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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER: 000-23747
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GETTY IMAGES, INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 98-0177556
(State or Juridsiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2013 FOURTH AVENUE 101 BAYHAM STREET
FOURTH FLOOR LONDON, ENGLAND
SEATTLE, WASHINGTON 98121 NW1 0AG
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(Addresses of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Numbers, including Area Code:(206)441-9355
(01144171)544-3456
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports) and (2) has been subject to such filing
requirements of the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $312,946,056 as of March 26, 1998, based upon the
closing price of $24 on the Nasdaq National Market reported on such date. Shares
of Common Stock held by each executive officer and director and by each person
who beneficially owns more than 5% of the Outstanding Common Stock have been
excluded in that such persons may under certain circumstances be deemed to be
affiliates. This determination of executive officer and affiliate status is not
necessarily a conclusive determination for other purposes.
As of March 26, 1998, the number of shares of Common Stock outstanding was
30,817,433.
DOCUMENTS INCORPORATED BY REFERENCE: Information required by Part III of
this document is incorporated by reference to certain portions of the Company's
definitive Proxy Statement for its 1998 Annual Meeting of Stockholders (to be
filed).
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GETTY IMAGES, INC.
FORM 10-K
DECEMBER 31, 1997
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PART I
Item 1. Business..................................................... 1
Item 2. Property..................................................... 18
Item 3. Legal Proceedings............................................ 18
Item 4. Submission of Matters to a Vote of Security Holders.......... 18
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters........................................ 19
Item 6. Selected Consolidated Financial Data......................... 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 21
Item 8. Financial Statements and Supplementary Data.................. 30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 30
PART III
Item 10. Directors and Executive Officers of the Registrant........... 31
Item 11. Executive Compensation....................................... 31
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 31
Item 13. Certain Relationships and Related Transactions............... 31
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form
8-K........................................................ 31
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PART I
ITEM 1: BUSINESS
A. GETTY IMAGES
OVERVIEW
Getty Images, Inc. (the "Company" or "Getty Images"(1)) is one of the
leading visual content providers worldwide(2). The Company is a combination of
Getty Communications plc ("Getty Communications") and PhotoDisc, Inc.
("PhotoDisc") and was formed pursuant to a scheme of arrangement (the "Scheme of
Arrangement") and a merger (the "Merger") that were completed on February 9,
1998.
The Company combines the broad spectrum of high quality, branded content and
extensive international distribution network of Getty Communications with
PhotoDisc's brand name and expertise in the digitization and electronic delivery
of images over the Internet and its royalty-free licensing model. Through this
commercial combination of high quality visual content and diverse delivery
systems and methods, Getty Images believes that it is well-positioned to satisfy
the visual content needs of existing, emerging and new market segments in the
visual content industry.
The principal strengths of Getty Images are (i) the breadth and depth of its
branded high-quality content across all content categories, (ii) its ability to
offer its customers a comprehensive range of options to meet their creative
needs, from full-service to self-service access, from rights-protected licensing
to royalty-free licensing, and from physical delivery of transparencies to
electronic delivery of digital images, (iii) its extensive international
distribution network and electronic distribution capabilities and (iv) its
experience in the application of technology in the visual content industry.
Getty Images believes that these strengths will allow it to take advantage of
both the increasing demand for visual content and the opportunities arising in
the rapidly changing visual content industry.
BACKGROUND
Getty Communications commenced operations on March 14, 1995 with the
acquisition of Tony Stone Images, one of the world's leading providers of
contemporary stock photography. In April 1996, the Company broadened its visual
content product offerings with the acquisitions of Hulton Getty, one of the
world's largest privately owned collections of archival photography, and
Fabulous Footage, a leading North American provider of contemporary stock
footage. In November 1996, the Company strengthened its distribution network in
Belgium, Denmark, Holland and Sweden with the acquisition of World View, its
former agent in these territories. In March 1997, Getty Communications acquired
Gamma Liaison, a well-established leading company in the photojournalism market.
In July 1997, Getty Communications acquired Energy Film Library, one of the
leading international providers of contemporary stock footage to the
advertising, television, feature film, corporate communications and multimedia
markets. In August 1997, Getty Communications strengthened its position in the
Asia Pacific market with the acquisition of Profile Photo Library, its former
agent in Hong Kong.
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(1) As used in this Annual Report on Form 10-K, unless the context requires
otherwise, the term the "Company" or "Getty Images" refers to Getty Images,
Inc. and its consolidated subsidiaries.
(2) Certain statements included herein under "Item 1. Business", "Item 3. Legal
Proceedings" and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations", including without limitation, those
concerning (i) the Company's strategy and competitive strengths, (ii) the
Company's expectations and plans regarding digitization, and (iii) the
Company's expansion plans, contain certain forward-looking statements
concerning the visual content industry and the Company's operations,
economic performance and financial condition. Because such statements
involve risks and uncertainties, actual results may differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause such differences include, but are not limited to, those
discussed under "--H. Business Risk Factors".
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Getty Images was formed in February 1998 with the completion of the Scheme
of Arrangement and the Merger with PhotoDisc.
Pursuant to the Scheme of Arrangement, each issued ordinary share, nominal
value one pence per share ("Getty Ordinary Shares"), of Getty Communications
(including Getty Ordinary Shares underlying Getty Communications' American
Depositary Shares ("Getty Communications ADSs")) was transferred to the Company,
the holders of Getty Ordinary Shares were issued one share of common stock, par
value $0.01 per share ("Getty Images Common Stock"), of the Company for every
two Getty Ordinary Shares (one share of Getty Images Common Stock for each Getty
Communications ADS) held of record by such holders, and Getty Communications
became a wholly owned subsidiary of the Company.
In addition to the Scheme of Arrangement, the Company also completed the
Merger with PhotoDisc, on February 9, 1998. Pursuant to the Merger, PhotoDisc
was merged with and into Print Merger, Inc., a Washington corporation and a
wholly owned subsidiary of Getty Images ("Merger Sub"), and each then
outstanding share of common stock, par value $0.01 per share, of PhotoDisc was
converted into the right to receive the amount of cash and the number of shares
of Getty Images Common Stock as specified in the Merger Agreement dated as of
September 15, 1997 (the "Merger Agreement") among Getty Communications, the
Company, PhotoDisc and Merger Sub.
As a result of these transactions, Getty Images became the successor to
Getty Communications. Trading in Getty Communications ADSs on the Nasdaq
National Market was terminated upon commencement of trading in shares of Getty
Images Common Stock on the Nasdaq National Market (NASDAQ:GETY).
Also on February 9, 1998, the Company issued an aggregate of 1,518,644
shares of Getty Images Common Stock to Getty Investments L.L.C. for an aggregate
consideration of $28 million and on February 10, 1998, it completed the
acquisition of all of the issued and outstanding shares of Allsport Photographic
Plc ("Allsport"). Allsport is a leading sports photographic agency, whose
customers include major newspaper groups worldwide, publishers, sports governing
bodies and sponsors. See "--D. Allsport".
B. GETTY COMMUNICATIONS
OVERVIEW
Getty Communications is one of the leading international providers of visual
content to a diverse range of professional users of images, including
advertising and design agencies, magazines, newspapers, broadcasters, production
companies and traditional and new media publishers. Getty Communications markets
rights to images and footage through its international network of wholly owned
offices in London, Chicago, New York, Los Angeles, Toronto, Munich, Hamburg,
Paris, Amsterdam, Brussels, Copenhagen, Stockholm, Vienna, Barcelona and Hong
Kong and dedicated agents in 18 other countries. Getty Communications has sought
to differentiate itself through its commitment to the highest level of quality
in the creation, selection and production of relevant images, its focus on
customer service, the quality and breadth of its content, its strong brand
names, its worldwide distribution network and its continuing investment in
value-added systems and technologies.
VISUAL CONTENT COLLECTIONS
Getty Communications' visual content collections are: (i) Tony Stone Images,
one of the world's leading providers of contemporary stock photography; (ii)
Hulton Getty, one of the two largest privately owned collections of archival
photography in the world; (iii) Gamma Liaison, a leading North American news and
reportage agency; and (iv) Energy Film Library, one of the world's leading stock
footage companies.
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CONTEMPORARY STOCK PHOTOGRAPHY--TONY STONE IMAGES
Tony Stone Images is one of the world's leading providers of contemporary
stock photography, based on revenues and the quality of its images, and supplies
images to a customer base of principally professional users. The images cover a
wide variety of contemporary subjects, including lifestyles, families, business,
science, health and beauty, sports, transportation, travel and the environment.
The customer base includes advertising and design agencies, local and
international design consultants, magazine, newspaper, book and news media
publishers, poster and calendar manufacturers, and travel companies.
Tony Stone Images is dedicated to providing high-quality images relevant to
the needs of its customers by focusing on a relatively small number of images.
Its core collection (the "Dupe Master Collection") contained approximately
57,000 images as of December 31, 1997 and accounted for approximately 80 percent
of Getty Communications' sales in 1997. The Dupe Master Collection is a tightly
edited, relevant and manageable collection that is designed to meet the needs of
all major customer segments and achieve greater sales efficiently with superior
levels of customer service. The Dupe Master Collection is complemented by the
mainstock collection, which comprises more than one million images that have
been selected for their subject matter or the demand in a particular market.
Getty Communications believes that Tony Stone Images is a world leader in
offering stock photography equal in creative and technical aspects to
commissioned work. Throughout the creation, selection and production processes,
Tony Stone Images focuses on producing images of the highest technical and
aesthetic quality of the subjects or concepts that are in demand, and on
anticipating future trends and customer needs. Tony Stone Images has creative
teams in London, Los Angeles, Seattle, Paris and Munich that analyze customer
requests and buying behavior and perform research in key markets in order to
target and source images.
The skill and creativity of Tony Stone Images' contributing photographers
are fundamental to the success of its business. Contributing photographers
include highly respected, internationally renowned professional photographers
representing a variety of styles, specialties and backgrounds. Tony Stone Images
currently contracts with approximately 700 active photographers.
Tony Stone Images has established in-house teams of skilled digital artists
that retouch, enhance and manipulate images to improve their salability. This
team also designs and creates images digitally, including composites of separate
photographs, illustrations, digital graphics and text.
ARCHIVAL PHOTOGRAPHY--HULTON GETTY
Hulton Getty is one of the largest privately owned collections of archival
photography in the world, based on the number of photographs in its collection.
Its archive consists of approximately 300 separate collections totalling
approximately 15 million images, including vintage prints by renowned
photographers such as Man Ray, Bill Brandt, Alfred Eisenstadt and Robert Capa,
dating back to the beginning of photography. Hulton Getty also incorporates the
special image collections of Ernst Haas and Slim Aarons. The Hulton Getty
collection includes images from all over the world and covers significant
events, people and places from the nineteenth and twentieth centuries. Key
collections within the archive include:
- The Picture Post Collection (1938-1957): images of everyday life, social
conditions, sport, politics and entertainment by leading international
photojournalists from the Picture Post magazine, a U.K. magazine similar
in style and content to LIFE magazine or Paris Match.
- The Keystone Collection (1900-1980s): incorporating the files of three
major London reportage agencies comprising Keystone Press, Fox Photos and
Central Press and an important U.S. archive, Three Lions.
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- London Evening Standard & Express Collections (1927-1989): extensive news
and feature libraries formed by one of the world's largest newspaper
groups.
- London Stereoscopic Company (1854-c.1910): approximately 100,000 original
glass plate negatives, vintage prints and daybooks of 3-D views, celebrity
portraits, travel photography and illustrated books from one of the
world's first commercial photography firms.
- Henry Guttman Collection (1800-1940s): specializing in modern and
historical European affairs, crime, early cinema and photography and
including old catalogs, books and book plates, prints and engravings.
Traditionally, the Hulton Getty collection has been used solely by
professional users, predominantly magazine, news and book publishers in the
United Kingdom. Since the acquisition of the Hulton Getty collection, there has
been an on going process of selecting, digitizing and indexing the most
marketable images of the collection to enhance the accessibility and appeal to a
broader customer base. Selected images are available for search and review
through the Hulton Getty Web site, which presently comprises 160,000 images.
NEWS AND REPORTAGE--GAMMA LIAISON
Gamma Liaison, Inc. ("Gamma Liaison") is a leading North American news and
reportage agency, based on its worldwide sales and the size of its images
database. Gamma Liaison sources stories worldwide and distributes images to
magazines, newspapers and book publishers, as well as advertising and design
agencies and other creative professionals. Gamma Liaison's library contains
several million photographs covering the major events, personalities and
entertainment of the last 30 years. Gamma Liaison receives material from
approximately 3,500 photographers worldwide. Since 1986, every image accepted by
the agency has been indexed using key words, creating one of the largest
databases in the industry.
Gamma Liaison currently has a relationship with Gamma Presse Images ("Gamma
Presse"), an independent Paris-based news and reportage agency, for the foreign
distribution and production of news and reportage imagery. Gamma Liaison has the
responsibility for the production of news and reportage imagery in North
America, South America, the Far East and the southern parts of Africa, while
Gamma Presse is responsible for production of photographs in Europe, the Middle
East and the central and northern parts of Africa. Sales are handled by Gamma
Liaison in the United States, by Gamma Presse in France and by agents managed by
Gamma Presse in other countries.
CONTEMPORARY STOCK FOOTAGE--ENERGY FILM LIBRARY
Energy Film Library is one of the leading international providers of
licensable motion imagery (often referred to as stock footage) to the
advertising, television, feature film, corporate communications and new media
markets. Energy Film Library's footage has been used in major feature films such
as "Independence Day", "Jerry Maguire", "Volcano" and "Men in Black", among
others. Getty Communications believes that the breadth and magnitude of Energy
Film Library's collection, together with the revenue generated by the
collection, have established Energy Film Library as a leader in the stock
footage segment.
Energy Film Library, which now includes the archives of the previously
acquired Fabulous Footage, maintains and licenses a growing library of over
9,500 hours of commercially desirable cinematography covering a broad range of
contemporary and archival subject matter. The collection of Energy Film Library,
which is generally licensed in short clips of 10 to 20 seconds, includes
material covering landscapes, cityscapes, wildlife, scenics, business, sports
and lifestyle.
The Energy Film Library is known for the breadth of its imagery and the high
resolution of its content.
It is catalogued on computer for quick access and retrieval, and master elements
are available in film,
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tape and digital formats. Energy Film Library represents imagery from over 400
leading cinematographers and film producers.
Energy Film Library has formed strategic alliances with technology and
telecommunications companies to develop on-line and Internet services. With the
assistance of strategic partners, Energy Film Library has converted a selection
of its most popular imagery into digital formats. It has strategic relationships
with Silicon Graphics and Intel, and it recently co-developed a visual search
software application for media asset management with IBM. In an ongoing project
with Avid Technology, Energy Film Library has developed an Avid-ready digital
film library that would allow customers to preview, via an on-line service or on
CD-ROM, digital clips for downloading directly onto an Avid or other editing
system.
MARKETING
Getty Communications primarily markets its still images through catalogs to
professional users of images such as advertising and design companies,
magazines, newspapers, broadcasters, production companies and news media
publishers, as well as corporate users involved in marketing and communication.
Catalogs are the "shop window" of the Company and it believes its catalog
quality leads the industry and is an important contributor to its reputation.
PRINTED CATALOGS
To date, Tony Stone Images has published 17 general catalogs covering a wide
range of subjects and concepts. Typically, general catalogs are published
annually, with 19 language variations corresponding to Tony Stone Images' most
important geographic markets, with an aggregate print run currently of over
200,000 copies. Tony Stone Images has published six specialist catalogs--VISIONS
OF NATURE, BUSINESS & INDUSTRY, SPORTS & RECREATION, HULTON GETTY SEVEN AGES OF
MAN, INTERPRETATIONS and PORTRAITS. The INTERPRETATIONS catalog, launched in May
1997, represented a major innovation in catalog design, with a conceptual theme
assisting clients to use photo imagery in a more creative way.
CD-ROM CATALOGS
Tony Stone Images also produces CD-ROM catalogs, and was one of the first
stock photography agencies to produce an electronic catalog in digital format.
CD-ROM catalogs enable customers to select from a wide range of images on-screen
at their offices. Although CD-ROM catalogs are significantly less expensive to
produce than printed catalogs, a substantial majority of customers currently
prefer to select images from printed catalogs. It is the Company's intention to
provide a CD-ROM version of all printed catalogs for distribution with the
printed catalog, as well as producing focused stand-alone CD-ROMs covering
specialized subjects.
GETTY-IMAGES.COM
The web site was launched in 1997 allowing customers from anywhere in the
world to request images from the Tony Stone collection or order catalogs and
CDs. In addition, some 160,000 images from the Hulton Getty collection are
currently available for on-line selection. New images have been continually
added to the on-line site during the year.
During 1998, the Tony Stone Dupe Master Collection will be made available on
the web for search and selection by and digital delivery to the client. The move
to digital delivery is a critical element of the Company's future strategy and
it is anticipated that the application of PhotoDisc's digital know-how will
allow the Company to accelerate its move to digital delivery of the Tony Stone
Dupe Master Collection.
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GAMMA LIAISON
Gamma Liaison markets its news and reportage photographs principally through
direct mail advertising on a quarterly basis.
ENERGY FILM LIBRARY
Energy Film Library markets its stock footage through demonstration reels
sent directly to its customers and potential customers. These demonstration
reels contain samples of available footage.
SALES AND DISTRIBUTION
SALES AND RESEARCH
Each of the Company's wholly owned offices has a sales force organized by
customer and industry group. The sales force assists customers in developing
selection requests ("briefs"), which are then passed on to a researcher
responsible for putting together a selection of images that respond to the
brief. Image researchers use their knowledge of the image collection, of either
still or moving imagery, to respond efficiently and creatively to the customer's
brief.
Since April 1997 the Company's Hulton Getty sales outlets have utilized the
Hulton On-Line collection to assist in the research and sales process, and to
allow customers to search for images. In 1997, the Company's United Kingdom and
North American sales outlets for Tony Stone Images began using COMPASS, a
proprietary keyword-based search and retrieval system developed by the Company,
to assist in the internal sales and research process. The Company is now
completing German and French versions of COMPASS. The Company believes that
these systems will, along with access for customers via the Internet, increase
the efficiency of the Company's sales and research operations in the future.
RIGHTS-PROTECTED LICENSING AND RIGHTS CONTROL
All of the images of Tony Stone Images and Hulton Getty are individually
marketed for specific customer applications. Licenses typically impose
restrictions on the permissible number of copies that can be made, the medium of
reproduction or publication, uses by other parties and other factors, including
the geographic area, duration and purpose of use. To ensure that their customers
can realize the full benefit of their negotiated licenses by allowing them to
negotiate exclusive rights, Tony Stone Images and Hulton Getty have developed a
computerized rights-protection system that monitors the licensing of images
throughout its global network of wholly owned offices and dedicated agents. The
system also enables Getty Communications to maximize revenue per image by
permitting multiple sales of the same image, without allowing the same rights to
be granted to different customers for conflicting uses. A central database
records image usage and its corresponding sales value, information that can then
be used in the targeting of popular subjects and the creation of new images of
the most salable subjects. Energy Film Library also uses a computerized
rights-protection system.
DISTRIBUTION NETWORK
Getty Communications markets images through an international distribution
network of wholly owned offices in 15 cities around the world and agents in 18
countries. The Company's policy is to own offices in major markets and to work
closely with agents in other markets in an exclusive relationship in almost all
cases. Management believes that control of its outlets results in more focused
marketing activities and better brand maintenance, which leads to higher sales
and market share.
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Agents are selected on the basis of management expertise and shared values
for high quality and service. Many agents have represented the Company for over
five years. The Company provides agents with products and marketing material and
assists with marketing initiatives and brand positioning. It initiates programs
to develop its agents' local operations, including library enhancement, staff
training and business development. By contract, the Company requires its agents
to spend a certain amount on marketing activities, to pay for catalogs and
duplicate transparencies ("dupes") and to report financial information in a
uniform manner. Agents are encouraged to develop their own complementary
collections.
The distribution network was strengthened by the acquisition of the
Company's agents in Hong Kong in 1997 and Barcelona, Spain in 1998 and by the
establishment of new agents in Poland, South Africa, Singapore, Malaysia and
Indonesia.
C. PHOTODISC
OVERVIEW
PhotoDisc is one of the leaders in the development and marketing of digital
stock photography products and electronic delivery of images. PhotoDisc's
products are offered on a royalty-free basis, which allows customers to pay a
one-time fee to use an image on a non-exclusive basis for almost any purpose. As
a pioneer in the royalty-free segment, PhotoDisc has established itself as a
leader in terms of customer recognition and revenues generated.
PhotoDisc markets its products to professional users of images such as
graphic designers and advertising agencies; corporate users, such as managerial
and sales professionals within an organization; and small office/home office
users ("SOHO"), such as owners and employees of small businesses. PhotoDisc has
coupled the benefits of advanced technologies with its royalty-free licensing
model to make stock photography more widely usable by professional users, while
at the same time making stock photography more accessible to users in emerging
markets, such as corporate users and SOHO users, and, potentially, consumers.
PHOTODISC IMAGE COLLECTION
The PhotoDisc Image Collection, currently consisting of more than 60,000
feature-enhanced photographic images digitized at a variety of resolutions, has
been developed specifically to support the digital royalty-free licensing model.
The standard license agreement employed by PhotoDisc historically has permitted
multiple uses for almost any purpose, except for use in products for resale in
quantities greater than 100,000, packaging for music, video or software
products, book jackets or unlawful use. On April 1, 1998, PhotoDisc will release
a new license that will permit broader use.
CD-ROM PRODUCTS
As of March 31, 1998, PhotoDisc offered approximately 26,000 images via six
product lines consisting of more than 140 thematically related CD-ROM products,
each containing between 100 and 336 images. PhotoDisc's CD-ROM product lines
include: Volumes (images organized by themes such as "Business and Industry" and
"Weekend Living"); Object Series (images of individual objects isolated against
a transparent background); Background Series (images to be used as a palette on
which other design elements may be placed); Fine Art Series (historic and
contemporary paintings and illustrations); Signature Series (photographs taken
by renowned photographers and unique interpretations of popular themes); and
Animation Series (images from the Object Series incorporating motion and sound
for electronic uses).
Each CD-ROM includes customized searching and browsing software utilities
that allow users to conduct a search using keywords and to locate a particular
image with ease. In addition, each CD-ROM
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includes various editing functions and capabilities. For example, the Clipping
Paths-Registered Trademark- feature makes it easier for the user to drag and
drop images into print and digital presentations. The images are available to
the customer in several file sizes depending upon the product and distribution
method.
PHOTODISC.COM
All 60,000 images in the PhotoDisc Image Collection are available for
immediate license and download for a fixed price through PhotoDisc's award
winning (e.g., PC WEEK, 1997, Top 10 Sites for Electronic Commerce, and First
Place Award Online Marketing--The 1997 Software Summit Awards) Web site. The
site offers its visitors 14 categories of images, including "Business &
Industry", "Education", "Lifestyle & Culture", "Science and Technology" and
"Wildlife and Animals". In addition, to enhance the search process, PhotoDisc
offers a combination of browsing, promotion and spotlight sections that
merchandise new images and CD-ROM products newly available on the PhotoDisc Web
site.
A primary feature of the PhotoDisc Web site is the ability of the customer
to search the PhotoDisc library by employing the search method most comfortable
and efficient for the customer. PhotoDisc provides simple search tools to locate
images via keyword or image number, and more complex search tools that employ
natural language, boolean logic or queries based on visual image attributes such
as color, composition, structure, texture or some combination thereof. Search
results return thumbnail images that can be enlarged for viewing purposes by
users prior to purchase.
Customers can immediately download free, low-resolution samples for use in
preliminary layouts or may license and download high-resolution images for use
in final projects. Customers can also search for different CD-ROM products, view
their contents, and place orders on-line. PhotoDisc also offers certain
value-added features via the PhotoDisc Web site and workflow oriented tools,
such as Lightbox-SM-, which enables customers or multiple groups working on the
same project in different locations to view images simultaneously, make notes
and add additional images to folders for individual or group viewing or
discussion. PhotoDisc believes that the ease of use of its Web site, coupled
with its recognition within the industry, has established PhotoDisc as the
leader in the electronic delivery of images.
MARKETING
Historically, PhotoDisc has used its print catalogs as the primary means of
marketing its products. These include the PhotoDisc Catalog and various smaller,
specialty catalogs that are published periodically and mailed to customers and
prospective customers worldwide, highlighting new CD-ROM products. PhotoDisc
also publishes Resource Books on a periodic basis, which serve as a reference
guide for users of PhotoDisc's CD-ROM titles by showing the images contained in
the most recent CD-ROM products released by PhotoDisc. Each Resource Book also
contains a CD-ROM "comping disc" and an Image Finder CD. The Image Finder, a new
tool released in February 1998, allows customers to search for images across all
PhotoDisc products and product lines using a single local database. The comping
disc allows a customer to utilize a low-resolution version of the images in
preliminary layouts before licensing a high-resolution image for use in the
final product, either by purchasing the applicable CD-ROM or downloading the
images from the Web. The PhotoDisc StarterKit is an introductory product
designed to familiarize new customers with the PhotoDisc system. It is comprised
of a Starter Book that features disc products that are anticipated to be popular
with new users and a corresponding comping CD of the images featured in that
book.
The print catalogs and Resource Books are supplemented by Internet and print
advertising, direct mail, trade and business public relations activities, trade
shows, co-marketing activities, sampler bundling with complementary software and
hardware products, electronic merchandising initiatives and customer loyalty
programs. PhotoDisc places advertisements on various high-profile and
high-traffic
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Web sites such as Yahoo and HotBot (WIRED's Web site) and in specialized and
general circulation magazines.
In addition to its domestic marketing activities, PhotoDisc is involved in
marketing activities internationally. Catalogs and other marketing materials are
translated in up to seven languages and PhotoDisc is in the process of creating
localized Web sites for various overseas markets, including the United Kingdom,
Japan, Germany, France and Australia, to address anticipated growing demand in
these countries. PhotoDisc has had an office in the London area since 1995 and
has recently opened foreign sales offices in Hamburg, Sydney and Tokyo.
SALES AND DISTRIBUTION
PhotoDisc licenses its products by direct telephone sales, on-line sales,
third-party distributors and direct field sales to key accounts.
INBOUND TELEPHONE SALES
The majority of PhotoDisc's domestic licensing revenues are generated by
orders received through PhotoDisc's inbound call center. Customers can order
PhotoDisc CD-ROM products by reviewing PhotoDisc's collection appearing in
PhotoDisc's catalogs, PhotoDisc Resource Books or Starter Kits and on the
PhotoDisc Web site.
WEB SALES
The PhotoDisc Web site gives PhotoDisc's customers the flexibility to
purchase an image immediately by downloading the image off the PhotoDisc Web
site or by reviewing the images and then making a telephone order. From the
PhotoDisc Web site, customers can access a variety of on-line services ranging
from image and CD-ROM search and purchase areas to image reviews, promotions,
on-line community features and personalized services areas. Approximately 5% and
19% of PhotoDisc's revenues in 1996 and 1997, respectively, were derived from
licensing and downloading transactions made solely through the PhotoDisc Web
site.
Upon approval of the user's credit card or login information, the selected
image is available for immediate download from the PhotoDisc Web site.
Compressed high-resolution 10 megabyte images (the most popular file size
offered) take approximately seven minutes to download with a standard 28.8 kbps
modem and less than 60 seconds to download with a T-1 access line.
CHANNEL SALES
PhotoDisc also sells its products through third-party distributors. This
distribution method is more widely utilized internationally due to PhotoDisc's
desire to minimize overhead while at the same time providing broad exposure in
the local markets. As of March 31, 1998, PhotoDisc had relationships with
approximately 200 domestic third parties to sell or bundle PhotoDisc's products
with their offerings in the United States and Canada. In addition, as of March
31, 1998, PhotoDisc had more than 50 international distributors covering most
major world markets. PhotoDisc also promotes its products through U.S.-based
catalog resellers.
KEY ACCOUNTS
PhotoDisc's key accounts sales force targets leading advertising and
publishing companies, and other high volume users of images, such as
communications companies. The key accounts sales force focuses on reaching art
directors and enterprise-wide image purchasers who are generally responsible for
large order purchases. PhotoDisc maintains domestic direct sales offices in
Seattle and New York.
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The key accounts sales force also includes technical support staff and trainers
who assist with both pre-and post-sales support.
CUSTOMER SERVICE AND TECHNICAL SUPPORT
PhotoDisc believes that its ability to establish and maintain long-term
relationships with its customers and encourage repeat visits and purchases
depends, in part, on the strength of its customer service and technical support
teams. PhotoDisc's customer service and technical support center is based out of
its Seattle headquarters and consists of a team of consultants with broad
knowledge of the PhotoDisc Image Collection, as well as expertise in digital
image applications, design tools and photo manipulation methodologies.
PhotoDisc's customer service and technical support group provides assistance in
six languages--English, Spanish, French, German, Japanese and Chinese--and
offers support via telephone, electronic mail, facsimile and the Internet.
TECHNOLOGY
The principal technologies utilized by PhotoDisc are those related to the
digitization of images, the enhancement and compression of digitized images, the
organization and management of PhotoDisc's database of digitized images and
customer profiles and technologies associated with customer interaction with the
PhotoDisc Web site including search functions, transaction-processing and
downloading of images. PhotoDisc's on-line commerce systems can manage a large
number of concurrent customer searches, as well as the process of accepting,
authorizing and charging customer credit cards. PhotoDisc uses a combination of
its own proprietary technologies and commercially available equipment and
licensed technologies. PhotoDisc's current strategy is to license commercially
available technology whenever possible rather than seek internally developed
solutions. PhotoDisc has focused its internal development efforts on creating
and enhancing the specialized software and processes related to enhancement and
delivery of digitized images.
A group of system administrators and network managers monitors and operates
PhotoDisc's Web site, network operations and transaction-processing systems.
PhotoDisc uses the services of two Internet service providers, Verio and
WorldCom, to obtain connectivity to the Internet. The main site is hosted by a
45 megabit dedicated T-3 connection and several T-1 connections.
Each image added to the PhotoDisc Image Collection is scanned using
state-of-the-art drumscanners and techniques. PhotoDisc is currently scanning
approximately 250 images per day and has the capacity to increase production.
D. ALLSPORT
On February 10, 1998, the Company completed the acquisition of Allsport. The
Company acquired Allsport for a total consideration of approximately $28 million
in cash and the issuance of approximately 1.1 million new shares of Getty Images
Common Stock.
Allsport is a world leading sports photography agency, with an archive of
more than four million images from sporting events around the world dating from
1896. Its visual content is both specialist and generalist, serving the sports
journalism market and the broader market for stock photography used by
advertisers and sports promoters. Its main customers are the news media, sports
brand manufacturers and sponsors, sports governing bodies and committees, and
commercial publishing and merchandising businesses.
Allsport employs approximately 25 staff photographers and has contractual
relationships with 40 prominent sports photographers. Allsport owns the
copyrights to approximately 85% of its archived photographs and has exclusive,
permanent rights of usage over an additional 10% of its photographs.
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Of its four million images, approximately 150,000 photographs have been
digitized and the Company is currently digitizing up to 5,000 additional images
per week.
Allsport distributes images via its digital on-line archive, an ISDN
Point-to-Point Network, the PhotoStream satellite network that is maintained by
the Associated Press, and numerous other Internet and digital transmission
methods. It has offices in London and Los Angeles and a network of 30 agents
providing representation in approximately 40 countries.
E. INTELLECTUAL PROPERTY
The Company obtains most of the images in its contemporary collections,
including the Tony Stone Images Collection and the PhotoDisc Collection, from
independent photographers on an exclusive basis. Professional photographers and
cinematographers strongly prefer to retain ownership of their work. As a result,
copyrights to an image remains with the contributing photographer in most cases,
while the Company obtains the exclusive right to market the image on behalf of
the photographer for a period of time (generally a minimum of five to seven
years, which management believes to be the useful life of contemporary images).
Due to the archival nature of the Hulton Getty collection (some images are
owned and some are in the public domain), commissions are not payable on a
substantial portion of the collection. Some of the other collections contain
images produced by photographers and cinematographers on a work for hire basis.
PhotoDisc, Energy Film Library and Allsport own the copyrights to approximately
10 percent, 25 percent and 85 percent, respectively, of their image or
cinematography collections.
F. COMPETITION
The market for non-commissioned visual content is characterized by strong
competition. The principal competitive factors in the non-commissioned sectors
of the visual content industry are company reputation, the quality, relevance
and diversity of the images, the quality of contributing photographers and
cinematographers under contract to an agency, customer service, pricing, ease of
purchase and use, accessibility, distribution capability and speed of
fulfillment. In addition, the Company also faces competition from commissioned
imagery.
The principal competitors of Tony Stone Images include (i) small libraries
generally operating on a local basis; (ii) specialist libraries focusing on
particular subjects such as transport, architecture or natural history; (iii)
medium-sized general libraries operating primarily in their home market; (iv)
regional agencies headquartered in a large market such as the United States,
Germany, the United Kingdom and France and which often have non-exclusive agents
in other markets; and (v) two international competitors, The Image Bank, Inc.
("The Image Bank"), a wholly owned subsidiary of Eastman Kodak Company, and
Visual Communications Group ("Visual Communications"), a wholly owned subsidiary
of United News and Media Group plc. Royalty-free stock photography agencies, of
which PhotoDisc is a leading example, have also emerged as an alternative to
rights-protected stock photography agencies for applications where
rights-protection and other services are not customer requirements.
The Hulton Getty collection competes with specialized archival collections
and regional stock photography agencies with archival content in their
collections, including the Bettman Archive, owned by Corbis Corporation
("Corbis"), a company controlled by Bill Gates, the Chairman of Microsoft
Corporation, and other privately owned and public domain collections.
In the news and reportage industry in the United States, Gamma Liaison
competes with a number of agencies that produce and distribute similar material.
Energy Film Library competes with small specialized footage providers and
The Image Bank.
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PhotoDisc competes with other royalty-free stock photography agencies,
including Adobe Systems Incorporated and its subsidiary, Image Club, Inc.,
Digital Vision, and Digital Stock, a wholly owned subsidiary of Corbis.
Allsport competes with Reuters and Associated Press for news wire coverage
and for magazine and commercial sales competes with Duomo Photography Inc.,
small specialized sports image providers and freelancers.
G. STRATEGY
Getty Images aims to provide high quality, relevant imagery across all
categories of the visual content market to the broadest range of customers in
existing, emerging and new markets, in ways that most appropriately meet their
needs. In order to achieve this aim, Getty Images pursues the following core
strategies:
- EMPHASIZE CONTENT QUALITY AND RELEVANCE. Getty Images believes that
content quality and relevance are critical for long-term success in the
visual content industry. Getty Images focuses on identifying its
customers' needs throughout the creation, selection and production
processes to create high quality branded imagery relevant to the needs of
its customers in each geographic region and market. Getty Images combines
excellence in creativity and image professionalism with expertise in
scanning and image enhancement to provide the highest quality images to
its customers.
- OFFER COMPREHENSIVE RANGE OF BRANDED CUSTOMER SOLUTIONS. Getty Images
offers its customers a comprehensive range of options to meet their
commercial and creative needs, from full-service to self-service access,
from rights-protected licensing to royalty-free licensing, and from
physical delivery of transparencies to electronic delivery of digital
images.
- PROMOTE AND IMPROVE BRAND IDENTITIES. Getty Images believes that Tony
Stone Images, Hulton Getty, Gamma Liaison, Energy Film Library, PhotoDisc
and Allsport represent pre-eminent brand names in their respective visual
content categories. Getty Images will continue to enhance the quality,
value and accessibility of these collections to reinforce their
international brand identities and to create new brands in these and other
visual content categories.
- LEVERAGE TECHNOLOGICAL EXPERTISE. To leverage its technological expertise,
Getty Images created a new division responsible for making Getty Images
content collections available in digital format and accessible on-line, as
well as developing and integrating new products, services and delivery
mechanisms. An example of a technological service feature is PhotoDisc's
Lightbox(SM), which enables multiple parties in different locations to
view images simultaneously. Getty Images also believes that it can realize
internal operating efficiencies through increasing the use of technology.
With this focus on digital delivery of images and use of technology, Getty
Images intends to provide the best products and service to its existing
and future customers.
- ENHANCE COMPREHENSIVE DISTRIBUTION NETWORK. Getty Images believes that it
has one of the most comprehensive distribution networks in the visual
content industry with the combination of its worldwide network of wholly
owned offices and dedicated agents and its Internet distribution
capabilities. In order to enlarge its available customer base and further
penetrate its existing customer base, Getty Images will continue to
strengthen its distribution capabilities by enhancing on-line access to
its visual content collections, by establishing wholly owned offices in
additional key territories and by developing agent relationships in new
markets.
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- DEVELOP NEW MARKETS, PRODUCTS AND CUSTOMER TYPES. Getty Images believes
that the increasing use of imagery in communications and the emergence of
advanced technologies has resulted in opportunities to develop products
and services targeted at emerging and new and potentially larger segments
of the potential customer base and to further penetrate existing market
segments. Getty Images expects to develop products and services for the
corporate and SOHO markets and believes that it will be positioned to
enter other potential new markets, including the consumer market.
- PURSUE STRATEGIC ACQUISITIONS. The visual content industry is currently
very fragmented with a few international players, a number of regional
players and a large number of small businesses that specialize in a
particular content type or geographical area. Getty Images believes that
the fragmented nature of the industry offers significant growth
opportunities through the consolidation of smaller independent businesses
that lack sufficient resources to compete in a rapidly changing
environment. Getty Images will target companies that offer one or more of
the following features: (i) complementary visual content; (ii) a presence
in a geographic market where Getty Images is under-represented; and (iii)
access to new technologies.
H. BUSINESS RISK FACTORS
Set out below is a description of certain factors that may affect the
Company's business and results of operations from time to time.
DEVELOPMENTAL NATURE OF THE VISUAL CONTENT INDUSTRY
The Company's future growth and profitability will depend in large measure
upon growth in demand for visual content. A visual content industry with
identifiable categories and growth characteristics is a relatively recent
development. The visual content industry is fragmented across all categories and
is experiencing significant structural and technological changes, including
substantial consolidation. To the extent that the visual content industry, or
any sector of that industry in which the Company operates, does not develop as
the Company anticipates, the value of the Company or its results of operations
or financial condition may be adversely affected.
RAPID TECHNOLOGICAL CHANGE
The success of Getty Images will depend, in part, on its ability to adapt to
new technological developments in the visual content industry and to develop new
services and technology that address the increasingly sophisticated and varied
needs of its customers and prospective customers on a cost-effective and timely
basis. In response to technological changes, Getty Images has invested, and will
continue to invest, in new technologies to keep pace with new developments, such
as advances in producing digital images and in delivering digital images
on-line. Getty Communications believes that during 1997 market demand for images
increasingly shifted towards digital search, selection and fulfillment of
images, particularly in the more developed markets of the United Kingdom and the
United States. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview". Getty Images will rely on third
parties for a substantial portion of the hardware, software and software tools
that it will use in its businesses, including, in particular, the hardware,
software and software tools that enable customers and potential customers to
access, search and license images through its Web sites. If suppliers fail to
upgrade or support such systems, the business, financial condition or results of
operations of Getty Images could be adversely affected. There can be no
assurance that Getty Images will successfully use new software and other
technologies effectively or adapt its third-party technology and systems to
customer requirements or emerging industry standards.
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SIGNIFICANT COMPETITION
The visual content industry is characterized by strong competition. Getty
Images competes with a number of large and small visual content providers,
including The Image Bank, Visual Communications and Corbis.
Some of the Company's competitors, including The Image Bank, Visual
Communications and Corbis, may have access to greater financial, marketing and
other resources than Getty Images. Getty Images also competes locally or with
respect to certain content or products with a number of general and specialized
content companies, many of which are well-established in their local or content
or product specific markets. Royalty-free stock photography agencies have also
emerged as an alternative to rights-protected stock photography businesses for
applications where rights-protection and other services are not customer
requirements. In addition, Getty Images competes indirectly with commissioned
work in contemporary stock photography and footage. New entrants into the visual
content industry could increase if technological advances make archiving,
searching and digital delivery systems more affordable, which could result in
lower average sales prices. There can be no assurance that Getty Images will be
able to compete successfully against current or future competitors or that
competitive pressures faced by Getty Images will not have a material adverse
effect on the business, financial condition or results of operations of Getty
Images. See "--F. Competition".
POTENTIAL DIFFICULTIES IN INTEGRATING OPERATIONS AND IN MANAGING GROWTH AND
EXPANSION
Getty Images was formed by the integration of companies that have previously
operated independently. The process of coordinating and integrating the
organizations will require substantial attention from management and could cause
the interruption of, or a loss of momentum in, the activities of any of the
companies' businesses, which could have a material adverse effect on their
combined operations, at least in the near term. The diversion of management
attention and any difficulties encountered in the integration of the businesses
could have a material adverse effect on the revenues and operating results of
Getty Images. The significant goodwill amortization charges and one-time
transaction costs will also adversely affect the reported operating results of
Getty Images and may result in reported net income in future periods being
negative.
In addition, each of Getty Communications, PhotoDisc and Allsport has grown
rapidly in recent years. The ability of Getty Images to compete effectively and
to manage future growth, if any, will require Getty Images to monitor and
upgrade as appropriate its financial and management controls, to reorient
management of recently acquired businesses to the operating philosophy of Getty
Images, to develop and expand management information systems and to recruit and
train personnel. If Getty Images is unable to manage such recent growth and any
future growth and expansion successfully, its financial condition and results of
operations could be adversely affected.
RISKS RELATED TO GETTY IMAGES' ACQUISITION STRATEGY
As part of its business strategy, Getty Images pursues the acquisition of
complementary visual content and other product lines, assets or technologies
that will complement or expand its business. Getty Images believes that the
recent increase in the level of demand for visual content and a trend toward
consolidation in the visual content industry, have increased the valuations of
visual content businesses and collections and are likely to have an adverse
impact on Getty Images' ability to make acquisitions and on its ability to
realize appropriate returns on such acquisitions. Acquisitions also involve a
number of other risks that could adversely affect the business, financial
condition or results of operations of Getty Images, including the diversion of
management's attention, the assimilation of the operations and personnel of the
acquired companies and the potential loss of key employees. No assurance can be
given that Getty Images will be able to identify any suitable acquisition
candidates or to make any acquisitions or that any acquisition by Getty Images
will not adversely affect the business,
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financial condition and results of operations of Getty Images or that such
acquisitions will enhance the business of Getty Images.
RISKS RELATED TO GOODWILL RECOGNITION
The PhotoDisc and Allsport acquisitions generated approximately $300 million
of goodwill that will result in a substantial annual charge to be amortized
against the earnings of the Company in future periods. Management considers that
an average period of around twenty years is a reasonable period over which to
amortize this goodwill. Getty Images could be required to write-down the
unamortized value of such goodwill in the future at an accelerated rate in the
event that it suffers a permanent dimunition in value.
INFLUENCE OF PRINCIPAL STOCKHOLDERS
Two groups of stockholders own substantial percentages of the outstanding
shares of Getty Images Common Stock and as a result are in a position to exert
significant influence in the election of the directors of Getty Images and other
corporate actions that require shareholder approval. Getty Investments L.L.C.,
Mr. Mark Getty, Mr. Jonathan Klein, Crediton Limited (a company of which the
sole beneficiary is Mr. Klein) and the October 1993 Trust (a trust established
by Mr. Getty) (collectively, the "Getty Group") own approximately 31 percent of
the outstanding shares of Getty Images Common Stock and PDI, L.L.C., Mr. Mark
Torrance, Ms. Wade Torrance and certain of their family members (collectively,
the "Torrance Group") own approximately 18 percent of the outstanding shares of
Getty Images Common Stock. Pursuant to the Stockholders' Agreement among the
Company, the Getty Group and the Torrance Group, none of the members of the
Getty Group or the Torrance Group may transfer such stockholder's shares of
Getty Images Common Stock except pursuant to the terms of such agreement. In
addition to ownership of Getty Images Common Stock, certain members of each of
the Getty Group and the Torrance Group will have management roles with Getty
Images that will increase their influence over the Company and certain members
of each group will have other rights and relationships with the Company.
DEPENDENCE UPON KEY PERSONNEL
Getty Images believes that its performance depends, to a significant extent,
upon the services of its senior management and other key personnel, including,
in particular, Mr. Mark Getty, Co-Chairman of Getty Images, Mr. Mark Torrance,
Co-Chairman of Getty Images, and Mr. Jonathan Klein, Chief Executive Officer of
Getty Images. The loss of the services of any of Messrs. Getty, Torrance and
Klein could materially adversely affect the future prospects of the Company.
Messrs. Getty, Torrance and Klein entered into an Employment Agreement with
Getty Images for a minimum period of three years commencing as of February 9,
1998.
The future success of Getty Images will also depend upon its ability to
identify, attract, hire, train, retain and motivate highly skilled technical,
managerial, editorial, merchandising, marketing and customer service personnel.
Competition for such personnel is intense, and there can be no assurance that
Getty Images will be able to successfully attract, hire, assimilate or retain
sufficiently qualified personnel. The failure to retain and attract the
necessary technical, managerial, editorial, merchandising, marketing and
customer service personnel could have a material adverse effect on the business,
financial condition or results of operations of Getty Images.
INCREASED LEVELS OF INDEBTEDNESS
Getty Images borrowed approximately $33 million from Midland Bank to finance
the cash consideration paid in the Merger. Such borrowings require Getty Images
to make substantial principal and interest payments during the next few years,
which may limit the payment of cash dividends (although
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Getty Images has no present intention to pay cash dividends in the foreseeable
future), and to maintain certain financial ratios, which may have the effect of
restricting the ability of Getty Images to incur additional indebtedness and
limiting other activities of Getty Images. There can be no assurance that the
need to utilize free cash flow to service these obligations may not limit the
ability of Getty Images to take advantage of other business opportunities which
may arise in the future. Such borrowings currently bear interest at floating
rates, causing Getty Images to be significantly more sensitive to prevailing
U.K. interest rates than was historically the case for Getty Communications or
PhotoDisc prior to completion of the Merger.
RISKS RELATED TO ELECTRONIC IMAGE DELIVERY SYSTEMS
The Company's future growth in sales and profitability depends in part upon
the increased acceptance and use of the Internet and other on-line services as
an effective medium of commerce. Rapid growth in the use of and interest in the
Internet, the Web and on-line services is a recent phenomenon, and there can be
no assurance that acceptance and use will continue to develop or that a
sufficiently broad base of users and prospective users of digital images will
adopt, and continue to use such on-line services as a medium of commerce. In
addition, such on-line services may not be accepted as a viable commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements.
A significant barrier to on-line commerce and communications is the secure
transmission of confidential information over public networks. Getty Images
relies on encryption and authentication technology licensed from third parties
to provide the security and authentication necessary to effect secure
transmission of confidential or proprietary information, such as customer credit
card numbers or digital images. There can be no assurance that advances in
computer capabilities or other events or developments will not result in a
compromise or breach of the algorithms used by Getty Images to protect customer
transaction data. Concerns over the security of the Internet and other on-line
transactions and the privacy of users may also inhibit the growth of the
Internet and other on-line services generally, and the Web in particular,
especially as a means of conducting commercial transactions. The success of the
on-line operations of Getty Images will also depend in part upon the efficient
and uninterrupted operation of its computer and communications hardware systems.
Such systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins, earthquake and similar
events. While the Company has implemented disaster recovery plans, the Company
could suffer significant delays in implementing a backup system if a major
interruption were to occur. In addition, despite the implementation of network
security measures, the Company's servers are vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions, which could lead to
interruptions, delays, loss of customer data or the inability to accept and
fulfill on-line customer orders.
IMPACT OF CHANGES IN FOREIGN EXCHANGE RATES
Getty Images publishes its consolidated financial statements in U.S. dollars
and conducts a portion of its business in currencies other than U.S. dollars,
particularly the pound sterling, German mark and French franc. As a result,
Getty Images is exposed to changes in the value of currencies against the U.S.
dollar. Fluctuations in the values of currencies against the U.S. dollar could
affect the translation of the results of non-U.S. based operations into U.S.
dollars for inclusion in the consolidated financial statements of Getty Images.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview".
POTENTIAL LOSS OF RIGHTS TO GETTY TRADEMARKS
Getty Images (through its subsidiaries) owns trademarks and trademark
applications in respect of the names Getty Communications and Hulton Getty, and
derivatives thereof (including the name "Getty
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Images") and the related logo (together, the "Getty Trademarks"). In the event
that Getty Images becomes controlled by a third party or parties not affiliated
with the Getty family, Getty Investments L.L.C. has 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. Although the primary brands used by Getty Images are Tony Stone Images,
Hulton Getty, Gamma Liaison, Energy Film Library, PhotoDisc and Allsport, Getty
Images is used as a corporate identity for certain of its subsidiaries and
Hulton Getty is a Getty Trademark. There can be no assurance that the exercise
by Getty Investments L.L.C. of its right to cause an assignment of the Getty
Trademarks would not have a material adverse effect on the business, financial
condition or results of operations of Getty Images. Further, there can be no
assurance that the existence of the right of Getty Investments L.L.C. to cause
such an assignment would not have a negative impact on the amount of
consideration a potential acquirer would be willing to pay to acquire Getty
Images Common Stock.
POSSIBLE VOLATILITY OF STOCK PRICE; FUTURE SALES OF SUBSTANTIAL NUMBERS OF GETTY
IMAGES SHARES COULD HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF GETTY IMAGES
SHARES
Prior to the completion of the Merger and the Scheme of Arrangement on
February 9, 1998, there had been significant volatility in the market for Getty
Communications ADSs since the initial public offering of Getty Communications
ADSs in July 1996. Since the closing of the Merger and Scheme of Arrangement on
February 9, 1998, there has been significant volatility in the market for Getty
Images Common Stock.
Sales, or the possibility of sales, of substantial numbers of shares of
Getty Images Common Stock in the public market could adversely affect prevailing
market prices of shares of Getty Images Common Stock. Certain stockholders of
Getty Images have the right, pursuant to various registration rights agreements,
to request that Getty Images register certain shares of Getty Images Common
Stock for resale under the Securities Act and certain outstanding options to
purchase Getty Ordinary Shares became immediately exercisable for shares of
Getty Images Common Stock at the closing of the Scheme of Arrangement pursuant
to the laws of the United Kingdom. In addition, employees of Getty Images hold a
significant number of options to purchase shares of Getty Images Common Stock,
many of which are presently exercisable. Many employees may exercise their
options and sell shares shortly after such options become exercisable,
particularly if they need to raise funds to pay for the exercise of such options
or to satisfy tax liabilities that they may incur in connection with exercising
their share options. Additional issuances or market sales of Getty Images Common
Stock could have an adverse effect on the market price of Getty Images Common
Stock prevailing from time to time.
ANTI-TAKEOVER CONSIDERATIONS
The Board of Directors of the Company has the authority, without stockholder
approval, to issue up to 5,000,000 shares of preferred stock and to fix the
rights, preferences, privileges and restrictions of such shares without any
further vote or action by the stockholders of Getty Images. This authority,
together with certain provisions of the Amended and Restated Certificate of
Incorporation of Getty Images (the "Getty Images Certificate of Incorporation"),
may have the effect of making it more difficult for a third party to acquire, or
discouraging a third party from attempting to acquire, control of the Company,
even if stockholders of the Company consider such change in control to be in
their best interests. In addition, the concentration of beneficial ownership of
Getty Images Common Stock by the Getty Group and the Torrance Group and certain
provisions of Delaware law may have the effect of delaying, deterring or
preventing a hostile takeover of the Company.
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I. EMPLOYEES
At February 28, 1998, the Company had 1,266 employees. Of these, 690 were
located in North America, 425 in the United Kingdom, 137 in the rest of Europe
and 14 in the rest of the world. The Company believes that it has satisfactory
relations with its employees.
J. RECENT DEVELOPMENTS
Stephen Mayes, Senior Vice President, Creative of Getty Images, and Michele
Vitucci, Managing Director, Tony Stone Images/Hulton Getty Europe, have resigned
from their positions at Getty Images, effective as of April 10, 1998 and June
30, 1998 respectively.
On March 31, 1998 Carlton Communications BV ("Carlton") confirmed the sale
of all of the shares of Getty Images Common Stock held by Carlton. Such sale is
scheduled to be completed on April 3, 1998.
ITEM 2: PROPERTY
The Company's principal offices are in Camden, London, England and Seattle,
Washington. The Company utilizes approximately 33,000 square feet of office
space at its office in Camden, London pursuant to two separate leases. One lease
covers approximately 15,000 square feet and will expire in 2015. The other lease
covers approximately 18,000 square feet of office space and will expire in 2010.
The Company utilizes approximately 70,000 square feet in its Seattle offices
pursuant to two separate leases. The Company leases approximately 37,000 square
feet of office space pursuant to an agreement between the Company and Mark
Torrance, the Co-Chairman of the Company; this lease expires in 2003. Under the
second lease, the Company utilizes 33,000 of square feet of office space; this
lease expires in 2004. Management believes that the Company's London and Seattle
facilities are suitable for the Company's current use and adequate for the
Company's operations for the foreseeable future. Operating subsidiaries of the
Company have leased office space throughout the world.
ITEM 3: LEGAL PROCEEDINGS
The Company has entered into a settlement agreement with Digital Stock
Corporation with respect to the previously disclosed complaint that had been
filed in September 1997. See Note 17 to the consolidated financial statements of
Getty Communications plc included in Item 14.
The Company has and may continue to be subject to legal claims from time to
time in the ordinary course of business, including those related to the alleged
infringement by the Company of the trademarks and other intellectual property
rights of third parties, such as failure to secure model releases. Presently,
there are no pending legal proceedings to which the Company is a party or to
which any of its property is subject which, either individually or in the
aggregate, are expected by the Company to have a material adverse effect on its
consolidated financial position or results of operations or its liquidity.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Getty Images Common Stock has been quoted on the Nasdaq National Market
under the symbol "GETY" since February 10, 1998. Prior to February 10, 1998, the
Getty Communications ADSs were quoted on the Nasdaq National Market under the
symbol "GETTY" since July 2, 1996. In connection with the Merger and the Scheme
of Arrangement that were completed on February 9, 1998, each previously
outstanding Getty Communications ADS was effectively converted into one share of
Getty Images Common Stock. See "Item 1. Business--A. Getty Images--Background".
The following table shows the high and low sales price for the Getty
Communications ADSs for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996
Third Quarter (July 2, 1996 until September 30, 1996)........... $14.25 $10.00
Fourth Quarter.................................................. 16.75 13.50
1997
First Quarter................................................... 18.00 14.00
Second Quarter.................................................. 15.25 11.50
Third Quarter................................................... 19.50 10.75
Fourth Quarter.................................................. 18.25 13.00
</TABLE>
On March 27, 1998, the last reported sales price of the Getty Images Common
Stock as reported on the Nasdaq National Market was $23.875 per share.
There were approximately 55 holders of record of the Getty Images Common
Stock as of March 26, 1998.
The Company has not paid or declared any dividends on its common stock since
its inception and anticipates that its future earnings will be retained to
finance the continuing development of its business. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, future earnings, the success of the Company's
business activities, regulatory and capital requirements, the general financial
condition of the Company and general business conditions. In addition, the
Company's loan agreements may restrict the Company's ability to pay future
dividends.
On March 14, 1997, Getty Communications issued an aggregate of 311,846 Getty
Class A Ordinary Shares as partial consideration for its purchase of Gamma
Liaison. On July 25, 1997, Getty Communications issued an aggregate of 617,762
Getty Class A Ordinary Shares as partial consideration for its purchase of
Energy Film Library. In each case, such shares were issued to the limited number
of the sellers of such businesses in a private placement not involving a public
offering pursuant to Section 4(2) of the Securities Act of 1933, as amended.
19
<PAGE>
ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of Getty Communications
are qualified by reference to and should be read in conjunction with Getty
Communications' consolidated financial statements and notes thereto included in
Item 14 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 7.
The following selected consolidated financial data does not reflect the
results of operations of PhotoDisc or Allsport, each of which were acquired by
Getty Images in February 1998, after the date of the most recent financial data
reflected in the following table.
<TABLE>
<CAPTION>
TONY STONE IMAGES
(PREDECESSOR COMPANY) GETTY COMMUNICATIONS
------------------------- ------------------------------------
YEAR ENDED DECEMBER 31,
YEAR ENDED JANUARY 1 MARCH 14 -------------------------
DECEMBER 31, THROUGH THROUGH 1995(1) 1996 1997
-------------- MARCH 13, DEC. 31, ------- ------- -------
1994 --------- --------
1993 ------ 1995 1995 $ $ $
------ --------- --------
$
$ $ $
(IN THOUSANDS, EXCEPT PER (IN THOUSANDS, EXCEPT PER
SHARE AND PER ADS DATA) SHARE AND PER ADS DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales....................................................... 27,559 42,052 9,498 53,523 63,021 85,014 100,797
Cost of sales............................................... 10,204 16,290 3,618 21,096 24,714 32,156 37,514
------ ------ --------- -------- ------- ------- -------
Gross profit................................................ 17,355 25,762 5,880 32,427 38,307 52,858 63,283
Selling, general and administrative expenses................ 13,297 19,140 4,918 22,737 27,655 37,250 43,936
Amortization of intangibles................................. 94 1,134 390 1,990 2,380 2,155 3,253
Depreciation................................................ 1,784 2,267 588 3,017 3,605 5,486 8,214
------ ------ --------- -------- ------- ------- -------
Operating income/(loss)..................................... 2,180 3,221 (16) 4,683 4,667 7,967 7,880
Net interest (expense)/ income.............................. (160) (218) (62) (1,406) (1,468) (1,951) 1,187
Exchange gains/(losses)..................................... (278) 247 119 (30) 89 (306) (198)
Legal settlement............................................ -- -- -- -- -- -- (974)
------ ------ --------- -------- ------- ------- -------
Income before income taxes.................................. 1,742 3,250 41 3,247 3,288 5,710 7,895
Income taxes................................................ (573) (1,556) (144) (1,873) (2,017) (2,982) (3,873)
------ ------ --------- -------- ------- ------- -------
Net income/(loss)........................................... 1,169 1,694 (103) 1,374 1,271 2,728 4,022
------ ------ --------- -------- ------- ------- -------
Net income per share(2)..................................... 0.06 0.05 0.10 0.11
-------- ------- ------- -------
-------- ------- ------- -------
Shares used in computing per share amount(2)................ 23,390 23,390 27,832 38,765
-------- ------- ------- -------
Net income per ADS(3)....................................... 0.12 0.11 0.20 0.21
-------- ------- ------- -------
OPERATING DATA:
EBITDA(4)................................................... 4,058 6,622 962 9,690 10,652 15,608 19,347
------ ------ --------- -------- ------- ------- -------
Ratio of earnings to fixed charges(5)....................... 6.42 8.53 1.15 3.93 3.38 3.79 6.69
------ ------ --------- -------- ------- ------- -------
Net cash provided by/(used in):
Operating activities...................................... 2,264 5,202 509 6,448 6,957 13,502 13,174
Investing activities...................................... (2,183) (5,296) (1,106) (23,583) (24,689) (25,528) (35,447)
Financing activities...................................... 229 (314) (38) 19,068 19,030 66,311 (3,052)
Exchange differences...................................... (34) 83 16 (34) (18) 2,755 (4,380)
------ ------ --------- -------- ------- ------- -------
Net increase/(decrease) in cash and cash equivalents........ 276 (325) (619) 1,899 1,280 57,040 (29,705)
------ ------ --------- -------- ------- ------- -------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
TONY STONE IMAGES
(PREDECESSOR COMPANY) GETTY COMMUNICATIONS
------------------------- ------------------------------------------
AT AT
AT AT AT DECEMBER 31, DECEMBER 31,
DECEMBER 31, MARCH 13, DECEMBER 31, ------------ ------------
-------------- --------- ------------ 1996 1997
1994 1995 1995 ------------ ------------
1993 ------ --------- ------------
------ $ $
$ $ $
$ (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... 1,533 1,208 589 1,899 58,939 29,234
Total assets................................................ 14,975 25,334 26,064 71,024 163,504 171,638
Long-term debt, net of
current maturities........................................ 1,311 2,617 2,728 8,704 17,910 14,657
Total shareholders' equity.................................. 4,026 5,984 54 27,012 113,523 119,539
</TABLE>
- ------------------------------
(1) Reflects the combination of the audited results of Tony Stone Images, the
predecessor of Getty Communications, for the period from January 1 through
March 13, 1995 with the audited results of Getty Communications for the
period from March 14 through December 31, 1995. Due to the nature of this
combination, the presentation of combined results for the two periods in
1995 does not conform with U.S. GAAP.
(2) Net income per share has not been computed for periods which relate to Tony
Stone Images as compared to Getty Communications. Amounts for the year ended
December 31, 1995 have been computed assuming the same number of shares
outstanding as determined for Getty Communications for the period March 14,
1995 through December 31, 1995.
(3) Net income per Getty Communications ADS is calculated by adjusting net
income per share data for the ratio of two Getty Class A Ordinary Shares per
Getty Communications ADS.
(4) "EBITDA" is defined as earnings before net interest, taxes, exchange
gains/(losses), depreciation, legal settlement costs and amortization. Thus,
EBITDA with respect to Getty Communications comprises sales less cost of
sales and selling, general and administrative expenses. Getty Communications
believes that EBITDA provides investors and analysts with a measure of
operating income unaffected by the financing and accounting effects of
acquisitions and assists in explaining trends in the operating performance
of Getty Communications. This was illustrated in 1995, when Getty
Communications' net income fell as a result of the financing and accounting
effects of the acquisition of Tony Stone Images with a consequent increase
in net interest expense and amortization of intangibles, while EBITDA rose
by approximately 61 percent over 1994. EBITDA should not be considered as an
alternative to operating income as an indicator of Getty Communications
operating performance or to cash flows as a measure of Getty liquidity. As
defined by Getty Communications, EBITDA may not be comparable to other
similarly titled measures used by other companies.
(5) Ratio of earnings to fixed charges means the ratio of net income (before
fixed charges and income taxes) to fixed charges, where fixed charges are
the aggregate of interest, amortization of the costs relating to debt and an
allocation of rental charges to approximate equivalent interest.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS OF GETTY COMMUNICATIONS AND THE NOTES THERETO, "SELECTED CONSOLIDATED
FINANCIAL DATA" AND OTHER FINANCIAL INFORMATION CONTAINED ELSEWHERE IN THIS
ANNUAL REPORT ON FORM 10-K. FOR PURPOSES OF THE FOLLOWING, 1995 AMOUNTS REFLECT
THE COMBINED RESULTS OF TONY STONE IMAGES AND GETTY COMMUNICATIONS FOR THE
ENTIRE CALENDAR YEAR, AS MANAGEMENT BELIEVES THAT THIS IS THE MOST MEANINGFUL
PRESENTATION FOR COMPARATIVE PURPOSES. SEE "BASIS OF PRESENTATION". IN THE
FOLLOWING DISCUSSION, THE "COMPANY" REFERS TO TONY STONE IMAGES IN 1994, GETTY
COMMUNICATIONS COMBINED WITH TONY STONE IMAGES FOR 1995, AND GETTY
COMMUNICATIONS IN 1996 AND 1997. ALL FINANCIAL DATA REFERRED TO IN THE FOLLOWING
MANAGEMENT'S DISCUSSION HAS BEEN PREPARED IN ACCORDANCE WITH U.S. GAAP.
THE STATEMENTS IN THIS SECTION THAT ARE NOT HISTORICAL FACTS ARE
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. GETTY IMAGES'
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF A VARIETY OF FACTORS, INCLUDING THOSE
SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.
21
<PAGE>
The following discussion does not reflect the results of operations of
PhotoDisc or Allsport, each of which were acquired by Getty Images on February
9, 1998, after the date of the most recent period discussed.
OVERVIEW
Getty Communications commenced operations on March 14, 1995 with the
acquisition of Tony Stone Images, one of the world's leading providers of
contemporary stock photography. In April 1996, the Company broadened its visual
content product offerings with the acquisitions of Hulton Getty, one of the
world's largest privately owned collections of archival photography, and
Fabulous Footage, a leading North American provider of contemporary stock
footage. In November 1996, the Company strengthened its distribution in Belgium,
Denmark, Holland and Sweden with the acquisition of World View, its former agent
in these territories. In March 1997, Getty Communications acquired Gamma
Liaison, a well-established leading company in the photojournalism market. In
July 1997, Getty Communications acquired Energy Film Library, one of the leading
international providers of contemporary stock footage to the advertising,
television, feature film, corporate communications and multimedia markets. In
August 1997, Getty Communications strengthened its position in the Asia Pacific
market with the acquisition of Profile Photo Library, its former agent in Hong
Kong.
During September 1997, Getty Communications entered into a merger agreement
with PhotoDisc, Inc. leading to the formation of Getty Images, Inc. and the
completion of the Merger in February 1998. PhotoDisc is the leader in the
development and marketing of digital stock photography products. Also in
February 1998, the Company acquired Allsport Photographic Plc, a leading sports
photographic agency.
Getty Communications' sales are primarily derived from the marketing of
image reproduction and broadcasting rights to a range of business customers.
Historically, approximately 91 percent of the Company's sales have been
generated through its wholly owned offices, with the remainder through its
international network of agents. Sales generally comprise a large number of
relatively small transactions, priced in the range of $150 to $750. Prices are
determined primarily by the customer's intended use of the image or clip and
vary significantly across geographic markets and customer groups.
Getty Communications' cost of sales consists primarily of payments to
contributing photographers and cinematographers. These suppliers are generally
under contract with one of the wholly owned offices, and generally receive as
payment: (i) 50 percent of the sales generated by their images in the same
territory as the office to which they are contracted ("in-territory sales") and
on revenues received from agents; and (ii) 30 percent of the sales generated by
their images outside of the territory of the office to which they are contracted
("out-of-territory sales"). Minimal payments are due for sales of Hulton Getty's
archival imagery as most of these images are free of any requirement to pay
commission.
Getty Communications' selling, general and administrative expenses include
salaries and related staff costs, premises and utility costs, and marketing and
catalog costs. The recent increases in these costs have been driven primarily by
acquisitions and by the volume of image transactions.
Getty Communications amortizes goodwill and other intangibles acquired and
depreciates the cost of the investment in image duplicates ("dupes"), digital
files, the archival picture collection, computer systems and other fixed assets
over their expected useful lives. The Merger with PhotoDisc and the acquisition
of Allsport will generate a significant amount of goodwill that will be
amortized over future periods. See "Item 1. Business--H. Business Risk
Factors--Risk related to Goodwill Recognition".
Throughout 1997, the Company saw a progressive slowing down in the rate of
growth of the core analog business of Tony Stone Images. The Company expects
this trend to continue into 1998 as more customers move towards digital search,
selection and fulfillment of images, particularly in the developed
markets of the United States and the United Kingdom. In recognition of this,
Getty Communications
22
<PAGE>
made significant investment throughout 1997 in digitization, and in 1998 it is
anticipated that the Dupe Master Collection will be available for search,
selection and fulfillment by customers at high resolution on the web. The Merger
with PhotoDisc also represents a further significant development in Getty
Communications' digital strategy, and Getty Images is increasing related capital
expenditures in 1998. In order to increase the sales potential of the combined
business and to achieve synergies with PhotoDisc, Getty Communications expects
to incur certain one-time charges, including those, for example, in respect of
office consolidation and reorganization.
As a result of Getty Communications' various acquisitions and their
consequential financial and accounting effects on net income, Getty
Communications believes that EBITDA provides investors and analysts with an
appropriate measure to explain the operating performance of Getty
Communications. Getty Communications defines EBITDA as earnings before interest,
taxes, exchange gains/(losses), depreciation, legal settlement costs and
amortization.
BASIS OF PRESENTATION
Management's discussion and analysis of the 1995 results refers to the
combination of the audited consolidated results of Tony Stone Images for the
pre-acquisition period January 1, 1995 through March 13, 1995 and the audited
consolidated results of Getty Communications from the date of acquisition of
Tony Stone Images on March 14, 1995 through December 31, 1995. The 1996
discussion and analysis refers to the audited consolidated results of Getty
Communications for the year ended December 31, 1996 and includes the
post-acquisition results of Hulton Getty, Fabulous Footage and the World View
group of companies. Management's discussion and analysis of the results for 1997
refers to the audited consolidated results for the year ended December 31, 1997
and includes the post-acquisition results of Gamma Liaison and Energy Film
Library.
The presentation of the combined results of Tony Stone Images and Getty
Communications for 1995 and Getty Communications for 1996 and 1997 is considered
by management to provide the most meaningful basis for the following discussion
and analysis, as the Company had no operations prior to the acquisition of Getty
Communications. The only change in basis of the net assets of Tony Stone Images
resulting from the acquisition was the creation of goodwill and other
intangibles. Due to the nature of this combination, the presentation of combined
results for the two periods in 1995 does not conform with U.S. GAAP.
Getty Communications had previously adopted pounds sterling as its reporting
currency. Getty Images has adopted U.S. dollars as its reporting currency. To
facilitate comparison of the future results of Getty Images with the historical
results of Getty Communications, the historical results of Getty Communications
have been translated into U.S. dollars using the exchange rates set out below
and as explained in Note 2 to the consolidated financial statements of Getty
Communications included in Item 14.
23
<PAGE>
EXCHANGE RATES
The table below sets forth, for the periods and dates indicated, certain
information concerning the Noon Buying Rates for pounds sterling expressed in
U.S. dollars per pound sterling.
PERIOD AVERAGE RATES:
<TABLE>
<CAPTION>
JANUARY 1 MARCH 14 YEAR ENDED DECEMBER
YEAR ENDED THROUGH THROUGH 31,
DECEMBER 31, MARCH 13, DECEMBER 31, --------------------
1994 1995 1995 1996 1997
- -------------- ------------ ------------ ------ ------
<S> <C> <C> <C> <C>
1.5319 1.5801 1.57801 1.5606 1.6389
</TABLE>
PERIOD END RATES:
<TABLE>
<CAPTION>
AT AT AT DECEMBER 31,
DECEMBER 31, MARCH 13, ----------------------------------
1994 1995 1995 1996 1997
- -------------- ---------- ------ ------ ------
<S> <C> <C> <C> <C>
1.5645 1.5914 1.5526 1.7113 1.6430
</TABLE>
RESULTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
The following table sets forth selected statement of operations and
operating data of the Company and such data as a percentage of sales for each of
the three years ended December 31, 1997.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
PERCENT PERCENT PERCENT
OF OF OF
SALES SALES SALES
1995(1) % 1996 % 1997 %
-------- ------- -------- ------- -------- -------
(IN THOUSANDS, EXCEPT NET INCOME PER ADS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Sales....................................................... $ 63,021 100 $ 85,014 100 $100,797 100
Gross profit................................................ 38,307 61 52,858 62 63,283 63
Operating income............................................ 4,667 7 7,967 9 7,880 8
Net income.................................................. 1,271 2 2,728 3 4022 4
-------- ------- -------- ------- -------- -------
-------- ------- -------- ------- -------- -------
Net Income per ADS.......................................... $ 0.11 $ 0.20 $ 0.21
OPERATING DATA:
EBITDA(2)................................................... 10,652 17 15,608 18 19,347 19
-------- ------- -------- ------- -------- -------
-------- ------- -------- ------- -------- -------
Net cash provided by/(used in):
Operating activities...................................... 6,957 13,502 13,174
Investing activities...................................... (24,689) (25,528) (35,447)
Financing activities...................................... 19,030 66,311 (3,052)
Translation differences................................... (18) 2,755 (4,380)
-------- -------- --------
-------- -------- --------
Net (decrease)/increase in cash and cash equivalents........ 1,280 57,040 (29,705)
-------- -------- --------
-------- -------- --------
</TABLE>
- ------------------------------
(1) Reflects the combination of the audited results of Tony Stone Images, the
Company's predecessor, for the period from January 1 through March 13, 1995,
with the audited results of Getty Communications for the period from March
14 through December 31, 1995.
(2) EBITDA should not be considered a substitute for net income as a measure of
the Company's operating results or for cash flows as a measure of liquidity.
24
<PAGE>
SALES
The Company's sales (including the Company's share of sales by agents) for
1995, 1996 and 1997 were $63.0 million, $85.0 million and $100.8 million,
respectively, representing increases of 35 percent in 1996 and 19 percent in
1997 over the respective previous year. Movements in currencies during 1997
adversely effected the sales reported in U.S. dollars of non-U.S. operations.
Had the equivalent 1996 exchange rate been applied, 1997 sales would have been
$104.6 million in 1997, 23% higher than 1996.
This increase arose from continued growth in the core business which, in
management's opinion, is attributed to continuing increases in the breadth of
Getty Communications' imagery and improvement in the distribution network. The
increase was also attributable in part to $11.1 million in sales from the
acquisitions in 1997.
VOLUME. The number of images and clips licensed in 1995, 1996 and 1997 was
approximately 105,000, 143,000 and 192,000, respectively. This represents growth
of 36 percent in 1996 and 34 percent in 1997 over the respective previous year.
The main source of the industry's growth in the three years has been a
continuing increase in demand for imagery from both traditional markets and new
markets such as multimedia uses, combined with an increasing share of the market
being fulfilled through stock imagery.
In 1997, sales of images from the Tony Stone Images' Dupe Master Collection
accounted for approximately 80 percent of the Company's sales. This contemporary
collection grew in number by approximately 19 percent in 1996 and 20 percent in
1997. Management intends to continue expanding the collection.
The Company published two Tony Stone Images' catalogs, one general and one
specialist, in 1996 and three Tony Stone Images' catalogs, one general and two
specialist, in 1997. The specialist PORTRAITS catalog, which included images
from the Liaison Stock Library, was a successful example of the opportunities of
leveraging the expertise of Tony Stone Images in image selection and catalog
design with recently acquired image libraries. In addition a specialist catalog
dedicated to Hulton Getty was launched in March 1997. In the second half of
1997, the Company published two CDs--"BUSINESS AND INDUSTRY" AND "INSTANTS". The
latter CD included 8,500 images in digital format from the Tony Stone Images and
Hulton Getty collections. The footage business issues sample tapes demonstrating
the quality and relevance of its library.
PRICING. Sales generally comprise a large number of relatively small
transactions in the range of $150 to $750. The image and clip licensing price is
determined primarily by the customer's intended use and the nature of the
product, and varies significantly across geographic markets and customer groups.
For example, prices tend to be higher in the advertising and design markets than
in the publishing market, higher for footage and contemporary images than for
archival images and higher in North America and continental Europe than in the
United Kingdom. The average price of contemporary images grew marginally in
1996, but in 1997 decreased marginally on a currency neutral basis.
CURRENCY. In 1997, 50 percent of Getty Communications' sales were generated
in currencies other than U.S. dollars. Getty Communications' results of
operations are affected by fluctuations in exchange rates between the U.S.
dollar, in which a large minority of Getty Communications' sales and expenses
are recorded, and the other currencies in which a majority of its sales and
costs are recorded, particularly the pound sterling, the German mark and the
French franc. In general, appreciation of the U.S. dollar, relative to another
currency, has an adverse impact on Getty Communications' sales and profits while
depreciation of the U.S. dollar has a positive effect. Movement in currencies
during 1997 adversely effected the sales reported in U.S. dollars of non-U.S.
operations but did not materially affect sales in 1995 or 1996. See "Item 1.
Business--H. Business Risk Factors--Impact of Changes in Foreign Exchange
Rates".
25
<PAGE>
SALES BY AGENTS. Agents remit to the Company 60 percent of the gross sales
they derive from licensing the Company's images. The Company's share of sales by
agents was $7.2 million, $8.6 million and $9.0 million in 1995, 1996 and 1997,
respectively, representing growth of 19 percent in 1996 and 5 percent in 1997
over the respective previous year. The growth in 1996 was primarily as a result
of the continuing growth of the market, especially in Europe, whilst in 1997
sales changed as a result of the acquisition of the Company's agents in Benelux
and Scandinavia in November 1996, and the Energy Film Library and Gamma Liaison
acquisitions in 1997.
COST OF SALES
The Company's cost of sales was $24.7 million, $32.2 million and $37.5
million in 1995, 1996 and 1997, respectively, with approximately 98 percent of
this cost comprising amounts payable to contributing photographers and
cinematographers. Other costs of sales include local image delivery and
reframing costs.
As a percentage of sales, contributing photographer and cinematographer
payments were 38.2 percent in 1995, 37.1 percent in 1996 and 37.2 percent in
1997. The decrease in 1996 costs, as a percentage of sales, is attributable to
the sales of archival images from Hulton Getty which, for the most part, do not
give rise to any payments to contributors. The margin is expected to continue to
improve as proportionately more archival images are sold, particularly following
the launch of the Hulton Getty catalog. The acquisition of Gamma Liaison in
March 1997 increased the commissions as a percentage of sales since contributors
normally received 50 percent of their total sales, although this was offset by
Energy Film Library where there is a high proportion of footage owned by the
Company.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $27.7 million, $37.2
million and $43.9 million in 1995, 1996 and 1997, respectively, representing
43.9 percent, 43.8 percent and 43.6 percent of sales in each respective year.
Key factors contributing to the increase in selling, general and administrative
expenses were the inclusion of costs associated with the operations of Hulton
Getty, Fabulous Footage, Gamma Liaison and Energy Film Library in the Company's
results and with the hiring of additional employees as a result of sales growth
over the period.
The slight decrease in selling, general and administrative expenses as a
percentage of sales was primarily attributable to operating efficiencies and
economies of scale achieved at Tony Stone Images and the merger of Hulton Getty
into Tony Stone Images, offset by higher operating costs attributable to Gamma
Liaison and Energy Film Library. At Tony Stone Images (including Hulton Getty),
selling, general and administrative expenses as a percentage of sales were 43.9
percent, 43.3 percent and 42.6 percent in 1995, 1996 and 1997, respectively.
SALARIES AND RELATED STAFF COSTS
Salaries and related staff costs totaled $15.3 million, $20.7 million and
$26.4 million in 1995, 1996 and 1997, respectively, representing 24.3 percent,
24.3 percent and 26.2 percent of sales in each respective year. Salaries and
related staff costs, which comprise salaries, bonuses, employment taxes and
benefits, are primarily a function of the average number of full-time equivalent
employees involved in selling, general and administrative activities, which was
376, 504 and 575 in 1995, 1996 and 1997, respectively. Salaries and related
staff costs have increased as a result of acquisitions and growth in the volume
of sales.
Since image research, selection and delivery are currently primarily
conducted manually, increased sales volumes require increased staffing.
Management expects that systems' enhancements and digitization will have an
important impact on the Company's required staffing levels in the future. During
1997, the digitized Dupe Master Collection, together with a keyword-based search
and retrieval system,
26
<PAGE>
was installed in the Company's main North American and United Kingdom sales
outlets. This allows customer requests to be researched by computer, reducing
research time and cost. As customers demand more electronic delivery, the
replacement of dupes with digitized images is expected to continue to reduce the
Company's reliance on sales-related employees and hence reduce their cost as a
percentage of sales.
Selling, general and administrative costs also include premises and utility
costs, marketing, catalog costs and other costs. These have also increased as a
result of acquisitions and growth of Getty Communications. Marketing and catalog
costs accounted for 10 percent of selling, general and administrative costs in
both 1996 and 1997 and comprised direct mail, advertising, promotions, trade
shows, exhibitions and catalogs. Catalogs are Getty Communications' principal
shop window, costs for which are expensed over their useful lives, giving rise
to charges, net of photographer commissions of $1.5 million, $1.3 million and
$1.5 million in 1995, 1996 and 1997, respectively.
AMORTIZATION OF INTANGIBLES
Amortization of intangibles amounted to $2.4 million, $2.2 million and $3.3
million in 1995, 1996 and 1997, respectively. Amortization of intangibles
includes amortization of goodwill and other intangibles that arose from
acquisitions in 1994 and the acquisition of Tony Stone Images in March 1995,
Fabulous Footage in April 1996, the World View group of companies in November
1996, Gamma Liaison in March 1997 and Energy Film Library in July 1997. The
merger with PhotoDisc and the acquisition of Allsport will result in a
substantial increase in intangible assets, and consequently a higher quarterly
amortization charge. See "Item 1. Business--H. Business Risk Factors--Risks
Related to Goodwill Recognition". A detailed allocation of the acquisition
purchase price to the seperable net assets of PhotoDisc and Allsport is to be
undertaken shortly.
DEPRECIATION
Depreciation amounted to $3.6 million, $5.5 million and $8.2 million,
respectively, for 1995, 1996 and 1997, of which depreciation of dupes amounted
to $2.2 million, $3.3 million and $3.8 million in each respective year. The
increase in depreciation of dupes is a result of higher image production and
duplication than in previous years. Tony Stone Images produced a total of 2.3
million, 1.8 million and 1.9 million dupes in total in 1995, 1996 and 1997,
respectively, at an average cost per dupe of $2.0, $2.1 and $2.2 in each
respective year. In 1997, the Company also invested significant capital
expenditure in the development of its digital strategy. The increase in the
depreciation of other fixed assets has arisen from the expansion of the
business, the implementation of new computer systems over the three-year period
and the inclusion of depreciation on the Hulton Getty archival picture
collection. The merger with PhotoDisc will provide the opportunity to accelerate
Getty Communications' digital strategy but will require additional substantial
expenditure in 1998. This will result in an increase in depreciation in 1998 and
future years.
NET INTEREST INCOME/EXPENSE
Net interest expense was $1.5 million and $2.0 million in 1995 and 1996,
respectively. In 1997, net interest income was $1.2 million. Net interest
expense increased substantially in 1995 due to $1.0 million of interest arising
on the financing of the acquisition of Tony Stone Images by Getty Communications
for which loan notes of $12.7 million were issued, and a term loan of $7.6
million was utilized.
Net interest expense in 1996 was affected by:
- the assumption of $19.2 million of debt, comprising a term loan of $9.5
million, a bridge loan of $7.6 million and $2.1 million of revolving
credit facilities, on the acquisition of Hulton Getty in April 1996;
27
<PAGE>
- the raising of $29.3 million (net of costs) from the initial public
offering in July 1995, of which $21.8 million was used to repay the $7.6
million bridge loan, loan notes of $12.7 million and $1.5 million of
overdraft facilities; and
- the raising of $44.3 million from the placement of shares to Carlton and
Getty Investments in December 1996.
Net interest received in 1997 was due to the investment income received from
the cash balances that resulted from the share placements in December 1996. This
cash was reduced during 1997 following the Gamma Liaison and Energy Film Library
acquisitions.
In order to limit the impact of movements in interest rates on borrowings,
the Company has entered into interest rate swap agreements with third parties to
exchange, at specified intervals, the difference between fixed rate and floating
rate interest amounts calculated by reference to an agreed principal amount. The
effect of interest rate swaps on the Company's results for 1995, 1996 and 1997
was to increase net interest expense by $66,000, $131,000 and $102,000,
respectively. See Note 14 to the consolidated financial statements of Getty
Communications included in Item 14.
The merger with PhotoDisc and the acquisition of Allsport have resulted in
an additional $33 million of interest bearing debt which will result in higher
interest charges. See "Item 1. Business--H. Business Risk Factors--Increased
Levels of Indebtedness".
NET EXCHANGE GAINS/(LOSSES)
Getty Communications' results of operations are affected by exchange rate
fluctuations to the extent that it or a subsidiary has receivables or payables
that are denominated in a currency other than the local currency, as the
exchange gains or losses arising on the translation of these balances into
sterling or on the settlement of these transactions are recognized in the income
statement of the relevant company.
The Company's policy is to hedge a substantial majority of its contracted
net receivables and payables using a combination of forward exchange contracts
and foreign currency term loans. Exchange gains and (losses) were $(89,000),
$(306,000) and $(198,000) in 1995, 1996 and 1997, respectively. See Note 14 to
the consolidated financial statements of Getty Communications included in Item
14.
INCOME TAXES
The Company's effective tax rate was 61.4 percent, 52.2 percent and 49.1
percent in 1995, 1996 and 1997, respectively. The Company's effective tax rate
was higher than the statutory tax rate in its primary geographic markets in
1995, 1996 and 1997 due to the high levels of non-deductible amortization of
intangibles in those years.
Excluding the effect of amortization of intangibles, the Company would have
had effective tax rates of 35.6 percent, 37.9 percent and 34.7 percent in 1995,
1996 and 1997, respectively. The changes in the effective rate of tax, excluding
the impact of the amortization of intangibles, are due to variations in profit
mix and tax rates in the countries which Getty Communications operates.
NET INCOME
The Company's net income was $1.3 million, $2.7 million and $4.0 million in
1995, 1996 and 1997, respectively. Net income for 1997 included a $1 million
pre-tax charge as settlement for the litigation with Digital Stock. If this item
is excluded, net income would have been $5.0 million for 1997, 84 percent higher
than for 1996. This was a result of a 24 percent increase in EBITDA, plus
interest earned of $1.2 million compared to an interest charge of $2.0 million
for 1996.
28
<PAGE>
The growth in EBITDA was offset by the higher depreciation charge,
reflecting the Company's continued investment in fixed assets, armortization of
goodwill, exchange losses and tax charges.
EBITDA
EBITDA was $10.7 million, $15.6 million and $19.3 million in 1995, 1996 and
1997, respectively, representing increases of 46.5 percent in 1996 and 24.0
percent in 1997 over the respective previous year. As a percentage of sales,
EBITDA represented 16.9 percent, 18.4 percent and 19.2 percent in 1995, 1996 and
1997, respectively. EBITDA in 1997 was significantly impacted by the effects of
currency movements for those offices that do not report in pounds sterling. If
the equivalent 1996 currency exchange rates had applied in 1997, EBITDA would
have been $21.2 million, 36 percent higher than 1996, rather than the 24 percent
increase reported. Currency movements had no material impact in 1995 or 1996.
"EBITDA" is defined as earnings before net interest, taxes, exchange
gains/(losses), depreciation, legal settlement costs and amortization. Thus,
EBITDA with respect to the Company comprises sales less cost of sales and
selling, general and administrative expenses. The Company believes that EBITDA
provides a measure of operating income unaffected by the financing of the
business and the accounting effects of acquisitions and assists in explaining
trends in the operating performance of the Company. EBITDA should not be
considered as an alternative to operating income as an indicator of the
Company's operating performance or to cash flows as a measure of the Company's
liquidity.
YEAR 2000
The Company has recently undertaken a year 2000 audit of its systems and is
developing a program to implement any necessary system upgrades. The major
business system within Tony Stone Images is currently being redeveloped and will
be implemented prior to the year 2000. It is not anticipated that significant
modifications will be required on other systems.
RECENTLY ISSUED ACCOUNTING STANDARDS
FAS 130, "Reporting Comprehensive Income" was issued in June 1997 and is
effective for financial statements for periods beginning after December 15,
1997. This statement requires that (a) items of other comprehensive income are
classified by their nature in a financial statement and (b) the accumulated
balance of other comprehensive income is displayed separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet.
The Company currently provides segmental information in accordance with FAS
14. This accounting standard has been superseded by FAS 131, which is effective
for financial statements for periods beginning after December 15, 1997. FAS 131
requires that segmental information is reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company is evaluating the impact of FAS 131 on
segmented information to be disclosed.
FAS 132 "Employer's Disclosures About Pensions and Other Post-Retirement
Benefits" was issued in February 1998, and is effective for financial statements
for periods beginning after December 15, 1997. This statement does not address
recognition or measurement issues, but improves and standardizes the disclosure
requirements in respect of pensions and other post-retirement benefits.
Upon adoption of FAS 130, FAS 131 and FAS 132 comparative financial
statements will be restated to comply with the relevant provisions.
SOP 98-1 "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" was issued in March 1998 and is effective for
financial statements for periods beginning after December 15, 1998. This
statement identifies the characteristics of internal-use software and provides
guidance
29
<PAGE>
on when costs incurred for internal-use computer software are and are not
capitalized. Costs incurred prior to initial application will not be
retrospectively adjusted to comply with the provision of this SOP.
The Company is evaluating the impact of SOP 98-1.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $7.0 million, $13.5 million
and $13.1 million in 1995, 1996 and 1997, respectively. Increased operating cash
flow in 1996 and 1997 was primarily due to higher EBITDA in those years, offset
by changes in working capital.
The Company made investments in fixed assets of $7.3 million, $7.2 million
and $14.8 million in 1995, 1996 and 1997, respectively, of which $4.6 million,
$3.9 million and $4.2 million related to investment in dupes. The Company
expects to make investments in fixed assets of approximately $26 million in
1998, of which $2.3 million relates to investment in dupes and $11.0 million is
the investment in the digitization of the Company's images and the associated
distribution systems.
A number of significant investment and financing activities took place in
1996 and 1997:
- In April 1996, Getty Communications purchased Hulton Getty for a cost of
$13.1 million and assumed $6.1 million of that company's debt. This was
financed by a $9.5 million loan, $7.6 million of bridge finance and a $2.1
million increase in the group's overdraft facility.
- In July 1996, Getty Communications completed an initial public offering
and raised $29.3 million, $21.8 million of which was applied against the
above debt.
- In December 1996, Getty Communications completed a placement of shares to
Carlton and Getty Investments, which raised $44.3 million.
- In March 1997, Getty Communications purchased Gamma Liaison for a cost of
$9.4 million. The consideration for this was made up of $2.4 million 'A'
ordinary shares, with the balance coming from the Company's cash
resources.
- In July 1997, Getty Communications acquired Energy Film Library for a cost
of $17.5 million, of which $4.0 million was through the issue of 'A'
ordinary shares and the balance from the Company's cash resources.
An element of the Company's strategy is to seek to make acquisitions of
visual content businesses and collections. The Company will consider acquisition
opportunities in the light of the availability of financing, in addition to
other factors. Acquisition financing could include cash provided by operations,
public or private debt financing or equity financing.
On December 31, 1997, Getty Communications had cash balances of $29.2
million and un- utilized revolving credit facilities of L3.8 in the United
Kingdom, $1.0 million in the United States, and French franc 2.5 million in
France.
In connection with the acquisitions of PhotoDisc and Allsport in February
1998, Getty Images entered into a refinancing agreement with its principal
banker. Under the terms of this Agreement, existing long-term debt was repaid
and new facilities were provided. See Note 1 and Note 8 to the consolidated
financial statements of Getty Communications included in Item 14.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14(a)
30
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT
(1) Financial Statements for Getty Communications plc and Tony Stone
Associates Limited (predecessor)
Reference is made to the listing on pg. 33 of all financial statements filed as
part of this report.
(2) Financial Statement Schedules
Reference is made to the listing on pg. 33 of all financial statements filed as
part of this report.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended December 31,
1997. On February 13, 1998, the Company filed a Current Report on Form 8-K
reporting certain transactions, including the announcement of Getty
Communications' 1997 financial results, the additional subscription of Getty
Images Common Stock by Getty Investments L.L.C., the execution of a definitive
agreement to acquire Allsport and the closing of the Merger and Scheme of
Arrangement. Additionally, on February 24, 1998, the Company filed a Current
Report on Form 8-K reporting the closing of the Scheme of Arrangement, the
Merger and the acquisition of Allsport.
(C) EXHIBITS
Reference is made to the Index to Exhibits beginning on page 61 for a list of
all exhibits filed as part of this report.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
GETTY IMAGES, INC.
By: /s/ MARK GETTY
-----------------------------------------
Name: Mark Getty
Title: Co-Chairman
</TABLE>
March 31, 1998
We, the undersigned directors and executive officer of the Registrant,
hereby severally constitute Jonathan Klein, Lawrence Gould and Heather Redman,
and each of them singly, our true and lawful attorneys with full power to them
and each of them to sign for us, and in our names in the capacities indicated
below, any and all amendments to the Annual Report on Form 10-K filed with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys to any and all amendments
to said Annual Report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on March 31, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE (CAPACITY)
- ------------------------------ --------------------------
<C> <S>
/s/ MARK GETTY
- ------------------------------ Co-Chairman and Director
Mark Getty
/s/ MARK TORRANCE
- ------------------------------ Co-Chairman and Director
Mark Torrance
/s/ JONATHAN KLEIN Chief Executive Officer
- ------------------------------ and Director (Principal
Jonathan Klein Executive Officer)
Treasurer (Principal
/s/ LAWRENCE GOULD Financial Officer and
- ------------------------------ Principal Accounting
Lawrence Gould Officer)
/s/ ANDREW GARB
- ------------------------------ Director
Andrew Garb
/s/ ANTHONY STONE
- ------------------------------ Director
Anthony Stone
/s/ JAMES BAILEY
- ------------------------------ Director
James Bailey
/s/ MANNY FERNANDEZ
- ------------------------------ Director
Manny Fernandez
/s/ CHRISTOPHER SPORBORG
- ------------------------------ Director
Christopher Sporborg
</TABLE>
32
<PAGE>
GETTY COMMUNICATIONS PLC AND TONY STONE
ASSOCIATES LIMITED (PREDECESSOR)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... 34
Consolidated Statement of Operations for the period January 1 through
March 13, 1995, the period March 14, 1995 through December 31, 1995 and
the two years ended December 31, 1996 and 1997.......................... 35
Consolidated Balance Sheets at December 31, 1996 and December 31, 1997.... 36
Consolidated Statements of Cash Flows for the period January 1 through
March 13, 1995, the period March 14, 1995 through December 31, 1995 and
the two years ended December 31, 1996 and 1997.......................... 37
Notes to Consolidated Financial Statements................................ 38
</TABLE>
FINANCIAL STATEMENT SCHEDULES (ITEM 14(A)(2))
All other schedules have been omitted because the required information is
included in the financial statements or notes thereto or because they are not
required.
In this annual report historic numbers are shown for Getty Communications
plc or Tony Stone Associates Limited, the predecessor companies of Getty Images,
Inc. References to "pounds", "sterling, "L", "pence" or "p" are to the lawful
currency of the United Kingdom and references to "U.S. dollars" or "$" are to
the lawful currency of the United States. Historically, Getty Communications plc
has published its consolidated financial statements in pounds. Certain
historical consolidated information of Getty Communications plc has been
translated into U.S. dollars as described in "Item 7. Management Discussion and
Analysis of Financial Condition and Results of Operation--Overview".
33
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Getty Communications plc:
We have audited the consolidated financial statements of Getty
Communications plc and subsidiaries (the "Company") and the consolidated
financial statements of its predecessor, Tony Stone Associates Limited and
subsidiaries, as set out on pages 35 to 60. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom which are substantially the same as auditing
standards generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company at
December 31, 1996 and at December 31, 1997 and the results of their consolidated
operations and cash flows for the period March 14, 1995 through December 31,
1995, for each of the two years in the period ended December 31, 1997 and the
results of the consolidated operations and cash flows of Tony Stone Associates
Limited and subsidiaries for the period January 1, 1995 through March 13, 1995
in conformity with generally accepted accounting principles in the United
States.
Coopers & Lybrand
Chartered Accountants
London
England
March 30, 1998
34
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TONY STONE
ASSOCIATES
LIMITED GETTY COMMUNICATIONS PLC
CONSOLIDATED CONSOLIDATED
-------------- ------------------------------------------
MARCH 14,
JANUARY 1, THROUGH YEAR ENDED YEAR ENDED
THROUGH MARCH DECEMBER 31, DECEMBER 31, DECEMBER 31,
13, 1995 1995 1996 1997
-------------- ------------ ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales....................................................... $9,498 $53,523 $85,014 $100,797
Cost of sales............................................... 3,618 21,096 32,156 37,514
------- ------------ ------------ ------------
Gross profit................................................ 5,880 32,427 52,858 63,283
------- ------------ ------------ ------------
Selling, general and administrative expenses................ 4,918 22,737 37,250 43,936
Amortization of intangibles................................. 390 1,990 2,155 3,253
Depreciation................................................ 588 3,017 5,486 8,214
------- ------------ ------------ ------------
5,896 27,744 44,891 55,403
------- ------------ ------------ ------------
Operating (loss)/income..................................... (16) 4,683 7,967 7,880
Net interest income/(expense)............................... (62) (1,406) (1,951) 1,187
Exchange gains/(losses)..................................... 119 (30) (306) (198)
Legal settlement............................................ -- -- -- (974)
------- ------------ ------------ ------------
Income before income taxes.................................. 41 3,247 5,710 7,895
Income taxes................................................ (144) (1,873) (2,982) (3,873)
------- ------------ ------------ ------------
Net (loss)/income........................................... $ (103) $ 1,374 $ 2,728 $ 4,022
------- ------------ ------------ ------------
------- ------------ ------------ ------------
Basic earnings per share.................................... 0.06 0.10 0.11
Basic earnings per ADS...................................... 0.12 0.20 0.21
Diluted earnings per share.................................. 0.06 0.10 0.10
Diluted earnings per ADS.................................... 0.12 0.20 0.21
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these Statements.
35
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................... $ 58,939 $ 29,234
Accounts receivable............................... 20,637 23,431
Prepaid expenses and other assets................. 3,737 7,839
------------ ------------
Total current assets................................ 83,313 60,504
Fixed assets, net................................... 33,699 39,853
Intangible assets (net of accumulated amortization
of $6.3 million and $9.4 million)................. 41,391 66,870
Deferred assets..................................... 5,101 4,411
------------ ------------
TOTAL ASSETS........................................ $163,504 $171,638
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.................................. 18,325 21,461
Accrued expenses.................................. 8,948 10,305
Income taxes payable.............................. 1,889 3,580
Current portion of long-term debt................. 2,909 2,096
------------ ------------
Total current liabilities........................... 32,071 37,442
Long-term debt...................................... 17,910 14,657
------------ ------------
Total liabilities................................... 49,981 52,099
------------ ------------
Shareholders' equity
Common stock...................................... 593 608
Class 'A' shares: par value L0.01 per share;
issued 23,943,000 shares in 1996 and
24,872,608 shares in 1997; Class 'B' shares:
par value L0.01 per share; issued 13,444,618
shares at December 31, 1996 and at December
31, 1997
Additional paid-in capital........................ 101,464 108,049
Retained earnings................................. 4,102 8,124
Cumulative translation adjustments................ 7,364 2,758
------------ ------------
Total shareholders' equity.......................... 113,523 119,539
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......... $163,504 $171,638
------------ ------------
------------ ------------
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these Statements.
36
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TONY STONE
ASSOCIATES
LIMITED GETTY COMMUNICATIONS PLC
CONSOLIDATED CONSOLIDATED
-------------- --------------------------------------------
MARCH 14
JANUARY 1 THROUGH YEAR ENDED YEAR ENDED
THROUGH MARCH DECEMBER 31, DECEMBER 31, DECEMBER 31,
13, 1995 1995 1996 1997
-------------- -------------- ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net (loss)/income......................................... $ (103) $ 1,374 $ 2,728 $ 4,022
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 978 5,007 7,641 11,467
Bad debt expense........................................ 78 297 510 536
Other items............................................. 145 -- 87 113
Change in assets and liabilities, net of effects of
business acquisitions:
Accounts receivable..................................... 491 (6,339) (1,275) (2,385)
Accounts payable........................................ (491) 4,932 1,483 919
Accrued expenses........................................ (433) 1,463 463 2,257
Other assets............................................ (156) (286) 1,865 (3,755)
-------------- -------------- ------------ ------------
Net cash provided by operating activities................... 509 6,448 13,502 13,174
-------------- -------------- ------------ ------------
Cash flows from investing activities
Business acquisitions, net of cash acquired............... -- (17,369) (18,402) (20,546)
Purchase of fixed assets.................................. (1,106) (6,230) (7,154) (14,901)
Proceeds from sale of fixed assets........................ -- 16 28 --
-------------- -------------- ------------ ------------
Net cash used in investing activities....................... (1,106) (23,583) (25,528) (35,447)
-------------- -------------- ------------ ------------
Cash flow from financing activities
Proceeds of debt.......................................... -- 9,354 17,084 --
Payments on principal balance of debt..................... (99) (4,166) (26,582) (3,052)
Capital contribution...................................... -- 352 124 --
Proceeds from issuance of ordinary shares................. 61 19,600 75,685 --
Dividends paid to shareholders of Tony Stone Associates
Limited................................................. -- (6,072) -- --
-------------- -------------- ------------ ------------
Net cash (used in)/provided by financing activities......... (38) 19,068 66,311 (3,052)
-------------- -------------- ------------ ------------
Exchange rate differences arising from translation of
foreign currency balances................................. 16 (34) 2,755 (4,380)
Net (decrease)/increase in cash and cash equivalents........ (619) 1,899 57,040 (29,705)
Cash and cash equivalents:
--beginning of period..................................... 1,208 -- 1,899 58,939
-------------- -------------- ------------ ------------
--end of period........................................... $ 589 $ 1,899 $ 58,939 $ 29,234
-------------- -------------- ------------ ------------
-------------- -------------- ------------ ------------
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these Statements.
37
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. POST BALANCE SHEET EVENTS
GETTY IMAGES, INC.
On February 9, 1998, the entire issued share capital of Getty Communications
plc ("Getty") was acquired via a Scheme of Arrangement by Getty Images, Inc.
("Getty Images"), a company registered in Delaware and whose principal executive
offices are located in Seattle, Washington and London, England. Under the Scheme
of Arrangement, each issued Getty Class B Ordinary Share was converted into one
Getty Class A Ordinary Share and each holder of Getty Ordinary Shares was issued
one share of Getty Images Common Stock for every two Getty Ordinary Shares held.
On March 10, 1998, Getty Communications plc deregistered as a public limited
company and became a private limited company.
The Scheme of Arrangement is accounted for as a transaction between entities
under common control, therefore purchase accounting has not been applied.
The consolidated financial statements presented are those of Getty
Communications plc and subsidiaries, and its predecessor, Tony Stone Associates
Limited and subsidiaries. Both of these companies are resident in the U.K. and
consequently the financial statements have been prepared on the basis of a U.K.
resident company.
PHOTODISC, INC.
On February 9, 1998, a wholly owned U.S. subsidiary of Getty Images merged
with PhotoDisc, Inc., a Washington corporation. The purchase consideration was
approximately $244 million including expenses, which included, the issue of
8,083,831 shares of Getty Images Common Stock, at a total market value of $172
million.
ALLSPORT PHOTOGRAPHIC PLC
On February 10, 1998, Getty Images purchased the entire issued share capital
of Allsport Photographic plc, a company registered in the U.K. The purchase
consideration was approximately $50 million, including expenses, which included
the issue of 1,137,916 shares of Getty Images Common Stock at a total market
value of $24 million.
REFINANCING
To facilitate the acquisitions of PhotoDisc, Inc. and Allsport Photographic
Plc, on February 10, 1998, Getty Images entered into a refinancing agreement
with its principal banker, Midland Bank plc. Under the terms of this agreement,
the existing long-term debt was repaid and the following new facilities were
provided:
(i) $24 million term loan facility and L16 million ($26 million)
multi-currency loan facility repayable in tranches from September 30, 1999 to
March 31, 2001.
(ii) L6.7 million ($11.9 million) revolving credit facility.
STOCK OPTIONS
Under the Scheme of Arrangement, the existing stock options granted in Getty
Communications plc were vested immediately, with the right to exercise the
options for a period of three months from
38
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. POST BALANCE SHEET EVENTS (CONTINUED)
February 17, 1998. As an alternative to exercising options, option holders may
exchange their existing options over Getty Communications Class "A" Ordinary
Shares for new options over Getty Images Common Stock.
On February 9, 1998, Getty Images granted 3,093,250 options to acquire Getty
Images Common Stock at $20.91 per share. These options are exercisable within
one to ten years.
CARLTON COMMUNICATIONS BV
On March 31, 1998 Carlton Communications BV ("Carlton") confirmed the sale
of all of the shares of Getty Images Common Stock held by Carlton. Such sale is
scheduled to be completed on April 3, 1998.
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
ACTIVITIES
The principal business of Getty Communications plc and its subsidiaries is
the marketing of reproduction rights to still and moving images. These rights
are marketed in many countries throughout the world.
BASIS OF PRESENTATION
The consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States,
present the consolidated financial statements of Getty Communications plc and
subsidiaries (the "Company") and the consolidated financial statements of its
predecessor, Tony Stone Associates Limited and subsidiaries ("Tony Stone
Images"). Amounts, unless otherwise indicated, have been rounded to the nearest
thousand. The Company was formed on January 4, 1995; however, the Company did
not commence operations until it acquired Tony Stone Images on March 14, 1995.
The Company's consolidated financial statements include Getty Communications plc
and its subsidiaries, all of which are 100 percent owned. Companies acquired
during a period are consolidated from the date of acquisition. All material
intercompany amounts and transactions have been eliminated in the consolidated
financial statements.
REPORTING CURRENCY
The financial statements of the Company and Tony Stone Images have
previously been reported in sterling. Due to the acquisition of the Company by
Getty Images, Inc., as described in Note 1, the reporting currency has been
changed to U.S. dollars. The figures shown in these financial statements have
been changed from sterling to U.S. dollars using the period average rates and/or
period end rates as applicable shown below.
PERIOD AVERAGE RATES:
<TABLE>
<CAPTION>
JANUARY 1 MARCH 14 YEAR ENDED DECEMBER
THROUGH THROUGH 31,
MARCH 13, DECEMBER 31, ---------------------
1995 1995 1996 1997
--------- ------------ ------ -------
<S> <C> <C> <C>
1.5801 1.57801 1.5606 1.6389
</TABLE>
39
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
PERIOD END RATES:
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
MARCH 13, ------------------------------------------
1995 1995 1996 1997
--------- ------------ ------ -------
<S> <C> <C> <C>
1.5914 1.5526 1.7113 1.6430
</TABLE>
TRANSLATION OF FOREIGN SUBSIDIARY FINANCIAL STATEMENTS
The Company and Tony Stone Images record all transactions in the currency of
the respective primary economic environments in which they operate.
The assets and liabilities of non-U.S. subsidiaries are translated into U.S.
dollars at exchange rates as of the balance sheet date, and income and expense
items are translated at the average of the rates prevailing during the period.
Gains or losses from translating foreign currency financial statements are
accumulated as a separate component of shareholders' equity.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Accounting estimates have been employed in these
financial statements to determine reported amounts, including realizability of
receivables and other assets, useful lives of assets, income taxes and the fair
value of financial instruments. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company and Tony Stone Images consider cash and demand bank deposits to
be cash. Cash equivalents consist of all deposits with an original maturity of
three months or less.
REVENUE RECOGNITION
Sales are recognized when a license agreement has been completed with the
customer for the use of the image and pricing terms, and the image has been made
available to the customer for use. Pricing terms do not call for additional fees
beyond the fixed license amount. Additionally, the customer is contractually
obligated to pay the fixed license amount upon agreement of the license terms
and availability of the image for use by the customer. Circumstances in which
sales are refunded are rare and are taken into account in the recognition of
revenue. Sales are recorded at invoiced amounts less sales tax.
CATALOG COSTS
The Company produces both general catalogs, that are issued annually, and
specialist catalogs, that are topical in nature and distributed over a longer
period. Costs relating to the production of
40
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
catalogs are expensed over their estimated useful life, up to three years from
the date on which they are available for distribution to customers.
FIXED ASSETS
The cost of acquired fixed assets includes the purchase cost, together with
any incidental expenses of acquisition. All costs associated with the production
of image duplicates are capitalized. The cost of purchased software is
capitalized and amortized from the implementation date over its estimated useful
economic life. The cost of internally developed software is expensed in the
period in which the cost is incurred.
Depreciation rates have been established to expense the cost of fixed
assets, less their estimated residual values, over their expected useful lives.
Depreciation is calculated at the following annual rates:
<TABLE>
<S> <C>
Archival picture collection.......................................... 2.5%
Fixtures, fittings, office and studio equipment...................... 10 to 20%
Computer hardware.................................................... 33%
Computer software.................................................... 25%
Image duplicates and digitization.................................... 25%
</TABLE>
INTANGIBLE ASSETS
Goodwill and other intangibles are amortized on a straight-line basis over
their estimated lives not to exceed 40 years. A life of between five and 30
years is typically used for goodwill, and other intangibles are generally
amortized over a period of up to ten years. The value of goodwill and other
intangibles is reviewed annually in relation to the operating performance and
future undiscounted cash flows of the underlying businesses, and a charge to the
consolidated statement of operations is made where a permanent diminution in
value is identified.
TAXES
Deferred tax assets and liabilities are provided for all temporary
differences between financial and tax reporting. As a matter of policy, deferred
tax assets are reduced by a valuation allowance if based on the weight of
available evidence it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are classified into a net current amount and a net non-current amount, based on
the balance sheet classification of the related asset or liability.
PENSIONS
The Company contributes to defined contribution pension schemes for certain
directors and employees. Contributions are recognized as an expense in the
period in which they are incurred.
LEASES
Under capital leasing arrangements, the present value of the future minimum
lease payments payable over the lease term is recorded as a fixed asset. The
corresponding leasing commitments are
41
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
shown as amounts payable to the lessor. Depreciation of leased assets is charged
to the statement of operations over the shorter of the lease term or the useful
lives of equivalent owned assets.
Other leases are treated as operating leases. Annual rentals are charged to
the income statement on a straight-line basis over the term of the lease.
FINANCIAL INSTRUMENTS
Forward exchange contracts hedging firm commitments relating to trade and
other balances are recorded as hedges. Unrealized gains or losses are deferred
and included in the statement of operations as part of the cost of the hedged
transaction.
Interest rate swap arrangements entered into as hedges of interest rates on
long-term debt obligations are also accounted for as hedges. Accordingly,
unrealized gains or losses are deferred and included in interest related to the
respective long-term debt instruments.
The Company does not issue or hold financial instruments for trading
purposes.
EARNINGS PER SHARE
Basic and diluted earnings per share (EPS) are computed in accordance with
FAS 128, which is effective for fiscal periods ending after December 15, 1997.
Prior periods have been restated to conform with the provisions of this
standard.
42
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
The numerators and denominators of the basic and diluted per share
computations are reconciled below:
<TABLE>
<CAPTION>
MARCH 14 THROUGH DECEMBER 31, 1995
---------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders... $1,374 23,057 $0.06
EFFECT OF DILUTIVE SECURITIES
Share options............................. -- 333 --
----------- ------------- ---------
DILUTED EPS
Income available to common stockholders
and assumed option exercises............ $1,374 23,390 $0.06
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders... $2,728 27,442 $0.10
EFFECT OF DILUTIVE SECURITIES
Share options............................. -- 390 --
----------- ------------- ---------
DILUTED EPS
Income available to common stockholders
and assumed option exercises............ $2,728 27,832 $0.10
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders... $4,022 37,908 $0.11
EFFECT OF DILUTIVE SECURITIES
Share options............................. -- 857 (0.01)
----------- ------------- ---------
DILUTED EPS
Income available to common stockholders
and assumed option exercises............ $4,022 38,765 $0.10
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
43
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
Options to purchase 1,683,722 shares of common stock at prices ranging from
$8.05 to $13.43 per share were outstanding during 1997 but were not included in
the computation of diluted EPS because the exercise prices of the options were
greater than the average market price of the common shares.
Net income per share has not been computed for the period January 1 through
March 13, 1995, which relates to Tony Stone Images, the predecessor of the
Company, as such information is not considered meaningful for a period over
period comparison due to the different capital structure of Tony Stone Images,
as compared to the Company.
A number of transactions have occurred following the year end, which would
have changed materially the number of common shares or potential common shares
outstanding at December 31, 1997 if the transactions had occurred before then.
These transactions are discussed in Note 1.
RECENTLY ISSUED ACCOUNTING STANDARDS
FAS 130, "Reporting Comprehensive Income" was issued in June 1997 and is
effective for financial statements for periods beginning after December 15,
1997. This statement requires that (a) items of other comprehensive income are
classified by their nature in a financial statement and (b) the accumulated
balance of other comprehensive income is displayed separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet.
The Company currently provides segmental information in accordance with FAS
14. This accounting standard has been superseded by FAS 131, which is effective
for financial statements for periods beginning after December 15, 1997. FAS 131
requires that segmental information is reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company is evaluating the impact of FAS 131 on
segmental information to be disclosed.
FAS 132 "Employer's Disclosures About Pensions and Other Post-Retirement
Benefits" was issued in February 1998, and is effective for financial statements
for periods beginning after December 15, 1997. This statement does not address
recognition or measurement issues, but improves and standardizes the disclosure
requirements in respect of pensions and other post-retirement benefits.
Upon adoption of FAS 130, FAS 131 and FAS 132 comparative financial
statements will be restated to comply with the relevant provisions.
SOP 98-1 "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" was issued in March 1998 and is effective for
financial statements for periods beginning after December 15, 1998. This
statement identifies the characteristics of internal-use software and provides
guidance on when costs incurred for internal-use computer software are and are
not capitalized. Costs incurred prior to initial application will not be
retrospectively adjusted to comply with the provision of this SOP.
The Company is evaluating the impact of SOP 98-1.
GENERAL
At December 31, 1997, Getty Investments LLC, a company registered in
Delaware and resident in Jersey, held a 34.1 percent interest in the share
capital (70.3 percent of voting rights) of Getty Communications plc.
44
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Fixtures, fittings, office and studio equipment..... $ 4,785 $10,175
Computer hardware and software...................... 9,727 13,206
Image duplicates and digitization................... 15,133 20,023
Archival picture collection......................... 16,911 15,847
Other fixed assets.................................. 3,376 4,451
------------ ------------
Total............................................... 49,932 63,702
Less accumulated depreciation....................... 16,233 23,849
------------ ------------
Fixed assets, net................................... $33,699 $39,853
------------ ------------
------------ ------------
</TABLE>
The net book value of fixed assets includes $993,000 and $796,000 in respect
of assets held under capital leases at December 31, 1996 and 1997, respectively.
The charge to income resulting from amortization of assets recorded under
capital leases is included within the depreciation expense in the consolidated
statements of operations. The accumulated amortization of assets recorded under
capital leases was $983,000 (1996=$729,000).
The fixed assets of the Company are pledged as collateral for borrowings, as
disclosed in Notes 7 and 8.
4. INTANGIBLE ASSETS
Intangible assets primarily consist of goodwill arising upon the acquisition
of companies and other businesses. Significant additions to goodwill arose from
the acquisitions of Fabulous Footage Inc. and World View in the year to December
31, 1996, and the acquisitions of Liaison and Energy in the year to December 31,
1997. These acquisitions are set out in Note 19.
Also included within intangible assets is $2 million for professional fees
relating to the acquisition of PhotoDisc, Inc. (see Note 1). This balance will
be included within the purchase consideration in the goodwill calculation, upon
acquisition in 1998.
5. ACCOUNTS RECEIVABLE
Trade receivables are stated net of provision for doubtful accounts of
$900,000 and $2.8 million at December 31, 1996, and 1997, respectively.
6. DEFERRED CATALOG COSTS
Deferred catalog costs included in the balance sheet at December 31, 1996
and 1997 were $1.7 million and $3.0 million, respectively. Catalog costs
expensed in the periods ended March 13, 1995 and December 31, 1995, 1996 and
1997 were $896,000, $610,000, $1.3 million and $1.5 million, respectively.
45
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt......... $2,909 $2,096
------------ ------------
------------ ------------
</TABLE>
As of December 31, 1996 and 1997 the Company had unutilized credit
facilities in sterling, U.S. dollars and French francs that were available for
short-term financing amounting to L3.8 million ($6.2 million), $1.0 million and
FF2.5 million ($462,000), respectively. The sterling facility is collateralized
by the assets of the Company and its U.K. and U.S. subsidiaries. The U.S. dollar
facility is collateralized by the Company's North American accounts receivable
and guarantees from the Company's subsidiaries. The French franc facility is
collateralized by a guarantee from Getty Images Limited. Interest on the
sterling facility is at a variable rate comprising the aggregate of a margin and
LIBOR. As of both December 31, 1996 and 1997 the margin was 1.75 percent and the
three-month LIBOR rate for sterling was 6.56 percent and 7.69 percent. Interest
on the U.S. dollar facility is at the prime rate, which was 8.25 percent and
8.50 percent as of December 31, 1996 and 1997, respectively. Interest on the
French franc facility is at 1.25 percent above PIBOR which was 3.43 percent and
3.69 percent as of December 31, 1996 and 1997 respectively.
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Bank loans.......................................... $18,365 $16,342
Other loans......................................... 1,528 --
Capital leases...................................... 926 411
------------ ------------
20,819 16,753
Less current portion................................ (2,909) (2,096)
------------ ------------
Total long-term debt................................ $17,910 $14,657
------------ ------------
------------ ------------
</TABLE>
The amounts outstanding at December 31, 1997 are payable as follows:
<TABLE>
<CAPTION>
CAPITAL
LOANS LEASES TOTAL
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
1998.................................................. $ 1,958 $138 $ 2,096
1999.................................................. 3,738 273 4,011
2000.................................................. 3,738 -- 3,738
2001.................................................. 3,738 -- 3,738
2002.................................................. 3,170 -- 3,170
------- ------ -------
Total................................................. $16,342 $411 $16,753
------- ------ -------
------- ------ -------
</TABLE>
BANK LOANS
These bank loans relate to loans payable to Midland Bank plc of $18.3
million and $16.3 million as of December 31, 1996 and 1997, respectively.
Interest is charged at a variable rate comprising the aggregate of a margin,
LIBOR and the MLA cost rate certified by Midland Bank plc to compensate for
their
46
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT (CONTINUED)
compliance with special financial requirements of the Bank of England. As of
December 31, 1997, the margin was 1.5 percent, the three-month LIBOR rate for
sterling equated to 7.69 percent and the MLA cost rate was 0.03 per cent. The
principal due is repayable by March 2001 in semi-annual installments, which
commenced in September 1996. An interest rate swap arrangement was entered into
on March 16, 1995, for $5.8 million of the above debt. As of December 31, 1997,
$1.6 million remained under this swap arrangement. Under this arrangement, a
fixed rate of interest of 8.54 percent plus the margin is payable on this
amount. A further interest rate swap arrangement was entered into on April 26,
1996 for $4.9 million of the above debt. Under this arrangement, a fixed rate of
interest of 7.79 percent plus the margin is payable on this amount.
Under this borrowing facility, the Company is able to transfer the sterling
loan into other currencies. As of December 31, 1996 and 1997, respectively,
$486,000 and $403,000 had been converted into a deutschmark loan as a hedge
against deutschmark receivables. The interest rate applicable to this borrowing
was 1.75 percent over the three-month LIBOR rate for deutschmarks of 3.81
percent and 3.75 percent as of December 31, 1996 and 1997, respectively.
In addition, as of December 31, 1997, a further amount of $830,000 had been
converted into a French franc loan. The interest rate applicable to this
borrowing was 1.5 percent over the three-month LIBOR rate for French francs of
3.69 percent.
There are a number of financial covenants associated with the Midland Bank
plc loan. The most restrictive of these covenants is the net interest cover
which should be 500 percent for the year ended December 31, 1997 and thereafter.
Net interest cover is defined as income before interest and taxes as included in
the Company's U.K. GAAP accounts, which exclude goodwill amortization, as a
percentage of net interest charges, excluding interest and charges arising on
loan notes payable to Mr. A.M. Stone and his family trusts of $12.3 million. For
the year ended December 31, 1997, the actual net interest cover was 707 percent.
The Midland Bank plc borrowings are collateralized with fixed and floating
charges on the Company's assets.
Issue costs amounting to $505,000 and $485,000 as of December 31, 1996 and
1997, respectively, were recorded as deferred assets and have been charged to
the income statement over the term of the loans. The unamortized balances at
December 31, 1996 and 1997 were, respectively, $388,000 and $286,000.
CAPITAL LEASES
Obligations under capital leases are collateralized by the respective assets
financed.
REFINANCING
The Company's financing arrangements were renegotiated in February 1998 as
part of the acquisition of PhotoDisc, Inc. A summary of the refinancing is
provided in Note 1.
INTEREST EXPENSE
The interest expense relating to short- and long-term borrowings amounted to
$1.5 million (1996-- $2.3 million).
47
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY
GETTY COMMUNICATIONS PLC
Changes in shareholders' equity are represented by the following:
<TABLE>
<CAPTION>
NO. OF NO. OF A NO. OF B ADDITIONAL CUMULATIVE
NO. OF REDEEMABLE ORD. ORD. COMMON PAID IN RETAINED TRANSLATION
ORD. SHARES SHARES SHARES SHARES STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL
----------- ----------- ---------- ---------- ------ ---------- -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1996....... 11,528,736 11,528,736 -- -- $365 $ 25,883 $1,374 $ (611) $ 27,011
Capital
contribution........ -- -- -- -- -- 124 -- -- 124
Options exercised..... 670,986 670,986 -- -- 20 2,302 -- -- 2,322
Reclassification of
shares.............. (12,199,722) (12,199,722) 13,054,238 11,345,206 -- -- -- -- --
Initial public
offering............ -- -- 7,150,000 112 29,056 -- -- 29,168
Placing............... -- -- 3,738,762 2,099,412 96 44,099 -- -- 44,195
Net income............ -- -- -- -- -- -- 2,728 -- 2,728
Translation
adjustments......... -- -- -- -- -- -- -- 7,975 7,975
----------- ----------- ---------- ---------- ------ ---------- -------- ----------- --------
December 31, 1996..... -- -- 23,943,000 13,444,618 $593 $101,464 $4,102 $ 7,364 $113,523
Issue of shares to
sellers of
Liaison............. -- -- 311,846 -- 5 2,595 -- -- 2,600
Issue of shares to
sellers of Energy... -- -- 617,762 -- 10 3,990 -- -- 4,000
Net income............ -- -- -- -- -- -- 4,022 -- 4,022
Translation
adjustments......... -- -- -- -- -- -- -- (4,606) (4,606)
----------- ----------- ---------- ---------- ------ ---------- -------- ----------- --------
December 31, 1997..... -- -- 24,872,608 13,444,618 $608 $108,049 $8,124 $ 2,758 $119,539
----------- ----------- ---------- ---------- ------ ---------- -------- ----------- --------
----------- ----------- ---------- ---------- ------ ---------- -------- ----------- --------
</TABLE>
48
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Options on 609,987 ordinary and 609,987 redeemable shares were granted on
March 14, 1995 at an exercise price of $1.58, equivalent to the market price at
the date of grant. Additional options were granted on the same date on 60,999
ordinary and 60,999 redeemable shares at an exercise price of $2.21. On July 1,
1996 all options with respect to 670,986 ordinary shares and 670,986 redeemable
shares were exercised for cash amounting to $2.3 million.
On April 1, 1996, $124,000 in subscription amounts receivable was paid under
agreements whereby shareholders were required to pay a proportionate
subscription amount receivable to fund payment of interest on the loan notes
issued to Mr. A.M. Stone and his family trusts.
The Company applied to the High Court of England and Wales to cancel the
amounts of unpaid share capital totaling $12.7 million with respect to 3,844,225
ordinary shares and 3,844,225 redeemable shares. Following receipt of the Court
order on June 21, 1996, the Company re-registered as a public limited company
under the name of Getty Communications plc.
On July 2, 1996, the Company completed an equity reorganization by
converting 5,672,603 ordinary shares and 5,672,603 redeemable shares into Class
B ordinary shares of 1 pence each and converting the remaining 6,527,119
ordinary and 6,527,119 redeemable shares into Class A ordinary shares of 1 pence
each.
Accordingly, following this equity reorganization, there were no outstanding
redeemable shares of the Company. The Class A and Class B Shares rank pari passu
except that the Class B shareholders are entitled to 10 votes per share and the
Class A shareholders have one vote per share.
On July 2, 1996, the Company's Class A Shares commenced trading on the
Nasdaq National Market and on July 8, 1996 the Company completed the initial
public offering of 10 million Class A shares, 6.4 million of which were sold by
the Company. A further 750,000 Class A Shares were issued on August 12, 1996
under an option granted to the underwriters to the initial public offering to
cover over-allotments under that offering. In total, the Company raised $29.2
million, net of expenses. Of the funds raised, approximately $21.7 million was
applied to repayment of short-term borrowing.
On December 10, 1996 a subsidiary of Carlton Communications Plc ("Carlton")
subscribed for 3,738,762 new Class A Shares for $28.5 million. Under the terms
of the subscription agreement, the Company has agreed to use all reasonable
efforts up to December 10, 1998 to allow Carlton the opportunity of increasing
its interest in the Company to 20 per cent of the total issued share capital at
market prices then prevailing.
Also on December 10, 1996, Getty Investments L.L.C. exercised its
anti-dilution option and subscribed for 2,099,412 new Class B Shares for $16
million.
On March 14, 1997, the Company issued 311,846 new Class A Shares for $2.6
million as part consideration for the purchase of Gamma Liaison.
On July 25, 1997, the Company issued 617,762 new Class A Shares for $4.0
million as part consideration for the purchase of Energy Film Library.
No dividends have been declared or paid by Getty Communications plc in
respect of the years ended December 31, 1995, 1996 or 1997.
49
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SHARE OPTION PLANS
On May 30, 1996 the Board approved the establishment of the Getty
Communications Executive Share Option Plan (the "Option Plan").
Under the Option Plan, the Board has the discretion to grant market options
and premium options. Market options are those granted with an exercise price
equal to the market price of the Class A Shares at the date of grant. Premium
options are those granted with an exercise price calculated by taking the market
price of the Class A Shares at the date of grant and increasing it by a compound
rate of return over a five-year period from the date of grant. The rate of
return for the first premium options granted was 10 percent.
Both market options and premium options vest in equal proportions on each
anniversary of the date of grant over a five-year period from the date of grant.
Market options become exerciseable, to the extent vested, after three years from
the date of grant and lapse after seven years from the date of grant. Premium
options become exerciseable when vested and remain exerciseable for a period of
two years after vesting.
Executive directors and all employees of the Company are eligible to
participate in the Option Plan under which a total of 6,159,890 Class A Shares
may be issued. Options which lapse will cease to be counted toward this limit.
Generally, options awarded under the Option Plan may not be exercised prior to
vesting, except under certain limited circumstances including a change of
control.
On July 2, 1996, market options over 2,793,960 Class A Shares were granted
under the Option Plan at an exercise price of $5.00 per share. Additionally,
premium options over 1,561,980 Class A Shares were granted under the Option Plan
at an exercise price of $8.05 per share.
On March 14, 1997, market options over 11,994 Class A Shares were granted
under the Option Plan at an exercise price of $6.81 per share and premium
options were granted over 11,994 Class A Shares at an exercise price of $10.97
per share. Additionally, on May 15, 1997, market options were granted over
215,204 Class A Shares at an option price of $6.81 per Class A Share and premium
options over 215,204 Class A Shares at an option price of $10.97 per share.
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
share option plans. Accordingly, no compensation expense has been recognized for
such plans. The pro forma effect on the Company's net income and earnings per
share, had compensation costs for the Company's share option plans been
determined based upon the fair value at the grant date for awards under these
plans consistent with the methodology prescribed under Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, is as
follows: net income would have been reduced by approximately $2.2 million (1996:
$1.2 million) to $1.8 million (1996: $1.5 million) and earnings per share would
have been reduced by $0.05 to $0.05 per share (1996: reduced by $0.05 to $0.05).
The fair value of the options granted during 1997 is estimated as $781,000
in respect of the market options and $655,000 in respect of the premium options
on the date of grant using the Black Scholes option pricing model with the
following assumptions: no dividends being paid, volatility of 50 percent,
risk-free interest rate of 6.47 percent in respect of market options and 6.57
percent in respect of premium options, assumed forfeiture rate of 0 percent, and
an expected life of five years for market options and six years for premium
options.
50
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES
The components of income before taxes and income tax expense are as follows:
<TABLE>
<CAPTION>
TONY STONE
ASSOCIATES
LIMITED GETTY COMMUNICATIONS PLC
CONSOLIDATED CONSOLIDATED
-------------- ------------------------------------------
JANUARY 1 MARCH 14
THROUGH THROUGH YEAR ENDED YEAR ENDED
MARCH 13, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
-------------- ------------ ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Income before income
taxes:
United Kingdom........ $ 25 $ 437 $ 977 6,745
Others................ 16 2,810 4,733 1,150
----- ------------ ------------ ------------
Income before taxes... 41 3,247 5,710 7,895
----- ------------ ------------ ------------
----- ------------ ------------ ------------
Current tax:
United Kingdom........ 66 867 950 2,563
Others................ 86 1,112 2,399 862
----- ------------ ------------ ------------
Total current tax..... 152 1,979 3,349 3,425
----- ------------ ------------ ------------
Deferred tax:
United Kingdom........ (6) (97) (367) 804
Others................ (2) (9) -- (356)
----- ------------ ------------ ------------
Total deferred tax.... (8) (106) (367) 448
----- ------------ ------------ ------------
Total tax provision... $144 $1,873 $2,982 $3,873
----- ------------ ------------ ------------
----- ------------ ------------ ------------
</TABLE>
The reconciliation of the effective tax rate to the statutory corporate tax
rate in the United Kingdom is as follows:
<TABLE>
<CAPTION>
GETTY COMMUNICATIONS PLC
CONSOLIDATED
------------------------------------------
MARCH 14
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Statutory tax rate.................... 33.00% 33.00% 31.49%
Amortization of intangibles........... 24.41 14.31 12.97
Tax rate differences.................. 1.64 7.68 1.82
Other differences..................... (1.34) (2.77) 2.78
------------ ------------ ------------
Effective tax rate.................... 57.71% 52.22% 49.06%
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The reconciliation of the effective tax rate to the statutory corporate tax
rate is not shown for the period January 1 to March 13, 1995, as management
believes it is not a meaningful presentation. The effective rate for this period
is 350 percent. The principal difference in rates for this period is due to the
amortization of intangibles which is not deductible for tax purposes.
51
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
The components of deferred tax asset and liability amounts are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Current deferred tax assets:
Short-term provisions............................... $ 794 $ 930
------------ ------------
Total net current deferred tax assets............... 794 930
------------ ------------
------------ ------------
Non-current deferred tax:
Loss carry forwards................................. 3,393 4,143
Depreciation........................................ 111 (661)
------------ ------------
Net non-current deferred tax asset.................. $3,504 $3,482
------------ ------------
------------ ------------
</TABLE>
The deferred tax asset in respect of loss carry forwards as at December 31,
1997 expires as follows:
<TABLE>
<CAPTION>
YEAR OF EXPIRY (IN THOUSANDS)
- ---------------------------------------------------------------- --------------
<S> <C>
2001............................................................ $ 162
2002............................................................ 403
Indefinite...................................................... 3,578
-------
$4,143
-------
-------
</TABLE>
11. DEFINED CONTRIBUTION PLANS
The costs recognized by the Company with respect to its defined contribution
plans are as follows:
<TABLE>
<CAPTION>
TONY STONE
ASSOCIATES
LIMITED GETTY COMMUNICATIONS PLC
CONSOLIDATED CONSOLIDATED
-------------- ------------------------------------------
JANUARY 1 MARCH 14
THROUGH THROUGH YEAR ENDED YEAR ENDED
MARCH 13, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
-------------- ------------ ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
United Kingdom........ $ 41 $159 $247 $353
United States......... 65 249 401 397
----- ----- ----- -----
$106 $408 $648 $750
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
The Company runs two pension plans in the U.K. Under the terms of the
schemes all employees are entitled to join one of the plans after six months'
service with the Company. Under the first scheme, the Company contributes 6
percent of each participatory employee's salary to this plan and contributes 5
percent under the second scheme. The employees contribute 4 percent of their
salary under the first scheme and 5 percent under the second.
The Company's U.S. subsidiary operates 401(k) pension plans for its
employees. Under the terms of these plans, employees over 21 years old who have
worked for the Company for 12 consecutive
52
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. DEFINED CONTRIBUTION PLANS (CONTINUED)
months are eligible to participate. The Company contributes 40 percent of up to
5 percent of the employee's salary.
12. COMMITMENTS UNDER FINANCE LEASES
The Company's commitments under finance leases as of December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
GETTY COMMUNICATIONS PLC
CONSOLIDATED
------------------------
(IN THOUSANDS)
<S> <C>
MINIMUM RENTAL PAYMENTS:
1998.................................................. $472
1999.................................................. 113
-----
Total................................................. 585
Less imputed interest cost............................ (62)
-----
Present value of minimum lease payments............... $523
-----
-----
</TABLE>
13. COMMITMENTS UNDER OPERATING LEASES
The Company's commitments under operating leases as of December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
GETTY COMMUNICATIONS PLC
CONSOLIDATED
------------------------
(IN THOUSANDS)
<S> <C>
MINIMUM RENTAL PAYMENTS:
1998.................................................. $1,988
1999.................................................. 1,352
2000.................................................. 917
2001.................................................. 818
2002.................................................. 690
After 2002............................................ 2,693
-------
Total................................................. $8,458
-------
-------
</TABLE>
Rent expense amounted to $343,000 in the period January 1, 1995 to March 13,
1995, $1.3 million in the period March 14, 1995 to December 31, 1995, $2.3
million in the year to December 31, 1996 and $3.1 million in the year ended
December 31, 1997.
14. FINANCIAL INSTRUMENTS
The Company operates internationally, giving rise to exposure to market
risks from changes in foreign exchange rates. The Company hedges only its
contracted net receivables and payables using a variety of financial
instruments. The Company does not issue or hold financial instruments for
trading purposes.
53
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. FINANCIAL INSTRUMENTS (CONTINUED)
For accounting purposes, financial instruments relating to trade and other
balances and which are specifically identified are accounted for as hedges.
Gains and losses from hedging firm commitments are deferred and are included in
the statement of operations as part of the hedged transactions. As of December
31, 1997, net losses of $102,000 related to instruments hedging anticipated
transactions were deferred.
Under interest rate swap agreements, the Company agrees with other parties
to exchange, at specified intervals, the difference between fixed rate and
floating rate interest amounts calculated by reference to an agreed principal
amount. Net interest income or (expense) from the interest rate swap is included
in the income statement over the life of the contract. As of December 31, 1997,
the Company had entered into interest rate swap agreements in order to limit the
impact of movements in interest rates on its borrowings.
The Company is exposed to credit losses in the event of non-performance by
counterparties to financial instruments, but considers this risk to be minimal.
As of December 31, 1997, the counterparty to all of the Company's interest rate
swap and forward exchange contracts was Midland Bank plc.
Outstanding off-balance sheet contracts as of December 31, 1997 were:
<TABLE>
<CAPTION>
NOTIONAL AVERAGE TERM
AMOUNT REMAINING
-------------- ------------
(IN THOUSANDS) DAYS
<S> <C> <C>
FORWARD EXCHANGE CONTRACTS........................ $5,792 82
Currencies sold
INTEREST RATE SWAP CONTRACTS...................... $6,572 888
</TABLE>
The table above summarizes the notional amounts and average term remaining
of the Company's forward exchange and interest rate swap contracts. The notional
amounts of off-balance sheet contracts summarized above do not represent amounts
exchanged by the parties and thus are not a measure of the exposure of the
Company. The amounts exchanged are calculated on the basis of the notional
amounts and the other terms of the contract. Foreign currency amounts are
translated at rates current at the reporting date.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosure of estimated fair value of financial instruments is based on the
requirements of Statements of Financial Accounting Standards No.105, 107 and
119, and upon the assumptions or methods described below. Different estimates
may have been obtained had other assumptions or methods been applied. The
estimates are not necessarily indicative of amounts that would be realized in a
market exchange.
CASH, RECEIVABLES, PAYABLES AND SHORT-TERM BORROWINGS
The carrying amounts of these items approximate fair value.
54
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
LONG-TERM DEBT
The fair value is the estimated net present value of future cash flows using
estimated current rates at which similar bank loans could be obtained for the
remaining maturities. As of December 31, 1997, the fair value and carrying
amount of bank debt were approximately the same.
FORWARD EXCHANGE CONTRACTS
The fair value is the amount at which the forward contract would be settled,
based upon estimates obtained from external counterparties. As of December 31,
1997, the fair value and carrying amounts of forward exchange contracts held was
$54,000 and $102,000, respectively, in unrealized gains.
INTEREST RATE SWAP AGREEMENTS
The fair value of the interest swaps is $133,000 in unrealized losses as of
December 31, 1997 and is based on its quoted market price.
16. SUPPLEMENTAL DISCLOSURES ON CASH FLOWS
<TABLE>
<CAPTION>
TONY STONE
ASSOCIATES
LIMITED GETTY COMMUNICATIONS PLC
CONSOLIDATED CONSOLIDATED
-------------- ------------------------------------------
JANUARY 1 MARCH 14
THROUGH THROUGH YEAR ENDED YEAR ENDED
MARCH 13, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
-------------- ------------ ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest paid......... $ 62 $1,406 $2,305 $1,688
Income taxes paid..... 425 2,829 3,396 769
</TABLE>
NON-CASH INVESTING ACTIVITIES
Fixed asset additions financed through capital leases amounted to $614,000,
$463,000 and $121,000 in the period from March 14, 1995 through December 31,
1995, the year ended December 31, 1996 and the year ended December 31, 1997,
respectively.
Further non-cash investing activities relating to acquisitions are detailed
in Note 19.
17. LEGAL SETTLEMENT
The Company entered into a settlement agreement with Digital Stock
Corporation over the complaint filed in September 1997. This has resulted in a
one time cost to the Company of $1.0 million including legal expenses accounted
for in the fourth quarter.
55
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. SEGMENT INFORMATION
As a provider of visual content, the Company operates one business segment.
Sales are reported in the geographic area where they originate. Due to the
increasing size and complexity of the business, the U.K. office now acts as a
clearing house for sales between geographic areas. This has been reflected in
the presentation of geographic information and prior year results have been
adjusted to reflect the new basis of presentation. The value at which transfers
are made among geographic areas is on a basis intended to reflect the market
value of the products.
Financial information by geographic areas is as follows, this information is
subject to the impact of translation differences and is therefore not a
reflection of the relative performance of individual areas:
<TABLE>
<CAPTION>
UNITED NORTH REST OF
KINGDOM AMERICA GERMANY WORLD ELIMINATIONS CONSOLIDATED
------- ------- ------- ------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
TONY STONE ASSOCIATES LIMITED JANUARY 1
THROUGH MARCH 13, 1995
Sales to customers........................ $1,860 $3,987 $1,416 $2,235 -- $9,498
Transfers among geographic areas.......... 2,812 2,103 127 126 $(5,068) --
------- ------- ------- ------- ------------ ------------
Total sales............................... $4,672 $6,090 $1,443 $2,361 $(5,068) $9,498
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
Operating income/(loss)................... $ 927 $(853) $(103) $ 13 $-- $ (16)
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
UNITED NORTH REST OF
KINGDOM AMERICA GERMANY WORLD ELIMINATIONS CONSOLIDATED
------- ------- ------- ------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GETTY COMMUNICATIONS PLC MARCH 14 THROUGH
DECEMBER 31, 1995
Sales to customers........................ $10,101 $22,131 $8,799 $12,492 -- $53,523
Transfers among geographic areas.......... 11,428 8,548 109 513 $(20,598) --
------- ------- ------- ------- ------------ ------------
Total sales............................... $21,529 $30,679 $8,908 $13,005 $(20,598) $53,523
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
Operating Income.......................... $ 1,909 $ 653 $1,142 $ 979 -- $4,683
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
UNITED NORTH REST OF
KINGDOM AMERICA GERMANY WORLD ELIMINATIONS CONSOLIDATED
------- ------- ------- ------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GETTY COMMUNICATIONS PLC YEAR ENDED
DECEMBER 31, 1996
Sales to customers........................ $17,494 $36,069 $14,621 $16,830 -- $85,014
Transfers among geographic areas.......... 17,708 14,706 362 883 $(33,659) --
------- ------- ------- ------- ------------ ------------
Total sales............................... $35,202 $50,775 $14,983 $17,713 $(33,659) $85,014
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
Operating income.......................... $ 2,549 $ 1,695 $ 1,281 $ 2,442 -- $ 7,967
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
Assets by geographic area................. $137,708 $11,062 $ 2,747 $ 6,886 -- $158,403
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
</TABLE>
56
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNITED NORTH REST OF
KINGDOM AMERICA GERMANY WORLD ELIMINATIONS CONSOLIDATED
------- ------- ------- ------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GETTY COMMUNICATIONS PLC YEAR ENDED
DECEMBER 31, 1997
Sales to customers........................ $24,636 $48,266 $12,869 $15,026 -- $100,797
Transfers among geographic areas.......... 20,209 14,313 452 936 $(35,910) --
------- ------- ------- ------- ------------ ------------
Total sales............................... $44,845 $62,579 $13,321 $15,962 $(35,910) $100,797
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
Operating income/(loss)................... $ 5,335 $ 2,519 $ 534 $ (508) $-- $ 7,880
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
Assets by geographic area................. $138,585 $16,443 $ 3,856 $ 8,343 $-- $167,227
------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------------ ------------
</TABLE>
The geographical analysis of assets excludes deferred assets. These amounts
are reconciled to total assets as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Identifiable assets................................. $158,403 $167,227
Deferred assets..................................... 5,101 4,411
------------ ------------
Total assets........................................ $163,504 $171,638
------------ ------------
------------ ------------
</TABLE>
19. ACQUISITIONS
HULTON GETTY HOLDINGS LIMITED
On April 2, 1996, the Company acquired all of the common stock of Hulton
Getty Holdings Limited (formerly Hephaistos Limited) for a purchase
consideration of $13.0 million in cash and acquisition expenses of $122,000, and
refinanced approximately $6.1 million of debt. Hulton Getty Holdings Limited is
the holding company of The Hulton Getty Picture Collection Limited (formerly The
Hulton-Deutsch Collection Limited) which owns and licenses to customers an
archival collection of still images and operates in the United Kingdom. The
acquisition and refinancing of existing debt was financed by a term loan of $9.5
million, a bridge loan of $7.6 million and $2.1 million from the Company's
revolving credit facilities.
57
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. ACQUISITIONS (CONTINUED)
The allocation of purchase price is summarized as follows:
<TABLE>
<CAPTION>
BOOK AND FAIR
VALUE
--------------
(IN THOUSANDS)
<S> <C>
Book value of net (liabilities) acquired at cost................ $(8,018)
Fair value adjustments:
Fair value of archival collection, as determined by appraisal,
less net book value........................................... 16,454
Interest and redemption premiums accrued on outstanding loan
notes issued by Hephaistos Limited and acquired by the Company
and converted to interest free debt........................... 1,489
-------
Fair value of net assets acquired at cost (including on demand
borrowings of $1,316,000 assumed and repaid by the Company)... 9,925
Purchase price:
Cash paid for the common stock, including acquisition
expenses...................................................... 4,202
-------
Excess of net assets acquired over purchase price, allocated
against the fair value of the archival collection............. $ 5,723
-------
-------
</TABLE>
In addition to the cash paid above, the Company acquired the outstanding
loan stock issued by Hephaistos Limited at its nominal value of $8,837,000 and
immediately converted this to interest free intercompany debt.
FABULOUS FOOTAGE INC.
On April 24, 1996, the Company acquired all of the common stock of Fabulous
Footage Inc. ("Fabulous Footage"), operating as two separate legal entities in
the United States and Canada, respectively. Fabulous Footage is a provider of
contemporary stock footage, with operations primarily in Canada and the United
States.
The purchase consideration was $2.3 million in cash and acquisition expenses
of $174,000, financed from a revolving credit facility.
The allocation of purchase price is summarized as follows:
<TABLE>
<CAPTION>
BOOK AND FAIR
VALUE
--------------
(IN THOUSANDS)
<S> <C>
Value of net assets acquired at cost (including cash of
$191,000)..................................................... $ 180
-------
Purchase price:
Cash paid, including acquisition expenses....................... 2,479
-------
Excess of purchase price over net assets acquired, allocated to
goodwill (amortized over 15 years)............................ $2,299
-------
-------
</TABLE>
58
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. ACQUISITIONS (CONTINUED)
WORLD VIEW
On November 20, 1996, the Company acquired all the common stock of the World
View Companies, operating as four separate legal entities in Belgium, Denmark,
Holland and Sweden. World View is a provider of contemporary stock photography,
operating primarily in Benelux and Scandinavia.
The purchase consideration was $2.6 million cash and acquisition expenses of
$104,000, financed from cash resources.
The allocation of purchase price is summarized as follows:
<TABLE>
<CAPTION>
BOOK AND FAIR
VALUE
--------------
(IN THOUSANDS)
<S> <C>
Value of net assets acquired at cost (including cash of
$360,000)..................................................... $ 437
-------
Purchase price:
Cash paid, including acquisition expenses....................... 2,706
-------
Excess of purchase price over net assets acquired, allocated to
goodwill (amortized over five years).......................... $2,269
-------
-------
</TABLE>
LIAISON
On March 14, 1997, the Company acquired all the common stock of Liaison Inc.
("Liaison"). Liaison is a provider of photographs to the photojournalist market,
operating primarily in North America but with relationships with independent
third party agencies in most major markets.
The purchase consideration was $8.7 million and acquisition expenses of
$684,000, financed by the issue of 311,846 Class A shares and $6.8 million
financed from cash.
The allocation of purchase price is summarized as follows:
<TABLE>
<CAPTION>
BOOK AND FAIR
VALUE
--------------
(IN THOUSANDS)
<S> <C>
Value of net assets acquired at cost (including bank overdraft
of $330,000).................................................. $ (793)
--------------
Purchase price:
Getty Communications shares issued.............................. 2,600
Cash paid, including acquisition expenses....................... 6,809
--------------
Total purchase price............................................ 9,409
--------------
Excess of purchase price over net assets acquired, allocated to
goodwill (amortized over 25 years)............................ $10,202
--------------
--------------
</TABLE>
59
<PAGE>
GETTY COMMUNICATIONS PLC AND SUBSIDIARIES;
TONY STONE ASSOCIATES LIMITED AND SUBSIDIARIES (PREDECESSOR)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. ACQUISITIONS (CONTINUED)
ENERGY
On July 25, 1997, the Company acquired all of the common stock of Energy
Film Library Inc. ("Energy"). Energy is a Los Angeles based provider of
contemporary stock footage with another office in New York and representation in
most major markets through independent third agencies.
The purchase consideration was $17.0 million and acquisition expenses of
$500,000, partially funded by the issue of 617,762 Class A Shares at a market
value of $4.0 million, with the balance from the Company's cash resources.
<TABLE>
<CAPTION>
BOOK AND FAIR
VALUE
--------------
(IN THOUSANDS)
<S> <C>
Value of net assets acquired at cost (including cash of
$93,000)...................................................... $ (181)
--------------
Purchase price:
Getty Communications shares issued.............................. 4,000
Cash paid, including acquisition expenses....................... 13,500
--------------
Total purchase price............................................ 17,500
Excess of purchase price over net assets acquired, allocated to
goodwill (amortized over 20 years)............................ $17,681
--------------
--------------
</TABLE>
20. PRO FORMA INFORMATION RELATING TO ACQUISITIONS (UNAUDITED)
The following unaudited pro forma information shows the results of the
Company for each of the three years ended December 31, 1997, as if the
acquisition of Tony Stone Images occurred on January 1, 1995, the acquisitions
of Hulton Getty Holdings Limited, Fabulous Footage and World View occurred on
January 1, 1996 and the acquisitions of Liaison and Energy occurred on January
1, 1997. The proforma information includes adjustments related to the financing
of the acquisitions, the effect of amortizing goodwill and other intangible
assets acquired, as well as the related tax effects. The pro forma results of
operations are unaudited, have been prepared for comparative purposes only and
do not purport to indicate the results of operations which would actually have
occurred had the combinations been in effect on the dates indicated or which may
occur in the future.
<TABLE>
<CAPTION>
UNAUDITED
--------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------- ------- --------
(IN THOUSANDS, EXCEPT FOR
SHARE AMOUNTS)
<S> <C> <C> <C>
Sales............................................... $63,088 $93,120 $105,592
Net income.......................................... 1,487 2,786 3,692
Net income per share................................ $ 0.06 $ 0.09 $ 0.09
</TABLE>
60
<PAGE>
GETTY IMAGES, INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1997
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER ASSIGNED
IN REGULATION
S-K, ITEM 601 DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------
<C> <S> <C>
(1) 2.1 Merger Agreement, dated as of September 15, 1997, among
Getty Communications (USA), Inc., Getty Communications
plc, PhotoDisc, Inc. and Print Merger, Inc. (2.1)
2.2 Agreement for the sale of the whole of the issued share
capital of Allsport Photographic plc, dated February 6,
1998, among Getty Images, Getty Communications and
Stephen Michael Powell and others named therein
(incorporated by reference from Exhibit 2.2 to the Report
on Form 8-K filed by Getty Images with the Commission on
February 24, 1998).
(1) 3.1 Amended and Restated Certificate of Incorporation of Getty
Images (3.1)
(1) 3.2 Bylaws of Getty Images (3.2)
10.1 Credit Agreement, dated February 9, 1998, among Getty
Images, Midland Bank plc and HSBC Investment Bank plc
10.2 Lease dated October 18, 1995 between Allied Dunbar
Assurance plc and Tony Stone Associates Limited
10.3 Lease dated March 11, 1993 between Bantry Investments
Limited and Tony Stone Associates Limited
10.4 Counterpart Lease dated March 11, 1993 between Bantry
Investments Limited and Tony Stone Associates Limited
10.5 Lease dated October 23, 1990 between Bantry Investments
Limited and Tony Stone Associates Limited
10.6 Lease Agreement dated November 1, 1997 between Marshall
Building, L.L.C. and PhotoDisc, Inc.
10.7 Lease dated February 14, 1997 between Martin Selig and
PhotoDisc, Inc.
(1) 10.8 Stockholders' Transaction Agreement, dated as of September
15, 1997, among Getty Images, Inc., certain shareholders
of PhotoDisc, Inc. and Mr. Mark Torrance, as
representative of the shareholders (10.1)
(1) 10.9 Restated Option Agreement among Getty Images, Inc., Getty
Communications plc and Getty Investments L.L.C. (10.21)
(1) 10.10 Stockholders' Agreement among Getty Images, Inc. and
certain stockholders of Getty Images, Inc. (10.8)
(1) 10.11 Registration Rights Agreement among Getty Images, Inc.,
PDI, L.L.C. and Mr. Mark Torrance (10.6)
(1) 10.12 Registration Rights Agreement among Getty Images, Inc. and
Getty Investments L.L.C. (10.7)
(1) 10.13 Restated Shareholders' Agreement among Getty Images, Inc.,
Getty Investments L.L.C. and the Investors named therein
(10.8)
(1) 10.14 Registration Rights Agreement dated July 3, 1996 among
Getty Communications plc, Simon Thornley, Brian Wolske,
Lawrence Gould, Jonathan Klein and Mark Getty and Form of
Amendment among Getty Images, Inc., Getty Communications
plc, Lawrence Gould, Jonathan Klein and Mark Getty
(10.16)
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
NUMBER ASSIGNED
IN REGULATION
S-K, ITEM 601 DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------
<C> <S> <C>
(1) 10.15 Registration Rights Agreement dated July 3, 1996 among
Getty Communications plc, Crediton Limited and October
1993 Trust and Form of Amendment among Getty Images,
Inc., Getty Communications plc, Crediton Limited and
October 1993 Trust (10.17)
(1) 10.16 Registration Rights Agreement dated July 3, 1996 among
Getty Communications plc, Hambro European Ventures
Limited, Hambro Group Investments Limited, RIT Capital
Partners plc and Tony Stone and Form of Amendment among
Getty Images, Inc., Getty Communications plc, RIT Capital
Partners plc and Tony Stone (10.18)
(1) 10.17 Registration Rights Agreement dated July 25, 1997 between
Getty Communications plc and The Schwartzberg Family L.P.
and Form of Amendment among Getty Images, Inc., Getty
Communications plc and The Schwartzberg Family L.P.
(10.19)
(1) 10.18 Indemnity between Getty Images, Inc. and Getty Investments
L.L.C. (10.15)
(1) 10.19 Escrow Agreement among Getty Images, Inc., certain
shareholders of PhotoDisc, Inc. and Citibank, as Escrow
Agent (10.2)
(1) 10.20 Getty Images, Inc. 1998 Stock Incentive Plan (10.13)
(1) 10.21 Employment Agreement between Getty Communications plc and
Mr. Mark Getty (10.9)
(1) 10.22 Employment Agreement between Getty Images, Inc. and Mr.
Mark Torrance (10.10)
(1) 10.23 Employment Agreement between Getty Communications plc and
Mr. Jonathan Klein (10.11)
(1) 10.24 Employment Agreement between Getty Images, Inc. and
Crediton Limited (10.12)
(1) 10.25 Indemnity among Getty Images, Inc., Getty Communications
plc and each of Mark Getty, Mark Torrance, Jonathan
Klein, Lawrence Gould, Andrew Garb, Manny Fernandez,
Christopher Sporborg, Anthony Stone and James Bailey
(10.24)
21.1 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand
24.1 Powers of Attorney (contained on page 32)
27.1 Financial Data Schedule
</TABLE>
- --------------------------
(1) Incorporated by reference from the Exhibits to the Form S-4 Registration
Statement No. 333-38777 of the Registrant. (Exhibit number in the Form S-4
is set forth in italics.)
(2) Incorporated by reference from the Exhibits to the Form F-1 Registration
Statement No. 333-4996 of Getty Communications plc. (Exhibit number in the
Form F-1 is set forth in italics.)
62
<PAGE>
CONFORMED COPY
CREDIT AGREEMENT
DATED 9th February, 1998
U.S.$24,000,000
TERM LOAN FACILITY
L16,000,000
MULTICURRENCY TERM LOAN FACILITY
L6,750,000
REVOLVING CREDIT FACILITY
Between
GETTY IMAGES, INC.
and others as Borrowers
and/or Guarantors
MIDLAND BANK PLC
as Arranger
THE BANKS
HSBC INVESTMENT BANK PLC
as Security Agent
and
HSBC INVESTMENT BANK PLC
as Facility Agent
ALLEN & OVERY
London
B3:118491.6
<PAGE>
INDEX
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C> <C>
1. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. The Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 23
5. Drawdown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6. Denomination of Tranche B Advances . . . . . . . . . . . . . . . . . . 26
7. Ancillary Facilities . . . . . . . . . . . . . . . . . . . . . . . . . 28
8. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9. Prepayment and Cancellation . . . . . . . . . . . . . . . . . . . . . .31
10. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11. Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14. Market Disruption . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17. Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
18. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
19. Additional Borrowers, Guarantors and Security . . . . . . . . . . . . 47
20. Representations and Warranties . . . . . . . . . . . . . . . . . . . . 51
21. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
22. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 73
23. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
24. The Agents, The Hedging Bank and The Arranger . . . . . . . . . . . . 85
25. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
26. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
27. Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
28. Evidence and Calculations . . . . . . . . . . . . . . . . . . . . . . 95
29. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . 95
30. Changes to the Parties . . . . . . . . . . . . . . . . . . . . . . . . 96
31. Disclosure of Information . . . . . . . . . . . . . . . . . . . . . . 99
32. Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
33. Pro Rata Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . 101
34. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
35. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
36. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
37. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
38. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES PAGE
- --------- ----
<S> <C> <C>
1. Various Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Part I - Original Borrowers . . . . . . . . . . . . . . . . . . . . . 105
Part II - Original Guarantors . . . . . . . . . . . . . . . . . . . . 106
2. Banks and Commitments . . . . . . . . . . . . . . . . . . . . . . . . 107
3. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . 108
4. Form of Request . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
5. Forms of Accession Documents . . . . . . . . . . . . . . . . . . . . 113
Part I - Substitution Certificate . . . . . . . . . . . . . . . . . . 113
Part II - Borrower Accession Agreement . . . . . . . . . . . . . . . 115
Part III - Guarantor Accession Agreement . . . . . . . . . . . . . . 116
6. Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . 117
7. Calculation of Hedging Liabilities . . . . . . . . . . . . . . . . . 119
8. Calculation of the Additional Cost . . . . . . . . . . . . . . . . . 120
8. Material Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 122
10. Hedging Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 123
SIGNATORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
</TABLE>
<PAGE>
1
THIS CREDIT AGREEMENT is dated 9th February, 1998 between:
(1) GETTY IMAGES, INC. a company incorporated under the laws of Delaware,
United States of America with its principal office at 122 South Michigan
Avenue, Suite 900, Chicago, Illinois 60606, United States America (the
"PARENT");
(2) THE COMPANIES listed in Part I of Schedule 1 as borrowers (in this
capacity each an "ORIGINAL BORROWER");
(3) THE COMPANIES listed in Part II of Schedule 1 as guarantors (in this
capacity each an "ORIGINAL GUARANTOR");
(4) MIDLAND BANK PLC as arranger (in this capacity the "ARRANGER");
(5) MIDLAND BANK PLC as the original provider of the Facilities (as defined
below) (in this capacity the "ORIGINAL BANK");
(6) HSBC INVESTMENT BANK PLC as facility agent for the Banks (in this
capacity the "FACILITY AGENT"); and
(7) HSBC INVESTMENT BANK PLC as security agent and trustee for the Banks (in
this capacity the "SECURITY AGENT").
IT IS AGREED as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement terms defined above or in Clause 22 have the same
meaning when used in this Agreement and:
"ACCOUNTANT'S REPORT" means the report dated 10th September, 1997
prepared by Coopers & Lybrand relating to PhotoDisc.
"ACCOUNTING DATE" means each 31st March, 30th June, 30th September and
31st December, save as any such date may be adjusted with the agreement
of the Facility Agent to avoid an Accounting Date falling on a day
which is not a Business Day and/or to ensure that all Accounting Dates
fall on the same day of the week.
"ACCOUNTING PERIOD" in relation to any person means any period of
approximately one month, three months or one year for which Accounts of
such person are required to be prepared ending, in the case of each
three months and each one year period, on an Accounting Date, provided
that the first Accounting Period of the Group shall be deemed to have
commenced on the Closing Date.
"ACCOUNTS" means at any time the latest audited or unaudited, as the
case may be, monthly, quarterly, or annual consolidated accounts of the
Group and any other accounts (whether consolidated or unconsolidated)
of any member of the Group in each case delivered or
<PAGE>
2
required to be delivered to the Facility Agent pursuant to this
Agreement, as the context requires.
"ACQUIRED ASSETS" means the shares acquired or to be acquired (either
directly or indirectly) by the Parent or Print Merger, Inc. (in the
case of the acquisition of PhotoDisc by its merger into Print Merger,
Inc.) pursuant to the terms of the Acquisition Agreements and by Getty
U.K. pursuant to the terms of the Allsport Sale and Purchase Agreement,
and all other rights, assets and liabilities (tangible and intangible,
present and future, actual and contingent) acquired or assumed or to be
acquired or assumed by the Parent (or any incorporated Subsidiary
thereof) or Getty U.K. pursuant to the Acquisition Agreements, whether
by merger, transfer or otherwise.
"ACQUISITION AGREEMENTS" means:
(a) the Merger Agreement;
(b) the Scheme of Arrangement;
(c) the Allsport Sale and Purchase Agreement,
and all transfers and other instruments made pursuant to any thereof to
which the Parent, Getty U.K., the Vendors or any member of the Group is a
party.
"ACQUISITION COSTS" means all fees, costs and expenses incurred by the
Parent (or any other member of the Group) in connection with the
negotiation, preparation, execution and registration of the Transaction
Documents.
"ACQUISITIONS" means the acquisition of the Acquired Assets by the
Parent (or a United States incorporated Subsidiary thereof) and Getty
U.K. pursuant to the Acquisition Agreements in the manner and by the
process therein described.
"ADDITIONAL BORROWER" means a member of the Group which becomes a Borrower
in accordance with Clause 19.1.
"ADDITIONAL COST" in relation to each Advance or overdue amount means, for
any Interest Period relating to that Advance or overdue amount:
(i) where such Advance or amount is denominated in Sterling, the MLA
Cost;
(ii) where such Advance or amount is denominated in a currency other
than Sterling, the rate per annum notified by any Bank to the
Facility Agent to be the cost to that Bank of compliance with all
reserve assets, liquidity or cash margin or other requirements of
any applicable monetary or other authority in relation to that
Advance or overdue amount; and
(iii) without double counting, in relation to each Advance or overdue
amount denominated in Dollars made to a U.S. Obligor, the rate
per annum determined from the formula (A)(i) LIBOR applicable to
such Utilisation or amount for the relevant Interest Period
divided by (ii) 1 MINUS the Euro-Dollar Reserve Percentage MINUS
(B) LIBOR applicable to such Utilisation or overdue amount for
that Interest Period.
<PAGE>
3
"ADDITIONAL GUARANTOR" means a member of the Group which becomes a
Guarantor in accordance with Clause 19.2.
"ADVANCE" means the principal amount of each borrowing under this
Agreement from (a) the Tranche A Commitments (a "TRANCHE A ADVANCE") or
(b) the Tranche B Commitments (a "TRANCHE B ADVANCE") or (c) the
Tranche C Commitments (a "TRANCHE C ADVANCE") or, in each case, the
principal amount thereof outstanding from time to time.
"AFFILIATE" in relation to any person means a Subsidiary or a Holding
Company of that person and any other Subsidiary of a Holding Company of
that person.
"AGENT" means the Facility Agent or the Security Agent, as the context
requires.
"AGENT'S SPOT RATE OF EXCHANGE" with respect to any Optional Currency
on any day means the spot rate of exchange of the Facility Agent (as
determined by the Facility Agent) for the purchase of the appropriate
amount of the relevant Optional Currency with Sterling in the London
Foreign Exchange Market in the ordinary course of business at or about
10:00 a.m. on the day in question for delivery two Business Days
thereafter.
"ALLSPORT SALE AND PURCHASE AGREEMENT" means the agreement between
Stephen Michael Powell and others, Getty U.K. and the Parent to be
dated on or about 6th February, 1998 providing, inter alia, for the
purchase by Getty U.K. and the Parent of Allsport Photographic plc.
"ANCILLARY BANK" means any Bank which becomes an Ancillary Bank by
operation of Clause 7.1.
"ANCILLARY COMMITMENT" means, at any time, the maximum principal amount
permitted to be made available under the Ancillary Facility relative
thereto to the extent not cancelled or reduced under this Agreement.
"ANCILLARY FACILITY" means an ancillary facility described in Clause
2.1(d).
"ANCILLARY OUTSTANDINGS" means, at any time in respect of any Ancillary
Bank, the aggregate amount in Sterling (any amounts denominated in
currencies other than Sterling being converted at exchange rates
applicable at the time in the London Interbank foreign exchange market)
of:
(a) all amounts of principal then outstanding under any overdraft,
cheque drawing or other current account facilities;
(b) the percentage weighting notified by the relevant Ancillary Bank
to the Obligors' Agent in accordance with that Ancillary Bank's
general credit policy of the gross amounts payable to the
Ancillary Bank under any contracts entered into for forward
foreign exchange but which have not yet matured;
(c) the maximum face amount (excluding amounts stated to be in
respect of interest) of all guarantees, bonds and letters of
credit then outstanding under any guarantee, bonding or letter of
credit facilities; and
<PAGE>
4
(d) in respect of any other facility or financial accommodation such
other amount as the relevant Ancillary Bank (acting reasonably
and in consultation with the Facility Agent and the Obligors'
Agent) may determine fairly represents the aggregate exposure at
such time of that Ancillary Bank,
in each case made available under the Ancillary Facility provided by such
Ancillary Bank.
"APPLICABLE ACCOUNTING PRINCIPLES" means (i) in respect of any Accounts
or projections of the Parent or of the Group as a whole delivered under
this Agreement, the accounting principles and practices generally
accepted as at the date hereof in the United States of America, and
(ii) in respect of any other Accounts or projections, the accounting
principles and practices generally accepted as at the date hereof in
the country in which the company or Holding Company concerned is
incorporated, and in each case any variation to such accounting
principles and practices which is not material or, if material, has
been agreed in writing by the Majority Banks.
"APPROVED BANK" means in England and Wales and the United States of
America any bank which is authorised to conduct banking business in
such jurisdiction, which has been approved by the Facility Agent for
the purposes of this definition and which has been given and has
acknowledged any and all notices required by the Security Documents,
and such approval (subject to the giving and, where required as
aforesaid, acknowledgement of such notices) is given:
(a) for accounts of any Obligor held in England or Wales, in respect of
Midland Bank plc; and
(b) for accounts of any Obligor held in the United States of America, in
respect of Marine Midland, Inc..
"AUDITORS" means Coopers & Lybrand or such other firm of independent
public accountants of international standing which is appointed in
compliance with Clause 21.29(b), to audit the annual Accounts of the
Parent.
"AVAILABLE FACILITY AMOUNT" means the amount of the Tranche C Commitments
(taking into account any reduction in the Tranche C Commitment of any
Ancillary Bank provided for in Clause 2.2(f)) less the Original Sterling
Amount of the then outstanding Tranche C Utilisations, at such time taking
into account any Tranche C Utilisations scheduled to be made, repaid or
prepaid assuming that the same occurs when due.
"AVAILABILITY DATE" means the date on which the Tranche A Advance and the
Tranche B Advance are repaid in full.
"AVAILABILITY PERIOD" means the period from the date of this Agreement
to (a) in respect of the Tranche A Commitments and the Tranche B
Commitments, close of business in London on 27th February, 1998 (the
"TRANCHE A/B AVAILABILITY PERIOD"), and (b) in respect of the Tranche C
Commitments, close of business in London on the earlier of the
Availability Date and the date falling 364 days after the date of this
Agreement, subject to the provisions of Clause 2.6 (the "TRANCHE C
AVAILABILITY PERIOD").
<PAGE>
5
"BANK" means each bank, trust, fund or other financial institution
whose name is set out in Schedule 2 or to which rights and/or
obligations under this Agreement are assigned or transferred pursuant
to Clause 30 or which assumes rights and obligations pursuant to a
Substitution Certificate, and any successor or successors in title to
any of the foregoing, provided that upon (i) termination in full of all
the Commitments of any such bank, trust, fund or financial institution,
and (ii) irrevocable payment in full of all amounts which may be or
become payable to such bank, trust, fund or financial institution in
any and all capacities under the Finance Documents, such bank, trust,
fund or financial institution shall not be regarded as being a Bank for
the purposes of determining whether any provision of any of the Finance
Documents requiring consultation with or the consent or approval of or
instructions from the Banks or the Majority Banks has been complied
with.
"BASE FINANCIAL STATEMENTS" means:
(a) the audited consolidated accounts dated as at and for the year
ended 31st December, 1996, and unaudited consolidated management
accounts for the period 1st January to 30th September, 1997, of
PhotoDisc;
(b) the audited consolidated accounts dated as at and for the year
ending 31st December, 1996, and unaudited consolidated management
accounts for the year ending 31st December, 1997 for Getty U.K.;
(c) the audited consolidated accounts dated as at and for the year
ending 30th November, 1996, and unaudited consolidated management
accounts for the year ending 30th November, 1997 for Allsport
Photographic plc and its subsidiaries.
"BORROWER" means an Original Borrower and any Additional Borrower.
"BORROWER ACCESSION AGREEMENT" means a letter substantially in the form
of Part II of Schedule 5 with such amendments as the Facility Agent may
approve or reasonably require.
"BORROWINGS" means any indebtedness (including any interest and other
charges relating thereto) in respect of:
(a) moneys borrowed or raised and debit balances at banks;
(b) any debenture, bond, bill, note, loan stock or other security;
(c) any acceptance or documentary credit;
(d) receivables sold or discounted (otherwise than on a non-recourse
basis);
(e) the acquisition cost of any asset or service to the extent
payable before or after the time of acquisition or possession by
the party liable where the advance or deferred payment (i) is
arranged primarily as a method of raising finance or financing
the acquisition of that asset or (ii) is normal in the trade
concerned and the advance is paid more than 180 days before, or
the deferred payment is paid more than 180 days after, the due
date of acquisition or possession of such asset;
<PAGE>
6
(f) finance leases and hire purchase and other arrangements treated as
finance leases in accordance with the Applicable Accounting
Principles;
(g) currency or interest rate swap, cap, collar or hedging arrangements
or financial futures transactions;
(h) any other transaction having the commercial effect of a borrowing
(whether involving money or commodities); or
(i) any guarantee, indemnity, letter of credit or similar assurance
against financial loss of any person in respect of any
indebtedness falling within paragraphs (a) to (h) inclusive and
any legally binding agreement to maintain the solvency of any
person whether by investing in, lending to or purchasing any
assets of such person,
provided that for the purposes of the calculation of Consolidated Total
Borrowings items falling within paragraph (g) shall be excluded, and
for the purposes of Clause 23.1(d) items falling within paragraph (g)
shall only be included to the extent of the net amount owing to any
counterparty under any such transaction (to the extent that the
underlying contract provides for net payments).
"BUSINESS DAY" means:
(a) a day (other than a Saturday or a Sunday) on which banks and foreign
exchange markets are open for business in London; and
(b) in respect of a day on which a payment or other transaction in
Dollars is required under this Agreement a day (not being a
Saturday or Sunday) on which banks and foreign exchange markets
are open for business in New York; and
(c) in respect of a day on which a payment or other transaction
involving an Optional Currency is required under this Agreement a
day (not being a Saturday or Sunday) on which banks and foreign
exchange markets are open for business in the principal financial
centre of the country of that Optional Currency.
"CAPITAL EXPENDITURE" means any expenditure which is treated as capital
expenditure in the audited consolidated Accounts of the Group in
accordance with the Applicable Accounting Principles.
"CASH EQUIVALENT INVESTMENTS" means:
(a) debt securities (denominated in Dollars, Sterling or another
Optional Currency) issued or guaranteed by the government of the
country of the currency concerned having not more than 6 months
to final maturity and which are not convertible into any other
form of security;
(b) debt securities (denominated in Dollars, Sterling or another
Optional Currency) which have not more than 60 days to final
maturity, are not convertible into any other form of security,
are rated at least P1 (Moody's Investor Services Inc.) and A-1
(Standard & Poors Corporation) and are not issued or guaranteed
by any member of the Group; and
<PAGE>
7
(c) such other securities (if any) as are approved as such in writing
by the Facility Agent.
"CASH PRICE" means the cash-paid element of the PhotoDisc Merger
Consideration.
"CHIEF EXECUTIVE OFFICER" means the chief executive officer of the Parent
from time to time.
"CHIEF FINANCIAL OFFICER" means the chief financial officer of the Parent
from time to time.
"CLOSING" means the completion of all of the Acquisitions.
"CLOSING DATE" means the date on which Closing occurs.
"COMMITMENT" in relation to a Bank means:
(a) when designated "TRANCHE A" or "Tranche B" or "TRANCHE C", as the
case may be, the amount appearing and designated as such against
that Bank's name in Schedule 2 or in the Substitution Certificate
or other document by which it became party to or acquired rights
under this Agreement;
(b) where designated "ANCILLARY" the amount of a Bank's Tranche C
Commitment converted into a Commitment so designated pursuant to
Clause 7;
(c) without any such designation, a Bank's Tranche A Commitment or
Tranche B Commitment or Tranche C Commitment or Ancillary
Commitment, as the context requires;
in each case as reduced or increased from time to time pursuant to any
Substitution Certificate or other transfer pursuant to Clause 30 to which
such Bank is party, and to the extent not otherwise cancelled, reduced or
terminated under this Agreement (collectively the "TOTAL COMMITMENTS").
"DANGEROUS SUBSTANCE" means any radioactive emissions, noise and any
natural or artificial substance (in whatever form) the generation,
transportation, storage, treatment, use or disposal of which (whether
alone or in combination with any other substance) gives rise to a risk
of causing harm to man or any other living organism or damaging the
Environment or public health or welfare, including (without limitation)
any controlled, special, hazardous, toxic, radioactive or dangerous
waste.
"DEFAULT" means an Event of Default or an event which, with the giving
of notice, lapse of time or fulfilment of any other applicable
condition stated in any Finance Document or combination of the
foregoing would constitute an Event of Default, provided that any such
event which requires the satisfaction of a condition as to materiality
before it becomes an Event of Default shall not be a Default until that
condition is satisfied.
"DEUTSCHMARKS" and "DM" means the lawful currency for the time being of
Germany.
"DISCLOSURE LETTER" means the letter (if any) designated the
"Disclosure Letter" of even date herewith from the Parent to the
Facility Agent counter-signed by the Facility Agent for the
<PAGE>
8
purposes of identification which makes specific disclosures against
certain of the representations and warranties set out in Clause 20.
"DOLLARS" and "U.S.$" means the lawful currency for the time being of the
United States of America.
"ENCUMBRANCE" means any mortgage, pledge, lien, charge, assignment for
the purpose of providing security, hypothecation, right in security,
security interest or trust arrangement for the purpose of providing
security, and any other security agreement or other arrangement having
the effect of providing security (including, without limitation, the
deposit of monies or property with a person with the primary intention
of affording such person a right of set-off or lien).
"ENVIRONMENT" means all, or any of, the following media, the air
(including, without limitation, the air within buildings and the air
within other natural or man-made structures above or below ground),
water (including, without limitation, ground and surface water) and
land (including, without limitation surface and sub-surface soil).
"ENVIRONMENTAL CLAIM" means any claim by any person:
(a) in respect of any loss or liability suffered or incurred by that
person as a result of or in connection with any violation of
Environmental Law; or
(b) that arises as a result of or in connection with Environmental
Contamination and that could give rise to any remedy or penalty
(whether interim or final) that may be enforced or assessed by
private or public legal action or administrative order or
proceedings.
"ENVIRONMENTAL CONTAMINATION" means each of the following and their
consequences:
(a) any release, discharge, emission, leakage or spillage of any
Dangerous Substance at or from any site owned, occupied or used
by any member of the Group into any part of the Environment; or
(b) any accident, fire, explosion or sudden event at any site owned,
occupied or used by any member of the Group which is directly or
indirectly caused by or attributable to any Dangerous Substance; or
(c) any other pollution of the Environment.
"ENVIRONMENTAL LAW" means all laws (including, without limitation,
common law), regulations, directives, codes of practice, circulars,
guidance notices and the like having legal effect concerning the
protection of human health, the Environment, the conditions of the work
place or the generation, transportation, storage, treatment or disposal
of Dangerous Substances.
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation,
consent or other approval required by any Environmental Law.
<PAGE>
9
"ERISA" means the United States Employee Retirement Income Security Act
of 1974 as amended from time to time, or any successor statute thereto
and any regulations promulgated thereunder.
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of
ERISA), whether or not incorporated, which is under common control or
would be considered a single employer with any Obligor domiciled in the
United States within the meaning of Section 414(b), (c), (m) or (o) of
the IRC and regulations promulgated under those sections or within the
meaning of Section 4001(b) of ERISA.
"EURO-DOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed
by the Board of Governors of the Federal Reserve System of the U.S.A.
(or any successor), for determining the maximum reserve requirement for
a member bank of the Federal Reserve System in New York City with
deposits exceeding five billion Dollars in respect of "Eurocurrency
liabilities" as specified in Regulation D (or in respect of any other
category of extensions of credit or other assets which includes loans
by a non-United States office of any bank to United States residents).
"EVENT OF DEFAULT" means an event specified as such in Clause 23.1.
"EXCLUDED INTELLECTUAL PROPERTY" means any trade names, trade marks and
service marks (whether registered or not and including all applications
for the same) which include the name or mark "GETTY", "GETTY
COMMUNICATIONS" or "GETTY IMAGES", or a design consisting of the letter
"G" in a circle (including the G & Eye device) and including any future
trade names, trade marks and service marks incorporating "GETTY",
"GETTY COMMUNICATIONS" or "GETTY IMAGES" or the aforementioned design
or device.
"EXECUTIVE" means each of Jonathan Klein, Mark Torrance and Mark Getty or
their respective replacements from time to time.
"EXECUTIVE OFFICER" means either of the Chief Executive Officer and the
Chief Financial Officer.
"EXISTING FACILITIES" means the term loan facility made available by
Midland Bank plc to Getty U.K. pursuant to a loan agreement dated 14th
March, 1995 and the term loan facility made available by Midland Bank
plc to, inter alios, Getty U.K. pursuant to a loan agreement dated 2nd
April, 1996.
"FACILITY" means each and any of:
(a) the term loan facility referred to in Clause 2.1(a) (the "TRANCHE A
FACILITY");
(b) the term loan facility referred to in Clause 2.1(b) (the "TRANCHE B
FACILITY");
(c) the revolving credit facility referred to in Clause 2.1(c) (the
"TRANCHE C FACILITY"); and
(d) any Ancillary Facility,
<PAGE>
10
(together the "FACILITIES").
"FACILITY OFFICE" means in relation to any Bank the office specified as
such in Schedule 2 or in the Substitution Certificate by which such
Bank became a party hereto or such other office notified by such Bank
to the Facility Agent by not less than 5 Business Days' notice as the
office through which it will perform all or any of its obligations
under this Agreement.
"FEE LETTERS" means the letters referred to in Clauses 25.1 and 25.3.
"FINAL REPAYMENT DATE" means 31st March, 2001.
"FINANCE DOCUMENTS" means this Agreement, the Fee Letters, the
Substitution Certificates, the Borrower Accession Agreements, the
Guarantor Accession Agreements, the Security Documents, the Hedging
Documents, any documents constituting or evidencing amounts outstanding
under any Ancillary Facility and any other document designated as such
by the Facility Agent and the Parent.
"FINANCE PARTY" means the Arranger, each Bank, each Ancillary Bank, the
Hedging Bank, the Facility Agent or the Security Agent (together the
"FINANCE PARTIES").
"FINANCIAL FORECASTS" means the document of the same title in the agreed
form.
"FRENCH FRANCS" and "FFR" means the lawful currency for the time being of
France.
"GETTY IMAGES" means Getty Images Limited, a company incorporated in
England under registered number 948785.
"GETTY U.K." means Getty Communications plc, a company incorporated in
England with registered number 3005770.
"GROUP" means the Parent and its Subsidiaries.
"GUARANTOR" means an Original Guarantor and any Additional Guarantor.
"GUARANTOR ACCESSION AGREEMENT" means a deed substantially in the form of
Part III of Schedule 5 with such amendments as the Facility Agent may
approve or reasonably require.
"HEDGING BANK" means Midland Bank plc and/or HSBC Investment Bank plc
in its capacity as the provider of hedging facilities pursuant to the
Hedging Documents.
"HEDGING DOCUMENTS" means the agreements described more particularly in
Schedule 10 and any and all currency or interest rate swap and/or
interest cap and/or other hedging agreements entered into or to be
entered into by any Obligor with the Hedging Bank as may hereafter be
agreed in writing between the Parent, the Hedging Bank and the Facility
Agent to constitute the Hedging Documents in each case as, and
including, any instrument pursuant to which the same are novated,
varied, supplemented or amended from time to time.
"HEDGING LIABILITIES" means all present and future liabilities (actual
or contingent) payable or owing by the Obligors or any of them to the
Hedging Bank or any of them under or in
<PAGE>
11
connection with the Hedging Documents, whether or not matured and
whether or not liquidated, together in each case with:
(a) any novation, deferral or extension of any of those liabilities
permitted by the terms of this Agreement;
(b) any claim for damages or restitution arising out of, by reference
to or in connection with any of the Hedging Documents;
(c) any claim flowing from any recovery by an Obligor or a receiver
or liquidator thereof or any other person of a payment or
discharge in respect of any of those liabilities on grounds of
preference or otherwise; and
(d) any amounts (such as post-insolvency interest) which would be
included in any of the above but for any discharge,
non-provability, unenforceability or non-allowability of the same
in any insolvency or other proceedings.
"HOLDING COMPANY" means an entity of which another person is a Subsidiary.
"INTELLECTUAL PROPERTY RIGHTS" means all know-how, patents, trademarks,
service marks, designs, business names, topographical or similar
rights, copyrights and other intellectual property rights and any
interests (including by way of licence) in any of the foregoing (in
each case whether registered or not and including all applications for
the same) of any member of the Group.
"INTEREST" means:
(a) interest and amounts in the nature of interest accrued;
(b) prepayment penalties or premiums incurred in repaying or prepaying
any Borrowings;
(c) discount fees and acceptance fees payable or deducted in respect of
any Borrowings (including all fees payable in connection with any
letter of credit or guarantee); and
(d) any other costs, expenses and deductions of the like effect
(excluding the interest element of finance leases (unless and
until the amount of any such leases permitted by Clause 21.11(ii)
is increased, with the consent of the Majority Banks, above U.S.
$2,000,000)) and any net payment (or, if appropriate in the
context, receipt) under any interest rate hedging agreement or
instrument (including without limitation under the Hedging
Documents), taking into account any premiums payable for the same
and the interest element of any net payment (plus or minus any
accrued exchange gains or losses) under any currency hedging
instrument or arrangement,
and "INTEREST" includes commitment and non-utilisation fees (including,
without limitation, those payable hereunder) but excludes agent's and
front-end, management, arrangement and participation fees with respect
to any Borrowings (including, without limitation, those payable
hereunder) and any up-front premium or front-end fee payable pursuant
to any Hedging Document.
<PAGE>
12
"INTEREST DATE" means, in relation to any Advance or any overdue
amount, the last day of an Interest Period relating thereto.
"INTEREST PERIOD" means, in relation to any Advance, each period
determined in accordance with Clause 11.1 and, in relation to any
overdue amount, each period determined in accordance with Clause 10.3.
"IRC" means the United States Internal Revenue Code of 1986, as amended
from time to time, or any successor statute and any regulations
promulgated thereunder.
"LIBOR" in relation to any Advance or overdue amount for any Interest
Period relative thereto, means:
(i) the annual rate of interest which appears on Telerate page 3750
or any equivalent successor to any such page, as appropriate, (as
determined by the Facility Agent) (the "TELERATE SCREEN") at or
about 11.00 a.m. (London time) two Business Days before the
commencement (or in the case of an Advance or overdue amount
denominated in Sterling, on the first day) of such Interest
Period, as being the interest rate offered in the London
Interbank Eurocurrency Market for the offering of deposits in the
currency of such Advance for a period comparable to such Interest
Period; and
(ii) (if the relevant rate does not appear on the Telerate Screen for
the purposes of paragraph (i) or the Facility Agent determines
that no rate for a period of comparable duration to the relevant
Interest Period appears on the Telerate Screen) the arithmetic
mean (rounded upward to four decimal places) of the rates
supplied to the Facility Agent at its request, quoted by the
Reference Banks to leading banks in the London Interbank
Eurocurrency Market at or about 11.00 a.m. (London time) two
Business Days before the commencement (or in the case of an
Advance or overdue amount denominated in Sterling, on the first
day) of such Interest Period for the offering of deposits in the
currency of such Advance for a period comparable to its Interest
Period, provided that if any of the Reference Banks fails to
supply such offered rate to the Facility Agent by 1.00 p.m.
(London time) on the required date, "LIBOR" for the relevant
Interest Period shall be determined on the basis of the
quotations of the remaining Reference Banks.
"MAJORITY BANKS" means, at any time, Banks the aggregate of whose
Commitments (ignoring for this purpose any reduction therein effected by
Clause 2.2(f)):
(a) represent by value at least 66 2/3 per cent. of the Total
Commitments; or
(b) if the Total Commitments have been reduced to zero, represented
by value at least 66 2/3 per cent. of the Total Commitments
immediately before the reduction.
"MARGIN" means:
(a) in the case of the Tranche A Advance or a Tranche B Advance, one
point two five per cent. (1.25%) per annum, subject to the
operation of Clause 10.5; and
(b) in the case of a Tranche C Advance, one point two five per cent.
(1.25%) per annum.
<PAGE>
13
"MATERIAL ADVERSE EFFECT" means any effect which is, or is reasonably
likely:
(a) to be materially adverse to (i) the ability of any Obligor to
perform its material obligations under any of the Finance
Documents, or (ii) the ability of the Parent to comply with its
obligations under Clause 22, or (iii) the business, assets or
financial condition of the Parent, or the Group taken as a whole;
and/or
(b) to result in any of the Transaction Documents not being legal,
valid and binding on, and enforceable substantially in accordance
with its terms against, any party to that Transaction Document
and/or (in the case of Security Documents) not providing to the
Security Agent for itself and on behalf of the Banks, perfected,
enforceable security over the assets purported to be covered by
that Security Document, in a manner and to an extent reasonably
considered by the Majority Banks to be materially adverse to
their interests under the Finance Documents.
"MATERIAL SUBSIDIARY" means each Borrower (other than the Parent),
Print Merger, Inc., after its merger with PhotoDisc Inc. pursuant to
the Merger Agreement, and each member of the Group (a) whose pre-tax
profits and/or the pre-tax profits of whose trading as agent for other
members of the Group represent five per cent. or any greater percentage
of the Consolidated EBITDA of the Group in any annual Accounting
Period, or (b) the book value of whose gross assets is five per cent.
or more of the consolidated gross assets of the Group, or (c) whose
aggregate turnover and/or the turnover of whose trading activities as
agent for other members of the Group in any annual Accounting Period,
calculated on a consolidated basis and excluding VAT and/or sales tax,
have been five per cent. or more of the turnover (similarly calculated)
of the Group, and for this purpose:
(i) in the case of a company which itself has Subsidiaries, the
calculation shall be made by using the actual consolidated
pre-tax profits or gross assets or turnover, as the case may be,
of it and its Subsidiaries and in accordance with the Applicable
Accounting Principles;
(ii) the calculation shall be made by reference to:
(I) the latest accounts of the relevant company (or, as the
case may be, a consolidation of the accounts of it and its
Subsidiaries) used for the purpose of the then latest
unaudited monthly, quarterly or audited annual consolidated
Accounts of the Group delivered to the Facility Agent under
Clause 21.2; and
(II) those unaudited monthly, quarterly or audited annual
consolidated Accounts (as the case may be) of the Group;
(iii) each member of the Group named in Schedule 9 or, if later, in the
latest annual list of Material Subsidiaries provided by the
Parent to the Facility Agent pursuant to Clause 21.2(d)(i)(B)
shall be deemed to be a Material Subsidiary until either the next
list of Material Subsidiaries is delivered to the Agent pursuant
to such Clause or it is shown to the Facility Agent's reasonable
satisfaction not to be a Material Subsidiary by reference to the
financial information referred to in paragraph (ii) above and on
the basis of the tests set out in this definition; and
<PAGE>
14
(iv) any member of the Group which is not a Material Subsidiary and to
which any Material Subsidiary transfers in any annual Accounting
Period any fixed assets in any transaction or series of
transactions (related or not) which transfer would result in the
transferee company meeting the test referred to in (b) above
(calculated by reference to the last set of accounts of the
relevant transferee company referred to in paragraph (ii)(I)
above but taking into account such transfer) shall be deemed to
be a Material Subsidiary (and the Material Subsidiary from which
the assets were transferred shall be deemed to continue to be a
Material Subsidiary) unless and until it is shown (in each such
case) to the Facility Agent's reasonable satisfaction not to be a
Material Subsidiary under paragraph (b) above.
"MERGER" means the merger of PhotoDisc and Print Merger, Inc. to be
effected in accordance with the Merger Agreement.
"MERGER AGREEMENT" means the agreement among Getty U.K., PhotoDisc, Print
Merger, Inc., and the Parent dated 15th September, 1997 providing, inter
alia, for the merger of PhotoDisc and Print Merger, Inc.
"MLA COST" means the cost imputed to the Banks of compliance with the
Mandatory Liquid Assets requirements of the Bank of England during an
Interest Period, expressed as a rate per annum and determined in
accordance with Schedule 8.
"MULTIEMPLOYER PLAN" means a Plan which is a multiemployer plan as
defined in section 3(37) or 4001(a)(3) of ERISA.
"NON-OBLIGOR" means each member of the Group which is not an Obligor.
"OBLIGOR" means any Borrower and any Guarantor.
"OBLIGORS' AGENT" means the Parent appointed to act on behalf of each
Obligor pursuant to Clause 2.4.
"OPTIONAL CURRENCY" means Dollars, Deutschmarks or French Francs.
"ORIGINAL BORROWERS" means each of those companies specified in
Schedule 1 Part I.
"ORIGINAL STERLING AMOUNT" means in relation to any amount:
(a) (if denominated in Sterling) the principal amount which is, or is
to be, outstanding or drawn; or
(b) (if denominated in an Optional Currency) the Sterling Equivalent
of the principal amount which is, or is to be, outstanding or
drawn calculated, in the case of an Advance, three Business Days
prior to the Utilisation Date for the making of that Advance or
in the case of any other amount, three Business Days prior to the
date on which the calculation is made.
<PAGE>
15
"PARTY" means a party to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a Plan that is subject to Title IV of ERISA.
"PHOTODISC" means PhotoDisc, Inc., a corporation incorporated under the
laws of Washington, U.S.A.
"PHOTODISC CLOSING ACCOUNT" means the account in the name of the Parent
at Wells Fargo Bank, San Francisco into which the Tranche A Advance and
other monies available to the Parent are to be paid for the purposes of
Closing.
"PHOTODISC MERGER CONSIDERATION" means the total consideration
(including, without limitation, all amounts paid by PhotoDisc to
holders of options to subscribe for PhotoDisc stock on the Closing Date
pursuant to PhotoDisc's offer to repurchase certain such options) to be
paid on Closing to the Vendors under the Merger Agreement in respect of
the merger of Print Merger, Inc. and PhotoDisc provided for therein.
"PLAN" means an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA.
"PROFORMA ACCOUNTS" means the form of monthly and quarterly
consolidated management Accounts of the Group in the format and with
the headings and level of information agreed by the Parent and the
Facility Agent from time to time (or if not so agreed as reasonably
required by the Facility Agent).
"PROSPECTUS" means the prospectus of the Parent dated 7th January, 1998
in relation to the issue of certain shares of common stock in the
Parent to be quoted on the NASDAQ National Market to be issued pursuant
to the Merger and the Scheme of Arrangement.
"QUALIFYING BANK" means a bank as defined in Section 840A of the Income
and Corporation Taxes Act 1988 (or any statutory re-enactment or
modification thereof in substantially the same form and context as at
the date hereof) which is within the charge to corporation tax as
regards interest payable or paid to it under the Finance Documents.
"RECOGNISED BANK" means in respect of Utilisations made available to
any Borrower, a bank, fund, trust or other financial institution which
is:
(i) (in the case of a Borrower not resident in the United Kingdom for
tax purposes) for the time being lending through an office,
branch, Affiliate or agency in the jurisdiction of incorporation
of such Borrower; or
(ii) (in the case of a Borrower resident in the United Kingdom for tax
purposes) a Qualifying Bank; or
(iii) (if such bank, fund, trust or other financial institution complies
with neither (i) nor (ii) above):
<PAGE>
16
(A) at the time the bank, fund, trust or financial institution
becomes a party to this Agreement, incorporated in a
country with which the jurisdiction of incorporation of
such Borrower has an appropriate double taxation treaty
which provides at the date hereof (or in the case of a
transferee under Clause 30, at the date of transfer) under
its terms for exemption from that jurisdiction's income Tax
on that jurisdiction's source interest for an entity such
as such bank, fund, trust or other financial institution
when acting through the office, branch, Affiliate or agency
through which it is acting; and
(B) prior to the first Interest Date after the date on which it
became a party to this Agreement on which any interest on
any of the Advances to such Borrower in which it has a
participation is payable, has made and filed an appropriate
application for exemption under such treaty (or would have
done so but for any failure by such Borrower to comply with
its obligations under Clause 13.5).
"REFERENCE BANKS" means, subject to Clause 30.4, the principal London
offices of Midland Bank plc and of such other Banks as may become
Reference Banks pursuant to that Clause.
"REPAYMENT DATE" means each date identified in Clause 8.1 or Clause 8.2.
"REPAYMENT INSTALMENT" means each Tranche A Repayment Instalment (as
defined in Clause 8.1) and each Tranche B Repayment Instalment (as
defined in Clause 8.2).
"REPORTABLE EVENT" shall have the meaning set forth in Section 4043(b)
of ERISA as to which the PBGC has not by regulation waived the notice
requirement of Section 4043(a) of ERISA.
"REPORTS" means each of:
(a) the Accountant's Report;
(b) the legal due diligence report dated 9th September, 1997,
prepared by Shearman & Sterling with respect to PhotoDisc Inc.
and its Subsidiaries;
(c) the taxation letter headed "Interest on Midland Bank Debt" dated
28th January, 1998 prepared by Shearman & Sterling;
(d) the legal due diligence report entitled "Project Picasso legal
review" dated 4th February, 1998, prepared by Clifford Chance; and
(e) the financial due diligence report entitled "Preliminary Review
of the Financial Affairs of Picasso" prepared by Coopers &
Lybrand dated 15th September, 1997,
in each case, in the agreed form.
"REQUEST" means a request made by the Obligors' Agent on behalf of a
Borrower for a Utilisation, substantially in the form of Schedule 4.
<PAGE>
17
"RESERVATIONS" means the principle that equitable remedies are remedies
which may be granted or refused at the discretion of the court, the
limitation of enforcement by laws relating to bankruptcy, insolvency,
liquidation, reorganisation, court schemes, moratoria, administration
and other laws generally affecting the rights of creditors, the time
barring of claims under the Limitation Acts, and the possibility that
an undertaking to assume liability for or to indemnify a person against
non-payment of U.K. stamp duty may be void, defences of set-off or
counterclaim and similar principles.
"SCHEME OF ARRANGEMENT" means the process pursuant to Section 425
Companies Act 1985 whereby shares in Getty U.K. are exchanged for
shares in the Parent on or before the Closing Date.
"SECURITY DOCUMENTS" means the share charges and other security
documents identified in Schedule 6, together with such other security
documents as may be required to be entered into by any Obligor pursuant
to any of the Finance Documents.
"SHARES" means each and any of the shares in the capital of the Parent.
"STERLING" and "L" means the lawful currency for the time being of the
United Kingdom.
"STERLING EQUIVALENT" means, in relation to all amounts expressed or
denominated in an Optional Currency, the equivalent thereof in Sterling
converted at the Agent's Spot Rate of Exchange on the date of the
relevant calculation (and if used in relation to an amount expressed or
denominated in Sterling, such amount).
"STRUCTURE MEMORANDUM" means the memorandum and corporate chart in the
agreed form.
"SUBSIDIARY" means in relation to any person, any entity which is
controlled directly or indirectly by that person or of whose dividends
or distributions that person is entitled to receive more than 50 per
cent. and any entity (whether or not so controlled) treated as a
subsidiary in the latest financial statements of that person from time
to time (provided that such entity or that person's interest in such
entity has not been disposed of after the date of such financial
statements in accordance with the Finance Documents), and "CONTROL" for
this purpose means the direct or indirect ownership of the majority of
the voting share capital of such entity or the right or ability to
direct management to comply with the type of material restrictions and
obligations contemplated in this Agreement or to determine the
composition of a majority of the board of directors (or like board) of
such entity, in each case whether by virtue of ownership of share
capital, contract or otherwise.
"SUBSTITUTION CERTIFICATE" has the meaning given to it in Clause 30.3.
"TARGET GROUP" means (a) each of PhotoDisc, PhotoDisc Europe Limited,
PhotoDisc Deutschland GmbH, PhotoDisc International, Inc., and
PhotoDisc Australia Pty Limited and their respective Subsidiaries,
taken together, and (b) Allsport Photographic plc, Allsport Photography
(US) Inc. and All-sport (UK) Limited and their respective Subsidiaries,
taken together.
"TAXES" means all taxes, imposts, duties, levies, charges, deductions
and withholdings in the nature or on account of tax, together with all
interest thereon and penalties with respect thereto (and "TAX" shall be
construed accordingly).
<PAGE>
18
"TRANSACTION DOCUMENTS" means the Finance Documents and the Acquisition
Agreements.
"U.K. GROUP" means Getty U.K. and its Subsidiaries from time to time.
"U.S. OBLIGOR" means each Obligor incorporated in the United States of
America (or any of its states or territories or any political or legal
sub-division thereof).
"U.S. PERSON" means a person who is a citizen or resident of the United
States of America and any corporation or other entity created or
organised in or under the laws of the United States of America or any
political or legal sub-division thereof.
"UTILISATION" means a utilisation under this Agreement of the Tranche A
Facility (a "TRANCHE A UTILISATION") and/or a utilisation under this
Agreement of the Tranche B Facility (a "TRANCHE B UTILISATION") and/or
a utilisation under this Agreement of the Tranche C Facility (a
"TRANCHE C UTILISATION").
"UTILISATION DATE" means in relation to each Utilisation, the date
specified as such in the relative Request or, on and after the making
and/or issue thereof pursuant to such Request, the date on which it was
made and/or issued.
"VENDORS" means, in the context of the Allsport Sale and Purchase
Agreement, the persons defined as Sellers therein and, in the context
of the Merger Agreement, the common and preferred stockholders of
PhotoDisc and each holder of options for shares therein.
1.2 CONSTRUCTION
(a) In this Agreement, unless the contrary intention appears, a
reference to:
(i) "ASSETS" includes properties, revenues and rights of every
description present, future and contingent;
an "AUTHORISATION" includes an authorisation, consent,
approval, resolution, licence, exemption, filing,
registration and notarisation;
a "MONTH" is a reference to a period starting on one day in
a calendar month and ending on the numerically
corresponding day in the next calendar month, except that,
if such period starts on the last day in a calendar month
or there is no numerically corresponding day in the month
in which that period ends, that period shall end on the
last Business Day in such later calendar month;
a "REGULATION" includes any regulation, rule, order,
official directive, request or guideline (whether or not
having the force of law) of any governmental body, agency,
department or regulatory, self-regulatory or other
authority or organisation;
(ii) a provision of a law is a reference to that provision as
amended or re-enacted;
(iii) a Clause or a Schedule is, unless otherwise specified, a
reference to a clause of or a schedule to this Agreement;
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19
(iv) a Transaction Document or any other document is a reference
to that Transaction Document or that other document as
amended, novated or supplemented from time to time
(including, where relevant by any Borrower Accession
Agreement, Guarantor Accession Agreement and/or
Substitution Certificate);
(v) a time of day is a reference to London time;
(vi) words importing the singular shall include the plural and
vice versa;
(vii) a document in an "AGREED FORM", is a reference to such
document either in a form previously agreed in writing by
or on behalf of the Parent and the Facility Agent or in
form and substance satisfactory to the Banks;
(viii) a Party or other person includes, unless otherwise
provided in this Agreement, such Party's or person's
permitted successors, assigns, transferees or substitutes;
and
(ix) the "EQUIVALENT IN OTHER CURRENCIES" or like terms shall,
unless otherwise agreed or the context otherwise requires,
mean the Dollar Equivalent of the relevant amount in other
currencies.
(b) Unless the contrary intention appears, a term used in any other
Finance Document or in any notice given under or in connection
with any Finance Document has the same meaning in that Finance
Document or notice as in this Agreement.
(c) The index to and the headings in this Agreement are for
convenience only and are to be ignored in construing this
Agreement.
2. THE FACILITIES
2.1 FACILITIES
Subject to the terms of this Agreement, the Banks grant (or in the case
of paragraph (d) below each Ancillary Bank grants):
(a) TRANCHE A FACILITY: A term loan facility under which the Banks
shall, when requested by the Obligors' Agent pursuant to a
Request, make to the Parent one Tranche A Advance in Dollars in
an amount not exceeding the Tranche A Commitments;
(b) TRANCHE B FACILITY: A term loan facility under which the Banks
shall, when requested by the Obligors' Agent pursuant to a
Request, make to Getty U.K. one Tranche B Advance (drawn
initially in Sterling) in an amount not exceeding the Tranche B
Commitments;
(c) TRANCHE C FACILITY: A revolving credit facility under which the
Banks shall, when requested by the Obligors' Agent pursuant to a
Request, make to the relevant Borrower, Tranche C Advances
denominated in Sterling or an Optional Currency up
<PAGE>
20
to an aggregate amount outstanding at any time the Original
Sterling Amount of which does not exceed the aggregate of the
Tranche C Commitments; and
(d) ANCILLARY FACILITIES: Ancillary facilities under which each
Ancillary Bank may provide to certain Borrowers:
(i) overdraft, cheque drawing and other current account
facilities; and/or
(ii) forward foreign exchange facilities; and/or
(iii) guarantee, bonding, documentary or stand-by letter of
credit facilities; and/or
(iv) such other facilities or financial accommodation as the
Obligors' Agent and the relevant Ancillary Bank may agree,
in an aggregate amount outstanding at any time not exceeding (A)
its Ancillary Commitment, plus (B) without any obligation on any
Ancillary Bank to make the same available, in respect of non-cash
advance facilities only an aggregate amount not exceeding
L3,250,000 outstanding at any time under all Ancillary Facilities.
If facilities of the type referred to in (B) above are made
available by any Ancillary Bank, such facilities shall be made so
available under the documents evidencing the Ancillary
Facilities.
2.2 LIMITATIONS
(a) The Tranche A Advance and the Tranche B Advance must be drawn down at
Closing.
(b) No Tranche B Advance may be made unless and until the Tranche A Advance
has been, or is on the same Utilisation Date being, made.
(c) No Tranche C Utilisation (and no utilisation of any Ancillary Facility)
may be made until the Tranche A Advance and the Tranche B Advance have
been, or are on the same Utilisation Date being, made.
(d) No more than five Tranche C Utilisations may be outstanding at any time.
(e) No Borrower (other than Getty U.K.) may utilise the Tranche C Facility
unless it is at the relevant Utilisation Date a subsidiary of Getty U.K.
(f) The Tranche C Commitment of each Ancillary Bank shall be reduced pro
tanto by the amount of its Ancillary Commitment but shall automatically
increase pro tanto upon any amount of its Ancillary Commitment ceasing
to be available to the relevant Borrowers.
(g) The aggregate of the Original Sterling Amount of the outstanding
Tranche C Utilisations and the Sterling Equivalent of the Ancillary
Outstandings at any time may not exceed the Tranche C Commitments then
in effect (ignoring for this purpose the effect of Clause 2.2(f)).
<PAGE>
21
(h) Notwithstanding Clause 2.1(a) above, in the event that the Cash Price
is less than U.S. $24,000,000, the maximum amount of the Tranche A
Commitments that may be drawn at Closing shall be reduced to an amount
equal to the Cash Price.
2.3 NATURE OF A FINANCE PARTY'S RIGHTS AND OBLIGATIONS
(a) No Bank is obliged to participate in the making of any Utilisation (i)
in the case of the Tranche A Advance or a Tranche B Advance, if its
participation in such Advance would exceed the amount of its Tranche A
Commitment or Tranche B Commitment, as the case may be, and (ii) in the
case of a Tranche C Utilisation, if to do so would cause the aggregate
of its participation in the Tranche C Utilisations outstanding under
this Agreement to exceed its Tranche C Commitment.
(b) The obligations of a Finance Party under the Finance Documents are
several. Failure of a Finance Party to carry out those obligations does
not relieve any other Party of its obligations under the Finance
Documents. No Finance Party is responsible for the obligations of any
other Finance Party under the Finance Documents.
(c) The rights of a Finance Party under the Finance Documents are divided
rights. A Finance Party may, except as otherwise stated in the Finance
Documents, separately enforce those rights.
(d) (i) The obligations of each Bank under this Agreement in respect of
each Advance to be made available by it under this Agreement may
be discharged by procuring that an Affiliate (which is itself a
party to this Agreement) of such Bank lends or otherwise makes
available to the relevant Borrower in accordance with and subject
to the terms of this Agreement the amount which such Bank is
obliged to lend or so make available hereunder.
(ii) The provisions of Clauses 10.1 (insofar as any Additional Cost is
incurred by such Affiliate), 13, 14, 15, 16, 30 and 32 shall
apply to any such Affiliate of any Bank and to any Advance made
by any such Affiliate as if such Affiliate were a Bank.
2.4 OBLIGORS' AGENT
(a) Each Obligor (other than the Parent) irrevocably authorises the Parent
to act on its behalf as its agent in relation to the Finance Documents
and irrevocably authorises (i) the Parent on its behalf to supply all
information concerning itself, its financial condition and otherwise to
the relevant persons contemplated under this Agreement and to give all
notices and instructions (including, in the case of a Borrower,
Requests and notices pursuant to Clause 11.1), to execute on its behalf
any Finance Document and to enter into any agreement in connection with
the Finance Documents notwithstanding that the same may affect such
Obligor, without further reference to or the consent of such Obligor,
and (ii) each Finance Party to give any notice, demand or other
communication to be given to or served on such Obligor pursuant to the
Finance Documents to the Parent on its behalf, and in each such case
such Obligor will be bound thereby as though such Obligor itself had
given such notice and instructions, executed such agreement or received
any such notice, demand or other communications.
(b) Every act, omission, agreement, undertaking, settlement, waiver, notice or
other communication given or made by the Obligors' Agent under this
Agreement, or in connection
<PAGE>
22
with this Agreement (whether or not known to any other Obligor and
whether occurring before or after such other Obligor became an Obligor
under this Agreement) shall be binding for all purposes on all other
Obligors as if the other Obligors had expressly made, given or
concurred with the same. In the event of any conflict between any
notices or other communications of the Obligors' Agent and any other
Obligor, those of the Obligors' Agent shall prevail.
2.5 CHANGE OF CURRENCY
(a) If more than one currency or currency unit are at the same time
recognised by the central bank of any country as the lawful currency of
that country, then:
(i) any reference in the Finance Documents to, and any obligations
arising under the Finance Documents in, the currency of that
country shall be translated into, or paid in, the currency or
currency unit of that country designated by the Facility Agent;
and
(ii) any translation from one currency or currency unit to another
shall be at the official rate of exchange recognised by the
central bank for the conversion of that currency or currency unit
into the other, rounded up or down by the Facility Agent acting
reasonably.
(b) If a change in any currency of a country occurs, this Agreement will be
amended to the extent the Facility Agent acting in good faith specifies
to be necessary to reflect the change in currency and to put the Banks
in the same position, so far as possible, that they would have been in
if no change in currency had occurred.
2.6 EXTENSION OF TRANCHE C AVAILABILITY PERIOD
Without prejudice to the duration of the Tranche C Availability Period
specified in Clause 1.1, the Facility Agent agrees that it shall
consult with the Parent not less than one month before the expiry of
the Tranche C Availability Period with a view to arranging terms
satisfactory to each of the Banks with a Tranche C Commitment and to
the Parent for an extension to the Tranche C Availability Period.
Nothing in this Clause 2.6 shall oblige any Bank to agree to extend the
Tranche C Availability Period or shall impose any obligation on the
Facility Agent beyond consultation with the Parent as aforesaid.
3. PURPOSE
(a) The proceeds of the Tranche A Advance shall be applied in or towards
financing payment of the Cash Price payable at Closing under the Merger
Agreement and any Acquisition Costs.
(b) The proceeds of the Tranche B Advance shall be applied in or towards
financing repayment of all amounts due from Getty U.K. or Getty Images
to Midland Bank plc under the Existing Facilities, and subject to
repayment in full of all such amounts for the general corporate
purposes of the U.K. Group.
(c) The proceeds of the Tranche C Utilisations shall be applied in or
towards financing the general working capital requirements of members
of the U.K. Group and/or intercompany loans to other members of the
Group (provided that the making of such intercompany loan is permitted
by Clause 21.10 and the borrowing of such intercompany loan is
permitted by Clause 21.17).
<PAGE>
23
(d) Each Borrower undertakes that no Utilisation shall be used in any way
which would be illegal under or cause the invalidity or
unenforceability of any Finance Document under any applicable law.
(e) Without affecting the obligations of any Obligor in any way, no Finance
Party is bound to monitor or verify the application of any Utilisation.
4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO FIRST UTILISATION
The obligations of each Finance Party to the Obligors under this
Agreement are subject to the conditions precedent that:
(a) DOCUMENTS: the Facility Agent shall have received all of the
documents set out in Part I of Schedule 3 in the agreed form, and
each of the documents referred to in Part I of Schedule 3 as
being certified shall be certified on behalf of the party
providing that document by one of its directors or, in the case
of any U.S. Obligor, by one of its officers as being a true,
complete and up to date copy and in full force and effect as at
the date such document is required to be delivered;
(b) ACQUISITIONS: the Facility Agent shall be satisfied that (i)
pursuant to the Scheme of Arrangement not less than 100% of the
ordinary shares in Getty U.K. are or will immediately after
Closing be legally and beneficially owned by the Parent (and the
Shares to be issued at Closing to the transferors of shares in
Getty U.K. have been issued to and are registered in their
respective names in the books of the Parent), (ii) at Closing all
of the stock of Print Merger, Inc. will be owned by the Parent,
(iii) pursuant to the Merger Agreement, upon Closing PhotoDisc
will be merged into Print Merger, Inc. with Print Merger, Inc. as
the surviving entity and all of the stock of PhotoDisc will be
cancelled and replaced by rights of the holders to receive their
share of the PhotoDisc Merger Consideration and (iv) pursuant to
the Allsport Sale and Purchase Agreement not less than 100% of
the ordinary shares in Allsport Photographic plc are or will
immediately after Closing be legally and beneficially owned by
Getty U.K.;
(c) LITIGATION: the Original Bank shall be satisfied that:
(i) no litigation which is current, pending or threatened may
have a material adverse effect on the business, assets or
financial condition of the Parent, the Target Group, any
Obligor or the Group; and
(ii) the litigation commenced by Digital Stock Corporation in
San Diego and any related actions against Getty
Communications plc have been irrevocably withdrawn and
settlement in relation thereto is full and final, evidenced
in writing and the cost of settlement thereof to the
members of the Group aggregates less than U.S. $2,000,000;
<PAGE>
24
(d) CLOSING: the Facility Agent shall be satisfied that:
(i) the proceeds of the Tranche A Advance and cash standing to
the credit of the PhotoDisc Closing Account are at least
equal to the aggregate of (A) the amount required to be
paid in cash by the Parent and/or PhotoDisc to the Vendors
at Closing pursuant to the Acquisition Agreements
(including the Cash Price) in respect of the Acquisition of
PhotoDisc, and (B) the Acquisition Costs;
(ii) the proceeds of the Tranche B Advance and cash of Getty
U.K. are at least equal to the aggregate amount of
indebtedness under the Existing Facilities and any other
Borrowings required to be repaid by the relevant Borrower
at Closing in order that Clause 21.10 shall be complied
with and the cash element of the consideration payable at
Closing to the Vendors under the Allsport Sale and Purchase
Agreement;
(iii) the obligations of all the parties to the Transaction
Documents (other than the Finance Documents) are
unconditional save to the extent that any of those
obligations are conditional upon the making of a
Utilisation or Utilisations under this Agreement;
(iv) Getty Investments LLC has subscribed for shares in the
Parent in cash in an aggregate amount of U.S.$28,000,000;
(e) AVAILABILITY: unless otherwise agreed in writing by the Banks the
Closing Date must occur by no later than 27th February, 1998;
(f) MATERIAL ADVERSE CHANGE: no event or series of events has
occurred or come to light which in the opinion of the Original
Bank has or is reasonably likely to have a material adverse
effect on the business, assets or financial condition of the
Parent or the UK Group (since 31st December, 1997) or the Target
Group (since 30th September, 1997) (and in the case of Allsport
Photographic plc or its Subsidiaries, since 31st December, 1997);
(g) MARKET CHANGE: since the date of this Agreement there has not
been any material change in the financial markets of the United
Kingdom or the United States or any material fluctuation in the
exchange rates relating to the currencies of such countries or
the financial condition of any Obligor which, in the opinion of
the Original Bank, would make it impracticable to proceed with
the transactions contemplated by the Finance Documents or would
materially and adversely impact upon the ability of any Borrower
to repay (and pay the interest on) any Advance to be made to it
hereunder or upon the ability of the Arranger to syndicate the
Facilities.
(h) ENCUMBRANCES: the Facility Agent shall be satisfied that any
Encumbrances over all or any material portion of PhotoDisc's
assets have been released before Closing and the relevant filings
recording such release have been made.
<PAGE>
25
4.2 CONDITIONS PRECEDENT TO EACH UTILISATION
The obligations of the Finance Parties in respect of each Utilisation
are subject to the further condition precedent that both at the date of
the Request for such Utilisation and at the Utilisation Date therefor:
(a) in respect of each Tranche C Advance requested to be made to a
Borrower which is matched by a Tranche C Advance of the same (or
a greater) amount which is repaid by such Borrower under Clause
8.3 on the proposed Utilisation Date for such Advance (a
"ROLLOVER UTILISATION"), no Event of Default has occurred and is
continuing or would result from the making of such Rollover
Utilisation which has not been waived;
(b) in respect of each Utilisation (other than a Rollover
Utilisation) the representations and warranties in Clause 20 to
be repeated on those dates in accordance with Clause 20.2 are
correct and will be correct immediately after the Utilisation is
made and no Default has occurred and is continuing or would
result from the making of such Utilisation which has not been
waived.
5. DRAWDOWN
5.1 RECEIPT OF REQUESTS
A Borrower may make a Utilisation if the Facility Agent receives from
the Obligors' Agent, not later than 11.00 a.m. three Business Days
before the proposed Utilisation Date (or, in respect of Utilisations to
be made at Closing, by such later time as the Facility Agent may
agree), a Request complying with Clause 5.2.
5.2 COMPLETION OF REQUESTS
Each Request will specify the name of the relevant Borrower and:
(a) the Utilisation Date, being a Business Day in the relevant
Availability Period;
(b) whether the Utilisation is the Tranche A Advance, the Tranche B
Advance or a Tranche C Utilisation;
(c) the amount of the Utilisation being, (I) in the case of the
Tranche A Advance an amount less than or equal to the aggregate
amount of the Tranche A Commitments, (II) in the case of the
Tranche B Advance an amount less than or equal to the aggregate
amount of the Tranche B Commitments and (III) in the case of a
Tranche C Utilisation, an Original Sterling Amount not less than
L1,000,000 and if more an integral multiple of L500,000 (or
equivalent) or the then Available Facility Amount, provided
always that no Requested Amount for a Tranche C Utilisation may
exceed the then Available Facility Amount;
(d) the duration of its (or its first) Interest Period;
(e) the currency of the Advance requested (being Dollars in the case
of the Tranche A Advance, Sterling in the case of a Tranche B
Advance made on the Closing Date and an Optional Currency or
Sterling in the case of a Tranche C Advance);
<PAGE>
26
(f) payment instructions (being, in the case of a Tranche A Advance
instructions to pay to the Closing Accounts and in the case of a
Tranche B Advance, instructions to pay Midland Bank plc).
The Facility Agent shall promptly notify each Bank of the details of
the requested Utilisation and, in the case of an Advance, the currency
and amount of its participation in such Advance.
5.3 AMOUNT OF EACH BANK'S PARTICIPATION IN ADVANCE
The amount of a Bank's participation in any Advance will be the
proportion of the Advance which its Commitment bearing the same
designation bears to the aggregate of the Banks' Commitments bearing
such designation on the date of receipt of the relevant Request.
5.4 PAYMENT OF PROCEEDS
Subject to the terms of this Agreement, each Bank shall make its
participation in each Advance available to the Facility Agent for the
relevant Borrower on the relevant Utilisation Date.
6. DENOMINATION OF TRANCHE B ADVANCES
6.1 SELECTION
(a) The Obligors' Agent may select the currency of a Tranche B Advance for
an Interest Period in either the relevant Request or, if such Advance
is outstanding, a notice received by the Bank not later than 11.00 a.m.
on the third Business Day before the commencement of that Interest
Period. In the latter case, the Obligors' Agent may specify whether
that Loan is to be denominated in more than one currency, and, if so,
the amount in Sterling of each such currency (being an Original
Sterling Amount of a minimum of L1,000,000 or the balance of the
Tranche B Advance, as the case may be, if more).
(b) If a Borrower fails to give a notice in respect of an outstanding
Tranche B Advance in accordance with paragraph (a) above, that Tranche
B Advance shall remain denominated for its next Interest Period in the
same currency in which it is then denominated.
(c) Each part of a Tranche B Advance which is to be denominated in a
different currency from any other part of that Tranche B Advance shall
be treated as a separate Tranche B Advance.
6.2 DRAWDOWNS
The first drawdown under Tranche B shall be made in Sterling. If a
Tranche B Advance is to be drawn down in an Optional Currency, the
amount of that Tranche B Advance will be determined by converting into
that Optional Currency the Original Sterling Amount of that Tranche B
Advance on the basis of the Agent's Spot Rate of Exchange three
Business Days before its Utilisation Date.
6.3 CHANGE OF CURRENCY
(a) If a Tranche B Advance is to be continued during its next Interest
Period in a different currency (the "NEW CURRENCY") from that in which
it is currently denominated (the "OLD
<PAGE>
27
CURRENCY"), such Tranche B Advance shall be repaid by the relevant
Borrower in full at the end of its current Interest Period in the old
currency and, subject to the terms of this Agreement, shall be
re-advanced by the Banks in the proportions which their respective
Tranche B Commitments bear to the aggregate Tranche B Commitments
forthwith in the new currency.
(b) If the new currency is Sterling, the amount of that Tranche B Advance
will be the Original Sterling Amount of that Tranche B Advance.
(c) If the new currency is an Optional Currency, the amount of that Tranche
B Advance will be determined by converting into the new currency the
Original Sterling Amount of that Tranche B Advance on the basis of the
Agent's Spot Rate of Exchange three Business Days before the
commencement of that Interest Period.
(d) The Facility Agent is authorised and requested to apply the aggregate
amount in the new currency advanced to the Facility Agent by the Banks
as aforesaid in or towards purchasing, for value on that Interest Date,
an amount in the old currency sufficient to discharge the repayment
obligation of the relevant Borrower under Clause 6.3(a) and, for value
on such Interest Date, to apply the amount in the old currency so
purchased towards the discharge of that obligation. If the aggregate
amount in the new currency re-advanced by the Banks as aforesaid
exceeds the amount in the new currency required to effect that
purchase, the Facility Agent shall pay the excess to the relevant
Borrower in the new currency. If the amount in the old currency
required to be repaid by the relevant Borrower exceeds the amount in
the old currency so purchased, the Borrower shall pay the excess to the
Facility Agent for the Banks participating in such Tranche B Advance in
the old currency.
(e) If the Facility Agent determines that it is or will be unable to effect
any such purchase, it shall so notify the relevant Borrower and the
provisions of paragraph (d) above shall not apply in relation to the
repayment and re-advance of the relevant Trance B Advance. Neither the
Facility Agent nor any Bank shall incur any liability to any Borrower
as a result of, nor shall the obligations of any Borrower under this
Agreement be prejudiced by, the inability of the Facility Agent for any
reason whatsoever to effect any such purchase.
(f) The relevant Borrower agrees to indemnify the Facility Agent against
any loss, expense or other liability incurred in connection with any
exchange contract entered into by the Facility Agent for any such
purchase (the certificate of the Facility Agent as to the amount
thereof to be conclusive in the absence of manifest error).
(g) All amounts received by the Facility Agent from the Banks shall be held
and applied by the Facility Agent on behalf of the Banks and shall not
be advanced or be deemed to be advanced to the relevant Borrower until
receipt by the Facility Agent of all amounts then due by way of
repayment as aforesaid.
6.4 SAME OPTIONAL CURRENCY
(a) If a Tranche B Advance is to be continued during its next Interest
Period in the same Optional Currency as that in which it is denominated
during its current Interest Period, there shall be calculated the
difference between the amount of the Tranche B Advance (in that Optional
Currency) for the current Interest Period and for the next Interest
Period. The amount of the Tranche B Advance for the next Interest Period
will be determined by notionally converting
<PAGE>
28
into that Optional Currency the Original Sterling Amount of the Tranche
B Advance on the basis of the Agent's Spot Rate of Exchange three
Business Days before the commencement of that Interest Period.
(b) At the end of the current Interest Period (but subject always to
paragraph (c) below):
(i) if the amount of the Tranche B Advance for the next Interest
Period is less than for the preceding Interest Period, Getty U.K.
shall repay the difference on the last day of the current
Interest Period; or
(ii) if the amount of the Tranche B Advance for the next Interest
Period is greater, the Banks in the proportion which their
respective Tranche B Commitments bear to the aggregate Tranche B
Commitments shall forthwith make available to Getty U.K. the
difference.
(c) If the Agent's Spot Rate of Exchange for the next Interest Period shows
an appreciation or depreciation of the Optional Currency against
Sterling of less than five per cent. (5%) when compared with the
Original Exchange Rate, no amounts are payable in respect of the
difference. In this Clause 6 "ORIGINAL EXCHANGE RATE" means the Agent's
Spot Rate of Exchange used for determining the amount of the Optional
Currency for the Interest Period which is the later of the following:
(i) the Interest Period during which the Tranche B Advance, as the
case may be, was first denominated in that Optional Currency if
the Tranche B Advance has since then remained denominated in that
Optional Currency; and
(ii) the most recent Interest Period immediately prior to which a
difference was required to be paid under this Clause 6.4.
6.5 PREPAYMENTS AND REPAYMENTS
If a Tranche B Advance is to be repaid or prepaid by reference to an
Original Sterling Amount, the Optional Currency amount to be repaid or
prepaid shall be determined by reference to the Agent's Spot Rate of
Exchange last used for determining the Optional Currency amount of that
Tranche B Advance under Clause 6 or, if applicable, the Original
Exchange Rate.
6.6 NOTIFICATION
The Facility Agent shall notify the Obligors' Agent and the Banks of
Optional Currency amounts (and the applicable Agent's Spot Rate of
Exchange) promptly after they are ascertained.
7. ANCILLARY FACILITIES
7.1 ANCILLARY FACILITY
(a) The Obligors' Agent may, at any time during the Tranche C Availability
Period, by notice in writing to the Facility Agent request the
establishment of an Ancillary Facility by the conversion of a Bank's
Tranche C Commitment (or part thereof) into an Ancillary
<PAGE>
29
Commitment with effect from the date (the "ANCILLARY EFFECTIVE DATE")
specified in such notice. Any such notice shall specify:
(i) the proposed Borrower;
(ii) the proposed start date;
(iii) the proposed Ancillary Bank;
(iv) the proposed Ancillary Commitment; and
(v) such other details as to the proposed Ancillary Facility as the
Facility Agent may reasonably require.
(b) Any Bank so nominated as an Ancillary Bank shall if it agrees to
provide the proposed Ancillary Facility become an Ancillary Bank from
the Ancillary Effective Date.
(c) No Ancillary Bank may demand repayment of or cash cover in respect of
any Ancillary Outstandings (and any other outstandings owing under or
in respect of any other facility provided by it to a member or members
of the Group) or set off (otherwise than for interest netting purposes)
any Ancillary Outstandings or take any action analogous to any of the
foregoing until notice has been served under Clause 23.2(b), (c) or (d)
(if any such notice is required) or the proviso to Clause 23.2 applies
unless Tranche C Commitments are available and are to be drawn as
provided below in this paragraph and in paragraph (d) below. If
Tranche C Commitments are available to be utilised under this Agreement
at the time such notice is served (ignoring for these purposes the
provisions of Clause 4.2) or the proviso to Clause 23.2 applies, as the
case may be, in an amount equal to the amount so demanded under the
relevant Ancillary Facility (provided that for these purposes the
Tranche C Commitment of the relevant Ancillary Bank shall be deemed to
be increased by the amount, not exceeding the amount of its Ancillary
Commitment, so demanded) an amount equal to the amount of the Ancillary
Outstandings so demanded shall be drawn as a Tranche C Advance
hereunder and shall be used to repay or provide cash cover in respect
of the amount so demanded under the relevant Ancillary Facility.
(d) On and subject to the terms of this Agreement (ignoring for these
purposes Clause 4.2), each of the Banks shall participate in any such
Tranche C Advance in such amount as will result, after the making of
such Tranche C Advance, in the proportion which (i) the aggregate
amount of its participation in the Tranche C Advances then outstanding
bears to (ii) the aggregate amount of the Tranche C Utilisations then
outstanding, being equal to the proportion which (iii) its Tranche C
Commitment bears to (iv) the aggregate of the Tranche C Commitments.
(e) The Ancillary Outstandings in respect of any Ancillary Facility shall
not at any time exceed the Ancillary Commitment relative to such
Ancillary Facility. All Ancillary Outstandings shall be repaid in full
(together with all accrued interest and any other costs and expenses
due under the terms of such Ancillary Facility) on the last day of the
Tranche C Availability Period (and on such date the Ancillary
Commitments shall be cancelled). An Ancillary Bank may, without
liability, return cheques and other payment instruments unpaid if the
payment of such cheques would result in a breach of this Clause 7.1(e).
<PAGE>
30
7.2 OPERATION OF ANCILLARY FACILITIES
(a) The rate of interest, fees, charges and other remuneration in respect
of each Ancillary Facility shall be determined by agreement between the
relevant Ancillary Bank and the Borrower concerned and in default of
agreement shall be based upon the normal market rates and terms from
time to time of the relevant Ancillary Bank.
(b) In the case of inconsistency between the terms of an Ancillary Facility
and of this Agreement, the terms of this Agreement shall prevail.
(c) A copy of any terms governing the operation of any Ancillary Facility
and any other information relating to the operation of any Ancillary
Facility (including the level of Ancillary Outstandings) shall on
request by the Facility Agent be provided by the Ancillary Bank and/or
the Obligors' Agent to the Facility Agent.
8. REPAYMENT
8.1 TRANCHE A FACILITY
The Parent shall repay the Tranche A Advance (subject to the
application of Clause 9) in full in instalments on the Repayment Dates
specified below and on the Final Repayment Date. The amount (a
"TRANCHE A REPAYMENT INSTALMENT") of the Tranche A Advance to be repaid
by the Parent on each Repayment Date shall be the amount representing
the percentage of the amount of the Tranche A Advance made at Closing
set out below opposite that Repayment Date.
<TABLE>
<CAPTION>
REPAYMENT DATES REPAYMENT INSTALMENTS
(% of the Tranche A Advance made at Closing)
<S> <C>
30th September, 1999 15
31st March, 2000 20
30th September, 2000 25
Final Repayment Date 40
</TABLE>
Any amount of the Tranche A Advance outstanding on the Final Repayment
Date shall be repaid in full on the Final Repayment Date.
8.2 TRANCHE B FACILITY
(a) Getty U.K. shall repay the Tranche B Advances (subject to the
application of Clause 9) in full in instalments on the Repayment Dates
specified below and on the Final Repayment Date. The Original Sterling
Amount of the Tranche B Advance to be repaid by Getty U.K. on each
Repayment Date (a "TRANCHE B REPAYMENT INSTALMENT") shall be a Sterling
amount equal as nearly as possible to the percentage of the amount of
the Original Sterling Amount of the Tranche B Advance made at Closing
set out below opposite that Repayment Date.
<TABLE>
<CAPTION>
REPAYMENT DATE REPAYMENT INSTALMENTS
(% of the Tranche B Advance made at Closing)
<S> <C>
30th September, 1999 15
31st March, 2000 20
</TABLE>
<PAGE>
31
<TABLE>
<CAPTION>
REPAYMENT DATE REPAYMENT INSTALMENTS
(% of the Tranche B Advance made at Closing)
<S> <C>
30th September, 2000 25
Final Repayment Date 40
</TABLE>
Any amount of the Tranche B Advance outstanding on the Final Repayment
Date shall be repaid in full on the Final Repayment Date.
(b) Each repayment of any principal of any Tranche B Advance pursuant to
this Clause 8.2 shall be made in the currency in which such Tranche B
Advance has been denominated during the Interest Period ending on the
relevant Repayment Date and the amount to be repaid (if denominated in
any Optional Currency) shall be calculated on the basis of the Agent's
Spot Rate of Exchange relative to the Interest Period (or, where Clause
6.4(c) is in operation, relative to the first Interest Period in the
series of consecutive Interest Periods during which the Advance has
remained denominated, by reason of that Clause at the same amount,
ignoring repayments and prepayments, in the Optional Currency in
question).
8.3 TRANCHE C ADVANCES
(a) Each Borrower shall repay the full amount of each Tranche C Advance
made to it on the Interest Date relating to that Advance. Any Tranche
C Utilisation then outstanding shall be repaid in full on the last day
of the Tranche C Availability Period.
(b) Without prejudice to each Borrower's obligations to repay the full
amount of each Tranche C Advance made to it on the due date, on the
date of any Rollover Utilisation made by any Borrower the amount to be
repaid and the amount to be drawn down by such Borrower shall be netted
off against each other so that the amount of cash which such Borrower
is actually required to repay or, as the case may be, the amount of
cash which the Banks are actually required to advance to such Borrower,
shall be the net amount.
9. PREPAYMENT AND CANCELLATION
9.1 AUTOMATIC CANCELLATION OF THE TOTAL COMMITMENTS
(a) Any part of the Tranche A Commitments not borrowed hereunder before the
earlier of the expiry of the Tranche A Availability Period and the
Closing Date shall be automatically cancelled at close of business on
such earlier date.
(b) Any part of the Tranche B Commitments not borrowed hereunder before the
earlier of the expiry of the Tranche B Availability Period and the
Closing Date shall be automatically cancelled at close of business on
such earlier date.
(c) The Tranche C Commitments shall be automatically cancelled at close of
business on the last day of the Tranche C Availability Period as from
time to time in force.
9.2 VOLUNTARY CANCELLATION
Getty U.K. may, by giving not less than 10 Business Days' prior notice
to the Facility Agent, cancel the unutilised portion of the Tranche C
Commitments in whole or in part (but, if in part, in an integral
multiple of L500,000) without incurring any penalty or other cost, but
<PAGE>
32
subject to providing to the Facility Agent evidence satisfactory to the
Majority Banks that notwithstanding such cancellation the U.K. Group
will have sufficient working capital facilities available to it to
enable the businesses of the U.K. Group members to be operated in such
a way as to enable those Obligors who are members of the U.K. Group to
repay all their outstandings under the Finance Documents on or before
the due date. Any cancellation in part shall be applied against the
Tranche C Commitment of each Bank pro rata.
9.3 VOLUNTARY PREPAYMENT
Subject to this Clause 9.3, on giving at least 10 Business Days' prior
written notice to the Facility Agent, specifying the Utilisation and
amount to be prepaid, any Borrower may prepay any Utilisation made by
it in whole or in part on the date and in the amount so specified.
Such prepayment of a Utilisation (if in part) shall be of an amount
which is (a) in the case of Tranche A Advances not less than U.S.
$1,000,000 and an integral multiple of U.S. $500,000 if more or (b) (in
the case of Tranche B and Tranche C Utilisations, an amount whose
Original Sterling Amount is not less than L750,000 and an integral
multiple of L250,000 if more.
9.4 RIGHT OF PREPAYMENT AND CANCELLATION
If any Borrower is required to pay any amount to a Bank or to the
Facility Agent for the account of such Bank under Clauses 13, 14 or 15
the Obligors' Agent may, whilst the circumstances giving rise to the
requirement continue, serve a notice of prepayment and cancellation on
that Bank through the Facility Agent. On the date falling 10 Business
Days after the date of service of the notice:
(a) each Borrower shall prepay that Bank's participation in any
Utilisation made to it together with all other amounts payable by
it to that Bank under this Agreement; and
(b) such Bank's Tranche A Commitment, Tranche B Commitment and Tranche
C Commitment shall be cancelled.
9.5 ADJUSTMENT OF REPAYMENT INSTALMENTS
Each prepayment of the Tranche A Advance and the Tranche B Advance made
pursuant to Clause 9.3 shall be applied against future Repayment
Instalments relative thereto determined pursuant to Clauses 8.1 and 8.2
pro rata.
9.6 PREPAYMENT FEE
(a) If any Utilisation is prepaid pursuant to Clause 9.3 from the proceeds
of monies borrowed or raised from a bank, trust, fund or other
financial institution (not being money raised by a public debt issue or
the proceeds of an equity issue not prohibited by the terms hereof)
otherwise than under the Finance Documents then such prepayment may
only be made if, in addition to all other sums required to be paid
under this Agreement with such prepayment, there is paid by the Parent
to the Facility Agent (for the account of the Banks) on or before the
date for such prepayment (and, if not already paid, there shall be due
and payable on such date) a prepayment premium calculated in an amount
of one quarter of one per cent. (0.25%) of the principal amount to be
so prepaid.
<PAGE>
33
(b) Any such prepayment premium received by the Facility Agent shall be
distributed by the Facility Agent to the Banks pro rata in the proportions
which each Bank's Commitment being the same designation as the Utilisation
prepaid bears to the aggregate of all the Commitments of the Banks so
designated at the date of such prepayment.
9.7 MISCELLANEOUS PROVISIONS
(a) Any notice of prepayment and/or cancellation under this Agreement is
irrevocable. The Facility Agent shall notify the Banks promptly of receipt
of any such notice.
(b) All prepayments under this Agreement shall be made together with accrued
interest on the amount prepaid.
(c) No prepayment of any Utilisation or cancellation of any Commitment is
permitted except in accordance with the express terms of this Agreement.
(d) No amount of the Tranche A Advance or Tranche B Advance repaid or prepaid
under this Agreement may subsequently be re-borrowed. No amount of the
Total Commitments cancelled under this Agreement may subsequently be
reinstated.
10. INTEREST
10.1 INTEREST RATE
The rate of interest on each Advance for each Interest Period relative
thereto is the rate per annum determined by the Facility Agent to be the
aggregate of:
(a) the applicable Margin;
(b) the applicable LIBOR; and
(c) the Additional Cost (if any) relative to such Advance from time to
time during such Interest Period.
10.2 DUE DATES
Except as otherwise provided in this Agreement, accrued interest on
each Advance for each Interest Period relative thereto shall be paid by
the relevant Borrower on the Interest Date relating to such Interest
Period and also, in the case of an Advance with an Interest Period of
longer than 6 months, on the last day of each consecutive period of 6
months from the first day of such Interest Period.
10.3 DEFAULT INTEREST
(a) If an Obligor fails to pay any amount payable by it under this Agreement,
it shall forthwith on demand by the Facility Agent from time to time pay
interest on the overdue amount from the due date up to the date of actual
payment, as well after as before judgment, at a rate (the "DEFAULT RATE")
determined by the Facility Agent to be two per cent. (2%) per annum above
the rate of interest which would have been payable if the overdue amount
had, during the period of non-payment, constituted a Tranche C Advance for
successive Interest Periods of such duration as the Facility Agent may
determine (each a "DESIGNATED PERIOD").
<PAGE>
34
(b) The Default Rate will be determined on each Business Day or on the date
two Business Days prior to the commencement of or on the first day of the
relevant Designated Period, as the Facility Agent shall determine, and
Default interest will be compounded at the end of each Designated Period
if not paid.
(c) If the Facility Agent determines that Clause 14 would apply if the overdue
amount were an Advance during the Designated Period, the rate to be used
pursuant to (a) above will be determined in accordance with Clause 14.
10.4 DETERMINATION CONCLUSIVE; NOTIFICATION
Each determination of a rate of interest by the Facility Agent under this
Agreement shall, in the absence of manifest error, be conclusive and shall
be promptly notified to the Obligors' Agent by the Facility Agent.
10.5 MARGIN ADJUSTMENT
If on 31st December, 1998 or any 30th June or 31st December thereafter the
aggregate of the outstanding Tranche A Utilisations and the equivalent in
Dollars (calculated at a rate of L1:$1.65) of the outstanding Tranche B
Utilisations at such date is less than:
(a) U.S. $40,000,000; or
(b) U.S. $20,000,000
then (subject to as mentioned below and subject to there being no
outstanding Event of Default at such time) the Margin shall be reduced for
that Tranche A Advance or Tranche B Advance, as the case may be, from such
Interest Date and for each other Tranche A Advance and Tranche B
Advance from the first day of each Interest Period for such Advance
commencing after such Interest Date such that if the test in
sub-paragraph (a) above is met the Margin shall be one per cent.
(1.00%) per annum and if the test in sub-paragraph (b) above is met the
Margin shall be zero point seven five per cent. (0.75%) per annum.
11. INTEREST PERIODS
11.1 SELECTION AND AGREEMENT
The Obligors' Agent shall give notice to the Facility Agent not later
than 11.00 a.m. on the third Business Day prior to the commencement of
each Interest Period relative to any Advance (or in the Request
therefor) specifying the duration of such Interest Period, which shall
be of 1 (in the case of a Tranche C Utilisation only), 3 or 6 months or
such other duration as may be agreed by the Facility Agent or as may be
required in order to comply with Clause 11.3 (provided that if such
duration is over six months the Facility Agent may only agree with the
unanimous consent of the Banks participating in such Advance). If the
Obligors' Agent fails to specify the duration of an Interest Period for
any Advance the duration of that Interest Period shall be three months.
<PAGE>
35
11.2 SPLITTING
The Obligors' Agent may, in any notice given pursuant to Clause 11.1,
split a Tranche A Advance and/or a Tranche B Advance into up to 2
Tranche A Advances or Tranche B Advances, provided that one of such
Tranche A Advances or Tranche B Advances (as the case may be) shall be in
an amount at least equal to the Repayment Instalment due to be repaid with
respect to the relevant Advances on the next Repayment Date (and its
specified Interest Period shall end on such next Repayment Date). No
more than 2 Tranche A Advances and 2 Tranche B Advances may be outstanding
at any time.
11.3 RESTRICTIONS ON SELECTION
(a) The Obligors' Agent (on behalf of the relevant Borrower) shall select the
duration of Interest Periods pursuant to Clause 11.1 so as to ensure that
(i) each Repayment Date will also be an Interest Date in relation to an
amount of the Tranche A Advances and the Tranche B Advances at least equal
to the Repayment Instalment (or part of the Repayment Instalment) relative
to the Tranche A Advances or Tranche B Advances (respectively) due to be
paid on such Repayment Date, (ii) no Tranche A Advance or Tranche B
Advance shall have an Interest Period expiring after the Final Repayment
Date and (iii) no Tranche C Utilisation shall have an Interest Period
expiring after the end of the Tranche C Availability Period.
(b) If it appears to the Facility Agent in good faith that the requirements of
paragraph (a) above, or the requirements of the Arranger for an orderly
primary syndication of the Facilities, will not be met by the Obligors'
Agent's selection of any Interest Period, the Facility Agent, on behalf of
and after consultation to the extent practicable with the Obligors' Agent,
shall select a different duration for such Interest Period.
11.4 DURATION
The (or the first) Interest Period relative to each Advance shall commence
on its Utilisation Date and end on the last day of the period selected
therefor and any subsequent Interest Period relative to a Tranche A
Advance or Tranche B Advance shall commence on the expiry of the
immediately preceding Interest Period relating thereto and end on the last
day of the period so selected therefor, provided that if any Interest
Period would otherwise end on a day which is not a Business Day, such
Interest Period shall end instead on the next Business Day in the same
calendar month (if there is one) or on the preceding Business Day (if
there is not).
11.5 NOTIFICATION
The Facility Agent will notify the relevant Banks and the Obligors'
Agent of the duration of each Interest Period relating to an Advance and
of the rate of interest applicable thereto promptly after ascertaining
the same (and such duration and rate shall, in the absence of manifest
error, be conclusive).
12. PAYMENTS
12.1 FUNDS
All payments by the Obligors or any of them or by the Banks or any of them
under the Finance Documents shall be made to the Facility Agent for the
account of the Party entitled. Payments under this Agreement to the
Facility Agent shall be made in freely transferable
<PAGE>
36
funds for same day value on the due date at such times and in
such manner as the Facility Agent may specify to the Party concerned as
being customary at the time for the settlement of transactions in the
currency in which the amount concerned is denominated to the account of
the Facility Agent at such bank or office as the Facility Agent shall
designate by at least three Business Days' notice to the Party making
payment.
12.2 DISTRIBUTION
(a) Each payment received by the Facility Agent under this Agreement for
another Party shall, subject to paragraphs (b) and (c) below, be made
available by the Facility Agent to that Party by payment (on the date
and in the currency and funds of receipt) to its account with such bank
as it may notify to the Facility Agent for this purpose by not less
than 10 Business Days' prior notice.
(b) The Facility Agent may apply any amount received by it for an Obligor in
or towards payment of any amount due from an Obligor under this Agreement.
(c) Where a sum is to be paid under this Agreement to the Facility Agent
for the account of another Party, the Facility Agent is not obliged to
pay that sum to that Party until it has established that it has
actually received that sum. The Facility Agent may, at its sole
discretion, assume that the sum has been paid to it in accordance with
this Agreement and, in reliance on that assumption, make available to
that Party a corresponding amount. If the sum has not been made
available but the Facility Agent has paid a corresponding amount to
another Party, that Party shall forthwith on demand refund the
corresponding amount to the Facility Agent together with interest on that
amount from the date of payment to the date of receipt, calculated at a
rate determined by the Facility Agent to reflect its cost of funds.
12.3 CURRENCY
(a) Interest accrued under this Agreement shall be payable in the currency in
which the relevant amount in respect of which it has accrued was
denominated during the period of accrual.
(b) The principal of each Advance shall be repaid or prepaid in the currency
in which it is denominated.
(c) Any amount (other than of principal and/or interest) calculated on or by
reference to or payable in respect of another amount shall be payable in
the currency in which that other amount is denominated at the time of
payment.
(d) Amounts payable in respect of costs, expenses, Taxes and the like are
payable in the currency in which they are incurred.
(e) Any other amount payable under this Agreement is, except as otherwise
provided in this Agreement, payable in Dollars (if payable by a member of
the Group other than a member of the U.K. Group) or Sterling (if payable
by a member of the U.K. Group).
12.4 SET-OFF AND COUNTERCLAIM
All payments to be made by an Obligor under any Finance Document shall be
made without set-off or counterclaim.
<PAGE>
37
12.5 NON-BUSINESS DAYS
(a) If a payment under this Agreement is due on a day which is not a Business
Day, the due date for that payment shall instead be the next Business Day.
(b) During any extension of the due date for payment of any principal under
this Agreement interest is payable on the principal at the rate payable
on the original due date.
12.6 PARTIAL PAYMENTS
(a) If the Facility Agent receives a payment insufficient to discharge all
the amounts then due and payable by the Obligors under this Agreement,
the Facility Agent shall apply that payment towards the obligations of
the Obligors in the following order:
(i) FIRST, in or towards payment pro rata of any unpaid costs, fees
and expenses of the Facility Agent or the Security Agent under
the Finance Documents;
(ii) SECONDLY, in or towards payment pro rata of any accrued fees due
but unpaid under Clause 25.1;
(iii) THIRDLY, in or towards payment pro rata of any accrued interest due
but unpaid under this Agreement;
(iv) FOURTHLY, in or towards payment pro rata of any principal due but
unpaid under this Agreement; and
(v) FIFTHLY, in or towards payment pro rata of any other sum due but
unpaid under this Agreement.
(b) The Facility Agent shall, if so directed by the Majority Banks, vary the
order set out in sub-paragraphs (a)(iii) to (v) above.
(c) Paragraphs (a) and (b) above shall override any appropriation made by an
Obligor.
12.7 SECURITY AGENT AS JOINT CREDITOR
(a) Each of the Obligors and each of the Finance Parties agree that the
Security Agent shall be the joint creditor (together with the relevant
Finance Party) of each and every obligation of any Obligor towards each
of the Finance Parties under this Agreement, and that accordingly the
Security Agent will have its own independent right to demand
performance by the relevant Obligor of those obligations. However, any
discharge of any such obligation to one of the Security Agent or a
Finance Party shall, to the same extent, discharge the corresponding
obligation owing to the other.
(b) Without limiting or affecting the Security Agent's rights against any
Obligor (whether under this paragraph or under any other provision of
the Finance Documents), the Security Agent agrees with each other
Finance Party (on a several and divided basis) that, subject as set out
in the next sentence, it will not exercise its rights as a joint
creditor with a Finance Party except with the consent of the relevant
Finance Party. However, for the avoidance of doubt, nothing in the
previous sentence shall in any way limit the Security Agent's right to
act in the protection or preservation of rights under or to enforce any
Security Document as
<PAGE>
38
contemplated by this Agreement and/or the relevant Security Document
(or to do any act reasonably incidental to any of the foregoing).
13. TAXES
13.1 GROSS-UP
All payments by an Obligor under the Finance Documents shall be made
without any deduction or withholding and free and clear of and without
deduction or withholding for or on account of any Taxes except to the
extent that the Obligor is required by law to make payment subject to
any Tax. Save as referred to in Clause 13.3, if any Tax or amounts in
respect of Tax must be deducted, or any other deductions must be made,
from any amounts payable or paid by an Obligor, or paid or payable by
the Facility Agent to a Finance Party, under the Finance Documents, the
Obligor shall pay such additional amounts as may be necessary to ensure
that the relevant Finance Party receives a net amount equal to the full
amount which it would have received had payment not been made subject
to Tax.
13.2 TAX RECEIPTS
All Taxes required by law to be deducted or withheld by an Obligor from
any amounts paid or payable under the Finance Documents shall be paid
by the relevant Obligor when due and the Obligor shall, within a month
of the payment being made, deliver to the Facility Agent for the
relevant Bank evidence satisfactory to that Bank (including all
relevant tax receipts) that the payment has been duly remitted to the
appropriate authority.
13.3 RECOGNISED BANK
(a) If, otherwise than as a result of the introduction of, change in, or
change in the interpretation, administration or application of or
expiry of, any law or regulation (including, without limitation, any
double tax treaty) or any practice or concession of any applicable Tax
authority occurring after the date of this Agreement, a Bank or the
Facility Agent is not or ceases to be a Recognised Bank, no Obligor
shall be liable to pay to that Bank or the Facility Agent under Clause
13.1 any amount in respect of Taxes levied or imposed in excess of the
amount it would have been obliged to pay if that Bank or the Facility
Agent was a Recognised Bank.
(b) No Obligor is liable to pay to a Bank or the Facility Agent any amount
under Clause 13.1 in respect of Taxes (not being withholding taxes)
imposed on the overall net income or gains of a Bank or the Facility
Agent by the jurisdiction in which such Bank or the Facility Agent is
organised or in which its principal office is located or on the overall
net income or gains of the Bank's Facility Office by the jurisdiction
in which that Facility Office is located.
(c) Each Bank and the Facility Agent confirms to each Borrower that it is a
Recognised Bank with respect to such Borrower at the time it becomes a
party to this Agreement and shall notify the Parent upon officers of
such Bank or the Facility Agent involved in administering this
Agreement becoming aware that it has ceased to be a Recognised Bank.
13.4 TAX SAVING
(a) If, following the imposition of any Tax on any payment by any Obligor (or
any corresponding payment by the Facility Agent to any Finance Party
under any Finance Document) in
<PAGE>
39
consequence of which such Obligor pays an additional amount under
Clause 13.1, any Finance Party shall as a result of such payment
receive or be granted a credit against or remission for or deduction or
relief from or in respect of any Tax payable by it which in such
Finance Party's sole opinion (acting in good faith) is both
identifiable and quantifiable by it without requiring such Finance
Party or its professional advisers to expend a material amount of time
or incur a material cost in so identifying or quantifying (any of the
foregoing, to the extent so identifiable and quantifiable, being
referred to as a "SAVING"), such Finance Party shall, to the extent
that it can do so without prejudice to the retention of the relevant
saving and subject to such Obligor's obligation to repay promptly on
demand by the Finance Party the amount to such Finance Party to the
extent that the relevant saving is subsequently disallowed or
cancelled, reimburse such Obligor promptly after receipt of such saving
by such Finance Party with such amount as such Finance Party shall in
its sole opinion but in good faith have concluded to be the amount or
value of the relevant saving.
(b) Nothing contained in this Agreement shall interfere with the right of any
Finance Party to arrange its Tax and other affairs in whatever manner
it thinks fit. No Finance Party shall be required to disclose any
confidential information relating to the organisation of its affairs.
13.5 DOUBLE TAX TREATY FILINGS
Each Finance Party shall, and the Parent shall ensure that each
relevant Borrower (and if a payment falls or is likely to fall to be
made by it, each Guarantor) shall, file all such forms, make all such
applications and take all such other action, in each case as it may
reasonably be able to file, make or take, pursuant to all relevant
treaties for the avoidance of double taxation in order that payments by
it hereunder to which such treaties apply (or would apply were such
filings, applications or other action made or taken) may be made
without (or, where complete avoidance is not possible, with a reduced
rate of) withholding tax. Each Finance Party shall give to each
relevant Obligor and each relevant Obligor shall give to each Finance
Party such assistance as the other may reasonably require in connection
with the completion and filing of such forms, the making of such
applications and the taking of such other duties as aforesaid.
13.6 U.S. TAXATION - DELIVERY OF FORMS AND STATEMENTS
(a) Each Finance Party which is not a U.S. Person and which is lending to a
U.S. Obligor which is a Borrower shall deliver (through the Facility
Agent) to each U.S. Obligor which is a Borrower on or before the first
Interest Date with respect to the first Advance to such Borrower (or in
the case of a Finance Party which became a party to this Agreement
after the date hereof, the first Interest Date with respect to an
Advance to any such Borrower after such Finance Party became a party
hereto), duly completed, two copies of such form or forms as may be
required to indicate that such Finance Party is entitled to receive
payments under this Agreement without deduction, withholding or payment
by the U.S. Obligor of any United States federal Taxes, including,
without limitation, either:
(i) two copies of Form 1001 of the Internal Revenue Service of the
United States of America (relating to an applicable double
revenue tax treaty concluded by the United States of America); or
(ii) two copies of Form 4224 of the Internal Revenue Service of the
United States of America (relating to income effectively
connected with the conduct of a trade or business in the United
States of America).
<PAGE>
40
Each such Finance Party, subject as otherwise provided in Clause
13.6(d), shall deliver (through the Facility Agent) to each U.S.
Obligor additional duly completed copies of any of the above forms
and/or such additional or successor forms as shall be adopted from time
to time by the Internal Revenue Service of the U.S.A. if it is notified
by the U.S. Obligor or the Internal Revenue Service of the U.S.A. that
any previous such form delivered by it pursuant to this Clause 13.5 has
expired or that Finance Party becomes aware that any such form shall
have become incomplete or inaccurate in any respect unless prior to
that delivery any event occurs which renders the relevant form
inapplicable.
(b) Each Finance Party which is a U.S. Person shall deliver (through the
Facility Agent) to each U.S. Obligor a statement signed by an
authorised signatory of the Finance Party to the effect that it is a
U.S. Person and if necessary to avoid United States backup withholding,
a duly completed copy of Internal Revenue Service Form W-9 (or
successor form) establishing that such Finance Party is not subject to
United States backup withholding.
(c) The Facility Agent shall have no responsibility or liability for and no
obligation to check the accuracy or appropriateness of any form or
statement delivered by any Finance Party pursuant to Clause 13.6(a) or
(b) respectively.
(d) If any Finance Party determines, as a result of any change in applicable
law, regulation or treaty, or in any official application or
interpretation thereof, that it is unable to submit to any U.S. Obligor
any form or certificate that the Finance Party is obliged to submit
pursuant to Clause 13.6(a) or 13.6(b), or that such Finance Party is
required to withdraw or cancel any form or certificate previously
submitted, the Finance Party shall promptly notify the U.S. Obligor of
that fact.
14. MARKET DISRUPTION
(a) If, in relation to any Advance:
(i) no, or (where there is more than one Reference Bank) only one,
Reference Bank supplies a rate for the purposes of determining
the applicable LIBOR or the Facility Agent otherwise determines
that adequate and fair means do not exist for ascertaining the
applicable LIBOR; or
(ii) the Facility Agent receives notification from Banks whose
participations in an Advance exceed fifty per cent. (50%) by
value of that Advance that, in their opinion, by reason of
circumstances affecting the London Interbank Eurocurrency Market:
(A) matching deposits will not be available to them in the London
Interbank Eurocurrency Market in the ordinary course of
business in amounts sufficient to fund their participations
in that Advance for the relevant Interest Period; or
(B) the cost to them of such matching deposits in the London
Interbank Eurocurrency Market for that Interest Period
would be in excess of the applicable LIBOR,
the Facility Agent shall promptly notify the Obligors' Agent and the
Banks of that fact and that this Clause 14 is in operation.
<PAGE>
41
(b) After any notification under paragraph (a) above:
(i) if Clause 14(a)(ii)(A) applies, no further Requests may be
delivered and no Bank shall be obliged to participate in the
Advance to which such notification relates, unless such Advance
is already outstanding, until the Facility Agent notifies the
Obligors' Agent that the event specified in the notification no
longer prevails;
(ii) if the Obligors' Agent so requires, within 5 Business Days of
receipt of any such notification, the Obligors' Agent and the
Facility Agent (on behalf of the Banks) shall, in good faith,
enter into negotiations for a period of not more than 30 days
with a view to agreeing a substitute basis (the "SUBSTITUTE
BASIS") for determining the rate of interest and/or funding
applicable to any future Advance and to maintaining any existing
Advances to which such notification relates;
(iii) any Substitute Basis agreed under sub-paragraph (ii) above shall
be, with the prior consent of all the Banks, binding on all the
Parties; and
(iv) until and unless a Substitute Basis is so agreed, each Bank's
participation in each outstanding Advance to which such
notification related shall bear interest during the current
Interest Period relative thereto at the rate certified by such
Bank to be its cost of funds (from such source as it may
reasonably select) for such Interest Period in relation to such
Advance, plus the applicable Margin.
(c) The Facility Agent, in consultation with the Obligors' Agent shall, not
less often than monthly, review whether or not the circumstances
referred to in Clause 14(a) still prevail with a view to returning to
the normal interest provisions of this Agreement.
15. INCREASED COSTS
15.1 INCREASED COSTS
(a) Subject to Clause 15.2 (Exceptions), the Parent shall forthwith on
demand by a Finance Party pay or procure that Getty U.K. shall pay that
Finance Party the amount of any increased cost incurred by it (or any
Holding Company of it) as a result of any introduction of or change in
or change in the interpretation, administration or application of any
law, directive or official regulation (including any law or regulation
relating to taxation, change in currency of a country or reserve asset,
special deposit, cash ratio, liquidity or capital adequacy requirements
or any other form of banking or monetary control) whether or not having
the force of law but, if not, being a directive or official regulation
with which it is the practice of banks in the relevant jurisdiction to
comply or compliance by any Finance Party (or any Holding Company of
such Finance Party) with any such introduction or change.
(b) In this Agreement "INCREASED COST" means:
(i) an additional cost incurred by a Finance Party (or any Holding
Company of it) as a result of it having entered into, or
performing, maintaining or funding its obligations under, any
Finance Document; or
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42
(ii) that portion of an additional cost incurred by a Finance Party (or
any Holding Company of it) in making, funding or maintaining all
or any advances, letters of credit or guarantees comprised in a
class of advances, letters of credit or guarantees formed by or
including the participations in the Advances made or to be made
under this Agreement which is attributable to it making, funding
or maintaining those participations; or
(iii) a reduction in any amount payable to a Finance Party (or any
Holding Company of it) or the effective return to a Finance Party
(or any Holding Company of it) under any Finance Document or on
its (or such Holding Company's) capital; or
(iv) the amount of any payment made by a Finance Party (or any Holding
Company of it), or the amount of interest or other return
foregone by a Finance Party (or any Holding Company of it),
calculated by reference to any amount received or receivable by a
Finance Party from any other Party under this Agreement.
(c) The relevant Finance Party shall notify the Parent as promptly as
reasonably practicable upon it becoming aware of circumstances giving
rise to the right of such Finance Party to receive payments as referred
to in this Clause 15.1, giving reasonable details of the likely
calculation of such increased cost and basis on which it is
attributable to the Facility, provided that such Finance Party shall
not be required to divulge information of a confidential nature with
respect to its business.
15.2 EXCEPTIONS
Clause 15.1 does not apply to any increased cost:
(a) compensated for by the operation of Clause 13 (or which would
have been so compensated for but for the operation of Clause
13.3(a)), Clause 10.1(c) or Clause 15.3; or
(b) attributable to any change in the rate of tax on the overall net
income or gains of a Bank imposed in the jurisdiction in which
its principal office is located or on the overall net income or
gains of the Bank's Facility Office by the jurisdiction in which
that Facility Office is located; or
(c) attributable to such Finance Party after the date of this Agreement
entering into a commitment to lend to a third party which is, at
the time that commitment is entered into, in breach of any law,
regulation, treaty, directive or request.
15.3 REGULATION D COMPENSATION
Unless such additional interest is paid in accordance with Clause
10.1(c), any Bank which is required by Regulation D issued by the Board
of Governors of the Federal Reserve System of the U.S.A. to maintain
and does maintain any reserves against "EUROCURRENCY LIABILITIES" (as
defined in such Regulation) pursuant to such Regulation may require any
U.S. Obligor to pay, contemporaneously with each payment of interest on
any Advance (in respect of which the Eurodollar Reserve Percentage
applies) made to such U.S. Obligor for any Interest Period relative
thereto, additional interest on the participation of such Bank in that
Advance at the rate per annum determined from the formula (A)(i) LIBOR
applicable to such Advance for
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43
that Interest Period divided by (ii) one MINUS the Euro-Dollar Reserve
Percentage MINUS (B) LIBOR applicable to such Advance for that Interest
Period. Any Bank requiring payment by any U.S. Obligor of such
additional interest shall notify such U.S. Obligor and the Facility
Agent at least five Business Days prior to the last day of each
Interest Period for each relevant Advance of the amount due to be paid
to it with respect to such Advance pursuant to this Clause 15.3
(certifying in that notice that the amount claimed does not exceed such
part of the cost to such Bank of maintaining such reserves as in the
opinion of that Bank should fairly and reasonably be apportioned to
such Advance), which notice shall be final and binding in the absence
of manifest error. No Bank shall be required to disclose in support of
any claim hereunder any information reasonably regarded by such Bank as
being confidential.
16. ILLEGALITY
If it becomes (or any change in the interpretation, administration or
application of any law makes it apparent that it is) unlawful in any
applicable jurisdiction or contrary to any applicable official
regulation (if not having the force of law, being one which it is the
practice of banks, trusts, funds or financial institutions in the
relevant jurisdiction to comply), for a Finance Party to give effect to
any of its obligations as contemplated by this Agreement or to fund or
maintain its participation in any Utilisation then:
(a) the Finance Party may notify the Obligors' Agent through the
Facility Agent accordingly; and
(b) (i) each Borrower shall forthwith or by such later date as is
immediately prior to the illegality taking effect prepay
that Finance Party's participation in all Utilisations made
to it together with all other amounts payable by it to that
Finance Party under this Agreement; and
(ii) such Finance Party's Commitments shall be cancelled and the
obligations of the Finance Party to the Borrowers hereunder
shall cease.
17. MITIGATION
17.1 MITIGATION
If Clauses 13, 14, 15 or 16 operate in relation to any Finance Party to
the detriment of any Borrower:
(a) such Finance Party shall, upon the request of the Obligors' Agent,
enter into discussions with the Obligors' Agent with a view to
determining what mitigating action might be taken by such Finance
Party; and
(b) at the request of the Obligors' Agent, the Facility Agent will
enter into discussions with the Obligors' Agent with a view to
determining what mitigating action might be taken by the Facility
Agent with respect to the administration of this Agreement by the
Facility Agent;
PROVIDED THAT nothing in this Clause shall oblige any Finance Party to
incur any material costs or expenses or to take any action or refrain
from taking any action other than entering into such discussions in
good faith.
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44
17.2 REPLACEMENT OF BANK
If such circumstances as are referred to in Clause 17.1 shall arise, the
Facility Agent, at the request of the Obligors' Agent, will consult
with the Obligors' Agent with a view to identifying and approaching
bank(s), trust(s), fund(s) and financial institution(s) acceptable to
the Obligors' Agent who may be willing to become party to this
Agreement as Bank(s) in replacement for the relevant Bank(s).
17.3 COSTS AND EXPENSES
Any costs and expenses reasonably incurred by any Finance Party pursuant
to this Clause 17 shall be paid by the Obligors' Agent within five
Business Days after receipt of a demand specifying the same in
reasonable detail.
18. GUARANTEE
18.1 GUARANTEE
Each Guarantor irrevocably, unconditionally, jointly and severally:
(a) as principal obligor, and not merely as surety, guarantees to each
Finance Party prompt performance by each other Obligor of all its
payment obligations under the Finance Documents;
(b) undertakes with each Finance Party that whenever a Borrower does
not pay any amount when due under or in connection with any
Finance Document, that Guarantor shall forthwith on demand by the
Facility Agent pay that amount as if that Guarantor instead of
the relevant Borrower were expressed to be the principal obligor;
and
(c) indemnifies each Finance Party on demand against any loss or
liability suffered by such Finance Party if any obligation
guaranteed by that Guarantor is or becomes unenforceable, invalid
or illegal.
18.2 CONTINUING GUARANTEE
This guarantee is a continuing guarantee and will extend to the ultimate
balance of all sums payable by the Obligors or any of them under the
Finance Documents, regardless of any intermediate payment or discharge
in whole or in part.
18.3 REINSTATEMENT
(a) Where any discharge (whether in respect of the obligations of any Obligor
or any security for those obligations or otherwise) is made in whole or
in part or any arrangement is made on the faith of any payment,
security or other disposition which is avoided or must be restored on
insolvency, liquidation or otherwise without limitation, the liability
of each Guarantor under this Clause 18 shall continue as if the
discharge or arrangement had not occurred.
(b) Each Finance Party may concede or compromise any claim that any payment,
security or other disposition is liable to avoidance or restoration.
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45
18.4 WAIVER OF DEFENCES
The obligations of each Guarantor under this Clause 18 will not be
affected by any act, circumstance, omission, matter or thing which, but
for this provision, would reduce, release or prejudice any of its
obligations under this Clause 18 or prejudice or diminish those
obligations in whole or in part, including without limitation (whether
or not known to it or any other Party):
(a) any time, indulgence or waiver granted to, or composition with, any
Obligor or other person;
(b) the taking, variation, compromise, exchange, renewal or release of,
or refusal or neglect to perfect, take up or enforce, any rights
or remedies against, or security over assets of, any Obligor or
other person or any non-presentation or non-observance of any
formality or other requirement in respect of any instrument or
any failure to realise the full value of any security;
(c) any legal limitation, disability, incapacity or lack of powers,
authority or legal personality of or dissolution or change in the
members or status of any Obligor or any other person;
(d) any variation (however fundamental and whether or not involving an
increase in liability of any Obligor) or replacement of a Finance
Document or any other document or security so that references to
that Finance Document in this Clause 18 shall include each
variation or replacement;
(e) any unenforceability, illegality, invalidity or frustration of any
obligation of any person under any Finance Document or any other
document or security or any failure of any Obligor or proposed
Obligor to become bound by the terms of any Finance Document;
(f) any postponement, discharge, reduction, non-provability or other
similar circumstance affecting any obligation of any Obligor
under a Finance Document resulting from any insolvency,
liquidation or dissolution proceedings or from any law,
regulation or order,
so that each such obligation shall, for the purposes of the Guarantor's
obligations under this Clause 18, remain in full force and be construed
as if there were no such act, circumstance, variation, omission, matter
or thing.
18.5 IMMEDIATE RECOURSE
Each Guarantor waives any right it may have of first requiring any
Finance Party (or any trustee or agent on its behalf) to proceed
against or enforce any other rights or security or claim payment from
or file any proof or claim in any insolvency proceedings of any person
before claiming from that Guarantor under this Clause 18.
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46
18.6 APPROPRIATIONS
Until all amounts which may be or become payable by the Obligors under
or in connection with the Finance Documents have been irrevocably paid
in full, each Finance Party (or any trustee or agent on its behalf) may:
(a) refrain from applying or enforcing any other moneys, security or
rights held or received by that Finance Party (or any trustee or
agent on its behalf) in respect of those amounts, or apply and
enforce the same in such manner and order as it sees fit (whether
against those amounts or otherwise) and no Guarantor shall be
entitled to the benefit of the same; and
(b) hold in an interest bearing suspense account any moneys received
from any Guarantor or on account of any Guarantor's liability
under this Clause 18.
18.7 NON-COMPETITION
Until all amounts which may be or become payable by the Obligors under
or in connection with the Finance Documents have been irrevocably paid
in full, no Guarantor shall, after a claim has been made or by virtue
of any payment or performance by it under this Clause 18:
(a) be subrogated to any rights, security or moneys held, received or
receivable by any Finance Party (or any trustee or agent on its
behalf) or be entitled to any right of contribution or indemnity
in respect of any payment made or moneys received on account of
that Guarantor's liability under this Clause 18 and, to the
extent that any Guarantor is so subrogated or entitled by law,
that Guarantor (to the fullest extent permitted by law) waives
and agrees not to exercise or claim those rights, security or
money or that right of contribution or indemnity;
(b) claim, rank, prove or vote as a creditor of any Obligor or its
estate in competition with any Finance Party (or any trustee or
agent on its behalf) unless otherwise required by the Facility
Agent or by law (in which case any proceeds of any claim in
respect of any rights, security or monies of any Finance Party to
which such Guarantor was subrogated will be paid by such
Guarantor to the Facility Agent to be applied in accordance with
the provisions of the Finance Documents); or
(c) receive, claim or have the benefit of any payment, distribution or
security from or on account of any Obligor, or exercise any right
of set-off as against any Obligor (and without prejudice to the
foregoing, each Guarantor shall forthwith pay to the Facility
Agent for the benefit of the Finance Parties an amount equal to
any amount so set-off by it).
Each Guarantor shall hold in trust for and forthwith pay or transfer to
the Facility Agent for the Finance Parties any payment or distribution
or benefit of security received by it contrary to this Clause 18.7.
18.8 ADDITIONAL SECURITY
This guarantee is in addition to and is not in any way prejudiced by any
other security now or hereafter held by any Finance Party.
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47
18.9 LIMITATIONS
Notwithstanding any other provision of this Clause 18:
(a) the obligations of each U.S. Obligor in its capacity as a Guarantor
under this Clause 18 shall be limited to a maximum aggregate
amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the
United States Bankruptcy Code or any applicable provisions of
comparable state law (collectively, the "FRAUDULENT TRANSFER
LAWS"), in each case after giving effect to all other liabilities
of such U.S. Obligor, contingent or otherwise, that are relevant
under the Fraudulent Transfer Laws (specifically excluding,
however, any liabilities of such U.S. Obligor in respect of
intercompany indebtedness to the Borrowers or Affiliates of the
Borrowers to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by such U.S.
Obligor hereunder) and after giving effect as assets to the value
(as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, contribution,
reimbursement, indemnity or similar rights of such U.S. Obligor
pursuant to (i) applicable law or (ii) any agreement providing
for an equitable allocation among such U.S. Obligor and other
Affiliates of the Borrowers of obligations arising under
guarantees by such parties;
(b) No Guarantor which is not incorporated in the United States of
America shall guarantee the liabilities of the Parent in respect
of the Tranche A Advance made to the Parent or the liabilities of
any other Guarantor in respect of such liabilities of the Parent
and no claim shall be made against any such Guarantor in respect
thereof.
19. ADDITIONAL BORROWERS, GUARANTORS AND SECURITY
19.1 ADDITIONAL BORROWERS
(a) If any wholly-owned Subsidiary of the Parent wishes to become a Borrower,
it and the Obligors' Agent (for itself and on behalf of the existing
Borrowers and Guarantors) shall execute and deliver to the Facility
Agent a duly completed Borrower Accession Agreement.
(b) If all the Banks confirm to the Facility Agent their agreement to the
relevant Subsidiary becoming a Borrower (such agreement not to be
unreasonably withheld in the case of an Obligor), the Facility Agent
shall execute such Borrower Accession Agreement for itself and on
behalf of the other Finance Parties.
(c) Subject to Clause 19.1(d), upon execution of such Borrower Accession
Agreement by the relevant Subsidiary as Additional Borrower, the
Obligors' Agent and the Facility Agent as aforesaid, such Subsidiary
shall become an Additional Borrower in accordance with the terms hereof
and thereof. If included in the Borrower Accession Agreement, the
Additional Borrower's right to make Utilisations hereunder may be
limited in accordance with the terms so included.
(d) The obligations of the Finance Parties to such Additional Borrower with
respect to the making of the first Utilisation to it under this Agreement
are subject to the condition precedent that the Facility Agent shall have
received in form and substance satisfactory to it each of the documents
listed in Schedule 3 Part II and such other reports, opinions and other
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documents relating to such Additional Borrower as the Facility Agent may
reasonably require.
19.2 ADDITIONAL GUARANTORS
(a) The Obligors shall procure that:
(i) Each of PhotoDisc Europe Limited and ArtCast Corporation shall
become n Additional Guarantor on the Closing Date;
(ii) each of Allsport Photographic plc, All-sport (UK) Limited and
Allsport Photography (U.S.) Inc. shall become within 45 days of
the acquisition of Allsport Photographic plc by Getty U.K. or any
other member of the Group, an Additional Guarantor; and
(iii) subject to any provision of law prohibiting the relevant person
from becoming an Additional Guarantor, (A) each company becoming
a Borrower, (B) on incorporating any company pursuant to Clause
21.16 such company (provided that it is also a Material
Subsidiary) and (C) if there has, in the opinion of the Majority
Banks, been a material and adverse change in the business, assets
or financial condition of an Obligor any member of the Group,
shall become, as soon as reasonably practicable after being
required by the Facility Agent on the instructions of the
Majority Banks to become, an Additional Guarantor,
in each case by (I) executing and delivering to the Facility Agent a
Guarantor Accession Agreement (duly executed by the Obligors' Agent for
itself and on behalf of the existing Borrowers and Guarantors) and (II)
delivering to the Facility Agent each of the documents listed in
Schedule 3 Part II and such other reports, opinions and documents (if
any) as the Facility Agent may reasonably require in respect of the
Additional Guarantor, each in form and substance satisfactory to the
Facility Agent.
(b) Where any such prohibition as is referred to in Clause 19.2(a)(ii) above
exists, each Obligor shall use its reasonable endeavours lawfully to
overcome the prohibition. For the avoidance of doubt the provisions of
Clause 18.9 shall apply with respect to the obligations of an Additional
Guarantor as they apply generally to Guarantors.
19.3 ADDITIONAL SECURITY
(a) Subject always to the limitations set out in Clause 19.3(e), the Obligors
shall procure that:
(i) the Security Documents specified in Schedule 6 are executed and
delivered to the Security Agent at Closing;
(ii) Each of ArtCast Corporation and PhotoDisc Europe Limited shall
execute and deliver to the Security Agent at Closing such further
or additional Security Documents as the Facility Agent may
require;
(iii) Tony Stone Images/America Inc. shall execute and deliver to the
Security Agent before 31st May, 1998 a stock pledge agreement
over all the issued shares in Tony Stone Images/Seattle Inc.;
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49
(iv) each of Allsport Photographic plc, All-sport (UK) Limited and
Allsport Photography (U.S.) Inc. shall, at the same time or
before such companies become Additional Guarantors pursuant to
Clause 19.2(a)(i), execute and deliver to the Security Agent such
further or additional Security Documents as the Facility Agent
may require in substantially the same terms as the Security
Documents charging similar assets entered into at Closing;
(v) on acquiring any asset deemed by the Majority Banks to be of
material value or material to the operation of the business of
any member of the Group, the member of the Group acquiring such
asset shall (if such asset is not, in the opinion of the Security
Agent, subject to a charge under any existing Security Document)
execute and deliver to the Security Agent such further or
additional Security Documents in relation to such assets as the
Majority Banks may require in substantially the same terms as the
Security Documents charging similar assets entered into at
Closing; and
(vi) if there has, in the reasonable opinion of the Majority Banks,
been a material and adverse change in the business, assets or
financial condition of any Obligor, such Obligor shall execute
and deliver to the Security Agent such further or additional
Security Documents in such form and in relation to such of its
assets as the Majority Banks shall require in substantially the
same terms as the Security Documents (if any) charging similar
assets in the same jurisdiction at Closing, subject in each case
to any provisions of law prohibiting such person from entering
into such Security Documents.
(b) Subject always to the limitations set out in Clause 19.3(e), the Obligors
shall procure that any entity which becomes a member of the Group after
Closing shall, if required by the Security Agent, promptly execute and
deliver to the Security Agent such Security Documents in substantially
the same terms as the Security Documents entered into at Closing
subject to any provision of law prohibiting such person from entering
into such Security Documents.
(c) Where any such prohibition as is referred to above exists, the Obligors
shall use their reasonable endeavours lawfully to overcome the
prohibition.
(d) Subject always to the limitations set out in Clause 19.3(e), the Obligors
shall at their own expense execute and do all such assurances, acts and
things (i) as the Security Agent may reasonably require for perfecting
or protecting the security intended to be afforded by the Security
Documents (and shall deliver to the Security Agent such directors and
shareholders resolutions, title documents and other documents as the
Security Agent may reasonably require) or (ii) as the Security Agent
may require for facilitating the realisation of all or any part of the
assets which are subject to the Security Documents and the exercise of
all powers, authorities and discretions vested in the Security Agent or
in any receiver of all or any part of those assets.
(e) Notwithstanding the other paragraphs of this Clause 19.3, no Obligor
which is not incorporated in the United States of America shall charge
any of its assets in favour of the Security Agent to secure the
obligations of the Parent (or of any Obligor in respect of the
obligations of the Parent) with respect to Advances made to the Parent
under this Agreement. Notwithstanding the other paragraphs of this
Clause 19.3, no U.S. Obligor shall pledge more than sixty-five per
cent. (65%) of the shares of any of its Subsidiaries which is not
incorporated in the United States of America to secure the obligations
of the Parent (or of any
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50
Obligor in respect of the obligations of the Parent) with respect to
the Advances made to the Parent under this Agreement.
19.4 RELEASE OF GUARANTORS AND SECURITY
(a) Subject to Clause 19.4(c), at the time of completion of any sale or other
disposal to a person or persons outside (and which will remain outside)
the Group of all of the shares in the capital of any Guarantor (or of
all of the shares in any other member of the Group such that any
Guarantor ceases as a result thereof to be a member of the Group) and
in such other circumstances (if any) as the Majority Banks may from
time to time agree in writing, such Guarantor shall be released from
all past, present and future liabilities (both actual and contingent
and including, without limitation, any liability to any other Guarantor
by way of contribution) hereunder and under the Security Documents to
which it is a party (other than liabilities which it has in its
capacity as a Borrower), and the security provided over its assets
under such Security Documents shall be released.
(b) Subject to Clause 19.4(c), at the time of completion of any sale or other
disposal to a person or persons outside (and which will remain outside)
the Group of any assets owned by an Obligor over which security has
been created by the Security Documents to which that Obligor is party,
those assets shall be released from such security.
(c) The release of the guarantees and security referred to in Clause 19.4(a)
and (b) shall only occur (save to the extent otherwise agreed by the
Majority Banks) if:
(i) either (1) such disposal by any member of the Group is permitted by
the provisions of this Agreement and will not result directly or
indirectly in any breach of any of the terms of this Agreement, or
(2) such disposal is being effected at the request of the Majority
Banks in circumstances where any of the security created by the
Security Documents has become enforceable, or (3) such disposal is
being effected by enforcement of the Security Documents; and
(ii) any assets to be transferred to other members of the Group before
completion of such disposal shall have been so transferred and
(if so required by the Majority Banks) security over such assets
shall have been granted to the Security Agent to its satisfaction.
The Security Agent shall (at the expense of the relevant Obligor) execute
such documents effecting such release as shall be reasonably required
to achieve such release as aforesaid (and the Security Agent shall
execute such documents promptly upon (and only upon) it being satisfied
that the conditions in (i) and (ii) above are satisfied or all the
Banks have otherwise agreed).
(d) If any person which is a member of the Group shall cease to be such a
member in consequence of the enforcement of any of the Security
Documents or in consequence of a disposal of the shares therein or in
any Holding Parent of it effected at the request of the Majority Banks
in circumstances where any of the security created by the Security
Documents has become enforceable, any claim which any Obligor may have
against such person or any of its Subsidiaries or which that person or
any of its Subsidiaries may have against any Obligor in or arising out
of this Agreement or any of the Security Documents (including, without
limitation, any claim by way of subrogation to the rights of the Agents
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and the Banks under the Finance Documents and any claim by way of
contribution or indemnity) shall be released automatically and
immediately upon such person ceasing to be a member of the Group.
20. REPRESENTATIONS AND WARRANTIES
20.1 REPRESENTATIONS AND WARRANTIES
Each Obligor makes the representations and warranties set out in this
Clause 20 to each Finance Party. The representations and warranties in
Clauses 20.1 shall be subject to any matter fairly and adequately
disclosed to the Finance Parties in the Disclosure Letter.
(a) STATUS: It is, and each Subsidiary of it is, a limited liability
company or in the case of a U.S. Person corporation, duly
incorporated or established and validly existing under the laws
of the jurisdiction of its incorporation or establishment, with
the power to own its assets and carry on its business as it is
being conducted, and no administrator, receiver, liquidator or
similar official has been appointed with respect to it or any
Material Subsidiary of it or with respect to the assets of any of
them who has not been released, discharged or resigned from such
appointment and no petition or proceeding for such an appointment
is pending.
(b) POWERS AND AUTHORITY: It has the power to enter into and perform,
and has taken all necessary action to authorise the entry into,
performance and delivery by it of, the Transaction Documents to
which it is or will be a party and the transactions contemplated
by those Transaction Documents.
(c) LEGAL VALIDITY: Subject to the Reservations, each Transaction
Document to which it is or will be a party constitutes, or when
executed in accordance with its terms will constitute, its legal,
valid and binding obligation and no limit on its powers will be
exceeded as a result of the borrowings, grant of security or
giving of guarantees contemplated by the Transaction Documents to
which it is a party.
(d) NON-CONFLICT: The entry into and performance by it of, and the
transactions contemplated by, the Transaction Documents do not and
will not:
(i) conflict with any law or judicial or official regulation
applicable to it; or
(ii) conflict with its constitutional documents; or
(iii) conflict in any material respect with any agreement or
document which is binding upon it, any Material Subsidiary
or any asset of the Parent or any Material Subsidiary; or
(iv) entitle any third party to terminate any material contract
with the Parent or any Material Subsidiary.
(e) NO DEFAULT:
(i) No Default is outstanding or is reasonably likely to result
from the making of any Utilisation; and
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(ii) No other event is outstanding which constitutes (or, with the
giving of notice, lapse of time or the fulfilment of any
other applicable condition (other than a condition as to
materiality which is not satisfied), will constitute) a
default under any agreement or document which is binding on
any member of the Group or any asset of any member of the
Group, which event or default or any action which any third
party is entitled to take following any such event or
default would have a Material Adverse Effect.
(f) AUTHORISATIONS: All authorisations required by it in connection
with the entry into, performance, validity and enforceability of,
and the transactions contemplated by, the Transaction Documents
have been obtained or effected (as appropriate) and are in full
force and effect save for any filings and registrations necessary
in connection with the Security Documents which can be effected
by or on behalf of the Security Agent (and without the need for
any action by any member of the Group) after the date hereof.
(g) ACCOUNTS:
(i) Its Accounts most recently delivered to the Facility Agent
(if audited) present a true and fair view of or (if
unaudited) fairly present its and (if consolidated) its
Subsidiaries consolidated financial condition as at the
date to which they were drawn up, subject in the case of
quarterly and monthly Accounts to normal year end
adjustments.
(ii) All forecasts and projections delivered to the Facility Agent
pursuant to Clause 21.3 were arrived at after careful
consideration, were fair and were based on reasonable
grounds and as at the date of such delivery were not
misleading in any material respect.
(h) LITIGATION AND LABOUR DISPUTES: No litigation, arbitration,
administrative or regulatory proceedings are current or, to its
knowledge, pending or threatened, which are reasonably likely to
be adversely determined to it and which would, if so determined,
have a Material Adverse Effect. No labour disputes are current
or, to its knowledge, threatened which would have a Material
Adverse Effect.
(i) TAX LIABILITIES: No claims are being or are reasonably likely to be
asserted against any member of the Group with respect to Taxes
which are reasonably likely to be determined adversely to such
member of the Group and which, if so adversely determined, would
have a Material Adverse Effect. It is not overdue in the filing
of any material Tax returns.
(j) PROSPECTUS AND REPORTS:
(i) The Prospectus did not, at the time that it was declared
effective under the U.S. Securities Act of 1933, as
amended, contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they
were made, not misleading.
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53
(ii) The forecasts and projections contained in the Financial
Forecasts are reasonable and are reasonably believed by the
Parent (which shall be deemed to have the belief of each of
the Executive Officers) to be attainable.
(iii) nothing has occurred or come to light which renders any of
the material factual information, expressions of opinion or
intention, projections or conclusions contained in the
Prospectus inaccurate or misleading (or in the case of
expressions of opinion, conclusions or projections, other
than fair and reasonable) in any material respect in the
context of the Acquired Assets, the Group and the
transactions contemplated hereby;
(k) BASE FINANCIAL STATEMENTS:
(i) So far as it is aware after due and careful enquiry (the
knowledge of each of the Executives being imputed to each
Obligor) the Base Financial Statements have been prepared
in accordance with the Applicable Accounting Principles and
fairly present the consolidated financial position of the
relevant Target Group or the U.K. Group, as the case may
be, as at the date to which the same were prepared and/or
(as appropriate) the results of operations and changes in
financial position during the period for which they were
prepared, subject, in the case of management Accounts, to
normal year end adjustments, and the Accounts referred to
in paragraphs (a) and (c) of the definition of Base
Financial Statements in Clause 1.1 do not consolidate or
include the results of any company, business or partnership
whose business at the Closing Date is not part of the
Acquired Assets.
(ii) There has been no material adverse change in the business,
assets or financial condition of the Acquired Assets (taken
as a whole) since the date to which the latest of the Base
Financial Statements in which its financial position and
results of operations are reflected were prepared.
(l) DOCUMENTS:
(i) The documents delivered to the Facility Agent by or on
behalf of any Obligor pursuant to Clause 4.1 and any other
provision of the Finance Documents were genuine and in the
case of copy documents, were true, complete and accurate
copies in all material respects, of originals which have
not been amended, varied, supplemented or superseded in any
way which would be likely materially and adversely to
affect the interests of the Banks under the Finance
Documents.
(ii) The Acquisition Agreements, as furnished to the Facility
Agent pursuant to Clause 4.1, contain all the material
terms of the Acquisitions.
(m) INTELLECTUAL PROPERTY RIGHTS:
(i) It and each of its Subsidiaries which is a Material
Subsidiary owns or has licensed to it all the Intellectual
Property Rights which are material in the context of its
(or such Material Subsidiaries') business and which are
required by it (or such Material Subsidiary) in order for
it to carry on its business in all
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54
material respects as it is being conducted and as
contemplated in the Financial Forecasts and it does not
(nor do any of its Subsidiaries which is a Material
Subsidiary), in carrying on its business, infringe any
Intellectual Property Rights of any third party in any
material respect.
(ii) It and each of its Subsidiaries which is a Material
Subsidiary has taken all actions (including payment of
fees) required to maintain in full force and effect any
registered Intellectual Property Rights owned by it which
are material in the context of its (or such Material
Subsidiaries') business or which are required by it (or
such Material Subsidiary) in order for it to carry on its
business in all material respects as it is being conducted
and as contemplated in the Financial Forecasts.
(iii) Save as disclosed in the Disclosure Letter, it and each of
its Subsidiaries which is a Material Subsidiary has the
right to use all trade names and has not entered into any
agreements restricting the use of such trade names.
(n) ENVIRONMENTAL MATTERS:
(i) It and its Subsidiaries have obtained all requisite
Environmental Licences required for the carrying on of its
business as currently conducted and have at all times
complied with (A) the terms and conditions of such
Environmental Licences and (B) all other applicable
Environmental Laws which, in each case, if not obtained or
complied with would have a Material Adverse Effect or a
material adverse effect on the value (taken as a whole) of
the real property charged pursuant to the Security
Documents. There are to its knowledge no circumstances
which may prevent or interfere with such compliance in the
future.
(ii) There is no Environmental Claim current or (to its knowledge)
pending or threatened, and there are no past or present
acts, omissions, events or circumstances that would be
reasonably likely to form the basis of any Environmental
Claim (including, without limitation, any arising out of
the generation, storage, transport, disposal or release of
any Dangerous Substance), against any Obligor which if
adversely determined would have a Material Adverse Effect.
(o) REPRESENTATIONS TO THE PARENT OR GETTY U.K. (AS APPROPRIATE): So
far as it is aware after due and careful enquiry none of the
representations and warranties (as qualified by any related
disclosure letter) by any of the Vendors or PhotoDisc in any of
the Acquisition Agreements are untrue or inaccurate in any
material respect.
(p) PARENT: Save as arises under the Transaction Documents and save
also for Acquisition Costs, before Closing the Parent has not
traded and has no material liabilities or commitments (actual or
contingent, present or future).
(q) STRUCTURE MEMORANDUM:
(i) The Structure Memorandum contains descriptions which in all
material respects are true, complete and correct of the
corporate ownership structure
<PAGE>
55
of the Group (including details of any minority
shareholdings held by any person who is not a member of the
Group, details of all partnerships, joint ventures and
co-operative agreements in which any member of the Group
has an interest and details of any minority shareholding
owned by any member of the Group) showing each Subsidiary
and all inter-company Borrowings (of a type specified in
paragraphs (a), (b) or (c) of the definition of
"Borrowings" in Clause 1.1) of more than U.S.$500,000 (or
its equivalent in other currencies) as they will be
immediately after Closing.
(ii) There are no re-organisational steps contemplated at the date
hereof (including, without limitation, significant
transfers of business or assets from one member of the
Group to another) which are not described in the Structure
Memorandum.
(r) ACQUIRED ASSETS: The Parent will, immediately upon Closing,
beneficially own all the stock in Print Merger, Inc. (into which
PhotoDisc upon Closing will be merged) and all the issued share
capital of Getty U.K. and Getty U.K. will, immediately upon
Closing beneficially own all the issued share capital in Allsport
Photographic plc and each of the Parent and Getty U.K. will
either be or will be entitled forthwith to become the legal
registered owner of such stock and shares free from all
Encumbrances, claims and competing interests whatsoever save as
expressly permitted under the Finance Documents.
(s) OWNERSHIP OF ASSETS: Save to the extent disposed of without
breaching the terms of any of the Finance Documents, with effect
from and after Closing, it and each of its Subsidiaries which is
a Material Subsidiary has good title to or valid leases or
licences of or is otherwise entitled to use and permit other
members of the Group to use all material assets necessary, in the
case of an Obligor, to conduct its business as conducted by it at
Closing or reflected in the latest of the Base Financial
Statements referred to in the definition of that term in Clause
1.1.
(t) SECURITY DOCUMENTS: It is the beneficial owner of the property
which it purports to charge with full title guarantee pursuant to
any of the Security Documents. The shares charged by it pursuant
to the Security Documents are all fully paid and non-assessable
and are not subject to any option to purchase or similar rights.
(u) ERISA:
(i) No act, omission or transaction has occurred which will
result in the imposition on any U.S. Obligor of:
(1) either a civil penalty assessed pursuant to section
502(i)of ERISA or a tax imposed by section 4975 of
the IRC;
(2) breach of fiduciary duty liability damages under
section 409 of ERISA,
which would in any such case have a Material Adverse Effect.
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56
(ii) No U.S. Obligor or ERISA Affiliate has maintained, or had an
obligation to contribute to, or has any liability or
potential liability with respect to any Plan that is or was
subject to Title IV of ERISA or to the minimum funding
requirements of Section 302 of ERISA or Section 412 of the
IRC.
(iii) Payment has been made of all amounts which any U.S. Obligor
or any ERISA Affiliate is required under the terms of each
Plan or applicable law to have paid as contributions to
such Plan, except as could not reasonably be expected to
have a Material Adverse Effect.
(iv) Each U.S. Obligor and each ERISA Affiliate are in compliance
in all material respects with the presently applicable
provisions of ERISA, the IRC, its terms, and all other
applicable laws, rules and regulations with respect to each
Plan.
(v) Neither any U.S. Obligor nor any ERISA Affiliate (nor any
trade or business that was an ERISA Affiliate) has at any
time contributed to or been obliged to contribute to any
Multiemployer Plan which, upon the complete or partial
withdrawal of the U.S. Obligor or any ERISA Affiliate from
such Plan, could result in the imposition of complete or
partial withdrawal liability which would have a Material
Adverse Effect.
(vi) There are no actions, suits or claims pending (other than
routine claims for benefits) against any Plan or the assets
of any such Plan, except as could not reasonably be
expected to have a Material Adverse Effect.
(v) INVESTMENT COMPANY STATUS: Each U.S. Obligor is either (i) not an
"investment company" or an "affiliated person" of, or "promoter"
or "principal underwriter" for an "investment company" in each
case within the meaning of the United States Investment Company
Act of 1940, as amended or (ii) is exempt from all provisions of
such Act, as amended.
(w) SOLVENCY OF U.S. OBLIGORS: At the date of this Agreement, each
U.S. Obligor is, and immediately after consummation of the
transactions contemplated to occur under this Agreement and the
other Transaction Documents and after giving effect to all
obligations incurred and Encumbrances created by such U.S.
Obligor in connection herewith and therewith will be, Solvent.
No Obligor is entering into this Agreement or the transactions
contemplated hereby with actual intent to hinder, delay or
defraud either present or future creditors. As used in this
Agreement, "SOLVENT" means, with respect to any U.S. Obligor on a
particular date, that on such date (i) the fair value of the
assets of such U.S. Obligor is greater than the total amount of
liabilities, including, without limitation, subordinated and
contingent liabilities, of such U.S. Obligor, (ii) the amount
that will be required to pay the probable liabilities of such
U.S. Obligor on its debts as they become absolute and matured
will not be greater than the fair saleable value of the property
of such U.S. Obligor at such time, (iii) such U.S. Obligor is
able to realise upon its assets and pay its debts and other
liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (iv) such U.S. Obligor
does not intend to, and does not believe that it will, incur
debts or liabilities beyond such U.S. Obligor's ability to pay as
such debts and liabilities become absolute and mature, and (v)
such U.S. Obligor is not
<PAGE>
57
engaged in a business or a transaction, and is not about to
engage in a business or a transaction, for which such U.S.
Obligor's property would constitute unreasonably small capital
with which to conduct the businesses in which it is engaged. In
computing the amount of any contingent liability at any time, it
is intended that such liability will be computed at the amount
which, in light of all the facts and circumstances existing at
such time, represents the amount that might reasonably be
expected to become an actual or matured liability and taking into
account the value of rights of contribution, reimbursement and
subrogation which such U.S. Obligor might reasonably be expected
to realise in respect thereof.
20.2 TIMES FOR MAKING REPRESENTATIONS AND WARRANTIES
The representations and warranties set out in Clause 20.1:
(a) (i) in the case of an Obligor which is a Party on the date of
this Agreement, are made by that Obligor on that date and
on the first Utilisation Date; and
(ii) in the case of an Obligor which becomes a Party after the
date of this Agreement, will be deemed to be made by that
Obligor on the date it executes a Borrower Accession
Agreement or Guarantor Accession Agreement; and
(b) (with the exception of Clause 20.1(e)(i), (j), (k), (l)(ii), (n),
(o), (p), (q), (r), (u)(ii)) are in addition deemed to be
repeated by each Obligor on the date of each Request, each
Utilisation Date and each Interest Date with reference to the
facts and circumstances then existing.
21. UNDERTAKINGS
21.1 DURATION
The undertakings in this Clause 21 remain in force from the date of this
Agreement for so long as any amount is or may be outstanding under this
Agreement or any Commitment is in force.
21.2 FINANCIAL INFORMATION
The Parent shall supply to the Facility Agent in sufficient copies for
all the Banks:
(a) as soon as the same are available (and in any event within 120
days of the end of each of its financial years):
(i) the audited consolidated accounts of the Group for that
financial year; and
(ii) promptly upon request by the Facility Agent, the audited
accounts, if prepared, of each Obligor (consolidated in the
case of an Obligor with Subsidiaries) for that financial
year;
(b) as soon as available (and in any event within 45 days) after the
end of each consecutive three month period ending on an
Accounting Date, unaudited consolidated management accounts for
that three month period in a form and showing the detailed
information provided for in the Proforma Accounts together
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58
with a written report by an Executive Officer explaining any
material variances against budget and the Financial Forecasts for
that period;
(c) as soon as available (and in any event within 45 days) after the
end of each calendar month the unaudited consolidated management
accounts of the Group for that month in a form and showing the
detailed information provided for in the Proforma Accounts and
with each set of monthly consolidated management accounts, a
written report of an Executive Officer explaining any material
variances against the budget and Financial Forecasts for that
period; and
(d) (i) together with the Accounts specified in paragraph (a)(i)
above, (A) a certificate signed by the Auditors (I) setting
out in reasonable detail computations establishing
compliance or otherwise with Clause 22.2, and (II) stating
that the Auditors did not in the course of their audit
discover any Event of Default which they know to be an
Event of Default or, if they did, describing the same, and
(B) a certificate signed by an Executive Officer
identifying the Material Subsidiaries on the basis of such
Accounts;
(ii) together with the Accounts specified in paragraph (b) above
ending on an Accounting Date other than 31st March and 30th
September (before any adjustment), a certificate signed by
two directors of the Parent (one of whom shall be the Chief
Financial Officer) setting out in reasonable detail
computations establishing compliance with Clause 22.2 as at
the date to which those Accounts were drawn-up; and
(iii) together with the Accounts specified in paragraph (b) above,
a certificate signed by two directors of the Parent stating
that as at the date of the certificate no Default is
outstanding or, if there is an outstanding Default,
providing details of the same and of any proposed remedial
action and stating that no Default is expected to occur
before the next Accounting Date.
21.3 PROJECTIONS
(a) The Parent shall furnish to the Facility Agent in sufficient copies for
each of the Banks as soon as available and in any event prior to the
twenty-first day before the commencement of each financial year, a
budget including a projected consolidated balance sheet, profit and
loss account, Capital Expenditure forecast and cash flow statement of
the Group for (or, in the case of a balance sheet, as at the end of)
such financial year together with details of the principal assumptions
underlying such projections all as approved by the Parent's board of
directors in a format consistent with the Proforma Accounts and
prepared in accordance with the Applicable Accounting Principles.
(b) At least once in every financial year the Executive Officers of the
Parent will give a presentation to the Banks, at a time and venue
agreed with the Facility Agent, about the ongoing business and
financial performance of the Group and about such other matters
relating to the ongoing business and financial performance of the Group
as any of the Banks may reasonably request.
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59
21.4 NOTIFICATIONS
The Parent shall furnish or procure that there shall be furnished to the
Facility Agent in sufficient copies for each of the Banks:
(a) promptly, documents despatched by the Parent to its shareholders
generally (or any class of them) in their capacity as such and
all documents relating to the financial obligations of any
Obligor despatched by or on behalf of any Obligor to its
creditors generally (in their capacity as creditors);
(b) promptly upon being notified of the same, details of all transfers
of more than 5% of any class of shares in the Parent's capital;
(c) on request from the Facility Agent (to be given not more often
than twice a year unless an Event of Default is then outstanding
or the Facility Agent has reasonable grounds for believing that
there is a Default), an up to date copy of the shareholders'
register of the Parent;
(d) as soon as the same are instituted or, to its knowledge,
threatened, details of any litigation (other than any which is
frivolous or vexatious), arbitration or administrative
proceedings involving any Group member which, if adversely
determined, would involve potential or alleged liability in
excess of U.S.$1,000,000 (or its equivalent in other currencies);
(e) as soon as the same are delivered or received or determined,
reasonable details of all warranty and indemnity claims, and of
any alleged breach involving liability or potential liability, in
each case in excess of U.S.$1,000,000 (or its equivalent in other
currencies) made by or against any member of the Group pursuant
to the Acquisition Agreements;
(f) promptly, such further information regarding its financial
condition, business and assets and that of the Group and/or any
member thereof (including any requested amplification or
explanation of any item in any Accounts, forecast, projections or
other material provided by any Obligor hereunder) as the Facility
Agent or any Bank through the Facility Agent may reasonably
request from time to time;
(g) written details of any Default forthwith upon becoming aware of the
same, and of all remedial steps being taken and proposed to be
taken in respect of that Default and, promptly after being
requested by the Facility Agent, a certificate to the Facility
Agent signed by a director of the Parent confirming that there is
no outstanding Default or, if there is, giving details of the
same;
(h) written details of the occurrence of any of the events referred to
in Clause 23.1(k) promptly upon becoming aware of the same
together with, if requested by the Facility Agent, calculations
showing whether or not any such event has resulted in an Event of
Default;
(i) promptly, and in any event within 14 days, after (i) it has
knowledge of the occurrence of any Reportable Event, a copy of
the materials that are filed with the PBGC, or the materials that
would have been required to be filed if the 30 day notice
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60
requirement to the PBGC was not waived, (ii) the U.S. Obligor or
any ERISA Affiliate files with participants, beneficiaries or the
PBGC a notice of intent to terminate any such Pension Plan, a
copy of any such notice, (iii) the receipt of notice by the U.S.
Obligor or any ERISA Affiliate from the PBGC of the PBGC's
intention to terminate any Pension Plan or to appoint a trustee
to administer any such Pension Plan, a copy of such notice, (iv)
the U.S. Obligor or any ERISA Affiliate knows or has reason to
know of any event or condition which might constitute ground
under the provisions of Section 4042 of ERISA for the termination
of (or the appointment of a trustee to administer) any Pension
Plan, an explanation of such event or condition, (v) the receipt
by the U.S. Obligor or any ERISA Affiliate of an assessment of
withdrawal liability under ERISA from a Multiemployer Plan, a
copy of such Assessment, (vi) the U.S. Obligor or any ERISA
Affiliate knows or has reason to know of any condition which
might cause any one of them to incur a liability under Section
4062, 4063, 4064, or 4069 of ERISA or Section 412(n) or 4971 of
the Code, an explanation of such event or condition, and (vii)
the U.S. Obligor or any ERISA Affiliate knows, or has reason to
know, that an application is to be, or has been, made to the
Secretary of the Treasury for a waiver of the minimum funding
standard under the provisions of Section 412 of the Code, a copy
of such application, and, in each case described in
sub-paragraphs (i) to (iii) (inclusive) and (iv) to (vi)
(inclusive) a statement signed by the chief financial officer of
the U.S. Obligor setting forth details as to such Reportable
Event, notice, event or condition and the action which the U.S.
Obligor or such ERISA Affiliate proposes to take with respect
thereto.
21.5 AUDIT AND ACCOUNTING DATES
The Parent will ensure that:
(a) each annual Accounting Period and each quarterly Accounting
Period, as the case may be, of the Group ends on an Accounting
Date;
(b) each of its annual Accounting Periods will end on 31st December;
and
(c) all Accounts are prepared in accordance with the Applicable
Accounting Principles or where any Accounts have been prepared in
any respect so as to depart materially from the Applicable
Accounting Principles the Parent shall provide to the Facility
Agent (in sufficient copies for the Banks) a written explanation
(and calculations in reasonable detail) prepared or confirmed by
the Auditors in the case of audited Accounts of the effect of
such departure on the financial covenants in Clause 22 and the
definitions referred to therein. The Facility Agent (acting on
the instructions of the Majority Banks) may, at the cost of the
Parent, instruct the Auditors to check any such calculations
where the Facility Agent has reasonable grounds for believing
that they may be inaccurate, save that where such calculations
are determined to be accurate, the costs will be for the account
of the Facility Agent. If the Majority Banks approve any such
departure it shall become part of the Applicable Accounting
Principles.
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61
21.6 NEGATIVE PLEDGE
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, create or permit to subsist any Encumbrance on the
whole or any part of its respective present or future business, assets
or undertaking except for the following:
(a) Encumbrances constituted or evidenced by the Security Documents;
(b) Encumbrances expressly permitted in writing by the Majority Banks,
provided that the principal amount of the indebtedness secured by
such Encumbrances shall not at any time be increased beyond the
amount expressly so permitted;
(c) Encumbrances arising by operation of law in the ordinary course
of business and not as a result of any default or omission on the
part of any member of the Group;
(d) Encumbrances over goods and documents of title to goods arising in
the ordinary course of letter of credit transactions entered into
in the ordinary course of trade;
(e) Encumbrances over credit balances on bank accounts of members of
the Group (in the case of an Obligor being with Approved Banks)
created in order to facilitate the operation of such bank
accounts and other bank accounts of such members of the Group
with such banks (or Approved Banks as the case may be) on a net
balance basis with credit balances and debit balances on the
various accounts being netted off for interest purposes or
Encumbrances over credit balances on bank accounts pursuant to
the standard terms and conditions of such bank (or Approved Bank
as the case may be) of general application to its corporate
customers;
(f) Encumbrances over assets acquired after the Closing Date and
existing at the date of acquisition but not created in
contemplation of their acquisition, provided that (A) the
principal amount secured by any such Encumbrance shall not be
increased beyond the amount secured thereby at the date of such
acquisition and (B) such Encumbrances are released and discharged
within three months of the date of such acquisition, unless the
Majority Banks otherwise consent;
(g) Encumbrances securing only the Existing Facilities granted over
shares in Tony Stone GmbH and Tony Stone Images/Canada Inc.,
provided that such Encumbrances shall be fully released within 30
days after the date hereof;
(h) Encumbrances in existence at the Closing Date securing Borrowings
owed to National Westminster Bank plc by Allsport Photographic
plc provided that such Encumbrances shall be fully released
within 45 days of the date hereof;
(i) Encumbrances in existence at the Closing Date over shares in Tony
Stone Images/Seattle, Inc. in favour of Marty Loken and Gloria
Grandow provided that such Encumbrances shall be fully released
before 31st May, 1998;
(j) the Encumbrances in existence at the Closing Date in favour of the
British Broadcasting Corporation created by Hulton Getty Picture
Collection Limited more particularly described in the Disclosure
Letter;
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62
(k) Encumbrances over accounts receivable from Subsidiaries of Tony
Stone Images/America Inc. in existence at the Closing Date in
favour of American National Bank created by Tony Stone
Images/America Inc. in respect of a U.S.$1,000,000 facility with
American National Bank, provided that such Encumbrances are fully
released within 14 days of the date hereof; and
(l) Encumbrances not otherwise permitted pursuant to paragraphs (a)-(k)
(inclusive) above together securing indebtedness in an aggregate
principal amount at any time outstanding not exceeding
U.S.$1,500,000 (or its equivalent in other currencies).
21.7 TRANSACTIONS SIMILAR TO SECURITY
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will:
(a) sell, transfer or otherwise dispose of:
(i) any of its assets on terms whereby such asset is or it is
contemplated is likely to be leased to or re-acquired or
acquired by any member of the Group; or
(ii) any of its receivables on recourse terms except for the
discounting of bills and notes in the ordinary course of
business where the resulting Borrowing is permitted by
Clause 21.10; and
(b) except for assets acquired in the normal course of trading,
purchase any asset on terms providing for a retention of title
by the vendor or on conditional sale terms or on terms having a
like substantive effect to any of the foregoing.
21.8 DISPOSALS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, either in a single transaction or in a series of
transactions, sell, transfer, lease or otherwise dispose of:
(a) any shares in any member of the Group (other than (i) the issue of
stock of the Parent permitted to be issued pursuant to Clause
21.19 and (ii) the disposal of any shares in a member of the
Group which is not a Material Subsidiary for cash consideration
payable in full at the time of disposal and on arm's length terms
for fair market value) or in any joint venture; or
(b) all or any part of its respective assets or undertaking (not being
shares in a member of the Group or in any joint venture), other
than:
(A) sales of trading assets or the expenditure of cash, in each
case in the ordinary course of trading on arm's-length terms;
(B) disposals of obsolete or redundant plant and equipment, or of
real property not required for the efficient operation of its
business, on arm's length terms and for fair market value;
(C) the lending of cash and the repayment of cash lent in
compliance with the terms of the Finance Documents;
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63
(D) disposals of Cash Equivalent Investments on arm's length
terms;
(E) disposals of assets or undertakings by (i) a Non-Obligor to
any Obligor, and/or (ii) an Obligor to another Obligor,
provided in the latter case that where the transferor has
granted security over any such asset or undertaking
pursuant to any of the Security Documents the transferee
must at the time of transfer provide equivalent security
(to the reasonable satisfaction of the Security Agent) over
such assets to the Security Agent and the Banks; and
(F) disposals of assets on arm's length terms not otherwise
permitted under this Clause 21.8 provided that the aggregate
fair market value of the assets disposed of during any annual
Accounting Period does not exceed U.S.$1,500,000 (or its
equivalent in other currencies).
All such sales, transfers, leases or other disposals (other than
under (C)) shall be made only for a cash consideration payable in
full at the time of disposal. Notwithstanding the foregoing no
member of the Group which is incorporated in the United States of
America shall sell, transfer or otherwise dispose of any shares,
real property, plant and equipment or contractual rights (or any
interest in any thereof) to any member of the Group which is
either not incorporated in the United States of America or is so
incorporated but is a Subsidiary of another member of the Group
which is not incorporated in the United States of America.
21.9 PARI PASSU RANKING
Each Obligor undertakes that its obligations under this Agreement rank
and will at all times rank at least pari passu in right and priority of
payment with all its other present and future unsecured and
unsubordinated obligations, other than obligations applicable generally
to companies which have priority by operation of law.
21.10 BORROWING
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, incur any Borrowings falling within paragraphs (a),
(b), (c), (d) or (h) of the definition of Borrowings in Clause 1.1
other than:
(a) under the Finance Documents; or
(b) Borrowings in the form of loans permitted pursuant to Clause
21.17(b); or
(c) Borrowings to the extent covered by a documentary credit made
available under an Ancillary Facility; or
(d) Borrowings by any member of the Group (not being a member of the
Group on the Closing Date) outstanding at the time that it first
became a member of the Group and not borrowed in contemplation of
it becoming a member of the Group provided that (i) the principal
amount of such Borrowings shall not be increased after the date
it first becomes a member of the Group and shall be repaid in
full within 45 days after it becomes a member of the Group unless
permitted to exist by any other paragraph of
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this Clause 21.10 and (ii) such Borrowings when aggregated with
all other Borrowings permitted to be outstanding at any time
pursuant to this paragraph (d) do not exceed L2,500,000; or
(e) Borrowings owed to National Westminster Bank plc by Allsport
Photographic plc outstanding at the Closing Date provided that
such Borrowings do not exceed L1,500,000 at such date, are not
increased after the date hereof and are fully repaid within 45
days of the date hereof; or
(f) any other Borrowings not exceeding U.S.$3,000,000 (or the
equivalent in other currencies) in aggregate for the Group as a
whole at any one time outstanding.
21.11 LEASES
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will enter into any leases of or in respect of vehicles,
machinery, plant or equipment (the "EQUIPMENT"):
(i) if such Equipment (not being computers used for accounting and
administrative purposes only or telecommunications equipment) is
of such importance to the business of the lessee that such
business would be materially and adversely affected were such
Equipment to be repossessed by the lessor; or
(ii) if the capital value of such Equipment aggregated with the capital
value of all other Equipment leased under existing leases entered
into by all members of the Group is greater than U.S.$2,000,000
or such other higher amount agreed to by the Majority Banks (or
its equivalent in other currencies).
21.12 THIRD PARTY GUARANTEES
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, incur or permit to be outstanding any guarantee,
indemnity or other assurance against loss on the part of any person of
a type referred to in paragraph (i) of the definition of "Borrowings"
in Clause 1.1 other than (a) under the Finance Documents, or (b) the
endorsement of negotiable instruments for the purpose and in the
ordinary course of carrying on the relevant entity's trade, or (c)
guarantees in favour of an Approved Bank to facilitate the operation of
bank accounts of members of the Group maintained with such Approved
Bank on a net balance basis, or (d) in respect of the Borrowings of any
other member of the Group which are permitted under Clause 21.10 where
the maximum aggregate exposure of the Obligors under any such
guarantees, indemnities or other assurances in respect of the
Borrowings of Non-Obligors does not exceed U.S.$2,000,000 (or its
equivalent in other currencies), or (e) guarantees of the Existing
Facilities granted by Tony Stone Images/Canada, Inc. which will be
discharged in full upon repayment of the Existing Facilities, or (f)
guarantees of Subsidiaries of Tony Stone Images/America Inc. in favour
of American National Bank securing a U.S.$1,000,000 facility to Tony
Stone Images/America Inc. provided that such guarantees shall be
released in full within 14 days of the date hereof.
21.13 OPTIONS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, enter into or permit to subsist any option or other
arrangement whereby any person has the right (whether or not
exercisable only on a contingency) to require any member of the Group
to purchase or
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65
otherwise acquire or sell or otherwise dispose of any material property
or any interest in any material property otherwise than where any such
arrangement is permitted by Clause 21.14 or arises with respect to
capital stock of the Parent under bona fide employee stock option or
incentive agreements entered into by the Parent on terms normal for
such arrangements.
21.14 TREASURY TRANSACTIONS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, enter into any interest rate or currency swap, cap,
ceiling, collar, floor or financial futures or commodity contract or
option or any similar treasury or hedging transaction, other than (i)
the Hedging Documents, (ii) spot foreign exchange contracts entered
into in the ordinary course of business and (iii) transactions entered
into for the hedging of actual or projected exposures arising in the
ordinary course of ordinary trading activities of members of the Group
carried on in compliance with the terms of the Finance Documents for
periods of not more than 12 months.
21.15 CAPITAL EXPENDITURE
In respect of each annual Accounting Period the Parent will procure
that the Group taken as a whole will not purchase, lease (by finance
lease) or make Capital Expenditure on assets in an aggregate amount for
such annual Accounting Period exceeding 120% of the amount budgeted for
Capital Expenditure in the Financial Forecasts or in any revision
thereto in this respect.
21.16 INVESTMENTS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, incorporate any company or enter into any merger or
consolidation with any business or person or acquire (by subscription
or otherwise) or invest in any business or company or any shares or
other securities (or any interest therein) other than:
(a) Cash Equivalent Investments; or
(b) shares in members of the Target Group or Getty U.K. or Allsport
Photographic plc acquired at Closing; or
(c) members of the Group at the date of this Agreement which are
Obligors; or
(d) the incorporation by a member of the Group of a limited liability
company provided that (A) such company is wholly-owned by a
member (or members) of the Group and (B) the Parent notifies the
Facility Agent in writing at least one month prior to any such
incorporation; or
(e) the acquisition of all the shares of limited liability companies
(each a "NEW SUBSIDIARY") whose business is similar to that
carried on by another member of the Group, where at least two
weeks advance notice of such acquisition has been given to the
Facility Agent and where the aggregate consideration payable by
members of the Group (including any deferred purchase price and
borrowings or other liabilities of the New Subsidiary discharged
as part of the acquisition and the costs incurred by members of
the Group) in making any such acquisitions does not exceed, when
aggregated with the aggregate consideration for all other New
Subsidiaries,
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U.S.$10,000,000 less the aggregate Joint Venture Investment
(as defined in Clause 21.33 from time to time),
provided that:
(A) (i) unless otherwise permitted by Clauses 21.12 or 21.17, no
member of the Group will, at any time, grant any loan or
other credit facilities to such New Subsidiary or provide
or be liable under any guarantees, indemnities or
assurances against loss in respect of the obligations or
liabilities of such New Subsidiary; and
(ii) no member of the Group will, at any time, enter into any
transaction with such New Subsidiary other than on arm's
length terms or sell, lease or dispose of any asset to such
New Subsidiary otherwise than for cash and on arm's length
terms in the ordinary course of business; and
(iii) save for such initial purchase of the shares of such New
Subsidiary, no member of the Group will purchase, acquire or
subscribe for any shares of such New Subsidiary; and
(iv) no member of the Group will enter into any put or call
arrangements with any such New Subsidiary; and
(B) the acquisition of the shares referred to in (e) above shall only
be permitted to the extent that, if requested by the Security
Agent, security is given over such shares upon or immediately
following their acquisition in favour of (and in form and
substance reasonably satisfactory to) the Security Agent for the
Banks by the relevant member of the Group.
21.17 LOANS OUT
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, be the creditor in respect of any Borrowings,
save for:
(a) any Borrowings under paragraph (e) of the definition of
"BORROWINGS" in Clause 1.1 where trade credit is extended by any
member of the Group on normal commercial arm's length terms and
in the ordinary course of its business; or
(b) loans made by one member of the Group to another member of the
Group where:
(i) the loan is specified in the Structure Memorandum; or
(ii) the loan is made by an Obligor to another Obligor; or
(iii) the loan is made by an Obligor to a Non-Obligor and the
recipient of the loan requires the funds to meet its normal
working capital requirements where the aggregate amount of
all such loans to all such Non-Obligors at any time
outstanding does not exceed U.S.$2,000,000 (or its
equivalent in other currencies) and the aggregate amount
lent (by all members of the Group) at
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any time outstanding to any particular Non-Obligor does not
exceed U.S.$1,000,000 (or its equivalent in other
currencies); or
(iv) loans by a Non-Obligor to any member of the Group,
provided that, if requested by the Facility Agent, the Parent will
procure that in respect of any such loan or series of loans
between the same parties in an aggregate amount of U.S.$1,000,000
(or its equivalent in other currencies) or more security in
favour of the Security Agent (in form and substance reasonably
satisfactory to the Security Agent) on behalf of the Banks is
granted over such loan(s); or
(c) loans made by any member of the Group to the employees of the
Group in an aggregate amount for the Group as a whole at any time
outstanding not exceeding U.S.$500,000 (or its equivalent in
other currencies); or
(d) counter-indemnity claims against another member of the Group in
respect of any guarantee or indemnity given by a member of the
Group issued to any person in respect of the obligations or
liabilities of such other member of the Group and which is
permitted pursuant to Clause 21.12; or
(e) Borrowings (not being loans to another member of the Group) not
otherwise permitted pursuant to paragraphs (a), (b), (c) or (d)
in an aggregate amount for the Group as a whole at any time
outstanding not exceeding U.S.$1,500,000 (or its equivalent in
other currencies).
21.18 DIVIDENDS
The Parent will not declare, make or pay any dividend (or interest on
any unpaid dividend), charge, fee or other distribution (whether in
cash or in kind) on or in respect of any of its Shares, or any other
shares in its capital or repay or distribute any share premium account,
except that the Parent may declare, make and pay dividends in respect
of its Shares for any annual Accounting Period commencing after 30th
September, 1999 (I) where no Default has occurred and is continuing at
the date of such declaration or payment and (II) up to an aggregate
amount (net of any applicable Tax payable by the Parent in respect
thereof) equal to Consolidated Cashflow less Consolidated Total Debt
Service for the annual Accounting Period most recently ended from time
to time (determined by reference to the audited consolidated Accounts
of the Parent for that Accounting Period).
21.19 SHARE CAPITAL
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, (i) redeem, repurchase, defease, retire or repay any
of its share capital or capital stock, or resolve to do so, or (ii)
issue any shares or capital stock which by their terms are redeemable
prior to the date falling one year after the Final Repayment Date, or
(iii) issue any share capital to any person other than to another
member of the Group, save that the Parent may issue (A) capital stock
of a type substantially similar to any class of its stock in issue at
Closing which is subscribed for in full in cash and in respect of which
no dividend or distribution is payable (other than to the extent
permitted pursuant to Clause 21.18) while any amount is outstanding
under the Finance Documents, (B) capital stock in accordance with bona
fide employee stock option agreements entered into on terms normal for
such arrangements and (C) capital stock
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of a type substantially similar to any class of its stock in issue at
Closing issued to the vendors of any New Subsidiary (as defined in
Clause 21.16(e)) provided that such issue does not cause a breach of
Clause 23.1(m).
21.20 INTELLECTUAL PROPERTY RIGHTS
Each Obligor will, and will procure that each of its Subsidiaries will:
(a) (other than in respect of Excluded Intellectual Property Rights)
make such registrations and pay such fees and other amounts as
are necessary to keep those registered Intellectual Property
Rights which are material to the business of such Obligor or the
Group taken as a whole and to record its interest in those
Intellectual Property Rights;
(b) take such steps as are necessary and commercially reasonable
(including, without limitation, the institution of legal
proceedings) to prevent third parties infringing those
Intellectual Property Rights referred to in paragraph (a) above;
and
(c) not assign, transfer or enter into licence arrangements in respect
of those rights save for (I) licence arrangements entered into
with members of the Group for so long as they remain members of
the Group, (II) licence arrangements entered into on normal
commercial terms and in the ordinary course of its business, and
(III) the arrangements in place at the date hereof in respect of
the Excluded Intellectual Property Rights.
21.21 ENVIRONMENTAL MATTERS
Each Obligor will and will procure that each of its Subsidiaries will:
(a) obtain all requisite Environmental Licences and comply with (A) the
terms and conditions of all Environmental Licences applicable to
it, and (B) all other applicable Environmental Law, where in any
such case failure to obtain or comply would have a Material
Adverse Effect;
(b) promptly upon receipt of the same, notify the Facility Agent of any
claim, notice or other communication served on it in respect of
any alleged breach of or corrective or remedial obligation or
liability under any Environmental Law which would, if
substantiated, have a Material Adverse Effect; and
(c) indemnify each Finance Party, each receiver appointed under any
Security Document and their respective officers, employees,
agents and delegates (together the "INDEMNIFIED PARTIES") against
any cost or expense suffered or incurred by them (except if
caused by their own negligence) which:
(i) arises by virtue of any actual or alleged breach of any
Environmental Law (whether by any Obligor, an Indemnified
Party or any other person); or
(ii) arises by virtue of the release or threatened release of, or
exposure to, any Dangerous Substance stored or handled
upon, transported from, or otherwise
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associated with, the past or present facilities or
operations of any Obligor or Group member;
and which would not have arisen if the Finance Documents or any of
them had not been executed.
21.22 INSURANCE
(a) Each Obligor will, and will procure that each of its Subsidiaries will,
insure and keep insured all its property and assets of an insurable
nature and which are customarily insured (either generally or by
companies carrying on a similar business) against loss or damage by
fire and other risks normally insured against by persons carrying on
the same class of business as that carried on by it.
(b) Without prejudice to paragraph (a) above, the Parent will, or will
procure that members of the Group will, effect and maintain insurance
against business interruption, loss of profits, product liability,
professional indemnity, pollution and public liability covering all
members of the Group.
(c) Each Obligor will, and will procure that each of its Subsidiaries will,
promptly pay all premiums and do all other things necessary to keep on
foot the insurances required to be taken out and maintained by it
pursuant to paragraphs (a) and (b) above and will procure that (except
for public liability, employers liability and professional indemnity
insurances) all of the insurance policies required to be taken out and
maintained by it pursuant to paragraphs (a) and (b) above shall contain
loss payee provisions reasonably acceptable to the Security Agent
noting the Security Agent's interest thereon and naming the Security
Agent as the payee.
(d) The Parent will promptly supply to the Facility Agent on request copies
of each insurance policy required to be taken out and maintained by any
member of the Group pursuant to this Clause 21.22 and the Obligors will
procure that the insurer in the case of each such policy undertakes to
the Facility Agent to notify the Facility Agent should any renewal fee
or other sum payable by any member of the Group not be paid when due.
21.23 CHANGE OF BUSINESS
No Obligor will, and each Obligor will procure that no member of the
Group will, make any substantial change in the nature of its respective
business as conducted at the Closing Date which would result in a
material change to the nature of the business carried on by the Group
as a whole.
21.24 INTER-COMPANY DEBT
Each Obligor will procure that, unless the borrower in respect of such
Borrowings has sufficient readily available cash to pay the sum due or
demanded, any member of the Group which is the creditor in respect of
any Borrowings by any other member of the Group shall take no action to
cause such Borrowings to become due or to be paid.
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21.25 ARM'S-LENGTH TERMS
Unless otherwise expressly permitted by this Agreement, no Obligor
will, and each Obligor will procure that none of its Subsidiaries will,
enter into any material transaction with any person otherwise than on
arm's-length terms in the ordinary course of trade.
21.26 AMENDMENTS TO DOCUMENTS
(a) No Obligor will, and each Obligor will procure that none of its
Subsidiaries will (i) amend, supplement, supersede or waive (A) any
term of the Transaction Documents or (B) (in the case of an Obligor or
a company over whose shares the Banks have a charge) its memorandum or
articles of association or other constitutional document without the
consent of the Majority Banks (not to be unreasonably withheld), other
than for changes reflected in the documents delivered in satisfaction
of the conditions precedent set out in Clause 4.1 or (ii) enter into
any agreements or arrangements with the holders of the Shares, in any
way which in either such case would be likely materially and adversely
to affect the interests of the Banks under the Finance Documents
(provided that if any such undertaking would not be enforceable against
any Obligor it shall not be given by that Obligor).
(b) The Parent will procure that within 30 days of the Closing Date the
shareholders of Getty U.K. amend the memorandum and articles of
association of Getty U.K. to the reasonable satisfaction of the
Facility Agent.
(c) The Parent will procure that within 45 days of the Closing Date the
shareholders of Allsport Photographic plc amend the memorandum and
articles of association of Allsport Photographic plc to the reasonable
satisfaction of the Facility Agent.
21.27 BANK ACCOUNTS
No Obligor incorporated in the United Kingdom or the United States of
America will open or maintain any account with any branch of any bank
or other financial institution providing like services (other than an
account maintained with a Finance Party pursuant to the requirements of
the Finance Documents) unless such branch and bank or financial
institution shall be an Approved Bank, provided that at any time an
aggregate of US$3,000,000 may be held by members of the Group
incorporated in the United States of America with banks or financial
institutions which are not Approved Banks.
21.28 COMPLIANCE WITH LAWS
Each Obligor will, and will procure that each of its Subsidiaries will,
comply in all material respects with all applicable laws and
regulations of any governmental authority, whether domestic or foreign
having jurisdiction over it or any of its assets, where failure to
comply with any such laws or regulations would have a Material Adverse
Effect and will obtain and promptly renew from time to time, and if so
requested promptly furnish certified copies to the Facility Agent of
all material authorisations which may be required under any applicable
law or regulation to enable each Obligor to perform its respective
obligations under the Finance Documents or required for the validity or
enforceability of such Finance Documents or of any security provided
for thereby.
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21.29 AUDITORS
(a) Each Obligor will, and will procure that each of its Subsidiaries will,
instruct its auditors to discuss (at the cost of such Group member) the
Group's and/or such other Group member's financial position with the
Facility Agent on request from the Facility Agent (not more than once
in any annual Accounting Period unless the Facility Agent has
reasonable grounds for believing that there is a breach of Clause 23 or
that any of the calculations delivered pursuant to Clause 21.2(d) are
wrong or that any of the Accounts delivered pursuant to Clause 21.2
have not been prepared in accordance with the Applicable Accounting
Principles) and to disclose to the Facility Agent for itself and the
Banks (and provide them with copies of) such information as the
Facility Agent and the Banks have requested from the Parent pursuant to
this Agreement regarding the financial condition and operations of the
Group and any member of the Group (if, when requested, the Parent has
failed to provide the same to the reasonable satisfaction of the Banks).
(b) The Parent will not appoint any auditors or change its auditors unless
the Majority Banks consent to the identity of such auditors, such
consent not to be unreasonably withheld.
21.30 ACCESS
Upon reasonable notice being given by the Facility Agent, each Obligor
will procure that any one or more representatives of the Facility Agent
and/or accountants or other professional advisers appointed by the
Facility Agent be allowed to have access during normal business hours
to the assets, books and records of such Obligor and its Subsidiaries
and to inspect the same.
21.31 PENSION SCHEMES AND TAX ALLOWANCES
The Parent will if requested by the Facility Agent deliver to the
Facility Agent at intervals of no more than 3 calendar years, and in
any event at such time as those reports are prepared in order to comply
with then current statutory or auditing requirements, actuarial reports
in relation to any and all defined benefit pension schemes for the time
being operated by members of the Group, and will ensure that all such
pension schemes (which, with respect to the Plans, shall only include
those Plans that are Pension Plans) are fully funded based on
reasonable actuarial assumptions.
21.32 SYNDICATION
The Parent shall ensure that the Executives provide reasonable
assistance to the Arranger in the preparation of an information
memorandum for syndication of the Facilities and shall comply with all
reasonable requests for access (including, without limitation, for
visits to operational sites) and information from potential syndicate
members or the Arranger.
21.33 JOINT VENTURES
Each Obligor will not, and will procure that none of its Subsidiaries
will, enter into or acquire any interest in any joint venture,
partnership or similar arrangement with any person (not being another
member of the Group) without the prior written consent of the Majority
Banks, where the aggregate investment whether by acquisition of an
ownership interest therein, the making of loans to such entity, the
guaranteeing of the obligations of such entity, transferring assets to
such entity or assuming the liabilities of or in respect of it (the
aggregate of such
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investments being the "JOINT VENTURE INVESTMENT") of members of the
Group in all joint ventures, partnerships and similar arrangements
would as a result exceed U.S. $2,000,000.
21.34 HOLDING COMPANY
After the Closing Date, the Parent shall not carry on any business
(other than administrative services to other members of the Group) or
hold or acquire any assets other than shares in PhotoDisc and Getty
U.K. and other shares pledged to Banks in accordance with the
provisions of this Agreement or any Security Document.
21.35 ERISA
Each U.S. Obligor will not, and will procure that none of its ERISA
Affiliates will (a) fail to make payment when due of all amounts due as
a contribution to any Plan, or (b) engage in any transaction in
connection with which any U.S. Obligor could be subjected to either a
civil penalty assessed pursuant to section 502(i) of ERISA, a tax
imposed by section 4975 of the IRC or breach of fiduciary duty
liability damages if, in any such case, such penalty or tax or such
liability, or the failure to make such payment, or the existence of
that deficiency, as the case may be, would have a Material Adverse
Effect.
21.36 COMPLIANCE WITH MARGIN STOCK REGULATION
Each U.S. Obligor shall not, and shall procure that its Subsidiaries shall
not:
(a) (i) sell, carry, pledge or otherwise dispose of any margin
stock ("MARGIN STOCK") within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System of
the U.S.A., as in effect from time to time ("REGULATION
U"), now owned or acquired after the date of this
Agreement; or
(ii) incur any Borrowings directly or indirectly secured (within
the meaning of Regulation U) by any Margin Stock;
if such transaction would cause any of the Advances or any part
thereof to be in violation of Regulation U, or Regulation X of
the Board of Governors of the Federal Reserve System of the
U.S.A., as in effect from time to time ("REGULATION X");
(b) use the proceeds of any Advance or Utilisation, directly or
indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock or for the
purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that
is currently a Margin Stock or for any other purpose which might
constitute any of the Facilities or Utilisations or this
Agreement a "purpose credit" within the meaning of Regulation U
or Regulation X. No Obligor and no agent acting on its behalf
will take or has taken any action which might cause this
Agreement or the Advances to violate Regulation U or Regulation X
or any other regulation of the Board of Governors of the Federal
Reserve System.
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21.37 UCC FILINGS
Each U.S. Obligor at its own expense will make and renew promptly, and
in any event in the case of renewal before any UCC filing relating to
any Finance Document expires, all UCC filings relating to any Finance
Document reasonably required by the Facility Agent and will pay all
applicable fees.
21.38 HEDGING
The Parent will, or will procure that the relevant Borrowers will,
enter into hedging arrangements (and the related Hedging Documents)
considered appropriate by its board of directors (after consultation
with the Facility Agent) within three months of the Closing Date.
21.39 YEAR 2000
Each Obligor will take such steps as its board of directors shall
consider to be necessary to ensure that the advent of the Year 2000
will not have a material adverse effect on the Group's financial
reporting or other systems and shall, at the request of the Facility
Agent (but not more than once in any twelve month period), instruct its
Auditors or other appropriate consultants to undertake an audit as to
the appropriateness of the Group's systems.
21.40 REORGANISATION
The Parent shall procure that within 45 days of the Closing Date,
Tri-Energy Productions Inc., Getty Images (US) Inc. and its
Subsidiaries and Liaison Agency Inc. and its Subsidiaries shall cease
to be Subsidiaries of Getty U.K. and shall become direct wholly-owned
Subsidiaries of the Parent or any other Obligor incorporated in the
United States of America, provided that (a) the Parent or such other
Obligor shall give security to the Security Agent over the shares in
such Subsidiary which shall be no less comprehensive than that given by
Getty U.K. over the shares in such Subsidiary at the Closing Date and,
for the avoidance of doubt, the limitation in the first sentence of
Clause 19.3(e) shall no longer apply to such pledge of shares and (b)
the Parent shall be under no obligation to effect any reorganisation
where the Parent reasonably believes that effecting such reorganisation
would adversely affect the tax position of the Group, taken as a whole.
22. FINANCIAL COVENANTS
22.1 DEFINITIONS
(a) In this Agreement:
"ADJUSTED TOTAL ASSETS"
at any time the consolidated total assets of the Group at such time,
less goodwill, capitalised research and development costs, deferred tax
assets and all other assets which fall to be treated as intangible
assets in accordance with the Applicable Accounting Principles, all as
determined from the Balance Sheet.
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"BALANCE SHEET"
means, at any time, the latest published audited or unaudited
consolidated balance sheet of the Group.
"CONSOLIDATED CASH FLOW" for any period means Consolidated EBIT for such
period:
(1) PLUS all depreciation, amortisation and other non-cash charges
deducted in establishing Consolidated EBIT for such period;
(2) PLUS the proceeds of any subscription in cash for shares in the
Parent (which by their terms are not redeemable prior to the
Final Repayment Date) received by the Parent (other than the
proceeds of the share subscription to be made at Closing by Getty
Investments Inc.);
(3) PLUS the amount of any tax rebate or credit in respect of any
advance corporation tax, mainstream corporation tax or
withholding tax or their equivalents in any relevant jurisdiction
actually received in cash by any member of the Group during such
period;
(4) MINUS all Capital Expenditure and all consideration and related
acquisition costs for all businesses, companies or shares
acquired by any member of the Group (other than in relation to
acquisitions permitted by Clause 21.16(e)) in each case actually
paid or contractually required to be paid by members of the Group
during such period, provided that for the period ending 31st
December, 1998 there shall not be deducted the consideration and
related acquisition costs for the Acquisitions actually paid;
(5) MINUS all advance corporation tax, mainstream corporation tax and
withholding tax actually paid and/or falling due for payment
during such period;
(6) MINUS the amount of all dividends, redemptions and other
distributions paid or which have become due and payable by any
member of the Group during such period on, of or in respect of
any of its share capital not held by a member of the Group;
(7) MINUS (to the extent not taken into account in calculating
Consolidated EBIT for such period and not otherwise deducted in
this definition) all amounts paid or contractually required to be
paid by any member of the Group to or for the account of any
joint venture or other person in which the Group has an ownership
interest but which is not a member of the Group during such
period and minus the amount by which profit of any joint ventures
or such other persons included in Consolidated EBIT for such
period exceeds the amount of such profit distributed or otherwise
made available in cash to members of the Group during such period;
(8) MINUS any increase or PLUS any decrease in Consolidated Net Working
Investment between the Accounting Dates at the beginning and end of
such period;
(9) MINUS all non-cash credits and plus all non-cash debits included in
establishing Consolidated EBIT for such period (to the extent not
included in calculating
<PAGE>
75
Consolidated Net Working Investment as at the Accounting Date on
which such period ends);
(10) MINUS all extraordinary items which are paid by any member of the
Group in cash during such period (net of any cash proceeds of
insurance or warranty claims which relate to such items) provided
that there shall be no such deduction in respect of any
restructuring charges aggregating up to U.S.$10,000,000 added
back in the calculation of Consolidated EBIT for the period
ending 31st December, 1998;
(11) PLUS the proceeds received during such period of any asset
disposal made on arm's length terms for fair market value to the
extent not taken into account when determining Consolidated EBIT
for such period.
"CONSOLIDATED EBIT" for any period means the profit of the Group for such
period:
(1) BEFORE TAKING INTO ACCOUNT all extraordinary items (whether
positive or negative) but AFTER TAKING INTO ACCOUNT all
exceptional items (whether positive or negative);
(2) BEFORE DEDUCTING advanced corporation tax, mainstream corporation
tax and their equivalents in any relevant jurisdiction;
(3) BEFORE TAKING INTO ACCOUNT Interest accrued as an obligation of or
owed to any member of the Group, in each case whether or not paid,
deferred or capitalised during such period; and
(4) AFTER DEDUCTING amortisation of any goodwill arising from the
Acquisition at Closing and the amortisation of any Acquisition
Costs;
(5) AFTER DEDUCTING any gain over book value arising in favour of the
Group on the sale, lease or other disposal of any asset (other
than on the sale of trading stock) during such period and any
gain arising on revaluation of any asset during such period, in
each case to the extent that it would otherwise be taken into
account;
(6) (for the period ended 31st December, 1998) AFTER ADDING BACK any
restructuring charges aggregating up to U.S.$10,000,000 deducted in
determining profit for such period.
"CONSOLIDATED EBITDA" for any period means Consolidated EBIT for such
period before any amortisation or depreciation.
"CONSOLIDATED NET INTEREST PAYABLE" for any period means the Interest
accrued during such period as an obligation of any member or members of
the Group (whether or not paid or capitalised during or deferred for
payment after such period) and after taking into account Interest
receivable (net of Tax) by any member of the Group on any Borrowings
made available by such member of the Group which is not more than 90
days overdue, adjusted to take account of any amount constituting
Interest receivable by any members of the Group (after deducting all
Taxes applicable thereto) under interest rate and/or currency hedging
agreements or instruments under which all parties are in compliance
with their material obligations.
<PAGE>
76
"CONSOLIDATED NET WORKING INVESTMENT" as at any Accounting Date means
Consolidated Current Commercial Assets as at such Accounting Date MINUS
Consolidated Current Commercial Liabilities as at such Accounting Date.
For this purpose:
(a) "CONSOLIDATED CURRENT COMMERCIAL ASSETS" as at any Accounting
Date means all of the current assets (other than Cash, Cash
Equivalent Investments, credits receivable for advance
corporation tax, mainstream corporation tax or withholding tax
suffered, Interest receivable and repayments of Borrowings within
paragraphs (a), (c) or (i) of the definition of that term in
Clause 1.1 receivable) of the Group as at such Accounting Date;
(b) "CONSOLIDATED CURRENT COMMERCIAL LIABILITIES" as at any
Accounting Date means all of the current liabilities (excluding
Borrowings within paragraph (a), (b), (c), (d), (f), (g), (h) and
(i) (unless consisting of a liability in relation to items
falling within paragraph (e) of the definition of Borrowings in
Clause 1.1) and any accrued or unpaid Interest and any
liabilities in respect of advanced corporation tax, mainstream
corporation tax and their equivalents in any relevant
jurisdiction and dividends, redemptions and other distributions
payable to shareholders of the Parent) of the Group as at such
Accounting Date.
"CONSOLIDATED TOTAL BORROWINGS" means at any time the aggregate at that
time of the Borrowings of the members of the Group from sources
external to the Group, determined (subject only as may be required in
order to reflect the express inclusion or exclusion of items as
specified herein and/or in the definition of Borrowings in Clause 1.1)
in accordance with the Applicable Accounting Principles and, where the
calculation is being made as at the end of any Accounting Period for
which a Balance Sheet of the Group has been or is required to be
delivered to the Facility Agent hereunder, determined from that Balance
Sheet.
"CONSOLIDATED TOTAL DEBT SERVICE" for any period means Consolidated Net
Interest Payable for such period:
(1) PLUS the amount of any reduction in any Repayment Instalment
which fell (or would otherwise have fallen) due during such
period caused by a prepayment made pursuant to this Agreement in
any previous period;
(2) PLUS all Borrowings (excluding Borrowings within paragraphs (b)
and/or (d) of the definition of Borrowings in Clause 1.1) of
members of the Group paid or which fell due for repayment during
such period (whether or not paid during or deferred for payment
after such period), including the amount of any prepayments made
during such period but excluding any principal amount paid or
which fell due under any overdraft or revolving credit facility
(including, without limitation, any Ancillary Facility) and which
was available for simultaneous redrawing according to the terms
of such facility or of a similar facility or under the Tranche C
Facility.
"CONSOLIDATED U.S. CASH FLOW" for any period means Consolidated Cash
Flow for such period determined as if references in the definition of
Consolidated Cash Flow in Clause 22.1(a) to (i) "Group" were to the
Group excluding those members of it not incorporated in the United
States of America, and (ii) "Consolidated EBIT" were to Consolidated
EBIT also determined as if references to the "Group" were to the Group
excluding those members of it not incorporated in the United States of
America.
<PAGE>
77
"CONSOLIDATED U.S. TOTAL DEBT SERVICE" means Consolidated Total Debt
Service determined as if (i) references in the definition of
Consolidated Total Debt Service (and in the definition of Consolidated
Net Interest Payable as referred to therein) in Clause 22.1(a) to the
"Group" were to the Group excluding those members of it not
incorporated in the United States of America and (ii) the reference in
paragraph (1) to any Repayment Instalment were to any Tranche A
Repayment Instalment and (iii) the reference in the last line to the
Tranche C Facility were deleted.
"EXCEPTIONAL ITEMS" has the meaning given to it in the Applicable
Accounting Principles.
"EXTRAORDINARY ITEMS" has the meaning given to it in the Applicable
Accounting Principles.
(b) (i) All the terms defined in paragraph (a) above are to be determined
on a consolidated basis and (except as expressly included or
excluded in the relevant definition) in accordance with the
Applicable Accounting Principles and as determined from the
consolidated Accounts of the Group for the relevant periods
delivered pursuant to Clause 21.2.
(ii) For the purposes of this Clause 22 no item shall be deducted or
credited more than once in any calculation.
(iii) Any component of any of the covenants set out in this Clause 22
to be determined for a period ending 31st December, 1998 shall be
determined in accordance with the Applicable Accounting
Principles for the period commencing 1st January, 1998 and ending
31st December, 1998.
22.2 FINANCIAL COVENANTS
The Obligors shall procure that:
(a) CONSOLIDATED EBITDA TO CONSOLIDATED NET INTEREST PAYABLE:
Consolidated EBITDA for any period comprising an annual
Accounting Period of the Group or four consecutive Accounting
Periods of three months duration of the Group (taken together as
one period) ending on any Accounting Date specified in the table
below, shall not be less than Y times Consolidated Net Interest
Payable for such period, where Y has the value indicated for such
Accounting Date in such table:
<TABLE>
<CAPTION>
ACCOUNTING DATE (BEFORE ANY ADJUSTMENT) Y
<S> <C>
31st December, 1998 5
30th June, 1999 5
31st December, 1999 5
30th June, 2000 7
31st December, 2000 7
and each 30th June and 31st December thereafter 7
</TABLE>
<PAGE>
78
(b) CONSOLIDATED CASH FLOW TO CONSOLIDATED TOTAL DEBT SERVICE:
(i) Consolidated Cash Flow for the period comprising an annual
Accounting Period of the Group or four consecutive
Accounting Periods of three months duration of the Group
(taken together as one period) ending on 31st December,
1998 or any 30th June or 31st December (before any
adjustment) falling thereafter shall not be less than 1.00
times Consolidated Total Debt Service for such period
provided that for the purpose of testing such covenant for
the period ended 31st December, 1998 only, (A) item (5) in
the definition of Consolidated Cash Flow shall be read as
if the following proviso thereto were included at the end,
"provided that the first U.S. $2,000,000 of such taxes in
the aggregate for such period shall not be so deducted".
(ii) Consolidated U.S. Cash Flow for the period comprising an
annual Accounting Period of the Group (taken together as
one period) ending on 31st December, 1998 or any 30th June
or 31st December (before any adjustment) falling thereafter
shall not be less than 1.00 times Consolidated U.S. Total
Debt Service for such period.
(c) CONSOLIDATED TOTAL BORROWINGS TO CONSOLIDATED EBITDA:
The Consolidated Total Borrowings on any Accounting Date
specified in the table below, shall be less than Y times
Consolidated EBITDA for the annual Accounting Period of the Group
or for the four consecutive Accounting Periods of three months
duration (taken together as one period) ending on such Accounting
Date, where Y has the value indicated opposite such Accounting
Date in such table:
<TABLE>
<CAPTION>
ACCOUNTING DATE (BEFORE ANY ADJUSTMENT) Y
<S> <C>
31st December, 1998 2.75
30th June, 1999 2.75
31st December, 1999 1.50
30th June, 2000 1.50
31st December, 2000 1.50
and each 30th June
and 31st December thereafter 1.50
</TABLE>
(d) ADJUSTED TOTAL ASSETS
At all times during each period set out in column (1) of the
table below (as adjusted so that each such period ends on and,
save in the case of that commencing on the Closing Date,
commences on the day following, an Accounting Date), Adjusted
Total Assets shall not be equal to or less than the amount set
opposite such period in column (2) below:
<PAGE>
79
<TABLE>
<CAPTION>
(1) (2)
PERIOD ADJUSTED TOTAL ASSETS
U.S.$'000,000
<S> <C>
Closing Date - 31st December, 1999 90
1st January, 2000 - Final Repayment Date 120
</TABLE>
22.3 PERIODS
Where any of the periods (a "COVENANT PERIOD") referred to in Clause
22.2 would otherwise commence before the Closing Date, such Covenant
Period shall instead commence on the Closing Date (and the part falling
before the Closing Date shall be ignored).
23. DEFAULT
23.1 EVENTS OF DEFAULT
Each of the events set out in this Clause 23.1 is an Event of Default
(whether or not caused by any reason whatsoever outside the control of
any Obligor or any other person):
(a) NON-PAYMENT: an Obligor does not pay on the due date any amount
payable by it under any Finance Document at the place and in the
funds and currency in which it is expressed to be payable unless
the Facility Agent is satisfied that the failure to pay is due
solely to technical or administrative delays in the transmission
of funds and the relevant amount is paid in full within 3
Business Days of the due date; or
(b) BREACH OF OTHER OBLIGATIONS: an Obligor does not comply in any
material respect with any provision of:
(i) Clauses 21.6, 21.7, 21.8, 21.15, 21.18, 21.19, 21.27 or 22.2;
or
(ii) any Finance Document (other than a provision referred to in
paragraphs (a) or (b)(i) above) and, if such default is in
the reasonable opinion of the Facility Agent capable of
remedy within such period, within 21 days after the earlier
of the relevant Obligor becoming aware of such default and
receipt by the relevant Obligor of written notice from the
Facility Agent requiring the failure to be remedied, such
Obligor shall have failed to cure such default, provided
that such Obligor shall not have any such 21 day remedy
period where in the Facility Agent's reasonable opinion it
may be materially prejudicial to the interests of the Banks
under the Finance Documents to wait to determine whether or
not such Obligor would remedy any such failure; or
(c) MISREPRESENTATION: a representation, warranty or statement made
or repeated by or on behalf of any Obligor, in any Finance
Document or in any certificate or statement delivered by or on
behalf of any Obligor under any Finance Document, is incorrect in
any respect which in the reasonable opinion of the Facility Agent
is material when made or deemed to be made or repeated by
reference to the facts and circumstances then subsisting and, if
the facts and circumstances causing such misrepresentation are in
the reasonable opinion of the Facility Agent capable of remedy
within such period,
<PAGE>
80
within 14 days after the earlier of the relevant Obligor becoming
aware of such misrepresentation and receipt by such Obligor of
written notice from the Facility Agent requiring the facts and
circumstances causing such misrepresentation to be remedied, such
Obligor shall have failed to remedy such facts and circumstances;
or
(d) CROSS-DEFAULT:
(i) any Borrowings of any members of the Group (taken together)
aggregating U.S.$500,000 (or its equivalent in other currencies)
or more at any one time outstanding become (or become capable of
being declared (but only while it remains so capable of being
declared)) due and payable or due for redemption before their
normal maturity date or are placed on demand in each such case by
reason of the occurrence of an event of default (howsoever
characterised) or any event having the same effect, unless the
obligation to pay such Borrowings is being contested in good
faith by the relevant member of the Group by appropriate
proceedings and an independent legal opinion addressed to the
relevant member of the Group confirms that such member of the
Group is likely to be successful in such proceedings; or
(ii) any Borrowings of any members of the Group (taken together)
aggregating U.S.$500,000 (or its equivalent in other currencies)
or more are not paid when due (whether falling due by demand, at
scheduled maturity or otherwise) or within any originally
applicable grace period provided for in the document evidencing
or constituting those Borrowings, unless the obligation to pay
such Borrowings is being contested in good faith by the relevant
member of the Group by appropriate proceedings and an independent
legal opinion addressed to the relevant member of the Group
confirms that such member of the Group is likely to be successful
in such proceedings; or
(iii) if funds are outstanding in respect thereof, any commitment for
or underwriting of any facility for Borrowings of any members of
the Group (taken together) aggregating U.S.$500,000 (or its
equivalent in other currencies) is cancelled or suspended by the
provider of that facility by reason of the occurrence of an event
of default (howsoever characterised); or
(e) INVALIDITY:
(i) any of the Finance Documents ceases to be in full force and
effect in any material respect or, subject to the
Reservations, ceases to constitute the legal, valid and
binding obligation of any Obligor party to it or, in the
case of any Security Document, fails to provide legal,
valid and enforceable security in favour of the Security
Agent and the Banks over the assets over which security is
intended to be given by that Security Document, in each
case in a manner and to an extent reasonably considered by
the Majority Banks to be materially adverse to their
interests under the Finance Documents; or
(ii) it is unlawful for any Obligor to perform any of its
obligations under any of the Finance Documents; or
<PAGE>
81
(iii) any Obligor alleges in writing that any Finance Document is
ineffective or invalid; or
(f) INSOLVENCY:
(i) the Parent or any Obligor which is a Material Subsidiary
is, or is deemed or declared for the purposes of any law to
be, unable to pay its debts as they fall due or to be
insolvent, or admits in writing its inability to pay its
debts as they fall due; or
(ii) the Parent or any Obligor which is a Material Subsidiary
suspends making payments on all or any class of its debts
or announces an intention to do so, or a moratorium is
declared in respect of any of its indebtedness; or
(iii) the Parent or an Obligor which is a Material Subsidiary by
reason of financial difficulties, begins negotiations with
its creditors generally with a view to the readjustment or
rescheduling of any of its indebtedness; or
(g) INSOLVENCY PROCEEDINGS:
(i) any step (including petition, proposal or convening a
meeting) is taken with a view to a composition, assignment
or arrangement with the creditors (or any class of them) of
the Parent or any Obligor which is a Material Subsidiary; or
(ii) a meeting of the board of directors or shareholders of the
Parent or any Obligor which is a Material Subsidiary is
convened for the purpose of considering any resolution for
(or to petition for) its winding-up or its administration
or any such resolution is passed; or
(iii) any person presents a petition for the winding-up or for
the administration of the Parent or any Obligor which is a
Material Subsidiary (not being a frivolous or vexatious
petition); or
(iv) any order for the winding-up or administration of the Parent
or any Obligor which is a Material Subsidiary is made; or
(v) any other step (including petition, resolution, proposal or
convening a meeting) is taken with a view to the
rehabilitation, administration, custodianship, liquidation,
winding-up or dissolution of the Parent or any Obligor
which is a Material Subsidiary or any other insolvency
proceedings involving any such person; or
(h) APPOINTMENT OF RECEIVERS AND MANAGERS:
(i) any liquidator, trustee in bankruptcy, judicial custodian,
compulsory manager, receiver, administrative receiver,
administrator or the like is appointed in respect of the
Parent or any Obligor which is a Material Subsidiary or any
part of its assets; or
<PAGE>
82
(ii) the directors of the Parent or any Obligor which is a
Material Subsidiary requests the appointment of a
liquidator, trustee in bankruptcy, judicial custodian,
compulsory manager, receiver, administrative receiver,
administrator or the like in respect of any Obligor which
is a Material Subsidiary or its assets; or
(iii) any other steps are taken to enforce any Encumbrance over
any part of the assets of the Parent or any Obligor which
is a Material Subsidiary, save where the Parent or that
Obligor is in good faith contesting such enforcement by
appropriate proceedings and the Majority Banks acting
reasonably are satisfied that the ability of the Parent or
any Obligor which is a Material Subsidiary to comply with
its obligations under any Finance Document will not be
materially and adversely affected; or
(i) CREDITORS' PROCESS: any attachment, sequestration, distress or
execution is made or ordered in respect of any assets of any
member or members of the Group having an aggregate value of
U.S.$500,000 (or its equivalent in other currencies), and is not
discharged within 7 days; or
(j) U.S. BANKRUPTCY: the Parent or any Obligor which is a Material
Subsidiary shall commence a voluntary case under the U.S.
Bankruptcy Code, or an involuntary case is commenced under the
U.S. Bankruptcy Code against such a member of the Group and the
petition is not controverted within 7 days and is not dismissed
within 30 days, after commencement of the case, or a custodian,
receiver, trustee or similar officer is appointed for, or takes
charge of, all or substantially all of the property of the Parent
or any Obligor which is a Material Subsidiary; or
(k) ANALOGOUS PROCEEDINGS:
(i) there occurs, in relation to any Non-Obligor (or any of its
assets) or any Obligor which is not a Material Subsidiary
(or any of its assets) any of the events referred to in
Clauses 23.1(f) to (j) (inclusive) (or in any jurisdiction
to which such person or any of its assets is subject, any
event which, in the reasonable opinion of the Majority
Banks, is analogous to any of those mentioned in Clauses
23.1(f) to (j) (inclusive)) (ignoring for these purposes
the requirement to be an Obligor and/or a Material
Subsidiary in any such Clause) where
(A) such event would have a Material Adverse Effect; or
(B) the aggregate of the gross assets, pre-tax profits or
turnover (excluding value added tax or sales tax) of
all such persons in respect of which any such events
have occurred in any twelve month period is 5% or
more of (I) the gross assets of the Group, (II)
Consolidated EBIT of the Group, or (III) the
aggregate consolidated sales of the Group to third
parties (excluding any value added tax or sales tax)
for such period, in each case calculated in
accordance with the Applicable Accounting Principles
and by reference to the latest audited or management
accounts of the relevant company and the
<PAGE>
83
latest quarterly or audited consolidated Accounts of
the Group delivered pursuant to Clause 21.2; or
(ii) there occurs, in relation to the Parent or any Obligor
which is a Material Subsidiary, in any jurisdiction to
which it or any of its assets are subject, any event which,
in the opinion of the Majority Banks, is analogous to any
of those mentioned in Clauses 23.1(f) to (j) (inclusive); or
(l) OWNERSHIP OF THE OBLIGORS: any Obligor (other than the Parent) is
not or ceases to be a wholly-owned Subsidiary of the Parent; or
(m) CONTROL: any single person, or group of persons acting in concert
(as defined in the City Code of Takeovers and Mergers), acquires
control (as defined in Section 416 of the Income and Corporation
Taxes Act 1988) of the Parent after the date of this Agreement; or
(n) PROCEEDINGS: there shall occur any litigation, arbitration,
administrative, regulatory or other proceedings or enquiry
(including without limitation, any such by any monopoly,
anti-trust or competition authority or commission, or any
equivalent body in the European Commission or any division of any
thereof or authority deriving power from any thereof) concerning
or arising in consequence of any of the Transaction Documents
and/or the implementation of any matter or transaction provided
for in the Transaction Documents and the same has a Material
Adverse Effect; or
(o) RESCISSION: any party to the Merger Agreement or the Scheme of
Arrangement rescinds or seeks to rescind any of those agreements
where to do so would materially and adversely affect the interest
of the Banks under the Finance Documents; or
(p) AUDIT QUALIFICATION: the Auditors qualify their report on any
audited consolidated Accounts of the Group in a manner which, in
the reasonable opinion of the Majority Banks, is material in the
context of the Finance Documents and the transactions
contemplated thereby; or
(q) ERISA: any U.S. Obligor or any Subsidiary of a U.S. Obligor or
any ERISA Affiliate has incurred or is likely to incur a
liability to or on account of a Plan under Section 409, 502(i),
502(1), 4041, 4042, 4062, 4063, 4064, 4068, 4069, 4201 or 4204 of
ERISA or Section 4971 or 4975 of the Code, or any U.S. Obligor or
any Subsidiary has incurred or is likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as
defined in Section 3(1) of ERISA) which provide benefits to
retired or terminated employees (other than as required by Part 6
of Subtitle B of Title I of ERISA) or employee pension benefit
plans (as defined in Section 3(2) of ERISA), and there shall
result from any such event or events the imposition of a lien,
the granting of a security interest, or a liability or a material
risk of incurring a liability, which lien, security interest or
liability (or the enforcement thereof) is reasonably likely to
have a Material Adverse Effect; or
(r) MATERIAL ADVERSE CHANGE: any event or series of events occurs which
has, or is reasonably likely to have a Material Adverse Effect; or
<PAGE>
84
(s) GETTY TRADEMARKS: the members of the Group shall cease for any
reason to be entitled to use the name Getty or any trademark
incorporating such name or the terms on which they are so
entitled shall be altered in any respect materially adverse to
the members of the Group.
(t) (i) any material factual information contained or referred to
in any Report was not true in all material respects at the
date (if any) ascribed thereto or (if none) on the date of
the relevant Report:
(ii) any of the Reports was misleading in any material respect at
its date;
(iii) any expressions of opinion or intention given by or on behalf
of any member of the Group and any forecasts or projections
furnished by any member of the Group and contained or referred
to in any Report are shown not to have been arrived at after
careful consideration or not to have been based on reasonable
grounds;
(iv) any Report omitted any information which would have made any
material information, forecasts or projections in such Report
misleading in any material respect;
provided that none of the above shall constitute an Event of Default
if not within the knowledge of any of the Executives or, to the
extent that the Reports or the factual information, expressions of
opinion or intention, forecasts or projections concerned do not
relate to an Obligor or to Material Subsidiaries which are its
Subsidiaries).
23.2 ACCELERATION
On and at any time after the occurrence of an Event of Default which is
subsisting the Facility Agent may, and shall if so directed by the
Majority Banks, by notice to the Parent:
(a) declare that an Event of Default has occurred; and/or
(b) cancel the Total Commitments; and/or
(c) declare that all or part of the Advances to some or all of the
Borrowers be payable on demand, whereupon they shall immediately
become payable on demand by the Facility Agent (and if any such
demand is subsequently made those Advances, together with accrued
interest and all other amounts accrued under this Agreement,
shall be immediately due and payable); and/or
(d) declare that all or part of the Advances to some or all of the
Borrowers, together with accrued interest, and all other amounts
accrued under this Agreement be immediately due and payable,
whereupon they shall become immediately due and payable,
provided (I) that no action or determination by any of the Finance
Parties shall be required in respect of any or all of the obligations
and liabilities (whether actual or contingent) of any Obligor upon or
at any time after the occurrence of an Event of Default specified in
Clause 23.1(f) to (h) (inclusive) and (j) to (k)(ii) (inclusive) in
respect of the Parent or any U.S. Obligor which is a Material
Subsidiary and on the occurrence of any such Event of Default all
<PAGE>
85
of the obligations and liabilities of the Obligors shall become
automatically and immediately due and payable and, (II) provided
further that the Facility Agent (on the instructions of the Majority
Banks) can by notice to the Obligors rescind any such acceleration in
whole or in part.
24. THE AGENTS, THE HEDGING BANK AND THE ARRANGER
24.1 APPOINTMENT AND DUTIES OF THE AGENTS
Each Finance Party irrevocably appoints each Agent to act as its agent
under and in connection with the Finance Documents, and irrevocably
authorises each Agent on its behalf (a) to execute on its behalf such
of the Finance Documents which are expressed by this Agreement to be
executed by such Agent on behalf of the Finance Parties, and (b) to
perform the duties and to exercise the rights, powers and discretions
that are specifically delegated to it under or in connection with the
Finance Documents, together with any other incidental rights, powers
and discretions. Each Agent shall have only those duties which are
expressly specified in this Agreement. Those duties are solely of a
mechanical and administrative nature.
24.2 ROLE OF THE ARRANGER
Except as otherwise provided in this Agreement, the Arranger has no
obligations of any kind to any other Party under or in connection with
any Finance Document.
24.3 RELATIONSHIP
The relationship between each Agent and the other Finance Parties is
that of agent and principal only. Nothing in this Agreement (other than
in relation to the Security Agent and the Security Documents)
constitutes any Agent as trustee or fiduciary for any other Party or
any other person and except where and to the extent otherwise stated in
this Agreement such Agent need not hold in trust any moneys paid to it
for a Party or be liable to account for interest on those moneys.
24.4 MAJORITY BANKS' DIRECTIONS
Each Agent will be fully protected if it acts in accordance with the
instructions of the Majority Banks in connection with the exercise of
any right, power or discretion or any matter not expressly provided for
in the Finance Documents. Any such instructions given by the Majority
Banks will be binding on all the Banks. In the absence of such
instructions each Agent may act as it considers to be in the best
interests of all the Banks.
24.5 DELEGATION
Each Agent may act under the Finance Documents through its personnel
and agents.
24.6 RESPONSIBILITY FOR DOCUMENTATION
Neither any Agent nor the Arranger is responsible to any other Party for:
(a) the execution, genuineness, validity, enforceability or sufficiency
of any Finance Document or any other document;
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(b) the collectability of amounts payable under any Finance Document;
or
(c) the accuracy of any statements (whether written or oral) made in
or in connection with any Finance Document (or in any Report or
information memorandum).
24.7 DEFAULT
(a) Neither Agent is obliged to monitor or enquire as to whether or not a
Default has occurred. Neither Agent will be deemed to have knowledge of
the occurrence of a Default. However, if an Agent receives notice from
a Party referring to this Agreement, describing the Default and stating
that the event is a Default, it shall promptly notify the Banks.
(b) Each Agent may require the receipt of security satisfactory to it,
whether by way of payment in advance or otherwise, against any
liability or loss which it may incur in taking any proceedings or
action arising out of or in connection with any Finance Document before
it commences these proceedings or takes that action.
24.8 EXONERATION
(a) Without limiting paragraph (b) below, no Agent will be liable to any
other Party for any action taken or not taken by it under or in
connection with any Finance Document, unless directly caused by its
gross negligence or wilful misconduct.
(b) No Party may take any proceedings against any officer, employee or
agent of any Agent in respect of any claim it might have against such
Agent or in respect of any act or omission of any kind (including gross
negligence or wilful misconduct) by that officer, employee or agent in
relation to any Finance Document.
24.9 RELIANCE
Each Agent may:
(a) rely on any notice or document believed by it to be genuine and
correct and to have been signed by, or with the authority of, the
proper person;
(b) rely on any statement made by a director or employee of any
person regarding any matters which may reasonably be assumed to
be within his knowledge or within his power to verify; and
(c) engage, pay for and rely on legal or other professional advisers
selected by it (including those in such Agent's employment and
those representing a Party other than such Agent).
24.10 CREDIT APPROVAL AND APPRAISAL
Without affecting the responsibility of any Obligor for information
supplied by it or on its behalf in connection with any Finance
Document, each Bank confirms that it:
(a) has made its own independent investigation and assessment of the
financial condition and affairs of each Obligor and its related
entities in connection with its participation
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in this Agreement and has not relied exclusively on any
information provided to it by any Agent or the Arranger in
connection with any Finance Document; and
(b) will continue to make its own independent appraisal of the
creditworthiness of each Obligor and its related entities while
any amount is or may be outstanding under the Finance Documents
or any Commitment is in force.
24.11 INFORMATION
(a) The Facility Agent shall promptly forward to the person concerned the
original or a copy of any document which is delivered to the Facility
Agent by a Party for that person.
(b) The Facility Agent shall, at the cost of the Parent, promptly supply a
Bank with a copy of each document received by the Facility Agent under
Clauses 4 (with the exception of the Fee Letters), 19.1(d) or 19.2(a)
upon the request of that Bank.
(c) Except where this Agreement specifically provides otherwise, the
Facility Agent is not obliged to review or check the accuracy or
completeness of any document it forwards to another Party.
(d) Except as provided above, neither any Agent nor the Arranger has any duty:
(i) either initially or on a continuing basis to provide any Bank
with any credit or other information concerning the financial
condition or affairs of any Obligor or any related entity of any
Obligor whether coming into its possession or that of any of its
related entities before, on or after the date of this Agreement;
or
(ii) unless specifically requested to do so by a Bank in accordance with
this Agreement, to request any certificates or other documents from
any Obligor.
24.12 THE AGENTS AND THE ARRANGER INDIVIDUALLY
(a) If it is also a Bank, each Agent and the Arranger has the same rights
and powers under this Agreement as any other Bank and may exercise
those rights and powers as though it were not an Agent or the Arranger.
(b) Each Agent and the Arranger may:
(i) carry on any business with any Obligor or its related entities;
(ii) act as agent or trustee for, or in relation to any financing
involving, any Obligor or its related entities; and
(iii) retain any fees, profits or remuneration in connection with its
activities under this Agreement or in relation to any of the
foregoing.
24.13 INDEMNITIES
(a) Without limiting the liability of any Obligor under the Finance
Documents, each Bank shall forthwith on demand indemnify each Agent for
its proportion of any liability or loss incurred by such Agent in any
way relating to or arising out of its acting as the Facility Agent or
the
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Security Agent, as the case may be, except to the extent that the
liability or loss arises directly from such Agent's gross negligence or
wilful misconduct.
(b) A Bank's proportion of the liability or loss set out in paragraph (a)
above is the proportion which its participation in the Utilisations (if
any) bears to all the Utilisations on the date of the demand. If,
however, there are no Utilisations outstanding on the date of demand,
then the proportion will be the proportion which its Commitment bears
to the Total Commitments at the date of demand or, if the Total
Commitments have been cancelled, bore to the Total Commitments
immediately before being cancelled.
(c) The Parent shall forthwith on demand reimburse each Bank for any payment
made by it under paragraph (a) above.
24.14 COMPLIANCE
(a) Each Agent may refrain from doing anything which might, in its opinion,
constitute a breach of any law or regulation or be otherwise actionable
at the suit of any person, and may do anything which, in its opinion,
is necessary or desirable to comply with any law or regulation of any
jurisdiction.
(b) Without limiting paragraph (a) above, neither Agent need disclose any
information relating to any Obligor or any of its related entities if
the disclosure might, in the opinion of such Agent, constitute a breach
of any law or regulation or any duty of secrecy or confidentiality or
be otherwise actionable at the suit of any person.
(c) In acting as Facility Agent and/or Security Agent for the Banks, the
Facility Agent's and Security Agent's agency division shall be treated
as a separate entity from any other of its divisions or departments
and, notwithstanding the foregoing provisions of this Clause 24, in the
event that Facility Agent or the Security Agent should act for any
member of the Group in any capacity in relation to any other matter,
any information given by such member of the Group to the Facility Agent
or the Security Agent in such other capacity may be treated as
confidential by the Facility Agent or the Security Agent (as the case
may be).
24.15 RESIGNATION
(a) Notwithstanding Clause 24.1, each Agent may resign (after consultation
with the Parent) by giving notice to the Banks and the Parent and may
be removed by the Majority Banks giving notice to such Agent and the
Parent. In that event the Majority Banks, after consultation with the
Parent, may appoint a successor (a "REPLACEMENT") for such Agent which
shall be a reputable and experienced bank acting and incorporated or
having a branch in England.
(b) If the Majority Banks have not, within 30 days after any such notice,
so appointed a Replacement which shall have accepted such appointment,
the retiring Agent, after consultation with the Parent, shall have the
right to appoint a Replacement which shall be a reputable and
experienced bank incorporated or having a branch in England.
(c) The resignation of the retiring Agent and the appointment of any
Replacement shall, subject to Clause 24.15(d), both become effective
upon the Replacement notifying all the parties hereto in writing that
it accepts such appointment, whereupon the Replacement shall succeed to
the position of the retiring Agent and the term "AGENT", "FACILITY
AGENT" or "SECURITY
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AGENT" in all of the Finance Documents shall include such Replacement
where appropriate. This Clause 24 shall continue to benefit a retiring
Agent in respect of any action taken or omitted by it hereunder while
it was an Agent.
(d) The resignation or removal of a retiring Security Agent shall not
become effective until the Facility Agent is satisfied that all things
required to be done in order that the Security Documents or
replacements therefor shall provide for legal, valid and enforceable
security in favour of the replacement Security Agent have been done.
The Obligors shall take such action as may be necessary in order that
the Security Documents or replacements therefor shall provide for
legal, valid and enforceable security in favour of any replacement
Security Agent.
(e) The retiring Agent shall make available to the Replacement such
documents and records as the Replacement may reasonably request for the
purpose of performing its function as the Facility Agent or Security
Agent as the case may be.
24.16 SECURITY AGENT AS TRUSTEE
(a) The Security Agent in its capacity as trustee or otherwise:
(i) shall not be liable for any failure, omission, or defect in
perfecting the security constituted by any Security Document or
any security created thereby;
(ii) may accept without enquiry such title as any Obligor may have to
the property over which security is intended to be created by any
Security Document.
(b) Save where the Security Agent holds a legal mortgage over, or over an
interest in, real property or shares, the Security Agent in its
capacity as trustee or otherwise shall not be under any obligation to
hold any title deeds, Security Documents or any other documents in
connection with the property charged by any Security Document or any
other such security in its own possession or to take any steps to
protect or preserve the same. The Security Agent may permit the
relevant Obligor to retain all such title deeds and other documents in
its possession.
(c) Save as otherwise provided in the Security Documents, all moneys which
under the trusts herein or therein contained are received by the
Security Agent in its capacity as trustee or otherwise may be invested
in the name of or under the control of the Security Agent in any
investment for the time being authorised by English law for the
investment by trustees of trust money or in any other investments which
may be selected by the Security Agent with the consent of the Majority
Banks. Additionally, the same may be placed on deposit in the name of
or under the control of the Security Agent at such bank or institution
(including any Agent) and upon such terms as the Security Agent may
think fit. Any and all such monies and all interest thereon shall be
paid over to the Facility Agent forthwith upon demand by the Facility
Agent.
(d) Each Finance Party authorises, empowers and directs the Security Agent
(by itself or by such person(s) as it may nominate) to execute and
enforce the Security Documents as trustee or as otherwise provided (and
whether or not expressly in the Finance Parties' names) on its behalf.
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24.17 BANKS
(a) Each Agent may treat each Bank as a Bank, entitled to payments under
this Agreement and as acting through its Facility Office(s) until it
has received not less than 5 Business Days' notice from such Bank to
the contrary prior to the relevant payment.
(b) Each Bank represents to the Facility Agent that, in the case of a Bank
which is a Bank on the date of this Agreement, on the date of this
Agreement and, in the case of a Bank which becomes a Bank after the
date of this Agreement, on the date it becomes a Bank it is:
(i) either:
(A) not resident in the United Kingdom for United Kingdom tax
purposes; or
(B) a "bank" as defined in section 840A of the Income and
Corporation Taxes Act 1988 and resident in the United
Kingdom for United Kingdom tax purposes; and
(ii) beneficially entitled to the principal and interest payable by the
Facility Agent to it under this Agreement,
and shall forthwith notify the Facility Agent if either representation
ceases to be correct.
24.18 UNDERTAKINGS OF THE HEDGING BANK
The Hedging Bank undertakes to each of the Banks that, except as the
Majority Banks have previously consented in writing, it will not:
(a) demand (other than as may be necessary in order to exercise any
right to terminate or close out any hedging transaction as
provided in and permitted under paragraph (b) below) or receive
payment, prepayment or repayment of, or any distribution in
respect of, or on account of, any of the Hedging Liabilities in
cash or in kind, or apply any money or property in or towards the
discharge of any Hedging Liabilities except for scheduled
payments arising under the original terms of the Hedging
Documents (without regard to any amendments made after the date
of those Hedging Documents other than those permitted by the
terms of this Agreement) and except for the proceeds of
enforcement of the Security Documents received and applied in the
order permitted by Clause 12.6;
(b) exercise any right to terminate or close out any hedging
transaction under the Hedging Documents prior to its stated
maturity (whether by reason of the Obligor counterparty becoming
a Defaulting Party thereunder (and as defined therein) or
otherwise) unless either:
(i) such Obligor has defaulted on a payment due under the Hedging
Documents after allowing for any required notice and any
applicable days of grace and such default continues for more
than seven Business Days after notice of such default being
given to the Facility Agent; or
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(ii) the Facility Agent has delivered a notice to the Parent
pursuant to Clause 23.2(b), (c) or (d);
(c) discharge all or any part of the Hedging Liabilities by set-off,
any right of combination of accounts or otherwise except if and
to the extent that those Hedging Liabilities are permitted to be
paid under paragraph (a) above; or
(d) permit to subsist or receive an Encumbrance or any financial
support (including without limitation to the taking of any
participation, the giving of any guarantee, indemnity or other
assurance against loss, or the making of any deposit or payment)
for, or in respect of, any of the Hedging Liabilities other than
under the Security Documents or any other Encumbrance or support
granted for the full benefit (save to the extent otherwise
required so as to comply with applicable law) of the Banks, and
except under the original provisions of the Hedging Documents.
24.19 TWO WAY PAYMENT
Each Obligor and the Hedging Bank agree with each other and with Finance
Parties that:
(a) any Hedging Document to which they are party governing the terms
of a hedging transaction will provide for "two way payments" in
the event of a termination of that hedging transaction entered
into under that Hedging Document whether upon a termination event
or an Event of Default (as defined therein), meaning that the
Defaulting party under (and as defined in) that Hedging Document
will be entitled to receive payment under the relevant
termination provisions if the net replacement value of all
terminated transactions effected under that Hedging Document is
in its favour;
(b) if, on termination of any hedging transaction under the Hedging
Documents, a settlement amount or other amount falls due from the
Hedging Bank to any Obligor then, if the security constituted by
the Security Documents has become enforceable, that amount shall
be paid by such Hedging Bank to the Security Agent and treated as
proceeds of enforcement of the security conferred by the Security
Documents for application in the order prescribed in this
Agreement; and
(c) unless it has already exercised such rights in accordance with
Clause 24.18(b), that Hedging Bank will exercise any rights it
may have to terminate the hedging transactions under the Hedging
Documents after the Facility Agent has delivered a notice to the
Parent pursuant to Clause 23.2(b), (c) or (d) unless the Majority
Banks otherwise agree or require.
24.20 HEDGING DOCUMENTS
The Hedging Bank will provide to the Facility Agent copies of all
documents constituting the Hedging Documents as soon as reasonably
practicable.
24.21 ISDA FORM
The provisions of this Agreement relating to hedging transactions
assume that all Hedging Documents will be based on prevailing standard
ISDA Agreements. If this proves not to be the case, such amendments
shall be made to such provisions as are necessary, in the light of
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the actual provisions of the Hedging Documents, in order that this
Agreement may have the same effect in relation to hedging transactions
as it would have had if such assumption had been correct.
25. FEES
25.1 ARRANGEMENT FEE
The Parent shall pay or procure that Getty U.K. shall pay to the
Facility Agent on behalf of the Arranger a front-end fee on the date
and in the amount agreed in the letter of even date herewith from the
Facility Agent on behalf of the Arranger to the Parent and
counter-signed by the Parent. The front-end fee shall be distributed by
the Arranger among the Banks in the proportions agreed between the
Arranger and the Banks.
25.2 COMMITMENT FEE
(a) The Parent shall pay to the Facility Agent for each Bank a commitment
fee in the currency in which the relevant Commitments are denominated
computed at the rate per annum equal to zero point five zero per cent.
(0.50%) on the daily unutilised balance of the aggregate of that Bank's:
(i) undrawn and available Tranche A Commitment during the Tranche A
Availability Period; and
(ii) undrawn and available Tranche B Commitment during the Tranche B
Availability Period.
(b) Accrued commitment fee is payable to the Facility Agent on the earlier of
the Closing Date and the expiry of the Tranche A/B Availability Period.
25.3 AGENCY FEES
The Parent shall pay to the Facility Agent for its own account the agency
fees on the dates and in the amount agreed in the letter of even date
herewith from the Facility Agent to the Parent and counter-signed by the
Parent.
25.4 VAT
Any fee referred to in this Clause 25 (Fees) is exclusive of any value
added tax or any other similar Tax which might be chargeable in
connection with that fee. If any value added tax or other similar Tax
is so chargeable, it shall be paid by the relevant Obligor at the same
time as it pays the relevant fee.
26. EXPENSES
26.1 INITIAL AND SPECIAL COSTS
The Parent shall promptly on demand pay or procure that the other
Borrowers pay the Agents and the Arranger the amount of all reasonable
costs and expenses (including legal fees and expenses) incurred by any
of them in connection with:
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(a) the negotiation, preparation, printing and execution of this
Agreement and any other Finance Document (including any executed
after the date of this Agreement) and the syndication of the
Facilities;
(b) any amendment, supplement, waiver, consent or suspension of
rights (or any proposal for any of the foregoing) requested by or
on behalf of an Obligor or, in the case of Clause 2.5, the
Facility Agent and relating to a Finance Document; and
(c) any other matter, not of an ordinary administrative nature, arising
out of or in connection with a Finance Document,
together in each case with any applicable value added tax or other
similar Taxes.
26.2 ENFORCEMENT COSTS
The Parent shall promptly on demand pay or procure that the other
Borrowers pay to each Finance Party the amount of all costs and
expenses (including legal fees and expenses) incurred by it:
(a) in connection with the enforcement of, or the protection or
preservation of any rights under, any Finance Document; or
(b) (in the case of the Facility Agent or the Security Agent only) in
investigating any Default,
together in each case with any applicable value added tax or other
similar Taxes.
While any Event of Default is continuing, the Parent shall promptly on
demand pay each Agent for the cost of the management time charged by such
Agent in connection with any additional administration of the Finance
Documents arising in consequence of such Event of Default.
26.3 STAMP DUTIES
The Parent shall pay and promptly on demand indemnify each Finance
Party against any liability it incurs in respect of any stamp,
registration and similar Tax which is or becomes payable in connection
with the entry into, registration, performance or enforcement of any
Finance Document.
27. INDEMNITIES
27.1 CURRENCY INDEMNITY
(a) If any amount payable by any Obligor under or in connection with any
Finance Document is received by any Finance Party in a currency (the
"PAYMENT CURRENCY") other than that agreed to be payable under that
Finance Document (the "AGREED CURRENCY"), whether as a result of any
judgement or order or the enforcement of the same, the liquidation of
such Obligor or otherwise and the amount produced by converting the
Payment Currency so received into the Agreed Currency at market rates
prevailing at or about the time of receipt of the Payment Currency is
less than the amount of the Agreed Currency due under that Finance
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Document, then the Obligors shall, as an independent and additional
obligation, indemnify each Finance Party for the deficiency and any
loss sustained as a result.
(b) The indemnities set out in paragraph (a) above shall constitute
separate and independent obligations of each of the Obligors from their
other obligations under the Finance Documents and shall apply
irrespective of any indulgence granted by any Finance Party. The
Obligors shall pay the reasonable costs of making any conversion from
the Payment Currency to the Agreed Currency.
(c) Each Obligor waives any right it may have in any jurisdiction to pay any
amount under this Agreement in a currency other than that in which it is
expressed to be payable under that Finance Document.
27.2 GENERAL INDEMNITIES
The Parent shall promptly on demand indemnify each Finance Party
against any loss or liability which that Finance Party incurs as a
consequence of:
(a) the occurrence of any Default;
(b) the operation of Clause 2.5, Clause 23.2 or Clause 33;
(c) any payment of principal of or interest on an Advance or of an
overdue amount being received otherwise than on its Interest
Date; or
(d) (other than by reason of default by a Finance Party) a
Utilisation not being made after a Request has been delivered for
that Utilisation,
including any loss of Margin or other loss or expense on account of
funds borrowed, contracted for or utilised to fund any amount payable
under any Finance Document, any amount repaid or prepaid or any Advance
(provided that the loss or liability recoverable by any Finance Party
under paragraphs (c) or (d) shall not exceed the amount which such
Finance Party could claim if it had funded such Advance or overdue
amount on a matched basis in the London Interbank Eurocurrency Market).
27.3 INDEMNITY RELATING TO FACILITIES
The Parent agrees to indemnify each Finance Party and each of their
respective directors, officers and employees against any and all
claims, damages, liabilities, reasonable costs and expenses (including
legal fees) which may be incurred by or asserted against such Finance
Party or their respective directors, officers and employees in
connection with or arising out of any such proceedings, actions or
enquiry by any regulatory authority of a type referred to in Clause
23.1(n) (ignoring the provision as to materiality contained therein) or
any litigation or other proceedings connected with the right to
transfer the Acquired Assets (or any part thereof), or the shares of
any member of the Target Group under the Transaction Documents or any
competing rights to the Acquired Assets (or any part thereof) or to any
of the Shares, provided that this indemnity shall not extend to any
claim, damage, liability, cost or expense arising out of such Finance
Parties' negligence or wilful misconduct or that of their respective
directors, officers and employees including any breach of any law,
regulation or official
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directive with which it was, at the time of such breach, the practice
of banks in its jurisdiction to comply.
28. EVIDENCE AND CALCULATIONS
28.1 ACCOUNTS
Accounts maintained by a Finance Party in connection with this
Agreement are prima facie evidence of the matters to which they relate.
28.2 CERTIFICATES AND DETERMINATIONS
Any certification or determination by a Finance Party of a rate or amount
under this Agreement is, in the absence of manifest error, prima facie
evidence of the matters to which it relates.
28.3 CALCULATIONS
Interest (including any applicable Additional Cost) and the fees
payable under Clause 25.2 accrue from day to day and are calculated on
the basis of the actual number of days elapsed and a year of 360 days
or, in the case of interest payable on an amount denominated in
Sterling only, 365 days.
29. AMENDMENTS AND WAIVERS
29.1 PROCEDURE
(a) Subject to Clause 29.2, if authorised by the Majority Banks, the
Facility Agent or (in the case of the Security Documents) the Security
Agent may waive or (with the consent of the Obligors' Agent) amend or
vary any term of the Finance Documents. Any such waiver, amendment or
variation so authorised and effected shall be binding on all the
Finance Parties and the Facility Agent (or Security Agent as the case
may be) shall be under no liability in respect of any such waiver,
amendment or variation. The Obligors' Agent and the other Obligors
shall be entitled to rely on any letter agreeing to any such waiver,
amendment or variation given by the Facility Agent or the Security
Agent, as the case may be, in their capacity as such, which the
Obligors may take as confirmation that the Facility Agent or the
Security Agent, as the case may be, has been duly authorised by the
Majority Banks.
(b) The Facility Agent shall promptly notify the Obligors' Agent and the
other Finance Parties of any waiver, amendment or variation effected
under paragraph (a) above, and any such waiver, amendment or variation
shall be binding on all the Parties.
29.2 EXCEPTIONS
A waiver, amendment or variation which relates to:
(a) the definition of "MAJORITY BANKS" in Clause 1.1;
(b) an extension of the date for, or a decrease in an amount or a
change in the currency or waiver of, any payment under the
Finance Documents;
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(c) a change in a Bank's Commitment (other than as expressly
contemplated by this Agreement) or an extension of any
Availability Period;
(d) the incorporation of Additional Borrowers and/or drawers or a
change in the Guarantors otherwise than in accordance with
Clauses 19.1 or 19.2;
(e) a term of a Finance Document which expressly requires the consent
of each Bank;
(f) Clauses 8, 9, 12.6, 13, 33, 38 or this Clause 29; or
(g) any material provision of any Security Document or any release
(not otherwise provided for in Clause 19 or the relevant Security
Document) of any material asset charged by any of the Security
Documents,
may not be effected without the consent of each Bank.
29.3 WAIVERS AND REMEDIES CUMULATIVE
The rights of each Finance Party under the Finance Documents:
(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of its rights under the general
law; and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver of
that right.
30. CHANGES TO THE PARTIES
30.1 Transfers by Obligors
No Obligor may assign, transfer, novate or dispose of any of, or any
interest in, its rights and/or obligations under this Agreement.
30.2 Transfers by Banks
(a) A Bank (the "EXISTING BANK") may at any time with the prior consent of
the Parent (not to be unreasonably withheld) assign, transfer or novate
any of its rights and/or obligations under this Agreement to another
bank, trust, fund or financial institution (the "NEW BANK") which is a
Recognised Bank.
(b) A transfer of obligations will be effective only if either:
(i) the obligations are novated in accordance with Clause 30.3
(Procedure for substitution); or
(ii) the New Bank confirms to the Facility Agent and the Parent that
it undertakes to be bound by the terms of the Finance Documents
as a Bank in form and substance satisfactory to the Facility
Agent. On the transfer becoming effective in this manner
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the Existing Bank shall be relieved of its obligations under the
Finance Documents to the extent that they are transferred to the
New Bank.
(c) Nothing in this Agreement restricts the ability of a Bank to
sub-participate or sub-contract an obligation if that Bank remains
liable under this Agreement for that obligation.
(d) Save where the Existing Bank is an Original Bank, on each occasion an
Existing Bank assigns, transfers or novates any of its rights and/or
obligations under this Agreement, the New Bank shall, on the date the
assignment, transfer and/or novation takes effect, pay to the Facility
Agent an administration fee of L1,000.
(e) Neither an Existing Bank nor any other Finance Party is responsible to a
New Bank for:
(i) the execution, genuineness, validity, enforceability or sufficiency
of any Finance Document or any other document;
(ii) the collectability of amounts payable under any Finance Document
or the financial condition of or the performance of its
obligations under the Finance Documents by any Obligor; or
(iii) the accuracy of any statements or information (whether written or
oral) made in or in connection with or supplied in connection
with any Finance Document.
(f) Each New Bank confirms to the Existing Bank and the other Finance Parties
that it:
(i) has made its own independent investigation and assessment of the
financial condition and affairs of each Obligor and its related
entities in connection with its participation in this Agreement and
has not relied exclusively on any information provided to it by the
Existing Bank or any other Finance Party in connection with any
Finance Document;
(ii) will continue to make its own independent appraisal of the
creditworthiness of each Obligor and its related entities while
any amount is or may be outstanding under this Agreement or any
Commitment is in force; and
(iii) is a bank, trust, fund or financial institution whose ordinary
business includes participation in syndicated facilities of this
type; and
(iv) is a Recognised Bank with respect to each Borrower.
(g) Nothing in any Finance Document obliges an Existing Bank to:
(i) accept a re-transfer from a New Bank of any of the rights and/or
obligations assigned, transferred or novated under this Clause
30.2 or Clause 30.3; or
(ii) support any losses incurred by the New Bank by reason of the
non-performance by any Obligor of its obligations under this
Agreement or otherwise.
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(h) Any reference in this Agreement to a Bank includes a New Bank, but
excludes a Bank if no amount is or may be owed to or by that Bank under
this Agreement and its Commitment has been cancelled or reduced to nil.
(i) If any Bank assigns its rights under this Agreement a written
instrument by which such rights are assigned must be notified to
Fotogram-Stone Sarl by an HUISSIER (bailiff) in accordance with the
provisions of Article 1690 of the French Civil Code.
30.3 PROCEDURE FOR SUBSTITUTION
(a) A novation is effected if after prior consultation with the Parent:
(i) the Existing Bank and the New Bank deliver to the Facility Agent
a duly completed certificate executed by the Existing Bank and
the New Bank, substantially in the form of Part I of Schedule 5
(a "SUBSTITUTION CERTIFICATE"); and
(ii) the Facility Agent executes it.
(b) Each Party (other than the Existing Bank and the New Bank) irrevocably
authorises the Facility Agent to execute any duly completed Substitution
Certificate on its behalf.
(c) To the extent that they are expressed to be the subject of the novation
in the Substitution Certificate:
(i) the Existing Bank and the other Parties (the "EXISTING PARTIES")
will be released from their obligations to each other under the
Finance Documents (the "DISCHARGED OBLIGATIONS");
(ii) the New Bank and the existing Parties will assume obligations
towards each other under the Finance Documents which differ from
the discharged obligations only insofar as they are owed to or
assumed by the New Bank instead of the Existing Bank;
(iii) the rights of the Existing Bank against the existing Parties
under the Finance Documents and vice versa (the "DISCHARGED
RIGHTS") will be cancelled; and
(iv) the New Bank and the existing Parties will acquire rights against
each other under the Finance Documents which differ from the
discharged rights only insofar as they are exercisable by or
against the New Bank instead of the Existing Bank,
all on the date of execution of the Substitution Certificate by the
Facility Agent or, if later, the date specified in the Substitution
Certificate.
The discharged obligations shall not include any obligation under
Clauses 13 and 15 in respect of payments made prior to the effective
date of such Substitution Certificate.
(d) Each Obligor and each Finance Party hereby agrees for the future that
in the event of an assignment or a transfer by any Existing Bank of all
or part of its rights and obligations under the Finance Documents to a
New Bank, the Existing Bank shall expressly preserve all of its
<PAGE>
99
rights under any security or privilege in relation to the existing
rights, so that such security or privilege shall be automatically
transferred to the New Bank.
30.4 REFERENCE BANKS
If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of
which it is an Affiliate) ceases to be one of the Banks, the Facility
Agent shall (in consultation with the Parent) appoint another Bank or
an Affiliate of a Bank to replace that Reference Bank.
30.5 REGISTER
The Facility Agent shall keep a record of all the Parties and shall
supply any other Party (at that Party's expense) with a copy of the
record on request.
30.6 INCREASED COSTS
(a) Subject as provided in paragraph (b) below, if any assignment, transfer
or novation of or with respect to all or any part of the rights and/or
obligations of a Bank under this Agreement pursuant to Clause 30.2 or
30.3 is made which results (or would but for this Clause result) at the
time thereof in amounts becoming payable under Clauses 13 or 15.1, then
the assignee, transferee or New Bank shall be entitled to receive such
amounts only to the extent that the assignor, transferor or Existing
Bank would have been so entitled had there been no such assignment,
transfer, or novation.
(b) The provisions of paragraph (a) above shall not apply in relation to
any assignment, transfer or novation of or with respect to the rights
and/or obligations of the Original Banks, provided that the same is
effected by the relevant Original Bank within six months from the date
of this Agreement.
31. DISCLOSURE OF INFORMATION
31.1 CONFIDENTIALITY
Each Finance Party hereby severally undertakes to each Obligor that it
will keep confidential and that it will not make use of for any
purposes (otherwise than for the purposes of the Finance Documents and
otherwise than in the context of an addition to its general experience,
knowledge or expertise), any of the Transaction Documents or other
documents relating to this Agreement and all of the information
distributed on behalf of the Obligors or any of them during syndication
or contained in, received under or obtained in the course of
discussions relating to the Transaction Documents and/or the Reports,
other than any such document or information which has become generally
available to banks in the London market through no breach by it of this
Clause, provided that each Finance Party shall be entitled to make
disclosure of the same:
(i) to its auditors, accountants, legal counsel and tax advisers and
to any other professional advisers appointed to act in connection
with the administration of the Finance Documents or the
enforcement of, or realisation of any security provided under,
any of the Finance Documents;
(ii) to any other third party where the relevant Obligor has previously
agreed in writing that disclosure may be made to that third party;
<PAGE>
100
(iii) to its Affiliates to the extent required as part of such Finance
Party's credit control procedures;
(iv) to any banking or other regulatory or examining authorities
(whether governmental or otherwise) where such disclosure is
requested by them;
(v) pursuant to subpoena or other legal process, or in connection
with any action, suit or proceeding relating to any of the
Finance Documents;
(vi) pursuant to any law or regulation having the force of law; and
(vii) to any member of the Group.
The provisions of this Clause 31.1 shall supersede any undertakings
with respect to confidentiality previously given by any Finance Party
in favour of any Obligor.
31.2 SUB-PARTICIPANTS
Notwithstanding Clause 31.1, a Bank may disclose to one of its
Affiliates or any person with whom it is proposing to enter, or has
entered into, any kind of transfer, participation or other agreement in
relation to this Agreement:
(i) a copy of any Finance Document; and
(ii) any information which that Bank has acquired under or in connection
with any Finance Document,
provided that any such proposed transferee, participant or assignee has
agreed with the Parent to keep any such Finance Document or information
confidential.
31.3 PUBLICITY
The Parent and the Arranger shall agree the form of all press
announcements issued in respect of the Finance Documents and any
transaction contemplated thereby.
32. SET-OFF
Following the occurrence of an Event of Default, a Finance Party may
set off any obligation due and payable by an Obligor under the Finance
Documents (to the extent beneficially owned by that Finance Party)
against any obligation (whether or not due and payable) owed by that
Finance Party to that Obligor, regardless of the place of payment,
booking branch or currency of either obligation. If the obligations are
in different currencies, the Finance Party may convert either
obligation, at the cost of such Obligor, at a market rate of exchange
in its usual course of business for the purpose of the set-off. If
either obligation is unliquidated or unascertained, the Finance Party
may set off in an amount estimated by it in good faith to be the amount
of that obligation.
<PAGE>
101
33. PRO RATA SHARING
33.1 REDISTRIBUTION
If any amount owing by an Obligor under this Agreement to a Finance Party
(the "RECOVERING FINANCE PARTY") is discharged by payment, set-off or any
other manner other than through the Facility Agent in accordance with
Clause 12 (a "RECOVERY"), then:
(a) the recovering Finance Party shall, within 3 Business Days, notify
details of the recovery to the Facility Agent;
(b) the Facility Agent shall determine whether the recovery is in excess
of the amount which the recovering Finance Party would have received
had the recovery been received by the Facility Agent and distributed
in accordance with Clause 12;
(c) subject to Clause 33.3 the recovering Finance Party shall, within 3
Business Days of demand by the Facility Agent, pay to the Facility
Agent an amount (the "REDISTRIBUTION") equal to the excess;
(d) the Facility Agent shall treat the redistribution as if it were a
payment by the Obligor concerned under Clause 12 and shall pay the
redistribution to the Finance Parties (other than the recovering
Finance Party) in accordance with Clause 12.6; and
(e) after payment of the full redistribution, the recovering Finance
Party will be subrogated to the portion of the claims paid under
paragraph (d) above, and that Obligor will owe the recovering
Finance Party a debt which is equal to the redistribution,
immediately payable and of the type originally discharged.
33.2 REVERSAL OF REDISTRIBUTION
If:
(a) a recovering Finance Party must subsequently return a recovery, or
an amount measured by reference to a recovery, to an Obligor; and
(b) the recovering Finance Party has paid a redistribution in relation
to that recovery,
each Finance Party shall, within 3 Business Days of demand by the
recovering Finance Party through the Facility Agent, reimburse the
recovering Finance Party all or the appropriate portion of the
redistribution paid to that Finance Party. Thereupon the subrogation in
Clause 33.1(e) will operate in reverse to the extent of the reimbursement.
33.3 EXCEPTION
A recovering Finance Party need not pay a redistribution to the
Facility Agent (i) to the extent that it would not, after the payment,
have a valid claim against the Obligor concerned in the amount of the
redistribution pursuant to Clause 33.1(e) or (ii) where the recovering
Finance Party made the recovery as a consequence of a judgment in any
legal proceedings, to the extent that any other Finance Party was given
notice of such proceedings and, being entitled to do so, did not join in
such proceedings.
<PAGE>
102
33.4 LOSS SHARING
Without prejudice to Clause 33.1, if it transpires for any reason that any
amount owing by an Obligor under any Finance Document to a Finance Party
remains undischarged and for any reason any resulting losses are not being
borne by the Banks and the Hedging Bank pro rata to the amount which their
respective participation in the Advances (including amounts under any
Ancillary Facility) bore to the aggregate of all Advances outstanding on
the date on which the Facility Agent gives notice to the Parent pursuant
to Clause 23.2(b), (c) (and demand has been made thereunder) or (d)
(PROVIDED THAT for this purpose the aggregate of all Advances outstanding
will be notionally increased by an aggregate amount calculated in
accordance with Schedule 7 with respect to any Bank's interest in the
Hedging Documents, and shall be deemed to be increased by an amount equal
to the aggregate amounts outstanding under any Ancillary Facility the
Banks and the Hedging Bank shall make such payments inter se as shall be
required to ensure that after taking into account such payments such
losses are borne by the Banks in their capacity as such) and the Hedging
Bank pro rata.
34. SEVERABILITY
If a provision of any Finance Document is or becomes illegal, invalid or
unenforceable in any jurisdiction, that shall not affect:
(a) the legality, validity or enforceability in that jurisdiction of any
other provision of the Finance Documents; or
(b) the legality, validity or enforceability in other jurisdictions of
that or any other provision of the Finance Documents.
35. COUNTERPARTS
This Agreement may be executed in any number of counterparts, and this has
the same effect as if the signatures on the counterparts were on a single
copy of this Agreement.
36. NOTICES
36.1 GIVING OF NOTICES
All notices or other communications under or in connection with this
Agreement shall be given in writing or by facsimile. Any such notice will
be deemed to be given as follows:
(a) if in writing, when delivered;
(b) if by facsimile, when received.
However, a notice given in accordance with the above but received on a
non-working day or after business hours in the place of receipt will only
be deemed to be given on the next working day in that place. Any notice
given to the Facility Agent shall be confirmed in writing, but non receipt
of the written confirmation shall not invalidate such notice or any action
taken in reliance on the facsimile version thereof.
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103
36.2 ADDRESSES FOR NOTICES
The address and facsimile number of each Party for all notices under or in
connection with this Agreement are:
(i) as specified in Schedule 1 or 2, as the case may be, or in the
Substitution Certificate, Borrower Accession Agreement or Guarantor
Accession Agreement by which such Party became a party to this
Agreement, as such Party's address for notices; or
(ii) as otherwise notified by that Party for this purpose to the Facility
Agent (or in the case of the Facility Agent as otherwise notified by
the Facility Agent to the other Parties) by not less than five
Business Days' notice.
37. JURISDICTION
37.1 SUBMISSION
For the benefit of each Finance Party, each Obligor agrees that the courts
of England have jurisdiction to settle any disputes in connection with any
Finance Document and accordingly submits to the jurisdiction of the
English courts.
37.2 SERVICE OF PROCESS
Without prejudice to any other mode of service, each Obligor:
(a) irrevocably appoints Getty U.K. whose registered office is at 101
Bayham Street, London, NW1 0AG as its agent for service of process
relating to any proceedings before the English courts in connection
with any Finance Document;
(b) agrees that failure by such process agent to notify the Obligor of
the process will not invalidate the proceedings concerned; and
(c) consents to the service of process relating to any such proceedings
by prepaid posting of a copy of the process to its address for the
time being applying under Clause 36.2 (Addresses for notices).
Getty U.K. hereby irrevocably accepts such appointment by each other
Obligor.
37.3 FORUM CONVENIENCE AND ENFORCEMENT ABROAD
Each Obligor:
(a) waives objection to the English courts on grounds of inconvenient
forum or otherwise as regards proceedings in connection with a
Finance Document; and
(b) agrees that a judgment or order of an English court in connection
with a Finance Document is (subject to rights of appeal before the
English courts) conclusive and binding on it and may be enforced
against it in the courts of any other jurisdiction.
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104
37.4 NON-EXCLUSIVITY
Nothing in this Clause 37 limits the right of a Finance Party to bring
proceedings against an Obligor in connection with any Finance Document:
(a) in any other court of competent jurisdiction including in New York
City, New York, United States of America; or
(b) concurrently in more than one jurisdiction.
37.5 WAIVER OF JURY TRIAL
Each Obligor waives, to the extent permitted by applicable law, trial by
jury in any litigation in any court with respect to, in connection with,
or arising out of this Agreement, or the validity, protection,
interpretation, collection or enforcement hereof; and the Obligors hereby
waive, to the extent permitted by applicable law, the right to interpose
any set off or counterclaim or cross-claim in connection with any such
litigation, irrespective of the nature of such setoff, counterclaim or
cross-claim except to the extent that the failure so to assert any such
setoff, counterclaim or cross-claim would permanently preclude the
prosecution of or recovery upon same. The Obligors agree that this
Clause 37.5 is a specific and material aspect of this Agreement and
acknowledge that the Banks would not make the Facilities available if this
Clause 37.5 were not part of this Agreement.
38. GOVERNING LAW
This Agreement is governed by English law.
This Agreement has been entered into on the date stated at the beginning of this
Agreement.
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SCHEDULE 1
VARIOUS PARTIES
PART I
ORIGINAL BORROWERS
TRANCHE A BORROWER
Getty Images, Inc.
TRANCHE B BORROWER
Getty Communications plc
TRANCHE C BORROWERS
Getty Communications plc
Getty Images Limited
ADDRESS FOR NOTICES FOR EACH BORROWER REFERRED TO ABOVE
101 Bayham Street
London
NW1 0AG
Attention: Lawrence Gould
Fax: 0171 267 6540
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PART II
ORIGINAL GUARANTORS
Getty Images, Inc.
Getty Images (U.S.), Inc.
Tony Stone Images/America Inc.
Tri-Energy Productions, Inc.
Liaison Agency, Inc.
Fabulous Footage Inc.
Tony Stone Images/Chicago Inc.
Tony Stone Images/New York Inc.
Tony Stone Images/Los Angeles Inc.
Tony Stone Images/Seattle Inc.
Getty Communications Plc
Getty Communications Group Finance Limited
Hulton Getty Holdings Limited
Hulton Getty Picture Collection Limited
Getty Images Limited
Gamma Liaison, Inc.
Liaison International, Inc.
Print Merger, Inc. (to be renamed PhotoDisc, Inc.)
ADDRESS FOR NOTICES FOR EACH GUARANTOR REFERRED TO ABOVE
101 Bayham Street
London
NW1 0AG
Attention: Lawrence Gould
Fax: 0171 267 6540
<PAGE>
107
SCHEDULE 2
BANKS AND COMMITMENTS
<TABLE>
<CAPTION>
BANKS AND NOTICE
DETAILS TRANCHE COMMITMENTS
<S> <C> <C>
Midland Bank plc A $24,000,000
B L16,000,000
31 Holborn C L6,750,000
London
EC1N 2HR
</TABLE>
Address for notices:
27/32 Poultry
London
EC2P 2BX
Attention: Midland Corporate Banking
Fax: 0171 260 4800
With a copy to:
31 Holborn
London
EC1N 2HR
Attention: Shirley Sinclair
Fax: 0171 599 6670
<PAGE>
108
SCHEDULE 3
CONDITIONS PRECEDENT DOCUMENTS
PART I
1. A certified copy of the constitutional documents, including the memorandum
and articles of association, and certificates of registration of each
Obligor (or, for each U.S. Obligor, the certificate and articles of
incorporation and by-laws), as currently in force.
2. (a) A certified copy of a resolution of the board of directors (or
equivalent governing body authority) of each Obligor approving the
terms of, and the transactions contemplated by the Finance Documents
to which it is a party and resolving that it execute each such
Finance Document and authorising a named person or persons to do so
on behalf of such Obligor and, in the case of a Borrower, to issue
any Request;
(b) a specimen of the signature of each authorised signatory of each
Obligor authorised to bind that company by his signature, whether
pursuant to the board resolution referred to in paragraph (a) above
or pursuant to registration at the commercial registry;
(c) a certificate of a director of each Borrower (or, for each U.S.
Borrower, by one of its officers) confirming that utilisation of
that part of the Facilities available to it in full would not cause
any borrowing limit binding on it to be exceeded;
(d) a certified copy of a resolution, passed by all the holders of the
issued or allotted shares in each Obligor, approving the terms of,
and the transactions contemplated by, the Finance Documents to which
such Obligor is to be a party; and
(e) a copy of the authorisation of the person/s acting for each U.S.
Obligor in relation to the transactions contemplated by this
Agreement, each being in the United States of America on the Closing
Date.
3. A certified copy (or originals) of the duly executed Acquisition
Agreements and all other Transaction Documents.
4. A certified copy of any other authorisation or consents or other document,
opinion or assurance which is necessary or desirable in connection with
the entry into and performance of, and the transactions contemplated by,
any Finance Document or for the validity and enforceability of any Finance
Document.
5. At least two originals of each of the Security Documents duly executed by
the relevant Obligor and each other party thereto, together with share
certificates, stock powers or share transfer forms (as appropriate)
executed in blank and title documents (if any) relating to assets charged
by the Security Documents which are contemplated to be delivered to the
Security Agent and copies of all notices required to be despatched
pursuant to the Security Documents;
6. A certified copy of the Base Financial Statements and the Financial
Forecasts.
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109
7. Satisfactory results to all company searches and land priority/charge
searches relating to each Obligor.
8. The Disclosure Letter.
9. Each of the Reports.
10. Releases for all existing Encumbrances registered in respect of any assets
of any member of the Group, save those Encumbrances permitted by Clause
21.6.
11. Requests in relation to all Utilisations to be made at Closing, together
with payment instructions in respect of all funds in the Closing Accounts.
12. Funds Flow Statement (to the extent not included in the Structure
Memorandum).
13. A legal opinion of:
(a) Allen & Overy, English legal advisers to the Facility Agent,
addressed to the Finance Parties;
(b) Kirkland & Ellis, United States legal advisers to the Facility
Agent, addressed to the Finance Parties;
(c) Oppenhoff & Radler, German legal advisers to the Facility Agent,
addressed to the Finance Parties;
(d) Jeantet et Associes, French legal advisers to the Facility Agent,
addressed to the Finance Parties;
(e) Shearman & Sterling, U.S. legal counsel to the Parent, addressed to
the Finance Parties.
14. Evidence that all Borrowings not permitted pursuant to Clause 21.10 have
been repaid.
15. (a) Evidence that the Parent owns at Closing legally and beneficially,
subject to stamping and registration (where appropriate), all the
issued shares in Getty U.K. and Print Merger, Inc. (to be renamed
PhotoDisc); and (b) evidence that Print Merger, Inc. owns at Closing
legally and beneficially exclusive rights to use the name PhotoDisc
and relevant trading names.
16. Written confirmation from Getty U.K. that it accepts the appointment as
process agent for each Obligor which is not incorporated in England and
any subsequent appointment made by any Additional Borrower or Additional
Guarantor.
17. Certificate signed by two directors of the Parent confirming that:
(i) all authorisations required in order that the Acquisition may
lawfully be effected and that the Acquired Assets may be owned by
the Parent and its Subsidiaries have been obtained and are in
effect;
<PAGE>
110
(ii) no material litigation or arbitration, and no material
administrative or regulatory proceedings or enquiry, is current,
pending or threatened in relation to, or likely to result from, the
Acquisition and no material labour dispute involving any member of
the Group as it will be constituted immediately after Closing is
current, pending or threatened;
(iii) neither the Parent nor any of its Subsidiaries has amended or waived
or agreed to amend or waive any provision of the Acquisition
Agreements or elected to complete the Acquisition in circumstances
where it would be entitled to decline to do so; and
(iv) all action required to effect the registration of the transfers of
stock and shares in (subject to stamping) Getty U.K. and PhotoDisc
and the issue of Shares in the Parent contemplated by the Merger
Agreement and the Scheme of Arrangement has been taken.
18. (a) Evidence that the section 155-158 whitewash procedure has been
completed by each relevant Obligor incorporated in England or Wales
including copies of the Auditor's report in relation to it and a
copy of the up to date register of directors of each such Obligor;
and
(b) A net asset letter from the Auditors addressed to the Facility Agent
and the Banks.
19. A solvency statement of the chief financial officer of each U.S. Obligor.
20. Structure Memorandum.
<PAGE>
111
PART II
Each of the documents referred to in paragraphs 1, 2, 4, 7 and 13 relating to
any Additional Borrower or Additional Guarantor.
<PAGE>
112
SCHEDULE 4
FORM OF REQUEST
To: HSBC Investment Bank plc as Facility Agent
Attention: [ ]
From: [BORROWER]
Date:[ ]
GETTY IMAGES, INC.
U.S.$24,000,000 TERM LOAN FACILITY, L16,000,000] TERM LOAN FACILITY,
AND L6,750,000 REVOLVING CREDIT FACILITY AGREEMENT
DATED 6TH FEBRUARY, 1998
(THE "CREDIT AGREEMENT")
Terms used in this Request and defined in the Credit Agreement have the same
meaning in this Request as in the Credit Agreement.
1. We wish to borrow an Advance as follows:
(a) Borrower: [ ]
(b) Tranche: [ ]
(c) Utilisation Date: [ ]
(d) Original Sterling Amount/amount: [L ]
(e) Currency: [Dollars/Sterling/
Deutschmarks/French Francs]
(f) Term: [ ]
(g) Payment Instructions: [ ].
2. We confirm that each condition specified in Clause 4.2 (Further conditions
precedent) is satisfied on the date of this Request.
Yours faithfully,
........................................
for and on behalf of
GETTY IMAGES, INC.
as Obligors' Agent
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SCHEDULE 5
FORMS OF ACCESSION DOCUMENTS
PART I
SUBSTITUTION CERTIFICATE
To: HSBC Investment Bank plc as Facility Agent
From: [THE EXISTING BANK] and [THE NEW BANK] Date: [ ]
GETTY IMAGES, INC.
U.S.$24,000,000 TERM LOAN FACILITY, L16,000,000 TERM LOAN FACILITY,
AND L6,750,000 REVOLVING CREDIT FACILITY AGREEMENT
DATED 6TH FEBRUARY, 1998
(THE "CREDIT AGREEMENT")
References to Clauses are to Clauses of the Credit Agreement.
We refer to Clause 30.3.
1. We [ ] (the "EXISTING BANK") and [ ] (the "NEW BANK")
agree to the Existing Bank and the New Bank novating all the Existing
Bank's rights and obligations referred to in the Schedule in accordance
with Clause 30.3.
2. From the date specified in paragraph 3 below, the New Bank becomes party
to the Credit Agreement as a Bank, with the rights and obligations
referred to in the Schedule.
3. The specified date for the purposes of Clause 30.3(c) is [date of
novation].
4. The Facility Office and address for notices of the New Bank for the
purposes of Clause 36.2 are set out in the Schedule.
5. The Existing Bank and the New Bank acknowledge and agree that Clauses
30.2(d), (e), (f) and (g) apply to this Substitution Certificate and the
novation contemplated hereby as if set out in full herein, mutatis
mutandis.
6. It is expressly agreed that the security created or evidenced by the
Security Documents shall be preserved for the benefit of the New Bank and
each other Finance Party.
7. This Substitution Certificate is governed by English law.
<PAGE>
114
THE SCHEDULE
RIGHTS AND OBLIGATIONS TO BE NOVATED
[Details of the rights and obligations of the Existing Bank to be novated].
[NEW BANK]
[Facility Office Address for notices]
[Existing Bank] [New Bank]
By: By:
Date: Date:
[ ]
as Facility Agent
By:
Date:
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115
PART II
BORROWER ACCESSION AGREEMENT
To: HSBC Investment Bank plc as Facility Agent
From: [PROPOSED BORROWER] and GETTY IMAGES, INC.
[Date]
GETTY IMAGES, INC. U.S.$24,000,000
TERM LOAN FACILITY, L16,000,000 TERM LOAN FACILITY AND
L6,750,000 REVOLVING CREDIT FACILITY AGREEMENT
DATED 6TH FEBRUARY, 1998
(THE "CREDIT AGREEMENT")
Terms used herein which are defined in the Credit Agreement shall have the same
meaning herein as in the Credit Agreement.
We refer to Clause 19.1.
We, [Name of company] of [Registered Office] (Registered no. [ ] agree to
become party to and to be bound by the terms of the Credit Agreement as an
Additional Borrower in accordance with Clause 19.1.
The address for notices of the Additional Borrower for the purposes of Clause
36.2 is:
[
]
This Agreement is governed by English law.
[ADDITIONAL BORROWER]
By:
GETTY IMAGES, INC.
By:
[Facility Agent]
By:
<PAGE>
116
PART III
GUARANTOR ACCESSION AGREEMENT
To: HSBC Investment Bank plc as Facility Agent
From: [PROPOSED GUARANTOR]
Date: [ ]
GETTY IMAGES, INC. U.S.$24,000,000
TERM LOAN FACILITY, L16,000,000 TERM LOAN FACILITY AND
L6,750,000 REVOLVING CREDIT FACILITY AGREEMENT
DATED 6TH FEBRUARY, 1998
(THE "CREDIT AGREEMENT")
Terms used herein which are defined in the Credit Agreement shall have the same
meaning herein as in the Credit Agreement.
We refer to Clause 19.2.
We, [name of company] of [Registered Office] (Registered no. [ ]) agree
to become party to and to be bound by the terms of the Credit Agreement as an
Additional Guarantor in accordance with Clause 19.2.
Our address for notices for the purposes of Clause 36.2 is:
[ ]
This Deed is governed by English law.
[EXECUTION AS A DEED
BY PROPOSED GUARANTOR]
GETTY IMAGES, INC.
By:
[Facility Agent]
By:
<PAGE>
117
SCHEDULE 6
SECURITY DOCUMENTS
1. Security over the shares of each of:
Getty Images (U.S.), Inc.
Tony Stone Images/America Inc.
Liaison Agency, Inc.
Fabulous Footage, Inc.
Tony Stone Images/Chicago Inc.
Tony Stone Images/New York Inc.
Tony Stone Images/Los Angeles Inc.
Getty Communications Plc
Getty Communications Group Finance Limited
Hulton Getty Holdings Limited
Hulton Getty Picture Collection Limited
Getty Images Limited
Fotogram - Stone Sarl
Tony Stone Associates GmbH Agentur fur visuelle Medien
ArtCast Corporation
Gamma Liaison, Inc.
Liaison International, Inc.
Tri-Energy Productions, Inc.
Print Merger, Inc. (to be renamed PhotoDisc Inc.)
Allsport Photographic plc
2. Debenture or general business charge from:
Getty Images, Inc.
Getty Images (U.S.), Inc.
Tony Stone Images/America Inc.
Liaison Agency, Inc.
Fabulous Footage Inc.
Tony Stone Images/Chicago Inc.
Tony Stone Images/New York Inc.
Tony Stone Images/Los Angeles Inc.
Tony Stone Images/Seattle Inc.
ArtCast Corporation
Gamma Liaison, Inc.
Liaison International, Inc.
Triernergy Productions
Getty Communications Plc
Getty Communications Group Finance Limited
Hulton Getty Holdings Limited
Hulton Getty Picture Collection Limited
Getty Images Limited
Print Merger, Inc. (to be renmed PhotoDisc, Inc.)
<PAGE>
118
3. Charge over trademarks (U.S. law) from:
Getty Communications plc
Getty Images Limited
<PAGE>
119
SCHEDULE 7
CALCULATION OF HEDGING LIABILITIES
1. For hedging transactions having remaining life of less than one year: NIL.
2. For hedging transactions having an original life in excess of one year, an
amount calculated according to the following formula:
Nominal amount
------------- x 2.0(2.5 x (maturity - 1)+3)
100
where the maturity is expressed as the number of years remaining in the
life of the transaction.
<PAGE>
120
SCHEDULE 8
CALCULATION OF THE ADDITIONAL COST
(1) The MLA Cost relative to each Advance where (and to the extent that) Banks
making such Advance are subject to the Mandatory Liquid Asset requirements
of the Bank of England, will be, subject as hereinafter provided, for the
Interest Period relating to such Advance (or, if longer than three months,
for each consecutive period of three months within such Interest Period
and for any balance of such Interest Period) (which Interest Period if not
longer than three months and each other such period is herein referred to
as a "RELEVANT PERIOD") the percentage rate supplied by the Facility Agent
arrived at by applying the following formula:
MLA Cost = BY + L(Y-X) + S(Y-Z) % per annum
---------------------
100-(B + S)
Where:
B = The percentage of the Facility Agent's eligible liabilities
then required to be held on a non-interest-bearing deposit
account with the Bank of England pursuant to the cash ratio
requirements of the Bank of England.
Y = The rate at which Sterling deposits in an amount approximately
equal to the principal amount of such Advance are offered by
the Facility Agent to leading banks in the London Interbank
Market at or about 11.00 a.m. on that day for a period
comparable to the Relevant Period in relation to such Advance.
L = The percentage of eligible liabilities which the Bank of
England from time to time requires the Facility Agent to
maintain as secured money with members of the London Discount
Market Association and/or as secured call money with those
money brokers and gilt-edged market makers recognised by the
Bank of England.
X = The rate at which secured Sterling deposits in an amount
approximately equal to the principal amount of such Advance
may be placed by the Facility Agent with members of the London
Discount Market Association and/or as secured call money with
money brokers and gilt-edged market makers at or about
11.00 a.m. on that day for a period comparable to the Relevant
Period in relation to such Advance.
S = The percentage of the Facility Agent's eligible liabilities
then required to be placed as a special deposit with the Bank
of England.
Z = The percentage interest rate per annum allowed by the Bank of
England on special deposits.
For the purposes of this paragraph "ELIGIBLE LIABILITIES" and "SPECIAL
DEPOSITS" shall bear the meanings ascribed to them from time to time by
the Bank of England.
<PAGE>
121
(2) In the application of the above formula, B, Y, L, X, S and Z will be
included in the formula as figures and not as percentages, e.g. if B =
0.5% and Y = 15%, BY will be calculated as 0.5 x 15 and not as 0.5% x 15%.
(3) The MLA Cost computed by the Facility Agent in accordance with this
schedule shall be rounded upward, if necessary, to four decimal places.
(4) The calculation in respect of the MLA Cost for each Advance denominated in
Sterling will be made by the Facility Agent on the first day of each
Relevant Period.
(5) Calculations will be made on the basis of a year of 365 days and the
actual number of days elapsed.
(6) In the event of a change in circumstances (including the imposition of
alternative or additional official requirements, excluding capital
adequacy requirements) which renders the above formula inappropriate in
the reasonable opinion of the Facility Agent, the Facility Agent shall
promptly notify the Banks thereof and shall notify the Parent of the
manner in which the Additional Cost shall thereafter be determined (which
manner shall be determined in a bona fide manner and provide a fair
assessment of the MLA Cost) and the Obligors and the Banks shall be bound
thereby.
<PAGE>
122
SCHEDULE 9
MATERIAL SUBSIDIARIES
Allsport Photographic plc
All-sport (UK) Limited
Tony Stone Images/Chicago, Inc.
Tony Stone Images/New York, Inc.
Tony Stone Images/Los Angeles, Inc.
Tony Stone Images/Seattle, Inc.
Allsport Photography (US) Inc.
PhotoDisc Europe Limited
Hulton Getty Picture Collection Limited
<PAGE>
123
SCHEDULE 10
HEDGING DOCUMENTS
1. Interest rate swap dated 16th March, 1995 with a maturity of 16th
September, 1998 at a notional amount of L3,500,000 at a rate of 8.54%,
subject to the terms of an ISDA Master Agreement (1992) dated 16th March,
1995.
2. Interest rate swap dated 1st May, 1996 with a maturity of 1st May, 2001 at
a notional amount of L3,000,000 at a rate of 7.79%, subject to the terms
of an ISDA Master Agreement (1992) dated 16th March, 1995.
<PAGE>
124
SIGNATORIES
PARENT
GETTY IMAGES, INC.
By: J. KLEIN
ORIGINAL BORROWERS
GETTY IMAGES, INC.
By: J. KLEIN
GETTY COMMUNICATIONS PLC
By: M. GETTY
GETTY IMAGES LIMITED
By: M. GETTY
ORIGINAL GUARANTORS
GETTY IMAGES, INC.
By: J. KLEIN
PRINT MERGER, INC.
By: J. KLEIN
GETTY IMAGES (U.S.) INC.
By: J. KLEIN
TONY STONE IMAGES/AMERICA INC.
By: J. SOBEL
<PAGE>
125
LIAISON AGENCY, INC.
By: J. KLEIN
FABULOUS FOOTAGE, INC.
By: A. DUNCOMB
TONY STONE IMAGES/CHICAGO INC.
By: J. SOBEL
TONY STONE IMAGES/NEW YORK INC.
By: J. SOBEL
TONY STONE IMAGES/LOS ANGELES INC.
By: J. SOBEL
TONY STONE IMAGES/SEATTLE INC.
By: J. SOBEL
GETTY COMMUNICATIONS PLC
By: M. GETTY
GETTY COMMUNICATIONS GROUP FINANCE LIMITED
By: M. GETTY
HULTON GETTY HOLDINGS LIMITED
By: M. GETTY
HULTON GETTY PICTURE COLLECTION LIMITED
By: M. GETTY
<PAGE>
126
GETTY IMAGES LIMITED
By: M. GETTY
GAMMA LIAISON, INC.
By: J. KLEIN
LIAISON INTERNATIONAL, INC.
By: J. KLEIN
TRI-ENERGY PRODUCTIONS, INC.
By: J. KLEIN
ARRANGER
MIDLAND BANK PLC
By: D. KEEBLE
ORIGINAL BANK
MIDLAND BANK PLC
By: D. KEEBLE
FACILITY AGENT
HSBC INVESTMENT BANK PLC
By: J. HAIRE
<PAGE>
127
SECURITY AGENT
HSBC INVESTMENT BANK PLC
By: J. HAIRE
<PAGE>
DATED 18th OCTOBER 1995
ALLIED DUNBAR ASSURANCE PLC
to
TONY STONE ASSOCIATES LIMITED
------------------------------
L E A S E
of
101 Bayham Street, Camden.
London, NWI
------------------------------
FORSYTE SAUNDERS KERMAN
79 New Cavendish Street
London
WIM 8AQ
<PAGE>
PARTICULARS
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------
1 DATE OF THIS DEED 18th October 1995
- -------------------------------------------------------------------------------
2 LEASE OR UNDERLEASE LEASE
- -------------------------------------------------------------------------------
3 LANDLORD ALLIED DUNBAR ASSURANCE PLC
of Allied Dunbar Centre Swindon
SN1 1EL
Company Registration No. 865292
- -------------------------------------------------------------------------------
4 TENANT TONY STONE ASSOCIATES LIMITED whose
registered office is at Worldwide
House 116 Bayham Street London NW1
0BA
Company Registration No. 948785
- -------------------------------------------------------------------------------
5 SURETY (if any) None
Company Registration No.
- -------------------------------------------------------------------------------
6 DEMISED PREMISES The land and buildings known as
Number 101 (formerly known as
numbers 95-111) Bayham Street
Camden as shown edged red on the
annexed plan for identification
only and including all such parts
of the buildings as oversail any
adjoining property but excluding
the premises comprised in and
demised by the Transformer Chamber
Lease
- -------------------------------------------------------------------------------
7 DATE OF COMMENCEMENT 18th October 1995
OF TERM
- -------------------------------------------------------------------------------
8 LENGTH OF TERM 15 years
- -------------------------------------------------------------------------------
<PAGE>
9 EXPIRY DATE OF TERM 17th October 2010
- -------------------------------------------------------------------------------
10 RENT(S) L292,400 per annum
as they may be reviewed
under the Third Schedule
- -------------------------------------------------------------------------------
11 RENT COMMENCEMENT DATE 7th October 1996
- -------------------------------------------------------------------------------
12 ANCILLARY RENT
COMMENCEMENT DATE 18th October 1995
- -------------------------------------------------------------------------------
13 RENT REVIEW DATE(S) 18th October 2000 and
18th October 2005
- -------------------------------------------------------------------------------
14 USER Offices (other than a betting shop)
together with such ancillary use as
may be required by the Tenant from
time to time
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
INDEX
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLAUSE SUBJECT
- -------------------------------------------------------------------------------
<S> <C>
1 Definitions
- -------------------------------------------------------------------------------
2 Interpretation Provisions
- -------------------------------------------------------------------------------
3 Demise and Rent
- -------------------------------------------------------------------------------
4 Insurance Provisions
- -------------------------------------------------------------------------------
5 Tenant's Covenants
- -------------------------------------------------------------------------------
6 Landlord's Covenants
- -------------------------------------------------------------------------------
7 General Provisions
- -------------------------------------------------------------------------------
FIRST SCHEDULE Rights granted
- -------------------------------------------------------------------------------
SECOND SCHEDULE Rights excepted
- -------------------------------------------------------------------------------
THIRD SCHEDULE Rent Review
- -------------------------------------------------------------------------------
FOURTH SCHEDULE Form of Surety Covenant
- -------------------------------------------------------------------------------
FIFTH SCHEDULE Deeds to which Demise is subject
- -------------------------------------------------------------------------------
SIXTH SCHEDULE Memoranda of Rent Review Provisions
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
THIS LEASE is made on the date stated in the Particulars
BETWEEN
(1) the Landlord specified in the Particulars ("the Landlord")
(2) the Tenant specified in the Particulars ("the Tenant") and
(3) the Surety (if any) specified in the Particulars ("the
Surety")
W I T N E S S E S:
1 DEFINITIONS
IN this Lease the following expressions (where the context so admits)
shall have the following meanings:
1.1 "Act" Shall mean every Act of Parliament (whether
specifically named herein or not) which may be
relevant to the Demised Premises its user or
anything on the Demised Premises the persons
employed or having recourse thereto whether or
not in force at the date hereof and shall include
any statutory re-enactment or modification thereof
and any order regulation directive by-law rule
consent or licence granted or required thereunder
or by any Public or local authority or by any
court of competent jurisdiction
1.2 "Conduit" Any conducting medium or other thing within the
Demised Premises by means of which any facility
service or matter may pass
1.3 "the Demised Premises" The whole and every part of the land described in
the Particulars together with everything for the
time being on the land and/or appurtenant to it
including the airspace above the land so described
1.4 "the Documents" The Deeds to which the demise is subject details
of which are set out in the Fifth Schedule
<PAGE>
1.5 "the Insured Risks" The risks insured against under Clause 4.1
1.6 "Landlord" Shall include the person entitled for the time
being to the reversion to this Lease
1.7 "Interest" Interest at the rate of 4% per annum above Lloyds
Bank plc Base Rate for the time being payable
from the date of demand by the Landlord (or if
earlier the date at which monies shall have become
due or at which the Landlord shall have expended
monies in respect of which interest is required
under this Lease) until the date of payment to
the Landlord compounded with quarterly rests on
the usual quarter days
1.8 "the Particulars" The details on the preceding pages headed
"Particulars"
1.9 "the Plan" The plan or plans specified in the Particulars
1.10 "Requisite Notice" A notice in writing to the Tenant seventy two
hours before any entry is made on the Demised
Premises Provided That in the case of an
emergency no notice shall be required
1.11 "Tenant" Shall include the Tenant's successors in title
and if it is an individual his personal
representatives
1.12 "the Term" The term mentioned in the Particulars which shall
include any extension or continuation whether by
statute or at common law
1.13 the "Termination Date" The date of expiration or sooner determination of
the Term
1.14 "the Transformer The Lease dated 18 March 1992 of the Ground Floor
Chamber Lease" Transformer Chamber
1.15 "VAT Act" The Value Added Tax Act 1994 as amended from time
to time and any Act from time to time replacing
re-enacting or consolidating it
<PAGE>
1.16 "VAT" Value Added Tax or any similar tax from time to
time replacing it or performing a similar fiscal
function
1.17 "VAT Supply" The meaning which "supply" has for the purpose of
the VAT Act
2 IN THIS LEASE:
2.1 The details and descriptions appearing in the Particulars shall be
included and form part of the Lease
2.2 If there shall be more than one person included in the expression
"Tenant" or "Surety" the covenants by them shall be joint and several
2.3 Where any act is prohibited the Tenant shall not allow or suffer such act
to be done
2.4 Where the Landlord or any other person deriving authority under or through
the Landlord exercises any rights to enter the Demised Premises under this
Lease unless specifically provided herein to the contrary the person
exercising such right shall cause the minimum amount of inconvenience or
disturbance possible and will make good any damage caused to the Demised
Premises to the reasonable satisfaction of The Tenant but neither such
person nor the Landlord shall be liable for any other compensation save
for any loss or damage occasioned by any negligent act
3 DEMISE
THE Landlord DEMISES to the Tenant ALL THOSE the Demised Premises
TOGETHER with so far as the Landlord has title to grant the same the
easements and rights specified in the First Schedule EXCEPTING AND
RESERVING to the Landlord the rights and easements specified in the
Second Schedule TO HOLD The Demised Premises to the Tenant from and
including the Date of Commencement of Term for the Term SUBJECT to all
rights easements privileges restrictions and stipulations of whatever
nature affecting the Demised Premises and FURTHER SUBJECT to the covenants
and other matters referred to in the Documents and FURTHER SUBJECT to the
rights granted by and the covenants contained in the Transformer Chamber
Lease YIELDING AND PAYING
3.1 Yearly and proportionately for any fraction of a year from and including
the Rent Commencement Date the rent specified in the Particulars and from
and including each rent review date referred to in the Particulars such
other rent as may become payable under the provisions of the Third
Schedule in each case to be paid by equal quarterly payments in advance
on the usual quarter days in every year the first such payment to be
<PAGE>
made on the Rent Commencement Date and to be in respect of the period from
and including the Rent Commencement Date to the next following quarter day
3.2 From and including the Ancillary Rent Commencement Date the insurance rent
as determined pursuant to Clause 4 hereof
4 INSURANCE
Subject to the Tenant paying the premium in accordance with the
provisions of this clause the Landlord covenants to insure the Demised
Premises (including tenant's and trade fixtures if the Landlord shall so
determine) subject to such excesses exclusions or limitations as the
Landlord or its Insurers may require in such reputable insurance office
or with such underwriters and through such agency as the Landlord may
from time to time decide in the full reinstatement value of the Demised
Premises or such higher value as the Tenant may reasonably require
including Architects' and Surveyors' and other professional fees and
incidental expenses including if the Landlord in its discretion from
time to time sees fit Value Added Tax on the rebuilding costs and such
fees and expenses and Value Added Tax which would arise by virtue of any
self supply charge against:
4.1.1 Loss or damage by fire explosion earthquake storm tempest (including
lightning) flood burst pipes impact and (in peacetime) aircraft
and articles dropped therefrom riot civil commotion and malicious
damage subsidence landslip and heave accidental damage and such
other risks against which the Landlord may from time to time deem
necessary to insure or which the Tenant may reasonably request in
writing
4.1.2 Public liability of the Landlord arising out of or in connection
with any matter involving or relating to the Demised Premises
4.1.3 The loss of rent payable under this Lease from time to time (having
regard to any review of rent which may become due under this Lease)
for four years
4.2 The Tenant shall pay to The Landlord within fourteen days of written demand
the amount of the premium for insuring the Demised Premises against the
Insured Risks from the Date of Commencement of Term as conclusively
determined by the Landlord
4.3 The Landlord shall:
4.3.1 At the reasonable request of the Tenant produce evidence of such
insurance and of the payment of the last premium and a copy of the
current policy and schedules thereto that relate to the Demised
Premises.
<PAGE>
4.3.2 Use reasonable endeavours to ensure that the premium for such
insurance and any excesses related thereto are reasonable taken in
the context of the insurance market as a whole and for insurance
cover on fully corresponding terms.
4.3.3 Procure that such insurance is on terms that there is a waiver of
the insurer's rights of subrogation against the Tenant.
4.4 If all or any part of the Demised Premises is damaged by any of the Insured
Risks and be unfit for occupation and use and the policy or policies of
insurance shall not have been vitiated or payment refused in whole or in
part as a result of some act or default of the Tenant then all or (as
the case may be) a fair proportion of The rent shall be suspended until
the Demised Premises shall be fit for occupation and use or if earlier
until the monies received by the Landlord in respect of loss of rent
insurance shall have been exhausted. In calculating the fair proportion
(if the Tenant has paid the rent due for the quarter then current)
refund shall be made in respect of the proportion of rent from the date
of damage or destruction until the next quarter day and any dispute
regarding the cesser of rent shall be referred to a single arbitrator to
be appointed in default of agreement upon the application of either
party by the President for the time being of the Royal Institution of
Chartered Surveyors under the Arbitration Acts 1950 and 1979
4.5.1 If the Demised Premises are damaged by any of the Insured Risks then
subject to Clause 4.5.3 below and subject to the Landlord being
able to obtain all necessary consents which the Landlord
covenants to use all reasonable endeavours to do the Landlord
will lay out all applicable proceeds of such insurance in
reinstating the Demised Premises and the Tenant will pay to the
Landlord within fourteen days of written demand with Interest the
amount equivalent to any excess which may be applicable to such
insurance but only insofar as such excesses have been previously
notified to the Tenant
4.5.2 If the payment of any insurance monies is lawfully refused as
referred to in Clause 4.4 hereof the Tenant will pay to the Landlord
on demand with Interest the amount so refused
4.5.3 The Landlord shall not be obliged to comply with the obligations
under Clause 4.5.1 hereof if payment of the insurance monies has
been lawfully refused in whole or in part by reason of any act or
default of the Tenant or anyone under its control and the Tenant
has not complied with Clause 4.5.2 hereof
4.6 The Tenant will not knowingly do anything which may prejudice any policy of
insurance for the time being in force in respect of any part of the Demised
Premises which may result in such insurance becoming void or voidable or
the rate of premium under such insurance being increased and the Tenant
will at all times comply with all requirements of the insurers of the
Demised Premises
<PAGE>
4.7 The Tenant will keep the Demised Premises supplied with such fire fighting
equipment as the insurers of the Demised Premises and the competent Fire
Authority may require or as the Landlord may reasonably require and
properly maintain such equipment
4.8 The Tenant will not store inflammable or explosive substances or goods at
the Demised Premises (save that with the prior written consents of the
Landlord and the insurers (such consent by the Landlord not to be
unreasonably withheld) and subject to payment by the Tenant of any
additional insurance premium the Tenant may retain reasonable quantities
of such substances or goods as are normally required for the Tenant's
business) or obstruct the access to any fire equipment or the means of
escape from or over the Demised Premises
4.9 The Tenant will reimburse to the Landlord on demand the reasonable and
proper cost of valuations of the Demised Premises for insurance purposes
which the landlord shall cause to be made from time to time but not more
frequently than once in every three years
5 TENANT'S OBLIGATIONS
THE Tenant COVENANTS with the Landlord:
5.1 Rents
To pay the rents reserved by this Lease without deduction or set off
whether legal or equitable in accordance with its terms and in the event
that any rent shall be unpaid for more than fourteen days after the due
date (whether formally demanded or not) to pay Interest
5.2.1 Repair and Decoration
At all times to keep the Demised Premises in good and substantial
repair and condition and to yield up the same at the Termination
Date in accordance with the covenants by the Tenant contained in
this Lease (damage by any of the Insured Risks excepted unless
payment of the insurance monies shall be withheld in whole or in
part by reason solely or in part of any act or default of the
Tenant or anyone under its control)
5.2.2 To keep the Demised Premises (including any part unbuilt on) and
all Conduits in a clean and tidy condition and properly cleansed and
free from obstruction and in particular to clean all the windows
(both inside and out) and all other glass in the Demised Premises as
often as occasion shall reasonably require
5.2.3 Decoration
<PAGE>
Without prejudice to the generality of the foregoing:
5.2.3.1 During the fifth year every succeeding fifth year and in
the last six months of the Term to cleanse external
surfaces and paint and otherwise treat as the case may be
all the outside of the Demised Premises usually so treated
in a workmanlike manner to the reasonable satisfaction of
the Landlord's surveyor and in the last six months in
colours to be approved by the Landlord
5.2.3.2 During the fifth year every succeeding fifth year and in
the last six months of the Term to paint with two coats of
good quality paint and otherwise treat with good quality
materials as the case may be all the inside wood and metal
work of the Demised Premises usually painted or otherwise
treated in a workmanlike manner to the reasonable
satisfaction of the Landlord's surveyor and also to clean
all other inside parts of the Demised Premises and to
paint as aforesaid or paper in a workmanlike manner all
walls and ceilings of the Demised Premises usually painted
or papered as the case may be such work in the last six
months of the Term to be executed in such colours patterns
and materials as the Landlord may reasonably require
5.2.4 To repair or replace forthwith by new articles of similar kind
and quality any fixtures fittings or plant or equipment (other
than tenant's or trade fixtures and fittings) in the Demised
Premises which shall become in need of repair or replacement
5.3 Alterations and additions
5.3.1 That no new building or new structure of any kind shall at any
time be erected upon any part of the Demised Premises
5.3.2 Not to make any internal or external alterations or additions
to any part of the Demised Premises and not to cut maim or
remove any structural parts of the Demised Premises and not to
make any change in the existing design or appearance of the
Demised Premises PROVIDED ALWAYS that the Tenant may with the
prior written consent of the Landlord (such consent not to be
unreasonably withheld) carry out (a) internal non-structural
alterations to any buildings for the time being erected on the
Demised Premises and (b) alterations (whether structural or
otherwise) involving the forming of openings to run cables
ducts and services or required for the purpose of extending
any hoist previously installed with the Landlord's consent or
required to support any additional air conditioning plant and
equipment and FURTHER PROVIDED that the Tenant
<PAGE>
at any time without requiring any consent of the Landlord may
erect install alter and remove internal demountable
partitioning but shall supply to the Landlord within a
reasonable time after any such erection alteration or removal
a plan or plans showing the details thereof
5.4 User
At all times during the Term to use the Demised Premises in accordance with
the provisions for user in the Particulars and not to use the same or any
part for any other purpose
5.5 Alienation
5.5.1 Not to the assign or charge nor (save as expressly hereinafter
provided) part with or share possession or occupation of any
part or parts (as distinct from the whole) of the Demised
Premises and not to agree to do so
5.5.2 Not to part with or share possession of the whole of the
Demised Premises or agree so to do or permit any person to
occupy the same save by way of an assignment or Underlease of
the whole of the Demised Premises
5.5.3 Not to underlet the whole or any part of the Demised Premises
at a fine or a premium and to procure that any underletting is
at a rent which in the reasonable opinion of the Tenant is not
less than the market rent of the premises underlet at the time
of such Underlease PROVIDED however that if the Landlord is
reasonably of the opinion that the rent as aforesaid is less
than the market rent of the premises underlet the Tenant shall
in the Licence granted by the Landlord for such underletting
or by such form of contemporaneous Deed as the Landlord shall
reasonably require acknowledge that such rent is to be wholly
disregarded for the purposes of any revision of the rent
payable under this Lease and shall concur in directing any
valuer appointed to determine such revision of rent to so
disregard
5.5.4 Not to underlet any part only of an individual floor of the
Demised Premises if to do so would cause more than two
separate sub-tenancies to subsist in relation to that floor
provided that it is hereby declared for the avoidance of doubt
that the Tenant may subject as hereinafter appearing underlet
any number of floors or parts of floors so long as no more
than two separate sub-tenancies shall subsist in relation to
any individual floor
5.5.5 Not to underlet any part only of the Demised Premises unless
the provisions of Sections 24 to 28 inclusive of the Landlord
and Tenant Act 1954 (as amended) are validly excluded from the
sub-tenancy and an Order of a competent Court
<PAGE>
authorising such exclusion shall have been obtained and a copy
thereof produced to the Landlord
5.5.6 Without prejudice to the foregoing provisions of this
sub-clause (each of which shall apply as a separate covenant)
and subject to compliance therewith not to assign or underlet
the whole or any part of the Demised Premises without the
previous written consent of the Landlord such consent not to
be unreasonably withheld or delayed
5.5.7 On any assignment to procure that the assignee enters into a
covenant with the Landlord to pay the rents reserved by and
perform and observe the covenants on the part of the Tenant
contained in this Lease
5.5.8 If the Landlord shall reasonably so require to obtain
acceptable guarantors for any person to whom this lease is to
be assigned who shall covenant with the Landlord in the terms
(mutatis mutandis) set out in the Fourth Schedule
5.5.9 Upon the Landlord consenting to an underletting of the whole
of the Demised Premises to procure that the Underlease shall
contain covenants by the Underlessee corresponding in all
respects (mutatis mutandis) with clauses 5.5.1 to 5.5.6 above
(inclusive) and with all references therein to the Landlord
meaning or including the Landlord under this Lease
5.5.10 Upon the Landlord consenting to an underletting of part only
of the Demised Premises to procure that the Underlease shall
contain:
5.5.10.1 An unqualified covenant on the part of the Underlessee
with the Tenant that the Underlessee will not assign
charge or underlet (or agree so to do) any part or
parts of the premises (as distinct from the whole)
thereby demised and will not (save by way of an
assignment or underletting of the whole) part with or
agree so to do or share possession of or permit any
person to occupy the whole or any part of the premises
thereby demised.
5.5.10.2 A covenant on the part of the Underlessee with the
Tenant that the Underlessee will not assign or
underlet (or agree so to do) the whole of the
premises thereby demised without the previous
consent in writing of the Landlord such consent
not to be unreasonably withheld or delayed
5.5.10.3 A covenant by the Underlessee not to sub-underlet the
underlet premises unless the provisions of Sections 24
to 28 inclusive of the Landlord & Tenant Act 1954 (as
amended) are validly excluded from the sub-tenancy and
an Order of a competent Court authorising such
<PAGE>
exclusion shall have been obtained and a copy thereof
produced to the Landlord
5.5.11 Upon the Landlord consenting to any underletting whether of
whole or part to procure that the Underlease shall contain:
5.5.11.1 Provisions for review of the rent reserved by the
Underlease corresponding (mutatis mutandis) both as to
terms and dates with the provisions set out in the
Third Schedule hereto for revision of the rent hereby
reserved
5.5.11.2 Covenants by the Underlessee (which the Tenant hereby
undertakes to enforce) to prohibit the Underlessee
from doing or suffering any act or thing upon or in
relation to the premises demised by the Underlease
which will contravene any of the Tenant's
obligations in this Lease
5.5.11.3 A condition for re-entry on breach of any covenant on
the part of the Underlessee
5.5.12 To procure in any underletting of the Demised Premises (or
any part thereof) that the rent under such underletting is
reviewed to the open market rent in accordance with the
terms of such review but not to agree the rent payable
thereunder with the undertenant without the prior written
consent of the Landlord (such consent not to be unreasonably
withheld) and to procure that if the rent under any
underlease is to be determined by an independent person not
to agree whether such person is to act as an expert or as an
arbitrator without the Landlord's prior written consent and
to procure that the Landlord's representations as to the
rent payable thereunder are made to such independent person
5.5.13 Not to vary the terms of or accept any surrender of any
underlease permitted under this clause (or agree so to do)
without the Landlord's prior written consent (such consent
not to be unreasonably withheld)
5.5.14.1 Notwithstanding anything hereinafter contained the
Tenant may share occupation of the Demised Premises
with a member of the same group of companies of which
the Tenant is a member provided that no tenancy is
created by such occupation
5.5.14.2 For the purposes of this Clause 5.5.14 the companies
shall be deemed to be in the same group if they meet
the criteria set out in Section 42(l) of the Landlord
and Tenant Act 1954
<PAGE>
5.5.15 Within one month after the transmission of any interest under
this Lease or derivative on it or the execution of any document
dealing with such interest to produce to and leave with the
Landlord the deed instrument or other document evidencing or
effecting such dealing or transmission together with a
certified copy thereof and with such reasonable registration
fee as the Landlord may require and such fees as may be payable
to any superior landlord and to procure that every document
creating a subletting of the Demised Premises or any part
thereof shall contain a similar covenant by the sub-lessee with
the Tenant and the Landlord PROVIDED THAT registration of any
such deed instrument or other document shall be evidence of
notification of such transaction to the Landlord but shall not
require the Landlord to consider the terms of such transaction
of the said deed instrument or other document and shall not be
evidence that it has done so
5.6 Entry
5.6.1 To permit the Landlord and all persons authorised by it at all
reasonable times upon Requisite Notice to enter upon the
Demised Premises:
5.6.1.1 To examine their condition and to take schedules of
repairs and the like and inventories of fixtures and
fittings plant and machinery
5.6.1.2 To execute any works of construction repair decoration
or of any other nature within the Building for which
the Landlord is responsible hereunder or on any other
adjoining or neighbouring premises and to carry out
any repairs decorations or other work which the
Landlord must or may carry out under the provisions
of this Lease upon or to the Demised Premises
5.6.1.3 For any other reasonable purpose connected with the
interest of the Landlord in the Demised Premises
including (without prejudice to the generality of the
foregoing) for the purpose of valuing or disposing of
any interest of the Landlord or any superior landlord
or doing anything which may be necessary to prevent a
forfeiture of any superior lease for the time being
affecting the Demised Premises
5.6.1.4 In the last six months of the Term to affix a sign or
signs indicating that the Demised Premises are to let
provided that such sign or signs are affixed in such a
manner so as not to interfere with the passage of
light or air or access to or egress from the Demised
Premises
5.6.2 If as a result of an inspection or otherwise the Landlord
becomes aware of any breaches of covenant by the Tenant
hereunder the Landlord may give notice in writing thereof to
the Tenant and within three months after every such notice or
sooner if required the Tenant shall remedy such breach of
covenant in accordance
<PAGE>
with such notice and the covenants contained in this Lease
to the reasonable satisfaction of the Landlord AND if the
Tenant shall fail within six weeks of such notice or
immediately in case of emergency to commence and diligently
and expeditiously to continue to comply with such notice or
if the Tenant shall at any time make default in the
performance of any of the covenants contained in this Lease
for or relating to the repair decoration or maintenance of
the Demised Premises then (without prejudice to the right of
re-entry and forfeiture hereinafter contained) the Landlord
may enter upon the Demised Premises pursuant to Clause 5.6.1
hereof and carry out or cause to be carried out all or any
of the works referred to in such notice or remedy the
default of the Tenant and all reasonable and proper costs of
all such works and all expenses properly incurred in
remedying such defaults in each case together with Interest
shall be paid by the Tenant to the Landlord on demand
5.7 Town and Country Planning Acts and Acts Generally
5.7.1 To comply with all Acts
5.7.2 At its expense to obtain from the appropriate authorities
all licences consents and permissions as may be required for
the carrying out by the Tenant of any operations or use on
any part of the Demised Premises
5.7.3 Not to make any application for planning permission without
first producing a copy of the same and obtaining the prior
written consent of the Landlord to such application which
consent shall not be unreasonably withheld or delayed
5.7.4 Unless the Landlord shall otherwise in writing direct to
carry out before the Termination Date any works stipulated
to be carried out to the Demised Premises as a condition of
any planning permission which may have been granted during
the Term and implemented by the Tenant or any other person
whether or not the date by which the planning permission
requires such works to be carried out falls within the Term
5.7.5 In any case where a planning permission granted is granted
subject to conditions and if the Landlord reasonably so
requires to provide security for the compliance with such
conditions and such planning permission shall not be
implemented until such security shall have been provided
5.7.6 If reasonably required by the Landlord but at the cost of
the Tenant to appeal against any refusal of planning
permission or the imposition of any conditions on a planning
permission in either case made pursuant to an application
therefor under this sub-clause
<PAGE>
5.7.7 Not to do anything in the Demised Premises or cause them to
be occupied in such a way as will cause any part of any
other land owned or occupied by the Landlord not to comply
with any Act
5.7.8 Within fourteen days of the receipt of notice thereof to
give full particulars to the Landlord of any permission
notice order or proposal relevant to the Demised Premises or
to the use thereof given to the Tenant or the occupier of
the Demised Premises (together with a copy of any notice
permission letter or document) under any Act and without
delay to take all necessary steps to comply therewith with
the written approval of the Landlord (such approval not to
be unreasonably withheld or delayed) and also at the request
of the Landlord to make or join with the Landlord in making
such objections and representations against or in respect of
any such notice order or proposal as aforesaid as the
Landlord shall reasonably require
5.8 Outgoings Costs and Fees
5.8.1 To pay and discharge all existing and future rates taxes
duties charges assessments impositions and outgoings
whatsoever and whether or not of a non-recurring nature
(hereinafter called "outgoings") which now are or may be
charged levied assessed or imposed upon the Demised Premises
or upon the owner or occupier thereof and to pay bear and
discharge the proportion properly attributable to the
Demised Premises of any outgoings as may be charged levied
assessed or imposed upon any premises of which the Demised
Premises form part (such proportion to be reasonably
determined by the Surveyor for the time being to the
Landlord whose decision shall be final save in the event of
manifest error)
5.8.2 To pay on demand to the Landlord any costs charges expenses
or outgoings which the Landlord has been obliged to expend
or incur in relation to any liability affecting the Demised
Premises
5.8.3 To pay to the Landlord all reasonable and proper costs
charges and expenses (including professional advisers' costs
and fees) reasonably and properly incurred by the Landlord
or any superior landlord
5.8.3.1 In or in contemplation of any proceedings under
Sections 146 or 147 of the Law of Property Act
1925 including the preparation and service of
notice thereunder (notwithstanding forfeiture is
avoided otherwise than by relief granted by the
Court)
5.8.3.2 In the preparation and service of a Schedule of
Dilapidations at any time during or after the Term
<PAGE>
5.8.3.3 In connection with any breach of covenant by or
the recovery of arrears of rent due from the
Tenant hereunder
5.8.3.4 In respect of any application for consent required
by this Lease whether or not such consent be
granted but not where such consent in unlawfully
refused
5.9 VAT
All sums payable under the terms of this Lease shall be exclusive of any
VAT and the Tenant shall pay to the Landlord all VAT for which the
Landlord is liable to account to HM Customs and Excise in relation to any
VAT Supply made or deemed to be made for VAT purposes pursuant to this
Lease
5.10 General Requirements concerning Use
5.10.1 Not to use any part of the Demised Premises for any noxious
noisy or offensive trade or business nor for any illegal or
immoral act or purpose nor for any sale by auction nor for
gaming and not to commit any nuisance or do anything which
may be or become an inconvenience or cause damage or
disturbance to the Landlord or any other person
5.10.2 Not to allow empty containers or rubbish of any description
to accumulate upon the Demised Premises nor to discharge
into any Conduit any deleterious matter or any substance
which might be or become a source of danger or injury to the
drainage system of the Demised Premises or any other
property or person
5.10.3 Not to use any part of the Demised Premises in such manner
as to subject it to any strain or interference which is not
reasonable or is in excess of that which the Demised
Premises were designed to bear and not to install machinery
on the Demised Premises which shall be unduly noisy or cause
vibration
5.10.4 Not to do anything on the Demised Premises which might
reasonably be expected to produce directly or indirectly
corrosive fumes or vapours or moisture or humidity in excess
of that which the Demised Premises were designed to bear and
are otherwise reasonable
5.10.5 Not to erect or display any mast or pole aerial satellite
dish flag signboard advertisement inscription bill placard
or sign whatsoever on the Demised Premises or the windows
thereof so as to be seen from the exterior without the
previous written consent of the Landlord which shall not be
unreasonably withheld or delayed (and if the Landlord so
requires any such to be removed and any damage caused
thereby made good by the Tenant at the Termination Date)
<PAGE>
5.10.6 To give written notice to the Landlord of any defect in the
Demised Premises which might give rise to an obligation on
the Landlord to do or refrain from doing any act or thing in
order to comply with the duty of care imposed on the
Landlord pursuant to the Defective Premises Act 1972
5.10.7 Not to stop up or paint out any windows at the Demised
Premises and not to permit any encroachment upon the Demised
Premises or the acquisition of any new right to light
passage drainage or other easement over any part of the
Demised Premises without the Landlord's consent in writing
and to give immediate written notice to the Landlord of any
threat of such encroachment or acquisition and at the
Landlord's written request to take such action as the
Landlord may reasonably require to prevent such encroachment
or acquisition
5.11 New Guarantor
Within twenty eight days of the death during the Term of any person
who at a future date shall have guaranteed to the Landlord the
Tenant's obligations contained in this Lease or of such person
becoming bankrupt or having a receiving order made against him or
being a company passing a resolution to wind up or entering into
liquidation then to give notice thereof to the Landlord and if so
required by the Landlord at the expense of the Tenant within Twenty
eight days to procure some other person reasonably acceptable to the
Landlord to execute a guarantee in respect of the Tenant's obligations
contained in this Lease in the form set out in the Fourth Schedule
hereto
5.12 Superior Interests
If this Lease shall at any time be an underlease any provision for
consent or approval of the Landlord shall be deemed to be subject to
the consent or approval of all superior landlords and the reasonable
and proper costs and expenses of obtaining such consents (whether or
not consent is forthcoming but not where the consent is unlawfully
refused) shall be repaid by the Tenant to the Landlord within fourteen
days of written demand
5.13 Construction Work
If the Tenant or any undertenant shall carry out any construction work
within the meaning of and to which the Construction (Design and
Management) Regulations 1994 (hereinafter referred to as "the CDM
Regulations") shall apply the Tenant shall:
5.13.1 prepare or procure the preparation of the Health and Safety
file ("the File") in accordance with the CDM Regulations
<PAGE>
5.13.2 grant or procure the grant of an irrevocable and non-exclusive
Licence free of any royalty or other consideration for the
Landlord its successors in title assigns and sub-licencees to
use and copy any design construction maintenance operational
and other information and documentation comprised in the File
for any purpose connected with the Demised Premises
5.13.3 ensure that the File is maintained and updated as necessary
from time to time in accordance with the CDM Regulations and
within fourteen days of request to supply to the Landlord such
copies or other evidence as the Landlord may reasonably require
to satisfy itself that the Regulations are and have been
complied with
5.13.4 upon any assignment of this Lease deliver the File to the
assignee and upon the expiration or sooner determination of the
Term to deliver the File to the Landlord
5.15 Subsisting obligations
To observe and perform all covenants agreements and conditions
contained in the Documents insofar as the same are binding upon the
Landlord or the Tenant and which relate to the Demised Premises and to
fully and effectually indemnify the Landlord from and against any
breach thereof
5.16 Indemnity
The Tenant will keep the Landlord fully indemnified against damages
losses costs expenses proceedings and liabilities arising directly or
indirectly out of the existence state of repair or user of the Demised
Premises or any breach of the Tenant's covenants herein contained or
the Tenant's failure to comply with any Act
6 THE Landlord COVENANTS with the Tenant that the Tenant paying the
rents reserved and observing and performing its covenants and
conditions contained in this Lease may peaceably and quietly hold and
enjoy the Demised Premises without any lawful interruption by the
Landlord or any person rightfully claiming through under or in trust
for it
7 PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows:
7.1 Re-entry
Notwithstanding and without prejudice to any other remedies and powers
herein contained or otherwise available to the landlord if the rents
reserved or any part thereof shall be unpaid for Twenty one days after
becoming payable whether formally demanded
<PAGE>
or not or if any covenant on the Tenant's part or condition contained in
this Lease shall not be performed or observed or if the Tenant for the
time being (being a company) shall enter into liquidation whether
compulsory or voluntary (save for the purpose (demonstrated to the
Landlords reasonable satisfaction) of reconstruction or amalgamation
whilst solvent) or pass a resolution for winding up (save as aforesaid)
or is unable to pay or has no reasonable prospect of being able to pay
its debts within the meaning of Sections 122 and 123 of the Insolvency
Act 1986 ("the 1986 Act") or summons a meeting of its creditors or any
of them under Part I of the 1986 Act or suffers a petition for an
Administration Order in respect of it to be filed in Court or suffers a
receiver or administrative receiver to be appointed or being an
individual or being more than one individual any one of them shall have
a receiving order made against him or become bankrupt or is unable to
pay or has no reasonable prospect of being able to pay his debts within
the meaning of Sections 267 and 268 of the 1986 Act or if the Tenant (or
if there shall be more than one Tenant any of them) shall enter into
composition with their or his creditors or suffer any distress or
execution to be levied on their or his goods or if an interim order is
made under Part VIII of the 1986 Act then and in any such case it shall
be lawful for the Landlord at any time thereafter to re-enter upon the
Demised Premises or any part thereof in the name of the whole and
thereupon this demise shall absolutely determine but without prejudice
to any right of action or remedy of the Landlord in respect of any
breach non-observance or non-performance of any of the tenant's
covenants or any conditions herein contained
7.2 Service of Notices
7.2.1 Any demand or notice to be served on the Tenant or any Surety
hereunder shall be validly served if sent by first class post
addressed to the Tenant or the Surety respectively (and if
there shall be more than one of them then any of them) at its
registered office or at the Demised Premises (if the Tenant is
still in occupation of the Demised Premises)
7.2.2 Any notice to be served on the Landlord shall be validly served
if sent by first class post addressed to the Landlord at its
registered office (or its last know address in the Landlord for
the time being shall have no registered office)
7.2.3 Any demand or notice sent by post shall be conclusively treated
as having been served forty eight hours after posting
7.3 No liability in damages
In the performance of any services for the Tenant at the Tenant's
request the Landlord shall not in any circumstances incur any liability
in respect of damage to person or properly or otherwise howsoever by
reason of any act neglect default or misfeasance of the Landlord its
servants employees agents or independent contractors or by reason of
<PAGE>
any accidental damage which may at any time be done to the Demised
Premises or to any of the goods persons or property of the Tenant or any
other person
7.4 Statutory Compensation
Except where any statutory provision prohibits the Tenant's right to
compensation being reduced or excluded by agreement the Tenant shall not
be entitled to claim from the Landlord on quitting the Demised Premises
or any part thereof any compensation under the Landlord and Tenant Act
1954
7.5 Exclusion of Rights not Granted
Nothing herein contained shall operate expressly or impliedly to confer
upon or grant to the Tenant any easement right or privilege other than
those expressly hereby granted and set out in the First Schedule hereto
7.6 Waiver of Right to Forfeit
That no demand for or acceptance or receipt of any part of the or rents
or other monies payable hereunder or any payment on account thereof
shall operate as a waiver by the Landlord of any right which the
Landlord may have to forfeit this Lease by reason of any breach of
covenant by the Tenant notwithstanding that the Landlord may know or be
deemed to know of such breach at the date of the demand acceptance or
receipt
I N W I T N E S S the parties hereto have executed these presents on the
date specified in Paragraph l of the Particulars
<PAGE>
SCHEDULE 1 above referred to
(Rights and Easements Granted)
In common with the Landlord and all others entitled to the like rights the
benefit of all such rights as were created by the Documents and are
appurtenant to the Demised Premises but subject to and conditional upon the
due performance and observance of all such covenants agreements and
conditions contained or referred to in the Documents and which relate to such
rights
<PAGE>
SCHEDULE 2 above referred to
(Rights and Easements Excepted)
There is excepted and reserved out of the Demised Premises to the Landlord
and all other persons authorised by the Landlord or having the like rights
and easements the right at any time on Requisite Notice to enter (or during
the Tenant's absence to break and enter) the Demised Premises for any
purposes for which the Tenant covenants hereunder to permit entry
<PAGE>
SCHEDULE 3 above referred to
(Provisions for Rent Review)
1 In this Schedule the following expressions shall have the following
meanings
1.1 "the Rent Review Dates" the date or dates specified in the Particulars
1.2 "the Relevant Review Date" shall mean that rent review date in respect
of which the rent is to be reviewed
1.3 "Open market rent" shall mean the yearly rent for which the Demised
Premises could be expected to be let with vacant possession on the
Relevant Review Date in the open market by a willing lessor to a willing
lessee without taking a fine or premium for a term equal to a term of
Ten years from the Relevant Review Date with provisions similar to those
contained herein for Rent Review at the end of the fifth year and
otherwise upon the terms and conditions (save as to the amount of rent)
as are herein contained on the assumption (if not the fact) that the
Demised Premises and the Building shall be in good and substantial
repair and ready for immediate beneficial occupation and that the Tenant
has had the benefit of any rent free or reduced rent period to fit out
the Demised Premises and that all the tenant's and the landlord's
covenants shall have been complied with but there being disregarded:
1.3.1 Any effect on rent of the fact that the Tenant or an
undertenant may have been in occupation of the Demised Premises
1.3.2 Any goodwill attached to the Demised Premises by reason of any
trade or business carried on therein by the Tenant or any
undertenant
1.3.3 Any effect of any improvement made by the Tenant for the time
being after the date hereof carried out with the written
consent of the Landlord (where necessary) under the terms
hereof otherwise than in pursuance of an obligation to the
Landlord
2 From and after each Rent Review Date the rent first reserved shall be
whichever is the higher of:
2.1 The yearly rent reserved immediately before the Relevant Review Date and
2.2 The Open market rent of the Demised Premises and such rent first
reserved after each Rent Review Date shall be hereinafter called "the
new rent"
<PAGE>
3 If the Landlord and the Tenant shall be able to agree the new rent or
when the new rent shall have been determined in accordance with the
provisions hereof as the case may be a note of the new rent shall be
endorsed in the Sixth Schedule to this Lease and the Counterpart hereof
and signed by the parties hereto
4 If three months before the Relevant Review Date the Landlord and the
Tenant shall not have agreed on the new rent payable from the Relevant
Review Date the Landlord or Tenant may at any time thereafter before the
rent shall be agreed between the Landlord and the Tenant require an
independent surveyor (hereinafter called "the Surveyor") to determine
the Open market rent
5 The Surveyor may be agreed upon by the Landlord and the Tenant and in
default of such agreement shall be appointed by the President for the
time being of the Royal Institution of Chartered Surveyors or the person
designated by such institution for such purpose on the application of
the Landlord or the Tenant or such professional body of Surveyors as the
Landlord shall designate and any reference hereafter to the said
President shall be deemed to include a reference to such officer
6.1 Notice in writing of his appointment shall be given by the Surveyor to
the Landlord and the Tenant and he shall invite each to submit within a
specified period (which shall not exceed four weeks) a valuation
accompanied if desired by a statement of reasons
6.2 The Surveyor (who shall be a Chartered Surveyor experienced in the
letting and/or valuation of premises of a similar nature to and situate
in the same region as the Demised Premises and used for purposes similar
to those authorised hereunder at the date of his appointment) shall as
an expert valuer whose decision shall be final and binding on all
persons who are or have been parties hereto
6.3 The Surveyor shall give notice in writing of his decision to the
Landlord and the Tenant within two months of his appointment or within
such extended period as may be reasonable
7 If the Surveyor shall fail to determine the Open market rent and give
notice thereof within the time and in the manner provided or if he shall
relinquish his appointment or die or if it shall become apparent that
for any reason he will be unable to complete his duties the Landlord may
apply to the said President for a substitute to be appointed in his
place which procedure may be repeated as many times as necessary
8 In the event that by the Relevant Review Date the new rent shall not
have been agreed or determined (whether or not negotiations shall have
commenced) the Tenant shall continue to pay rent at the rate of the
current rent on each day appointed by this Lease for payment of rent
until the new rent shall have been agreed or determined and thereupon
<PAGE>
the Tenant shall pay to the Landlord as arrears of rent an amount equal
to the difference between the new rent and the rent actually paid for
the period since the Relevant Review Date together with interest thereon
from the Relevant Review Date calculated at Lloyds Bank Plc base rate
(or if such rate is not calculated or published there shall be
substituted such rate as is most closely comparable therewith)
9 The fees of the Surveyor shall be shared as the Surveyor shall determine
between the parties or equally in the event that there shall be no such
determination
10 As respects all periods of time referred to in this Schedule time shall
be deemed not to be of the essence
11 If on any one of the Rent Review Dates there shall be in force any Act
which shall restrict interfere with or affect the Landlord's right to
revise the rent hereby reserved in accordance with the terms hereof then
the Landlord shall be entitled once following each removal or
modification of such Act to serve notice requiring a review of the said
rent (hereinafter called an "interim notice") upon the Tenant and from
and after the date of service of such interim notice until the next Rent
Review Date the rent shall be increased to whichever is the higher of
the Open market rent at the date of service of the interim notice and
the rent payable immediately prior thereto and the provisions of this
Schedule shall apply accordingly with the substitution of the said date
of service for the Relevant Review Date
<PAGE>
SCHEDULE 4 above referred to
(form of Covenant to be given pursuant to clause 5.11)
The Surety COVENANTS with the Landlord:
1 That if at any time during the Term the Tenant shall default in payment
of any of the rents reserved by this Lease on the due dates or in
observing or performing any of the covenants and conditions contained in
this Lease the Surety will pay the rents or observe or perform the
covenants or conditions in respect of which the Tenant shall have
defaulted and the Surety shall make good to the Landlord on demand all
losses costs damages and expenses resulting from any such default but so
that no time or indulgence granted by the Landlord to the Tenant nor any
variation to the terms of this Lease nor any other act matter or thing
by virtue of which but for this provision the Surety would have been
released shall in any way release the obligations of the Surety to the
Landlord under this Schedule
2 That if a liquidator or trustee in bankruptcy shall surrender or
disclaim this Lease or if this Lease shall become forfeited the Surety
will at the request of the Landlord within three months after such
surrender or disclaimer or forfeiture (as the case may be) take from the
Landlord a lease of the Demised Premises for a term equal to the residue
of the Term which would have remained had there been no surrender or
disclaimer or forfeiture at the same rent and subject to the same
covenants and conditions as are reserved by and contained in this Lease
such lease to take effect from the date of such surrender or disclaimer
or forfeiture (as the case may be) and in such case the Surety shall pay
the reasonable and proper legal costs of the Landlord of such new lease
and execute and deliver a counterpart of it to the Landlord
3 That if the Landlord shall not require the Surety to take a lease of the
Demised Premises pursuant to Paragraph 2 above the Surety shall
nevertheless within twenty eight days of written demand pay to the
Landlord a sum equal to the rent that would have been payable under this
Lease but for the surrender or disclaimer or forfeiture in respect of
the period from the date of such surrender or disclaimer or forfeiture
(as the case may be) until the expiration of three months from it or
until the Demised Premises shall have been relet by the Landlord
whichever shall first occur
<PAGE>
SCHEDULE 5 above referred to
(The Documents)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Date Description of Document Parties
- ------------- ------------------------ ------------------------------------------
<S> <C> <C>
6 May 1986 Transfer LDB Developments LTD(1) L C
Lamerton Ltd (2) Oxleys Department
Store Ltd (3)
- ------------- ------------------------ ------------------------------------------
31 May 1991 Deed L C Lamerton Ltd (1) BBC Enterprises
Ltd (2) Barclays Bank Plc (3) City Trust
Ltd (4)
- ------------- ------------------------ ------------------------------------------
31st May 1991 Deed International Caledonian Assets Ltd (1)
BBC Enterprises Ltd (2)
- ------------- ------------------------ ------------------------------------------
18 March 1992 Lease of Transformer BBC Enterprises Ltd (1) London
Chamber Electricity Plc (2)
- ------------- ------------------------ ------------------------------------------
13 August 1991 Party Wall Award BBC Enterprises Ltd (1) Bass Holdings
Ltd (2)
- ------------- ------------------------ ------------------------------------------
19 August 1991 Party Wall Award BBC Enterprises Ltd (1) Kusti Solomon
& Ruthven (2)
- ------------- ------------------------ ------------------------------------------
12 August 1991 Party Wall Award BBC Enterprises Ltd (1) L C Lamerton
Ltd (2)
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 6 above referred tp
Memoranda of rent reviews
The rent payable from the first rent review date specified in the Particulars
has been agreed as POUNDS (L ) per annum
Signed .............................
duly authorised signatories
of the Landlord/Tenant/Surety
The rent payable from the second rent review date specified in the
Particulars has been agreed as POUNDS (L ) per annum
Signed .............................
duly authorised signatories
of the Landlord/Tenant/Surety
Signed .............................
duly authorised signatories
of the Landlord/Tenant/Surety
<PAGE>
THE COMMON SEAL of ALLIED DUNBAR )
ASSURANCE PLC was hereunto affixed in the )
presence of )
Authorised Signatory
Authorised Signatory
<PAGE>
DATED 11th MARCH 1993
BANTRY INVESTMENTS LIMITED
-AND-
TONY STONE ASSOCIATES LIMITED
-------------------------------------------
LEASE
OF PART GROUND FLOOR, 116/134 BAYHAM STREET
CAMDEN TOWN, LONDON NW1
-------------------------------------------
Reid Minty
92 Seymour Place
London
W1H 5DB
<PAGE>
THIS LEASE is made the eleventh day of March __, 19__ BETWEEN BANTRY
INVESTMENTS LIMITED a Company register Gibraltar whose registered office is
at Library Ramp PO BOX 104 Gibraltar and whose address in the United Kingdom
is c/o Fox Associates 1 Bayham Street London NW1 OER (hereinafter called "the
Landlord") of the one part and TONY STONE ASSOCIATES LIMITED a Company
registered in England and having its registered office at 116 Bayham Street
London NW1 OBA (hereinafter called "the Tenant") of the other part
WITNESSETH as follows:
1. PARTICULARS AND INTERPRETATION IN THIS LEASE
1.1 The expression "the Landlord" shall where the context so admits include
the person for the time being entitled to the reversion immediately
expectant on the determination of the term hereby created;
1.2 The expression "the Tenant" shall where the context so admits include
its successors in title and permitted assign;
1.3 Words importing the neuter gender include the masculine and feminine
genders;
1.4 Words importing the singular number only include the plural number and
vice versa and where there are two or more persons included in the
expressions "the Tenant" "and the Guarantor" respectively covenants
expressed to be made by the Tenant and the Guarantor respectively shall
be deemed to be made by such persons jointly and severally;
1.5 The expression "Superior Landlord" shall mean any Landlord (other than
the Landlord) holding an estate or interest in reversion on the Premises
or on the said term whether immediate to the Landlord or otherwise;
1.6 Such of the division walls as divide the Premises from other premises of
the Landlord shall be deemed to be party walls or fences and to belong
in equal moieties (considered as divided vertically down the middle
throughout the whole length) to the property on either side thereof
1.7 The expression "the Previous Lease" means the Lease of premises situated
on the basement First and Second Floors of the building known as 116/134
Bayham Street, Camden Town, London NW1 dated the 23rd day of October
1990 and made between the Landlord (1) and the Tenant (2) for a term of
twenty five years from the 23rd day of October 1990
2. DEMISE AND RENTS
IN consideration of the rents and the Tenant's covenants hereinafter reserved
and contained the Landlord HEREBY DEMISES unto the Tenant ALL THOSE the
premises ("the Premises") being part Ground Floor of the building situate and
known as 116/134 Bayham Street Camden Town London NWl ("the Building") as the
same is shown edged red on the plan ("the Plan") annexed hereto and includes:
(i) all doors and windows and window and door frames and the glass
(including any plate glass) fitted therein (but excluding the
paintwork and decoration of the external surfaces of such doors
windows and window frames):
<PAGE>
(ii) on half (severed vertically) of all non-structural partitions
separating the Premises from any other part of the Building;
(iii) all other internal non-structural partitions;
(iv) the ceilings and floors;
(v) the plaster or other finish on all structural walls and ceilings
within the Premises;
(vi) all pipes and sanitary and water apparatus which are within the
Premises and serve the Premises alone
but excludes:
(i) the main structure of the Building including (but not by way of
limitation) the roof and the roof joists above the ceilings of
premises in the Building the foundations and the exterior and the
load bearing columns and walls the main beams decks or girders
supporting the floors of the Building of any premises comprised
within the Building ("the Main Structure");
(ii) any pipes and other service conduits in the Premises which serve
any other part of the Building.
TOGETHER with the easements and rights set out in Part 1 of the First
Schedule hereto but except and reserving from the demise in favour of the
Landlord and the tenants and occupiers of other portions of the Building of
which the Premises form part and other persons entitled thereto the easements
and rights set out in Parl 2 of the First Schedule hereof
TO HOLD unto the Tenant for a term of twenty five years from (and including)
the 23rd day of October 1990 and expiring on the 22nd day of October 2015
("the Term") subject to the restrictive covenants conditions stipulations
exceptions reservations easements and other matters referred to or contained
in the Entries on the Register at H M Land Registry of the Landlord's Title
Number NGL468360 YIELDING AND PAYING therefor unto the Landlord yearly during
the Term and so in proportion for any less time than a year the respective
rents following (that is to say):
FIRST from the commencement date of the Term until the 2nd day of September
1993 the rent of a peppercorn (if demanded)
And thereafter from (and including) the third day of September 1993 until the
22nd day of April 1994 the exclusive yearly rent of FORTY ONE THOUSAND SEVEN
HUNDRED AND SIXTY POUNDS (L41,760.00)
And thereafter from (and including) the 23rd day of April 1994 until the 22nd
day of April 1995 the exclusive yearly rent of FORTY SIX THOUSAND AND EIGHTY
POUNDS (L46,080.00) and thereafter from (and including) the 23rd day of April
1995 until the 22nd day of October 1995 the exclusive yearly rent of FIFTY
THOUSAND FOR HUNDRED POUNDS (L50,400.00)
And thereafter for the next five years of the Term ("the second period")
either the yearly rent reserved above or the market rent (as hereinafter
defined) of the Premises at the commencement of the said period whichever is
the higher
<PAGE>
And thereafter for the next five years of the Term ("the third period")
either the yearly rent reserved above and payable immediately prior to the
commencement of the third period or the market rent (as hereinafter defined)
of the Premises at the commencement of the said period whichever is the higher
And thereafter for the next five years of the Term ("the fourth period")
either the yearly rent reserved above and payable immediately prior to the
commencement of the fourth period or the market rent (as hereinafter defined)
of the premises at the commencement of the said period whichever is the higher
And thereafter for the last five years for the Term ("the last period")
either the yearly rent reserved above and payable immediately prior to the
commencement of the last period or the market rent (as hereinafter defined)
of the premises at the commencement of the said period whichever is the
higher
the said rents in all cases to be paid without any deduction (except
for tax authorised by statutory to be deducted) by equal quarterly payments
in advance on the usual quarter days in every year ("the Rent Payment Days")
and the Tenant shall give to the Bankers for the time being of the Landlord
(as nominated from time to time in writing by the Landlord to the Tenant) a
standing order directing such quarterly payments to be made on the due dates
at the Bankers of the Landlords the first of such rent payments to be a
proportionate part for the period from the date ("the first Rent Payment
Date") hereof to the date one day before the next Rent Payment Date and shall
be made on the execution hereof
SECONDLY by way of further or additional rent an amount equal to a fair
proportion (to be determined failing agreement by the Landlord's Surveyor
whose determination shall be final and binding on the parties hereto save in
case of manifest error) of the yearly sum or sums properly expended by or
demanded of the Landlord in insuring the Building, and the Landlord's
fixtures and fittings therein against loss or damage by fire explosion
lightning impact vehicles aircraft (not being hostile aircraft) and articles
dropped therefrom flood storm or tempest bursting and overflowing of water
tanks apparatus or pipes riot civil commotion malicious damage theft
following forcible and violent entry into or exit from the Premises
subsidence and accidental damage and against such other risks as the Landlord
shall reasonably think necessary ("the Insured Risks") in a sum equal to the
full cost of reinstatement (including Architects' and Surveyors' fees
demolition and site clearance charges and three years' loss of rent such
amount to be paid by the Tenant within 14 days of demand
THIRDLY by way of further or additional rent due in each year of the Term a
Service Charge equal to such proportion of the total cost ("the total cost")
incurred or estimated by the Landlord in respect of the Services and Expenses
specified in the Third Schedule to the Previous Lease and the costs of the
Landlord carrying out its obligations set out herein as the Area of the
premises bears to the aggregate Area of all other parts of the Building let
or intended to be let by the Landlord (the expression "Area" means the Net
Internal Area measured in accordance with the Code of Measuring Practice
issued by the Royal Institution of Chartered Surveyors and the Incorporated
Society of Valuers and Auctioneers as amended from time to time) such Service
Charge to be calculated and payable in accordance with the following
provisions
(1) The Service Charge shall be payable in advance on the usual quarter days
<PAGE>
(2) For the period from the date hereof to the 31st day of December 1993 the
Tenant shall pay an estimated Service Charge at the rate of
L6,600 per annum the first payment (being a proportionate payment) in
respect of the period up to the quarter day next following the date
hereof to be made on or before the execution hereof
(3) The total cost to the Landlord during each financial year of the
Landlord shall be certified by a Chartered Accountant appointed by the
Landlord and shall contain a fair summary of the items referred to in it
and shall include the fees of the Chartered Accountant for such
certification and an amount for general management expenses up to 10 per
cent of the said total cost if the Landlord shall manage the Building
and up to 12.5% maximum thereof plus VAT if the Landlord shall appoint
managing agents and the said certificate shall (save in case of manifest
error be conclusive evidence of all matters of fact referred to in it
but the Tenant shall be entitled to inspect the audited account on
request and be provided with copies of the same
(4) For the purpose of assessing payment on account of the Service Charge
for each financial year of the Landlord subsequent to the 31st day of
December 1993 the Service Charge for such year shall be provisionally
based on actual cost of providing the services calculated and certified
as aforesaid for the previous financial year of the Landlord and until
the actual costs of providing service for such year shall have been
certified by the Landlord the Tenant shall continue to make equal
quarterly payments in advance on the usual quarter days in every year at
the rate based on the last cost certified by the Landlord (or on the
aforementioned estimated Service Charge if no certificate shall have been
issued by the Landlord)
(5) Any under-payment or over-payment in respect of the Service Charge for a
particular financial year or lesser period shall be adjusted on the
quarter day next following the certification in manner aforesaid of the
actual costs to the Landlord of carrying out the said works and
providing the said services and facilities during that year or period
(6) The Landlord will not charge the Tenant and the Service Charge shall not
include any part of the total cost as shall be attributable from time to
time from other parts of the Building as shall be designed and available
for letting whether let or unlet or which are occupied by the Landlord
during the whole or proportionately for any part of the relevant Service
Charge year
(7) The Tenant shall also pay by way of Service Charge if requested by the
Landlord a reasonable provision (to be determined by the Surveyor acting
as an expert and not as an arbitrator) towards the Landlord's
anticipated expenditure during the Term in respect of:
(a) periodically recurring items whether recurring at regular or
irregular intervals and
(b) such of the Landlord's obligations as relate to the renewal of
replacement of the items referred to
PROVIDED that:
(i) such reasonable provision in respect of items in sub-paragraph
(7)(b) aforesaid shall be determined on the assumption that
the cost of replacement of such items is calculated on such
life expectancy as the Surveyor may reasonably determine
(acting as an expert and not as an
<PAGE>
arbitrator) and that each year the Tenant will be required to
pay a rateable proportion towards the anticipated cost of
renewal or replacement to the intent that a fund or funds be
accumulated sufficient to cover the cost of renewal or
replacement by the end of the anticipated life of each such
item except that the Tenant shall not be require to make any
provision towards expenditure by the Landlord that it is
anticipated will be incurred by the Landlord after the expiry
of the Term
(ii) nothing in the provisions herein contained shall oblige the
Landlord to establish and/or maintain any such fund sufficient
in whole or in part to cover such cost of replacement or
renewal of any such item
(iii) any expenditure by the Landlord in respect of a recurring
item referred to in this Schedule or in respect of its
obligations in connection with the renewal or replacement of
an item referred to where either:
(a) a fund has been established in connection
with such recurring item or the renewal or
replacement of that item ("the Specific
Fund") or
(b) a part of a fund ("the General Fund") has
been allocated by the Landlord for such
recurring item or the renewal of replacement
of that item
shall first be met out of the Specific Fund or as appropriate out
of the General Fund to the extent of the credit allocated for that
item by the Landlord in the General Fund
(iv) the certificate referred to in paragraph (3) aforesaid shall
indicate whether or not the Landlord has established and is
maintaining any fund or funds pursuant to this paragraph and shall
provide full details of any such fund or funds
(v) All sums received by the Landlord pursuant to sub-paragraph (7)
aforesaid shall be credited to an account separate from the
Landlord's own money and shall be held by the Landlord upon trust
during the period of 80 years from the date of this Lease (which
shall be the perpetuity period applicable to the provisions) for
the persons whom from time to time shall be the tenants of the
Building to apply the same and any interest accruing for the
purposes set out in this paragraph and at the expiry of such
period any such sums unexpended shall be paid to the persons who
shall then be the tenants of the Building in shares equal to the
percentage which the Service Charge payable by each tenant
respectively bears to the total of all the Service Charge paid by
the tenants of the Building
AND FOURTHLY by way of further or additional rent all sums of money which
become payable to the Landlord or its Agents by virtue of any provision of
this Lease
3. VAT
All sums payable under or in connection with this Lease in respect of rent or
any other monies payable or taxable supplies received by the Tenant shall be
deemed to be exclusive of Value Added Tax (or any similar tax which shall
replace Value Added Tax) which may be chargeable thereon (but without any
obligation upon the Landlord to exercise any election to waive exemption in
respect of such tax) and upon the production by the Landlord or its agent to
the Tenant of an invoice appropriate to that tax the Tenant shall pay and
indemnify the Landlord in
<PAGE>
respect of such tax in addition to those sums and the Landlord shall have the
same remedies for non-payment of the tax as if the tax were part of the rent
or other such moneys or supply
4. MARKET RENT
The market rent ("the Market Rent") of the Premises shall be the amount which
shall be agreed between the Landlord and the Tenant to be the open market
rent for the time being reasonably obtainable as between a willing landlord
and a willing tenant in respect of the Premises let as a whole with vacant
possession for a term equal to the residue of the term hereby granted or
fifteen years whichever shall be the longer (in both cases commencing on the
commencement of the relevant period) without payment of any fine or premium
and in all other respects on the terms and conditions of this Lease
(including the provision for the review of rent but excluding the amount of
rent payable)
ASSUMPTIONS
4.1 Upon the suppositions (if not facts)
4.1.1 That all parts of the Premises are then ready fit and
available for immediate use and occupation and could and would
be immediately occupied whether by any willing tenant or
under-tenant;
4.1.2 That the Landlord and the Tenant have complied with all the
obligations on the part of the Landlord and the Tenant
respectively imposed by these presents (but without prejudice
to any rights of either party in regard thereto); and
4.1.3 That if the Premises or any part thereof or the means of
access thereto or any services enjoyed therewith shall have
been destroyed or damaged the same had before the relevant
period been fully reinstated; and
4.1.4 That the whole of the Premises are then and will (throughout
the term required to be calculated for the purposes of such
lease) remain in good and substantial repair and condition fit
for immediate occupation and use; and
4.1.5 That the Premises have been fully fitted out and equipped so
as to be ready for immediate occupation and use by such
willing tenant for the Assumed Use; and
4.1.6 That the Premises have and will have throughout the term
required to be calculated for the purposes of such lease the
benefit of all necessary or appropriate rights easements
quasi-rights quasi-easements permissions approvals services
facilities or amenities (whether the same be required from the
Landlord or from any other person or authority) so as to
enable the willing tenant properly and beneficially to occupy
use and enjoy the Premises for the Assumed Use;
4.1.7 That the willing Lessee and its potential assignees or
underlessees of the Demised Premises suffer no disadvantage at
the relevant review date or at any time during the term
arising from an actual or potential election by the Landlord
to waive exemption in respect of Value Added Tax (or any
similar tax which shall replace Value Added Tax) so far as
concerns rent payable or of any taxable supply received by the
Tenant under or in connection with this Lease
4.1.8 That the Landlord is able to and does make full recovery of
Value Added Tax paid or payable on payments made by it in
connection with this Lease and which the Tenant is obliged to
reimburse the Landlord (whether by way of service charge or
otherwise) under the terms of this Lease
4.1.9 That for the purpose of this clause 4 the Assumed Use shall
mean as offices only
<PAGE>
DISREGARDS:
4.2 Taking no account of
4.2.1 Any goodwill attributable to the Premises by reason of any
trade or business carried on therein by the Tenant or any
permitted Under tenant; and
4.2.2 Any effect on rent of the fact that the Tenant or any
permitted Under tenant has carried out any works to the
premises (to which the Landlord shall have given written
consent) excluding works carried out pursuant to an obligation
to the Landlord; and
4.2.3 Any effect on rent of the fact that the Tenant or any
permitted Under tenant may have been in occupation of the
Premises; and
4.2.4 Any effect on rent of the absence of any rent free period or
contribution towards fitting out costs or other inducement
which it might then be the practice in the open market to make
or allow to tenants on a new letting with vacant possession
4.2.5 Any diminution of rental value which is attributable to work
carried out by or anything done or omitted by the Tenant or
any such predecessor in title or other person as aforesaid;
4.2.6 Any effect on rental value of anything by reason whereof the
Premises fail to comply with the lawful requirements of any
competent authority in respect of health or safety
4.2.7 All restrictions whatsoever relating to rent or to security of
tenure contained in any Act of Parliament and any directions
thereby given relating to any method of determining rent as
may be permitted by law
4.2.8 Any adverse effect upon rent of any temporary works operations
or other activities on any adjoining or neighbouring property;
5. REFERRAL TO EXPERT
5.1 If in any circumstances whatsoever the Market Rent shall not have been
agreed between the Landlord and the Tenant by the date three months
before the commencement ("the Review Date") of any period ("the Review
Period") of the Term for which a rent review is stipulated then the
question may at any time thereafter at the joint expense of the parties
be referred by either party to the decision of a Surveyor ("the
Surveyor") practising in or having knowledge of rental values in the
area in which the Premises are situate
5.2 The Surveyor shall be mutually agreed by the Landlord and the Tenant or
in default of agreement to be nominated by the President for the time
being of The Royal Institution of Chartered Surveyors
5.3 The Surveyor whether agreed or nominated as aforesaid shall act as an
expert and not as an Arbitrator
5.4 The Surveyor's decision shall be binding on both the Landlord and the
Tenant but he shall be required to:
5.4.1 Afford the Landlord and the Tenant an opportunity to make
written representations to him
5.4.2 Afford the Landlord and the Tenant an opportunity to comment
on any such written representations received by his
5.4.3 Give written reasons for his decision
<PAGE>
6. MEMORANDUM
At the joint expense of the parties a deed of variation recording the Market
Rent in the form set out in the First Schedule to the Previous Lease shall be
prepared and completed in duplicate forthwith after the same has been agreed or
determined
7. LATE REVIEW
7.1 In the event of the Market Rent not having been agreed or determined prior
to any Review Date for any reason whatever then the Tenant shall continue
to pay to the Landlord in the manner hereinbefore provided rent ("the
Previous Yearly Rent") at the yearly rate payable immediately before such
Review Date
7.2 On the Rent Payment Date immediately following the date on which such
agreement or determination shall have been made the Tenant shall pay to the
Landlord
7.2.1 the amount whereby the yearly rent agreed or determined as
aforesaid shall exceed the Previous Yearly Rent but duly
apportioned on a daily basis
7.2.2 interest on such amount at the rate of Barclays Bank plc base
rate from time to time upon each and every quarterly instalment
of additional yearly rent which would have fallen due on or after
such Review Date if the amount of the additional yearly rent had
been ascertained before such Review Date (the amount of such
interest being calculated on a day to day basis in respect of
each such quarterly instalment of additional yearly rent as
aforesaid for the period from the date upon which the relevant
instalment would have become payable if ascertained before such
Review Date up to and including the date of payment)
7.3 In the event that such rate shall cease to exist such other comparable rate
of interest shall apply as the Landlord and the Tenant may from time to
time agree or in default of agreement shall be determined by an Arbitrator
appointed on the application of either party by the President for the time
being of the Institute of Chartered Accountants in England and Wales in
accordance with the Arbitration Acts 1950 to 1979.
8. SAME TERMS
This Lease is made upon the same terms and subject to the same covenants
provisos and conditions as are contained in the Previous Lease except as to the
premises demised the term of years granted and the rents reserved and except as
to such modifications as are set out in the Second Schedule hereto so that this
Lease shall be construed and take effect as if such terms covenants provisos and
conditions were (except as aforesaid) repeated in this Lease in full with such
modifications only as are necessary to make them applicable to this demise
9. TENANT'S COVENANTS
The Tenant covenants with the Landlord to observe and perform all the
covenants and conditions on its part contained in the Previous Lease (as
modified as above)
10. LANDLORD'S COVENANTS
The Landlord covenants with the Tenant to observe and perform all the
covenants and conditions on its part contained in the Previous Lease
IN WITNESS whereof the parties hereto have duly executed this Lease as a Deed
the day and year first before written
THE FIRST SCHEDULE above referred to
<PAGE>
PART 1
EASEMENTS AND RIGHTS GRANTED
1 the right of free passage and running of water soil gas electricity and
other services to and from the Premises through any sewers drains pipes
wires and channels now or during the period of the term as hereinafter
defined running under or through any adjoining or neighbouring premises
now or during such period belonging to the Landlord (but not including any
right or easement unless the same be expressly herein referred to)
2 The full right and liberty for the Tenant and all persons authorised by it
(in common with all other persons entitled to the like right) at all times
by day or night to go pass and re-pass through and along or use part of the
forecourt and the entrance hall of the Building leading to the Premises and
the lavatories and cloakrooms for males and females respectively situated
in the common parts of the Building and such other lavatories and
cloakrooms as shall hereafter from time to time be allocated at its
discretion by the Landlord for use by the Tenant and staff employed at the
Premises
3 The right of support and protection now enjoyed by the Premises from the
Main Structure and adjacent premises in the Building capable of providing
such support and protection
4 With the Landlord's prior consent (which shall not be unreasonably
withheld) the full right and liberty for the Tenant and his authorised
servants agents and workmen at all reasonable times on reasonable notice
(except in emergency) to enter into and upon the remainder of the Building
as shall be necessary for the purpose of repairing maintaining or altering
cleaning renewing or examining the Premises and any part thereof the
subject matter of any easements or any other rights set out in this Clause
2 and to make or permit any connections and disconnections which may be
necessary in relation thereon or for the purpose of carrying out any work
which may be necessary for the protection of the Premises PROVIDED that in
the exercise of such right the Tenant or such persons exercising such
rights shall cause as little inconvenience and interference as is
practicable and shall forthwith make good any damage caused thereby.
5 The right to park two motor vehicles in the forecourt of the Building in
spaces designated from time to time by the Landlord in the area shown
hatched black on the plan annexed hereto
PART 2
EXCEPTIONS AND RESERVATlONS
PASSAGE OF WATER ETC
1 The free passage and running of water soil gas electricity and all other
service for any adjoining or neighbouring premises within the Building
through any sewers drains pipes wires and channels now or which at any
time within such period as aforesaid shall run under or through the
Premises and to make connections with such sewers drains pipes wires and
channels for the purpose of exercising the said fee passage of water
soil gas electricity and all other services as aforesaid
LIGHT AND AIR
2 All rights of light air and other easements and rights (but without
prejudice to those expressly hereinbefore granted to the Tenant) now or
hereafter belonging to be enjoyed by any adjacent or neighbouring land
or building over or against the Premises
SUPPORT AND SHELTER
<PAGE>
3 The right to support and shelter and all other easements and rights now
or hereafter belonging to or enjoyed by the Building other than the
Premises and all adjacent or neighbouring land or buildings an interest
wherein in possession or reversion is at any time during the term hereby
granted vested in the Landlord
THE SECOND SCHEDULE AFORESAID
MODIFICATIONS OF TENANT'S COVENANTS
In Clause 28.1 the following words shall not apply and shall be excluded from
this Lease this is to say:
"save that the Tenant may with previous written consent in writing of the
Landlord such consent not to be unreasonably withheld or delayed underlet
the whole or any part of each of the first second and basement floors
provided that no more than four underlettings are created"
The Common Seal of BANTRY
INVESTMENTS LIMITED was
affixed in the presence of
...........................................
........................................... Secretary
<PAGE>
DATED 11 March 1993
BANTRY INVESTMENTS LIMITED
-and-
TONY STONE ASSOCIATES LIMITED
--------------------
COUNTERPART
LEASE
of Part Ground Floor, 116/134 Bayham Street
Camden Town, London NW1
--------------------
Reid Minty
92 Seymour Place
London
WIH 5DB
<PAGE>
T H I S L E A S E is made the eleventh day of March 1993 B E T W E E N
BANTRY INVESTMENTS LIMITED a Company registered in Gibraltar whose registered
office is at Librairy Ramp PO BOX 104 Gibraltar and whose address in the
United Kingdom is c/o Fox Associates 1 Bayham Street London NW1 OER
(hereinafter called "the Landlord") of the one part and TONY STONE ASSOCIATES
LIMITED a Company registered in England and having its registered office at
116 Bayham Street London NW1 OBA (hereinafter called the Tenant") of the
other part
W I T N E S S E T H as follows:
1. PARTICULARS AND INTERPRETATION IN THIS LEASE
1.1 The expression "the Landlord" shall where the context so admits include
the person for the time being entitled to the reversion immediately
expectant on the determination of the term hereby created;
1.2 The expression "the Tenant" shall where the context so admits include
its successors in title and permitted assign;
1.3 Words importing the neuter gender include the masculine and feminine
genders;
1.4 Words importing the singular number only include the plural number and
vice versa and where there are two or more persons included in the
expressions "the Tenant" "and the Guarantor" respectively covenants
expressed to be made by the Tenant and the Guarantor respectively
shall be deemed to be made by such persons jointly and severally;
1.5 The expression "Superior Landlord" shall mean any Landlord (other than
the Landlord) holding an estate or interest in reversion on the Premises
or on the said term whether immediate to the Landlord or otherwise;
1.6 Such of the division walls as divide the Premises from other premises of
the Landlord shall he deemed to be party walls or fences and to belong
in equal moieties (considered as divided vertically down the middle
throughout the whole length) to the property on either side thereof
1.7 The expression "the Previous Lease" means the Lease of premises situated
on the basement First and Second Floors of the building known as 116/134
Bayham Street Camden Town London NW1 dated the 23rd day of October 1990
and made between the Landlord (1) and the Tenant (2) for a term of
twenty five years from the 23rd day of October 1990
2. DEMISE AND RENTS
IN consideration of the rents and the Tenant's covenants hereinafter reserved
and contained the Landlord HEREBY DEMISES unto the Tenant ALL THOSE the premises
("the Premises") being part Ground Floor of the building situate and known as
116/134 Bayham Street Camden Town London NW1 ("the Building") as the same is
shown edged red on the plan ("the Plan") annexed hereto and includes:
(i) all doors and windows and window and door frames and the glass
(including any plate glass) fitted therein (but excluding the paintwork
and decoration of the external surfaces of such doors windows and window
frames):
<PAGE>
(ii) on half (several vertically) of all non-structural partitions
separating the Premises from any other part of the Building;
(iii) all other internal non-structural partitions;
(iv) The ceilings and floors;
(v) the plaster or other finish on all structural walls and ceilings within
the Premises;
(vi) all pipes and sanitary and water apparatus which are within the
Premises and serve the Premises alone
but excludes:
(i) the main structure of the Building including (but not by way of
limitation) the roof and the roof joists above the ceilings of premises
in the Building the foundations and the exterior and the load bearing
columns and walls the main beams decks or girders supporting the floors
of the Building of any premises comprised within the Building ("the
Main Structure");
(ii) any pipes and other service conduits in the Premises which serve any
other part of the Building.
TOGETHER with the easements and rights set out in Part 1 of the First
Schedule hereto but except and reserving from the demise in favour of the
Landlord and the tenants and occupiers of other portions of the Building of
which the Premises form part and other persons entitled thereto the easements
and rights set out in Part 2 of the First Schedule hereof TO HOLD unto the
Tenant for a term of twenty five years from (and including) the 23rd day of
October 1990 and expiring on the 22nd day of October 2015 ("the Term")
subject to the restrictive covenants conditions stipulations exceptions
reservations easements and other matters referred to or contained in the
Entries on the Register at H M Land Registry of the Landlord's Title Number
NGL468360 YIELDING AND PAYING therefor unto the Landlord yearly during the
Term and so in proportion for any less time than a year the respective rents
following (that is to say):
FIRST from the commencement date of the Term until the 2nd day of September
1993 the rent of a peppercorn (if demanded)
And thereafter from (and including) the third day of September 1993 until the
22nd day of April 1994 the exclusive yearly rent of FORTY ONE THOUSAND SEVEN
HUNDRED AND SIXTY POUNDS (L41,760.00)
And thereafter from (and including) the 23rd day of April 1994 until 22nd day
April 1995 the exclusive yearly rent of FORTY SIX THOUSAND AND EIGHTY POUNDS
(L46,080.00) and thereafter from (and including) the 23rd day of April 1995
until the 22nd day of October 1995 the exclusive yearly rent of FIFTY
THOUSAND FOUR HUNDRED POUNDS (L50,400.00)
<PAGE>
And thereafter for the next five years of the Term ("the second period")
either the yearly rent reserved above or the market rent (as hereinafter
defined) of the Premises at the commencement of the said period whichever is
the higher.
And thereafter for the next five years of the Term ("the third period")
either the yearly rent reserved above and payable immediately prior to the
commencement of the third period or the market rent (as hereinafter defined)
of the Premises at the commencement of the said period whichever is the higher
And thereafter for the next five years of the Term ("the fourth period")
either the yearly rent reserved above and payable immediately prior to the
commencement of the fourth period or the market rent (as hereinafter defined)
of the Premises at the commencement of the said period whichever is the higher
And thereafter for the last five years for the Term ("the last period")
either the yearly rent reserved above and payable immediately prior to the
commencement of the last period or the market rent (as hereinafter defined)
of the premises at the commencement of the said period whichever is the higher
the said rents in all cases to be paid without any deduction (except for tax
authorised by statutory to be deducted) by equal quarterly payments in
advance on the usual quarter days in every year ("the Rent Payment Days") and
the Tenant shall give to the Bankers for the time being of the Landlord (as
nominated from time to time in writing by the Landlord to the Tenant) a
standing order directing such quarterly payments to be made on the due dates
at the Bankers of the Landlords the first of such rent payments to be a
proportionate part for the period from the date ("the first Rent Payment
Date") hereof to the date one day before the next Rent Payment date and shall
be made on the execution hereof
SECONDLY by way of further or additional rent an amount equal to a fair
proportion (to be determined failing agreement by the Landlord's Surveyor
whose determination shall be final and binding on the parties hereto save in
case of manifest error) of the yearly sum or sums properly expended by or
demanded of the Landlord in insuring the Building and the Landlord's fixtures
and fittings therein against loss or damage by fire explosion lightning
impact vehicles aircraft (not being hostile aircraft) and articles dropped
therefrom flood storm or tempest bursting and overflowing of water tanks
apparatus or pipes riot civil commotion malicious damage theft following
forcible and violent entry into or exit from the Premises subsidence and
accidental damage and against such other risks as the Landlord shall
reasonably think necessary ("the Insured Risks") in a sum equal to the full
cost of reinstatement (including Architects' and Surveyors' fees demolition
and site clearance charges and three years' loss of rent such amount to be
paid by the Tenant within 14 days of demand
<PAGE>
THIRDLY by way of further or additional rent due in each year of the Term a
Service Charge equal to such proportion of the total cost ("the total cost")
incurred or estimated by the Landlord in respect of the Services and Expenses
specified in the Third Schedule to the Previous Lease and the costs of the
Landlord carrying out its obligation set out herein as the Area of the
premises bears to the aggregate Area of all other parts of the Building let
or intended to be let by the Landlord (the expression "Area" means the Net
Internal Area" measured in accordance with the Code of Measuring Practice
issued by the Royal Institution of Chartered Surveyors and the Incorporated
Society of Valuers and Auctioneers as amended from time to time) such Service
Charge to be calculated and payable in accordance with the following
provisions
(1) The Service Charge shall be payable in advance on the usual quarter days
(2) For the period from the date hereof to the 31st day of December 1993 the
Tenant shall pay an estimated Service Charge at the rate of L6,600 per annum
the first payment (being a proportionate payment) in respect of the period up
to the quarter day next following the date hereof to be made on or before the
execution hereof
(3) The total cost to the landlord during each financial year of the Landlord
shall be certified by a Chartered Accountant appointed by the Landlord and
shall contain a fair summary of the items referred to in it and shall
include the fees of the Chartered Accountant for such certification and an
amount for general management expenses up to 10 per cent of the said total
cost if the Landlord shall manage the Building and up to 12.5% maximum
thereof plus VAT if the Landlord shall appoint managing agents and the said
certificate shall (save in case of manifest error be conclusive evidence of
all matters of fact referred to in it but the Tenant shall be entitled to
inspect the audited account on request and be provided with copies of the
same
(4) For the purpose of assessing payment on account of the Service Charge for
each financial year of the Landlord subsequent to the 31st day of December
1993 the Service Charge for such year shall be provisionally based on
actual cost of providing the services calculated and certified as aforesaid
for the pervious financial year of the Landlord and until the actual costs
of providing service for such year shall have been certified by the
Landlord the Tenant shall continue to make equal quarterly payments in
advance on the usual quarter days in every year at the rate based on the
last cost certified by the Landlord (or on the aforementioned estimated
Service Charge if no certificate shall have been issued by the Landlord)
(5) Any under-payment or over-payment in respect of the Service Charge for a
particular financial year or lesser period shall be adjusted on the quarter
day next following the certification in manner aforesaid of the actual
costs to the Landlord of carrying out the said works and providing the said
services and facilities during that year or period
<PAGE>
(6) The Landlord will not charge the Tenant and the Service Charge shall not
include an part of the total cost as shall be attributable from time to
time from other parts of the Building as shall be designed and available
for letting whether let or unlet or which are occupied by the Landlord
during the whole or proportionately for any part of the relevant Service
Charge year
(7) The Tenant shall also pay by way of Service Charge if requested by the
Landlord reasonable provision (to be determined by the Surveyor acting as
an expert and not as an arbitrator) towards the Landlord's anticipated
expenditure during the Term in respect of:
(a) periodically recurring items whether recurring at regular or irregular
intervals and
(b) such of the Landlord's obligations as relate to the renewal of
replacement of the items referred to
PROVIDED that:
(i) such reasonable provision in respect of items in sub-paragraph
(7)(b) aforesaid shall be determined on the assumption that the
cost of replacement of such items is calculated on such life
expectancy as the Surveyor may reasonable determine (acting as
an expert and not as an arbitrator) and that each year the
Tenant will be required to pay a rateable proportion towards the
anticipated cost of renewal or replacement by the end of the
anticipated life of each such item except that the Tenant shall
not be require to make any provision towards expenditure by the
Landlord that it is anticipated will be incurred by the Landlord
after the expiry of the Term
(ii) nothing in the provisions herein contained shall oblige the
Landlord to establish and/or maintain any such fund
sufficient in whole or in part to cover such cost of
replacement or renewal of any such item
(iii) any expenditure by the Landlord in respect of a recurring
item referred to in this Schedule or in respect of its
obligations in connection with the renewal or replacement of
any such item referred to where either:
(a) a fund has been established in connection with such
recurring item or the renewal or replacement of that item
("the Specific Fund") or
(b) a part of a fund ("the General Fund") has been allocated by
the Landlord for such recurring item or the renewal of
replacement of that item
shall first be met out of the Specific Fund or as appropriate out
of the General Fund to the extent of the credit allocated for that
item by the Landlord in the General Fund
<PAGE>
(iv) the certificate referred to in paragraph (3) aforesaid shall
indicate whether or not the Landlord has established and is
maintaining any fund or funds pursuant to this paragraph and
shall provide full details of any such fund or funds
(v) All sums received by the Landlord pursuant to sub-paragraph (7)
aforesaid shall be credited to an account separate from the
Landlord's own money and shall be held by the Landlord upon trust
during the period of 80 years from the date of this Lease (which
shall be the perpetuity period applicable to the provisions) for
the persons whom from time to time shall be the tenants of the
Building to apply the same and any interest accruing for the
purposes set out in this paragraph and at the expiry of such
period any such sums unexpended shall be paid to the persons who
shall then be the Tenant of the Building in shares equal to the
percentage which the Service Charge payable by each tenant
respectively bears to the total of all the Service Charge paid
by the tenants of the Building
AND FOURTHLY by way of further or additional rent all sums of money which become
payable to the Landlord or its Agents by virtue of any provision of this Lease
3. VAT
All sums payable under or in connection with this Lease in respect of rent or
any other monies payable or taxable supplies received by the Tenant shall be
deemed to be exclusive of Value Added Tax (or any similar tax which shall
replace Value Added Tax) which may be chargeable thereon (but without any
obligation upon the Landlord to exercise any election to waive exemption in
respect of such tax) and upon the production by the Landlord or its agent to
the Tenant of an invoice appropriate to that tax the Tenant shall pay and
indemnify the Landlord in respect of such tax in addition to those sums and
the Landlord shall have the same remedies for non-payment of the tax as if
the tax were part of the rent or other such moneys or supply
4. MARKET RENT
The market rent ("the Market Rent") of the Premises shall be the amount which
shall be agreed between the Landlord and the Tenant to be the open Market
rent for the time being reasonably obtainable as between a willing landlord
and a willing tenant in respect of the Premises let as a whole with vacant
possession for a term equal to the residue of the term hereby granted or
fifteen years whichever shall be the longer (in both cases commencing on the
commencement of the relevant period) without payment of any fine or premium
and in all other respects on the terms and conditions of this Lease
(including the provision for the review of rent but excluding the amount of
rent payable)
ASSUMPTIONS
4.1 Upon the suppositions (if not facts)
<PAGE>
4.1.1 That all parts of the Premises are then ready fit and
available for immediate use and occupation and could and would
be immediately occupied whether by any willing tenant or
under-tenant;
4.1.2 That the Landlord and the Tenant have complied with all the
obligations on the part of the Landlord and the Tenant
respectively imposed by these presents (but without prejudice
to any rights of either party in regard thereto); and
4.1.3 That if the Premises or any part thereof or the means of
access thereto or any services enjoyed therewith shall have
been destroyed or damaged the same had before the relevant
period been fully reinstated; and
4.1.4 That the whole of the Premises are then and will (throughout
the term required to be calculated for the purposes of such
lease) remain in good and substantial repair and condition
fit for immediate occupation and use; and
4.1.5 That the Premises have been fully fitted out and equipped so
as to be ready for immediate occupation and use by such
willing tenant for the Assumed Use; and
4.1.6 That the Premises have and will have throughout the term
required to be calculated for the purposes of such lease the
benefit of all necessary or appropriate rights easements
quasi-rights quasi-easements permissions approvals services
facilities or amenities (whether the same he required
from the Landlord or from any other person or authority) so as
to enable the willing tenant properly and beneficially to
occupy use and enjoy the Premises for the Assumed Use;
4.1.7 That the willing Lessee and its potential assignees or
underlessees to the Demised Premises suffer no disadvantage at
the relevant review date or at any time during the term
arising from an actual or potential election by the Landlord
to waive exemption in respect of Value Added Tax (or any
similar tax which shall replace Value Added Tax) so far as
concerns rent payable or of any taxable supply received by the
Tenant under or in connection with this Lease
4.1.8 That the Landlord is able to and does make full recovery of
Value Added Tax paid or payable on payments made by it in
connection with this Lease and which the Tenant is obliged to
reimburse the Landlord (whether by way of service charge or
otherwise) under the terms of this Lease
4.1.9 That for the purpose of this clause 4 the Assumed Use shall
mean as offices only
DISREGARDS:
4.2 Taking no account of
4.2.1 Any goodwill attributable to the Premises by reason of any
trade or business carried on therein by the Tenant or any
permitted Under tenant; and
<PAGE>
4.2.2 Any effect on rent of the fact that the Tenant or any
permitted Under tenant has carried out any works to the
premises (to which the Landlord shall have given written
consent) excluding works carried out pursuant to an obligation
to the landlord; and
4.2.3 Any effect on rent of the fact that the Tenant or any
permitted Under tenant may have been in occupation of the
Premises; and
4.2.4 Any effect on rent of the absence of any rent free period or
contribution towards fitting out cost or other inducement
which it might then be the practice in the open market to make
or allow to tenants on a new letting with vacant possession
4.2.5 Any diminution of rental value which is attributable to work
carried out by or anything done or omitted by the Tenant or
any such predecessor in title or other person as aforesaid;
4.2.6 Any effect on rental value of anything by reason whereof the
Premises fail to comply with the lawful requirements of any
competent authority in respect of health or safety
4.2.7 All restrictions whatsoever relating to rent or to security of
tenure contained in any Act of Parliament and any directions
thereby given relating to any method of determining rent as
may be permitted by law
4.2.8 Any adverse effect upon rent of any temporary works operations
or other activities on any adjoining or neighbouring property;
5. REFERRAL TO EXPERT
5.1 If in any circumstances whatsoever the Market Rent shall not have been
agreed between the Landlord and the Tenant by the date three months
before the commencement ("the Review Date") of any period ("the Review
Period") of the Term for which a rent review is stimulated then the
question may at any time thereafter at the joint expense of the parties
be referred by either party to the decision of a Surveyor ("the
Surveyor") practising in or having knowledge of rental values in the
area in which the premises are situate
5.2 The Surveyor shall be mutually agreed by the Landlord and the Tenant or
in default of agreement to be nominated by the President for the time
being of The Royal Institution of Chartered Surveyors
5.3 The Surveyor whether agreed or nominated as aforesaid shall act as an
expert and not as an Arbitrator
5.4 The Surveyor's decision shall be binding on both the Landlord and the
Tenant but he shall be required to :
5.4.1 Afford the Landlord and the Tenant an opportunity to make
written representations to him
5.4.2 Afford the Landlord and the Tenant an opportunity to comment
on any such written representations received by his
<PAGE>
5.4.3 Give written reasons tor his decision
6. MEMORANDUM
At the joint expense of the parties a deed of variations recording the Market
Rent in the form set out in the First Schedule to the Previous Lease shall be
prepared and completed in duplicate forthwith after the same has been agreed or
determined
7. LATE REVIEW
7.1 In the event of the Market Rent not having been agreed or determined
prior to any Review Date for any reason whatever then the Tenant shall
continue to pay to the Landlord in the manner hereinbefore provided rent
("the Previous Yearly Rent") at the yearly rate payable immediately
before such Review Date
7.2 On the Rent Payment Date immediately following the date on which such
agreement or determination shall have been made the Tenant shall pay to
the Landlord
7.2.1 the amount whereby the yearly rent agreed or determined as
aforesaid shall exceed the Previous Yearly Rent but duly
apportioned on a daily basis
7.2.2 interest on such amount at the rate of Barclays Bank plc base
rate from time to time upon each and every quarterly
instalment of additional yearly rent which would have fallen
due on or after such Review Date if the amount of the
additional yearly rent had been ascertained before such Review
Date (the amount of such interest being calculated on a day to
day basis in respect of each such quarterly instalment of
additional yearly rent as aforesaid for the period from the
date upon which the relevant instalment would have become
payable if ascertained before such Review Date up to and
including the date of payment )
7.3 In the event that such rate shall cease to exist such other comparable
rate of interest shall apply as the Landlord and the Tenant may from
time to time agree or in default of agreement shall be determined by an
Arbitrator appointed on the application of either party by the President
for the time being of the Institute of Chartered Accountants in England
and Wales in accordance with the Arbitration Acts 1950 to 1979.
8. SAME TERMS
This Lease is made upon the same terms and subject to the same covenants
provisos and conditions as are contained in the Previous Lease except as to
the premises demised the term of years granted and the rents reserved and
(except as to such modifications as are set out in the Second Schedule hereto
so that this Lease shall be construed and take effect as if such terms
covenants provisos and conditions were (except as aforesaid) repeated in this
Lease in full with such modifications only as are necessary to make them
applicable to this demise
9. TENANT'S COVENANTS
<PAGE>
The Tenant covenants with the Landlord to observe and perform all the
covenants and conditions on its part contained in the Previous Lease (as
modified as above)
10. LANDLORD'S COVENANTS
The landlord covenants with the Tenant to observe and perform all the
covenants and conditions on its part contained in the Previous Lease
IN WITNESS whereof the parties hereto have duly executed this Lease as a Deed
the day and year first before written
THE FIRST SCHEDULE above refereed to
PART 1
EASEMENTS AND RIGHTS GRANTED
1 the right of free passage and running of water soil gas electricity and
other services to and from the Premises through any sewers drains pipes
wires and channels now or during the period of the term as hereinafter
defined running under or through any adjoining or neighbouring premises
now or during such period belonging to the Landlord (but not including
any right or easement unless the same be expressly herein referred to)
2 The full right and liberty for the Tenant and all persons authorised by
it (in common with all other persons entitled to the like right) at all
times by day or night to go pass and re-pass through and along or use
part of the forecourt and the entrance hall of the Building leading to
the Premises and the lavatories and cloakrooms for males and females
respectively situated in the common parts of the Building and such other
lavatories and cloakrooms as shall hereafter from time to time be allocated
at its discretion by the Landlord for use by the Tenant and staff employed
at the Premises
3 The right of support and protection now enjoyed by the Premises from the
Main Structure and adjacent premises in the Building capable of
providing such support and protection
4 With the Landlord's prior consent (which shall not be unreasonably
withheld) the full right and liberty for the Tenant and his authorised
servants agents and workmen at all reasonable times on reasonable notice
(except in emergency) to enter into and upon the remainder of the
Building as shall be necessary for the purpose of repairing maintaining
or altering cleaning renewing or examining the Premises and any part
thereof the subject matter of any easements or any other rights set out
in this Clause 2 and to make or permit any connections and
disconnections which may be necessary in relation thereon or for the
purpose of carrying out any work which may be necessary for the
protection of the Premises PROVIDED that in the exercise of such right
the Tenant or such persons exercising such rights shall cause as little
inconvenience and interference as is practicable and shall forthwith
make good any damage caused thereby.
<PAGE>
5 The right to park two motor vehicles in the forecourt of the Building in
spaces designated from time to time by the Landlord in the area shown
hatched black on the plan annexed hereto
PART 2
EXCEPTIONS AND RESERVATIONS
PASSAGE OF WATER ETC
1 The free passage and running of water soil gas electricity and all other
service for any adjoining or neighbouring premises within the Building
through any sewers drains pipes wires and channels now or which at any
time within such period as aforesaid shall run under or through the
Premises and to make connections with such sewers drains pipes wires and
channels for the purpose of exercising the said fee passage of water
soil gas electricity and all other services as aforesaid
LIGHT AND AIR
2 All rights of light air and other easements and rights (but without
prejudice to those expressly hereinbefore granted to the Tenant) now or
hereafter belonging to be enjoyed by any adjacent or neighbouring land
or building over or against the Premises
SUPPORT AND SHELTER
3 The right to support and shelter and all other easements and rights now
or hereafter belonging to or enjoyed by the Building other than the
Premises and all adjacent or neighbouring land or buildings an interest
wherein in possession or reversion is at any time during the term hereby
granted vested in the Landlord
THE SECOND SCHEDULE AFORESAID
MODIFICATIONS OF TENANTS COVENANTS
In Clause 28.1 the following words shall not apply and shall be excluded from
this Lease this is to say:
"save that the Tenant may with previous written consent in writing of the
Landlord such consent not to he unreasonably withheld or delayed underlet
the whole or any part of each of the first second and basement floors
provided that no more than four underlettings are created"
The Common Seal of TONY
STONE ASSOCIATES LIMITED
was affixed in the
presence of
Director
Secretary
<PAGE>
Dated 23rd OCTOBER 1990
BANTRY INVESTMENTS LIMITED
- and -
TONY STONE ASSOCIATES LIMITED
---------------------------
L E A S E
relating to Basement, First
and Second Floors
116/134 Bayham Street Camden Town
London NW1
---------------------------
Leonard Kasler & Co.
20-21 Queenhithe
London EC4V 3DX
Ref: MDB
Tel: 071 236-1826
Fax: 071 236 3328
DX: 42601 Cheapside
OIS: 0314b
<PAGE>
THIS LEASE is made the twenty-third day of October, 1990
BETWEEN:
1. BANTRY INVESTMENTS LIMITED a Company registered in Gibralter whose
registered office is at Librairy Ramp PO Box 104 Gibralter and whose
address in the United Kingdom is c/o Fox Associates 1 Bayham Street
London NW1 OER ("the Landlord")
2. TONY STONE ASSOCIATES LIMITED a Company registered in England, number
948785 and having its registered office at 28 Finchley Road, St. Johns
Wood, London NW1 ("the Tenant")
WITNESSETH as follows:
IN consideration of the sum of the rent and the Tenant's covenants
hereinafter reserved and contained the Landlord HEREBY DEMISES unto the
Tenant ALL THOSE the premises ("the Premises") being the Basement, First and
Second Floors of the building situate and known as 116/134 Bayham Street
Camden Town London NW1 ("the Building") as the same are shown edged in red on
the plans ("the Plans") annexed hereto and includes:-
(i) all doors and windows and window and door frames and the glass
(including any plate glass) fitted therein (but excluding the
paintwork and decoration of the external surfaces of such doors
windows and window frames);
(ii) one half (severed vertically) of all non-structural partitions
separating the Premises from any other part of the Building;
(iii) all other internal non-structural partitions;
(iv) the ceilings and floors;
(v) the plaster or other finish on all structural walls and ceilings
within the Premises;
(vi) all pipes and sanitary and water apparatus which are within the
Premises and serve the Premises alone
but excludes:
(vii) the main structure of the Building including (but not by way of
limitation) the roof and the roof joists above the ceilings of
premises in the Building the foundations and the exterior and the
load bearing columns and walls the main beams decks or girders
supporting the floors of the Building of any premises comprised
within the Building ("the Main Structure");
(ii) any pipes and other service conduits in the Premises which serve
any other part of the Building.
2. RIGHTS
The Premises are demised together with:-
2.1 the right of free passage and running of water soil gas electricity
and all other services to and from the Premises through any sewers
drain pipes wires and channels now or during the period of the
term as hereinafter defined running under or through any adjoining
or neighbouring premises now or during such period belonging to
the Landlord (but not including any right or easement unless the
same be expressly herein referred to)
2.2 the exclusive right to park private motor vehicles in the area
shown hatched black on the Plans annexed hereto
2.3 The full right and liberty for the Tenant and all persons
authorized by him (in common with all other persons entitled to
the like right) at all times by day or night to go pass and
re-pass through and along or use part of the forecourt cross
hatched black on the Plans the entrance hall landings and
staircases of the Building leading to the Premises and the lifts
in the Building and the lavatories and cloakrooms for males and
females respectively situated in the common parts of the Building
and such other lavatories and cloakrooms as shall hereafter from
time to time be allocated at its discretion by the Landlord for
use by the Tenant and staff employed at the Premises
<PAGE>
2.4 The right of support and protection now enjoyed by the Premises
from the Main Structure and adjacent premises in the Building
capable of providing such support and protection any sewers
drains pipes wires and channels now or which at any time
within such period as aforesaid shall run under or through
the Premises and to make connections with such sewers drains pipes
wires and channels for the purpose of exercising the said free
passage of water soil gas electricity and all other services as
aforesaid
2.5 With the Landlord's prior consent (which shall not be unreasonably
withheld) the full right and liberty for the Tenant and his
authorised servants agents and workmen at all reasonable times on
reasonable notice (except in emergency) to enter into and upon the
remainder of the Building as shall be necessary for the purpose of
repairing maintaining or altering cleaning renewing or examining
the Premises and any part thereof the subject matter of any
easements or any other rights set out in this clause 2 and to make
or permit any connections and disconnections which may be necesary
in relation thereto or for the purpose of carrying out any work
which may be necessary for the protection of the Premises PROVIDED
that in the exercise of such right the Tenant or such persons
exercising such rights shall cause as little inconvenience and
interference as is practicable and shall forthwith make good any
damage caused thereby.
3. EXCEPTIONS AND RESERVATIONS
There is excepted and reserved from the demise in favour of the
Landlord and the Tenants and Occupiers of other portions of the building of
which the Premises form part and all other persons entitled thereto the
following rights:-
PASSAGE OF WATER ETC.
3.1. The free passage and running of water soil gas electricity and all
other services for any adjoiniing or neighbouring premises with
the Building through any sewers drain pipes wires and channels now
or which at any time within such period as aforesaid shall run
under or through the Premises and to make connections with such
sewers drains pipes wires and channels for the purpose of
exercising the said free passage of water soil gas electricity and
all other services as aforesaid.
LIGHT AND AIR
3.2 All rights of light air and other easements and rights (but
without prejudice to those expressly hereinbefore granted to the
Tenant) now or hereafter belonging to or enjoyed by any adjacent
or neighbouring land or building over or against the Premises
SUPPORT AND SHELTER
3.3 The right to support and shelter and all other easements and
rights now or hereafter belonging to or enjoyed by the Building
other than the Premises and all adjacent or neighbouring land or
buildings an interest wherein in possession or reversion is at any
time during the term hereby granted vested in the Landlord
4. TERM
The demise is for a term ("the Term") of TWENTY FIVE YEARS from the
23rd day of October 1990
5. ENCUMBRANCES
The demise is subject to the restrictive covenants conditions
stipulations exceptions reservations easements and other matters
referred to or contained in the entries on the register at H.M.
Land Registry of the Landlords title number NGL 468360
6. RENTS
6.1 The Tenant shall yield and pay the following rents namely:-
6.1.1 For the first six months of the Term the rent of one
peppercorn (if demanded) and thereafter for the next four
and a half years the yearly rent of TWO HUNDRED AND
FOURTEEN THOUSAND FOUR HUNDRED POUNDS (L214,400.00)
6.1.2 For the next five years of the Term ("the second period")
either the yearly rent reserved above or the market rent of
the Premises at the commencement of the said period
whichever is the higher
<PAGE>
6.1.3 For the next five years of the Term ("the third period") either
the yearly rent reserved above or the market rent of the
Premises at the commencement of the said period whichever is
the higher
6.1.4 For the next five years of the Term ("the fourth period") either
the yearly rent reserved above or the market rent of the
Premises at the commencement of the said period whichever is
the higher
6.1.5 For the last five years of the Term ("the last period") either
the yearly rent payable hereunder immediately prior to the
commencement of the last period or the market rent of the
Premises at the commencement of the last period whichever is
the higher
6.2. NO DEDUCTION
The said rents shall in all cases be paid without any deduction
(except for tax authorized by statute to be deducted) by equal quarterly
payments in advance on the usual quarter days in every year ("the Rent
Payment Days")
7. STANDING ORDER
The Tenant shall give to the Bankers for the time being of the
Landlord (as nominated from time to time in writing by the Landlord to the
Tenant) a standing order directing such quarterly payments to be made on
due date at the Bankers of the Landlord
8. FIRST PAYMENT
The first of such rent payments shall be a proportionate part for
the period from the date ("the first Rent Payment Date") six months
after the commencement of the Term to the date one day before the next
Rent Payment Date thereafter and shall be made on the first Rent Payment
Date
9 INSURANCE PREMIUM
The Tenant shall also pay by way of further or additional rent an
amount equal to a fair proportion (to be determined failing agreement by
the Landlord's Surveyor whose determination shall be final and binding
on the parties hereto save in case of manifest error) of the yearly sum
or sums properly expended by or demanded of the Landlord in insuring the
Building and the Landlord's fixtures and fittings therein against loss
or damage by fire explosion lightning impact vehicles aircraft (not
being hostile aircraft) and articles dropped therefrom flood storm or
tempest bursting and overflowing of water tanks apparatus or pipes riot
civil commotion malicious damage theft following forcible and violent
entry into or exit from the Premises subsidence and accidental damage
and against such other risks as the Landlord shall reasonably think
necessary ("the Insured Risks") in a sum equal to the full cost of
reinstatement (including Architects' and Surveyors' fees demolition and
site clearance charges and three years' loss of rent) such amount to be
paid by the Tenant within 14 days of demand
<PAGE>
10. SERVICE CHARGE
10.1 The Tenant shall also pay by way of further or additional rent due
in each year of the term a Service Charge equal to such proportion
of the total cost ("the total cost") incurred or estimated by the
Landlord in respect of the Services and Expenses specified in the
Third Schedule and the cost of the Landlord carrying out its
obligations set out herein as the Area of the premises bears to the
aggregate Area of all other parts of the Building let or intended
to be let by the Landlord where "Area" means the Net Internal Area
measured in accordance with the Code of Measuring Practice issued
by the Royal Institution of Chartered Surveyors and the
Incorporated Society of Valuers and Auctioneers as amended from
time to time
10.2 The Service Charge shall be payable in advance on the usual quarter
days. For the period from the date hereof to the 31st day of
December 1990 the Tenant shall pay an estimated Service Charge at
the rate of L16,000 per annum The first payment (being a
proportionate payment) in respect of the period up to the quarter
day next following the date hereof shall be made on the execution
hereof
10.3 The said total cost to the Landlord during each financial year of
the Landlord shall be certified by a Chartered Accountant appointed
by the Landlord and shall contain a fair summary of the items
referred to in it and shall include the fees of the Chartered
Accountant for such certification and an amount for general
management expenses up to 10 per cent of the said total
cost if the Landlord shall manage the Building and up to 12.5%
maximum thereof plus VAT if the Landlord shall appoint managing
agents and the said certificate shall (save in case of manifest
error) be conclusive evidence of all matters of fact referred to in
it but the Tenant shall be entitled to inspect the audited account
on request and be provided with copies of the same
10.4 For the purpose of assessing payment on account of the Service
Charge for each financial year of the Landlord subsequent to the
31st day of December 1990 the Service Charge for such year shall be
provisionally based on actual cost of providing the services
calculated and certified as aforesaid for the previous financial
year of the Landlord and until the actual cost of providing
services for such year shall have been certified by the Landlord
the Tenant shall continue to make equal quarterly payments in
advance on the usual quarter days in every year at the rate based
on the last cost certified by the Landlord (or on the
aforementioned estimated Service Charge if no certificate shall
have been issued by the Landlord)
10.5 Any under-payment or over-payment in respect of the Service Charge
for a particular financial year or lesser period shall be adjusted
on the quarter day next
<PAGE>
following the certification in manner aforesaid of the actual cost
to the Landlord of carrying out the said works and providing the
said services and facilities during that year or period
10.6 The Landlord will not charge the Tenant and the Service Charge
shall not include any part of the total cost as shall be
attributable from time to time from other parts of the Building as
shall be designed and available for letting whether let or unlet
or which are occupied by the Landlord during the whole or
proportionately for any part of the relevant Service Charge year.
10.7 The Tenant shall also pay by way of Service Charge if requested by
the Landlord a reasonable provision (to be determined by the
Surveyor acting as an expert and not as an arbitrator) towards the
Landlord's anticipated expenditure during the term in respect of:
10.7.1 periodically recurring items whether recurring at regular or
irregular intervals and
10.7.2 such of the Landlord's obligations as relate to the renewal
of replacement of the items referred to
PROVIDED that:
10.7.3 such reasonable provision in respect of items in paragraph
10.7.2 shall be determined on the assumption that the cost
of replacement of such items is calculated on such life
expectancy as the Surveyor may reasonably determine (acting
as an expert and not as an arbitrator) and that each year
the Tenant will be required to pay a rateable proportion
towards the anticipated cost of renewal or replacement to
the intent that a fund or funds be accumulated sufficient
to cover the cost of renewal or replacement by the end of
the anticipated life of each such item except that the
Tenant shall not be required to make any provision towards
expenditure by the Landlord that it is anticipated will be
incurred by the Landlord after the expiry of the Term
10.7.4 nothing in this paragraph shall oblige the Landlord to
establish and/or maintain any such fund sufficient in whole
or in part to cover such cost of replacement or renewal
of any such item
10.7.5 any expenditure by the Landlord in respect of a recurring
item referred to in this schedule or in respect of its
obligations in connection with the renewal or replacement
of an item referred to where either:
10.7.5.1 a fund has been established in connection with such
recurring item or the renewal or replacement of
that item ("the Specific Fund") or
10.7.5:2 a part of a fund ("the General Fund") has been
allocated by the Landlord for such recurring item
or the renewal of replacement of that item
shall first be met out of the Specific Fund or as appropriate
out of the General Fund to the extent of the credit allocated
for that item by the Landlord in the General Fund
<PAGE>
10.7.6 the certificate referred to in paragraph 10.3 shall
indicate whether or not the Landlord has established
and is maintaining any fund or funds pursuant to this
paragraph and shall provide full details of any such
fund or funds
10.7.7 all sums received by the Landlord pursuant to this
paragraph 10.7 shall be credited to an account separate
from the Landlord's own money and shall be held by the
Landlord upon trust during the period of 80 years from
the date of this lease (which shall be the perpetuity
period applicable to these provisions) for the persons
who from time to time shall be the tenants of the
Building to apply the same and any interest accruing for
the purposes set out in this paragraph and at the expiry
of such period any such sums unexpended shall be paid to the
persons who shall then be the tenants of the Building in
shares equal to the percentage which the Service Charge
payable by each tenant respectively bears to the total of
all the Service Charges paid by the tenants of the Building
11. FURTHER RENT
The Tenant shall also pay by way of further or additional rent all
sums of money which become payable to the Landlord or its Agents by virtue
of any provision of this Lease
12. VAT
All sums payable under or in connection with this Lease in respect of
rent or any other monies payable or taxable supplies received by the Tenant
shall be deemed to be exclusive of Value Added Tax (or any similar tax
which shall replace Value Added Tax) which may be chargeable thereon (but
without any obligation upon the Landlord to exercise any election to waive
exemption in respect of such tax) and upon the production by the Landlord
to the Tenant of an invoice appropriate to that tax the Tenant shall pay
and indemnify the Landord in respect of such tax in addition to those sums
and the Landlord shall have the same remedies for non-payment of the tax as
if the tax were part of the rent or other such moneys or supply
13. MARKET RENT
The said market rent ("the Market Rent") shall be the amount which
shall be agreed between the Landlord and the Tenant to be the open
market rent for the time being reasonably obtainable as between a
willing landlord and a willing tenant in respect of the Premises let as
a whole (notwithstanding the provision for underletting herein
contained) with vacant possession for a term equal to the residue of the
term hereby granted or fifteen years whichever shall be the longer (in
both cases commencing on the commencement of the relevant period)
without payment of any fine or premium and in all other respects on the
terms and conditions of this Lease (including the provision for the
review of rent but excluding the amount of rent payable)
<PAGE>
ASSUMPTIONS
13.1 Upon the suppositions (if not facts):-
13.1.1 That all parts of the Premises are then ready fit and
available for immediate use and occupation and could and
would be immediately occupied whether by any willing tenant
or under-tenant;
13.1.2 That the Landlord and the Tenant have complied with all the
obligations on the part of the Landlord and the Tenant
respectively imposed by these presents (but without
prejudice to any rights of either party in regard thereto);
and
13.1.3 That if the Premises or any part thereof or the means of
access thereto or any services enjoyed therewith shall have
been destroyed or damaged the same had before the relevant
period been fully reinstated; and
13.1.4 That the whole of the Premises are then and will (throughout
the term required to be calculated for the purposes of such
lease) remain in good and substantial repair and condition
fit for immediate occupation and use; and
13.1.5 That the Premises have been fully fitted out and equipped so
as to be ready for immediate occupation and use by such
willing tenant for the Assumed Use; and
13.1.6 That the Premises have and will have throughout the term
required to be calculated for the purposes of such lease the
benefit of all necessary or appropriate rights easements
quasi-rights quasi-easements permissions approvals services
facilities or amenities (whether the same be required from the
Landlord or from any other person or authority) so as to enable
the willing tenant properly and beneficially to occupy use and
enjoy the Premises for the Assumed Use;
13.1.7 That the willing Lessee and its potential assignees or
underlessees of the Demised Premises suffer no disadvantage
at the relevant review date or at any time during
the term arising from an actual or potential election by the
Landlord to waive exemption in respect of Value Added Tax
(or any similar tax which shall replace Value Added Tax) so
far as concerns rent payable or of any taxable supply received
by the Tenant under or in connection with this Lease
13.1.8 That the Landlord is able to and does make full recovery of
Value Added Tax paid or payable on payments made by it in
connection with this Lease and which the Tenant is obliged
to reimburse the Landlord (whether by way of service charge
or otherwise) under the terms of this Lease
<PAGE>
13.1.9 That for the purpose of this clause 13 the
Assumed Use shall mean as to the First and
Second Floors as offices only and as to the
Basement as storerooms, dark rooms and
studios only.
DISREGARDS:
13.2 Taking no account of :-
13.2.1 Any goodwill attributable to the Premises by
reason of any trade or business carried on
therein by the Tenant or any permitted Under
tenant; and
13.2.2 Any effect on rent of the fact that the
Tenant or any permitted Under tenant has
carried out any works to the premises (to
which the Landlord shall have given written
consent) excluding works carried out pursuant
to an obligation to the Landlord; and
13.2.3 Any effect on rent of the fact that the
Tenant or any permitted Under tenant may have
been in occupation of the Premises; and
13.2.4 Any effect on rent of the absence of any rent
free period or contribution towards fitting
out costs or other inducement which it might
then be the practice in the open market to
make or allow to tenants on a new letting
with vacant possession
13.2.5 Any diminution of rental value which is
attributable to work carried out by or
anything done or omitted by the Tenant or any
such predecessor in title or other person as
aforesaid;
13.2.6 Any effect on rental value of anything by
reason whereof the Premises fail to comply
with the lawful requirements of any competent
authority in respect of health or safety
13.2.7 All restrictions whatsoever relating to rent
or to security of tenure contained in any Act
of Parliament and any directions thereby
given relating to any method of determining
rent as may be permitted by law
13.2.8 Any adverse effect upon rent of any temporary
works operations or other activities on any
adjoining or neighbouring property;
14. REFERRAL TO EXPERT
14.1 If in any circumstances whatsoever the Market Rent
shall not have been agreed between the Landlord and the
Tenant by the date three months before the commencement
("the Review Date") of any period ("the Review Period")
of the Term for which a rent review is stipulated then
the question may at any time thereafter at the joint
expense of the parties be referred by either party to
the decision of a Surveyor ("the Surveyor") practising
in or having knowledge of rental values in the
area in which the Premises are situate
14.2 The Surveyor shall be mutually ayreed by the Landlord
and the Tenant or in default of agreement to be
nominated by the President for the time being of The
Royal Institution of Chartered Surveyors
<PAGE>
14.3 The Surveyor whether agreed or nominated as aforesaid
shall act as an expert and not as an Arbitrator
14.4 The Surveyor's decision shall be binding on both the
Landlord and the Tenant but he shall be required to:-
14.4.1 Afford the Landlord and the Tenant an
opportunity to make written representations
to him
14.4.2 Afford the Landlord and the Tenant an
opportunity to comment on any such written
representations received by him
14.4.3 Give written reasons for his decision
15. MEMORANDUM
At the joint expense of the parties a deed of variation
recording the Market Rent in the form set out in the
First Schedule hereto shall be prepared and completed
in duplicate forthwith after the same has been agreed
or determined
16. LATE REVIEW
16.1 In the event of the Market Rent not having been agreed
or determined prior to any Review Date for any reason
whatever then the Tenant shall continue to pay to the
Landlord in the manner hereinbefore provided rent ("the
Previous Yearly Rent") at the yearly rate payable
immediately before such Review Date
16.2 On the Rent Payment Date immediately following the date
on which such agreement or determination shall have
been made the Tenant shall pay to the Landlord:-
16.2.1 the amount whereby the yearly rent agreed or
determined as aforesaid shall exceed the
Previous Yearly Rent but duly apportioned on
a daily basis
16.2.2 interest on such amount at the rate of
Barclays Bank plc base rate from time to time
upon each and every quarterly instalment of
additional yearly rent which would have
fallen due on or after such Review Date if
the amount of the additional yearly rent had
been ascertained before such Review Date (the
amount of such interest being calculated on a
day to day basis in respect of each such
quarterly instalment of additional yearly
rent as aforesaid for the period from the
date upon which the relevant instalment would
have become payable if ascertained before
such Review Date up to and including the date
of payment )
16.3 In the event that such rate shall cease to exist such
other comparable rate of interest shall apply as the
Landlord and the Tenant may from time to time agree or
in default of agreement shall be determined by an
Arbitrator appointed on the application of either party
by the President for the time being of the Institute of
Chartered Accountants in England and Wales in
accordance with the Arbitration Acts 1950 to 1979.
TENANTS COVENANTS
<PAGE>
The Tenant HEREBY COVENANTS with the Landlord as
follows:
17. TO PAY RENT ETC
17.1 To pay the rents and Service Charge reserved at the
times and in manner aforesaid without any deduction or
abatement whatsoever (except as aforesaid)
17.2 To reimburse to the Landlord on demand any charge to
the Landlord by certificated bailiffs in connection
with the collection of any of the said rents which are
in arrear
18. TO PAY RATES ETC
To pay (or in the absence of direct assessment on the
Premises to repay to the Landlord a fair proportion of) all
existing and future rates uniform business rate taxes
impositions assessments and outgoings payable by law in
respect of the Premises whether by the owner or occupier
thereof other than any such arising from any transaction or
dealing with the Premises by some person other than the
Tenant or any person claiming through or under the Tenant
including without prejudice to the generality of the
foregoing all present and future payments for works under
any Act or Acts of Parliament concerning buildings sewerege
drainage the public health or any other public or local
purposes (except tax authorised by statute to be deducted)
19. TO REPAIR
At all times during the said term to keep the Premises
and every part thereof and all additions thereto and the
Landlord's fixtures and fittings thereon (but excluding
boilers air conditioning plant and units radiators hoists
pumps and other apparatus of a like nature) in good and
substantial and decorative repair and condition
20. TO REPAIR PLANT
20.1 Without prejudice to the generality of the foregoing
paragraph at all times to keep all present and future
lifts (the same being hereinafter referred to
collectively or individually as "the Lifts") in or
about the Premises or the Building in proper repair and
in good working order and condition keeping the same
free from rust and clean and oiled the presence running
and operation thereof not to contravene any other
provisions hereof and from time to time to replace
renew and reinstate any parts of the Lifts which may
become broken lost worn out or unfit for use
20.2 The Tenant shall enter into a maintenance agreement in
respect of the repair maintenance and servicing of the
Lifts with a reputable Lift Contractor such agreement
and Contractor to be approved by the Landlord such
approval not to be unreasonably withheld or delayed and
shall pay all sums of money due under such agreement
and observe and perform all covenants conditions
agreements and obligations contained in such agreement
and to procure that the same is kept in force
throughout the Term.
<PAGE>
21. TO PAINT
To paint with two coats of good quality paint in a
proper and workmanlike manner all the internal wood iron and
other internal parts of the Premises heretofore or usually
painted in every fifth year and in the last year or on
sooner determination (howsoever determined) of the said term
and after every internal painting to grain polish varnish
distemper wash stop whiten and colour all such parts as are
usually so treated and to repaper the parts usually papered
with suitable paper of good quality PROVIDED THAT any
painting in the last year of the Term shall be done in a
colour to be approved by the Landlord such approval not to
be unreasonably withheld or delayed
22. NO ALTERATIONS
22.1 Not to pull down cut alter or injure any of the main
walls foundations footings main timbers or external
appearance or floors or ceilings of the Premises or
make any additions thereto or suffer any waste spoil or
destruction in or upon the Premises nor install a
shopfront or shop fittings at the Premises And not to
make or suffer to be made any alteration or addition to
any non-structural part of the Premises without the
previous consent in writing of the Landlord (such
consent not to be unreasonably withheld) subject to the
proviso that no such consent shall be required in the
case of the Tenant installing demountable partitioning
in the Premises And to carry out any work to which the
Landlord may consent hereunder in a good and
workmanlike manner with good and substantial materials
and to the satisfaction of the Landlord in accordance
with plans elevations sections and specifications
previously approved in writing by the Landlord's
Architect or Surveyor for the time being and to pay the
fees of such Architect or Surveyor in relation thereto
And at the expense of the Tenant to remove any such
erections additions or alterations made without such
previous consent in writing of the Landlord or in
respect of which the permission of the appropriate
Planning Authority is withdrawn or lapses and at the
expense of the Tenant to comply with every order of
such authority requiring the removal or demolition of
or other work in connection with such erections
additions or alterations and such cases the Tenant will
at its own expense make good all damage caused by such
removal demolition or other work and restore all parts
of the Premises affected thereby to a state of good
repair and condition PROVIDED THAT if the Landlord so
requests to reinstate the Premises at the end of the
Term (howsoever determined) and make good any damage
caused as a consequence of such reinstatement
22.2 Not save in accordance with the terms and
conditions laid down by the Institution of
Electrical Engineers and the regulations of the
electricity supply authority to make any
alteration or addition to the electrical
installation in the Demised Premises and not to
connect any apparatus thereto which might endanger
or overload such installation and any part thereof
<PAGE>
23. NO OVERLOADING ENCROACHMENTS ETC.
Not to overload or do any other thing which may in any
manner weaken the structure of the Premises or at any time
block up darken obstruct or obscure any external doorway
passage windows light grating or opening belonging to the
Premises or permit any new window light opening or other
encroachment or easement to be made into against or upon the
Premises and will at the request and cost of the Landlord
adopt such means as may in the reasonable opinion of the
Landlord be expedient for preventing any such encroachment
or the acquisition of any such easement on or over the
Premises
24. ENTRY TO ENFORCE REPAIRS
To permit the Landlord and its agents with or without
workmen and others twice a year at reasonable times in the
daytime upon not less than 7 days prior notice to enter upon
and view the condition and state of repair of the Premises
and thereupon the Landlord may serve upon the Tenant notice
in writing specifying any repairs and works necessary to be
done and for which the Tenant is liable and require the
Tenant within three months or sooner if requisite to execute
the same and if the Tenant shall not within one month after
service of such notice proceed diligently with the execution
of such repairs and complete the same within the space of
three calendar months from the date of the notice or sooner
if requisite then (without prejudice to any other rights of
the Landlord under this Lease) in any of such cases to
permit the Landlord to enter upon the Premises and execute
such repairs and works and the proper and reasonable cost
thereof shall be a debt due from the Tenant to the Landlord
and be forthwith recoverable as rent in arrear
25. ENTRY FOR REPAIRS
To permit the Landlord or its agents or workmen and
also the Tenants or Occupiers of any adjoining or
neighbouring premises at any time during the said term at
reasonable hours in the daytime upon reasonable prior
appointment (except in case of emergency) to enter upon the
Premises for the purpose of executing works to or upon such
adjoining or neighbouring premises
26. NO ALIENATION OF PART
Nor to assign charge underlet or part with or share the
possession or occupation of part only of the Premises save
as hereinafter mentioned
27. ASSIGNMENT/CHARGE OF WHOLE
27.1 Not to assign or charge the Premises as a whole without
the previous written consent of the Landlord (such
consent not to be unreasonably withheld or delayed)
27.2 On any assignment of the Premises to procure that the
Assignee enters into a covenant with the Landlord
throughout the residue of the said term to pay the
rents reserved by and perform and observe the covenants
on the part of the Tenant
<PAGE>
contained in this Lease and further if the Landlord
shall in its reasonable discretion so require to obtain
a reasonably acceptable Guarantor for any assignee or
proposed assignee to whom this Lease is about to be
assigned who shall covenant with the Landlord in the
terms set out in the Second Schedule hereto
28. UNDERLETTING
28.1 Not to underlet or part with or share possession or
occupation of the whole of the Premises without the
previous consent in writing of the Landlord such
consent not to be unreasonably withheld or delayed nor
to underlet or part with or share possession of
occupation of part of the premises save that the tenant
may with previous written consent in writing of the
Landlord such consent not to be unreasonably withheld
or delayed underlet the whole or any part of each of
the first, second and basement floors provided that no
more that four underlettings are created
28.2 Upon the Landlord consenting to an underletting
(whether immediate or derivate) of the Premises to
procure that the underlease or sub-underlease shall:-
28.2.1 in the case of an underletting of part only
of the Premises (as opposed to the whole)
exclude by Order of the Court under s.38(4)of
Part II of the Landlord and Tenant Act 1954
(as amended by the Law of Property Act 1969)
Sections 24 and 28 thereof in relation to the
said underlease or sub-underlease and that no
underlease or sub-underlease shall be created
unless such Order of the Court be obtained
and unless the aforementioned Sections are
excluded
28.2.2 be made subject to the Tenant's covenants and
conditions herein contained so far as the
same shall apply to the underlet premises and
28.2.3 shall contain:
28.2.3.1 an absolute covenant on the part of the
underlessee or sub-underlessee not to
assign or charge part only of the
underlet premises or underlet or part
with or share the possession or
occupation of any part (as opposed to
the whole) of the underlet premises
28.2.3.2 a qualified covenant on the part of the
underlessee or sub-underlessee not
without the previous consent in writing
of the Landlord for the time being of
this present Lease (the grant of which
shall be subject to the same provisos as
are hereinbefore set forth in this
clause) to assign charge underlet share
or part with possession or occupation of
the underlet premises as a whole
28.2.3.3 a covenant that the underlessee or
sub-underlessee will cause to be
inserted in every sub-underlease whether
immediate or derivative covenants on the
part of the
<PAGE>
relevant sub-underlessee
corresponding to this covenants in the
two preceding sub-clauses
28.3. Not to grant any underlease or permit any
sub-underletting of or Licence to occupy the
Premises or any part thereof otherwise than at a
rent not less (proportionately) than the rent
payable under the terms of these presents (without
payment of premium) and upon such terms generally
(including provisions as to the periodical review
of rent in an upwards direction only and to the
then current market rent at intervals and at dates
to correspond with the dates for review of the
rents hereby reserved and hereinbefore mentioned)
29. REGISTRATION
Within one month of every assignment assent charge
transfer underlease or sub-underlease or assignment of
underlease or sub-underlease of or relating to the Premises
or any part thereof to give notice thereof in writing with
particulars thereof to the Solicitors for the time being of
the Landlord and produce to them such assignment assent
charge transfer underlease or sub-underlease or in the case
of devolution of the interest of the Tenant not perfected by
an assent within twelve months of the happening thereof to
produce to the said Solicitors the Probate of the Will or
Letters of Administration under which such devolution arises
and to pay them their reasonable registration fee being not
less than Twenty Pounds
30. FORFEITURE ETC EXPENSES
30.1 To pay all proper expenses (including Solicitor' costs
and Surveyors' fees incurred by the Landlord incidental
to or in contemplation of the preparation and service
of a notice of proceedings under Sections 146 and 147
of the Law of Property Act 1925 notwithstanding
forfeiture is avoided otherwise than by relief granted
by the Court or incidental to the preparation and
service of a Schedule of Dilapidations at the end of
the said term (howsoever determined) and if not paid
within seven days of demand such expenses shall be
recoverable as if they were rent in arrear
30.2. In the event of the Tenant committing any breach
of any covenant contained in this Lease whether
for the payment of rent or otherwise whatsoever or
of the Tenant applying to the Landlord for any
consent or licence required by the Tenant then if
the Landlord shall incur any costs charges and
expenses including reasonable and proper
Solicitors' costs Architects' fees and Surveyors'
charges to indemnify the Landlord in respect
thereof and if the same are not paid within seven
days of demand they shall be recoverable as if
they were rent in arrear
31. USER
Not to use or permit or suffer the Premises to be used for any
illegal or immoral purpose or for betting gaming or wagering or for
any offensive trade or business or for the sale of alcohol and not
to use or permit or suffer to be used the Premises
<PAGE>
or any part thereof otherwise than as offices and/or studios (which
expression "studios" shall for the avoidance of doubt include dark
rooms for use in the photographic industry) in accordance with all
statutory requirements applicable thereto and the Tenant shall not
reside or sleep on the Premises
or any part thereof or permit or suffer any person to reside or
sleep thereon
32. NO NUISANCE REGULATIONS ETC
32.1 Not to do or permit or suffer anything in or upon the Premises or
any part thereof which may be or become a nuisance annoyance or
cause damage or inconvenience to the Landlord or the tenants of the
Landlord or the tenants or occupiers of other property in the
neighbourhood or which may render the Landlord or the Tenant liable
to any notice under any Public Health Act for the time being in
force or for any purpose or in any way which would constitute a
breach of any of the provisions of any private or public Act or
Acts of Parliament for the time being in force or any regulations
or bye-laws made thereunder or by any competent public or local
authority whether affecting the Landlord or any of its present or
future property (including the Premises) or which may be in any way
calculated to injure any such property or do or suffer any other
thing which may make void or voidable any insurance of the Premises
and if at any time during the said term anything shall be done upon
the Premises which shall cause the premium to be charged by any
insurance office to exceed the average current rate for the time
being in force to give notice thereof unto the Landlord and also to
pay the extra premium so to be charged as aforesaid
32.2 To observe and perform at all times the regulations set out in the
Fourth Schedule hereto or such reasonable revisions amendments and
additions thereto made by the Landlord from time to time in
accordance with the prior notice in writing which shall be given to
the Tenant PROVIDED THAT such regulations shall not conflict with
the Tenant's use and occupation of the Premises
33. TO KEEP LANDLORD INFORMED
33.1 Within seven days after the service upon the Tenant of any notice
proposal or requirement or order made or served under any statute
or statutory regulation or any statutory modification or
re-enactment thereof and any regulation made thereunder forthwith
to supply a true copy thereof to the Landlord and to join with the
Landlord (if the Landlord deems it necessary) in raising any
objections to the same and taking such action as may be deemed
reasonably appropriate
33.2 To notify the Landlord immediately in writing of any conviction
judgment or finding of any court or tribunal relating to the Tenant
(or if the Tenant is a body corporate any director other officer or
major shareholder of the Tenant) of such a nature as to be likely
to affect the decision of any insurer or underwriter to grant or to
continue insurance of any of the Insured Risks
<PAGE>
34. ADVERTISEMENTS
Not to affix or exhibit or to permit or suffer to be affixed or
exhibited to or upon the external walls windows or other external
parts of the Premises or within one metre from any external door
window or other opening through which it is visible from outside
the Premises any name flag placard sign poster signboard nameplate
sunblind or other advertisement whatsoever without the prior
consent in writing of the Landlord (such consent not to be
unreasonably withheld)
35. PLATE GLASS
To insure and to keep insured the plate glass windows of the
Premises against damage or destruction in some insurance office or
offices or with underwriters of repute to be directed by the
Landlord and to pay all premiums necessary for this purpose within
the usual days of grace after the same shall become due and
whenever required produce to the Landlord or its agent the policy
or several policies of such insurance and the receipts for the
current year's premium and in each case of destruction of or damage
to the plate glass windows with all convenient speed to expend all
moneys received by virtue of such insurance in reinstating the same
and to make up any deficiency out of its own money PROVIDED ALWAYS
that if the Tenant shall fail to make and maintain any such
insurance as aforesaid the Landlord may from time to time at its
discretion effect and keep on foot such insurance and the Tenant
will on demand repay to the Landlord all sums of money expended by
it for that purpose Provided that if the Tenant shall with the
Landlord's agreement (such agreement not to be unreasonably withheld)
first undertake in writing to the Landlord to carry its own plate
glass insurance and the Tenant shall in the event of damage
occurring to the plate glass in the Premises forthwith make good all
damage which shall occur to such plate glass as aforesaid and shall
reinstate the said plate glass on being so damaged with like material
to the reasonable satisfaction of the Landlord then the Landlord will
not enforce this covenant
36. NO AUCTIONS ETC
Not to hang place deposit or expose outside the Premises any goods
articles or thing for sale or otherwise or cause or permit any
obstruction to the entrance passages and other common portions of
the said building and not to hold or permit to be held any sale by
auction on the Premises
37. PLANNING
In relation to the Town and Country Planning Acts 1971 to 1974 and
the Town & Country Planning (Amendment) Act 1977 and the Local
Government Planning and Land Act 1980 and any existing or future
Act or enactment modifying or re-enacting or for similar purposes
to the Acts and any rules regulations orders and directions made or
given thereunder all of which are hereinafter referred to
<PAGE>
collectively as "the Planning Acts" (an application for permission
consent or approval under such Acts being hereinafter referred to
as a "planning application" and "development" having the meaning
assigned thereto in Section 22 of the Town and Country Planning Act
1971 or that meaning as it may be amended or re-enacted from time
to time or any meaning from time to time substituted for that
meanings:-
37.1 COMPLIANCE At all times during the said term including
any statutory continuation thereof to comply with all
requirements of or having validity under the Planning Acts and
with the conditions of any planning permission relating to the
Premises and forthwith upon the receipt of any Notice or Order
or any proposal for the same from a Planning Authority or
Statutory Authority to give full particulars thereof to the
Landlord and if required to produce such Notice Order or
proposal to the Landlord and at the request and cost of the
Landlord to make or join with the Landlord in making such
objections or representations against or in respect of any
Notice Order or proposal that the Landlord shall deem
expedient
37.2 NO DEVELOPMENT Not to make any planning application for
development or carry out or cause to be carried out any
development on the Premises without the prior written contract
of the Landlord such consent not to be unreasonably withheld
37.3 INDEMNITY Except in so far as the Tenant cannot lawfully
contract to do so to pay the whole amount of any levy charge
or imposition assessed or imposed in respect of any
development of the Premises or any permission consent or
approval for such development the payment to be so made as to
ensure that no part thereof shall become or remain longer than
is avoidable recoverable from any person other than the Tenant
or charged or chargeable upon any interest in the Premises
other than that of the Tenant
37.4 TO COMPLETE WORKS
Unless the Landlord otherwise directs in writing to carry out
before the end of the tenancy hereby granted (disregarding any
statutory continuation thereof) any works required to be carried
out to the Premises on or by a date subsequent thereto by reason of
any limitation or condition imposed by a planning permission
consent or approval implemented by or by a person deriving title
through or under or acting on behalf of the Tenant or if the work
cannot lawfully be done before the end of the tenancy as aforesaid
to pay to the Landlord the estimated cost of carrying it out
Provided that if application to the Court has been made for a new
tenancy under Part II of the Landlord and Tenant Act 1954 this
sub-clause shall apply to the date on which the tenancy as
continued under the Act comes to an end and to produce to the
Landlord or its agent when required in writing to do so
<PAGE>
all such drawings documents and other evidence that the provisions
of this covenant have been complied with as either of them may require
38. STATUTORY WORKS
38.1 To execute all such works relating to the Premises as are or may
under or in pursuance of the Offices Shops and Railway Premises Act
1963 the Shops Acts the Factories Acts or any other Act or Acts of
Parliament already or hereafter to be passed or under any bye-law
regulation or order of any competent authority be directed to be done
or required by any County Council or other local or public or Town
Planning Authority to be executed at any time during the said term
upon or in respect of the Premises whether by the Landlord or Tenant
thereof
38.2 At all times hereafter to indemnify the Landlord from and against
all actions proceedings costs losses expenses claims and demands
arising out of any failure by the Tenant to observe or perform any
of its obligations under these presents in relation to the Planning
Acts and non-compliance with all matters referred to in the
preceding sub-clause
39. REINSTATEMENT
On the expiration or sooner determination of the said term to carry
out all such restoration and/or reinstatement of in or upon the
Premises as the Tenant was under obligation to carry out upon or at
any time prior to the determination of the said term
40. LAST SIX MONTHS
40.1 To permit the Landlord during the six months immediately preceding
the determination of the said term (howsoever determined) to affix
and retain without interference upon any part of the Premises but
not so as to obscure any windows of the Premises a notice for
reletting the same and during the said six months and at any time
during the said term in the event of the Landlord wishing to sell
or otherwise deal with its reversion to permit persons with written
authority from the Landlord or its agents at reasonable times of
the day to view the Premises
40.2 To permit the Landlord or its Surveyors or Agents at any reasonable
time or times during ths last six months of the said term to enter
the Premises or any part thereof during reasonable hours in the
daytime and to take schedules or inventories of the fixtures and
things to be yielded up at the expiration or sooner determination
of the said term
41. YIELD UP
To yield up the Premises with all Landlord's fixtures and additions
thereto and the pipes and water and sanitary apparatus thereof at the
determination of the term hereby
<PAGE>
granted in good and substantial and decorative repair and condition in
accordance with the covenants hereinbefore contained
42. COSTS
To pay his own Solicitors costs and disbursements in connection
with this Lease it being agreed that each party shall bear their own
costs.
43. INDEMNITY
To indemnify and keep indemnified the Landlord from liability in
respect of any injury to or the death of any person damage to any
property movable or immovable the infringement disturbance or
destruction of any right easement or privilege or otherwise by reason of
or arising directly or indirectly out of the repair state of repair
condition or any alteration to or to the user hereinbefore permitted of
the Premises and from all proceedings costs claims and demands of
whatsoever nature in respect of any such liability or alleged liability
44. RESPONSIBILITY FOR ACTS OF OTHERS
To be responsible for and to indemnify the Landlord against all
damage occasioned to the Premises or any other part of the building of
which the Premises form part or any adjacent or neighbouring premises or
to any person caused by any act default or negligence of the Tenant or
the servants agents licensees or invitees of the Tenant
45. COVENANTS
To observe and perform the restrictive covenants conditions
stipulations exceptions reservations easements and other matters
referred to or contained in Title number NGL 468360 and to keep the
Landlord indemnified against all actions proceedings costs claims and
demands in any way relating thereto
46. EFFECTS LEFT
The Tenant hereby irrevocably appoints the Landlord to be the
Tenant's agent to store or dispose of any effects left by the Tenant on
or about the Premises after the expiry or sooner determination of the
term (howsoever determined) on any terms which the Landlord in the
Landlords absolute discretion thinks fit without the Landlord being
liable to the Tenant save to account for the net proceeds of sale less
the cost of storage (if any) and any other expenses reasonably incurred
by the Landlord
47. LANDLORDS COVENANTS
THE Landlord HEREBY COVENANTS with the Tenant as follows:
47.1 QUIET ENJOYMENT
That the Tenant paying the rent hereby reserved and performing and
observing the several covenants on his part herein contained shall
peaceably hold and enjoy the Premises during the said term without any
interruption by the Landlord or any person rightfully claiming under or
in trust for the Landlord or by title paramount
<PAGE>
47.2 INSURANCE
47.2.1 To insure and keep insured or cause to be insured the
Building and the Landlord's fixtures and fittings therein in
the name of the Landlord in a sum (including any incidental
expenses) not less than the full reinstatement value
thereof and the cost of site clearance against losses or
damage by the Insured Risks in some insurance office or
underwriters of repute and:-
(a) to supply a summary of such insurance and evidence
of payment of the current premium to the Tenant on
request; and
(b) to procure that a note of the Tenant's interest is
endorsed on the policy; and
(c) to procure from the insurer a Notice of Waiver of its
right of subrogation against the Tenant; and
(d) to notify the Tenant of any alteration or variation
in the terms of the insurance cover within seven
days of such alteration or variation being effected
47.2.2. As often as any part of the Building shall be destroyed or
damaged by any of the Insured Risks (unless payment of any
money payable under any policy of insurance shall be wholly
or partially withheld or refused in consequence of any act,
neglect or default of the Tenant the Tenants Undertenants
or their respective servants agents or licencees) to lay
out all monies received in respect of such insurance with
all convenient speed in rebuilding repairing or otherwise
reinstating the same or in providing such other premises as
the Landlord shall reasonably deem appropriate to replace
the Building so destroyed or damaged
47.3. REPAIR AND MAINTENANCE
47.3.1 To maintain repair and renew
(i) the Main Structure of the Building
(ii) the boundary walls and fences (if any) and the gutters
and rainwater pipes of the Building
(iii) the service conduits serving the Building (other than
those within and serving only the Premises)
<PAGE>
(iv) the entrance halls landings and staircases of the
Building
(v) the means of access and egress over the carpark and
common areas over which the Tenant and other occupiers
are granted rights
(vi) the fire fighting and alarm apparatus and the fire
escapes in the Building
(vii) the boilers air conditioning plant and units radiators
hoists pumps and other apparatus of a like nature
47.3.2. To use all reasonable endeavours to enter into and thereafter
exercise and enforce the benefit of a Roof Guarantee ("the
Guarantee") to be provided by Integrated Polymer Systems
Limited ("the Guarantor") a specimen copy of which Guarantee
is annexed hereto and to inform the Tenant of the date of
installation as referred to in such Guarantee PROVIDED that
for so long as the Landlord shall fail to observe this
covenant the Tenant shall at no time during the term of the
Guarantee be liable to contribute towards the cost of the
maintenance repair or renewal of the roof of the Building in
so far as any such works are the responsibility of the
Guarantor under the Guarantee
47.3.3 So far as practicable to provide for the lighting of and
keeping clean and furnished the common entrance halls landings
staircases fire escapes and other common parts of the Building
and (as appropriate) the carpark area
47.3.4 To keep all the outside parts and all the inside parts (except
in so far as the same may have been demised) of both the
Building and the carpark area painted or otherwise decorated
or treated to the extent and in the manner to which or in
which such parts were prevlously or usually painted decorated
or treated at such intervals as the Landlord reasonably shall
determine all such work to be carried out with good quality
materials and in a good and workmanlike manner
47.3.5 To pay all rates (including water rate) taxes assessments and
outgoings payable in respect of the Building and othe carpark
area save and except other premises comprised therein as shall
be designated for letting
47.3.6 To comply with and ensure due compliance with all fire and
other regulations now or hereafter made by any competent
authority in relation to the Common Parts and the carpark
area
47.4. SERVICES
Unless prevent or restricted by any circumstances beyond its control
the Landlord will as far as practicable provide the services more
particularly referred to in the Third Schedule hereto or procure
that the said services are provided
<PAGE>
47.5. ACCESS
In exercising all rights involving entry to the Premises to cause
(and to ensure that those persons exercising such rights on its
behalf cause) as little damage as is reasonably practicable to the
Premises and as little inconvenience as possible to the occupiers
and immediately to make good any damage to the Premises and to the
Tenant's fixtures fittings and chattels therein
47.6. EXTENSION OF THE BUILDING
The Landlord so as to bind itself and successors-in-title covenants
with the Tenant that the Building shall not any time during the term
hereby created be extended or altered by the construction or erection
of an additional floor on the Building
PROVISOS
PROVIDED ALWAYS and IT IS HEREBY AGREED as follows:-
48. FORFEITURE
It shall be lawful for the Landlord at any time to re-enter
upon the Premises or any part thereof in the name of the whole
and thereupon this demise shall absolutely determine but
without prejudice to any right of action of the Landlord in
respect of any breach of the Tenant's covenants herein
contained:-
48.1 If the rents hereby reserved or any part thereof shall at any
time be unpaid for fourteen days after becoming payable (whether
formally demanded or not) or
48.2 if any covenant on the Tenant's part herein contained shall not
be performed or observed or
48.3 if the Tenant (being a Company) shall enter into liquidation
whether compulsory or voluntary (save for the purpose of
reconstruction or amalgamation) or
48.4 if a Receiver or an Administrative Receiver shall be appointed or
48.5 if the Tenant shall change its status from limited to unlimited
or vice versa or
48.6 if the Tenant shall make any composition or enter into any arrangement
with its creditors or permit any execution to be levied on the
Premises or
48.7 if the Tenant (not being a Company) shall become bankrupt
49. SUSPENSION OF RENT.
In case the Premises or any part thereof or access thereto shall at
any time be destroyed or damaged by any of the Insured Risks so as
to be unfit for occupation or use then (unless the insurance policy
or policies of the Premises shall have been vitiated and payment of
the policy monies avoided either in whole or in part by reason of any
act or default of the Tenant or of any occupier of the Premises
or the Lessee or Occupier of any other part of the Building
of which the premises form part) the rents and service charge hereby
reserved or a fair and just proportion thereof according to the nature
and extent of the damage sustained shall for a period from the date of
such destruction or damage as aforesaid until the Premises
<PAGE>
shall have been rebuilt and reinstated and made fit for
occupation or use be suspended and cease to be payable
PROVIDED that if upon expiry of a period of twenty-four
months commencing on the date of the damage or destruction
the Premises shall not have been rebuilt and reinstated and
made fit for occupation or use then the Landlord or the
Tenant shall be entitled by giving three months notice in
writing to the other to terminate this Lease and upon the
expiration of such notice this Lease shall determine and
absolutely cease but without prejudice to any rights or
remedies that may have accrued to either party against the
other in respect of any breach of any of the covenants and
conditions contained in this Lease.
50. INTEREST
50.1 If any rent or any other money payable by the Tenant to the
Landlord under this Lease shall not be paid on the days upon
which it is due the same shall be payable with interest
thereon at the rate of Three per centum above the base
lending rate of Barclays Bank Plc for the time being in force
calculated on a day to day basis from the said day upon which
it is due down to the date of payment
50.2 In the event that such base rate shall cease to exist then
such other comparable rate of interest shall apply as the
Landlord and the Tenant may from time to time agree or in
default of agreement shall be determined by an Arbitrator
appointed on the application of either party by the President
for the time being of the Institute of Chartered Accountants
in England and Wales in accordance with the Arbitration Acts
1950 to 1979.
51 INHERENT DEFECTS
Nothing in this Lease shall be construed as obliging the
Tenant to remedy any defect in the Premises or to
contribute towards the cost of remedying any defect in the
Building which is attributable to defective design
defective workmanship or defective supervision of the
construction of or the installation of anything in or on
the Premises or the Building PROVIDED THAT for the
avoidance of doubt and without prejudice to the generality
of the foregoing nothing in this Lease shall be construed
as obliging the Tenant to remedy or to contribute towards
the cost of remedying any damp in the floor or walls to
the basement of the Building.
52. COMPENSATION
Except where any statutory provision prohibits the
Tenant's right to compensation being reduced or excluded
by agreement the Tenant shall not be entitled to claim
from the Landlord on quitting the Premises or any part
thereof any compensation under the Landlord and Tenant Act
1954 or any statute modifying or re-enacting the same
53. NOTICES
Any demand or notice under this Lease shall be made or
given in writing by the Landlord or the Landlord's
Solicitor or Agent and served upon the Tenant either
personally or by post addressed to the Tenant at the
address of the Tenant stated in this Lease or at the
address or place of business of the Tenant last known to
the Landlord or
<PAGE>
the Premises A demand or notice so addressed and posted shall
be deemed to be delivered forty-eight hours after posting and
shall be effective notwithstanding that it be returned
undelivered and notwithstanding the death of the Tenant
54. NO WAIVER
The receipt of rent on the part of the Landlord shall not
be and shall not be deemed to be a waiver of any of the
covenants provisions or conditions herein contained and on
the part of the Tenant to be observed and performed
55. INTERPRETATION In this Lease where the context so admits:-
55.1. Words importing the neuter gender include the masculine and
feminine genders;
55.2. Words importing the singular number only include the plural
number and vice versa and where there are two or more
persons included in the expressions "the Tenant" "and the
Guarantor" respectively covenants expressed to be made by the
Tenant and the Guarantor respectively shall be deemed to be
made by such persons jointly and severally;
55.3. The expression "Superior Landlord" shall mean any landlord
(other than the Landlord) holding an estate or interest
in reversion on the Premises or on the said term whether
immediate to the Landlord or otherwise;
55.4 The expression "the Landlord" shall where the context so
admits include the person for the time being entitled to
the reversion immediately expectant on the determination
of the term hereby created;
55.5 The expression "the Tenant" shall where the context so
admits include its successors in title and permitted assigns;
55.6. Such of the division walls as divide the Premises from other
premises of the Landlord shall be deemed to be party walls or
fences and to belong in equal moieties (considered as divided
vertically down the middle throughout the whole length) to the
property on either side thereof
I N W I T N E S S whereof the parties hereto being Companies have caused their
respective Common Seals to be hereunto affixed and the parties hereto being
individuals have set their respective hands and seals the day and year first
above written
THE FIRST SCHEDULE
(Deed recording Rent payable on Review)
THIS DEED is made the ___ day of ___________ 19__ BETWEEN ____________ LIMITED
whose registered office is at _______________________________________
(hereinafter referred to as "the Landlord") of the first part of
________________________________________________________________________
(hereinafter referred to as "the Tenant") of the secont part and of
<PAGE>
______________________________________________________________________________
(hereinafter referred to as "the Guarantor") of the third part
WHEREAS this Deed is supplemental to a Lease (hereinafter referred to as "the
Lease") dated the day of One thousand nine hundred and
and made between the Landlord of the first part the Tenant of
the second part and the Guarantor of the third part whereby the premises
therein described and shortly known as were demised to the Tenant for a term
of years from the day of One thousand nine hundred and
at an annual rent of POUNDS SUBJECT TO revision as
provided for in Clause of the Lease
NOW THIS DEED WITNESSETH as follows :-
1. PURSUANT to Clause of the Lease the Landlord and the
Tenant have agreed that the rent payable by the Tenant from the
expiration of the year of the term created by the
Lease shall be POUNDS per annum in lieu of
POUNDS per annum
2. THE Guarantor HEREBY AGREES to the revision of the rent pursuant to
Clause of the Lease as hereinbefore
THE SECOND SCHEDULE
(GUARANTEE)
The Guarantor[s] at the request of the Assignee and in consideration of the
Licence and consent hereinbefore contained HEREBY [JOINTLY AND SEVERALLY]
COVENANT[S] AND GUARANTEE[S] with and to the Landlord in manner following
that is to say:-
1. That the Assignee shall at all times during the said term duly pay the
respective rents reserved by the Lease at the times and in the matter at and
in which the same are thereby reserved and made payable and duly observe and
perform all the covenants on the part of the Tenant and the conditions
therein contained
2. That the Guarantor[s] will at all times hereafter pay and make good to
the Landlord all losses costs damages and expenses occasioned to the Landlord
by the non-payment of the said rents or any of them or any part thereof or
the breach non-observance or non-performance of any of the said covenants and
conditions as aforesaid And further that any neglect or forbearance on the
part of the Lease in enforcing or giving time to the Assignee for payment of
the said rents or any of them or any part thereof or the observance or
performance of any of the said covenants and conditions shall not in any way
release the/any Guarantor[s] in respect of his [their] liability under the
covenant or guarantee on his part hereinbefore contained
3. That if the Assignee shall be dissolved or (being an individual) shall
become bankrupt and the Liquidator or Trustee in Bankruptcy (as the case may
be) shall disclaim the Lease and if the Landlord shall within three months
after such disclaimer by notice in writing require the Guarantor[s] to accept
a Lease of the Demised Premises for a term commensurate with the
<PAGE>
residue which if there had been no disclaimer would have remained of the term
granted by the Lease at the like rents and containing the like covenants
conditions and provisions (other than the provisions relating to the
Gurantor[s]) in all respects as are reserved by and contained therein (such
new Lease and the rights and liabilities thereunder to take effect from the
date of such disclaimer as aforesaid) then and in such case the Guarantor[s]
shall at his [their] own expense take up such a Lease and deliver a duly
executed Counterpart thereof to the Landlord
4. That if the Landlord shall not require the Guarantor[s] to take a Lease
of the Demised Premises pursuant to sub-clause (iii) above the Guarantor[s]
shall nevertheless upon demand pay to the Landlord a sum equal to the rent
that would have been payable under the Lease but for the disclaimer in
respect of the period from the date of the said disclaimer until the
expiration of three months therefrom or until the Demised Premises shall have
been re-let by the Landlord whichever shall first occur
THIRD SCHEDULE
(SERVICES)
1. Keeping the entrance hall landings passages stairs lifts drains and soil
pipes intended for the common use and service of the occupiers of the
Building in good tenantable and sufficient repair and condition
2. So far as reasonably practicable keeping the entrance hall landings
staircase and passages of the Building clean and properly lit and to cause to
be carried out normal cleaning of the common parts of the Building
3. At all times
a) Supplying hot water to the wash basins in the lavatories of the
Building and
b) between the 1st day of October in one year and the 30th day of April
in the next year or such alterative period as the Landlord may from time to
time reasonably deem necessary and/or desirable using its best endeavours to
maintain an efficient heating system to the demised premises by means of the
existing radiators (if any) and heating plant.
4. Provision maintenance and replacement of fire extinguishing
equipment
5. Provision and replacement of carpets in the common parts of the Building
6. Repair and maintenance of the access road railings gates and parking
area yard
7. Decorating the exterior and common parts and washing down and cleaning
the exterior stonework and brickwork of the Building
8. Compliance with any Act of Parliament Statutory Instrument Order or
Regulation or Local Bye-Law relating to the common parts of the Building
9. Provision of any other service of facility and the making of any other
payment which may reasonably be required for the efficient running of the
Building and the comfort of the Tenant thereof including the provision of a
signwriter for the purpose of displaying in such manner as the Landlord shall
consider appropriate the name of the Tenant in the entrance hall
10. Payment of insurance premiums as required by the Landlord to cover
<PAGE>
10.1 the Building Architects' and Surveyors' fees and loss of rent
against fire and other risks from time to time insured by the Landlord
and/or Superior Landlord
10.2 engineering insurances for lifts boilers and electrical and/or
mechanical equipment installed in the Building
10.3 public liability insurance policies
11. Payment of water rates for the Building
12. Payment of general rates or uniform business rate until such time
as the demised premises are separately assessed
THE FOURTH SCHEDULE
REGULATIONS OF THE BUILDING
1. No tea leaves or other matter or things likely to cause an obstruction
or corrosion are to be placed or thrown in or down the waste pipes or W.C
lavatory basins or urinals
2. All necessary steps shall be taken to prevent the overflow or waste of
hot or cold water
3. The Tenant shall not interfere or permit any interference with the
heating appliances and installations apart from the normal switching on or
off of the appliances in the demised premises for the comfort of the
occupants thereof
4. Apart from any self-operating lifts installed in the Building no person
other than the attendant employed for such purpose shall operate the lifts
5. The Tenant shall not in any circumstances overload or permit any
overloading or other misuse of any of the lifts in the Building
6. The Tenant shall not obstruct or permit any obstruction of or wedge open
the smoke doors in the Building
7. The Tenant shall not obstruct that part of the forecourt shown cross
hatched black on the plan
THE COMMON SEAL of BANTRY INVESTMENTS )
LIMITED was hereunder affixed in )
the presence of:- )
For and on behalf of E. Watkins Director
Finsbury Corporate Services Ltd.
Secretary
FINSBURY SECRETARIES LIMITED
SECRETARIES
Leonard Kasler & Company
20-21 Queenhithe
London EC4V 3DX.
Ref: MDB
Tel: 071 236 1826
Fax: 071 236 3328
DX: 42601 Cheapside
OIS: 0314b
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is entered into as of November 1, 1997,
between MARSHALL BUILDING, L.L.C., a Washington limited liability company
("Lessor"), and PHOTODISC, INC., a Washington corporation ("Lessee"). Lessor
and Lessee agree as follows:
1. LEASE SUMMARY AND EXHIBITS.
1.1. LEASED PREMISES. The leased premises are a portion of the
building commonly known as the Marshall Building located at 2013 Fourth
Avenue, Seattle, Washington 98121 (the "Building") described on EXHIBIT A
attached hereto and incorporated herein by this reference (the "Premises")
that is situated on real property legally described on the attached EXHIBIT B
(the "Property"). The parties agree that the Premises constitute
approximately 37,389 rentable square feet and that the total rentable square
feet in the Building is 46,957.
1.2. LEASE COMMENCEMENT DATE.
This Lease shall commence as of November 1, 1997 (the "Commencement Date").
1.3. LEASE TERMINATION DATE.
This Lease shall terminate at midnight on February 28, 2003, or such earlier or
later date as provided in Section 3 (the "Termination Date").
1.4. BASE RENT.
The base monthly rent shall be $41,980.00 allocated among the Premises on an
annual per square foot basis as described on EXHIBIT C. Rent shall be payable
at Lessor's address shown in Section 1.7, or such other place designated in
writing by Lessor.
1.5. SECURITY DEPOSIT.
Lessee has deposited with Lessor a security deposit of $10,000, receipt of which
is hereby acknowledged. Lessee shall deposit an additional $31,980.00 with
Lessor concurrently with the execution of this Lease as an additional security
deposit so that the total security deposit will be $41,980.00.
1.6. PERMITTED USE.
The Premises shall be used only for retail and wholesale digital photographic
services, other software development services and business use, and similar
business purposes and
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for no other purpose without the prior written consent of Lessor which
consent shall not be unreasonably withheld.
1.7. NOTICE AND PAYMENT ADDRESSES.
LESSOR: Marshal Building, L.L.C. FAX:
5th Floor
Fourth and Blanchard Building
2101 Fourth Avenue
Seattle, Washington, 98121
Attn: Mark Torrance
LESSEE: PhotoDisc, Inc. FAX: 206-441-7379
2013 Fourth Avenue
Seattle, Washington, 98121
Attn: General Counsel
2. PREMISES. Lessor leases to Lessee, and Lessee leases from Lessor
the Premises upon the terms specified in this Lease.
3. TERM.
3.1. COMMENCEMENT DATE. This Lease shall commence on the
Commencement Date specified in Section 1.2 The first "Lease Year" shall
commence on the Commencement Date and shall end on October 31, 1998. Each
successive Lease Year during the initial term and any extension terms shall
be twelve (12) months, commencing on the first day following the end of the
preceding Lease Year, except that the last Lease Year shall end on the
Termination Date.
3.2. LESSEE OBLIGATIONS. Lessee accepts the Premises in the
condition they existed on the Commencement Date. Except as specified
elsewhere in this Lease, Lessor makes no representations or warranties to
Lessee regarding the Premises, including the structural condition of the
Premises and the condition of all mechanical, electrical, and other systems
on the Premises. Lessee shall be responsible for performing any work
necessary to bring the Premises into a condition satisfactory to Lessee. By
signing this Lease, Lessee acknowledges that it has previously been leasing
the Premises and has had adequate opportunity to investigate the Premises,
acknowledges responsibility for making any corrections, alterations and
repairs to the Premises, agrees that it has determined to its satisfaction
that the Premises can be used for the purposes set forth in Section 1.6 and
that such use and the Premises do not conflict with any zoning or other laws,
and waives any right to terminate this Lease if the Premises cannot be used
for such purposes.
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3.3. OPTION TO EXTEND. Provided that no uncured Event of Default
then exists, Lessor grants Lessee the option to extend the term of this Lease
for a period of 5 years commencing the day following the Termination Date,
which option shall be exercisable by Lessee by giving Lessor written notice
at least 180 days prior to the commencement date of the option term. All
terms and conditions of this Lease shall remain in effect during the option
term except that the Rent shall be 95% of the then fair market rent for the
Premises as determined by mutual agreement of Lessor and Lessee, or, if
Lessor and Lessee are unable to agree within 45 days after receipt by Lessor
of Lessee's notice of exercise of its option to extend, as determined by an
independent real estate professional with experience in commercial rental
rates in the area where the Property is located selected by mutual agreement
of Lessor and Lessee. If Lessor and Lessee are unable to agree upon such
individual within 15 days after the expiration of such 45 day period, then
each party shall select a similarly qualified real estate professional within
15 days after the expiration of such first 15 day period and the two
professionals so selected shall select a third similarly qualified
professional. If either party does not select a professional within such
second 15 day period, then the professional selected by the other party shall
make the determination. The determination of fair market rent shall be made
by the individual or group selected within 30 days after their selection. If
it is made by the group it shall be made by majority vote of the group. The
expenses of such determination shall be shared equally by Lessor and Lessee.
Notwithstanding the foregoing, in no event shall the Rent during the
extension term be less than the Rent during the initial term of this Lease
unless Lessor consents in writing to such reduction.
4. RENT.
4.1. PAYMENT OF RENT. Lessee shall pay Lessor without demand,
deduction or offset, in lawful money of the United States, the monthly rental
stated in Section 1.4 in advance on or before the first day of each month
during the Lease term, and any other additional payments due to Lessor
(collectively the "Rent") when required under this Lease. Payments for any
partial month at the beginning or end of the Lease term shall be prorated.
4.2. LATE PAYMENTS. If any sums payable by Lessee to Lessor under
this Lease are not received within ten (10) days after the date due, Lessee
shall pay Lessor in addition to the amount due, for the cost of collecting
and handling such late payment, an amount equal to the greater of $100 or
five percent (5%) of the delinquent amount. In addition, all delinquent sums
payable by Lessee to Lessor, and not paid by the due date shall, at Lessor's
option, bear interest at the rate of twelve percent (12%) per annum, or the
highest rate of interest allowable by law, whichever is less. Interest on
all delinquent amounts shall be calculated from the original due date to the
date of payment.
4.3. NO ACCORD AND SATISFACTION. Lessor's acceptance of less than
the full amount of any payment due from Lessee shall not be deemed an accord
and
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satisfaction or compromise of such payment unless Lessor specifically
consents in writing to payment of such lesser sum as an accord and
satisfaction or compromise of the amount which Lessor claims.
5. SECURITY DEPOSIT. Lessee shall deliver to Lessor the security
deposit specified in Section 1.5. Lessor may commingle the security deposit
with its other funds and Lessor's obligations with respect to the security
deposit are those of a debtor and not a trustee. If Lessee breaches any
covenant or condition of this Lease, including but not limited to the payment
of Rent, Lessor may apply all or any part of the security deposit to the
payment of any sum in default and any damage suffered by Lessor as a result
of Lessee's breach. In such event, Lessee shall, upon demand, deposit with
Lessor the sum necessary to restore the security deposit to the amount
initially deposited with Lessor. Any payment to Lessor from the security
deposit shall not be construed as a payment of liquidated damages for any
default. If Lessee complies with all of the covenants and conditions of this
Lease throughout the Lease term or cures any default hereunder within the
applicable cure period, the security deposit shall be repaid to Lessee
without interest within thirty (30) days after the vacation of the Premises
by Lessee.
6. USES. The Premises shall be used only for the uses specified in
Section 1.6 (the "Permitted Use"), and for no other business or purpose
without the prior written consent of Lessor which consent shall not be
unreasonably withheld. Lessee shall not do any act on or around the Premises
or Property that is unlawful or that will cause an increase in the existing
rate or cancellation of insurance on the Premises. Lessee shall not commit
or allow to be committed any waste upon the Premises or Property, or any
public or private nuisance nor shall Lessee do anything that may be dangerous
to life or limb or that will cause damage to the Premises or overload any
floor or part thereof, or permit any objectionable noise or odor to escape or
be done on the Premises. No safe or other article of over 5,000 pounds shall
be moved into the Premises without the prior written consent of Lessor, and
Lessor shall have the right to direct where to locate the position of any
article of weight in the Premises if Lessor so desires.
7. COMPLIANCE WITH LAWS. Lessee shall not cause or permit the
Premises to be used in any way which violates any law, ordinance, or
governmental regulation or order or certificate of occupancy issued for the
Premises. Lessee shall be responsible for complying with all laws applicable
to the Premises as a result of Lessee's particular use, such as modifications
required by the Americans With Disabilities Act related to the Premises or
access to the Premises. If the enactment or enforcement of any law,
ordinance, regulation or code during the Lease term requires changes to the
Premises during the Lease term, Lessee shall perform all such changes at its
expense.
8. UTILITIES. Lessor shall not be responsible for providing any
utilities to the Premises, but represents and warrants to Lessee that as of
the Commencement Date electricity, water, sewer, and telephone utilities are
available at or adjacent to the
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<PAGE>
Premises. Lessee has determined that the available capacity of such
utilities meets Lessee's needs. Lessee shall install and connect, if
necessary, and directly pay for all water, sewer, gas, janitorial,
electricity, garbage removal, heat, telephone, and other utilities and
services used by Lessee on the Premises during the term of this Lease,
whether or not such services are billed directly to Lessee. Lessee will also
procure, or cause to be procured, without cost to Lessor, all necessary
permits, licenses or other authorizations required for the lawful and proper
installation, maintenance, replacement, and removal on or from the Premises
of wires, pipes, conduits, tubes, and other equipment and appliances for use
in supplying all utilities or services to the Premises. Lessor, upon request
of Lessee, and at the sole expense and liability of Lessee, shall join with
Lessee in any application required for obtaining or continuing such utilities
or services.
9. TAXES.
9.1. PAYMENT OF TAXES. During the lease term, Lessee shall pay
Lessee's prorata share of Taxes (as defined in Section 9.2) based upon the
ratio of the rentable square feet of the Premises to the total rentable
square feet in the Building. Lessee shall pay such amount together with Taxes
collected by Lessee from other tenants in the Building pursuant to its duties
under Section 34 at least twenty (20) days prior to their due date. Lessee
shall promptly furnish Lessor with satisfactory evidence that Taxes have been
paid. If any Taxes paid by Lessee cover any period of time before or after
the expiration of the term of this Lease, Lessee's share of those Taxes paid
will be prorated to cover only the period of time within the tax fiscal year
during which this Lease was in effect, and Lessor shall promptly reimburse
Lessee to the extent required. If Lessee fails to timely pay any Taxes,
Lessor may pay them, and Lessee shall repay such amount to Lessor with
Lessee's next installment of Rent.
9.2. DEFINITION OF TAXES. The term "Taxes" shall mean: (i) any
form of real estate tax or assessment imposed on the Premises by any
authority, including any city, state or federal government, or any
improvement district, as against any legal or equitable interest of Lessor or
Lessee in the Premises or in the real property of which the Premises are a
part or against rent paid for leasing the Premises; and (ii) any form of
personal property tax or assessment imposed on any personal property,
fixtures, furniture, Lessee improvements, equipment, inventory, or other
items, and all replacements, improvements, and additions to them, located on
the Premises, whether owned by Lessor or Lessee. "Taxes" shall not include
any net income tax imposed on Lessor for income that Lessor receives under
this Lease.
9.3. TAX CONTESTS. Lessee may contest the amount or validity, in
whole or in part, of any Taxes at its sole expense, only after paying such
Taxes or posting such security as Lessor may reasonably require in order to
protect the Premises against loss or forfeiture. Upon the termination of any
such proceedings, Lessee shall pay the amount of such Taxes or part of such
Taxes as finally determined, together with any
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costs, fees, interest, penalties, or other related liabilities. Lessor shall
cooperate with Lessee in contesting any Taxes, provided Lessor incurs no
expense or liability in doing so.
10. ALTERATIONS. Lessee shall not make any alterations, additions or
improvements to the Premises ("Alterations") without the prior written
consent of Lessor. The term "Alterations" shall not include the installation
of shelves, movable partitions, Lessee's equipment, wiring and cabling that
do not affect structural components of the Building, and trade fixtures which
may be performed without damaging existing improvements or the structural
integrity of the Premises or Building, and Lessor's consent shall not be
required for Lessee's installation of those items. Lessee shall complete all
Alterations at Lessee's expense in compliance with all applicable laws and in
accordance with plans and specifications approved by Lessor, and using
contractors approved by Lessor. Lessor shall be deemed the owner of all
Alterations, without compensation to Lessee, except for those which Lessor
requires to be removed at the end of the Lease term. Lessee shall remove all
Alterations prior to the end of the Lease term (including, without
limitation, Alterations that were constructed under the Prior Lease as
defined in Section 35.3 that Lessor requests to be removed up to a maximum
cost for such removal of $20,000) unless Lessor conditioned its consent upon
Lessee leaving a specified Alteration at the Premises, in which case Lessee
shall not remove such Alteration. Lessee, at its sole expense, shall
immediately repair any damage to the Premises caused by removal of
Alterations. Lessor hereby approves the Alternations described on EXHIBIT D
attached hereto and incorporated herein by this reference and requires
removal of those designated for removal on such Exhibit.
11. REPAIRS AND MAINTENANCE; COMMON PROJECT COSTS.
11.1. REPAIR AND MAINTENANCE. Lessee shall, at its sole expense,
maintain the interior of the Premises in good condition, subject to
reasonable wear and tear, and promptly make all repairs and replacements,
whether structural or non-structural, necessary to keep the Premises in safe
operating condition, including all utilities and other systems serving the
Premises. Lessee shall not damage any demising wall or disturb the
structural integrity of the Premises and shall promptly repair any damage or
injury done to any such demising walls or structural elements caused by
Lessee or its employees, agents, contractors, subtenants or invitees.
Notwithstanding anything in this Section to the contrary, Lessee shall not be
responsible for any repairs to the Premises made necessary by the negligent
acts of Lessor or its agents, employees, contractors or invitees therein.
Lessor shall in no event be liable to Lessee for any loss or damage caused by
or resulting from any variation, interruption or failure of utility services
due to any cause whatsoever. No temporary interruption or failure of such
services incident to the making of repairs, alterations, or improvements, or
due to accident or strike or conditions or events not under Lessor's control
shall be deemed an eviction of Lessee or relieve Lessee from any of Lessee's
obligations under this Lease.
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LEASE TORRANCE PHOTODISC PAGE 6 OF 24
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11.2. COMMON PROJECT COSTS. Lessee covenants and agrees to pay to
Lessor, as additional monthly Rent, its pro rata share (based upon the ratio
of the rentable square feet of the Premises to the total rentable square feet
in the Building ) of all estimated "Project Operating Costs" for each
calendar year which falls in whole or in part within the term of this Lease,
prorated for any partial calendar year at the beginning or end of the term of
this Lease, such additional rent to be paid at the same time and on the same
terms as base Rent. For purposes of this Lease, "Project Operating Costs"
which are recoverable by Lessor from Lessee as additional Rent shall include,
without limitation, all reasonable expenses of Lessor for maintaining,
operating, and repairing the Building and the Property, and the personal
property used in connection therewith, including utilities, customary
management fees and other expenses (except any operating costs which are
billed directly to Lessee by the service provider) which in accordance with
generally accepted accounting and management practices would be considered an
expense of maintaining, operating or repairing the Building or the Property.
Notwithstanding anything in this Section 11, Lessee is not responsible for
the following which Lessor shall maintain in good condition and repair at
Lessor's expense unless repair is necessitated by the negligence or wrongful
acts of Lessee or its employees, agents, contractors, subtenants or
invitees.: (i) the parapet and roof, (ii) HVAC annual maintenance agreements
and capital replacements up to a maximum cost to Lessor of $3,000 unless
Lessor agrees otherwise, (iii) electrical vault upgrade if required by the
City of Seattle as long as such upgrade is not required because of Lessee's
load increases and (iv) structural reinforcement to the Building if required
because of City of Seattle Code changes.
12. SURRENDER OF PREMISES. Upon expiration of the Lease term whether
by lapse of time or otherwise, Lessee shall promptly and peacefully surrender
the Premises, together with all keys, to Lessor in as good condition as when
received by Lessee from Lessor or as thereafter improved, reasonable wear and
tear excepted. The delivery of keys to any employee of Lessor or to Lessor's
agent or any employee thereof shall not be sufficient to constitute a
termination of this Lease or a surrender of the Premises.
13. ACCESS. After reasonable notice from Lessor (except in cases of
emergency, where no notice is required) Lessee shall permit Lessor and its
agents and employees to enter the Premises at all reasonable times for the
purposes of repair or inspection. This Section shall not impose any repair
or other obligation upon Lessor not expressly stated elsewhere in this Lease.
After reasonable notice to Lessee, Lessor shall have the right to enter the
Premises for the purpose of showing the Premises to prospective purchasers or
lenders at any time, and to prospective lessees within one hundred eighty
(180) days prior to the expiration or sooner termination of the Lease term.
14. SIGNAGE. Lessee shall obtain Lessor's written consent before
installing any signs upon the Premises. Lessee shall install any approved
signage at Lessee's sole
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expense and in compliance with all applicable laws. Lessee shall not damage
or deface the Premises when installing or removing signage and shall repair
any injury or damage to the Premises caused by such installation or removal.
15. LOCKS. Lessee has keys to the Premises and at the termination of
this Lease, Lessee shall surrender to Lessor all keys to the Premises whether
paid for or not. Lessor or its agents may retain a passkey to the Premises
to allow access to the Premises in accordance with Section 13. Lessee, at
Lessee's cost, shall provide Lessor with one copy of each key relating to the
Premises and space therein.
16. TELEPHONE SERVICE. If Lessee desires telephonic or other electric
connection that affect any of the structural components of the Building,
Lessor shall direct the electricians as to where and how the wires are to be
introduced, and without such directions no boring or cutting for wires or
installation thereof will be permitted.
17. DESTRUCTION OR CONDEMNATION.
17.1. DAMAGE AND REPAIR.
17.1.1. REPAIR. If (a) all or part of the Premises or the
Building are damaged or destroyed or (b) Lessee's access ("Access") to the
Building, Premises, parking area or any common areas of the Building to
which Lessee must have access for the continuing use and occupancy of the
Premises is materially obstructed or hindered, and Lessor, in good faith,
estimates the time required to repair the damage and destruction and
restore the Building or the Premises to their condition existing
immediately prior to the damage, including all leasehold improvements that
were completed at Lessor's cost and expense, is less than one hundred and
eighty (180) days, then to the extent such repair is covered by insurance
carried by Lessor, Lessor shall substantially complete (i) repair and
restoration of the damage and destruction, including, at Lessor's sole cost
and expense, all leasehold improvements that were completed at Lessor's
cost and expense and/or (ii) restoration of Access. Lessor's estimate of
the time required to repair shall be given within thirty (30) days after
the damage or destruction. If Lessor's estimate of the time required for
repair exceeds one hundred and eighty (180) days, either party shall have
the right to terminate this Lease by giving notice to the other party
within thirty (30) days after receipt of the estimate.
17.1.2. COMPLETION OF WORK; ABATEMENT. If Lessor restores the
Premises under this Section 17.1., Lessor shall proceed with reasonable
diligence to complete the work, and the base monthly Rent shall be abated
in the same proportion as the untenantable portion of the Premises bears to
the whole Premises based upon the portion of the Premises destroyed and the
per square foot
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annual rent for that portion set forth on EXHIBIT C, provided that there
shall be a rent abatement only if the damage or destruction of the
Premises did not result from, or was not contributed to, directly or
indirectly, by the act, fault or neglect of Lessee or Lessee's officers,
contractors, licensees, agents, servants, employees, guests, invitees,
subtenants or visitors. If Lessor complies with its obligations under
this Section, no damages, compensation or claim shall be payable by
Lessor for inconvenience, loss of business or annoyance directly,
indirectly, incidentally or consequentially arising from any repair or
restoration of any portion of the Premises. Lessor will not carry
insurance of any kind for the protection of Lessee or on any
improvements paid for by Lessee or on Lessee's furniture or on any
fixtures, equipment, improvements or appurtenances of Lessee under this
Lease, and Lessor shall not be obligated to repair any damage thereto or
replace the same unless the damage is caused solely by Lessor's
negligence.
17.1.3. TERMINATION. If either party exercises its termination
right under this Section 17.1, the Lease shall terminate on the date
specified in the termination notice. Rent shall be payable to the
termination date less any abatement.
17.1.4. DELAY IN COMPLETING REPAIR. If Lessor does not
substantially complete repair and restoration of any damage or destruction,
or does not restore Access within sixty (60) days after the expiration of
the period for the repair estimated by Lessor, unless such failure to
complete repair and restoration is for reasons that are outside of the
control of Lessor, Lessee shall have the right to terminate this Lease by
giving written notice to Lessor within thirty (30) days after the
expiration of such sixty (60) day period, unless the repairs are completed
prior to the expiration of such thirty (30) day period after Lessee's
notice.
17.1.5. FINAL YEAR OF TERM. If the damage or destruction or
loss of Access occurs during the last year of the term of this Lease,
either party may terminate this Lease by giving notice to the other party.
17.2. CONDEMNATION. If all of the Premises is made untenantable by
eminent domain or conveyed under a threat of condemnation, this Lease shall
automatically terminate as of the earlier of the date title vests in the
condemning authority or the condemning authority first has possession of the
Premises and all Rents and other payments shall be paid to that date. In
case of taking of a part of the Premises that does not render the Premises
entirely untenantable, then this lease shall continue in full force and
effect and the base monthly Rent shall be equitably reduced based on the
proportion by which the floor area of the Premises is reduced and the per
square foot annual rent for that floor area set forth on EXHIBIT C, such
reduction in Rent to be effective as of the earlier of the date the
condemning authority first has possession of such portion or title
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vests in the condemning authority. Lessor shall be entitled to the entire
award from the condemning authority attributable to the value of the Premises
and Lessee shall make no claim for the value of its leasehold. Lessee shall
be permitted to make a separate claim against the condemning authority for
moving expenses or damages resulting from interruption in its business,
provided that in no event shall Lessee's claim reduce Lessor's award.
18. INSURANCE.
18.1. LIABILITY INSURANCE. During the Lease term Lessee shall pay
for and maintain commercial general liability insurance with broad form
property damage and contractual liability endorsements. This policy shall
name Lessor as an additional insured, and shall insure Lessee's activities
and those of Lessee's employees, officers, contractors, licensees, agents,
servants, employees, guests, invitees, subtenants or visitors with respect to
the Premises against loss, damage or liability for personal injury or death
or loss or damage to property with a combined single limit of not less than
$2,000,000, and a deductible of not more than $5,000. The insurance will be
noncontributory with any liability insurance carried by Lessor.
18.2. CASUALTY INSURANCE. During the Lease term, Lessee shall
pay for and maintain all-risk coverage casualty insurance for the Premises,
including loss of income insurance for Lessor's benefit in the initial amount
of $3,200,000, in an amount sufficient to prevent Lessor or Lessee from
becoming a co-insurer under the terms of the policy, and in an amount not
less than the replacement cost of the Premises, with a deductible of not more
than $5,000. The casualty insurance policy shall name Lessee as the insured
and Lessor and Lessor's lender(s) as additional insureds, with loss payable
to Lessor, Lessor's lender(s), and Lessee as their interests may appear. In
the event of a casualty loss on the Premises, Lessor may apply insurance
proceeds under the casualty insurance policy in the manner described in
Section 17.1.
18.3. MISCELLANEOUS INSURANCE REQUIREMENTS. If required by
Lessor, Lessee shall also obtain business interruption insurance issued in a
form and by an insurer satisfactory to Lessor. Insurance required under this
Section shall be with companies rated A-XV or better in Best's Insurance
Guide, and which are authorized to transact business in the State of
Washington. No insurance policy shall be canceled or reduced in coverage and
each such policy shall provide that it is not subject to cancellation or a
reduction in coverage except after thirty (30) days' prior written notice to
Lessor. Lessee shall deliver to Lessor upon request, copies or certificates
of the insurance policies required by this Section. In no event shall the
limit of such policies be considered as limiting the liability of Lessee
under this Lease.
18.4. WAIVER OF SUBROGATION. Lessor and Lessee hereby release each
other, their agents and employees, from responsibility for, and waive their
entire claim of recovery for any loss or damage arising from any cause
covered by insurance
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required to be carried by each of them under this Lease. Each party shall
provide notice to the insurance carrier or carriers of this mutual waiver of
subrogation, and shall cause its respective insurance carriers to waive all
rights of subrogation against the other. This waiver shall not apply to the
extent of the deductible amounts to any such policies or to the extent of
liabilities exceeding the limits of such policies.
19. ASSIGNMENT AND SUBLETTING.
19.1. RESTRICTION ON TRANSFER. Lessee shall not sell, assign,
sublet, mortgage, encumber or otherwise transfer by operation of law or
otherwise any interest in this Lease (collectively referred to as a
"Transfer") or any part of the Premises, without first obtaining Lessor's
written consent which shall not be unreasonably withheld or delayed. No
Transfer shall relieve Lessee of any liability under this Lease
notwithstanding Lessor's consent to such Transfer. Consent to any Transfer
shall not operate as a waiver of the necessity for Lessor's consent to any
subsequent Transfer. Lessee shall by written notice advise Lessor of its
desire from and after a stated date (which shall be not less than thirty (30)
days nor more than ninety (90) days after the date of Lessee's notice), to
Transfer the Premises or any portion thereof for any part of the term hereof.
Lessee's notice shall state the name and address of the proposed transferee
and the proposed rent and any other amounts payable and Lessee shall deliver
to Lessor a true and complete copy of the proposed document of Transfer with
such notice. In addition to its other rights, in such event Lessor shall
have the right, to be exercised by giving written notice to Lessee within ten
(10) days after the receipt of Lessee's notice, (i) to consent to the
Transfer, but require Lessee to pay to Lessor one-half of the amount received
by Lessee from the transferee (net of all reasonable expenses incurred by
Lessee to effect the Transfer) in excess of the amounts payable by Lessee to
Lessor for the portion of the Premises described in Lessee's notice, or (ii)
to terminate this Lease as to such portion of the Premises and such notice
shall, if given, terminate this Lease with respect to the portion of the
Premises therein described as of the date stated in Lessor's response to
Lessee's notice. If such notice shall specify all of the Premises and Lessor
shall give such termination notice with respect thereto, this Lease shall
terminate on the date stated in Lessor's response to Lessee's notice. If,
however, this Lease shall terminate pursuant to the foregoing with respect to
less than all the Premises, the Rent shall be equitably reduced based on the
proportion by which the floor area of the Premises is reduced and the per
square foot annual rent for that floor area as set forth on EXHIBIT C, and
this Lease as so amended shall continue thereafter in full force and effect.
19.2. CHANGES IN ENTITIES. Notwithstanding anything contained in
this Lease to the contrary, Lessor hereby consents to Transfer to (a) the
parent of Lessee or to a wholly owned subsidiary of Lessee or of such parent;
(b) a corporation into which or with which Lessee may be merged or
consolidated provided that the net worth of the resulting corporation is at
least equal to the greater of (i) the net worth of Lessee on the date hereof
or (ii) the net worth of Lessee immediately prior to such merger or
consolidation; or (c) to any entity to whom Lessee sells all, or
substantially all, of its
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assets, provided that such entity expressly assumes all of Lessee's
obligations hereunder and meets the net worth requirement of Section (b) of
this Section 19.2. In addition, notwithstanding anything contained in this
Lease to the contrary, if Lessee conducts a public offering of its stock,
such transaction shall not be deemed a Transfer. Lessor further acknowledges
that Lessee has entered into a transaction in which Lessee, through a merger
and related recapitalization transaction with Getty Communications, Inc. and
its affiliates, will become a wholly owned subsidiary of Getty Images, Inc.,
a Delaware corporation. Lessor consents to the consummation of such
transaction and such transaction shall not be a Transfer.
19.3. CONDITION TO TRANSFER. As a condition to Lessor's approval,
if given, any potential assignee or sublessee otherwise approved by Lessor
shall assume all obligations of Lessee under this Lease and shall be jointly
and severally liable with Lessee and any guarantor, if required, for the
payment of Rent and performance of all terms of this Lease. In connection
with any Transfer, Lessee shall provide Lessor with copies of all
assignments, subleases and assumption instruments.
20. INDEMNIFICATION.
20.1. LESSEE'S INDEMNITY. Lessee shall indemnify, defend and hold
Lessor harmless from all liabilities, damages, costs, and expenses, including
reasonable attorneys' fees, arising from Lessee's use of the Premises or
Property or conduct of its business or the business of its subtenants, from
any activity, work or thing done, permitted or suffered by Lessee in or about
the Premises or Property, from any breach or default in the performance of
any obligation to be performed by Lessee under the terms of this Lease, or
from any act or omission of Lessee or Lessee's officers, contractors,
licensees, agents, servants, employees, guests, invitees, subtenants or
visitors. Lessee, as a material part of the consideration to Lessor, hereby
assumes all risk of damage to property or injury to persons in, upon or about
the Premises from any cause whatsoever, except that which is caused by the
negligence of Lessor or the failure of Lessor to observe any of the terms and
conditions of this Lease where such failure of Lessor has persisted for an
unreasonable period of time after written notice of such failure. In case
any action or proceeding is brought against Lessor by reason of any claim
described in this Section, Lessee upon notice from Lessor, shall defend the
same at Lessee's expense, by counsel reasonably approved in writing by Lessor.
20.2. LESSOR LIMITATION OF LIABILITY. Neither Lessor nor any
partner, director, member, officer, manager, agent or employee of Lessor
shall be liable to Lessee, or its directors, officers, shareholders, agents,
employees, invitees, subtenants or licensees, for any loss, injury or damage
to Lessee or any other person, or to its or their property, irrespective of
the cause of such injury, damage or loss, unless and then only to the extent
it is caused by or resulting from the negligence or willful misconduct of
Lessor or its employees without contributory negligence on the part of Lessee
or any of its employees, agents or contractors or any other lessees or
occupants of the Building.
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21. LIENS. Lessee shall keep the Premises free from any liens created
by or through Lessee. Lessee shall indemnify and hold Lessor harmless from
liability from any such liens including, without limitation, liens arising
from any Alterations. If a lien is filed against the Premises by any person
claiming by, through or under Lessee, Lessee shall, upon request of Lessor,
at Lessee's expense, immediately furnish to Lessor a bond in form and amount
requested by Lessor and issued by a surety satisfactory to Lessor,
indemnifying Lessor and the Premises against all liabilities, costs and
expenses, including attorneys' fees, which Lessor could reasonably incur as a
result of such lien(s). If Lessee shall not, within twenty (20) days
following the imposition of any such lien, cause the same to be released of
record or furnish such bond, Lessor shall, in addition to all other remedies
provided herein and by law, have the right, but not the obligation, to cause
the same to be released by such means as Lessor deems proper, including
payment of the claim giving rise to such lien. All such sums paid by Lessor
and all expenses incurred by it in connection therewith shall be considered
additional Rent and shall be payable to it by Lessee on demand with interest
at the rate of twelve percent (12%) per annum from the date such sums and
expenses were paid by Lessor until paid by Lessee.
22. DEFAULT. The following occurrences shall each be deemed an Event
of Default by Lessee:
22.1. FAILURE TO PAY. Lessee fails to pay any sum, including Rent,
due under this Lease within ten (10) days after notice from Lessor of the
failure to pay.
22.2. ABANDONMENT. Lessee abandons the Premises (defined as an
absence of five (5) days or more while Lessee is in breach of some other term
of this Lease). Lessee's abandonment of the Premises shall not be subject to
any notice or right to cure.
22.3. INSOLVENCY. Lessee becomes insolvent, voluntarily or
involuntary bankrupt or a receiver, assignee or other liquidating officer is
appointed for Lessee's business' provided that in the event of any
involuntary bankruptcy or other insolvency proceeding, the existence of such
proceeding shall constitute an Event of Default only if such proceeding is
not dismissed or vacated within sixty (60) days after its institution or
commencement.
22.4. LEVY OR EXECUTION. Lessee's interest in this Lease or the
Premises, or any part thereof, is taken by execution or other process of law
directed against Lessee, or is taken upon or subjected to any attachment by
any creditor of Lessee, if such attachment is not discharged within fifteen
(15) days after being levied.
22.5. OTHER NON-MONETARY DEFAULTS. Lessee breaches any agreement,
term or covenant of this Lease other than one requiring the payment of money
and not otherwise enumerated in this Section, and the breach continues for a
period of thirty (30) days after notice by Lessor to Lessee of the breach
provided that if such breach
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cannot reasonably be cured within such thirty (30) day period, an Event of
Default shall not exist if Lessee commences cure within such thirty (30) day
period and diligently proceeds with a cure, provided further, that if the
cure is not completed within ninety (90) days after notice by Lessor to
Lessee, an Event of Default shall exist.
23. REMEDIES ON DEFAULT. Lessor shall have the following remedies upon
an Event of Default. Lessor's rights and remedies under this Lease shall be
cumulative, and none shall exclude any other right or remedy allowed by law.
23.1. TERMINATION OF LEASE. Lessor may terminate Lessee's
interest under this Lease, but no act by Lessor other than written notice
from Lessor to Lessee of termination shall terminate this Lease. This Lease
shall terminate on the date specified in the notice of termination. Upon
termination of this Lease, Lessee will remain liable to Lessor for damages in
an amount equal to the Rent and other sums that would have been owing by
Lessee under this Lease for the balance of the Lease term, less the net
proceeds, if any, of any reletting of the Premises by Lessor subsequent to
the termination, after deducting all Lessor's Reletting Expenses (as defined
in Section 23.2). Lessor shall be entitled to either collect damages from
Lessee monthly on the days on which Rent or other amounts would have been
payable under this Lease, or alternatively, Lessor may accelerate Lessee's
obligations under this Lease and recover from Lessee: (i) unpaid Rent which
had been earned at the time of termination; (ii) the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of Rent loss that Lessee proves could reasonably
have been avoided; (iii) the amount by which the unpaid Rent for the balance
of the term of this Lease after the time of award exceeds the amount of Rent
loss that Lessee proves could reasonably be avoided (discounting such amount
by the discount rate of the Federal Reserve Bank of San Francisco at the time
of the award, plus 1%); and (iv) any other amount necessary to compensate
Lessor for all the detriment proximately caused by Lessee's failure to
perform its obligations under this Lease, or which in the ordinary course
would be likely to result from the Event of Default, including without
limitation Reletting Expenses described in Section 23.2.
23.2. RE-ENTRY AND RELETTING. Lessor may continue this Lease in
full force and effect, and without demand or notice, reenter and take
possession of the Premises or any part thereof, expel Lessee from the
Premises and anyone claiming through or under Lessee, and remove the personal
property of either. Lessor may relet the Premises, or any part of them, in
Lessor's or Lessee's name for the account of Lessee, for such period of time
and at such other terms and conditions, as Lessor, in its discretion, may
determine. Lessor may collect and receive the Rents for the Premises.
Re-entry or taking possession of the Premises by Lessor under this Section
shall not be construed as an election on Lessor's part to terminate this
Lease, unless a written notice of termination is given to Lessee. Lessor
reserves the right following any re-entry or reletting, or both, under this
Section to exercise its right to terminate this Lease. During the Event of
Default, Lessee will pay Lessor the Rent and other sums which would be
payable under
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this Lease if repossession had not occurred, less the proceeds received by
Lessor, if any, from reletting the Premises net of Lessor's Reletting
Expenses. "Reletting Expenses" is defined to include all expenses incurred
by Lessor in connection with reletting the Premises, including without
limitation, all repossession costs, brokerage commissions, attorneys' fees,
remodeling and repair costs, costs for removing and storing Lessee's property
and equipment, and rent concessions granted by Lessor to any new Lessee,
prorated over the life of the new lease.
23.3. WAIVER OF REDEMPTION RIGHTS. Lessee, for itself, and on
behalf of any and all persons claiming through or under Lessee, including
creditors of all kinds, hereby waives and surrenders all rights and
privileges which they may have under any present or future law, to redeem the
Premises or to have a continuance of this Lease for the Lease term, as it may
have been extended, after an Event of Default.
23.4. NONPAYMENT OF ADDITIONAL RENT. All costs which Lessee
agrees to pay to Lessor pursuant to this Lease shall in the event of
nonpayment be treated as if they were payments of Rent, and Lessor shall have
all the rights herein provided for in case of nonpayment of Rent.
23.5. FAILURE TO REMOVE PROPERTY. If Lessee fails to remove any
of its property from the Premises at Lessor's request following an Event of
Default, Lessor may, at its option, remove and store the property at Lessee's
expense and risk. If Lessee does not pay the storage cost within five (5)
days of Lessor's request, Lessor may, at its option, have any or all of such
property sold at public or private sale (and Lessor may become a purchaser at
such sale), in such manner as Lessor deems proper, without notice to Lessee.
Lessor shall apply the proceeds of such sale: (i) to the expense of such
sale, including reasonable attorneys' fees actually incurred; (ii) to the
payment of the costs or charges for storing such property; (iii) to the
payment of any other sums of money which may then be or thereafter become due
Lessor from Lessee under any of the terms hereof; and (iv) the balance, if
any, to Lessee. Nothing in this Section shall limit Lessor's right to sell
Lessee's personal property as permitted by law to foreclose Lessor's lien for
unpaid Rent.
24. LESSOR'S MORTGAGES. Lessor may mortgage, or grant deeds of trust
with respect to the Premises or the Property. Lessee shall within ten (10)
days after request by Lessor deliver an executed and acknowledged instrument
amending this Lease in such respects as may be required by any present or
future mortgagee, provided that such amendment does not materially alter or
impair Lessee's rights or remedies under this Lease or increase its rental
burdens.
This Lease shall automatically be subordinate to any mortgage or deed of
trust created by Lessor which is now existing or hereafter placed upon the
Premises including any advances, interest, modifications, renewals, replacements
or extensions thereof ("Lessor's Mortgage"), provided the holder of any Lessor's
Mortgage or any person(s)
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acquiring the Premises at any sale or other proceeding under any such
Lessor's Mortgage shall elect to continue this Lease in full force and
effect. Lessee shall attorn to the holder of any Lessor's Mortgage or any
person(s) acquiring the Premises at any sale or other proceeding under any
Lessor's Mortgage provided such person(s) assume the obligations of Lessor
under this Lease. Lessee shall promptly and in no event later than fifteen
(15) days execute, acknowledge and deliver documents which the holder of any
Lessor's Mortgage may reasonably require as further evidence of this
subordination and attornment. Notwithstanding the foregoing, Lessee's
obligations under this Section are conditioned on the holder of each of
Lessor's Mortgage and each person acquiring the Premises at any sale or other
proceeding under any such Lessor's Mortgage not disturbing Lessee's occupancy
and other rights under this Lease, so long as no uncurred Event of Default
exists.
25. NON-WAIVER. No waiver of any right under this Lease shall be
effective unless contained in a writing signed by a duly authorized officer
or representative of the party sought to be charged with the waiver. No
waiver by Lessor of a breach by Lessee of any covenant or condition of this
Lease shall be construed to be a waiver of any subsequent breach of the same
or any other covenant or condition. The acceptance by Lessor of Rent or other
amounts due from Lessee hereunder shall not be deemed to be a waiver of any
breach by Lessee preceding such acceptance or any other right of Lessor
arising under this Lease.
26. HOLDOVER. If Lessee shall, without the written consent of Lessor,
hold over after the expiration or termination of the Lease term, such tenancy
shall be deemed to be on a month-to-month basis and may be terminated
according to Washington law. During such tenancy, Lessee shall be bound by
all of the terms, covenants and conditions of this Lease except that Lessee
agrees to pay to Lessor 150% of the rate of rental last payable under this
Lease, unless a different rate is agreed upon by Lessor. If Lessee fails to
surrender the Premises at the expiration of the term of this Lease, Lessee
shall indemnify and hold Lessor harmless from and against all loss or
liability resulting from such holding over. Lessee further acknowledges that
during any agreed upon month-to-month tenancy, Lessor may be attempting to
relet the Premises. Lessee agrees to cooperate with Lessor in connection
with such reletting and Lessee further acknowledges Lessor's statutory right
to terminate this Lease with proper notice.
27. NOTICES. All notices under this Lease shall be in writing and
effective (i) when delivered in person, (ii) three (3) business days after
being sent by registered or certified mail to Lessor or Lessee, as the case
may be, at the Notice Addresses set forth in Section 1.7; or (iii) upon
confirmed transmission by facsimile to such persons at the facsimile numbers
set forth in Section 1.7 or such other addresses/facsimile numbers as may
from time to time be designated by such parties in writing. If required by
any lender of Lessor, Lessee agrees that any notice sent to Lessor shall be
concurrently sent to such lender at any address(es) of which Lessee is
notified.
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28. COSTS AND ATTORNEYS' FEES. If Lessee or Lessor engage the services
of an attorney to collect monies due or to bring any action for any relief
against the other, declaratory or otherwise, arising out of this Lease,
including any action by Lessor for the recovery of Rent or other payments or
for possession of the Premises, the losing party shall pay the substantially
prevailing party a reasonable sum for attorneys' fees and costs in such
action, including those arising without resort to suit and those in any
bankruptcy action and any appeal, and for all other costs incurred in
connection therewith including, without limitation, the fees of accountants,
appraisers and other professionals.
29. ESTOPPEL CERTIFICATES. Lessee shall, from time to time, upon
written request of Lessor, execute, acknowledge and deliver to Lessor or its
designee a written statement specifying the following, subject to any
modifications necessary to make such statements true and complete: (i) the
date the Lease term commenced and the date it expires; (ii) the amount of
minimum monthly Rent and the date to which such Rent has been paid; (iii)
that this Lease is in full force and effect and has not been assigned,
modified, supplemented or amended in any way; (iv) that this Lease represents
the entire agreement between the parties; (v) that all conditions under this
Lease to be performed by Lessor have been satisfied; (vi) that there are no
existing claims, defenses or offsets which Lessee has against the enforcement
of this Lease by Lessor; (vii) that no Rent has been paid more than one month
in advance; and (viii) that no security has been deposited with Lessor (or,
if so, the amount thereof). Any such statement delivered pursuant to this
Section may be relied upon by a prospective purchaser of Lessor's interest or
assignee of any mortgage or new mortgagee of Lessor's interest in the
Premises. If Lessee shall fail to respond within ten (10) days of receipt by
Lessee of a written request by Lessor as herein provided, Lessee shall be
deemed to have given such certificate as above provided without modification
and shall be deemed to have admitted the accuracy of any information supplied
by Lessor to a prospective purchaser or mortgagee.
30. TRANSFER OF LESSOR'S INTEREST. This Lease shall be assignable by
Lessor without the consent of Lessee. In the event of any transfer or
transfers of Lessor's interest in the Premises, other than a transfer for
security purposes only, upon the assumption of this Lease by the transferee
and transfer by Lessor of the security deposit to the transferee, Lessor
shall be automatically relieved of obligations and liabilities accruing from
and after the date of such transfer, except for any retained security deposit
or prepaid rent, and Lessee shall attorn to the transferee.
31. RIGHT TO PERFORM. If Lessee shall fail to timely pay any sum or
perform any other act on its part to be performed hereunder, Lessor may make
any such payment or perform any such other act on Lessee's part to be made or
performed as provided in this Lease. Lessee shall, on demand, reimburse
Lessor for its expenses incurred in making such payment or performance.
Lessor shall (in addition to any other
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right or remedy of Lessor provided by law) have the same rights and remedies
in the event of the nonpayment of sums due under this Section as in the case
of default by Lessee in the payment of Rent.
32. HAZARDOUS MATERIAL.
32.1. RESTRICTION ON HAZARDOUS MATERIALS. Lessee shall not cause
or permit any Hazardous Material to be brought upon, kept, or used in or
about, or disposed of on the Premises, Property or Building by Lessee, its
agents, employees, contractors, subtenants or invitees, except in strict
compliance with all applicable federal, state and local laws, regulations,
codes and ordinances. If Lessee breaches the obligations stated in the
preceding sentence, then Lessee shall indemnify, defend and hold Lessor
harmless from any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses including, without limitation, diminution in the
value of the Premises, Property and Building, damages for the loss or
restriction on use of rentable or usable space or of any amenity of the
Premises, Property or Building, or elsewhere, damages arising from any
adverse impact on marketing of space at the Premises, Property or Building,
and sums paid in settlement of claims, attorneys' fees, consultant fees and
expert fees incurred or suffered by Lessor either during or after the Lease
term. This indemnification by Lessee includes, without limitation, costs
incurred in connection with any investigation of site conditions or any
clean-up, remedial, removal or restoration work, whether or not required by
any federal, state or local governmental agency or political subdivision,
because of Hazardous Material present in the Premises, Property or Building,
or in soil or groundwater on or under the Premises, Property or Building.
Lessee shall immediately notify Lessor of any inquiry, investigation or
notice that Lessee may receive from any third party regarding the actual or
suspected presence of Hazardous Material on the Premises, Property or
Building.
32.2. REMEDIATION. Without limiting the foregoing, if the
presence of any Hazardous Material brought upon, kept or used in or about the
Premises, Property or Building by Lessee, its agents, employees, contractors,
subtenants or invitees, results in any unlawful release of Hazardous Material
on the Premises, the Property, Building or any other property, Lessee shall
promptly take all actions, at its sole expense, as are necessary to return
the Premises, Property or Building or any other property, to the condition
existing prior to the release of any such Hazardous Material; provided that
Lessor's approval of such actions shall first be obtained, which approval may
be withheld at Lessor's sole discretion.
32.3. DEFINITION OF HAZARDOUS MATERIALS. As used herein, the term
"Hazardous Material" means any hazardous, dangerous, toxic or harmful
substance, material or waste including biomedical waste which is or becomes
regulated by any local governmental authority, the State of Washington or the
United States Government due to its potential harm to the health, safety or
welfare of humans or the environment.
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33. QUIET ENJOYMENT. So long as Lessee pays the Rent and performs all
of its obligations in this Lease, Lessee's possession of the Premises will
not be disturbed by Lessor or anyone claiming by, through or under Lessor, or
by the holders of any Lessor's Mortgage or any successor thereto.
34. PROPERTY MANAGEMENT.
34.1. MANAGEMENT. Lessor hereby engages Lessee as Lessor's
exclusive agent to perform all of Lessor's leasing, management, reporting,
and administrative functions under the leases of space in the Building other
that this Lease (the "Tenant Leases") during the term of this Lease and
Lessee hereby accepts such engagement. Lessor may terminate this Section 34
for any reason upon thirty days' written notice to Lessee. Upon such
termination, Lessee shall provide an orderly transition regarding the
management of the Building, including without limitation, delivering to
Lessor (i) a final accounting, reflecting the balance of income and expenses
for the Building as of the date of termination, (ii) any balance or monies
due to Lessor together with tenant security deposits, if any, held by Lessee
with respect to the Building; and (iii) all records, keys and other access
mechanisms, papers and documentation relating to the Tenant Leases.
Termination of this Section 34 shall not terminate this Lease.
34.2. MANAGEMENT DUTIES. Except as set forth in this Section 34.2,
Lessee, on behalf of Lessor, shall perform all obligations of Lessor related
to operating and maintenance of the Building and Property and administration
of Lessor's obligations under the Tenant Leases, other than leasing of the
Premises to Lessee. The other current tenants in the Building are listed on
EXHIBIT E attached hereto and incorporated herein by this reference. Lessee
shall at all times conform to the policies and programs established by Lessor
and the scope of Lessee's authority shall be limited by such policies and
this Lease. Lessee shall use its best efforts in the management and
operation of the Building and Property, including but not limited to the
following:
(a) COLLECTION OF RENT AND OTHER AMOUNTS. Lessee shall receive
and collect rent and all other monies payable to Lessor under the Tenant
Leases, including, without limitation, payments for taxes, utilities,
insurance and Project Operating Costs and deposit the same promptly with
such financial institution as Lessor shall from time to time designate.
Lessee shall also collect, deposit, and disburse security deposits, in
accordance with the terms of each tenant's lease. The amount of each
security deposit will be as specified in the lease.
(b) INSURANCE; TAXES; PROJECT OPERATING COSTS. Lessee shall
arrange for property and casualty insurance on the Building and Property in
such amounts and with such carriers as Lessor shall request from time to
time. Unless Lessor directs otherwise in writing, Lessee shall pay the
premiums for such insurance from amounts collected under the Tenant Leases
for insurance and
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amounts due under this Lease for insurance. Further, unless Lessor
directs otherwise in writing, Lessee shall pay the Taxes and
Project Operating Costs for the Building and Property from amounts
collected under the Tenant Leases for such purposes and amounts due under
this Lease for such purposes. Lessor shall pay the portions of the
premiums for such insurance and portions of such Taxes and Project
Operating Costs that Lessee does not owe under this Lease and, after its
best efforts, does not collect under the Tenant Leases.
(c) RENTAL OF SPACE. Lessor shall be responsible for
negotiation and execution of all Tenant Leases. Lessee shall advise Lessor
of prospective tenants of which it becomes aware. At the request of
Lessor, Lessee shall show the space in the Building to prospective tenants.
(d) SERVICE CONTRACTS. Lessee shall negotiate contracts, in the
name of Lessor, for submission to and approval by Lessor, for gas,
electricity, water and such other services as are furnished to the Building
and Property and paid for under the Tenant Leases or this Lease.
(e) LESSEE'S EMPLOYEES. Lessee shall select, employ, pay,
supervise, direct and discharge all on-site employees necessary for the
operation and maintenance of the Building and Property and shall use
reasonable care in the selection and supervision of such employees. Lessee
shall be responsible for complying with all laws and regulations and
agreements affecting such employment. Persons employed by Lessee to
perform work in the Building and on the Property are considered employees
of Lessee, and neither Lessee nor Lessee's employees are employees of
Lessor. Lessee shall not establish an employee/employer relationship on
behalf of Lessor without Lessor's prior consent. Lessee and each of its
employees and subcontractors will be acting as an independent contractor to
Lessor.
(f) MAINTENANCE AND REPAIR OF PREMISES. Lessee shall keep the
Building and Property in a clean and good condition and shall make all
repairs, alterations, replacements, and installations, do all decorating
and landscaping, and purchase all supplies necessary for the proper
operation of the Building and Property and pay for such items with amounts
designated for Project Operating Costs under this Lease and the Tenant
Leases; provided, however, that Lessee shall not make any purchase or do
any work, or undertake any obligation on behalf of Lessor, the cost of
which shall exceed $500 without obtaining in each instance the prior
approval of Lessor. If Lessor shall require, Lessee shall submit a list of
contractors and subcontractors performing tenant work, repairs, alteration
or services at the Building and Property, under Lessee's direction.
(g) NOTICES TO LESSOR. Lessee shall handle promptly complaints
and reasonable requests from tenants and promptly notify Lessor of any
breach or default under any Tenant Lease, any major complaint made by a
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tenant; any notice of violation of any governmental requirements (together
with copies of supporting documentation), any defect in the Building; any
personal injury or property damage occurring to or claimed by any tenant or
third party on or with respect to the Building or Property, any
condemnation proceedings, rezoning or other governmental order, lawsuit or
threat thereof involving the Building or Property, any violations relative
to the Building or Property under governmental laws, rules, regulations,
ordinances, or like provisions and any fire or other damage to the
Building. In the case of any serious damage to the Building or Property,
Lessee shall also immediately telephone notice thereof to Lessor so that an
insurance adjuster can view the damage before repairs are started, and
complete customary loss reports in connection with such damage to the
Building or Property.
(h) COMPLIANCE WITH LAWS. Lessee shall promptly comply with all
present and future laws, ordinances, orders, rules, regulations and
requirements of all federal, state and local governments, courts,
departments, commission, boards and offices having jurisdiction, or any
other body exercising functions similar to those of any of the foregoing
which may be applicable to the Building or Property or any part thereof or
to the leasing, use, repair, operation and management thereof.
(i) REPORTING REQUIREMENTS. Lessee shall promptly prepare and
deliver to Lessor financial reports relating to the management and
operation of the Building and Property for the preceding calendar month, on
or before the 20th day of each month, in a form satisfactory to Lessor. In
addition, upon Lessor's request, Lessee shall prepare, such rent rolls,
business and personal property tax forms or exemption certificates, and
such other financial reports as may be reasonably required from time to
time. Lessee shall establish and maintain control over accounting and
financial transactions as is reasonably required to protect Lessor's assets
from loss. Lessor may audit the books and records maintained by Lessee for
the Building and Property at any time during normal business hours.
(j) MANAGEMENT FEE. Lessor shall pay Lessee a management fee of
$1,375 per month for its services hereunder which shall be charged to the
tenants in the Building as one of the Project Operating Costs. Such fee
shall be reviewed annually by Lessor and Lessee and shall not be changed
without the written consent of Lessor.
35. GENERAL.
35.1. HEIRS AND ASSIGNS. This Lease shall apply to and be binding
upon Lessor and Lessee and their respective heirs, executors, administrators,
successors and assigns.
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35.2. BROKERS. Lessee and Lessor each represents and warrants to
the other that it has not engaged any broker, finder or other person who
would be entitled to any commission or fees for the negotiation, execution,
or delivery of this Lease. Lessee and Lessor shall each indemnify and hold
the other harmless against any loss, cost, liability or expense incurred by
such other as a result of any claim asserted by any such broker, finder or
other person on the basis of any arrangements or agreements made or alleged
to have been made by or on behalf of the indemnitor.
35.3. ENTIRE AGREEMENT. Lessor and Lessee hereby terminate in its
entirety the existing PhotoDisc, Inc. Marshall Building Lease dated as of
October 1, 1995 (the "Prior Lease") and Lessor and Lessee shall have no
further rights or obligations thereunder. This Lease contains all of the
covenants and agreements between Lessor and Lessee relating to the Premises.
No prior agreements or understanding pertaining to this Lease shall be valid
or of any force or effect and the covenants and agreements of this Lease
shall not be altered, modified or added to except in writing signed by Lessor
and Lessee. Lessee acknowledges and agrees that Lessor has made no
representations or promises except as are contained in this Lease.
35.4. SEVERABILITY. Any provision of this Lease which shall prove
to be invalid, void or illegal shall in no way affect, impair or invalidate
any other provision of this Lease and such other provisions shall remain in
full force and effect.
35.5. TIME OF ESSENCE. Time is of the essence with respect to the
performance of this Lease.
35.6. GOVERNING LAW. This Lease shall be governed by and
construed in accordance with the laws of the State of Washington.
35.7. MUTUAL PREPARATION OF LEASE. Lessor and Lessee acknowledge
and agree that this Lease was prepared mutually by both parties. In the
event of ambiguity, Lessor and Lessee agree that it shall not be construed
against either party as the drafter of this Lease.
35.8. MEMORANDUM OF LEASE. This Lease shall not be recorded.
However, at the request of Lessor or Lessee, Lessor and Lessee shall execute
and record a memorandum of Lease in recordable form that identifies Lessor
and Lessee, the commencement and expiration dates of this Lease, and the
legal description of the Property as set forth on attached EXHIBIT B.
35.9. AUTHORITY OF PARTIES. Any individual signing this Lease on
behalf of an entity represents and warrants to the other party that such
individual has authority to do so and, upon such individual's execution, that
this Lease shall be binding upon and enforceable against the party on behalf
of whom such individual is signing.
_______________________________________________________________________________
LEASE TORRANCE PHOTODISC PAGE 22 OF 24
<PAGE>
IN WITNESS WHEREOF this Lease has been executed the date and year first
above written.
LESSOR: LESSEE:
Marshall Building, L.L.C. PhotoDisc, Inc.
By: /s/ Mark Torrance By: /s/ Robert J. Chamberlain
----------------------------- -------------------------------
Its: Managing Partner Its: Sr. Vice President-CFO
------------------------- -------------------------------
STATE OF WASHINGTON )
ss.
COUNTY OF KING )
On this day personally appeared before me Mark Torrance, to me known to
be the Managing Partner of Marshall Building, L.L.C., the Limited Liability
Company that executed the foregoing instrument, and acknowledged such
instrument to be the free and voluntary act and deed of such limited
liability company, for the uses and purposes therein mentioned, and on oath
stated that he/she was duly authorized to execute such instrument.
GIVEN UNDER MY HAND AND OFFICIAL SEAL this 21st day of January, 1998.
/s/ Synda S. McCormick
----------------------------------
Printed Name Synda S. McCormick
NOTARY PUBLIC in and for the State of Washington, residing at
Snohomish, WA
My Commission Expires 4/29/00
_______________________________________________________________________________
LEASE TORRANCE PHOTODISC PAGE 23 OF 24
<PAGE>
STATE OF WASHINGTON )
ss.
COUNTY OF KING )
On this day personally appeared before me Robert J. Chamberlain, to me
known to be the Sr. VP CFO of PhotoDisc, Inc., the corporation that executed
the foregoing instrument, and acknowledged such instrument to be the free and
voluntary act and deed of such corporation, for the uses and purposes
therein mentioned, and on oath stated that he/she was duly authorized to
execute such instrument.
GIVEN UNDER MY HAND AND OFFICIAL SEAL this 21st day of January, 1998.
/s/ Synda S. McCormick
---------------------------------
Printed Name Synda S. McCormick
NOTARY PUBLIC in and for the State of Washington, residing at
Snohomish, WA
My Commission Expires 4/29/00
_______________________________________________________________________________
LEASE TORRANCE PHOTODISC PAGE 24 OF 24
<PAGE>
EXHIBIT A
DESCRIPTION OF PREMISES
Lessee leases 34,108 rentable square feet of general office space on
floors four, three and two of the Building, representing all of floors three
and four in the Building and all of floor two of the Building other than the
space leased by Derek Andrew. Lessee also leases 3,281 rentable square feet
of shipping garage space on floor one.
_______________________________________________________________________________
LEASE TORRANCE PHOTODISC EXHIBIT A
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION OF PROPERTY
Lots 10 and 11, Block 49, A. A. Denny's Sixth Addition to the City of
Seattle, except the easterly 12 feet of said lots taken for the
widening of Fourth Avenue, situated in the City of Seattle, King
County, State of Washington. Also known as parcel 197720-1245-06,
records of the King County Assessor.
_______________________________________________________________________________
LEASE TORRANCE PHOTODISC EXHIBIT B
<PAGE>
EXHIBIT C
RENTABLE SQUARE FEET AND ANNUAL PER SQUARE FOOT RENT
<TABLE>
<CAPTION>
Floor Rentable Annual Per Square Monthly
Square Feet Foot Rent Rent
<S> <C> <C> <C>
2-4 34,108 $14.00 39,792.67
1-Warehouse 3,281 $ 8.00 2,187.33
-----------
Total Monthly Rent $41,980.00
</TABLE>
_______________________________________________________________________________
LEASE TORRANCE PHOTODISC EXHIBIT C
<PAGE>
EXHIBIT D
DESCRIPTION OF PREAPPROVED ALTERATIONS
Approved alterations floor plan attached.
DESCRIPTION OF DESIGNATED ALTERATIONS THAT LESSEE WILL REMOVE AT LESSEE'S
COST AT THE END OF THE LEASE TERM:
1) All card reader and related security equipment; and
2) Back up generator.
_______________________________________________________________________________
LEASE TORRANCE PHOTODISC EXHIBIT D
<PAGE>
EXHIBIT E
CURRENT TENANT LIST
<TABLE>
<CAPTION>
TENANT BASE RENT
<S> <C>
Frank & Bernies $1,993.00
Seattle Coin Shop $1,002.00
Shear Seattle $ 950.00
Habit Cleaners $ 600.00
Derek Andrew $4,423.20
TOTAL BASE RENT 1/98 $8,968.20
</TABLE>
_______________________________________________________________________________
LEASE TORRANCE PHOTODISC EXHIBIT E
<PAGE>
[FOURTH FLOOR PLAN]
MARSHALL BLDG.
<PAGE>
[THIRD FLOOR PLAN]
MARSHALL BLDG.
<PAGE>
[SECOND FLOOR PLAN]
MARSHALL BLDG.
<PAGE>
FOURTH AND BLANCHARD
OFFICE LEASE
THIS LEASE, made the 14th day of February, 1997, by and between
MARTIN SELIG, whose address is 1000 Second Avenue, Suite 1800, Seattle,
Washington, 98104-1046, hereinafter referred to as "Lessor" and PhotoDisc,
Inc., whose address is 2013 Fourth Avenue, Seattle, Washington, hereinafter
referred to as "Lessee".
1. DESCRIPTION. Lessor in consideration of the agreements
contained in this lease, does hereby lease to Lessee, upon the terms and
conditions hereinafter set forth, that certain space consisting of the agreed
upon total square footage of 47,843 comprising of 20,624 square footage on
the 5th floor, 20,624 square footage on the 6th floor and 6,595 square
footage on the 18th floor, (hereinafter referred to as "Premises") of the
Fourth & Blanchard Building, 2121 Fourth Avenue, City of Seattle, State of
Washington 98121, whose mailing address is 2101 Fourth Avenue, Seattle,
Washington 98121, the legal description of which is:
Lots 7, 8, 9, 10, 11 and 12, Block C, Third
addition to the part of the City of Seattle
heretofore laid off by A. A. Denny and
William N. Bell according to plat recorded in
Volume 1 of plats, page 137 in King County
Washington, except in the north easterly 12
feet thereof as condemned for road purposes
under King County Superior Court, cause
number 52280.
2. TERM. The term of this lease shall be for a period of 72
months, commencing the 1st day of March, 1997, and ending 72 months
thereafter.
3. RENT. Lessee covenants and agrees to pay rent each month in
advance on the first day of each calendar month. Rent shall be computed at
the annual base rental rate of $18.50 per square foot. Rent for any
fractional calendar month, at the beginning or end of the term, shall be the
pro-rated portion of the rent computed on an annual basis. Physical
possession of and rent payments for the 18th floor Premises shall commence
March 1, 1997. Physical possession of and rent payments for the 5th floor
Premises shall commence October 1, 1997. Physical possession of the 6th
floor Premises shall commence October 1, 1997. Rent for the 6th floor
Premises shall commence April 1, 1998 pursuant to Paragraph 31. SPACE POCKET.
4. CONSIDERATION. As consideration for the execution of this
Lease, Lessee shall pay to lessor the sum of $73,758.00, in accordance with
Paragraph 38. REAL ESTATE LEASING FEE. In the event Lessee fully complies
with all the terms and conditions of this Lease, but not otherwise,
$10,167.30 shall be credited to the rent due for the 18th floor Premises for
the month of March, 1997, $31,795.30 shall be credited to the rent due for
the 5th floor Premises for the month of October, 1997 and $31,795.30 shall be
credited to the rent due for the 6th floor Premises for the month of April,
1998.
<PAGE>
5. USES. Lessee agrees that Lessee will use and occupy said
Premises for general offices and related purposes, including, but not limited
to, all types of business currently conducted by Lessee and/or its
subsidiaries and for no other purposes.
6. RULES AND REGULATIONS. Lessee and their agents, employees,
servants or those claiming under Lessee will at all times observe, perform
and abide by all of the Rules and Regulations printed on this instrument, or
which may be hereafter promulgated by Lessor and be applicable to all tenants
in the Fourth & Blanchard Building, all of which it is covenanted and agreed
by the parties hereto shall be and are hereby made a part of this lease.
7. CARE AND SURRENDER OF PREMISES. Lessee shall take good care
of the Premises and shall promptly make all necessary repairs except those
required herein to be made by Lessor. At the expiration or sooner
termination of this lease, Lessee, without notice, will immediately and
peacefully quit and surrender the Premises in good order, condition and
repair (damage by reasonable wear, the elements, or fire expected). Lessee
shall be responsible for removal of all personal property from the Premises,
(excepting fixtures being that which is attached to the Premises, and
property of the Lessor) including, but not limited to, the removal of
Lessee's communication cabling, telephone equipment and signage. Lessee
shall be responsible for repairing any damage to the Premises caused by such
removal. If Lessee fails to remove and restore the Premises at lease
expiration, then Lessor shall have the right to remove said property and
restore the Premises and Lessee shall be responsible for all costs associated
therewith. Lessee shall also be responsible for those costs incurred by
Lessor for removing debris Lessee may discard in the process of preparing to
vacate the Premises and for a final cleaning of the Premises, including, but
not limited to, the cleaning, or replacement of carpets if damage is not
caused by reasonable wear, and removal and disposal of Lessee's personal
property remaining in the Premises.
8. ALTERATIONS. Lesser shall not make any alterations or
improvements in, or additions to said Premises without first obtaining the
written consent of Lessor, which consent shall not be unreasonably withheld.
Subject to Paragraph 34. TENANT IMPROVEMENT ALLOWANCE, such alterations,
additions and improvements shall be at the sole cost and expense of Lessee
and shall become the property of Lessor and shall remain and be surrendered
with the Premises as a part thereof at the termination of this lease, without
disturbance, molestation or inquiry. Lessor has physically inspected
Lessee's Premises located at 2013 Fourth Avenue, Seattle, Washington and
hereby grants approval to Lessee to construct tenant improvements of similar
design within Lessee's Premises. Such approval by Lessor in no way limits
Lessee's right to revise and/or change the design standards of said tenant
improvements.
9. RESTRICTIONS. Lessee will not use or permit to be used in
said Premises anything that will increase the rate of insurance on said
building or any part thereof, nor anything that may be dangerous to life or
limb; nor in any manner deface or injure said building or any part thereof;
nor overload any floor or part thereof; nor permit any objectionable noise or
<PAGE>
order to escape or to be emitted from said Premises, or do anything or permit
anything to be done upon said Premises in any way tending to create a
nuisance or to disturb any other tenant or occupant of any part of said
building. Lessee, at Lessee's expense, will comply with all health, fire and
police regulations respecting said Premises, subject to Paragraph 37. ADA
COMPLIANCE/FIRE SAFETY. The Premises shall not be used for lodging or
sleeping, and no animals or birds will be allowed in the building.
10. WEIGHT RESTRICTIONS. Safes, furniture or bulky articles may
be moved in or out of said Premises only at such hours and in such manner as
will least inconvenience other tenants, which hours and manner shall be at
the discretion of Lessor. No safe or other article of over 2,000 pounds
shall be moved into said Premises without the consent of Lessor, and Lessor
shall have the right to locate the position of any article of such weight in
said Premises if Lessor so desires.
11. SIGN RESTRICTION. No sign, picture, advertisement or notice
shall be displayed, inscribed, painted or affixed to any of the glass or
woodwork of the building without the prior approval of Lessor.
12. LOCKS. No additional locks shall be placed upon any doors of
the Premises. Keys will be furnished to each door lock. At the termination
of the lease, Lessee shall surrender all keys to the Premises whether paid
for or not.
13. KEY. Lessor, his janitor, engineer or other agents may retain
a pass key to said Premises to enable him to examine the Premises from time
to time with reference to any emergency or to the general maintenance of said
Premises.
14. TELEPHONE SERVICE. If Lessee desires telephonic or any other
electric connection, Lessor will direct the electricians as to where and how
the wires are to be introduced, and without such directions no boring or
cutting for wires in installation thereof will be permitted.
15. SERVICES. Lessor shall maintain Premises and the public and
common areas of building, such as lobbies, stairs, corridors and restrooms,
in reasonably good order and condition except for damage occasioned by the
act of Lessee.
Lessor shall furnish Premises with electricity for lighting and
operation of office machines used in Lessee's business, heat and normal
office air-conditioning sufficient to maintain a reasonable temperature at
all times in all areas of the Premises, and elevator services, during the
ordinary business hours of the building. Should Lessee or a division of
Lessee require HVAC services on a 24-hour basis, said after hours services
shall be subject to additional costs which may be determined by the extra
amount of electricity and water required over and above standard operating
hours. Air-conditioning units and electricity therefore for special
air-conditioning requirements, such as for computer centers, shall be at
Lessee's expense. Lessor
<PAGE>
shall also provide lighting replacement for Lessor furnished lighting, toilet
room supplies, window washing with reasonable frequency, and customary
janitor service, in accordance with Exhibit "C", and window washing at least
two (2) times per year. Lessee acknowledges the building's exterior window
washing schedule is in hiatus due to mechanical failure of window washing
riggings. Lessor is pursuing corrective action and anticipates the next
window washing to commence no later than October 15, 1997, provided that if
washing of exterior windows of the Premises does not commence by such date,
or if window washing is not completed at least two (2) times per calendar
year, Lessee shall be entitled to reduce the monthly rent payable by fifty
percent (50%) for the entire Premises affected (Example: If the 18th floor
windows are not washed, then the reduction would be based upon 50% of the
monthly rent attributable to the 18th floor premises only; if the 5th and/or
18th floor windows are not washed, then the reduction would be based upon 50%
of the monthly rent attributable to the 5th and/or 18th floor premises only)
until washing of such windows commences and, each calendar year thereafter,
the second washing is completed.
Lessor shall not be liable to Lessee for any loss or damage caused
by or resulting from any variation, interruption or any failure of said
services due to any cause whatsoever, unless caused by Lessor's negligence.
No temporary interruption or failure of such services incident to the making
of repairs, alterations, or improvements, or due to accident or strike or
conditions or events not under Lessor's control shall be deemed as an
eviction of Lessee or relieve Lessee from any of Lessee's obligations
hereunder, unless caused by Lessor's negligence.
In the event of any lack of attention on the part of Lessor and any
dissatisfaction with the service of the building, or any unreasonable
annoyance of any kind, Lessee is requested to make complaints at Lessor's
building office and not to Lessor's employees or agents seen within the
building. Lessee is further requested to remember that Lessor is as anxious
as Lessee that a high grade service be maintained, and that the Premises be
kept in a state to enable Lessee to transact business with the greatest
possible ease and comfort. The rules and regulations are not made to
unnecessarily restrict Lessee, but to enable Lessor to operate the building
to the best advantage of both parties hereto. To this end Lessor shall have
the right to waive from time to time such part or parts of these rules and
regulations as in his judgment may not be necessary for the proper
maintenance or operation of the building or consistent with good service, and
may from time to time make such further reasonable rules and regulations as
in his judgment may be needed for the safety, care and cleanliness of the
Premises and the building and for the preservation of order therein.
16. SOLICITORS. Lessor will make an effort to keep solicitors out
of the building, and Lessee will not oppose Lessor in his attempt to
accomplish this end.
17. FLOOR PLAN. The floor plan and specifications for Lessee's
occupancy shall be attached hereto and marked Exhibit "A" which shall be
approved by both Lessor and Lessee, both of whose approval shall not be
unreasonably withheld.
<PAGE>
18. ASSIGNMENT. Lessee will not assign this Lease or any part
thereof without first obtaining the written consent of Lessor, which shall
not be unreasonably withheld. In the event such written consent shall be
given, no other or subsequent assignment shall be made without the previous
written consent of Lessor, which shall not be unreasonably withheld.
Lessee may sublet all or any portion of the Premises at any time,
on such terms as Lessee deems appropriate, without the consent of Lessor,
provided that notwithstanding such sublease, Lessee shall remain liable for
all of its obligations under this Lease.
19. OPERATING SERVICES AND REAL ESTATE TAXES. The annual base
rental rate per rentable square foot in Paragraph 3 includes Lessee's
proportionate share of Operating Services and Real Estate Taxes for the first
twelve months of the lease term, "Base Year Costs". Only actual increases
from these Base Year Costs, if any, will be passed on to Lessee on a
proportionate share basis. In no case will the cost of Operating Services
increase more than five percent (5%) per year over the Base Year amount.
DEFINITIONS
BASE YEAR
For computing the Base Year Costs, the base year shall be the calendar year
stated herein or if a specific calendar year is not stated herein then the
base year shall be the calendar year in which the lease term commences. The
base year for the 5th floor and 18th floor Premises shall be the calendar
year 1997. The base year for the 6th floor Premises shall be the calendar
year 1998.
COMPARISON YEAR
The Comparison Year(s) shall be the calendar year(s) subsequent to the base
year.
OPERATING SERVICES
"Operating Services" include, but are not limited to, the charges incurred by
Lessor for: building operation salaries, benefits, management fee of five
percent (5%) of gross income for the building, insurance, electricity,
janitorial, supplies, telephone, HVAC, repair and maintenance, window
washing, water and sewer, security, landscaping, disposal and elevator.
Operating Services shall also include the amortization cost of capital
investment items and of the installation thereof, which are primarily for the
purpose of safety, saving energy or reducing operating costs, or which may be
required by governmental authority (all such costs shall be amortized over
the reasonable life of the capital investment item, with the reasonable life
and amortization schedule being determined in accordance with generally
accepted accounting principles). Notwithstanding anything to the contrary
contained herein, Operating Services shall not include any of the following:
<PAGE>
(i) real estate taxes
(ii) legal fees, auditing fees, brokerage commissions, advertising
costs, or other related expenses incurred by Lessor in an effort to generate
rental income;
(iii) repairs, alterations, additions, improvements, or
replacements made to rectify or correct any defect in the original design,
materials or workmanship of the building or common areas (but not including
repairs, alterations, additions, improvements or replacements made as a
result of ordinary wear and tear);
(iv) damage and repairs attributable to fire or other casualty;
(v) damage and repairs necessitated by the negligence or willful
misconduct of Lessor, Lessor's employees, contractors or agents;
(vi) executive salaries to the extent that such services are not in
connection with the management, operating, repair or maintenance of the
building;
(vii) Lessor's general overhead expenses not related to the
building;
(viii) legal fees, accountant's fees and other expenses incurred
in connection with disputes with tenants or other occupants of the building
or associated with the enforcement of the terms of any leases with tenants or
the defense of Lessor's title to or interest in the building or any part
thereof unless the outcome is to the financial benefit of all tenants;
(ix) costs (including permit, license and inspection fees) incurred
in renovating or otherwise improving, decorating, painting or altering (1)
vacant space (excluding common areas) in the building or (2) space for
tenants or other occupants in the building and costs incurred in supplying
any item or service to less than all of the tenants in the building;
(x) costs incurred due to a violation by Lessor or any other
tenant of the building of the terms and conditions of a lease;
(xi) cost of any specific service provided to Lessee or other
occupants of the building for which Lessor is reimbursed (but not including
Operating Services and Real Estate Tax increases above Base Year Costs to the
extent reimbursed Lessor) or any other expense for which Lessor is or will be
reimbursed by another source (i.e., expenses covered by insurance or
warranties);
(xii) costs and expenses which would be capitalized under
generally accepted accounting principles, with the exception of the capital
investment items specified hereinabove;
<PAGE>
(xiii) building management fees in excess of the management fees
specified hereinabove;
(xiv) cost incurred with owning and/or operating the parking
lot(s) serving the building by independent parking operator(s);
(xv) fees paid to Lessor or any affiliate of Lessor for goods or
services in excess of the fees that would typically be charged by unrelated,
independent persons or entities for similar goods and services;
(xvi) rent called for under any ground lease or master lease;
(xvii) principal and/or interest payments called for under any
debt secured by a mortgage or deed of trust on the building; and
Operating Services shall be adjusted for the Base Year and all Comparison
Year(s) to reflect the greater of actual occupancy or 95% occupancy.
REAL ESTATE TAXES
Real Estate Taxes shall be the taxes paid by Lessor in the base year and each
respective Comparison Year. Real Estate Taxes shall be a separate category
and shall be treated as such.
PROPORTIONATE BASIS
Lessee's share of Base Year and Comparison Year(s) Costs shall be a fraction,
the numerator of which shall be the number of rentable square feet contained
in the leased Premises on the last day of the year before the Comparison Year
and the denominator of which shall be the number of rentable square feet in
the building in which the leased Premises are located (390.659/RSF).
COMPUTATION OF ADJUSTMENTS TO BASE YEAR COSTS
Any adjustment to Base Year Costs will commence to occur in Month 13 of the
lease term with subsequent adjustments commencing every twelve months of the
lease term or in Months 25, 37, 49, etc. as appropriate under the lease term.
Lessee shall be responsible for any increase between Lessee's proportionate
share of Base Year Costs and Lessee's proportionate share of each respective
Comparison Year(s) Costs. The increase shall be the increase to each expense
individually. These costs shall be initially calculated based on estimated
(projected) costs with reconciliation to actual costs when annual audited
numbers are completed. For the purpose of calculating projected increases to
Base Year Costs, Lessor shall review historical data to predict if any
estimated increases would be anticipated in a Comparison Year(s). If they
are, then commencing in Month 13 and/or every twelve month period thereafter,
Lessor will assess a monthly charge to be paid together with monthly base
rent. Once actual cost data for
<PAGE>
Comparison year(s) Real Estate Taxes and Operating Services for the entire
building is formulated in accordance with generally accepted accounting
principles and adjusted to the greater of actual average occupancy over such
year or 95% occupancy, then Lessee's estimated pass-through costs shall be
corrected with Lessee or Lessor, as appropriate, reimbursing the other for
the difference between the estimated and actual costs, at that time in a lump
sum payment.
Upon termination of this lease, the amount of any corrected amount between
estimated and actual costs with respect to the final comparison year shall
survive the termination of the lease and shall be paid to Lessee or Lessor as
appropriate within thirty (30) days after final reconciliation.
Computation of or adjustment to Operating Services and/or Real Estate Taxes
pursuant to this paragraph or to rent pursuant to Paragraph 3 shall be
computed based on a three hundred sixty-five (365) day year.
For an example, see Exhibit B attached hereto.
20. ADDITIONAL TAXES OR ASSESSMENTS. Should there presently be in
effect or should there be enacted during the term of this lease, any law,
statute or ordinance levying any assessment or any tax upon rents or the
income from real estate or rental property (other than federal or state
income or estate taxes), Lessee shall reimburse Lessor for Lessee's
proportionate share of said expenses at the same time as rental payments.
21. LATE PAYMENTS. Any payment, required to be made pursuant to
this Lease, not made on the date the same is due shall bear interest at a
rate equal to three percent (3%) above the prime rate of interest charged
from time to time by Seafirst National Bank, or its successor. In no case,
however, shall payment be considered late until after the 10th day.
22. RISK. All personal property of any kind or description
whatsoever in the demised Premises shall be at Lessee's sole risk. Lessor
shall not be liable for any damage done to or loss of such personal property
or damage or loss suffered by the business or occupation of the Lessee
arising from any acts or neglect of co-tenants or other occupants of the
building, or of Lessor or the employees of Lessor, or of any other persons,
or from bursting, overflowing or leaking of water, sewer or steam pipes, or
from the heating or plumbing or sprinklering fixtures, or from electric
wires, or from gas, or odors, or caused in any other manner whatsoever except
in the case of negligence on the part of Lessor, or Lessor's agents,
employees or servants. Lessee shall keep in force throughout the term of
this lease such casualty, general liability and business interruption
insurance as a prudent tenant occupying and using the Premises would keep in
force.
23. INDEMNIFICATION. Lessee and Lessor will each defend,
indemnify and hold harmless the other from any claim, liability or suit
including attorney's fees on behalf of any person, persons, corporations
and/or firm for any injuries or damages occurring in or about the said
Premises or on or about the sidewalk, stairs, or thoroughfares adjacent
thereto where said
<PAGE>
damages or injury was caused or partially caused by the ordinary or gross
negligence or intentional act of it and/or its agents, employees or servants.
24. WAIVER OF SUBROGATION. Lessee and Lessor do hereby release
and relieve the other, and waive their entire claim of recovery for loss,
damage, injury, and all liability of every kind and nature which may arise
out of, or be incident to, fire and extended coverage perils, in, on or about
the Premises herein described, whether due to negligence of either of said
parties, their agents, or employees, or otherwise.
25. SUBORDINATION. This lease and all interest and estate of
Lessee hereunder is subject to and is hereby subordinated to all present and
future mortgages and deeds of trust affecting the Premises or the property of
which said Premises are a part. Lessee agrees to execute at no expense to
the Lessor, any instrument which may be deemed necessary or desirable by the
Lessor to further effect the subordination of this lease to any such mortgage
or deed of trust. In the event of a sale or assignment of Lessor's interest
in the Premises, or in the event of any proceedings brought for the
foreclosure of, or in the event of exercise of the power of sale under any
mortgage or deed of trust made by Lessor covering the Premises, Lessee shall
attorn to the purchaser and recognize such purchaser as Lessor. Said sale,
assignment or foreclosure shall in no way affect the validity of this Lease
and/or any amendments made thereto. In such case, this Lease shall remain in
full force and effect. Lessee agrees to execute, at no expense to Lessor,
any estoppel certificate deemed necessary or desirable by Lessor that is true
and accurate in all respects to further effect the provisions of this
paragraph.
26. CASUALTY. In the event the leased Premises or the said
building is destroyed or injured by fire, earthquake or other casualty to the
extent that they are untenantable in whole or in part, then Lessor may, at
Lessor's option, proceed with reasonable diligence to rebuild and restore the
said Premises or such part thereof as may be injured as aforesaid, provided
that within sixty (60) days after such destruction or injury Lessor will
notify Lessee of Lessor's intention to do so, and during the period of such
rebuilding and restoration the rent shall be abated on the portion of the
Premises that is unfit for occupancy. If necessary, Lessor will provide
access to any needed alternative space for Lessee at the fair market rate not
to exceed Lessee's rental rate hereunder.
If the Premises are destroyed or damages and the damage or
destruction renders more than 40% of the Premises untenantable for 120 days
or more, either party may elect to terminate the Lease as of the date of the
damage or destruction by giving the other party written notice within 30 days
after the date of the damage provided, however, if Lessor can provide
comparable alternative space with comparable tenant improvements acceptable
to Lessee, which approval shall not be unreasonably withheld, as a substitute
for the damaged or destroyed premises, then Lessee shall not have the right
to terminate the Lease. Lessee shall pay for the temporary space at the
market rate or at Lessee's existing rate whichever is lower and Lessor agrees
to pay the costs of relocation and required tenant improvements acceptable to
Lessee, which approval shall not be unreasonably withheld. In the event of
termination, all rights and
<PAGE>
obligations of the parties shall cease as of the date of termination, and
Lessee shall be entitled to reimbursement of any prepaid rent. If neither
party elects to terminate, Lessor shall promptly and diligently proceed to
restore the Premises to substantially the same form as prior to the damage or
destruction. Work shall be commenced as soon as possible and shall proceed
without interruption except for work stoppages on account of labor disputes
and matters outside of Lessor's control.
27. INSOLVENCY. If Lessee becomes insolvent, or makes an
assignment for the benefit of creditors, or a receiver is appointed for the
business or property of Lessee, or a petition is filed in a court of
competent jurisdiction to have Lessee adjudged bankrupt and such action is
not cured within sixty (60) days, then Lessor may at Lessor's option
terminate this lease. Said termination shall reserve unto Lessor all of the
rights and remedies available under Paragraph 28 ("Default") hereof, and
Lessor may accept rents from such assignee or receiver without waiving or
forfeiting said right of termination. As an alternative to exercising his
right to terminate this lease, Lessor may require Lessee to provide adequate
assurances, including the posting of a cash bond, of Lessee's ability to
perform its obligations under this lease.
28. LESSEE'S DEFAULT. If this Lease is terminated in accordance
with any of the terms herein (with the exception of Paragraph 27), or if
Lessee vacates or abandons the Premises or if Lessee shall fail at any time
to keep or perform any of the covenants or conditions of this lease for
thirty (30) days after written notice delivered to Lessee for such failure,
i.e., specifically the covenant for the payment of monthly rent, then, and in
any of such events Lessor may with or without notice or demand, at Lessor's
option, and without being deemed guilty of trespass and/or without
prejudicing any remedy or remedies which might otherwise be used by Lessor
for arrearanges or preceding breach of covenant or condition of this lease,
enter into and repossess said Premises and expel the Lessee and all those
claiming under Lessee. In such event Lessor may eject and remove from said
Premises all goods and effects (forcibly if necessary). This lease is not
otherwise terminated may immediately be declared by Lessor as terminated. The
termination of this lease pursuant to this Article shall not relieve Lessee
of its obligations to make the payments required herein . In the event this
lease is terminated pursuant to this Article, or if Lessor enters the
Premises without terminating this lease and Lessor relets all or a portion of
the Premises, Lessee shall be liable to Lessor for all the costs of
reletting, including necessary renovation and alteration of the leased
Premises. Lessee shall remain liable for all unpaid rental which has been
earned plus late payment charges pursuant to Paragraph 21 and for the
remainder of the term of this lease for any deficiency between the net
amounts received following reletting and the gross amounts due from Lessee,
or if Lessor elects, Lessee shall be immediately liable for all rent and
additional rent (Paragraph 19) that would be owing to the end of the term,
less any rental loss Lessee proves could be reasonably avoided, which amount
shall be discounted by the discount rate of the Federal Reserve Bank,
situated nearest to the Premises, plus one percent (1%). Lessor shall use its
best efforts to re-lease the Premises and otherwise mitigate the damages
suffered by Lessor from any breach by Lessee.
<PAGE>
29. LESSOR'S DEFAULT. Notwithstanding any other term or provision
of this Lease, if Lessor fails to comply with any term or provision of this
Lease for more than thirty (30) days after written notice from Lessee stating
the nature of the default, Lessee may direct all sums due Lessor under this
Lease to an escrow account until Lessor has cured the default to Lessee's
reasonable satisfaction; provided, however, if the default cannot reasonably
be cured within such 30-day period, Lessor shall not be in default of this
Lease if Lessor commences to cure the default within the 30-day period and
diligently and in good faith continues to cure the default and if the cure is
not completed with 90 days Lessee may terminate this Lease and all amounts in
the escrow account shall be returned to Lessee.
30. RIGHT OF FIRST REFUSAL. During the initial lease term and any
renewal terms thereof, Lessor will provide Lessee with a right of first
refusal on all space which becomes available within the building. This right
is subordinate to existing rights. If Lessor has an interested party in such
space, Lessor will notify Lessee accordingly and Lessee shall have fifteen
(15) working days from receipt of said notice in which to respond either way.
Rent for such space shall be at the same rate and on the same terms as a
bona fide written offer received by Lessor which shall be no greater than the
fair market value for comparable office space within the Denny Regrade area.
31. RENEWAL. Lessee shall have the right to renew this lease
under the same terms as contained herein, except rent, for two (2), five year
periods, provided Lessee is not in default under the terms and conditions of
this Lease. Rent for the renewal terms shall be at 95% of fair market value
for comparable office space within the Denny Regrade area. Lessee must
provide Lessor written notice of its election to renew at least six (6)
months prior to the expiration of the then current lease term.
32. SPACE POCKET. Lessor extends to Lessee the right to designate
a portion of the Premises (which portion shall be mutually acceptable) as
space pockets. Such acceptance shall not be unreasonably withheld. The
space pocket shall not exceed 20,624 square feet. These space pockets may be
located at various locations throughout the Premises. Space pockets will be
rent free and not part of the leased Premises for the purposes of Section 19,
until the space is actually used for active conduct of Lessee's business,
which may be in whole or in part. If the space pockets are actually used,
Lessee shall pay rent on only the portion used at the same rent that Lessee
is paying for the other space under this Lease. The initial area space
pocketed shall be incorporated into rentable space on April 1, 1998 or upon
actual use of said space if sooner. Lessee's use of space pockets as dead
storage shall not cause them to accrue rent.
33. RIGHT TO EARLY CANCELLATION. At any time after October 1,
1997 Lessee may cancel their Lease obligation for the 18th floor Premises
only, by providing Lessor with sixty (60) days prior written notice.
<PAGE>
If Lessee elects to cancel this right, the tenant improvement
allowance described below will become applicable to the 18th floor premises
as well.
34. TENANT IMPROVEMENT ALLOWANCE. Lessor shall provide a tenant
improvement allowance of $10.00 per square foot of space leased to modify and
upgrade the 5th, 6th and 18th floors of the Premises. The 18th floor
allowance is more specifically detailed in the preceding Paragraph 33. RIGHT
OF EARLY TERMINATION. In the event Lessee does not use the entire tenant
improvement allowance to modify the Premises, Lessee may use the remaining
allowance to pay for other costs involved with occupying the Premises,
including rent. Lessee will provide Lessor with supporting documentation for
such allowances. Lessee shall have the right to select and contract directly
with a general contractor for all tenant improvement work. Lessor shall have
the right to accept such general contractor. Such acceptance shall not be
unreasonably withheld. In such case Lessee shall pay for all tenant
improvements and shall have the right to offset its rent commencing at
anytime after November 1, 1997, for repayment of its actual costs. Lessee
shall be entitled to a monthly interest rate of two percent (2%) over
Seafirst National Bank's quoted Prime Rate until reimbursed in full for the
costs of improvements by means of the offset. In the alternative, Lessor
shall have the right to pay for the tenant improvements either upon
completion or at any time, provided Lessor reimburses Lessee for any balance
owing Lessee for the costs of improvements incurred, plus accrued interest,
if any.
35. BUILDING SALE. Lessor shall provide Lessee with prior notice
if Lessor intends to sell the building or formally place the building on the
market for sale. At that time Lessor shall provide Lessee information
necessary to review a purchase of the building.
36. PARKING. Lessor agrees to provide Lessee with parking stalls.
The cost of such parking shall remain fixed at $150.00 per stall, per month
during the first lease year, then be subject to market increases.
37. ADA COMPLIANCE/FIRE SAFETY. Lessor warrants that all common
areas and fire escape routes are in compliance with the Americans with
Disabilities Act (ADA) and other governmental acts and regulations, and any
improvements to the common areas and fire escape routes necessitated by the
ADA or other governmental acts and regulations shall be at the sole cost and
expense of Lessor.
38. REAL ESTATE LEASING FEE. Lessor shall owe Colliers Macaulay
Nicolls a real estate leasing fee of $172,474.00. It is agreed the fee shall
be paid as follows: Lessee shall pay directly to Colliers $73,758.00 upon
full execution of this Lease and offset it against the lease consideration
due and referenced in Paragraph 4. CONSIDERATION. Lessee shall pay the
remaining commission, $98,716.00, directly to Colliers upon commencement of
the lease term referenced in Paragraph 2. TERM. The amount so paid shall be
offset by Lessee as a rent credit against the rents becoming due to Lessor
other than rents for the months for which credit is given under Paragraph 4.
CONSIDERATION. Lessee shall continue offsetting the rent until the entire
leasing fee is paid in full.
<PAGE>
Lessor shall be financially responsible for additional real estate
leasing fees equivalent to $3.50 per square foot if Lessee expands Lessee's
Premises beyond the square footage in Paragraph 1. DESCRIPTION. Such fees
shall be owed Colliers upon Lessee providing notice to Lessor of their intent
to lease said expansion space.
39. BINDING EFFECT. The parties hereto further agree with each
other that each of the provisions of this lease shall extend to and shall, as
the case may require, bind and inure to the benefit, not only of Lessor and
Lessee, but also of their respective heirs, legal representatives, successors
and assigns, subject, however, to the provisions of Paragraph 18.
ASSIGNMENT, of this lease.
It is also understood and agreed that the terms "Lessor" and
"Lessee" and verbs and pronouns in the singular number are uniformly used
throughout this lease regardless of gender, number or fact of incorporation
of the parties hereto. The typewritten riders or supplemental provisions, if
any, attached or added hereto are made a part of this lease by reference. It
is further mutually agreed that no waiver by Lessor or Lessee of a breach by
Lessor or Lessee of any covenant or condition of this lease shall be
construed to be a waiver of any subsequent breach of the same or any other
covenant or condition.
40. HOLDING OVER. If Lessee requires possession of the Premises
after expiration of the term of this lease, Lessee shall so notify Lessor
within sixty (60) days of the Lease expiration and Lessor shall then be
deemed to be a month-to-month tenant upon the same terms and conditions as
contained herein, except rent which shall be revised to reflect the then
current market rate. During month-to-month tenancy, Lessee acknowledges
Lessor will be attempting to relet the Premises. Lessee agrees to cooperate
with Lessor and Lessee further acknowledges Lessor's statutory right to
terminate the lease with proper notice. In the event Lessee disagrees with
the market rate established by Lessor, market rate shall be established as
follows:
Within sixty (60) days after notice of holding over, the parties
shall mutually agree on an appraiser who shall determine the fair market
value for the Premises. If the parties are unable to agree on an appraiser,
then each party shall select an appraiser. The two appraisers shall then
select a third appraiser who shall determine the fair market value for the
Premises as of the commencement of the holding over term.
All appraisers selected shall be M.A.I. appraisers with commercial
property experience in King County.
41. ANTENNAS. Lessor shall provide a mutually agreed upon
location acceptable to Lessee for Lessee's antennas, dishes and other
communication equipment required by Lessee free of rent. Lessee will bear
all expenses regarding installation of said equipment. Such approval shall
not be unreasonably withheld.
<PAGE>
Location depends on which technically works best, available space
and located so as to not interfere with other antennas or equipment.
42. GENERATOR. Lessor grants Lessee the right to install and
maintain at Lessee's expense a backup generator sufficient to provide Lessee
the necessary electricity during such times when the electrical service
provided by Lessor is disrupted. Said generator shall be installed at a
location mutually acceptable to both Lessee and Lessor and shall be connected
to the existing power feed, if any, installed by R.W. Beck which may be
currently located in the loading dock area of the building. Lessor shall not
unreasonably withhold consent as to the chosen location of the generator.
Lessee shall maintain, at Lessee's sole cost and expense, a fence around such
emergency generator. Lessee will not operate generator during standard
business hours, unless due to an emergency power outage.
43. ATTORNEY'S FEES. If any legal action is commenced to enforce
any provision of this lease, the prevailing party shall be entitled to an
award of reasonable attorney's fees and disbursements. The phrase
"prevailing Party" shall include a party who receives substantially the
relief desired, whether by dismissal, summary judgment, judgment or otherwise.
44. NO REPRESENTATIONS. The Lessor has made no representations or
promises except as contained herein or in some future writings signed by
Lessor.
45. QUIET ENJOYMENT. So long as Lessee pays the rent and performs
the covenants contained in this lease, Lessee shall hold and enjoy the
Premises peaceably and quietly, subject to the provisions of this lease.
46. RECORDATION. Lessee shall not record this lease without the
prior written consent of Lessor. However, at the request of Lessor, both
parties shall execute a memorandum or "short form" of this lease for the
purpose of recordation in a form customarily used for such purpose. Said
memorandum or short form of this lease shall describe the parties, the
Premises and the lease term, and shall incorporate this lease by reference.
47. MUTUAL PREPARATION OF LEASE. It is acknowledged and agreed
that this lease was prepared mutually by both parties. In the event of
ambiguity, it is agreed by both parties that it shall not be construed
against either party as the drafter of this lease.
48. GOVERNING LAW. This lease shall be governed by, construed and
enforced in accordance with the laws of the State of Washington.
<PAGE>
IN WITNESS WHEREOF, the parties hereof have executed this lease the
day and year first above written.
PHOTODISC, INC.
/s/ Martin Selig By: /s/ Robert Chamberlain
- --------------------------- ----------------------------------
Martin Selig Its: V.P. Finance and Operations
----------------------------------
"Lessor" "Lessee"
<PAGE>
EXHIBIT B
EXAMPLE
The intent is to include Lessee's proportionate share of all Base Year Costs
in Lessee's Annual Base Rental Rate. It is further the intent to limit
adjustments to Lessee's Base Year Costs to actual increases in cost. The
Operating Services are adjusted to the greater of actual average occupancy or
95% occupancy for the base year to fairly establish the Base Year Costs at an
equitable standard for comparison purposes. Comparison Years are similarly
adjusted for purposes of fairness and equality. To prevent any confusion
regarding computation of Base Year Costs, Comparison Year Costs and the
adjustment of those costs to 95% occupancy, if necessary, we have set forth
the following example. It is important to note that if adjustment to 95%
occupancy is necessary, not all Operating Services are adjusted.
Expenses requiring adjustment are those which are 100% dependent upon the
change in footage and adjust with the change in occupied footage. This
category includes electricity, water/sewer, superintendent, disposal
management, janitorial supplies, window washing, repair and maintenance, HVAC
maintenance, and janitorial labor.
Other expenses do not require adjustment nor are they dependent upon occupied
footage change. These categories are the same whether the building is empty
or full. They are, insurance, security, elevator, landscaping and telephone.
Real Estate Taxes are dependent upon independent assessment. Real Estate
Taxes are not adjusted to 95%, but are established for each respective year
based on the actual tax paid whether for the respective Base Year or each
subsequent Comparison Year (s).
Please note the expenses noted below which are and are not adjusted and the
adjustment to each expense to achieve 95% occupancy, if necessary. The
method of adjusting expenses depicted in the example will be followed when
adjusting actual Operating Service Expenses for both the Base Year and
Comparison Year(s).
HYPOTHETICAL FACTS
<TABLE>
<S> <C>
Building Occupancy: 80%
Actual Base Year Costs: $375,000
Grossed Base Year Costs to 95%: $440,000
Actual Comparison Year Costs: (see below) $405,440
Grossed Comparison Year Costs to 95%: (see below) $463,080
Tenant Premises: 10,000 RSF
Building RSF: 125,000 RSF
Tenant Proportionate Basis: 10,000 + 125,000 = 8%
</TABLE>
<PAGE>
EXAMPLE
<TABLE>
<CAPTION>
Actual Grossed
Description Expenses Expenses
- ----------- -------- --------
<S> <C> <C> <C>
Percent Occupied 80.00% 95.00% Methodology
-----------
Real Estate Taxes $ 54,854 $ 54,854 Actual Cost
- -----------------
Operating Expenses
- ------------------
Insurance $ 26,595 $ 28,595 Actual Cost
Electricity $ 69,358 $ 82,363 Adjusts with occupancy
Water & Sewer $ 4,945 $ 5,872 Adjusts with occupancy
Security $ 5,000 $ 5,000 Actual Cost
Elevator $ 7,526 $ 7,526 Actual Cost
Superintendent $ 82,869 $ 98,407 Adjusts with occupancy
Landscaping $ 2,912 $ 2,912 Actual Cost
Disposal $ 15,502 $ 18,409 Adjusts with occupancy
Management $ 41,680 $ 49,495 Adjusts with occupancy
Supplies $ 4,339 $ 5,153 Adjusts with occupancy
Window Washing $ 1,527 $ 1,813 Adjusts with occupancy
Repairs & Maintenance $ 24,333 $ 28,895 Adjusts with occupancy
Telephone $ 1,444 $ 1,144 Actual Cost
HVAC Maintenance $ 6,208 $ 7,372 Adjusts with occupancy
Janitorial $ 56,648 $ 67,270 Adjusts with occupancy
-------- --------
TOTALS: $405,440 $463,080
</TABLE>
<PAGE>
I. GENERAL OFFICE MAINTENANCE SCHEDULE
DAILY SERVICES
1. Gather wastepaper and place in your containers for disposal.
2. Dust mop all resilient tile or hard surface floors, including
rug protectors.
3. Vaccum carpet as needed. If vacuum will not pick up, police by
hand.
4. Empty and wash ashtrays.
5. Leave furniture neat and orderly, ready for next days business.
6. Keep janitor closet neat and orderly.
7. Leave only designated night lights on.
8. Spot mop spillage on tile or hard floor surfaces.
9. Wet mop lunchroom floors complete.
10. Clean and sanitize drinking fountains.
WEEKLY SERVICES
1. Within reason, spot clean carpeted areas, as needed.
2. Dust low ledges including window sills and other hard
surfaces that are accessible without the use of a ladder.
<PAGE>
TWICE A WEEK SERVICES
TUESDAY AND THURSDAY
1. Remove fingerprints from woodwork, doors, door glass and
around light switches on walls.
THREE TIMES A WEEK SERVICE
MONDAY, WEDNESDAY, AND FRIDAY
1. Dust tops of desks, chairs, tables, counters, file
cabinets and telephones.
2. Wipe fingerprints from desks and tabletops that are
formica.
<PAGE>
MONTHLY SERVICES
1. Shampoo and extract elevator carpets.
2. Sweep stairways complete and camp mop as needed.
3. Dust handrails on stairwells.
TWICE MONTHLY SERVICE
1. Polish elevator threshold.
EVERY OTHER MONTH SERVICES
1. Spot clean stairwell walls.
QUARTERLY SERVICES
1. High dust areas that require the use of a 6' ladder.
2. Dust lobby walls.
<PAGE>
SPECIFICATIONS FOR
MARTIN SELEC
BUILDING AND PROPERTIES
1. GENERAL OFFICE MAINTENANCE SCHEDULE
2. MAINTENANCE IN LOBBY, ELEVATORS, CORRIDORS, AND ENTRANCES
3. RESTROOM MAINTENANCE
4. FLOOR MAINTENANCE
5. JANITORIAL MAINTENANCE -- EXTERIOR AREAS -- LOADING DOCKS
<PAGE>
I. GENERAL OFFICE MAINTENANCE SCHEDULE
MONTHLY SERVICES
1. Remove fingerprints from walls, door frames and partition
glass, not done daily.
EVERY SIX WEEKS
1. Dust chair rungs, chair ledges and arms.
2. Dust sides of file cabinets, desks and desk walls.
SIX TIMES A YEAR
1. Edge all carpeted areas with a compact vacuum cleaner.
(doesn't include removing staples.)
2. Vacuum upholstered furniture
FOUR TIMES A YEAR
1. Vacuum under chair carpet protectors that are movable
only.
QUARTERLY SERVICES
1. Vacuum air vent, grills, and louvres.
2. Dust horizontal surfaces requiring the use of a 6' ladder
(i.e. tops of picture frames, high shelves).
3. Dust venetian blinds.
<PAGE>
II. MAINTENANCE IN LOBBY, ELEVATORS, CORRIDORS AND ENTRANCES
DAILY SERVICES
1. Remove fingermarks from doors, door glass, door frames,
elevator doors and trim.
2. Vacuum all corridors, elevator and lobby carpets complete.
Including any interior entrance mats.
3. Remove fingerprints from elevator walls.
4. Dust all horizontal flat surfaces within reach.
5. Wet mop floors as needed and sweep latter.
6. Empty and wash cigarette receptacles.
7. Spot clean spillage on carpeted surfaces, within reason.
8. Sift sand in cigarette receptacles, change as needed at
least weekly.
9. Edge elevator carpets, as needed.
10. Clean security scanner (FIRE CONTROL) and building
directories.
WEEKLY SERVICES
1. Clean elevator door tracks.
2. Polish elevator doors, control panels, and floor indicator
plates.
3. Damp wipe or vacuum lobby furniture.
4. Edge carpets with compact vacuum cleaner.
5. Dust tops of stairwell lights.
<PAGE>
III. RESTROOM MAINTENANCE
DAILY SERVICES
1. Clean and polish wastebaskets, dispensers and chrome
fittings.
2. Clean mirrors and mirror frames.
3. Wet mop floors using disinfectant cleaner.
4. Sanitize toilets, toilet sinks and urinals.
5. Dust all ledges and partitions.
6. Report any fixtures not working properly to building
office.
7. Remove all wastepaper and place for disposal.
8. Refill all restroom dispensers. Use only cocoanut soap in
soap dispensers.
9. Spot wash partitions (walls and doors) and vinyl
wallcovering.
10. Clean vanity counters.
11. Maintain waste receptacles containers and consumable
supply dispensers.
12. Clean janitor closets and sinks.
WEEKLY SERVICES
1. Dust door trim and clean door vents.
2. Spot wash doors, inside and out.
<PAGE>
III. RESTROOM MAINTENANCE . . . . . . . CONTINUED
MONTHLY SERVICES
1. Wash partitions.
QUARTERLY SERVICES
1. Dust or vacuum all ceiling vents or air grills.
SIX TIMES A YEAR SERVICE
1. Machine scrub ceramic tile floors including base.
IV. FLOOR MAINTENANCE
MONTHLY SERVICE
1. Hot water extract and shampoo lobby and common use
corridor areas.
SIX TIMES A YEAR SERVICE
1. Clean and refinish all hard surface tile flooring January,
March, May, July, September, November.
<PAGE>
JANITORIAL MAINTENANCE -- EXTERIOR AREAS -- LOADING DOCK
DAILY SERVICES
1. Police and remove debris from around building.
2. Wash lobby door glass and spot clean door frames.
3. Empty waste containers and spot clean the insides and the
outside of the containers.
4. Remove gum and other adhesive materials reasonably as
needed
WEEKLY SERVICES
1. Sweep sidewalk plaza areas complete.
THREE TIMES A WEEK SERVICE
MONDAY, WEDNESDAY, FRIDAY
1. Wipe down horizontal ledges, including handrails.
MONTHLY SERVICES
1. Degrease loading dock
2. Hose all sidewalk and plaza areas.
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 19th day of February, 1997, before me, a Notary Public in and for the
State of Washington, personally appeared MARTIN SELIG, the individual who
executed the within and foregoing instrument, and acknowledged said
instrument to be his free and voluntary act and deed for the uses and
purposes therein mentioned.
Theresa Groff
Notary Public in and for the State of Washington
Residing at: Bellvue
My commission expires: 1/98
(individual)
STATE OF )
) ss.
COUNTY OF )
On this ___ day of _________, 19__, before me, a Notary Public in and for the
State of _______________, personally appeared _________________________, the
individual(s) who executed the within and foregoing instrument, and
acknowledged said instrument to be his/her/their free and voluntary act and
deed for the uses and purposes therein mentioned.
Notary Public in and for the State of
--------------------
Residing at:
---------------------------------------------
My commission expires:
-----------------------------------
(Partnership)
STATE OF )
) ss.
COUNTY OF )
On this ___ day of _________, 19__, before me, a Notary Public in and for the
State of _______________, personally appeared _________________________ to me
known to be partner(s) of ______________________, the partnership that
executed the foregoing instrument,
<PAGE>
and acknowledged said instrument to be the free and voluntary act and deed of
said partnership, for the uses and purposes therein mentioned, and an oath
stated that he/she/they is/are authorized to execute said instrument on
behalf of the partnership.
Notary Public in and for the State of
--------------------
Residing at:
---------------------------------------------
My commission expires:
-----------------------------------
(Corporation)
STATE OF )
) ss.
COUNTY OF )
On this 20th day of February, 1997, before me, a Notary Public in and for the
State of Washington, personally appeared Chris Birkeland to me known to be
the Vice President of Finance respectively, of PhotoDisc, the corporation
that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and an oath stated that he/she/they
is/are authorized to execute said instrument and that the seal affixed is the
corporate seal of said corporation.
Crissi R. Young
Notary Public in and for the State of Delaware
Residing at: Bellvue
My commission expires: 5/99
<PAGE>
EXHIBIT E
CURRENT TENANT LIST
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
TENANT BASE RENT
<S> <C>
- ------------------------------------------------------------------------------
Frank & Bernies $1,993.00
- ------------------------------------------------------------------------------
Seattle Coin Shop $1,002.00
- ------------------------------------------------------------------------------
Shear Seattle $950.00
- ------------------------------------------------------------------------------
Habit Cleaners $600.00
- ------------------------------------------------------------------------------
Derek Andrew $4,423.20
- ------------------------------------------------------------------------------
TOTAL BASE RENT 1/98 $8,968.20
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Registrant's subsidiaries, the state or other jurisdiction of
incorporation or organization of each, and the name under which such
subsidiaries do business (if any) are set forth below.
<TABLE>
<CAPTION>
Subsidiary State or Country Name under Which Subsidiary
of Incorporation Does Business (if any)
- -----------------------------------------------------------------------------------------------
<S> <C>
Allsport Photographic Limited England and Wales
All Sport (UK) Limited England and Wales
Allsport Photography USA Inc. California
Artcast Corporation Washington
Fabulous Footage, Inc. Massachusetts
Fotogram-Stone SARL France
Fototeca Stone SRL Spain
Gamma Liaison, Inc. New York
Getty Communications Group Finance Limited England and Wales
Getty Communications Limited England and Wales
Getty Images Belgium
Getty Images Denmark
Getty Images Holland
Getty Images Sweden
Getty Images Do Brasil Limitada Brazil
Getty Images Hong Kong Ltd. Hong Kong
Getty Images Limited England and Wales
Getty Images South America Limited England and Wales
Hulton Getty Holdings Limited England and Wales
Hulton Getty Picture Collection Ltd. England and Wales
Liaison Agency, Inc. New York
Liaison International, Inc. New York
PhotoDisc Australia Pty Limited Australia
PhotoDisc Deutschland GmbH Germany
PhotoDisc Europe Limited England and Wales
PhotoDisc, Inc. Washington
PhotoDisc Japan Kabushiki Kaisha Japan
PhotoDisc International, Inc. Barbados
Tony Stone Associates Limited England and Wales
<PAGE>
Subsidiary State or Country Name under Which Subsidiary
of Incorporation Does Business (if any)
- -----------------------------------------------------------------------------------------------
<S> <C>
Tony Stone Associates GmbH Germany
Tony Stone GmbH Austria
Tony Stone Images/America Inc. Illinois
Tony Stone Images/Canada, Inc. Ontario
Tony Stone Images/Chicago, Inc. Illinois
Tony Stone Images/Los Angeles, Inc. California
Tony Stone Images/New York, Inc. New York
Tony Stone Images/Seattle, Inc. Washington
Tony Stone Images Singapore Singapore
TriEnergy Productions California
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
(No. 333-46325) on Form S-8 of Getty Images, Inc. of our report dated
March 30, 1998, of our audits of the consolidated financial statements and
financial statement schedules of Getty Communications plc as of December 31,
1997 and 1996, and for the period March 14, 1995 through December 31, 1995
and for the two years ended December 31, 1997 and 1996, and the consolidated
financial statements and financial statement schedules of Tony Stone
Associates Limited for the period January 1, 1995 through March 13, 1995
which is included in this Annual Report on Form 10-K for the year ended
December 31, 1997.
Coopers & Lybrand
Chartered Accountants
London
March 31, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statement of Getty Communications plc and subsidiaries
and is qualified in its entirety by reference to such consolidated
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
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