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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
GETTY IMAGES, INC.
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(Name of Issuer)
Shares of Common Stock, par value $0.01 per share
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(Title of Class of Securities)
374276 10 3
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(CUSIP Number)
Mark Torrance
c/o PhotoDisc, Inc.
2013 Fourth Avenue, 4th Floor
Seattle, Washington 98121
(206) 441-9355
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications)
Copy to:
John Steel, Esq.
Graham & James/Riddell Williams
1001 Fourth Avenue Plaza, Suite 4500
Seattle, Washington 98154
Telephone: (206) 624-3600
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February 9, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Exhibit Index is at Page 15
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CUSIP No. 374276 10 3
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Mark Torrance
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(2) Check the Appropriate Box if a Member of a Group (See Instructions)
/ / (a)
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/X/ (b)
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(3) SEC Use Only
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(4) Source of Funds (See Instructions) OO
----------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Item 2(d) or 2(e). / /
(6) Citizenship or Place of Organization
U.S.
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Number of (7) Sole Voting Power 3,104,955
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Shares
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Beneficially (8) Shared Voting Power 2,473,224
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Owned by
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Each (9) Sole Dispositive Power 3,104,955
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Reporting
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Person (10) Shared Dispositive Power 2,473,224
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With
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 5,578,179
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
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(13) Percent of Class Represented by Amount in Row (11) 18.7%
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(14) Type of Reporting Person (See Instructions) IN
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CUSIP No. 374276 10 3
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
PDI, L.L.C.
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(2) Check the Appropriate Box if a Member of a Group (See Instructions)
/ / (a)
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/X/ (b)
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(3) SEC Use Only
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(4) Source of Funds (See Instructions) OO
----------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Item 2(d) or 2(e). / /
(6) Citizenship or Place of Organization
Washington
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Number of (7) Sole Voting Power 3,071,357
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Shares
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Beneficially (8) Shared Voting Power 2,473,224
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Owned by
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Each (9) Sole Dispositive Power 3,071,357
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Reporting
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Person (10) Shared Dispositive Power 2,473,224
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With
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 5,544,581
--------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
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(13) Percent of Class Represented by Amount in Row (11) 18.5%
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(14) Type of Reporting Person (See Instructions) OO
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CUSIP No. 374276 10 3
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Wade Torrance
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(2) Check the Appropriate Box if a Member of a Group (See Instructions)
/ / (a)
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/X/ (b)
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(3) SEC Use Only
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(4) Source of Funds (See Instructions) OO
----------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Item 2(d) or 2(e). / /
(6) Citizenship or Place of Organization
U.S.
---------------------------------------------------------------------------
- --------------
Number of (7) Sole Voting Power 0
--------------------------------
Shares
--------------------------------------------------
Beneficially (8) Shared Voting Power 2,473,224
------------------------------
Owned by
--------------------------------------------------
Each (9) Sole Dispositive Power 0
---------------------------
Reporting
--------------------------------------------------
Person (10) Shared Dispositive Power 2,473,224
-------------------------
With
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,473,224
--------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
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(13) Percent of Class Represented by Amount in Row (11) 8.3%
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(14) Type of Reporting Person (See Instructions) IN
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Item 1. SECURITY AND ISSUER.
The class of equity securities to which this Statement on Schedule 13D
(this "Statement") relates is the shares of common stock, par value $0.01 per
share (the "Shares"), of Getty Images, Inc. (the "Issuer"), a Delaware
corporation. The principal executive offices of the Issuer are located at 122
South Michigan Avenue, Suite 900, Chicago, IL 60606.
Item 2. IDENTITY AND BACKGROUND.
This Statement is being filed jointly by Mark Torrance, a U.S.
citizen residing in the State of Washington, and PDI, L.L.C., a Washington
limited liability company ("PDI") and Wade Torrance, a U.S. citizen residing
in the State of Washington.
The principal business address for both Mark Torrance and PDI is
2013 Fourth Avenue, 4th Floor, Seattle, Washington 98121. The principal
address for Wade Torrance is The Highlands, Seattle, Washington 98117. Mark
Torrance's principal occupation is Co-Chairman of the Issuer. Wade
Torrance's principal occupation is investor. PDI was initially formed to
hold and to vote the shares of common stock of PhotoDisc, Inc., a Washington
corporation ("PhotoDisc"), which were transferred to PDI pursuant to the
terms of a Property Settlement Agreement between Mark Torrance and Wade B.
Torrance. Upon consummation of the Merger (as defined below in Item 3), PDI
received Shares in exchange for shares of common stock, par value $0.01 per
share of PhotoDisc ("PhotoDisc Shares"). Mark Torrance and Wade B. Torrance
desired to continue to have their respective interests in the Shares received
in the Merger to be held in PDI with voting and management of the Shares held
by PDI and governed by the terms of Amended and Restated Limited Liability
Company Agreement of PDI dated as of February 9, 1998 (the "PDI LLC
Agreement") by and among Mark Torrance, Wade Torrance, Mark Torrance and
Stephen K. Gattis as Co-Trustees for the Alexandra W. Torrance Trust, the
Rosemary E. Torrance Trust and the Thomas M. Torrance Trust (all such parties
referred to as the "Members"). Wade Torrance is Mark Torrance's former wife.
Alexandra W. Torrance, Rosemary E. Torrance and Thomas M. Torrance are the
children of Mark Torrance and Wade Torrance. Mark Torrance holds
approximately 51.1% of the membership interests in PDI, with Wade Torrance
holding approximately 44.6% and Mark Torrance and Stephen K. Gattis as
Co-Trustees holding approximately 1.4% for each of the Alexandra W. Torrance
Trust, the Rosemary E. Torrance Trust and the Thomas M. Torrance Trust.
The initial manager of PDI is Mark Torrance (the "Manager"). Except
as otherwise provided in the PDI LLC Agreement, the Manager has the exclusive
right and power to manage, operate and control PDI and to do all things and make
all decisions necessary or appropriate to carry on the business and affairs of
PDI.
In addition to the rights and powers set forth above, the Manager has,
without limitation, the following specific rights and powers: (i) to vote all
of the Shares of Issuer (or of any successor entity) owned or held by PDI,
subject to the restrictions described in the
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PDI LLC Agreement; (ii) to sell Issuer's Shares, including sales of stock
directly to the Manager at fair market value; PROVIDED, that in no event shall
the Manager sell Issuer's Shares that represent Class B Assets (defined in the
PDI Agreement as Wade Torrance's interests in PDI) without the express written
consent of a majority of the Class B Members (defined in the PDI LLC Agreement
as "Wade Torrance"), except as defined and permitted under the PDI LLC
Agreement; and (iii) to perform any and all other acts necessary or incidental
to (a) the foregoing powers or (b) the general authority and powers of the
Manager set forth in the PDI LLC Agreement.
However, the following decisions require the following approvals of
the Members:
(i) a vote in regard to a sale or exchange of all or substantially all of
the assets of, a recapitalization of and/or a tax-free reorganization
of PDI (a "Reorganization") if such assets include Class B Assets
shall require the written consent of a majority of the Class B Members
unless the Reorganization has been recommended by the Issuer (or such
successor's) board of directors (the "Issuer Board");
(ii) continuation of PDI after its termination date shall require the
written consent of a majority of Class A Members (defined in the PDI
LLC Agreement as "Mark Torrance") and a majority of Class B Members;
(iii) except under certain circumstances, the dissolution and winding up
of PDI shall require the written consent of a Super Majority of
Members (defined within the PDI LLC Agreement as at least 67% of
the ownership of all the Members); and
(iv) amendment of the PDI LLC Agreement as provided therein shall require
the written consent of a majority of Class A Members and a majority of
Class B Members.
Under the terms of the PDI LLC Agreement, no Member may voluntarily or
involuntarily, directly or indirectly, sell, transfer, assign, pledge or
otherwise dispose of; mortgage, pledge, hypothecate or otherwise encumber; or
permit or suffer any encumbrance of all or any part of such Member's interest in
the Company, except as provided under the PDI LLC Agreement. The PDI LLC
Agreement prescribes certain rights of first refusal on proposed transfers of
Member interests and other transfer restrictions.
Pursuant to the PDI LLC Agreement, the Members agreed that, after the
consummation of the Merger (as defined below in Item 3), the Manager shall
distribute 250,000 Shares to the Class B Member from the Class B Assets. The
Class B Member shall thereafter have the right upon no less than 20 days'
advance written notice to the Manager to request distribution of the then
remaining Class B Assets ("Remaining Shares") at the following times and in the
following amounts: (i) during December 1998, up to 20% of the Remaining Shares;
(ii) during December 1999, up to 20% of the Remaining Shares (plus amounts not
previously requested); (iii) during December 2000, up to 20% of the Remaining
Shares (plus amounts not previously requested); (iv) during December 2001, up
to 20% of
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the Remaining Shares (plus amounts not previously requested under the PDI LLC
Agreement); and (v) during December 2002, any then Remaining Shares.
The Manager may, in his sole discretion, cause PDI to make additional
non-liquidating distributions to any class of Members from such Member's Class
of assets; PROVIDED, that if the Manager shall at any time dispose of or
distribute a greater percentage of Class A Assets (defined in the PDI LLC
Agreement as those interests in PDI held by Mark Torrance) than the percentage
of Class B Assets that has previously been distributed or become eligible for
distribution under the PDI LLC Agreement then the Class B Member shall be
entitled to request immediate distribution of additional Class B Assets so that
the percentage of Class A Assets and Class B Assets so disposed of or
distributed shall remain equal.
The summary of the PDI LLC Agreement set forth above does not purport
to be complete and is subject, and qualified in its entirety by reference, to
all the terms and provisions contained within the actual agreement which is
attached hereto as Exhibit 1 and which is deemed to be incorporated herein by
reference.
During the last five years, none of Mark Torrance, PDI or Wade
Torrance has been (a) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (b) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On February 9, 1998, Mark Torrance acquired 33,598 Shares, and PDI
acquired 5,544,581 Shares, in connection with the Transactions (as defined
below) pursuant to the Merger Agreement, dated as of September 15, 1997 (the
"Merger Agreement"), by and among Issuer, Getty Communications plc, a public
limited company organized under the laws of England and Wales and the
predecessor of Issuer ("Getty Communications"), PhotoDisc and Print Merger,
Inc., a Washington corporation and wholly owned subsidiary of Issuer ("Merger
Sub").
Mark Torrance and PDI each received Shares and an amount of cash in
exchange for their respective holdings of PhotoDisc Shares. Mark Torrance held
46,154 PhotoDisc Shares and PDI held 7,616,748 PhotoDisc Shares. Pursuant to
the Merger Agreement, upon the terms and subject to the conditions thereof, (i)
pursuant to a scheme of arrangement (the "Scheme of Arrangement") in accordance
with the Companies Act of 1985 of Great Britain (the"Companies Act"), each
issued Class B ordinary share, nominal value one pence per share ("Getty
Communications Class B Ordinary Shares"), of Getty Communications was converted
into one Class A ordinary share, nominal value one pence per share ("Getty
Communications Class A Ordinary Shares", and together with Getty
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Communications Class B Ordinary Shares, the "Getty Communications Ordinary
Shares"), of Getty Communications, each Getty Communications Ordinary Share was
transferred to Issuer or its nominees and the holders of Getty Communications
Ordinary Shares were issued one Issuer Share for every two Getty Communications
Ordinary Shares held of record by such holders, and Getty Communications became
a wholly owned subsidiary of Issuer; and (ii) PhotoDisc was merged with and into
Merger Sub (the "Merger", and, together with the Scheme of Arrangement, the
"Transactions"), with Merger Sub as the surviving corporation in the Merger
becoming a wholly owned subsidiary of Issuer and the then outstanding PhotoDisc
Shares were converted into the right to receive the amount of cash and the
number of Shares specified in the Merger Agreement.
Item 4. PURPOSE OF TRANSACTION.
Mark Torrance, PDI and Wade Torrance acquired the Shares to which
this Schedule 13D relates for the purpose of investing in Issuer.
Mark Torrance, PDI and Wade Torrance from time to time intend to
review their respective investments in Issuer on the basis of various
factors, including Issuer's business, financial condition, results of
operations and prospects, general economic and industry conditions, the
securities markets in general and those for Issuer's securities in
particular, as well as other developments and other investment opportunities.
Based upon such review, Mark Torrance, PDI and Wade Torrance will take such
actions in the future as they may deem appropriate in light of the
circumstances existing from time to time. If Mark Torrance, PDI and Wade
Torrance believe that further investment in Issuer is attractive, whether
because of the market price of Issuer's securities or otherwise, they may
acquire Shares either in the open market or in privately negotiated
transactions. Similarly, depending on market and other factors, Mark
Torrance, PDI and Wade Torrance may determine to dispose of some or all of
the Shares currently owned by them or otherwise acquired by them either in
the open market or in privately negotiated transactions. As described in
Item 2, the Manager has agreed to distribute 250,000 shares held by PDI to
Wade Torrance. Depending upon market and other factors, Wade Torrance may
determine to dispose of some or all of such Shares.
Except as set forth above or in Item 2, Mark Torrance, PDI and Wade
Torrance have not formulated any plans or proposals which relate to or would
result in: (i) the acquisition by any person of additional securities of
Issuer or the disposition of securities of Issuer, (ii) an extraordinary
corporate transaction involving Issuer or any of its subsidiaries, (iii) a
sale or transfer of a material amount of the assets of Issuer or any of its
subsidiaries, (iv) any change in the present board of directors or management
of Issuer, (v) any material change in Issuer's capitalization or dividend
policy, (vi) any other material change in Issuer's business or corporate
structure, (vii) any change in Issuer's charter or bylaws or other
instruments corresponding thereto or other action which may impede the
acquisition of control of Issuer by any person, (viii) causing a class of
Issuer's securities to be deregistered or delisted, (ix) a class of equity
securities of Issuer becoming eligible for termination of registration or (x)
any action similar to any of those enumerated above.
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Item 5. INTEREST IN SECURITIES OF ISSUER.
Based on the most recent information available to Mark Torrance,
PDI and Wade Torrance, each of Mark Torrance, PDI and Wade Torrance are
deemed to beneficially own the number of Shares and the percentage of
outstanding Shares listed in the responses to Items 11 and 13, respectively,
on Mark Torrance's, PDI's and Wade Torrance's respective cover pages filed
herewith, and such responses are incorporated by reference herein. In
addition, the number of Shares with respect to which each of Mark Torrance,
PDI and Wade Torrance (i) has sole voting power, (ii) shares voting power,
(iii) has sole dispositive power, and (iv) shares dispositive power, are
listed in responses to Items 7, 8, 9, and 10, respectively, on Mark
Torrance's, PDI's and Wade Torrance's respective cover pages filed herewith,
and such responses are incorporated by reference herein.
Mark Torrance is deemed to be the beneficial owner of the following
Shares:
(i) 33,598 Shares owned directly by Mark Torrance; and
(ii) 5,544,581 Shares owned by PDI, the limited liability company of which
Mark Torrance is the Manager.
PDI is deemed to be the beneficial owner of 5,544,581 Shares owned by
PDI directly.
By virtue of her membership interest in PDI, Wade Torrance is
deemed to be the beneficial owner of 2,473,224 shares held by PDI.
Except as described herein, none of Mark Torrance, PDI or Wade
Torrance has acquired or disposed of, or entered into any other transaction
with respect to, any Shares during the past 60 days.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF ISSUER.
Mark Torrance, PDI and Wade Torrance are parties to the following
agreements, arrangements, understandings or relationships with respect to
securities of Issuer, which are summarized in the following sections. (The
summaries below do not purport to be complete and are subject, and qualified
in their entirety by reference, to all the terms and provisions contained
within the actual agreements.)
A. STOCKHOLDERS' AGREEMENT
The Stockholders' Agreement dated as of February 9, 1998 (the
"Stockholders' Agreement") by and among (i) Issuer, (ii) Getty Investments,
Mark H. Getty, Jonathan D. Klein, Crediton Limited and the October 1993 Trust
(collectively, the "Getty Group"), and (iii) PDI, Mark Torrance and Wade
Torrance (collectively, the "Torrance Group"), and together with the Getty
Group, the "Significant Stockholders"), places certain restrictions on the
Significant Stockholders' abilities to transfer Shares. Pursuant to the
terms of the Stockholders' Agreement, no Significant Stockholder may sell,
encumber or
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otherwise transfer such Significant Stockholders' Shares except (i) to
Permitted Transferees (as defined below); (ii) pursuant to the terms of the
Stockholders' Agreement; (iii) pursuant to a registered public offering of
Shares in which no person or "Group" will purchase more than five percent of
the then outstanding Shares; or (iv) sales within the Rule 144 volume
limitations (or within two times the Rule 144(e) volume limitations for
sellers entitled to rely upon Rule 144(k)), or in a cashless exercise of
options. A "Permitted Transferee" is defined as (i) Issuer or its
subsidiaries; (ii) in the case of any Significant Stockholder who is a
natural person, a person to whom Shares are transferred from such Significant
Stockholder by gift, will or the laws of descent and distribution; (iii) any
other member of the Getty Group or the Torrance Group, as the case may be
(and any Permitted Transferee of such Group); (iv) any affiliate of any
Significant Stockholder; or (v) with respect only to the taking of an
encumbrance on Shares, any commercial bank or other financial institution
that lends funds to a Significant Stockholder on the condition of taking such
encumbrance in such Significant Stockholders' Shares.
If any Significant Stockholder (a "Prospective Seller") receives from
a person, other than a Permitted Transferee or another Significant Stockholder
(a "Stockholders' Agreement Third Party"), a bona fide offer to purchase any or
all of such Prospective Seller's Shares (the "Offered Stock") and such
Prospective Seller desires to sell the Offered Stock to such Stockholders'
Agreement Third Party, the Prospective Seller must provide written notice (the
"Offer Notice") of such offer to Issuer and the other Significant Stockholders
constituting the Significant Stockholders' "Group" in which the Prospective
Seller does not belong. The Offer Notice will constitute an offer by such
Prospective Seller to sell to the recipients of such Offer Notice all of the
Offered Stock at the price per share of Shares at which the sale to the
Stockholders' Agreement Third Party is proposed to be made in cash and will be
irrevocable for ten days after receipt of such Offer Notice. The Prospective
Seller has the right to reject any or all of the acceptances of the offer to
sell the Offered Stock and sell all, but not less than all, the Offered Stock to
the Stockholders' Agreement Third Party if (i) the Prospective Seller has not
received acceptances as to all the Offered Stock prior to the expiration of the
ten-day period following receipt of the Offer Notice or (ii) an accepting party
fails to consummate the purchase of the Offered Stock and neither Issuer nor the
other Significant Stockholders who received the Offer Notice are prepared to
purchase such Offered Stock within five business days of receiving notice of
such failed purchase. The obligations and rights of the Significant
Stockholders relating to the rights of first refusal will terminate when the
Getty Group or the Torrance Group, as the case may be, and any of such "Group's"
Permitted Transferees collectively beneficially own fewer than the greater of
3,000,000 Shares and such number of Shares as is equal to two percent or less of
the then outstanding Shares.
Each of the Torrance Group and the Getty Group will have the right,
subject to termination conditions, to nominate one director. For so long as the
Getty Group has the right to nominate one director, it shall also have the right
to appoint from among the directors of Issuer, the Chairman of Issuer, provided,
however, that for so long as either Mark Torrance or Mark H. Getty are
Co-Chairmen of the Board of Directors of Issuer (the "Issuer Board"), such right
shall not be in effect.
Issuer shall include as a nominee for the Issuer Board the person
designated by each of the Getty Group and the Torrance Group and shall nominate
such person and use its reasonable best efforts to cause the election of such
person, unless the Issuer Board, in the
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exercise of its fiduciary duties, reasonably shall determine that such person is
not qualified to serve on the Issuer Board. If the Issuer Board reasonably
determines that such designee is not so qualified, the Group designating such
nominee shall have the opportunity to specify one additional designee who shall
be so included as a nominee subject to the qualification set forth in the
immediately preceding sentence.
The Significant Stockholders have agreed to take such actions within
their control as are necessary to implement each "Group's" right to appoint a
director, including the voting of their respective shares in favor of the
nominees designated by the Getty Group and the Torrance Group in accordance with
the Stockholders' Agreement.
The foregoing description of the Stockholders' Agreement is qualified
in its entirety by reference to such agreement, a copy of which is attached
hereto as Exhibit 2.
B. REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement, dated as of February 9, 1998 (the
"PDI Registration Rights Agreement"), among Issuer, PDI and Mark Torrance (Mark
Torrance and PDI together being the "PDI Shareholders") gives the PDI
Shareholders the right to require Issuer to file a registration statement with
respect to all or a portion of the PDI Shareholders' Shares (a "PDI Demand
Right"). Pursuant to the PDI Registration Rights Agreement, the PDI
Shareholders have three "long form" and two "short form" PDI Demand Rights. The
PDI Shareholders may exercise a "long form" PDI Demand Right only if the
aggregate number of Shares covered by the "long form" PDI Demand Right is
greater than such number of Shares equal to 25% of the aggregate Shares owned by
the PDI Shareholders as of the effective time of the Transactions. The PDI
Shareholders may exercise a "short form" PDI Demand Right only if the aggregate
number of Shares covered by such Demand Right is greater than 350,000 shares.
In addition to their PDI Demand Rights, the PDI Shareholders have the right to
have any or all of their Shares included in any registration by Issuer (a "PDI
Piggy-Back Right"), subject to certain limitations that may be imposed by the
managing underwriter. Both the PDI Demand Rights and PDI Piggy-Back Rights will
terminate on the earlier of (i) immediately, once all of the PDI Shareholders'
Shares can be sold within a three-month period under the volume limitation of
Rule 144 of the Securities Act or (ii) on the 15th anniversary of the date of
the PDI Registration Rights Agreement.
The foregoing description of the PDI Registration Rights Agreement is
qualified in its entirety by reference to such agreement, a copy of which is
attached hereto as Exhibit 3.
C. ESCROW AGREEMENT
As a condition to the consummation of the Transactions, Issuer,
certain principal shareholders of PhotoDisc (the "Principal PhotoDisc
Shareholders"), Mark Torrance, as designated representative of the Principal
Stockholders, and an escrow agent
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executed and delivered, an Escrow Agreement (the "Escrow Agreement"), dated as
of February 9, 1998. Pursuant to the Merger Agreement and the Escrow Agreement,
at closing of the Transactions (the "Closing"), Issuer deposited into an escrow
fund certificates representing 12.5% of the number of shares of Shares (the
"Escrow Shares") to be issued to each Principal PhotoDisc Shareholder at Closing
(an aggregate of 1,006,938 Shares, including 4,200 Shares issued to Mark
Torrance and 693,073 Shares issued to PDI) to secure the indemnification
obligations of the Principal PhotoDisc Shareholders contained in the Merger
Agreement and the Stockholders' Transaction Agreement, dated as of September 15,
1997, among Issuer, the Principal PhotoDisc Shareholders and Mark Torrance, as
designated representative of the Principal Stockholders.
The foregoing description of the Escrow Agreement is qualified in its
entirety by reference to such agreement, a copy of which is attached hereto as
Exhibit 4.
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Item 7. MATERIAL TO BE FILED AS EXHIBITS.
Description Exhibit Number
- ------------------------------------ -----------------------------------------
Amended and Restated Limited 1
Liability Company Agreement of
PDI, L.L.C. dated as of
February 9, 1998, by and among
Mark Torrance, Wade Torrance,
Mark Torrance and Stephen K.
Gattis as Co-Trustees for the
Alexandra W. Torrance Trust,
the Rosemary E. Torrance Trust
and the Thomas M. Torrance
Trust
Stockholders' Agreement, dated 2
as of February 9, 1998, by and
among (i) Getty Images, Inc.,
(ii) Getty Investments L.L.C.,
Mark Getty, Jonathan Klein,
Crediton Limited and the
October 1993 Trust and
(iii) PDI, L.L.C., Mark
Torrance and Wade Torrance
The Registration Rights 3
Agreement, dated as of
February 9, 1998, among Getty
Images, Inc., PDI, L.L.C. and
Mark Torrance
The Escrow Agreement, dated as 4
of February 9, 1998, by and
among Getty Images, Inc., the
Principal Shareholders of
PhotoDisc (as defined
therein), Mark Torrance, as
designated representative of
the Principal Stockholders,
and Citibank, N.A., as escrow
agent
Joint Filing Agreement, 5
dated February 19, 1998, by
and among Mark Torrance, PDI,
L.L.C. and Wade Torrance
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
February 19, 1998
/s/ Mark Torrance
--------------------------------------
Mark Torrance
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
February 19, 1998 PDI, L.L.C.
By: /s/ Mark Torrance
----------------------------------
Name: Mark Torrance
Title: Manager
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
February 19, 1998
By: /s/ Wade Torrance
----------------------------------
Wade Torrance
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EXHIBIT INDEX
Exhibit Description Page
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1 Amended and Restated Limited Liability Company
Agreement of PDI, L.L.C. dated as of
February 9, 1998, by and among Mark Torrance,
Wade Torrance, Mark Torrance and Stephen K. Gattis
as Co-Trustees for the Alexandra W. Torrance
Trust, the Rosemary E. Torrance Trust and the
Thomas M. Torrance Trust
2 Stockholders' Agreement, dated as of February
9, 1998, by and among (i) Getty Images, Inc.,
(ii) Getty Investments L.L.C., Mark Getty,
Jonathan Klein, Crediton Limited and the
October 1993 Trust and (iii) PDI, L.L.C., Mark
Torrance and Wade Torrance
3 The Registration Rights Agreement, dated as of
February 9, 1998, among Getty Images, Inc.,
PDI, L.L.C. and Mark Torrance
4 The Escrow Agreement, dated as of February 9,
1998, by and among Getty Images, Inc., the
Principal Shareholders of PhotoDisc (as defined
therein), Mark Torrance, as designated
representative of the Principal Stockholders,
and Citibank, N.A., as escrow agent
5 Joint Filing Agreement, dated as February 19, 1998,
by and among Mark Torrance, PDI, L.L.C. and
Wade Torrance.
17
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
PDI, L.L.C.
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
PDI, L.L.C.
Table of Contents
ARTICLE 1 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 - FORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Name and Office. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Partnership Intended for Tax Purposes Only . . . . . . . . . . . . 6
2.5 Rights of Creditors and Third Parties. . . . . . . . . . . . . . . 6
2.6 Payments of Individual Obligations . . . . . . . . . . . . . . . . 6
ARTICLE 3 - POWERS, RIGHTS AND OBLIGATIONS OF THE MANAGER AND THE MEMBERS. . 6
3.1 General Authority and Powers of the Manager. . . . . . . . . . . . 6
3.2 Specific Rights and Powers of the Manager. . . . . . . . . . . . . 7
3.3 Right to Rely on Manager . . . . . . . . . . . . . . . . . . . . . 7
3.4 Ceasing to Be a Manager; Successor Manager . . . . . . . . . . . . 7
3.5 Manager's Compensation . . . . . . . . . . . . . . . . . . . . . . 8
3.6 Independent Activities of Managers and Members . . . . . . . . . . 8
3.7 Liability of the Members to Other Members and the Company. . . . . 8
3.8 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Fiduciary Duties . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 Restrictions on the Authority of the Manager . . . . . . . . . . . 9
3.11 Manner of Action by Members; Meetings. . . . . . . . . . . . . . . 9
ARTICLE 4 - STATUS OF MEMBER . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 No Participation in Management . . . . . . . . . . . . . . . . . . 9
4.2 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . 10
4.3 Termination of Agreements. . . . . . . . . . . . . . . . . . . . . 10
4.4 Recourse of the Members. . . . . . . . . . . . . . . . . . . . . . 10
4.5 IRC Sections 2701, 2703 and 2704 . . . . . . . . . . . . . . . . . 10
4.6 Class of Members . . . . . . . . . . . . . . . . . . . . . . . . . 11
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ARTICLE 5 - TRANSFERS OF COMPANY INTERESTS; WITHDRAWAL AND ADMISSION OF
MEMBERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 General Prohibitions . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 No Withdrawal of a Member and Termination of Membership. . . . . . 11
5.3 Permitted Transfers. . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Transfers to Outside Parties . . . . . . . . . . . . . . . . . . . 11
5.4.1 Sale . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4.2 Option at Death of a Member. . . . . . . . . . . . . . . 12
5.4.3 Involuntary Transfers. . . . . . . . . . . . . . . . . . 14
5.4.4 Pledges and Hypothecation. . . . . . . . . . . . . . . . 14
5.4.5 Marriage Dissolution . . . . . . . . . . . . . . . . . . 14
5.5 Rights of a Transferee and Admission of a New Member . . . . . . . 14
5.6 Voting Rights and Sale Escrows . . . . . . . . . . . . . . . . . . 15
ARTICLE 6 - CONTRIBUTIONS AND CAPITAL ACCOUNTS . . . . . . . . . . . . . . . 16
6.1 Capital Contributions, Percentage Interests. . . . . . . . . . . . 16
6.2 Additional Capital . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Preexisting Liabilities. . . . . . . . . . . . . . . . . . . . . . 18
6.6 Capital Account Revaluation. . . . . . . . . . . . . . . . . . . . 18
ARTICLE 7 - ALLOCATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Allocation of Net Profit and Loss -- In General. . . . . . . . . . 18
7.1.1 Net Profits. . . . . . . . . . . . . . . . . . . . . . . 18
7.1.2 Net Losses . . . . . . . . . . . . . . . . . . . . . . . 19
7.1.3 Limitation . . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Special Allocations. . . . . . . . . . . . . . . . . . . . . . . . 19
7.2.1 Minimum Gain Chargeback. . . . . . . . . . . . . . . . . 19
7.2.2 Member Minimum Gain Chargeback . . . . . . . . . . . . . 19
7.2.3 Qualified Income Offset. . . . . . . . . . . . . . . . . 20
7.2.4 Nonrecourse Deductions . . . . . . . . . . . . . . . . . 20
7.2.5 Member Nonrecourse Deductions. . . . . . . . . . . . . . 20
7.3 Corrective Allocations.. . . . . . . . . . . . . . . . . . . . . . 20
7.3.1 Allocations to Achieve Economic Agreement. . . . . . . . 20
7.3.2 Waiver of Application of Minimum Gain Chargeback . . . . 20
7.4 Other Allocation Rules.. . . . . . . . . . . . . . . . . . . . . . 21
7.4.1 General. . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4.2 Allocation of Recapture Items. . . . . . . . . . . . . . 21
7.4.3 Allocation of Excess Nonrecourse Liabilities . . . . . . 21
7.4.4 Allocations in Connection with Varying Interests . . . . 21
7.5 Determination of Net Profit or Loss. . . . . . . . . . . . . . . . 21
7.5.1 Computation of Net Profit or Loss. . . . . . . . . . . . 21
7.5.2 Adjustments to Net Profit or Loss. . . . . . . . . . . . 22
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7.5.3 Items Specially Allocated. . . . . . . . . . . . . . . . 22
7.6 Mandatory Tax Allocations Under Code Section 704(c). . . . . . . . 22
ARTICLE 8 - EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9 - DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Nonliquidating Distributions . . . . . . . . . . . . . . . . . . . 23
9.2 Excessive Distributions. . . . . . . . . . . . . . . . . . . . . . 25
9.3 Liquidating Distributions. . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 10 - BOOKS AND RECORDS, ACCOUNTING, REPORTS, STATEMENTS AND TAX
MATTERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.1 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 25
10.2 Annual Accounting Period . . . . . . . . . . . . . . . . . . . . . 25
10.3 Reports to the Members . . . . . . . . . . . . . . . . . . . . . . 25
10.4 Right to Examine Records . . . . . . . . . . . . . . . . . . . . . 26
10.5 The Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . 26
10.6 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 Tax Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 11 - DISSOLUTION, WINDING UP AND TERMINATION . . . . . . . . . . . . 26
11.1 Events Causing Dissolution . . . . . . . . . . . . . . . . . . . . 26
11.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.3 Allocation of Net Income and Net Loss Upon Termination or Sale . . 28
11.4 Distributions in Dissolution . . . . . . . . . . . . . . . . . . . 28
11.5 Certificate of Cancellation; Report; Termination . . . . . . . . . 28
ARTICLE 12 - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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ARTICLE 13 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 29
13.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.3 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.5 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.6 Captions; Pronouns . . . . . . . . . . . . . . . . . . . . . . . 29
13.7 Independent Agreement and Survival of Covenants. . . . . . . . . 30
13.8 Legal Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.9 Waiver of Breach . . . . . . . . . . . . . . . . . . . . . . . . 30
13.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.11 Equitable Relief and Specific Performance . . . . . . . . . . . 30
13.12 Rights Cumulative. . . . . . . . . . . . . . . . . . . . . . . . 31
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<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
PDI, L.L.C.
Reference is made to the Limited Liability Agreement of PDI, L.L.C. made
and entered into October 31, 1996 (the "Original Agreement") by and among Mark
Torrance; Wade Torrance; and Mark Torrance and Stephen K. Gattis as Co-Trustees
for the Alexandra W. Torrance Trust, the Rosemary E. Torrance Trust and the
Thomas M. Torrance Trust (all such parties being referred to as the "Members").
The parties have executed this Amended and Restated Agreement (the
"Agreement") as of February ____, 1998. This Agreement shall be effective as of
the moment immediately preceding the consummation of the merger (the "Merger")
as described in the Merger Agreement dated as of September 15, 1997 among Getty
Images (USA) ("Getty Images"), Inc., Getty Communications plc, PhotoDisc, Inc.
and Print Merger, Inc. In the event the Merger is not consummated, this
Agreement shall not take effect and the Original Agreement shall remain in
effect.
The parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
The following terms used in the Agreement shall have the meanings specified
below:
1.1 "ACT" means the Washington Limited Liability Company Act,
Chapter 25.15 of the Revised Code of Washington ("RCW") as amended from time to
time.
1.2 "AGREEMENT" means this Agreement of the PDI, L.L.C., as it may be
amended from time to time.
1.3 "ASSIGNEE" means a person or entity that has acquired Units as allowed
by this Agreement and has not been admitted to the Company as a Member. An
Assignee shall have all duties and obligations of a Member with respect to Units
acquired, but the sole right and/or entitlement of an Assignee shall be to
receive distributions and allocations with respect to the Units as if the
Assignee were a Member. An Assignee shall not be entitled to vote or otherwise
participate in any Company decision.
1.4 "CAPITAL ACCOUNT" means the account maintained for each Member in
accordance with Section 6.3. In the case of a transfer or assignment of Units
allowed under this Agreement, the person or entity acquiring the Units, i.e.,
the Assignee or
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Member, as the case may be, shall succeed to the Capital Account of the
transferor or, in the case of a partial transfer, a proportionate share thereof.
1.5 "CAPITAL CONTRIBUTION" means the total amount of money and the fair
market value of all property contributed to the Company by each Member pursuant
to the terms of the Agreement. "Capital Contribution" shall also include any
amounts paid directly by a Member to any creditor of the Company in respect of
any guarantee or similar obligation undertaken by such Member in connection with
the Company's operations. Any reference to the Capital Contribution of a Member
shall include the Capital Contribution made by a predecessor holder of the
interest of such Member.
1.6 "CAPITAL TRANSACTION" OR "CAPITAL TRANSACTIONS" means any of the
following: the sale of the Company's assets or its interests therein, the
refinancing of Company mortgages or other liabilities, the condemnation of
Company Property, net insurance recoveries (other than for temporary loss of
use) and any similar item or transaction the proceeds of which, in accordance
with generally accepted tax or accounting principles and practices, are deemed
attributable to capital.
1.7 "CASH AVAILABLE FOR DISTRIBUTION" means all cash receipts of the
Company in excess of amounts reasonably required for payment of operating
expenses and repayment of current liabilities.
1.8 "CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time. References to specific Code sections or Treasury
Regulations shall be deemed to refer to such Code sections or Treasury
Regulations as they may be amended from time to time or to any successor Code
sections or Treasury Regulations if the Code section or Treasury Regulation
referred to is repealed.
1.9 "COMPANY" means the PDI, L.L.C. created and governed by this
Agreement.
1.10 "COMPANY PROPERTY" OR "PROPERTY" means all the real and personal
(tangible and intangible) property owned by the Company.
1.11 "FAMILY MEMBER" means Mark Torrance and Wade Torrance, and the lineal
descendants and/or adopted children of either of them, or a trustee, custodian
or legal guardian of the estate for any such person's primary benefit. "Family
Member" does not include the spouse of a Family Member.
1.12 "MANAGER" or "MANAGERS" means the Member or Members who are appointed
in accordance with this Agreement to exercise the authority of Manager under
this Agreement and the Act. The initial Manager is: MARK TORRANCE.
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1.13 "MEMBER" or "MEMBERS" means those persons who own Units and who
execute this Agreement or a counterpart of this Agreement or who are hereafter
admitted as Members as provided in Section 5.5.
1.14 "MINIMUM GAIN" means the amount determined by computing, with respect
to each nonrecourse liability of the Company, the amount of gain, if any, that
would be realized by the Company if it disposed of the Company Property subject
to such nonrecourse liability in full satisfaction thereof in a taxable
transaction, and then by aggregating the amounts so determined. Such gain shall
be determined in accordance with Treasury Regulation Section 1.704-2(d). Each
Member's share of Minimum Gain ("Member Minimum Gain") at the end of any taxable
year of the Company shall be determined in accordance with Treasury Regulation
Section 1.704-2(g)(1).
1.15 "NET INCOME" or "NET LOSS" means taxable income or loss (including
items requiring separate computation under Section 702 of the Code) of the
Company as determined using the method of accounting chosen by the Manager and
used by the Company for federal income tax purposes.
1.16 "OUTSIDE PARTY" means any individual or entity other than a Family
Member.
1.17 "SALE OR REFINANCING PROCEEDS" means the net cash proceeds resulting
from any Capital Transaction, after deduction of all expenses incurred in
connection with such Capital Transaction and application of any such proceeds
toward the payment of any other debts or expenses of the Company.
1.18 "SIMPLE MAJORITY" means more than fifty percent (50%) of the Units
owned by Members.
1.19 "SUPER MAJORITY" means at least sixty-seven percent (67%) of the Units
owned by Members.
1.20 "UNITS" OR "UNIT" means an ownership interest in the Company expressed
as a number of Units. The number of Units owned by a Member or an Assignee in
proportion to the total number of Units then issued and outstanding shall
correspond to such individual's or such entity's percentage interest in the
Company. Each Unit owned by a Member shall carry one (1) vote. Units owned by
an Assignee shall not entitle the owner to vote or otherwise entitle the owner
to any right or benefit of a Member except the right to distributions and
allocations as provided hereunder. There shall be a reduction in the number of
Units owned by a Unit Holder for either (i) any in-kind distribution of shares
of Getty Images Common Stock to such Unit Holder or (ii) any cash distribution
to a Unit Holder. The reduction in the number of Units owned by a Unit Holder
for an in-kind distribution of shares of Getty Images Common Stock shall equal
the number of shares distributed to such Unit Holder. In the event of a cash
distribution to a Unit Holder where
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<PAGE>
the source of such cash distributed was the sale of shares of Getty Images
Common Stock, the reduction in the number of Units owned by a Unit Holder shall
equal the number of shares of Getty Images Common Stock that was sold to
generate the cash that was distributed to such Unit Holder. In the event of a
cash distribution to a Unit Holder where the source of such cash distributed was
not the sale of shares of Getty Images Common Stock, the reduction in the number
of Units owned by a Unit Holder shall equal the following quotient in which (a)
the numerator is the amount of the cash distributed and (b) the denominator is
the simple average closing price per share of Getty Images Common Stock for the
ten (10) trading days immediately preceding the date of such cash distribution.
Any reduction in the number of Units owned by a Unit Holder shall also be an
equivalent reduction in the total number of Units issued and outstanding. In
the event of any stock splits or stock dividends of Getty Images Common Stock,
the number of Units owned by such Unit Holder shall be increased by (x) the
product of the relative percentage interest of each Unit Holder and (y) the
total number of additional shares of Getty Images Common Stock received by the
Company as a result of the stock split or stock dividend.
1.21 "NONMANAGER MEMBER" means Wade B. Torrance and each of the trusts that
are Members.
1.22 "CLASS A MEMBERS" means those members identified as such in Section
6.1 who have the rights and obligations of a Class A Member in this Company as
set forth in this Agreement. All assets of the Company that relate to the Units
held by a Class A Member are referred to in this Agreement as Class A assets.
1.23 "CLASS B MEMBERS" means those members identified as such in Section
6.1 who have the rights and obligations of a Class B Member in the Company as
set forth in this Agreement. All assets of the Company that relate to the Units
held by a Class B Member are referred to in this Agreement as Class B assets.
1.24 "CLASS C MEMBER" means those members identified as such in Section 6.1
who have the rights and obligations of a Class C Member as set forth in this
Agreement. All assets of the Company that relate to the Units held by a Class C
Member are referred to in this Agreement as Class C assets.
1.25 "UNIT HOLDER" means a Member or an Assignee.
ARTICLE 2 - FORMATION
2.1 NAME AND OFFICE. The Members hereby form and agree to operate the
Company to be known as PDI, L.L.C. in accordance with the Act under the terms
and conditions set forth herein. Except as otherwise provided herein, the
rights and liabilities of the Members shall be governed by the Act.
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The initial principal place of business shall be:
2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
The initial registered office and the initial registered agent of the
Company for service of process, notice or demand shall be:
Registered Agent: MARK TORRANCE
Registered Office: 2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
2.2 PURPOSES. The Company was initially formed to hold and to vote the
common stock and stock warrants of PhotoDisc, Inc., a Washington corporation
("PhotoDisc"), which are described on Exhibit A to the Agreement, and which were
transferred to the Company pursuant to the terms of that certain Property
Settlement Agreement between Mark Torrance and Wade B. Torrance. Upon
consummation of the Merger, shares of common stock of Getty Images will be
received in exchange for (i) shares of common stock of PhotoDisc and (ii) shares
issued upon the exercise of warrants of PhotoDisc. Mark Torrance and Wade B.
Torrance wish to continue to have their respective interests in the stock of
Getty Images, which will be received by the Company in exchange for the
PhotoDisc stock and warrants held by the Company, to be held in the Company with
voting and management of the stock of Getty Images held by the Company and
governed by the terms of this Agreement. In addition, the Company may engage in
any other activities and shall have such other purposes as may be reasonably
necessary, incidental or convenient to carry on the Company's primary purpose
as described herein, or as may be mutually agreed upon by the Members.
2.3 TERM. The Company commenced on the filing of the Certificate of
Formation with the Office of the Secretary of State of Washington and shall
continue until March 1, 2003, unless sooner dissolved, wound up and terminated
in accordance with the provisions of this Agreement and the Act.
2.4 PARTNERSHIP INTENDED FOR TAX PURPOSES ONLY. The Members are forming
the Company under the Act and expressly do not intend for the Company to be a
partnership under either the Washington Uniform Partnership Act or the
Washington Uniform Revised Limited Partnership Act or to be a corporation under
the Washington Business Corporation Act. The Members do not intend to be
partners one to another or partners as to any third party. The Members hereto
agree and acknowledge that the Company is to be treated as a partnership for
federal internal revenue tax purposes. Specifically, the Company shall not have
the corporate characteristic of "free transferability of interests" as described
in Treasury Regulation Section 301.7701-2(e), nor shall the Company have the
corporate characteristic of "continuity of life" as described in Treasury
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Regulation Section 301.7701-2(b). Any provision of this Agreement or the
Act that would cause the Company to be treated other than as a partnership
for federal internal revenue tax purposes shall hereby be disregarded, and
any provision absent from this Agreement necessary to cause the Company to be
treated as a partnership for federal internal revenue tax purposes shall be
deemed included in this Agreement and is hereby incorporated herein.
2.5 RIGHTS OF CREDITORS AND THIRD PARTIES. This Agreement is entered into
among the Company and the Members for the exclusive benefit of the Company, its
Members and their successors and assigns. The Agreement is expressly not
intended for the benefit of any creditor of the Company or any other person.
Except and only to the extent provided by applicable statute, no such creditor
or third party shall have any rights under the Agreement or any agreement
between the Company and any Member with respect to any contribution or
otherwise.
2.6 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Company's credit and assets
shall be used solely for the benefit of the Company, and no asset of the Company
shall be transferred or encumbered for or in payment of any individual
obligation of any Member unless otherwise provided for herein.
ARTICLE 3 - POWERS, RIGHTS AND OBLIGATIONS
OF THE MANAGER AND THE MEMBERS
3.1 GENERAL AUTHORITY AND POWERS OF THE MANAGER. The initial Manager of
the Company is Mark Torrance. Except as otherwise provided herein, the Manager
shall have the exclusive right and power to manage, operate and control the
Company and to do all things and make all decisions necessary or appropriate to
carry on the business and affairs of the Company. The Manager may issue Company
checks and otherwise act on behalf of the Company in any manner consistent with
the terms of this Agreement. If at any time there are more than two (2)
Managers, decisions shall be made by majority consent or agreement. In this
regard each Manager shall have one (1) vote. All the Managers may delegate to
one (1) or more of the Managers the power to draw checks on behalf of the
Company; to endorse drafts, checks and notes on behalf of the Company; and to
exercise all rights, including voting rights and transfer rights, with respect
to shares of stock or securities held by the Company. This power to delegate is
provided for the convenience of the Managers and shall relieve third parties,
but not the Managers, from liability with respect to the other Members or the
Company for actions taken pursuant to it.
3.2 SPECIFIC RIGHTS AND POWERS OF THE MANAGER. In addition to the rights
and powers set forth in Section 3.1, the Manager shall, without limitation, have
the following specific rights and powers:
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(a) Vote all of the shares of stock of Getty Images (or of any
successor entity) owned or held by the Company, subject to
the restrictions described in Section 3.10(a); and
(b) Sell shares of stock of Getty Images, including sales of
stock directly to the Manager at fair market value;
PROVIDED, that in no event shall the Manager sell shares of
Getty Images stock that represent Class B assets without the
express written consent of a majority of the Class B
Members, except as permitted under Section 3.10(a); and
(c) Perform any and all other acts necessary or incidental to
(i) the foregoing powers or (ii) the general authority and
powers of the Manager set forth in Section 3.1.
3.3 RIGHT TO RELY ON MANAGER. Any individual or entity dealing with the
Company may rely (without duty of further inquiry) upon a certificate signed by
the Manager as to the identity and authority of the Manager to act on behalf of
the Company.
3.4 CEASING TO BE A MANAGER; SUCCESSOR MANAGER. A Manager shall cease to
be a Manager upon such Manager's death, bankruptcy, dissolution, insanity,
adjudication of incompetency, incapacity (within the meaning of RCW 11.88), or
expulsion as a Member of the Company. A Manager may resign by giving written
notice of such resignation to the Company with copies to each other Member. A
Manager may be removed with or without cause upon the written approval of
Members holding a Super Majority. Subject to Section 11.1(g), if Mark Torrance
ceases to be a Manager, the successor shall be such person (or persons)
designated by Mark Torrance and Wade Torrance. If Mark Torrance or Wade
Torrance cannot, because of death or disability, make such designation, his or
her personal representative or attorney-in-fact shall designate in his or her
stead. Otherwise, a new or replacement Manager may be appointed with the
written approval of a majority of Class A Members and a majority of Class B
Members.
3.5 MANAGER'S COMPENSATION. The Manager shall take no salary or other
compensation as Manager.
3.6 INDEPENDENT ACTIVITIES OF MANAGERS AND MEMBERS. Any Manager or Member
may engage in or possess an interest in other business ventures of every nature
and description, independently or with others, including but not limited to, the
ownership, financing, management, employment by, lending to or otherwise
participating in businesses which are similar to the business of the Company,
and neither the Company nor any of the Managers or Members shall have any right
by virtue of this Agreement in and to such independent ventures or to the income
or profits therefrom.
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3.7 LIABILITY OF THE MEMBERS TO OTHER MEMBERS AND THE COMPANY. In
carrying out their duties and exercising the powers hereunder, the Manager and
the Members shall exercise reasonable skill, care and business judgment. A
Member or the Manager shall not be liable to the Company or the Members for any
act or omission performed or omitted by the Member or Manager in good faith
pursuant to the authority granted to it by this Agreement as a Member, Manager
or Tax Matters Partner (as defined in the Code) unless such act or omission
constitutes gross negligence or willful misconduct by such Member or Manager.
3.8 INDEMNIFICATION. The Company shall indemnify, defend and hold the
Members and the Manager harmless from any loss or damage, including attorney
fees actually and reasonably incurred, by reason of any act or omission
performed or omitted by the Member or the Manager on behalf of the Company or in
furtherance of the Company's interests or as Tax Matters Partner; however,
recovery under such indemnification or agreement to hold harmless shall be only
out of the assets of the Company and not from the Members or the Manager. The
foregoing indemnity shall extend only to acts or omissions performed or omitted
by a Member or the Manager in good faith and in the belief that the acts or
omissions were in the Company's interest or not opposed to the best interests of
the Company. This Section 3.7 shall not be construed as giving a Member who is
not a Manager any right or power in contravention of Article 3 hereof or any of
the rights or powers of the Manager.
3.9 FIDUCIARY DUTIES. The Manager shall have a fiduciary responsibility
for the safekeeping and use of all funds and assets of the Company, and all such
funds and assets shall be used in accordance with the terms of this Agreement.
As to the Members and the Company, the Manager shall have fiduciary duties. As
between the Company and themselves, the Members (including the Manager) shall be
fiduciaries as to each other and as to the Company. Provided however, the
Manager shall not be required to diversify the investments of the Company.
3.10 RESTRICTIONS ON THE AUTHORITY OF THE MANAGER. The following decisions
shall require the following approvals of Members:
(a) A vote in favor of, a sale or exchange of all or substantially
all of the assets of, a recapitalization of and/or a tax-free
reorganization of the Company or Getty Images (a
"Reorganization") if such assets include Class B assets shall
require the written consent of a majority of the Class B Members
unless the Reorganization has been recommended by the Getty
Images (or such successor's) board of directors;
(b) Continuation of the Company after its termination date shall
require the written consent of a majority of Class A Members and
a majority of Class B Members;
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(c) The dissolution and winding up of the Company shall require the
written consent of a Super Majority of Members; or
(d) Amendment of this Agreement as provided in Article 12 shall
require the written consent of a majority of Class A Members and
a majority of Class B Members.
3.11 MANNER OF ACTION BY MEMBERS; MEETINGS. Decisions which require the
vote or consent of the Members may be made by the Members in writing, over
the telephone or through any other means of communication. Further, Member
meetings, for any purpose or purposes, may be called by the Manager or by
Members holding at least ten percent (10%) of the Units held by Members;
provided, such meetings may be called no more frequently than once each
quarter. Minutes shall be kept of all Company meetings.
ARTICLE 4 - STATUS OF MEMBER
4.1 NO PARTICIPATION IN MANAGEMENT. Except as specifically provided in
Article 3, no Member who is not also a Manager shall take part in the conduct or
control of the Company's business or the management of the Company, or have any
right or authority to act for or on the behalf of the Company.
4.2 LIMITATION OF LIABILITY. No Member or a Manager shall have, solely by
virtue of such Member's status as a Member in the Company or as a Manager, any
personal liability whatever, whether to the Company, to any Members or to the
creditors of the Company, for the debts or obligations of the Company or any of
its losses beyond the amount committed by such Member to the capital of the
Company, except as otherwise specifically required by the Act or by this
Agreement.
4.3 TERMINATION OF AGREEMENTS. The Termination Agreement dated as of
____________, 1998, a copy of which is attached hereto as Exhibit B will be
executed by the Company and the Members. The Put Agreement which is attached as
Exhibit C to the Original Agreement is terminated and ceases to be in force and
effect as of the effective date of the Merger.
4.4 RECOURSE OF THE MEMBERS. Each Member shall look solely to the assets
of the Company for all distributions with respect to the Company and such
Member's Capital Contribution thereto and share of Net Income and Net Loss
thereof and shall have no recourse therefor, upon dissolution or otherwise,
against any Manager or any other Member.
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4.5 IRC SECTIONS 2701, 2703 AND 2704. It is each party's intent that this
Agreement not operate so as to create any voting right or liquidation right
which, if it lapsed, would cause there to be a transfer for purposes of Code
Section 2704(a). It is also each party's intent that Code Section 2701 not
apply to transfers of interests in the Company due to the exception of Code
Section 2701(a)(2)(B) and Treasury Regulation Section 25.2701-l(c)(3) relating
to interests in the same class of equity interest. If the granting of any
right, power, privilege, authority or immunity (or the absence of any
restriction) by any provision of this Agreement (or lack thereof) or if any
provision of this Agreement would allow a lapse of a liquidation right or voting
right to occur or would cause any equity interest in the Company not to be of
the same class as any other equity interest for purposes of Code Section
2701(a)(2)(B) and Treasury Regulation Section 25.2701-l(c)(3), such provision
shall be ineffective to such extent or, if a provision required to accomplish
such intent is absent, it shall be deemed to be provided by this Section 4.6.
It is the parties' intention that this Agreement be interpreted, construed and
applied in accordance with the intent expressed in this Section 4.6,
notwithstanding any other provision of this Agreement seemingly to the contrary.
4.6 CLASS OF MEMBERS. Except as expressly set forth in this Agreement,
the rights, obligations and status of Class A Members, Class B Members and Class
C Members are identical.
ARTICLE 5 - TRANSFERS OF COMPANY INTERESTS;
WITHDRAWAL AND ADMISSION OF MEMBERS
5.1 GENERAL PROHIBITIONS. No Member may voluntarily or involuntarily,
directly or indirectly, sell, transfer, assign, pledge or otherwise dispose of;
mortgage, pledge, hypothecate or otherwise encumber; or permit or suffer any
encumbrance of all or any part of such Member's interest in the Company, except
as provided in this Article 5. Any other purported sale, transfer, assignment,
pledge or encumbrance shall be null and void and of no force or effect
whatsoever. A person or entity that acquires Units as allowed by this Agreement
who is not then a Member shall be an Assignee unless admitted as a Member of the
Company as provided in Section 5.5.
5.2 NO WITHDRAWAL OF A MEMBER AND TERMINATION OF MEMBERSHIP. A Member or
Assignee shall have no right or power to withdraw from the Company. However, a
Member shall cease to be a Member of the Company upon assignment of all of the
Member's Units in accordance with this Agreement. The Assignee shall not be a
Member of the Company unless admitted as provided in Section 5.5.
5.3 PERMITTED TRANSFERS. A Member may, without the consent of any other
Member, by inter vivos gift, sale, bequest, intestacy or otherwise, transfer any
or all of such Member's interests in the Company to (or for the benefit of) any
Member or Family Member, provided such transferee who is not already a Member
shall be an Assignee
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except if admitted to Membership as provided in Section 5.5. Such a transfer
may be outright, in trust, for the benefit of such a transferee or to a
custodian under the Washington Uniform Transfers to Minors Act or under similar
laws of another jurisdiction for the benefit of such a transferee. In addition,
and notwithstanding anything herein seemingly to the contrary, a Member may
transfer such Member's interest to a marital trust for the benefit of the
Member's spouse, so long as the remainder interest in such trust will pass only
to (or for the benefit of) a Family Member(s) upon such spouse's death, or upon
such trust's earlier termination (a "Permitted Trust").
5.4 TRANSFERS TO OUTSIDE PARTIES. A Member may sell such Member's
interest in the Company to an Outside Party upon compliance with the following
terms and conditions:
5.4.1 SALE. In the event a Member ("Selling Member") desires to
sell any or all of such Member's Units in the Company, the following shall
apply:
(a) When a Selling Member receives or plans to make a written
offer for Selling Member's Units ("Offer"), the Selling Member before accepting
or making the Offer shall first notify the Manager and provide the Manager with
a copy of the Offer. The Offer must contain all material terms relating to the
proposed purchase and sale, including but not limited to the name and address of
the proposed transferee, the Units involved, and the price and terms; the
consideration must be entirely monetary; and the offer must contain a provision
that the transferee agrees to be bound by all of the terms and conditions of
this Agreement. The Manager may request, and the proposed transferee shall
provide, financial statements and references as reasonably necessary to
demonstrate the ability of the proposed transferee to pay for the interest
offered. A copy of the Offer shall be forwarded immediately by the Manager to
all Members, together with the date the notice was given.
(b) For fifteen (15) days after notice is received by the
Company, the Manager on behalf of the Company shall have the option to purchase
all the Units offered upon the terms set forth in the Offer. If a Manager is
the Selling Member, the Company's option to purchase shall not be exercised
unless Members holding at least a Simple Majority of the other Units (excluding
that Manager's Units) consent to the exercise. If the option of the Company is
not exercised, the Manager shall immediately notify all Members and, for fifteen
(15) days after such notice, all Members pro rata in proportion to each such
Member's Units in the Company shall have the option to purchase such Units at
the same price and terms available to the Company. If less than all Members
desire to purchase the offered Units, those Members who are interested may
purchase any remaining Units pro rata in proportion to such Members' respective
Units in the Company. The options granted the Company and the other Members
under this Section 5.4.1(b) must be exercised collectively so that all of the
offered interest of the Selling Member is purchased pursuant to the exercise of
such options.
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(c) If such option is not exercised as to all of the Selling
Member's interest in the Company so offered, the Selling Member may within
ninety (90) days from the time the above options lapse transfer the entire
interest in the Company so offered in accordance with the terms and conditions
and to the person(s) described in the Offer; provided, however, that if the
Selling Member does not sell such Units in accordance with the Offer within such
ninety (90) day period, then any sale of all or any portion of such Units shall
again be subject to the right of first refusal described in this Section.
5.4.2 OPTION AT DEATH OF A MEMBER. In the event the death of a
Member would otherwise result in a transfer to an Outside Party (other than to a
Permitted Trust), the Company and the other Members shall have the option to
purchase the deceased Member's Units under the procedure set forth in
Article 5.4.1, provided:
(a) The price at which the deceased Member's Units shall be
purchased and sold pursuant to this Section shall be the appraised value (the
"Appraised Value") of such Units at the month end preceding the date of death as
determined in accordance with this Section. Within thirty (30) days after
commencement of the option period, the deceased Member's personal representative
(the "Seller") shall select an appraiser with at least five (5) years experience
in valuing businesses similar to the Company and shall notify the Manager and
other Members of the name and qualifications of the appraiser so selected in
writing. Within fifteen (15) days after receipt of such notice, the other
Members, by Simple Majority vote of such Members, shall select an appraiser with
at least five (5) years experience in valuing businesses similar to the Company
and shall notify the Seller of the name and qualifications of the appraiser so
selected in writing. If either the Seller or the other Members shall fail to
appoint an appraiser as required by this Section, the appraiser selected by the
other shall determine the aggregate fair market value of the Units and that
value shall be the Appraised Value of the Units. If two appraisers are selected
within the time frame provided in this Section, each appraiser shall thereafter
independently determine the aggregate fair market value of the Units within
thirty (30) days and each shall submit an independent appraisal report to the
Seller and the other Members. The Appraised Value shall be the average of the
two appraisals; provided, however, if the lower of the two appraisals is less
than eighty-five percent (85%) of the higher appraisal, the two appraisers shall
select a third appraiser within twenty (20) days after the expiration of the
thirty (30) day period for submitting the independent appraisal reports. Such
third appraiser shall thereafter independently determine the aggregate fair
market value of the Units within thirty (30) days and shall submit its appraisal
report to the Seller and the other Members. In such case, the Appraised Value
shall be the average of the two highest appraisals. The cost of the appraisals
shall be borne by the Company.
(b) The first option period shall be ninety (90) days and shall
begin when the Manager sends written notice of the Member's death to the other
Members with a statement of the option price as determined in clause (a) above.
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(c) Payment of not less than thirty-three and one-third (33-1/3)
of the option purchase price shall be made within the option period, and the
balance of the purchase price shall be paid, together with interest at a rate
equal to the lesser of (1) the then applicable midterm federal rate compounded
quarterly as determined under Section 1274(d) of the Code or (2) ten percent
(10%) per annum compounded quarterly, determined as of the date of the down
payment in not more than sixteen (16) equal quarterly installments. The payment
obligation shall be evidenced by a promissory note and secured by a pledge of
the purchased Units.
(d) If the option for all the deceased Member's Units is not
exercised, the Units shall pass as would otherwise be the case subject to the
terms and conditions of this Agreement.
5.4.3 INVOLUNTARY TRANSFERS. In the event that (a) voluntary
proceedings by, or involuntary proceedings against, any Member are commenced
under any provision of any federal, state or foreign law relating to bankruptcy
or insolvency, legal or equitable (unless dismissed within ten (10) days after
commencement of the proceeding); (b) any Unit is attached or garnished; (c) a
judgment or decree is obtained in any legal or equitable proceeding against any
Member and the transfer of the Member's Units is threatened under legal process
as a result of such judgment; (d) any execution is issued against any Member or
against the Member's Units; or (e) any other form of legal proceeding or process
is commenced, or is threatened, against any Member by which the Units of any
Member may reasonably be anticipated to be sold, either voluntarily or
involuntarily, the Company shall have the option (but not the obligation) to
purchase from such Member, or such Member's successor in Interest, as the case
may be, all the Member's Units in the Company at their Appraised Value as
provided in Section 5.4.2, as if the Units were to pass to an Outside Party by
reason of a death.
5.4.4 PLEDGES AND HYPOTHECATION. Except as otherwise provided
herein, Units may not be transferred by pledge or other hypothecation as
security for any debt or obligation of a Member or Assignee except with the
written consent of the Manager, which consent may not be unreasonably withheld.
Notwithstanding the foregoing, the Members acknowledge and agree that both Mark
Torrance and Wade B. Torrance may pledge their respective interests in the
Company as security for their respective obligations.
5.4.5 MARRIAGE DISSOLUTION. In the event of a dissolution,
divorce, annulment or termination of the marriage of any Member, the Member's
Units in the Company may not be transferred to the Member's spouse except as
provided herein. If the spouse of the Member has or is determined to have any
interest in Units of the Company (community, separate or otherwise), and the
Member does not obtain that interest as part of any property settlement or award
pursuant to termination of the marriage, those Members who are Family Members of
the Member whose marriage is dissolved shall have the option to purchase the
Units so passing at their Appraised Value as provided in Section 5.4.2, with the
first fifteen (15) day option period beginning on the
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date of termination of the marriage or the date the Manager is given notice of
the award, whichever is later.
5.5 RIGHTS OF A TRANSFEREE AND ADMISSION OF A NEW MEMBER. An Assignee
shall have no right to participate in the management of the business and affairs
of the Company and shall have no right to vote upon any matter a Member is
entitled to vote on. An Assignee shall be entitled only to the distributions
and allocations to which the transferor Member would have been entitled with
respect to such Units, and shall not become or have any other rights of a
Member. An Assignee shall be subject to all of the duties and obligations of a
Member. No Assignee shall become a Member except with the written approval the
Manager; provided, however, if the Manager does not own at least one percent
(1%) of the Units, then no Assignee shall become a Member except with the
written approval of a Super Majority of the Members other than the transferor
or person controlled by the transferor of the Assignee's Units. For purposes
of this Section 5.5, "control" or "controlled by" shall mean legal,
beneficial, actual or de facto, direct or indirect ownership or control of:
(i) Units, (ii) the voting power of Units, or (iii) the Member who directly
or indirectly, legally, beneficially, actually or de facto owns or controls
the Units. The consent by any Manager or Member to admission of an Assignee
as a new Member may be unreasonably or arbitrarily withheld.
5.6 VOTING RIGHTS AND SALE ESCROWS. In the event of a sale of Units made
pursuant to this Agreement where the payment is to be made over a term, Units
sold shall, at the request of either party, be pledged to secure performance,
and in such case the purchaser shall grant the Selling Member a security
interest therein, the Selling Member shall have the right to perfect such
security interest, and the purchaser shall cooperate with the Selling Member in
the granting of any of such security interest or its perfection. Once the
purchase price (including interest) is paid in full, the security interest shall
be released. During such term, and if there is no default in the payment of the
installments (including interest) of the purchase price, the purchaser, if
admitted as a Member pursuant to Section 5.5, shall have the right to exercise
the voting rights of such Units and shall be entitled to all distributions paid
with respect to such Units. This Section 5.6 shall not apply to Units (as
opposed to debt) redeemed by the Company, which Units shall be canceled by the
Company, but the transferor (other than an expelled Member) may require the
Company to provide reasonably adequate security if payment is to be made over
time. A request for security interests in property with a net fair market value
of at least the principal amount of the promissory note (or purchase obligation)
shall not be regarded as an unreasonable request.
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ARTICLE 6 - CONTRIBUTIONS AND CAPITAL ACCOUNTS
6.1 CAPITAL CONTRIBUTIONS, PERCENTAGE INTERESTS. Immediately prior to the
Merger the Members own the following percentage interests in the Company and the
following numbers of Units:
<TABLE>
<CAPTION>
Percentage Number of Member
Name Interest Units Class
- -------- -------- ---------- -------
<S> <C> <C> <C>
Mark Torrance 51.140% 3,895,211 Class A
Wade B. Torrance 44.606% 3,397,537 Class B
Mark Torrance
and
Stephen Gattis as
Co-Trustees for
the Alexandra W. 1.418% 108,000 Class C
Torrance Trust
Mark Torrance and
Stephen K.
Gattis as Co-
Trustees for the
Rosemary E. 1.418% 108,000 Class C
Torrance Trust
Mark Torrance
and Stephen K.
Gattis as Co-
Trustees for the 1.418% 108,000 Class C
Thomas M. -------- ---------
Torrance Trust
TOTALS 100.000% 7,616,748
</TABLE>
Effective upon consummation of the Merger, the number of Units held by the
Members shall be automatically and proportionately adjusted, in accordance with
the ratio for exchange of shares of PhotoDisc, Inc. into shares of Getty Images
in the Merger, so as to represent the aggregate number of shares and warrants of
Getty Images received by the Company in the Merger.
6.2 ADDITIONAL CAPITAL. Each Member and Assignee shall be required to
make additional Capital Contributions, in proportion to such Member or
Assignee's total number of Units, as, when, and in such amounts as Members
holding a Simple Majority determine
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from time to time to be reasonably necessary to provide working capital,
establish reserves or pay the expenses of the Company. Such additional Capital
Contributions shall be made no later than thirty (30) days following written
notice. Any past due contribution shall bear interest at the then applicable
federal rate under Code Section 1274. If payment of a capital call is more than
six (6) months in default, the Company and the Members shall have the option to
purchase the Units of the Member or Assignee who is in default as provided in
Section 5.4.2 as if the Units were to pass to an Outside Party by reason of a
death.
6.3 CAPITAL ACCOUNTS. The Company shall establish and maintain a
Capital Account for each Member in accordance with Treasury Regulations
issued under Code Section 704. The initial Capital Account balance for each
Member shall be the amount of Capital Contributions made by each Member under
Section 6.1 above. The Capital Account of each Member shall be increased to
reflect (a) such Member's cash contributions, (b) the fair market value of
Property contributed by such Member (net of liabilities secured by such
contributed Property that the Company is considered to assume or take under
Code Section 752), (c) such Member's share of Net Income of the Company
(including all gain as calculated pursuant to Code Section 1001), and (d)
such Member's share of income and gain exempt from tax. The Capital Account
of each Member shall be reduced to reflect (a) the amount of money and the
fair market value of Property distributed to such Member (net of liabilities
secured by such distributed Property that the Member is considered to assume
or take subject to Section 752), (b) such Member's share of noncapitalized
expenditures not deductible by the Company in computing its taxable income as
determined under Code Section 705(a)(2)(B), (c) such Member's share of Net
Loss of the Company, and (d) such Member's share of amounts paid or incurred
to organize the Company or to promote the sale of Company Interests to the
extent that an election under Code Section 709(b) has not properly been made
for such amounts. If Units are held by an Assignee, the Assignee shall
succeed to the Capital Account of the Assignor with respect to such Units,
and subsequently, all increases or decreases to the Assignee's Capital
Account shall be made as provided herein as if the Assignee were a Member.
The Manager shall determine the fair market value of all Property distributed
in kind, and the Capital Accounts of the Members shall be adjusted as though
the Property had been sold for its fair market value and the gain or loss
attributable to such sale allocated among the Members in accordance with
Article 7 or Section 11.3, as applicable. In the event of a contribution of
Property with a fair market value not equal to its adjusted basis (as
determined for federal income tax purposes) or a reevaluation of the Members'
Capital Accounts upon the admission of new Members to the Company, the
Company shall maintain separate "tax" and "book" Capital Accounts in
accordance with the rules prescribed in Treasury Regulations promulgated
under Code Section 704.
6.4 DEFAULT. In the event any Member shall fail to contribute any cash or
Property when due hereunder, such Member shall remain liable therefor to the
Company, which may institute proceedings in any court of competent jurisdiction,
in connection with which such Member shall pay the costs of such collection,
including reasonable attorney
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fees. Any compromise or settlement with a Member failing to contribute cash or
Property due hereunder must be approved by other Members who hold a majority of
the Units in the Company, excluding the Units of the defaulting Member.
6.5 PREEXISTING LIABILITIES. In the event any Member contributes any
asset subject to liabilities, such transferring Member shall remain liable for
those liabilities to the extent that, after the application of the Treasury
Regulations promulgated under Code Section 752, the Member would otherwise
recognize gain for federal income tax purposes (the "Excess Liability Gain"),
unless at the time of the contribution it was specifically agreed in writing
otherwise by the transferring Member and the Company. Such transferring Member
shall pay the Excess Liability Gain obligation (the "Excess Obligation") by
annual additional contributions of capital to the Company of an amount equal to
the amount required to keep the Excess Obligation current during that year.
Such contribution shall be withheld from such Member's distributions up to an
aggregate amount reasonably necessary to keep such Excess Obligation current and
to avoid default thereon with respect to the Excess Obligation. If not sooner
paid, the full amount of the Excess Obligation shall be paid in the event of
sale of that asset or on termination of the Member's interest in the Company (by
reason other than death) from such Member's liquidating distributions. Failure
to make such additional Capital Contributions shall be governed by the
provisions of Section 6.4 regarding defaults and other applicable provisions of
this Agreement.
6.6 CAPITAL ACCOUNT REVALUATION. All Members have agreed to the
valuations established for Property described in Exhibit A, taking into account
the difficulty in valuing such assets. However, if the values to which the
Members have agreed are incorrect, the Capital Accounts of all Members shall be
readjusted in accordance with such values. This Section 6.6 shall apply in a
like manner to Capital Contributions to the Company made by a Member and not
reflected on Exhibit A.
ARTICLE 7 - ALLOCATIONS
7.1 ALLOCATION OF NET PROFIT AND LOSS -- IN GENERAL. After giving effect
to the special allocations set forth in Sections 7.2 and 7.3:
7.1.1 NET PROFITS. Net Profits from Class A assets for any
fiscal year shall be allocated to Class A Members in proportion to the
respective number of Units owned by each Class A Member. Net Profits from Class
B assets for any fiscal year shall be allocated to Class B Members in proportion
to the respective number of Units owned by each Class B Member. Net Profits
from Class C assets for any fiscal year shall be allocated to Class C Members in
proportion to their respective number of Units owned by each Class C Member.
7.1.2 NET LOSSES. Net Losses from any Class A assets for any
Fiscal Year shall be allocated to the Class A Members in proportion to the
respective number of
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Units owned by each Class A Member. Net Losses from any Class B assets for any
fiscal year shall be allocated to the Class B Members in proportion to the
respective number of Units owned by each Class B Member. Net losses from any
Class C assets for any Fiscal year shall be allocated to the Class C Members in
proportion to the respective number of Units owned by each Class C Member.
7.1.3 LIMITATION. The Net Loss allocated to each Member for any
Company fiscal year pursuant to Section 7.1.2. shall not exceed the maximum
amount of Net Loss that can be so allocated without causing such member to have
a Deficit Capital Account at the end of the fiscal year. All Net Losses in
excess of the limitation set forth in this Section 7.1.3 shall be allocated to
the other Unit Holders who do not have Deficit Capital Accounts in proportion to
their respective Percentage Interests.
7.2 SPECIAL ALLOCATIONS. The following special allocations shall be made
for any fiscal year of the Company in the following order:
7.2.1 MINIMUM GAIN CHARGEBACK. If there is a net decrease in
Minimum Gain during any Company fiscal year, each Unit Holder shall be
specially allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Unit Holder's share
of the net decrease in Minimum Gain, determined in accordance with Regulation
Sections 1.704-2(f) and 1.704-2(g) (2). The items to be so allocated, and
the manner in which those items are to be allocated among the Unit Holders,
shall be determined in accordance with Regulation Sections 1.704-2(f) and
1.704-2(j) (2). This Section 7.2.1 is intended to satisfy the minimum gain
chargeback requirement in Regulation Section 1.704-2(f) and shall be
interpreted and applied accordingly.
7.2.2 MEMBER MINIMUM GAIN CHARGEBACK. If there is a net decrease
in Member Minimum Gain during any Company fiscal year, each Unit Holder who has
a share of that Member Minimum Gain, determined in accordance with Regulation
Section 1.704-2(i)(5), shall be specially allocated items of Company income and
gain for such year and, if necessary, subsequent years in an amount equal to
such Unit Holder's share of the net decrease in Member Minimum Gain, determined
in accordance with Regulation Sections 1.704-2(i)(4) and 1.704-2(i)(5). The
items to be so allocated, and the manner in which those items are to be
allocated among the Unit Holders, shall be determined in accordance with
Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 7.2.2 is
intended to satisfy the minimum gain chargeback requirement in Regulation
Section 1.704-2(i)(4) and shall be interpreted and applied accordingly.
7.2.3 QUALIFIED INCOME OFFSET. In the event that any Unit Holder
unexpectedly receives any adjustments, allocations, or distributions described
in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
income and gain shall be specially allocated to such Unit Holder in an amount
and in a manner sufficient to eliminate as quickly as possible, to the extent
required by Regulation
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<PAGE>
Section 1.704-(1)(b)(2)(ii)(d), the Deficit Capital Account of the Unit Holder
(which Deficit Capital Account shall be determined as if all other allocations
provided for in this Article 7 have been tentatively made as if this
Section 7.2.3 were not in this Agreement.)
7.2.4 NONRECOURSE DEDUCTIONS. Nonrecourse Deductions shall be
allocated among the Unit Holders in accordance with their respective percentage
interests.
7.2.5 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse
Deductions shall be specially allocated among the Unit Holders in accordance
with Regulation Section 1.704-2(i).
7.3 CORRECTIVE ALLOCATIONS.
7.3.1 ALLOCATIONS TO ACHIEVE ECONOMIC AGREEMENT. The allocations
set forth in the last sentence of Section 7.1.2 and in Section 7.2 are intended
to comply with certain regulatory requirements under Code Section 704(b). The
Members intend that, to the extent possible, all allocations made pursuant to
such Sections will, over the term of the Company, be offset either with other
allocations pursuant to Section 7.2 or with special allocations of other items
of Company income, gain, loss, or deduction pursuant to this Section 7.3.1 in
whatever manner the Manager determine is appropriate, consistent with good tax
accounting practices consistently applied, so that, after such offsetting
special allocations are made, the Capital Accounts of the Unit Holders are, to
the extent possible, equal to the Capital Accounts each would have if the
provisions of Section 7.2 were not contained in this Agreement and all income,
gain, loss and deduction of the Company were instead allocated pursuant to
Sections 7.1.1 and 7.1.2.
7.3.2 WAIVER OF APPLICATION OF MINIMUM GAIN CHARGEBACK. The
Manager with the prior consent of Members holding a Majority Interest shall
request from the Commissioner of the Internal Revenue Service a waiver, pursuant
to Regulation Section 1.704-2(f)(4), if the minimum gain chargeback requirement
would cause a permanent distortion of the economic arrangement of the Unit
Holders, as reflected in Section 7.1.
7.4 OTHER ALLOCATION RULES.
7.4.1 GENERAL. Except as otherwise provided in this Agreement,
all items of Company income, gain, loss, deduction, and any other allocations
not otherwise provided for shall be divided among the Unit Holders in the same
proportions as they share Net Profits or Net Losses, as the case may be, for the
year.
7.4.2 ALLOCATION OF RECAPTURE ITEMS. In making any allocation
among the Unit Holders of income or gain from the sale or other disposition of a
Company asset, the ordinary income portion, if any, of such income and gain
resulting from the recapture of cost recovery or other deductions shall be
allocated among those Unit Holders who were
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previously allocated (or whose predecessors-in-interest were previously
allocated) the cost recovery deductions or other deductions resulting in the
recapture items, in proportion to the amount of such cost recovery deductions or
other deductions previously allocated to them.
7.4.3 ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. Solely for
purposes of determining a Unit Holder's proportionate share of the excess
nonrecourse liabilities of the Company within the meaning of Regulation
Section 1.752-3(a)(3), the Unit Holders' interests in the Company's profits
shall be determined by taking into account all facts and circumstances relating
to the economic arrangement of the Unit Holders and shall be consistent with
allocation of other significant items of Company income or gain.
7.4.4 ALLOCATIONS IN CONNECTION WITH VARYING INTERESTS. If,
during a Company fiscal year, there is (i) a permitted transfer of a Membership
Interest or Economic Interest under this Agreement or (ii) the admission of a
Member or additional Members, Net Profit, Net Loss, each item thereof, and all
other tax items of the Company for such period shall be divided and allocated
among the Unit Holders by taking into account their varying interests during
such fiscal year in accordance with Code Section 706(d) and using any
conventions permitted by law and selected by the Manager.
7.5 DETERMINATION OF NET PROFIT OR LOSS.
7.5.1 COMPUTATION OF NET PROFIT OR LOSS. The Net Profit or Net
Loss of the Company, for each fiscal year or other period, shall be an amount
equal to the Company's taxable income or loss for such period, determined in
accordance with Code Section 703(a) (and, for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1), including income and gain exempt from federal income tax,
shall be included in taxable income or loss). Net Profit and Net Loss shall
then be apportioned between the Class A assets and Class B assets.
7.5.2 ADJUSTMENTS TO NET PROFIT OR LOSS. For purposes of
computing taxable income or loss on the disposition of an item of Company
property or for purposes of determining the cost recovery, depreciation, or
amortization deduction with respect to any property, the Company shall use such
property's book value determined in accordance with Regulation
Section 1.704-1(b). Consequently, each property's book value shall be equal to
its adjusted basis for federal income tax purposes, except as follows:
(a) The initial book value of any property contributed by a
Member to the Company shall be the gross fair market value of such property at
the time of contribution;
(b) In the discretion of the Members holding a Majority Interest
of the Units held by Members, the book value of all Company properties may be
adjusted to equal their respective gross fair market values, as determined by
the Members as of the
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following times: (1) in connection with the acquisition of an interest in the
Company by a new or existing Member for more than a DE MINIMIS capital
contribution, (2) in connection with the liquidation of the Company as defined
in Regulation Section 1.704-(1)(b)(2)(ii)(g), or (3) in connection with a more
than DE MINIMIS distribution to a retiring or a continuing Unit Holder as
consideration for all or a portion of his or its interest in the Company. In
the event of a revaluation of any Company assets hereunder, the Capital Accounts
of the Unit Holders shall be adjusted, including continuing adjustments for
depreciation, to the extent provided in Regulation
Section 1.704-(1)(b)(2)(iv)(f);
(c) If the book value of an item of Company property has been
determined pursuant to this Section 7.5.2, such book value shall thereafter be
used, and shall thereafter be adjusted by depreciation or amortization, if any,
taken into account with respect to such property, for purposes of computing
taxable income or loss.
7.5.3 ITEMS SPECIALLY ALLOCATED. Notwithstanding any other
provision of this Section 7.5, any items that are specially allocated pursuant
to Sections 7.2 or 7.3 shall not be taken into account in computing Net Profit
or Net Loss.
7.6 MANDATORY TAX ALLOCATIONS UNDER CODE SECTION 704(c). In accordance
with Code Section 704(c) and Regulation Section 1.704-3, income, gain, loss and
deduction with respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Unit Holders so as to
take account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial book value computed in
accordance with Paragraph (a) of Section 7.5.2. Prior to the contribution of
any property to the Company that has a fair market value that differs from its
adjusted tax basis in the hands of the contributing Member on the date of
contribution, the contributing Member and the Majority Interest of the
non-contributing Members shall agree upon the allocation method to be applied
with respect to that property under Regulation Section 1.704-3, which allocation
method shall be set forth on attached SCHEDULE 2, as amended from time to time.
If the book value of any Company property is adjusted pursuant to Paragraph
(b) of Section 7.5.2, subsequent allocations of income, gain, loss and deduction
with respect to such property shall take account of any variation between the
adjusted basis of such property for federal income tax purposes and its book
value in the same manner as under Code Section 704(c). The choice of allocation
methods under Regulation Section 1.704-3 with respect to such revalued property
shall be made by the Members holding a Majority Interest.
Allocations pursuant to this Section 7.6 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Unit Holder's Capital Account or share of Net
Profit, Net Loss, or other items as computed for book purposes, or distributions
pursuant to any provision of this Agreement.
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ARTICLE 8 - EXPENSES
The Company shall pay, and Manager and the Members shall be reimbursed for,
all costs and expenses of the Company, including, but not limited to, all
organizational expenses; all costs reasonably related to the conduct of the
Company's day-to-day business affairs; all costs of borrowed money, taxes and
assessments on Company Property and other taxes applicable to the Company; all
legal, audit, accounting, brokerage and other fees; all expenses in connection
with the acquisition, management and disposition of Company Property (including
legal and accounting fees); and all costs related to reporting to Members or
complying with state or federal laws relating to regulating the Company.
ARTICLE 9 - DISTRIBUTIONS
9.1 NONLIQUIDATING DISTRIBUTIONS.
(a) After the consummation of the Merger, the Manager shall promptly
distribute Two Hundred Fifty Thousand (250,000) shares of Getty Images stock to
the Class B Member from the Class B assets. The Class B Member shall thereafter
have the right upon no less than twenty (20) days' advance written notice to the
Manager to request distribution of the then remaining Class B assets ("Remaining
Shares") at the following times and in the following amounts:
9.1.1 During December 1998, up to Twenty percent (20%) of the
Remaining Shares;
9.1.2 During December 1999, up to Twenty percent (20%) of the
Remaining Shares (plus amounts not previously requested under subsection 9.1.1);
9.1.3 During December 2000, up to Twenty percent (20%) of the
Remaining Shares (plus amounts not previously requested under subsections 9.1.1
and 9.1.2);
9.1.4 During December 2001, up to Twenty percent (20%) of the
Remaining Shares (plus amounts not previously requested under subsections 9.1.1,
9.1.2 and 9.1.3); and
9.1.5 During December 2002, any then Remaining Shares.
The "Remaining Shares" distributable shall be adjusted to reflect stock splits,
stock dividends, recapitalizations, reorganizations and the like. The amounts
so requested shall be delivered by the Manager to the Class B Member no later
than twenty (20) days following the date on which the Manager receives such
request. The Class B Member agrees that, to the extent she chooses to dispose
of any Class B assets which are
22
<PAGE>
distributed to her, she will effect such sales or dispositions through a stock
or securities broker acceptable to the Manager and the Class B Member.
(b) In addition to any distribution described in Section 9.1(a),
the Manager may, in his sole discretion, cause the Company to make additional
nonliquidating distributions to any class of Members from such Member's Class
of assets; PROVIDED, that if the Manager shall at any time dispose of or
distribute a greater percentage of Class A assets than the percentage of
Class B assets that has previously been distributed or become eligible for
distribution under Section 9.1(a), then the Manager Shall give prior notice to
the Class B Member of such distibution or sale and the Class B Member shall
be entitled to request immediate distribution of additional Class B assets so
that the percentage of Class A assets and Class B assets so disposed of or
distributed shall remain equal.
(c) Solely for purposes of this Section 9.1, the value of shares of
Getty Images common stock distributed shall be equal to the Closing Sales Price
for such shares on the last trading day immediately preceding the day of
distribution. Closing Sales Price means the price per share of the last sale of
Getty Images Common Stock as reported on NASDAQ or the exchange on which Getty
Images Common Stock is then quoted or traded. In the event Getty Images Common
Stock is not reported on NASDAQ or traded on a stock exchange, an independent
appraiser experienced in the valuation of businesses shall determine the value
of shares of Getty Images common stock.
9.2 EXCESSIVE DISTRIBUTIONS. No Member (or successor of a Member) may
receive a nonliquidating distribution in excess of his or her adjusted basis in
the Company for federal income tax purposes determined immediately before the
distribution. Any purported distribution in violation of this section shall in
fact be a loan repayable by the distributee to the Company within ninety (90)
days of the next distribution to the extent of such distributee's share of the
distribution, together with interest at the then applicable federal midterm rate
(monthly compounding) as specified in Code Section 1274.
9.3 LIQUIDATING DISTRIBUTIONS. Distributions in liquidation of the
Company shall be made to each Member in accordance with the provisions of
Section 11.4. In the event Property is distributed to the Members rather than
sold, each Member's percentage interest in such distributed Property shall be
equal to the portion of the sale proceeds that would have been received if such
Property had been sold.
ARTICLE 10 - BOOKS AND RECORDS, ACCOUNTING,
REPORTS, STATEMENTS AND TAX MATTERS
10.1 BOOKS AND RECORDS. The Manager shall, at the expense of the Company,
keep and maintain, or cause to be kept and maintained, the books and records of
the Company, using the same method of accounting as used for federal income tax
purposes.
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10.2 ANNUAL ACCOUNTING PERIOD. All books and records of the Company shall
be kept on the basis of an annual accounting period ending December 31 of each
year, which shall also be the year-end for federal tax purposes, and the fiscal
year-end, except for the final accounting and tax period, which shall end on the
date of termination of the Company. All references herein to the "fiscal year
of the Company" are to the annual accounting period described in the preceding
sentence whether the same shall consist of twelve (12) months or less.
10.3 REPORTS TO THE MEMBERS. Within ninety (90) days after the end of each
fiscal year of the Company, the Manager shall send to each Member, at Company
expense, such information as shall be necessary for the preparation by such
Member of such Member's federal income tax return, which information shall
include a computation of the distributions to such Member and the allocation for
federal income tax purposes to such Member of income, gain, profits, loss,
deduction or credit, as the case may be.
10.4 RIGHT TO EXAMINE RECORDS. Members shall be entitled to review the
records of the Company at all reasonable times and at the location where such
records are kept by the Company.
10.5 THE TAX MATTERS PARTNER. Should there be any controversy with the
Internal Revenue Service or any other taxing authority involving the Company,
the Manager may expend such funds as it deems necessary and advisable in the
interest of the Company to resolve such controversy satisfactorily, including,
without being limited thereto, attorney and accounting fees. The Manager is
hereby designated as the "Tax Matters Partner" as referred to in Code Section
6231(a)(7)(A) and is specially authorized to exercise all of the rights and
powers now or hereafter granted to the Tax Matters Partner under the Code.
Any cost incurred in the audit by any governmental authority of the income
tax returns of a Member (as opposed to the Company) shall not be a Company
expense. The Manager agrees to consult with and keep the Members advised with
respect to (a) any income tax audit of a Company income tax return and (b) any
elections made by the Company for federal, state or local income tax purposes.
10.6 TAX RETURNS. The Manager shall, at Company expense, cause the Company
to prepare and file a United States Partnership return of income and all other
tax returns required to be filed by the Company. The Manager shall provide a
draft of each such return to the respective certified public accountant(s) then
used by the Class A and Class B Members, at least fifteen (15) business days
before such returns are scheduled to be filed with the Internal Revenue Service
or other taxing authorities; and the Manager shall consult in good faith with
such accountant(s) as to any disagreements or other comments they may have with
respect to such drafts.
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<PAGE>
10.7 TAX ELECTIONS. The Manager shall be permitted in the Manager's
discretion to determine whether the Company should make an election pursuant to
Code Section 754 to adjust the basis of the assets of the Company. Each Member
shall, upon request, supply any information necessary properly to give effect to
any such election. In addition, the Manager, in the Manager's discretion, shall
be authorized to cause the Company to make and revoke any other elections for
federal income tax purposes as the Manager deems appropriate, necessary, or
advisable.
ARTICLE 11 - DISSOLUTION, WINDING UP AND TERMINATION
11.1 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved and its
affairs shall be wound up upon the happening of the first to occur of any of the
following events:
(a) Any event causing a dissolution or dissociation of the Company
under the Act unless the Company is continued as provided in herein.
(b) Expiration of the term of the Company stated in Section 2.3
hereof.
(c) The sale, lease or other disposition of all or substantially all
of the assets of the Company other than a sale, lease, or other disposition in
the normal course of the Company's business or pursuant to the written consent
of a Super Majority as required by Section 3.9.
(d) The written consent of a Super Majority as provided in
Section 3.9.
(e) The entry of a decree of judicial dissolution under the Act.
(f) The decision by the Manager to dissolve the Company provided the
dissolution occurs at least one year after the effective date of this Agreement.
(g) The death or incapacity (as that term is defined in RCW 11.88
Guardianships) of Mark Torrance after March 1, 1999. If Mark Torrance should
die or become incapacitated before such date, the Company shall not be dissolved
but continued until March 1, 1999 and a successor Manager shall be named
pursuant to Section 3.4.
11.2 WINDING UP. Upon an event of dissolution, the Manager shall proceed
to wind up the affairs of the Company and shall immediately provide the Members
with written notice of such event. Members who wish to receive Company Property
in kind shall deliver written notice to the Manager within ten (10) days of
receipt of the notice of dissolution. The Manager shall comply with a Member's
request unless such distribution in kind is not legally possible. Further, any
distribution in kind shall be subject to the provisions of this Article. Except
to the extent Members have requested distributions in kind, the Manager
25
<PAGE>
shall sell or otherwise liquidate all of the Company's assets as promptly as
practicable. In the event the Company has terminated and there is then no
Manager, the remaining Members shall appoint a new Manager solely for the
purpose of winding up the affairs of the Company. The Manager shall have the
full right and unlimited discretion to determine the time, manner and terms of
any sale or sales of Company Property pursuant to such liquidation. Pending
such sales, the Manager shall have the right to continue to operate or otherwise
deal with the assets of the Company. A reasonable time shall be allowed for the
orderly winding up of the business of the Company, the liquidation of its assets
and the discharge of its liabilities to creditors (or provision therefor) so as
to enable the Manager to minimize the normal losses attendant upon a
liquidation, having due regard for the activity and condition of the relevant
markets for the Company Property and general financial and economic conditions.
Any Member may be a purchaser of any Property of the Company upon liquidation of
the Company's assets, including, without limitation, any liquidation conducted
pursuant to a judicial dissolution or otherwise under judicial supervision,
provided, however, that the purchase price and terms of sale are fair and
reasonable to the Company.
11.3 ALLOCATION OF NET INCOME AND NET LOSS UPON TERMINATION OR SALE. All
Net Income and Net Loss upon dissolution of the Company or from sale,
conversion, disposition or taking of all or substantially all of the Company's
Property, including, but not limited to, the proceeds of any eminent domain
proceeding or insurance award, shall be allocated in accordance with the
applicable provisions of Article 7 - Allocations.
11.4 DISTRIBUTIONS IN DISSOLUTION. Before making distributions in
dissolution to the Members, the Manager shall first pay or make provision for
all debts and liabilities of the Company and all expenses of liquidation.
Subject to the right of the Members to set up such cash reserves as they may
deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Company, the proceeds of liquidation and any other funds of
the Company shall be distributed in the following order:
(a) First, to the Members in proportion to their remaining Capital
Account balances as adjusted by the allocations provided for in Section 11.3;
and
(b) Thereafter, the balance, if any, to the Members in proportion to
their Units.
It is intended and anticipated that the amount of cash and/or Property
distributable upon a termination or dissolution of the Company should equal the
sum of the Members' Capital Accounts, after adjustment of such balances in
accordance with Article 7 and Section 11.3 and that, therefore, all cash and/or
Property will be distributable under subsection (a) of this Section 11.4.
11.5 CERTIFICATE OF CANCELLATION; REPORT; TERMINATION. Upon the
dissolution and commencement of winding up of the Company, the Manager shall
execute and file
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<PAGE>
articles of dissolution for the Company. Within a reasonable time following the
completion of the liquidation of the Company's assets, the Manager shall prepare
and furnish to each Member, at the expense of the Company, a statement that
shall set forth the assets and liabilities of the Company as of the date of
complete liquidation and the amount of each Member's distribution pursuant to
Section 11.4 hereof. Upon completion of the liquidation and distribution of all
Company funds, the Company shall terminate and the Managers shall have the
authority to execute and file all documents required to effectuate the
termination of the Company, including but not limited to a final Company income
tax return.
ARTICLE 12 - AMENDMENTS
This Agreement may only be amended by the written consent of a majority of
Class A Members and a majority of Class B Members.
ARTICLE 13 - MISCELLANEOUS
13.1 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties and is the final and complete expression of the parties.
This Agreement supersedes any prior written or oral agreements between them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between and among the parties
hereto relating to the subject matter of this Agreement which are not fully
expressed herein. This Agreement may not be modified or amended other than
pursuant to Article 12 hereof.
13.2 NOTICES. Any notice, demand or communication required or permitted
under this Agreement shall be deemed to have been duly given, on the date of
such delivery, if delivered personally to the party to whom directed or, three
(3) business days following the day of mailing, if mailed by registered or
certified mail, postage and charges prepaid, and addressed (a) if to a Member,
to the address set forth on Exhibit A, (b) if to the Company, to the address set
forth in Section 2.1, and (c) if to the Manager, to the address set forth in
Section 2.1.
13.3 BINDING EFFECT. This Agreement is binding upon and shall inure to the
benefit of the parties hereto, their successors and assigns.
13.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and all of such counterparts shall for all purposes constitute one
(1) agreement, binding on the parties hereto, notwithstanding that all parties
are not signatory to the same counterparts.
13.5 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Washington, without regard to
choice of law or conflicts of law principles.
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13.6 CAPTIONS; PRONOUNS. The articles, sections, subsections, paragraphs
and subparagraph titles or captions contained in this Agreement are inserted
only as a matter of convenience of reference. Such titles and captions in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provision hereof. All pronouns and any variation thereof shall be deemed
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
13.7 INDEPENDENT AGREEMENT AND SURVIVAL OF COVENANTS. The benefits
provided hereunder are independent and unrelated to any payments, benefits,
rights or interests of a Member or Manager in any other agreements or
arrangements between the Company and the Member or Manager. The existence of
any claim or cause of action by a Member or Manager against the Company shall
not constitute a defense to the enforcement of this Agreement or excuse
performance of the obligations assumed by a Member or a Manager hereunder. The
covenants contained herein are independent of any other agreement, including any
employment or consulting agreement into which this Agreement may be
incorporated, and such covenants shall survive the termination of a Member's or
Manager's employment or association with the Company.
13.8 LEGAL EXPENSES. In any suit, proceeding or action to enforce any
term, condition or covenant of this Agreement or to procure an adjudication or
determination of the rights of a Member or Manager, Family Member, spouse of a
Member, spouse of a Family Member, or the Company, the most prevailing party
shall be entitled to recover from the other party reasonable sums, such as
attorney fees and costs and expenses in connection with such suit, proceeding or
action, including appeal, which sums shall be included in any judgment or decree
entered therein.
13.9 WAIVER OF BREACH. The waiver of any breach of any provision of this
Agreement or failure to enforce any provision hereof shall not operate or be
construed as a waiver of any subsequent breach by any party.
13.10 SEVERABILITY. If any portion of this Agreement shall be invalid,
void, voidable or unenforceable, such invalidity or unenforceability shall in no
way affect the validity or enforceability of any other portion hereof.
13.11 EQUITABLE RELIEF AND SPECIFIC PERFORMANCE. The parties hereto
specifically agree that in the event of a breach or threatened breach of this
Agreement, substantial and irreparable harm will be or may be suffered by the
nonbreaching parties (e.g., the Members, the Manager and/or the Company), and
the remedies available at law will be or may be inadequate and/or incapable of
compensating the nonbreaching parties inasmuch as money damages are incapable of
being made certain. Therefore, in addition to any remedies available at law,
injunctive relief or other equitable relief shall be available in the event of a
breach or threatened breach of this Agreement, including but not limited to
injunctive relief preventing the actual or the threatened transfer, assignment
or other disposition of interests in the Company in breach of this Agreement (or
ordering the
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reversal of such), or injunctive or other equitable relief directing the
transfer, assignment or other disposition of interests in the Company in
accordance with this Agreement.
13.12 RIGHTS CUMULATIVE. The rights and remedies specified in this
Agreement are cumulative and are not exclusive of any rights or remedies that
any party would otherwise have.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.
Manager-Member: /s/ Mark Torrance
-------------------------------------------------------
Mark Torrance
Member: /s/ Wade B. Torrance
-------------------------------------------------------
Wade B. Torrance
Member:
/s/ Mark Torrance
-------------------------------------------------------
Mark Torrance, as Co-Trustee for the Torrance Children
Trusts named in the introductory paragraph of this
Agreement
/s/ Stephen K. Gattis
-------------------------------------------------------
Stephen K. Gattis, as Co-Trustee for the Torrance
Children Trusts named in the introductory paragraph of
this Agreement
29
<PAGE>
EXHIBIT A
DESCRIPTION OF PROPERTY
MEMBER INFORMATION
<TABLE>
<CAPTION>
SHARES OF PHOTODISC INC.
MEMBER NAME & ADDRESS CONTRIBUTED
<S> <C>
Mark Torrance 3,895,211
2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
Wade B. Torrance 3,397,537
The Highlands
Seattle, WA 98177
Mark Torrance and Stephen K. Gattis 108,000
as Co-Trustees for the Alexandra W.
Torrance Trust
2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
Mark Torrance and Stephen K. Gattis 108,000
as Co-Trustees for the Rosemary E.
Torrance Trust
2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
Mark Torrance and Stephen K. Gattis 108,000
as Co-Trustees for the Thomas M.
Torrance Trust
2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
</TABLE>
30
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
---------------------------------
STOCKHOLDERS' AGREEMENT
---------------------------------
AMONG
GETTY IMAGES, INC.,
GETTY INVESTMENTS L.L.C.,
MARK GETTY,
JONATHAN KLEIN,
CREDITON LIMITED,
OCTOBER 1993 TRUST,
PDI, L.L.C.,
MARK TORRANCE,
AND
WADE TORRANCE
Dated as of February 9, 1998
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Defined Terms. . . . . . . . . . . . . . . . . . 4
ARTICLE II
BOARD REPRESENTATION
SECTION 2.01. Board Representation . . . . . . . . . . . . . . . . . 4
ARTICLE III
TRANSFERS OF SHARES
SECTION 3.01. Agreement Not to Sell. . . . . . . . . . . . . . . . . 5
SECTION 3.02. Restrictions on Transfer . . . . . . . . . . . . . . . 6
SECTION 3.03. Rights of First Refusal. . . . . . . . . . . . . . . . 6
SECTION 3.04. Transferees to Execute Agreement . . . . . . . . . . . 11
SECTION 3.05. Improper Sale or Encumbrance . . . . . . . . . . . . . 12
SECTION 3.06. Legends . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Expenses.. . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.03. Public Announcements.. . . . . . . . . . . . . . . . . 14
SECTION 4.04. Headings.. . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.05. Severability.. . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.06. Entire Agreement.. . . . . . . . . . . . . . . . . . . 15
SECTION 4.07. Assignment.. . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.08. No Third Party Beneficiaries.. . . . . . . . . . . . . 15
SECTION 4.09. Amendment; Waiver; Termination . . . . . . . . . . . . 15
(i)
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
SECTION 4.10. Governing Law; Dispute Resolution. . . . . . . . . . . 15
SECTION 4.11. Counterparts.. . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.12. Specific Performance.. . . . . . . . . . . . . . . . . 16
SECTION 4.13. All Shares Subject to this Agreement.. . . . . . . . . 16
(ii)
<PAGE>
STOCKHOLDERS' AGREEMENT (this "AGREEMENT") dated as of February 9,
1998 among Getty Images, Inc., a Delaware corporation ("GETTY IMAGES"), and
(a) Getty Investments L.L.C. ("GETTY INVESTMENTS"), Mark Getty, Jonathan Klein,
Crediton Limited and October 1993 Trust and (b) PDI, L.L.C. ("PDI"), Mark
Torrance and Wade Torrance (each of the foregoing (except Getty Images) being a
"STOCKHOLDER" and collectively, the "STOCKHOLDERS").
WHEREAS, Getty Images, Getty Communications plc, a public limited
company organized under the laws of England and Wales ("GETTY COMMUNICATIONS"),
Photodisc, Inc. a Washington corporation ("PHOTODISC"), and Print Merger, Inc.,
a Washington corporation and a wholly owned subsidiary of Getty Images ("MERGER
SUB") entered into the Merger Agreement dated as of September 15, 1997 (the
"MERGER AGREEMENT"), which provides, upon the terms and subject to the
conditions thereof, for the merger of Merger Sub and PhotoDisc; and
WHEREAS, it is a condition to the consummation of the transactions
contemplated under the Merger Agreement that the parties hereto enter into this
Agreement;
NOW, THEREFORE, in consideration of the forgoing and the mutual
agreements and covenants hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this agreement, the
following terms have the following meanings:
"AFFILIATE" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"BENEFICIAL OWNER" or "BENEFICIALLY OWN" has the meaning given such
term in Rule 13d-3 under the Exchange Act, PROVIDED that beneficial ownership
under Rule 13d-3(d)(1)(i) shall be determined based on whether a Person has a
right to acquire beneficial ownership within 60 days or thereafter.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public
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2
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from any of Standard & Poor's Corporation, Moody's Investors Service, Inc. or
Duff & Phelps Credit Rating Co. or (c) commercial paper maturing not more than
one year from the date of issuance thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's Corporation
or Moody's Investors Service, Inc.
"CASHLESS EXERCISE OF OPTIONS" means sales of Shares of Common Stock
in connection with the simultaneous exercise of options to purchase Shares of
Common Stock to the extent required to pay the applicable exercise price.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
Getty Images.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise. Control shall be conclusively presumed when
any Person directly or indirectly owns 50% or more of the voting securities of
another Person.
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien,
charge, adverse claim, preferential arrangement or restriction or other
encumbrance of any kind.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"GETTY GROUP" means Getty Investments, Mark Getty, Jonathan Klein,
Crediton Limited and October 1993 Trust, and any other Person constituting a
Permitted Transferee of the foregoing Persons under clauses (ii), (iii) or (iv)
of the definition of Permitted Transferee.
"GROUP" means either the Getty Group or the Torrance Group.
"MARKETABLE SECURITIES" means securities that are (a) (i) securities
of or other interests in any Person that are traded on a national securities
exchange or reported on by the National Association of Securities Dealers
Automated Quotation System or (ii) debt securities on market terms of an issuer
that has debt or equity securities that are so traded or so reported on and in
which a nationally recognized securities firm has agreed to make a market, and
(b) not subject to restrictions on transfer as a result of any applicable
contractual provisions or the provisions of the Securities Act or, if subject to
such restrictions under the
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3
Securities Act, are also subject to registration rights reasonably acceptable to
the Person receiving such securities.
"PERMITTED TRANSFEREE" means (i) Getty Images or any Subsidiary, (ii)
in the case of any Stockholder who is a natural person, a Person to whom shares
of Common Stock are transferred from such Stockholder by gift, will or the laws
of descent and distribution, (iii) any other member of the Getty Group or the
Torrance Group, as the case may be (and any Permitted Transferee of such Group),
(iv) any "affiliate" of any Stockholder, including, without limitation, any
trust, partnership or limited liability company that a Stockholder controls or
is a beneficiary of, or any Person that is a member or a beneficiary of any
Stockholder or a beneficiary of any such trust, and any partnership or limited
liability company controlled by two or more of such trusts or beneficiaries of
such trust or trusts, or (v) with respect only to the taking of an Encumbrance
on Shares, any commercial bank or other financial institution that lends funds
to a Stockholder on condition of taking such Encumbrance in such Stockholder's
Shares.
"PERSON" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization, joint venture or other entity,
as well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Exchange Act.
"RULE 144 TRANSACTION" means any Sale of Shares within the volume
limitations of Rule 144(e) under the Securities Act (as in effect on the date
hereof) (or, if the seller is entitled to rely upon paragraph (k) of Rule 144,
within two times the volume limitations of Rule 144(e) that would have applied
if the seller was not entitled to rely upon paragraph (k) of Rule 144) to a
Person who, to the knowledge of the seller, does not beneficially own more than
5% of the then outstanding Common Stock.
"SALE" means any sale, assignment, transfer, distribution, gift or
other disposition of shares or of a participation therein, whether voluntarily
or by operation of law.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SHARE" means any share of Common Stock and any securities issued in
respect thereof.
"SUBSIDIARY" means any and all corporations, partnerships, joint
ventures, associations and other entities controlled by Getty Images directly or
indirectly through one or more intermediaries.
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4
"TORRANCE GROUP" means PDI, Mark Torrance and Wade Torrance, and any
other Person constituting a Permitted Transferee of the foregoing Persons under
clauses (ii), (iii) or (iv) of the definition of Permitted Transferee.
"THIRD PARTY" means, with respect to any Stockholder, any other Person
(other than a Permitted Transferee of such Stockholder).
SECTION 1.02. OTHER DEFINED TERMS. The following terms shall have
the meanings defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Accepting Party 3.03(b)
Board 2.01(a)
Notice of Acceptance 3.03(b)
Offer 3.03(a)
Offered Shares 3.03(a)
Offer Notice 3.03(a)
Offer Price 3.03(a)
Other Stockholders 3.03(a)
Prospective Seller 3.03(a)
Prospective Transferee 3.04(a)
Restricted Period 3.01(a)
</TABLE>
ARTICLE II
BOARD REPRESENTATION
SECTION 2.01. BOARD REPRESENTATION. (a) Each of the Getty Group and
the Torrance Group shall have the right to nominate one director to the Board of
Directors of Getty Images (the "BOARD") whenever such class of directors is
subject to an election; PROVIDED, HOWEVER, that the Torrance Group shall not
have such right for so long as Mark Torrance is an employee of Getty Images and
a member of the Board; and PROVIDED FURTHER, that such right shall terminate
with respect to either the Torrance Group or the Getty Group, as the case may
be, once such Group beneficially owns fewer than the greater of (i) 3,000,000
shares of Common Stock (subject to equitable adjustment in the event of stock
splits, stock dividends and similar events) and (ii) such number of shares of
Common Stock as is equal to 2% of the then outstanding shares of Common Stock.
Such right shall be in addition to any other voting rights that each Stockholder
may have with respect to its Shares.
<PAGE>
5
(b) For so long as the Getty Group has the right to nominate one
director to the Board pursuant to Section 2.01(a), the Getty Group shall also
have the right to appoint the Chairman of the Board from among the directors of
Getty Images; PROVIDED, HOWEVER, that the Getty Group shall not have such right
for so long as either Mark Torrance or Mark Getty is the Chairman or a
Co-Chairman of the Board.
(c) The Stockholders agree to take such actions within their control
as are necessary to implement the agreements set forth in Sections 2.01(a) and
2.01(b), including the voting of their respective Shares in favor of the Board
nominees designated by the Getty Group and the Torrance Group in accordance with
this Section 2.01.
(d) Getty Images shall include as a nominee for the Board recommended
by the Board the person designated by each of the Getty Group and the Torrance
Group in accordance with Section 2.01(a) and shall nominate such person and use
its reasonable best efforts to cause the election of such person, unless the
Board of Directors of Getty Images, in the exercise of its fiduciary duties,
reasonably shall determine that such person is not qualified to serve on the
Board. If the Board reasonably determines that such designee is not so
qualified, the Group designating such nominee shall have the opportunity to
specify one additional designee who shall be so included as a nominee subject to
the qualification set forth in the immediately preceding sentence.
(e) In the event that a vacancy is created at any time by the death,
disability, resignation or removal of any director nominated by the Getty Group
or the Torrance Group, the nominating Group shall have the right to designate a
replacement director to fill such vacancy (provided that such Group would be
entitled at that time to nominate a director pursuant to Section 2.01(a)) and
Getty Images and the Stockholders agree to take such actions within their
control as are necessary to implement the agreements set forth in this Section
2.01(e).
(f) To the extent not already proposed pursuant to Exhibit 7.11 of
the Merger Agreement, Mark Torrance may propose to the Board of Directors of
Getty Images non-employees with appropriate industry experience to fill two
vacancies on the Board of Directors of Getty Images as of the date hereof. The
Board of Directors of Getty Images shall consider any proposed appointee in good
faith.
ARTICLE III
TRANSFERS OF SHARES
SECTION 3.01. AGREEMENT NOT TO SELL. (a) Except with the prior
written consent of Getty Images, no Stockholder shall sell any Shares until the
earlier of (i) the date
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6
six months after the date of this Agreement and (ii) the time of the
effectiveness of a registration statement filed by Getty Images under the
Securities Act pursuant to which stockholders of Getty Images sell Shares (such
period being the "RESTRICTED PERIOD"); PROVIDED, HOWEVER, that during the
Restricted Period, the Getty Group or the Torrance Group, as the case may be,
may each sell up to 200,000 Shares in a Rule 144 Transaction or in a Cashless
Exercise of Options.
(b) After the expiration of the Restricted Period, no Stockholder
shall, directly or indirectly, make or solicit any Sale of, or create, incur,
solicit or assume any Encumbrance with respect to, any Share, except in
compliance with the Securities Act and this Agreement.
SECTION 3.02. RESTRICTIONS ON TRANSFER. Each Stockholder agrees that
it will not, directly or indirectly, make or solicit any Sale of, or create,
incur, solicit or assume any Encumbrance with respect to, any Share beneficially
owned by such Stockholder other than (i) any Sale to a Permitted Transferee or
the granting of any Encumbrance to a Permitted Transferee, (ii) any Sale that is
made in compliance with the procedures, and subject to the limitations, set
forth in Section 3.03 or any Sale made to any Third Party after the termination
of Section 3.03 pursuant to subparagraph (g) thereof, (iii) any Sale pursuant to
a public offering of shares of Common Stock pursuant to an effective
registration statement under the Securities Act in which, to the knowledge of
the selling Stockholder, no one Person shall purchase more than five percent of
the then outstanding shares of Common Stock, or (iv) any Sale pursuant to a Rule
144 Transaction or in a Cashless Exercise of Options. Notwithstanding the
foregoing, except as otherwise expressly provided in this Agreement, all Sales
permitted by the foregoing clauses (i) through (iv) shall be subject to, and
shall not be made other than in compliance with, the provisions of Sections
3.01, 3.04, 3.05 and 3.06.
SECTION 3.03. RIGHTS OF FIRST REFUSAL. (a) If at any time any
Stockholder receives from or otherwise negotiates with a Third Party a bona fide
offer to purchase for cash, Cash Equivalents or Marketable Securities or other
securities reasonably subject to valuation in the manner set forth in Section
3.03(b)(ii) below (for purposes of this Section 3.03, an "OFFER") any of the
Shares owned or held by such Stockholder, and such Stockholder intends to sell
such Shares to such Third Party, such Stockholder (for purposes of this Section
3.03, the "PROSPECTIVE SELLER") shall provide Getty Images and each of the other
Stockholders in the Group in which the Prospective Seller is not a member (for
purposes of this Section 3.03, the "OTHER STOCKHOLDERS") written notice of such
offer (for purposes of this Section 3.03, an "OFFER NOTICE"). The Offer Notice
shall identify the Third Party making the Offer, the number of Shares with
respect to which the Prospective Seller has such an Offer (for purposes of this
Section 3.03, the "OFFERED SHARES"), the consideration per Share at which a sale
is proposed to be made (for purposes of this Section 3.03, the "OFFER PRICE"),
and all other material terms and conditions of the Offer, including, without
<PAGE>
7
limitation, a description of any non-cash consideration sufficiently detailed to
permit valuation thereof, as well as a copy of the Offer, if available and
permitted pursuant the terms thereof. For avoidance of doubt, the Offer Price
may be expressed as an amount correlated to the price of the publicly traded
Common Stock determined as of a particular date or over a particular period.
(b) (i) The receipt of an Offer Notice by Getty Images and the
Other Stockholders from a Prospective Seller shall constitute an offer by such
Prospective Seller to sell to Getty Images and each Other Stockholder all (but
not less than all) of the Offered Shares at the Offer Price per Share in cash
(subject to the valuation procedures set forth in Section 3.03(b)(ii) below if
the Offer Price includes any non-cash consideration). Such offer shall be
irrevocable for 10 days after receipt of such Offer Notice by Getty Images and
each Other Stockholder. During such 10-day period, Getty Images and each Other
Stockholder shall, subject to the priorities set forth in Section 3.03(b)(iii),
have the right to accept such offer as to any or all of the Offered Shares by
giving a written notice of acceptance (for purposes of this Section 3.03, a
"NOTICE OF ACCEPTANCE") to the Prospective Seller prior to the expiration of
such 10-day period (for purposes of this Section 3.03, Getty Images or any Other
Stockholder so accepting such offer being an "ACCEPTING PARTY"). In the event
that within five days prior to the expiration of such 10-day period the
Prospective Seller shall not have received Notices of Acceptance for all of the
Offered Shares, the Prospective Seller shall notify each Accepting Party of such
fact and shall provide each Accepting Party an opportunity to submit an
additional Notice of Acceptance for any such remaining Offered Shares prior to
the expiration of such 10-day period. In the event that after the expiration of
such 10-day period (as may be extended pursuant to Section 3.03(b)(ii)(B)) the
Prospective Seller shall not have received Notices of Acceptance for all of the
Offered Shares, the Prospective Seller shall have the right to reject any or all
Notices of Acceptance theretofore received and to sell Shares in accordance with
Section 3.03(d).
(ii) If the Offer Price specified in the Offer Notice includes any
Cash Equivalents, Marketable Securities or other securities reasonably subject
to valuation in the manner set forth below, such Offer Price shall be deemed to
be the amount of any cash included in the Offer Price plus the value (as jointly
determined by two nationally recognized investment banking firms, one of whom
shall have been selected by Getty Images and other of whom shall have been
selected by the Prospective Seller) of such non-cash consideration included in
the Offer Price. For this purpose:
(A) the parties shall use their best efforts to cause any
determination of the value of any such non-cash consideration included in
the Offer Price to be made within three business days after the date of
receipt of the Offer Notice by Getty Images and the Other Stockholders. If
the firms selected by Getty Images and the Prospective Seller are unable to
agree upon the value of any such non-cash consideration within such
three-day period, the value of such non-cash consideration
<PAGE>
8
shall be deemed to be the average of the valuations determined by each
investment bank; and
(B) notwithstanding Section 3.03(b)(i), the date by which Getty
Images and the Other Stockholders must exercise their rights of first
refusal under this Section 3.03 shall be extended until three days after
the determination of the value of such non-cash consideration.
(iii) Getty Images and each Other Stockholder shall be entitled to
accept such offer from the Prospective Seller in the following order of
priority:
FIRST, Getty Images shall be entitled to accept such offer for any or
all of the Offered Shares;
SECOND, if Getty Images shall not have accepted such offer for all the
Offered Shares, each Other Stockholder shall be entitled to
accept such offer for any or all of the remaining Offered
Shares (PROVIDED, HOWEVER, that if Notices of Acceptance are
received from Other Stockholders in respect of more than the
number of remaining Offered Shares, each Other Stockholder
shall be entitled to accept such offer for not more than the
portion of the remaining Offered Shares determined on a pro
rata basis based on the ratio of the number of Shares then
owned by such Other Stockholder to the number of Shares then
owned by all Other Stockholders who have submitted Notices of
Acceptance); and
THIRD, if Getty Images and one or more of the Other Stockholders have
not accepted such offer for all the Offered Shares, each Other
Stockholder shall then be entitled to accept such offer for not
more than the portion of the remaining Offered Shares
determined on a pro rata basis based on the ratio of the number
of Offered Shares specified in such Other Stockholder's Notice
of Acceptance in respect of which such Other Stockholder shall
not be entitled to accept the Prospective Seller's offer as a
result of the application of the proviso contained in clause
SECOND above to the number of Offered Shares specified in all
such Other Stockholders' Notices of Acceptance in respect of
which such Other Stockholders shall not be entitled to accept
the Prospective Seller's offer as a result of the application
of the proviso contained in clause SECOND above (it being
understood that each such Other Stockholder shall be entitled
to indicate its interest in accepting more than its pro rata
share of the remaining Offered Shares and to accept the
Prospective Seller's offer with respect to (A) such additional
Offered Shares if all the Offered Shares are not otherwise
accepted pursuant to
<PAGE>
9
clauses FIRST, SECOND and THIRD or (B) such Offered Shares that
remain unsold as described in Section 3.03(d)(ii) below).
If Getty Images or any Other Stockholder so accepts the Prospective
Seller's offer, such Accepting Party will purchase for cash from the Prospective
Seller, and the Prospective Seller will sell to such Accepting Party, such
number of Offered Shares as to which such Accepting Party shall have accepted
the Prospective Seller's offer (which must total, as to all Accepting Parties,
all of the Offered Shares). The price per Share to be paid by such Accepting
Party shall be the Offer Price specified in the Offer Notice, payable in
accordance with the terms of the Offer by the Prospective Seller specified in
Section 3.03(b)(i) (or in cash if the Offer Price includes any non-cash
consideration, subject to the valuation procedures set forth in Section
3.03(b)(ii)). The Notice of Acceptance shall specify (i) such Accepting Party's
Acceptance of the Prospective Seller's offer and (ii) the number of Offered
Shares to be purchased by such Accepting Party. If, collectively, the Accepting
Parties shall not have accepted the Prospective Seller's offer as to all of the
Offered Shares, the Prospective Seller shall have the right to reject any or all
Notices of Acceptance theretofore received and to sell Shares in accordance with
Section 3.03(d).
(c) The consummation of any such purchase by and sale to any
Accepting Party shall take place on such date, not later than 20 days after
receipt of the latest Notice of Acceptance timely received by the Prospective
Seller, as such Accepting Party and the Prospective Seller shall select. Upon
the consummation of such purchase and sale, the Prospective Seller shall,
against delivery by the relevant Accepting Party of the Offer Price multiplied
by the number of Shares being purchased by such Accepting Party, (i) deliver to
the Accepting Party certificates evidencing the Offered Shares purchased and
sold, duly endorsed in blank or accompanied by written instruments of transfer
in form and substance satisfactory to such Accepting Party and duly executed by
the Prospective Seller, and (ii) shall assign all its rights under this
Agreement with respect to the Offered Shares purchased and sold pursuant to an
instrument of assignment reasonably satisfactory to such Accepting Party.
(d) In the event that:
(i) Getty Images and each Other Stockholder shall have received an Offer
Notice from a Prospective Seller but the Prospective Seller shall not
have received from Getty Images and one or more Other Stockholders
Notices of Acceptance as to all the Offered Shares prior to the
expiration of the 10-day period following receipt of such Offer Notice
(as may be extended pursuant to Section 3.03(b)(ii)(B)) or
(ii) (x) an Accepting Party shall have given a Notice of Acceptance
to the Prospective Seller but shall have failed to
consummate, other than as a
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10
result of the fault of the Prospective Seller, a purchase of
the Offered Shares with respect to which such Notice of
Acceptance was given within 20 days after receipt of the
Notice of Acceptance by the Prospective Seller and
(y) one or more Other Stockholders shall not have indicated an
interest upon any such failure to buy such Shares as
provided in clause (B) of the parenthetical phrase following
clause THIRD of Section 3.03(b)(iii) and shall not have
indicated that they are prepared to purchase such Shares
within five days of their receipt of a notice of such
failure from the Prospective Seller and
(z) Getty Images shall not have indicated an interest in
purchasing such Shares as have not been purchased pursuant
to the immediately preceding clause (y) and shall not have
been prepared to purchase such Shares at the offer price
originally specified in the Offer Notice relating to such
Shares within five days of its receipt of a notice from the
Prospective Seller that such Shares have not been purchased
pursuant to the immediately preceding clause (y),
such Prospective Seller shall have the right to reject any or all Notices of
Acceptance theretofore received, and nothing in this Section 3.03 shall limit
the right of the Prospective Seller to make thereafter a sale of the Offered
Shares so long as all the Offered Shares that are sold or otherwise disposed of
by the Prospective Seller (which number of Offered Shares shall be not less than
the number of Offered Shares specified in such Offer Notice) are sold for cash
or the Offer Consideration (A) within 90 days after the date of receipt of such
Offer Notice by Getty Images and the Other Stockholders, (B) at an amount not
less than the Offer Price included in such Offer Notice, (C) to the Third Party
making the Offer and (D) in compliance with applicable securities laws.
(e) In the event that Getty Images and the Other Stockholders
shall have received an Offer Notice from a Prospective Seller but the
Prospective Seller shall not have received Notices of Acceptance for all the
Offered Shares prior to the expiration of the 10-day period following receipt of
such Offer Notice by Getty Images and the Other Stockholders (as may be extended
pursuant to Section 3.03(b)(ii)(B)) and such Prospective Seller shall not have
sold the remaining Offered Shares before the expiration of the 90-day period in
accordance with paragraph (d) above, then such Prospective Seller shall not give
another Offer Notice for a period of 90 days from the last day of such 90-day
period.
(f) Anything in this Section 3.03 or in Section 3.02 to the
contrary notwithstanding, the provisions of this Section 3.03 will not be
applicable to any Sale or Encumbrance described in Sections 3.02(i), (iii) or
(iv).
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11
(g) The provisions of Sections 2.01(e) and 2.01(d) and Article
III shall terminate and be of no further force and effect with respect to either
the Getty Group or the Torrance Group, as the case may be, on and after the date
on which such Group collectively beneficially owns fewer than the greater of (i)
3,000,000 shares of Common Stock (subject to equitable adjustment in the event
of stock splits, stock dividends and similar events); and (ii) such number of
shares of Common Stock as is equal to 2% of the then outstanding shares of
Common Stock.
SECTION 3.04. TRANSFEREES TO EXECUTE AGREEMENT. (a) Each
Stockholder agrees that it will not, directly or indirectly, make any Sale of,
or create, incur or assume any Encumbrance with respect to, any Shares
beneficially owned by such Stockholder, unless prior to the consummation of any
such Sale or the creation, incurrence or assumption of any such Encumbrance, the
Person to whom such Sale is proposed to be made or the Person in whose favor
such Encumbrance is proposed to be created, incurred or assumed (a "PROSPECTIVE
TRANSFEREE") (i) executes and delivers to Getty Images and each Stockholder an
agreement, in form and substance reasonably satisfactory to Getty Images,
whereby such Prospective Transferee confirms that, with respect to the Shares
that are the subject of such Sale or Encumbrance, it shall be deemed to be a
"Stockholder" for purposes of this Agreement and agrees to be bound by all the
terms of this Agreement, and (ii) unless such Prospective Transferee is an
institutional investor, delivers to Getty Images an opinion of counsel,
satisfactory in form and substance to Getty Images, to the effect that such Sale
or Encumbrance is being conducted in compliance with applicable securities laws
and that the agreement referred to above that is delivered by such Prospective
Transferee is a legal, valid and binding obligation of such Prospective
Transferee enforceable against such Prospective Transferee in accordance with
its terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditor's rights generally and
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Upon the execution and delivery by such Prospective
Transferee of the agreement referred to in clause (i) of the preceding sentence
and, if required, the delivery of the opinion of counsel referred to in clause
(ii) of the preceding sentence, such Prospective Transferee shall be deemed a
"Stockholder" for purposes of this Agreement and shall have the rights and be
subject to the obligations of a Stockholder under this Agreement, in each case
with respect to the Shares that were transferred to it by a Stockholder
hereunder or in respect of which such Encumbrance shall have been created,
incurred or assumed.
(b) Anything in this Section 3.04 or in Section 3.02 to the
contrary notwithstanding, the provisions of this Section 3.04 will not be
applicable to (i) any Sale of Shares pursuant to a public offering of shares of
Common Stock pursuant to an effective registration statement under the
Securities Act, (ii) any Sale of Shares in a Rule 144 Transaction or in a
Cashless Exercise of Options or (iii) any Sale of Shares to a Third Party
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12
in accordance with Section 3.03(d) after complying with the right of first
refusal requirements of Section 3.03.
SECTION 3.05. IMPROPER SALE OR ENCUMBRANCE. Any attempt not in
compliance with this Agreement to make any Sale of, or create, incur or assume
any Encumbrance with respect to, any Shares shall be null and void and of no
force and effect, the purported transferee shall have no rights or privileges in
or with respect to Getty Images, and Getty Images shall not give any effect in
Getty Images's stock records to such attempted Sale or Encumbrance.
SECTION 3.06. LEGENDS. (a) For so long as Shares beneficially
owned by a Stockholder are subject to the voting obligations and restrictions on
transfer set forth in Article II and in this Article III, certificates
evidencing such Share shall bear a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING
OBLIGATIONS AND RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCKHOLDERS'
AGREEMENT, DATED AS OF FEBRUARY __, 1998, AS IT MAY BE AMENDED FROM TIME TO
TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF
GETTY IMAGES. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE
ON THE BOOKS OF GETTY IMAGES UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE
BEEN COMPLIED WITH."
(b) In the event that any Shares shall cease to be subject to
the voting obligations or restrictions on transfer set forth in Article II or in
this Article III, Getty Images shall, upon the written request of the holder
thereof, issue to such holder a new certificate evidencing such Shares without
the relevant legend.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. EXPENSES. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
SECTION 4.02. NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be
<PAGE>
13
deemed to have been duly given or made upon receipt) by delivery in person, by
courier service, by cable, by facsimile, by telegram, by telex or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 4.02):
(a) if to Getty Images or members of the Getty Group other than Getty
Investments:
Getty Images, Inc.
500 North Michigan Avenue
Suite 1700
Chicago, Illinois 60611
Facsimile: (1312) 922-9075
Attention: Andrew Duncomb
with a copy to each of:
Getty Communications plc
101 Bayham Street
London NW1 0AG England
Facsimile: (44171) 267-6540
Attention: Nick Evans-Lombe
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ England
Facsimile: (44171) 600-5555
Attention: Michael Francies
Shearman & Sterling
555 California Street
San Francisco, California 94104
Facsimile: (415) 616-1199
Attention: Christopher D. Dillon
(b) if to Getty Investments:
Getty Investments L.L.C.
1325 Airmotive Way, Suite 262
Reno, Nevada 89502
Facsimile: (702) 786-5414
<PAGE>
14
Attention: Jan D. Moehl
Mark J. Jenness
(c) if to members of the Torrance Group:
PhotoDisc, Inc.
2013 Fourth Avenue
4th Floor
Seattle, WA 98121
Facsimile: (206) 441-9379
Attention: Mark Torrance
with a copy to:
Graham & James LLP/Riddell Williams P.S.
1001 Fourth Avenue Plaza
Suite 4500
Seattle, Washington 98154-1085
Facsimile: (206) 389-1708
Attention: John Steel
SECTION 4.03. PUBLIC ANNOUNCEMENTS. No party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party (except to the extent that such disclosure is required by law or the rules
of the Nasdaq National Market), and, to the extent practicable, the parties
shall cooperate as to the timing and contents of any such press release or
public announcement.
SECTION 4.04. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 4.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions
<PAGE>
15
contemplated hereby are consummated as originally contemplated to the greatest
extent possible.
SECTION 4.06. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, both written and
oral, among the parties hereto with respect to the subject matter hereof, except
as otherwise expressly provided herein.
SECTION 4.07. ASSIGNMENT. Except as otherwise expressly provided
herein, this Agreement shall be binding upon and shall inure solely to the
benefit of the parties hereto and their respective successors and permitted
assigns; PROVIDED, HOWEVER, that this Agreement shall not inure to the benefit
of any transferee unless such transferee shall have complied with the terms of
Section 3.04. No Stockholder may assign any of its rights hereunder to any
Person other than a transferee that has complied with the requirements of
Section 3.04 in all respects.
SECTION 4.08. NO THIRD PARTY BENEFICIARIES. Nothing herein, express
or implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 4.09. AMENDMENT; WAIVER; TERMINATION. Any term of this
Agreement may be amended or modified, and the observance of any term may be
waived, only by an instrument in writing signed by Getty Images and Stockholders
in each of the Getty Group and the Torrance Group holding Shares representing a
majority of the Shares then held by Stockholders in such Group; provided,
however, that no modification to Sections 2.01 or 4.09 may be made without the
consent of the party affected thereby. Waiver of any term or condition of this
Agreement shall only be effective if it is in writing and shall not be construed
as a waiver of any subsequent breach or waiver of the same term or condition, or
a waiver of any other term or condition of this Agreement. Each Stockholder
shall be bound by any amendment or waiver authorized by this Section 4.09,
whether or not such Stockholder shall have consented thereto. No failure or
delay by any party in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
This Agreement may be terminated upon the unanimous written consent of the
Stockholders.
SECTION 4.10. GOVERNING LAW; DISPUTE RESOLUTION. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Delaware applicable to contracts executed in and to be performed entirely within
that State. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in
<PAGE>
16
any Delaware state or federal court sitting in the State of Delaware. In the
event of any dispute, claim or litigation with regard to this Agreement, the
prevailing party shall be entitled to receive from the non-prevailing party, and
the non-prevailing party shall promptly pay, all reasonable fees and expenses of
counsel for the prevailing party incurred in connection with such dispute, claim
or litigation.
SECTION 4.11. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 4.12. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
SECTION 4.13. ALL SHARES SUBJECT TO THIS AGREEMENT. All Shares shall
be held subject to the terms of this Agreement and the Stockholder thereof shall
be deemed a holder for purposes of this Agreement, as follows:
(i) Any Shares hereafter acquired by any Stockholder shall be held
by such Person subject to the provisions of this Agreement and such Person
shall be deemed to be a Stockholder for purposes of such additional Shares;
and
(ii) Any Stockholder who ceases to own any Shares as provided for in
this Agreement shall cease to be a Stockholder for purposes of such Shares
no longer so owned.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized or in their individual capacities, as applicable.
GETTY IMAGES, INC.
By: /s/ Lawrence Gould
---------------------------
Title: Treasurer
<PAGE>
17
GETTY INVESTMENTS L.L.C.
By: /s/ Jan D. Moehl
---------------------------
Title: Officer
/s/ Mark Getty
------------------------------
Mark Getty
/s/ Jonathan Klein
------------------------------
Jonathan Klein
CREDITON LIMITED
By: /s/ RL Breadner
---------------------------
Title: Director
OCTOBER 1993 TRUST
By: /s Authorised Signatory
---------------------------
Title: Authorised Signatory
PDI, L.L.C.
By: /s/ Mark Torrance
---------------------------
Title:
/s/ Mark Torrance
------------------------------
Mark Torrance
/s/ Wade Torrance
------------------------------
Wade Torrance
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 9, 1998 (this
"Agreement"), between Getty Images, Inc., a Delaware corporation (the
"Company"), PDI, L.L.C., a Washington limited liability company ("PDI"), and
Mark Torrance ("Mr. Torrance", and together with PDI, the "PDI Shareholders").
WHEREAS, the Company, Getty Communications plc, a public limited
company organized under the laws of England and Wales ("Getty Communications"),
PhotoDisc, Inc., a Washington corporation ("PhotoDisc") and Print Merger, Inc.,
a Washington corporation and a wholly owned subsidiary of the Company ("Merger
Sub"), are parties to the Merger Agreement (the "Merger Agreement") dated as of
September 15, 1997, pursuant to which and subject to the terms and conditions
contained therein, (i) the Company and Getty Communications will enter into a
scheme of arrangement in accordance with the Companies Act of 1985 of Great
Britain (the "Scheme of Arrangement") and (ii) Merger Sub will be merged with
PhotoDisc (the "Merger", and together with the Scheme of Arrangement, the
"Transactions"); and
WHEREAS, it is a condition to the consummation of the transactions
provided for in the Merger Agreement, including the Scheme of Arrangement and
the Merger, that the parties hereto enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties and conditions contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. As used in this Agreement, the following terms shall
have the following respective meanings:
"COMMISSION" shall mean the United States Securities and Exchange
Commission, or any other United States federal agency at the time
administering the Securities Act or the Exchange Act, as applicable,
whichever is the relevant statute.
"COMPANY COMMON STOCK" shall mean the common stock, par value
$0.01 per share, of the Company.
<PAGE>
2
"HOLDERS' REPRESENTATIVE" shall mean PDI or such other Person or
Persons designated by PDI.
"EXCHANGE ACT" shall mean the United States Securities Exchange
Act of 1934, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be amended from time to
time.
"HOLDER" shall mean PDI or any transferee or assignee thereof to
whom the rights under this Agreement are assigned in accordance with the
provisions of Section 2.11 hereof.
"PERSON" shall mean an individual, corporation, association,
partnership, limited liability company, trust, organization, group (as such
term is used in Rule 13d-5 under the Exchange Act), business, government or
political subdivision thereof, governmental agency or other entity.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus
supplement with respect of the terms of the offering of any security of the
Company covered by such Registration Statement and all other amendments or
supplements to the prospectus, including post-effective amendments, and all
material incorporated, or deemed to be incorporated, by reference in such
prospectus.
"REGISTRABLE SECURITIES" shall mean any Company Common Stock
(except Escrow Shares (as defined in the Escrow Agreement dated as of
February 9, 1998, among the Company, certain shareholders of PhotoDisc,
and Citibank, as escrow agent) while such shares are held in escrow
pursuant to such Escrow Agreement) issued pursuant to the Merger
Agreement or securities which may be issued or distributed in respect
thereof by way of stock dividend or stock split or other distribution,
exchange, recapitalization, or reclassification. For purposes of this
Agreement, any Registrable Securities shall cease to be Registrable
Securities when (i) a Registration Statement with respect to the sale
of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
Registration Statement, (ii) such Registrable Securities are sold by a
person in a transaction in which the rights under the provisions of this
Agreement are not assigned, or (iii) such Registrable Securities shall
have ceased to be outstanding.
"REGISTRATION STATEMENT" shall mean any registration statement
under the Securities Act filed by the Company, including the Prospectus
contained therein, any amendments and supplements to such registration
statement, including post-effective
<PAGE>
3
amendments, and all exhibits and all material incorporated, or deemed to
be incorporated, by reference in such registration statement.
"SECURITIES ACT" shall mean the United States Securities Act of
1933, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be amended from time to time.
"STOCKHOLDERS' AGREEMENT" shall mean the Stockholders' Agreement
dated the date hereof among the Company, Getty Investments L.L.C., Mark
Getty, Jonathan Klein, Crediton Limited, October 1993 Trust, PDI, L.L.C.,
Mark Torrance and Wade Torrance.
ARTICLE II
AGREEMENTS IN RESPECT OF THE REGISTRABLE SECURITIES
SECTION 2.01. DEMAND REGISTRATIONS. (a) Subject to the
limitations set forth below, the Holders' Representative on behalf of the
Holders of Registrable Securities, shall have the right (a "Demand Right") to
require the Company to file a Registration Statement under the Securities Act
in respect of Registrable Securities held by such Initiating Holders. If at
the time that a Demand Right is exercised by the Holders' Representative on
behalf of Holders, the Company is not eligible to use Form S-3, such Demand
Right shall be a "Long-Form Demand Right". If at the time that a Demand
Right is exercised by the Holders' Representative on behalf of Holders, the
Company is eligible to use Form S-3, such Demand Right shall be a "Short-Form
Demand Right". Together, the Holders shall be entitled to exercise a Demand
Right on up to five occasions; PROVIDED, HOWEVER, that the Holders may not
require the Company to file a registration statement on a form other than
Form S-3 on more than three occasions. Each Long-Form Demand Right must be
exercised in respect of a number of Registrable Securities greater than the
number (subject to equitable adjustment in the event of stock splits, stock
dividends and similar events) equal to 25% of the Registrable Securities
issued to the PDI Shareholders at the effective time of the Merger (the
"Effective Time"). Each Short-Form Demand Right must be exercised in respect
of at least 350,000 Registrable Securities (subject to equitable adjustment
in the event of stock splits, stock dividends and similar events). No Demand
Right may be exercised within one year after the date that the registration
of Registrable Securities pursuant to a prior exercise of a Demand Right was
declared effective.
(b) As promptly as practicable, but in no event later than 45 days
after the Company receives a written request from the Holders' Representative
demanding that the Company so register the number of Registrable Securities
specified in such request, the
<PAGE>
4
Company shall file with the Commission and thereafter use its reasonable best
efforts to cause to be declared effective promptly a Registration Statement
(a "Demand Registration") providing for the registration of all Registrable
Securities as the Holders' Representative shall have demanded be registered
on behalf of Holders.
(c) Anything in this Agreement to the contrary notwithstanding, the
Company shall be entitled to postpone and delay, for a reasonable period of time
(the "Blackout Period"), not to exceed 60 days after the exercise of a Demand
Right in the case of subsections (i) and (iii) below, the filing of any Demand
Registration if:
(i) the Company will be filing, within 30 days after the
exercise of a Demand Right, a Registration Statement pertaining to a public
offering of Company Common Stock in which the Holders are entitled to join
pursuant to Section 2.02 hereof;
(ii) the Company is subject to an existing contractual obligation
to its underwriters not to engage in a public offering;
(iii) the Company shall determine that any such filing or the
offering of any Registrable Securities would
(A) in the good faith judgement of the Board of Directors
of the Company, impede, delay or otherwise interfere with any pending
or contemplated financing, acquisition, corporate reorganization or
other similar transaction involving the Company or its wholly owned
subsidiaries;
(B) based upon advice from the Company's investment banker
or financial advisor, adversely affect any pending or contemplated
offering or sale of any class of securities by the Company; or
(C) in the good faith judgement of the Board of Directors
of the Company, require disclosure of material nonpublic information
which, if disclosed at such time, would be materially harmful to the
interests of the Company and its stockholders;
PROVIDED, HOWEVER, that the Blackout Period shall terminate upon the completion
or abandonment of the relevant securities offering or sale, the termination or
expiration of the existing contractual obligation not to engage in a public
offering, the completion or abandonment of the relevant financing, acquisition,
corporate reorganization or other similar transaction, such time as such Demand
Registration shall no longer affect the relevant pending or contemplated
offering or sale of securities by the Company, the public disclosure by the
<PAGE>
5
Company or public admission by the Company of such material nonpublic
information or such time as such material nonpublic information shall be
publicly disclosed not in breach of confidentiality obligations, as the case
may be. After the expiration of any Blackout Period and without any further
request from the Holders' Representative of Holders, the Company shall effect
the filing of the relevant Demand Registration and shall use its reasonable
best efforts to cause any such Demand Registration to be declared effective
as promptly as practicable unless the Holders' Representative shall have,
prior to the effective date of such Demand Registration, withdrawn in writing
the initial request, in which case such withdrawn request shall not
constitute a Demand Registration for purposes of determining the number of
Demand Registrations to which the Holders are entitled hereunder. The
Company may not exercise its right to postpone or delay the filing of any
Demand Registration pursuant to this subsection (c) more than twice during
any 12 month period.
(d) Any request by the Holders' Representative on behalf of
Holders for a Demand Registration which is subsequently withdrawn prior to
such Demand Registration becoming effective shall not constitute a Demand
Registration for purposes of determining the number of Demand Registrations
to which the Holders are entitled if such withdrawal (i) is due to a material
adverse change affecting the Company, (ii) is due to a notification by the
Company of an intention to file a Registration Statement with respect to
Company Common Stock or (iii) is made in accordance with the penultimate
sentence of Section 2.01(c).
(e) The Company shall be entitled to include authorized but
unissued shares of Company Common Stock in any Demand Registration, subject
to Section 2.02. Notwithstanding anything contained herein, if the lead
underwriter of an offering involving a Demand Registration delivers a written
opinion to the Holders' Representative (a copy of which shall be provided to
the Company) that the number of shares of Company Common Stock included in
such Demand Registration would (i) materially and adversely affect the price
of the Company Common Stock to be offered or (ii) result in a greater amount
of Company Common Stock being offered than the market could reasonably
absorb, then the number of Registrable Securities to be registered by the
Company and the number of shares of Company Common Stock to be included in
such Demand Registration by other holders of shares of Company Common Stock
pursuant to contractual incidental registration rights, shall be reduced in
proportion to the number of securities originally requested to be registered
by each of them to the extent that, in the lead underwriter's opinion,
neither of the effects in the foregoing clauses (i) and (ii) would result
from the number of shares of Company Common Stock included in such Demand
Registration.
SECTION 2.02. INCIDENTAL REGISTRATION. (a) If, at any time
following the Effective Time, the Company proposes to file a Registration
Statement under the Securities Act with respect to an offering of Company
Common Stock (i) for its own account (other than a Registration Statement on
Form S-4 or S-8 (or any substitute form that may be adopted by the
<PAGE>
6
Commission)) or (ii) for the account of any holders of Company Common Stock
(including any pursuant to a Demand Registration), the Company shall give
written notice of such proposed filing to each Holder as soon as practicable
(but in any event not less than 30 days before the anticipated filing date),
and such notice shall offer each Holder the opportunity to register such
number of Registrable Securities as the Holder shall request. Upon the
written direction of any Holder, given within 20 days following the receipt
by such Holder of any such written notice (which direction shall specify the
number of Registrable Securities intended to be disposed of by such Holder),
the Company shall include in such Registration Statement (an "Incidental
Registration" and, collectively with a Demand Registration, a "Registration")
such number of Registrable Securities as shall be set forth in such written
direction. Notwithstanding anything contained herein, if the lead
underwriter of an offering involving an Incidental Registration delivers a
written opinion to the Company (a copy of which shall be provided to the
Holders) that the number of shares of Company Common Stock included in such
Registration would (i) materially and adversely affect the price of the
Company Common Stock to be offered or (ii) result in a greater amount of
Company Common Stock being offered than the market could reasonably absorb,
then the number of Registrable Securities to be registered by each party
requesting Incidental Registration rights hereunder, and the number of shares
of Company Common Stock to be included in such Registration by other holders
of shares of Company Common Stock pursuant to contractual incidental
registration rights, shall be reduced in proportion to the number of
securities originally requested to be registered by each of them to the
extent that, in the lead underwriter's opinion, neither of the effects in the
foregoing clauses (i) and (ii) would result from the number of shares of
Company Common Stock included in such Registration. Nothing contained herein
shall require the Company to reduce the number of shares of Company Common
Stock proposed to be issued by the Company in a Registration initiated by the
Company with respect to an offering of Company Common Stock for its own
account.
(b) No Incidental Registration effected under this Section 2.02
shall be deemed to have been effected pursuant to Section 2.01 hereof or
shall release the Company of its obligations to effect any Demand
Registration upon request as provided under Section 2.01 hereof.
SECTION 2.03. REGISTRATION PROCEDURES. (a) In connection with
each Registration, and in accordance with the intended method or methods of
distribution of the Company Common Stock as described in such Registration,
the Company shall, as soon as reasonably practicable (and, in any event,
subject to the terms of this Agreement, including, without limitation,
Section 2.01(a) hereof, at or before the time required by applicable laws and
regulations):
(i) prepare and file with the Commission a Registration Statement
with respect to such Registrable Securities, which, if the method of
distribution is by means
<PAGE>
7
of an underwriting, shall be in form and substance reasonably
acceptable to the underwriters for such underwriting, and use its
reasonable best efforts to cause such Registration Statement to become
and remain effective for the period of the distribution contemplated
thereby; PROVIDED, HOWEVER, that the Company shall use its reasonable
best efforts to cause a Registration Statement on Form S-3 to remain
effective until the earlier of (i) the disposition of all the
Registrable Securities registered thereunder, and (ii) the expiration
of the 90-day period commencing on the first day of the effectiveness
of such Registration;
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement;
(iii) furnish to the Holder such numbers of copies of the
Registration Statement and the Prospectus included therein (including each
preliminary prospectus and any amendments or supplements thereto), in
conformity with the requirements of the Securities Act and such other
documents and information as it may reasonably request;
(iv) (A) make available for inspection by the Holder and its counsel
and financial advisors such financial and other information as shall be
reasonably requested by them, and provide such Holder and its counsel and
financial advisors the opportunity to discuss the business affairs of the
Company with its principal executives and accountants, for the purposes of
enabling the Holder to exercise its due diligence responsibilities under
the Securities Act and (B) before the Registration Statement (and any
amendments or supplements thereto) is filed, provide copies thereof to the
Holder and its counsel and provide them with adequate time to review and
comment thereon;
(v) use its reasonable best efforts to register or qualify the
Registrable Securities covered by such Registration Statement under such
other securities or blue sky laws of such jurisdiction within the United
States and Puerto Rico as shall be reasonably appropriate for the
distribution of the Registrable Securities covered by the Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business in
or to file a general consent to service of process in any jurisdiction
wherein it would not but for the requirements of this paragraph (v) be
obligated to do so; and PROVIDED, FURTHER, that the Company shall not be
required to qualify such Registrable Securities in any jurisdiction in
which the securities regulatory authority requires that the Holder submit
any of its Registrable Securities to the terms, provisions and restrictions
of any escrow, lockup or
<PAGE>
8
similar agreement(s) for consent to sell Registrable Securities in
such jurisdiction unless such Holder agrees to do so;
(vi) promptly notify each Holder, at any time when a Prospectus
relating to the Registrable Securities is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
Prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made, and at the request of any such Holder promptly prepare and
furnish to such Holder a reasonable number of copies of a supplement to or
an amendment of such Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such Prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made;
(vii) furnish, at the request of any Holder requesting
Registration of Registrable Securities pursuant to Sections 2.01 or 2.02
hereof, if the method of distribution is by means of an underwriting, on
the date that the Registrable Securities are delivered to the underwriters
for sale pursuant to such registration, or if such Registrable Securities
are not being sold through underwriters, on the date that the Registration
Statement with respect to such Registrable Securities becomes effective,
(1) a signed opinion, dated such date, of the independent legal counsel
representing the Company for the purpose of such registration, addressed to
the underwriters, if any, and if such Registrable Securities are not being
sold through underwriters, then to the Holders making such request, as to
such matters as such underwriters or the Holders holding a majority of the
Registrable Securities included in such Registration, as the case may be,
may reasonably request and as would be customary in such a transaction; and
(2) letters dated such date and the date the offering is priced from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and if such Registrable Securities are not being sold
through underwriters, then to the Holders making such request and, if such
accountants refuse to deliver such letters to such Holders, then to the
Company (A) stating that they are independent certified public accountants
within the meaning of the Securities Act and that, in the opinion of such
accountants, the financial statements and other financial data of the
Company included in the Registration Statement or the Prospectus, or any
amendment or supplement thereto, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and
(B) covering such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date of
such letters) with respect to the Registration in respect of
<PAGE>
9
which such letter is being given as such underwriters or the Holders
holding a majority of the Registrable Securities included in such
Registration, as the case may be, may reasonably request and as would
be customary in such a transaction;
(viii) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable
Securities to be so included in the Registration Statement;
(ix) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, but not later than
eighteen (18) months after the effective date of the Registration
Statement, an earnings statement covering the period of at least
twelve (12) months beginning with the first full month after the effective
date of such Registration Statement, which earnings statements shall
satisfy the provisions of Section 11(a) of the Securities Act; and
(x) use its reasonable best efforts to list the Company Common Stock
covered by such Registration Statement with any securities exchange or
recognized trading market on which the Company Common Stock are then
listed.
(b) Each Holder requesting Registration shall furnish to the Company
in writing such information regarding such Holder and its intended method of
distribution of the Registrable Securities as the Company may from time to time
reasonably request in writing, but only to the extent that such information is
required in order for the Company to comply with its obligations under all
applicable securities and other laws and to ensure that the Prospectus relating
to such Registrable Securities conforms to the applicable requirements of the
Securities Act and the rules and regulations thereunder. Such Holder shall
notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to the Company or of the
occurrence of any event, in either case as a result of which any Prospectus
relating to the Registrable Securities contains or would contain an untrue
statement of a material fact regarding such Holder or its intended method of
distribution of such Registrable Securities or omits to state any material fact
regarding such Holder or its intended method of distribution of such Registrable
Securities required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and promptly furnish to the Company any additional information
required to correct and update any previously furnished information, or required
so that such prospectus shall not contain, with respect to such Holder or the
intended method of distribution of the Registrable Securities, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
<PAGE>
10
SECTION 2.04. REGISTRATION EXPENSES. All expenses incurred in
connection with each Registration pursuant to Sections 2.01 and 2.02 of this
Agreement, excluding underwriters' discounts and commissions and any stamp or
transfer tax or duty, but including without limitation all registration, filing
and qualification fees, word processing, duplicating, printers' and accounting
fees (including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance), fees of the
National Association of Securities Dealers, Inc. or listing fees, messenger and
delivery expenses, all fees and expenses of complying with state securities or
blue sky laws, fees and disbursements of one counsel for the Holders (selected
by the Holders) and fees and disbursements of counsel for the Company incurred
in connection with each registration shall be paid by the Company; PROVIDED,
HOWEVER, that if a registration request pursuant to Section 2.01 of this
Agreement is subsequently withdrawn at the request of the Holders'
Representative on behalf of Holders of a number of shares of Registrable
Securities such that the remaining Holders requesting registration would not
have been able to request registration under the provisions of Section 2.01 of
this Agreement and the provisions of Section 2.01(d) do not apply, such
withdrawing Holders shall bear such expenses (in proportion to the number of
shares orginally included in such Registration by such Holders) and the Company
shall not be required to pay any of such expenses, unless the Holders shall
forfeit their right to one requested registration pursuant to Section 2.01 of
this Agreement. Each Holder shall bear and pay the underwriting commissions and
discounts and any stamp or transfer tax or duty and the fees and disbursements
of counsel for the Holders other than the one counsel referred to above incurred
in connection with each Registration applicable to securities offered for its
account in connection with any Registrations, filings and qualifications made
pursuant to this Agreement.
SECTION 2.05. UNDERWRITING REQUIREMENTS. In connection with any
underwritten offering, the Company shall not be required under Section 2.02 of
this Agreement to include shares of Registrable Securities in such underwritten
offering unless the Holders of such shares of Registrable Securities accept the
terms of the underwriting of such offering that have been reasonably agreed upon
between the Company and the underwriters selected by the Company.
SECTION 2.06. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall, and it hereby
agrees to, indemnify and hold harmless each Holder, such Holder's directors,
officers, partners, managers, members and trustees and each Person who
participates as a placement or sales agent or as an underwriter (within the
meaning of the Securities Act) in any offering or sale of the Registered
Securities, against any losses, claims, damages or liabilities ("Losses") to
which such Holder, such Holder's directors, officers, partners, managers,
members and trustees or such agent or underwriter may become subject, insofar as
such Losses (or actions, proceedings or investigations in respect thereof) arise
out of or are based upon an untrue
<PAGE>
11
statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus contained therein or arise out of or are
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company shall, and it hereby agrees to, reimburse each
such Holder, such Holder's directors, officers, partners, managers, members
and trustees or any such agent or underwriter for any legal or other
out-of-pocket expenses reasonably incurred by them (but not in excess of
expenses incurred in respect of one counsel for all of them unless there is
an actual conflict of interest between any indemnified parties, which
indemnified parties may be represented by separate counsel) in connection
with investigating or defending any such action, proceeding or investigation;
PROVIDED, HOWEVER, that the indemnity agreement contained in this Section
2.06(a) shall not apply to amounts paid in settlement of any such Loss,
action, proceeding or investigation if such settlement is effected without
the consent of the Company which consent shall not be unreasonably withheld;
PROVIDED, FURTHER, that the Company shall not be liable to any such Person in
any such case to the extent that any such Loss or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement or Prospectus contained
therein, in reliance upon and in conformity with written information
furnished to the Company by such Holder or any agent, underwriter or
representative of such Holder expressly for use therein, or by such Holder's
failure to furnish the Company, upon request, with the information with
respect to such Holder, such Holder's directors, officers, partners,
managers, members and trustees, or any agent, underwriter or representative
of such Holder, or such Holder's intended method of distribution, that is the
subject of the untrue statement or omission or, in the case of such agent or
underwriter, if the Company shall sustain the burden of proving that such
agent or underwriter sold securities to the person alleging such Loss without
sending or giving, at or prior to the written confirmation of such sale, a
copy of the applicable Prospectus (excluding any documents incorporated by
reference therein) or of the applicable Prospectus, as then amended or
supplemented (excluding any documents incorporated by reference therein) if
the Company had previously furnished copies thereof to such agent or
underwriter, and such Prospectus corrected such untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration.
(b) INDEMNIFICATION BY THE HOLDERS AND ANY AGENT OR UNDERWRITERS.
Each Holder requesting or joining in a Registration shall severally and not
jointly indemnify and hold harmless the Company, each of its directors and
officers, each Person, if any, who controls the Company within the meaning of
the Securities Act, and each agent and any underwriter for the Company (within
the meaning of the Securities Act) against any Losses, joint or several, to
which the Company or any such director, officer, controlling Person, agent or
underwriter may become subject, under the Securities Act or otherwise, insofar
as such Losses (or actions, proceedings or investigations in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such Registration Statement on the effective
date thereof (including any Prospectus filed under
<PAGE>
12
Rule 424 under the Securities Act or any amendments or supplements thereto)
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement or
Prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by or on behalf of such Holder
expressly for use in connection with such Registration Statement or
Prospectus, or by such Holder's failure to furnish the Company, upon request,
with the information with respect to such Holder, such Holder's directors,
officers, partners, managers, members and trustees or any agent, underwriter
or representative of such Holder, or such Holder's intended method of
distribution, that is the subject of the untrue statement or omission; and
each such Holder shall reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
agent or underwriter (but not in excess of expenses incurred in respect of
one counsel for all of them unless there is an actual conflict of interest
between any indemnified parties, which indemnified parties may be represented
by separate counsel) in connection with investigating or defending any such
Loss or action, proceeding or investigation; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 2.06(b) shall not apply to
amounts paid in settlement of any such Loss, action, proceeding or
investigation if such settlement is effected without the consent of such
Holder which consent shall not be unreasonably withheld and in no event shall
a Holder be liable under this Section 2.06(b) for an amount in excess of the
gross proceeds received by such Holder from the sale of securities pursuant
to such Registration.
(c) NOTICE OF CLAIMS, ETC. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action or proceeding for which indemnification under subsection (a) or (b)
may be requested, such indemnified party shall, without regard to whether a
claim in respect thereof is to be made against an indemnifying party pursuant to
the indemnification provisions of, or as contemplated by, this Section 2.06,
notify such indemnifying party in writing of the commencement of such action or
proceeding; but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified party in
respect of such action or proceeding on account of the indemnification
provisions of or contemplated by Section 2.06(a) or 2.06(b) hereof unless the
indemnifying party was materially prejudiced by such failure of the indemnified
party to give such notice, and in no event shall such omission relieve the
indemnifying party from any other liability it may have to such indemnified
party. In case any such action or proceeding shall be brought against any
indemnified party and it shall notify an indemnifying party of the commencement
thereof, such indemnifying party shall be entitled to participate therein and,
to the extent that it shall determine, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified
<PAGE>
13
party of its election so to assume the defense thereof, such indemnifying
party shall not be liable to such indemnified party for any legal or any
other expenses subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of investigation (unless
such indemnified party reasonably objects to such assumption on the grounds
that there may be defenses available to it which are different from or in
addition to the defenses available to such indemnifying party, in which event
the indemnified party shall have the right to control its defense and shall
be reimbursed by the indemnifying party for the expenses incurred in
connection with retaining separate counsel). If the indemnifying party is
not entitled to, or elects not to, assume the defense of a claim, it will not
be obligated to pay the fees and expenses of more than one counsel (in
addition to local counsel) for each indemnified party with respect to such
claim. The indemnifying party will not be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld or delayed. No indemnifying party will consent to entry of any
judgment or enter into any settlement agreement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.
(d) CONTRIBUTION. Each Holder requesting or joining in a
Registration and the Company agree that if, for any reason, the indemnification
provisions contemplated by Section 2.06(a) or Section 2.06(b) hereof are
unavailable to or are insufficient to hold harmless an indemnified party in
respect of any Losses (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative fault of, and benefits derived by, the indemnifying party and the
indemnified party, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such indemnifying party or by
such indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 2.06(d) were determined (i) by pro rata allocation
(even if the Holder or any agents for, or underwriters of, the Registrable
Securities, or all of them, were treated as one entity for such purpose); or
(ii) by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 2.06(d). The amount paid
or payable by an indemnified party as a result of the Losses (or actions or
proceedings in respect thereof) referred to above shall be deemed to include
(subject to the limitations set forth in Section 2.06(c) hereof) any legal or
other fees or expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action, proceeding or claim.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f)
<PAGE>
14
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) BENEFICIARIES OF INDEMNIFICATION. The obligations of the Company
under this Section 2.06 shall be in addition to any liability that it may
otherwise have and shall extend, upon the same terms and conditions, to each
officer, director, partner, manager, member and trustee of each Holder
requesting or joining in a Registration and each agent and underwriter of the
Registrable Securities and each person, if any, who controls such Holder or any
such agent or underwriter within the meaning of the Securities Act; and the
obligations of such Holder and any agents or underwriters contemplated by this
Section 2.06 shall be in addition to any liability that such Holder or its
respective agent or underwriter may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company
(including any person who, with his consent, is named in any Registration
Statement as about to become a director of the Company) and to each person, if
any, who controls the Company within the meaning of the Securities Act.
SECTION 2.07. TERMINATION OF REGISTRATION RIGHTS. Notwithstanding
any other provisions of this Agreement to the contrary, the registration rights
granted pursuant to this Agreement shall terminate with respect to a Holder on
the earlier of: (i) the date that the Registrable Securities held by such Holder
can be sold within a three month period under the volume limitation of Rule
144(e) under the Securities Act (or other similar rule), regardless of whether
at the time of such sales the Holder is entitled to rely upon paragraph (k) of
Rule 144; or (ii) on the 15th anniversary of the date of this Agreement,
regardless of the tradeability of any Registrable Securities held by such
Holder.
SECTION 2.08. UNDERWRITERS. If any of the Registrable Securities are
to be sold pursuant to an underwritten offering, the investment banker or
bankers and the managing underwriter or underwriters thereof shall be selected
by the Company after consultation with the Holders participating in such
Registration, PROVIDED, that such managing underwriter or underwriters must be
of recognized international standing.
SECTION 2.09. LOCKUP. Each Holder shall, in connection with any
Registration of the Company's securities, upon the request of the underwriters
managing any underwritten offering of the Company's securities, agree in writing
not to effect any sale, disposition or distribution of any Registrable
Securities (other than that included in the Registration or, if the
effectiveness of such Registration is after two years after the date of this
Agreement and such Registration has not been initiated by the exercise of demand
registration rights by a stockholder party to the Stockholders' Agreement, sales
in accordance with Rule 144 under the Securities Act and within the volume
limitation of Rule 144(e) under the Securities Act, regardless of whether at the
time of such sales the Holder is entitled to rely upon paragraph (k) of Rule
144) without the prior written consent of the Company or such
<PAGE>
15
underwriters, as the case may be, for such period of time not to exceed one
hundred and eighty (180) days from the effective date of such Registration as
the underwriters may specify; PROVIDED, HOWEVER, that all executive officers
and directors of the Company shall also have agreed not to effect any sale,
disposition or distribution of any Registrable Securities under the
circumstances and pursuant to the terms set forth in this Section 2.09.
SECTION 2.10. LEGENDS. (a) Stop transfer restrictions will be given
to the Company's transfer agent(s) with respect to the Registrable Securities
and there will be placed on the certificate or instruments representing the
Registrable Securities, and on any certificate or instrument delivered in
substitution or exchange therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO SUCH REGISTRATION OR IN ACCORDANCE WITH
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(b) The Company hereby agrees that it will cause stop transfer
restrictions to be released with respect to any Registrable Securities that are
transferred (i) pursuant to an effective Registration Statement under the
Securities Act, (ii) pursuant to Rule 144 under the Securities Act, or
(iii) pursuant to another exemption from the registration requirements of the
Securities Act; PROVIDED, HOWEVER, that in the case of any transfer pursuant to
clause (ii) or (iii) above, the request for transfer is accompanied by a written
statement signed by the Holder confirming compliance with the requirements of
the relevant exemption from registration; and PROVIDED, FURTHER, that in the
case of any transfer pursuant to clause (iii) above, other than any transfer by
the Holder to one or more of its direct or indirect subsidiaries, or among such
subsidiaries, or by any such subsidiary to the Holder, the Company shall have
received a written opinion of counsel reasonably satisfactory to the Company
that such registration is not required. The Company further agrees that it will
cause the legend described in subsection (a) of this Section 2.10 to be removed
in the event of any transfer as provided in clause (i) or (ii) above.
SECTION 2.11. TRANSFER OF REGISTRATION RIGHTS. The Holders may not
transfer their rights under this Agreement without the written consent of the
Company; PROVIDED, HOWEVER, that a Holder may transfer such Holder's rights
without the Company's consent to a Permitted Transferee (as defined below) if
(i) the transferring Holder gives the Company written notice, whether or not the
Company's consent is necessary to effect such transfer, at or prior to the time
of such transfer stating the name and address of the transferee and identifying
the securities with respect to which the rights under this Agreement are being
transferred and
<PAGE>
16
(ii) such transferee agrees in writing, in form and substance reasonably
satisfactory to the Company, to be bound as a Holder by the provisions of
this Agreement. Any transfer of Registrable Securities not in compliance
with this Section 2.11 shall cause such Registrable Securities to lose such
status. For purposes of this Section 2.11, "Permitted Transferee" shall mean
(i) in the case of any Holder who is a natural person, a Person to whom
Registrable Securities are transferred from such Holder by gift, will or the
laws of descent and distribution, (ii) any member of the Getty Group or the
Torrance Group (each as defined in the Stockholders' Agreement, as amended
from time to time), and (iii) any "affiliate" of any Holder, including,
without limitation, any trust, partnership or limited liability company that
a Holder controls or is a beneficiary of, or any Person that is a member of
any Holder or a beneficiary of any such trust, and any partnership or limited
liability company controlled by two or more of such trusts or beneficiaries
of such trust or trusts.
SECTION 2.12. PUBLIC INFORMATION. The Company covenants to make
available "adequate current public information" concerning the Company within
the meaning of Rule 144(c) under the Securities Act.
SECTION 2.13. MERGERS AND CONSOLIDATIONS. The Company shall not,
directly or indirectly, enter into any merger, consolidation or reorganization
in which the Company shall not be the surviving corporation, or transfer all or
substantially all of its assets, unless prior to such merger, consolidation,
reorganization or transfer, the surviving corporation or transferee shall have
agreed in writing to assume the obligations of the Company under this Agreement
and for that purpose references to Registrable Securities shall mean the
securities issued in exchange for such Registrable Securities pursuant to such
merger, consolidation, reorganization or sale.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. EXPENSES. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
SECTION 3.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given and made upon receipt) by delivery
in person, by courier service, by cable, by facsimile, by telegram, by telex, or
by registered or certified mail (postage prepaid,
<PAGE>
17
return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 3.02):
(a) if to the Company:
Getty Images, Inc.
500 North Michigan Avenue, Suite 1700
Chicago, Illinois 60611
Facsimile: (1312) 922-9075
Attention: Andrew Duncomb
with copies to:
Clifford Chance
200 Aldersgate
London EC1A 4JJ
Facsimile: (44171) 600-5555
Attention: Michael Francies
Shearman & Sterling
555 California Street
San Francisco, California 94104
Facsimile: (415) 616-1199
Attention: Christopher D. Dillon
(b) if to the PDI Shareholders:
c/o PhotoDisc, Inc.
2013 Fourth Avenue, 4th Floor
Seattle, Washington 98121
Facsimile: (206) 441-9379
Attention: Mark Torrance
with a copy to:
Graham & James LLP/Riddell Williams P.S.
1001 Fourth Avenue Plaza
Suite 4500
Seattle, Washington 98154-1085
Facsimile: (206) 389-1708
Attention: John Steel
<PAGE>
18
SECTION 3.03. PUBLIC ANNOUNCEMENTS. No party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party (except to the extent that such disclosure is required by law or the rules
of the Nasdaq National Market), and, to the extent practicable, the parties
shall cooperate as to the timing and contents of any such press release or
public announcement.
SECTION 3.04. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 3.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 3.06. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties hereto with respect to the subject matter hereof, except as
otherwise expressly provided herein.
SECTION 3.07. ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns; PROVIDED, HOWEVER, that this Agreement shall
not inure to the benefit of any transferee unless such transferee shall have
complied with the terms of Section 2.11. Except with the consent of the
Company, no Holder may assign any of its rights hereunder to any Person other
than a transferee that has complied with the requirements of Section 2.11 in all
respects.
SECTION 3.08. NO THIRD PARTY BENEFICIARY. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
respective successors and permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
<PAGE>
19
SECTION 3.09. AMENDMENT. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Company and Holders of a majority of the Registrable Securities then held by all
Holders or (b) by a waiver in accordance with Section 3.10 of this Agreement.
SECTION 3.10. WAIVER. Any party to this Agreement may (a) extend the
time for the performance of any obligations or other acts of any other party
hereto or (b) waive compliance with any agreements or conditions contained
herein. Any such extension or waiver shall be valid against the Company only if
set forth in an instrument in writing signed by the Company and shall be valid
against the Holders only if set forth in an instrument in writing signed by
Holders of a majority of the Registrable Securities then held by all Holders.
Any waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or as a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
of such rights.
SECTION 3.11. GOVERNING LAW; DISPUTE RESOLUTION. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Delaware applicable to contracts executed in and to be performed entirely within
that State. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in any Delaware state or federal court
sitting in the State of Delaware. In the event of any dispute, claim or
litigation with regard to this Agreement, the prevailing party shall be entitled
to receive from the non-prevailing party, and the non-prevailing party shall
promptly pay, all reasonable fees and expenses of counsel for the prevailing
party incurred in connection with such dispute, claim or litigation.
SECTION 3.12. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
SECTION 3.13. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 3.14. SURVIVAL. The several indemnities, agreements,
representations, warranties and each other provision set forth in this Agreement
and made pursuant hereto shall remain in full force and effect regardless of any
investigation (or statement as to the results thereof) made by or on behalf of
any party, any director or officer of such party, or any controlling person of
any of the foregoing, and shall survive the transfer of
<PAGE>
20
any Registrable Securities by a Holder, and the indemnification and
contribution provisions set forth in Section 2.06 hereof shall survive
termination of this Agreement.
SECTION 3.15. THE HOLDERS' REPRESENTATIVE. Each Holder hereby
appoints the Holders' Representative as its attorney-in-fact to act on its
behalf and to take any and all actions required or permitted to be taken by the
Holders' Representative under this Agreement. The Company shall be entitled to
rely, as being binding upon each Holder, upon any document or other paper
believed by it to be genuine and correct and to have been signed or sent by the
Holders' Representative, and the Company shall not be liable to any Holder for
any action taken or omitted to be taken by it in such reliance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized or in their individual capacities, as applicable.
GETTY IMAGES, INC.
By: /s/ Mark Getty
--------------------------------------------
Name: Mark Getty
Title: Director
PDI, L.L.C
By: /s/ Mark Torrance
--------------------------------------------
Name: Mark Torrance
Title: Director
/s/ Mark Torrance
------------------------------------------------
Mark Torrance
<PAGE>
ESCROW AGREEMENT, dated as of February 9, 1998 (this "AGREEMENT"),
among Getty Images, Inc., a Delaware corporation ("GETTY IMAGES"), the
stockholders (the "PRINCIPAL STOCKHOLDERS") of PhotoDisc, Inc., a Washington
corporation ("PHOTODISC"), identified on the signature pages of this Agreement,
Mark Torrance, as designated representative of the Principal Stockholders (the
"PRINCIPAL STOCKHOLDERS' REPRESENTATIVE"), and Citibank, N.A., a national
banking association, as escrow agent (the "ESCROW AGENT").
W I T N E S E T H:
WHEREAS, (i) Getty Images, Getty Communications plc, a public limited
company organized under the laws of England and Wales ("GETTY COMMUNICATIONS"),
PhotoDisc and Merger Sub, Inc., a Washington corporation ("MERGER SUB"), have
entered into a Merger Agreement dated September 15, 1997, a copy of which is
attached hereto (but not made a part hereof) as Exhibit A (the "MERGER
AGREEMENT"; capitalized terms not defined herein have the meanings ascribed to
them in the Merger Agreement), and (ii) Getty Images and the Principal
Stockholders have entered into the Stockholders' Transaction Agreement dated as
of September 15, 1997, a copy of which is attached hereto as Exhibit B (the
"STOCKHOLDERS' TRANSACTION AGREEMENT");
WHEREAS, pursuant to the Merger Agreement, Merger Sub will merge (the
"MERGER") with and into PhotoDisc in accordance with the Business Corporation
Act of the State of Washington (the "WBCA") and upon the terms and subject to
the conditions set forth in the Merger Agreement;
WHEREAS, pursuant to the Merger, each issued and outstanding share of
common stock, par value $0.01 per share, of PhotoDisc ("PHOTODISC COMMON
STOCK"), other than shares owned directly or indirectly by Getty or by
PhotoDisc, will be converted into the right to receive a number of shares of
common stock, par value $0.01 per share, of Getty Images ("GETTY IMAGES SHARES")
and an amount of cash as set forth in the Merger Agreement;
WHEREAS, it is contemplated under the Merger Agreement that Getty
Images will deposit or cause to be deposited into escrow at Closing certificates
representing ____________ shares of Getty Images Shares (the "ESCROW SHARES")
issued in the name of the Principal Stockholders to be held and disbursed by the
Escrow Agent in accordance with Section 8 of this Agreement;
WHEREAS, the Escrow Agent is willing to act as the Escrow Agent
hereunder;
<PAGE>
2
WHEREAS, the Escrow Agent will hold the Escrow Shares in a
non-interest bearing account, Account No. 794610 at Citibank, N.A., New York,
New York, ABA No. 021000089 (the "ESCROW ACCOUNT"); and
WHEREAS, pursuant to the Principal Stockholders' Transaction
Agreement, each of the Principal Stockholders has appointed the Principal
Stockholders' Representative to act on such Stockholder's behalf for purposes of
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
SECTION 1. APPOINTMENT AND AGREEMENT OF ESCROW AGENT. Getty
Images and the Principal Stockholders hereby appoint the Escrow Agent to serve
as, and the Escrow Agent hereby agrees to act as, escrow agent upon the terms
and conditions of this Agreement.
SECTION 2. ESTABLISHMENT OF THE ESCROW FUND. (a) Pursuant to
Section 1.12(a)(ii) of the Merger Agreement, Getty Images shall deliver to the
Escrow Agent on the date hereof certificates representing the Escrow Shares
endorsed in blank or accompanied by duly executed stock transfer powers. The
Escrow Agent shall hold the Escrow Shares and/or any cash (the "ESCROW FUND") in
escrow pursuant to this Agreement. The Escrow Shares shall be registered in the
name of the Principal Stockholders. On the date hereof, each Principal
Stockholder shall deliver (or cause his or her nominee to deliver) to the Escrow
Agent stock transfer powers duly executed in blank with respect to the shares of
Getty Images Shares issued to such Principal Stockholder and deposited in the
Escrow Fund.
(b) Each of Getty Images and the Principal Stockholders confirms to
the Escrow Agent and to each other that the Escrow Fund is free and clear of all
Encumbrances except as may be created by this Agreement and the Merger
Agreement.
SECTION 3. PURPOSE OF THE ESCROW FUND. The Escrow Shares will be
deposited with the Escrow Agent and held by the Escrow Agent to secure the
indemnification obligations of the Principal Stockholders contained in Section
2.01 of the Stockholders' Transaction Agreement and Article X of the Merger
Agreement.
SECTION 4. PRINCIPAL STOCKHOLDER PERCENTAGE INTEREST IN ESCROW
FUND. Attached hereto as Schedule A is a schedule listing each Principal
Stockholder and such Principal Stockholder's initial interest in the Escrow Fund
(expressed as a percentage, based on the number of shares of Getty Images Shares
delivered to the Escrow Agent at Closing on behalf of such Principal
Stockholder).
<PAGE>
3
SECTION 5. PRINCIPAL STOCKHOLDER RIGHTS. (a) While any Escrow
Shares are held in escrow in the Escrow Fund, and pending the distribution
thereof to Getty Images or the Principal Stockholders, as the case may be, in
connection with any distributions from the Escrow Fund in accordance with
Section 8 hereof, each Principal Stockholder will have all rights with respect
to the Escrow Shares issued in such Principal Stockholder's name (including,
without limitation, the right to vote such shares as set forth in Section 5(b)
below), except (i) the right of possession thereof or (ii) the right to sell,
assign, pledge, hypothecate or otherwise dispose of such shares or any interest
therein. Principal Stockholders shall have the right to receive any dividends
or other distributions in respect thereof.
(b) Each Principal Stockholder shall have the right to exercise any
voting rights with respect to the Escrow Shares issued in such Principal
Stockholder's name. The Principal Stockholders' Representative (as defined
below) shall direct the Escrow Agent in writing as to the exercise of any voting
rights by the Principal Stockholders, and the Escrow Agent shall comply with any
such directions of the Principal Stockholders' Representative. In the absence
of such directions, the Escrow Agent shall not vote any of the Escrow Shares.
(c) Each Principal Stockholder shall be responsible for and shall pay
and discharge all taxes, assessments and governmental charges imposed on or with
respect to the Escrow Shares issued in such Principal Stockholder's name.
SECTION 6. PRINCIPAL STOCKHOLDERS' REPRESENTATIVE. Each Principal
Stockholder hereby acknowledges and affirms (a) the appointment of Mark Torrance
as the Principal Stockholders' Representative and (b) the authority of the
Principal Stockholders' Representative to perform the actions specified in this
Agreement to be performed by the Principal Stockholders' Representative.
SECTION 7. SHARE VALUE. The parties hereto agree and acknowledge
that, for all purposes under this Agreement, each share of Getty Images Shares
held in escrow pursuant to this Agreement shall be valued at the Average Trading
Price of Getty ADRs at Closing (the "SHARE VALUE"), which Share Value shall be
provided to the Escrow Agent by Getty Communications.
SECTION 8. PAYMENTS FROM THE ESCROW FUND. (a) If, at any time on
or prior to the Expiration Date (as defined below), a Getty Images Party shall
deliver to the Escrow Agent a certificate of such Getty Images Party, executed
by an authorized officer of such Getty Images Party (a "GETTY IMAGES PARTY'S
CERTIFICATE"), which Getty Images Party's Certificate shall:
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4
(i) state that such Getty Images Party has paid or incurred a Loss
(an "INDEMNIFICATION ITEM");
(ii) state the aggregate amount of such Indemnification Item and the
number of Getty Images Shares necessary to satisfy the Loss specified in
the Indemnification Item based on the Share Value; and
(iii) specify in reasonable detail the nature and amount of each
individual Indemnification Item, including whether such Indemnification
Item results from a breach of representation or warranty or covenant of
PhotoDisc or a Principal Stockholder;
the Escrow Agent shall, promptly upon receipt of such Getty Images Party's
Certificate, deliver a copy of such Getty Images Party's Certificate to the
Principal Stockholders' Representative. For purposes of this Agreement, the
"EXPIRATION DATE" shall be March 31, 1999.
(b) If the Principal Stockholders' Representative shall object to any
amount claimed in connection with any Indemnification Item specified in any
Getty Images Party's Certificate, the Principal Stockholders' Representative
shall, within 15 Business Days after delivery by the Escrow Agent to the
Principal Stockholders' Representative of such Getty Images Party's Certificate,
deliver to the Escrow Agent a certificate, executed by the Principal
Stockholders' Representative (a "PRINCIPAL STOCKHOLDERS' CERTIFICATE"),
(i) specifying each such amount to which the Principal Stockholders'
Representative objects and (ii) specifying in reasonable detail the nature and
basis for each such objection. Promptly upon receipt of a Principal
Stockholders' Certificate, the Escrow Agent shall deliver a copy of such
Principal Stockholders' Certificate to the Getty Images Party. If the Escrow
Agent shall not have received a Principal Stockholders' Certificate objecting to
the amount claimed with respect to an Indemnification Item within 15 Business
Days after delivery to the Principal Stockholders' Representative of a Getty
Images Party's Certificate specifying such Indemnification Item, the Principal
Stockholders shall be deemed to have acknowledged the correctness of the amount
claimed on such Getty Images Party's Certificate with respect to such
Indemnification Item, and the Escrow Agent shall thereafter forward to the
transfer agent for the Getty Images Shares (the "TRANSFER AGENT") as soon as
administratively permissible for further transfer to the Getty Images Party, out
of the Escrow Fund (such transfer to be applied pro rata in accordance with each
Stockholder's percentage interest in the Escrow Fund) such number of shares of
Getty Images Shares, as specified in the Getty Images Party's Certificate, equal
to the lesser of (A) the amount claimed in the Getty Images Party's Certificate
with respect to such Indemnification Item divided by the Share Value and (B) the
number of shares of Getty Images Shares then remaining in the Escrow Fund.
<PAGE>
5
(c) If the Escrow Agent receives, within 15 Business Days after
delivery to the Principal Stockholders' Representative of a Getty Images Party's
Certificate, a Principal Stockholders' Certificate objecting to the amount
claimed with respect to any Indemnification Item specified in such Getty Images
Party's Certificate, the amount so objected to shall be held by the Escrow Agent
and shall not be released from the Escrow Fund except in accordance with either
(i) written instructions executed by an authorized officer of each of Getty
Images and the Principal Stockholders' Representative or (ii) written
instructions from the Getty Images Party and the final nonappealable judgment of
a court having jurisdiction over the matters relating to the claim by the Getty
Images Party for indemnification from the Principal Stockholders, after which
time the Escrow Agent shall forward to the Transfer Agent as soon as
administratively practicable for further transfer to the Getty Images Party, out
of the Escrow Fund such number of shares of Getty Images Shares, as specified in
the judgement, or if not so specified, as determined by such Getty Images Party
in accordance with such judgment and communicated to the Escrow Agent in
writing, equal to the lesser of (A) the amount set forth in the written
instructions or in such judgment, as the case may be, divided by the Share Value
and (B) the number of shares of Getty Images Shares then remaining in the Escrow
Fund.
(d) Notwithstanding the limitations set forth in Section 8(a) of this
Agreement, following the Expiration Date, the Getty Images Party shall be
entitled to assert claims against the Escrow Fund under this Section 8 in
respect of all Losses that were included in determining the Reserved Amount (as
defined below).
(e) For purposes of this Agreement, the "Reserved Amount" shall be
equal to the aggregate of the amounts claimed and unpaid in all Getty Images
Party's Certificates delivered to the Escrow Agent prior to the Expiration Date
(which claims shall not have been resolved on or prior to the Expiration Date).
(i) If, on the Expiration Date, the Reserved Amount is less than the
product of the number of Escrow Shares then remaining in the Escrow Fund
and the Share Value (the "ESCROW FUND SHARES VALUE"), on the Expiration
Date, the Escrow Agent shall promptly liquidate all investments (other than
shares of Getty Images Stock) of the Escrow Fund and transfer to each
Principal Stockholder (x) by wire transfer in immediately available funds
in accordance with the written wire transfer instructions provided by the
Principal Stockholders' Representative, the amount in cash, if any, then
remaining in the Escrow Fund and attributable to the Escrow Shares issued
in such Principal Stockholder's name and (y) the number of shares of Getty
Images Shares issued in such Principal Stockholder's name then remaining in
the Escrow Fund less such Principal Stockholder's percentage interest of
the Reserved Amount divided by the Share Value.
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6
(ii) If, on the Expiration Date, the Reserved Amount is greater than
the Escrow Fund Shares Value, on the Expiration Date, the Escrow Agent
shall promptly liquidate all investments (other than shares of Getty Images
Stock) of the Escrow Fund and transfer to each Principal Stockholder, by
wire transfer in immediately available funds in accordance with the written
wire transfer instructions provided by such Principal Stockholder, the
amount in cash, if any, then remaining in the Escrow Fund and attributable
to the Escrow Shares issued in such Principal Stockholder's name less such
Principal Stockholder's percentage interest of the difference between the
Reserved Amount and the Escrow Fund Shares Value.
(f) With respect to indemnifiable Losses resulting from a breach of
representation or warranty or covenant of a Principal Stockholder and not from a
breach of representation or warranty or covenant of PhotoDisc, any Escrow Shares
transferred out of the Escrow Fund pursuant to Sections 8(b) or 8(c) shall be
transferred out of such Principal Stockholder's percentage interest in the
Escrow Fund and shall not be accounted against the interest of other Principal
Stockholders in the Escrow Fund.
(g) Upon the termination of this Agreement in accordance with
Section 11, the Escrow Agent shall promptly liquidate all investments (other
than shares of Getty Images Shares) of the Escrow Fund and transfer to each
Principal Stockholder (i) the shares of Getty Images Shares issued in such
Principal Stockholder's name then remaining in the Escrow Fund and (ii) by wire
transfer in immediately available funds, the amount in cash, if any, then
remaining in the Escrow Fund and attributable to the Escrow Shares issued in
such Principal Stockholder's name in accordance with the written wire transfer
instructions provided by such Principal Stockholder, which shall be deemed to be
standing instructions unless revised instructions are subsequently received by
the Escrow Agent.
SECTION 9. RESERVATION OF GETTY IMAGES' RIGHTS. Subject to
Section 10.05(c) of the Merger Agreement, the rights of Getty Images to receive
distributions from the Escrow Fund in respect to Indemnification Items shall be
without prejudice to any other rights Getty Images may have under the
Stockholders' Transaction Agreement or the Merger Agreement to seek indemnity
for Indemnification Items. Except with respect to claims based on fraud by an
individual Principal Stockholder, or claims for any equitable remedies available
under this Agreement, in no event shall the Investors (as defined in the Merger
Agreement) be liable for the satisfaction of Indemnification Items other than
out of their respective Escrow Shares.
SECTION 10. ALLOCATION OF ESCROW SHARES. (a) With respect to any
Escrow Shares distributed to the Principal Stockholders pursuant to Section 8 of
this Agreement, the Escrow Agent, the Principal Stockholders and Getty Images
will take such action as may be necessary: (i) to cause appropriate
certificates to be issued and delivered to the Principal
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7
Stockholders and (ii) to the extent necessary if not all shares of Getty Images
Shares have been distributed from the Escrow Fund, to cause appropriate
certificates to be issued to the Principal Stockholders and delivered to the
Escrow Agent representing the number of shares of Getty Images Shares remaining
in the Escrow Fund after such distribution to the Principal Stockholders and to
cause appropriate stock transfer powers, duly executed in blank by the Principal
Stockholders, to be delivered to the Escrow Agent with respect to the shares of
Getty Images Shares then remaining in the Escrow Fund.
(b) In the event Escrow Shares are distributed by the Escrow Agent to
Getty Images pursuant to Section 8 of this Agreement and, after such
distribution, shares of Getty Images Shares remain in the Escrow Fund, Getty
Images, the Principal Stockholders and the Escrow Agent will take such action as
may be necessary: (i) to cause appropriate certificates to be issued to the
Principal Stockholders and delivered to the Escrow Agent representing the number
of shares of Getty Images Shares remaining in the Escrow Fund after such
distribution to Getty Images and (ii) to cause appropriate stock transfer
powers, duly executed in blank by the Principal Stockholders, to be delivered to
the Escrow Agent with respect to the shares of Getty Images Shares then
remaining in the Escrow Fund.
(c) Notwithstanding any of the provisions of Section 8 of this
Agreement, in each circumstance in which shares of Getty Images Shares are to be
distributed to Getty Images or the Principal Stockholders pursuant to this
Agreement, the number of shares of Getty Images Shares to be distributed shall
be rounded down to the nearest whole integer.
SECTION 11. MAINTENANCE OF THE ESCROW FUND; TERMINATION OF THE ESCROW
FUND. (a) The Escrow Agent shall continue to maintain the Escrow Fund until
the earlier of (i) the time at which there shall be no funds, shares of Getty
Images Shares or other property in such Escrow Fund and (ii) the termination of
this Agreement.
(b) Notwithstanding any other provision of this Agreement to the
contrary, at any time prior to the termination of the Escrow Fund, the Escrow
Agent shall, if so instructed in a writing signed by Getty Images and the
Principal Stockholders' Representative, pay from the Escrow Fund, as instructed,
to the Getty Images Party and the Principal Stockholders, as directed in such
writing, the number of shares of Getty Images Shares and the amount of cash or
other property so instructed.
SECTION 12. INVESTMENT OF ESCROW FUND. (a) The Escrow Agent shall
invest and reinvest moneys on deposit in the Escrow Fund upon written direction
from Getty Images and the Principal Stockholders' Representative, in any
combination of the following, as specified in such direction: (i) readily
marketable direct obligations of the Government of the United States or any
agency or instrumentality thereof or readily marketable obligations
<PAGE>
8
unconditionally guaranteed by the full faith and credit of the Government of the
United States, (ii) insured certificates of deposit, or time deposits, with any
commercial bank that is a member of the Federal Reserve System and which issues
(or the parent of which issues) commercial paper rated as described in
clause (iii) below, is organized under the laws of the United States or any
State thereof and has combined capital and surplus of at least $1 billion or
(iii) commercial paper in an aggregate amount of no more than $1,000,000 per
issuer outstanding at any time, issued by any corporation organized under the
laws of any State of the United States, rated at least "Prime-1" (or the then
equivalent grade) by Moody's Investors Services, Inc. or "A-1" (or the then
equivalent grade) by Standard & Poors, Inc. Any interest or other income
received on such investment or reinvestment of the Escrow Fund shall become part
of the Escrow Fund.
(b) The Escrow Agent shall report to the United States Internal
Revenue Service the amount of interest or other income received by the Escrow
Agent on such investment or reinvestment of the Escrow Fund as having been
received by each Principal Stockholder in accordance with the amount
attributable to the Escrow Shares issued in such Principal Stockholder's name.
Distributions of such interest or other income to the Principal Stockholders
will not be made unless the Escrow Agent shall have received a fully completed
Form W-9 from each Principal Stockholder on file.
SECTION 13. ASSIGNMENT OF RIGHTS TO THE ESCROW FUND; ASSIGNMENT OF
OBLIGATIONS; SUCCESSORS. This Agreement may not be assigned by operation of Law
or otherwise without the express written consent of the other parties hereto
(which consent may be granted or withheld in the sole discretion of such other
parties). This Agreement shall be binding upon and inure solely to the benefit
of the parties hereto and their permitted assigns.
SECTION 14. ESCROW AGENT. (a) Except as expressly contemplated by
this Agreement or by joint written instructions from Getty Images and the
Principal Stockholders' Representative, the Escrow Agent shall not sell,
transfer or otherwise dispose of in any manner all or any portion of the Escrow
Fund, except pursuant to an order of a court of competent jurisdiction.
(b) The duties and obligations of the Escrow Agent shall be
determined solely by this Agreement, and the Escrow Agent shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Agreement and no implied covenants shall be read into this
Agreement against the Escrow Agent.
(c) In the performance of its duties hereunder, the Escrow Agent
shall be entitled to rely without any investigation into the underlying facts
upon any certificate, statement, opinion, report, notice, request, consent,
order, approval, document, instrument,
<PAGE>
9
signature or other paper document believed by it in good faith to be genuine and
signed by any party hereto or an authorized officer or agent thereof, and shall
not be required to investigate the truth or accuracy of any statement contained
in any such document or instrument. The Escrow Agent may assume that any Person
purporting to give any notice in accordance with the provisions of this
Agreement has been duly authorized to do so.
(d) The Escrow Agent shall not be liable for any error of judgment,
or any action taken hereunder except in the case of its gross negligence, bad
faith or willful misconduct. The Escrow Agent may consult with counsel of its
own choice and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(e) The Escrow Agent shall have no duty as to the collection of
dividends, distributions or income on the Escrow Shares or any investments held
in the Escrow Fund or as to the preservation of any rights pertaining thereto,
and shall not be under any duty to give the Escrow Funds held by it hereunder
any greater degree of care than it gives its own similar property.
(f) As compensation for its services to be rendered under this
Agreement, for each year or any portion thereof, the Escrow Agent shall receive
a fee in the amount specified in Schedule B to this Agreement and shall be
reimbursed upon request for all expenses, disbursements and advances, including
reasonable fees of outside counsel and of all persons not regularly in its
employ, if any, incurred or made by it in connection with the preparation of
this Agreement or any other documents executed in connection herewith and the
carrying out of its duties under this Agreement. All such fees and expenses
shall be the responsibility of Getty Images. The obligations of Getty Images
under this section 14(f) to compensate the Escrow Agent and to pay or reimburse
the Escrow Agent for reasonable expenses, disbursements and advances shall
survive the satisfaction and discharge of this Agreement or the earlier
resignation or removal of the Escrow Agent.
(g) Getty Images shall reimburse and indemnify the Escrow Agent and
its officers, directors, employees and agents for, and hold it harmless against
and reimburse the Escrow Agent for, any loss, injuries, penalties, stamp or
other taxes, actions, suits, liability, damage or expense, including, without
limitation, reasonable attorneys' and consultant's fees, incurred without gross
negligence, bad faith or willful misconduct on the part of the Escrow Agent,
directly or indirectly related to, or arising out of, or in connection with the
acceptance of, or the performance of, its duties and obligations under this
Agreement.
(h) The Escrow Agent may at any time resign by giving 30 Business
Days' prior written notice of resignation to the Principal Stockholders'
Representative and Getty
<PAGE>
10
Images. The Principal Stockholders' Representative and Getty Images may at any
time jointly remove the Escrow Agent by giving 20 Business Days' written notice
signed by each of them to the Escrow Agent. If the Escrow Agent shall resign or
be removed, a successor Escrow Agent, which shall be a bank or trust company
having its principal executive offices in San Francisco or New York and assets
in excess of $500,000,000, and which shall be reasonably acceptable to the
Principal Stockholders' Representative, shall be appointed by Getty Images by
written instrument executed by the Principal Stockholders' Representative and
Getty Images and delivered to the Escrow Agent and to such successor Escrow
Agent and, thereupon, the resignation or removal of the predecessor Escrow Agent
shall become effective and such successor Escrow Agent, without any further act,
deed or conveyance, shall become vested with all right, title and interest to
all cash and property held hereunder of such predecessor Escrow Agent, and such
predecessor Escrow Agent shall, on the written request of the Principal
Stockholders' Representative, Getty Images or the successor Escrow Agent,
execute and deliver to such successor Escrow Agent all the right, title and
interest hereunder in and to the Escrow Fund of such predecessor Escrow Agent
and all other rights hereunder of such predecessor Escrow Agent. If no
successor Escrow Agent shall have been appointed within 20 Business Days of a
notice of resignation by the Escrow Agent, the Escrow Agent's sole
responsibility shall thereafter be to hold the Escrow Fund until the earlier of
(i) its receipt of designation of a successor Escrow Agent in a joint written
instruction by the Principal Stockholders' Representative and Getty Images and
(ii) termination of this Agreement in accordance with its terms. If no
successor Escrow Agent shall have been appointed within 20 Business Days, the
Escrow Agent may apply to a court of competent jurisdiction for such
appointment.
(i) The Escrow Agent shall prepare and deliver to Getty Images and
the Principal Stockholders' Representative at the end of each calendar month
prior to termination of this Agreement an account statement describing all
transactions with respect to the Escrow Fund during such calendar month.
(j) The Escrow Agent does not have any interest in the Escrow Fund
deposited hereunder but is serving as escrow holder only and having only
possession thereof. The Principal Stockholders shall pay or reimburse the
Escrow Agent upon request for any transfer taxes or other taxes relating to the
Escrow Fund incurred in connection herewith and shall indemnify and hold
harmless the Escrow Agent from any amounts that it is obligated to pay in the
way of such taxes. If necessary under applicable law, any payments of income
from the Escrow Fund shall be subject to withholding regulations then in force
with respect to United States taxes. The parties hereto will provide the Escrow
Agent with appropriate W-9 forms for taxpayer identification number
certifications or W-8 forms for non-resident alien certifications. It is
understood that the Escrow Agent shall be responsible for income reporting only
with respect to income earned and paid on investment of funds which are a part
of the
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11
Escrow Fund and is not responsible for any other reporting. This Section 14(j)
and Section 14(g) above shall survive notwithstanding any termination of this
Escrow Agreement or the resignation of the Escrow Agent.
(k) The Escrow Agent makes no representation as to the validity,
value, genuineness or collectability of any security or other document or
instrument held by or delivered to it.
(l) The Escrow Agent shall not be called upon to advise any party as
to the wisdom in selling or retaining, or taking or refraining from taking any
action with respect to any securities or other property deposited hereunder.
(m) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund, or in the event that the Escrow Agent in good faith is in doubt as to what
action it should take hereunder, the Escrow Agent shall be entitled to retain
the Escrow Fund until the Escrow Agent shall have received (i) a final
nonappealable order of a court having jurisdiction directing delivery of the
Escrow Fund or (ii) a written agreement executed by the other parties hereto
directing delivery of the Escrow Fund, in which event the Escrow Agent shall
disburse the Escrow Fund in accordance with such order, judgment or agreement.
Any court order shall be accompanied by a legal opinion of counsel for the
presenting party satisfactory to the Escrow Agent to the effect that said order
or judgment is final and nonappealable. The Escrow Agent shall act on such
court order or judgment and legal opinion without further question.
(n) The Escrow Agent shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with any
direction of Getty Images and the Principal Stockholders given under this
Agreement.
(o) None of the provisions of this Agreement shall require the Escrow
Agent to expend or risk its own funds or otherwise to incur any liability,
financial or otherwise, in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or indemnity satisfactory to it
against such risk or liability is not assured to it.
(p) Whenever in the administration of the provisions of this
Agreement the Escrow Agent shall deem it necessary or desirable that a matter be
provided or established prior to taking or suffering any action to be taken
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of gross negligence, bad faith or
willful misconduct on the part of the Escrow Agent, be deemed to be
<PAGE>
12
conclusively proved and established by a certificate signed by Getty Images and
the Principal Stockholders' Representative and delivered to the Escrow Agent and
such certificate, in the absence of gross negligence, bad faith or willful
misconduct on the part of the Escrow Agent, shall be full warrant to the Escrow
Agent for any action taken, suffered or omitted by it under the provisions of
this Agreement upon the faith thereof.
(q) The Escrow Agent shall have no obligation to invest and reinvest
any cash held in the Escrow Fund in the absence of timely and specific written
investment direction from Getty Images and the Principal Stockholders'
Representative as provided in Section 12. In no event shall the Escrow Agent be
liable for the selection of investments or for investment losses incurred
thereon. The Escrow Agent shall have no liability in respect of losses incurred
as a result of the liquidation of any investment prior to its stated maturity or
the failure of Getty Images and the Principal Stockholders' Representative to
provide timely written investment direction.
(r) The Escrow Agent may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees appointed with due care, and shall not
be responsible for any bad faith, willful misconduct or gross negligence on the
part of any agent, attorney, custodian or nominee so appointed.
(s) Any corporation into which the Escrow Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Escrow Agent shall be
a party, or any corporation succeeding to the business of the Escrow Agent shall
be the successor of the Escrow Agent hereunder without the execution or filing
of any paper with any party hereto or any further act on the part of any of the
parties hereto except where an instrument of transfer or assignment is required
by law to effect such succession, anything herein to the contrary
notwithstanding.
(t) The parties each (for itself and any person or entity claiming
through it) hereby releases, waives, discharges, exculpates and covenants not to
sue the Escrow Agent for any action taken or omitted under this Agreement except
to the extent caused by the Escrow Agent's gross negligence, bad faith or
willful misconduct. Anything in this Agreement to the contrary notwithstanding,
in no event shall the Escrow Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Escrow Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.
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13
SECTION 15. TERMINATION. This Agreement shall terminate on the later
of: (a) the date on which there are no funds, shares of Getty Images Shares or
other property remaining in the Escrow Fund and (b) ten Business Days following
the date after the Expiration Date on which all claims made in Getty Images
Party's Certificates delivered to the Escrow Agent prior to the Expiration Date
shall have been resolved.
SECTION 16. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by facsimile, by telegram, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this
Section 16):
(a) if to Getty Images:
c/o Getty Communications plc
101 Bayham Street
London NW1 0AG England
Telephone: (44171) 544-3456
Facsimile: (44171) 267-6540
Attention: Nick Evans-Lombe
with a copy to each of:
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ England
Telephone: (44171) 600-1000
Facsimile: (44171) 600-5555
Attention: Michael Francies
Shearman & Sterling
555 California Street
San Francisco, California 94104
Telephone: (415) 616-1100
Facsimile: (415) 616-1199
Attention: Christopher D. Dillon
(b) if to the Principal Stockholders' Representative:
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14
c/o PhotoDisc, Inc.
2013 Fourth Avenue
4th Floor
Seattle, Washington 98121
Telephone: (206) 441-9355
Facsimile: (206) 441-9379
Attention: Mark Torrance
with a copy to:
Heller Ehrman White & McAuliffe
6100 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104
Telephone: (206) 447-0900
Telecopy: (206) 447-0849
Attention: Thomas S. Hodge
(c) if to the Escrow Agent, to:
Citibank, N.A.
111 Wall Street, 5th Floor
New York, New York 10043
Telephone: (212) 657-6015
Facsimile: (212) 657-3866
Telex: NYCTA
Attention: Escrow Administration
SECTION 17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to its conflict of law principals. The parties hereto hereby irrevocably submit
to the jurisdiction of any federal court sitting in the City of New York in any
action or proceeding arising out of or relating to this Agreement and
irrevocably waive the defense of an inconvenient forum to the maintenance of any
such action or proceeding.
SECTION 18. AMENDMENTS. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section 19 of this
Agreement.
<PAGE>
15
SECTION 19. WAIVER. Any party to this Agreement may (a) extend the
time for the performance of any obligations or other acts of any other party
hereto or (b) waive compliance with any agreements or conditions contained
herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby. Any waiver of
any term or condition shall not be construed as a waiver of any subsequent
breach or a subsequent waiver of the same term or condition, or as a waiver of
any other term or condition, of this Agreement. The failure of any party to
assert any of its rights hereunder shall not constitute a waiver of any of such
rights.
SECTION 20. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
SECTION 21. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties hereto with respect to the subject matter hereof.
SECTION 22. NO THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns, and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 23. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 24. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
when taken together shall constitute one and the same agreement.
<PAGE>
16
(Intentionally Left Blank)
<PAGE>
17
IN WITNESS WHEREOF, each of Getty Images, the Principal Stockholders,
the Principal Stockholders' Representative and the Escrow Agent has duly
executed, or has caused this Agreement to be duly executed by its duly
authorized representative, as of the date first written above.
GETTY IMAGES, INC.
By: /s/ Mark Getty
_____________________________________
Name: Mark Getty
Title: Director
PDI, L.L.C.
By: /s/ Mark Torrance
_____________________________________
Name: Mark Torrance
Title: Director
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On February 6, 1998, before me personally appeared Mark Torrance,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] /s/ Syndra S. McCormick
________________________________________
_____
Name: Syndra S. McCormick
Notary Public
<PAGE>
18
/s/ Mark Torrance
_____________________________________________
_____
Mark Torrance
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On February 9, 1998, before me personally appeared Mark Torrance,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] /s/ Cherie D. Ware
_____ _____________________________________________
Name: Cherie D. Ware
Notary Public
/s/ Thomas D. Hughes
________________________________________
_____
Thomas D. Hughes
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On February 6, 1998, before me personally appeared Thomas D. Hughes,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL]
<PAGE>
19
/s/ Syndra S. McCormick
________________________________________
_____
Name: Syndra S. McCormick
Notary Public
/s/ Mark B. Callaghan
________________________________________
_____
Mark B. Callaghan
STATE OF MONTANA )
) ss.:
COUNTY OF GALLATIN )
On February 10, 1998, before me personally appeared Mark Callaghan,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] /s/ Mary C. Boscha
________________________________________
_____
Name: Mary C. Boscha
Notary Public
/s/ Chris Birkeland
________________________________________
_____
Chris Birkeland
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On February 9, 1998, before me personally appeared Chris Birkeland,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
<PAGE>
20
WITNESS my hand and official seal
[SEAL] /s/ Syndra S. McCormick
________________________________________
_____
Name: Syndra S. McCormick
Notary Public
/s/ Sally von Bargen
________________________________________
_____
Sally von Bargen
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On February 5, 1998, before me personally appeared Sally von Bargen,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] /s/ Syndra S. McCormick
________________________________________
_____
Name: Syndra S. McCormick
Notary Public
/s/ Colleen Maloney
________________________________________
_____
Colleen Maloney
STATE OF WYOMING )
) ss.:
COUNTY OF TETON )
<PAGE>
21
On February 6, 1998, before me personally appeared Colleen Maloney,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] /s/ Jennifer L. Roundtree
________________________________________
_____
Name: Jennifer L. Roundtree
Notary Public
/s/ Paul Shipman
________________________________________
_____
Paul Shipman
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On February 5, 1998, before me personally appeared Paul Shipman,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] /s/ Syndra S. McCormick
________________________________________
_____
Name: Syndra S. McCormick
Notary Public
J&B VENTURE PARTNERS I
By: /s/ John Kryzanowski
_____________________________________
_____
<PAGE>
22
Name: John Kryzanowski
Title: Partner
STATE OF CALIFORNIA )
) ss.:
COUNTY OF SAN FRANCISCO )
On February 5, 1998, before me personally appeared John Kryzanowski,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] /s/ Ellen Sargent
________________________________________
_____
Name: Ellen Sargent
Notary Public
<PAGE>
23
ADVENT VII L.P.
By: /s/ Michael C. Child
______________________________________
_______
Name: Michael C. Child
Title: Authorized Signatory
STATE OF ________________)
) ss.:
COUNTY OF _______________)
On February ___, 1998, before me personally appeared _______________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL]
________________________________________
_____
Name:
Notary Public
ADVENT ATLANTIC
AND PACIFIC III, L.P.
By: /s/ Michael C. Child
_____________________________________
_____
Name: Michael C. Child
Title: Authorized Signatory
STATE OF ________________)
) ss.:
COUNTY OF _______________)
On February ___, 1998, before me personally appeared _____________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
<PAGE>
24
WITNESS my hand and official seal
[SEAL] ________________________________________
_____
Name:
Notary Public
ADVENT NEW YORK L.P.
By: /s/ Michael C. Child
_____________________________________
_____
Name: Michael C. Child
Title: Authorized Signatory
STATE OF ________________)
) ss.:
COUNTY OF _______________)
On February ___, 1998, before me personally appeared _____________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] ________________________________________
_____
Name:
Notary Public
TA VENTURE INVESTORS
LIMITED PARTNERSHIP
By: /s/ Michael C. Child
_____________________________________
_____
Name: Michael C. Child
Title: Authorized Signatory
STATE OF ________________)
) ss.:
COUNTY OF _______________)
<PAGE>
25
On February ___, 1998, before me personally appeared ______________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL]
________________________________________
_____
Name:
Notary Public
GEOCAPITAL III, L.P.
By: /s/ Richard A. Vines
_____________________________________
_____
Name: Richard A. Vines
Title: General Partner
STATE OF ________________)
) ss.:
COUNTY OF _______________)
On February ___, 1998, before me personally appeared ________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL]
________________________________________
_____
Name:
Notary Public
GEOCAPITAL IV, L.P.
By: /s/ Richard A. Vines
____________________________________
_____
<PAGE>
26
Name: Richard A. Vines
Title: General Partner
STATE OF ________________)
) ss.:
COUNTY OF _______________)
On February ___, 1998, before me personally appeared _______________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL]
________________________________________
_____
Name:
Notary Public
<PAGE>
27
THE BROADVIEW PARTNERS GROUP
By: /s/ Peter J. Mooney
_____________________________________
_____
Name: Peter J. Mooney
Title: Nominee for the Broadview
Partners Group
STATE OF NJ )
) ss.:
COUNTY OF BERGEN )
On February 5, 1998, before me personally appeared Peter J. Mooney,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL] /s/ Margaret Ehrlich
________________________________________
_____
Name: Margaret Ehrlich
Notary Public
/s/ Mark Torrance
________________________________________
_____
Mark Torrance, as Principal
Stockholders' Representative
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On February 9, 1998, before me personally appeared Mark Torrance,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within agreement and
acknowledged to me that he executed the same and that by his signature he
executed this agreement
WITNESS my hand and official seal
[SEAL]
<PAGE>
28
/s/ Cherie D. Ware
________________________________________
_____
Name: Cherie D. Ware
Notary Public
CITIBANK, N.A., as Escrow Agent
By: /s/ Kerry A. Monaghan
_____________________________________
_____
Name: Kerry A. Monaghan
Title: Senior Trust Officer
<PAGE>
JOINT FILING AGREEMENT
The undersigned hereby agree that the Statement on Schedule
13D, dated February 19, 1998, (the "Schedule 13D"), with respect to the
common stock, par value $0.01 per share, of Getty Images, Inc., a Delaware
corporation is, and any amendments thereto executed by each of us shall be,
filed on behalf of each of us pursuant to and in accordance with the
provisions of Rule 13d-1(f) under the Securities and Exchange Act of 1934, as
amended, and that this Agreement shall be included as an Exhibit to the
Schedule 13D and each such amendment. Each of the undersigned agrees to be
responsible for the timely filing of the Schedule 13D and any amendments
thereto, and for the completeness and accuracy of the information concerning
itself contained therein. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the 19th day of February, 1998.
MARK TORRANCE
By /s/ Mark Torrance
----------------------------
Name: Mark Torrance
PDI, L.L.C.
By /s/ Mark Torrance
----------------------------
Name: Mark Torrance
Title: Director
WADE TORRANCE
By /s/ Wade Torrance
----------------------------
Name: Wade Torrance
