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EXHIBIT 10.18
THE TRANSFER OF THE OPTION EVIDENCED BY THIS AGREEMENT
IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN. THE OPTION
HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF
THE HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TOWARDS THE RESALE OR OTHER DISTRIBUTION
THEREOF. NEITHER THE OPTION NOR THE SHARES ISSUABLE UPON
THE EXERCISE OF THE OPTION HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933.
THIS OPTION, AND THE OPTION SHARES ISSUABLE UPON EXERCISE
IN ACCORDANCE WITH THE TERMS CONTAINED HEREIN, ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AND A LIEN IN FAVOR OF KING
WORLD PRODUCTIONS, INC. (THE "COMPANY") TO SECURE CERTAIN OBLIGA-
TIONS OF HARPO, INC. ("HARPO") TO THE COMPANY PURSUANT TO AN
AGREEMENT DATED AS OF JANUARY 30, 1987, AS AMENDED THROUGH
MARCH 17, 1994 BETWEEN THE COMPANY AND HARPO.
KING WORLD PRODUCTIONS, INC.
1700 Broadway
New York, New York 10019
Ms. Oprah Winfrey As of March 17, 1994
c/o Harpo, Inc.
110 North Carpenter Street
Chicago, Illinois 60607
Dear Ms. Winfrey:
This is the stock option agreement referred to in the
amendment (the "Harpo Amendment") dated as of March 17, 1994, to the Agreement
dated as of January 30, 1987 (the "Original Agreement"), as previously amended
to the date hereof (the Original Agreement, as amended to the date hereof and
by the Harpo Amendment, being herein called the "Harpo Agreement") between
Harpo, Inc. ("Harpo") and the undersigned (the "Company"). As partial
consideration for Harpo to enter into the Harpo Amendment, and as an inducement
for you to render services with respect to the production of the Show (as such
term is defined in the Harpo Amendment), the Company hereby grants to you an
option (the "Option") to purchase four hundred fifty thousand (450,000) shares
of the Company's Common Stock, $.01 par value ("Common Stock"; such shares of
Common Stock, as the same may be adjusted as described in Section 6 below,
being herein referred to as the "Option Shares"). The terms and conditions of
the Option are set out below.
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The Option will be treated as and shall constitute a
"non-qualified stock option" for Federal income tax purposes. The Option will
not constitute or be treated either by you or by the Company as an "incentive
stock option" as defined under Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code").
1. Date of Grant. The Option is granted to you on the
date hereof.
2. Termination of the Option. Your right to exercise
the Option (and to purchase the Option Shares) shall expire and terminate in
all events on (i) March 18, 2004, or (ii) such earlier date provided in Section
7 below.
3. Option Price. The purchase price to be paid upon the
exercise of the Option (the "Option Price") will be $33-5/8 per Option Share,
the closing price of the Common Stock on the New York Stock Exchange on March
8, 1994, the date on which the parties reached an agreement in principle with
respect to the Harpo Amendment.
4. Vesting Provisions -- Entitlement to Exercise the
Option and Purchase Option Shares. The Option shall be exercisable by you, in
whole or part, at any time prior to expiration and termination pursuant to
Section 2 above.
5. Exercise of Option.
(a) To exercise the Option, you must deliver a completed
copy of the attached Option Exercise Form to the address indicated on the Form,
specifying the number of Option Shares being purchased as a result of such
exercise, together with payment of the full Option Price for the Option Shares
being purchased.
(b) Payment of the Option Price must be made in cash.
(c) In the event of any exercise of the Option, a
certificate or certificates representing the Option Shares so purchased,
registered in your name, shall be delivered to you within a reasonable time.
(d) You agree that Option Shares shall be held by you for
investment and may not be resold unless registered under the Securities Act of
1933, as amended (the "Securities Act"), or an exemption from registration is
available, and that the Option Shares will bear a legend referring to such
limitation, to the restrictions on transfer of the Option Shares referred to
else-
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where in this Agreement and to any security interests encumbering the Option
Shares.
6. Adjustments. If the total outstanding shares of
Common Stock of the Company shall be increased or decreased or changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation through reorganization, merger or
consolidation, recapitalization, stock split, combination or exchange of shares
or declaration of any dividends payable in stock or other corporate
transaction, then the number of Option Shares subject to the unexercised
portion of the Option (and the Option Price per share) shall be appropriately
adjusted (to the nearest possible full share) by the Board of Directors of the
Company.
7. Default under the Harpo Agreement.
(a) In the event that you die, or the term of the Harpo
Agreement terminates for any other reason except a material breach by Harpo,
then the Option may be exercised by you or your estate only within the nine (9)
month period following your death or the termination of the term of the Harpo
Agreement.
(b) In the event that the term of the Harpo Agreement
terminates by reason of a material breach thereof by Harpo, then your right to
exercise the Option as to any and all Option Shares that have not theretofore
been issued shall terminate simultaneously with the termination of such term.
(c) In the event that the Company exercises its rights
pursuant to paragraph 17 or 18 of the Original Agreement and the term of the
Harpo Agreement is suspended, then your right to exercise the Option pursuant
to Section 4 hereof shall be suspended during the period that the term of the
Harpo Agreement is suspended.
(d) Notwithstanding any provision contained herein to the
contrary, in no event may the Option be exercised to any extent after March 18,
2004.
8. Representations.
(a) You represent and warrant that you are acquiring the
Option and the Option Shares for investment purposes only and not with a view
towards the public distribution thereof.
(b) You understand that neither the Options nor the
Option Shares have been registered under the Securities Act by reason of their
issuance in a transaction exempt from the regis-
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tration requirements thereof pursuant to Section 4(2) of the Securities Act.
(c) You represent and warrant that (i) you have the
financial ability to bear the economic risk of investment in the Option and the
Option Shares and (ii) you, together with the financial advisers who have
assisted you in acquiring the Option, have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Option and the Option Shares and have had
sufficient opportunity to obtain, and have obtained, all information regarding
the Company as you have deemed relevant in order to evaluate the merits and
risks of such investment.
(d) You represent and warrant that you understand the
Federal, state and local income tax consequences of the granting of the Option
to you, the exercise of the Option and purchase of Option Shares, and the
subsequent sale or other disposition of any Option Shares.
9. Covenants of the Company. The Company will at all
times reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of issue upon the exercise of the Option,
such number of shares of Common Stock as shall then be issuable upon the
exercise of the Option. The Company covenants that all Option Shares, when
issued in accordance with the terms hereof, shall be duly and validly issued,
fully paid and nonassessable. The Company will take all such action as may be
necessary to assure that all Option Shares may be so issued without violation
of any applicable law or regulation, or of any requirements of any national
securities exchange upon which the Common Stock of the Company may then be
listed. The Company will not take any action which results in any adjustment
of the Option Price if the total number of Option Shares issued and issuable
after such action would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation. The Company has not
granted and will not grant any right of first refusal with respect to the
Option Shares, and there are no preemptive rights associated with such shares.
10. Required Registration.
(a) At any time you may by notice to the Company (the
"Registration Notice") request that it register for sale under the
Securities Act, in the manner specified in your Registration Notice, all or any
portion of the Option Shares and any other shares of Common Stock that have
been issued or are issuable to you and/or Jeffrey D. Jacobs upon the
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exercise of stock options granted or to be granted pursuant to the
Harpo Agreement, including any prior or subsequent amendment to that agreement
(collectively, together with the Option Shares, the "Agreement Shares"), and
that have been purchased, or will be purchased on or before the effective date
of such registration statement, or, provided that deferral of the date of
purchase to the closing date of sale of such shares in the manner contemplated
by the proposed registration will not disqualify the offering from registration
on Form S-3 (or any successor to such form), then on such closing date pursuant
to such exercise.
(b) Promptly following receipt of your Registration
Notice, the Company shall commence to prepare and, unless it elects to
purchase all of the Agreement Shares specified in such Registration Notice
through the procedures specified in Section 10(f) below, shall file a
registration statement under the Securities Act for the sale of the Agreement
Shares specified in such Registration Notice (less any shares to be purchased
pursuant to Section 10(f) below) and shall use its best efforts to cause such
registration statement to become effective and remain in effect for the
Required Effective Period for public sale in accordance with the method of
disposition specified by you, provided, however, that the Company shall not be
required to file a "shelf" registration except on Form S-3 (or any successor to
such Form). The "Required Effective Period" shall be the greater of (A) the
180-day period following the effective date of such registration statement; and
(B) unless the proposed plan of distribution involves a firm commitment
underwritten public offering, the period required to dispose of all of the
shares included in such registration statement assuming the sale in each
three-month period of the maximum number of shares permitted to be sold under
the limitations of Section 14 of this Agreement. If such method of disposition
shall be an underwritten public offering, the Company may designate the
managing underwriter of such offering. If, in the good faith opinion of the
Board of Directors of the Company, registration would materially interfere with
pre-existing contractual obligations to which the Company is then subject or
financing arrangements or other material transactions involving the Company or
any of its subsidiaries are pending at the time the Registration Notice is
given, or are under active consideration by the Company, the Company may elect
to defer registration for such period of time, in no event in excess of one
hundred twenty (120) days from the date on which the Registration Notice was
given, as in the good faith judgment of the Board of Directors of the Company
is necessary in order to preclude adverse impact
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upon such financing or other transaction. In the event of such
deferral, if the shares to be registered are to be acquired on exercise of this
Option following the date of such Registration Notice, the date on which the
Option was exercised shall, for purposes of Sections 2 and 7(d) hereof, be
deemed to be the date on which the Registration Notice was given. The
obligation of the Company under this Section 10 shall be deemed satisfied only
when a registration statement covering all Agreement Shares specified in your
Registration Notice and not purchased by the Company pursuant to Section 10(f)
below shall have become effective and, (X) if the method of disposition you
specify is a firm commitment underwritten public offering, all such Agreement
Shares shall have been sold pursuant thereto; or (Y) if it is not such an
offering, has remained in effect for the Required Effective Period specified
herein or until the distribution of the Agreement Shares covered thereby is
completed, whichever is shorter.
(c) The Company shall not be obligated to register
Agreement Shares pursuant to this Section 10 (i) more than once; (ii)
in any period of twelve consecutive months in which any Agreement Shares have
been registered pursuant to the exercise of a demand registration right granted
pursuant to any other agreement between the Company and you or Jeffrey D.
Jacobs; or (iii) at any time when the registration, offering or sale of Option
Shares would violate any law, rule or regulation. For purposes of the
foregoing sentence, (X) a registration under this Option or the corresponding
provisions of the option agreement issued to Jeffrey D. Jacobs on the date
hereof shall be aggregated (so that a registration initiated by you pursuant to
this Section 10 shall decrease by one the number of demand registrations
available to each of you and Jeffrey D. Jacobs pursuant said corresponding
provisions, and vice versa) and (Y) any request for registration given by
Jeffrey D. Jacobs pursuant the corresponding provisions of the option agreement
issued to him shall, as a condition to its effectiveness, be confirmed in
writing by you (provided that you are then competent to give such
confirmation). If any Agreement Shares included in a registration statement
filed pursuant to this Section 10 were issued upon the exercise of any other
stock option granted to you or Jeffrey D. Jacobs pursuant to the Harpo
Agreement, the number of "demand" registration rights granted to you and to
Jeffrey D. Jacobs pursuant to such stock option or stock options shall each be
reduced by one.
(d) The Company shall be entitled to include in any
registration statement referred to in this Section 10, for
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sale in accordance with the method of disposition you specify, shares
of Common Stock to be sold by the Company for its own account or by other
security holders of the Company for their accounts, or both, except as and to
the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Agreement Shares to be sold.
(e) The procedures for registration of Agreement Shares
under this Section 10 shall conform to the following:
(1) Obligations of the Company. If and whenever
the Company is required by the provisions of Section 10 or 11 to effect the
registration of Agreement Shares, the Company will:
(i) Prepare and file with the Commission a
registration statement with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective for
the Required Effective Period or until the securities covered by such
registration statement have been sold in accordance with the method of
disposition specified by you in your Registration Notice, whichever is shorter,
and prepare and file with the Commission such amendments or supplements to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for the Required
Effective Period or until the shares covered by such registration statement
have been sold in accordance with such method of disposition, whichever is
shorter;
(ii) If the offering is to be underwritten
in whole or in part, enter into a written underwriting agreement in
form and substance reasonably satisfactory to the managing underwriter or
underwriters of the public offering of such securities;
(iii) Furnish to the shareholders
participating in such registration and to the underwriters of the
securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to facilitate
the public offering of such securities;
(iv) Use its best efforts to register or
qualify the shares covered by such registration statement
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under such state securities or blue sky laws of such jurisdictions as
you may reasonably request within 20 days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(v) Notify you promptly after it shall
receive notice thereof, of the time when such registration statement
has become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(vi) Notify you promptly of any request by
the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) Prepare and file with the Commission,
promptly upon your request, any amendments or supplements to such
registration statement or prospectus which, in the opinion of your counsel, are
required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Option Shares by you;
(viii) Prepare and promptly file with the
Commission and promptly notify you of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such shares is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading;
(ix) In case you or any underwriters for you
is required to deliver a prospectus at a time when the prospectus then
in effect may no longer be used under the Securities Act, prepare promptly upon
request such amendment or amendments to such registration statement and such
prospectus or prospectuses as may be necessary to permit compliance with the
requirements of the Securities Act;
(x) Advise you, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance
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of any stop order by the Commission suspending the effectiveness of
such registration statement; or the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should be issued;
(xi) If such registration is by way of an
underwritten public offering and if you so request, use its best
efforts to cause counsel and the independent certified public accountants to
the Company to furnish on the effective date of the registration statement and
at the closing provided for in the underwriting agreement, (i) an opinion dated
such date, of the counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to you, covering such
matters with respect to the registration statement and prospectus and each
amendment or supplement thereto, proceedings under state and federal securities
laws and other matters relating to the Company, the securities included in the
registration statement and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel provided to
underwriters at or about the time such registration statement becomes effective
and the sale is closed; and (ii) a letter dated each such date, from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to you, stating that they are independent certified
public accountants within the meaning of the Securities Act and providing such
assurances as are customarily provided by the independent certified public
accountants for an issuer in connection with the registration of securities,
including information as to the period ending not more than five business days
prior to the date of such letter with respect to the registration statement and
prospectus, as the underwriters or you may reasonably request. If the
furnishing of such opinion and/or letter causes Company to incur any additional
cost or expense, you agree to reimburse Company therefor at the closing
provided for in the underwriting agreement.
(2) Obligations of Option Holder. It shall be a
condition to the inclusion of any Agreement Shares in a registration
statement that the holder thereof shall cooperate in the execution and filing
of the registration statement and any necessary state securities law filings,
and if the offering is to be underwritten, that such holder become a party to
the underwriting agreement and, if so requested by the managing underwriter,
execute and deliver Powers of
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Attorney and/or custodial agreements or other suitable arrangements as
the managing underwriter deems reasonably necessary in order to insure orderly
sale of the shares.
As among the holders of shares included in any registration statement,
decisions respecting the terms and conditions of any underwriting agreements
shall be made by the party initiating the registration; so that in the case of
a registration required pursuant to a request by you under Section 10,
determinations with respect to the underwriting agreement shall be made by you,
in your reasonable judgment, after appropriate consultation with the Company
and with other persons whose shares are to be included in such offering; and if
you are party to a registration statement pursuant to Section 11, you shall not
have the right to make such determinations, but shall be informed of them, and
consulted with respect thereto.
(f) Within ten (10) business days following receipt of a
Registration Notice, the Company may elect, by written notice to you, to
purchase all or any portion of the Agreement Shares specified by you in such
Registration Notice for a purchase price equal to the closing price of the
Common Stock on the date such notice was given. In the event that the Company
elects to purchase any of the Agreement Shares specified by you in such notice,
the delivery of such Agreement Shares against payment therefor shall take place
on the fifth business day following receipt by you of the Company's election
notice. In the event that the Company does not elect to purchase all of the
Agreement Shares specified by you in such Registration Notice, the Company
shall register under the Securities Act all the Agreement Shares not so
purchased, in the manner provided above.
11. Incidental Registration. If the Company at any time
(other than pursuant to Section 10 hereof) proposes to register any of its
Common Stock under the Securities Act for sale to the public, whether for its
own account or for the account of other security holders or both (except with
respect to registration statements on Forms S-4 or S-8 or another form not
available for registering the Option Shares for sale to the public), it will
give written notice at such time to you of its intention to do so. Upon your
written request, given within 30 days after receipt of any such notice by the
Company, to register any of the Option Shares that you have purchased, or will
purchase on or before the effective date of such registration statement,
pursuant to the exercise of the Option (which request shall state the intended
method of disposition thereof), the Company will use its best efforts to cause
such Option Shares to be included in the securities to be covered by the
registration
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statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by you of the Option Shares so registered.
In the event that any registration pursuant to this Section 11 shall be, in
whole or in part, an underwritten public offering of Common Stock, any request
by you pursuant to this Section 11 to register Option Shares shall specify that
either (i) such Option Shares are to be included in the underwriting on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such registration; or (ii) such Option Shares are to
be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances. The number of Option Shares to be included
in such an underwriting may be reduced if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold therein by the Company or other
security holders of the Company.
Notwithstanding anything to the contrary contained in this
Section 11, in the event that there is a firm commitment underwritten public
offering of securities of the Company pursuant to a registration covering
Option Shares and you do not elect to sell any Option Shares to the
underwriters of the Company's securities in connection with such offering, you
agree to refrain from selling any Option Shares during the period of
distribution of the Company's securities by such underwriters and the period in
which the underwriting syndicate participates in the after market; provided,
however, that you shall, in any event, be entitled to sell Option Shares
commencing on the 150th day after the effective date of such registration
statement.
12. Expenses.
(a) The expenses incurred by the Company in complying
with the registration pursuant to Section 10 and all registrations pursuant to
Section 11 hereof shall be paid as follows:
(i) all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants
for the Company, fees of the National Association of Securities
Dealers, Inc. and/or the New York Stock Exchange, transfer taxes, fees
of transfer agents and registrars, costs of insurance and other costs
not described in (ii) below shall be paid by the Company; and
(ii) fees and expenses of your counsel, and all
underwriting discounts and selling commissions applicable to the sale
of Agreement Shares sold by you, and any additional
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cost or expense incurred by the Company pursuant to your request under
Section (10)(e)(1)(xi), shall be paid by you.
13. Indemnification. In the event of a registration of
Agreement Shares under the Securities Act pursuant to Section 10 or 11 hereof,
the Company will indemnify and hold you harmless against any losses, claims,
damages or liabilities, joint or several, to which you may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Option Shares were registered under
the Securities Act pursuant to Section 10 or 11, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse you for any legal or
other expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished in writing by you for inclusion
in such registration statement.
In the event of a registration of any of the Agreement Shares
under the Securities Act pursuant to Section 10 or 11 hereof, you will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company,
each underwriter and each person who controls any underwriter within the
meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer or director
or underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Agreement Shares were registered under the
Securities Act pursuant to Section 10 or 11, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will
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reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that you will be liable hereunder in
any such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information furnished to the Company by you in writing for
inclusion in such registration statement.
Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party other than under this Section 13.
In case any such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 13 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party, or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall
have the right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemni-
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fying party shall have failed to retain counsel for the indemnified person as
aforesaid or (ii) the indemnifying party and such indemnified party shall have
mutually agreed to the retention of such counsel. It is understood that the
indemnifying party shall not, in connection with any action or related actions
in the same jurisdiction, be liable for the fees and disbursements of more than
one separate firm qualified in such jurisdiction to act as counsel for the
indemnified party. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
If the indemnification provided for in the first two
paragraphs of this Section 13 is unavailable or insufficient to hold harmless
an indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
you, on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well as any
other relevant equitable considerations, including the failure to give any
notice under the third paragraph of this Section 13. The relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information supplied by
the Company, on the one hand, or you, on the other, and to the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and you agree that it would
not be just and equitable if contributions pursuant to this paragraph were
determined by pro rata allocation or by any other method of allocation which
did not take account of the equitable considerations referred to above in this
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or action in respect thereof, referred
to above in this paragraph, shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
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The indemnification of underwriters provided for in this
Section 13 shall be on such other terms and conditions as are at the time
customary and reasonably required by such underwriters. Upon your reasonable
request, or upon the reasonable request of any underwriter of Agreement Shares,
the Company shall obtain, if reasonably available, an insurance policy covering
the risks described above in this Section 13 in an amount and with a deductible
reasonably requested by you or such underwriter and naming you, any underwriter
of such stock and any person controlling you or such underwriter as
beneficiaries. The costs of obtaining and maintaining any such insurance shall
be borne by the Company.
14. Sale of Option Shares.
(a) You hereby agree to limit your sales of Agreement
Shares so that, except for sales pursuant to underwritten, firm commitment
public offerings, your sales of Agreement Shares, aggregated with sales of
Agreement Shares by Jeffrey D. Jacobs, shall not exceed in any three-month
period the greater of (i) one percent of the outstanding shares of Common Stock
of the Company, as disclosed in its public report most recently filed with the
Securities and Exchange Commission before the date of any sale and (ii) the
average weekly reported volume of trading in Common Stock of the Company on the
New York Stock Exchange and all other national securities exchanges during the
four calendar weeks preceding the date of any sale; provided however, that upon
any "Change in Control" (as such term is defined in Exhibit B of the Harpo
Amendment) of the Company, the foregoing restriction shall be reduced or
eliminated to the extent that any volume restrictions on resales of Common
Stock that then apply to Roger King and/or any other person who was an
executive officer of the Company prior to such Change in Control are more
favorable than those afforded to you pursuant to this Option. Notwithstanding
anything to the contrary contained in this Agreement, you shall not be entitled
to register, sell or dispose of any Agreement Shares that are subject to any
liens, claims, security interests and other encumbrances of any kind, unless
and until the same are removed (or will be removed in conjunction with their
sale).
(b) In order to secure the repayment to the Company of
the Secured Amount (as defined in the Harpo Amendment) pursuant to the Harpo
Agreement, you hereby grant to the Company a first priority lien and security
interest (the "Security Interest") in (i) your rights under this Option, (ii)
all Option Shares now or hereafter issuable or issued pursuant to the exercise
of the Option and (iii) all proceeds thereof (collectively, the "Stock Option
Collateral"), provided that, unless and until the Company notifies you that the
amount of Harpo's Share of Revenues (as
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defined in the Harpo Amendment) which the Company reasonably projects at the
time of such notice will be payable to Harpo would be inadequate to fully
secure the Secured Amount (an "Additional Security Notice"; such notice
specifying, in reasonable detail, the amount of such inadequacy (the "Security
Shortfall")), you may exercise the Option, sell the Option Shares issued to you
upon such exercise and retain the proceeds thereof without restriction. The
Security Interest shall, in any event, be limited to such number of shares of
Common Stock (and to the Option to the extent corresponding to such shares)
that, as of the date of such Additional Security Notice, would, upon sale at a
price per share equal to the closing price of the Common Stock on the New York
Stock Exchange, generate Net Realizable Value equal to the projected amount of
the Security Shortfall. The Net Realizable Value of an Option Share at any
time shall be the fair market value of such share at such time less the sum of
(i) the Option Price for such Option Share, and (ii) a provision for taxes
equal to the difference between such fair market value and such Option Price
(the "Option Gain") multiplied by the highest rate of federal and state income
tax to which the Option Gain will be subject (with offset for deductibility of
such state taxes). At any time that any Stock Option Collateral is subject to
the Security Interest, you may obtain its release from the Security Interest by
substituting alternate collateral, as more fully set forth in the Security and
Pledge Agreement dated as of March 17, 1994 among you, the Company, Harpo,
Jacobs & Company and Jeffrey D. Jacobs (the "Security and Pledge Agreement").
You hereby agree to take such steps as are reasonably requested by the Company
to perfect the Security Interest, including the execution and filing of UCC-1
financing statements in such form as reasonably requested by the Company, the
delivery to the Company of the certificates evidencing the Option Shares, the
delivery to such third-party financial intermediaries as may from time to time
be requested by the Company of written notice confirming the Security Interest
and obtaining the written confirmation and agreement of any such financial
intermediaries that such Option Shares and the proceeds thereof are subject to
the Security Interest, and that such financial intermediaries shall hold the
Option Shares and the proceeds thereof as agent for the Company, as pledgee,
subject to such written confirmation and agreement. Upon the occurrence of an
Event of Default (as such term is defined in the Security and Pledge
Agreement), the Company shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code in all relevant jurisdictions with
respect to the Stock Option Collateral.
15. Defaults. It shall constitute a breach of this
Agreement by either party if such party shall fail or refuse to fully perform
any of its obligations under this Agreement and
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shall not have cured such failure or refusal within 30 days after receipt from
the other party of written notice advising it of such failure or refusal, or,
in the event that such failure or refusal is of a nature that cannot be cured
within 30 days, then if such party shall not begin to cure the same within such
30-day period and thereafter diligently prosecute such cure to completion.
16. Successors; No Assignment. Each of the covenants,
terms, provisions and agreements contained herein shall be binding upon and
inure to the benefit of the parties' successors and assigns. Neither the
Option, nor any of the rights granted to you pursuant hereto, may be
transferred or assigned (including, without limitation, by operation of law),
except by will or the laws of descent and distribution.
17. Withholding Taxes. In the event that the Company is
required to withhold any Federal, state or local taxes in respect of the grant
of the Option or in respect of the acquisition of any Option Shares, the
Company may deduct from any payments of any kind otherwise due to you under the
Harpo Agreement the aggregate amount of such Federal, state or local taxes
required to be so withheld or, if such payments are insufficient to satisfy
such Federal, state or local taxes or if no such payments are due or to become
due, then, you will be required to pay to the Company, or to make other
arrangements satisfactory to the Company regarding payment to the Company of,
the aggregate amount of any such taxes. All matters with respect to the total
amount of taxes to be withheld shall be determined by the Company in its sole
discretion.
18. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York. If any one
or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
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Please acknowledge receipt of this Option Agreement and
agreement with the terms hereof by signing the enclosed copy of this Option
Agreement in the space provided below.
KING WORLD PRODUCTIONS, INC.
By /s/ STEPHEN W. PALLEY
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Accepted and Agreed:
/s/ OPRAH WINFREY
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Oprah Winfrey
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King World Productions, Inc.
OPTION EXERCISE FORM
Oprah Winfrey hereby exercises her right to purchase ________
shares of Common Stock, $.01 par value, of King World Productions, Inc.
pursuant to the option granted to her on March 17, 1994, memorialized in the
Option Agreement, dated as of March 17, 1994, between her and King World
Productions, Inc.
Date:
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Oprah Winfrey
Send a completed copy of this Option Exercise Form to:
Vice President - Finance
King World Productions, Inc.
c/o King World Corporation
830 Morris Turnpike
Short Hills, New Jersey 07078