________________________
Accepted and Agreed:
_____________________
XXXXX XXXXXXX
Page 22 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 January 28, 1991, memorialized in the
attached Option Agreement dated April ____, 1992 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.
000 Xxxxxx Xxxxxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Page 23 of 124 Pages
