<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Getty Images, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO OF GETTY IMAGES, INC.]
August 3, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Getty Images, Inc., ("Getty Images" or the "Company") which will be held at
The Meeting Place at the Pike Place Market, 93 Pike Street, Suite 307, Seattle,
WA 98101, on September 1, 1998, at 10:00 a.m We hope that you will be able to
attend the meeting.
Details of the business to be conducted at the Annual Meeting are presented
in the attached Notice of Annual Meeting and Proxy Statement.
At the meeting, you will be asked to (i) elect to the Company's Board of
Directors, for a three-year term one class of directors consisting of three (3)
directors, (ii) approve an amendment to the Company's Certificate of
Incorporation to increase from 55,000,000 to 80,000,000 the total number of
authorized shares of capital stock of the Company, and the total number of
shares of common stock, par value $0.01, of the Company from 50,000,000 to
75,000,000, and (iii) ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors for the 1998 fiscal year.
Whether or not you attend the annual meeting, it is important that your
shares be represented and voted at the meeting. After reading the enclosed
Proxy Statement, kindly complete, sign, date, and promptly return the enclosed
proxy in the enclosed postage-paid envelope. Returning the proxy will not
preclude you from voting in person at the meeting should you later decide to
attend.
Your management and the Board of Directors unanimously recommend that you
vote FOR all nominees for directors and FOR the other proposals.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company.
Sincerely,
Jonathan D. Klein
Chief Executive Officer
<PAGE>
[LOGO OF GETTY IMAGES, INC.]
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The 1998 Annual Meeting of the Stockholders (the "Annual Meeting") of
Getty Images, Inc., a Delaware corporation (the "Company"), will be held at
The Meeting Place at the Pike Place Market, 93 Pike Street, Suite 307,
Seattle, WA 98101, on September 1, 1998, at 10:00 a.m. for the following
purposes:
1. To elect to the Company's Board of Directors for a three-year term one
class of directors, consisting of three (3) directors.
2. To approve an amendment to the Company's Certificate of Incorporation
to increase from 55,000,000 to 80,000,000 the total number of
authorized shares of capital stock of the Company, and the total
number of shares of common stock, par value $0.01, of the Company from
50,000,000 to 75,000,000.
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the 1998 fiscal year.
4. To transact such other business as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on July 21, 1998 are
entitled to notice of, to attend and to vote at, this meeting and any
adjournment or postponement thereof. Additional information regarding the
matters to be acted on at the Annual Meeting can be found in the accompanying
Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Heather Redman,
SENIOR VICE PRESIDENT, GENERAL COUNSEL & SECRETARY
Seattle, WA
August 3, 1998
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend in person, we urge you to complete, sign,
date, and return the enclosed Proxy at your earliest convenience. This will
ensure the presence of a quorum at the Annual Meeting. An addressed envelope
for which no postage is required if mailed in the United States is enclosed for
that purpose. Sending in your Proxy will not prevent you from voting your stock
at the Annual Meeting if you desire to do so, as your Proxy is revocable at your
option.
<PAGE>
GETTY IMAGES, INC.
2101 FOURTH AVENUE, FIFTH FLOOR 101 BAYHAM STREET
SEATTLE, WA 98121-2460 LONDON NW1 OAG
USA ENGLAND
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 1, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board of Directors") of Getty Images,
Inc., a Delaware corporation ("Getty Images" or the "Company"), from the
holders (the "Stockholders") of the issued and outstanding shares of common
stock, par value $0.01 per share (the "Common Stock"), of the Company, to be
exercised at the 1998 Annual Meeting of the Stockholders to be held at 10:00
a.m. on September 1, 1998, at The Meeting Place at the Pike Place Market, 93
Pike Street, Suite 307, Seattle, WA 98101, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders.
The purpose of the Annual Meeting is to consider and act upon the following
proposals:
1. To elect to the Company's Board of Directors for a three-year term one
class of directors, consisting of three (3) directors;
2. To approve an amendment to the Company's Certificate of Incorporation to
increase from 55,000,000 to 80,000,000 the total number of authorized
shares of capital stock of the Company, and the total number of shares of
Common Stock of the Company from 50,000,000 to 75,000,000;
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the 1998 fiscal year; and
4. To transact such other business as may properly be brought before the
Annual Meeting.
This Proxy Statement, the accompanying Annual Report on Form 10-K and the
enclosed proxy card are being mailed to the Stockholders on or about August
3, 1998.
Stockholders of record as of the close of business on July 21, 1998 (the
"Record Date") will be entitled to notice of, to attend and to vote at the
Annual Meeting on the basis of one vote for each share held. At the close of
business on the Record Date, there were 30,441,081 shares of Common Stock
outstanding (the "Outstanding Common Stock").
The presence at the Annual Meeting, in person or by proxy, of
Stockholders entitled to cast a majority of the votes entitled to be cast by
all the Stockholders shall constitute a quorum for the transaction of
business at the Annual Meeting. Abstentions and broker non-votes (i.e.,
votes not cast by a broker or other record holder in "street" or nominee name
solely because such record holder does not have discretionary authority to
vote on the matter) will be counted toward the presence of a quorum, but will
not be counted for purposes of determining the number of votes cast and
therefore will not have any effect on
<PAGE>
the results of the votes on the proposals. The election of directors
(Proposal 1) requires a plurality of the votes cast at the Annual Meeting.
The approval of an amendment to the Company's Certificate of Incorporation to
increase the total number of authorized shares of capital stock of the
Company from 55,000,000 to 80,000,000 and the total number of shares of
Common Stock from 50,000,000 to 75,000,000 (Proposal 2) requires the
affirmative vote of the Stockholders holding a majority of the outstanding
shares of Common Stock. The ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors (Proposal 3)
requires the affirmative vote of a majority of the Stockholders holding a
majority of the outstanding shares of Common Stock represented at the Annual
Meeting and entitled to vote thereon.
Under the Delaware General Corporation Law ("DGCL"), holders of shares
of Outstanding Common Stock will not be entitled to appraisal rights with
respect to such shares with respect to any of the proposals.
This Proxy Statement is accompanied by a proxy card for use by the
Stockholders. The shares of Common Stock represented by a proxy card
properly executed, duly returned and not subsequently revoked will be voted
at the Annual Meeting as indicated or, if no instructions are given, in favor
of Proposals 1, 2 and 3, and otherwise in accordance with the judgment of the
person or persons voting the proxy on any other matter properly brought
before the meeting. The Company does not presently know of any other
business which may come before the Annual Meeting. Any Stockholder executing
a proxy has the right to revoke it at any time before it is exercised by (a)
filing with the Secretary of the Company a duly signed revocation or proxy
bearing a later date or (b) voting in person at the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is currently composed of eight members, divided
into three classes, designated Class I, Class II and Class III. Pursuant to
the terms of the Company's Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation"), the term of the Class I directors will
terminate on the date of the Annual Meeting. Accordingly, the Stockholders,
voting as a class, have the right to elect four directors to serve until the
date of the annual meeting of stockholders held in 2001 and until their
respective successors are duly elected and qualified. The terms of the Class
II and Class III directors will terminate on the date of the annual meeting
of stockholders in the years 1999 and 2000, respectively.
The Board of Directors has nominated the three persons named below under
the heading "Nominees" to serve as directors of the Company to hold office
for a term ending at the annual meeting of stockholders to be held in 2001.
The remaining five directors named below will continue in office. The Board
of Directors does not anticipate that any of these nominees would be unable
or unwilling to serve, but if any nominee should be unable or unwilling to
serve, the proxies will be voted for the election of such other person or
persons designated by the Board of Directors. All nominees are current
directors of the Company. Set forth below is a brief description of the
background of the nominees for election as directors and directors continuing
in office.
2
<PAGE>
Nominees for Class I Directors
- ------------------------------
<TABLE>
<CAPTION>
Director
Name Age Business Experience During Past Five Years Since
----- ---- ------------------------------------------ --------
<S> <C> <C> <C>
James N. Bailey 51 Mr. Bailey has been a director since 1998
February 1998 and served as a director of
Getty Communications plc from September
1996 to February 1998. Mr. Bailey is a
founder of Cambridge Associates, Inc., an
investment consulting firm, and has served
as its President since its formation in May
1973. He also serves on the board of The
Plymouth Rock Company, SAB Company Inc.,
Direct Response Corporation, Coolidge
Investment Company Inc., Homeowners Direct
Company and a number of not-for-profit
organizations, including the New England
Aquarium.
Andrew Garb 55 Mr. Garb has been a director since February 1998
1998, and served as a director of Getty
Communications plc from May 1996 to
February 1998. Mr. Garb also has served as
a director of Getty Investments L.L.C. and
its predecessor, Getty Investment Holdings
L.L.C., since 1993. Mr. Garb is a partner
in Loeb and Loeb, L.L.P., a U.S. based law
firm, and was the firm's Managing Partner
from 1986 to 1992. Getty Communications
plc has retained, and the Company may
retain during the current fiscal year, Loeb
& Loeb, L.L.P. from time to time.
Anthony Stone 66 Mr. Stone has been a director since 1998
February 1998 and served as a director of
Getty Communications plc from March 1995 to
February 1998. Mr. Stone, the founder of
Tony Stone Images, served as Chairman and
Managing Director of Tony Stone Images from
1969 to 1992. From 1992 until the
acquisition of Tony Stone Images by Getty
Communications plc in March 1995, he served
as its Chairman.
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF ALL THREE NOMINEES TO THE BOARD OF DIRECTORS LISTED ABOVE.
3
<PAGE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
Director
Name Age Business Experience During Past Five Years Since
----- ---- ------------------------------------------ --------
<S> <C> <C> <C>
Manny Fernandez 52 Mr. Fernandez has been a director since 1998
(Class II) February 1998 and served as a director of
Getty Communications plc from February 1997
to February 1998. Mr. Fernandez is
Chairman of the Board of Gartner Group,
Inc., an independent provider of research
and analysis on the computer hardware,
software, communications and related
information technology industries. Mr.
Fernandez has been Chief Executive Officer
of Gartner Group, Inc. since April 1991.
Prior to joining Gartner Group, Inc., Mr.
Fernandez was President and Chief Executive
Officer of Dataquests Inc., Gavilian
Computer Corporation and Zilog,
Incorporated. Mr. Fernandez is a director
of Brunswick Corporation.
Christopher Sporborg 59 Mr. Sporborg has been a director since 1998
(Class II) February 1998 and served as a director of
Getty Communications plc from May 1996 to
February 1998. From its inception in 1993
until April 1996, he served as a Chairman
of Getty Investment Holdings L.L.C. Mr.
Sporborg has held various positions at
Hambros Bank Limited since 1962, becoming
Deputy Chairman of Hambros PLC in 1990.
Among other positions, Mr. Sporborg is
Chairman of Hambros Countrywide PLC,
Hambros Insurance Services Group PLC and
Atlas Copco PLC; Deputy Chairman of CE
Health PLC; and a director of Trade
Indemnity PLC.
Mark H. Getty 37 Mr. Getty has been Co-Chairman and a 1998
(Class III) director since February 1998 and served as
Executive Chairman and a director of Getty
Communications plc from April 1996 to
February 1998. From March 1995 to April
1996, Mr. Getty served as the Joint
Chairman of Getty Communications plc. In
1993, Mr. Getty co-founded Getty Investment
Holdings L.L.C. and from 1993 to 1995,
together with Mr. Klein, formulated and
implemented its strategy. From 1991 to
1993, Mr. Getty worked at Hambros Bank
Limited. Mr. Getty serves on the board of
directors of The Conservation Corporation,
in addition to several other organizations
and is Chairman of Getty Investments L.L.C.
Mark Torrance 52 Mr. Torrance has been Co-Chairman and a 1998
(Class III) director since February 1998. Mr. Torrance
co-founded PhotoDisc, Inc. in 1992 and
served as its Chairman of the Board and
Chief Executive Officer from 1992 to
February 1998. Prior to founding
PhotoDisc, Inc., Mr. Torrance served as
President of Muzak, Inc. from 1985 to 1987,
and as President of Yesco from 1972 to
1985, both of which are foreground music
distribution companies.
4
<PAGE>
Jonathan D. Klein 37 Mr. Klein has been Chief Executive Officer 1998
(Class III) and a director since February 1998 and
served as Chief Executive Officer and a
director of Getty Communications plc from
April 1996 to February 1998. From March
1995 to April 1996, Mr. Klein served as the
Joint Chairman of Getty Communications plc.
In 1993, Mr. Klein co-founded Getty
Investment Holdings L.L.C. and from 1993 to
1995, together with Mr. Getty, formulated
and implemented its strategy. From 1983 to
1993, Mr. Klein held various positions at
Hambros Bank Limited and was a director
from 1989 to 1998. Mr. Klein serves on the
board of directors of The Conservation
Corporation and Getty Investments L.L.C.,
in addition to several other organizations.
</TABLE>
5
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held ten meetings during 1997. Each member of the
Board of Directors attended at least 50% of the aggregate number of meetings of
the Board of Directors and the committees of which he was a member during the
last year.
The Company has an Executive Committee which consists of Messrs. Getty,
Klein and Torrance. The Executive Committee, among other things, recommends the
strategy of the Company. The Executive Committee was formed as of the inception
of the Company on February 9, 1998, thus no meetings were held in fiscal year
1997.
The Company also has an Audit Committee which consists of Messrs. Bailey,
Garb and Sporborg. The Audit Committee reviews the internal controls of the
Company and reviews the services performed and to be performed by the
independent auditors of the Company during the year. The members of the Audit
Committee also meet regularly with the independent auditors to review the scope
and results of the annual audit. The Audit Committee met twice during 1997.
The Company also has a Compensation Committee which consists of Messrs.
Bailey, Garb and Sporborg. The Compensation Committee reviews the compensation
of the officers of the Company, including executive bonus plan allocations, and
was responsible for the administration of the Getty Communications Executive
Share Option Plan and is responsible for the administration of the Getty Images,
Inc. 1998 Stock Incentive Plan. The Compensation Committee met once during
1997.
PROPOSAL 2
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
On July 22, 1998, the Board of Directors proposed that an
amendment to the Company's Certificate of Incorporation to increase the total
number of authorized shares of capital stock of the Company from 55,000,000
to 80,000,000 and the total number of shares of Common Stock of the Company
from 50,000,000 to 75,000,000 be adopted by the Stockholders at the Annual
Meeting.
If the amendment is approved, the text of Section 4.01 of the Amended and
Restated Certificate of Incorporation would read in its entirety as follows:
"SECTION 4.01. Authorized Capital; Shares. The total number of
shares of all classes of capital stock that the Corporation shall have the
authority to issue is 80,000,000 shares of which (i) 75,000,000 shares will be
common stock, par value $0.01 per share ("Common Stock"), and (ii) 5,000,000
shares shall be preferred stock, par value $0.01 per share ("Preferred Stock").
If approved by Stockholders at the Annual Meeting, the amendment will
provide the Company with flexibility by assuring the availability of a
sufficient number of authorized but unissued shares of Common Stock for valid
corporate purposes, such as stock-based employee benefit plans, financings and
acquisitions. If the amendment is approved at the Annual Meeting, the newly
authorized Common Stock will be available for issuance without further action by
Stockholders except as required by law or applicable requirements of the Nasdaq
Stock Market or such other successor markets on which the Common Stock may be
traded.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
6
<PAGE>
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Coopers & Lybrand, certified public accountants, served as independent
auditors of Getty Communications plc, the predecessor to the Company, for the
fiscal year ended December 31, 1997. The Board of Directors, acting upon the
recommendation of the Audit Committee, has appointed PricewaterhouseCoopers LLP
as independent auditors to audit the financial statements of the Company for the
fiscal year ending December 31, 1998 and to perform other appropriate accounting
services. A proposal will be presented at the Annual Meeting to ratify the
appointment of PricewaterhouseCoopers LLP as the Company's independent auditors.
A representative of PricewaterhouseCoopers LLP will be present at the Annual
Meeting and will have the opportunity to make a statement if the representative
so desires and to respond to appropriate questions from the Stockholders. If
the Stockholders do not ratify this appointment, the Board of Directors will
reconsider its appointment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS OF THE COMPANY.
OTHER MATTERS
The Company knows of no other matters to be presented at the Annual Meeting
other than those described in this Proxy Statement. In the event that other
business properly comes before the meeting, the persons named as proxies will
have discretionary authority to vote the shares represented by the accompanying
proxy in accordance with their own judgment.
7
<PAGE>
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, AND MANAGEMENT
The following table sets forth information as of June 30, 1998, with
respect to directors, certain employees of the Company and each person who is
known by the Company to own beneficially more than 5% of the shares of its
Common Stock, and with respect to shares of Common Stock owned beneficially by
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF
NAMES COMMON SHARES AS OF JUNE 30, 1998(1) PERCENT OF CLASS
- ----- ------------------------------------ ----------------
<S> <C> <C>
Mark H. Getty. . . . . . . . . . . . . . 1,103,844(2) 3.6%
Mark Torrance. . . . . . . . . . . . . . 5,328,179(3) 17.5
Jonathan D. Klein. . . . . . . . . . . . 1,104,744(4) 3.6
James N. Bailey. . . . . . . . . . . . . 0 *
Manny Fernandez. . . . . . . . . . . . . 3,125(5) *
Andrew Garb. . . . . . . . . . . . . . . 10,000 *
Christopher H. Sporborg. . . . . . . . . 800 *
Anthony Stone. . . . . . . . . . . . . . 130,019 *
Lawrence J. Gould. . . . . . . . . . . . 155,035 *
Don P. Smith . . . . . . . . . . . . . . 0 *
Warwick Woodhouse. . . . . . . . . . . . 5,346(6) *
Getty Investments L.L.C. . . . . . . . . 8,040,690(7) 26.4
PDI, L.L.C.. . . . . . . . . . . . . . . 5,294,581(8) 17.4
Wade Torrance. . . . . . . . . . . . . . 2,223,224(9) 7.3
All Executive Officers and Directors
as a group (21 persons). . . . . . . . 9,219,860(10) 29.1
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership represents sole voting and investment power and is
defined by the Securities and Exchange Commission (the "Commission") to
mean generally the power to vote or dispose of securities, regardless of
economic interest. The numbers were calculated pursuant to Rule 13d-3(d) of
the Securities and Exchange Act of 1934, as amended. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or
conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage owned by any other
person listed. Getty Images had 30,436,303 shares of Common Stock
outstanding as of June 30, 1998. To the Company's knowledge, the only
stockholders who beneficially owned more than 5% of the outstanding common
shares as of June 30, 1998, were Mr. Torrance, Ms. Torrance, PDI, L.L.C.
and Getty Investments L.L.C.
(2) Includes 481,242 shares of Common Stock issuable upon exercise of
outstanding options and 622,602 shares held by the October 1993 Trust, a
trust established by Mr. Mark Getty of which he and his immediate family
are the beneficiaries. The Common Stock held by the October 1993 Trust are
subject to the Getty Parties Stockholders' Agreement and are voted as
directed by Getty Investments L.L.C. Mr. Getty's business address is 101
Bayham Street, London NW1 OAG, England.
(3) Mr. Torrance has sole voting power with respect to the shares held by PDI,
L.L.C, of which he is Manager, but disclaims beneficial ownership of
2,223,224 shares of Common Stock in which he has no pecuniary interest. See
Note (8) below. Mr. Torrance's business address is 2101 Fourth Avenue,
Fifth Floor, Seattle, WA 98121.
(4) Includes 481,242 shares of Common Stock issuable upon exercise of
outstanding options and 622,602 shares held by Crediton Limited, a company
of which the sole beneficiary is Mr. Jonathan Klein. The Common Stock held
by Crediton Limited are subject to the Getty Parties Stockholders'
Agreement and are voted as directed by Getty Investments L.L.C. Mr. Klein's
business address is 101 Bayham Street, London NW1 OAG, England.
(5) Represents 3,125 shares of Common Stock issuable upon exercise of
outstanding options.
(6) Includes 4,766 shares of Common Stock issuable upon exercise of outstanding
options.
(7) The address of Getty Investments L.L.C. is 1325 Airmotive Way, Suite 262,
Reno, Nevada 89502.
8
<PAGE>
(8) PDI, L.L.C. is a Washington limited liability company formed on October 31,
1996 with five members, Mr. Mark Torrance, Ms. Wade Torrance and three
trusts established for the benefit of their children. Mr. Mark Torrance,
Co-Chairman of Getty Images, is manager of PDI, L.L.C. and has sole voting
power with respect to the shares held by PDI, L.L.C. and disclaims
beneficial ownership of 2,223,224 shares of Common Stock held by PDI,
L.L.C. in which he has no pecuniary interest. The address for PDI, L.L.C.
is 2101 Fourth Avenue, Fifth Floor, Seattle, Washington 98121.
(9) Represents 2,223,224 shares of Common Stock held by PDI, L.L.C. Ms.
Torrance's address is The Highlands, Seattle, Washington 98117.
(10) Includes 1,246,597 shares issuable upon exercise of outstanding options to
purchase Common Stock.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid or earned for all services rendered to Getty Communications plc ("Getty
Communications"), predecessor to Getty Images, in all capacities during the
fiscal years ended December 31, 1997, 1996 and 1995, respectively, by Getty
Images' chief executive officer and the four other most highly compensated
executive officers of Getty Images whose total annual salary and bonus exceeded
$100,000, based on salary and bonuses earned during the fiscal years ended
December 31, 1997, 1996 and 1995, respectively (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(2) SALARY(3) BONUS(3)(4) OPTIONS(#)(5) COMPENSATION(6)
- --------------------------- ------- --------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Jonathan D. Klein 1997 $228,677 _ _ $16,573(7)
Chief Executive Officer 1996 187,206 $20,288 923,985
1995 72,990 _ _
Mark H. Getty 1997 228,677 _ _ 13,965(8)
Chairman of the Board 1996 187,206 20,288 923,985
1995 72,990 _ _
Lawrence J. Gould 1997 134,185 _ _ 21,462(9)
Senior Vice President, Finance 1996 128,750 16,737 36,250
1995 89,349 16,037 _
Warwick Woodhouse 1997 114,177 83,584(10) 30,500 13,180(11)
Senior Vice President, Planning 1996 21,390 _ _
1995 _ _ _
Don P. Smith 1997 112,674 32,778 30,500 27,707(12)
Senior Vice President, Services 1996 _ _ _
1995 _ _ _
</TABLE>
- ---------------
(1) The cash compensation paid to the Named Executive Officers was paid in
pounds sterling and has been translated into U.S. dollars on an annual
basis. The exchange rates in U.S. dollars per pound sterling based on the
average of the noon buying rate in the City of New York for cable transfers
in pounds sterling as certified for customs purposes by the Federal Reserve
Bank of New York in effect on each day for the years ended December 31,
1997, 1996 and 1995 were $1.64, $1.56 and $1.58, respectively.
(2) Getty Communications, predecessor to the Company, became a reporting
company under the Securities Exchange Act of 1934, as amended, on July 2,
1996.
(3) The Salary and Bonus information included herein relates to salaries and
bonuses paid to Messrs. Klein, Getty, Gould, Woodhouse, and Smith as
employees of Getty Communications.
(4) The amounts disclosed in the Bonus column were all awarded under the Getty
Communications plc Executive Bonus Plan.
9
<PAGE>
(5) The Securities Underlying Options column reflects options over common
stock, par value $0.01 per share (the "Common Stock"), of Getty Images.
These options were granted over Getty Communications Class A ordinary
shares pursuant to the Getty Communications plc Executive Share Option
Plan. Upon exchanging these options for options over Common Stock of Getty
Images, they were converted as to one share of Common Stock for each two
Getty Communications Class A ordinary shares under option prior to the
exchange, with the exercise price for each share of Common Stock being the
aggregate of the option price for the two Getty Communications Class A
ordinary shares formerly under option.
(6) The amounts disclosed in this column include Company contributions under
the Company's pension plan and other miscellaneous benefits as described in
the footnotes below, for the Company's most recent fiscal year.
(7) Represents $1,850 for permanent health insurance, $12,115 for car
allowance, $2,280 for fuel expenses and $328 for mobile phone expenses.
(8) Represents $11,357 for car allowance, $2,280 for fuel expenses and $328 for
mobile phone expenses.
(9) Represents $19,793 for company pension contributions, $1,172 for permanent
health insurance, $169 for life assurance and $328 for mobile phone
expenses.
(10) The amount reflects bonuses of $42,611 paid in 1997 and $40,973 earned in
1997, but paid in 1998.
(11) Represents $11,756 for company pension contributions, $341 for private
medical insurance, $755 for life assurance and $328 for mobile phone
expenses.
(12) Represents $11,336 for company pension contributions, $328 for mobile phone
expenses, $11,800 for accommodation expenses and $4,243 for relocation
expenses.
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OPTION GRANTS IN LAST FISCAL YEAR(1)
The following table sets forth certain information concerning options
granted during 1997 to the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
OPTION TERM(2)
INDIVIDUAL GRANTS --------------
-----------------
PERCENT OF TOTAL
NUMBER OF OPTIONS GRANTED
SECURITIES TO EMPLOYEES IN
UNDERLYING FISCAL YEAR ASSUMED ASSUMED
NAME OPTIONS GRANTED 1997 EXERCISE PRICE PER SHARE EXPIRATION DATE RATE 5% RATE 10%
- ---- --------------- ---- ------------------------ --------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Warwick Woodhouse. . . 15,250 7% $13.62 5/15/07 $130,625 $331,028
15,250 7 21.94 5/15/07 3,745 204,148
Don P. Smith . . . . . 15,250 7 13.62 5/15/07 130,625 331,028
15,250 7 21.94 5/15/07 3,745 204,148
</TABLE>
- ---------------
(1) These options were granted over Getty Communications Class A ordinary
shares pursuant to the Getty Communications plc Executive Share Option
Plan. However, upon exchanging these options for options over Common Stock
of Getty Images, they were converted as to one share of Common Stock for
each two Getty Communications Class A ordinary shares under option prior to
the exchange, with the exercise price for each share of Common Stock being
the aggregate of the option price for the two Getty Communications Class A
ordinary shares formerly under option. The expiration date was also
extended from seven years under the Getty Communications plc Executive
Share Option Plan, to ten years under the Getty Images, Inc. 1998 Stock
Incentive Plan.
(2) The potential gain is calculated from the closing price of Common Stock on
the dates of grant to executive officers. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future performance
of the Common Stock and overall market conditions.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
The following table sets forth information regarding the number and
aggregate dollar value of unexercised options held as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(2)
----------------- --------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jonathan D. Klein. . . . 61,599 862,386 _ $3,002,951
Mark H. Getty. . . . . . 61,599 862,386 _ 3,002,951
Lawrence J. Gould. . . . 3,625 32,625 _ 88,359
Warwick Woodhouse. . . . _ 30,500 _ 19,139
Don P. Smith . . . . . . _ 30,500 _ 19,139
</TABLE>
- ---------------
(1) None of the Named Executive Officers exercised options to purchase stock of
Getty Communications in 1997.
(2) Values are calculated for options that are "in-the-money" by subtracting
the exercise price per share of the option from the per share closing price
of Getty Communications on December 31, 1997, which was $14.875.
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<PAGE>
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
AGREEMENTS WITH JONATHAN D. KLEIN. As of February 9, 1998 (the
"Effective Date"), both Getty Images and Getty Communications entered into
employment agreements with Jonathan D. Klein, pursuant to which Mr. Klein has
agreed to serve as the Chief Executive Officer of the Getty Images Group. Mr.
Klein's agreement with the Getty Images Group related to his services to be
performed for the Getty Images Group outside of the United Kingdom and his
agreement with Getty Communications relates to his services to be performed
for the Getty Images Group in the United Kingdom. Each of the employment
agreements with Mr. Klein is for a term commencing on February 9, 1998 and
continuing until either party provides the other with at least twelve months'
notice of its intent not to renew the agreement, provided that neither party
may provide the other with a notice of termination to terminate either
agreement prior to the third anniversary of the effective date of the
agreements.
During the term of the agreements, Mr. Klein will receive the aggregate
amount of $325,000 as base salary (as may be increased from time to time) and
will participate in a bonus plan pursuant to which he will have the opportunity
to earn up to 60% of his base salary as a bonus in each calendar year during the
term. Mr. Klein's employment agreement also provides him with certain other
benefits and perquisites, such as a supplemental pension program, a company car
and reimbursement of expenses associated therewith, and certain other welfare
and fringe benefits.
In addition, pursuant to his employment agreements, Mr. Klein was granted
an option to purchase 75,000 shares of Common Stock at an exercise price equal
to the fair market value of such stock on the Effective Date, which was $20.91
per share, which option will vest in full on February 1, 1999, and an additional
option to purchase 500,000 shares of Common Stock, at an exercise price equal to
the fair market value of Common Stock on the Effective Date, which option will
vest as to 25% on February 1, 1999 and the remainder will vest ratably on the
first day of each month thereafter over the following three years.
In the event that Mr. Klein is terminated without "cause" or "disability"
or resigns for "good reason" (as each such term is defined in his employment
agreement), he will receive (in addition to amounts accrued and unpaid) a lump
sum payment in an amount equal to his base salary, maximum bonus and
supplemental pension contributions for the remainder of the term of the
agreement. In the event of a change in control of Getty Images (as defined in
the Getty Images, Inc. 1998 Stock Incentive Plan (the "Stock Incentive Plan")),
Mr. Klein will have the right to resign his employment and receive a lump sum
payment in an amount equal to his base salary, maximum bonus and supplemental
pension contributions for the remainder of the term of the agreement. In either
of these circumstances, Mr. Klein and his eligible dependents will continue to
participate in the Company's medical benefit plans for the longer of two years
following the termination or resignation, as the case may be, and the remainder
of the term. In the event that any of the payments to be made to Mr. Klein would
constitute "excess parachute payments" within the meaning of Section 280G of the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), the aggregate
amount of his parachute payments will be reduced to $1.00 less than three times
Mr. Klein's "base amount" (as defined under Section 280G of the Code).
AGREEMENT WITH MARK H. GETTY. As of the Effective Date, Getty
Communications entered into an employment agreement with Mark H. Getty, pursuant
to which Mr. Getty has agreed to serve as the Co-Chairman of the Board of
Directors of Getty Images for a term commencing on February 9, 1998 and
continuing until either party provides the other with at least twelve month's
notice of its intent not to renew the agreement, provided that neither party may
provide the other with a notice of termination to terminate the agreement prior
to the third anniversary of the effective date of the agreement.
During the term of the agreement, Mr. Getty will receive a base salary of
$275,000 (as may be increased from time to time) and will participate in a bonus
plan pursuant to which he will have the opportunity to earn up to 50% of his
base salary as a bonus in each calendar year during the term.
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<PAGE>
Mr. Getty's employment agreement also provides him with certain other benefits
and perquisites, such as a supplemental pension program, a company car and
reimbursement of expenses associated therewith, and certain other welfare and
fringe benefits.
In addition, pursuant to his employment agreement, Mr. Getty was granted an
option to purchase 75,000 shares of Common Stock at an exercise price equal to
the fair market value of such stock on the Effective Date, which was $20.91 per
share, which option will vest in full on February 1, 1999, and an additional
option to purchase 500,000 shares of Common Stock, at an exercise price equal to
the fair market value of Common Stock on the Effective Date, which option will
vest as to 25% on February 1, 1999 and the remainder will vest ratably on the
first day of each month thereafter over the following three years.
In the event that Mr. Getty is terminated without "cause" or "disability"
or resigns for "good reason" (as each such term is defined in his employment
agreement), he will receive (in addition to amounts accrued and unpaid) a lump
sum payment in an amount equal to his base salary, maximum bonus and
supplemental pension contributions for the remainder of the term of the
agreement. In the event of a change in control of Getty Images (as defined in
the Stock Incentive Plan), Mr. Getty will have the right to resign his
employment and receive a lump sum payment in an amount equal to his base salary,
maximum bonus and supplemental pension contributions for the remainder of the
term of the agreement. In either of these circumstances, Mr. Getty and his
eligible dependents will continue to participate in the Company's medical
benefit plans for the longer of two years following the termination or
resignation, as the case may be, and the remainder of the term. In the event
that any of the payments to be made to Mr. Getty would constitute "excess
parachute payments" within the meaning of Section 280G of the Code, the
aggregate amount of his parachute payments will be reduced to $1.00 less than
three times Mr. Getty's "base amount" (as defined under Section 280G of the
Code).
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following includes a summary of the material terms of certain
agreements to which Getty Images is a party, copies of which have been filed as
exhibits to the Company's Form 10-K/A for the fiscal year ended December 31,
1997, or to the Company's previous filings with the Commission. The following
does not purport to be complete and is qualified in its entirety by reference to
the copies of the agreements filed with the Commission.
EMPLOYMENT AGREEMENT WITH MARK TORRANCE
As of the Effective Date, Getty Images entered into an employment agreement
with Mark Torrance pursuant to which Mr. Torrance has agreed to serve as the
Co-Chairman of the Board of Directors of Getty Images for a term commencing on
February 9, 1998 and continuing until either party provides the other with at
least twelve months' notice of its intent not to renew the agreement, provided
that neither party may provide the other with a notice of termination to
terminate the agreement prior to the third anniversary of the effective date of
the agreement.
During the term of the agreement, Mr. Torrance will receive a base salary
of $275,000 (as may be increased from time to time) and will participate in a
bonus plan pursuant to which he will have the opportunity to earn up to 50% of
his base salary as a bonus in each calendar year during the term.
Mr. Torrance's employment agreement also provides him with certain other
benefits and perquisites, such as a supplemental pension program, a company car
and reimbursement of expenses associated therewith, and certain other welfare
and fringe benefits.
In addition, pursuant to his employment agreement, Mr. Torrance was granted
an option to purchase 50,000 shares of Common Stock at an exercise price equal
to the fair market value of such stock on the Effective Date, which was $20.91
per share, which option will vest in full on February 1, 1999, and an additional
option to purchase 500,000 shares of Common Stock, at an exercise price equal to
the fair market value of Common Stock on the Effective Date, which option will
vest as to 25% on February 1, 1999 and the remainder will vest ratably on the
first day of each month thereafter over the following three years.
In the event that Mr. Torrance is terminated without "cause" or
"disability" or resigns for "good reason" (as each such term is defined in his
employment agreement), he will receive (in addition to amounts accrued and
unpaid) a lump sum payment in an amount equal to his base salary, maximum bonus
and supplemental pension contributions for the remainder of the term of the
agreement. In the event of a change in control of Getty Images (as defined in
the Getty Images, Inc. 1998 Stock Incentive Plan), Mr. Torrance will have the
right to resign his employment and receive a lump sum payment in an amount equal
to his base salary, maximum bonus and supplemental pension contributions for the
remainder of the term of the agreement. In either of these circumstances,
Mr. Torrance and his eligible dependents will continue to participate in the
Company's medical benefit plans for the longer of two years following the
termination or resignation, as the case may be, and the remainder of the term.
In the event that any of the payments to be made to Mr. Torrance would
constitute "excess parachute payments" within the meaning of Section 280G of the
Code, the aggregate amount of his parachute payments will be reduced to $1.00
less than three times Mr. Torrance's "base amount" (as defined under
Section 280G of the Code).
OTHER EMPLOYMENT AGREEMENTS
As of the Effective Date, Getty Images or PhotoDisc, Inc. ("PhotoDisc")
entered into employment agreements with certain executive officers of PhotoDisc
and the Company, including Mr. William Heston, Ms. Heather Redman, Mr. Robert J.
Chamberlain, and Ms. Sally von Bargen to secure their services following
completion of the transactions (the "Transactions") contemplated by the Merger
Agreement dated as of September 15, 1997 among Getty Images, Getty
Communications, PhotoDisc, Inc. ("PhotoDisc"), and Print Merger, Inc., a wholly
owned subsidiary of Getty Images.
14
<PAGE>
THE STOCKHOLDERS' AGREEMENT
The Company and (i) the Getty Group (as defined below) and (ii) the
Torrance Group (as defined below) have entered into a Stockholders' Agreement
dated as of February 9, 1998 (the "Stockholders' Agreement"), which, among other
things, provides for representation on the Company's Board of Directors and
limits the rights of the parties thereto to transfer their respective shares of
Common Stock. Certain provisions of the Stockholders' Agreement are described
below. The "Getty Group" refers collectively to Getty Investments L.L.C. ("Getty
Investments"), Mr. Mark H. Getty, Mr. Jonathan D. Klein, Crediton Limited (a
company of which the sole beneficiary is Mr. Klein) and the October 1993 Trust
(a trust established by Mr. Getty). The "Torrance Group" refers collectively to
PDI, L.L.C., Mr. Mark Torrance, Ms. Wade Torrance and certain of their family
members. The Getty Group, together with the Torrance Group are collectively the
"Significant Stockholders".
Pursuant to the Stockholders' Agreement, no Significant Stockholder may
sell, encumber or otherwise transfer such Significant Stockholder's shares of
Common Stock except (i) to a Permitted Transferee (as defined below);
(ii) pursuant to the terms of the Stockholders' Agreements; (iii) subject to the
arrangements within their respective "Group", pursuant to a registered public
offering of shares of Common Stock in which no person or "Group" will purchase
more than 5% of the then outstanding shares of Common Stock; or (iv) subject to
any arrangements within their respective "Group", sales within the Rule 144
volume limitation, or in a cashless exercise of options. A "Permitted
Transferee" is defined generally as (i) Getty Images or its subsidiaries;
(ii) in the case of any Significant Stockholder who is a natural person, a
person to whom shares of Common Stock are transferred from such Significant
Stockholder by gift, will or the laws of descent and distribution; (iii) any
other member of the Getty Group or the Torrance Group, as the case may be;
(iv) any affiliate of any Significant Stockholder; or (v) with respect to the
taking of an encumbrance, any commercial bank or other financial institution
that lends funds to a Significant Stockholder on condition of taking such
encumbrance.
If any Significant Stockholder (a "Prospective Seller") receives from or
negotiates with a person, other than a Permitted Transferee or another
Significant Stockholder (a "Stockholders' Agreement Third Party"), a bona fide
offer to purchase any or all of such Prospective Seller's shares of Common Stock
(the "Offered Stock") and such Prospective Seller intends to sell the Offered
Stock to such Stockholder's Agreement Third Party, the Prospective Seller must
provide written notice (the "Offer Notice") of such offer to Getty Images and
the other Significant Stockholders constituting the Significant Stockholders'
"Group" in which the Prospective Seller does not belong. The Offer Notice will
constitute an offer by such Prospective Seller to sell to the recipients of such
Offer Notice all (but not less than all) of the Offered Stock at the price per
share of Common Stock at which the sale to the Stockholders' Agreement Third
Party is proposed to be made in cash and will be irrevocable for ten days after
receipt of such Offer Notice. The Prospective Seller has the right to reject any
or all of the acceptances of the offer to sell the Offered Stock and sell all,
but not less than all, the Offered Stock to the Stockholders' Agreement Third
Party if (i) the Prospective Seller has not received acceptances as to all the
Offered Stock prior to the expiration of the ten-day period following receipt of
the Offer Notice or (ii) an accepting party fails to consummate the purchase of
the Offered Stock and neither Getty Images nor the other Significant
Stockholders who received the Offer Notice are prepared to purchase such Offered
Stock within five business days of receiving notice of such failed purchase.
Each of the Torrance Group and Getty Group will have the right, subject to
termination conditions, to nominate one director. For so long as the Getty Group
has the right to nominate one director of Getty Images, it shall also have the
right to appoint from among the directors of Getty Images, the Chairman of Getty
Images, provided however, that for so long as either Mark Torrance or Mark Getty
are Co-Chairmen of the Board, such rights shall not be in effect.
The obligations and rights of the Significant Stockholders relating to the
rights of first refusal and right to nominate one director will terminate when
the Getty Group or the Torrance Group, as the case may be, and any of such
Group's Permitted Transferees collectively beneficially own fewer than the
greater of
15
<PAGE>
3,000,000 shares of Common Stock and such number of shares of Common Stock as is
equal to two percent or less of the then outstanding shares of Common Stock.
THE REGISTRATION RIGHTS AGREEMENTS
In connection with the consummation of the Transactions, Getty Images
entered into Registration Rights Agreements, one with PDI, L.L.C. and Mr. Mark
Torrance (the "PDI Shareholders") and a second with Getty Investments. Pursuant
to the terms of the Registration Rights Agreement between Getty Images and the
PDI Shareholders (the "PDI Registration Rights Agreement"), the PDI
Shareholders, subject to the terms and conditions set forth in the PDI
Registrations Rights Agreement, may require Getty Images to file a registration
statement with respect to all or a portion of the PDI Shareholders' shares of
Common Stock (a "PDI Demand Right"), subject to certain limitations that may be
imposed by the managing underwriter. The PDI Shareholders have a total of five
Demand Rights, provided that the PDI Shareholders may not require the Company to
file a registration statement on a "long form" on more than three occasions. In
addition to their PDI Demand Rights, the PDI Shareholders will have the right to
have any or all of their shares of Common Stock included in any registration by
Getty Images with respect to an offering of Common Stock (a "PDI Piggy-Back
Right"), subject to certain limitations that may be imposed by the managing
underwriter. Both the PDI Demand Rights and PDI Piggy-Back Rights will terminate
on the earlier of (i) the date that all of the PDI Shareholders' shares of the
Common Stock can be sold within a three-month period under the volume limitation
of Rule 144(e) of the Securities Act or (ii) on the 15th anniversary of the date
of the PDI Registration Rights Agreement.
Pursuant to the terms of the Registration Rights Agreement between Getty
Images and Getty Investments (the "Getty Investments Registration Rights
Agreement"), Getty Investments, subject to the terms and conditions set forth in
the Getty Investments Registration Rights Agreement, may require Getty Images to
file a registration statement with respect to all or a portion of Getty
Investments' shares of Common Stock (a "Getty Demand Right"), subject to certain
limitations that may be imposed by the managing underwriter. Getty Investments
has five Getty Demand Rights. In addition to their Getty Demand Rights, Getty
Investments will have the right to have any or all of their shares of Common
Stockholder included in any registration by Getty Images with respect to an
offering of Common Stock (a "Getty Piggy-Back Right"), subject to certain
limitations that may be imposed by the managing underwriter. Both the Getty
Demand Rights and the Getty Piggy-Back Rights will terminate on the earlier of
(i) the date that all of the shares of Common Stock held by Getty Investments
L.L.C. can be sold within a three-month period under the volume limitation of
Rule 144(e) of the Securities Act or (ii) on the 15th anniversary of the date of
the Getty Investments Registration Rights Agreement.
In addition to the registration rights described above, upon the
consummation of the Transactions, Getty Images assumed the obligations of Getty
Communications and PhotoDisc with respect to certain demand and piggy-back
registration rights granted by the companies to certain of their respective
shareholders, including, in the case of PhotoDisc, certain registration rights
granted to holders of its Series A Preferred Stock, and, in the case of Getty
Communications, certain registration rights granted to the October 1993 Trust
and Crediton Limited, Messrs. Getty, Klein and Gould, RIT Capital Partners and
Mr. Anthony Stone and The Schwartzberg Family L.P.
GETTY PARTIES SHAREHOLDERS' AGREEMENT
Getty Images, Getty Investments, the October 1993 Trust and Crediton
Limited have entered into a Shareholders' Agreement with respect to their
ownership of shares of Common Stock (the "Getty Parties Shareholders'
Agreement"). Certain provisions of the Getty Parties Shareholders' Agreement are
described below.
The Getty Parties Shareholders' Agreement provides that all the Common
Stock held by the parties thereto (other than the Company) will be voted as
directed by the board of directors of Getty Investments. Before transferring
such shares (other than certain permitted transfers to affiliates or family
16
<PAGE>
members who, as a condition of such permitted transfer, must agree to be bound
by the terms of the Getty Parties Shareholders' Agreement), the parties must
first offer such shares to the other parties. The price at which such shares
must be offered is either the price that another purchaser is willing to pay for
such shares or, in the event of a transfer pursuant to an exercise of
registration rights, the average closing market price of the shares of Common
Stock over the preceding ten business days. In the event that these rights of
first refusal are not exercised with respect to all shares of Common Stock
offered for sale, then the rights of first refusal in the Stockholders'
Agreement will apply.
In the Getty Parties Shareholders' Agreement, the October 1993 Trust and
Crediton Limited have each agreed to retain at least 311,301 shares of Common
Stock until July 8, 2001 and thereafter to retain at least 155,651 for an
additional two years, provided, however, that the October 1993 Trust and
Crediton Limited may sell shares in the event that (i) Mr. Mark Getty (in the
case of the October 1993 Trust) or Mr. Jonathan Klein (in the case of Crediton
Limited) ceases to be employed by the Company or any of its subsidiaries, or
(ii) Getty Investments and its members cease at any time to hold at least 7% of
the then outstanding shares of Common Stock. In addition, if Getty Investments
or any of its members sells any shares of Common Stock, the October 1993 Trust
and Crediton Limited will be permitted to sell the same proportion of their
shares of Common Stock which are subject to this sale restriction as the number
of shares of Common Stock sold by Getty Investment bears to its total number of
shares of Common Stock. The Getty Parties Shareholders' Agreement will provide
that each of the October 1993 Trust and Crediton Limited will, in consideration
of its participation under such agreement, receive an annual fee from Getty
Investments in 1998 of L81,051 and L279,757, subject to certain inflation
adjustments, respectively, and thereafter an annual fee of L29,283 and L101,445,
subject to certain inflation adjustments, respectively, for each of the next
four years.
The Getty Parties Shareholders' Agreement also provides that each of the
October 1993 Trust and Crediton Limited have the right to nominate a director to
the board of directors of Getty Investments (the "Getty Investments Board").
Such parties have nominated Mr. Getty and Mr. Klein to the Getty Investments
Board. The October 1993 Trust also has the right to nominate the chairman of the
Getty Investments Board. The October 1993 Trust has appointed Mr. Getty as
Chairman of Getty Investments.
Getty Investments agreed in the Getty Parties Shareholders' Agreement that,
subject to certain exceptions, it will not operate or own or control any other
business in the visual content industry.
The Getty Parties Shareholders' Agreement expires on July 7, 2003, but may
be terminated early with respect to a party (or its permitted transferees) who
ceases to be a stockholder of Getty Images. The Getty Parties Shareholders'
Agreement terminates for all parties if the parties to the agreement cease to
own beneficially fewer than the greater of 3,000,000 shares of Common Stock and
such number of shares as is equal to two percent or less of the then outstanding
shares of Common Stock.
GETTY INVESTMENTS COMPANY AGREEMENT
Getty Investments is a limited liability company organized in the State of
Delaware and is governed by a limited liability company agreement among the four
various Getty family trusts (the "Getty Trusts") and Transon Limited (interest
was transferred from 525 Investments Limited on March 16, 1998 into Transon
Limited) (the "Getty Investments Company Agreement"). As of June 30, 1998, the
membership interests of the Getty Trusts in Getty Investments were held as to
39.3 percent by The Cheyne Walk Trust, as to 18.75 percent by the Ronald Family
Trust A, as to 18.75 percent by the Ronald Family Trust B and as to 12.5 percent
by the Gordon P. Getty Family trust. The remaining 10.7 percent interest was
held by Transon Limited. The four Getty Trusts result from a partition in 1988
of the Sarah C. Getty Trust in accordance with a court order in 1985. Two of the
four trustees of The Cheyne Walk Trust are also two of the four trustees of the
Ronald Family Trust B, two of the three trustees of the Ronald Family Trust A
are also two of the four trustees of the Ronald Family Trust B. The life income
beneficiaries of the four Getty Trusts referred to above are children of J.P.
Getty, and the remainder beneficiaries are his
17
<PAGE>
grandchildren (including Mr. Mark Getty) and other descendants. Transon Limited
is a company owned by Sir Paul Getty, one of the children of J.P. Getty.
Mr. Mark Getty is the son of Sir Paul Getty.
The Getty Investments Company Agreement provides that the Getty Investments
Board will consist of six directors. One director will be appointed by each of
the four Getty Trusts. In addition, the members of Getty Investments agree to
appoint one person nominated by each of the October 1993 Trust and Crediton
Limited. The members also agree to appoint the director nominated by the October
1993 Trust as the Chairman of the Board of Getty Investments. Mr. Getty has been
appointed a director and chairman by the October 1993 Trust and Mr. Klein has
been appointed a director by Crediton Limited. Decisions at meetings of the
Getty Investments Board require the approval (at a meeting or in writing) of a
majority of directors. Of the six members of the Getty Investments Board, three
(Mr. Getty, Mr. Klein and Mr. Garb) are also directors of Getty Images. There
are currently no voting arrangements whereby one member of Getty Investments can
control a majority of the members of the Getty Investments Board.
GETTY TRADEMARKS
Getty Images, directly or through its subsidiaries, has trademark
registrations and applications for the trademarks and trademark applications in
respect of the names Getty Communications and Hulton Getty, and derivatives
thereof (including the name "Getty Images") and the related logos (together, the
"Getty Trademarks"). Getty Images and Getty Investments have agreed that in the
event that Getty Images becomes controlled by a third party or parties not
affiliated with the Getty family, Getty Investments will have the right to call
for an assignment to it, for a nominal sum, of all rights to the Getty
Trademarks. Upon such assignment, Getty Images will have 12 months in which it
will be permitted to continue to use the Getty Trademarks and thereafter will
have to cease such use.
INDEMNIFICATION
Getty Images has agreed to indemnify Getty Investments and its members for
liabilities arising in connection with the Transactions. In addition, Getty
Images has entered into agreements to indemnify its directors and certain
executive officers, in addition to indemnification provided for in the Company's
Bylaws and Amended and Restated Certificate of Incorporation. These agreements,
among other things, indemnify the Company's directors and certain executive
officers for certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of the Company, arising out of such
person's services as a director or executive officer of the Company, any
subsidiary of the Company or any other company or enterprise to which the person
provides services at the request of the Company. The Company believes that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
TRANSACTIONS WITH RESPECT TO PHOTODISC COMMON STOCK
On June 28, 1996, PhotoDisc entered into a Stock Redemption Agreement with
Mr. Mark Torrance and Ms. Wade Torrance pursuant to which PhotoDisc redeemed
236,372 shares of common stock, par value $0.01 per share ("PhotoDisc Common
Stock"), of PhotoDisc for a purchase price of approximately $4.23 per share,
totaling $1,000,000. The price per share of PhotoDisc Common Stock was
determined based on a valuation conducted by the firm of Brueggeman & Johnson.
Mr. Torrance is a founder, director and chief executive officer of PhotoDisc and
became a director and executive officer of Getty Images as of February 9, 1998.
Ms. Wade Torrance is Mr. Torrance's former wife.
On August 12, 1997, PhotoDisc repurchased 333,334 shares of PhotoDisc
Common Stock from Ms. Wade Torrance for a purchase price of $6.00 per share,
totaling $2,000,004. The price per share of PhotoDisc Common Stock was
determined based on arm's-length negotiations between PhotoDisc and
Ms. Torrance, who is a member of PDI.
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In 1995, PhotoDisc issued warrants to purchase 500,880 shares of PhotoDisc
Common Stock for $0.1250 per share and warrants to purchase 91,592 shares of
PhotoDisc Common Stock for $0.1575 per share to Mr. Torrance in consideration
for loans to PhotoDisc by Mr. Torrance, aggregating $174,000 and for Mr.
Torrance's guarantee of certain obligations of PhotoDisc. These warrants were
contributed by Mr. Torrance to PDI, L.L.C. in October 1996. The loans were
repaid by PhotoDisc in 1996. PDI, L.L.C. exercised these warrants immediately
prior to the consummation of the Transactions.
TORRANCE LEASE
PhotoDisc and the Marshall Building LLC, an entity of which Mr. Torrance is
the Manager, have entered into a lease under which PhotoDisc leases the majority
of the Marshall Building (46,957 total square feet), of which 9,568 square feet
is occupied by other tenants. This lease has a term of five years and four
months (which may be extended for a further five years at the option of
PhotoDisc) beginning November 1, 1997, provides for rent at the weighted average
rate of $13.47 per square foot per year, which the Company believes is a fair
market rate, and under which Mr. Torrance pays a monthly service and maintenance
fee of $1,375. In addition, PhotoDisc has made certain improvements to the
Marshall Building in the amount of approximately $360,000 as of December 31,
1997, for which it will be reimbursed by a reduction in monthly lease payments
ratably over the term of the lease. Interest on the outstanding amount is
charged at a rate of 5.77% per annum.
COMPENSATION OF DIRECTORS
Members of the Board of Directors did not receive any cash compensation in
connection with their service on the Board or any committee thereof during 1997,
1996 or 1995. Directors are reimbursed for their reasonable out-of-pocket
expenses incurred in connection with attendance at meetings of the Board of
Directors or any committee thereof. During 1997, Mr. Fernandez received an
option to purchase 10,000 shares of the Common Stock at an exercise price equal
to the market price of the Common Stock on the date of the grant, and another
option with respect to 10,000 shares at a higher premium exercise price,
pursuant to the Getty Communications plc Executive Share Option Plan.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR 1997
COMPENSATION COMMITTEE GOVERNANCE. The Compensation Committee of Getty
Communications plc was composed, in 1997, of the five directors listed below.
Messrs. Getty and Klein absented themselves from Compensation Committee meetings
when their own compensation was being discussed, and in the event of a tie vote,
the chairman of the Committee had the deciding vote. The Compensation Committee
is responsible for the general compensation policies of the Company, and in
particular is responsible for setting and administering the policies that govern
executive compensation and administering the Company's equity-based employee
compensation benefit plans. The Compensation Committee evaluates the performance
of management and determines the compensation levels for all executive officers.
After the consummation of the transactions (the "Transactions") contemplated by
the Merger Agreement dated as of September 15, 1997 among Getty Images, Getty
Communications, PhotoDisc, Inc. ("PhotoDisc"), and Print Merger, Inc., a wholly
owned subsidiary of Getty Images, Getty Images established a Compensation
Committee with Messrs. Bailey, Garb and Sporborg as its initial members.
COMPENSATION POLICIES. The primary objectives of the Company's
compensation policies and programs are (i) to attract and retain key executives,
(ii) to reward performance by the executives which benefits the stockholders of
Getty Images and (iii) to align the financial interests of the company's
executive officers directly with those of the Stockholders. The primary elements
of executive officer compensation are base salary, annual cash bonuses, and
stock option grants. The salary is based on factors such as related experience,
level of responsibility, and comparison to similar positions in comparable
companies. The annual cash bonuses are based on the Company's performance
measured against
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attainment of financial and other objectives, and on individual performance.
Stock option grants are intended to align the executive officer's interest with
those of the Stockholders, and are determined based on the executive officer's
level of responsibility, number of options or shares previously granted, and
contributions toward achieving the goals and objectives of the Company.
Additional information on each of these compensation elements follows.
- SALARIES. Base salaries for the executive officers are based on
performance of the individual, increases in responsibility and
salaries for similar positions. Comparisons are made to the total
compensation packages of companies in the media and other related
industries that are comparable in size and structure. Base salaries
are generally in the range of median base salaries paid by such
comparable companies to employees having duties and responsibilities
similar to those of the executive officers.
- EXECUTIVE BONUS PLAN. Annual bonuses are awarded on a discretionary
basis and reflect both Company and individual performance. The
Compensation Committee considers numerous qualitative and quantitative
factors in determining these bonus awards, including individual
performance, corporate and segment revenue and profit goals,
performance and compensation levels of comparable companies.
- OPTION GRANTS. Stock options are an integral part of each executive
officer's compensation and are utilized by the Company to provide an
incentive to the officer, and to align the interests of the executive
with those of the Stockholders by providing him with a financial
interest in the Company. Options granted by the Compensation Committee
under the Getty Communications plc Executive Share Option Plan (the
"Share Option Plan") were made at fair market value on the date of the
grant, vested over a period of five years, at a rate of 20% per year,
and expired after seven years. Such options were not exercisable for
three years after the date of the grant. In addition, executive
officers were granted premium options at an exercise price based on an
assumed 10% return on investment compounded over five years. The
premium options vested over a period of five years, at a rate of 20%
per year, and expired after seven years. In making grants, the
Compensation Committee takes into account the executive officer's
contributions to the Company, scope of responsibilities, salary and
the number of options previously granted. The options granted in 1997
were granted pursuant to the Share Option Plan. Upon the consummation
of the Transactions and pursuant to the Share Option Plan, such
options became immediately exercisable until May 17, 1998. As an
alternative to exercising such options, the optionholders were given
the choice to elect to exchange their options over Getty
Communications Class A ordinary shares to new options over Common
Stock, with the exercise price for each share of Common Stock being
the aggregate of the option price for the two Getty Communications
Class A ordinary shares formerly under option. The new options were
deemed to be vested with respect to 25% one year from the date of
grant and the remainder to vest ratably on the first of each month for
the next three years thereafter. Any future options granted by Getty
Images will be granted under, and governed by, the Getty Images, Inc.
1998 Stock Incentive Plan, which was adopted by the Company in
connection with the Transactions.
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SECTION 162(m). As a foreign corporation, Section 162(m) of the Code was not
applicable to Getty Communications in 1997. Furthermore, even if the Company was
a U.S. taxpayer, it would not have had any compensation paid disallowed under
Section 162(m) of the Code
COMPENSATION COMMITTEE,
Christopher H. Sporborg (Chairman)
James N. Bailey
Andrew S. Garb
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PERFORMANCE GRAPH
Set forth below is a graph comparing cumulative total stockholder returns
on the Common Stock, the Nasdaq Stock Market Index of U.S. Companies (the
"Nasdaq Market Index") and the S&P Photography/Imaging Index (the "Image
Index"). The graph assumes the $100 was invested on July 2, 1996 (the date of
Getty Communications' initial public offering) in Getty Images (using Getty
Communications initial offering price of $10.00 per share), and no payment or
reinvestment of dividends, and is rounded to the nearest whole dollar. The stock
price performance on the following graph is not necessarily indicative of future
stock price performance.
[PERFORMANCE GRAPH AND KEY]
<TABLE>
<CAPTION>
MEASUREMENT POINT GETTY IMAGES NASDAQ MARKET INDEX IMAGE INDEX
----------------- ------------ ------------------- -----------
<S> <C> <C> <C>
7/2/96 $100 $100 $100
12/31/96 150 108 104
12/31/97 149 132 80
6/30/98 223 159 84
</TABLE>
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors, executive officers and persons
who own more than 10% of the Common Stock (collectively, "Reporting Persons") to
file with the Securities and Exchange Commission (the "Commission") initial
reports of ownership and changes in ownership of the Common Stock. Reporting
Persons are also required by Commission regulations to furnish the Company with
copies of all Section 16(a) reports they file.
The Company's predecessor, Getty Communications plc, was subject to the
information requirements of the Exchange Act applicable to "foreign private
issuers", and pursuant to Rule 3a12-3(b) of the Exchange Act, the directors,
executive officers and persons owning more than 10% of the voting securities of
Getty Communications were exempt from Section 16 and the beneficial ownership
reporting obligations thereunder.
PROPOSALS OF STOCKHOLDERS
Proposals of Stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than March 1, 1998 to be considered for inclusion in the Company's 1999
proxy materials. Such proposals must meet the requirements of the rules of the
Commission.
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SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers, directors, and
regular supervisory and executive employees of the Company, none of whom will
receive any additional compensation for their services. Such solicitations may
be made personally, or by mail, facsimile, telephone, telegraph, or messenger.
The Company will pay persons holding shares of common stock in their names or in
the names of nominees, but not owning such shares beneficially, such as
brokerage houses, banks, and other fiduciaries, for the expense of forwarding
solicitation materials to their principals. The Company will reimburse brokers
and other nominees for costs incurred by them in mailing proxy materials to
beneficial holders. All of the costs of solicitation of proxies will be paid by
the Company.
Seattle, WA
August 3, 1998
A COPY OF THE COMPANY'S FORM 10-K AND FORM 10-K/A REPORT FOR FISCAL YEAR ENDED
DECEMBER 31, 1997, CONTAINING INFORMATION ON OPERATIONS, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE UPON REQUEST. PLEASE WRITE TO:
INVESTOR RELATIONS DEPARTMENT
GETTY IMAGES, INC.
ATTENTION: COLETTE FUREY
101 BAYHAM STREET
LONDON NW1 OAG
ENGLAND
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[Proxy Card]
In the interest of saving time and money, Getty Images, Inc. has opted to
provide you with the enclosed Form 10-K for fiscal 1997 in lieu of producing a
glossy annual report.
1. To elect to the Company's Board of Directors for a three-year term one
class of directors, consisting of three (3) directors.
FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below / / for all nominees listed below / / / /
NOMINEES: James N. Balley, Anthony Stone and Andrew Garb
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions ___________________________________________________________________
2. To approve an amendment to the Company's Certificate of Incorporation to
increase from 55,000,000 to 80,000,000 the total number of authorized
shares of capital stock of the Company, and the total number of shares of
common stock, par value $0.01, of the Company from 50,000,000 to
75,000,000.
FOR / / AGAINST / / ABSTAIN / /
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the 1998 fiscal year.
FOR / / AGAINST / / ABSTAIN / /
4. To transact such other business as may properly come before the Annual
Meeting.
FOR / / AGAINST / / ABSTAIN / /
CHANGE OF ADDRESS AND OR COMMENTS MARK HERE / /
This proxy card should be signed by the shareholder(s) exactly as his or her
name(s) appear(s) hereon, dated and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both persons should sign.
Dated: 1998
-----------------------
- ---------------------------------
Signature
- ---------------------------------
Signature
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD.
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK. / /
GETTY IMAGES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 1, 1998
The undersigned shareholder of Getty Images, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement with respect to the Annual Meeting of
Shareholders of Getty Images, Inc. to be held at 93 Pike Street, Suite 307,
Seattle, WA 98101, on Tuesday, September 1, 1998 at 10:00 a.m., and hereby
appoints Johathan D. Klein and Heather Redman, and each of them, proxies and
attorneys-in-fact, each with power of substitution and revocation, and each
with all powers that the undersigned would possess if personally present, to
vote the Getty Images, Inc. Common Stock of the undersigned at such meeting
and any postponements or adjournments of such meeting, as set forth below,
and in their discretion upon any other business that may properly come before
the meeting (and any such postponements or adjournments).
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR
THE ELECTION OF THE NOMINEES, FOR PROPOSALS 1, 2, 3 AND 4 AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND
ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE
GETTY IMAGES, INC.
P.O. BOX 11053
NEW YORK, N.Y. 10203-0053
