<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1 TO
ANNUAL REPORT ON FORM 10-K/A
PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER: 000-23747
------------------------
GETTY IMAGES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 98-0177556
(State or Jurisdiction of (I.R.S. Employer
Incorporation or Identification No.)
Organization)
</TABLE>
<TABLE>
<S> <C>
2013 FOURTH AVENUE 101 BAYHAM STREET
FOURTH FLOOR LONDON, ENGLAND
SEATTLE, WASHINGTON NW1 0AG
98121
(206) 441-9355 (011 44 171)
544-3456
</TABLE>
(Addresses, including zip code, and telephone number,
including area code, of principal executive offices)
------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
------------------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports) and (2) has been subject to such filing
requirements of the past 90 days. Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $343,948,946 as of April 24, 1998, based upon the
closing price of $23 per share of Getty Images common stock on the Nasdaq
National Market reported on such date. Shares of Common Stock held by each
executive officer and director and by each person who beneficially owns more
than 5% of the outstanding Common Stock have been excluded in that such persons
may under certain circumstances be deemed to be affiliates. This determination
of executive officer and affiliate status is not necessarily a conclusive
determination for other purposes.
As of April 24, 1998, the number of shares of Common Stock outstanding was
30,868,211.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Form 10-K/A amends Items 10, 11, 12 and 13 of the Annual Report on Form
10-K for the year ended December 31, 1997, filed by the Registrant on March 30,
1998. In that report, these items were incorporated by reference from the
Company's proxy statement which was expected to be filed by April 30, 1998.
Since the annual proxy statement will not be finalized by April 30, 1998, Items
10, 11, 12 and 13 of Form 10-K are being filed with the Commission via this Form
10-K/A.
1
<PAGE>
GETTY IMAGES, INC.
AMENDMENT NO. 1 TO
ANNUAL REPORT ON FORM 10-K/A
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PART III
Item 10. Directors and Executive Officers of the Registrant............................................. 3
Item 11. Executive Compensation......................................................................... 8
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 16
Item 13. Certain Relationships and Related Transactions................................................. 17
</TABLE>
2
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information about the current directors and
executive officers of Getty Images, Inc., a Delaware corporation ("Getty Images"
or the "Company"):
BUSINESS EXPERIENCE OF DIRECTORS
Set forth below is certain information with respect to each of the directors
of Getty Images:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS SINCE
- ------------------------ --- ----------------------------------------------------------------------- -----------
<S> <C> <C> <C>
MARK H. GETTY 37 Mr. Getty has been Co-Chairman and a director since February 1998 and 1998
(Class III) served as Executive Chairman and a director of Getty Communications
plc from April 1996 to February 1998. From March 1995 to April 1996,
Mr. Getty served as the Joint Chairman of Getty Communications plc.
In 1993, Mr. Getty co-founded Getty Investment Holdings LLC
(predecessor to Getty Investments L.L.C.) and from 1993 to 1995,
together with Mr. Klein, formulated and implemented its strategy.
From 1991 to 1993, Mr. Getty worked at Hambros Bank Limited. Mr.
Getty serves on the board of directors of The Conservation
Corporation, in addition to several other organizations and is
Chairman of Getty Investments L.L.C.
MARK TORRANCE 51 Mr. Torrance has been Co-Chairman and a director since February 1998. 1998
(Class III) Mr. Torrance founded PhotoDisc, Inc. in 1992 and served as its
Chairman of the Board and Chief Executive Officer from 1992 to
February 1998. Prior to founding PhotoDisc, Mr. Torrance served as
President of Muzak, Inc. from 1985 to 1987, and as President of Yesco
from 1972 to 1985, both of which are foreground music distribution
companies.
JONATHAN D. KLEIN 37 Mr. Klein has been Chief Executive Officer and a director since 1998
(Class III) February 1998 and served as Chief Executive Officer and a director of
Getty Communications plc from April 1996 to February 1998. From March
1995 to April 1996, Mr. Klein served as the Joint Chairman of Getty
Communications plc. In 1993, Mr. Klein co-founded Getty Investment
Holdings LLC and, from 1993 to 1995, together with Mr. Getty,
formulated and implemented its strategy. From 1983 to 1993, Mr. Klein
held various positions at Hambros Bank Limited and was a director
from 1989 to 1998. Mr. Klein serves on the board of directors of The
Conservation Corporation and Getty Investments L.L.C., in addition to
several other organizations.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS SINCE
- ------------------------ --- ----------------------------------------------------------------------- -----------
<S> <C> <C> <C>
JAMES N. BAILEY 51 Mr. Bailey has been a director since February 1998 and served as a 1998
(Class I) director of Getty Communications plc from September 1996 to February
1998. Mr. Bailey is a founder of Cambridge Associates, Inc., an
investment consulting firm, and has served as its President since its
formation in May 1973. He also serves on the board of directors of
The Plymouth Rock Company, SAB Company Inc., Direct Response
Corporation, Coolidge Investment Company Inc., South Eastern Capital
Corporation and a number of not-for-profit organizations, including
the New England Medical Center, Inc. and the New England Aquarium.
MANNY FERNANDEZ 51 Mr. Fernandez has been a director since February 1998 and served as a 1998
(Class II) director of Getty Communications plc from February 1997 to February
1998. Mr. Fernandez is Chairman of the Board of Gartner Group, Inc.,
an independent provider of research and analysis on the computer
hardware, software, communications and related information technology
industries. Mr. Fernandez has been Chief Executive Officer of Gartner
Group, Inc. since April 1991. Prior to joining Gartner Group, Inc.,
Mr. Fernandez was President and Chief Executive of Dataquests Inc.,
Gavilan Computer Corporation and Zilog, Incorporated. Mr. Fernandez
is a director of Brunswick Corporation.
ANDREW GARB 55 Mr. Garb has been a director since February 1998, and served as a 1998
(Class I) director of Getty Communications plc from May 1996 to February 1998.
Mr. Garb also has served as a director of Getty Investments L.L.C.
and its predecessor, Getty Investment Holdings LLC, since 1993. Mr.
Garb is a partner in Loeb & Loeb, L.L.P., a U.S. based law firm, and
was the firm's Managing Partner from 1986 to 1992. Getty
Communications plc has retained, and Getty Images may retain during
the current fiscal year, Loeb & Loeb, L.L.P. from time to time.
CHRISTOPHER H. SPORBORG 58 Mr. Sporborg has been a director since February 1998 and served as a 1998
(Class II) director of Getty Communications plc from May 1996 to February 1998.
From its inception in 1993 until April 1996, he served as a Chairman
of Getty Investment Holdings LLC. Mr. Sporborg has held various
positions at Hambros Bank Limited since 1962, becoming Deputy
Chairman of Hambros PLC in 1990. Among other positions, Mr. Sporborg
is Chairman of Hambros Countrywide PLC, Hambros Insurance Services
Group PLC and Atlas Copco PLC; Deputy Chairman of CE Heath PLC; and a
director of Trade Indemnity PLC.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS SINCE
- ------------------------ --- ----------------------------------------------------------------------- -----------
<S> <C> <C> <C>
ANTHONY STONE 65 Mr. Stone has been a director since February 1998 and served as a 1998
(Class I) director of Getty Communications plc from March 1995 to February
1998. Mr. Stone, the founder of Tony Stone Images, served as Chairman
and Managing Director of Tony Stone Images from 1969 to 1992. From
1992 until the acquisition of Tony Stone Images by Getty
Communications plc in March 1995, he served as its Chairman.
</TABLE>
Except as set forth above, none of the directors holds a directorship in any
company with a class of securities registered pursuant to Section 12 of the
Exchange Act, or subject to the requirements of Section 15(d) of the Securities
and Exchange Act, as amended (the "Exchange Act"), or any company registered as
an investment company under the Investment Company Act of 1940, as amended.
The Company's Board of Directors is currently composed of eight members,
divided into three classes, designated Class I, Class II and Class III, each
having a term of three years. Pursuant to the terms of the Company's Amended and
Restated Certificate of Incorporation (the "Certificate of Incorporation"), the
term of Class I directors will terminate on the date of the 1998 Annual Meeting
of the Stockholders. The terms of the Class II and Class III directors will
terminate on the date of the Annual Meeting of the Stockholders in 1999 and
2000, respectively.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held ten regular meetings during 1997. Each member of
the Board of Directors attended at least 50% of the aggregate number of meetings
of the Board of Directors and the committees of which he was a member during the
last year.
The Company has an Audit Committee that consists of Messrs. Bailey, Garb and
Sporborg. The Audit Committee reviews the internal control of the Company and
reviews the services performed and to be performed by the independent auditors
of the Company during the year. The members of the Audit Committee also meet
regularly with the independent auditors to review the scope and results of the
annual audit. The Audit Committee met twice during 1997.
The Company also has a Compensation Committee that consists of Messrs.
Bailey, Garb and Sporborg. The Compensation Committee reviews the compensation
of the officers of the Company, including executive bonus plan allocations, and
was responsible for the administration of the Getty Communications Executive
Share Option Plan and is responsible for the administration for the Getty
Images, Inc. 1998 Stock Incentive Plan. The Compensation Committee met once
during 1997.
BUSINESS EXPERIENCE OF OTHER EXECUTIVE OFFICERS
Set forth below is certain information with respect to other executive
officers of Getty Images:
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- ------------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
LAWRENCE J. GOULD 39 Mr. Gould has been the Chief Financial Officer and Senior Vice President,
Finance since February 1998 and served as the Chief Financial Officer of Getty
Communications plc from March 1995 to February 1996. From 1990 to March 1995,
Mr. Gould served as the Finance Director of Tony Stone Images. From 1981 to
1990, Mr. Gould held several positions at Coopers & Lybrand, in both its audit
and corporate finance departments.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- ------------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
NICHOLAS EVANS-LOMBE 31 Mr. Evans-Lombe has been Senior Vice President, Strategy and Corporate
Development since February 1998 and served as the Director of Strategy and
Corporate Development of Getty Communications plc from 1997 to February 1998.
Prior to joining Getty Communications plc in 1996, Mr. Evans-Lombe held
various positions in the corporate finance division at Hambros Bank Limited
from 1989 to December 1995. At Getty Communications plc and the Company, he
has been involved with strategy and development and the management of the
licensee network.
WILLIAM HESTON 38 Mr. Heston has been Senior Vice President, Head of Getty Images On-Line Group
since February 1998 and served as Senior Vice President, Business Development
of PhotoDisc, Inc. from June 1997 to February 1998. Mr. Heston also served as
a director of PhotoDisc, Inc. from February 1994 to August 1996, and as its
Vice President, Business Development from April 1994 to June 1997. From
January 1993 until April 1994, Mr. Heston was a consultant to PhotoDisc, Inc.
From September 1985 to December 1992, Mr. Heston was a general partner of The
Phoenix Partners, a venture capital firm.
HEATHER B. REDMAN 33 Ms. Redman has been Senior Vice President, General Counsel and Secretary since
February 1998 and served as General Counsel to PhotoDisc, Inc. from June 1996
to February 1998, its Vice President from July 1997 to February 1998 and its
Secretary from August 1996 to February 1998. Prior to joining PhotoDisc, Inc.,
Ms. Redman was associated with the law firm of Heller Ehrman White & McAuliffe
from November 1991 until June 1996.
DON P. SMITH 37 Mr. Smith has been Senior Vice President, Services since February 1998 and
served as Group Services Director of Getty Communications plc from February
1997 to February 1998. From 1995 to January 1997, he was Divisional Managing
Director of Wace Corporate Imaging. From 1988 to 1995, Mr. Smith worked in a
number of production roles at RR Donnelley before being appointed Divisional
Director.
WARWICK WOODHOUSE 46 Mr. Woodhouse has been Senior Vice President, Planning since February 1998 and
served as Group Planning Director of Getty Communications plc from October
1996 to February 1998. Prior to joining Getty Communications plc, Mr.
Woodhouse had gained extensive international experience in organizational
design and the management of change, customer service and strategic
development. From 1996 until October 1996, Mr. Woodhouse was Executive
Director of Strategic Development of Rennies Travel Pty, a travel and
travel-related services company. During 1995, he was an Associate Partner at
PA Consulting Group, a London-based international management consulting firm.
From 1990 to 1995, Mr. Woodhouse held various executive positions at The
Thomas Cook Group Ltd., a travel and travel-related services company.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- ------------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
MICHEL G. BERNARD 61 Mr. Bernard has been Managing Director, Gamma Liaison since 1997, following the
acquisition of Liaison Agency by Getty Communications plc. Mr. Bernard founded
Liaison Agency in New York in 1966. From 1966 to 1997, Mr. Bernard was
President of Liaison Agency, and was responsible for the development of Gamma
Liaison into one of the leading news and reportage agencies in North America.
Prior to 1966, Mr. Bernard was the U.S. correspondent for various French
newspapers and broadcasting companies.
ANDREW DUNCOMB 31 Mr. Duncomb has been President, Tony Stone Images/Hulton Getty Americas since
1997. Mr. Duncomb joined Tony Stone Images in 1990 and became Vice President
of Sales at Tony Stone Images/New York in 1994 before returning to London in
1995 to manage Getty Communications plc's network of licensees throughout
Europe, Australia and Japan. In 1996, he became Managing Director of Getty
Communications plc's newly acquired footage division in North America.
JAN ROSS 46 Ms. Ross has been Chief Executive Officer, Energy Film Library since July 1997.
Ms. Ross co-founded Energy Film Library in 1974, serving as its Chief
Executive Officer since 1993, which was acquired by Getty Communications in
1997.
STEPHEN B. WARSHAW 49 Mr. Warshaw has been Managing Director, Tony Stone Images and Hulton Getty since
October 1997. From 1990 until October 1997, he held various divisional Chief
Executive positions at Reed Elsevier plc. Prior to 1990, Mr. Warshaw held
Divisional Managing Director positions at William Collins plc and Oxford
University Press.
ROBERT J. CHAMBERLAIN 44 Mr. Chamberlain has been Co-President, PhotoDisc, Inc. since February 1998 and
served as its Chief Financial Officer and Senior Vice President, Finance from
May 1997 to February 1998. Prior to joining PhotoDisc, Inc., Mr. Chamberlain
served as Executive Vice President and Chief Financial Officer of Midcom
Communications, Inc., a telecommunications reseller, from January 1996 to May
1997. From January 1992 to December 1995, Mr. Chamberlain was Vice President
of Finance and Operations and Chief Financial Officer for ElseWare
Corporation, a font technology software developer.
SALLY VON BARGEN 49 Ms. von Bargen has been Co-President, PhotoDisc, Inc. since February 1998 and
served as its Senior Vice President of Sales and Service from March 1997 to
February 1998. Ms. von Bargen served as a director of PhotoDisc, Inc. from
1992 to August 1996, and as an advisor and consultant to the Chief Executive
Officer and President from September 1995 to March 1997. She was also a senior
management consultant with Satellite Market Resources from September 1992 to
November 1996 and a Seattle public school teacher from September 1993 to June
1994.
STEPHEN M. POWELL 45 Mr. Powell has been Chief Executive Officer, Allsport Photographic plc since
February 1998. Mr. Powell helped establish Allsport Photographic plc in 1971,
which was acquired by Getty Images in February 1998.
</TABLE>
7
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth certain information regarding compensation
paid or earned for all services rendered to Getty Communications plc ("Getty
Communications"), predecessor to Getty Images, in all capacities during the
fiscal years ended December 31, 1997, 1996 and 1995, respectively, by Getty
Images' chief executive officer and the four other most highly compensated
executive officers of Getty Images whose total annual salary and bonus exceeded
$100,000, based on salary and bonuses earned during the fiscal years ended
December 31, 1997, 1996 and 1995, respectively, (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(2) SALARY(3) BONUS(3)(4) OPTIONS(#)(5) COMPENSATION(6)
- ---------------------------------------------- ----------- ---------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Jonathan D. Klein ............................ 1997 $ 228,677 -- -- $ 16,573(7)
Chief Executive Officer 1996 187,206 $ 20,288 923,985
1995 72,990 -- --
Mark H. Getty ................................ 1997 228,677 -- -- 13,965(8)
Chairman of the Board 1996 187,206 20,288 923,985
1995 72,990 -- --
Lawrence J. Gould ............................ 1997 134,185 -- -- 21,462(9)
Senior Vice President, Finance 1996 128,750 16,737 36,250
1995 89,349 16,037 --
Warwick Woodhouse ............................ 1997 114,177 83,584(10) 30,500 13,180(11)
Senior Vice President, Planning 1996 21,390 -- --
1995 -- -- --
Don P. Smith ................................. 1997 112,674 32,778 30,500 27,707(12)
Senior Vice President, Services 1996 -- -- --
1995 -- -- --
</TABLE>
- ------------------------------
(1) The cash compensation paid to the Named Executive Officers was paid in
pounds sterling and has been translated into U.S. dollars on an annual
basis. The exchange rates in U.S. dollars per pound sterling based on the
average of the noon buying rate in the City of New York for cable transfers
in pounds sterling as certified for customs purposes by the Federal Reserve
Bank of New York in effect on each day for the years ended December 31,
1997, 1996 and 1995 were $1.64, $1.56 and $1.58, respectively.
(2) Getty Communications, predecessor to the Company, became a reporting company
under the Securities Exchange Act of 1934, as amended, on July 2, 1996.
(3) The Salary and Bonus information included herein relates to salaries and
bonuses paid to Messrs. Klein, Getty, Gould, Woodhouse, and Smith as
employees of Getty Communications.
(4) The amounts disclosed in the Bonus column were all awarded under the Getty
Communications plc Executive Bonus Plan.
(5) The Securities Underlying Options information reflects options over common
stock, par value $0.01 per share (the "Common Stock"), of Getty Images.
These options were granted over Getty Communications Class A ordinary shares
pursuant to the Getty Communications plc Executive Share Option Plan.
Pursuant to such share option plan, such options are immediately exercisable
until May 17, 1998. As an alternative to exercising such options, the
optionholders may elect to exchange their options for new options over
Common Stock. The new options will be over one share of Common Stock for
each two Getty Communications Class A ordinary shares under option prior to
the exchange, with the exercise price for each share of Common Stock being
the aggregate of the option price for the two Getty Communications Class A
ordinary shares formerly under option. The new options will be deemed to be
vested with respect to 25% one year from the date of grant and the remainder
will vest ratably on the first of each month for the next three years
therafter. Messrs. Klein and Getty have agreed to exchange their options to
new options over Common Stock.
(6) The amounts disclosed in this column include Company contributions under the
Company's pension plan and other miscellaneous benefits as described in the
footnotes below, for the Company's most recent fiscal year.
8
<PAGE>
(7) Represents $1,850 for permanent health insurance, $12,115 for car allowance,
$2,280 for fuel expenses and $328 for mobile phone expenses.
(8) Represents $11,357 for car allowance, $2,280 for fuel expenses and $328 for
mobile phone expenses.
(9) Represents $19,793 for company pension contributions, $1,172 for permanent
health insurance, $169 for life assurance and $328 for mobile phone
expenses.
(10) The amount reflects bonuses of $42,611 paid in 1997 and $40,973 earned in
1997, but paid in 1998.
(11) Represents $11,756 for company pension contributions, $341 for private
medical insurance, $755 for life assurance and $328 for mobile phone
expenses.
(12) Represents $11,336 for company pension contributions, $328 for mobile phone
expenses, $11,800 for accommodation expenses and $4,243 for relocation
expenses.
9
<PAGE>
1997 STOCK OPTION GRANTS
The following table sets forth certain information concerning options
granted during 1997 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------- ANNUAL RATES OF STOCK
NUMBER OF PRICE APPRECIATION FOR
SECURITIES PERCENT OF TOTAL OPTION TERM(1)
UNDERLYING OPTIONS GRANTED ----------------------
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION ASSUMED ASSUMED
NAME GRANTED(2) FISCAL YEAR PER SHARE DATE RATE 5% RATE 10%
- --------------------------------- ----------- ----------------- --------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Warwick Woodhouse................ 15,250 7% $ 13.62 5/15/04 $ 130,625 $ 331,028
15,250 7 21.94 5/15/04 3,745 204,148
Don P. Smith..................... 15,250 7 13.62 5/15/04 130,625 331,028
15,250 7 21.94 5/15/04 3,745 204,148
</TABLE>
- ------------------------
(1) The potential gain is calculated from the closing price of Common Stock on
the dates of grant to executive officers. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future performance
of the Common Stock and overall market conditions.
(2) The Number of Securities Underlying Options Granted information reflects
options over Common Stock. These options were granted over Getty
Communications Class A ordinary shares pursuant to the Getty Communications
plc Executive Share Option Plan. Pursuant to such share option plan, such
options are immediately exercisable until May 17, 1998. As an alternative to
exercising such options, the optionholders may elect to exchange their
options for new options over Common Stock. The new options will be over one
share of Common Stock for each two Getty Communications Class A ordinary
shares under option prior to the exchange, with the exercise price for each
share of Common Stock being the aggregate of the option price for the two
Getty Communications Class A ordinary shares formerly under option. The new
options will be deemed to be vested with respect to 25% one year from the
date of grant and the remainder will vest ratably on the first of each month
for the next three years thereafter. The new options will expire 10 years
after the date of grant, which will be May 15, 2007.
1996 STOCK OPTION GRANTS
The following table sets forth certain information concerning options
granted during 1996 to the Named Executive Officers:
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
--------------------------------------------- AT ASSUMED ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR OPTION TERM(1)
UNDERLYING GRANTED TO --------------------------
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ASSUMED RATE ASSUMED RATE
NAME GRANTED(2) FISCAL YEAR PER SHARE DATE 5% 10%
- ----------------------------- ----------- --------------- --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan D. Klein............ 615,990 29.7% $ 10.00 7/2/07 $ 3,873,928 $ 9,817,294
307,995 14.9 16.10 7/2/07 58,195 3,029,878
Mark H. Getty................ 615,990 29.7 10.00 7/2/03 3,873,928 9,817,294
307,995 14.9 16.10 7/2/03 58,195 3,029,878
Lawrence J. Gould............ 18,125 * 10.00 7/2/03 113,987 288,866
18,125 * 16.10 7/2/03 3,425 178,303
</TABLE>
- ------------------------
* Less than 1%
(1) The potential gain is calculated from the closing price of Common Stock on
the dates of grant to executive officers. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future performance
of the Common Stock and overall market conditions.
10
<PAGE>
(2) The Number of Securities Underlying Options Granted information reflects
options over Common Stock. These options were granted over Getty
Communications Class A ordinary shares pursuant to the Getty Communications
plc Executive Share Option Plan. Pursuant to such share option plan, such
options are immediately exercisable until May 17, 1998. As an alternative to
exercising such options, the optionholders may elect to exchange their
options for new options over Common Stock. The new options will be over one
share of Common Stock for each two Getty Communications Class A ordinary
shares under option prior to the exchange, with the exercise price for each
share of Common Stock being the aggregate of the option price for the two
Getty Communications Class A ordinary shares formerly under option. The new
options will be deemed to be vested with respect to 25% one year from the
date of grant and the remainder will vest ratably on the first of each month
for the next three years thereafter. The new options will expire 10 years
after the date of grant, which will be July 2, 2006.
AGGREGATE OPTION EXERCISES IN 1997 AND VALUES AT YEAR-END 1997
The following table sets forth information regarding the number and
aggregate dollar value of unexercised options held as of December 31, 1997:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(2)
-------------------------- --------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jonathan D. Klein......................................... 61,599 862,386 $ (75,459) $ 2,625,657
Mark H. Getty............................................. 61,599 862,386 (75,459) 2,625,657
Lawrence J. Gould......................................... 3,625 32,625 (4,441) 70,597
Warwick Woodhouse......................................... -- 30,500 -- (88,603)
Don P. Smith.............................................. -- 30,500 -- (88,603)
</TABLE>
- ------------------------
(1) None of the Named Executive Officers exercised options to purchase stock of
Getty Communications in 1997.
(2) Values are calculated for options that are "in-the-money" by subtracting the
exercise price per share of the option from the per share closing price of
Getty Communications on December 31, 1997, which was $14.875.
AGGREGATE OPTION EXERCISES IN 1996 AND VALUES AT YEAR-END 1996
The following table sets forth information regarding the number and
aggregate dollar value of unexercised options held as of December 31, 1996:
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996(2)
------------------------------ ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Jonathan D. Klein......................................... -- 923,985 $ -- $ 2,741,156
Mark H. Getty............................................. -- 923,985 -- 2,741,156
Lawrence J. Gould......................................... -- 36,250 -- 70,688
Warwick Woodhouse......................................... -- -- -- --
Don P. Smith.............................................. -- -- -- --
</TABLE>
- ------------------------------
(1) None of the Named Executive Officers exercised options to purchase stock of
Getty Communications in 1996.
(2) Values are calculated for options that are "in-the-money" by subtracting the
exercise price per share of the option from the per share closing price of
Getty Communications on December 31, 1996, which was $15.00.
11
<PAGE>
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
AGREEMENTS WITH JONATHAN D. KLEIN. As of February 9, 1998 (the "Effective
Date"), both Getty Images and Getty Communications entered into employment
agreements with Jonathan D. Klein, pursuant to which Mr. Klein has agreed to
serve as the Chief Executive Officer of the Getty Images Group. Mr. Klein's
agreement with Getty Images Group related to his services to be performed for
the Getty Images Group outside of the United Kingdom and his agreement with
Getty Communications relates to his services to be performed for the Getty
Images Group in the United Kingdom. Each of the employment agreements with Mr.
Klein is for a term commencing on February 9, 1998 and continuing until either
party provides the other with at least twelve months' notice of its intent not
to renew the agreement, provided that neither party may provide the other with a
notice of termination to terminate either agreement prior to the third
anniversary of the effective date of the agreements.
During the term of the agreements, Mr. Klein will receive the aggregate
amount of $325,000 as base salary (as may be increased from time to time) and
will participate in a bonus plan pursuant to which he will have the opportunity
to earn up to 60% of his base salary as a bonus in each calendar year during the
term. Mr. Klein's employment agreement also provides him with certain other
benefits and perquisites, such as a supplemental pension program, a company car
and reimbursement of expenses associated therewith, and certain other welfare
and fringe benefits.
In addition, pursuant to his employment agreements, Mr. Klein was granted an
option to purchase 75,000 shares of Common Stock at an exercise price equal to
the fair market value of such stock on the Effective Date, which was $20.91 per
share, which option will vest in full on February 1, 1999, and an additional
option to purchase 500,000 shares of Common Stock, at an exercise price equal to
the fair market value of Common Stock on the Effective Date, which option will
vest as to 25% on February 1, 1999 and the remainder will vest ratably on the
first day of each month thereafter over the following three years.
In the event that Mr. Klein is terminated without "cause" or "disability" or
resigns for "good reason" (as each such term is defined in his employment
agreement), he will receive (in addition to amounts accrued and unpaid) a lump
sum payment in an amount equal to his base salary, maximum bonus and
supplemental pension contributions for the remainder of the term of the
agreement. In the event of a change in control of Getty Images (as defined in
the Getty Images, Inc. 1998 Stock Incentive Plan (the "Stock Incentive Plan")),
Mr. Klein will have the right to resign his employment and receive a lump sum
payment in an amount equal to his base salary, maximum bonus and supplemental
pension contributions for the remainder of the term of the agreement. In either
of these circumstances, Mr. Klein and his eligible dependents will continue to
participate in the Company's medical benefit plans for the longer of two years
following the termination or resignation, as the case may be, and the remainder
of the term. In the event that any of the payments to be made to Mr. Klein would
constitute "excess parachute payments" within the meaning of Section 280G of the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), the aggregate
amount of his parachute payments will be reduced to $1.00 less than three times
Mr. Klein's "base amount" (as defined under Section 280G of the Code).
AGREEMENT WITH MARK H. GETTY. As of the Effective Date, Getty Communications
entered into an employment agreement with Mark H. Getty, pursuant to which Mr.
Getty has agreed to serve as the Co-Chairman of the Board of Directors of Getty
Images for a term commencing on February 9, 1998 and continuing until either
party provides the other with at least twelve month's notice of its intent not
to renew the agreement, provided that neither party may provide the other with a
notice of termination to terminate the agreement prior to the third anniversary
of the effective date of the agreement.
During the term of the agreement, Mr. Getty will receive a base salary of
$275,000 (as may be increased from time to time) and will participate in a bonus
plan pursuant to which he will have the opportunity to earn up to 50% of his
base salary as a bonus in each calendar year during the term. Mr. Getty's
employment agreement also provides him with certain other benefits and
perquisites, such as a
12
<PAGE>
supplemental pension program, a company car and reimbursement of expenses
associated therewith, and certain other welfare and fringe benefits.
In addition, pursuant to his employment agreement, Mr. Getty was granted an
option to purchase 75,000 shares of Common Stock at an exercise price equal to
the fair market value of such stock on the Effective Date, which was $20.91 per
share, which option will vest in full on February 1, 1999, and an additional
option to purchase 500,000 shares of Common Stock, at an exercise price equal to
the fair market value of Common Stock on the Effective Date, which option will
vest as to 25% on February 1, 1999 and the remainder will vest ratably on the
first day of each month thereafter over the following three years.
In the event that Mr. Getty is terminated without "cause" or "disability" or
resigns for "good reason" (as each such term is defined in his employment
agreement), he will receive (in addition to amounts accrued and unpaid) a lump
sum payment in an amount equal to his base salary, maximum bonus and
supplemental pension contributions for the remainder of the term of the
agreement. In the event of a change in control of Getty Images (as defined in
the Stock Incentive Plan), Mr. Getty will have the right to resign his
employment and receive a lump sum payment in an amount equal to his base salary,
maximum bonus and supplemental pension contributions for the remainder of the
term of the agreement. In either of these circumstances, Mr. Getty and his
eligible dependents will continue to participate in the Company's medical
benefit plans for the longer of two years following the termination or
resignation, as the case may be, and the remainder of the term. In the event
that any of the payments to be made to Mr. Getty would constitute "excess
parachute payments" within the meaning of Section 280G of the Code, the
aggregate amount of his parachute payments will be reduced to $1.00 less than
three times Mr. Getty's "base amount" (as defined under Section 280G of the
Code).
COMPENSATION OF DIRECTORS
Members of the Board of Directors did not receive any cash compensation in
connection with their service on the Board or any committee thereof during 1997,
1996 or 1995. Directors are reimbursed for their reasonable out-of-pocket
expenses incurred in connection with attendance at meetings of the Board of
Directors or any committee thereof. During 1997, Mr. Fernandez received an
option to purchase 10,000 shares of the Common Stock at an exercise price equal
to the market price of the Common Stock on the date of the grant, and another
option with respect to 10,000 shares at a higher premium exercise price,
pursuant to the Getty Communications plc Executive Share Option Plan.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR 1997 AND
1996
COMPENSATION COMMITTEE GOVERNANCE. The Compensation Committee of Getty
Communications plc was composed, in 1997, of the five directors listed below,
and in 1996, of Messrs. Sporborg, Garb, Getty and Klein. Messrs. Getty and Klein
absented themselves from Compensation Committee meetings when their own
compensation was being discussed, and in the event of a tie vote, the chairman
of the Committee had the deciding vote. The Compensation Committee is
responsible for the general compensation policies of the Company, and in
particular is responsible for setting and administering the policies that govern
executive compensation and administering the Company's equity-based employee
compensation benefit plans. The Compensation Committee evaluates the performance
of management and determines the compensation levels for all executive officers.
After the consummation of the transactions (the "Transactions") contemplated by
the Merger Agreement dated as of September 15, 1997 among Getty Images, Getty
Communications, PhotoDisc, Inc. ("PhotoDisc"), and Print Merger, Inc., a wholly
owned subsidiary of Getty Images, Getty Images established a Compensation
Committee with Messrs. Bailey, Garb and Sporborg as its initial members.
COMPENSATION POLICIES. The primary objectives of the Company's compensation
policies and programs are (i) to attract and retain key executives, (ii) to
reward performance by the executives which
13
<PAGE>
benefits the stockholders of Getty Images (the "Stockholders") and (iii) to
align the financial interests of the company's executive officers directly with
those of the Stockholders. The primary elements of executive officer
compensation are base salary, annual cash bonuses, and stock option grants. The
salary is based on factors such as related experience, level of responsibility,
and comparison to similar positions in comparable companies. The annual cash
bonuses are based on the Company's performance measured against attainment of
financial and other objectives, and on individual performance. Stock option
grants are intended to align the executive officer's interest with those of the
Stockholders, and are determined based on the executive officer's level of
responsibility, number of options or shares previously granted, and
contributions toward achieving the goals and objectives of the Company.
Additional information on each of these compensation elements follows.
- SALARIES. Base salaries for the executive officers are based on
performance of the individual, increases in responsibility and salaries
for similar positions. Comparisons are made to the total compensation
packages of companies in the media and other related industries that are
comparable in size and structure. Base salaries are generally in the range
of median base salaries paid by such comparable companies to employees
having duties and responsibilities similar to those of the executive
officers.
- EXECUTIVE BONUS PLAN. Annual bonuses are awarded on a discretionary basis
and reflect both Company and individual performance. The Compensation
Committee considers numerous qualitative and quantitative factors in
determining these bonus awards, including individual performance,
corporate and segment revenue and profit goals, performance and
compensation levels of comparable companies.
- OPTION GRANTS. Stock options are an integral part of each executive
officer's compensation and are utilized by the Company to provide an
incentive to the officer, and to align the interests of the executive with
those of the Stockholders by providing him with a financial interest in
the Company. Options granted by the Compensation Committee under the Getty
Communications plc Executive Share Option Plan (the "Share Option Plan")
are made at fair market value on the date of the grant, vest over a period
of five years, at a rate of 20% per year, and expire after seven years.
Such options are not exercisable for three years after the date of the
grant. In addition, executive officers were granted premium options at an
exercise price based on an assumed 10% return on investment compounded
over five years. The premium options vest over a period of five years, at
a rate of 20% per year, and expire after seven years. In making grants,
the Compensation Committee takes into account the executive officer's
contributions to the Company, scope of responsibilities, salary and the
number of options previously granted. The executive officers were granted
a significant number of options in 1996, as the Compensation Committee
sought to implement its overall strategy of aligning the financial
interests of the executive officers with those of the Stockholders. The
options granted in 1997 and 1996 were granted pursuant to the Share Option
Plan. Upon the consummation of the Transactions and pursuant to the Share
Option Plan, such options became immediately exercisable until May 17,
1998. As an alternative to exercising such options, the optionholders may
elect to exchange their options over Getty Communications Class A ordinary
shares to new options over Common Stock, with the exercise price for each
share of Common Stock being the aggregate of the option price for the two
Getty Communications Class A ordinary shares formerly under option. The
new options will be deemed to be vested with respect to 25% one year from
the date of grant and the remainder will vest ratably on the first of each
month for the next three years thereafter. Any future options granted by
Getty Images will be granted under, and governed by, the Getty Images,
Inc. 1998 Stock Incentive Plan, which was adopted by the Company in
connection with the Transactions.
14
<PAGE>
SECTION 162(m). As a foreign corporation, Section 162(m) of the Code was
not applicable to Getty Communications in 1997 and 1996. Furthermore, even if
the Company was a U.S. taxpayer, it would not have had any compensation paid
disallowed under Section 162(m) of the Code
COMPENSATION COMMITTEE
Christopher H. Sporborg (Chairman)
James N. Bailey
Andrew S. Garb
Mark H. Getty
Jonathan D. Klein
PERFORMANCE GRAPH
Set forth below is a graph comparing cumulative total stockholder returns on
the Common Stock, the Nasdaq Stock Market Index of U.S. Companies (the "Nasdaq
Market Index") and the S & P Photography/ Imaging Index (the "Image Index"). The
graph assumes the $100 was invested on July 2, 1996 (the date of Getty
Communications' initial public offering) in Getty Images (using Getty
Communications initial offering price of $10.00 per share), and no payment or
reinvestment of dividends, and is rounded to the nearest whole dollar. The stock
price performance on the following graph is not necessarily indicative of future
stock price performance.
[CHART]
<TABLE>
<CAPTION>
MEASUREMENT POINT GETTY IMAGES NASDAQ MARKET INDEX IMAGE INDEX
- ------------------ --------------- ----------------------- -------------
<S> <C> <C> <C>
7/2/96 $ 100 $ 100 $ 100
12/31/96 150 108 104
12/31/97 149 132 80
4/24/98 230 157 91
</TABLE>
15
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 24, 1998, with
respect to directors, certain employees of the Company and each person who is
known by the Company to own beneficially more than 5% of the shares of its
Common Stock, and with respect to shares of Common Stock owned beneficially by
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF COMMON SHARES AS OF
NAMES APRIL 24, 1998(1) PERCENT OF CLASS
- -------------------------------------------------------------- -------------------------------- -----------------
<S> <C> <C>
Mark H. Getty................................................. 1,065,345(2) 3.4%
Mark Torrance................................................. 5,328,179(3) 17.3
Jonathan D. Klein............................................. 1,065,795(4) 3.4
James N. Bailey............................................... 0 *
Manny Fernandez............................................... 4,792(5) *
Andrew Garb................................................... 10,000 *
Christopher H. Sporborg....................................... 800 *
Anthony Stone................................................. 130,019 *
Lawrence J. Gould............................................. 155,035(6) *
Don P. Smith.................................................. 0 *
Warwick Woodhouse............................................. 15,450(7) *
Getty Investments L.L.C....................................... 8,040,690(8) 26.0
PDI, L.L.C.................................................... 5,294,581(9) 17.2
Wade Torrance................................................. 2,223,224(10) 7.2
All Executive Officers and Directors as a group (21
persons)..................................................... 9,178,898(11) 28.6
</TABLE>
- ------------------------------
* Less than 1%
(1) Beneficial ownership represents sole voting and investment power and is
defined by the Securities and Exchange Commission (the "Commission") to
mean generally the power to vote or dispose of securities, regardless of
economic interest. Getty Images had 30,868,211 shares of Common Stock
outstanding as of April 24, 1998. To the Company's knowledge, the only
stockholders who beneficially owned more than 5% of the outstanding common
shares as of April 24, 1998, were Mr. Torrance, Ms. Torrance, PDI, L.L.C.
and Getty Investments L.L.C.
(2) Includes 442,743 shares of Common Stock issuable upon exercise of
outstanding options and 622,602 shares held by the October 1993 Trust, a
trust established by Mr. Mark Getty of which he and his immediate family
are the beneficiaries. The Common Stock held by the October 1993 Trust are
subject to the Getty Parties Stockholders' Agreement and are voted as
directed by Getty Investments L.L.C. Mr. Getty's business address is 101
Bayham Street, London NWI OAG, England.
(3) Mr. Torrance has sole voting power with respect to the shares held by PDI,
L.L.C, of which he is Manager, but disclaims beneficial ownership of
2,223,224 shares of Common Stock in which he has no pecuniary interest. See
Note (8) below. Mr. Torrance's business address is 2013 Fourth Avenue,
Fourth Floor, Seattle, WA 98122.
(4) Includes 442,743 shares of Common Stock issuable upon exercise of
outstanding options and 622,602 shares held by Crediton Limited, a company
of which the sole beneficiary is Mr. Jonathan Klein. The Common Stock held
by Crediton Limited are subject to the Getty Parties Stockholders'
Agreement and are voted as directed by Getty Investments L.L.C. Mr. Klein's
business address is 101 Bayham Street, NW1 OAG, England.
(5) Represents 4,792 shares of Common Stock issuable upon exercise of
outstanding options.
(6) Includes 18,125 shares of Common Stock issuable upon exercise of
outstanding options.
(7) Represents 15,250 shares of Common Stock issuable upon exercise of
outstanding options.
(8) The address of Getty Investments L.L.C. is 1325 Airmotive Way, Suite 262,
Reno, Nevada 89502.
(9) PDI, L.L.C. is a Washington limited liability company formed on October 31,
1996 with five members, Mr. Mark Torrance, Ms. Wade Torrance and three
trusts established for the benefit of their children. Mr. Mark Torrance,
Co-Chairman of Getty Images, is manager of PDI, L.L.C. and has sole voting
power with respect to the shares held by PDI, L.L.C. and disclaims
beneficial ownership of 2,223,224 shares of Common Stock held by PDI,
L.L.C. in which he has no pecuniary interest. The address for the PDI,
L.L.C. is 2013 Fourth Avenue, Seattle, Washington 98121.
(10) Represents 2,223,224 shares of Common Stock held by PDI, L.L.C. Ms.
Torrance's address is The Highland, Seattle, Washington 98117.
(11) Includes 1,220,610 shares issuable upon exercise of outstanding options to
purchase Common Stock.
16
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following includes a summary of the material terms of certain agreements
to which Getty Images is a party, copies of which have been filed as exhibits to
this Form 10-K/A or to the Company's previous filings with the Commission. The
following does not purport to be complete and is qualified in its entirety by
reference to the copies of the agreements filed with the Commission.
EMPLOYMENT AGREEMENT WITH MARK TORRANCE
As of the Effective Date, Getty Images entered into an employment agreement
with Mark Torrance pursuant to which Mr. Torrance has agreed to serve as the
Co-Chairman of the Board of Directors of Getty Images for a term commencing on
February 9, 1998 and continuing until either party provides the other with at
least twelve months' notice of its intent not to renew the agreement, provided
that neither party may provide the other with a notice of termination to
terminate the agreement prior to the third anniversary of the effective date of
the agreement.
During the term of the agreement, Mr. Torrance will receive a base salary of
$275,000 (as may be increased from time to time) and will participate in a bonus
plan pursuant to which he will have the opportunity to earn up to 50% of his
base salary as a bonus in each calendar year during the term. Mr. Torrance's
employment agreement also provides him with certain other benefits and
prerequisits, such as a supplemental pension program, a company car and
reimbursement of expenses associated therewith, and certain other welfare and
fringe benefits.
In addition, pursuant to his employment agreement, Mr. Torrance was granted
an option to purchase 50,000 shares of Common Stock at an exercise price equal
to the fair market value of such stock on the Effective Date, which was $20.91
per share, which option will vest in full on February 1, 1999, and an additional
option to purchase 500,000 shares of Common Stock, at an exercise price equal to
the fair market value of Common Stock on the Effective Date, which option will
vest as to 25% on February 1, 1999 and the remainder will vest ratably on the
first day of each month thereafter over the following three years.
In the event that Mr. Torrance is terminated without "cause" or "disability"
or resigns for "good reason" (as each such term is defined in his employment
agreement), he will receive (in addition to amounts accrued and unpaid) a lump
sum payment in an amount equal to his base salary, maximum bonus and
supplemental pension contributions for the remainder of the term of the
agreement. In the event of a change in control of Getty Images (as defined in
the Getty Images, Inc. 1998 Stock Incentive Plan), Mr. Torrance will have the
right to resign his employment and receive a lump sum payment in an amount equal
to his base salary, maximum bonus and supplemental pension contributions for the
remainder of the term of the agreement. In either of these circumstances, Mr.
Torrance and his eligible dependents will continue to participate in the
Company's medical benefit plans for the longer of two years following the
termination or resignation, as the case may be, and the remainder of the term.
In the event that any of the payments to be made to Mr. Torrance would
constitute "excess parachute payments" within the meaning of Section 280G of the
Code, the aggregate amount of his parachute payments will be reduced to $1.00
less than three times Mr. Torrance's "base amount" (as defined under Section
280G of the Code).
OTHER EMPLOYMENT AGREEMENTS
As of the Effective Date, Getty Communications (and in the case of Jonathan
D. Klein for his services performed outside the U.K., Getty Images) entered into
employment agreements with Jonathan D. Klein and Mark H. Getty. See "Item 11.
Executive Compensation--Employment Agreements with Named Executive Officers".
As of the Effective Date, Getty Images or PhotoDisc entered into employment
agreements with certain executive officers of PhotoDisc, including Mr. William
Heston, Ms. Heather B. Redman,
17
<PAGE>
Mr. Robert J. Chamberlin, and Ms. Sally von Bargen to secure their services
following the completion of the Transactions.
THE STOCKHOLDERS' AGREEMENT
The Company and (i) the Getty Group (as defined below) and (ii) the Torrance
Group (as defined below) have entered into a Stockholders' Agreement dated as of
February 9, 1998 (the "Stockholders' Agreement"), which, among other things,
provides for representation on the Company's Board of Directors and limits the
rights of the parties thereto to transfer their respective shares of Common
Stock. Certain provisions of the Stockholders' Agreement are described below.
The "Getty Group" refers collectively to Getty Investments L.L.C. ("Getty
Investments"), Mr. Mark H. Getty, Mr. Jonathan D. Klein, Crediton Limited (a
company of which the sole beneficiary is Mr. Klein) and the October 1993 Trust
(a trust established by Mr. Getty). The "Torrance Group" refers collectively to
PDI, L.L.C., Mr. Mark Torrance, Ms. Wade Torrance and certain of their family
members. The Getty Group, together with the Torrance Group are collectively the
"Significant Stockholders".
Pursuant to the Stockholders' Agreement, no Significant Stockholder may
sell, encumber or otherwise transfer such Significant Stockholder's shares of
Common Stock except (i) to a Permitted Transferee (as defined below); (ii)
pursuant to the terms of the Stockholders' Agreements; (iii) subject to the
arrangements within their respective "Group", pursuant to a registered public
offering of shares of Common Stock in which no person or "Group" will purchase
more than 5% of the then outstanding shares of Common Stock; or (iv) subject to
any arrangements within their respective "Group", sales within the Rule 144
volume limitation, or in a cashless exercise of options. A "Permitted
Transferee" is defined generally as (i) Getty Images or its subsidiaries; (ii)
in the case of any Significant Stockholder who is a natural person, a person to
whom shares of Common Stock are transferred from such Significant Stockholder by
gift, will or the laws of descent and distribution; (iii) any other member of
the Getty Group or the Torrance Group, as the case may be; (iv) any affiliate of
any Significant Stockholder; or (v) with respect to the taking of an
encumbrance, any commercial bank or other financial institution that lends funds
to a Significant Stockholder on condition of taking such encumbrance.
If any Significant Stockholder (a "Prospective Seller") receives from or
negotiates with a person, other than a Permitted Transferee or another
Significant Stockholder (a "Stockholders' Agreement Third Party"), a bona fide
offer to purchase any or all of such Prospective Seller's shares of Common Stock
(the "Offered Stock") and such Prospective Seller intends to sell the Offered
Stock to such Stockholder's Agreement Third Party, the Prospective Seller must
provide written notice (the "Offer Notice") of such offer to Getty Images and
the other Significant Stockholders constituting the Significant Stockholders'
"Group" in which the Prospective Seller does not belong. The Offer Notice will
constitute an offer by such Prospective Seller to sell to the recipients of such
Offer Notice all (but not less than all) of the Offered Stock at the price per
share of Common Stock at which the sale to the Stockholders' Agreement Third
Party is proposed to be made in cash and will be irrevocable for ten days after
receipt of such Offer Notice. The Prospective Seller has the right to reject any
or all of the acceptances of the offer to sell the Offered Stock and sell all,
but not less that all, the Offered Stock to the Stockholders' Agreement Third
Party if (i) the Prospective Seller has not received acceptances as to all the
Offered Stock prior to the expiration of the ten-day period following receipt of
the Offer Notice or (ii) an accepting party fails to consummate the purchase of
the Offered Stock and neither Getty Images nor the other Significant
Stockholders who received the Offer Notice are prepared to purchase such Offered
Stock within five business days of receiving notice of such failed purchase.
Each of the Torrance Group and Getty Group will have the right, subject to
termination conditions, to nominate one director. For so long as the Getty Group
has the right to nominate one director of Getty Images, it shall also have the
right to appoint from among the directors of Getty Images, the Chairman of Getty
Images, provided however, that for so long as either Mark Torrance or Mark Getty
are Co-Chairmen of the Board, such rights shall not be in effect.
18
<PAGE>
The obligations and rights of the Significant Stockholders relating to the
rights of first refusal and right to nominate one director will terminate when
the Getty Group or the Torrance Group, as the case may be, and any of such
Group's Permitted Transferees collectively beneficially own fewer than the
greater of 3,000,000 shares of Common Stock and such number of shares of Common
Stock as is equal to two percent or less of the then outstanding shares of
Common Stock.
THE REGISTRATION RIGHTS AGREEMENTS
In connection with the consummation of the Transactions, Getty Images
entered into Registration Rights Agreements, one with PDI, L.L.C. and Mr. Mark
Torrance (the "PDI Shareholders") and a second with Getty Investments. Pursuant
to the terms of the Registration Rights Agreement between Getty Images and the
PDI Shareholders (the "PDI Registration Rights Agreement"), the PDI
Shareholders, subject to the terms and conditions set forth in the PDI
Registrations Rights Agreement, may require Getty Images to file a registration
statement with respect to all or a portion of the PDI Shareholders' shares of
Common Stock (a "PDI Demand Right"), subject to certain limitations that may be
imposed by the managing underwriter. The PDI Shareholders have a total of five
Demand Rights, provided that the PDI Shareholders may not require the Company to
file a registration statement on a "long form" on more than three occasions. In
addition to their PDI Demand Rights, the PDI Shareholders will have the right to
have any or all of their shares of Common Stock included in any registration by
Getty Images with respect to an offering of Common Stock (a "PDI Piggy-Back
Right"), subject to certain limitations that may be imposed by the managing
underwriter. Both the PDI Demand Rights and PDI Piggy-Back Rights will terminate
on the earlier of (i) the date that all of the PDI Shareholders' shares of the
Common Stock can be sold within a three-month period under the volume limitation
of Rule 144(e) of the Securities Act or (ii) on the 15th anniversary of the date
of the PDI Registration Rights Agreement.
Pursuant to the terms of the Registration Rights Agreement between Getty
Images and Getty Investments (the "Getty Investments Registration Rights
Agreement"), Getty Investments, subject to the terms and conditions set forth in
the Getty Investments Registration Rights Agreement, may require Getty Images to
file a registration statement with respect to all or a portion of Getty
Investments' shares of Common Stock (a "Getty Demand Right"), subject to certain
limitations that may be imposed by the managing underwriter. Getty Investments
has five Getty Demand Rights. In addition to their Getty Demand Rights, Getty
Investments will have the right to have any or all of their shares of Common
Stockholder included in any registration by Getty Images with respect to an
offering of Common Stock (a "Getty Piggy-Back Right"), subject to certain
limitations that may be imposed by the managing underwriter. Both the Getty
Demand Rights and the Getty Piggy-Back Rights will terminate on the earlier of
(i) the date that all of the shares of Common Stock held by Getty Investments
L.L.C. can be sold within a three-month period under the volume limitation of
Rule 144(e) of the Securities Act or (ii) on the 15th anniversary of the date of
the Getty Investments Registration Rights Agreement.
In addition to the registration rights described above, upon the
consummation of the Transactions, Getty Images assumed the obligations of Getty
Communications and PhotoDisc with respect to certain demand and piggy-back
registration rights granted by the companies to certain of their respective
shareholders, including, in the case of PhotoDisc, certain registration rights
granted to holders of its Series A Preferred Stock, and, in the case of Getty
Communications, certain registration rights granted to the October 1993 Trust
and Crediton Limited, Messrs. Getty, Klein and Gould, RIT Capital Partners and
Mr. Anthony Stone and The Schwartzberg Family L.P.
GETTY PARTIES SHAREHOLDERS' AGREEMENT
Getty Images, Getty Investments, the October 1993 Trust and Creditor Limited
have entered into a Shareholders' Agreement with respect to their ownership of
shares of Common Stock (the "Getty Parties Shareholders' Agreement"). Certain
provisions of the Getty Parties Shareholders' Agreement are described below.
19
<PAGE>
The Getty Parties Shareholders' Agreement provides that all the Common Stock
held by the parties thereto (other than the Company) will be voted as directed
by the board of directors of Getty Investments. Before transferring such shares
(other than certain permitted transfers to affiliates or family members who, as
a condition of such permitted transfer, must agree to be bound by the terms of
the Getty Parties Shareholders' Agreement), the parties must first offer such
shares to the other parties. The price at which such shares must be offered is
either the price that another purchaser is willing to pay for such shares or, in
the event of a transfer pursuant to an exercise of registration rights, the
average closing market price of the shares of Common Stock over the preceding
ten business days. In the event that these rights of first refusal are not
exercised with respect to all shares of Common Stock offered for sale, then the
rights of first refusal in the Stockholders' Agreement will apply. See "--The
Stockholders' Agreement."
In the Getty Parties Shareholders' Agreement, the October 1993 Trust and
Crediton Limited have each agreed to retain at least 311,301 shares of Common
Stock until July 8, 2001 and thereafter to retain at least 155,651 for an
additional two years, provided, however, that the October 1993 Trust and
Crediton Limited may sell shares in the event that (i) Mr. Mark Getty (in the
case of the October 1993 Trust) or Mr. Jonathan Klein (in the case of Crediton
Limited) ceases to be employed by the Company or any of its subsidiaries, or
(ii) Getty Investments and its members cease at any time to hold at least 7% of
the then outstanding shares of Common Stock. In addition, if Getty Investments
or any of its members sells any shares of Common Stock, the October 1993 Trust
and Crediton Limited will be permitted to sell the same proportion of their
shares of Common Stock which are subject to this sale restriction as the number
of shares of Common Stock sold by Getty Investment bears to its total number of
shares of Common Stock. The Getty Parties Shareholder's Agreement will provide
that each of the October 1993 Trust and Crediton Limited will, in consideration
of its participation under such agreement, receive an annual fee from Getty
Investments in 1998 of L78,843 and L272,137, subject to certain inflation
adjustments, respectively, and thereafter an annual fee of L28,485 and L98,681,
subject to certain inflation adjustments, respectively, for each of the next
four years.
The Getty Parties Shareholders' Agreement also provides that each of the
October 1993 Trust and Crediton Limited have the right to nominate a director to
the board of directors of Getty Investments (the "Getty Investments Board").
Such parties have nominated Mr. Getty and Mr. Klein to the Getty Investments
Board. The October 1993 Trust also has the right to nominate the chairman of the
Getty Investments Board. The October 1993 Trust has appointed Mr. Getty as
Chairman of Getty Investments.
Getty Investments agreed in the Getty Parties Shareholders' Agreement that,
subject to certain exceptions, it will not operate or own or control any other
business in the visual content industry.
The Getty Parties Shareholders' Agreement expires on July 7, 2003, but may
be terminated early with respect to a party (or its permitted transferees) who
ceases to be a stockholder of Getty Images. The Getty Parties Shareholders'
Agreement terminates for all parties if the parties to the agreement cease to
own beneficially fewer than the greater of 3,000,000 shares of Common Stock and
such number of shares as is equal to two percent or less of the then outstanding
shares of Common Stock.
GETTY INVESTMENTS COMPANY AGREEMENT
Getty Investments is a limited liability company organized in the State of
Delaware and is governed by a limited liability company agreement among the four
various Getty family trusts (the "Getty Trusts") and 525 Investments Limited
(the "Getty Investments Company Agreement"). As of February 6, 1998, the
membership interests of the Getty Trusts in Getty Investments were held as to
39.3 percent by The Cheyne Walk Trust, as to 18.75 percent by the Ronald Family
Trust A, as to 18.75 percent by the Ronald Family Trust B and as to 12.5 percent
by the Gordon P. Getty Family trust. The remaining 10.7 percent interest was
held by 525 Investments Limited. The four Getty Trusts result from a partition
in 1988 of the Sarah C. Getty Trust in accordance with a court order in 1985.
Two of the four trustees of The Cheyne Walk Trust are also two of the four
trustees of the Ronald Family Trust B, two of the three trustees of the Ronald
20
<PAGE>
Family Trust A are also two of the four trustees of the Ronald Family Trust B.
The life income beneficiaries are the four Getty Trusts referred to above are
the the children of J.P. Getty, and the remainder beneficiaries are his
grandchildren (including Mr. Mark Getty) and other descendants. 525 Investments
Limited is a company owned by the family trusts of J.P. Getty KBE, one of the
children of J.P. Getty. Mr. Mark Getty is the son of J.P. Getty KBE.
The Getty Investments Company Agreement provides that the Getty Investments
Board will consist of six directors. One director will be appointed by each of
the four Getty Trusts. In addition, the members of Getty Investments agree to
appoint one person nominated by each of the October 1993 Trust and Crediton
Limited. The members also agree to appoint the director nominated by the October
1993 Trust as the Chairman of the Board of Getty Investments. Mr. Getty has been
appointed a director and chairman by the October 1993 Trust and Mr. Klein has
been appointed a director by Crediton Limited. Decisions at meetings of the
Getty Investments Board require the approval (at a meeting or in writing) of a
majority of directors. Of the six members of the Getty Investments Board, three
(Mr. Getty, Mr. Klein and Mr. Garb) are also directors of Getty Images. There
are currently no voting arrangements whereby one member of Getty Investments can
control a majority of the members of the Getty Investments Board.
GETTY TRADEMARKS
Getty Images, directly or through its subsidiaries, has trademark
registrations and applications for the trademarks and trademark applications in
respect of the names Getty Communications and Hulton Getty, and derivatives
thereof (including the name "Getty Images") and the related logos (together, the
"Getty Trademarks"). Getty Images and Getty Investments have agreed that in the
event that Getty Images becomes controlled by a third party or parties not
affiliated with the Getty family, Getty Investments will have the right to call
for an assignment to it, for a nominal sum, of all rights to the Getty
Trademarks. Upon such assignment, Getty Images will have 12 months in which it
will be permitted to continue to use the Getty Trademarks and thereafter will
have to cease such use.
INDEMNIFICATION
Getty Images has agreed to indemnify Getty Investments and its members for
liabilities arising in connection with the Transactions. In addition, Getty
Images has entered into agreements to indemnify its directors and certain
executive officers, in addition to indemnification provided for in the Company's
Bylaws and Amended and Restated Certificate of Incorporation. These agreements,
among other things, indemnify the Company's directors and certain executive
officers for certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of the Company, arising out of such
person's services as a director or executive officer of the Company, any
subsidiary of the Company or any other company or enterprise to which the person
provides services at the request of the Company. The Company believes that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
TRANSACTIONS WITH RESPECT TO PHOTODISC COMMON STOCK
On June 28, 1996, PhotoDisc entered into a Stock Redemption Agreement with
Mr. Mark Torrance and Ms. Wade Torrance pursuant to which PhotoDisc redeemed
236,372 shares of common stock, par value $0.01 per share ("PhotoDisc Common
Stock"), of PhotoDisc for a purchase price of approximately $4.23 per share,
totaling $1,000,000. The price per share of PhotoDisc Common Stock was
determined based on a valuation conducted by the firm of Brueggeman & Johnson.
Mr. Torrance is a founder, director and chief executive officer of PhotoDisc and
became a director and executive officer of Getty Images as of February 9, 1998.
Ms. Wade Torrance is Mr. Torrance's former wife.
21
<PAGE>
On August 12, 1997, PhotoDisc repurchased 333,334 share of PhotoDisc Common
Stock from Ms. Wade Torrance for a purchase price of $6.00 per share, totaling
$2,000,004. The price per share of PhotoDisc Common Stock was determined based
on arm's-length negotiations between PhotoDisc and Ms. Torrance, who is a member
of PDI.
In 1995, PhotoDisc issued warrants to purchase 500,880 shares of PhotoDisc
Common Stock for $0.1250 per share and warrants to purchase 91,592 shares of
PhotoDisc Common Stock for $0.1575 per share to Mr. Torrance in consideration
for loans to PhotoDisc by Mr. Torrance, aggregating $174,000 and for Mr.
Torrance's guarantee of certain obligations of PhotoDisc. These warrants were
contributed by Mr. Torrance to PDI, L.L.C. in October 1996. The loans were
repaid by PhotoDisc in 1996. PDI, L.L.C. exercised these warrants immediately
prior to the consummation of the Transactions.
TORRANCE LEASE
PhotoDisc and the Marshall Building LLC, an entity of which Mr. Torrance is
the Manager, have entered into a lease under which PhotoDisc leases the entire
Marshall Building (46,957 total square feet), of which 9,568 square feet is
occupied by other tenants. This lease has a term of five years and four months
(which may be extended for a further five years at the option of PhotoDisc)
beginning November 1, 1997, provides for rent at the rate of $14.00 per square
foot per year, which the Company believes is a fair market rate, and under which
Mr. Torrance pays a monthly service and maintenance fee of $1,375. In addition,
PhotoDisc has made certain improvements to the Marshall Building in the amount
of approximately $360,000 as of December 31, 1997, for which it will be
reimbursed by a reduction in monthly lease payments ratably over the term of the
lease. Interest on the outstanding amount is charged at a rate of 5.77% per
annum.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
GETTY IMAGES, INC.
By: /s/ MARK H. GETTY
-----------------------------------------
Name: Mark H. Getty
TITLE: CO-CHAIRMAN
</TABLE>
April 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on April 27, 1998.
SIGNATURE TITLE (CAPACITY)
- ------------------------------ --------------------------
/s/ MARK H. GETTY
- ------------------------------ Co-Chairman and Director
Mark H. Getty
*
- ------------------------------ Co-Chairman and Director
Mark Torrance
/s/ JONATHAN D. KLEIN Chief Executive Officer
- ------------------------------ and Director (Principal
Jonathan D. Klein Executive Officer)
Treasurer (Principal
/s/ LAWRENCE J. GOULD Financial Officer and
- ------------------------------ Principal Accounting
Lawrence J. Gould Officer)
*
- ------------------------------ Director
Andrew Garb
*
- ------------------------------ Director
Anthony Stone
*
- ------------------------------ Director
James N. Bailey
*
- ------------------------------ Director
Manny Fernandez
*
- ------------------------------ Director
Christopher Sporborg
*By: /s/ JONATHAN D. KLEIN
------------------------- Attorney-in-Fact
Jonathan D. Klein
23
<PAGE>
GETTY IMAGES, INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1997
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.1 Employment Agreement between Getty Communications plc and Mr. Mark Getty
10.2 Employment Agreement between Getty Images, Inc. and Mr. Mark Torrance
10.3 Employment Agreement between Getty Communications plc and Mr. Jonathan Klein for Services Performed
Within the U.K.
10.4 Employment Agreement between Getty Images, Inc. and Mr. Jonathan Klein for Services Performed Outside
the U.K.
10.5 Employment Agreement between Getty Images, Inc. and Mr. William Heston
10.6 Employment Agreement between Getty Images, Inc. and Ms. Heather Redman
10.7 Employment Agreement between PhotoDisc, Inc. and Mr. Robert J. Chamberlain
10.8 Employment Agreement between PhotoDisc, Inc. and Ms. Sally von Bargen
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 9th day of February, 1998, by and
between GETTY COMMUNICATIONS PLC, a company organized under the laws of England
and Wales (the "COMPANY"), which is a subsidiary of Getty Images, Inc., a
Delaware Corporation (the "PARENT"), and whose registered office is at 101
Bayham Street, London NW1 OAG and MARK H. GETTY, an individual residing at
Number 7, The Lanterns, Bridge Lane, Battersea, London SW11 (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Executive is presently serving as the Executive Chairman
of the Board of Directors of Getty Communications plc ("GETTY"); and
WHEREAS, Getty, the predecessor to the Parent, is a party to a merger
agreement dated as of September 15, 1997 (the "MERGER AGREEMENT"), pursuant to
which PhotoDisc, Inc. shall merge into a merger subsidiary of the Parent and,
following the consummation of which, the Company shall be a subsidiary of the
Parent; and
WHEREAS, the Company seeks to continue to employ the Executive and the
Executive seeks to continue to be employed by the Company; and
WHEREAS, both parties desire that the terms and conditions of the
Executive's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) GENERAL. The Company hereby employs the Executive, effective as
of the closing of the transactions contemplated by the Merger Agreement (the
"EFFECTIVE DATE"), and the Executive's period of continuous employment for
statutory purposes began on March 14, 1995, and the Executive agrees upon the
terms and conditions herein set forth to serve, effective as of the Effective
Date, as Co-Chairman of the Board of Directors of the Parent (the "BOARD"). In
such capacity, the Executive shall report directly and only to the Board. The
Executive's principal place of business shall be 101 Bayham Street, London NW1
OAG.
(b) SERVICES AND DUTIES. For so long as the Executive is employed
hereunder, and except as otherwise expressly provided in Section 1(c) below, the
Executive shall devote his full business time to the performance of his duties
hereunder; shall faithfully serve the Parent and the Company; shall in all
respects conform to and comply with the lawful
<PAGE>
2
and good faith directions and instructions given to him by the Board as the
same are consistent with his status and the terms hereof; and shall use his
best efforts to promote and serve the interests of the Parent and the
Company. Specifically, the Executive shall share equal duties and authority
with his Co-Chairman and Chief Executive Officer for the financial
performance of the Parent and the Company, the management of the Parent's
shareholders, developing strategic alliances and partnerships and maximizing
their commercial benefits, communications to both internal and external
audiences and external relationships with business, industry and academic
communities, strategic leadership, and the provision of visible leadership
and direction to the front line. In addition, the Executive shall be jointly
responsible with his Co-Chairman for chairing the Board and managing
relationships with members and provide leadership for the research and
development function of the Parent and the Company. The Executive shall have
a special emphasis on acquisitions and corporate development.
(c) NO OTHER EMPLOYMENT. Except as provided below, for so long as
the Executive is employed by the Company, he shall not, directly or indirectly,
render services to any other person or organization for which he receives
compensation without the prior approval of the Board. No such approval will be
required if the Executive seeks to perform inconsequential services without
direct compensation therefor in connection with the management of personal
investments or in connection with the performance of charitable and civic
activities, provided that such activities do not contravene the provisions of
Section 5 hereof. In addition, the Company expressly agrees that the Executive
shall be permitted to continue to perform external activities as necessary to
perform his obligations as President of Remainderman, LLC (or its successor) or
otherwise in relation to Getty family business affairs and is permitted to act
as a non-executive director of Getty Investments LLC; PROVIDED, HOWEVER, that
the foregoing shall not compromise in any way the Executive's obligation to
carry out his duties hereunder as set forth in Section 1(b).
(d) BOARD MEMBERSHIP. The Executive shall be a member of the Board
and of the Executive Committee. In addition, the Executive shall be entitled to
attend the meetings of all other committees of the Board, such as the Audit
Committee and the Compensation Committee, and shall be a member of any strategy
committee of the Board. After his initial term as director, the Company shall
nominate the Executive for reelection to the Board and shall use all reasonable
efforts to cause the Executive to be elected to such term.
2. TERM OF EMPLOYMENT. The term of the Executive's employment under
this Agreement (the "TERM") shall commence on the Effective Date and continue
until the second anniversary date of the Effective Date. Thereafter, the Term
shall continue until it is terminated by either party giving the other at least
twelve months' written notice of termination of the Term, with no such notice to
be given so as to expire before the third anniversary of the Effective Date.
<PAGE>
3
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions of
this Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Term as compensation for all services
rendered hereunder:
(a) SALARY. The Company shall pay to the Executive an annual salary
(the "SALARY") at the initial rate of $275,000 (retroactive to February 1,
1998), payable to the Executive in accordance with the normal payroll practices
of the Company for its executive officers as are in effect from time to time.
The amount of the Executive's Salary shall be reviewed annually by the Board on
or about April 1 of each year during the Term beginning in the 1999 calendar
year and may be increased, but not decreased below such amount, on the basis of
such review and then-current market practices.
(b) ANNUAL BONUS. During the Term, the Executive shall be eligible
for each calendar year that begins within the Term to participate in an annual
incentive bonus program established by the Company in accordance with the
policies of the Company, its subsidiaries and affiliates (hereinafter,
collectively the "GROUP") and subject to such terms and conditions as may be
approved annually by the Compensation Committee of the Board (the "COMPENSATION
COMMITTEE"). Under the terms of the annual incentive bonus program, the
Executive will be afforded the opportunity to earn up to 50% of his Salary (the
"BONUS") in effect for the applicable calendar year if the Company achieves the
performance targets established by the Compensation Committee for that year, to
be paid on a pro-rata basis in the event that the Executive is employed for less
than twelve months of any calendar year within the Term (for purposes of
determining the 1998 Bonus, the Executive shall be deemed to have commenced
employment as of January 1, 1998).
(c) STOCK OPTIONS. Effective as of the Closing Date (as defined in
the Merger Agreement), the Company shall grant the Executive an option (the
"DEAL OPTION") to purchase 75,000 shares of the common stock of the Parent
pursuant to the terms of the Parent's 1998 Stock Incentive Plan (the "OPTION
PLAN"). The per share exercise price of the Deal Option shall equal the fair
market value of a share of Common Stock on the Closing Date, as determined in
accordance with the terms of the Option Plan. The Deal Option shall vest and
become exercisable in full on February 1, 1999. Also effective as of the
Effective Date, the Company shall grant the Executive an option (the "OPTION")
to purchase 500,000 shares of the common stock of the Parent pursuant to the
terms of the Option Plan. The per share exercise price of the Option shall equal
the fair market value of a share of Common Stock on the Closing Date, as
determined in accordance with the terms of the Option Plan. The Option shall
vest and become exercisable as to 25% on February 1, 1999; the remainder of the
Option shall vest ratably on the first day of each month over the following
three years. Both the Deal Option and the Option shall be subject to the terms
of the Option Plan and to such other terms and conditions as may be specified by
the Compensation Committee in the form of a standard option agreement between
the Company and the Executive. In the event that the Executive ceases to be an
employee of the Company for any reason other than (i) if he is terminated for
"Cause", "Disability" or on account of his death, or (ii) if he resigns without
"Good Reason"
<PAGE>
4
(as each term is defined below), the vesting under both the Deal Option and
the Option shall accelerate and all options thereunder shall become
immediately exercisable and the Executive shall be entitled to retain such
options, for the remainder of their respective terms, as if he had remained
an employee of the Company. In the event that the Executive ceases to be an
employee of the Company because he is terminated for Cause or resigns without
Good Reason, the Executive shall be entitled to retain the then-vested
portion of such options as if he had remained an employee of the Company, but
the unvested portion of such options shall lapse. In the event of the
Executive's death or Disability, the vesting under both the Deal Option and
the Option shall accelerate and all options thereunder shall become
immediately exercisable and shall remain outstanding for a period of twelve
(12) months.
(d) PENSION SCHEME AND LIFE INSURANCE. During the Term, the
Company shall pay, in addition to amounts payable under Sections 3(a) and
3(b) above, an amount equal to 20% of the Executive's Salary through equal
monthly contributions in arrears into a personal pension scheme for the
benefit of the Executive, or, at the Executive's sole discretion, the Company
shall pay such amount to him as additional compensation. In addition, during
the Term, the Company shall maintain a life insurance policy on the life of
the Executive for the benefit of the Executive's estate providing a benefit
equal to the greater of (i) $750,000 and (ii) four times the Executive's
Salary (and maximum Bonus).
(e) COMPANY AUTOMOBILE. During the Term, the Company will provide
the Executive with an automobile of such make and model as the Board deems
appropriate and suitable for his status with the Company for his sole use and
will reimburse the Executive for all costs and expenses incurred by the
Executive in connection with the use of that vehicle, or, at the Executive's
sole discretion, the Company shall pay an equivalent amount of such
perquisite to him as additional compensation.
(f) OTHER SPECIFIC BENEFITS. The Company shall install and pay
the rental and unit charges attributable to a dedicated business telephone
and/or ISDN line at his home. During the Term, the Company shall also pay
for the Executive's purchase, line charges, rental and unit charges for his
mobile phones. The Company shall provide the Executive with a fax machine
and computer modem to be installed at the Executive's home and a suitable
desktop and laptop computer, as well as all ancillary equipment and
maintenance therefor. In addition, the Company will pay for the cost of the
Executive's membership in or subscriptions to the internet service provider
of his choice, and such professional memberships and journals as are
appropriate to his duties under this Agreement.
(g) EXPENSES. The Company shall pay or reimburse the Executive
for all reasonable out-of-pocket expenses incurred by the Executive in
connection with his employment hereunder and expressly agrees that it will
reimburse the Executive for his business class airfare on international
flights which are over five hours in duration taken in connection with
Company business. Such expenses shall be paid upon the periodic submission
of invoices and shall be paid reasonably promptly after the date of such
invoice. The
<PAGE>
5
reimbursement of expenses under this Section 3(g) shall be subject to the
Executive's providing the Company with such documentation of the expenses as
the Company may from time to time reasonably request in accordance with the
policies of the Group. The Company also agrees that, in the event that the
Executive is required to travel abroad in connection with the performance of
his duties hereunder for a period in excess of two weeks, the Company will
reimburse the Executive for the airfare, hotel and other transportation
expenses only of his spouse and minor children so that they may accompany him
on such trip.
(h) WELFARE AND FRINGE BENEFITS. During the Term, the Executive
shall be eligible to participate in the Company's medical and disability
plans applicable to senior officers of the Company in accordance with the
terms of such plans as in effect from time to time. Specifically, the
Executive, his spouse and his children who are under the age of 18 shall
participate in the British United Provident Association, providing benefits
at London Teaching Hospital Rates, or such other private insurance scheme
providing equivalent benefits. In addition, the Executive shall participate
in the Company's permanent health insurance plan or receive payment for his
personal permanent health insurance plan, at his sole discretion. The
Executive shall participate in any disability plan of the Company that
replaces his Salary under this Agreement in the event that he suffers a
Disability (as defined in Section 4(d) below).
(i) LONG-TERM INCENTIVE PROGRAM. During the Term, the Executive
shall participate in all long-term incentive plans and programs of the Company
that are applicable to its senior officers in accordance with their terms and in
a manner consistent with his position with the Company.
(j) HOLIDAYS. In addition to the usual public and bank holidays, the
Executive shall be entitled to thirty days' paid vacation annually, which shall
be taken at such times as are approved by the Board or the Executive Committee.
4. TERMINATION OF EMPLOYMENT. Subject to the notice and other
provisions of this Section 4, as well as Section 5.13 of the Bylaws of the
Company, the Company shall have the right to terminate the Executive's
employment hereunder, and he shall have the right to resign, at any time for any
reason or for no stated reason.
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. (i) If,
prior to the expiration of the Term, the Executive's employment is terminated by
the Company for Cause or if the Executive resigns from his employment hereunder
other than for Good Reason, he shall be entitled to payment of the pro rata
portion of his Salary, accrued Bonus and supplemental pension contributions as
described in Section 3(d), through and including the date of termination or
resignation as well as any unreimbursed expenses. Except to the extent required
by the terms of any applicable compensation or benefit plan or program or as
otherwise required by applicable law, the Executive shall have no rights under
this Agreement or otherwise to receive any other compensation or to participate
in any other plan, program or
<PAGE>
6
arrangement after such termination or resignation of employment with respect
to the year of such termination or resignation and later years.
(ii) Termination for "CAUSE" shall mean termination of the
Executive's employment with the Company because of (A) willful or
persistently repeated material non-performance of the Executive's duties to
the Company or the Parent (other than by reason of the incapacity of the
Executive due to physical or mental illness) after notice by the Board of
such failure and the Executive's non-performance and continued, willful or
persistently repeated material non-performance after such notice, (B) the
indictment of the Executive for a felony offense, (C) the commission by the
Executive of fraud against the Group or any willful misconduct that brings
the reputation of the Group into serious disrepute or causes the Executive to
cease to be able to perform his duties, (D) any other material breach by the
Executive of any material term of this Agreement, or (E) is adjudged bankrupt
or makes any arrangement or composition with his creditors or has an interim
order made against him pursuant to Section 252 of the Insolvency Act 1986.
(iii) Termination of the Executive's employment for Cause shall be
communicated by delivery to the Executive of a written notice from the Company
stating that the Executive has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Executive without Good Reason shall be the date specified in
a written notice of resignation from the Executive to the Company. The
Executive shall provide at least 90 days' advance written notice of resignation
without Good Reason.
(b) INVOLUNTARY TERMINATION. (i) If, prior to the expiration of the
Term, the Company terminates the Executive's employment for any reason other
than Disability or Cause or Executive resigns from his employment hereunder for
Good Reason (collectively hereinafter referred to as an "INVOLUNTARY
TERMINATION"), the Company shall pay to the Executive his Salary and Bonus
accrued up to and including the date of such Involuntary Termination, as well as
any unreimbursed expenses. In addition, the Company shall pay to the Executive
as severance (the "SEVERANCE PAYMENTS") within 30 days after the date of
termination a lump sum payment in an amount equal to the sum of his Salary, at
the rate in effect immediately prior to such Involuntary Termination, plus his
maximum Bonus as described in Section 3(b) and his supplemental pension
contributions as described in Section 3(d), in each case for the remainder of
the Term. Anything in this Agreement to the contrary notwithstanding, no
amounts shall be payable under this Section 4(b) if the Executive's employment
with the Company ends at the expiration of the Term in accordance with
Section 2.
(ii) In the event of the Executive's Involuntary Termination, the
Executive shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided to the Executive pursuant to Section 3(h)
above at the time of such Involuntary Termination for a period equal to the
longer of (A) two years following the Involuntary Termination or (B) the
<PAGE>
7
remainder of the Term (the "CONTINUATION PERIOD"). Anything herein to the
contrary notwithstanding, the Company shall have no obligation to continue to
maintain during the Continuation Period any plan or program solely as a result
of the provisions of this Agreement, but this obligation shall apply in respect
of any substitute or replacement plan.
(iii) Resignation for "GOOD REASON" shall mean resignation by
Executive because of (A) an adverse and material change in the Executive's
duties, titles or reporting responsibilities, (B) a material breach by the
Company of any term of the Agreement, (C) a reduction in the Executive's Salary
or bonus opportunity or the failure of the Company to pay the Executive any
material amount of compensation when due, (D) failure by the Company or the
Parent to nominate the Executive for reelection to the Board during the Term,
(E) the failure of the Executive to be reelected to the Board during the Term,
or (F) a relocation of the Executive's principal place of business without his
prior written consent. The Company shall have 30 business days from the date of
receipt of such notice to effect a cure of the material breach described therein
and, upon cure thereof by the Company to the reasonable satisfaction of the
Executive, such material breach shall no longer constitute Good Reason for
purposes of this Agreement.
(iv) The date of termination of employment without Cause shall be the
date specified in a written notice of termination to the Executive. The date of
resignation for Good Reason shall be the date specified in a written notice of
resignation from the Executive to the Company; PROVIDED, HOWEVER, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(iii) above has expired without the Company having corrected, to the
reasonable satisfaction of the Executive, the event or events subject to cure.
(c) TERMINATION FOLLOWING A CHANGE IN CONTROL. In the event of a
Change in Control (defined as it is for purposes of the Option Plan), the
Executive shall have the right to resign his employment with the Company and
will be entitled to receive within 30 days a lump sum payment in an amount equal
to the Executive's Salary, at the rate in effect immediately prior to such
Involuntary Termination, plus his maximum Bonus as described in Section 3(b) and
his supplemental pension contributions as described in Section 3(d), in each
case for the remainder of the Term. In addition, the Executive shall continue
to participate on the same terms and conditions as are in effect immediately
prior to such resignation in the Company's health and medical plans provided to
the Executive pursuant to Section 3(h) above at the time of such resignation for
the a period equal to the longer of (A) two years following the resignation or
(B) the remainder of the Term (the "CIC CONTINUATION PERIOD"). Anything herein
to the contrary notwithstanding, the Company shall have no obligation to
continue to maintain during the CIC Continuation Period any plan or program
solely as a result of the provisions of this Agreement but this obligation shall
apply in respect of any substitute or replacement plan.
(d) TERMINATION DUE TO DISABILITY. In the event of the Executive's
Disability (as hereinafter defined), the Company shall be entitled to terminate
his employment upon
<PAGE>
8
providing the Executive with six months' prior written notice. If the Company
terminates the Executive's employment due to Disability, the Executive shall
be entitled to receive, for the remainder of the Term, his Salary at the rate
in effect immediately prior to his Disability, plus his maximum Bonus as
described in Section 3(b) and supplemental pension contributions as described
in Section 3(d), less any sums paid to the Executive under any disability
plan of the Company. In addition, the Executive shall continue to be covered
by the Company's health and medical benefit plans as described in Section
3(h) for the longer of (A) two years following his termination for Disability
or (B) the remainder of the Term. As used in this Section 4(d), the term
"DISABILITY" shall mean a physical or mental incapacity that substantially
prevents the Executive from performing his duties hereunder and that has
continued for at least six of the last twelve months and that can reasonably
be expected to continue indefinitely. Any dispute as to whether or not the
Executive is disabled within the meaning of the preceding sentence shall be
resolved by a physician reasonably satisfactory to the Executive and the
Company, and the determination of such physician shall be final and binding
upon both the Executive and the Company.
(e) DEATH. Except as provided in Sections 3(d), 3(h) and this
Section 4(d), no Salary or benefits shall be payable under this Agreement
following the date of the Executive's death. In the event of the Executive's
death, the Executive's Beneficiary shall be entitled to receive within 30 days a
lump sum payment in an amount equal to the Executive's Salary at the rate in
effect immediately prior to his death, plus his maximum Bonus as described in
Section 3(b) and supplemental pension contributions as described in Section
3(d), in each case for the remainder of the Term, less any death benefits which
are provided to the Executive's Beneficiary under the terms of any plan, program
or arrangement referred to in Section 3(d) or 3(h) applicable to the Executive
at the time of death. In addition, the Executive's spouse and then-eligible
dependents shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided pursuant to Section 3(h) above at the time of
the Executive's death for a period equal to the longer of (A) two years
following his death or (B) the remainder of the Term (the "DEATH CONTINUATION
PERIOD"). Anything herein to the contrary notwithstanding, the Company shall
have no obligation to continue to maintain during the Death Continuation Period
any plan or program solely as a result of the provisions of this Agreement but
this obligation shall apply in respect of any substitute or replacement plan.
(f) BENEFICIARY. For purposes of this Agreement, except as provided
in Section 3(d) or 3(h), "BENEFICIARY" shall mean the person or persons
designated in writing by the Executive to receive benefits under a plan, program
or arrangement or to receive the balance of the Severance Payments, if any, in
the event of the Executive's death, or, if no such person or persons are
designated by the Executive, the Executive's estate. No Beneficiary designation
shall be effective unless it is in writing and received by the Company prior to
the date of the Executive's death.
<PAGE>
9
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the
payments made hereunder would constitute a "PARACHUTE PAYMENT" (as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), and the net after-tax amount of the parachute payment is less than the
net after-tax amount if the aggregate payments to be made to the Employee were
three times his "BASE AMOUNT" (as defined in Section 280G(b)(3) of the Code),
less $1.00, then the aggregate of the amounts constituting the parachute payment
shall be reduced to an amount that will equal three times the base amount, less
$1.00. The determinations to be made with respect to this Section 5 shall be
made by an independent accounting firm of national standing (other than the
Company's regular auditors). The accounting firm shall be paid by the Company
for its services performed hereunder.
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT. For so long as the Executive is
employed by the Company and, in circumstances where the Executive receives a
payment pursuant to Section 4(b), 4(c) or 4(d) or his employment is terminated
for Cause, but in no other circumstances, and continuing for the remainder of
the Term (such period being referred to hereinafter as the "RESTRICTED PERIOD"),
the Executive shall not, without the prior written consent of the Board,
directly or indirectly, own an interest in, manage, operate, join, control, lend
money or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes with the Group by providing any goods or
services provided or under development by the Group at the effective date of the
Executive's termination of employment under this Agreement; PROVIDED, HOWEVER,
that this Section 6(a) shall not proscribe the Executive's ownership, either
directly or indirectly, of either less than five percent of any class of
securities which are listed on a national securities exchange or quoted on the
automated quotation system of the National Association of Securities Dealers,
Inc. or any limited partnership investment over which the Executive has no
control.
(b) NO INTERFERENCE. During the Restricted Period, in circumstances
in circumstances where the Executive receives a payment pursuant to
Section 4(b), 4(c) or 4(d) or his employment is terminated for Cause, and in no
other circumstances, the Executive shall not, whether for his own account or for
the account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), intentionally endeavor to entice
away from the Group, or otherwise interfere with the relationship of the Group
with, any senior person who is employed by or otherwise engaged to perform
services for the Group or any senior person or entity who is, or was within the
then most recent twelve-month period, a customer, client or supplier of the
Group.
<PAGE>
10
(c) SECRECY. The Executive recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder, he may acquire confidential information and
trade secrets concerning the operation of the Group, the use or disclosure of
which could cause the Group substantial losses and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, the Executive covenants and agrees with the Company that he will
not at any time, except in performance of the Executive's obligations to the
Company hereunder or with the prior written consent of the Board, directly or
indirectly disclose to any person any secret or confidential information that he
may learn or has learned by reason of his association with the Group. The term
"CONFIDENTIAL INFORMATION" means any information not previously disclosed to the
public or to the trade by the Group with respect to the Group's, products,
facilities and methods, trade secrets and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, customer lists,
financial information (including the revenues, costs or profits associated with
any of the Group's products), business plans, prospects or opportunities.
(d) EXCLUSIVE PROPERTY. The Executive confirms that all confidential
information is and shall remain the exclusive property of the Group. All
business records, papers and documents kept or made by the Executive relating to
the business of the Group shall be and remain the property of the Group. Upon
the termination of his employment with the Company or upon the request of the
Company at any time, the Executive shall promptly deliver to the Company, and
shall not without the consent of the Board retain copies of, any written
materials not previously made available to the public, or records and documents
made by the Executive or coming into his possession concerning the business or
affairs of the Group; PROVIDED, HOWEVER, that subsequent to any such
termination, the Company shall provide the Executive with copies (the cost of
which shall be borne by the Executive) of any documents which are requested by
the Executive and which the Executive has determined in good faith are
(i) required to establish a defense to a claim that the Executive has not
complied with his duties hereunder or (ii) necessary to the Executive in order
to comply with applicable law.
(e) ASSIGNMENT OF DEVELOPMENTS. All "DEVELOPMENTS" (as defined
below) that were or are at any time made, conceived or suggested by Executive,
whether acting alone or in conjunction with others, during Executive's
employment with the Group shall be the sole and absolute property of the Group,
free of any reserved or other rights of any kind on the part of Executive.
During Executive's employment and, if such Developments were made, conceived or
suggested by Executive during his employment with the Group, thereafter,
Executive shall promptly make full disclosure of any such Developments to the
Group and, at the Group's cost and expense, do all acts and things (including,
among others, the execution and delivery under oath of patent and copyright
applications and instruments of assignment) deemed by the Group to be necessary
or desirable at any time in order to effect the full assignment to the Group of
Executive's right and title, if any, to such Developments. For purposes of this
Agreement, the term "DEVELOPMENTS" shall mean all data, discoveries, findings,
reports, designs, inventions, improvements, methods, practices, techniques,
<PAGE>
11
developments, programs, concepts, and ideas, whether or not patentable, relating
to the activities of the Group of which Executive is as of the date of this
Agreement aware or of which Executive becomes aware at any time during the Term,
excluding any Development for which no equipment, supplies, facilities or
confidential information of the Group was used and which was developed entirely
on Executive's own time, unless (i) the Development relates directly to the
business of the Group, (ii) the Development relates to actual or demonstrably
anticipated research or development of the Group, or (iii) the Development
results from any work performed by Executive for the Group (the foregoing is
agreed to satisfy the written notice and other requirements of Section 49.44.140
of the Revised Code of Washington).
(f) INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of the
covenants contained in this Section 6 may result in material irreparable injury
to the Group for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Executive from engaging in activities prohibited by this Section
6 or such other relief as may be required to specifically enforce any of the
covenants in this Section 6. Without intending to limit the remedies available
to the Executive, the Executive shall be entitled to seek specific performance
of the Company's obligations under this Agreement.
(g) The Executive shall during the continuance of his employment (and
shall procure that his spouse or partner and his minor children shall comply)
with all applicable rules of law, stock exchange regulations and codes of
conduct applicable to employees, officers and directors of the Company and the
Group for the time being in force in relation to dealings in the shares,
debentures and other securities of the Company or any member of the Group or any
unpublished share price sensitive information affecting the securities of any
other company with which the Company has dealings (provided that the Executive
shall be entitled to exercise any options granted to him under any share option
scheme established by the Company or any member of the Group, subject to the
rules of such scheme).
(h) The Executive shall in relation to any dealings in securities of
overseas companies comply with all laws of any foreign state affecting dealings
in the securities of such companies and all regulations of any relevant stock
exchanges on which such dealings take place.
(i) During the continuance of his employment the Executive shall
observe the terms of any policy issued by the Company in relation to payments,
rebates, discounts, gifts, entertainment or other benefits ("Gratuities") from
any third party in respect of any business transacted or proposed to be
transacted (whether or not by him) by or on behalf of the Company or any
Associated Company.
<PAGE>
12
7. GENERAL PROVISIONS.
(a) SOURCE OF PAYMENTS. All payments provided under this Agreement,
other than payments made pursuant to a plan which provides otherwise, shall be
paid in cash from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets made, to assure
payment. The Executive shall have no right, title or interest whatever in or to
any investments which the Company may make to aid the Company in meeting its
obligations hereunder. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall be no greater than
the right of an unsecured creditor of the Company; PROVIDED, HOWEVER, that this
provision shall not be deemed to waive or abrogate any preferential or other
rights to payment accruing to the Executive under applicable bankruptcy laws by
virtue of the Executive's status as an employee of the Company.
(b) NO OTHER SEVERANCE BENEFITS. Except as specifically set forth in
this Agreement, the Executive covenants and agrees that he shall not be entitled
to any other form of severance benefits from the Company, including, without
limitation, benefits otherwise payable under any of the Company's regular
severance policies, in the event his employment hereunder ends for any reason
and, except with respect to obligations of the Company expressly provided for
herein, the Executive unconditionally releases the Company and its subsidiaries
and affiliates, and their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with his employment or the termination
thereof.
(c) TAX WITHHOLDING. Payments to the Executive of all compensation
contemplated under this Agreement shall be subject to all applicable tax
withholding.
(d) NOTICES. Any notice hereunder by either party to the other shall
be given in writing by personal delivery, or certified mail, return receipt
requested, or (if to the Company) by telex or facsimile, in any case delivered
to the applicable address set forth below:
(i) To the Company: Getty Communications plc
101 Bayham Street
London NW1 OAG
England
With copies to:
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13
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: John J. Cannon, III, Esq.
Shearman & Sterling
555 California Street
Suite 2000
San Francisco, CA 94104
Attn.: Christopher D. Dillon, Esq.
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ England
Attn.: Michael Francies
(ii) To the Executive: Mark H. Getty
Number 7, The Lanterns
Bridge Lane
Battersea, London SW11
or to such other persons or other addresses as either party may specify to
the other in writing.
(e) REPRESENTATION BY THE EXECUTIVE. The Executive represents and
warrants that his entering into this Agreement does not, and that his
performance under this Agreement and consummation of the transactions
contemplated hereby will not, violate the provisions of any agreement or
instrument to which the Executive is a party, or any decree, judgment or order
to which the Executive is subject, and that this Agreement constitutes a valid
and binding obligation of the Executive in accordance with its terms. Breach of
this representation will render all of the Company's obligations under this
Agreement void AB INITIO.
(f) LIMITED WAIVER. The waiver by the Company or the Executive of a
violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(g) ASSIGNMENT; ASSUMPTION OF AGREEMENT. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Executive in respect of any claim, debt,
obligation or similar process. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
<PAGE>
14
(h) AMENDMENT; ACTIONS BY THE COMPANY. This Agreement may not be
amended, modified or canceled except by written agreement of the Executive and
the Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; PROVIDED, HOWEVER, that by resolution duly adopted in accordance with
this Section 7(h), the Board may delegate its responsibilities hereunder to one
or more of its members other than the Executive.
(i) SEVERABILITY. If any term or provision hereof is determined to
be invalid or unenforceable in a final court or arbitration proceeding, (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the invalid
or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(j) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of England and the parties to this Agreement hereby
submit to the jurisdiction of the English courts.
(k) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby and supersedes all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(l) HEADINGS. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not control
the meaning or interpretation of any provisions of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
(n) DISCIPLINARY AND GRIEVANCE PROCEDURES. For statutory purposes,
there is no formal disciplinary procedure in relation to the Executive's
employment. The Executive shall be expected to maintain the highest standards
of integrity and behavior. If the Executive has any grievance in relation to
his employment or is not satisfied with any disciplinary procedure taken in
relation to him he may apply in writing within 14 days of that decision to the
Board whose decision shall be final. The foregoing shall not be construed,
however, to limit the Executive's remedies at law or otherwise.
<PAGE>
15
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first written above.
GETTY COMMUNICATIONS PLC
By:
--------------------------------------
Name:
Title:
EXECUTIVE
--------------------------------------
Mark H. Getty
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 9th day of February, 1998, by and
between GETTY IMAGES, INC., a Delaware corporation (the "COMPANY"), whose
principal executive offices are located at 500 North Michigan Avenue, Suite
1700, Chicago, Illinois 60611 and MARK TORRANCE, an individual whose mailing
address is 2013 Fourth Avenue, Seattle, Washington 98121 (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Executive is presently serving as Chairman of the Board
and Chief Executive Officer of PhotoDisc, Inc. ("PHOTODISC"); and
WHEREAS, Getty Communications, plc, the predecessor to the Company, is
a party to a merger agreement dated as of September 15, 1997 (the "MERGER
AGREEMENT"), pursuant to which PhotoDisc shall merge into a merger subsidiary of
the Company; and
WHEREAS, the Company seeks to employ the Executive and the Executive
seeks to become employed by the Company; and
WHEREAS, both parties desire that the terms and conditions of the
Executive's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) GENERAL. The Company hereby employs the Executive, effective as
of the closing of the transactions contemplated by the Merger Agreement (the
"EFFECTIVE DATE"), and the Executive agrees upon the terms and conditions herein
set forth to serve, effective as of the Effective Date, as Co-Chairman of the
Board of Directors of the Company (the "BOARD"). In such capacity, the
Executive shall report directly and only to the Board. The Executive's
principal place of business shall be Seattle, Washington.
(b) SERVICES AND DUTIES. For so long as the Executive is employed
by the Company, the Executive shall devote his full business time to the
performance of his duties hereunder; shall faithfully serve the Company;
shall in all respects conform to and comply with the lawful and good faith
directions and instructions given to him by the Board as the same are
consistent with his status and the terms hereof; and shall use his best
efforts to promote and serve the interests of the Company. Specifically, the
Executive shall share equal duties and authority with his Co-Chairman and
Chief Executive Officer for the financial performance of
<PAGE>
2
the Company, the management of the Company's shareholders, developing
strategic alliances and partnerships and maximizing their commercial
benefits, communications to both internal and external audiences and external
relationships with business, industry and academic communities and strategic
leadership. In addition, the Executive shall be jointly responsible with his
Co-Chairman for chairing the Board and managing relationships with members
and provide leadership for the research and development function of the
Company. The Executive shall have a special emphasis on technology and
corporate culture. It is expressly acknowledged that the Executive may be
required to travel to London, England in order to perform his duties
hereunder.
(c) NO OTHER EMPLOYMENT. Except as provided below, for so long as
the Executive is employed by the Company, he shall not, directly or indirectly,
render services to any other person or organization for which he receives
compensation without the prior approval of the Board. No such approval will be
required if the Executive seeks to perform inconsequential services without
direct compensation therefor in connection with the management of personal
investments or in connection with the performance of charitable and civic
activities, provided that such activities do not contravene the provisions of
Section 6 hereof. In addition, the Company expressly agrees that the Executive
may continue his management activities relating to the Torrance Real Estate
Partnership, WestLake Marina, PDI LLP, and Marshall Building LLP; PROVIDED,
HOWEVER, that the foregoing shall not compromise in any way the Executive's
obligation to carry out his duties hereunder as set forth in Section 1(b).
(d) BOARD MEMBERSHIP. The Executive shall be a member of the Board
and of the Executive Committee. In addition, the Executive shall be entitled to
attend the meetings of all other committees of the Board, such as the Audit
Committee and the Compensation Committee, and shall be a member of any strategy
committee of the Board. After his initial term as director, the Company shall
nominate the Executive for reelection to the Board and shall use all reasonable
efforts to cause the Executive to be elected to such term.
2. TERM OF EMPLOYMENT. The term of the Executive's employment under
this Agreement (the "TERM") shall commence on the Effective Date and continue
until the second anniversary date of the Effective Date. Thereafter, the Term
shall continue until it is terminated by either party giving the other at least
twelve months' written notice of termination of the Term, with no such notice to
be given so as to expire before the third anniversary of the Effective Date.
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions of
this Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Term as compensation for all services
rendered hereunder:
(a) SALARY. The Company shall pay to the Executive an annual salary
(the "SALARY") at the initial rate of $275,000 (retroactive to February 1,
1998), payable to the
<PAGE>
3
Executive in accordance with the normal payroll practices of the Company for
its executive officers as are in effect from time to time. The amount of the
Executive's Salary shall be reviewed annually by the Board on or about April
1 of each year during the Term beginning in the 1999 calendar year and may be
increased, but not decreased below such amount, on the basis of such review
and then-current market practices.
(b) ANNUAL BONUS. During the Term, the Executive shall be eligible
for each calendar year within the Term to participate in an annual incentive
bonus program established by the Company in accordance with the policies of
the Company, its subsidiaries and affiliates (hereinafter, collectively the
"GROUP") and subject to such terms and conditions as may be approved annually
by the Compensation Committee of the Board (the "COMPENSATION COMMITTEE").
Under the terms of the annual incentive bonus program, the Executive will be
afforded the opportunity to earn up to 50% of his Salary (the "BONUS") in
effect for the applicable calendar year if the Company achieves the
performance targets established by the Compensation Committee for that year,
to be paid on a pro-rata basis in the event that the Executive is employed
for less than twelve months of any calendar year within the Term (for
purposes of determining the 1998 Bonus, the Executive shall be deemed to have
commenced employment as of January 1, 1998).
(c) STOCK OPTIONS. Effective as of the Closing Date (as defined
in the Merger Agreement), the Company shall grant the Executive an option
(the "DEAL OPTION") to purchase 50,000 shares of the common stock of the
Company pursuant to the terms of the Company's 1998 Stock Incentive Plan (the
"OPTION PLAN"). The per share exercise price of the Deal Option shall equal
the fair market value of a share of Common Stock on the Closing Date, as
determined in accordance with the terms of the Option Plan. The Deal Option
shall vest and become exercisable in full on February 1, 1999. Also
effective as of the Effective Date, the Company shall grant the Executive an
option (the "OPTION") to purchase 500,000 shares of the common stock of the
Company pursuant to the terms of the Option Plan. The per share exercise
price of the Option shall equal the fair market value of a share of Common
Stock on the Closing Date, as determined in accordance with the terms of the
Option Plan. The Option shall vest and become exercisable as to 25% on
February 1, 1999; the remainder of the Option shall vest ratably on the first
day of each month over the following three years. Both the Deal Option and
the Option shall be subject to the terms of the Option Plan and to such other
terms and conditions as may be specified by the Compensation Committee in the
form of a standard option agreement between the Company and the Executive.
In the event that the Executive ceases to be an employee of the Company for
any reason other than (i) if he is terminated for "Cause", "Disability" or on
account of his death, or (ii) if he resigns without "Good Reason" (as each
such term is defined below), the vesting under both the Deal Option and
Option shall accelerate and all options thereunder shall become immediately
exercisable and the Executive shall be entitled to retain such options, for
the remainder of their respective terms, as if he had remained an employee of
the Company. In the event that the Executive ceases to be an employee of the
Company because he is terminated for Cause or resigns without Good Reason,
the Executive shall be entitled to retain the then-vested portion of such
<PAGE>
4
options as if he had remained an employee of the Company, but the unvested
portion of such options shall lapse. In the event of the Executive's death
or Disability (as defined below), the vesting under both the Deal Option and
Option shall accelerate and all options thereunder shall become immediately
exercisable and shall remain outstanding for a period of twelve (12) months.
(d) PENSION SCHEME AND LIFE INSURANCE. During the Term, the
Company shall pay, in addition to amounts payable under Sections 3(a) and (b)
above, an amount equal to 20% of the Executive's Salary through equal monthly
contributions in arrears, which amounts shall either be paid to the Executive
as additional compensation or, to the extent the Executive so elects with
respect to any such payments not yet earned by him, be paid into a
non-qualified deferred compensation arrangement that will enable him to
effectively defer such compensation for U.S. federal income tax purposes. In
addition, during the Term, the Company shall maintain a life insurance policy
on the life of the Executive for the benefit of the Executive's estate
providing a benefit equal to the greater of (i) $750,000 and (ii) four times
the Executive's Salary (and maximum Bonus).
(e) COMPANY AUTOMOBILE. During the Term, the Company will provide
the Executive with an automobile of such make and model as the Board deems
appropriate and suitable for his status with the Company for his sole use and
will reimburse the Executive for all costs and expenses incurred by the
Executive in connection with the use of that vehicle, or, at the Executive's
sole discretion, the Company shall pay an equivalent amount of such
perquisite to him as additional compensation.
(f) OTHER SPECIFIC BENEFITS. The Company shall install and pay
the rental and unit charges attributable to a dedicated business telephone
and/or ISDN line at his home. During the Term, the Company shall also pay
for the Executive's purchase, line charges, rental and unit charges for his
mobile phones. The Company shall provide the Executive with a fax machine
and computer modem to be installed at the Executive's home and a suitable
desktop and laptop computer, as well as all ancillary equipment and
maintenance therefor. In addition, the Company will pay for the cost of the
Executive's membership in or subscriptions to the internet service provider
of his choice, and such professional memberships and journals as are
appropriate to his duties under this Agreement.
(g) EXPENSES. The Company shall pay or reimburse the Executive
for all reasonable out-of-pocket expenses incurred by the Executive in
connection with his employment hereunder and expressly agrees that it will
reimburse the Executive for his business class airfare on international
flights which are over five hours in duration taken in connection with
Company business. Such expenses shall be paid upon the periodic submission
of invoices and shall be paid reasonably promptly after the date of such
invoice. The reimbursement of expenses under this Section 3(g) shall be
subject to the Executive's providing the Company with such documentation of
the expenses as the Company may from time to time reasonably request. The
Company also agrees that, in the event that the Executive is required
<PAGE>
5
to travel abroad in connection with the performance of his duties hereunder
for a period in excess of two weeks, the Company will reimburse the Executive
for the airfare, hotel and other transportation expenses only of his spouse
and minor children so that they may accompany him on such trip.
(h) WELFARE AND FRINGE BENEFITS. During the Term, the Executive
shall be eligible to participate in the Company's medical and disability plans
applicable to senior officers of the Company in accordance with the terms of
such plans as in effect from time to time. The Executive shall participate in
any disability plan of the Company that replaces his Salary under this Agreement
in the event that he suffers a Disability (as defined in Section 4(b) below).
(i) LONG-TERM INCENTIVE PROGRAM. During the Term, the Executive
shall participate in all long-term incentive plans and programs of the Company
that are applicable to its senior officers in accordance with their terms and in
a manner consistent with his position with the Company.
(j) HOLIDAYS. In addition to the usual public and bank holidays, the
Executive shall be entitled to thirty days' paid vacation annually, which shall
be taken at such times as are approved by the Board or the Executive Committee.
4. TERMINATION OF EMPLOYMENT. Subject to the notice and other
provisions of this Section 4, as well as the provisions of Section 5.13 of the
Bylaws of the Company, the Company shall have the right to terminate the
Executive's employment hereunder, and he shall have the right to resign, at any
time for any reason or for no stated reason.
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. (i) If,
prior to the expiration of the Term, the Executive's employment is terminated by
the Company for Cause or if the Executive resigns from his employment hereunder
other than for Good Reason, he shall be entitled to payment of the pro rata
portion of his Salary, accrued Bonus and supplemental pension contributions as
described in Section 3(d) through and including the date of termination or
resignation as well as any unreimbursed expenses. Except to the extent required
by the terms of any applicable compensation or benefit plan or program or as
otherwise required by applicable law, the Executive shall have no rights under
this Agreement or otherwise to receive any other compensation or to participate
in any other plan, program or arrangement after such termination or resignation
of employment with respect to the year of such termination or resignation and
later years.
(ii) Termination for "CAUSE" shall mean termination of the Executive's
employment with the Company because of (A) willful or persistently repeated
material non-performance of the Executive's duties to the Company (other than by
reason of the incapacity of the Executive due to physical or mental illness)
after notice by the Board of such failure and
<PAGE>
6
the Executive's non-performance and continued, willful or persistently
repeated material non-performance after such notice, (B) the indictment of
the Executive for a felony offense, (C) fraud against the Group or any
willful misconduct that brings the reputation of the Group into serious
disrepute or causes the Executive to cease to be able to perform his duties,
(D) any other material breach by the Executive of any material term of this
Agreement, or (E) the Executive files for personal bankruptcy under the
United States Bankruptcy Code.
(iii) Termination of the Executive's employment for Cause shall be
communicated by delivery to the Executive of a written notice from the Company
stating that the Executive has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Executive without Good Reason shall be the date specified in
a written notice of resignation from the Executive to the Company. The
Executive shall provide at least 90 days' advance written notice of resignation
without Good Reason.
(b) INVOLUNTARY TERMINATION. (i) If, prior to the expiration of the
Term, the Company terminates the Executive's employment for any reason other
than Disability or Cause or Executive resigns from his employment hereunder for
Good Reason (collectively hereinafter referred to as an "INVOLUNTARY
TERMINATION"), the Company shall pay to the Executive his Salary and Bonus
accrued up to and including the date of such Involuntary Termination, as well as
any unreimbursed expenses. In addition, the Company shall pay to the Executive
as severance (the "SEVERANCE PAYMENTS") within 30 days after the date of
termination a lump sum payment in an amount equal to the sum of his Salary, at
the rate in effect immediately prior to such Involuntary Termination, plus his
maximum Bonus as described in Section 3(b) and his supplemental pension
contributions as described in Section 3(d), in each case for the remainder of
the Term. Anything in this Agreement to the contrary notwithstanding, no
amounts shall be payable under this Section 4(b) if the Executive's employment
with the Company ends at the expiration of the Term in accordance with
Section 2.
(ii) In the event of the Executive's Involuntary Termination, the
Executive shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided to the Executive pursuant to Section 3(h)
above at the time of such Involuntary Termination for a period equal to the
longer of (A) two years following the Involuntary Termination or (B) the
remainder of the Term (the "CONTINUATION PERIOD"). Anything herein to the
contrary notwithstanding, the Company shall have no obligation to continue to
maintain during the Continuation Period any plan or program solely as a result
of the provisions of this Agreement but this obligation shall apply in respect
of any substitute or replacement plan.
(iii) Resignation for "GOOD REASON" shall mean resignation by
Executive because of (A) an adverse and material change in the Executive's
duties, titles or reporting responsibilities, (B) a material breach by the
Company of any term of the Agreement, (C) a reduction in the Executive's Salary
or bonus opportunity or the failure of the Company to pay
<PAGE>
7
the Executive any material amount of compensation when due, (D) failure by
the Company to nominate the Executive for reelection to the Board during the
Term, (E) the failure of the Executive to be reelected to the Board during
the Term, or (F) a relocation of the Executive's principal place of business
without his prior written consent. The Company shall have 30 business days
from the date of receipt of such notice to effect a cure of the material
breach described therein and, upon cure thereof by the Company to the
reasonable satisfaction of the Executive, such material breach shall no
longer constitute Good Reason for purposes of this Agreement.
(iv) The date of termination of employment without Cause shall be the
date specified in a written notice of termination to the Executive. The date of
resignation for Good Reason shall be the date specified in a written notice of
resignation from the Executive to the Company; PROVIDED, HOWEVER, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(iii) above has expired without the Company having corrected, to the
reasonable satisfaction of the Executive, the event or events subject to cure.
(c) TERMINATION FOLLOWING A CHANGE IN CONTROL. In the event of a
Change in Control (defined as it is for purposes of the Option Plan), the
Executive shall have the right to resign his employment with the Company and
will be entitled to receive within 30 days a lump sum payment in an amount equal
to the Executive's Salary, at the rate in effect immediately prior to such
Involuntary Termination, plus his maximum Bonus as described in Section 3(b) and
his supplemental pension contributions as described in Section 3(d), in each
case for the remainder of the Term. In addition, the Executive shall continue to
participate on the same terms and conditions as are in effect immediately prior
to such resignation in the Company's health and medical plans provided to the
Executive pursuant to Section 3(h) above at the time of such resignation for the
a period equal to the longer of (A) two years following the resignation or (B)
the remainder of the Term (the "CIC CONTINUATION PERIOD"). Anything herein to
the contrary notwithstanding, the Company shall have no obligation to continue
to maintain during the CIC Continuation Period any plan or program solely as a
result of the provisions of this Agreement but this obligation shall apply in
respect of any substitute or replacement plan.
(d) TERMINATION DUE TO DISABILITY. In the event of the Executive's
Disability (as hereinafter defined), the Company shall be entitled to terminate
his employment upon providing the Executive with six months' prior written
notice. If the Company terminates the Executive's employment due to Disability,
the Executive shall be entitled to receive, for the remainder of the Term, his
Salary at the rate in effect immediately prior to his Disability, plus his
maximum Bonus as described in Section 3(b) and supplemental pension
contributions as described in Section 3(d), less any sums paid to the Executive
under any disability plan of the Company. In addition, the Executive shall
continue to be covered by the Company's health and medical benefit plans as
described in Section 3(h) for the longer of (A) two years or (B) the remainder
of the Term. As used in this Section 4(d), the term "DISABILITY" shall mean a
physical or mental incapacity that substantially prevents the Executive from
performing his
<PAGE>
8
duties hereunder and that has continued for at least six of the last twelve
months and that can reasonably be expected to continue indefinitely. Any
dispute as to whether or not the Executive is disabled within the meaning of
the preceding sentence shall be resolved by a physician reasonably
satisfactory to the Executive and the Company, and the determination of such
physician shall be final and binding upon both the Executive and the Company.
(e) DEATH. In the event of the Executive's death, the Executive's
Beneficiary shall be entitled to receive within 30 days a lump sum payment in an
amount equal to the Executive's Salary, at the rate in effect immediately prior
to his death, plus his maximum Bonus as described in Section 3(b) and
supplemental pension contributions as described in Section 3(d), in each case
for the remainder of the Term, less any death benefits which are provided to the
Executive's Beneficiary under the terms of any plan, program or arrangement
referred to in Section 3(d) or 3(h) applicable to the Executive at the time of
death. In addition, the Executive's spouse and then-eligible dependents shall
continue to participate on the same terms and conditions as are in effect
immediately prior to such termination or resignation in the Company's health and
medical plans provided pursuant to Section 3(h) above at the time of the
Executive's death for a period equal to the longer of (A) two years following
his death or (B) the remainder of the Term (the "DEATH CONTINUATION PERIOD").
Anything herein to the contrary notwithstanding, the Company shall have no
obligation to continue to maintain during the Death Continuation Period any plan
or program solely as a result of the provisions of this Agreement but this
obligation shall apply in respect of any substitute or replacement plan.
(f) BENEFICIARY. For purposes of this Agreement, except as provided
in Section 3(d) or 3(h), "BENEFICIARY" shall mean the person or persons
designated in writing by the Executive to receive benefits under a plan, program
or arrangement or to receive the balance of the Severance Payments, if any, in
the event of the Executive's death, or, if no such person or persons are
designated by the Executive, the Executive's estate. No Beneficiary designation
shall be effective unless it is in writing and received by the Company prior to
the date of the Executive's death.
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the
payments made hereunder would constitute a "PARACHUTE PAYMENT" (as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), and the net after-tax amount of the parachute payment is less than the
net after-tax amount if the aggregate payments to be made to the Employee were
three times his "BASE AMOUNT" (as defined in Section 280G(b)(3) of the Code),
less $1.00, then the aggregate of the amounts constituting the parachute payment
shall be reduced to an amount that will equal three times the base amount, less
$1.00. The determinations to be made with respect to this Section 5 shall be
made by an independent accounting firm of national standing (other than the
Company's regular auditors). The accounting firm shall be paid by the Company
for its services performed hereunder.
<PAGE>
9
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT. For so long as the Executive is
employed by the Company, and in circumstances where the Executive receives a
payment pursuant to Section 4(b), 4(c) or 4(d) or his employment is
terminated for Cause, and in no other circumstances, continuing for the
remainder of the Term (such period being referred to hereinafter as the
"RESTRICTED PERIOD"), the Executive shall not, without the prior written
consent of the Board, directly or indirectly, own an interest in, manage,
operate, join, control, lend money or render financial or other assistance to
or participate in or be connected with, as an officer, employee, partner,
stockholder, consultant or otherwise, any individual, partnership, firm,
corporation or other business organization or entity that competes with the
Group by providing any goods or services provided or under development by the
Group at the effective date of the Executive's termination of employment
under this Agreement; PROVIDED, HOWEVER, that this Section 6(a) shall not
proscribe the Executive's ownership, either directly or indirectly, of either
less than five percent of any class of securities which are listed on a
national securities exchange or quoted on the automated quotation system of
the National Association of Securities Dealers, Inc. or any limited
partnership investment over which the Executive has no control.
(b) NO INTERFERENCE. During the Restricted Period, in
circumstances where the Executive receives a payment pursuant to Section
4(b), 4(c) or 4(d) or his employment is terminated for Cause, and in no other
circumstances, the Executive shall not, whether for his own account or for
the account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), intentionally endeavor to
entice away from the Group, or otherwise interfere with the relationship of
the Group with, any key person or team who is employed by or otherwise
engaged to perform services for the Group or any key person or team or entity
who is, or was within the then most recent twelve-month period, a customer,
client or supplier of the Group.
(c) SECRECY. The Executive recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder, he may acquire confidential information
and trade secrets concerning the operation of the Group, the use or
disclosure of which could cause the Group substantial losses and damages
which could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, the Executive covenants and agrees with the Company
that he will not at any time, except in performance of the Executive's
obligations to the Company hereunder or with the prior written consent of the
Board, directly or indirectly disclose to any person any secret or
confidential information that he may learn or has learned by reason of his
association with the Group. The term "CONFIDENTIAL INFORMATION" means any
information not previously disclosed to the public or to the trade by the
Group with respect to the Group's, products, facilities and methods, trade
secrets and other intellectual property, systems, procedures, manuals,
confidential reports, product price lists, customer lists, financial
information
<PAGE>
10
(including the revenues, costs or profits associated with any of
the Group's products), business plans, prospects or opportunities.
(d) EXCLUSIVE PROPERTY. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Group. All business records, papers and documents kept or made by the
Executive relating to the business of the Group shall be and remain the
property of the Group. Upon the termination of his employment with the
Company or upon the request of the Company at any time, the Executive shall
promptly deliver to the Company, and shall not without the consent of the
Board retain copies of, any written materials not previously made available
to the public, or records and documents made by the Executive or coming into
his possession concerning the business or affairs of the Group; PROVIDED,
HOWEVER, that subsequent to any such termination, the Company shall provide
the Executive with copies (the cost of which shall be borne by the Executive)
of any documents which are requested by the Executive and which the Executive
has determined in good faith are (i) required to establish a defense to a
claim that the Executive has not complied with his duties hereunder or (ii)
necessary to the Executive in order to comply with applicable law.
(e) ASSIGNMENT OF DEVELOPMENTS. All "DEVELOPMENTS" (as defined
below) that were or are at any time made, conceived or suggested by
Executive, whether acting alone or in conjunction with others, during
Executive's employment with the Group shall be the sole and absolute property
of the Group, free of any reserved or other rights of any kind on the part of
Executive. During Executive's employment and, if such Developments were made,
conceived or suggested by Executive during his employment with the Group,
thereafter, Executive shall promptly make full disclosure of any such
Developments to the Group and, at the Group's cost and expense, do all acts
and things (including, among others, the execution and delivery under oath of
patent and copyright applications and instruments of assignment) deemed by
the Group to be necessary or desirable at any time in order to effect the
full assignment to the Group of Executive's right and title, if any, to such
Developments. For purposes of this Agreement, the term "DEVELOPMENTS" shall
mean all data, discoveries, findings, reports, designs, inventions,
improvements, methods, practices, techniques, programs, concepts, and ideas,
whether or not patentable, relating to the activities of the Group of which
Executive is as of the date of this Agreement aware or of which Executive
becomes aware at any time during the Term, excluding any Development for
which no equipment, supplies, facilities or confidential information of the
Group was used and which was developed entirely on Executive's own time,
unless (i) the Development relates directly to the business of the Group,
(ii) the Development relates to actual or demonstrably anticipated research
or development of the Group, or (iii) the Development results from any work
performed by Executive for the Group (the foregoing is agreed to satisfy the
written notice and other requirements of Section 49.44.140 of the Revised
Code of Washington). It is understood that for purposes of this Section
6(e), the fact that an invention was created using equipment provided by the
Company for the Executive's personal use shall not create a presumption that
such invention is a "Development."
<PAGE>
11
(f) INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of
the covenants contained in this Section 6 may result in material irreparable
injury to the Group for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of such a breach or threat thereof, the Company shall be
entitled to obtain a temporary restraining order and/or a preliminary or
permanent injunction restraining the Executive from engaging in activities
prohibited by this Section 6 or such other relief as may be required to
specifically enforce any of the covenants in this Section 6. Without
intending to limit the remedies available to the Executive, the Executive
shall be entitled to seek specific performance of the Company's obligations
under this Agreement.
(g) The Executive shall during the continuance of his employment
(and shall procure that his spouse or partner and his minor children shall
comply) comply with all applicable rules of law, stock exchange regulations
and codes of conduct applicable to employees, officers and directors of the
Company and any company which is a holding company or a subsidiary of the
Company or a subsidiary of the Company's holding company (an "ASSOCIATED
COMPANY") for the time being in force in relation to dealings in the shares,
debentures and other securities of the Company or any Associated Company or
any unpublished price sensitive information affecting the securities of any
other company with which the Company has business dealings (provided that the
Executive shall be entitled to exercise any options granted to him under any
share option scheme established by the Company or any Associated Company
subject to the rules of such scheme).
(h) The Executive shall in relation to any dealings in securities
of overseas companies comply with all laws of any foreign state affecting
dealings in the securities of such companies and all regulations of any
relevant stock exchange on which such dealings take place.
(i) During the continuance of his employment, the Executive shall
observe the terms of any policy issued by the Company in relation to
payments, rebates, discounts, gifts, entertainment or other benefits
("GRATUITIES") from any third party in respect of any business transacted or
proposed to be transacted (whether or not by him) by or on behalf of the
Group or any Associated Company.
7. GENERAL PROVISIONS.
(a) SOURCE OF PAYMENTS. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation of
assets made, to assure payment. The Executive shall have no right, title or
interest whatever in or to any investments which the Company may make to aid
the Company in meeting its obligations hereunder. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right
<PAGE>
12
of an unsecured creditor of the Company; PROVIDED, HOWEVER, that this
provision shall not be deemed to waive or abrogate any preferential or other
rights to payment accruing to the Executive under applicable bankruptcy laws
by virtue of the Executive's status as an employee of the Company.
(b) NO OTHER SEVERANCE BENEFITS. Except as specifically set forth in
this Agreement, the Executive covenants and agrees that he shall not be entitled
to any other form of severance benefits from the Company, including, without
limitation, benefits otherwise payable under any of the Company's regular
severance policies, in the event his employment hereunder ends for any reason
and, except with respect to obligations of the Company expressly provided for
herein, the Executive unconditionally releases the Company and its subsidiaries
and affiliates, and their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with his employment or the termination
thereof.
(c) TAX WITHHOLDING. Payments to the Executive of all compensation
contemplated under this Agreement shall be subject to all applicable tax
withholding.
(d) NOTICES. Any notice hereunder by either party to the other shall
be given in writing by personal delivery, or certified mail, return receipt
requested, or (if to the Company) by telex or facsimile, in any case delivered
to the applicable address set forth below:
(i) To the Company: Getty Images, Inc.
500 North Michigan Avenue
Suite 1700
Chicago, Illinois 60611
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: John J. Cannon, III, Esq.
Shearman & Sterling
555 California Street
San Francisco, CA 94104
Attn.: Christopher D. Dillon, Esq.
Clifford Chance
<PAGE>
13
200 Aldersgate Street
London EC1A 4JJ England
Attn.: Michael Francies
(ii) To the Executive: Mark Torrance
2013 Fourth Avenue
Seattle, Washington 98121
or to such other persons or other addresses as either party may specify to
the other in writing.
(e) REPRESENTATION BY THE EXECUTIVE. The Executive represents and
warrants that his entering into this Agreement does not, and that his
performance under this Agreement and consummation of the transactions
contemplated hereby will not, violate the provisions of any agreement or
instrument to which the Executive is a party, or any decree, judgment or
order to which the Executive is subject, and that this Agreement constitutes
a valid and binding obligation of the Executive in accordance with its terms.
Breach of this representation will render all of the Company's obligations
under this Agreement void AB INITIO.
(f) LIMITED WAIVER. The waiver by the Company or the Executive of
a violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(g) ASSIGNMENT; ASSUMPTION OF AGREEMENT. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge,
pledge, hypothecation or setoff by the Executive in respect of any claim,
debt, obligation or similar process. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business or assets of the Company to
assume expressly and to agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place.
(h) AMENDMENT; ACTIONS BY THE COMPANY. This Agreement may not be
amended, modified or canceled except by written agreement of the Executive
and the Company. Any and all determinations, judgments, reviews,
verifications, adjustments, approvals, consents, waivers or other actions of
the Company required or permitted under this Agreement shall be effective
only if undertaken by the Company pursuant to authority granted by a
resolution duly adopted by the Board; PROVIDED, HOWEVER, that by resolution
duly adopted in accordance with this Section 7(h), the Board may delegate its
responsibilities hereunder to one or more of its members other than the
Executive.
(i) SEVERABILITY. If any term or provision hereof is determined
to be invalid or unenforceable in a final court or arbitration proceeding,
(i) the remaining terms and provisions hereof shall be unimpaired and (ii)
the invalid or unenforceable term or provision shall be deemed replaced by a
term or provision
<PAGE>
14
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(j) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (determined
without regard to the choice of law provisions thereof).
(k) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby and supersedes all prior agreements and understandings of the
parties with respect to the subject matter hereof.
(l) HEADINGS. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not
control the meaning or interpretation of any provisions of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both
such counterparts shall together constitute one and the same document.
(n) DISCIPLINARY AND GRIEVANCE PROCEDURES. For statutory
purposes, there is no formal disciplinary procedure in relation to the
Executive's employment. The Executive shall be expected to maintain the
highest standards of integrity and behavior. If the Executive has any
grievance in relation to his employment or is not satisfied with any
disciplinary procedure taken in relation to him, he may apply in writing
within 14 days of that decision to the Board, whose decision shall be final.
The foregoing shall not be construed, however, to limit the Executive's
remedies at law or otherwise.
<PAGE>
15
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first written above.
GETTY COMMUNICATIONS, INC.
By:
--------------------------------------
Name:
Title:
EXECUTIVE
--------------------------------------
Mark Torrance
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 9th day of February, 1998, by and
between GETTY COMMUNICATIONS, PLC, a company organized under the laws of England
and Wales (the "COMPANY"), whose registered office is at 101 Bayham Street,
London NW1 OAG England and which is a subsidiary of Getty Images, Inc., a
Delaware corporation (the "PARENT"), and JONATHAN D. KLEIN, an individual
residing at 34 Crediton Hill, London NW6 1HP England (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Executive is presently serving as the Chief Executive
Officer of Getty Communications, plc ("GETTY"); and
WHEREAS, Getty is a party to a merger agreement dated as of September
15, 1997 (the "MERGER AGREEMENT"), pursuant to which PhotoDisc, Inc. shall merge
into a merger subsidiary of the Parent and, following the consummation of which,
the Company shall be a subsidiary of the Parent; and
WHEREAS, in connection with his performance of services in the United
Kingdom, the Company seeks to continue to employ the Executive and the Executive
seeks to continue to be employed by the Company; and
WHEREAS, both parties desire that the terms and conditions of the
Executive's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) GENERAL. The Company hereby employs the Executive, effective as
of the closing of the transactions contemplated by the Merger Agreement (the
"EFFECTIVE DATE"), and the Executive's period of continuous employment for
statutory purposes began on 14 March, 1995, and the Executive agrees upon the
terms and conditions herein set forth to serve, effective as of the Effective
Date, as Sole Group Chief Executive. In such capacity, the Executive shall
report directly and only to the Executive Committee, which in turn reports
directly to the Board of Directors of the Parent (the "BOARD"). The Executive's
principal place of business shall be 101 Bayham Street, London NW1 OAG England,
and this Agreement shall only be in respect of the Executive's services to be
performed in the United Kingdom.
<PAGE>
2
(b) SERVICES AND DUTIES. For so long as the Executive is employed
hereunder, and except as otherwise expressly provided in Section 1(c) below, the
Executive shall devote his full business time to the performance of his duties
hereunder; shall faithfully serve the Company; shall in all respects conform to
and comply with the lawful and good faith directions and instructions given to
him by the Executive Committee and the Board as the same are consistent with his
status and the term hereof; and shall use his best efforts to promote and serve
the interests of the Company. Specifically, the Executive shall be solely
responsible for the day-to-day operational management of the Company, its
subsidiaries and affiliates (hereinafter, collectively the "GROUP"), provision
of operational direction to the Senior Management Team ("SMT") and oversight of
corporate operations, sales, marketing and finance, management of the SMT, and
professional development of all direct reports. In addition, the Executive shall
share equal duties and authority with the Co-Chairmen for the financial
performance of the Group, the management of the Company's shareholders,
developing strategic alliances and partnerships and maximizing their commercial
benefits, communications to both internal and external audiences and external
relationships with business, industry and academic communities, and strategic
leadership. All employees of the Group (other than the Co-Chairmen) shall
report, either directly or indirectly, to the Executive.
(c) NO OTHER EMPLOYMENT. Except as provided below, for so long as
the Executive is employed by the Company, he shall not, directly or indirectly,
render services to any other person or organization for which he receives
compensation without the prior approval of the Board. No such approval will be
required if the Executive seeks to perform inconsequential services without
direct compensation therefor in connection with the management of personal
investments or in connection with the performance of charitable and civic
activities, provided that such activities do not contravene the provisions of
Section 6 hereof. In addition, the Company expressly agrees that the Executive
may continue to act as a non-executive director of The Conservation Corporation
Africa Limited and of Getty Investments LLC. The Company, however, recognizes
that the Executive shall be required to provide services for approximately 60
percent of his working time under an Employment Agreement entered into between
the Parent and the Executive, dated as of the date hereof, which agreement
relates to the business and affairs of any other company in the Group for which
he is required to perform duties.
(d) BOARD MEMBERSHIP. The Executive shall be a member of the Board
and of the Executive Committee. In addition, the Executive shall be entitled to
attend the meetings of all other committees of the Board, such as the Audit
Committee and the Compensation Committee, and shall be a member of any strategy
committee of the Board. After his initial term as director, the Company shall
nominate the Executive for reelection to the Board and shall use all reasonable
efforts to cause the Executive to be elected to such term.
(e) PAYMENT FOR SERVICES TO BE PERFORMED; OBLIGATIONS. Compensation
to be paid under this Agreement shall be made with regard only to the
Executive's services to be
<PAGE>
3
provided to the Company within the United Kingdom. Any payments made with
respect to services to be provided by the Executive outside of the United
Kingdom shall be made under the Employment Agreement with the Parent
regarding the provision of the Executive's services outside the United
Kingdom, dated as of the date hereof.
2. TERM OF EMPLOYMENT. The term of the Executive's employment under
this Agreement (the "TERM") shall commence on the Effective Date and continue
until the second anniversary date of the Effective Date. Thereafter, the Term
shall continue until it is terminated by either party giving the other at least
twelve months' written notice of termination of the Term, with no such notice to
be given so as to expire before the third anniversary of the Effective Date.
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions of
this Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Term as compensation for all services
rendered hereunder:
(a) SALARY. The Company shall pay to the Executive an annual salary
(the "SALARY") at the initial rate of USD $130,000 (retroactive to February 1,
1998), payable to the Executive in accordance with the normal payroll practices
of the Company for its executive officers as are in effect from time to time.
The amount of the Executive's Salary shall be reviewed annually by the Board on
or about April 1 of each year during the Term beginning in the 1999 calendar
year and may be increased, but not decreased below such amount, on the basis of
such review and then-current market practices. It is acknowledged that the
Executive's Salary that is payable hereunder is to be paid in respect of the
services he performs in the United States and otherwise outside the United
Kingdom.
(b) ANNUAL BONUS. During the Term, the Executive shall be eligible
for each calendar year that begins within the Term to participate in an annual
incentive bonus program established by the Company in accordance with the
policies of the Group and subject to such terms and conditions as may be
approved annually by the Compensation Committee of the Board (the "COMPENSATION
COMMITTEE"). Under the terms of the annual incentive bonus program, the
Executive will be afforded the opportunity to earn up to 60% of his Salary in
effect for the applicable calendar year if the Company achieves the performance
targets established by the Compensation Committee for that year, to be paid on a
pro-rata basis in the event that the Executive is employed for less than twelve
months of any calendar year within the Term (for purposes of determining the
1998 Bonus, the Executive shall be deemed to have commenced employment as of
January 1, 1998).
(c) STOCK OPTIONS. Effective as of the Closing Date (as defined in
the Merger Agreement), the Company shall grant the Executive an option (the
"DEAL OPTION") to purchase 37,500 shares of the common stock of the Parent
pursuant to the terms of the Parent's 1998 Stock Incentive Plan (the "OPTION
PLAN"). The per share exercise price of the Deal Option shall equal the fair
market value of a share of Common Stock on the Closing Date, as
<PAGE>
4
determined in accordance with the terms of the Option Plan. The Deal Option
shall vest and become exercisable in full on February 1, 1999. Also
effective as of the Effective Date, the Company shall grant the Executive an
option (the "OPTION") to purchase 200,000 shares of the common stock of the
Parent pursuant to the terms of the Option Plan. The per share exercise price
of the Option shall equal the fair market value of a share of Common Stock on
the Closing Date, as determined in accordance with the terms of the Option
Plan. The Option shall vest and become exercisable as to 25% on February 1,
1999; the remainder of the Option shall vest ratably on the first day of each
month over the following three years. Both the Deal Option and the Option
shall be subject to the terms of the Option Plan and to such other terms and
conditions as may be specified by the Compensation Committee in the form of a
standard option agreement between the Company and the Executive. In the
event that the Executive ceases to be an employee of the Company for any
reason other than (i) if he is terminated for "Cause", "Disability" or on
account of his death, or (ii) if he resigns without "Good Reason" (as each
such term is defined below), the vesting of both the Deal Option and the
Option shall accelerate and both the Deal Option and the Option shall become
immediately exercisable and the Executive shall be entitled to retain such
options, for the remainder of their respective terms, as if he had remained
an employee of the Company. In the event that the Executive ceases to be an
employee of the Company because he is terminated for Cause or resigns without
Good Reason, the Executive shall be entitled to retain the then-vested
portion of such options as if he had remained an employee of the Company, but
the unvested portion of such options shall lapse. In the event of the
Executive's death or Disability (as defined below), the vesting under both
the Deal Option and the Option shall accelerate and all options thereunder
shall become immediately exercisable and shall remain outstanding for a
period of twelve (12) months.
(d) PENSION SCHEME AND LIFE INSURANCE. During the Term, the Company
shall pay, in addition to the amounts payable under Sections 3(a) and 3(b)
above, an amount equal to 20% of his Salary through equal monthly contributions
in arrears into a personal pension scheme for the benefit of the Executive, or,
at the Executive's sole discretion, the Company shall pay such amount to him as
additional compensation. In addition, during the Term, the Company shall
maintain a life insurance policy on the life of the Executive for the benefit of
the Executive's estate providing a benefit equal to the greater of (i) $750,000
and (ii) four times the Executive's Salary (and maximum Bonus).
(e) COMPANY AUTOMOBILE. During the Term, the Company will provide
the Executive with an automobile of such make and model as the Board deems
appropriate and suitable for his status with the Company for his sole use and
will reimburse the Executive for all costs and expenses incurred by the
Executive in connection with the use of that vehicle, or, at the Executive's
sole discretion, the Company shall pay an equivalent amount of such perquisite
to him as additional compensation.
(f) OTHER SPECIFIC BENEFITS. The Company shall install and pay the
rental and unit charges attributable to a dedicated business telephone and/or
ISDN line at his home.
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5
During the Term, the Company shall also pay for the Executive's purchase,
line charges, rental and unit charges for his mobile phones. The Company
shall provide the Executive with a fax machine and computer modem to be
installed at the Executive's home and a suitable desktop and laptop computer,
as well as all ancillary equipment and maintenance therefor. In addition,
the Company will pay for the cost of the Executive's membership in or
subscriptions to the internet service provider of his choice, and such
professional memberships and journals as are appropriate to his duties under
this Agreement.
(g) EXPENSES. The Company shall pay or reimburse the Executive for
all reasonable out-of-pocket expenses incurred by the Executive in connection
with his employment hereunder and expressly agrees that it will reimburse the
Executive for his business class airfare on international flights which are over
five hours in duration taken in connection with Company business. Such expenses
shall be paid upon the periodic submission of invoices and shall be paid
reasonably promptly after the date of such invoice. The reimbursement of
expenses under this Section 3(g) shall be subject to the Executive's providing
the Company with such documentation of the expenses as the Company may from time
to time reasonably request. The Company also agrees that, in the event that the
Executive is required to travel abroad in connection with the performance of his
duties hereunder for a period in excess of two weeks, the Company will reimburse
the Executive for the airfare, hotel and other transportation expenses only of
his spouse and minor children so that they may accompany him on such trip.
(h) WELFARE AND FRINGE BENEFITS. During the Term, the Executive
shall be eligible to participate in the Company's medical and disability plans
applicable to senior officers of the Company in accordance with the terms of
such plans as in effect from time to time. Specifically, the Executive, his
spouse and his children who are under the age of 18 shall participate in the
British United Provident Association, providing benefits at London Teaching
Hospital Rates, or such other private insurance scheme providing equivalent
benefits. In addition, the Executive shall participate in the Company's
permanent health insurance plan or receive payment for his personal permanent
health insurance plan, at his sole discretion. The Executive shall participate
in any disability plan of the Company that replaces his Salary under this
Agreement in the event that he suffers a Disability (as defined in Section 4(d)
below).
(i) LONG-TERM INCENTIVE PROGRAM. During the Term, the Executive
shall participate in all long-term incentive plans and programs of the Group
that are applicable to its senior officers in accordance with their terms and in
a manner consistent with his position with the Company.
(j) HOLIDAYS. In addition to the usual public and bank holidays, the
Executive shall be entitled to ten days' paid vacation annually, which shall be
taken at such times as are approved by the Board.
<PAGE>
6
4. TERMINATION OF EMPLOYMENT. Subject to the notice and other
provisions of this Section 4, as well as Section 5.13 of the Bylaws of the
Company, the Company shall have the right to terminate the Executive's
employment hereunder, and he shall have the right to resign, at any time for any
reason or for no stated reason.
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. (i) If,
prior to the expiration of the Term, the Executive's employment is terminated by
the Company for Cause or if the Executive resigns from his employment hereunder
other than for Good Reason, he shall be entitled to payment of the pro rata
portion of his Salary, accrued Bonus and supplemental pension contributions as
described in Section 3(d), through and including the date of termination or
resignation as well as any unreimbursed expenses. Except to the extent required
by the terms of any applicable compensation or benefit plan or program or as
otherwise required by applicable law, the Executive shall have no rights under
this Agreement or otherwise to receive any other compensation or to participate
in any other plan, program or arrangement after such termination or resignation
of employment with respect to the year of such termination or resignation and
later years.
(ii) Termination for "CAUSE" shall mean termination of the Executive's
employment with the Company because of (A) willful or persistently repeated
material non-performance of the Executive's duties to the Company (other than by
reason of the incapacity of the Executive due to physical or mental illness)
after notice by the Board of such failure and the Executive's non-performance
and continued, willful or persistently repeated material non-performance after
such notice, (B) the indictment of the Executive for a felony offense, (C) the
commission by the Executive of fraud against the Group or any willful misconduct
that brings the reputation of the Group into serious disrepute or causes the
Executive to cease to be able to perform his duties, (D) any other material
breach by the Executive of any material term of this Agreement, or (E) the
Executive is adjudged bankrupt or makes any arrangement or composition with his
creditors or has an interim order made against him pursuant to Section 252 of
the Insolvency Act 1986.
(iii) Termination of the Executive's employment for Cause shall be
communicated by delivery to the Executive of a written notice from the Company
stating that the Executive has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Executive without Good Reason shall be the date specified in
a written notice of resignation from the Executive to the Company. The
Executive shall provide at least 90 days' advance written notice of resignation
without Good Reason.
(b) INVOLUNTARY TERMINATION. (i) If, prior to the expiration of the
Term, the Company terminates the Executive's employment for any reason other
than Disability or Cause or Executive resigns from his employment hereunder for
Good Reason (collectively hereinafter referred to as an "INVOLUNTARY
TERMINATION"), the Company shall pay to the Executive his Salary and bonus
accrued up to and including the date of such Involuntary Termination, as well
<PAGE>
7
as any unreimbursed expenses. In addition, the Company shall pay to the
Executive as severance (the "SEVERANCE PAYMENTS") within 30 days after the
date of termination a lump sum payment in an amount equal to the sum of his
Salary at the rate in effect immediately prior to such Involuntary
Termination, plus his maximum Bonus as described in Section 3(b) and
supplemental pension contributions as described in Section 3(d), in each
case, for the remainder of the Term. Anything in this Agreement to the
contrary notwithstanding, no amounts shall be payable under this Section 4(b)
if the Executive's employment with the Company ends at the expiration of the
Term in accordance with Section 2.
(ii) In the event of the Executive's Involuntary Termination, the
Executive shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided to the Executive pursuant to Section 3(h)
above at the time of such Involuntary Termination for a period equal to the
longer of (A) two years following the Involuntary Termination or (B) the
remainder of the Term (the "CONTINUATION PERIOD"). Anything herein to the
contrary notwithstanding, the Company shall have no obligation to continue to
maintain during the Continuation Period any plan or program solely as a result
of the provisions of this Agreement, but this obligation shall apply in respect
of any substitute or replacement plan.
(iii) Resignation for "GOOD REASON" shall mean resignation by
Executive because of (A) an adverse and material change in the Executive's
duties, titles or reporting responsibilities, (B) a material breach by the
Company of any term of the Agreement, (C) a reduction in the Executive's Salary
or bonus opportunity or the failure of the Company to pay the Executive any
material amount of compensation when due, (D) failure by the Company or the
Parent to nominate the Executive for reelection to the Board during the Term,
(E) the failure of the Executive to be reelected to the Board during the Term,
(F) the Company appoints a President without the Executive's prior written
approval, or (G) a relocation of the Executive's principal place of business
without his prior written consent. The Company shall have 30 business days from
the date of receipt of such notice to effect a cure of the material breach
described therein and, upon cure thereof by the Company to the reasonable
satisfaction of the Executive, such material breach shall no longer constitute
Good Reason for purposes of this Agreement.
(iv) The date of termination of employment without Cause shall be the
date specified in a written notice of termination to the Executive. The date of
resignation for Good Reason shall be the date specified in a written notice of
resignation from the Executive to the Company; PROVIDED, HOWEVER, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(iii) above has expired without the Company having corrected, to the
reasonable satisfaction of the Executive, the event or events subject to cure.
(c) TERMINATION FOLLOWING A CHANGE IN CONTROL. In the event of a
Change in Control (defined as it is for purposes of the Option Plan), the
Executive shall have the right to resign his employment with the Company and
will be entitled to receive within 30 days a lump
<PAGE>
8
sum payment in an amount equal to the Executive's Salary, at the rate in
effect immediately prior to such Involuntary Termination, plus his maximum
Bonus as described in Section 3(b) and his supplemental pension contributions
as described in Section 3(d), in each case, for the remainder of the Term.
In addition, the Executive shall continue to participate on the same terms
and conditions as are in effect immediately prior to such resignation in the
Company's health and medical plans provided to the Executive pursuant to
Section 3(h) above at the time of such resignation for the a period equal to
the longer of (A) two years following the resignation or (B) the remainder of
the Term (the "CIC CONTINUATION PERIOD"). Anything herein to the contrary
notwithstanding, the Company shall have no obligation to continue to maintain
during the CIC Continuation Period any plan or program solely as a result of
the provisions of this Agreement but this obligation shall apply in respect
of any substitute or replacement plan.
(d) TERMINATION DUE TO DISABILITY. In the event of the Executive's
Disability (as hereinafter defined), the Company shall be entitled to terminate
his employment upon providing the Executive with six months' prior written
notice. If the Company terminates the Executive's employment due to Disability,
the Executive shall be entitled to receive, for the remainder of the Term, his
Salary at the rate in effect immediately prior to the Disability, plus his
maximum Bonus as described in Section 3(b) and his supplemental pension
contributions as described in Section 3(d), less any amounts paid to the
Executive under any disability plan of the Company. In addition, the Executive
shall continue to be covered by the Company's health and medical benefit plans
as described in Section 3(h) for the longer of (A) two years from his
termination date or (B) the remainder of the Term. As used in this Section
4(d), the term "DISABILITY" shall mean a physical or mental incapacity that
substantially prevents the Executive from performing his duties hereunder and
that has continued for at least six of the last twelve months and that can
reasonably be expected to continue indefinitely. Any dispute as to whether or
not the Executive is disabled within the meaning of the preceding sentence shall
be resolved by a physician reasonably satisfactory to the Executive and the
Company, and the determination of such physician shall be final and binding upon
both the Executive and the Company.
(e) DEATH. Except as provided in Sections 3(d), 3(h) and this
Section 4(d), no Salary or benefits shall be payable under this Agreement
following the date of the Executive's death. In the event of the Executive's
death, the Executive's Beneficiary shall be entitled to receive within 30 days a
lump sum payment in an amount equal to the Executive's Salary, at the rate in
effect immediately prior to his death, plus his maximum Bonus as described in
Section 3(b) and supplemental pension contributions as described in Section
3(d), in each case for the remainder of the Term, less any death benefits which
are provided to the Executive's Beneficiary under the terms of any plan, program
or arrangement referred to in Section 3(d) or 3(h) applicable to the Executive
at the time of death. In addition, the Executive's spouse and then-eligible
dependents shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided pursuant to Section 3(h) above at the time of
the
<PAGE>
9
Executive's death for a period equal to the longer of (A) two years following
his death or (B) the remainder of the Term (the "DEATH CONTINUATION PERIOD").
Anything herein to the contrary notwithstanding, the Company shall have no
obligation to continue to maintain during the Death Continuation Period any
plan or program solely as a result of the provisions of this Agreement but
this obligation shall apply in respect of any substitute or replacement plan.
(f) BENEFICIARY. For purposes of this Agreement, except as provided
in Section 3(d) or 3(h), "BENEFICIARY" shall mean the person or persons
designated in writing by the Executive to receive benefits under a plan, program
or arrangement or to receive the balance of the Severance Payments, if any, in
the event of the Executive's death, or, if no such person or persons are
designated by the Executive, the Executive's estate. No Beneficiary designation
shall be effective unless it is in writing and received by the Company prior to
the date of the Executive's death.
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the
payments made hereunder would constitute a "PARACHUTE PAYMENT" (as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), and the net after-tax amount of the parachute payment is less than the
net after-tax amount if the aggregate payments to be made to the Employee were
three times his "BASE AMOUNT" (as defined in Section 280G(b)(3) of the Code),
less $1.00, then the aggregate of the amounts constituting the parachute payment
shall be reduced to an amount that will equal three times the base amount, less
$1.00. The determinations to be made with respect to this Section 5 shall be
made by an independent accounting firm of national standing (other than the
Company's regular auditors). The accounting firm shall be paid by the Company
for its services performed hereunder.
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT. For so long as the Executive is
employed by the Company and, in circumstances where the Executive receives a
payment pursuant to Section 4(b), 4(c) or 4(d) or his employment is terminated
for Cause, but in no other circumstances, and continuing for the remainder of
the Term (such period being referred to hereinafter as the "RESTRICTED PERIOD"),
the Executive shall not, without the prior written consent of the Board,
directly or indirectly, own an interest in, manage, operate, join, control, lend
money or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes with the Group by providing any goods or
services provided or under development by the Group at the effective date of the
Executive's termination of employment under this Agreement; PROVIDED, HOWEVER,
that this Section 6(a) shall not proscribe the Executive's ownership, either
directly or indirectly, of either less than five percent of any class of
securities which are listed on a national securities exchange or quoted on the
automated quotation system of the National
<PAGE>
10
Association of Securities Dealers, Inc. or any limited partnership investment
over which the Executive has no control.
(b) NO INTERFERENCE. During the Restricted Period, in circumstances
in circumstances where the Executive receives a payment pursuant to
Section 4(b), 4(c) or 4(d) or his employment is terminated for Cause, and in no
other circumstances, the Executive shall not, whether for his own account or for
the account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), intentionally endeavor to entice
away from the Group, or otherwise interfere with the relationship of the Group
with, any senior person who is employed by or otherwise engaged to perform
services for the Group or any senior person or entity who is, or was within the
then most recent twelve-month period, a customer, client or supplier of the
Group.
(c) SECRECY. The Executive recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder, he may acquire confidential information and
trade secrets concerning the operation of the Group, the use or disclosure of
which could cause the Group substantial losses and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, the Executive covenants and agrees with the Company that he will
not at any time, except in performance of the Executive's obligations to the
Company hereunder or with the prior written consent of the Board, directly or
indirectly disclose to any person any secret or confidential information that he
may learn or has learned by reason of his association with the Group. The term
"CONFIDENTIAL INFORMATION" means any information not previously disclosed to the
public or to the trade by the Group with respect to the Group's, products,
facilities and methods, trade secrets and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, customer lists,
financial information (including the revenues, costs or profits associated with
any of the Group's products), business plans, prospects or opportunities.
(d) EXCLUSIVE PROPERTY. The Executive confirms that all confidential
information is and shall remain the exclusive property of the Group. All
business records, papers and documents kept or made by the Executive relating to
the business of the Group shall be and remain the property of the Group. Upon
the termination of his employment with the Company or upon the request of the
Company at any time, the Executive shall promptly deliver to the Company, and
shall not without the consent of the Board retain copies of, any written
materials not previously made available to the public, or records and documents
made by the Executive or coming into his possession concerning the business or
affairs of the Group; PROVIDED, HOWEVER, that subsequent to any such
termination, the Company shall provide the Executive with copies (the cost of
which shall be borne by the Executive) of any documents which are requested by
the Executive and which the Executive has determined in good faith are
(i) required to establish a defense to a claim that the Executive has not
complied with his duties hereunder or (ii) necessary to the Executive in order
to comply with applicable law.
<PAGE>
11
(e) ASSIGNMENT OF DEVELOPMENTS. All "DEVELOPMENTS" (as defined
below) that were or are at any time made, conceived or suggested by Executive,
whether acting alone or in conjunction with others, during Executive's
employment with the Group shall be the sole and absolute property of the Group,
free of any reserved or other rights of any kind on the part of Executive.
During Executive's employment and, if such Developments were made, conceived or
suggested by Executive during his employment with the Group, thereafter,
Executive shall promptly make full disclosure of any such Developments to the
Group and, at the Group's cost and expense, do all acts and things (including,
among others, the execution and delivery under oath of patent and copyright
applications and instruments of assignment) deemed by the Group to be necessary
or desirable at any time in order to effect the full assignment to the Group of
Executive's right and title, if any, to such Developments. For purposes of this
Agreement, the term "DEVELOPMENTS" shall mean all data, discoveries, findings,
reports, designs, inventions, improvements, methods, practices, techniques,
developments, programs, concepts, and ideas, whether or not patentable, relating
to the activities of the Group of which Executive is as of the date of this
Agreement aware or of which Executive becomes aware at any time during the Term,
excluding any Development for which no equipment, supplies, facilities or
confidential information of the Group was used and which was developed entirely
on Executive's own time, unless (i) the Development relates directly to the
business of the Group, (ii) the Development relates to actual or demonstrably
anticipated research or development of the Group, or (iii) the Development
results from any work performed by Executive for the Group (the foregoing is
agreed to satisfy the written notice and other requirements of Section 49.44.140
of the Revised Code of Washington).
(f) INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of the
covenants contained in this Section 6 may result in material irreparable injury
to the Group for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Executive from engaging in activities prohibited by this Section
6 or such other relief as may be required to specifically enforce any of the
covenants in this Section 6. Without intending to limit the remedies available
to the Executive, the Executive shall be entitled to seek specific performance
of the Company's obligations under this Agreement.
(g) The Executive shall during the continuance of his employment (and
shall procure that his spouse or partner and his minor children shall comply)
with all applicable rules of law, stock exchange regulations and codes of
conduct applicable to employees, officers and directors of the Company and the
Group for the time being in force in relation to dealings in the shares,
debentures and other securities of the Company or any member of the Group or any
unpublished share price sensitive information affecting the securities of any
other company with which the Company has dealings (provided that the Executive
shall be entitled to exercise any options granted to him under any share option
scheme established by the Company or any member of the Group, subject to the
rules of such scheme).
<PAGE>
12
(h) The Executive shall in relation to any dealings in securities
of overseas companies comply with all laws of any foreign state affecting
dealings in the securities of such companies and all regulations of any
relevant stock exchanges on which such dealings take place.
(i) During the continuance of his employment the Executive shall
observe the terms of any policy issued by the Company in relation to
payments, rebates, discounts, gifts, entertainment or other benefits
("Gratuities") from any third party in respect of any business transacted or
proposed to be transacted (whether or not by him) by or on behalf of the
Company or any Associated Company.
7. GENERAL PROVISIONS.
(a) SOURCE OF PAYMENTS. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation of
assets made, to assure payment. The Executive shall have no right, title or
interest whatever in or to any investments which the Company may make to aid
the Company in meeting its obligations hereunder. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor of the
Company; PROVIDED, HOWEVER, that this provision shall not be deemed to waive
or abrogate any preferential or other rights to payment accruing to the
Executive under applicable bankruptcy laws by virtue of the Executive's
status as an employee of the Company.
(b) NO OTHER SEVERANCE BENEFITS. Except as specifically set forth
in this Agreement and the Employment Agreement with the Parent, the Executive
covenants and agrees that he shall not be entitled to any other form of
severance benefits from the Company, including, without limitation, benefits
otherwise payable under any of the Company's regular severance policies, in
the event his employment hereunder ends for any reason and, except with
respect to obligations of the Company expressly provided for herein, the
Executive unconditionally releases the Company and its subsidiaries and
affiliates, and their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with his employment or the termination
thereof.
(c) TAX WITHHOLDING. Payments to the Executive of all
compensation contemplated under this Agreement shall be subject to all
applicable tax withholding.
(d) NOTICES. Any notice hereunder by either party to the other
shall be given in writing by personal delivery, or certified mail, return
receipt requested, or (if to the
<PAGE>
13
Company) by telex or facsimile, in any case delivered to the applicable
address set forth below:
(i) To the Company: Getty Communications, plc
101 Bayham Street
London POWL OAA
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: John J. Cannon, III, Esq.
Shearman & Sterling
555 California Street
Suite 2000
San Francisco, CA 94104
Attn.: Christopher D. Dillon, Esq.
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ England
Attn.: Michael Francies
(ii) To the Executive: Jonathan D. Klein
34 Crediton Hill
London NWG 1HP
or to such other persons or other addresses as either party may specify to the
other in writing.
(e) REPRESENTATION BY THE EXECUTIVE. The Executive represents and
warrants that his entering into this Agreement does not, and that his
performance under this Agreement and consummation of the transactions
contemplated hereby will not, violate the provisions of any agreement or
instrument to which the Executive is a party, or any decree, judgment or order
to which the Executive is subject, and that this Agreement constitutes a valid
and binding obligation of the Executive in accordance with its terms. Breach of
this representation will render all of the Company's obligations under this
Agreement void AB INITIO.
(f) LIMITED WAIVER. The waiver by the Company or the Executive of a
violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
<PAGE>
14
(g) ASSIGNMENT; ASSUMPTION OF AGREEMENT. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Executive in respect of any claim, debt,
obligation or similar process. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
(h) AMENDMENT; ACTIONS BY THE COMPANY. This Agreement may not be
amended, modified or canceled except by written agreement of the Executive and
the Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; PROVIDED, HOWEVER, that by resolution duly adopted in accordance with
this Section 7(h), the Board may delegate its responsibilities hereunder to one
or more of its members other than the Executive.
(i) SEVERABILITY. If any term or provision hereof is determined to
be invalid or unenforceable in a final court or arbitration proceeding, (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the invalid
or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(j) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of England and the parties to this Agreement hereby
submit to the exclusive jurisdiction of the English laws (determined without
regard to the choice of law provisions thereof).
(k) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby and supersedes all prior agreements and understandings of the parties,
other than the Services Agreements, with respect to the subject matter hereof.
(l) HEADINGS. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not control
the meaning or interpretation of any provisions of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
(n) DISCIPLINARY AND GRIEVANCE PROCEDURES. Nor statutory purposes
there is no formal disciplinary procedure in relation to the Executive's
employment. The Executive
<PAGE>
15
shall be expected to maintain the highest standards of integrity and
behaviour. If the Executive has any grievance in relation to his employment
or is not satisfied with any disciplinary decision taken in relation to him
he may apply in writing within 14 days of that decision to the Board whose
decision shall be final. The foregoing shall not be construed, however, to
limit the Executive's remedies at law or otherwise. If the Executive has any
grievance in relation to his employment he may raise it in writing with the
Board whose decision shall be final.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first written above.
GETTY COMMUNICATIONS, PLC
By:
---------------------------------
Name:
Title:
EXECUTIVE
-------------------------------------
Jonathan D. Klein
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 9th day of February, 1998, by and
between GETTY IMAGES, INC., a Delaware corporation (the "COMPANY"), whose
principal executive offices are located at 500 North Michigan Avenue, Suite
1700, Chicago, Illinois 60611, and JONATHAN D. KLEIN, an individual residing at
34 Crediton Hill, London NW6 1HP England (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Executive is presently serving as the Chief Executive
Officer of Getty Communications, plc ("GETTY"), the predecessor of the Company;
and
WHEREAS, Getty is a party to a merger agreement dated as of September
15, 1997 (the "MERGER AGREEMENT"), pursuant to which PhotoDisc, Inc. shall merge
into a merger subsidiary of the Company; and
WHEREAS, in connection with his performance of services in the United
States and elsewhere outside of the United Kingdom, the Company seeks to employ
the Executive and the Executive seeks to be employed by the Company; and
WHEREAS, both parties desire that the terms and conditions of the
Executive's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) GENERAL. The Company hereby employs the Executive, effective as
of the closing of the transactions contemplated by the Merger Agreement (the
"EFFECTIVE DATE"), and the Executive's period of continuous employment for
statutory purposes began on 14 March, 1995, and the Executive agrees upon the
terms and conditions herein set forth to serve, effective as of the Effective
Date, as Sole Group Chief Executive. In such capacity, the Executive shall
report directly and only to the Executive Committee, which in turn reports
directly to the Board of Directors of the Company (the "BOARD"). The Executive's
principal place of business shall be 101 Bayham Street, London NW1 OAG England,
and this Agreement shall only be in respect of the Executive's services to be
performed outside the United Kingdom.
(b) SERVICES AND DUTIES. For so long as the Executive is employed
hereunder, and except as otherwise expressly provided in Section 1(c) below, the
Executive
<PAGE>
2
shall devote his full business time to the performance of his duties
hereunder; shall faithfully serve the Company; shall in all respects conform
to and comply with the lawful and good faith directions and instructions
given to him by the Executive Committee and the Board as the same are
consistent with his status and the term hereof; and shall use his best
efforts to promote and serve the interests of the Company. Specifically, the
Executive shall be solely responsible for the day-to-day operational
management of the Company, its subsidiaries and affiliates (hereinafter,
collectively the "GROUP"), provision of operational direction to the Senior
Management Team ("SMT") and oversight of corporate operations, sales,
marketing and finance, management of the SMT, and professional development of
all direct reports. In addition, the Executive shall share equal duties and
authority with the Co-Chairmen for the financial performance of the Group,
the management of the Company's shareholders, developing strategic alliances
and partnerships and maximizing their commercial benefits, communications to
both internal and external audiences and external relationships with
business, industry and academic communities, and strategic leadership. All
employees of the Group (other than the Co-Chairmen) shall report, either
directly or indirectly, to the Executive.
(c) NO OTHER EMPLOYMENT. Except as provided below, for so long as
the Executive is employed by the Company, he shall not, directly or
indirectly, render services to any other person or organization for which he
receives compensation without the prior approval of the Board. No such
approval will be required if the Executive seeks to perform inconsequential
services without direct compensation therefor in connection with the
management of personal investments or in connection with the performance of
charitable and civic activities, provided that such activities do not
contravene the provisions of Section 6 hereof. In addition, the Company
expressly agrees that the Executive may continue to act as a non-executive
director of the Conservation Corporation Africa Limited and of Getty
Investments LLC. The Company, however, recognizes that the Executive shall
be required to provide services for approximately 40 percent of his working
time under an Employment Agreement entered into between Getty and the
Executive, dated as of the date hereof, which agreement relates to the
business and affairs that the Executive performs in the United Kingdom.
(d) BOARD MEMBERSHIP. The Executive shall be a member of the
Board and of the Executive Committee. In addition, the Executive shall be
entitled to attend the meetings of all other committees of the Board, such as
the Audit Committee and the Compensation Committee, and shall be a member of
any strategy committee of the Board. After his initial term as director, the
Company shall nominate the Executive for reelection to the Board and shall
use all reasonable efforts to cause the Executive to be elected to such term.
(e) PAYMENT FOR SERVICES TO BE PERFORMED; OBLIGATIONS.
Compensation to be paid under this Agreement shall be made with regard only
to the Executive's services to be provided to the Group outside the United
Kingdom. Any payments made with respect to services to be provided by the
Executive in the United Kingdom shall be made under the
<PAGE>
3
Employment Agreement with Getty regarding the provision of the Executive's
services in the United Kingdom.
2. TERM OF EMPLOYMENT. The term of the Executive's employment under
this Agreement (the "TERM") shall commence on the Effective Date and continue
until the second anniversary date of the Effective Date. Thereafter, the Term
shall continue until it is terminated by either party giving the other at least
twelve months' written notice of termination of the Term, with no such notice to
be given so as to expire before the third anniversary of the Effective Date.
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions of
this Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Term as compensation for all services
rendered hereunder:
(a) SALARY. The Company shall pay to the Executive an annual salary
(the "SALARY") at the initial rate of USD $195,000 (retroactive to February 1,
1998), payable to the Executive in accordance with the normal payroll practices
of the Company for its executive officers as are in effect from time to time.
The amount of the Executive's Salary shall be reviewed annually by the Board on
or about April 1 of each year during the Term beginning in the 1999 calendar
year and may be increased, but not decreased below such amount, on the basis of
such review and then-current market practices.
(b) ANNUAL BONUS. During the Term, the Executive shall be eligible
for each calendar year that begins within the Term to participate in an annual
incentive bonus program established by the Company in accordance with the
policies of the Group and subject to such terms and conditions as may be
approved annually by the Compensation Committee of the Board (the "COMPENSATION
COMMITTEE"). Under the terms of the annual incentive bonus program, the
Executive will be afforded the opportunity to earn up to 60% of his Salary in
effect for the applicable calendar year if the Company achieves the performance
targets established by the Compensation Committee for that year, to be paid on a
pro-rata basis in the event that the Executive is employed for less than twelve
months of any calendar year within the Term (for purposes of determining the
1998 Bonus, the Executive shall be deemed to have commenced employment as of
January 1, 1998).
(c) STOCK OPTIONS. Effective as of the Closing Date (as defined in
the Merger Agreement), the Company shall grant the Executive an option (the
"DEAL OPTION") to purchase 37,500 shares of the common stock of the Parent
pursuant to the terms of the Parent's 1998 Stock Incentive Plan (the "OPTION
PLAN"). The per share exercise price of the Deal Option shall equal the fair
market value of a share of Common Stock on the Closing Date, as determined in
accordance with the terms of the Option Plan. The Deal Option shall vest and
become exercisable in full on February 1, 1999. Also effective as of the
Effective Date, the Company shall grant the Executive an option (the "OPTION")
to purchase 300,000 shares of the common stock of the Parent pursuant to the
terms of the Option Plan. The per share exercise
<PAGE>
4
price of the Option shall equal the fair market value of a share of Common
Stock on the Closing Date, as determined in accordance with the terms of the
Option Plan. The Option shall vest and become exercisable as to 25% on
February 1, 1999; the remainder of the Option shall vest ratably on the first
day of each month over the following three years. Both the Deal Option and
the Option shall be subject to the terms of the Option Plan and to such other
terms and conditions as may be specified by the Compensation Committee in the
form of a standard option agreement between the Company and the Executive.
In the event that the Executive ceases to be an employee of the Company for
any reason other than (i) if he is terminated for "Cause", "Disability" or on
account of his death, or (ii) if he resigns without "Good Reason" (as each
such term is defined below), the vesting of both the Deal Option and the
Option shall accelerate and both the Deal Option and the Option shall become
immediately exercisable and the Executive shall be entitled to retain such
options, for the remainder of their respective terms, as if he had remained
an employee of the Company. In the event that the Executive ceases to be an
employee of the Company because he is terminated for Cause or resigns without
Good Reason, the Executive shall be entitled to retain the then-vested
portion of such options as if he had remained an employee of the Company, but
the unvested portion of such options shall lapse. In the event of the
Executive's death or Disability (as defined below), the vesting under both
the Deal Option and the Option shall accelerate and all options thereunder
shall become immediately exercisable and shall remain outstanding for a
period of twelve (12) months.
(d) PENSION SCHEME AND LIFE INSURANCE. During the Term, the Company
shall pay, in addition to the amounts payable under Sections 3(a) and 3(b)
above, an amount equal to 20% of his Salary through equal monthly contributions
in arrears into a personal pension scheme for the benefit of the Executive, or,
at the Executive's sole discretion, the Company shall pay such amount to him as
additional compensation. In addition, during the Term, the Company shall
maintain a life insurance policy on the life of the Executive for the benefit of
the Executive's estate providing a benefit equal to the greater of (i) $750,000
and (ii) four times the Executive's Salary (and maximum Bonus).
(e) EXPENSES. The Company shall pay or reimburse the Executive for
all reasonable out-of-pocket expenses incurred by the Executive in connection
with his employment hereunder and expressly agrees that it will reimburse the
Executive for his business class airfare on international flights which are over
five hours in duration taken in connection with Company business. Such expenses
shall be paid upon the periodic submission of invoices and shall be paid
reasonably promptly after the date of such invoice. The reimbursement of
expenses under this Section 3(e) shall be subject to the Executive's providing
the Company with such documentation of the expenses as the Company may from time
to time reasonably request. The Company also agrees that, in the event that the
Executive is required to travel abroad in connection with the performance of his
duties hereunder for a period in excess of two weeks, the Company will reimburse
the Executive for the airfare, hotel and other transportation expenses only of
his spouse and minor children so that they may accompany him on such trip.
<PAGE>
5
(f) LONG-TERM INCENTIVE PROGRAM. During the Term, the Executive
shall participate in all long-term incentive plans and programs of the Group
that are applicable to its senior officers in accordance with their terms and in
a manner consistent with his position with the Company.
(g) HOLIDAYS. In addition to the usual public and bank holidays, the
Executive shall be entitled to twenty days' paid vacation annually, which shall
be taken at such times as are approved by the Board.
4. TERMINATION OF EMPLOYMENT. Subject to the notice and other
provisions of this Section 4, as well as Section 5.13 of the Bylaws of the
Company, the Company shall have the right to terminate the Executive's
employment hereunder, and he shall have the right to resign, at any time for any
reason or for no stated reason.
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. (i) If,
prior to the expiration of the Term, the Executive's employment is terminated by
the Company for Cause or if the Executive resigns from his employment hereunder
other than for Good Reason, he shall be entitled to payment of the pro rata
portion of his Salary, accrued Bonus and supplemental pension contributions as
described in Section 3(d), through and including the date of termination or
resignation as well as any unreimbursed expenses. Except to the extent required
by the terms of any applicable compensation or benefit plan or program or as
otherwise required by applicable law, the Executive shall have no rights under
this Agreement or otherwise to receive any other compensation or to participate
in any other plan, program or arrangement after such termination or resignation
of employment with respect to the year of such termination or resignation and
later years.
(ii) Termination for "CAUSE" shall mean termination of the Executive's
employment with the Company because of (A) willful or persistently repeated
material non-performance of the Executive's duties to the Company (other than by
reason of the incapacity of the Executive due to physical or mental illness)
after notice by the Board of such failure and the Executive's non-performance
and continued, willful or persistently repeated material non-performance after
such notice, (B) the indictment of the Executive for a felony offense, (C) the
commission by the Executive of fraud against the Group or any willful misconduct
that brings the reputation of the Group into serious disrepute or causes the
Executive to cease to be able to perform his duties, (D) any other material
breach by the Executive of any material term of this Agreement, or (E) the
Executive is adjudged bankrupt or makes any arrangement or composition with his
creditors or has an interim order made against him pursuant to Section 252 of
the Insolvency Act 1986.
(iii) Termination of the Executive's employment for Cause shall be
communicated by delivery to the Executive of a written notice from the Company
stating that the Executive has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Executive without Good
<PAGE>
6
Reason shall be the date specified in a written notice of resignation from
the Executive to the Company. The Executive shall provide at least 90 days'
advance written notice of resignation without Good Reason.
(b) INVOLUNTARY TERMINATION. (i) If, prior to the expiration of the
Term, the Company terminates the Executive's employment for any reason other
than Disability or Cause or Executive resigns from his employment hereunder for
Good Reason (collectively hereinafter referred to as an "INVOLUNTARY
TERMINATION"), the Company shall pay to the Executive his Salary and bonus
accrued up to and including the date of such Involuntary Termination, as well as
any unreimbursed expenses. In addition, the Company shall pay to the Executive
as severance (the "SEVERANCE PAYMENTS") within 30 days after the date of
termination a lump sum payment in an amount equal to the sum of his Salary at
the rate in effect immediately prior to such Involuntary Termination, plus his
maximum Bonus as described in Section 3(b) and supplemental pension
contributions as described in Section 3(d), in each case, for the remainder of
the Term. Anything in this Agreement to the contrary notwithstanding, no
amounts shall be payable under this Section 4(b) if the Executive's employment
with the Company ends at the expiration of the Term in accordance with
Section 2.
(ii) Resignation for "GOOD REASON" shall mean resignation by Executive
because of (A) an adverse and material change in the Executive's duties, titles
or reporting responsibilities, (B) a material breach by the Company of any term
of the Agreement, (C) a reduction in the Executive's Salary or bonus opportunity
or the failure of the Company to pay the Executive any material amount of
compensation when due, (D) failure by the Company or the Parent to nominate the
Executive for reelection to the Board during the Term, (E) the failure of the
Executive to be reelected to the Board during the Term, (F) the Company appoints
a President without the Executive's prior written approval, or (G) a relocation
of the Executive's principal place of business without his prior written
consent. The Company shall have 30 business days from the date of receipt of
such notice to effect a cure of the material breach described therein and, upon
cure thereof by the Company to the reasonable satisfaction of the Executive,
such material breach shall no longer constitute Good Reason for purposes of this
Agreement.
(iii) The date of termination of employment without Cause shall be
the date specified in a written notice of termination to the Executive. The
date of resignation for Good Reason shall be the date specified in a written
notice of resignation from the Executive to the Company; PROVIDED, HOWEVER, that
no such written notice shall be effective unless the cure period specified in
Section 4(b)(ii) above has expired without the Company having corrected, to the
reasonable satisfaction of the Executive, the event or events subject to cure.
(c) TERMINATION FOLLOWING A CHANGE IN CONTROL. In the event of a
Change in Control (defined as it is for purposes of the Option Plan), the
Executive shall have the right to resign his employment with the Company and
will be entitled to receive within 30 days a lump sum payment in an amount equal
to the Executive's Salary, at the rate in effect immediately
<PAGE>
7
prior to such Involuntary Termination, plus his maximum Bonus as described in
Section 3(b) and supplemental pension contributions as described in Section
3(d), in each case, for the remainder of the Term.
(d) TERMINATION DUE TO DISABILITY. In the event of the Executive's
Disability (as hereinafter defined), the Company shall be entitled to terminate
his employment upon providing the Executive with six months' prior written
notice. If the Company terminates the Executive's employment due to Disability,
the Executive shall be entitled to receive, for the remainder of the Term, his
Salary at the rate in effect immediately prior to the Disability, plus his
maximum Bonus as described in Section 3(b) and supplemental pension
contributions as described in Section 3(d), less any amounts paid to the
Executive under any disability plan of the Company. As used in this Section
4(d), the term "DISABILITY" shall mean a physical or mental incapacity that
substantially prevents the Executive from performing his duties hereunder and
that has continued for at least six of the last twelve months and that can
reasonably be expected to continue indefinitely. Any dispute as to whether or
not the Executive is disabled within the meaning of the preceding sentence shall
be resolved by a physician reasonably satisfactory to the Executive and the
Company, and the determination of such physician shall be final and binding upon
both the Executive and the Company.
(e) DEATH. In the event of the Executive's death, the Executive's
Beneficiary shall be entitled to receive within 30 days a lump sum payment in an
amount equal to the Executive's Salary, at the rate in effect immediately prior
to his death, plus his maximum Bonus as described in Section 3(b) and
supplemental pension contributions as described in Section 3(d), in each case
for the remainder of the Term, less any death benefits which are provided to the
Executive's Beneficiary under the terms of any plan, program or arrangement for
the benefit of the Executive at the time of death.
(f) BENEFICIARY. For purposes of this Agreement, "BENEFICIARY" shall
mean the person or persons designated in writing by the Executive to receive
benefits under a plan, program or arrangement or to receive the balance of the
Severance Payments, if any, in the event of the Executive's death, or, if no
such person or persons are designated by the Executive, the Executive's estate.
No Beneficiary designation shall be effective unless it is in writing and
received by the Company prior to the date of the Executive's death.
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the
payments made hereunder would constitute a "PARACHUTE PAYMENT" (as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), and the net after-tax amount of the parachute payment is less than the
net after-tax amount if the aggregate payments to be made to the Employee were
three times his "BASE AMOUNT" (as defined in Section 280G(b)(3) of the Code),
less $1.00, then the aggregate of the amounts constituting the parachute payment
shall be reduced to an amount that will equal three times the base amount, less
$1.00. The
<PAGE>
8
determinations to be made with respect to this Section 5 shall be made by an
independent accounting firm of national standing (other than the Company's
regular auditors). The accounting firm shall be paid by the Company for its
services performed hereunder.
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT. For so long as the Executive is
employed by the Company and, in circumstances where the Executive receives a
payment pursuant to Section 4(b), 4(c) or 4(d) or his employment is terminated
for Cause, but in no other circumstances, and continuing for the remainder of
the Term (such period being referred to hereinafter as the "RESTRICTED PERIOD"),
the Executive shall not, without the prior written consent of the Board,
directly or indirectly, own an interest in, manage, operate, join, control, lend
money or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes with the Group by providing any goods or
services provided or under development by the Group at the effective date of the
Executive's termination of employment under this Agreement; PROVIDED, HOWEVER,
that this Section 6(a) shall not proscribe the Executive's ownership, either
directly or indirectly, of either less than five percent of any class of
securities which are listed on a national securities exchange or quoted on the
automated quotation system of the National Association of Securities Dealers,
Inc. or any limited partnership investment over which the Executive has no
control.
(b) NO INTERFERENCE. During the Restricted Period, in circumstances
in circumstances where the Executive receives a payment pursuant to
Section 4(b), 4(c) or 4(d) or his employment is terminated for Cause, and in no
other circumstances, the Executive shall not, whether for his own account or for
the account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), intentionally endeavor to entice
away from the Group, or otherwise interfere with the relationship of the Group
with, any senior person who is employed by or otherwise engaged to perform
services for the Group or any senior person or entity who is, or was within the
then most recent twelve-month period, a customer, client or supplier of the
Group.
(c) SECRECY. The Executive recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder, he may acquire confidential information and
trade secrets concerning the operation of the Group, the use or disclosure of
which could cause the Group substantial losses and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, the Executive covenants and agrees with the Company that he will
not at any time, except in performance of the Executive's obligations to the
Company hereunder or with the prior written consent of the Board, directly or
indirectly disclose to any person any secret or confidential information that he
may learn or has learned by reason of his association with the Group. The term
"CONFIDENTIAL INFORMATION" means any information not previously
<PAGE>
9
disclosed to the public or to the trade by the Group with respect to the
Group's, products, facilities and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential reports,
product price lists, customer lists, financial information (including the
revenues, costs or profits associated with any of the Group's products),
business plans, prospects or opportunities.
(d) EXCLUSIVE PROPERTY. The Executive confirms that all confidential
information is and shall remain the exclusive property of the Group. All
business records, papers and documents kept or made by the Executive relating to
the business of the Group shall be and remain the property of the Group. Upon
the termination of his employment with the Company or upon the request of the
Company at any time, the Executive shall promptly deliver to the Company, and
shall not without the consent of the Board retain copies of, any written
materials not previously made available to the public, or records and documents
made by the Executive or coming into his possession concerning the business or
affairs of the Group; PROVIDED, HOWEVER, that subsequent to any such
termination, the Company shall provide the Executive with copies (the cost of
which shall be borne by the Executive) of any documents which are requested by
the Executive and which the Executive has determined in good faith are
(i) required to establish a defense to a claim that the Executive has not
complied with his duties hereunder or (ii) necessary to the Executive in order
to comply with applicable law.
(e) ASSIGNMENT OF DEVELOPMENTS. All "DEVELOPMENTS" (as defined
below) that were or are at any time made, conceived or suggested by Executive,
whether acting alone or in conjunction with others, during Executive's
employment with the Group shall be the sole and absolute property of the Group,
free of any reserved or other rights of any kind on the part of Executive.
During Executive's employment and, if such Developments were made, conceived or
suggested by Executive during his employment with the Group, thereafter,
Executive shall promptly make full disclosure of any such Developments to the
Group and, at the Group's cost and expense, do all acts and things (including,
among others, the execution and delivery under oath of patent and copyright
applications and instruments of assignment) deemed by the Group to be necessary
or desirable at any time in order to effect the full assignment to the Group of
Executive's right and title, if any, to such Developments. For purposes of this
Agreement, the term "DEVELOPMENTS" shall mean all data, discoveries, findings,
reports, designs, inventions, improvements, methods, practices, techniques,
developments, programs, concepts, and ideas, whether or not patentable, relating
to the activities of the Group of which Executive is as of the date of this
Agreement aware or of which Executive becomes aware at any time during the Term,
excluding any Development for which no equipment, supplies, facilities or
confidential information of the Group was used and which was developed entirely
on Executive's own time, unless (i) the Development relates directly to the
business of the Group, (ii) the Development relates to actual or demonstrably
anticipated research or development of the Group, or (iii) the Development
results from any work performed by Executive for the Group (the foregoing is
agreed to satisfy the written notice and other requirements of Section 49.44.140
of the Revised Code of Washington).
<PAGE>
10
(f) INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of
the covenants contained in this Section 6 may result in material irreparable
injury to the Group for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of such a breach or threat thereof, the Company shall be
entitled to obtain a temporary restraining order and/or a preliminary or
permanent injunction restraining the Executive from engaging in activities
prohibited by this Section 6 or such other relief as may be required to
specifically enforce any of the covenants in this Section 6. Without
intending to limit the remedies available to the Executive, the Executive
shall be entitled to seek specific performance of the Company's obligations
under this Agreement.
(g) The Executive shall during the continuance of his employment (and
shall procure that his spouse or partner and his minor children shall comply)
with all applicable rules of law, stock exchange regulations and codes of
conduct applicable to employees, officers and directors of the Company and the
Group for the time being in force in relation to dealings in the shares,
debentures and other securities of the Company or any member of the Group or any
unpublished share price sensitive information affecting the securities of any
other company with which the Company has dealings (provided that the Executive
shall be entitled to exercise any options granted to him under any share option
scheme established by the Company or any member of the Group, subject to the
rules of such scheme).
(h) The Executive shall in relation to any dealings in securities of
overseas companies comply with all laws of any foreign state affecting dealings
in the securities of such companies and all regulations of any relevant stock
exchanges on which such dealings take place.
(i) During the continuance of his employment the Executive shall
observe the terms of any policy issued by the Company in relation to payments,
rebates, discounts, gifts, entertainment or other benefits ("Gratuities") from
any third party in respect of any business transacted or proposed to be
transacted (whether or not by him) by or on behalf of the Company or any
Associated Company.
7. GENERAL PROVISIONS.
(a) SOURCE OF PAYMENTS. All payments provided under this Agreement,
other than payments made pursuant to a plan which provides otherwise, shall be
paid in cash from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets made, to assure
payment. The Executive shall have no right, title or interest whatever in or to
any investments which the Company may make to aid the Company in meeting its
obligations hereunder. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall be no greater than
the right of an unsecured creditor of the Company; PROVIDED, HOWEVER, that this
provision shall not be deemed to waive or abrogate any preferential or other
rights to payment accruing to the
<PAGE>
11
Executive under applicable bankruptcy laws by virtue of the Executive's
status as an employee of the Company.
(b) NO OTHER SEVERANCE BENEFITS. Except as specifically set forth in
this Agreement, and the Employment Agreement with Getty, the Executive covenants
and agrees that he shall not be entitled to any other form of severance benefits
from the Company, including, without limitation, benefits otherwise payable
under any of the Company's regular severance policies, in the event his
employment hereunder ends for any reason and, except with respect to obligations
of the Company expressly provided for herein, the Executive unconditionally
releases the Company and its subsidiaries and affiliates, and their respective
directors, officers, employees and stockholders, or any of them, from any and
all claims, liabilities or obligations under this Agreement or under any
severance or termination arrangements of the Company or any of its subsidiaries
or affiliates for compensation or benefits in connection with his employment or
the termination thereof.
(c) TAX WITHHOLDING. Payments to the Executive of all compensation
contemplated under this Agreement shall be subject to all applicable tax
withholding.
(d) NOTICES. Any notice hereunder by either party to the other shall
be given in writing by personal delivery, or certified mail, return receipt
requested, or (if to the Company) by telex or facsimile, in any case delivered
to the applicable address set forth below:
(i) To the Company: Getty Images, Inc.
500 North Michigan Avenue
Suite 1700
Chicago, Illinois 60611
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: John J. Cannon, III, Esq.
Shearman & Sterling
555 California Street
Suite 2000
San Francisco, CA 94104
Attn.: Christopher D. Dillon, Esq.
<PAGE>
12
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ England
Attn.: Michael Francies
(ii) To the Executive: Jonathan D. Klein
34 Crediton Hill
London NWG 1HP
or to such other persons or other addresses as either party may specify to
the other in writing.
(e) REPRESENTATION BY THE EXECUTIVE. The Executive represents and
warrants that his entering into this Agreement does not, and that his
performance under this Agreement and consummation of the transactions
contemplated hereby will not, violate the provisions of any agreement or
instrument to which the Executive is a party, or any decree, judgment or order
to which the Executive is subject, and that this Agreement constitutes a valid
and binding obligation of the Executive in accordance with its terms. Breach of
this representation will render all of the Company's obligations under this
Agreement void AB INITIO.
(f) LIMITED WAIVER. The waiver by the Company or the Executive of a
violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(g) ASSIGNMENT; ASSUMPTION OF AGREEMENT. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Executive in respect of any claim, debt,
obligation or similar process. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
(h) AMENDMENT; ACTIONS BY THE COMPANY. This Agreement may not be
amended, modified or canceled except by written agreement of the Executive and
the Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; PROVIDED, HOWEVER, that by resolution duly adopted in accordance with
this Section 7(h), the Board may delegate its responsibilities hereunder to one
or more of its members other than the Executive.
(i) SEVERABILITY. If any term or provision hereof is determined
to be invalid or unenforceable in a final court or arbitration proceeding,
(i) the remaining terms and provisions hereof shall be unimpaired and (ii)
the invalid or unenforceable term or provision shall be deemed replaced by a
term or provision
<PAGE>
13
that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
(j) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of England and the parties to this
Agreement hereby submit to the exclusive jurisdiction of the English laws
(determined without regard to the choice of law provisions thereof).
(k) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby and supersedes all prior agreements and understandings of the
parties, other than the Services Agreements, with respect to the subject
matter hereof.
(l) HEADINGS. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not
control the meaning or interpretation of any provisions of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both
such counterparts shall together constitute one and the same document.
(n) DISCIPLINARY AND GRIEVANCE PROCEDURES. Nor statutory purposes
there is no formal disciplinary procedure in relation to the Executive's
employment. The Executive shall be expected to maintain the highest standards
of integrity and behaviour. If the Executive has any grievance in relation to
his employment or is not satisfied with any disciplinary decision taken in
relation to him he may apply in writing within 14 days of that decision to the
Board whose decision shall be final. The foregoing shall not be construed,
however, to limit the Executive's remedies at law or otherwise. If the
Executive has any grievance in relation to his employment he may raise it in
writing with the Board whose decision shall be final.
<PAGE>
14
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first written above.
GETTY IMAGES, INC.
By:
------------------------------------
Name:
Title:
EXECUTIVE
---------------------------------------
Jonathan D. Klein
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 9th day of February, 1998, by and
between GETTY IMAGES, INC., a Delaware corporation (the "COMPANY"), and WILLIAM
HESTON, an individual residing at 2610-11th Avenue East, Seattle, Washington
98102 (the "EMPLOYEE").
W I T N E S S E T H:
WHEREAS, the Employee is presently serving as Senior Vice President,
Business Development of PhotoDisc, Inc. ("PHOTODISC"); and
WHEREAS, the Company seeks to employ the Employee and the Employee
seeks to become employed by the Company; and
WHEREAS, both parties desire that the terms and conditions of the
Employee's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) GENERAL. The Company hereby employs the Employee, effective as
of the date hereof (the "EFFECTIVE DATE"), and the Employee agrees upon the
terms and conditions herein set forth to serve, effective as of the Effective
Date, as Senior Vice President, Head of Getty Images Web Group and shall perform
all duties customarily appurtenant to such position. In such capacity, the
Employee shall report directly and only to Jonathan Klein, or his successor.
The Employee's principal place of business shall be Seattle, Washington.
(b) SERVICES AND DUTIES. For so long as the Employee is employed by
the Company, the Employee shall devote his full business time to the performance
of his duties hereunder; shall faithfully serve the Company; shall in all
respects conform to and comply with the lawful and good faith directions and
instructions given to him by Jonathan Klein, or his successor, and the Board of
Directors of the Company (the "BOARD"); and shall use his best efforts to
promote and serve the interests of the Company.
(c) NO OTHER EMPLOYMENT. For so long as the Employee is employed by
the Company, he shall not, directly or indirectly, render services to any other
person or organization for which he receives compensation without the prior
approval of the Board. No such approval will be required if the Employee seeks
to perform inconsequential services
<PAGE>
2
without direct compensation therefor in connection with the management of
personal investments or in connection with the performance of charitable and
civic activities, provided that such activities do not contravene the provisions
of Section 6 hereof.
2. TERM OF EMPLOYMENT. The term of the Employee's employment under
this Agreement (the "TERM") shall commence on the Effective Date and continue
until it is terminated by either party giving the other at least six months'
written notice of termination of the Term; PROVIDED, HOWEVER, that in no event
may a non-renewal notice given prior to August 10, 1999; and PROVIDED FURTHER,
HOWEVER, that, in any event, the Term shall not extend beyond the last day of
the month in which the Employee attains age 65.
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions of
this Agreement, the Company shall pay and provide the following compensation and
other benefits to the Employee during the Term as compensation for all services
rendered hereunder and the covenants contained in Section 6 hereof:
(a) SALARY. The Company shall pay to the Employee an annual salary
(the "SALARY") at the initial rate of $175,000 (retroactive to February 1,
1998), payable to the Employee in accordance with the normal payroll practices
of the Company for its employees as are in effect from time to time. The amount
of the Employee's Salary shall be reviewed annually by the Company on or about
April 1 of each year during the Term beginning in the 1999 calendar year and may
be increased, but not decreased below such amount, on the basis of such review
and then-current market practices.
(b) ANNUAL BONUS. During the Term, the Employee shall be eligible for
1998 and each calendar year thereafter that begins within the Term to
participate in an annual incentive bonus program established by the Company by
March 31, 1998 in accordance with the policies of the Company, its subsidiaries
and affiliates (hereinafter, collectively the "GROUP") and subject to such terms
and conditions as may be approved annually by the Compensation Committee of the
Board (the "COMPENSATION COMMITTEE") . Under the terms of the annual incentive
bonus program, the Employee will be afforded the opportunity to earn up to 30%
of his Salary (the "BONUS") in effect for the applicable calendar year, subject
to the achievement of the performance targets for the Group established by the
Compensation Committee for that year, to be paid on a pro-rata basis in the
event that the Employee is employed for less than a full calendar year within
the Term (for purposes of determining the 1998 bonus, the Employee shall be
deemed to have commenced employment as of January 1, 1998).
(c) STOCK OPTIONS. Effective as of the Effective Date, the Company
shall grant the Employee an option (the "DEAL OPTION") to purchase 50,000 shares
of the common stock of the Company pursuant to the terms of the Company's 1998
Stock Incentive Plan (the "OPTION PLAN"). The per share exercise price of the
Deal Option shall equal the fair market
<PAGE>
3
value of a share of Common Stock on the Effective Date, as determined in
accordance with the terms of the Option Plan. The Deal Option shall vest and
become exercisable in full on February 1, 1999. Also effective as of the
Effective Date, the Company shall grant the Employee an option (the "OPTION") to
purchase 80,000 shares of the common stock of the Company pursuant to the terms
of the Option Plan. The per share exercise price of the Option shall equal the
fair market value of a share of Common Stock on the Effective Date, as
determined in accordance with the terms of the Option Plan. The Option shall
vest and become exercisable as to 25% on February 1, 1999; the remainder of the
Option shall vest ratably on the first day of each month over the following
three years. Except as otherwise specified herein, both the Deal Option and the
Option shall be subject to the terms of the Option Plan and to such other terms
and conditions as may be specified by the Compensation Committee in the form of
a standard option agreement between the Company and the Employee.
(d) EXPENSES. The Company shall pay or reimburse the Employee for
all reasonable out-of-pocket expenses incurred by the Employee in connection
with his employment hereunder in accordance with Group policy and expressly
agrees that it will reimburse the Employee for his business class airfare on
international flights that are over eight hours in duration taken in connection
with Company business. Such expenses shall be paid upon the periodic submission
of invoices and shall be paid reasonably promptly after the date of such
invoice. The reimbursement of expenses under this Section 3(d) shall be subject
to the Employee's providing the Company with such documentation of the expenses
as the Company may from time to time reasonably request in accordance with the
policies of the Group.
(e) PENSION, WELFARE AND FRINGE BENEFITS. During the Term, the
Employee shall be eligible to participate in the Company's pension, medical,
disability and life insurance plans applicable to executives of the Company in
accordance with the terms of such plans as in effect from time to time;
PROVIDED, HOWEVER, that in no event shall the Employee's medical, disability and
life insurance benefits be less favorable than those in effect for the Employee
at PhotoDisc at the date of this Agreement.
(f) LONG-TERM INCENTIVE PROGRAM. During the Term, the Employee shall
participate in all long-term incentive plans and programs of the Group that are
applicable to its senior executives in accordance with their terms and in a
manner consistent with his position with the Company.
(g) OTHER SPECIFIC BENEFITS. The Company shall install and pay the
rental and unit charges attributable to a dedicated business telephone or ISDN
line at his home. During the Term, the Company shall also pay for the
Employee's purchase, line charge, rental and unit charges for his mobile phone.
The Company shall provide the Employee with a computer modem to be installed at
the Employee's home and a suitable desktop or laptop
<PAGE>
4
computer, as well as all ancillary equipment and maintenance therefor. In
addition, the Company will pay for the cost of the Employee's membership in or
subscriptions to the internet service provider of his choice. It is
acknowledged that in no event is any of the foregoing intended to duplicate the
equipment that PhotoDisc has previously provided to Employee and these items
shall only be provided to the extent that they are required for legitimate
business reasons. In addition, the Company shall continue to provide parking
benefits to Employee.
(h) HOLIDAYS. In addition to the usual public and bank holidays, the
Employee shall be entitled to twenty days' paid vacation annually, which shall
be taken at such times as are approved by the Company. The Employee shall be
permitted to carry forward any portion of his vacation time for up to one year
and, upon the expiration of such one year period, the Employee shall be paid in
lieu of such vacation days.
4. TERMINATION OF EMPLOYMENT. Subject to the notice and other
provisions of this Section 4, the Company shall have the right to terminate the
Employee's employment hereunder, and he shall have the right to resign, at any
time for any reason or for no stated reason.
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. (i) If,
prior to the expiration of the Term, the Employee's employment is terminated by
the Company for Cause or if the Employee resigns from his employment hereunder
other than for Good Reason, he shall be entitled to payment of the pro rata
portion of his Salary and accrued Bonus (for purposes of this Agreement,
"ACCRUED BONUS" shall be determined using the number of days in the applicable
calendar year that the Employee was employed by the Company and the applicable
performance criteria under the bonus plan, in each case through the date of
termination or resignation) through and including the date of termination or
resignation, as well as any unreimbursed expenses. Except to the extent
required by the terms of any applicable compensation or benefit plan or program
or as otherwise required by applicable law, the Employee shall have no rights
under this Agreement or otherwise to receive any other compensation or to
participate in any other plan, program or arrangement after such termination or
resignation of employment with respect to the year of such termination or
resignation and later years.
(ii) In addition, the Employee shall be entitled to retain the
then-vested portion of his options to purchase shares of the Company's common
stock as if he had remained an Employee until such options otherwise expire in
accordance with their terms.
(iii) Termination for "CAUSE" shall mean termination of the
Employee's employment with the Company because of (A) willful, material or
persistently repeated non-performance of the Employee's duties to the Company or
the Parent (other than by reason of the incapacity of the Employee due to
physical or mental illness) after notice by the Board of
<PAGE>
5
such failure and the Employee's non-performance and continued, willful, material
or persistent repeated non-performance after such notice, (B) the indictment of
the Employee for a felony offense, (C) fraud against the Group or any willful
misconduct that brings the reputation of the Group into serious disrepute or
causes the Employee to cease to be able to perform his duties, (D) any other
material breach by the Employee of any material term of this Agreement, or (E)
the Employee files for personal bankruptcy under the United States Bankruptcy
Code.
(iv) Termination of the Employee's employment for Cause shall be
communicated by delivery to the Employee of a written notice from the Company
stating that the Employee has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Employee without Good Reason shall be the date specified in a
written notice of resignation from the Employee to the Company. The Employee
shall provide at least 45 days' advance written notice of resignation without
Good Reason.
(b) INVOLUNTARY TERMINATION. (i) If, prior to the expiration of
the Term, the Company terminates the Employee's employment for any reason other
than Disability or Cause or Employee resigns from his employment hereunder for
Good Reason (collectively hereinafter referred to as an "INVOLUNTARY
TERMINATION"), the Company shall pay to the Employee his Salary and accrued
Bonus up to and including the date of such Involuntary Termination, as well as
any unreimbursed expenses. In addition, the Company shall continue to pay to
the Employee as severance (the "SEVERANCE PAYMENTS") in accordance with the
Company's normal payroll practices, his Salary, at the rate in effect
immediately prior to such Involuntary Termination, plus his maximum Bonus as
described in Section 3(b), in each case for the greater of one year or the
remainder of the Term.
(ii) In the event of the Employee's Involuntary Termination, the
Employee shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided to the Employee pursuant to Section 3(e) above
at the time of such Involuntary Termination for a period equal to the greater of
(x) one year following the Involuntary Termination or (y) the remainder of the
Term (the "CONTINUATION PERIOD"); PROVIDED, HOWEVER, that the Company shall have
no obligation to continue to maintain during the Continuation Period any plan or
program solely as a result of the provisions of this Agreement, but this
obligation shall apply in respect of any substitute plan.
(iii) In addition, in the event of the Employee's Involuntary
Termination, all of the Employee's then-outstanding options to purchase shares
of the Company's common stock shall continue to vest for the longer of (A) the
remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to pro-rata portion of the next tranche through the longer of (A) the
remainder of the term or (B) twelve months. The Employee shall be entitled to
<PAGE>
6
retain the vested portion of his options as of he remained an Employee until
such options otherwise expire in accordance with their terms.
(iv) Resignation for "GOOD REASON" shall mean resignation by
Employee because of (A) an adverse and material change in the Employee's duties,
titles or reporting responsibilities, (B) a material breach by the Company of
any term of the Agreement, (C) a reduction in the Employee's Salary or bonus
opportunity or the failure of the Company to pay the Employee any material
amount of compensation when due, (D) the assignment to Employee of any material
duties that are inconsistent with those described in Section 1 of this Agreement
without the Employee's consent, or (E) the Company's requirement that Employee
perform a substantial portion of his duties outside the Seattle, Washington
metropolitan area, except for travel in furtherance of the Company's business to
an extent substantially consistent with his business travel as of the date of
this Agreement, but acknowledging that the Company is now part of a larger
international Group, without the Employee's prior written consent. The Company
shall have 30 business days from the date of receipt of such notice to effect a
cure of the material breach described therein and, upon cure thereof by the
Company to the reasonable satisfaction of the Employee, such material breach
shall no longer constitute Good Reason for purposes of this Agreement.
(v) The date of termination of employment without Cause shall be
the date specified in a written notice of termination to the Employee. The date
of resignation for Good Reason shall be the date specified in a written notice
of resignation from the Employee to the Company; PROVIDED, HOWEVER, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(iv) above has expired without the Company having corrected, to the
reasonable satisfaction of the Employee, the event or events subject to cure.
(vi) Anything in this Agreement to the contrary notwithstanding,
no amounts shall be payable under this Section 4(b) if the Employee's employment
with the Company ends at the expiration of the Term in accordance with the
provisions of Section 2. Notwithstanding the foregoing, upon such expiration,
all of the Employee's then-outstanding options to purchase the Parent's common
stock shall continue to vest for an additional twelve months; PROVIDED, HOWEVER,
that to the extent that any such option vests on an annual basis, the Employee
shall also be vested as to a pro-rata portion of the next tranche through the
longer of (A) the remainder of the term or (B) twelve months. The Employee
shall be entitled to retain the vested portion of his options as if he had
remained an Employee until such options otherwise expire in accordance with
their terms.
(c) TERMINATION DUE TO DISABILITY. (i) In the event of the
Employee's Disability (as hereinafter defined), the Company shall be entitled to
terminate his employment upon providing the Employee with six months' prior
written notice. In the case that the Company terminates the Employee's
employment due to Disability, the Employee shall be entitled to receive, for the
remainder of the Term, his Salary at the rate in effect immediately
<PAGE>
7
prior to the Disability, plus his maximum Bonus as described in Section 3(b),
less any amounts paid to the Employee under any disability plan of the Company.
In addition, the Employee shall continue to be covered by the Company's health
and medical benefit plans as described in Section 3(e) for the remainder of the
Term.
(ii) In addition, in the event of the Employee's Disability, all of
the Employee's then-outstanding options to purchase shares of the Company's
common stock shall continue to vest for a period of the longer of (A) the
remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the term or (B) twelve months. The Employee shall be entitled
to retain the vested portion of his options as if he had remained an Employee
until such options otherwise expire in accordance with their terms.
(iii) As used in this Section 4(c), the term "DISABILITY" shall mean
a physical or mental incapacity that substantially prevents the Employee from
performing his duties hereunder and that has continued for at least six of the
last twelve months and that can reasonably be expected to continue indefinitely.
Any dispute as to whether or not the Employee is disabled within the meaning of
the preceding sentence shall be resolved by a physician reasonably satisfactory
to the Employee and the Company, and the determination of such physician shall
be final and binding upon both the Employee and the Company.
(d) DEATH. In the event of the Employee's death, the Employee's
Beneficiary shall be entitled to receive, for the remainder of the Term, his
Salary at the rate in effect immediately prior to his death, plus his maximum
Bonus described in Section 3(b), less any death benefits which are provided
under the terms of any plan, program or arrangement referred to in Section 3(e)
applicable to the Employee at the time of death. In addition, the Employee's
spouse and then-eligible dependents shall continue to be covered by the
Company's health and medical benefit plans as described in Section 3(e) for the
remainder of the Term. In addition, in the event of the Employee's death, all
of the Employee's then-outstanding options to purchase shares of the Company's
common stock shall continue to vest for a period of the longer of (A) the
remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the term or (B) twelve months. The Employee's estate shall be
entitled to retain the vested portion of his options as if he had remained an
Employee until such options otherwise expire in accordance with their terms.
(e) BENEFICIARY. For purposes of this Agreement, except as provided
in Section 3(e), "BENEFICIARY" shall mean the person or persons designated as
the beneficiary of the Employee's account under the 401(k) Plan, or, if no such
person or persons are designated
<PAGE>
8
by the Employee, the Employee's estate. No Beneficiary designation shall be
effective unless it is in writing and received by the Company prior to the date
of the Employee's death.
<PAGE>
9
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the
payments made hereunder would constitute a "PARACHUTE PAYMENT" (as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), and the net after-tax amount of the parachute payment is less than the
net after-tax amount if the aggregate payments to be made to the Employee were
three times his "BASE AMOUNT" (as defined in Section 280G(b)(3) of the Code),
less $1.00, then the aggregate of the amounts constituting the parachute payment
shall be reduced to an amount that will equal three times the base amount, less
$1.00. The determinations to be made with respect to this Section 5 shall be
made by an independent accounting firm of national standing (other than the
Company's regular auditors). The accounting firm shall be paid by the Company
for its services performed hereunder.
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT. For so long as the Employee is employed
by the Company and in circumstances where (i) the Employee receives a payment
pursuant to Section 4(b)(i), continuing for the longer of one year period
following his termination or the remainder of the Term, (ii) the Employee's
employment is terminated for Cause or pursuant to Section 4(c), for the one year
period following his termination or the remainder of the Term, if less, and
(iii) the Employee's employment terminates due to a non-renewal of the
Agreement, pursuant to Section 2 or without Good Reason, for one year at the
Company's option exercised within 10 business days of the termination (such
notice shall bind the Company to continue to pay the Employee's Salary and
maximum Bonus during such year (such period being referred to hereinafter as the
"RESTRICTED PERIOD")), the Employee shall not, without the prior written consent
of the Board, directly or indirectly, own an interest in, manage, operate, join,
control, lend money or render financial or other assistance to or participate in
or be connected with, as an officer, employee, partner, stockholder, consultant
or otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes with the Group by providing any goods or
services provided or under development by the Group at the effective date of the
Employee's termination of employment under this Agreement; PROVIDED, HOWEVER,
that this Section 6(a) shall not proscribe the Employee's ownership, either
directly or indirectly, of either less than five percent of any class of
securities which are listed on a national securities exchange or quoted on the
automated quotation system of the National Association of Securities Dealers,
Inc. or any other limited partnership investment over which the Employee has no
control.
(b) NO INTERFERENCE. During the Restricted Period, the Employee
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), intentionally endeavor to entice away from the Group or
otherwise interfere with the relationship of the Group with, any
<PAGE>
10
key person or team who is employed by or otherwise engaged to perform services
for the Group or any key person or team or entity who is, or was within the then
most recent twelve-month period, a customer, client or supplier of the Group.
(c) SECRECY. The Employee recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder, he may acquire confidential information and
trade secrets concerning the operation of the Group, the use or disclosure of
which could cause the Group substantial losses and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, the Employee covenants and agrees with the Company that he will not
at any time, except in performance of the Employee's obligations to the Company
hereunder or with the prior written consent of the Board, directly or indirectly
disclose to any person any confidential information that he may learn or has
learned by reason of his association with the Group. The term "CONFIDENTIAL
INFORMATION" means any information not previously disclosed to the public or to
the trade by the Group with respect to the Company's, or any of its affiliates'
or subsidiaries', products, facilities and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential reports,
product price lists, customer lists, financial information (including the
revenues, costs or profits associated with any of the Group's products),
business plans, prospects or opportunities.
(d) EXCLUSIVE PROPERTY. The Employee confirms that all confidential
information is and shall remain the exclusive property of the Group. All
business records, papers and documents kept or made by the Employee relating to
the business of the Group shall be and remain the property of the Group. Upon
the termination of his employment with the Company or upon the request of the
Company at any time, the Employee shall promptly deliver to the Company, and
shall not without the consent of the Board retain copies of, any written
materials not previously made available to the public, or records and documents
made by the Employee or coming into his possession concerning the business or
affairs of the Group; PROVIDED, HOWEVER, that subsequent to any such
termination, the Company shall provide the Employee with copies (the cost of
which shall be borne by the Employee) of any documents which are requested by
the Employee and which the Employee has determined in good faith are
(i) required to establish a defense to a claim that the Employee has not
complied with his duties hereunder or (ii) necessary to the Employee in order to
comply with applicable law.
(e) ASSIGNMENT OF DEVELOPMENTS. All "DEVELOPMENTS" (as defined
below) that were or are at any time made, conceived or suggested by Employee,
whether acting alone or in conjunction with others, during Employee's employment
with the Group shall be the sole and absolute property of the Group, free of any
reserved or other rights of any kind on the part of Employee. During Employee's
employment and, if such Developments were made, conceived or suggested by
Employee during his employment with the Group, thereafter, Employee shall
promptly make full disclosure of any such Developments to the Group and, at
<PAGE>
11
the Group's cost and expense, do all acts and things (including, among others,
the execution and delivery under oath of patent and copyright applications and
instruments of assignment) deemed by the Group to be necessary or desirable at
any time in order to effect the full assignment to the Group of Employee's right
and title, if any, to such Developments. For purposes of this Agreement, the
term "DEVELOPMENTS" shall mean all data, discoveries, findings, reports,
designs, inventions, improvements, methods, practices, techniques, developments,
programs, concepts, and ideas, whether or not patentable, relating to the
activities of the Group of which Employee is as of the date of this Agreement
aware or of which Employee becomes aware at any time during the Term, excluding
any Development for which no equipment, supplies, facilities or confidential
information of the Group was used and which was developed entirely on Employee's
own time, unless (i) the Development relates directly to the business of the
Group, (ii) the Development relates to actual or demonstrably anticipated
research or development of the Group, or (iii) the Development results from any
work performed by Employee for the Group (the foregoing is agreed to satisfy the
written notice and other requirements of Section 49.44.140 of the Revised Code
of Washington).
(f) INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Employee acknowledges that a breach of any of the
covenants contained in this Section 6 may result in material irreparable injury
to the Group for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Employee from engaging in activities prohibited by this Section
6 or such other relief as may be required to specifically enforce any of the
covenants in this Section 6. Without intending to limit the remedies available
to the Employee, the Employee shall be entitled to seek specific performance of
the Company's obligations under this Agreement.
7. GENERAL PROVISIONS.
(a) SOURCE OF PAYMENTS. All payments provided under this Agreement,
other than payments made pursuant to a plan which provides otherwise, shall be
paid in cash from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets made, to assure
payment. The Employee shall have no right, title or interest whatever in or to
any investments which the Company may make to aid the Company in meeting its
obligations hereunder. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall be no greater than
the right of an unsecured creditor of the Company; PROVIDED, HOWEVER, that this
provision shall not be deemed to waive or abrogate any preferential or other
rights to payment accruing to the Employee under applicable bankruptcy laws by
virtue of the Employee's status as an employee of the Company.
<PAGE>
12
(b) NO OTHER SEVERANCE BENEFITS. Except as specifically set forth in
this Agreement, the Employee covenants and agrees that he shall not be entitled
to any other form of severance benefits from the Company, including, without
limitation, benefits otherwise payable under any of the Company's regular
severance policies, in the event his employment hereunder ends for any reason
and, except with respect to obligations of the Company expressly provided for
herein, the Employee unconditionally releases the Company and its subsidiaries
and affiliates, and their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with his employment or the termination
thereof.
(c) TAX WITHHOLDING. Payments to the Employee of all compensation
contemplated under this Agreement shall be subject to all applicable tax
withholding.
(d) NOTICES. Any notice hereunder by either party to the other shall
be given in writing by personal delivery, or certified mail, return receipt
requested, or (if to the Company) by telex or facsimile, in any case delivered
to the applicable address set forth below:
(i) To the Company: Getty Images, Inc.
500 North Michigan Avenue
Suite 1700
Chicago, Illinois 60611
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: John J. Cannon, III, Esq.
Shearman & Sterling
555 California Street
San Francisco, CA 94104
Attn.: Christopher D. Dillon, Esq.
(ii) To the Employee: William Heston
2610-11th Avenue East
Seattle, Washington 98102
or to such other persons or other addresses as either party may specify to the
other in writing.
<PAGE>
13
(e) REPRESENTATION BY THE EMPLOYEE. The Employee represents and
warrants that his entering into this Agreement does not, and that his
performance under this Agreement and consummation of the transactions
contemplated hereby will not, violate the provisions of any agreement or
instrument to which the Employee is a party, or any decree, judgment or order to
which the Employee is subject, and that this Agreement constitutes a valid and
binding obligation of the Employee in accordance with its terms. Breach of this
representation will render all of the Company's obligations under this Agreement
void AB INITIO.
(f) LIMITED WAIVER. The waiver by the Company or the Employee of a
violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(g) ASSIGNMENT; ASSUMPTION OF AGREEMENT. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Employee in respect of any claim, debt,
obligation or similar process. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
(h) AMENDMENT; ACTIONS BY THE COMPANY. This Agreement may not be
amended, modified or canceled except by written agreement of the Employee and
the Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; PROVIDED, HOWEVER, that by resolution duly adopted in accordance with
this Section 7(h), the Board may delegate its responsibilities hereunder to one
or more of its members other than the Employee.
(i) SEVERABILITY. If any term or provision hereof is determined to
be invalid or unenforceable in a final court or arbitration proceeding, (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the invalid
or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(j) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (determined without regard
to the choice of law provisions thereof).
<PAGE>
14
(k) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby and supersedes all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(l) HEADINGS. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not control
the meaning or interpretation of any provisions of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
(n) DISCIPLINARY AND GRIEVANCE PROCEDURES. For statutory purposes,
there is no formal disciplinary procedure in relation to the Employee's
employment. The Employee shall be expected to maintain the highest standards of
integrity and behavior. If the Employee has any grievance in relation to his
employment or is not satisfied with any disciplinary procedure taken in relation
to him, he may apply in writing within 14 days of that decision to the Board,
whose decision shall be final. The foregoing shall not be construed, however,
to limit the Employee's remedies at law or otherwise.
<PAGE>
15
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first written above.
GETTY IMAGES, INC.
By:
-----------------------------------
Name:
Title:
EMPLOYEE
-----------------------------------
William Heston
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 9th day of February, 1998, by and
between GETTY IMAGES, INC., a Delaware corporation (the "COMPANY"), and HEATHER
BELL REDMAN, an individual residing at 3525 West Howe Street, Seattle,
Washington 98199 (the "EMPLOYEE").
W I T N E S S E T H:
WHEREAS, the Employee is presently serving as Vice President,
General Counsel and Secretary of PhotoDisc, Inc. ("PHOTODISC"); and
WHEREAS, the Company seeks to employ the Employee and the Employee
seeks to become employed by the Company; and
WHEREAS, both parties desire that the terms and conditions of the
Employee's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) GENERAL. The Company hereby employs the Employee, effective
as of the date hereof (the "EFFECTIVE DATE"), and the Employee agrees upon the
terms and conditions herein set forth to serve, effective as of the Effective
Date, as Senior Vice President, Secretary and General Counsel of the Company and
shall perform all duties customarily appurtenant to such position. In such
capacity, the Employee shall report directly and only to Jonathan Klein, or his
successor. The Employee's principal place of business shall be Seattle,
Washington.
(b) SERVICES AND DUTIES. For so long as the Employee is employed
by the Company, the Employee shall devote her full business time to the
performance of her duties hereunder; shall faithfully serve the Company; shall
in all respects conform to and comply with the lawful and good faith directions
and instructions given to her by Jonathan Klein, or his successor, and the Board
of Directors of the Company (the "BOARD"); and shall use her best efforts to
promote and serve the interests of the Company.
(c) NO OTHER EMPLOYMENT. For so long as the Employee is employed
by the Company, she shall not, directly or indirectly, render services to any
other person or organization for which she receives compensation without the
prior approval of the Board. No such approval will be required if the Employee
seeks to perform inconsequential services
<PAGE>
2
without direct compensation therefor in connection with the management of
personal investments or in connection with the performance of charitable and
civic activities, provided that such activities do not contravene the provisions
of Section 6 hereof.
2. TERM OF EMPLOYMENT. The term of the Employee's employment
under this Agreement (the "TERM") shall commence on the Effective Date and
continue until it is terminated by either party giving the other at least six
months' written notice of termination of the Term; PROVIDED, HOWEVER, that in no
event may a non-renewal notice be given prior to August 10, 1999; and PROVIDED
FURTHER, HOWEVER, that, in any event, the Term shall not extend beyond the last
day of the month in which the Employee attains age 65.
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions
of this Agreement, the Company shall pay and provide the following compensation
and other benefits to the Employee during the Term as compensation for all
services rendered hereunder and the covenants contained in Section 6 hereof:
(a) SALARY. The Company shall pay to the Employee an annual
salary (the "SALARY") at the initial rate of $175,000 (retroactive to February
1, 1998), payable to the Employee in accordance with the normal payroll
practices of the Company for its employees as are in effect from time to time.
The amount of the Employee's Salary shall be reviewed annually by the Company on
or about April 1 of each year during the Term beginning in the 1999 calendar
year and may be increased, but not decreased below such amount, on the basis of
such review and then-current market practices.
(b) ANNUAL BONUS. During the Term, the Employee shall be eligible
for 1998 and each calendar year thereafter that begins within the Term to
participate in an annual incentive bonus program established by the Company by
March 31, 1998 in accordance with the policies of the Company, its subsidiaries
and affiliates (hereinafter, collectively the "GROUP") and subject to such terms
and conditions as may be approved annually by the Compensation Committee of the
Board (the "COMPENSATION COMMITTEE"). Under the terms of the annual incentive
bonus program, the Employee will be afforded the opportunity to earn up to 30%
of her Salary (the "BONUS") in effect for the applicable calendar year, subject
to the achievement of the performance targets for the Group established by the
Compensation Committee for that year, to be paid on a pro-rata basis in the
event that the Employee is employed for less than a full calendar year within
the Term (for purposes of determining the 1998 bonus, the Employee shall be
deemed to have commenced employment as of January 1, 1998).
(c) STOCK OPTIONS. Effective as of the Effective Date, the
Company shall grant the Employee an option (the "DEAL OPTION") to purchase
50,000 shares of the common stock of the Company pursuant to the terms of the
Company's 1998 Stock Incentive Plan (the "OPTION PLAN"). The per share exercise
price of the Deal Option shall equal the fair market
<PAGE>
3
value of a share of Common Stock on the Effective Date, as determined in
accordance with the terms of the Option Plan. The Deal Option shall vest and
become exercisable in full on February 1, 1999. Also effective as of the
Effective Date, the Company shall grant the Employee an option (the "OPTION") to
purchase 80,000 shares of the common stock of the Company pursuant to the terms
of the Option Plan. The per share exercise price of the Option shall equal the
fair market value of a share of Common Stock on the Effective Date, as
determined in accordance with the terms of the Option Plan. The Option shall
vest and become exercisable as to 25% on February 1, 1999; the remainder of the
Option shall vest ratably on the first day of each month over the following
three years. Except as otherwise specified herein, both the Deal Option and the
Option shall be subject to the terms of the Option Plan and to such other terms
and conditions as may be specified by the Compensation Committee in the form of
a standard option agreement between the Company and the Employee.
(d) EXPENSES. The Company shall pay or reimburse the Employee
for all reasonable out-of-pocket expenses incurred by the Employee in connection
with her employment hereunder in accordance with Group policy and expressly
agrees that it will reimburse the Employee for her business class airfare on
international flights that are over eight hours in duration taken in connection
with Company business. Such expenses shall be paid upon the periodic submission
of invoices and shall be paid reasonably promptly after the date of such
invoice. The reimbursement of expenses under this Section 3(d) shall be subject
to the Employee's providing the Company with such documentation of the expenses
as the Company may from time to time reasonably request in accordance with the
policies of the Group.
(e) PENSION, WELFARE AND FRINGE BENEFITS. During the Term, the
Employee shall be eligible to participate in the Company's pension, medical,
disability and life insurance plans applicable to executives of the Company in
accordance with the terms of such plans as in effect from time to time;
PROVIDED, HOWEVER, that in no event shall the Employee's medical, disability and
life insurance benefits be less favorable than those in effect for the Employee
at PhotoDisc at the date of this Agreement.
(f) LONG-TERM INCENTIVE PROGRAM. During the Term, the Employee
shall participate in all long-term incentive plans and programs of the Group
that are applicable to its senior executives in accordance with their terms and
in a manner consistent with her position with the Company.
(g) OTHER SPECIFIC BENEFITS. The Company shall install and pay
the rental and unit charges attributable to a dedicated business telephone or
ISDN line at her home. During the Term, the Company shall also pay for the
Employee's purchase, line charge, rental and unit charges for her mobile phone.
The Company shall provide the Employee with a computer modem to be installed at
the Employee's home and a suitable desktop or laptop
<PAGE>
4
computer, as well as all ancillary equipment and maintenance therefor. In
addition, the Company will pay for the cost of the Employee's membership in or
subscriptions to the internet service provider of her choice. It is
acknowledged that in no event is any of the foregoing intended to duplicate the
equipment that PhotoDisc has previously provided to the Employee and these items
shall only be provided to the extent that they are required for legitimate
business reasons. In addition, the Company shall continue to provide parking
benefits to Employee.
(h) HOLIDAYS. In addition to the usual public and bank holidays,
the Employee shall be entitled to twenty days' paid vacation annually, which
shall be taken at such times as are approved by the Company. The Employee shall
be permitted to carry forward any portion of her vacation time for up to one
year and, upon the expiration of such one year period, the Employee shall be
paid in lieu of such vacation days.
4. TERMINATION OF EMPLOYMENT. Subject to the notice and other
provisions of this Section 4, the Company shall have the right to terminate the
Employee's employment hereunder, and she shall have the right to resign, at any
time for any reason or for no stated reason.
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. (i)
If, prior to the expiration of the Term, the Employee's employment is terminated
by the Company for Cause or if the Employee resigns from her employment
hereunder other than for Good Reason, she shall be entitled to payment of the
pro rata portion of her Salary and accrued Bonus (for purposes of this
Agreement, "ACCRUED BONUS" shall be determined using the number of days in the
applicable calendar year that the Employee was employed by the Company and the
applicable performance criteria under the bonus plan, in each case through the
date of termination or resignation) through and including the date of
termination or resignation, as well as any unreimbursed expenses. Except to the
extent required by the terms of any applicable compensation or benefit plan or
program or as otherwise required by applicable law, the Employee shall have no
rights under this Agreement or otherwise to receive any other compensation or to
participate in any other plan, program or arrangement after such termination or
resignation of employment with respect to the year of such termination or
resignation and later years.
(ii) In addition, the Employee shall be entitled to retain the
then-vested portion of her options to purchase shares of the Company's common
stock as if she had remained an Employee until such options otherwise expire in
accordance with their terms.
(iii) Termination for "CAUSE" shall mean termination of the
Employee's employment with the Company because of (A) willful, material or
persistently repeated non-performance of the Employee's duties to the Company or
the Parent (other than by reason of the incapacity of the Employee due to
physical or mental illness) after notice by the Board of
<PAGE>
5
such failure and the Employee's non-performance and continued, willful, material
or persistent repeated non-performance after such notice, (B) the indictment of
the Employee for a felony offense, (C) fraud against the Group or any willful
misconduct that brings the reputation of the Group into serious disrepute or
causes the Employee to cease to be able to perform her duties, (D) any other
material breach by the Employee of any material term of this Agreement, or (E)
the Employee files for personal bankruptcy under the United States Bankruptcy
Code.
(iv) Termination of the Employee's employment for Cause shall be
communicated by delivery to the Employee of a written notice from the Company
stating that the Employee has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Employee without Good Reason shall be the date specified in a
written notice of resignation from the Employee to the Company. The Employee
shall provide at least 45 days' advance written notice of resignation without
Good Reason.
(b) INVOLUNTARY TERMINATION. (i) If, prior to the expiration of
the Term, the Company terminates the Employee's employment for any reason other
than Disability or Cause or Employee resigns from her employment hereunder for
Good Reason (collectively hereinafter referred to as an "INVOLUNTARY
TERMINATION"), the Company shall pay to the Employee her Salary and accrued
Bonus up to and including the date of such Involuntary Termination, as well as
any unreimbursed expenses. In addition, the Company shall continue to pay to
the Employee as severance (the "SEVERANCE PAYMENTS") in accordance with the
Company's normal payroll practices, her Salary, at the rate in effect
immediately prior to such Involuntary Termination, plus her maximum Bonus as
described in Section 3(b), in each case for the greater of one year or the
remainder of the Term.
(ii) In the event of the Employee's Involuntary Termination, the
Employee shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided to the Employee pursuant to Section 3(e) above
at the time of such Involuntary Termination for a period equal to the greater of
(x) one year following the Involuntary Termination or (y) the remainder of the
Term (the "CONTINUATION PERIOD"); PROVIDED, HOWEVER, that the Company shall have
no obligation to continue to maintain during the Continuation Period any plan or
program solely as a result of the provisions of this Agreement, but this
obligation shall apply in respect of any substitute plan.
(iii) In addition, in the event of the Employee's Involuntary
Termination, all of the Employee's then-outstanding options to purchase shares
of the Company's common stock shall continue to vest for the longer of (A) the
remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the Term, or (B) twelve months. The Employee shall be
<PAGE>
6
entitled to retain the vested portion of her options as if she remained an
Employee until such options otherwise expire in accordance with their terms
(iv) Resignation for "GOOD REASON" shall mean resignation by
Employee because of (A) an adverse and material change in the Employee's duties,
titles or reporting responsibilities, (B) a material breach by the Company of
any term of the Agreement, (C) a reduction in the Employee's Salary or bonus
opportunity or the failure of the Company to pay the Employee any material
amount of compensation when due, (D) the assignment to Employee of any material
duties that are inconsistent with those described in Section 1 of this Agreement
without the Employee's consent, or (E) the Company's requirement that Employee
perform a substantial portion of her duties outside the Seattle, Washington
metropolitan area, except for travel in furtherance of the Company's business to
an extent substantially consistent with her business travel as of the date of
this Agreement, but acknowledging that the Company is now part of a larger
international Group, without the Employee's prior written consent. The Company
shall have 30 business days from the date of receipt of such notice to effect a
cure of the material breach described therein and, upon cure thereof by the
Company to the reasonable satisfaction of the Employee, such material breach
shall no longer constitute Good Reason for purposes of this Agreement.
(v) The date of termination of employment without Cause shall be
the date specified in a written notice of termination to the Employee. The date
of resignation for Good Reason shall be the date specified in a written notice
of resignation from the Employee to the Company; PROVIDED, HOWEVER, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(iv) above has expired without the Company having corrected, to the
reasonable satisfaction of the Employee, the event or events subject to cure.
(vi) Anything in this Agreement to the contrary notwithstanding,
no amounts shall be payable under this Section 4(b) if the Employee's employment
with the Company ends at the expiration of the Term in accordance with the
provisions of Section 2. Notwithstanding the foregoing, upon such expiration,
all of the Employee's then-outstanding options to purchase the Company's common
stock shall continue to vest for an additional twelve months; PROVIDED, HOWEVER,
that to the extent that any such option vests on an annual basis, the Employee
shall also be vested as to a pro-rata portion of the next tranche through the
longer of (A) the remainder of the term or (B) twelve months. The Employee
shall be entitled to retain the vested portion of her options as if she had
remained an Employee until such options otherwise expire in accordance with
their terms.
(c) TERMINATION DUE TO DISABILITY. (i) In the event of the
Employee's Disability (as hereinafter defined), the Company shall be entitled to
terminate her employment upon providing the Employee with six months' prior
written notice. In the case that the Company terminates the Employee's
employment due to Disability, the Employee shall be entitled to receive, for the
remainder of the Term, her Salary at the rate in effect immediately
<PAGE>
7
prior to the Disability, plus her maximum Bonus as described in Section 3(b),
less any amounts paid to the Employee under any disability plan of the Company.
In addition, the Employee shall continue to be covered by the Company's health
and medical benefit plans as described in Section 3(e) for the remainder of the
Term.
(ii) In addition, in the event of the Employee's Disability, all
of the Employee's then-outstanding options to purchase shares of the Company's
common stock shall continue to vest for a period of the longer of (A) the
remainder of the Term or (B) twelve months PROVIDED, HOWEVER, that to the extent
that any such option vests on an annual basis, the Employee shall also be vested
as to a pro-rata portion of the next tranche through the longer of (A) the
remainder of the term or (B) twelve months. The Employee shall be entitled to
retain the vested portion of her options as of she had remained an Employee
until such options otherwise expire in accordance with their terms.
(iii) As used in this Section 4(c), the term "DISABILITY" shall
mean a physical or mental incapacity that substantially prevents the Employee
from performing her duties hereunder and that has continued for at least six of
the last twelve months and that can reasonably be expected to continue
indefinitely. Any dispute as to whether or not the Employee is disabled within
the meaning of the preceding sentence shall be resolved by a physician
reasonably satisfactory to the Employee and the Company, and the determination
of such physician shall be final and binding upon both the Employee and the
Company.
(d) DEATH. In the event of the Employee's death, the Employee's
Beneficiary shall be entitled to receive, for the remainder of the Term, her
Salary at the rate in effect immediately prior to her death, plus her maximum
Bonus described in Section 3(b), less any death benefits which are provided
under the terms of any plan, program or arrangement referred to in Section 3(e)
applicable to the Employee at the time of death. In addition, the Employee's
spouse and then-eligible dependents shall continue to be covered by the
Company's health and medical benefit plans as described in Section 3(e) for the
remainder of the Term. In addition, in the event of the Employee's death, all
of the Employee's then-outstanding options to purchase shares of the Company's
common stock shall continue to vest for a period of the longer of (A) the
remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the term or (B) twelve months. The Employee's estate shall be
entitled to retain the vested portion of her options as if she had remained an
Employee until such options otherwise expire in accordance with their terms.
(e) BENEFICIARY. For purposes of this Agreement, except as
provided in Section 3(e), "BENEFICIARY" shall mean the person or persons
designated as the beneficiary of the Employee's account under the Company's
401(k) Plan, or, if no such person or persons are designated by the Employee,
the Employee's estate. No Beneficiary designation shall be
<PAGE>
8
effective unless it is in writing and received by the Company prior to the date
of the Employee's death.
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the
payments made hereunder would constitute a "PARACHUTE PAYMENT" (as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), and the net after-tax amount of the parachute payment is less than the
net after-tax amount if the aggregate payments to be made to the Employee were
three times her "BASE AMOUNT" (as defined in Section 280G(b)(3) of the Code),
less $1.00, then the aggregate of the amounts constituting the parachute payment
shall be reduced to an amount that will equal three times the base amount, less
$1.00. The determinations to be made with respect to this Section 5 shall be
made by an independent accounting firm of national standing (other than the
Company's regular auditors). The accounting firm shall be paid by the Company
for its services performed hereunder.
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT. For so long as the Employee is
employed by the Company and in circumstances where (i) the Employee receives a
payment pursuant to Section 4(b)(i), continuing for the longer of one year
period following her termination or the remainder of the Term, (ii) the
Employee's employment is terminated for Cause or pursuant to Section 4(c), for
the one year period following her termination or the remainder of the Term, if
less, and (iii) the Employee's employment terminates due to a non-renewal of the
Agreement pursuant to Section 2 or without Good Reason, for one year at the
Company's option exercised within 10 business days of the termination (such
notice shall bind the Company to continue to pay the Employee's Salary and
maximum Bonus during such year (such period being referred to hereinafter as the
"RESTRICTED PERIOD")), the Employee shall not, without the prior written consent
of the Board, directly or indirectly, own an interest in, manage, operate, join,
control, lend money or render financial or other assistance to or participate in
or be connected with, as an officer, employee, partner, stockholder, consultant
or otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes with the Group by providing any goods or
services provided or under development by the Group at the effective date of the
Employee's termination of employment under this Agreement; PROVIDED, HOWEVER,
that this Section 6(a) shall not proscribe the Employee's ownership, either
directly or indirectly, of either less than five percent of any class of
securities which are listed on a national securities exchange or quoted on the
automated quotation system of the National Association of Securities Dealers,
Inc. or any other limited partnership investment over which the Employee has no
control.
(b) NO INTERFERENCE. During the Restricted Period, the Employee
shall not, whether for her own account or for the account of any other
individual, partnership, firm,
<PAGE>
9
corporation or other business organization (other than the Company),
intentionally endeavor to entice away from the Group or otherwise interfere with
the relationship of the Group with, any key person or team who is employed by or
otherwise engaged to perform services for the Group or any key person or team or
entity who is, or was within the then most recent twelve-month period, a
customer, client or supplier of the Group.
(c) SECRECY. The Employee recognizes that the services to be
performed by her hereunder are special, unique and extraordinary in that, by
reason of her employment hereunder, she may acquire confidential information and
trade secrets concerning the operation of the Group, the use or disclosure of
which could cause the Group substantial losses and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, the Employee covenants and agrees with the Company that she will
not at any time, except in performance of the Employee's obligations to the
Company hereunder or with the prior written consent of the Board, directly or
indirectly disclose to any person any confidential information that she may
learn or has learned by reason of her association with the Group. The term
"CONFIDENTIAL INFORMATION" means any information not previously disclosed to the
public or to the trade by the Group with respect to the Company's, or any of its
affiliates' or subsidiaries', products, facilities and methods, trade secrets
and other intellectual property, systems, procedures, manuals, confidential
reports, product price lists, customer lists, financial information (including
the revenues, costs or profits associated with any of the Group's products),
business plans, prospects or opportunities.
(d) EXCLUSIVE PROPERTY. The Employee confirms that all
confidential information is and shall remain the exclusive property of the
Group. All business records, papers and documents kept or made by the Employee
relating to the business of the Group shall be and remain the property of the
Group. Upon the termination of her employment with the Company or upon the
request of the Company at any time, the Employee shall promptly deliver to the
Company, and shall not without the consent of the Board retain copies of, any
written materials not previously made available to the public, or records and
documents made by the Employee or coming into her possession concerning the
business or affairs of the Group; PROVIDED, HOWEVER, that subsequent to any such
termination, the Company shall provide the Employee with copies (the cost of
which shall be borne by the Employee) of any documents which are requested by
the Employee and which the Employee has determined in good faith are
(i) required to establish a defense to a claim that the Employee has not
complied with her duties hereunder or (ii) necessary to the Employee in order to
comply with applicable law.
(e) ASSIGNMENT OF DEVELOPMENTS. All "DEVELOPMENTS" (as defined
below) that were or are at any time made, conceived or suggested by Employee,
whether acting alone or in conjunction with others, during Employee's employment
with the Group shall be the sole and absolute property of the Group, free of any
reserved or other rights of any kind on the part of Employee. During Employee's
employment and, if such Developments were made,
<PAGE>
10
conceived or suggested by Employee during her employment with the Group,
thereafter, Employee shall promptly make full disclosure of any such
Developments to the Group and, at the Group's cost and expense, do all acts and
things (including, among others, the execution and delivery under oath of patent
and copyright applications and instruments of assignment) deemed by the Group to
be necessary or desirable at any time in order to effect the full assignment to
the Group of Employee's right and title, if any, to such Developments. For
purposes of this Agreement, the term "DEVELOPMENTS" shall mean all data,
discoveries, findings, reports, designs, inventions, improvements, methods,
practices, techniques, developments, programs, concepts, and ideas, whether or
not patentable, relating to the activities of the Group of which Employee is as
of the date of this Agreement aware or of which Employee becomes aware at any
time during the Term, excluding any Development for which no equipment,
supplies, facilities or confidential information of the Group was used and which
was developed entirely on Employee's own time, unless (i) the Development
relates directly to the business of the Group, (ii) the Development relates to
actual or demonstrably anticipated research or development of the Group, or
(iii) the Development results from any work performed by Employee for the Group
(the foregoing is agreed to satisfy the written notice and other requirements of
Section 49.44.140 of the Revised Code of Washington).
(f) INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Employee acknowledges that a breach of any of the
covenants contained in this Section 6 may result in material irreparable injury
to the Group for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Employee from engaging in activities prohibited by this Section
6 or such other relief as may be required to specifically enforce any of the
covenants in this Section 6. Without intending to limit the remedies available
to the Employee, the Employee shall be entitled to seek specific performance of
the Company's obligations under this Agreement.
7. GENERAL PROVISIONS.
(a) SOURCE OF PAYMENTS. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides otherwise,
shall be paid in cash from the general funds of the Company, and no special or
separate fund shall be established, and no other segregation of assets made, to
assure payment. The Employee shall have no right, title or interest whatever in
or to any investments which the Company may make to aid the Company in meeting
its obligations hereunder. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall be no greater than
the right of an unsecured creditor of the Company; PROVIDED, HOWEVER, that this
provision shall not be deemed to waive or abrogate any preferential or other
rights to payment accruing to the Employee under applicable bankruptcy laws by
virtue of the Employee's status as an employee of the Company.
<PAGE>
11
(b) NO OTHER SEVERANCE BENEFITS. Except as specifically set
forth in this Agreement, the Employee covenants and agrees that she shall not be
entitled to any other form of severance benefits from the Company, including,
without limitation, benefits otherwise payable under any of the Company's
regular severance policies, in the event her employment hereunder ends for any
reason and, except with respect to obligations of the Company expressly provided
for herein, the Employee unconditionally releases the Company and its
subsidiaries and affiliates, and their respective directors, officers, employees
and stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with her employment or the termination
thereof.
(c) TAX WITHHOLDING. Payments to the Employee of all
compensation contemplated under this Agreement shall be subject to all
applicable tax withholding.
(d) NOTICES. Any notice hereunder by either party to the other
shall be given in writing by personal delivery, or certified mail, return
receipt requested, or (if to the Company) by telex or facsimile, in any case
delivered to the applicable address set forth below:
(i) To the Company: Getty Images, Inc.
500 North Michigan Avenue
Suite 1700
Chicago, Illinois 60611
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: John J. Cannon, III, Esq.
Shearman & Sterling
555 California Street
San Francisco, CA 94104
Attn.: Christopher D. Dillon, Esq.
(ii) To the Employee: Heather Bell Redman
3525 West Howe Street
Seattle, Washington 98199
<PAGE>
12
or to such other persons or other addresses as either party may specify to the
other in writing.
(e) REPRESENTATION BY THE EMPLOYEE. The Employee represents and
warrants that her entering into this Agreement does not, and that her
performance under this Agreement and consummation of the transactions
contemplated hereby will not, violate the provisions of any agreement or
instrument to which the Employee is a party, or any decree, judgment or order to
which the Employee is subject, and that this Agreement constitutes a valid and
binding obligation of the Employee in accordance with its terms. Breach of this
representation will render all of the Company's obligations under this Agreement
void AB INITIO.
(f) LIMITED WAIVER. The waiver by the Company or the Employee of
a violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(g) ASSIGNMENT; ASSUMPTION OF AGREEMENT. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Employee in respect of any claim, debt,
obligation or similar process. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
(h) AMENDMENT; ACTIONS BY THE COMPANY. This Agreement may not be
amended, modified or canceled except by written agreement of the Employee and
the Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; PROVIDED, HOWEVER, that by resolution duly adopted in accordance with
this Section 7(h), the Board may delegate its responsibilities hereunder to one
or more of its members other than the Employee.
(i) SEVERABILITY. If any term or provision hereof is determined
to be invalid or unenforceable in a final court or arbitration proceeding, (i)
the remaining terms and provisions hereof shall be unimpaired and (ii) the
invalid or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(j) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (determined
without regard to the choice of law provisions thereof).
<PAGE>
13
(k) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby and supersedes all prior agreements and understandings of the
parties with respect to the subject matter hereof.
(l) HEADINGS. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not control
the meaning or interpretation of any provisions of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
(n) DISCIPLINARY AND GRIEVANCE PROCEDURES. For statutory
purposes, there is no formal disciplinary procedure in relation to the
Employee's employment. The Employee shall be expected to maintain the highest
standards of integrity and behavior. If the Employee has any grievance in
relation to her employment or is not satisfied with any disciplinary procedure
taken in relation to her, she may apply in writing within 14 days of that
decision to the Board, whose decision shall be final. The foregoing shall not
be construed, however, to limit the Employee's remedies at law or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first written above.
GETTY IMAGES, INC.
By:
--------------------------------
Name:
Title:
EMPLOYEE
--------------------------------
Heather Bell Redman
<PAGE>
14
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 9th day of February, 1998, by and
between PHOTODISC, INC., a Washington corporation (the "COMPANY"), and ROBERT J.
CHAMBERLAIN, an individual residing at 1927-45th Avenue Southwest, Seattle,
Washington 98116 (the "EMPLOYEE").
W I T N E S S E T H:
WHEREAS, the Employee is presently serving as Chief Financial
Officer and Senior Vice President, Finance of the Company; and
WHEREAS, the Company is a wholly-owned subsidiary of Getty Images,
Inc., a Delaware corporation (the "PARENT"); and
WHEREAS, the Company seeks to employ the Employee and the Employee
seeks to continue to be employed by the Company; and
WHEREAS, both parties desire that the terms and conditions of the
Employee's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) GENERAL. The Company hereby employs the Employee, effective
as of the date hereof (the "EFFECTIVE DATE"), and the Employee agrees upon the
terms and conditions herein set forth to serve, effective as of the Effective
Date, as Co-President of the Company and shall perform all duties customarily
appurtenant to such position. In such capacity, the Employee shall report
directly and only to Jonathan Klein, or his successor. The Employee's principal
place of business shall be Seattle, Washington.
(b) SERVICES AND DUTIES. For so long as the Employee is employed
by the Company, the Employee shall devote his full business time to the
performance of his duties hereunder; shall faithfully serve the Company; shall
in all respects conform to and comply with the lawful and good faith directions
and instructions given to him by Jonathan Klein, or his successor; and shall use
his best efforts to promote and serve the interests of the Company.
<PAGE>
2
(c) NO OTHER EMPLOYMENT. For so long as the Employee is employed
by the Company, he shall not, directly or indirectly, render services to any
other person or organization for which he receives compensation without the
prior approval of Jonathan Klein, or his successor. No such approval will be
required if the Employee seeks to perform inconsequential services without
direct compensation therefor in connection with the management of personal
investments or in connection with the performance of charitable and civic
activities, provided that such activities do not contravene the provisions of
Section 6 hereof.
2. TERM OF EMPLOYMENT. The term of the Employee's employment
under this Agreement (the "TERM") shall commence on the Effective Date and
continue until it is terminated by either party giving the other at least six
months' written notice of termination of the Term; PROVIDED, HOWEVER, that in no
event may a non-renewal notice be given prior to August 10, 1999; and PROVIDED
FURTHER, HOWEVER, that, in any event, the Term shall not extend beyond the last
day of the month in which the Employee attains age 65.
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions
of this Agreement, the Company shall pay and provide the following compensation
and other benefits to the Employee during the Term as compensation for all
services rendered hereunder and the covenants contained in Section 6 hereof:
(a) SALARY. The Company shall pay to the Employee an annual
salary (the "SALARY") at the initial rate of $190,000 (retroactive to February
1, 1998), payable to the Employee in accordance with the normal payroll
practices of the Company for its employees as are in effect from time to time.
The amount of the Employee's Salary shall be reviewed annually by the Company on
or about April 1 of each year during the Term beginning in the 1999 calendar
year and may be increased, but not decreased below such amount, on the basis of
such review and then-current market practices.
(b) ANNUAL BONUS. During the Term, the Employee shall be eligible
for 1998 and each calendar year thereafter that begins within the Term to
participate in an annual incentive bonus program established by the Company by
March 31, 1998, in accordance with the policies of the Company, its Parent, its
subsidiaries and affiliates (hereinafter, collectively the "GROUP") and subject
to such terms and conditions as may be approved annually by the Company. Under
the terms of the annual incentive bonus program, the Employee will be afforded
the opportunity to earn up to 30% of his Salary (the "BONUS") in effect for the
applicable calendar year, subject to the achievement of the performance targets
established by the Company for that year, to be paid on a pro-rata basis in the
event that the Employee is employed for less than a full calendar year within
the Term (for purposes of determining the 1998 bonus, the Employee shall be
deemed to have commenced employment as of January 1, 1998).
<PAGE>
3
(c) STOCK OPTIONS. Effective as of the Effective Date, the
Parent shall grant the Employee an option (the "DEAL OPTION") to purchase 50,000
shares of the common stock of the Parent pursuant to the terms of the Parent's
1998 Stock Incentive Plan (the "OPTION PLAN"). The per share exercise price of
the Deal Option shall equal the fair market value of a share of Common Stock on
the Effective Date, as determined in accordance with the terms of the Option
Plan. The Deal Option shall vest and become exercisable in full on February 1,
1999. Also effective as of the Effective Date, the Parent shall grant the
Employee an option (the "OPTION") to purchase 65,000 shares of the common stock
of the Parent pursuant to the terms of the Option Plan. The per share exercise
price of the Option shall equal the fair market value of a share of Common Stock
on the Effective Date, as determined in accordance with the terms of the Option
Plan. The Option shall vest and become exercisable as to 25% on February 1,
1999; the remainder of the Option shall vest ratably on the first day of each
month over the following three years. Except as otherwise specified herein,
both the Deal Option and the Option shall be subject to the terms of the Option
Plan and to such other terms and conditions as may be specified by the
Compensation Committee of the Parent in the form of a standard option agreement
between the Parent and the Employee.
(d) EXPENSES. The Company shall pay or reimburse the Employee
for all reasonable out-of-pocket expenses incurred by the Employee in connection
with his employment hereunder in accordance with Group policy and expressly
agrees that it will reimburse the Employee for his business class airfare on
international flights that are over eight hours in duration taken in connection
with Company business. Such expenses shall be paid upon the periodic submission
of invoices and shall be paid reasonably promptly after the date of such
invoice. The reimbursement of expenses under this Section 3(d) shall be subject
to the Employee's providing the Company with such documentation of the expenses
as the Company may from time to time reasonably request in accordance with the
policies of the Group.
(e) PENSION, WELFARE AND FRINGE BENEFITS. During the Term, the
Employee shall be eligible to participate in the Company's pension, medical,
disability and life insurance plans applicable to executives of the Company in
accordance with the terms of such plans as in effect from time to time;
PROVIDED, HOWEVER, that in no event shall the Employee's medical, disability and
life insurance benefits be less favorable than those in effect for the Employee
at the Company at the date of this Agreement.
(f) LONG-TERM INCENTIVE PROGRAM. During the Term, the Employee
shall participate in all long-term incentive plans and programs of the Group
that are applicable to its senior executives in accordance with their terms and
in a manner consistent with his position with the Company.
(g) OTHER SPECIFIC BENEFITS. The Company shall install and pay
the rental and unit charges attributable to a dedicated business telephone or
ISDN line at his home.
<PAGE>
4
During the Term, the Company shall also pay for the Employee's purchase, line
charge, rental and unit charges for his mobile phone. The Company shall provide
the Employee with a computer modem to be installed at the Employee's home and a
suitable desktop or laptop computer, as well as all ancillary equipment and
maintenance therefor. In addition, the Company will pay for the cost of the
Employee's membership in or subscriptions to the internet service provider of
his choice. It is acknowledged that in no event is any of the foregoing
intended to duplicate the equipment that the Company has previously provided to
Employee and these items shall only be provided to the extent that they are
required for legitimate business reasons. In addition, the Company shall
continue to provide parking benefits to Employee.
(h) HOLIDAYS. In addition to the usual public and bank holidays,
the Employee shall be entitled to twenty days' paid vacation annually, which
shall be taken at such times as are approved by the Company. The Employee shall
be permitted to carry forward any portion of his vacation time for up to one
year and, upon the expiration of such one year period, the Employee shall be
paid in lieu of such vacation days.
4. TERMINATION OF EMPLOYMENT. Subject to the notice and other
provisions of this Section 4, the Company shall have the right to terminate the
Employee's employment hereunder, and he shall have the right to resign, at any
time for any reason or for no stated reason.
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. (i)
If, prior to the expiration of the Term, the Employee's employment is terminated
by the Company for Cause or if the Employee resigns from his employment
hereunder other than for Good Reason, he shall be entitled to payment of the pro
rata portion of his Salary and accrued Bonus (for purposes of this Agreement,
"ACCRUED BONUS" shall be determined using the number of days in the applicable
calendar year that the Employee was employed by the Company and the applicable
performance criteria under the bonus plan, in each case through the date of
termination or resignation) through and including the date of termination or
resignation, as well as any unreimbursed expenses. Except to the extent
required by the terms of any applicable compensation or benefit plan or program
or as otherwise required by applicable law, the Employee shall have no rights
under this Agreement or otherwise to receive any other compensation or to
participate in any other plan, program or arrangement after such termination or
resignation of employment with respect to the year of such termination or
resignation and later years.
(ii) In addition, the Employee shall be entitled to retain the
then-vested portion of his options to purchase shares of the Parent's common
stock as if he had remained an Employee until such options otherwise expire in
accordance with their terms.
<PAGE>
5
(iii) Termination for "CAUSE" shall mean termination of the
Employee's employment with the Company because of (A) willful, material or
persistently repeated non-performance of the Employee's duties to the Company or
the Parent (other than by reason of the incapacity of the Employee due to
physical or mental illness) after notice by the Board of such failure and the
Employee's non-performance and continued, willful, material or persistent
repeated non-performance after such notice, (B) the indictment of the Employee
for a felony offense, (C) fraud against the Group or any willful misconduct that
brings the reputation of the Group into serious disrepute or causes the Employee
to cease to be able to perform his duties, (D) any other material breach by the
Employee of any material term of this Agreement, or (E) the Employee files for
personal bankruptcy under the United States Bankruptcy Code.
(iv) Termination of the Employee's employment for Cause shall be
communicated by delivery to the Employee of a written notice from the Company
stating that the Employee has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Employee without Good Reason shall be the date specified in a
written notice of resignation from the Employee to the Company. The Employee
shall provide at least 45 days' advance written notice of resignation without
Good Reason.
(b) INVOLUNTARY TERMINATION. (i) If, prior to the expiration of
the Term, the Company terminates the Employee's employment for any reason other
than Disability or Cause or Employee resigns from his employment hereunder for
Good Reason (collectively hereinafter referred to as an "INVOLUNTARY
TERMINATION"), the Company shall pay to the Employee his Salary and accrued
Bonus up to and including the date of such Involuntary Termination, as well as
any unreimbursed expenses. In addition, the Company shall continue to pay to
the Employee as severance (the "SEVERANCE PAYMENTS") in accordance with the
Company's normal payroll practices, his Salary, at the rate in effect
immediately prior to such Involuntary Termination, plus his maximum Bonus as
described in Section 3(b), in each case for the greater of one year or the
remainder of the Term.
(ii) In the event of the Employee's Involuntary Termination, the
Employee shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided to the Employee pursuant to Section 3(e) above
at the time of such Involuntary Termination for a period equal to the greater of
(x) one year following the Involuntary Termination or (y) the remainder of the
Term (the "CONTINUATION PERIOD"); PROVIDED, HOWEVER, that the Company shall have
no obligation to continue to maintain during the Continuation Period any plan or
program solely as a result of the provisions of this Agreement, but this
obligation shall apply in respect of any substitute plan.
(iii) In addition, in the event of the Employee's Involuntary
Termination, all of the Employee's then-outstanding options to purchase shares
of the Parent's common stock
<PAGE>
6
shall continue to vest for the longer of (A) the remainder of the Term or (B)
twelve months; PROVIDED, HOWEVER, that to the extent that any such option vests
on an annual basis, the Employee shall also be vested as to a pro-rata portion
of the next tranche through the longer of (A) the remainder of the term or (B)
twelve months. The Employee shall be entitled to retain the vested portion of
his options as if he had remained an Employee until such options otherwise
expire in accordance with their terms.
(iv) Resignation for "GOOD REASON" shall mean resignation by
Employee because of (A) an adverse and material change in the Employee's duties,
titles or reporting responsibilities, (B) a material breach by the Company of
any term of the Agreement, (C) a reduction in the Employee's Salary or bonus
opportunity or the failure of the Company to pay the Employee any material
amount of compensation when due, (D) the assignment to Employee of any material
duties that are inconsistent with those described in Section 1 of this Agreement
without the Employee's consent, or (E) the Company's requirement that Employee
perform a substantial portion of his duties outside the Seattle, Washington
metropolitan area, except for travel in furtherance of the Company's business to
an extent substantially consistent with his business travel as of the date of
this Agreement, but acknowledging that the Company is now part of a larger
international Group, without the Employee's prior written consent. The Company
shall have 30 business days from the date of receipt of such notice to effect a
cure of the material breach described therein and, upon cure thereof by the
Company to the reasonable satisfaction of the Employee, such material breach
shall no longer constitute Good Reason for purposes of this Agreement.
(v) The date of termination of employment without Cause shall be
the date specified in a written notice of termination to the Employee. The date
of resignation for Good Reason shall be the date specified in a written notice
of resignation from the Employee to the Company; PROVIDED, HOWEVER, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(iv) above has expired without the Company having corrected, to the
reasonable satisfaction of the Employee, the event or events subject to cure.
(vi) Anything in this Agreement to the contrary notwithstanding,
no amounts shall be payable under this Section 4(b) if the Employee's employment
with the Company ends at the expiration of the Term in accordance with the
provisions of Section 2. Notwithstanding the foregoing, upon such expiration,
all of the Employee's then-outstanding options to purchase the Parent's common
stock shall continue to vest for an additional twelve months; PROVIDED, HOWEVER,
that to the extent that any such option vests on an annual basis, the Employee
shall also be vested as to a pro-rata portion of the next tranche through the
longer of (A) the remainder of the term or (B) twelve months. The Employee
shall be entitled to retain the vested portion of his options as if he had
remained an Employee until such options otherwise expire in accordance with
their terms.
<PAGE>
7
(c) TERMINATION DUE TO DISABILITY. (i) In the event of the
Employee's Disability (as hereinafter defined), the Company shall be entitled to
terminate his employment upon providing the Employee with six months' prior
written notice. In the case that the Company terminates the Employee's
employment due to Disability, the Employee shall be entitled to receive, for the
remainder of the Term, his Salary at the rate in effect immediately prior to the
Disability, plus his maximum Bonus as described in Section 3(b), less any
amounts paid to the Employee under any disability plan of the Company. In
addition, the Employee shall continue to be covered by the Company's health and
medical benefit plans as described in Section 3(e) for the remainder of the
Term.
(ii) In addition, in the event of the Employee's Disability, all
of the Employee's then-outstanding options to purchase shares of the Parent's
common stock shall continue to vest for a period of the longer of (A) the
remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the term or (B) twelve months. The Employee shall be entitled
to retain the vested portion of his options as if he had remained an Employee
until such options otherwise expire in accordance with their terms.
(iii) As used in this Section 4(c), the term "DISABILITY" shall
mean a physical or mental incapacity that substantially prevents the Employee
from performing his duties hereunder and that has continued for at least six of
the last twelve months and that can reasonably be expected to continue
indefinitely. Any dispute as to whether or not the Employee is disabled within
the meaning of the preceding sentence shall be resolved by a physician
reasonably satisfactory to the Employee and the Company, and the determination
of such physician shall be final and binding upon both the Employee and the
Company.
(d) DEATH. In the event of the Employee's death, the Employee's
Beneficiary shall be entitled to receive, for the remainder of the Term, the
Employee's Salary at the rate in affect immediately prior to his death, plus the
maximum Bonus described in Section 3(b), less any death benefits which are
provided under the terms of any plan, program or arrangement referred to in
Section 3(e) applicable to the Employee at the time of death. In addition, the
Employee's spouse and then-eligible dependents shall continue to be covered by
the company's health and medical benefit plans as described in Section 3(e) for
the remainder of the Term. In addition, in the event of the Employee's death,
all of the Employee's then-outstanding options to purchase shares of the
Parent's common stock shall continue to vest for a period of the longer of (A)
the remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the term or (B) twelve months. The Employee's estate shall be
entitled to retain the vested portion of his options as if he had remained an
Employee until such options otherwise expire in accordance with their terms.
<PAGE>
8
(e) BENEFICIARY. For purposes of this Agreement, except as
provided in Section 3(e), "BENEFICIARY" shall mean the person or persons
designated as the beneficiary of the Employee's account under the 401(k) plan,
or, if no such person or persons are designated by the Employee, the Employee's
estate. No Beneficiary designation shall be effective unless it is in writing
and received by the Company prior to the date of the Employee's death.
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the
payments made hereunder would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), and the net after-tax amount of the parachute payment is less than the
net after-tax amount if the aggregate payments to be made to the Employee were
three times his "BASE AMOUNT" (as defined in Section 280G(b)(3) of the Code),
less $1.00, then the aggregate of the amounts constituting the parachute payment
shall be reduced to an amount that will equal three times the base amount, less
$1.00. The determinations to be made with respect to this Section 5 shall be
made by an independent accounting firm of national standing (other than the
Company's regular auditors). The accounting firm shall be paid by the Company
for its services performed hereunder.
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT. For so long as the Employee is
employed by the Company and in circumstances where (i) the Employee receives a
payment pursuant to Section 4(b)(i), continuing for the longer of one year
period following his termination or the remainder of the Term, (ii) the
Employee's employment is terminated for Cause or pursuant to Section 4(c), for
the one year period following his termination or the remainder of the Term, if
less and, (iii) the Employee's employment terminates due to a non-renewal of the
Agreement pursuant to Section 2 or without Good Reason for one year at the
Company's option exercised within 10 business days of the termination, (such
notice shall bind the Company continues to pay the Employee's Salary and maximum
Bonus during such year (such period being referred to hereinafter as the
"RESTRICTED PERIOD")), the Employee shall not, without the prior written consent
of the Board, directly or indirectly, own an interest in, manage, operate, join,
control, lend money or render financial or other assistance to or participate in
or be connected with, as an officer, employee, partner, stockholder, consultant
or otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes with the Group by providing any goods or
services provided or under development by the Group at the effective date of the
Employee's termination of employment under this Agreement; PROVIDED, HOWEVER,
that this Section 6(a) shall not proscribe the Employee's ownership, either
directly or indirectly, of either less than five percent of any class of
securities which are listed on a national securities exchange or quoted on the
automated quotation system of the National
<PAGE>
9
Association of Securities Dealers, Inc. or any other limited partnership
investment over which the Employee has no control.
(b) NO INTERFERENCE. During the Restricted Period, the Employee
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), intentionally solicit, endeavor to entice away from the Group
or otherwise interfere with the relationship of the Group with, any key person
or team who is employed by or otherwise engaged to perform services for the
Group or any key person or team or entity who is, or was within the then most
recent twelve-month period, a customer, client or supplier of the Group.
(c) SECRECY. The Employee recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder, he may acquire confidential information and
trade secrets concerning the operation of the Group, the use or disclosure of
which could cause the Group substantial losses and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, the Employee covenants and agrees with the Company that he will not
at any time, except in performance of the Employee's obligations to the Company
hereunder or with the prior written consent of the Board, directly or indirectly
disclose to any person any confidential information that he may learn or has
learned by reason of his association with the Group. The term "CONFIDENTIAL
INFORMATION" means any information not previously disclosed to the public or to
the trade by the Group with respect to the Company's, or any of its affiliates'
or subsidiaries', products, facilities and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential reports,
product price lists, customer lists, financial information (including the
revenues, costs or profits associated with any of the Group's products),
business plans, prospects or opportunities.
(d) EXCLUSIVE PROPERTY. The Employee confirms that all
confidential information is and shall remain the exclusive property of the
Group. All business records, papers and documents kept or made by the Employee
relating to the business of the Group shall be and remain the property of the
Group. Upon the termination of his employment with the Company or upon the
request of the Company at any time, the Employee shall promptly deliver to the
Company, and shall not without the consent of the Board retain copies of, any
written materials not previously made available to the public, or records and
documents made by the Employee or coming into his possession concerning the
business or affairs of the Group; PROVIDED, HOWEVER, that subsequent to any such
termination, the Company shall provide the Employee with copies (the cost of
which shall be borne by the Employee) of any documents which are requested by
the Employee and which the Employee has determined in good faith are
(i) required to establish a defense to a claim that the Employee has not
complied with his duties hereunder or (ii) necessary to the Employee in order to
comply with applicable law.
<PAGE>
10
(e) ASSIGNMENT OF DEVELOPMENTS. All "DEVELOPMENTS" (as defined
below) that were or are at any time made, conceived or suggested by Employee,
whether acting alone or in conjunction with others, during Employee's employment
with the Group shall be the sole and absolute property of the Group, free of any
reserved or other rights of any kind on the part of Employee. During Employee's
employment and, if such Developments were made, conceived or suggested by
Employee during his employment with the Group, thereafter, Employee shall
promptly make full disclosure of any such Developments to the Group and, at the
Group's cost and expense, do all acts and things (including, among others, the
execution and delivery under oath of patent and copyright applications and
instruments of assignment) deemed by the Group to be necessary or desirable at
any time in order to effect the full assignment to the Group of Employee's right
and title, if any, to such Developments. For purposes of this Agreement, the
term "DEVELOPMENTS" shall mean all data, discoveries, findings, reports,
designs, inventions, improvements, methods, practices, techniques, developments,
programs, concepts, and ideas, whether or not patentable, relating to the
activities of the Group of which Employee is as of the date of this Agreement
aware or of which Employee becomes aware at any time during the Term, excluding
any Development for which no equipment, supplies, facilities or confidential
information of the Group was used and which was developed entirely on Employee's
own time, unless (i) the Development relates directly to the business of the
Group, (ii) the Development relates to actual or demonstrably anticipated
research or development of the Group, or (iii) the Development results from any
work performed by Employee for the Group (the foregoing is agreed to satisfy the
written notice and other requirements of Section 49.44.140 of the Revised Code
of Washington).
(f) INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Employee acknowledges that a breach of any of the
covenants contained in this Section 6 may result in material irreparable injury
to the Group for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Employee from engaging in activities prohibited by this Section
6 or such other relief as may be required to specifically enforce any of the
covenants in this Section 6. Without intending to limit the remedies available
to the Employee, the Employee shall be entitled to seek specific performance of
the Company's obligations under this Agreement.
7. GENERAL PROVISIONS.
(a) SOURCE OF PAYMENTS. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides otherwise,
shall be paid in cash from the general funds of the Company, and no special or
separate fund shall be established, and no other segregation of assets made, to
assure payment. The Employee shall have no right, title or interest whatever in
or to any investments which the Company may make to aid the Company in meeting
its obligations hereunder. To the extent that any person acquires a
<PAGE>
11
right to receive payments from the Company hereunder, such right shall be no
greater than the right of an unsecured creditor of the Company; PROVIDED,
HOWEVER, that this provision shall not be deemed to waive or abrogate any
preferential or other rights to payment accruing to the Employee under
applicable bankruptcy laws by virtue of the Employee's status as an employee of
the Company.
(b) NO OTHER SEVERANCE BENEFITS. Except as specifically set
forth in this Agreement, the Employee covenants and agrees that he shall not be
entitled to any other form of severance benefits from the Company, including,
without limitation, benefits otherwise payable under any of the Company's
regular severance policies, in the event his employment hereunder ends for any
reason and, except with respect to obligations of the Company expressly provided
for herein, the Employee unconditionally releases the Company and its
subsidiaries and affiliates, and their respective directors, officers, employees
and stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with his employment or the termination
thereof.
(c) TAX WITHHOLDING. Payments to the Employee of all
compensation contemplated under this Agreement shall be subject to all
applicable tax withholding.
(d) NOTICES. Any notice hereunder by either party to the other
shall be given in writing by personal delivery, or certified mail, return
receipt requested, or (if to the Company) by telex or facsimile, in any case
delivered to the applicable address set forth below:
(i) To the Company: PhotoDisc, Inc.
2013 Fourth Avenue
4th Floor
Seattle, Washington 98121
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: John J. Cannon, III, Esq.
Shearman & Sterling
555 California Street
San Francisco, CA 94104
Attn.: Christopher D. Dillon, Esq.
<PAGE>
12
(ii) To the Employee: Robert J. Chamberlain
1927-45th Avenue Southwest
Seattle, Washington 98116
or to such other persons or other addresses as either party may specify to the
other in writing.
(e) REPRESENTATION BY THE EMPLOYEE. The Employee represents and
warrants that his entering into this Agreement does not, and that his
performance under this Agreement and consummation of the transactions
contemplated hereby will not, violate the provisions of any agreement or
instrument to which the Employee is a party, or any decree, judgment or order to
which the Employee is subject, and that this Agreement constitutes a valid and
binding obligation of the Employee in accordance with its terms. Breach of this
representation will render all of the Company's obligations under this Agreement
void AB INITIO.
(f) LIMITED WAIVER. The waiver by the Company or the Employee of
a violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(g) ASSIGNMENT; ASSUMPTION OF AGREEMENT. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Employee in respect of any claim, debt,
obligation or similar process. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
(h) AMENDMENT; ACTIONS BY THE COMPANY. This Agreement may not be
amended, modified or canceled except by written agreement of the Employee and
the Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; PROVIDED, HOWEVER, that by resolution duly adopted in accordance with
this Section 7(h), the Board may delegate its responsibilities hereunder to one
or more of its members other than the Employee.
(i) SEVERABILITY. If any term or provision hereof is determined
to be invalid or unenforceable in a final court or arbitration proceeding, (i)
the remaining terms and provisions hereof shall be unimpaired and (ii) the
invalid or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
<PAGE>
13
(j) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (determined
without regard to the choice of law provisions thereof).
(k) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby and supersedes all prior agreements and understandings of the
parties with respect to the subject matter hereof.
(l) HEADINGS. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not control
the meaning or interpretation of any provisions of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
(n) DISCIPLINARY AND GRIEVANCE PROCEDURES. For statutory
purposes, there is no formal disciplinary procedure in relation to the
Employee's employment. The Employee shall be expected to maintain the highest
standards of integrity and behavior. If the Employee has any grievance in
relation to his employment or is not satisfied with any disciplinary procedure
taken in relation to him, he may apply in writing within 14 days of that
decision to the Board, whose decision shall be final. The foregoing shall not
be construed, however, to limit the Employee's remedies at law or otherwise.
<PAGE>
14
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first written above.
PHOTODISC, INC.
By:
----------------------------------
Name:
Title:
EMPLOYEE
----------------------------------
Robert J. Chamberlain
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 9th day of February, 1998, by and
between PHOTODISC, INC., a Washington corporation (the "COMPANY"), and SALLY VON
BARGEN, an individual residing at 2414-1st Avenue, Seattle, Washington 98121
(the "EMPLOYEE").
W I T N E S S E T H:
WHEREAS, the Employee is presently serving as Senior Vice President,
Sales and Service of the Company; and
WHEREAS, the Company is a wholly-owned subsidiary of Getty Images,
Inc., a Delaware corporation (the "PARENT"); and
WHEREAS, the Company seeks to employ the Employee and the Employee
seeks to continue to be employed by the Company; and
WHEREAS, both parties desire that the terms and conditions of the
Employee's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) GENERAL. The Company hereby employs the Employee, effective
as of the date hereof (the "EFFECTIVE DATE"), and the Employee agrees upon the
terms and conditions herein set forth to serve, effective as of the Effective
Date, as Co-President of the Company and shall perform all duties customarily
appurtenant to such position. In such capacity, the Employee shall report
directly and only to Jonathan Klein, or his successor. The Employee's principal
place of business shall be Seattle, Washington.
(b) SERVICES AND DUTIES. For so long as the Employee is employed
by the Company, the Employee shall devote her full business time to the
performance of her duties hereunder; shall faithfully serve the Company; shall
in all respects conform to and comply with the lawful and good faith directions
and instructions given to her by Jonathan Klein, or his successor); and shall
use her best efforts to promote and serve the interests of the Company.
<PAGE>
2
(c) NO OTHER EMPLOYMENT. For so long as the Employee is employed
by the Company, she shall not, directly or indirectly, render services to any
other person or organization for which she receives compensation without the
prior approval of Jonathan Klein, or his successor. No such approval will be
required if the Employee seeks to perform inconsequential services without
direct compensation therefor in connection with the management of personal
investments or in connection with the performance of charitable and civic
activities, provided that such activities do not contravene the provisions of
Section 6 hereof.
2. TERM OF EMPLOYMENT. The term of the Employee's employment
under this Agreement (the "TERM") shall commence on the Effective Date and
continue until it is terminated by either party giving the other at least six
months' written notice of termination of the Term; PROVIDED, HOWEVER, that in no
event may a non-renewal notice be given prior to August 10, 1999; and PROVIDED
FURTHER, HOWEVER, that, in any event, the Term shall not extend beyond the last
day of the month in which the Employee attains age 65.
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions
of this Agreement, the Company shall pay and provide the following compensation
and other benefits to the Employee during the Term as compensation for all
services rendered hereunder and the covenants contained in Section 6 hereof:
(a) SALARY. The Company shall pay to the Employee an annual
salary (the "SALARY") at the initial rate of $190,000 (retroactive to February
1, 1998), payable to the Employee in accordance with the normal payroll
practices of the Company for its employees as are in effect from time to time.
The amount of the Employee's Salary shall be reviewed annually by the Company on
or about April 1 of each year during the Term beginning in the 1999 calendar
year and may be increased, but not decreased below such amount, on the basis of
such review and then-current market practices.
(b) ANNUAL BONUS. During the Term, the Employee shall be eligible
for 1998 and each calendar year thereafter that begins within the Term to
participate in an annual incentive bonus program established by the Company by
March 31, 1998, in accordance with the policies of the Company, its Parent, its
subsidiaries and affiliates (hereinafter, collectively the "GROUP") and subject
to such terms and conditions as may be approved annually by the Company. Under
the terms of the annual incentive bonus program, the Employee will be afforded
the opportunity to earn up to 30% of her Salary (the "BONUS") in effect for the
applicable calendar year, subject to the achievement of the performance targets
established by the Company for that year, to be paid on a pro-rata basis in the
event that the Employee is employed for less than a full calendar year within
the Term (for purposes of determining the 1998 bonus, the Employee shall be
deemed to have commenced employment as of January 1, 1998).
<PAGE>
3
(c) STOCK OPTIONS. Effective as of the Effective Date, the
Parent shall grant the Employee an option (the "OPTION") to purchase 65,000
shares of the common stock of the Parent pursuant to the terms of the Parent's
1998 Stock Incentive Plan (the "OPTION PLAN"). The per share exercise price of
the Option shall equal the fair market value of a share of Common Stock on the
Effective Date, as determined in accordance with the terms of the Option Plan.
The Option shall vest and become exercisable as to 25% on February 1, 1999; the
remainder of the Option shall vest ratably on the first day of each month over
the following three years. Except as otherwise specified herein, the Option
shall be subject to the terms of the Option Plan and to such other terms and
conditions as may be specified by the Compensation Committee of the Parent in
the form of a standard option agreement between the Parent and the Employee.
(d) EXPENSES. The Company shall pay or reimburse the Employee
for all reasonable out-of-pocket expenses incurred by the Employee in connection
with her employment hereunder in accordance with Group policy and expressly
agrees that it will reimburse the Employee for her business class airfare on
international flights that are over eight hours in duration taken in connection
with Company business. Such expenses shall be paid upon the periodic submission
of invoices and shall be paid reasonably promptly after the date of such
invoice. The reimbursement of expenses under this Section 3(d) shall be subject
to the Employee's providing the Company with such documentation of the expenses
as the Company may from time to time reasonably request in accordance with the
policies of the Group.
(e) PENSION, WELFARE AND FRINGE BENEFITS. During the Term, the
Employee shall be eligible to participate in the Company's pension, medical,
disability and life insurance plans applicable to executives of the Company in
accordance with the terms of such plans as in effect from time to time;
PROVIDED, HOWEVER, that in no event shall the Employee's medical, disability and
life insurance benefits be less favorable than those in effect for the Employee
at the Company at the date of this Agreement.
(f) LONG-TERM INCENTIVE PROGRAM. During the Term, the Employee
shall participate in all long-term incentive plans and programs of the Group
that are applicable to its senior executives in accordance with their terms and
in a manner consistent with her position with the Company.
(g) OTHER SPECIFIC BENEFITS. The Company shall install and pay
the rental and unit charges attributable to a dedicated business telephone or
ISDN line at her home. During the Term, the Company shall also pay for the
Employee's purchase, line charge, rental and unit charges for her mobile phone.
The Company shall provide the Employee with a computer modem to be installed at
the Employee's home and a suitable desktop or laptop computer, as well as all
ancillary equipment and maintenance therefor. In addition, the Company will pay
for the cost of the Employee's membership in or subscriptions to the
<PAGE>
4
internet service provider of her choice. It is acknowledged that in no event is
any of the foregoing intended to duplicate the equipment that the Company has
previously provided to Employee and these items shall only be provided to the
extent that they are required for legitimate business reasons. In addition, the
Company shall continue to provide parking benefits to Employee.
(h) HOLIDAYS. In addition to the usual public and bank holidays,
the Employee shall be entitled to twenty days' paid vacation annually, which
shall be taken at such times as are approved by the Company. The Employee shall
be permitted to carry forward any portion of her vacation time for up to one
year and, upon the expiration of such one year period, the Employee shall be
paid in lieu of such vacation days.
4. TERMINATION OF EMPLOYMENT. Subject to the notice and other
provisions of this Section 4, the Company shall have the right to terminate the
Employee's employment hereunder, and she shall have the right to resign, at any
time for any reason or for no stated reason.
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. (i)
If, prior to the expiration of the Term, the Employee's employment is terminated
by the Company for Cause or if the Employee resigns from her employment
hereunder other than for Good Reason, she shall be entitled to payment of the
pro rata portion of her Salary and accrued Bonus (for purposes of this
Agreement, "ACCRUED BONUS" shall be determined using the number of days in the
applicable calendar year that the Employee was employed by the Company and the
applicable performance criteria under the bonus plan, in each case through the
date of termination or resignation) through and including the date of
termination or resignation, as well as any unreimbursed expenses. Except to the
extent required by the terms of any applicable compensation or benefit plan or
program or as otherwise required by applicable law, the Employee shall have no
rights under this Agreement or otherwise to receive any other compensation or to
participate in any other plan, program or arrangement after such termination or
resignation of employment with respect to the year of such termination or
resignation and later years.
(ii) In addition, the Employee shall be entitled to retain the
then-vested portion of her options to purchase shares of the Parent's common
stock as if she had remained an Employee until such options otherwise expire in
accordance with their terms.
(iii) Termination for "CAUSE" shall mean termination of the
Employee's employment with the Company because of (A) willful, material or
persistently repeated non-performance of the Employee's duties to the Company or
the Parent (other than by reason of the incapacity of the Employee due to
physical or mental illness) after notice by the Board of such failure and the
Employee's non-performance and continued, willful, material or persistent
repeated non-performance after such notice, (B) the indictment of the Employee
for a felony
<PAGE>
5
offense, (C) fraud against the Group or any willful misconduct that brings the
reputation of the Group into serious disrepute or causes the Employee to cease
to be able to perform her duties, (D) any other material breach by the Employee
of any material term of this Agreement, or (E) the Employee files for personal
bankruptcy under the United States Bankruptcy Code.
(iv) Termination of the Employee's employment for Cause shall be
communicated by delivery to the Employee of a written notice from the Company
stating that the Employee has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Employee without Good Reason shall be the date specified in a
written notice of resignation from the Employee to the Company. The Employee
shall provide at least 45 days' advance written notice of resignation without
Good Reason.
(b) INVOLUNTARY TERMINATION. (i) If, prior to the expiration of
the Term, the Company terminates the Employee's employment for any reason other
than Disability or Cause or Employee resigns from her employment hereunder for
Good Reason (collectively hereinafter referred to as an "INVOLUNTARY
TERMINATION"), the Company shall pay to the Employee her Salary and accrued
Bonus up to and including the date of such Involuntary Termination, as well as
any unreimbursed expenses. In addition, the Company shall continue to pay to
the Employee as severance (the "SEVERANCE PAYMENTS") in accordance with the
Company's normal payroll practices, her Salary, at the rate in effect
immediately prior to such Involuntary Termination, plus her maximum Bonus as
described in Section 3(b), in each case for the greater of one year or the
remainder of the Term.
(ii) In the event of the Employee's Involuntary Termination, the
Employee shall continue to participate on the same terms and conditions as are
in effect immediately prior to such termination or resignation in the Company's
health and medical plans provided to the Employee pursuant to Section 3(e) above
at the time of such Involuntary Termination for a period equal to the greater of
(x) one year following the Involuntary Termination or (y) the remainder of the
Term (the "CONTINUATION PERIOD"); PROVIDED, HOWEVER, that the Company shall have
no obligation to continue to maintain during the Continuation Period any plan or
program solely as a result of the provisions of this Agreement, but this
obligation shall apply in respect of any substitute plan.
(iii) In addition, in the event of the Employee's Involuntary
Termination, all of the Employee's then-outstanding options to purchase shares
of the Parent's common stock shall continue to vest for the longer of (A) the
remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the Term or (B) twelve months. The Employee shall be entitled
to retain the vested portion of her options as if she had remained an Employee
until such options otherwise expire in accordance with their terms.
<PAGE>
6
(iv) Resignation for "GOOD REASON" shall mean resignation by
Employee because of (A) an adverse and material change in the Employee's duties,
titles or reporting responsibilities, (B) a material breach by the Company of
any term of the Agreement, (C) a reduction in the Employee's Salary or bonus
opportunity or the failure of the Company to pay the Employee any material
amount of compensation when due, (D) the assignment to Employee of any material
duties that are inconsistent with those described in Section 1 of this Agreement
without the Employee's consent, or (E) the Company's requirement that Employee
perform a substantial portion of her duties outside the Seattle, Washington
metropolitan area, except for travel in furtherance of the Company's business to
an extent substantially consistent with her business travel as of the date of
this Agreement, but acknowledging that the Company is now part of a larger
international Group, without the Employee's prior written consent. The Company
shall have 30 business days from the date of receipt of such notice to effect a
cure of the material breach described therein and, upon cure thereof by the
Company to the reasonable satisfaction of the Employee, such material breach
shall no longer constitute Good Reason for purposes of this Agreement.
(v) The date of termination of employment without Cause shall be
the date specified in a written notice of termination to the Employee. The date
of resignation for Good Reason shall be the date specified in a written notice
of resignation from the Employee to the Company; PROVIDED, HOWEVER, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(iv) above has expired without the Company having corrected, to the
reasonable satisfaction of the Employee, the event or events subject to cure.
(vi) Anything in this Agreement to the contrary notwithstanding,
no amounts shall be payable under this Section 4(b) if the Employee's employment
with the Company ends at the expiration of the Term in accordance with the
provisions of Section 2. Notwithstanding the foregoing, upon such expiration,
all of the Employee's then-outstanding options to purchase shares of the
Parent's common stock shall continue to vest for an additional twelve months;
PROVIDED, HOWEVER, that to the extent that any such option vests on an annual
basis, the Employee shall also be vested as to a pro-rata portion of the next
tranche through the longer of (A) the remainder of the term or (B) twelve
months. The Employee shall be entitled to retain the vested portion of her
options as if she had remained an Employee until such options otherwise expire
in accordance with their terms.
(c) TERMINATION DUE TO DISABILITY. (i) In the event of the
Employee's Disability (as hereinafter defined), the Company shall be entitled to
terminate her employment upon providing the Employee with six months' prior
written notice. In the case that the Company terminates the Employee's
employment due to Disability, the Employee shall be entitled to receive, for the
remainder of the Term, her Salary at the rate in effect immediately prior to the
Disability, plus her maximum Bonus as described in Section 3(b), less any
amounts paid to the Employee under any disability plan of the Company. In
addition, the
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7
Employee shall continue to be covered by the Company's health and medical
benefit plans as described in Section 3(e) for the remainder of the Term.
(ii) In addition, in the event of the Employee's Disability, all
of the Employee's then-outstanding options to purchase shares of the Parent's
common stock shall continue to vest for a period of the longer of (A) the
remainder of the Term or (b) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the term or (B) twelve months. The Employee shall be entitled
to retain the vested portion of her options as if she had remained an Employee
until such options otherwise expire in accordance with their terms.
(iii) As used in this Section 4(c), the term "DISABILITY" shall
mean a physical or mental incapacity that substantially prevents the Employee
from performing her duties hereunder and that has continued for at least six of
the last twelve months and that can reasonably be expected to continue
indefinitely. Any dispute as to whether or not the Employee is disabled within
the meaning of the preceding sentence shall be resolved by a physician
reasonably satisfactory to the Employee and the Company, and the determination
of such physician shall be final and binding upon both the Employee and the
Company.
(d) DEATH. In the event of the Employee's death, the Employee's
Beneficiary shall be entitled to receive, for the remainder of the Term, her
Salary at the rate in effect immediately prior to her death, plus her maximum
Bonus described in Section 3(b), less any death benefits which are provided
under the terms of any plan, program or arrangement referred to in Section 3(e)
applicable to the Employee at the time of death. In addition, the Employee's
spouse and then-eligible dependents shall continue to be covered by the
Company's health and medical benefit plans as described in Section 3(e) for the
remainder of the Term. In addition, in the event of the Employee's death, all
of the Employee's then-outstanding options to purchase shares of the Parent's
common stock shall continue to vest for a period of the longer of (A) the
remainder of the Term or (B) twelve months; PROVIDED, HOWEVER, that to the
extent that any such option vests on an annual basis, the Employee shall also be
vested as to a pro-rata portion of the next tranche through the longer of (A)
the remainder of the term or (B) twelve months. The Employee's estate shall be
entitled to retain the vested portion of her options as if she had remained an
Employee until such options otherwise expire in accordance with their terms.
(e) BENEFICIARY. For purposes of this Agreement, except as
provided in Section 3(e), "BENEFICIARY" shall mean the person or persons
designated as the beneficiary of the Employee's account under the Company's
401(k) Plan, or, if no such person or persons are designated by the Employee,
the Employee's estate. No Beneficiary designation shall be effective unless it
is in writing and received by the Company prior to the date of the Employee's
death.
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8
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the payments made
hereunder would constitute a "PARACHUTE PAYMENT" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), and
the net after-tax amount of the parachute payment is less than the net after-tax
amount if the aggregate payments to be made to the Employee were three times her
"BASE AMOUNT" (as defined in Section 280G(b)(3) of the Code), less $1.00, then
the aggregate of the amounts constituting the parachute payment shall be reduced
to an amount that will equal three times the base amount, less $1.00. The
determinations to be made with respect to this Section 5 shall be made by an
independent accounting firm of national standing (other than the Company's
regular auditors). The accounting firm shall be paid by the Company for its
services performed hereunder.
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT. For so long as the Employee is
employed by the Company and in circumstances where (i) the Employee receives a
payment pursuant to Section 4(b)(i), continuing for the longer of one year
period following her termination or the remainder of the Term, (ii) the
Employee's employment is terminated for Cause or pursuant to Section 4(c), for
the one year period following her termination or the remainder of the Term, if
less, and (iii) the Employee's employment terminates due to a non-renewal of the
agreement pursuant to Section 2 or without Good Reason, for one year at the
Company's option exercised within 10 business days of the termination (such
notice shall bind the Company to continue to pay the Employee's Salary and
maximum Bonus during such year (such period being referred to hereinafter as the
"RESTRICTED PERIOD")), the Employee shall not, without the prior written consent
of the Board, directly or indirectly, own an interest in, manage, operate, join,
control, lend money or render financial or other assistance to or participate in
or be connected with, as an officer, employee, partner, stockholder, consultant
or otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes with the Group by providing any goods or
services provided or under development by the Group at the effective date of the
Employee's termination of employment under this Agreement; PROVIDED, HOWEVER,
that this Section 6(a) shall not proscribe the Employee's ownership, either
directly or indirectly, of either less than five percent of any class of
securities which are listed on a national securities exchange or quoted on the
automated quotation system of the National Association of Securities Dealers,
Inc. or any other limited partnership investment over which the Employee has no
control.
(b) NO INTERFERENCE. During the Restricted Period, the Employee
shall not, whether for her own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), intentionally endeavor to entice away from the Group or
otherwise interfere with the relationship of the Group with, any
<PAGE>
9
key person or team who is employed by or otherwise engaged to perform services
for the Group or any key person or team or entity who is, or was within the then
most recent twelve-month period, a customer, client or supplier of the Group.
(c) SECRECY. The Employee recognizes that the services to be
performed by her hereunder are special, unique and extraordinary in that, by
reason of her employment hereunder, she may acquire confidential information and
trade secrets concerning the operation of the Group, the use or disclosure of
which could cause the Group substantial losses and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, the Employee covenants and agrees with the Company that she will
not at any time, except in performance of the Employee's obligations to the
Company hereunder or with the prior written consent of the Board, directly or
indirectly disclose to any person any confidential information that she may
learn or has learned by reason of her association with the Group. The term
"CONFIDENTIAL INFORMATION" means any information not previously disclosed to the
public or to the trade by the Group with respect to the Company's, or any of its
affiliates' or subsidiaries', products, facilities and methods, trade secrets
and other intellectual property, systems, procedures, manuals, confidential
reports, product price lists, customer lists, financial information (including
the revenues, costs or profits associated with any of the Group's products),
business plans, prospects or opportunities.
(d) EXCLUSIVE PROPERTY. The Employee confirms that all
confidential information is and shall remain the exclusive property of the
Group. All business records, papers and documents kept or made by the Employee
relating to the business of the Group shall be and remain the property of the
Group. Upon the termination of her employment with the Company or upon the
request of the Company at any time, the Employee shall promptly deliver to the
Company, and shall not without the consent of the Board retain copies of, any
written materials not previously made available to the public, or records and
documents made by the Employee or coming into her possession concerning the
business or affairs of the Group; PROVIDED, HOWEVER, that subsequent to any such
termination, the Company shall provide the Employee with copies (the cost of
which shall be borne by the Employee) of any documents which are requested by
the Employee and which the Employee has determined in good faith are
(i) required to establish a defense to a claim that the Employee has not
complied with her duties hereunder or (ii) necessary to the Employee in order to
comply with applicable law.
(e) ASSIGNMENT OF DEVELOPMENTS. All "DEVELOPMENTS" (as defined
below) that were or are at any time made, conceived or suggested by Employee,
whether acting alone or in conjunction with others, during Employee's employment
with the Group shall be the sole and absolute property of the Group, free of any
reserved or other rights of any kind on the part of Employee. During Employee's
employment and, if such Developments were made, conceived or suggested by
Employee during her employment with the Group, thereafter, Employee shall
promptly make full disclosure of any such Developments to the Group and, at
<PAGE>
10
the Group's cost and expense, do all acts and things (including, among others,
the execution and delivery under oath of patent and copyright applications and
instruments of assignment) deemed by the Group to be necessary or desirable at
any time in order to effect the full assignment to the Group of Employee's right
and title, if any, to such Developments. For purposes of this Agreement, the
term "DEVELOPMENTS" shall mean all data, discoveries, findings, reports,
designs, inventions, improvements, methods, practices, techniques, developments,
programs, concepts, and ideas, whether or not patentable, relating to the
activities of the Group of which Employee is as of the date of this Agreement
aware or of which Employee becomes aware at any time during the Term, excluding
any Development for which no equipment, supplies, facilities or confidential
information of the Group was used and which was developed entirely on Employee's
own time, unless (i) the Development relates directly to the business of the
Group, (ii) the Development relates to actual or demonstrably anticipated
research or development of the Group, or (iii) the Development results from any
work performed by Employee for the Group (the foregoing is agreed to satisfy the
written notice and other requirements of Section 49.44.140 of the Revised Code
of Washington).
(f) INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Employee acknowledges that a breach of any of the
covenants contained in this Section 6 may result in material irreparable injury
to the Group for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Employee from engaging in activities prohibited by this Section
6 or such other relief as may be required to specifically enforce any of the
covenants in this Section 6. Without intending to limit the remedies available
to the Employee, the Employee shall be entitled to seek specific performance of
the Company's obligations under this Agreement.
7. GENERAL PROVISIONS.
(a) SOURCE OF PAYMENTS. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides otherwise,
shall be paid in cash from the general funds of the Company, and no special or
separate fund shall be established, and no other segregation of assets made, to
assure payment. The Employee shall have no right, title or interest whatever in
or to any investments which the Company may make to aid the Company in meeting
its obligations hereunder. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall be no greater than
the right of an unsecured creditor of the Company; PROVIDED, HOWEVER, that this
provision shall not be deemed to waive or abrogate any preferential or other
rights to payment accruing to the Employee under applicable bankruptcy laws by
virtue of the Employee's status as an employee of the Company.
<PAGE>
11
(b) NO OTHER SEVERANCE BENEFITS. Except as specifically set
forth in this Agreement, the Employee covenants and agrees that she shall not be
entitled to any other form of severance benefits from the Company, including,
without limitation, benefits otherwise payable under any of the Company's
regular severance policies, in the event her employment hereunder ends for any
reason and, except with respect to obligations of the Company expressly provided
for herein, the Employee unconditionally releases the Company and its
subsidiaries and affiliates, and their respective directors, officers, employees
and stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with her employment or the termination
thereof.
(c) TAX WITHHOLDING. Payments to the Employee of all
compensation contemplated under this Agreement shall be subject to all
applicable tax withholding.
(d) NOTICES. Any notice hereunder by either party to the other
shall be given in writing by personal delivery, or certified mail, return
receipt requested, or (if to the Company) by telex or facsimile, in any case
delivered to the applicable address set forth below:
(i) To the Company: PhotoDisc, Inc.
2013 Fourth Avenue
4th Floor
Seattle, Washington 98121
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: John J. Cannon, III, Esq.
Shearman & Sterling
555 California Street
San Francisco, CA 94104
Attn.: Christopher D. Dillon, Esq.
(ii) To the Employee: Sally von Bargen
2414-1st Avenue
Seattle, Washington 98121
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12
or to such other persons or other addresses as either party may specify to the
other in writing.
(e) REPRESENTATION BY THE EMPLOYEE. The Employee represents and
warrants that her entering into this Agreement does not, and that her
performance under this Agreement and consummation of the transactions
contemplated hereby will not, violate the provisions of any agreement or
instrument to which the Employee is a party, or any decree, judgment or order to
which the Employee is subject, and that this Agreement constitutes a valid and
binding obligation of the Employee in accordance with its terms. Breach of this
representation will render all of the Company's obligations under this Agreement
void AB INITIO.
(f) LIMITED WAIVER. The waiver by the Company or the Employee of
a violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(g) ASSIGNMENT; ASSUMPTION OF AGREEMENT. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Employee in respect of any claim, debt,
obligation or similar process. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
(h) AMENDMENT; ACTIONS BY THE COMPANY. This Agreement may not be
amended, modified or canceled except by written agreement of the Employee and
the Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; PROVIDED, HOWEVER, that by resolution duly adopted in accordance with
this Section 7(h), the Board may delegate its responsibilities hereunder to one
or more of its members other than the Employee.
(i) SEVERABILITY. If any term or provision hereof is determined
to be invalid or unenforceable in a final court or arbitration proceeding, (i)
the remaining terms and provisions hereof shall be unimpaired and (ii) the
invalid or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(j) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (determined
without regard to the choice of law provisions thereof).
<PAGE>
13
(k) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby and supersedes all prior agreements and understandings of the
parties with respect to the subject matter hereof.
(l) HEADINGS. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not control
the meaning or interpretation of any provisions of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
(n) DISCIPLINARY AND GRIEVANCE PROCEDURES. For statutory
purposes, there is no formal disciplinary procedure in relation to the
Employee's employment. The Employee shall be expected to maintain the highest
standards of integrity and behavior. If the Employee has any grievance in
relation to her employment or is not satisfied with any disciplinary procedure
taken in relation to her, she may apply in writing within 14 days of that
decision to the Board, whose decision shall be final. The foregoing shall not
be construed, however, to limit the Employee's remedies at law or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first written above.
PHOTODISC, INC.
By:
----------------------------------------
Name:
Title:
EMPLOYEE
----------------------------------------
Sally von Bargen
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14
