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Bowne of London. 28, Finsbury Circus, London EC2M 7DP. TEL: (0171) 551-5000
FAX: (0171) 551-5151
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER: 000-23747
GETTY IMAGES, INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 98-0177556
(State or Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
2101 FOURTH AVENUE 101 BAYHAM STREET
SUITE 500 NW1 0AG
SEATTLE, WASHINGTON 98121 LONDON, ENGLAND
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(Addresses of Principal Executive Offices)
(Zip Code)
REGISTRANT'S TELEPHONE NUMBERS, INCLUDING AREA CODE:
(206) 695 3400
(01144171) 544-3456
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class)
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 $282,957,703 as of March 1, 1999 based upon the
closing price of $19.125 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 per cent of the Common Stock have been
excluded in that such persons may under certain circumstances be deemed to be
affiliates. This determination of executive officer and affiliate status is not
necessarily a conclusive determination for other purposes.
As of March 1, 1999, the number of shares of Common Stock outstanding was
30,694,297.
DOCUMENTS INCORPORATED BY REFERENCE: Information required by Part III of this
document is incorporated by reference to certain portions of the Company's
definitive Proxy Statement for its 1999 Annual Meeting of Stockholders (to be
filed).
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GETTY IMAGES, INC.
FORM 10-K
DECEMBER 31, 1998
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PART I
Item 1. Business.................................................... 1
Item 2. Property.................................................... 12
Item 3. Legal Proceedings........................................... 13
Item 4. Submission of Matters to a Vote of Security Holders......... 13
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 14
Item 6. Selected Consolidated Financial Data........................ 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 17
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 25
Item 8. Financial Statements and Supplementary Data................. 26
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 26
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 27
Item 11. Executive Compensation...................................... 27
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 27
Item 13. Certain Relationships and Related Transactions.............. 27
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form
8-K......................................................... 27
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PART I
ITEM 1: BUSINESS
This Annual Report on Form 10-K and the documents incorporated herein by
reference contain forward-looking statements based on current expectations,
estimates and projections about Getty Images, Inc.'s ("Getty Images" or the
"Company") industry, management's beliefs, and certain assumptions made by
management. All statements, trends, analyses and other information contained in
this report relative to trends in sales, gross margin, anticipated expense
levels and liquidity and capital resources, as well as other statements
including, but not limited to, words such as "anticipate," "believe," "plan,"
"estimate," "expect," "seek," "intend" and other similar expressions, constitute
forward looking statements. These forward-looking statements are not guarantees
of future performance and are subject to certain risks and uncertainties that
are difficult to predict. Accordingly, actual results may differ materially from
those anticipated or expressed in such statements. Potential risks and
uncertainties include, among others, those set forth herein under "Factors That
May Affect the Business", as well as "Management's Discussion and Analysis of
Financial Conditions and Results of Operations -- Overview" and "-- Liquidity
and Capital Resources." Except as required by law, the Company undertakes no
obligation to update any forward-looking statement, whether as a result of new
information, future events or otherwise. Readers, however, should carefully
review the factors set forth in other reports or documents that the Company
files from time to time with the Securities and Exchange Commission.
A. OVERVIEW
Getty Images (getty-images.com) is a leading global visual content provider
offering products and services over its Web sites and through a diverse set of
channels. Getty Images owns or controls content products across most major
categories of the visual content industry. Through its e-commerce enabled Web
sites and international network of wholly-owned offices, agents and
distributors, Getty Images is able to provide its customers access to image and
footage products. Its visual content brands and businesses include Allsport
(allsport.com), a leading provider of global sports photography; Energy Film
Library (digital-energy.com), a leading provider of stock footage; Liaison
Agency (liaisonphoto.com), a leading provider of North American news and
reporting photography; Hulton Getty (hultongetty.com), one of the largest
commercially available collections of archival photography; and Tony Stone
Images (tonystone.com) and PhotoDisc (photodisc.com), leaders in contemporary
stock photography. Getty Images has more than 30 million images and 13,000 hours
of film footage, worldwide. In terms of revenue, Getty Images believes it is the
largest provider of stock photography image products in the business-to-business
market, both on the Web and through all distribution channels combined.
Getty Images' customers today range from large corporations to small businesses
and include advertising and design agencies, magazines, newspapers,
broadcasters, production companies and traditional and new media publishers. The
Company believes that the demand for visual communication and related products
and services is growing as a result of an increase in the numbers of channels of
communication, increasing reliance on moving and still imagery, and improvements
in ease of use of and access to images. A key element of the Company's strategy
is to drive the migration of the visual content industry to the Web and to
promote growth in the use of image products and services. Initiatives in these
areas include seeking strategic partnerships directed at driving traffic to its
existing and planned Web sites and potential alliances to develop the small
office/home office ("SOHO") and consumer markets.
Currently, Getty Images markets and distributes its imagery products through a
diverse and broad set of channels. The Company has e-commerce enabled Web sites,
allsport.com, photodisc.com and tonystone.com, for its highest revenue
generating brands. These Web sites allow the Company's customers to shop for,
purchase and receive the Company's image products anywhere, anytime, and also
provide value-added services to customers. In addition to its e-commerce
properties, Getty Images has an international network of wholly-owned offices,
including offices in Seattle, London, Amsterdam, Barcelona, Brussels, Chicago,
Copenhagen, Dubai, Hamburg, Hong Kong, Los Angeles, Melbourne, Munich, New York,
Paris, Sao Paulo, Stockholm, Sydney, Tokyo, Toronto and Vienna and agents and
distributors in more than 50 countries, which
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provide local, market specific support and services for both traditional and
online customers as well as market intelligence and branding. Getty Images also
promotes its products through print and CD-ROM catalogs which are distributed
widely to existing and potential customers and through print and Web
advertising.
B. BACKGROUND
Getty Communications plc ("Getty Communications", the predecessor Company)
commenced operations on March 14, 1995 with the acquisition of Tony Stone
Images, one of the world's leading providers of contemporary stock photography.
In April 1996, the Company broadened its visual content product offerings with
the acquisitions of Hulton Deutsch Collection Limited (now Hulton Getty), one of
the world's largest commercially available collections of archival photography
and Fabulous Footage, a leading North American provider of contemporary stock
footage. In March 1997, Getty Communications acquired Liaison, a well-
established leader in the photojournalism market. In July 1997, the Company
acquired Energy Film Library, one of the leading international providers of
contemporary stock footage to the advertising, television, feature film,
corporate communications and multimedia markets.
During September 1997, Getty Communications entered into an acquisition
agreement with PhotoDisc, Inc., leading to the formation of Getty Images and the
completion of the full acquisition in February 1998. PhotoDisc is a leading
provider of royalty-free imagery and one of the largest providers of imagery on
the Internet. Also in February 1998, the Company acquired Allsport Photographic
plc, a leading provider of worldwide sports photography.
The Company continued its global expansion in March 1998 with the acquisition of
Fototeca Stone, a leading stock photography agent based in Barcelona, Spain and
previously an exclusive agent for Tony Stone Images. The expansion in the
distribution network included the opening of wholly-owned offices in Brazil and
Dubai. The Company also appointed exclusive distributors in Costa Rica and
Columbia. During 1998, PhotoDisc opened wholly-owned offices in Sweden and
France. In May 1998, Allsport opened an office in Sydney, Australia with the
acquisition of images previously owned by Australian Picture Library. In
November 1998, the Company acquired Sporting Pix, a leading sports picture
agency based in Melbourne, Australia. These acquisitions significantly built the
Company's base in Australia ahead of the 2000 Summer Olympic Games as Allsport
has been selected as the official photographer of the US Olympic Committee and
the International Olympic Committee marketing partners.
In May 1998, the Company completed the issue of $75 million, 4.75% Convertible
Subordinated Notes, the proceeds of which were applied partially to the
repayment of $49 million of term debt due to Midland Bank plc.
In August 1998, the Company acquired Imageways, Inc. ("Imageways"), a noted
archival footage collection. Imageways' collection is comprised of industrial
footage, lifestyles, feature films and newsreels and is being marketed by Energy
Film Library. During 1998, Energy Film Library expanded its agency network into
Italy and commenced selling its product in the United Kingdom.
The principal executive offices of Getty Images are located at 2101 Fourth
Avenue, Suite 500, Seattle, Washington 98121 (telephone number 206 695-3400) and
at 101 Bayham Street, London England NW1 0AG (telephone number 01144171
544-3456).
C. BRANDED CONTENT PRODUCTS AND MARKETS SERVED
The Company's visual content brands include Tony Stone Images, PhotoDisc,
Allsport, Liaison Agency, Energy Film Library and Hulton Getty. Currently, the
Company operates almost exclusively in the business-to-business market and has
approximately 130,000 customers world-wide.
TONY STONE IMAGES (TONYSTONE.COM)
Tony Stone Images is a leading global provider of contemporary stock
photography. It supplies images to a customer base of principally professional
users, such as advertising and design agencies and magazine, newspaper, book and
news media publishers. The images cover a wide variety of contemporary subjects
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including lifestyles, families, business, science, health and beauty, sports,
transportation, travel and the environment.
Tony Stone Images is dedicated to providing high-quality images relevant to the
needs of its customers by focusing on a relatively small number of images. Its
core collection contains approximately 60,000 images designed to meet the needs
of all major customer segments. The core collection is complemented by the
mainstock collection, which comprises more than one million images which have
been selected for their subject matter or demand in a particular market.
Tony Stone Images has creative teams in London, Los Angeles, Munich, Paris,
Seattle and New York that analyze customer requests and buying behavior and
perform research in key markets in order to target and source images. Tony Stone
Images has approximately 700 active contributing photographers including highly
respected, internationally renowned professional photographers representing a
variety of styles, specialties and backgrounds. In addition, Tony Stone Images
has established in-house teams of skilled digital artists that retouch, enhance
and manipulate images in order to improve their commercial appeal and also
design and create images digitally, including composites of separate
photographs, illustrations, digital graphics and text.
PHOTODISC (PHOTODISC.COM)
PhotoDisc is one of the leaders in the development and marketing of digital
stock photography, products and electronic delivery of images. PhotoDisc's
products are offered on a royalty-free basis, which allows customers to pay a
one-time fee to use an image on a non-exclusive basis for almost any purpose. As
a pioneer in the royalty-free segment, PhotoDisc has established itself as the
leader in terms of customer recognition and revenues generated.
The PhotoDisc image collection, currently consisting of more than 75,000
feature-enhanced photographic images digitized at a variety of resolutions, has
been developed specifically to support the royalty-free licensing model. The
images are available to the customer in several file sizes depending upon the
product and distribution method. All of the images are available for search,
selection and immediate download from photodisc.com, 24 hours a day, 7 days a
week, and approximately 26,000 images are available on 140 CD-ROMs.
ALLSPORT (ALLSPORT.COM)
Allsport is a leading provider of world-wide sports photography, with an archive
from sporting events around the world, dating from 1896. Its visual content is
both specialist and generalist, providing current images to the sports
journalism market and the broader market of advertisers and sports promoters.
Its main customers are the news media, sports brand manufacturers and sponsors,
sports governing bodies and committees, and commercial publishing and
merchandising businesses. A majority of the images are wholly-owned by Allsport.
LIAISON AGENCY (LIAISONPHOTO.COM)
Liaison Agency is a leading North American news and reportage agency. On a daily
basis, Liaison Agency sources stories worldwide and distributes images to
magazines, newspapers and book publishers, as well as advertising and design
agencies and other creative professionals. Liaison Agency's library contains
several million photographs covering the major events, personalities and
entertainment of the last 30 years. Liaison Agency receives and distributes
material from approximately 3,500 photographers worldwide. Since 1986, every
image accepted by the agency has been indexed using key words, creating one of
the largest databases in the industry.
ENERGY FILM LIBRARY (DIGITAL-ENERGY.COM)
Energy Film Library is a leading international provider of stock film footage to
the advertising, television, feature film, corporate communications and new
media markets. Energy Film Library's footage has been used in major feature
films, including "Independence Day", "Jerry Maguire" and "Armageddon", among
others.
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Energy Film Library, which now includes the archives of the previously acquired
Fabulous Footage and the historic footage of Imageways Inc., maintains and
licenses a growing library of over 13,000 hours of cinematography covering a
broad range of contemporary and archival subject matter. The collection of
Energy Film Library, which is generally licensed in short clips of 10 to 20
seconds, includes material covering landscapes, cityscapes, wildlife, scenics,
business, sports and lifestyle.
HULTON GETTY (HULTONGETTY.COM)
Hulton Getty is one of the largest commercially available collections of
archival photography in the world. Its archive consists of approximately 300
separate collections totaling more than 15 million images, including vintage
prints by renowned photographers such as Man Ray, Bill Brandt, Alfred Eisenstadt
and Robert Capa dating back to the beginning of photography. Hulton Getty also
incorporates the image collections of Ernst Haas and Slim Aarons. The Hulton
Getty collection includes images from all over the world and covers significant
events, people and places from the nineteenth and twentieth centuries.
Predominantly, the Hulton Getty collection is used by professional users (mainly
magazine, news and book publishers) primarily in the United Kingdom. Since the
acquisition of the Hulton Getty collection, there has been an ongoing process of
selecting, digitizing and indexing the most marketable images of the collection
to enhance the accessibility and appeal to a broader customer base. Selected
images are available for search and review through the Hulton Getty Web site,
which presently comprises approximately 175,000 images. The Company plans to
launch a full e-commerce site in 1999.
D. SALES AND MARKETING
E-COMMERCE
One of Getty Images' key strategies is to drive the migration of the visual
content industry online, using e-commerce to create a more efficient, flexible
and value-added system for the search, purchase, delivery and use of images.
Today, Getty Images' highest revenue product brands (Tony Stone Images,
PhotoDisc and Allsport) are fully e-commerce enabled and are migrating their
businesses to an entirely Web-based model. The Company plans to further
e-commerce enable its other brands in the near future. The Company believes that
the licensing of images and related products and services online offers
attractive benefits to customers, including but not limited to, self-service
capability, personalization, access to broader and deeper content selection, as
well as providing operating efficiencies to both the Company and its customers.
The Company's Web sites are designed to offer an environment tailored to the
needs of the particular customer base and the individual customer. In addition
to searching, selecting, purchasing and downloading images, customers of the
tonystone.com and photodisc.com Web sites can use complimentary online image
management services, download sample images to use on a "try before you buy"
basis and manage and monitor their own accounts. The Web sites also offer
extensive and advanced searching capability. On photodisc.com, customers can
also search for different CD-ROM products, view their contents, and place orders
online. In addition, the Web sites offer a combination of browsing, promotion
and spotlight sections that merchandise new images. The Company plans to
leverage these features, where appropriate, to the Web sites for its other
content brands, and to incorporate them in its planned hub site.
Customer service and technical support for tonystone.com and photodisc.com are
based in Seattle and consist of a team of consultants with broad knowledge of
the image products, supported by the comprehensive search system on the Web
sites. The consultants also have extensive expertise in digital image
applications, design tools and photo manipulation methodologies in order to
assist customers in using the images they license.
Due to its more specialized customer base, Allsport operates its Web site
primarily on a subscription basis. Allsport distributes images via its digital
on-line archive, an ISDN Point-to-Point network, the Photo Stream satellite
network maintained by Associated Press and numerous other internet and digital
transmission methods. Energy Film Library, Liaison Agency and Hulton Getty also
use Web sites to market products and provide search and selection services to
customers.
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CUSTOMER SERVICE, SALES AND RESEARCH
In many instances, the Company serves its customers through both a combination
of e-commerce and a more traditional form of customer service. PhotoDisc sells
its CD-ROM products primarily through its 24 hour a day, 7 days a week, in-bound
call center and the other brands continue to license images in transparency
form, primarily through in-bound call centers.
The majority of the Company's wholly-owned offices have sales forces organized
by customer and industry group. The sales force assists customers, who may
contact the Company by telephone or e-mail, in developing selection requests,
which are then passed on to a researcher responsible for compiling a selection
of images that meet the request. Image researchers use their knowledge of the
image collection, either still or moving imagery, to respond efficiently and
creatively to the customers' requirements.
The Company's sales outlets utilize their respective online databases of images
and related data to assist in the internal research and sales process. Tony
Stone sales outlets use a more complex proprietary search and retrieval system,
"COMPASS," than that made available to customers. The Company believes that
systems such as COMPASS will, along with access for customers through the
Internet, increase the efficiency of the Company's sales and research operations
in the future.
DIRECT SALES FORCE
The Company employs a direct sales force and key account management team that
target leading advertising and publishing companies, and other high volume users
of images, such as communications companies. The direct sales force focuses on
reaching image purchasers who are generally responsible for large order
purchases. The Company maintains direct sales offices in its key markets in the
United States and Europe. The key accounts sales force also includes technical
support staff and trainers who assist with both pre- and post-sales support.
DISTRIBUTION NETWORK
Getty Images markets images through an international distribution network of
wholly-owned offices in 21 cities and agents and distributors in more than 50
countries. Generally, the Company's policy is to own offices in major markets
and to work closely with agents and distributors in these and other markets.
Management believes that control of its outlets results in more focused
marketing activities and better brand maintenance, thus leading to higher sales
and market share.
LICENSING
PhotoDisc's products are offered on a royalty-free basis, which allows customers
to pay a one-time fee to use an image on a non-exclusive basis for any purpose.
All of the images of Tony Stone Images, Allsport, Hulton Getty, Energy Film
Library and Liaison Agency are individually marketed for specific customer
applications. Licenses typically impose restrictions on the permissible number
of copies that can be made, the medium of reproduction or publication, uses by
other parties and other factors, including the geographic area, duration and
purpose of use. A central database records image usage and its corresponding
sales value, information that can then be used in the targeting of popular
subjects and the creation of new images of the most salable subjects.
ONLINE MARKETING
All of the Company's Web sites act as marketing tools as well as sales tools. In
addition, the Company has relationships with other online properties to
advertise and drive traffic to some of the Company's Web sites. Increasing the
number of relationships of this nature and creating other new relationships in
order to drive traffic to the Company's Web sites and increase demand for its
products, is a key part of the Company's strategy during 1999 and 2000.
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PRINTED CATALOGS AND DIRECT MAIL
Getty Images uses catalogs to market its contemporary and archival photography
brands (Tony Stone Images, Hulton Getty, PhotoDisc and Allsport) and believes
that its catalog quality leads the industry and contributes to its strong
reputation. Typically, each brand publishes both general catalogs, with language
variations corresponding to the Company's most important geographic markets, and
specialist catalogs, which often promote a particular concept or innovate in
catalog design. These catalogs are used to promote the Company's Web sites as
well its other product offerings. Customers routinely use the catalogs as a
means of selecting a particular image for license and the Company tracks sales
arising from particular catalogs. Each of the Company's brands also uses direct
mail advertising to market its images.
CD-ROM AND DEMONSTRATION REELS
Several of the Company's brands (PhotoDisc, Tony Stone Images and Hulton Getty)
produce CD-ROM catalogs which enable customers to select from a wide range of
images on-screen and, in some cases, provide direct links to the corresponding
Web site. PhotoDisc also permits its customers to use the images featured in
CD-ROM catalogs for comping or "try before you buy" use. Energy Film Library
markets its stock footage through demonstration reels sent directly to its
customers and potential customers. These demonstration reels contain samples of
available footage.
E. TECHNOLOGY
Getty Images utilizes technologies related to the digitization of images, the
enhancement and compression of digitized images, the organization and management
of Getty Images' database of digitized images and customer profiles. The Company
also utilizes technologies associated with customer interaction with the various
Web sites including search functions, transaction-processing and downloading of
images. These technologies are now primarily used by PhotoDisc, Tony Stone
Images and Allsport, but the Company expects that they will be used by its other
brands as well in a manner tailored to their respective customers and products.
Getty Images' online commerce systems can manage a large number of concurrent
customer searches, as well as the process of accepting, authorizing and charging
customer credit cards. Getty Images uses a combination of its own proprietary
technologies and commercially available equipment and licensed technologies and
the current strategy is to license commercially available technology whenever
possible rather than seek internally developed solutions. The Company has
focused its internal development efforts on creating and enhancing the
specialized software and processes related to the enhancement and delivery of
digitized images.
F. INTELLECTUAL PROPERTY
The Company obtains most of its images distributed by the Tony Stone Images,
PhotoDisc, Energy Film Library and Liaison Agency brands from independent
photographers and cinematographers on an exclusive basis. Professional
photographers and cinematographers prefer to retain ownership of their work. As
a result, copyright to an image remains with the contributing photographer or
cinematographer in most cases, while the Company obtains the exclusive right to
market the image on behalf of the photographer or cinematographer for a period
of time (generally a minimum of five to seven years, which management believes
to be the useful life of contemporary images). A substantial portion of the
images of Allsport and Hulton Getty, and certain images of the Company's other
brands, are owned by the Company or are in the public domain.
G. COMPETITION
The market for visual content is characterized by strong competition. The
principal competitive factors are company reputation; the quality, relevance and
diversity of the images; the quality of contributing photographers and
cinematographers under contract to a company; effective use of technology,
customer service, pricing, ease of purchase and use online and through
traditional methods; accessibility, distribution capability and speed of
fulfillment. Getty Images generally faces competition from (i) small companies
serving local markets; (ii) specialist companies focusing on particular subjects
such as transportation, sports, architecture
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or natural history; (iii) medium-sized generalist companies operating primarily
in their home market; (iv) regional companies headquartered in a large market
such as the United States, Germany, the United Kingdom and France and which
often have non-exclusive agents and distributors in other markets, and (v) three
international competitors, The Image Bank ("TIB"), a wholly-owned subsidiary of
Eastman Kodak Company, Visual Communications Group ("VCG"), a wholly-owned
subsidiary of United News and Media Group plc, and Corbis Corporation
("Corbis"), a company owned by Bill Gates, the Chairman of Microsoft. In
addition, the Company's contemporary photography businesses also face
competition from commissioned imagery. In addition to competitors and
competitive factors applicable to the visual content market as a whole, the
individual Getty Images' brands are subject to competitors and competitive
factors specific to each such brand. The Tony Stone Images brand competes
principally with two international competitors, TIB and VCG. The Hulton Getty
brand competes with specialized archival collections and regional stock
photography companies with archival content in their collections, including the
Bettman Archive, owned by Corbis, and other privately owned and public domain
collections. In the news and reportage industry in the United States, Liaison
Agency competes with a number of companies that produce and distribute similar
material. Energy Film Library competes with TIB, as well as with small
specialized footage providers. PhotoDisc competes with other royalty-free stock
photography offerings, including Digital Vision, Eyewire, Inc. and Corbis. The
Allsport brand competes with Reuters and Associated Press for news wire
coverage.
H. FACTORS THAT MAY AFFECT THE BUSINESS
IN ADDITION TO OTHER INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K, THE
FOLLOWING IMPORTANT FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE
COMPANY AND ITS BUSINESS BECAUSE SUCH FACTORS CURRENTLY HAVE A SIGNIFICANT
IMPACT OR MAY HAVE A SIGNIFICANT IMPACT ON THE COMPANY'S BUSINESS, PROSPECTS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
DEVELOPMENTAL NATURE OF THE VISUAL CONTENT INDUSTRY
The Company's future growth and profitability will depend in large measure upon
growth in demand for visual content. A visual content industry with identifiable
categories and growth characteristics is a relatively recent development. The
visual content industry is fragmented across all categories and is experiencing
significant structural and technological changes, including substantial
consolidation. To the extent that the visual content industry, or any sector of
that industry in which the Company operates or hopes to operate, including the
corporate, SOHO or consumer markets, does not develop as the Company
anticipates, the value of the Company or its results of operations or financial
condition may be adversely affected.
RAPID TECHNOLOGICAL CHANGE
The success of Getty Images will depend, in part, upon its ability to adapt to
new technological developments in the visual content and e-commerce industries
and to develop new services and technology that address the needs of its
customers and prospective customers on a cost-effective and timely basis. In
response to technological changes, Getty Images has invested, and will continue
to invest, in new technologies to keep pace with new developments, such as
advances in e-commerce related technologies including search systems and other
tools for customers using digital images and technologies used in producing
digital images. Getty Images believes that market demand for images is rapidly
shifting towards an e-commerce model, particularly in more developed markets.
Getty Images will rely on third parties for a portion of the hardware, software
and software tools that it will use in its businesses, including, in particular,
those tools that enable customers and potential customers to access, search and
license images and other products and services, if developed by the Company,
through its Web sites. If suppliers fail to upgrade or support such systems, the
business, financial condition or results of operations of Getty Images could be
adversely affected. There can be no assurance that Getty Images will
successfully use new software and other technologies effectively or adapt its
third-party technology and systems to customer requirements or emerging industry
standards.
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SIGNIFICANT COMPETITION
The visual content industry is characterized by strong competition. Getty Images
competes with a number of large and small visual content providers. Some of the
Company's competitors, including TIB, VCG and Corbis, may have access to greater
financial, marketing and other resources than Getty Images. Getty Images also
competes locally with respect to certain content or products with a number of
general and specialized content companies, many of which are well-established in
their local, content or product specific markets. Getty Images competes
indirectly with commissioned work in contemporary photography and footage areas.
New entrants into the visual content industry could increase if technological
advances make archiving, searching and digital delivery systems more affordable,
which could result in lower average sales prices. There can be no assurance that
Getty Images will be able to compete successfully against current or future
competitors or that competitive pressures faced by Getty Images will not have a
material adverse effect on the business, financial condition or results of
operations of Getty Images.
POTENTIAL DIFFICULTIES IN INTEGRATING OPERATIONS AND IN MANAGING GROWTH AND
EXPANSION
Getty Images was formed by the acquisition of several companies that have
previously operated independently. The process of coordinating and integrating
these organizations, which the Company expects will accelerate over time, will
require substantial attention from management and could cause the interruption
of, or a loss of momentum in, the activities of any of the companies'
businesses, which could have a material adverse effect on their combined
operations, at least in the near term. Significant goodwill amortization
charges, one-time transaction costs and other related one-time reorganization
charges will also adversely affect the reported operating results of Getty
Images and will result in reported net income in future periods being negative.
Non-recurring integration and restructuring costs of $13.8 million were incurred
during 1998 to integrate its businesses, following the acquisitions of PhotoDisc
and Allsport. There can be no guarantee that further integration of the
Company's existing and future businesses will not result in similar or greater
integration and restructuring costs.
In addition, each of the Company's individual brands have grown rapidly in
recent years. The ability of Getty Images to compete effectively and to manage
future growth will require Getty Images to monitor and upgrade as appropriate
its financial and management controls, to re-orient management of recently
acquired businesses to the operating philosophy of Getty Images, to develop and
expand management information systems and to recruit and train personnel. If
Getty Images is unable to manage such recent growth and any future growth and
expansion successfully, its financial condition and results of operations could
be adversely affected.
RISKS RELATED TO GOODWILL RECOGNITION
The acquisitions of PhotoDisc and Allsport in February, 1998 generated
approximately $242 million of goodwill and $51 million of other intangibles that
will result in a substantial annual charge to be amortized against the earnings
of the Company in future periods. Management considers that a period of twenty
years is a reasonable period over which to amortize this goodwill and that the
other intangibles should be amortized over one to three years. Getty Images
could be required to write-down the unamortized value of such goodwill in the
future at an accelerated rate in the event that it suffers an impairment in
value. Future acquisitions by the Company, if any, could generate goodwill and
other intangibles that would result in similar charges to be amortized against
the Company's future earnings.
INFLUENCE OF PRINCIPAL SHAREHOLDERS
Two groups of shareholders own substantial percentages of the outstanding shares
of Common Stock and as a result are in a position to exert significant influence
in the election of the directors of Getty Images and other corporate actions
that require stockholder approval. Getty Investments L.L.C., a Delaware limited
liability company ("Getty Investments"), Mr. Mark Getty, Mr. Jonathan Klein,
Abacus Trust Company (Isle of Man) as Trustee of the J.D. Klein Family
Settlement (an entity of which the sole beneficiary is Mr. Klein) and the
October 1993 Trust (a trust established by Mr. Getty) (collectively, the "Getty
Group") own approximately 30 per cent of the outstanding shares of Common Stock
and PDI, L.L.C., Mr. Mark Torrance,
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<PAGE> 12
Ms. Wade Ballinger (Torrance) and certain of their family members (collectively,
the "Torrance Group") own approximately 14 per cent of the outstanding shares of
Common Stock, in each case as of March 1, 1999. Pursuant to the Shareholders'
Agreement among the Company, the Getty Group and the Torrance Group, none of the
members of the Getty Group or the Torrance Group may transfer such stockholder's
shares of Common Stock except pursuant to the terms of such agreement. In
addition to ownership of Common Stock, certain members of each of the Getty
Group and the Torrance Group have management and director roles within Getty
that increase their influence over the Company and certain members of each group
also have other rights and relationships with the Company.
DEPENDENCE UPON KEY PERSONNEL
Getty Images believes that its performance depends, to a significant extent,
upon the services of its senior management and other key personnel, including,
in particular, Mr. Mark Getty, Executive Chairman of Getty Images and Mr.
Jonathan Klein, Chief Executive Officer of Getty Images. The loss of the
services of either of Messrs. Getty or Klein could materially adversely affect
the future prospects of the Company. Messrs. Getty and Klein are each parties to
an Employment Agreement with Getty Images (or its subsidiaries) for a minimum
period of three years commencing as of February 9, 1998.
The future success of Getty Images will also depend upon its ability to
identify, attract, hire, train, retain and motivate highly skilled technical,
managerial, new product development, editorial, merchandising, marketing and
customer service personnel. Competition for such personnel is intense, and there
can be no assurance that Getty Images will be able to successfully attract,
hire, assimilate or retain sufficiently qualified personnel. The failure to
retain and attract the necessary technical, managerial, new product development,
editorial, merchandising, marketing and customer service personnel could have a
material adverse effect on the business, financial condition or results of
operations of Getty Images.
RISKS RELATED TO E-COMMERCE
A key component of the Company's strategy is the increased digitization of its
products and their delivery via the Internet. As a result, a substantial portion
of the Company's revenues is and will continue to be dependent on customers'
access to the Company's Web sites. The Company has experienced occasional system
interruptions that make its Web sites unavailable or prevent it from efficiently
fulfilling orders, which may reduce the volume of images licensed and the
attractiveness of the Company's products and services. These interruptions will
continue. The Company will need to add additional software and hardware and
upgrade its systems and network infrastructure to accommodate increased traffic
on its Web sites and increased sales volume. Without these upgrades, the Company
would face additional system interruptions, slower response times, diminished
customer service, impaired quality and speed of order fulfillment, and delays in
the Company's financial reporting. The Company cannot accurately project the
rate or timing of any increases in traffic or sales volume on its Web sites and,
therefore, the integration and timing of these upgrades are uncertain.
The Company maintains substantially all of its computer and communications
hardware necessary for servicing its Web customers at a single facility in
Seattle, Washington. The Company's systems and operations could be damaged or
interrupted by fire, flood, power loss, telecommunications failure, break-ins,
earthquake and similar events. Computer viruses, physical or electronic
break-ins and similar disruptions could cause system interruptions, delays and
loss of critical data and could prevent the Company from providing services and
accepting and fulfilling customer orders.
The Company's future growth in sales and profitability will depend in part on
the effectiveness of its use of the Internet and other on-line services as a
medium of commerce. Technology in the on-line commerce industry changes rapidly.
Customer functionality requirements and preferences also change. Competitors
often introduce new products and services with new technologies. These changes
and the emergence of new industry standards and practices could render the
Company's existing Web sites and related proprietary technology obsolete. To
succeed, the Company must enhance Web site responsiveness, functionality and
features, acquire and license leading technologies, enhance its existing
services, develop new services and technology and
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<PAGE> 13
respond to technological advances and emerging industry standards and practices
on a cost-effective and timely basis. There can be no assurance that the Company
will be able to adapt quickly enough to changing customer requirements and
industry standards.
IMPACT OF CHANGES IN FOREIGN EXCHANGE RATES
Getty Images publishes its consolidated financial statements in U.S. dollars and
conducts a portion of its business in currencies other than U.S. dollars,
particularly the United Kingdom pound sterling, German mark, French franc and
the Euro. As a result, Getty Images is exposed to changes in the value of
currencies against the U.S. dollar. Fluctuations in the values of currencies
against the U.S. dollar could affect the translation of the results of non-U.S.
based operations into U.S. dollars for inclusion in the consolidated financial
statements of Getty Images.
POTENTIAL LOSS OF RIGHTS TO GETTY IMAGES TRADEMARKS
Getty Images (through its subsidiaries) owns trademarks and trademark
applications in respect of the names Getty Communications and Hulton Getty, and
derivatives thereof (including the name "Getty") and the related logo (together,
the "Getty Trademarks"). In the event that Getty Images becomes controlled by a
third party or parties not affiliated with the Getty family, Getty Investments
has the right to call for an assignment to it, for a nominal sum, of all rights
to the Getty Trademarks. Upon such assignment, Getty Images will have 12 months
in which it will be permitted to continue to use the Getty Images Trademarks and
thereafter will have to cease such use. Although the Company's product brands
currently are Allsport, Energy Film Library, Liaison Agency, Hulton Getty,
PhotoDisc and Tony Stone Images, Getty Images is used as a corporate identity
for certain of the Company's subsidiaries and the Company itself. Hulton Getty
is also a Getty Trademark. The Company plans to use Getty Images as a product or
service brand in the future. There can be no assurance that the exercise by
Getty Investments L.L.C. of its right to cause an assignment of the Getty Images
Trademarks would not have a material adverse effect on the business, financial
condition or results of operations of Getty Images. Further, there can be no
assurance that the existence of the right of Getty Investments to cause such an
assignment would not have a negative impact on the amount of consideration that
a potential acquirer would be willing to pay to acquire the Common Stock.
RISKS RELATED TO GETTY IMAGES' STRATEGIC ALLIANCE AND ACQUISITION STRATEGY
Getty Images' strategy depends, in part, on its ability to drive customers to
its Web sites and to encourage and take advantage of the growth of new markets.
The Company believes that it is well positioned to accomplish both of these
tasks and will seek strategic alliances and acquisitions to drive traffic and
create new markets, products and services. The market for these types of
alliances and acquisitions, particularly in areas related to e-commerce, is
highly competitive and there can be no assurance that the Company will be
successful in negotiating such alliances or acquisitions on terms favorable to
the Company. There can also be no assurance that any such alliances or
acquisitions will assist the Company in attaining its goals.
Acquisitions also involve a number of other risks that could adversely affect
the business, financial condition or results of operations of Getty Images,
including the diversion of management's attention, the assimilation of the
operations and personnel of the acquired companies and the potential loss of key
employees. No assurance can be given that Getty Images will be able to identify
any suitable acquisition candidates or to make any acquisitions or that any
acquisition by Getty Images will not adversely affect the business, financial
condition and results of operations of Getty Images or that such acquisitions
will enhance the business of Getty Images.
RISKS RELATED TO INDEBTEDNESS
On May 20, 1998, the Company completed the issue of $75 million convertible
notes due 2003. These notes carry a coupon of 4.75 percent and are convertible
into 2.6 million shares of Common Stock of the Company at a conversion price of
$28.51 per share, subject to adjustments in certain circumstances. The notes are
generally unsecured subordinated obligations of the Company. The Company may
incur substantial additional debt in the future. Such indebtedness could:
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<PAGE> 14
- make it difficult to make principal and interest payments on the
Convertible Subordinated Notes;
- make it difficult to obtain necessary financing for working
capital, capital expenditures, debt service requirements and other
purposes;
- limit the Company's flexibility in planning for, or reacting to,
changes in the business and competition; and
- make it more difficult to react in the event of an economic
downturn.
VOLATILITY OF STOCK PRICE; FUTURE SALES OF SUBSTANTIAL NUMBERS OF GETTY IMAGES'
SHARES COULD HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF GETTY IMAGES' SHARES
There has been significant volatility in the price of shares of Getty Images'
Common Stock. Trading prices of shares of the Common Stock may continue to
fluctuate in response to a number of events and factors, such as:
- quarterly variations in operating results;
- announcements of innovations;
- new products, services and strategic developments by the Company or
its competitors;
- business combinations and investments by the Company or its
competitors;
- changes in the Company's revenues, expense levels, or
profitability;
- changes in financial estimates and recommendations by securities
analysts;
- performance by other visual content companies; and
- news reports relating to trends in the visual content, Internet or
other product or service industries.
Any of these events may cause the price of shares of the Common Stock to fall,
which may adversely affect the Company's business and financing opportunities.
In addition, the stock market in general and the market prices for e-commerce
companies in particular have experienced significant volatility that often has
been unrelated to the operating performance of such companies. These broad
market and industry fluctuations may adversely affect the trading price of
shares of the Common Stock, regardless of the Company's operating performance.
In addition, sales, or the possibility of sales, of substantial numbers of
shares of Common Stock in the public market could adversely affect prevailing
market prices of shares of Common Stock. Certain stockholders of Getty Images
have the right, pursuant to various registration rights agreements, to request
that Getty Images register certain shares of Common Stock for resale under the
Securities Act. In addition, employees of Getty Images hold a significant number
of options to purchase shares of Common Stock, many of which are presently
exercisable. Many employees may exercise their options and sell shares shortly
after such options become exercisable, particularly if they need to raise funds
to pay for the exercise of such options or to satisfy tax liabilities that they
may incur in connection with exercising their share options.
RISK OF YEAR 2000 NON-COMPLIANCE
The Company has developed a plan to modify its information technology and other
systems to recognize the Year 2000 and has begun converting its critical data
processing and other systems. The Company has completed a review of its
significant suppliers and service providers to determine the extent to which its
systems may be vulnerable if they fail to address and correct their own Year
2000 issues. The Company cannot guarantee that the systems of suppliers or other
companies on which it relies will be Year 2000 compliant. Their failure to
convert their systems could disrupt the Company's systems. In addition, the
computer systems necessary to maintain the viability of the Internet or any of
the Web sites that direct consumers to the Company's on-line stores may not be
Year 2000 compliant. Finally, computers used by Company's customers to access
its on-line stores may not be Year 2000 compliant, delaying its customers'
purchases of its products. The Company is in the process of developing a formal
contingency plan. The Company cannot guarantee that
11
<PAGE> 15
its systems will be Year 2000 compliant or that the Year 2000 problem will not
adversely affect the Company's business, which includes limiting or precluding
customer purchases.
RISK RELATED TO THE EURO
A new European currency was implemented in January 1999 to replace the separate
currencies of eleven Western European countries. This is requiring changes in
the Company's operations as it modifies systems and commercial arrangements to
deal with the new currency. Modifications are necessary in operations such as
payroll, benefits and pension systems, contracts with suppliers and customers
and internal financial reporting systems. Although a three-year transition
period is expected during which transactions may also be made in the old
currency, this is requiring dual currency processes for the Company's
operations. The Company has identified the issues involved and is developing and
implementing solutions. The cost of this effort is not expected to have a
material effect on our business or results of operations. The Company cannot
assure, however, that all problems will be foreseen and corrected or that no
material disruption of its business will occur.
ANTI-TAKEOVER CONSIDERATIONS
The Board of Directors of the Company has the authority, without stockholder
approval, to issue up to 5,000,000 shares of preferred stock and to fix the
rights, preferences, privileges and restrictions of such shares without any
further vote or action by the stockholders of Getty Images. This authority,
together with certain provisions of the Amended and Restated Certificate of
Incorporation of Getty Images (the "Certificate of Incorporation"), may have the
effect of making it more difficult for a third party to acquire, or discouraging
a third party from attempting to acquire control of the Company, even if
stockholders of the Company consider such change in control to be in their best
interests. In addition, the concentration of beneficial ownership of Common
Stock by the Getty Group and the Torrance Group and certain provisions of
Delaware law may have the effect of delaying, deterring or preventing a hostile
takeover of the Company.
I. EMPLOYEES
At March 1, 1999, the Company had 1,345 employees. Of these, 690 were located in
North America, 602 in Europe and 53 in the rest of the world. The Company
believes that it has satisfactory relations with its employees.
J. RECENT DEVELOPMENTS
William Heston, Senior Vice President, Business Development, resigned from his
position as Senior Vice President, Business Development, effective as of
February 12, 1999. He will remain an employee and will perform various
consulting duties for the Company.
Lawrence Gould, Chief Financial Officer, resigned from his position as Senior
Vice President and Chief Financial Officer, effective as of January 7, 1999.
Effective January 7, 1999, Christopher Roling was appointed Senior Vice
President and Chief Financial Officer.
ITEM 2. PROPERTY
The Company's principal offices are in Seattle, Washington and London, England.
The Company utilizes approximately 70,000 square feet in its Seattle offices
pursuant to two separate leases, both expiring in 2003. The Company utilizes
approximately 33,000 square feet of office space at its offices in London
pursuant to two separate leases. One lease covers approximately 15,000 square
feet and will expire in 2015. The other lease covers approximately 18,000 square
feet of office space and will expire in 2010. The Company has also leased office
space for its wholly-owned offices throughout the world.
Recently the Company has made plans to consolidate some of its operations in
Seattle, including its worldwide headquarters, and has entered into leases for
approximately 76,000 square feet with an initial term of six years, and an
option to renew. The Company plans to sublet some or all of its existing office
space in Seattle.
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Management believes that the Company's facilities will be suitable for the
Company's current use and adequate for the Company's operations for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
On June 25, 1997, Keith D. Simon and Victoria Newell-Simon, as individuals and
on behalf of their daughter, McKenzie Simon, filed a complaint against PhotoDisc
and others in California, San Diego Superior Court, alleging, among other
things, invasion of privacy and misappropriation of their likenesses and sought
compensatory and punitive damages, injunctive relief, attorneys' fees and
miscellaneous costs. PhotoDisc, on its own behalf and on behalf of its
customers, reached a settlement with the Simons in October 1998 and all claims
asserted against PhotoDisc have been dismissed. PhotoDisc has initiated
proceedings to recover the amounts it paid to settle the suit from its licensor
and others.
The Company has been, and may continue to be, subject to legal claims from time
to time in the ordinary course of business, including those related to the
alleged infringement by the Company of the trademarks and other intellectual
property rights of third parties, such as the failure to secure model releases.
Presently, there are no pending legal proceedings to which the Company is a
party or to which any of its property is subject which, either individually or
in the aggregate, are expected by the Company to have a material adverse effect
on its consolidated financial position, results of operations or its liquidity.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Getty Images Common Stock has been quoted on the Nasdaq National Market
under the symbol "GETY" since February 10, 1998. Prior to February 10, 1998, the
Getty Communications ADSs were quoted on the Nasdaq National Market under the
symbol "GETTY" since July 2, 1996. In connection with the Merger and the Scheme
of Arrangement that were completed on February 9, 1998, each previously
outstanding Getty Communications ADS was effectively converted into one share of
Getty Images Common Stock. See "Item 1. Business -- B. Background".
The following table shows the high and low sales price for the Getty
Communications ADSs and Getty Images Common Stock for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997
First Quarter............................................... $18.00 $14.00
Second Quarter.............................................. 15.25 11.50
Third Quarter............................................... 19.50 10.75
Fourth Quarter.............................................. 18.25 13.00
1998
First Quarter............................................... 27.25 13.50
Second Quarter.............................................. 27.25 16.88
Third Quarter............................................... 27.63 13.88
Fourth Quarter.............................................. 21.75 8.63
</TABLE>
On March 1, 1999, the last reported sales price of the Getty Images Common Stock
as reported on the Nasdaq National Market was $19.125 per share.
There were approximately 76 holders of record of the Getty Images Common Stock
as of March 1, 1999.
The Company has not paid or declared any dividends on its common stock since its
inception and anticipates that its future earnings will be retained to finance
the continuing development of its business. The payment of any future dividends
will be at the discretion of the Company's Board of Directors and will depend
upon, among other things, future earnings, the success of the Company's business
activities, regulatory and capital requirements, the general financial condition
of the Company and general business conditions. In addition, the Company's loan
agreements may restrict the Company's ability to pay future dividends.
On November 16, 1998, the Company issued an aggregate of 7,587 shares as partial
consideration for its purchase of certain assets from a contributing
photographer.
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ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of Getty Images are qualified
by reference to, and should be read in conjunction with, Getty Images'
consolidated financial statements and notes thereto included in Item 14 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" included in Item 7.
<TABLE>
<CAPTION>
TONY STONE IMAGES LIMITED GETTY COMMUNICATIONS PLC GETTY IMAGES,
(PREDECESSOR COMPANY) (PREDECESSOR COMPANY) INC.
------------------------- ------------------------------ ------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1994 1995(1) 1996 1997 1998(2)
------------------------- -------- -------- -------- ------------------
(IN THOUSANDS EXCEPT PER (IN THOUSANDS EXCEPT PER (IN THOUSANDS
SHARE DATA) SHARE DATA) EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales....................................... $42,052 $63,021 $85,014 $100,797 $185,084
Cost of sales............................... 16,290 24,714 32,156 37,514 52,830
------ ------ ------- ------- -------
Gross profit................................ 25,762 38,307 52,858 63,283 132,254
Selling, general and administrative
expenses.................................. 19,140 27,655 37,250 43,936 96,904
Amortization of intangibles................. 1,134 2,380 2,155 3,253 36,961
Depreciation................................ 2,267 3,605 5,486 8,214 14,397
Non-recurring integration and restructuring
costs..................................... -- -- -- -- 13,755
------ ------ ------- ------- -------
Operating income/(loss)..................... 3,221 4,667 7,967 7,880 (29,763)
Net interest (expense)/income............... (218) (1,468) (1,951) 1,187 (2,986)
Net Exchange gains/(losses)................. 247 89 (306) (198) (124)
Legal settlement............................ -- -- -- (974) --
------ ------ ------- ------- -------
Income before income taxes.................. 3,250 3,288 5,710 7,895 (32,873)
Income taxes................................ (1,556) (2,017) (2,982) (3,873) (2,680)
Extraordinary items......................... -- -- -- -- (830)
------ ------ ------- ------- -------
Net income/(loss)........................... $1,694 $1,271 $2,728 $4,022 $(36,383)
------ ------ ------- ------- -------
Net income/(loss) per share(3).............. $0.05 $0.10 $0.11 $(1.25)
------ ------- ------- -------
Shares used in computing per share
amount(3)................................. 27,442 27,442 37,908 29,160
------ ------- ------- -------
Net income per ADS(4)....................... $0.11 $0.20 $0.21 N/A
------ ------- ------- -------
OPERATING DATA:
EBITDA(5)................................... $6,622 $10,652 $15,608 $19,347 $35,350
------ ------ ------- ------- -------
Ratio of earnings to fixed charges(6)....... 8.53 3.38 3.79 6.69 N/A
------ ------ ------- ------- -------
Deficiency of earnings to fixed
charges(7)................................ N/A N/A N/A N/A $(33,703)
------ ------ ------- ------- -------
CASHFLOW DATA:
Net cash provided by/(used in):
Operating activities........................ $5,202 $6,957 $13,502 $13,174 $7,222
Investing activities........................ (5,296) (24,689) (25,528) (35,447) (107,869)
Financing activities........................ (314) 19,030 66,311 (3,052) 85,003
Exchange differences........................ 83 (18) 2,755 (4,380) 2,560
------ ------ ------- ------- -------
Net increase/(decrease) in cash and cash
equivalents............................... $(325) $1,280 $57,040 $(29,705) $(13,084)
------ ------ ------- ------- -------
BALANCE SHEET DATA:
Cash and cash equivalents................... $1,208 $1,899 $58,939 $29,234 $16,150
Total assets................................ 25,334 71,024 163,504 171,638 462,863
Long-term debt, net of current maturities... 2,617 8,704 17,910 14,657 72,354
Total stockholders' equity.................. $5,984 $27,012 $113,523 $119,539 $343,927
------ ------ ------- ------- -------
</TABLE>
- ---------------
(1) Reflects the combination of the results of Tony Stone Images, the
predecessor of Getty Communications and Getty Images, for the period from
January 1 through March 13, 1995 with the results of Getty Communications
for the period from March 14 through December 31, 1995. Due to the nature of
this combination, the presentation of combined results for the two periods
in 1995 does not conform with U.S. GAAP.
(2) Reflects the combination of the consolidated statement of operations of
Getty Communications plc (the predecessor company) for the period January 1,
1998 through February 9, 1998 and the consolidated statement of operations
of Getty Images, Inc. for the period February 10, 1998 through December 31,
1998. See "Explanatory Note".
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(3) Net income per share has not been computed for periods which relate to Tony
Stone Images as compared to Getty Communications or Getty Images. Amounts
for the year ended December 31, 1995 have been computed assuming the same
number of shares outstanding as determined for Getty Communications for the
period March 14, 1995 through December 31, 1995.
(4) Net income per Getty Communications ADS is calculated by adjusting net
income per share data for the ratio of two Getty Communications Class A
Ordinary Shares per Getty Communications ADS.
(5) "EBITDA" is defined as earnings before interest, taxes, exchange
gains/(losses), amortization, depreciation, non-recurring integration and
restructuring costs, legal settlement and extraordinary items. Thus, EBITDA
with respect to Getty Images comprises sales less cost of sales and selling,
general and administrative expenses. Getty Images believes that EBITDA
provides investors and analysts with a measure of operating income
unaffected by the financing and accounting effects of acquisitions and
assists in explaining trends in the operating performance of Getty Images.
EBITDA should not be considered as an alternative to operating income as an
indicator of Getty Images' operating performance or to cash flows as a
measure of Getty Images' liquidity. As defined by Getty Images, EBITDA may
not be comparable to other similarly titled measures used by other
companies.
(6) Ratio of earnings to fixed charges means the ratio of net income (before
fixed charges and income taxes) to fixed charges, where fixed charges are
the aggregate of interest, amortization of the costs relating to debt and an
allocation of rental charges to approximate equivalent interest.
(7) Deficiency of earnings to fixed charges means the deficiency of income
(before fixed charges and income taxes) to fixed charges, where fixed
charges are the aggregate of interest, amortization of the costs relating to
debt and an allocation of rental charges to approximate equivalent
interests.
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following should be read in conjunction with the consolidated financial
statements of Getty Images, Inc. and the notes thereto, "Selected Consolidated
Financial Data" and other financial information contained elsewhere in this
Annual Report. In the following discussion, the "Company" refers to Getty
Communications plc combined with Tony Stone Images Limited for 1995, Getty
Communications plc in 1996 and 1997 and Getty Communications plc combined with
Getty Images, Inc. for 1998. All financial data referred to in the following
management's discussion has been prepared in accordance with U.S. GAAP.
The statements in this section that are not historical facts are forward-looking
statements that involve risks and uncertainties. Getty Images' actual results
could differ materially from those anticipated in these forward-looking
statements as a result of a variety of factors, including those set forth under
Item 1. Business -- H "Factors that may impact the Business" in the Company's
Form 10-K.
OVERVIEW
Getty Images, Inc. is a leading global visual content provider extensively
involved in e-commerce, offering products and services over its Web sites and
through a diverse set of channels. Getty Images owns or controls content
products across most major categories of the visual content industry. Through
its e-commerce enabled Web sites and international network of wholly-owned
offices, agents and distributors, Getty Images is able to provide its customers
access to image and footage products. Its visual content brands and businesses
include Allsport (allsport.com), a leading provider of global sports
photography; Energy Film Library (digital-energy.com), a leading provider of
stock footage; Liaison Agency (liaisonphoto.com), a leading provider of North
American news and reporting photography; Hulton Getty (hultongetty.com), one of
the largest commercially available collections of archival photography; and Tony
Stone Images (tonystone.com) and PhotoDisc (photodisc.com), leaders in
contemporary stock photography.
Getty Communications commenced operations on March 14, 1995 with the acquisition
of Tony Stone Images, one of the world's leading providers of contemporary stock
photography. In April 1996, the Company broadened its visual content product
offerings with the acquisitions of Hulton Deutsch Collection Limited (now Hulton
Getty), one of the world's largest commercially available collections of
archival photography and Fabulous Footage, a leading North American provider of
contemporary stock footage. In March 1997, Getty Communications acquired
Liaison, a well-established leader in the photojournalism market. In July 1997,
the Company acquired Energy Film Library, one of the leading international
providers of contemporary stock footage to the advertising, television, feature
film, corporate communications and multimedia markets.
During September 1997, Getty Communications entered into an acquisition
agreement with PhotoDisc, Inc. leading to the formation of Getty Images and the
completion of the full acquisition in February 1998. PhotoDisc is a leading
provider of royalty-free imagery and one of the largest providers of imagery on
the Internet. Also in February 1998, the Company acquired Allsport Photographic
plc, a leading provider of worldwide sports photography.
The Company continued its global expansion in March 1998 with the acquisition of
Fototeca Stone, a leading stock photography agent based in Barcelona, Spain and
previously an exclusive agent for Tony Stone Images. The expansion in the
distribution network included the opening of wholly-owned offices in Brazil and
Dubai. The Company also appointed exclusive distributors in Costa Rica and
Colombia. During 1998, PhotoDisc opened wholly-owned offices in Sweden and
France. In May 1998, Allsport opened an office in Sydney, Australia with the
acquisition of images previously owned by Australian Picture Library. In
November 1998, the Company acquired Sporting Pix, a leading sports picture
agency based in Melbourne, Australia. These acquisitions significantly built the
Company's base in Australia ahead of the 2000 Summer Olympic Games as Allsport
has been selected as the official photographer of the US Olympic Committee and
the International Olympic Committee marketing partners.
17
<PAGE> 21
In May 1998, the Company completed the issue of $75 million, 4.75% Convertible
Subordinated Notes, the proceeds of which were applied partially to the
repayment of $49 million of term debt due to Midland Bank plc.
In August 1998, the Company acquired Imageways, Inc. ("Imageways"), a noted
archival footage collection. Imageways' collection is comprised of industrial
footage, lifestyles, feature films and newsreels and is being marketed by Energy
Film Library. During 1998, Energy Film Library expanded its agency network into
Italy and commenced selling its product in the United Kingdom.
The Company's sales are primarily derived from the marketing of image
reproduction and broadcasting rights to a range of business customers. Sales
generally consist of a large number of relatively small transactions involving
the sale either of single images, video and film clips or of CD-ROM products
containing between 100 and 300 images. Getty Images utilizes a variety of
digital and analog distribution platforms, including electronic commerce via the
Internet, CD-ROMS, 35mm film, video and traditional analog transparencies. Price
is determined by the extent of rights granted over the use of the image or clip
and can vary significantly across geographic markets and customer groups. Sales
are also generated from subscription or bulk purchase deals where customers are
provided access to imagery on-line.
Getty Images' cost of sales primarily consists of commission payments to
contributing photographers and cinematographers. These suppliers are under
contract to the Company and receive payments of up to 50 percent of sales
depending on the product sold and the location of the sale. Minimal payments are
due for sales of Hulton Getty's and Allsport's imagery and certain images of the
other brands as most of the images are owned by the Company and do not require
commission payments. Also included in cost of sales is the cost of CD-ROM
production at PhotoDisc.
The Company's selling, general and administrative expenses include salaries and
related staff costs, premises and utility costs and marketing and catalog costs.
In the case of Allsport, staff costs include salaries of photographers who are
employed directly by the Company.
Getty Images amortizes goodwill and depreciates the cost of the investment in
duplicate transparencies, digital files, the archival picture collection,
computer systems and other fixed assets over their expected useful lives. The
acquisition of PhotoDisc and Allsport generated $242 million of goodwill that
will be amortized over twenty years and $51 million of other intangibles that
will be amortized over periods varying from two to three years.
As a result of Getty Images' various acquisitions and their consequential
financial and accounting effects on net income, the Company believes that EBITDA
provides stockholders, investors and analysts with an appropriate measure of the
operating performance of Getty Images. Getty Images defines EBITDA as earnings
before interest, taxes, exchange gains/(losses), depreciation, amortization,
non-recurring integration and restructuring costs, legal settlement and
extraordinary items. EBITDA should not be considered as an alternative to
operating income as an indicator of Getty Images' operating performance or to
cash flows as a measure of Getty Images' liquidity.
The Company experienced a significant increase in the rate of demand for the
digital, as well as analog, search, selection and fulfillment of imagery during
1997 and 1998, particularly in North America. This is evident by the launch of
full e-commerce for the Company's largest brand, Tony Stone Images, in October
1998 and further enhancements to the PhotoDisc Web site. As a result, the
Company intends to increase the amount of capital expenditure on digitization in
1999, building on the significant investment made in 1998. This includes
updating Hulton Getty's Web site in preparation for full e-commerce.
During the year ended December 31, 1998, the Company approved and commenced a
program to integrate its businesses following the acquisitions of PhotoDisc and
Allsport in February 1998. This has resulted in integration and restructuring
charges totaling $13.8 million. The Company also incurred an extraordinary
charge of $0.8 million relating to the early repayment of $49 million of bank
debt.
18
<PAGE> 22
BASIS OF PRESENTATION
Getty Images reports in US dollars. Getty Communications previously reported in
United Kingdom pounds sterling until December 31, 1996. To facilitate comparison
of the results of Getty Images with the historical results of Getty
Communications and Tony Stone Images, the historical results of Getty
Communications have been translated into US dollars using the exchange rates set
out below.
<TABLE>
<S> <C>
Noon Buying Rates for pounds sterling expressed in US
dollars per pound sterling:
Average rate for twelve month period ended December 31,
1994...................................................... 1.5319
Period end rate at December 31, 1994........................ 1.5645
Average rate for twelve month period ended December 31,
1995...................................................... 1.5785
Period end rate at December 31, 1995........................ 1.5526
Average rate for twelve month period ended December 31,
1996...................................................... 1.5606
Period end rate at December 31, 1996........................ 1.7113
</TABLE>
RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------------ -------------------------------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
------------------------ -------------------------------------------------
1998 % OF SALES 1997 % OF SALES 1996 % OF SALES
----------- ---------- ----------- ---------- --------- ----------
(IN THOUSANDS, (IN THOUSANDS, EXCEPT PERCENTAGES)
EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales........................ $185,084 100.0 $100,797 100.0 $85,014 100.0
Gross profit................. 132,254 71.5 63,283 62.8 52,858 62.2
Selling, general and
administrative expense..... (96,904) (52.4) (43,936) (43.6) (37,250) (43.8)
Amortization and
depreciation............... (51,358) (27.7) (11,467) (11.4) (7,641) (9.0)
Non-recurring integration and
restructuring costs........ (13,755) (7.4) -- -- -- --
Operating (loss)/income...... (29,763) (16.1) 7,880 7.8 (7,967) (9.4)
Net interest
(expense)/income........... (2,986) (1.6) 1,187 1.2 (1,951) (2.3)
Net exchange losses.......... (124) -- (198) (0.2) (306) (0.4)
Income taxes................. (2,680) (1.4) (3,873) (3.8) (2,982) (3.5)
Extraordinary items.......... (830) (0.4) -- -- -- --
Net (loss)/income............ $(36,383) (19.7) $4,022 4.0 $2,728 3.2
OPERATING DATA:
EBITDA(1).................... $35,350 19.1 $19,347 19.2 $15,608 18.4
</TABLE>
- ---------------
(1) "EBITDA" is defined as earnings before interest, taxes, exchange
gains/(losses), depreciation, amortization, non-recurring integration and
restructuring costs, legal settlement and extraordinary items. EBITDA should
not be considered as an alternative to operating income as an indicator of
Getty Images' operating performance or to cash flows as a measure of Getty
Images' liquidity.
SALES
Getty Images' sales (including the Company's share of sales by agents) for 1996,
1997 and 1998 were $85.0 million, $100.8 million and $185.1 million
respectively, representing increases of 18.6 percent in 1997 and 83.6 percent in
1998 over the respective prior year.
The Company's operations reported strong sales growth on both a reported and
proforma basis as compared to the same period in 1997, primarily achieved
through an increase in North American sales of 77 percent and 49 percent
respectively. The positive sales performance in the North American operations
was largely driven by the success of e-commerce sales which continued to grow at
a significant rate.
19
<PAGE> 23
Growth in digital sales, including both e-commerce and CD-ROM sales, continued
strongly in 1998 compared to the year ended December 31, 1997. Digital sales of
$59.0 million in 1998 represented 31.9 percent of total sales, growing at a rate
of 37.5 percent over 1997 compared to an 8.6 percent growth in the Company's
analog sales. This growth emphasizes the orientation of the market and the rapid
pace of adoption of e-commerce. Specifically, 1998 e-commerce sales at PhotoDisc
represented more than 35 percent of total sales for the brand. The launch of the
Tony Stone Images' Web site also exceeded the Company's initial expectations,
while Allsport continued to increase its emphasis on digital technology.
GROSS PROFIT
Gross profit for Getty Images has increased as a percentage of sales from 62.2
percent in 1996 and 62.8 percent in 1997 to 71.5 percent in 1998. This
improvement was largely attributable to a reduction in the amounts payable to
contributing photographers and cinematographers (the principal components of
costs of sales) and an improvement in the sales mix of wholly-owned imagery
during 1998.
Cost of sales for the Company increased from $32.2 million in 1996 and $37.5
million in 1997 to $52.8 million in the twelve month period ended December 31,
1998. As a percentage of sales, average cost of sales declined from 37.2 percent
for the full year 1997 to 28.5 percent in 1998. The significant improvement in
cost of sales as a percentage of sales primarily reflected the higher proportion
of sales of wholly-owned imagery following the Allsport acquisition as well as a
lower cost of sales in the PhotoDisc business. Minimal payments are due for
sales of Hulton Getty's and Allsport's imagery and certain images of the other
brands as most of the images are owned by the Company and do not require
commission payments. In line with the Company's strategy of increasing its sales
of wholly-owned content, the proportion of sales of owned imagery increased from
approximately nine percent in the year ended December 31, 1997 to approximately
20 percent at the end of 1998.
During 1998, Tony Stone Images entered into new contracts with the majority of
the contributing photographers represented in its core collection which included
a new rate payable to contributing photographers for on-line sales. This
compares favorably to the prior contractual arrangements and management expects
this agreement to further improve gross margin as a higher proportion of imagery
sales moves on-line to the Web.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $37.3 million, $43.9 million
and $96.9 million in 1996, 1997 and 1998, respectively, representing 43.8
percent, 43.6 percent and 52.4 percent of sales in each respective year. The key
contributing factors to the increase in selling, general and administrative
expenses during 1998 were the inclusion of the PhotoDisc and Allsport businesses
into the consolidated Company's results, as well as increased investment in the
management team and new business systems, including e-commerce development.
Management expects to continue to invest further in these areas during 1999.
Management remains committed to closely managing selling, general and
administrative expenses and believes that there will be improvements as the
Company further integrates and consolidates its businesses, as well as
implements new business systems. In addition, it is expected that system
enhancements and digitization will have a significantly positive impact on the
Company's productivity and required staffing levels in the future. As customers
increasingly move towards electronic image search, retrieval and payment, the
Company expects to further integrate and streamline its support operations and
hence reduce costs as a percentage of sales.
AMORTIZATION OF INTANGIBLES AND DEPRECIATION
Amortization of intangibles was $37.0 million in 1998, compared to $3.3 million
in 1997 and $2.2 million in 1996. The increase in amortization arose from the
inclusion of amortization of goodwill relating to the acquisitions of PhotoDisc
and Allsport. Intangibles of $242.3 million and $50.5 million, respectively,
arose on consolidation of these acquisitions. A substantial part of these
intangibles, $241.9 million, has been attributed
20
<PAGE> 24
to goodwill which is being amortized over 20 years. Other intangibles of $51.0
million are being amortized over periods varying from two to three years.
Depreciation increased from $5.5 million in the twelve month period ended
December 31, 1996 to $8.2 million in the year ended 1997 and $14.4 million in
the year ended 1998. The increase primarily arose from acquisitions, together
with increased investment in capital expenditure related to the continued
development of Getty Images' digital strategy. Capital expenditure was
approximately $27 million in 1998 and management anticipates this will increase
moderately in 1999. Depreciation charges are therefore expected to increase in
the short and medium term.
NON-RECURRING INTEGRATION AND RESTRUCTURING COSTS
During the year ended December 31, 1998, the Company approved and commenced a
program to integrate its businesses following the acquisitions of PhotoDisc and
Allsport in February 1998. This has resulted in integration and restructuring
charges totaling $13.8 million. The charges included restructuring costs,
severance costs, consulting and professional fees, systems and process
integration costs, and costs associated with contract renegotiations and
terminations.
Restructuring costs, amounting to $10.1 million in 1998, were for estimated exit
costs associated with the closure of certain facilities operated by the Company,
including asset writedowns and termination costs. The largest element of the
asset writedowns comprised system assets, primarily hardware and software, both
of which have shortened useful lives as a result of the restructuring plans.
Termination costs arose in relation to property related exit costs, termination
of agents and photographer contracts and employee terminations. Non-recurring
costs associated with employee severance related primarily to the resignation of
Mark Torrance as Co-Chairman of the Company. Mr. Torrance has now assumed the
new position of non-executive Vice Chairman.
Integration costs of $3.7 million were associated with the activities of teams
responsible for integrating the Company's businesses for the benefit of future
operations and included items such as consulting and professional fees, systems
and process integration costs and contract renegotiation and termination costs.
NET EXCHANGE LOSSES
Getty Images' operating results are affected by exchange rate fluctuations to
the extent that it or a subsidiary has receivables or payables that are
denominated in a currency other than the local currency, as the exchange gains
or losses arising on the translation of these balances into local currency or on
the settlement of these transactions are recognized in the income statement of
the relevant company.
The Company's policy is to hedge a substantial majority of its contracted net
receivables and payables using a combination of forward exchange contracts and
foreign currency term loans. Net exchange losses were $306,000 in 1996, $198,000
in 1997 and $124,000 in the twelve month period ended December 31, 1998. These
losses are largely unrealized and arise from revaluation of currency balances
residing in the Company's subsidiary companies' books.
INCOME TAXES
Getty Images' 1998 tax charge was $2.7 million compared with $3.9 million in
1997 and $3.0 million in 1996. Excluding the effect of the amortization of
intangibles, which is largely non-tax deductible, the Company had an effective
tax rate of 38.0 percent in 1998 as compared to 34.7 percent in 1997 and 37.9
percent in 1996. The changes in the effective rate of tax, excluding the impact
of the amortization of intangibles, are due to variations in the profit mix and
tax rates in the countries in which Getty Images operates and non-recurring
integration and restructuring costs which are not all fully tax deductible.
EXTRAORDINARY ITEMS
The repayment of the term debt due to Midland Bank plc from the proceeds of the
$75 million, 4.75 percent convertible subordinated notes resulted in an
extraordinary charge of $0.8 million in the twelve months ended
21
<PAGE> 25
December 31, 1998 comprising the write off of unamortized loan arrangement costs
net of the associated income tax benefit.
NET (LOSS)/INCOME
Largely as a result of the amortization of intangibles which gave rise to a
charge of $37.0 million and a $13.8 million non-recurring integration and
restructuring charge, the Company experienced a net loss of $36.4 million in the
twelve month period ended December 31, 1998 versus net income of $4.0 million in
1997 and $2.7 million in 1996.
EBITDA
EBITDA for 1996, 1997 and 1998 was $15.6 million, $19.3 million and $35.4
million representing increases of 24.0 percent in 1997 and 82.7 percent in 1998
over the respective prior year. Currency movements did not have a material
impact on 1998 EBITDA.
YEAR 2000
The Year 2000 issue refers to the risk that systems, products and equipment
having date-sensitive components will not recognize the Year 2000 as a result of
computer programs using two digits rather than four to define the applicable
year. The use of non-Year 2000 compliant programs or the inability of the
Company to update its systems successfully may result in system failures,
miscalculations or errors causing disruption of operations, the corruption of
data or other business problems, including, among other things, a temporary
inability to process transactions and invoices, or engage in similar normal
business activities. In addition to the Company's computer systems, the Year
2000 issue may affect certain embedded systems (alarms, gates and time locks,
lighting, security, electrical supply control and backup equipment) and
communication systems (switchboards, fax machines and cellular telephones).
In addition to Year 2000 issues related to the Company's systems, Getty Images
may be adversely affected if the Company's key suppliers or other material third
party service providers are unable or fail to address the Year 2000 issue
adequately. Such suppliers can include infrastructure suppliers in areas such as
utilities, communications, transportation and other services. While the Company
is developing alternate power generation sources for its most sensitive systems,
the likelihood and effects of failures in infrastructure systems and in the
supply chain cannot be estimated.
Getty Images' Year 2000 Compliance Program and the Company's readiness
Getty Images developed the Year 2000 Compliance Program (the "Program") to
identify and mitigate Year 2000 issues in its information systems, facilities
and suppliers. The Program can be divided into three phases: (1) Evaluation
(identify issues, inventory the systems affected and develop solutions to
address the issues); (2) Implementation (deploy program and software changes and
complete necessary contingency plans); and (3) Testing (perform applications and
acceptance testing and certification).
The goals of the Program are to ensure that Getty Images and its business
divisions can continue to function at optimal levels up to and beyond December
31, 1999; to provide Getty Images' customers and partners with the Company's
services throughout the affected period and to ensure that key suppliers are
Year 2000 compliant and that there will be no disruption in the supply of
services and products to Getty Images.
The Chief Executive Officer of the Company, subject to the Board of Directors'
oversight, is responsible for the overall implementation of the Program and
ensuring that the Company becomes Year 2000 compliant by December 31, 1999. The
Senior Vice President of Planning is responsible for the day-to-day management
of the Program and reports directly to the Board of Directors of the Company. A
dedicated team has been assembled to implement the Program.
As of March 31, 1999, Getty Images had completed Phase 1 of the Program and had
partially completed Phases 2 and 3. The Company expects that the bulk of its
systems will be Year 2000 compliant by the end of the third quarter of 1999,
with the remainder compliant during the fourth quarter of 1999. Contingency
plans
22
<PAGE> 26
will be developed for any matter not resolved in 1999 that may have a material
negative impact on the Company's final Year 2000 readiness.
Evaluation The Company has inventoried all of its major hardware and software
platforms, as well as the relevant computer, embedded and communication systems,
which may be affected by the Year 2000 issue and assessed the needs of the
Company to become Year 2000 compliant. The Company has completed a review of the
Year 2000 issues faced by its material suppliers and evaluated the risks and
dependencies associated with such suppliers. The review of the Year 2000 issue
faced by licensees and agents is scheduled to be completed by April 1, 1999.
Implementation The Company is well advanced in its deployment of software and
hardware changes. Year 2000 compliance measures have been incorporated into all
new Web initiatives, becoming the standard within the Company for all new
contracts and have been incorporated into the Company's due diligence program
when evaluating potential acquisitions and partnerships.
In addition, the Company has begun preparation of its first stage contingency
plan which addresses the identification of alternate suppliers and distribution
channels and the implementation of manual systems if it becomes necessary. The
Company expects to complete all contingency planning by the end of the second
quarter of 1999.
Testing The Company has tested its CD products and e-commerce systems. Testing
on the e-commerce system demonstrated that certain of the systems, principally
credit authorization and payment processing, needed upgrades to become Year 2000
compliant. If further testing identifies this as a problem, then a new compliant
payment processor or payment software will be implemented.
The Company will continue its testing of its computer, embedded and
communication systems as it completes the implementation of its software and
hardware changes.
Getty Images estimates that the expected total aggregate costs for its Year 2000
activities and related systems changes from 1997 through 2000 will be
approximately $2.5 million, of which approximately $750,000 has been spent as of
March 31, 1999.
RISKS RELATED TO THE YEAR 2000 ISSUE
Although the Company's efforts to be Year 2000 compliant are intended to
minimize the adverse effects of the Year 2000 issues on the Company's operations
and business, the actual effects of the Year 2000 issue will not be known until
2000. The failure by the Company and/or its material suppliers to become Year
2000 compliant in a timely manner could have a material adverse effect on the
Company's business, results of operations and financial condition. The Company's
capital requirements may differ materially from the foregoing estimate as a
result of regulatory, technological and competitive developments in the
Company's industry.
The Year 2000 disclosure set forth above is intended to be a "Year 2000
statement" as such term is defined in the Year 2000 Information and Readiness
Disclosure Act of 1998 (the "Year 2000 Act") and, to the extent such disclosure
relates to Year 2000 processing of the Company or to products or services
offered by the Company, is intended to be a "Year 2000 readiness disclosure" as
such term is defined in the Year 2000 Act.
THE EURO CONVERSION
A new European currency was implemented in January 1999 to replace the separate
currencies of eleven Western European countries. This is requiring changes in
the Company's operations as it modifies systems and commercial arrangements to
deal with the new currency. Modifications are necessary in operations such as
payroll, benefits and pension systems, contracts with suppliers and customers
and internal financial reporting systems, and have a particularly significant
impact on the Company's European subsidiaries. Although a three-year transition
period is expected during which transactions may also be made in the old
currency, this is requiring dual currency processes for the Company's
operations. The Company has identified the issues involved and is developing and
implementing solutions. The Company does not expect the cost of this effort to
23
<PAGE> 27
have a material effect on its business or results of operations. However, there
can be no assurance that all problems will be foreseen and corrected or that no
material disruption of the Company's business will occur.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1998 1997 1996
------------------ ----------- -----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by/(used in):
Operating activities............................. $7,222 $13,174 $13,502
Investing activities............................. (107,869) (35,447) (25,528)
Financing activities............................. 85,003 (3,052) 66,311
Exchange differences............................. 2,560 (4,380) 2,755
----------------- ----------- -----------
Net increase/(decrease) in cash and cash
equivalents.................................... $(13,084) $(29,705) $57,040
----------------- ----------- -----------
</TABLE>
Getty Images' cash resources decreased by $13.1 million in the twelve month
period ended December 31, 1998 compared to a decrease of $29.7 million in 1997.
There was a net increase in cash and cash equivalents of $57.0 million in 1996.
Net cash provided by operating activities amounted to $7.2 million in 1998
compared to $13.2 million in 1997 and $13.5 million in 1996. The cash generated
was less in 1998 principally as a result of payments in respect of non-recurring
integration and restructuring costs. In the year ended December 31, 1998, Getty
Images invested $27.3 million in fixed assets compared to $14.9 million in 1997
and $7.2 million in 1996.
The acquisitions of PhotoDisc and Allsport in February 1998 and other businesses
throughout the year resulted in a net cash outflow of $80.6 million, including
expenses. To fund this, Getty Images raised a net additional $47.2 million of
debt and Getty Investments L.L.C. subscribed for an additional 1.5 million
shares, providing $28 million of additional capital. On May 20, 1998 the Company
raised $75 million from the issue of convertible notes; $49 million of this was
applied to the repayment of term debt and debt issue costs of approximately $3.3
million were incurred. Also, in the twelve months ended December 31, 1998, the
Company raised $5.3 million from the exercise of options.
At December 31, 1998, Getty Images had outstanding long term debt of $75.0
million and cash of $16.2 million.
24
<PAGE> 28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Getty Images is exposed to a variety of risks, including changes in interest
rates affecting the return on its investments and foreign currency fluctuations.
In the normal course of business, the Company employs established policies and
procedures to manage its exposure to fluctuations in interest rates and foreign
currency values.
INTEREST RATE RISK
The Company's exposure to market rate risk for changes in interest rates relates
primarily to the Company's debt instruments, most of which are fixed rate
borrowings.
INTEREST RATE RISK
(U.S. DOLLARS IN THOUSANDS EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
MATURITIES FAIR VALUE
--------------------------------------------------------- DECEMBER 31,
DEBT (INCLUDING CURRENT PORTION) 1999 2000 2003 TOTAL 1998
- -------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Fixed rate (USD)............... $75,000 $75,000 $75,000
Average interest rate.......... 4.75%
Other borrowings............... $202 $522 $724 $724
Average interest rate.......... 7.25% 7.25%
</TABLE>
FOREIGN CURRENCY RISK
The company conducts its business primarily in the United States and the United
Kingdom and, therefore, its cashflows are primarily denominated in US dollars
and United Kingdom sterling ("L"). The company is exposed to foreign exchange
risk related to foreign currency denominated liabilities and cash. The
introduction of the euro does not significantly affect the foreign exchange
exposure of the Company.
The Company has entered into forward foreign currency exchange contracts to
hedge its contracted net receivables denominated in foreign currencies. Getty
Images' functional currency is U.S. dollars. The forward foreign currency
contracts typically have a term of less than six months. All forward foreign
currency exchange contracts at December 31, 1998 are designated and accounted
for as hedges.
The criteria used by the Company for designating a contract as a hedge include
the contract's effectiveness in risk reduction. Gains and losses on these
contracts, relating to the hedged risk, are recognized as incurred, reflecting
the income statement treatment of the hedge items.
If an underlying hedged transaction is terminated earlier than initially
anticipated, the offsetting gain or loss on the related forward foreign exchange
contract would be recognized in income in the same period. In addition, since
the Company enters into forward contracts only as hedges, any change in currency
rates would not result in any material gain or loss, as any gain or loss on the
underlying foreign currency denominated balances would be offset by the loss or
gain on the forward contract.
The following tables present certain information regarding the Company's use of
financial instruments and should be read in conjunction with Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and Notes 1, 16 and 17 to the Consolidated Financial Statements.
25
<PAGE> 29
FOREIGN EXCHANGE RISK
(CURRENCY AND US DOLLAR EQUIVALENTS IN THOUSANDS EXCEPT AVERAGE CONTRACTUAL
EXCHANGE RATE WHICH IS TO THE NEAREST SECOND DECIMAL POINT)
<TABLE>
<CAPTION>
MATURITIES FAIR VALUE
--------------------------------- U.S. DOLLAR EQUIVALENT
CONTRACT TYPE 1999 U.S. DOLLAR EQUIVALENT DECEMBER 31, 1998
- ------------- -------- ---------------------- ----------------------
<S> <C> <C> <C>
Buy L/sell French franc........................... 6,400 $1,130 $(22)
Average contractual exchange rate (French
franc/L)........................................ 9.42
Buy L/sell Deutsche mark.......................... 2,700 $1,621 $(7)
Average contractual exchange rate (Deutsche
Mark/L)......................................... 2.78
Buy L/sell Italian lire........................... 610,000 $941 $(23)
Average contractual exchange rate (Italian
lire/L)......................................... 2,792.39
Buy L/sell Japanese yen........................... 48,000 $389 $(39)
Average contractual exchange rate (Japanese
yen/L).......................................... 205.22
Buy L/sell Spanish pesetas........................ 51,000 $355 $(7)
Average contractual exchange rate (Spanish
pesetas/L)...................................... 239.07
</TABLE>
There are further forward exchange contracts at December 31, 1998, that are
together considered immaterial. The US dollar equivalent maturity value of these
are $752,000. All foreign exchange risk contracts are foreign currency forward
exchange contracts between the indicated currency and the United Kingdom
sterling (L).
Forward foreign exchange contracts between United Kingdom sterling and Deutsch
mark, French francs, Italian lire, Japanese yen and Spanish pesetas account for
31 percent, 22 percent, 18 percent, 8 percent and 7 percent respectively of the
Company's total US dollar equivalents in forward foreign exchange contracts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(See Item 14(a))
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
<PAGE> 30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commissions no later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commissions no later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item will be contained in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND
REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT
Financial Statement Schedules: Reference is made to the listing on page 29 of
all financial statements filed as part of this report.
(B) REPORTS ON FORM 8-K
Three reports on Form 8K were filed during the quarter ended December 31, 1998.
These were:
(i) Form 8K filed on November 4, 1998 reporting Item 7;
(ii) Form 8K filed on November 10, 1998 reporting Items 5 and 7; and
(iii) Form 8K filed on November 11, 1998, reporting Items 5, 7 and 9.
(C) EXHIBITS
Reference is made to the Index to Exhibits beginning on page 51 for a list of
all exhibits filed as part of this report.
27
<PAGE> 31
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.
GETTY IMAGES, INC.
/s/ CHRISTOPHER J. ROLING
By:
--------------------------------------
Name: Christopher J. Roling
Title: Chief Financial Officer
March 31, 1999
We, the undersigned directors and executive officers of the Registrant, hereby
severally constitute Jonathan Klein, Christopher Roling and Heather Redman, and
each of them singly, our true and lawful attorneys with full power to them and
each of them to sign for us, and in our names in the capacities indicated below,
any and all amendments to the Annual Report on Form 10-K filed with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys to any and all amendments
to said Annual Report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on March 31, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE (CAPACITY)
--------- ----------------
<C> <S>
/s/ MARK H. GETTY Executive Chairman and Director
- ---------------------------------------------
Mark H. Getty
/s/ JONATHAN D. KLEIN Chief Executive Officer and Director
- --------------------------------------------- (Principal Executive Officer)
Jonathan D. Klein
/s/ MARK TORRANCE Non-Executive Vice Chairman and Director
- ---------------------------------------------
Mark Torrance
/s/ CHRISTOPHER J. ROLING Treasurer
- --------------------------------------------- (Principal Financial Officer and Principal Accounting
Christopher J. Roling Officer)
/s/ ANDREW S. GARB Director
- ---------------------------------------------
Andrew S. Garb
/s/ ANTHONY STONE Director
- ---------------------------------------------
Anthony Stone
/s/ JAMES N. BAILEY Director
- ---------------------------------------------
James N. Bailey
/s/ MANNY FERNANDEZ Director
- ---------------------------------------------
Manny Fernandez
/s/ CHRISTOPHER H. SPORBORG Director
- ---------------------------------------------
Christopher H. Sporborg
</TABLE>
28
<PAGE> 32
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Report of Independent Accountants........................... 30
Consolidated Statements of Operations for the period January
1 through December 31, 1998, 1997 and 1996................ 31
Consolidated Balance Sheets at December 31, 1998 and
December 31, 1997......................................... 32
Consolidated Statements of Stockholders' Equity at December
31, 1998 and December 31, 1997............................ 33
Consolidated Statements of Comprehensive Income for the
period January 1 through December 31, 1998, 1997 and
1996...................................................... 33
Consolidated Statements of Cash Flows for the period January
1 through December 31, 1998, 1997 and 1996................ 34
Notes to Consolidated Financial Statements.................. 35
</TABLE>
FINANCIAL STATEMENT SCHEDULES (ITEM 14(A))
All other schedules have been omitted because the required information is
included in the financial statements or notes thereto or because they are not
required.
In this annual report historic numbers are shown for Getty Communications plc,
the predecessor company of Getty Images, Inc. References to "sterling" or "L"
are to the lawful currency of the United Kingdom and references to "U.S.
dollars" or "$" are to the lawful currency of the United States.
29
<PAGE> 33
GETTY IMAGES, INC.
AND
SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF GETTY IMAGES, INC.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, comprehensive income, stockholders'
equity and cash flows present fairly, in all material respects, the financial
position of Getty Images, Inc. and subsidiaries (the "Company") and of its
predecessor, Getty Communications plc and subsidiaries, at December 31, 1998,
and at December 31, 1997 and the results of their consolidated operations and
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS
Chartered Accountants
London, England
March 31, 1999
30
<PAGE> 34
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
-------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1998 1997 1996
-------------------- ------------ ------------
(IN THOUSANDS EXCEPT (IN THOUSANDS EXCEPT
PER SHARE DATA) PER SHARE DATA)
<S> <C> <C> <C>
Sales......................................... $185,084 $100,797 $85,014
Cost of sales................................. 52,830 37,514 32,156
--------- --------- --------
GROSS PROFIT.................................. 132,254 63,283 52,858
--------- --------- --------
Selling, general and administrative
expenses.................................... 96,904 43,936 37,250
Amortization of intangibles................... 36,961 3,253 2,155
Depreciation.................................. 14,397 8,214 5,486
Non-recurring integration and restructuring
costs....................................... 13,755 -- --
--------- --------- --------
162,017 55,403 44,891
--------- --------- --------
OPERATING (LOSS)/INCOME....................... (29,763) 7,880 7,967
Net interest (expense)/income................. (2,986) 1,187 (1,951)
Net exchange losses........................... (124) (198) (306)
Legal settlement.............................. -- (974) --
--------- --------- --------
(LOSS)/INCOME BEFORE INCOME TAXES............. (32,873) 7,895 5,710
Income taxes.................................. (2,680) (3,873) (2,982)
--------- --------- --------
(Loss)/income before extraordinary items...... (35,553) 4,022 2,728
Extraordinary items........................... (830) -- --
--------- --------- --------
NET (LOSS)/INCOME............................. $(36,383) $4,022 $2,728
--------- --------- --------
--------- --------- --------
BASIC (LOSS)/EARNINGS PER SHARE(2)............ $(1.22) $0.11 $0.10
--------- --------- --------
--------- --------- --------
Extraordinary items........................... (0.03) -- --
NET (LOSS)/EARNINGS PER SHARE(2).............. $(1.25) $0.11 $0.10
--------- --------- --------
--------- --------- --------
Diluted earnings per share(2)................. N/A $0.10 $0.10
--------- --------- --------
--------- --------- --------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic(3).................................... 29,160 37,908 27,442
--------- --------- --------
--------- --------- --------
Diluted(3).................................. N/A 38,765 27,832
--------- --------- --------
--------- --------- --------
</TABLE>
- ---------------
(1) As explained in the "Explanatory Note", the 1998 consolidated statement of
operations reflects the combination of the consolidated statement of
operations of Getty Communications plc (the predecessor company) for the
period January 1, 1998 through February 9, 1998 and the consolidated
statement of operations of Getty Images, Inc. for the period February 10,
1998 through December 31, 1998.
(2) The comparatives reflect the share structure of Getty Communications plc
(the predecessor company). See "Explanatory Note".
(3) The difference between basic and diluted weighted average shares in 1996 and
1997 results from the assumption that dilutive stock options outstanding
were exercised.
For pages 31 to 50, historic numbers are shown for Getty Communications plc, the
predecessor company of Getty Images, Inc. References to "sterling" or "L", are
to the lawful currency of the United Kingdom and references to "U.S. dollars" or
"$" are to the lawful currency of the United States.
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
31
<PAGE> 35
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ ------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1998 1997
------------------ ------------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................ $16,150 $29,234
Accounts receivable, net............................. 32,967 23,431
Inventories, net..................................... 2,834 --
Prepaid expenses and other assets.................... 17,258 7,839
--------- ---------
TOTAL CURRENT ASSETS................................. 69,209 60,504
Fixed assets, net.................................... 62,757 39,853
Intangible assets, net............................... 325,861 66,870
Deferred tax assets.................................. 5,036 4,411
--------- ---------
TOTAL ASSETS......................................... $462,863 $171,638
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable..................................... 26,232 21,461
Accrued expenses..................................... 20,148 10,305
Income taxes payable................................. -- 3,580
Current portion of long-term debt.................... 202 2,096
--------- ---------
TOTAL CURRENT LIABILITIES............................ 46,582 37,442
Long-term debt....................................... 72,354 14,657
--------- ---------
TOTAL LIABILITIES.................................... 118,936 52,099
--------- ---------
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 15)
STOCKHOLDERS' EQUITY
Common stock......................................... 306 608
Shares of common stock: par value $0.01 per share,
issued 30,574,792 at December 31, 1998;
Class 'A' shares: par value L0.01 per share; issued
24,872,608 shares at December 31, 1997;
Class 'B' shares: par value L0.01 per share; issued
13,444,618 shares at December 31, 1997
Additional paid-in capital........................... 368,267 108,049
Retained (deficit)/earnings.......................... (28,259) 8,124
Cumulative translation adjustments................... 3,613 2,758
--------- ---------
TOTAL STOCKHOLDERS' EQUITY........................... 343,927 119,539
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $462,863 $171,638
--------- ---------
--------- ---------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
32
<PAGE> 36
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
GETTY
GETTY IMAGES,
COMMUNICATIONS PLC INC.
--------------------- ---------
NO. OF NO. OF SHARES OF
A ORD. B ORD. COMMON
SHARES SHARES STOCK ADDITIONAL RETAINED CUMULATIVE
L0.01 L0.01 $0.01 COMMON PAID IN EARNINGS/ TRANSLATION
PAR VALUE PAR VALUE PAR VALUE STOCK CAPITAL (DEFICIT) ADJUSTMENTS TOTAL
---------------- ------- ------------------------------------------------------
(IN THOUSANDS)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1996...................... -- $593 $101,464 $4,102 $7,364 $113,523
23,943 13,445
Issue of shares to sellers
of Liaison................ -- 5 2,595 -- -- 2,600
312 --
Issue of shares to sellers
of Energy................. -- 10 3,990 -- -- 4,000
618 --
Net income.................. -- -- -- 4,022 -- 4,022
-- --
Translation adjustments..... -- -- -- -- (4,606) (4,606)
-- --
------- ------- ------- ---- -------- -------- ----- -------
BALANCE AT DECEMBER 31,
1997...................... 24,873 13,445 -- $608 $108,049 $8,124 $2,758 $119,539
Capital restructuring....... (24,873) (13,445) 19,159 (416) 416 -- -- --
Getty Investments
Subscription.............. -- -- 1,519 15 27,985 -- -- 28,000
Issue of shares to sellers
of PhotoDisc.............. -- -- 8,084 81 201,401 -- -- 201,482
Issue of shares to sellers
of Allsport............... -- -- 1,138 11 23,203 -- -- 23,214
Issue of shares for other
acquisitions.............. -- -- 52 1 983 -- -- 984
Options exercised........... -- -- 623 6 6,230 -- -- 6,236
Net loss.................... -- -- -- -- -- (36,383) -- (36,383)
Translation adjustments..... -- -- -- -- -- -- 855 855
------- ------- ------- ---- -------- -------- ----- -------
BALANCE AT DECEMBER 31,
1998...................... -- -- 30,575 $306 $368,267 $(28,259) $3,613 $343,927
------- ------- ------- ---- -------- -------- ----- -------
------- ------- ------- ---- -------- -------- ----- -------
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1998 1997 1996
------------------ ----------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Net (loss)/income............................... $(36,383) $4,022 $2,728
Other comprehensive income, net of tax:
Foreign currency translation adjustments........ 855 (4,606) 7,975
--------- ------ --------
Comprehensive (loss)/income..................... $(35,528) $(584) $10,703
--------- ------ --------
--------- ------ --------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
33
<PAGE> 37
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1998(1) 1997 1996
------------------ ----------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income............................... $(36,383) $4,022 $2,728
Adjustments to reconcile net (loss)/income to
net cash provided by operating activities:
Depreciation and amortization................... 51,358 11,467 7,641
Bad debt expense................................ 412 536 510
Other items..................................... 4,291 113 87
CHANGE IN ASSETS AND LIABILITIES, NET OF EFFECTS
OF BUSINESS ACQUISITIONS:
Accounts receivable............................. (2,359) (2,385) (1,275)
Accounts payable................................ (2,690) 919 1,483
Accrued expenses................................ 2,094 2,257 463
Inventory....................................... (1,758) -- --
Other assets.................................... (7,743) (3,755) 1,865
--------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES....... 7,222 13,174 13,502
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired..... (80,564) (20,546) (18,402)
Purchase of fixed assets........................ (27,305) (14,901) (7,154)
Proceeds from sale of fixed assets.............. -- -- 28
--------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES........... (107,869) (35,447) (25,528)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of debt................................ 123,168 -- 17,084
Payments on principal balance of debt........... (67,153) (3,052) (26,582)
Capital contribution............................ -- -- 124
Proceeds from issuance of ordinary shares....... 33,306 -- 75,685
Debt issue costs................................ (4,318) -- --
--------- -------- --------
NET CASH PROVIDED BY/(USED IN) FINANCING
ACTIVITIES.................................... 85,003 (3,052) 66,311
--------- -------- --------
Exchange rate differences arising from
translation of foreign currency balances...... 2,560 (4,380) 2,755
Net (decrease)/increase in cash and cash
equivalents................................... (13,084) (29,705) 57,040
Cash and cash equivalents:
-- beginning of period........................ 29,234 58,939 1,899
--------- -------- --------
-- end of period.............................. $16,150 $29,234 $58,939
--------- -------- --------
--------- -------- --------
SUPPLEMENTAL DISCLOSURES
Interest paid................................... $2,314 $1,688 $2,305
Income taxes paid............................... $6,387 $769 $3,396
--------- -------- --------
--------- -------- --------
</TABLE>
- ---------------
(1) Reflects the combination of the consolidated statement of cash flows of
Getty Communications plc (the predecessor company) for the period January
1, 1998 through February 9, 1998 and the consolidated statement of cash
flows of Getty Images, Inc. for the period February 10, 1998 through
December 31, 1998. See "Explanatory Note".
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
34
<PAGE> 38
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
EXPLANATORY NOTE On February 9, 1998, the entire issued share capital of Getty
Communications plc ("Getty Communications") was acquired via a Scheme of
Arrangement by Getty Images, Inc. ("Getty Images" or the "Company"), a company
incorporated in Delaware and whose principal executive offices are located in
Seattle, Washington and London, England. Under the Scheme of Arrangement, each
issued Getty Communications Class B Ordinary Share was converted into one Getty
Communications Class A Ordinary Share and each holder of Getty Communications
Class A Ordinary Shares was issued one share of Getty Images Common Stock, par
value $0.01 ("Common Stock") for every two Getty Communications Class A Ordinary
Shares held.
The Scheme of Arrangement was accounted for as a transaction between entities
under common control, therefore purchase accounting was not applied.
On February 9, 1998, a wholly-owned subsidiary of Getty Images acquired
PhotoDisc, Inc., a Washington corporation ("PhotoDisc"). The purchase
consideration was $245.7 million, including expenses, which included the issue
of 8,083,831 shares of Getty Images Common Stock, at a total market value of
$171.8 million.
Also on February 9, 1998, Getty Investments LLC ("Getty Investments"), a company
registered in Delaware and resident in Jersey, completed a subscription for
1,518,644 shares of Getty Images Common Stock at a purchase price of $18.4375
per share or an aggregate of $28 million (the "Getty Investments Subscription").
At December 31, 1998, Getty Investments held a 26.3 percent interest in the
share capital of the Company.
On February 10, 1998, Getty Images purchased the entire issued and outstanding
share capital of Allsport Photographic plc, a public limited company organized
under the laws of England & Wales ("Allsport"). The purchase consideration was
$51.1 million, including expenses, which included the issue of 1,137,916 shares
of Getty Images Common Stock, at a total market value of $24.2 million.
Descriptions of these transactions were included in the Current Report on Form
8-K dated February 9, 1998 and the Current Report on Form 8-K dated February 24,
1998 (as amended by the Amendment to Current Report on Form 8-K/A dated April
27, 1998), filed with the Securities and Exchange Commission (the "Commission")
by Getty Images and the Registration Statement on Form S-4 (No. 333-38777) that
the Company filed with the Commission in connection with the meetings of the
stockholders of Getty Communications and the special meetings of the
stockholders of PhotoDisc that were required to approve the transactions and the
offering of securities in connection therewith.
As a result of such transactions, Getty Images became the successor to Getty
Communications. Trading in Getty Communications American Depository Shares
("ADSs") on the Nasdaq National Market (NASDAQ:GETTY) terminated on February 9,
1998 and trading subsequently commenced in shares of Getty Images Common Stock
on the NASDAQ National Market (NASDAQ:GETY). Registration of the Getty
Communications Ordinary Shares and ADSs under the Securities Exchange Act of
1934, as amended, has been terminated.
ACTIVITIES
The principal business of Getty Images and its subsidiaries is the marketing of
reproduction rights to still and moving images. These rights are marketed in
many countries throughout the world through the Company's Web sites and through
its international network of wholly-owned offices and agents.
35
<PAGE> 39
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
The consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States, present the
consolidated financial statements of Getty Images and subsidiaries and the
consolidated financial statements of its predecessor, Getty Communications and
subsidiaries. The Company's consolidated financial statements include Getty
Images and its subsidiaries, all of which are 100 percent owned. Companies
acquired during a period are consolidated from the date of acquisition. All
material intercompany amounts and transactions have been eliminated in the
consolidated financial statements.
TRANSLATION OF FOREIGN SUBSIDIARY FINANCIAL STATEMENTS
The Company records all transactions in the currency of the respective primary
economic environments in which they operate.
The assets and liabilities of non-U.S. subsidiaries are translated into U.S.
dollars at exchange rates as of the balance sheet date, and income and expense
items are translated at the average of the rates prevailing during the period.
Gains or losses from translating foreign currency financial statements are
accumulated as a separate component of stockholders' equity.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Accounting estimates have been employed in these financial statements to
determine reported amounts, including realizability of receivables and other
assets, useful lives of assets, income taxes and the fair value of financial
instruments. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers cash and demand bank deposits to be cash. Cash equivalents
consist of all deposits with an original maturity of three months or less.
REVENUE RECOGNITION
Sales are recognized when a license agreement has been completed with the
customer for the use of the image and pricing terms, and the image has been made
available to the customer for use. Pricing terms do not call for additional fees
beyond the fixed license amount. Additionally, the customer is contractually
obligated to pay the fixed license amount upon agreement of the license terms
and availability of the image for use by the customer. In the case of royalty
free sales, revenue is recognized upon the sale of the CD-Rom or at the time
images are downloaded by the customer. Circumstances in which sales are refunded
are rare and are taken into account in the recognition of revenue. Sales are
recorded at invoiced amounts less sales tax.
INVENTORIES
Inventories are valued at the lower of cost or market value. Inventories consist
of physical materials and finished goods, such as resource books, CD-ROMs and
packaging materials. Inventories are reviewed periodically for obsolescence.
36
<PAGE> 40
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
CATALOG COSTS
The Company produces both general catalogs, that are issued annually, and
specialist catalogs, that are topical in nature and distributed over a longer
period. Costs relating to the production of catalogs are expensed over their
estimated useful life, up to three years from the date on which they are
available for distribution to customers.
FIXED ASSETS
Fixed assets are stated at cost. The cost of acquired fixed assets includes the
purchase cost, together with any incidental expenses of acquisition. All costs
associated with the production of image duplicates are capitalized. The cost of
purchased software is capitalized and amortized from the implementation date
over its estimated useful economic life. The cost of internally developed
software is capitalized in accordance with Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", and amortized from the implementation date over its estimated
useful economic life. The value of fixed assets is reviewed annually for
impairments in value.
Depreciation rates have been established to expense the cost of fixed assets,
less their estimated residual values, over their expected useful lives.
Depreciation is calculated at the following annual rates:
<TABLE>
<S> <C>
Archival picture collection................................. 2.5%
Fixtures, fittings, office and studio equipment............. 10 to 20%
Computer hardware........................................... 33%
Computer software (including internally developed
software)................................................. 25 to 33%
Image duplicates and digitization........................... 25%
</TABLE>
INTANGIBLE ASSETS
Goodwill and other intangibles are amortized on a straight-line basis over their
estimated lives not to exceed 40 years. The value of goodwill and other
intangibles is reviewed annually in relation to the operating performance and
future undiscounted cash flows of the underlying businesses, and a charge to the
consolidated statement of operations is made where a permanent diminution in
value is identified.
TAXES
Deferred tax assets and liabilities are provided for all temporary differences
between financial and tax reporting. As a matter of policy, deferred tax assets
are reduced by a valuation allowance if based on the weight of available
evidence it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Deferred tax assets and liabilities are classified
into a net current amount and a net non-current amount, based on the balance
sheet classification of the related asset or liability.
PENSIONS
The Company contributes to defined contribution pension schemes for certain
directors and employees. Contributions are recognized as an expense in the
period in which they are incurred.
LEASES
Under capital leasing arrangements, the present value of the future minimum
lease payments payable over the lease term is recorded as a fixed asset. The
corresponding leasing commitments are shown as amounts payable
37
<PAGE> 41
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
to the lessor. Depreciation of leased assets is charged to the statement of
operations over the shorter of the lease term or the useful lives of equivalent
owned assets.
Other leases are treated as operating leases. Annual rentals are charged to the
income statement on a straight-line basis over the term of the lease.
FINANCIAL INSTRUMENTS
Forward exchange contracts hedging firm commitments relating to trade and other
balances are recorded as hedges. Unrealized gains or losses are expensed.
The Company does not issue or hold financial instruments for trading purposes.
EARNINGS PER SHARE
Basic and diluted earnings per share (EPS) are computed in accordance with FAS
No. 128, "Earnings per Share", which is effective for fiscal periods ending
after December 15, 1997. Prior periods have been restated to conform with the
provisions of this standard.
Basic (loss)/earnings per share is computed on the basis of weighted average
number of shares in issue. Diluted earnings per share are not given for the year
ended December 31, 1998 due to the loss incurred in that period.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities". The standard
requires that an entity recognize all derivatives as either assets or
liabilities and measure those instruments at fair value. The new rules will be
effective for fiscal years beginning after June 15, 1999. The Company does not
believe that the new standard will have a material impact on reporting segments.
3. NON-RECURRING INTEGRATION AND RESTRUCTURING COSTS
During the year ended December 31, 1998, the Company approved and commenced a
program to integrate its businesses following the acquisitions of PhotoDisc and
Allsport. This has resulted in integration and restructuring charges.
Integration costs in the year ended December 31, 1998 amounted to $3.7 million
and are associated with the activities of teams responsible for integrating the
various businesses of the Company for the benefit of future operations. These
include items such as consulting and professional fees, systems and process
integration costs and contract renegotiation costs. These costs are expensed as
incurred.
Restructuring costs, which amounted to $10.1 million in the year ended December
31, 1998, were for estimated exit costs associated with the closure of 10
facilities, asset write downs, employee termination costs and contract
termination costs.
38
<PAGE> 42
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
3. NON-RECURRING INTEGRATION AND RESTRUCTURING COSTS (CONTINUED)
Non-recurring integration and restructuring costs have been incurred as follows:
<TABLE>
<CAPTION>
GETTY IMAGES, INC.
--------------------------------
DECEMBER 31, 1998
--------------------------------
CHARGE UTILIZED PROVISION
------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEGRATION COSTS
Consulting and professional fees............................ $1,167 $(1,017) $150
Systems and process integration costs....................... 1,891 (1,847) 44
Contract renegotiation costs................................ 622 (165) 457
------- -------- ---------
$3,680 $(3,029) $651
------- -------- ---------
RESTRUCTURING COSTS
Property exit costs......................................... $1,406 $(191) $1,215
Asset write downs........................................... 3,182 (2,732) 450
Employee termination costs.................................. 4,026 (3,598) 428
Contract termination costs.................................. 1,461 (94) 1,367
------- -------- ---------
$10,075 $(6,615) $3,460
------- -------- ---------
$13,755 $(9,644) $4,111
======= ======== =========
</TABLE>
Total amounts utilised comprised $7.0 million of cash expenditure and $2.6
million of non-cash write offs. It is anticipated that the majority of the
provision at December 31, 1998 will be used by December 31, 1999.
4. EXTRAORDINARY ITEMS
On May 22, 1998, the Company completed the issue of $75 million, 4.75%
convertible subordinated notes due 2003, the proceeds of which were applied
partially to the repayment of $49 million of term debt due to Midland Bank plc.
The early payment of such debt resulted in an extraordinary charge of $830,000
($0.03 per share) net of an income tax benefit of $408,000.
5. INVENTORIES
Inventories at December 31, 1998, are stated net of a $100,000 provision (1997:
$nil).
6. FIXED ASSETS
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ ------------------------
DECEMBER 31 DECEMBER 31
1998 1997
------------------ ------------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
Fixtures, fittings, office and studio equipment...... $23,334 $10,175
Computer hardware and software....................... 29,678 13,206
Image duplicates and digitization.................... 36,287 20,023
Archival picture collection.......................... 15,714 15,847
Other fixed assets................................... 6,157 4,451
-------- ---------
Total................................................ 111,170 63,702
Less accumulated depreciation........................ (48,413) (23,849)
-------- ---------
Fixed assets, net.................................... $62,757 $39,853
-------- ---------
-------- ---------
</TABLE>
39
<PAGE> 43
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
6. FIXED ASSETS (CONTINUED)
The net book value of fixed assets includes $1,601,000 and $796,000 in respect
of assets held under capital leases at December 31, 1998 and 1997, respectively.
The charge to income resulting from depreciation of assets held under capital
leases, the majority of which form part of "other fixed assets", is included
within the depreciation expense in the consolidated statements of operations.
The accumulated depreciation of assets held under capital leases was $1,213,000
(1997: $983,000).
7. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ ------------------------
DECEMBER 31 DECEMBER 31
1998 1997
------------------ ------------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
Cost................................................. $372,222 $76,270
Less accumulated amortization........................ (46,361) (9,400)
--------- --------
$325,861 $66,870
--------- --------
--------- --------
</TABLE>
Intangible assets primarily consist of goodwill arising upon the acquisition of
companies and other businesses. Additions to goodwill arose principally from the
acquisitions of Liaison Inc. and Energy Film Library Inc. in the year to
December 31, 1997 and PhotoDisc and Allsport in the year to December 31, 1998.
Additional information on these acquisitions is set out in Note 21.
8. ACCOUNTS RECEIVABLE
Accounts receivable comprise solely of receivables from customers. Receivables
are stated net of a provision for doubtful accounts of $4.8 million and $2.8
million at December 31, 1998 and 1997, respectively. The Company has a diverse
customer base and is not dependent on any one customer.
9. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets include deferred catalog costs of $6.6 million
and $3.0 million at December 31, 1998 and 1997, respectively. Catalog costs
expensed in the periods ended December 31, 1998, 1997 and 1996 were $2.7
million, $1.5 million and $1.3 million, respectively.
10. SHORT-TERM BORROWINGS
At December 31, 1998 the Company had an unutilized credit facility of L2.0
million with Midland Bank plc. This facility is unsecured. Interest on the
facility is at a variable rate comprising the aggregate of a margin and Midland
Bank Rate ("MBR"). As of December 31, 1998, the margin was 1.0 percent and the
MBR was 6.25 percent.
40
<PAGE> 44
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
11. LONG-TERM DEBT
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ ------------------------
DECEMBER 31 DECEMBER 31
1998 1997
------------------ ------------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
4.75% Convertible subordinated notes due 2003........ $71,832 --
Bank loans........................................... -- $16,342
Other loans.......................................... 34 --
Capital leases....................................... 690 411
-------- --------
72,556 16,753
Less current portion................................. (202) (2,096)
-------- --------
Total long-term debt................................. $72,354 $14,657
-------- --------
-------- --------
</TABLE>
The amounts outstanding at December 31, 1998 are payable as follows:
<TABLE>
<CAPTION>
CONVERTIBLE
SUBORDINATED
NOTES LOANS CAPITAL LEASES TOTAL
-------------- -------------- -------------- --------------
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
1999.............................. -- -- $202 $202
2000.............................. -- $34 488 522
2001.............................. -- -- -- --
2002.............................. -- -- -- --
2003.............................. $71,832 -- -- 71,832
-------- --- ----- --------
Total............................. $71,832 $34 $690 $72,556
-------- --- ----- --------
-------- --- ----- --------
</TABLE>
On May 20, 1998, the Company completed the issue of $75 million convertible
subordinated notes due 2003 (the "Notes"). These Notes carry a coupon of 4.75
percent and are convertible into 2.6 million shares of Common Stock of the
Company at a conversion price of $28.51 per share, subject to adjustments in
certain circumstances. The Notes are general unsecured subordinated obligations
of the Company. The funds raised were principally used to repay $49 million of
term debt, and to fund further investment in digitization and e-commerce. Issue
costs of $3.6 million were incurred in obtaining the Notes and have been offset
against the Notes. These costs are being amortized over the term of the Notes.
CAPITAL LEASES
Obligations under capital leases are collateralized by the respective assets
financed.
INTEREST EXPENSE
The interest expense relating to short and long-term borrowings amounted to $2.6
million in 1998 (1997: $1.5 million).
12. SHARE OPTION PLANS
Executive directors and all employees of the Company were eligible to
participate in the Getty Communications Option Plan ("the Option Plan") under
which market and premium options over a total of 6,159,890 Class A Shares could
be issued. Options vest in equal proportions on each anniversary of the date of
grant over a five year period from the date of grant. Market options became
exercisable, to the extent vested, after three
41
<PAGE> 45
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
12. SHARE OPTION PLANS (CONTINUED)
years from the date of grant and lapse seven years from the date of the grant.
Premium options become exercisable when vested and remain exercisable for a
period of two years after vesting. Generally, options awarded under the Option
Plan could not be exercised prior to vesting, except under certain limited
circumstances including a change of control.
On July 2, 1996, market options over 2,793,960 Class A Shares were granted under
the Option Plan at an exercise price of $5.00 per share. Additionally, premium
options over 1,561,980 Class A Shares were granted under the Option Plan at an
exercise price of $8.05 per share.
On March 14, 1997, market options over 11,994 Class A Shares were granted under
the Option Plan at an exercise price of $6.81 per share and premium options were
granted over 11,994 Class A Shares at an exercise price of $10.97 per share.
Additionally, on May 15, 1997, market options were granted over 215,204 Class A
Shares at an option price of $6.81 per Class A Share and premium options over
215,204 Class A Shares at an option price of $10.97 per share.
Under the Scheme of Arrangement, the existing Options granted by Getty
Communications were vested immediately, with the right to exercise the options
for a period of three months from February 17, 1998, which was subject to
extension at the discretion of the Company. As an alternative to exercising
Options, option holders had the right to exchange their existing Options for
Getty Communications Class A Ordinary Shares for new Options for Getty Images
Common Stock at a ratio of 2 for 1 with an appropriate adjustment to exercise
price, but with the terms otherwise unchanged. As of December 31, 1998, 468,332
options over Getty Images Common Stock were exercised and the remainder were
exchanged for new options over Getty Images Common Stock.
Pursuant to the acquisition of PhotoDisc, all outstanding options over PhotoDisc
Common Stock were assumed by Getty Images on an agreed basis. This resulted in
the issuance of 1.8 million options over Getty Images Common Stock to former
PhotoDisc option holders.
On February 8, 1998, the Board approved the establishment of the Getty Images,
Inc. Stock Incentive Plan (the "Getty Images Plan").
Under the Getty Images Plan, the Board has the discretion to grant stock options
("Options") underlying shares of Common Stock at fair market prices, based on
the average of the high and low prices of the Company's Common Stock on the date
of grant. The Options vest 25% on the first anniversary of the date of grant and
on a monthly pro rata basis over three years thereafter and have a term of ten
years.
Executive directors, officers, consultants and all employees of the Company are
eligible to participate in the Getty Images Plan under which a total of
10,000,000 shares may be issued. Options which lapse will cease to be counted
toward this limit. Options become exercisable when vested and remain exercisable
through the remainder of the option term except upon termination of employment,
in which case the Options will terminate 90 days after the termination date.
Options granted under the Getty Images Plan in the year to December 31, 1998,
were as follows:
<TABLE>
<CAPTION>
GRANT DATE NUMBER EXERCISE PRICE
- ---------- --------- ----------------
<S> <C> <C>
February 9, 1998............................................ 2,701,863 $20.91
April 1, 1998............................................... 81,000 $25.88
June 2, 1998................................................ 240,500 $19.22
August 31, 1998............................................. 192,500 $15.32
September 8, 1998........................................... 539,000 $14.94
September 9 - December 15, 1998............................. 356,500 $11.69 to $17.57
</TABLE>
42
<PAGE> 46
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
12. SHARE OPTION PLANS (CONTINUED)
Options outstanding under the Getty Images Plan at December 31, 1998, are
analyzed by exercised price below, as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
(NUMBER) EXERCISE PRICE
------------------- ----------------
<S> <C> <C>
978,428............ $0.18 to $5.00
1,511,304.......... $5.01 to $10.00
872,372............ $10.01 to $15.00
1,196,333.......... $15.01 to $20.00
2,851,025.......... $20.01 to $26.86
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 ("APB No. 25"),
Accounting for Stock Issued to Employees and related interpretations in
accounting for its stock option plans. In accordance with APB No. 25, no
compensation expense has been recognized for such plans. The pro forma effect on
the Company's net income and earnings per share, had compensation costs for the
Company's stock option plans been determined based upon the fair market value at
the date of grant for awards under these plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards ("FAS") No. 123,
Accounting for Stock-Based Compensation, is as follows: the net loss would have
increased by approximately $6.3 million to $42.7 million and the loss per share
would have increased by $0.22 to $1.47 per share. Net income for 1997 and 1996
would have been reduced by approximately $2.2 million and $1.2 million to $1.8
million and $1.5 million respectively. Earnings per share would have been
reduced by $0.05 to $0.05 per share and by $0.05 to $0.05 per share, in the
years ended December 31, 1997 and 1996 respectively.
The fair value of the Options granted during 1998 is estimated at $47.3 million
on the date of grant using the Black Scholes option pricing model with the
following assumptions: no dividends are paid, volatility of 65 percent,
risk-free interest rate range of 3.94 percent to 5.71 percent, assumed
forfeiture rate of nil percent and expected life of 4 years.
13. INCOME TAXES
The components of income before taxes and income tax expense are as follows:
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1998 1997 1996
------------------ ----------- -----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Current tax:
Federal.......................................... $876 $605 $1,977
State............................................ 184 40 153
Non-US........................................... $3,321 $2,780 $1,219
------ ------ ------
Total current tax................................ $4,381 $3,425 $3,349
Deferred tax:
Federal.......................................... (1,175) 190 (213)
Non-US........................................... (526) 258 (154)
------ ------ ------
Total deferred tax............................... (1,701) 448 (367)
------ ------ ------
Total tax provision.............................. $2,680 $3,873 $2,982
------ ------ ------
------ ------ ------
</TABLE>
43
<PAGE> 47
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
13. INCOME TAXES (CONTINUED)
The provisions differ from the amounts that would result by applying the United
States (United Kingdom in 1996 and 1997) statutory rate to earnings before
taxes. A reconciliation of the difference is:
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1998 1997 1996
------------------ ----------- -----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Income taxes based on statutory rate............. $(11,795) $2,486 $1,884
Amortization of intangibles...................... 12,936 1,024 817
Change in valuation allowance.................... 187 -- --
State income taxes, net of US tax................ 184 40 153
Other -- net..................................... 1,168 323 128
--------- ------ ------
Total tax provision.............................. $2,680 $3,873 $2,982
--------- ------ ------
--------- ------ ------
Current deferred tax assets:
Short-term provisions............................ $1,103 $930 $794
--------- ------ ------
Total net current deferred tax assets............ $1,103 $930 $794
Non-current deferred tax assets:
Loss carry forwards.............................. $4,112 $4,143 $3,393
Depreciation..................................... (179) (661) 111
--------- ------ ------
Total non-current deferred tax assets............ $3,933 $3,482 $3,504
--------- ------ ------
--------- ------ ------
</TABLE>
The deferred tax assets in respect of loss carry forwards as at December 31,
1998 expire as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
2001........................................................ $185
2002........................................................ 476
2003........................................................ 138
2005........................................................ 31
2012........................................................ 112
2013........................................................ 487
Indefinite.................................................. 2,683
------
$4,112
------
------
</TABLE>
14. DEFINED CONTRIBUTION PLANS
The costs recognized by the Company with respect to its defined contribution
plans are as follows:
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
------------------ -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1998 1997 1996
------------------ ----------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
United Kingdom.................................. $634 $353 $247
United States................................... 839 397 401
------ ----- -----
$1,473 $750 $648
------ ----- -----
------ ----- -----
</TABLE>
44
<PAGE> 48
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
14. DEFINED CONTRIBUTION PLANS (CONTINUED)
The Company runs two pension plans in the United Kingdom. Under the terms of the
schemes, all employees are entitled to join one of the plans after six months'
service with the Company. Under the first scheme, the Company contributes 6
percent of each participatory employee's salary to the plan and contributes 5
percent under the second scheme. The employees contribute 4 percent of their
salary under the first scheme and 5 percent under the second.
The Company's U.S. subsidiaries operate three separate 401(k) pension plans for
their employees. Under the terms of the first plan, employees over 18 years old
are immediately eligible to participate. The Company contributes 40 percent of
up to 5 percent of the employee's contribution. Under the terms of the second
plan, employees over 21 years old are immediately eligible to participate. The
Company contributes 40 percent of up to 5 percent of the employee's
contributions. Under the terms of the third plan, employees over 21 years old
are eligible to participate after 6 months service (however, only at entry
periods of January 1 and July 1). The Company contributes 25 percent of up to 3
percent of the employee's contribution.
15. COMMITMENTS AND CONTINGENCIES
The Company's commitments under capital leases as of December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Minimum rental payments:
1999...................................................... $226
2000...................................................... 546
-----
Total....................................................... 772
Less imputed interest cost.................................. (82)
-----
Present value of minimum lease payments..................... $690
-----
-----
</TABLE>
The Company's commitments under operating leases as of December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Minimum rental payments:
1999...................................................... $2,028
2000...................................................... 1,955
2001...................................................... 1,905
2002...................................................... 1,894
2003...................................................... 663
After 2003................................................ 1,235
------
Total....................................................... $9,680
------
------
</TABLE>
Rent expense amounted to $4.8 million in the year to December 31, 1998, $3.1
million in the year to December 31, 1997 and $2.3 million in the year to
December 31, 1996.
From time to time the Company is subject to various legal actions arising out of
the normal course of business including claims relating to trademark, patent or
copyright infringements or other items. Management believes the outcome of any
such actions and claims will not materially affect these consolidated financial
statements.
45
<PAGE> 49
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
16. FINANCIAL INSTRUMENTS
The Company operates internationally, giving rise to exposure to market risks
from changes in foreign exchange rates. The Company hedges only its contracted
net receivables and payables using a variety of financial instruments. The
Company does not issue or hold financial instruments for trading purposes.
For accounting purposes, financial instruments relating to trade and other
balances and which are specifically identified are accounted for as hedges.
Gains and losses from hedging firm commitments are expensed as incurred.
The Company is exposed to credit losses in the event of non-performance by
counterparties to financial instruments, but considers this risk to be minimal.
Outstanding off-balance sheet contracts as of December 31, 1998 were:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT AVERAGE TERM
--------------- ----------------
(IN THOUSANDS) (REMAINING DAYS)
<S> <C> <C>
Forward exchange contracts.................................. $5,188 87
------ ------
------ ------
</TABLE>
The table above summarizes the notional amounts and average term remaining of
the Company's forward exchange contracts. The notional amounts of off-balance
sheet contracts summarized above do not represent amounts exchanged by the
parties and thus are not a measure of the exposure of the Company. The amounts
exchanged are calculated on the basis of the notional amounts and the other
terms of the contract. Foreign currency amounts are translated at rates current
at the reporting date.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosure of estimated fair value of financial instruments is based on the
requirements of Statements of Financial Accounting Standards No. 105, 107 and
119, and upon the assumptions or methods described below. Different estimates
may have been obtained had other assumptions or methods been applied. The
estimates are not necessarily indicative of amounts that would be realized in a
market exchange.
CASH, RECEIVABLES, PAYABLES AND SHORT-TERM BORROWINGS
The carrying amounts of these items approximate fair value.
LONG-TERM DEBT
The fair value is the estimated net present value of future cash flows using
estimated current rates at which similar bank loans could be obtained for the
remaining maturities. As of December 31, 1998, the fair value and the carrying
amount of convertible subordinated note debt were approximately the same.
FORWARD EXCHANGE CONTRACTS
The fair value is the amount at which the forward contract would be settled,
based upon estimates obtained from external counterparties. As of December 31,
1998, the fair value of forward exchange contracts did not differ significantly
from their notional values.
46
<PAGE> 50
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
18. SUPPLEMENTAL DISCLOSURES ON CASH FLOWS
NON-CASH INVESTING ACTIVITIES
Fixed asset additions financed through capital leases amounted to $279,000,
$121,000 and $463,000 for the year ended December 31, 1998, the year ended
December 31, 1997 and the year ended December 31, 1996, respectively.
Further non-cash investing activities relating to acquisitions are detailed in
Note 21.
19. LEGAL SETTLEMENT
The Company entered into a settlement agreement with Digital Stock Corporation
over a complaint filed in 1997. This resulted in a one time charge to 1997
earnings of $1.0 million (including legal expenses).
20. SEGMENT INFORMATION
As a provider of visual content, the Company operates one business segment.
Sales are reported in the geographic area where they originate.
Financial information by geographic areas is as follows, this information is
subject to the impact of translation differences and is therefore not a
reflection of the relative performance of individual areas:
<TABLE>
<CAPTION>
EUROPE NORTH AMERICA REST OF WORLD CONSOLIDATED
------- ------------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
GETTY IMAGES, INC.
YEAR ENDED DECEMBER 31, 1998
Sales to customers..................... $94,823 $85,339 $4,922 $185,084
------- -------- -------- ---------
------- -------- -------- ---------
GETTY COMMUNICATIONS PLC
YEAR ENDED DECEMBER 31, 1997
Sales to customers..................... $37,505 $48,266 $15,026 $100,797
------- -------- -------- ---------
------- -------- -------- ---------
GETTY COMMUNICATIONS PLC
YEAR ENDED DECEMBER 31, 1996
Sales to customers..................... $32,115 $36,069 $16,830 $85,014
------- -------- -------- ---------
------- -------- -------- ---------
</TABLE>
Due to the nature of the operations of the Company sales are made to a diverse
client base and there is no reliance on a single customer or group of customers.
21. ACQUISITIONS
PHOTODISC
On February 9, 1998, a wholly-owned subsidiary of Getty Images acquired
PhotoDisc. PhotoDisc develop and market digital stock photography, products and
electronic delivery of images. The purchase consideration was $245.7 million
including expenses, which included the issue of 8,083,831 shares of Getty Images
Common Stock, at a total market value of $171.8 million.
47
<PAGE> 51
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
21. ACQUISITIONS (CONTINUED)
<TABLE>
<CAPTION>
BOOK AND
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Cash consideration to holders of PhotoDisc Common Stock and
Series A Preferred Stock.................................. $34,076
Getty Images' transaction expenses.......................... 10,155
---------
Cash costs of the acquisition............................... 44,231
Stock consideration -- Shares of Getty Images Common Stock
issued (8,083,831 at $21.25).............................. 171,781
Fair value of options over shares of PhotoDisc Common Stock
converted to options over shares of Getty Images Common
Stock..................................................... 29,701
---------
Total purchase price........................................ 245,713
PhotoDisc net assets at February 9, 1998.................... (3,366)
---------
Excess of purchase price over net assets acquired........... $242,347
---------
---------
Amount allocated to specific intangibles (amortized over 2
to 3 years)............................................... 46,387
Amount allocated to goodwill (amortized over 20 years)...... 195,960
---------
$242,347
---------
---------
</TABLE>
ALLSPORT
On February 10, 1998, Getty Images purchased the entire issued share capital of
Allsport. Allsport is a world-wide sports photography company, providing images
to the sports journalism market and the broader market of advertisers and sports
promoters. The purchase consideration was $51.1 million, including expenses,
which included the issue of 1,137,916 shares of Getty Images Common Stock at a
total market value of $24.2 million.
<TABLE>
<CAPTION>
BOOK AND
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Cash consideration to holders of Allsport Ordinary Shares at
closing................................................... $26,998
Getty Images' transaction expenses.......................... 900
---------
Cash costs of the acquisition............................... 27,898
Stock consideration -- Shares of Getty Images Common Stock
issued (691,899 at $21.25)(1)............................. 14,703
Fair value of options over shares of Allsport Ordinary
Shares held by an Employee Benefit Trust, converted to
options over shares of Getty Images Common Stock(1)....... 8,511
---------
Total purchase price........................................ 51,112
Allsport net assets at February 10, 1998.................... (631)
---------
Excess of purchase price over net assets acquired........... $50,481
---------
---------
Amount allocated to specific intangibles (amortized over 2
to 3 years)............................................... 4,571
Amount allocated to goodwill (amortized over 20 years)...... 45,910
---------
$50,481
---------
---------
</TABLE>
(1) Of the stock consideration of 1,137,916 shares of Getty Images Common Stock,
446,017 were issued to an Employee Benefit Trust established on behalf of
certain employees of Allsport. Such shares of Getty Images Common Stock have
not been valued for the purpose of calculating the stock consideration, but
48
<PAGE> 52
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
21. ACQUISITIONS (CONTINUED)
the underlying options over Allsport Ordinary Shares, which converted into
options over shares of Getty Images Common Stock, have been valued by reference
to the Black Scholes Option pricing model.
ENERGY
On July 25, 1997, the Company acquired all of the common stock of Energy Film
Library Inc. ("Energy"). Energy is a Los Angeles based provider of contemporary
stock footage with another office in New York and representation in most major
markets through independent third agencies. The purchase consideration was $17.5
million including expenses, which included the issue of 617,762 Class A Shares
at a total market value of $4.0 million.
<TABLE>
<CAPTION>
BOOK AND
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Cash paid, including acquisition expenses................... $13,500
Stock consideration -- Shares of Getty Communications stock
issued (617,762 at $6.47)................................. 4,000
--------
Total purchase price........................................ 17,500
Energy net liabilities acquired at July 25, 1997............ $181
--------
Excess of purchase price over net assets acquired, allocated
to goodwill (amortized over 20 years)..................... $17,681
--------
--------
</TABLE>
LIAISON
On March 14, 1997, the Company acquired all the common stock of Liaison Inc.
("Liaison"). Liaison is a provider of photographs to the photojournalist market,
operating primarily in North America but with relationships with independent
third party agencies in most major markets.
The purchase consideration was $9.4 million, including expenses, which included
the issue of 311,846 Class A Shares at total market value of $2.6 million.
<TABLE>
<CAPTION>
BOOK AND
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Cash paid, including acquisition expenses................... $6,809
Stock consideration -- Shares of Getty Communications stock
issued (311,846 at $8.34)................................. 2,600
--------
Total purchase price........................................ 9,409
Liaison net liabilities acquired at March 14, 1997.......... $793
--------
Excess of purchase price over net assets acquired, allocated
to goodwill (amortized over 25 years)..................... $10,202
--------
--------
</TABLE>
49
<PAGE> 53
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
22. PRO FORMA INFORMATION RELATING TO ACQUISITIONS (UNAUDITED)
The following unaudited pro forma information shows the results of the Company
for each of the three years ended December 31, 1998, as if the acquisition of
Hulton Getty Holdings Limited, Fabulous Footage and World View occurred on
January 1, 1996, the acquisitions of Liaison and Energy occurred on January 1,
1997 and the acquisitions of PhotoDisc and Allsport occurred on January 1, 1998.
The proforma information includes adjustments related to the financing of the
acquisitions, the effect of amortizing goodwill and other intangible assets
acquired, as well as the related tax effects. The pro forma results of
operations are unaudited, have been prepared for comparative purposes only and
do not purport to indicate the results of operations which would actually have
occurred had the combinations been in effect on the dates indicated or which may
occur in the future.
<TABLE>
<CAPTION>
UNAUDITED
--------------------------------
YEAR ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Sales.................................................... $191,912 $105,592 $93,120
Net (loss)/income........................................ (36,616) 3,692 2,786
Net (loss)/income per share.............................. $(1.26) $0.09 $0.09
</TABLE>
50
<PAGE> 54
GETTY IMAGES, INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1998
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER ASSIGNED
IN REGULATION S-K,
ITEM 601 DESCRIPTION OF EXHIBIT
- ------------------ ----------------------
<S> <C> <C>
(1) 2.1 Merger Agreement, dated as of September 15, 1997, among
Getty Communications (USA), Inc., Getty Communications plc,
PhotoDisc, Inc. and Print Merger, Inc. (2.1)
(2) 2.2 Agreement for the sale of the whole of the issued share
capital of Allsport Photographic plc, dated February 6,
1998, among Getty Images, Getty Communications and Stephen
Michael Powell and others named therein (2.2)
(1) 3.1.1 Amended and Restated Certificate of Incorporation of Getty
Images (3.1)
(3) 3.1.2 Certificate of Amendment to the Certificate of Incorporation
of Getty Images (1)
(1) 3.2 Bylaws of Getty Images (3.2)
(4) 4.1 Indenture relating to the Company's 4.75% Convertible
Subordinated Notes due 2003, dated as of May 27, 1998,
between Getty Images, Inc. and The Bank of New York, as
Trustee (4.1)
(4) 10.1 Registration Rights Agreement, dated as of May 27, 1998,
among Getty Images, Inc. and BT Alex Brown Incorporated,
BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette
Securities Corporation and Hambrecht & Quist LLC (10.1)
(5) 10.2 Employment Agreement between Getty Communications plc and
Mark Getty (10.1)
(5) 10.3 Employment Agreement between Getty Communications plc and
Jonathan Klein for services performed within the U.K. (10.3)
(5) 10.4 Employment Agreement between the Company and Jonathan Klein
for services performed outside the U.K. (10.4)
(5) 10.5 Employment Agreement between the Company and William Heston
(10.5)
(5) 10.6 Employment Agreement between the Company and Heather Redman
(10.6)
(5) 10.7 Employment Agreement between the Company and Robert J.
Chamberlain (10.7)
(5) 10.8 Employment Agreement between the Company and Sally von
Bargen (10.8)
10.9 Employment Agreement between the Company and David Howard.
10.10 Employment Agreement between the Company and John Hallberg.
10.11 Employment Agreement between the Company and Christopher J.
Roling.
10.12 Separation Agreement between the Company and Robert J.
Chamberlain.
10.13 Separation Agreement between the Company and Mark Torrance.
10.14 Separation Agreement between the Company and Stephen
Warshaw.
10.15 Separation Agreement between the Company and Stephen Mayes.
(2) 10.16 Credit Agreement, dated February 9, 1998, among Getty
Images, Midland Bank plc and HSBC Investment Bank plc (10.1)
(2) 10.17 Lease dated October 18, 1995 between Allied Dunbar Assurance
plc and Tony Stone Associates Limited (10.2)
(2) 10.18 Lease dated March 11, 1993 between Bantry Investments
Limited and Tony Stone Associates Limited (10.3)
</TABLE>
51
<PAGE> 55
<TABLE>
<CAPTION>
NUMBER ASSIGNED
IN REGULATION S-K,
ITEM 601 DESCRIPTION OF EXHIBIT
- ------------------ ----------------------
<S> <C> <C>
(2) 10.19 Counterpart Lease dated March 11, 1993 between Bantry
Investments Limited and Tony Stone Associates Limited (10.4)
(2) 10.20 Lease dated October 23, 1990 between Bantry Investments
Limited and Tony Stone Associates Limited (10.5)
(2) 10.21 Lease Agreement dated November 1, 1997 between Marshall
Building, L.L.C. and PhotoDisc, Inc. (10.6)
(2) 10.22 Lease dated February 14, 1997 between Martin Selig and
PhotoDisc, Inc. (10.7)
(1) 10.23 Stockholders' Transaction Agreement, dated as of September
15, 1997, among Getty Images, Inc., certain shareholders of
PhotoDisc, Inc. and Mark Torrance, as representative of the
shareholders (10.1)
(1) 10.24 Restated Option Agreement among the Company, Getty
Communications plc and Getty Investments L.L.C. (10.21)
(1) 10.25 Stockholders' Agreement among the Company and certain
stockholders of the Company (10.8)
(1) 10.26 Registration Rights Agreement among the Company, PDI, L.L.C.
and Mark Torrance (10.6)
(1) 10.27 Registration Rights Agreement among the Company and Getty
Investments L.L.C. (10.7)
(1) 10.28 Restated Shareholders' Agreement among the Company, Getty
Investments L.L.C. and the Investors named therein (10.8)
(1) 10.29 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Simon Thornley, Brian Wolske, Lawrence
Gould, Jonathan Klein and Mark Getty and Form of Amendment
among the Company, Getty Communications plc, Lawrence Gould,
Jonathan Klein and Mark Getty (10.6)
(1) 10.30 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Crediton Limited and October 1993 Trust
and Form of Amendment among the Company, Getty
Communications plc, Crediton Limited and October 1993 Trust
(10.17)
(1) 10.31 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Hambro European Ventures Limited, Hambro
Group Investments Limited, RIT Capital Partners plc and Tony
Stone and Form of Amendment among the Company, Getty
Communications plc and The Schwartzberg Family L.P. (10.18)
(1) 10.32 Registration Rights Agreement dated July 25, 1997 between
Getty Communications plc and The Schwartzberg Family L.P.
and Form of Amendment among the Company, Getty
Communications plc and The Schwartzberg Family L.P. (10.19)
(1) 10.33 Indemnity between the Company and Getty Investments L.L.C.
(10.15)
(1) 10.34 Escrow Agreement among the Company, certain shareholders of
PhotoDisc, Inc. and Citibank, as Escrow agent (10.2)
(1) 10.35 Getty Images, Inc. 1998 Stock Incentive Plan (10.13)
(1) 10.36 Form of Indemnity among the Company, Getty Communications
plc and each of Mark Getty, Mark Torrance, Jonathan Klein,
Lawrence Gould, Andrew Garb, Manny Fernandez, Christopher
Sporborg, Anthony Stone and James Bailey (10.24)
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers.
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
NUMBER ASSIGNED
IN REGULATION S-K,
ITEM 601 DESCRIPTION OF EXHIBIT
- ------------------ ----------------------
<S> <C> <C>
27.1 Financial Data Schedule
</TABLE>
- ---------------
(1) Incorporated by reference from the Exhibits to the Form S-4 Registration
Statement No. 333-38777 of the Registrant. (Exhibit number in the Form S-4
is set forth in italics.)
(2) Incorporated by reference from the Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997. (Exhibit number in
the Form 10-K is set forth in italics.)
(3) Incorporated by reference from the Exhibits to the 8-K dated November 10,
1998. (Exhibit number in the 8-K is set forth in italics.)
(4) Incorporated by reference from the Exhibit to the Company's Quarterly Report
on Form 10-Q for the period ended June 30, 1998. (Exhibit number in the 10-Q
is set forth in italics.)
(5) Incorporated by reference from the Exhibit to the Company's Amendment No. 1
to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1997.
(Exhibit number in the 10-K/A is set forth in italics.)
53
<PAGE> 1
EXHIBIT 10.9
(1) DAVID HOWARD
-- AND --
(2) GETTY IMAGES, INC.
---------------------------------------------------
SERVICE AGREEMENT
---------------------------------------------------
DATED 6 OCTOBER 1998
<PAGE> 2
THIS AGREEMENT is made the sixth day of October 1998
BETWEEN:
(1) DAVID HOWARD of 1 Chestnut Road, Twickenham, Middlesex, TW2 5QZ ("the
Executive") and
(2) GETTY IMAGES INC whose registered office is at 101 Bayham Street,
London, NW1 0AG ("the company").
WHEREBY it is agreed as follows:--
1. DEFINITIONS & INTERPRETATION
1.1 In this Agreement the following expressions shall unless the context
otherwise requires bear the following meanings: --
"the Act" the Employment Rights Act (1996)
"Associated Company" any company which for the time being is:
(a) a holding company (as defined in Section 736 of
the Companies Act 1985) of the Company; and/or
(b) a subsidiary (as defined in Section 736 of the
Companies Act 1985) of any such holding company
(other than the company) or of the Company; and/or
(c) any other company on behalf of which the
Executive carries out duties at the request of the
Company
"Group Operating Profit" operating profit before interest currency losses or
gains and tax
"Intellectual Property" rights in or to patents industrial designs
copyright trade secrets know-how and trademarks and
any other intangible property created through the
application of intellect to technical or commercial
matters and capable of proprietary distinction and
definition
"Chief Executive Officer
(CEO)" Jonathan Klein or whosoever is appointed his place
by the Company
"The Stock Exchange" The International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited
Limited
1.2 Any reference in this Agreement to any statute or statutory provision
shall be construed as including a reference to that statute or statutory
provision as from time to time amended modified extended or re-enacted whether
before or after the date of this Agreement and to all statutory instruments
orders and regulations for the time being made pursuant to it or deriving
validity from it.
1.3 Unless the context otherwise requires words denoting the singular shall
include the plural and vice versa and words denoting any one gender shall
include all genders and words denoting persons shall include bodies corporate
unincorporated associations partnerships and individuals.
1.4 Unless otherwise stated references to clauses, sub-clauses, paragraphs
and sub-paragraphs relate to this Agreement.
1.5 Clause headings do not affect the interpretation of this Agreement.
2. APPOINTMENT
2.1 The Company shall employ the Executive and the Executive shall serve
the Company as Group Brands and Communications Director commencing on a date to
be agreed and shall continue thereafter until
1
<PAGE> 3
this Agreement is terminated in accordance with Clause 11 hereof or by either
party giving to the other not less than three calendar months' notice.
3. DUTIES OF EMPLOYMENT
3.1 The Executive shall unless prevented by ill health or other incapacity
devote the whole of his time and attention to the performance of his duties
hereunder and shall faithfully and diligently exercise such powers and perform
such duties in relation to the Company or any Associates Company as may from
time to time be vested in or assigned to him by the CEO at such place or places
within the United Kingdom as the CEO shall determine and shall obey and comply
with all proper orders and directions from time to time given or made by the
CEO. The Executive's normal place of work shall be 101 Bayham Street, London,
NW1 0AG or such other place as the Company shall reasonably require. The
Executive may be required to travel on business from time to time subject to
Clause 6.1.
3.2 If the Company requires the Executive to work at a place which would
reasonably oblige the Executive to move permanently from his then normal place
of residence, the Company shall reimburse the Executive (on production of the
necessary receipts or vouchers) for all removal and relocation expenses directly
and reasonably incurred as a result of the Company's requirements in accordance
with the Company's then current policy for relocation of executives.
3.3 The Executive's hours of work are the normal hours of the Company being
9.15 am to 5.15 pm Monday to Friday each week together with such additional
hours as may be necessary properly to fulfil his duties.
4. SALARY
4.1 The Company shall pay to the Executive a salary at the rate of L80,000
(eighty thousand pounds) per annum such salary to be reviewed in April 2000 and
annually thereafter, and to accrue from day to day and to be payable by monthly
instalments in arrears on or before the last working day of each calendar month.
4.2 The Company shall if it deems it necessary to do so be entitled to
suspend the Executive but shall during such suspension continue to pay the
Executive in accordance with the provisions of this Clause.
5. BONUS SCHEME AND SHARE OPTIONS
5.1 The Executive shall be entitled to participate in a bonus scheme which
may be amended or varied from time to time at the Company's discretion.
5.2 For the time being, the Executive's bonus will be limited to a maximum
of 60% of the Executive's salary; 60% of which will be payable subject to
satisfactory completion of performance related targets as set by the SVP
Planning and 40% of which will be payable on the achievement of the budgeted
Company performance.
5.3 The Executive will be eligible to receive 15,000 Getty Images Inc.
options upon signing of this Agreement.
6. EXPENSES
6.1 The Company shall reimburse to the Executive, subject to the Executive
producing proper receipts or vouchers, all travelling hotel entertainment and
out of pocket expenses which may reasonably and properly be incurred in the
performance of the Executive's duties pursuant to this Agreement.
6.2 The Company shall pay to the Executive an annual allowance of L7,500 in
lieu of a car.
2
<PAGE> 4
7. PENSION AND ADDITIONAL BENEFITS
7.1 The Company will contribute 7.5% of the Executive's annual gross salary
to a private pension scheme or to the company pension scheme, effective from the
Executive's commencement date, as the Executive so chooses.
7.2 The Executive and his spouse and children shall be entitled to private
medical cover under the Company's Executive Healthcare Scheme.
8. HOLIDAYS
8.1 The Executive shall be entitled in addition to UK public holidays to 20
working days holiday in every calendar year taken at such time or times as may
be agreed between the Executive and the CEO.
8.2 For the holiday year commencing January 1998 the Executive will be
entitled to such proportion of his annual holiday entitlement as is equal to the
proportion of that holiday year during which the Executive is employed by the
Company.
8.3 The Executive may with the prior written consent of the company carry
forward any unused part of his holiday entitlement to a subsequent holiday year.
Holidays not taken in any calendar year and not carried forward will be lost.
8.4 The Executive's entitlement to holiday shall accrue pro rata through
each year of the appointment under this Agreement.
8.5 In the event of termination of his employment for whatever reason, the
Executive shall be entitled to pay in lieu of outstanding holiday entitlement.
The Executive will be required to repay the Company any holiday taken in excess
of his actual pro rata entitlement.
9. SICKNESS
9.1 If you are absent through sickness or injury, you must comply with the
company's requirements for reporting your absence, as explained in Annex 3 IF
YOU ARE SICK accompanying this statement and contained in the staff handbook.
You should familiarise yourself with these requirements.
9.2 During absence for illness (which includes injury or other disability)
you will be entitled to receive a sick pay allowance in accordance with, and
subject to, the provisions set out in Annex 3 IF YOU ARE SICK from the
information in the staff handbook under the heading PAYMENT DURING SICKNESS
ABSENCE.
10. PATERNITY LEAVE
Paternity Leave is provided by the Company.
11. TERMINATION
The Company may terminate summarily the employment of the Executive under
this Agreement without payment in lieu of notice:--
11.1 If the Executive shall have committed any serious breach or repeated
or continued (after warning) any material breach of any of the terms of this
Agreement;
11.2 If the Executive shall (whether or not in the course of his
employment) have been guilty of gross misconduct or conduct likely to bring the
business of the Company or any Associated Company into disrepute or of conduct
calculated or likely to prejudice the interests of the Company or any Associated
Company;
11.3 If the Executive shall have committed any act of bankruptcy or made
any composition or entered into any Agreement with his creditors generally;
11.4 If the Executive shall have been convicted of any criminal offence
punishable by a term of imprisonment.
3
<PAGE> 5
11.5 The Company shall have the right lawfully to terminate this Agreement
with immediate effect by giving notice of such termination and by paying to the
Executive, in lieu of salary and other benefits pursuant to this Agreement, an
amount equal to the basic salary which the Executive would have earned from then
until the first date upon which his employment could, apart from this Clause
11.5, have been lawfully terminated together with a further sum equivalent to
the value of benefits to which the Executive would have been entitled during
such period, to the extent that the Executive does not in fact receive those
benefits for the whole or part of such period. Any such payment to the Executive
will be subject to tax and other statutory deductions required from time to
time.
11.6 If this Agreement is terminated by notice given by either party to the
other, whether pursuant to Clause 2.1 or otherwise, or if the Executive wishes
to resign with immediate effect but the Company refuses to accept such
resignation and requires the due period of notice to be given by the Executive,
then:
11.6.1 the Company shall be under no obligation to vest in or
assign to the Executive any powers or duties or to provide work for the
Executive [but the Company may at its discretion provide suitable work
for the Executive to be undertaken at the Executive's home and the
Company may require the Executive to carry out special duties or
projects]; and
11.6.2 the Company may at any time or from time to time during
such notice period deny the Executive access to any premises of the
Company; and
11.6.3 salary and all benefits will not cease to be payable or
available to the Executive by reason only of that exclusion of the
Executive from any premises of the Company until the expiry of such
notice period.
11.7 On the termination of this Agreement for whatever reason the Executive
shall:
11.7.1 comply with the provision of Clause 13.1
11.7.2 immediately deliver to the company or to its order all
books, documents, papers (including copies) plan, prototypes, computer
software materials, keys and other property of or relating to the
business of the Company or its Associates Companies then in his
possession or which are or were last under his power or control.
11.8 The Executive shall not at any time after termination of this
Agreement wrongfully represent himself as being employed by or connected in any
way with the Company or any Associated Company.
12. RESTRICTIONS ON ACTIVITIES DURING EMPLOYMENT
The Executive shall not during the continuance of his employment hereunder
without the written consent of the Company be engaged or interested either
directly or indirectly in any capacity in any other trade business or occupation
whatsoever, provided that this provision shall not prohibit the Executive being
interested as a bona fide investor in any securities of any company listed or
dealt in on The Stock Exchange, the Unlisted Securities Market of The Stock
Exchange or any other recognised securities market provided that such interest
(together with that of his family being his spouse and children under the age of
18) shall not exceed 5% of those securities.
13. CONFIDENTIALITY
13.1 The Executive shall not during the continuance of his employment
hereunder or at any time thereafter use other than for the benefit of the
Company or any Associated Company nominated by the Company or as required by law
disclose or make accessible to any other person firm or company any of the
confidential information trade secrets formulae or methods of doing business of
the Company or any Associated Company or its or their customers and other
business associates. This restriction shall cease to apply to information or
knowledge which may legitimately come into the public domain.
4
<PAGE> 6
14. INTELLECTUAL PROPERTY
14.1 If the Executive shall while employed by the Company discover or
create any Intellectual Property whether alone or jointly with others which is
connected with or which in any way affects or relates to the business of the
Company or of any Associated Company or is capable of being used or adapted for
use therein or in connection therewith she shall forthwith disclose it to the
Company and subject to the rights of the Executive under the Copyright, Designs
and Patents Act 1988 such Intellectual Property shall belong to and be the
absolute property of the Company or such Associated Company as the Company may
nominate.
14.2 The Executive shall be entitled to a non-exclusive right to use, at
all times, such Intellectual Property belonging to the Company pursuant to
Clause 14.1
14.3 The Executive if and whenever required so to do (whether during or
after the termination of this Agreement) shall at the expense of the Company (or
its nominee) apply or join in applying or assist the Company to apply for
letters patent design registration or other similar protection in the United
Kingdom or any other part of the world for any such Intellectual Property and
execute instruments and do all things necessary for vesting the said letters
patent or other similar protection when obtained and all right title and
interest to and in the same in the Company (or its nominee) absolutely and as
sole beneficial owner or in such other person as may the Company shall require.
14.4 The Executive hereby agrees that neither during the currency of this
Agreement nor subsequently will he do any act or thing which may prejudice the
application for the grant or the validity of any patent design right or other
monopoly right in any Intellectual Property which is the property of the Company
or any Associated Company.
15. CONSEQUENCES OF TERMINATION
UPON the termination of this Agreement howsoever arising:-
15.1 such of the provisions of this Agreement as are expressed to have
effect after termination shall do so but without prejudice to any rights or
remedies of the parties whether accrued or arising on termination; and
15.2 the provisions of Clause 13 and 14 of this Agreement relating to
Confidentiality and Intellectual Property shall bind the Executive's personal
representatives.
16. RESTRICTIONS ON TERMINATION
The Executive covenants with the Company that he will not for the period of
twelve months after ceasing to be employed under this Agreement without the
prior written consent of the Company in connection with the carrying on of any
business in competition with the business of stock photography of the Company on
his own behalf or on behalf of any person firm or company directly:
16.1 seek to procure orders from or do business with any person firm or
company who has at any time during the twelve months immediately preceding such
cesser done business with the Company.
Provided that nothing in this Clause shall prohibit the seeking or
procuring of orders or the doing of business not relating or similar to the
business of the Company described above.
17. RECONSTRUCTION OR AMALGAMATION
If before the expiration of this Agreement the employment of the Executive
under this Agreement is terminated by reason of the liquidation of the Company
for the purpose of reconstruction or amalgamation and the Executive shall be
offered employment with any concern or undertaking resulting from such
reconstruction or amalgamation for a period not less than the unexpired term of
this Agreement and on terms and conditions not less favourable than the terms of
this Agreement then the Executive shall have no claim against the Company in
respect of the termination of his employment hereunder by reason of such
liquidation.
5
<PAGE> 7
18. NOTICES
Any notice to be given hereunder shall be in writing and shall be
sufficiently served if sent or delivered in the case of the Company to its
registered office for the time being and in the case of the Executive to her in
person or to her usual or last known place of residence and may be sent by
prepaid post or delivered by hand and proof of dispatch by one of these methods
shall be deemed to be proof of receipt in the case of notices sent by first
class prepaid post within the United Kingdom forty-eight hours after the time of
posting and otherwise in the normal course of delivery.
No form of notice by electronic means, cable or telex will be acceptable.
19. DISCIPLINARY AND GRIEVANCE PROCEDURES
19.1 The Executive is subject to the Company's disciplinary rules and
disciplinary procedures. These rules and procedures are non-contractual and may
be varied by the Company from time to time.
19.2 If the Executive has any grievance relating to his employment (other
than one relating to a disciplinary decision) he should refer such grievance to
the directors of the Company for resolution.
20. PREVIOUS AGREEMENTS
This Agreement supersedes all or any previous contract of service between
the company or any subsidiary or Holding Company and the Executive and any such
contracts shall be deemed to have been terminated by mutual consent as from the
date on which his employment hereunder shall commence.
21. STATUTORY STATEMENT
The information contained herein and in the schedule constitutes a written
statement of the terms of employment of the Executive in compliance with the
provisions of the Act.
22. LAW
This Agreement is governed by and shall be construed in accordance with the
laws of England.
IN WITNESS whereof the Company and the Executive have executed and
delivered this Agreement as a deed on the date first stated above.
6
<PAGE> 8
THE SCHEDULE
In accordance with the Employment Rights Act 1996 the following terms of
the Executive's employment apply on the date of the Agreement to which this is a
schedule.
1. COMMENCEMENT OF EMPLOYMENT
The Executive has been continuously in the employment of the Company since
a date to be agreed.
2. JOB TITLE AND SPECIFICATION
The Executive's job title is Group Brands and Communications Director.
The Executive's job specification is attached.
3. PRINCIPAL PLACE OF WORK
The Executive's principal place of work is 101 Bayham Street, London, NW1
0AG.
4. DISCIPLINARY PROCEDURE
The Executive has been notified where a copy is available for inspection of
the Company's Disciplinary Procedure which may be updated from time to time by
the Company.
5. GRIEVANCE AND APPEALS PROCEDURE
The Executive has been notified where a copy is available for inspection of
the Company's Grievance Procedure which may be updated from time to time by the
Company.
6. HOLIDAY
The Executive is entitled to 20 working days weeks holidays with pay -- see
Clause 8 of the Agreement. The Executive's entitlement to holiday will accrue
pro rata through each calendar year or part thereof of employment.
On the cessation of employment for whatsoever reason an adjustment shall be
made to the final payment of salary to the Executive by way of additional
payment of salary in respect of holidays accrued if appropriate.
7. REMUNERATION
See Clause 4.
8. HOURS OF WORK
The hours of work will be from 9.15 am to 5.15 pm, Monday to Friday, and
any such hours as may be necessary or required from time to time.
9. SICKNESS OR INJURY
The Executive is entitled to be paid during absence from work during
sickness or injury -- see Clause 9.
7
<PAGE> 9
10. NOTICES
See Clause 18.
<TABLE>
<S> <C>
EXECUTED AND DELIVERED as a
deed by GETTY IMAGES, INC.
acting by
(a director)
and
(a director / secretary)
SIGNED AND DELIVERED as a deed
by the said DAVID HOWARD
in the presence of
</TABLE>
8
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement is made by and between TONY STONE IMAGES AMERICA
("Employer"), a wholly owned subsidiary of Getty Images, Inc., and JOHN
HALLBERG, an individual resident in the State of Illinois ("Executive").
WITNESSETH THAT:
WHEREAS, Employer is engaged in the business of acquiring, distributing and
marketing the rights to stock photography;
WHEREAS, Employer is a wholly owned subsidiary of Getty Images, Inc.
("Getty Images"), a Delaware corporation;
WHEREAS, Executive has particular expertise and knowledge concerning the
business of Employer and its operations and is a valued member of Employer's
senior management;
WHEREAS, by virtue of his employment with Employer, Executive will become
acquainted with certain confidential information regarding the products,
customers, methods of doing business, strategic plans, marketing, and other
aspects of the business of Employer; and
WHEREAS, Employer and Executive desire to restate and set forth in this
Agreement the terms, conditions and obligations of the parties with respect to
such employment and this Agreement is intended by the parties to supersede all
previous agreements and understanding, whether written or oral, concerning such
employment, including, without limitation, the letter from Don Smith, Managing
Director of Employer, dated September 9, 1998.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, of Executive's employment, of the compensation to be paid by Employer
for Executive's services, and of Employer's other undertakings in this
Agreement, the parties hereto do hereby agree as follows:
1. SCOPE OF EMPLOYMENT. Executive will be employed as President of
Employer and shall perform such duties as may be assigned to Executive by the
Managing Director of Employer and the Board of Directors of Getty Images in such
position. Executive agrees that during his employment Executive will be subject
to and abide by the written policies and practices of Employer and Getty Images.
Executive also agrees to assume such new or additional positions and
responsibilities as he may from time to time be assigned for or on behalf of
Getty Images or any Affiliate of Getty Images. For purposes of this Agreement,
the term "Affiliate" shall include, but shall not be limited to PhotoDisc,
Allsport, Hulton Getty, Gamma Liaison, Energy Film Library and any subsidiary of
any of them and shall further include any present or future affiliate of any of
them. In the event Executive shall perform services for Getty Images or any
Affiliate in addition to serving as President of Employer, the provisions of
this Agreement shall also apply to the performance of such services by Executive
on behalf of Getty Images or any Affiliate.
2. TERM OF AGREEMENT. The initial term of Executive's employment
pursuant to this Agreement shall be one (1) year, commencing on the date of this
Agreement. After such initial term, this Agreement shall be extended
automatically for successive one (1) year terms, unless either Executive or
Employer gives contrary written notice not less than one hundred eighty (180)
days in advance of the expiration of the initial or any succeeding term of this
Agreement.
3. COMPENSATION AND BENEFITS.
a. Signing Bonus. Upon the execution of this Agreement, Employer shall
pay Executive a signing bonus of $10,000.
b. Base Salary. During the term of this Agreement, Executive will be
paid a base salary of $230,000 per annum as such amount may be adjusted annually
in the sole discretion of the Managing Director of Employer. The base salary
payable to Executive shall be payable in monthly installments in arrears on or
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before the last business day of each month. In the event that Employer deems it
necessary to suspend Executive from employment from time to time during the term
of this Agreement, Employer shall remain obligated to pay Executive the amount
of base salary accrued during such suspension in accordance with the provisions
of this Section 2(b).
c. Performance Bonus. Beginning in 1999, Executive shall be entitled to
participate in Employer's annual bonus scheme which may be amended or modified
from time to time at Employer's discretion. Under the Employer's current bonus
scheme, Executive's annual bonus would be calculated as a percentage of
Executive's base salary up to but not exceeding 30%. Executive's bonus shall be
determined in the sole discretion of Employer's Managing Director based on
achieving a combination of revenue, profit and other business performance
targets.
d. Stock Options. Executive shall be eligible to participate in the
Getty Images Stock Option Plan (the "Option Plan") or any successor Plan
thereto. Upon the execution of this Agreement, Executive shall be granted
options to purchase 20,000 shares of Getty common stock. The options shall be
subject to the provisions of the Option Plan and the terms of any agreement
evidencing the grant of these options.
e. Benefits. Executive will be entitled to coverage under such
compensation plans, health plans, retirement plans, insurance plans and other
fringe benefit plans and programs as may from time to time be established for
employees of Getty Images and its Affiliates in accordance with the terms and
conditions of such plans and programs.
f. Vacation. In addition to all regular U.S. holidays, Executive shall
be entitled to twenty (20) working days of paid vacation in every calendar year
during the term of this Agreement to be taken at such time(s) as may be agreed
between Executive and the Managing Director of Employer. Executive's entitlement
to receive vacation days shall accrue pro rata during each calendar year during
the term of this Agreement. For the calendar year commencing on January 1, 1998,
Executive will be entitled to five (5) working days of paid vacation. Executive
may, with the prior written consent of Employer, carry forward any unused part
of his vacation to a subsequent calendar year. In the event of Executive's
termination of employment for whatever reason, Executive shall be entitled to
receive payment in lieu of any unused vacation days and shall be required to
repay Employer for any vacation days taken in excess of the amount of vacation
days which had accrued during such calendar year.
g. Other Perquisites. Employer shall reimburse Executive for the costs
incurred by Executive to park his car in a parking garage located near the
Employer's premises.
h. Reimbursement of Expenses. Employer shall reimburse Executive for all
traveling, hotel, entertainment and other out-of-pocket expenses which may be
reasonably and properly be incurred by Executive in the performance of his
duties pursuant to this Agreement, subject to Employer's policies regarding such
expenses and Executive producing proper receipts and vouchers.
4. EXTENT OF SERVICE. Executive shall devote his entire time, attention
and energies to the business of Employer during the term of this Agreement;
provided that this Section shall not be construed as preventing Executive from
(i) investing Executive's personal assets in such form or manner as will not
require any services on the part of Executive in the operation or the affairs of
the companies in which such investments are made; or (ii) engaging (whether or
not during normal business hours) in any other business, professional or civic
activities provided that Executive's engagement does not result in a violation
of his covenants under this Section and Sections 5 or 6 hereof.
5. COMPETITION. During the period in which Executive performs services
for Employer and for a period of twelve (12) months after termination of
Executive's employment with Employer, regardless of the reason, Executive shall
not, directly or indirectly, either alone or in conjunction with any person,
firm, association, company or corporation: (i) engage in the business of
acquiring, distributing, licensing or marketing the rights to stock photography
or film imagery; or (ii) seek to procure orders from or conduct business which
involves stock photography or film imagery with any person, corporation or other
entity which was a customer or otherwise did business with Employer, Getty
Images or any Affiliate during the twelve (12) month period prior to Executive's
termination of employment with Employer; provided that nothing in this
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Section shall prohibit Executive from engaging in a business not related to the
business of Employer, Getty Images or any Affiliate as described above.
Notwithstanding the foregoing, Executive shall not be prevented from (i)
investing or owning, either directly or beneficially, shares of stock of any
corporation engaged in any business provided that such shares are regularly
traded on a national securities exchange or in any over-the-counter market,
subject to the condition that Executive's interests (together with the interests
owned directly or beneficially by Executive's spouse and children) may not
exceed 5% of the outstanding securities of such corporation or (ii) retaining
any shares of stock in any corporation which Executive owned prior to the date
of his employment with Employer.
6. CONFIDENTIAL INFORMATION. Executive acknowledges that, during his
employment with Employer, Executive has and will obtain access to Confidential
Information of and for Employer, Getty Images and its Affiliates. For purposes
of this Agreement, "Confidential Information" shall mean information not
generally known or available without restriction to the trade or industry,
including, without limitation, (i) proprietary stock photography and film
footage imagery used by Employer, Getty Images or any Affiliate in conducting
its business; (ii) technical information regarding the operations of Employer,
Getty Images or any Affiliate; (iii) trade secrets or methods of doing business
utilized by Employer, Getty Images or its Affiliates or any of its or their
customers and other business associates; (iv) the identity of actual or
potential customers of Employer, Getty Images or any Affiliate, including lists
of the same; (v) marketing materials and information regarding the stock
photography and film footage imagery offered by Employer, Getty Images or any
Affiliate and the nature and scope of use of such marketing materials and
product information; (vi) the business and strategic growth plans of Employer,
Getty Images or any Affiliate; and (vii) confidential communication materials
provided for shareholders of Getty Images. Absent prior authorization by
Employer or as required in Executive's duties for Employer, Executive will not
at any time, directly or indirectly, use, permit the use of, disclose or permit
the disclosure to any third party of any such Confidential Information to which
Executive will be provided access. These obligations apply both during
Executive's employment with Employer and shall continue beyond the termination
of Executive's employment and this Agreement.
7. INVENTIONS. All discoveries, designs, improvements, ideas, and
inventions, whether patentable or not, relating to (or suggested by or resulting
from) products, services, or other technology of Employer, Getty Images or any
Affiliate or relating to (or suggested by or resulting from) methods or
processes used or usable in connection with the business of Employer, Getty
Images or any Affiliate that may be conceived, developed, or made by Executive
during employment with Employer (hereinafter "Inventions"), either solely or
jointly with others, shall automatically become the sole property of Employer,
Getty Images or an Affiliate as the case may be. Executive shall immediately
disclose to Employer all such Inventions and shall, without additional
compensation, execute all assignments and other documents deemed necessary to
perfect the property rights of Employer, Getty Images or any Affiliate therein.
These obligations shall continue beyond the termination of Executive's
employment with respect to Inventions conceived, developed, or made by Executive
during employment with Employer. The provisions of this Section shall not apply
to any Invention for which no equipment, supplies, facility, or trade secret
information of Employer, Getty Images or any Affiliate is used by Executive and
which is developed entirely on Executive's own time, unless (i) such Invention
relates (A) to the business of Employer, Getty Images or an Affiliate or (B) to
the actual or demonstrably anticipated research or development of Employer,
Getty Images or an Affiliate, or (ii) such Invention results from work performed
by Executive for Employer.
8. REMEDIES. Executive acknowledges that compliance with the terms of
this Agreement is necessary to protect the Confidential Information and goodwill
of Getty Images and its Affiliates and that any breach by Executive of this
Agreement will cause continuing and irreparable injury to Employer, Getty Images
and its Affiliates for which money damages would not be an adequate remedy.
Executive acknowledges that Getty Images and all Affiliates other than Employer
are and are intended to be third party beneficiaries of this Agreement.
Executive acknowledges that Employer, Getty Images and any Affiliate shall, in
addition to any other rights or remedies they may have, be entitled to
injunctive relief for any breach by Executive of any part of this Agreement.
This Agreement shall not in any way limit the remedies in law or equity
otherwise available to Employer, Getty Images and any Affiliate.
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9. TERMINATION OF EMPLOYMENT.
a. General Provisions. Executive's employment may be terminated by
Employer at any time and, except as otherwise provided in this Section 9, any
and all of Employer's obligations under this Agreement shall terminate, other
than Employer's obligation to pay Executive, within thirty (30) days of
Executive's termination of employment, the full amount of any unpaid base salary
earned by Executive pursuant to this Agreement through and including the date of
termination and to observe the terms and conditions of any plan or benefit
arrangement which, by its terms, survives such termination of Executive's
employment. The payments to be made under this Section 9(a) shall be made to
Executive, or in the event of Executive's death, to such beneficiary as
Executive may designate in writing to Employer for that purpose, or if Executive
has not so designated, then to the spouse of Executive, or if none is surviving,
then to the personal representative of the estate of Executive. Notwithstanding
the foregoing, termination of employment shall not affect the obligations of
Executive that, pursuant to the express provisions of this Agreement, continue
in effect.
b. Termination Due to Death/Permanent Disability. If Executive should
die or suffer a permanent disability during the term of this Agreement, which
event shall result in the termination of Executive's employment, Employer shall
continue to pay the Executive's base salary then in effect for a period of one
hundred eighty (180) days after Executive's termination of employment due to
death or permanent disability. In addition, Employer shall pay Executive the
amount of his annual bonus, if any, which had fully accrued prior to Executive's
termination of employment pursuant to this Section 9(b) in a lump sum within
thirty (30) days following the date of Executive's death or permanent
disability. The amount to be paid to Executive pursuant to this Section 9(b)
shall be reduced by the amount of any life insurance or long-term disability
benefit payments paid or payable to Executive from policies of insurance
maintained and paid for by Employer or Getty Images; provided that in the event
the life insurance or long-term disability benefits exceed the amount to be paid
to Executive pursuant to this Section 9(b), Executive shall remain entitled to
receive the excess life insurance or long-term disability payments. The payments
to be made under this Section 9(b) shall be made to Executive, or in the event
of Executive's death, to such beneficiary as Executive may designate in writing
to Employer for that purpose, or if Executive has not so designated, then to the
spouse of Executive, or if none is surviving, then to the personal
representative of the estate of Executive. Furthermore, in the event of
Executive's death or permanent disability, Executive's or Executive's
dependents' participation in any medical, health, accident, disability, death,
life insurance or similar plan in which Executive was participating immediately
prior to termination shall continue for the period in which payments are being
made under this Section 9(b) at Employer's or Getty Images' expense (subject to
any normal employee contributions, if any), although any continuation of health
coverage shall count toward the "COBRA" continuation of coverage period.
For the purposes of this Agreement, "permanent disability" means any mental
or physical illness, disability or incapacity which renders Executive unable to
perform his duties hereunder for ninety (90) consecutive working days.
c. Termination Without Cause. In the event that notice is provided by
Executive or Employer to the other party pursuant to Section 2 hereof such that
Executive's employment is to be terminated without Cause (as such term is
defined in Section 9(f) hereof) by Employer upon the expiration of the initial
term or the expiration of any succeeding one (1) year term of this Agreement (i)
Employer shall be obligated to continue to pay Executive's base salary and
Executive will continue to accrue benefits provided pursuant to Section 3 of
this Agreement until the expiration of the Agreement; (ii) Employer shall pay
Executive in a lump sum upon his termination any amount of an annual bonus which
had accrued prior to the termination of Executive's employment; (iii) Employer
shall be under no obligation to vest in or assign Executive any powers or duties
or to provide work for Executive; and (iv) Employer may from time to time during
the period prior to the Expiration of this Agreement deny Executive access to
the premises of Employer.
d. Termination Upon Change In Control. In the event that within twelve
(12) months of a Change In Control of Employer or Getty Images Executive's
employment is terminated without Cause (as such term is defined in Section 9(f)
hereof) prior to the expiration of the initial term or any succeeding one (1)
year term of this Agreement, Employer (or the successor thereto) shall pay
Executive 200% of Executive's annual base
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salary as determined at the time of termination of employment payable in a lump
sum within thirty (30) days following the date of Executive's termination. Such
payment shall be in addition to any and all other payments due Executive under
this Agreement. For the purposes of this Agreement, a "Change in Control" of
Employer means (i) the acquisition by any person of 50% or more of Employer's
then outstanding capital stock; or (ii) approval by the stockholders of Employer
of a merger or consolidation effecting a change in ownership of 50% or more of
the voting power of the outstanding capital stock of Employer or a sale of all
or substantially all of the assets of Employer; in each case, the acquiring
persons in such merger, consolidation or sale shall be persons other than the
stockholders of Employer, Getty Images or any Affiliate immediately prior to
such transaction. For the purposes of this Agreement, a "Change in Control" of
Getty Images means (i) any consolidation or merger of Getty Images in which the
Getty Images is not the continuing or surviving corporation or pursuant to which
shares of the Getty Images' common stock would be converted into cash,
securities or other property, other than a consolidation or merger of Getty
Images in which the beneficial holders of fifty-one percent (51%) or more of the
Getty Images' common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation directly or
indirectly immediately after the merger; (ii) any sale, lease, exchange or
transfer of all or substantially all of the assets of Getty Images; or (iii) any
Person or Persons (as hereinafter defined) other than the current stockholders
of Getty Images or Persons who directly or indirectly, control, is controlled by
or is under common control with or in any Shareholder (including any beneficiary
of any trust which is the owner of common stock on the date hereof) become
owners of fifty-one percent (51%) or more of the Getty Images' outstanding
common stock. For the purposes hereof, "Person" shall mean an individual, a
partnership, a joint venture, a joint stock company, a corporation, a trust, an
unincorporated organization, and a government or governmental body, or any
department, agency or political subdivision, or other entity.
e. Voluntary Termination. If Executive voluntarily terminates employment
prior to the expiration of the initial term or any succeeding one (1) year term
of this Agreement, this Agreement shall terminate forthwith and all obligations
of each party to the other shall terminate immediately except for the
obligations of the parties contained in Section 9(a) hereof.
f. Termination For Cause. If Executive is terminated for Cause as
determined in the sole discretion of the Managing Director of Employer, all
obligations of each party to the other shall terminate immediately except the
obligations of the parties described in Section 9(a) hereof. For purposes of
this Agreement, termination for "Cause" means:
(i) Executive's failure or refusal, after written notice thereof, to
perform specific directives approved by the Managing Director of
Employer or a majority of the Getty Images Board of Directors which
are consistent with the scope and nature of Executive's duties and
responsibilities as President of Employer;
(ii) Habitual drunkenness or use of drugs which interferes with the
performance of Executive's duties and obligations under this
Agreement;
(iii) Executive's conviction of a felony;
(iv) Any defalcation or acts of gross or willful misconduct of Executive
resulting in economic loss to Getty Images or substantial damage to
Employer's or Getty Images' reputation; or
(v) Any breach of Executive's covenants contained in Sections 4 through 6
hereof.
g. Executive's right to receive payments per Sections 9(b) through 9(d)
hereof is contingent upon Executive not violating any of the on-going
obligations under this Agreement.
h. The payments to Executive pursuant to Sections 9(b) through 9(d)
hereof shall be liquidated damages for and in full satisfaction of any and all
claims Executive may have relating to or arising out of Executive's employment
and termination of employment by Employer, any and all claims Executive may have
relating to or arising out of this Agreement and the termination thereof and any
and all claims Executive may have arising under any statute, ordinance or
regulation or under common law. Executive expressly acknowledges and agrees
that, except for whatever claim Executive may have to such payments, Executive
shall not
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have any claim for damages or other relief of any sort relating to or arising
out of employment or termination of employment by Employer or relating to or
arising out of this Agreement and the termination thereof.
i. Upon termination of employment with Employer for any reason, Executive
shall promptly deliver to Employer all writings, records, data, memoranda,
contracts and other documents, prototypes, computer software materials, keys and
other property, whether or not obtained from Employer, Getty Images or any
Affiliate, which pertain to or were used by Executive in connection with his
employment by Employer or which pertain to Getty Images or any other Affiliate,
including, but not limited to, Confidential Information, as well as any
automobiles, computers or other equipment which were purchased by Employer for
Executive.
j. Executive shall not at any time after termination of this Agreement
wrongfully represent himself as being employed by or connected in any way with
Employer, Getty Images or any Affiliate.
10. WITHHOLDING OF TAXES. The Company may withhold from any benefits
payable under the Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
11. DISCIPLINARY PROCEDURES/RESOLUTION OF DISPUTES. Executive is subject
to Employer's disciplinary rules and procedures which are non-contractual and
may be modified by Employer from time to time. If Executive has a grievance
relating to his employment (other than one relating to a disciplinary decision),
Executive should refer such grievance to the Managing Director of Employer. To
the extent disputes relating to Executive's employment cannot be resolved by the
parties hereto and except as otherwise provided herein, such disputes arising
under or in connection with this Agreement shall be resolved by binding
arbitration, to be held in Chicago, Illinois, in accordance with the rules and
procedures of the American Arbitration Association (the "AAA") and the parties
hereby agree to expedite such arbitration proceedings to the extent permitted by
the AAA. Judgment upon the award rendered by the arbitrator(s) may be entered in
any court having jurisdiction thereof. This requirement to arbitrate any
disputes arising under or in connection with this Agreement shall not apply to
claims made by Employer for injunctive and/or other equitable relief for
Executive's failure to adhere to the covenants set forth in Sections 4, 5, 6 and
7 of this Agreement. Each party shall bear their own costs of the arbitration or
litigation, except that, if Employer is found to have violated the terms of this
Agreement, Employer shall reimburse Executive for the entire amount of
reasonable attorneys fees incurred by Executive as a result of the dispute
hereunder in addition to the payment of any damages awarded to Executive.
Notwithstanding the foregoing, any dispute arising under this Agreement as a
result of Executive's termination of employment must be raised by Executive
within two (2) years after the Executive's termination, provided, however, that
the claim must be initiated within thirty (30) days after written notice of the
claim has been delivered by the Executive to Employer (Attn: Managing Director).
12. NOTICES. Any notices to be given hereunder shall be in writing and
shall be sufficiently served if sent or delivered in the case of Employer to the
registered offices of the Employer or to Executive at Executive's usual or last
known place of residence. Such notices may be hand delivered, sent via certified
U.S. mail, return receipt requested or via Federal Express or via a comparable
overnight delivery service and shall be deemed received two (2) business days
upon deposit in the U.S. mail or one (1) business day after deposit with an
overnight courier service.
13. GENERAL PROVISIONS.
a. All provisions of this Agreement are intended to be interpreted and
construed in a manner to make such provisions valid, legal, and enforceable. To
the extent that any Section of this Agreement or any word, phrase, clause, or
sentence hereof shall be deemed by any court to be illegal or unenforceable,
such word, clause, phrase, sentence, or Section shall be deemed modified,
restricted, or omitted to the extent necessary to make this Agreement
enforceable. Without limiting the generality of the foregoing, if the scope of
any covenant in this Agreement is too broad to permit enforcement to its full
extent, such covenant shall be enforced to the maximum extent provided by law
and Executive agrees that such scope may be judicially modified accordingly.
b. This Agreement may be assigned by Employer. This Agreement and the
covenants set forth herein shall inure to the benefit of and shall be binding
upon the successors and assigns of Employer.
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c. This Agreement may not be assigned by Executive, but shall be binding
upon Executive's executors, administrators, heirs, and legal representatives.
d. No waiver by either party of any breach by the other party of any of
the obligations, covenants, or representations under this Agreement shall
constitute a waiver by any prior or subsequent breach.
e. Where in this Agreement the masculine gender is used, it shall include
the feminine if the sense so requires.
f. The use of any number shall be construed as singular or plural, as the
case may require.
g. This instrument constitutes the entire agreement of the parties with
respect to its subject matter. This Agreement may not be changed or amended
orally but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought. Any other understandings and agreements, oral or written, respecting the
subject matter hereof are hereby superseded and canceled.
12. GOVERNING LAW. The parties agree that this Agreement shall be
construed and governed by the laws of the State of Illinois, excepting its
conflict of laws principles. Further, the parties acknowledge and specifically
agree to the jurisdiction of the courts of the State of Illinois in the event of
any dispute regarding this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date written opposite their signatures.
TONY STONE IMAGES AMERICA
By: --------------------------------------------------------
Its:--------------------------------------------------------
Dated:-------------------------------------------------------
[Executive]
----------------------------------------------------
Dated:-------------------------------------------------------
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EXHIBIT 10.11
(1) CHRISTOPHER ROLING
-- AND --
(2) GETTY IMAGES, INC.
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EMPLOYMENT AGREEMENT
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DATED 15 DECEMBER 1998
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THIS AGREEMENT is made the fifteenth day of December 1998
BETWEEN:
(1) CHRISTOPHER ROLING of 9 Sherbrook Rise, Wilmslow, Cheshire, SK9 2AX
("the Executive") and
(2) GETTY IMAGES, INC. whose registered office is at 101 Bayham Street,
London, NW1 0AG ("the Company").
WHEREBY it is agreed as follows:--
1. DEFINITIONS & INTERPRETATION
1.1 In this Agreement the following expressions shall unless the context
otherwise requires bear the following meanings:--
"the Act" the Employment Rights Act (1996)
"Associated Company" any company which for the time being is:
(a) a holding company (as defined in Section 736 of
the Companies Act 1985) of the Company; and/or
(b) a subsidiary (as defined in Section 736 of the
Companies Act 1985) of any such holding company
(other than the company) or of the Company; and/or
(c) any other company on behalf of which the
Executive carries out duties at the request of the
Company
"Group Operating Profit" operating profit before interest currency losses or
gains and tax
"Intellectual Property" rights in or to patents industrial designs
copyright trade secrets know-how and trademarks and
any other intangible property created through the
application of intellect to technical or commercial
matters and capable of proprietary distinction and
definition
"Chief Executive Officer
(CEO)" Jonathan Klein or whosoever is appointed in his
place by the Company
"The Stock Exchange" The International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited
1.2 Any reference in this Agreement to any statute or statutory provision
shall be construed as including a reference to that statute or statutory
provision as from time to time amended modified extended or re-enacted whether
before or after the date of this Agreement and to all statutory instruments
orders and regulations for the time being made pursuant to it or deriving
validity from it.
1.3 Unless the context otherwise requires words denoting the singular shall
include the plural and vice versa and words denoting any one gender shall
include all genders and words denoting persons shall include bodies corporate
unincorporated associations partnerships and individuals.
1.4 Unless otherwise stated references to clauses, sub-clauses, paragraphs
and sub-paragraphs relate to this Agreement.
1.5 Clause headings do not affect the interpretation of this Agreement.
2. APPOINTMENT
2.1 The Company shall employ the Executive and the Executive shall serve
the Company as Chief Financial Officer (CFO) commencing on a date to be agreed
and shall continue thereafter until this Agreement is terminated in accordance
with Clause 11 hereof or by either party giving to the other not less than six
calendar months' notice.
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3. DUTIES OF EMPLOYMENT
3.1 The Executive shall unless prevented by ill health or other incapacity
devote the whole of his time and attention to the performance of his duties
hereunder and shall faithfully and diligently exercise such powers and perform
such duties in relation to the Company or any Associates Company as may from
time to time be vested in or assigned to him by the CEO at such place or places
as the CEO shall determine and shall obey and comply with all proper orders and
directions from time to time given or made by the CEO. The Executive's normal
place of work shall be 101 Bayham Street, London, NW1 0AG or such other place as
the Company shall reasonably require. The Executive may be required to travel on
business from time to time subject to Clause 6.1.
3.2 If the Company requires the Executive to work at a place which would
reasonably oblige the Executive to move permanently from his then normal place
of residence, the Company shall reimburse the Executive (on production of the
necessary receipts or vouchers) for all removal and relocation expenses directly
and reasonably incurred as a result of the Company's requirements in accordance
with the Company's then current policy for relocation of executives.
3.3 The Executive's hours of work are the normal hours of the Company being
9.15am to 5.15pm Monday to Friday each week together with such additional hours
as may be necessary properly to fulfil his duties.
4. SALARY
4.1 The Company shall pay to the Executive a salary at the rate of L135,000
(one hundred and thirty five thousand pounds) per annum such salary to be
reviewed in April 2000 and annually thereafter, and to accrue from day to day
and to be payable by monthly instalments in arrears on or before the last
working day of each calendar month.
4.2 The annual increase to the Executive's annual gross salary is at the
discretion of the CEO and/or Board of Directors, however, the prevailing annual
base salary cannot be reduced.
4.3 The Company shall if it deems it necessary to do so, in accordance with
the Company's disciplinary procedure, be entitled to suspend the Executive but
shall during such suspension continue to pay the Executive in accordance with
the provisions of this Clause.
5. BONUS SCHEME AND SHARE OPTIONS
5.1 The Executive shall be entitled to participate in an annual bonus
scheme, the details of which are to be agreed between the Executive and the CEO.
Such bonus to be a maximum of up to 60% of the Executive's gross annual salary
and a minimum of 20% of the Executive's gross annual salary, and to be a mixture
of the achievement of agreed personal performance targets and Getty Images
financial targets, unless otherwise agreed in writing by both parties. A
proportion of the bonus will be paid in the Executive's first year, depending on
the commencement date. Any bonus payable under this scheme will be effected in
the month immediately following the Getty Images, Inc. annual accounts being
finalised. The bonus scheme will be reviewed annually.
5.2 The Executive shall be eligible to receive 60,000 Getty Images Share
Options upon joining the Company. Share options are granted under the rules of
the Getty Images Stock Incentive Plan, a copy of which will be sent separately.
5.3 Future annual share options will be granted under the rules of the
Getty Images Stock Incentive Plan (or any subsequently amended plan) and are at
the discretion of the CEO but will not be less than a grant amount of 15,000
(fifteen thousand) shares (or the minimum amount specified in a subsequently
revised Getty Images Stock Incentive Plan if greater than 15,000 shares per
annum).
5.4 If there is a generally applicable award of options or restricted
shares to senior executives of Getty Images other than the annual award of
options, the Executive shall participate in such award(s) on terms consistent
with Getty Images' then current practices and with awards made to other senior
executives.
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<PAGE> 4
6. EXPENSES
6.1 The Company shall reimburse to the Executive, subject to the Executive
producing proper receipts or vouchers, all travelling hotel entertainment and
out of pocket expenses which may reasonably and properly be incurred in the
performance of the Executive's duties pursuant to this Agreement.
6.2 The Company shall provide a fully expensed car purchased from new to a
maximum value of L35,000 which the Executive may use for business and personal
purposes. Should the Executive choose to receive cash in lieu of a car, the
annual increase to salary will be L8,000.
6.3 The Company shall provide a car parking space, free of charge, near to
the place of work at 101 Bayham Street, London, NW1 0AG
6.4 The Company shall provide fully furnished living accommodation suitable
for the Executive for the duration of six months from the date of commencement
of employment. The Company will be responsible for the payment of all proper
outgoings on the premises including rent, ground rent, maintenance and repairs,
and the Executive will be responsible for the payment of all other reasonable
expenses incurred, including but not limited to gas, electricity and water bills
and community charge.
6.5 The Company shall reimburse to the Executive, subject to the Executive
producing proper receipts, a maximum of L4,000 relocation fees which may
reasonably be incurred when the Executive establishes a permanent place of
residence in the transfer from the Executive's current place of residence.
6.6 The Company shall reimburse to the Executive any properly substantiated
financial penalties (not to exceed L12,500 in total) associated with the early
redemption of the current mortgage on his existing residence.
6.7 The Company shall reimburse to the Executive costs associated with the
preparation of his annual US and UK personal tax returns by
PriceWaterhouseCoopers (not to exceed L1,500 per annum).
6.8 On an annual basis, the Company will pay for one home leave airfare for
economy-class fully-flexible return tickets for the Executive and his dependent
direct family members between the UK and the US. Home leave will be defined as
holiday taken in the Executive's home country and is optional. Whenever
possible, home leave should be taken in conjunction with a business trip to the
US.
7. PENSION AND ADDITIONAL BENEFITS
7.1 The Company shall make a contribution equivalent to 10% of the
Executive's annual gross salary to a private pension scheme or to the company
pension scheme effective from the Executive's commencement date, as the
Executive so chooses. If the Executive chooses to join the company pension
scheme, the Executive will contribute 2% of the Executive's annual gross salary
and be able to make additional voluntary contributions through the Salary
Sacrifice Scheme. A summary of the benefits of the company pension scheme,
including Life Insurance Benefits and Long Term Incapacity Benefits, can be
found in the enclosed booklet "Your Pension and Employee Benefit Plan." Life
Insurance Benefits and Long Term Incapacity Benefits are provided in the company
pension scheme, should the Executive choose to join, or can be organised through
separate arrangement. The Executive's Life Insurance Benefits will be four times
his pensionable salary.
7.2 The Executive and his spouse and children shall be entitled to private
medical cover under the Company's Executive Healthcare Scheme.
8. HOLIDAYS
8.1 The Executive shall be entitled in addition to UK public holidays to 25
working days holiday in every calendar year taken at such time or times as may
be agreed between the Executive and the CEO.
8.2 For the holiday year commencing January 1999 the Executive will be
entitled to such proportion of his annual holiday entitlement as is equal to the
proportion of that holiday year during which the Executive is employed by the
Company.
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8.3 The Executive may with the prior written consent of the company carry
forward any unused part of his holiday entitlement to a subsequent holiday year.
Holidays not taken in any calendar year and not carried forward will be lost.
8.4 The Executive's entitlement to holiday shall accrue pro rata through
each year of the appointment under this Agreement.
8.5 In the event of termination of his employment for whatever reason, the
Executive shall be entitled to pay in lieu of outstanding holiday entitlement.
The Executive will be required to repay the Company any holiday taken in excess
of his actual pro rata entitlement.
9. SICKNESS
9.1 If the Executive shall be absent from duty or otherwise unable fully to
perform his duties under this Agreement due to sickness or injury the Company
shall continue to pay the Executive in respect of such absence such payment to
be inclusive of his entitlement to any statutory sick pay to which the Executive
may be entitled.
9.2 The Executive shall report or cause to be reported any such absence as
soon as possible to the Company and if the Executive is so prevented for seven
or more consecutive days he shall provide a medical practitioner's certificate
on the eighth day and weekly thereafter. Immediately following his return to
work after a period of absence of less than seven days, the Executive shall
complete a self-certification form available from the Company detailing the
reason of his absence when required by the Company furnish the Company with
evidence satisfactory to it of the reasons for any absence from duty sickness
injury or other disability of the Executive.
9.3 If the Executive does not return to or is otherwise unable to perform
his duties under this Agreement for an aggregate of 9 months in any period of 12
consecutive calendar months the Company may terminate the employment of the
Executive under this Agreement forthwith on a date not more that twenty eight
days after the end of the last of such 9 months in which event the Company shall
pay to the Executive a sum equal to 6 months salary from the date of such
termination.
10. PATERNITY LEAVE
Paternity Leave is provided by the Company.
11. TERMINATION
The Company may terminate summarily the employment of the Executive under
this Agreement without payment in lieu of notice:--
11.1 If the Executive shall have committed any serious breach or repeated
or continued (after warning) any material breach of any of the terms of this
Agreement;
11.2 If the Executive shall (whether or not in the course of his
employment) have been guilty of gross misconduct or conduct likely to bring the
business of the Company or any Associated Company into disrepute or of conduct
calculated or likely to prejudice the interests of the Company or any Associated
Company;
11.3 If the Executive shall have committed any act of bankruptcy or made
any composition or entered into any Agreement with his creditors generally;
11.4 If the Executive shall have been convicted of any criminal offence
punishable by a term of imprisonment.
11.5 The Company shall have the right lawfully to terminate this Agreement
with immediate effect by giving notice of such termination and by paying to the
Executive, in lieu of salary and other benefits pursuant to this Agreement, an
amount equal to the basic salary which the Executive would have earned from then
until the first date upon which his employment could, apart from this Clause
11.5, have been lawfully terminated together with a further sum equivalent to
the value of benefits to which the Executive would have been
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entitled during such period. The Executive has no duty to mitigate severance
benefits by finding alternative employment, nor shall amounts he earns from
other employment be offset against these benefits. Any such payment to the
Executive will be subject to tax and other statutory deductions required from
time to time.
11.6 If this Agreement is terminated by notice given by either party to the
other, whether pursuant to Clause 2.1 or otherwise, or if the Executive wishes
to resign with immediate effect but the Company refuses to accept such
resignation and requires the due period of notice to be given by the Executive,
then:
11.6.1 the Company shall be under no obligation to vest in or
assign to the Executive any powers or duties or to provide work for the
Executive [but the Company may at its discretion provide suitable work
for the Executive to be undertaken at the Executive's home and the
Company may require the Executive to carry out special duties or
projects]; and
11.6.2 the Company may at any time or from time to time during
such notice period deny the Executive access to any premises of the
Company; and
11.6.3 salary and all benefits will not cease to be payable or
available to the Executive by reason only of that exclusion of the
Executive from any premises of the Company until the expiry of such
notice period.
11.7 On the termination of this Agreement for whatever reason the Executive
shall:
11.7.1 comply with the provision of Clause 13.1
11.7.2 immediately deliver to the company or to its order all
books, documents, papers (including copies) plan, prototypes, computer
software materials, keys and other property of or relating to the
business of the Company or its Associates Companies then in his
possession or which are or were last under his power or control.
11.8 The Executive shall not at any time after termination of this
Agreement wrongfully represent himself as being employed by or connected in any
way with the Company or any Associated Company.
12. RESTRICTIONS ON ACTIVITIES DURING EMPLOYMENT
The Executive shall not during the continuance of his employment hereunder
without the written consent of the Company be engaged or interested either
directly or indirectly in any capacity in any other trade business or occupation
whatsoever, provided that this provision shall not prohibit the Executive being
interested as a bona fide investor in any securities of any company listed or
dealt in on The Stock Exchange, the Unlisted Securities Market of The Stock
Exchange or any other recognised securities market provided that such interest
(together with that of his family being his spouse and children under the age of
18) shall not exceed 5% of those securities.
The Company has agreed that this does not preclude the Executive from his
work as an author, lecturer and creative expert, which shall be limited to 15
working days in any twelve calendar month period, unless otherwise agreed by
both parties in writing.
13. CONFIDENTIALITY
13.1 The Executive shall not during the continuance of his employment
hereunder or at any time thereafter use other than for the benefit of the
Company or any Associated Company nominated by the Company or as required by law
disclose or make accessible to any other person firm or company any of the
confidential information trade secrets formulae or methods of doing business of
the Company or any Associated Company or its or their customers and other
business associates. This restriction shall cease to apply to information or
knowledge which may legitimately come into the public domain.
14. INTELLECTUAL PROPERTY
14.1 If the Executive shall while employed by the Company discover or
create any Intellectual Property whether alone or jointly with others which is
connected with or which in any way affects or relates to the
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business of the Company or of any Associated Company or is capable of being used
or adapted for use therein or in connection therewith she shall forthwith
disclose it to the Company and subject to the rights of the Executive under the
Copyright, Designs and Patents Act 1988 such Intellectual Property shall belong
to and be the absolute property of the Company or such Associated Company as the
Company may nominate.
14.2 The Executive shall be entitled to a non-exclusive right to use, at
all times, such Intellectual Property belonging to the Company pursuant to
Clause 14.1.
14.3 The Executive if and whenever required so to do (whether during or
after the termination of this Agreement) shall at the expense of the Company (or
its nominee) apply or join in applying or assist the Company to apply for
letters patent design registration or other similar protection in the United
Kingdom or any other part of the world for any such Intellectual Property and
execute instruments and do all things necessary for vesting the said letters
patent or other similar protection when obtained and all right title and
interest to and in the same in the Company (or its nominee) absolutely and as
sole beneficial owner or in such other person as may the Company shall require.
14.4 The Executive hereby agrees that neither during the currency of this
Agreement nor subsequently will he do any act or thing which may prejudice the
application for the grant or the validity of any patent design right or other
monopoly right in any Intellectual Property which is the property of the Company
or any Associated Company.
15. CONSEQUENCES OF TERMINATION
UPON the termination of this Agreement howsoever arising:--
15.1 such of the provisions of this Agreement as are expressed to have
effect after termination shall do so but without prejudice to any rights or
remedies of the parties whether accrued or arising on termination; and
15.2 the provisions of Clause 13 and 14 of this Agreement relating to
Confidentiality and Intellectual Property shall bind the Executive's personal
representatives.
16. RESTRICTIONS ON TERMINATION
The Executive covenants with the Company that he will not for the period of
twelve months after ceasing to be employed under this Agreement without the
prior written consent of the Company in connection with the carrying on of any
business in competition with the business of visual content of the Company on
his own behalf or on behalf of any person firm or company directly:
16.1 seek to procure orders from or do business with any person firm or
company who has at any time during the twelve months immediately preceding such
cessation done business with the Company.
Provided that nothing in this Clause shall prohibit the seeking or
procuring of orders or the doing of business not relating or similar to the
business of the Company described above.
17. RECONSTRUCTION OR AMALGAMATION
If before the expiration of this Agreement the employment of the Executive
under this Agreement is terminated by reason of the liquidation of the Company
for the purpose of reconstruction or amalgamation and the Executive shall be
offered employment with any concern or undertaking resulting from such
reconstruction or amalgamation for a period not less than the unexpired term of
this Agreement and on terms and conditions not less favourable than the terms of
this Agreement then the Executive shall have no claim against the Company in
respect of the termination of his employment hereunder by reason of such
liquidation.
18. NOTICES
Any notice to be given hereunder shall be in writing and shall be
sufficiently served if sent or delivered in the case of the Company to its
registered office for the time being and in the case of the Executive to her in
person or to her usual or last known place of residence and may be sent by
prepaid post or delivered by hand
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and proof of dispatch by one of these methods shall be deemed to be proof of
receipt in the case of notices sent by first class prepaid post within the
United Kingdom forty-eight hours after the time of posting and otherwise in the
normal course of delivery.
No form of notice by electronic means, cable or telex will be acceptable.
19. DISCIPLINARY AND GRIEVANCE PROCEDURES
19.1 The Executive is subject to the Company's disciplinary rules and
disciplinary procedures. These rules and procedures are non-contractual and may
be varied by the Company from time to time.
19.2 If the Executive has any grievance relating to his employment (other
than one relating to a disciplinary decision) he should refer such grievance to
the directors of the Company for resolution.
20. INDEMNIFICATION
To the fullest extent permitted by law and Getty Images' by laws, the
Company shall indemnify the Executive (including advancement of expenses) for
any judgements, fines, amounts paid in settlement and reasonable expenses,
including solicitor's fees, incurred by the Executive in connection with the
defence of any lawsuit or other claim to which he is made party by reason of
being an officer, director, or employee of Getty Images or its associated
companies.
21. PREVIOUS AGREEMENTS
This Agreement supersedes all or any previous contract of service between
the company or any subsidiary or Holding Company and the Executive and any such
contracts shall be deemed to have been terminated by mutual consent as from the
date on which his employment hereunder shall commence.
22. STATUTORY STATEMENT
The information contained herein and in the schedule constitutes a written
statement of the terms of employment of the Executive in compliance with the
provisions of the Act.
23. LAW
This Agreement is governed by and shall be construed in accordance with the
laws of England.
IN WITNESS whereof the Company and the Executive have executed and
delivered this Agreement as a deed on the date first stated above.
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THE SCHEDULE
In accordance with the Employment Rights Act 1996 the following terms of
the Executive's employment apply on the date of the Agreement to which this is a
schedule.
1. COMMENCEMENT OF EMPLOYMENT
To be agreed.
2. JOB TITLE AND SPECIFICATION
The Executive's job title is Chief Financial Officer.
The Executive's job specification will follow.
3. PRINCIPAL PLACE OF WORK
The Executive's principal place of work is 101 Bayham Street, London, NW1
0AG.
4. DISCIPLINARY PROCEDURE
The Executive has been notified where a copy is available for inspection of
the Company's Disciplinary Procedure which may be updated from time to time by
the Company.
5. GRIEVANCE AND APPEALS PROCEDURE
The Executive has been notified where a copy is available for inspection of
the Company's Grievance Procedure which may be updated from time to time by the
Company.
6. HOLIDAY
The Executive is entitled to 25 working days weeks holidays with pay -- see
Clause 8 of the Agreement. The Executive's entitlement to holiday will accrue
pro rata through each calendar year or part thereof of employment.
On the cessation of employment for whatsoever reason an adjustment shall be
made to the final payment of salary to the Executive by way of additional
payment of salary in respect of holidays accrued if appropriate.
7. REMUNERATION
See Clause 4.
8. HOURS OF WORK
The hours of work will be from 9.15 am to 5.15 pm, Monday to Friday, and
any such hours as may be necessary or required from time to time.
9. SICKNESS OR INJURY
See Clause 9.
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10. NOTICES
See Clause 18.
<TABLE>
<S> <C>
EXECUTED AND DELIVERED as a
deed by GETTY IMAGES, INC.
acting by
(a director)
and
(a director / secretary)
SIGNED AND DELIVERED as a deed
by the said Christopher J Roling
in the presence of
</TABLE>
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<PAGE> 1
EXHIBIT 10.12
SEPARATION AGREEMENT
This separation agreement ("Separation Agreement") is entered into this
day of July, 1998 (the "Effective Date"), by and between PhotoDisc Inc.
("PhotoDisc"), Getty Images, Inc. ("Getty Images") and Robert J. Chamberlain
("Chamberlain").
I. RECITALS
A. Chamberlain is currently employed by PhotoDisc as Co-President. Getty
Images is the parent company of PhotoDisc.
B. The parties agree that it is in their mutual interest for Chamberlain
to resign from his employment with PhotoDisc.
C. The parties desire to agree on a separation package to aid
Chamberlain's transition to alternative employment.
II. AGREEMENT
In consideration of the foregoing recitals, the parties agree as follows:
1. SEPARATION OF EMPLOYMENT. Chamberlain resigns from his employment
with PhotoDisc effective July 1, 1998 (the "Separation Date").
2. SEPARATION PACKAGE. PhotoDisc and Getty Images agree to provide
Chamberlain with the following benefits:
a. Separation Pay. PhotoDisc and Getty Images agree that Chamberlain
shall continue to be paid his current regular salary from the Separation Date
through May 31, 1999. Any such salary continuation payments PhotoDisc and Getty
Images are obligated to make shall be paid, at Chamberlain's election either by
check or via direct deposit, in installments consistent with PhotoDisc's normal
payroll periods; provided, however, that the first payment shall not be made
until after the Effective Date of this Agreement.
b. Bonus. PhotoDisc and Getty Images agree to pay Chamberlain a bonus
equal to 20 percent of the salary continuation payments Chamberlain is entitled
to receive under this Separation Agreement. Such bonus shall be paid in two
equal installments, the first bonus installment to be included in the first
salary continuation payment made after the effective date of this Separation
Agreement, and the remaining bonus installment to be included in the final
salary continuation payment made under this Separation Agreement.
c. Health Insurance. PhotoDisc will provide Chamberlain and his
dependents with continued medical, dental and vision benefits under its current
health insurance policies for 18 months following the Separation Date ("COBRA"
benefits). If Chamberlain makes timely application for such COBRA benefits,
PhotoDisc agrees that it will pay the premiums for such coverage to the same
extent paid by the PhotoDisc immediately prior to the effective date of this
Separation Agreement through May 31, 1999 or the date on which Chamberlain
becomes eligible for health insurance coverage through a new employer, whichever
is earlier. If Chamberlain becomes reemployed with another employer prior to May
31, 1999, Chamberlain agrees to notify PhotoDisc within 30 days of becoming
eligible for health insurance benefits through his new employer. If Chamberlain
is not eligible for health insurance through another employer on May 31, 1999,
Chamberlain may continue coverage for himself and his dependents for the
remainder of the COBRA period at his own expense. It is the intent of the
parties that Chamberlain's COBRA rights begin to run on the Separation Date.
Chamberlain acknowledges the parties' agreement that the separation package
described above is designed to aid Chamberlain's transition to alternative
employment, and that the specified benefits do not constitute benefits to which
he would otherwise be entitled under existing employee benefit plans provided by
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PhotoDisc or under any pre-existing contract between Chamberlain and PhotoDisc
or between Chamberlain and Getty Images.
3. STOCK OPTIONS. The parties agree that stock options previously
granted Chamberlain via the Employment Agreement dated February 9, 1998 between
Chamberlain and PhotoDisc and/or via the Non-Qualified Stock Option Agreement
dated February 9, 1998 between Chamberlain and Getty Images shall continue to
vest through May 1, 1999. Such options shall remain outstanding until February
1, 2008. The options previously granted to Chamberlain by PhotoDisc shall
continue to vest through May 16, 1999, and shall remain outstanding for 10 years
following the date on which such options were granted.
4. ACCRUED VACATION. PhotoDisc agrees to pay Chamberlain for his accrued
but unused vacation as of the Effective Date of this Separation Agreement.
5. TAX WITHHOLDING. All payments made under this Separation Agreement
shall be subject to applicable federal income tax, social security and any other
required withholdings.
6. RELEASE. Chamberlain accepts the benefits contained in this
Separation Agreement in full satisfaction of all his rights and interests
relating to his employment with and separation from PhotoDisc and in full
satisfaction of all his rights and interests arising under any pre-existing
agreement between the parties including, without limitation, the Employment
Agreement dated February 9, 1998 between Chamberlain and PhotoDisc and any and
all option agreements between Chamberlain and PhotoDisc or between Chamberlain
and Getty Images. In consideration therefore, Chamberlain hereby releases
PhotoDisc, its affiliates, its parent Getty Images, and their respective
successors, past and present officers, directors, agents, and employees (the
"PhotoDisc Affiliates") from all claims (other than claims for the payments
provided for under this Separation Agreement), causes of action or liabilities,
suspected or unsuspected and irrespective of any present lack of knowledge of
any possible claim or of any fact or circumstance pertaining thereto, which
Chamberlain may have or claim to have against PhotoDisc or any of the foregoing
arising from or during his employment or as a result of his separation from
employment. This release specifically covers, but is not limited to, any
workers' compensation or disability claims under state law; any claims of
discrimination based on race, color, national origin, sex, marital status, or
physical or mental disability under any federal, state, or local law, rule, or
regulation; any contract or tort claims arising under federal, state, or local
law; any claims arising under federal, state or local law based on promises made
or allegedly made by PhotoDisc or the PhotoDisc Affiliates to Chamberlain; and
any claims under any express or implied contract or legal restrictions on
PhotoDisc's right to terminate its employees. Chamberlain hereby covenants not
to assert any such claims or causes of action.
7. OTHER CLAIMS OR LAWSUITS. Chamberlain represents that as of the date
of the Separation Agreement, he has not filed any complaints, charges or
lawsuits against PhotoDisc with any governmental agency or any court.
8. NO ADMISSION. Nothing in this Separation Agreement shall be construed
as any indication that PhotoDisc has acted wrongfully towards Chamberlain or any
other person.
9. NO DISPARAGEMENT. PhotoDisc and Chamberlain agree that neither will
make any derogatory or disparaging statements about the other party or, in the
case of Chamberlain, the PhotoDisc Affiliates, including, without limitation, in
any discussion with third parties, in a press release, or in any other similar
forum or manner. This prohibition specifically includes any statements about
Chamberlain if made by PhotoDisc through its officers or directors or those of
the PhotoDisc Affiliates, and any statements made about PhotoDisc or the
PhotoDisc Affiliates, their officers and/or directors, if made by Chamberlain.
This paragraph shall not in any way prohibit either party from making whatever
statements are necessary in order to defend itself in any third-party
litigation, or as otherwise required by law or legal process.
10. CHARACTERIZATION OF SEPARATION. PhotoDisc and Chamberlain agree that
PhotoDisc will announce Chamberlain's separation to PhotoDisc personnel via the
internal announcement attached to this Separation Agreement as Exhibit A. The
parties further agree, and PhotoDisc agrees on behalf of the PhotoDisc
Affiliates, to characterize Chamberlain's separation in a manner consistent with
said internal announcement in any discussions or communications with third
parties.
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11. INDEMNIFICATION. PhotoDisc agrees that nothing in this Separation
Agreement shall alter Chamberlain's entitlement to corporate officer
indemnification under PhotoDisc's corporate bylaws.
12. VOLUNTARY EXECUTION. Chamberlain represents that he has read,
considered, and fully understands this Separation Agreement and all its terms,
and executes it freely and voluntarily.
13. CONSTRUCTION OF AGREEMENT; GOVERNING LAW. Each party has had a full
and complete opportunity to review this Separation Agreement, and has been given
the opportunity to have counsel review it. Accordingly, the parties agree that
the common law principles of construing ambiguities against the drafter shall
have no application to this Separation Agreement. Interpretation of this
Separation Agreement shall be under Washington law. If any such action is
necessary to enforce the terms of this Separation Agreement, the substantially
prevailing party shall be entitled to receive reasonable attorneys' fees and
costs.
14. NO REPRESENTATIONS. Chamberlain represents that in entering into this
Separation Agreement, he does not rely and has not relied upon any
representation or statement made by PhotoDisc or the PhotoDisc Affiliates or any
of their respective employees or agents concerning this Separation Agreement.
15. CONFIDENTIALITY. Chamberlain agrees to keep the terms of this
Separation Agreement confidential, except for communications about it with his
immediate family, attorney or accountants or other professional financial
advisors. Chamberlain further agrees to take all reasonable steps necessary to
ensure that confidentiality is maintained by any of the individuals referenced
above to whom disclosure is authorized, and agrees to accept responsibility for
any breach of confidentiality by any individual to whom he disclosed the terms
of the Separation Agreement. Chamberlain agrees that damages for breach of this
Confidentiality provision would be difficult to determine and therefore agrees
that this provision may be enforced by temporary or permanent injunction. The
right to such injunctive relief shall be in addition to and not in place of any
further remedies to which PhotoDisc may be entitled.
16. COMPLETE AGREEMENT. This Separation Agreement constitutes a full and
final resolution of all matters in any way related to Chamberlain's employment
with and separation from PhotoDisc. This Separation Agreement supersedes any and
all other agreements between the parties including without limitation the
Employment Agreement dated February 9, 1998 between Chamberlain and PhotoDisc,
with the express exception of the following: Section 6 of the above-referenced
Employment Agreement is hereby incorporated by reference; provided, however,
that, in addition to the circumstances described in Section 6, paragraph (a)
(i)-(iii) of said Employment Agreement, the execution of this Separation
Agreement is sufficient to trigger the obligations owed under paragraphs (a)
through (f) of Section 6, and further provided that the "Restricted Period"
specified in paragraph (a) of Section 6 shall terminate effective May 31, 1999.
Consistent with the remainder of this Separation Agreement, the incorporated
portion of the February 9, 1998 Employment Agreement shall be interpreted in
accordance with Washington law. Except as provided in this Separation Agreement,
there are no other wages, bonuses or benefits of any kind owed by PhotoDisc or
Getty Images to Chamberlain.
17. AMENDMENT. The parties agree that no modification, change or amendment
of this Separation Agreement or any of its provisions shall be valid, unless in
writing and signed by the party against whom such claimed modification, change
or amendment is sought to be enforced.
18. SEVERABILITY. If any provision of this Separation Agreement, or
portion thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction or in any arbitration proceeding, such invalidity or
unenforceability shall attach only to such provision or portion thereof, and
shall not in any way affect or render invalid or unenforceable any other
provision of this Separation Agreement or portion thereof, and this Separation
Agreement shall be carried out as if any such invalid or unenforceable provision
or portion thereof were not contained herein. In addition, any such invalid or
unenforceable provision shall be deemed, without further action on the part of
the parties, modified, amended or limited to the extent necessary to render the
same valid and enforceable.
19. TITLES. The titles of the paragraphs of this Separation Agreement are
inserted merely for convenience and ease of reference and shall not affect or
modify the meaning of any of the terms, covenants or conditions of the
Separation Agreement.
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IN WITNESS WHEREOF, the parties have executed this Separation Agreement
effective as of the day and year first written above.
<TABLE>
<S> <C>
ROBERT J. CHAMBERLAIN
- --------------------------------------------
Robert J. Chamberlain
PHOTODISC, INC.
By
- --------------------------------------------
Its
- --------------------------------------------
GETTY IMAGES, INC.
By
- --------------------------------------------
Its
- --------------------------------------------
</TABLE>
4
<PAGE> 1
EXHIBIT 10.13
GETTY IMAGES, INC.
September 28, 1998
Mark Torrance
2013 Fourth Avenue
Seattle, Washington 98121
Dear Mr. Torrance:
This Agreement (this "Agreement"), dated as of September 28, 1998, reflects
our mutual agreement concerning your resignation as an officer and employee of
Getty Images, Inc., a Delaware corporation (the "Company"), including your
position as Co-Chairman of the Board of Directors (the "Board"), and your
appointment as Vice-Chairman of the Board, in accordance with the terms and
conditions set forth below.
1. RESIGNATION AND APPOINTMENT. By signing this Agreement, effective as
of September 28, 1998 (the "Effective Date"), you hereby agree to resign without
further action by the parties hereto from your position as Co-Chairman of the
Board and a member of the Executive Committee and from each other position in
which you serve as an officer or employee of the Company. In this regard, you
will vacate any offices that you may have in any Company building or buildings,
including, but not limited to, your office in Seattle, Washington. You will have
a reasonable opportunity on and following the Effective Date to remove and take
with you from your offices at the Company your personal property, equipment,
records and files (in whatever form), effects and belongings, and copies of any
other documents, records, and files that you and the Company mutually agree are
appropriate for you to have. Representatives of the Company will be made
available to you to assist you with this process. Both you and the Company will
use your respective best efforts to effect this vacation of the offices promptly
and in a seemly and proper manner. All equipment located in a home of yours and
provided pursuant to Section 3(f) of the Employment Agreement will be yours
without charge.
Upon the Effective Date you will remain a member of the Board and become
its Vice Chairman. You hereby acknowledge that the Vice Chairmanship is a
non-executive, non-employee position with the Company. In accordance with
Section 2.01 of the Stockholders' Agreement among the Company's stockholders,
dated as of February 9, 1998, so long as any combination of you, PDI, L.L.C. and
Wade Torrance beneficially own not less than the greater of (a) 3,000,000 shares
of the Company's $.01 par value common stock (the "Common Stock"), subject to
equitable adjustments in the event of stock splits, stock dividends and similar
events, and (b) such number of shares of Common Stock as is equal to 2% of the
then outstanding shares of Common Stock, the Company will be obligated, unless
you advise it otherwise, to nominate you for reelection, and to use all
reasonable efforts to cause you to be elected to its Board.
2. TERMINATION OF PRIOR AGREEMENTS AND UNDERSTANDINGS. As of the date
hereof, subject to fulfillment by the Company of its obligations under this
Agreement, all written or oral agreements or understandings between you and the
Company regarding your employment with the Company are terminated and of no
further force and effect, and this Agreement shall supersede all prior
agreements or understandings between you and the Company regarding your
employment, including, without limitation, the Employment Agreement between you
and the Company, dated as of February 9, 1998 (the "Employment Agreement").
3. STRATEGIC OVERSIGHT COMMITTEE; BOARD GUIDELINES. Subject to your
execution of this Agreement and your compliance with its terms, the Company
covenants that:
(a) As soon as reasonably practicable following the Effective Date, the
Board shall form a Strategic Oversight Committee (the "Strategic
Committee") that will render advice to the Company's management (the
"Management") on all of the Company's major strategic initiatives,
including those relating to the new products or services and
acquisitions, mergers and other business combinations. You and Mark
Getty will be members of the Strategic Committee, and the Board
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will determine in its discretion the additional members,
responsibilities and procedures of the Strategic Committee.
(b) As soon as reasonably practicable following the Effective Date, the
Board shall establish a set of guidelines (the "Guidelines")
concerning the relationship and communications between the Board and
the Management for the purposes of enabling the Board and the
Management to better carry out their respective duties and
responsibilities to the Company and its stockholders, including their
duties of care and loyalty.
4. NO AGENCY. Nothing contained in this Agreement shall be construed as
creating an agency relationship between you and the Company and, without prior
consent of or direction from an officer of the Company with the proper authority
to exercise such consent or direction, you will have no authority hereunder to
bind the Company or to speak or make any commitments on the Company's behalf.
You agree that you will not take any action in connection with your membership
and position on the Board or the Strategic Committee which you reasonably
believe would cause any third party to assume that you have such authority.
5. PAYMENTS AND BENEFITS IN CONNECTION WITH YOUR RESIGNATION. Subject to
the remedies for breach set forth in Section 8, the Company shall pay and
provide to you the following payments and benefits.
(a) Contract Termination and Release Payments. As soon as practicable (but
in no event later than October 28, 1998), the Company shall pay to you a lump
sum of $560,000.00 as consideration for the termination of your employment
relationship with the Company under the Employment Agreement and the release of
the Company Parties (as hereinafter defined) included in Section 10 hereof.
(b) Accrued Compensation; Bonus. As soon as practicable (but in no event
later than October 28, 1998), the Company agrees to pay you (i) any salary and
deferred compensation accrued pursuant to the Employment Agreement for the
period beginning on September 15, 1998 and ending on the Effective Date, and
(ii) a lump sum payment of $73,333.33 representing the portion of your bonus
earned in 1998 through and including the Effective Date.
(c) Covenant Payment. As soon as practicable (but in no event later than
October 28, 1998), the Company shall pay to you a lump sum of $530,833.00 as
consideration for the covenants included in Section 7 hereof.
(d) Stock Options. After the Effective Date, you shall be entitled to hold
and exercise the stock options granted to you pursuant to the Company's 1998
Stock Incentive Plan, including the Option and the Deal Option (as these terms
are defined in the Employment Agreement) in accordance with the stock option
agreement between you and the Company, dated as of February 9, 1998 (the "Option
Agreement"), as if you had continued to be an employee of the Company. The
Option Agreement provides that you may exercise any vested options until
February 1, 2008. In addition, as long as you comply with the restrictions
described in Section 7 hereof, such options will vest in accordance with the
following schedule: 175,000 options will vest on November 1, 1998 and the
remaining 375,000 options will vest at a rate of 15,000 options per month.
(e) Continuation of Benefits. Beginning on the Effective Date and
continuing until September 27, 2000 (the "Benefits Termination Date"), you will
continue to participate, at the Company's expense, in the health and medical
plans of the Company, on the same terms and conditions as are in effect
immediately prior to the Effective Date. Thereafter, you may continue to
participate in the Company's group health insurance program in accordance with
Section 4980B(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
at your expense. Anything herein to the contrary notwithstanding, the Company
shall have no obligation to continue or maintain, during the period preceding
the Benefits Termination Date, 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) Life Insurance. If you so elect, the life insurance policy maintained
by the Company pursuant to Section 3(d) of the Employment Agreement will, to the
extent permitted by its terms, be assigned and transferred to you.
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(g) Expenses. As soon as practicable (but in no event later than October
28, 1998), the Company will pay to you a lump sum of $70,000.00 as reimbursement
for the costs, fees and expenses (i) incurred in connection with the merger of
PhotoDisc, Inc. and Print Merger, Inc. and still remaining unreimbursed, and
(ii) associated with the termination of your employment and reaching this
Agreement.
6. NO OTHER PAYMENTS OR BENEFITS. Except as otherwise expressly provided
herein, you hereby acknowledge and agree that you are not entitled to any other
compensation or benefits from the Company in connection with your resignation of
employment or otherwise and that, except as expressly set forth herein, you are
not entitled to any severance or similar benefits under any plan, program,
policy or arrangement, whether formal or informal, written or unwritten, of the
Company.
7. PROTECTION OF THE COMPANY'S INTERESTS. In partial consideration of
the payments and benefits to be paid and provided to you in accordance with
Section 5 above, you hereby agree to abide by the terms and covenants included
in this Section 7, which you acknowledge and agree are necessary to protect the
interests of the Company and are reasonable in scope and duration. The
activities described in this Section 7 shall be permitted and prohibited
regardless of whether undertaken by you in an individual or representative
capacity, and regardless of whether performed for your own account or for the
account of any other individual, partnership, firm, corporation, or other
business organization (other than the Company).
(a) You agree that during the period beginning on the Effective Date and
ending on February 9, 2001 (the "Restricted Period"), you shall not, without the
prior 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
Company, its subsidiaries and affiliates (collectively, the "Group") by
providing any goods or services provided or under development by the Group at
the Effective Date; provided, however, that this Section 7(a) shall not
proscribe your ownership, directly or indirectly, of either (i) less than five
percent of any 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 (ii) any limited partnership investment over which
you have no control.
(b) No Interference. You agree that during the Restricted Period, you
shall not, whether for your own account or for the account of any other
individual, partnership, firm, corporation or other business organization,
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 (other than your
current assistant, Debbie Pfeifer) or any key person, team or entity who is, or
was within the most recent twelve-month period, a customer, client or supplier
of the Group.
(c) Secrecy. You understand and acknowledge that in the course of your
employment, you acquired "Confidential Information" (as defined below) 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, you
covenant and agree with the Company that you will not, at any time, except with
the prior written consent of the Board, directly or indirectly disclose to any
person any secret or confidential information that you have learned by reason of
your association with the Group.
"Confidential Information" shall mean 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. You confirm that all Confidential Information is
and shall remain the exclusive property of the Group. All business records,
papers and documents kept or made by you relating to the business of the Group
shall be and remain the property of the Group. You 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 you or coming into
your possession concerning the business or affairs of the Group;
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provided, however, that nothing herein will require you to surrender documents
that the Company reasonably believes are necessary for you to retain in your
capacity as a director of the Company; provided, further, that the Company
hereby agrees to provide you with copies (the cost of which shall be borne by
you) of any documents which you request and which you have determined in good
faith are (i) required to establish a defense to a claim that you have not
complied with your duties as an officer of the Company or (ii) necessary to you
in order to comply with applicable law.
(e) Assignment of Developments. All "Developments" (as defined below) that
were at any time made, conceived or suggested by you, whether acting alone or in
conjunction with others, during or as a result of your 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 your part. You acknowledge and confirm
that if such Developments were made, conceived or suggested by you during or as
a result of your employment relationship with the Group, you had and complied
with an affirmative obligation to make prompt and full disclosure of any such
Developments to the Group and, at the Group's cost and expense, to 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 your right and title, if any, to such Developments.
"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 present or
planned activities, or future activities, of the Group of which you are aware as
of the date of this Agreement, excluding any Development for which no equipment,
supplies, facilities or confidential information of the Group was used and which
was developed entirely on your 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 you 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 8(e), the fact that an invention was created using equipment
provided by the Company for your personal use shall not create a presumption
that such invention is a "Development." The parties hereto acknowledge and agree
that "Developments" shall not be construed to include any data, discoveries,
findings, reports, designs, inventions, improvements, methods, practices,
techniques, developments, programs, concepts or ideas of which you became aware
prior to your employment with the Company (each a "Pre-Employment Development");
provided, however, that any enhancement, improvement, refinement or any other
modification to any Pre-Employment Development relating to the present or
planned activities, or any future activities of which you are aware, or the
products and services of the Company of which you became aware during the course
of your employment with the Company shall be construed to be a Development.
(f) Extension of Restricted Period. The Restricted Period shall be
extended by the length of any period during which you are in breach of any of
the terms of this Section 7.
(g) As soon as practicable after the Effective Date, other than as agreed
upon pursuant to Sections 1 and 5(d) of this agreement, you shall return to the
Group all property of the Group then in your possession and all property made
available to you in connection with your service to the Group, including,
without limitation, your Company credit cards, any and all records, drawings,
manuals, reports, papers and documents kept or made by you in connection with
your employment as an officer or employee of the Company, all computer hardware
or software, files, memoranda, correspondence, vendor and customer lists,
financial data, keys and security access cards, and any other materials or
documents described in Section 7(c) above.
(h) Each of the parties hereto hereby agrees to keep the terms of this
Agreement and all communications between either party and its respective counsel
regarding the same and any and all events, allegations, actions and
circumstances related to your resignation from the Company in strict confidence.
The form of the Company's press release to be issued in connection with your
resignation is attached as Exhibit A to this Agreement.
8. REMEDIES. Without intending to limit the remedies available to the
Company, you acknowledge that a breach of any of the covenants contained in
Section 7 may result in material irreparable injury to the
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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 you
from engaging in activities prohibited by Section 7 or such other relief as may
be required to specifically enforce any of the covenants in Section 7. Without
intending to limit the remedies available to you, you shall be entitled to seek
specific performance of the Company's obligations under this Agreement.
9. UNFAVORABLE COMMENTS; STATEMENTS REGARDING YOUR RESIGNATION;
CONFIDENTIALLY. (a) You agree to refrain from making now or at any time in the
future any false, derogatory or defamatory comment, statement or other
communication concerning the Group, its products, its services or any current or
former directors, officers or employees of the Group to any third party,
including, without limitation, the press, employees of the Company and any
individual or entity with whom you or the Company has a current or prospective
business relationship.
(b) The Company agrees to refrain from making now or at any time in the
future any false, derogatory or defamatory comment, statement or other
communication concerning you or your employment relationship with the Company to
any third party, including, without limitation, the press, employees of the
Company and any individual or entity with whom you or the Company has a current
or prospective business relationship.
(c) You and the Company hereby agree that you have resigned from your
employment with the Company pursuant to a mutually acceptable separation
agreement, the terms of which are confidential, and that, upon inquiry regarding
your resignation by any third party, including, without limitation, employees of
the Company, customers of the Company and the press, such inquirer shall not be
given information which is contrary to or violates this Section 9. Exhibit A to
this Agreement sets forth a press release regarding your termination to which
both of us have agreed and which will be used, to the exclusion of any other
such release, to announce your resignation.
10. MUTUAL RELEASE. (a) For purposes of this Mutual Release, "Employee
Parties" means you, your family members, your estate, your beneficiaries, your
heirs and your assigns and the estate, beneficiaries, heirs and assigns of each
of the foregoing; "Company Parties" means the Company (as defined in the first
paragraph of this Agreement) and each of its present, former and future
directors, officers, employees, agents, attorneys, heirs and assigns. The
Employee Parties and the Company Parties together shall hereinafter be referred
to as the "Released Parties."
(b) In recognition of the mutual consideration set forth herein, the
receipt and adequacy of which are herein acknowledged, and intended to be
legally bound hereby, the Company Parties, on the one hand, and the Employee
Parties, on the other hand, hereto do hereby release and discharge each other
from any and all claims, actions, causes of action, suits, costs, controversies,
judgements, decrees, verdicts, damages, liabilities, attorneys' fees, covenants,
contracts, and agreements that any of the Employee Parties or Company Parties
may have, or in the future may possess, with respect to each other, and arising
out of or directly or indirectly relating to your employment by the Company,
including, but not limited to, any claims arising under Title VII of the Civil
Rights Act of 1964, the Rehabilitation Act of 1973, the Americans with
Disabilities Act of 1990, the Civil Rights Act of 1866, the Civil Rights Act of
1991, the Employee Retirement Income Security Act of 1974, the Family Medical
Leave Act of 1993, or any other federal or state or local law, whether such
claim arises under statute, common law or in equity, and whether or not any of
the Released Parties are presently aware of the existence of such claim, damage,
action or cause of action, suit or demand. The Company Parties, on the one hand,
and the Employee Parties, on the other, also do forever release, discharge and
waive any right they may have to recover in any proceeding brought by any
federal, state or local agency against any other party hereto to enforce any
laws. Each of the parties hereto agrees that the value received as described in
this Agreement shall be in full satisfaction of any and all claims, actions or
causes of action for payment or other benefits of any kind that any party or
Released Parties hereto may have against another party hereto and or any
corresponding Released Parties.
11. ACKNOWLEDGMENT. By signing this Agreement, you hereby acknowledge and
confirm that you were advised by the Company in connection with your resignation
to consult with an attorney of your choice prior to signing this Agreement and
to have such attorney explain to you the terms of this Agreement.
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12. ACCEPTANCE. You may indicate your acceptance of this Agreement by
signing and dating both copies of this Agreement and delivering one such copy to
the Company.
13. TAX CONSIDERATIONS. Any payments made to you under this Agreement
shall be reduced by the full amount legally required to be withheld for federal,
state or local income or other payroll tax purposes by the Company.
14. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware without regard to the choice
of law provisions thereof.
15. SUCCESSORS. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of its business and/or assets to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
16. SEVERABILITY. Each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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Your signature on the line below constitutes your agreement with each
provision contained herein.
GETTY IMAGES, INC.
By:
--------------------------------------
Name:
Title:
ACCEPTED AND AGREED:
Mark Torrance
Date: September 28, 1998
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EXHIBIT A
COMPANY PRESS RELEASE
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EXHIBIT 10.14
COMPROMISE AGREEMENT
THIS AGREEMENT is made on the 30th day of June 1998
BETWEEN
GETTY IMAGES LIMITED of 101 Bayham Street London NW1 0AG ("the Employer"), and
STEPHEN WARSHAW of 29 Heath Hurst Road, London, NW3 2RU ("the Employee").
AGREEMENT:
1. The effective date of termination of the Employee's employment will be 30
June 1998 ("Termination Date"). The Employee will receive his salary and
other employment benefits, including accrued but untaken holiday pay, up to
the Termination Date as well as all outstanding unpaid bonus.
2. In addition, by way of compensation for loss of employment, but without
admission of liability and subject to basic rate tax and other statutory
deductions, if any, the Employer is obliged to make, the Employer will pay
to the Employee within 14 days of his agreement the sum of L350,000. This
sum represents the following:
(a) salary for the period 1 July 1998 to 19 October 1999;
(b) bonus for the period 1 July 1998 to 19 October 1999;
(c) permanent health insurance and life insurance;
(d) payment, on an engrossed basis, of the 25% of gross salary pension
contributions to which the Employee is entitled under his contract of
employment;
(e) payment in lieu of car benefit from October 1998 to October 1999;
each adjusted for different tax treatment.
3. The Employee will be permitted to make use of the company car R812 JMR
until 19 October 1998, during which time the costs of insurance, road fund
licence, tax and maintenance will be borne by he Employer and the day to
day running costs, including fuel, will be met by the Employee.
4. The Employer will continue to provide executive health cover for the
Employee and his family through PPP Healthcare Scheme 66283 until such time
as the Employee takes up other employment or until 19 October 1999,
whichever falls earlier.
5. Options over 50,000 shares are to be retained by the Employee and the
Employer will arrange for execution of an appropriate written amendment of
the Non-Qualified Stock Option Agreement to allow for these share options
to vest immediately and be exercisable at any time within 3 years of the
Termination Date.
6. The employer agrees that any restrictive covenants referred to in clause 16
(Restrictions on Termination) of the Employee's Service Agreement dated 17
October 1997 with the Employer are waived upon signature of this agreement.
7. The Employer agrees to directly bear the costs of the Employee obtaining
the following services:
- - Outplacement counselling provided by a reputable provider approved by and on
terms agreed by the Employer for a period of up to 12 months from the date
of this Agreement or until such time as the Employee takes up other,
whichever is the earlier;
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- - legal and taxation advice in relation to this agreement to a maximum of
L6,000 (plus VAT), payment of this sum to be made direct to the Employee's
solicitor subject to receipt of a copy invoice from them stated to be
payable by the Employer; and
- - independent financial planning advice provided by Johnstone Douglas Limited.
8. The Employer will provide a reference in the form of Attachment A to this
Agreement and undertakes that any oral references given by it will be
consistent with the attached written reference. The Employer agrees that
any internal statements given by it will be in accordance with Attachment B
to this Agreement and only by mutual agreement and that any external
statements given by it will be consistent with Attachment B to this
Agreement and only by mutual agreement. Both the Employer and the Employee
agree that they will not damage the other in the market place.
9. The Employee accepts the above in full and final settlement of all matters
arising out of the Employee's employment with the Employer and the
termination thereof.
10. The Employer will pay the Employee his June salary via normal payroll and
issue the Employee's P45 on the Termination Date. The Employer will process
all other monies to which the Employee is entitled under this Agreement
within 14 days of the date of this Agreement and pay those either directly
into the Employee's bank account or by cheque sent to the Employee's home
address.
11. The Employee will refrain from instituting any proceedings before an
Industrial Tribunal in respect of any claim for unfair dismissal or
redundancy payment under Sections 94, 105, and 135 respectively of the
Employment Rights Act 1996, for sex discrimination under the Sex
Discrimination Act 1975, for Race Discrimination under the Race Relations
Act 1976, for equal pay under the Equal Pay Act 1970, for wages under Part
II of the Employment Rights Act 1996 or for disability under the disability
Discrimination Act 1995.
12. The Employee will refrain from instituting any proceedings in a court of
relevant jurisdiction for any remedy arising from any matter under his
contract of employment with the Employer or any other contract connected
with his employment and made between the parties to this Agreement and/or
the termination of any such contract, except any claim in relation to
accrued pension rights and/or personal injury.
13. The Employee will immediately return to the Employer all correspondence,
documents and information (including any contained on any computer disk or
other medium of storage of information) and without limitation, any other
property of the Employer in his possession or control (unless otherwise
agreed in writing), and he will not permit any of that property to be used
by any person and will not make or retain any copies before giving up
possession to the Employer.
14. The Employee will not, without prior written consent of the Employer,
divulge any confidential information of the Employer, including without
limitation, its technical processes, plans and passwords to any person or
company and the Employee agrees not to use any of the same directly or
indirectly.
This Agreement is made in compliance with the provisions regulating compromise
agreements under the Employment Rights Act 1996 both generally and in the
following particulars:--
(i) The Employee hereby confirms that he has received independent legal
advice as to the terms and effect of this Agreement and in particular
its effect on his ability to pursue his rights before an Industrial
Tribunal.
(ii) The legal advice has been given to the Employee by Elizabeth Potter,
Solicitor of Farrer & Co.
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(iii) The said Solicitor has confirmed to the Employee that there is in
force professional indemnity insurance covering the risk of a claim
against him and/or the said firm of Farrer & Co by the Employee in
respect of loss arising in consequence of the said advice.
- --------------------------------------
Signed for and on behalf of the
Employer
- --------------------------------------
Signed by the Employee
Signed by
(Solicitor of the Employee)
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EXHIBIT 10.15
SEPARATION AGREEMENT
THIS AGREEMENT was made effective the 13th day of March 1998, by and
between Getty Images Limited, located at 101 Bayham Street, London, NW1 0AG
("Getty Images" or the "Company") and Stephen Mayes, who resides at The
Warehouse, 17 Borland Road, London SE15 3AJ ("Executive").
WHEREAS, Getty Images and Executive entered into an Employment Agreement
dated 23rd September 1994 (the "Employment Agreement");
WHEREAS, the Employment Agreement provided for a trial period of six (6)
months followed by an indefinite term of employment which would continue
thereafter unless either party were to provide a six (6) month notification to
the other of its desire to terminate Executive's employment;
WHEREAS, Executive has determined to leave Getty Images to pursue a new
career path;
WHEREAS, Getty Images has agreed with Executive with a verbal notification
and a written Separation Agreement dated 13th March 1998, which specifies that
Executive's last day of employment would be 13th April 1998 (the "Termination
Date"); and
WHEREAS, Getty Images and Executive would like to memorialise certain
aspects of their agreement concerning Executive's termination and to reconfirm
certain terms of the Employment Agreement.
NOW THEREFORE, in consideration of the premises set forth above, the
parties agree as follows:
1. The parties agree that:
a. Executive has received and accepted the verbal notification and
written Separation Agreement dated 13th March 1998, and his last day of
employment will be the Termination Date;
Executive will be bound by the following restrictions:
b. Confidentiality. The Executive will not at any time use or disclose
or make accessible to any other person or firm or company any of the
confidential information, trade secrets, formulae or methods of doing business
of the Company or any company controlled by, controlling or under common control
with the Company or its or their customers and other business associates. This
restriction shall cease to apply to information or knowledge which may
legitimately come into the public domain. For the avoidance of doubt practices,
techniques or processes which are generally known and applied within the Visual
Content industry are excluded from this restriction.
c. Intellectual Property. If during the term of his employment the
Executive has alone or jointly with others discovered or created any
Intellectual Property which is connected with or which in any way affects or
relates to the business of the Company or is capable of being used or adapted
for use therein or in connection therewith he shall forthwith disclose it to the
Company and subject to the rights of the Executive under the Copyright, Designs
and Patents Act 1988 such Intellectual Property shall belong to and be the
absolute property of the Company or such Associated Company as the Company may
nominate. For the avoidance of doubt, this shall exclude commonly used terms
tools techniques and processes commonly found within the Visual Content
industry.
d. The Executive if and whenever required to do so shall at the expense
of the Company (or its nominee) apply or join in applying or assist the Company
to apply for letters patent design registration, copyright or other similar
protection in the United Kingdom or any other part of the world for any such
Intellectual Property and execute such instruments and do all things necessary
for vesting the said letters patent or other similar protection when obtained
and all right title and interest to and in the same in the Company (or its
nominee) absolutely and as sole beneficial owner or in such other person as the
Company require.
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e. The Executive agrees that he will not deliberately do any act or thing
which may prejudice the application for the grant or the validity of any patent
design right, copyright or other monopoly right in any
1.1
<PAGE> 3
Intellectual Property which is the property of the Company or such Associated
Company as the Company may nominate.
f. Restrictive Covenant. The Executive covenants with the Company that
he will not for the period of twelve (12) months after the Termination Date
without the prior written consent of the Company in connection with the carrying
on of any business in competition with the business of licensing Visual Content
on his own or on behalf of any person firm or company directly:
(1) seek to procure orders from or do business with any person firm or
company who to his knowledge has at any time during the twelve (12)
months immediately preceding the Termination Date done business with
the Company;
(2) seek to procure the services of any officer, Executive or employee of
the Company or supplier of Visual Content to the Company.
Provided that nothing in this Restrictive Covenant shall prohibit the
Executive from seeking or procuring of orders or the doing of business not
relating or similar to the business of the Company described above. For the
purposes of this Agreement, the "Company" or a "Getty Group Company" is defined
as Getty Images Limited, Getty Images, Inc. and all subsidiaries and all
Affiliated Companies of each.
2. Executive acknowledges and agrees that there are no agreements or
arrangements outstanding under which Getty Images or any Getty Group Company has
or could have an obligation to Executive pursuant to a contract of employment,
whether now or in the future, except for the payment of all sums owed to
Executive pursuant to the Employment Agreement, including salary, accrued
holiday pay, if any, existing bonus arrangements, if any, and all reimbursable
expenses incurred on behalf of Getty Images and any Getty Group Company, up to
and including the Termination date.
3. a. Executive acknowledges and agrees that, to the best of his
knowledge, he has no claim whatsoever against Getty Images or any Getty Group
Company for breach of contract, compensation for wrongful termination of
employment, loss of office, redundancy, wrongful dismissal or retirement or on
any other account. Executive for himself and his heirs, executors, personal
representatives and assigns also irrevocably and unconditionally waives,
releases and forever discharges Getty Images and the Getty Group Companies and
their shareholders, directors, Executives, successors, and assigns, from and
against all actions, causes of action, suits, debts, sums of money, covenants,
controversies, agreements, promises, damages, judgements, executions,
proceedings, claims, demands and costs, including reasonable attorneys fees and
court costs, whatsoever in law or in equity, whether known or unknown, foreseen
or unforeseen, related to Executive's employment and his positions as officer
and director of Getty Images and various Getty group Companies prior to the date
of this Agreement, which Executive may now have or would have had but for the
execution of this Agreement.
b. Getty Images and the Getty Group Companies acknowledge and agree
that, to the best of their knowledge, they have no claim whatsoever against the
Executive for any conduct during the term of his employment with Getty Images,
whether as Executive, officer or director of any Getty Group Company. Getty
Images and each Getty Group Company for itself and its shareholders, directors,
Executives, successors and assigns, also irrevocably and unconditionally waives,
releases and forever discharges Executive and his personal representatives,
heirs, executors, and assigns from and against all actions, causes of action,
suits, debts, sums of money, covenants, controversies, agreements, promises,
damages, judgements, executions, proceedings, claims, demands and costs,
including reasonable attorneys fees and court costs, whether known or unknown,
foreseen or unforeseen related to Executive's employment and his position as an
officer and director of various Getty Group Companies prior to the date hereof,
which it may now have or would have had but for the execution of this Agreement.
For the purposes of the Agreement the above clause shall apply
unconditionally in all circumstances except those that may contravene any civil,
moral or legal right either party may have to protect their good name,
reputation, personal or professional standing.
2
<PAGE> 4
4. Executive agrees that, having resigned as an Executive, officer and
director of Getty Images from the Termination Date forward, he shall not conduct
himself in any way inconsistent with having surrendered his authority, whether
in matters of the internal administration of any Getty Group Company or
externally and shall not represent himself as being a director of, employed by
or connected in any way with any Getty Group Company.
5. Executive agrees that after the Termination Date he shall provide
Getty Images and any other Getty Group Company with such assistance as it may
reasonably require in the conduct of any court proceeding or settlement
negotiation brought by or against any Getty Group Company in respect of which
Getty Images, the Getty Group Company or their legal advisers believe that
Executive may be able to provide assistance, subject to an agreement that
Executive's reasonable costs, loss of earnings if any and expenses incurred in
providing such assistance shall be paid to Executive.
6. The parties agree that the terms of this Agreement and all discussions
and other correspondence on this subject shall be treated as confidential and
that neither party will disclose them to any other person or entity except to a
professional advisor who has also agreed to be bound by this restriction and
except as may be required by law or any regulatory authorities or with Getty
Images' consent.
7. Executive represents and warrants that he has not, to the best of his
knowledge, withheld nor failed to disclose any material fact concerning the
performance of his duties with Getty Images and any Getty Group Company or any
breach of any material (express or implied) term of the Employment Agreement.
8. This Agreement shall be governed by and construed in accordance with
English law and the English Courts shall be the exclusive jurisdiction to hear
and decide any suit, action or proceeding and to settle any disputes which may
arise out of or in connection with the Agreement or the Employment Agreement.
GETTY IMAGES LIMITED
<TABLE>
<S> <C>
By: By:
- -------------------------------------------- --------------------------------------------
Lawrence Gould, Director Stephen Mayes
</TABLE>
The undersigned, acknowledges the obligations of Getty Images, Inc. and its
subsidiaries as set forth in Paragraphs 3b and 6 and agrees to be bound by same.
GETTY IMAGES, INC.
<TABLE>
<S> <C>
By:
- --------------------------------------------
Jonathan D. Klein, Chief Executive Officer
</TABLE>
3
<PAGE> 1
EXHIBIT 21.1
The Registrant's subsidiaries, the state or other jurisdiction of
incorporation or organization of each, and the name under which such
subsidiaries do business (if any) are set forth below.
<TABLE>
<CAPTION>
Subsidiary State or Country Name under Which
of Incorporation Subsidiary
Does Business
(if any)
- --------------------------------------------------------------------------------
<S> <C> <C>
Allsport Australia Pty Limited Australia
Allsport Photographic Limited England and Wales
Allsport (UK) Limited England and Wales
Allsport Photography USA Inc. California
Artcast Corporation Washington
Fabulous Footage, Inc. Massachusetts
Fotogram Stone S.a.r.l. France
Fototeca Stone S.L. Spain
Gamma-Liaison Inc. New York
Getty Communications Group
Finance Limited England and Wales
Getty Communications Limited England and Wales
Getty Images Australia Pty Limited Australia
Getty Images BvbA Belgium
Getty Images Denmark ApS Denmark
Getty Images do Brasil Limitada Brazil
Getty Images Holland BV Holland
Getty Images Hong Kong Limited Hong Kong
Getty Images Limited England and Wales
Getty Images South America Limited England and Wales
Getty Images South America LLC Delaware
Getty Images Sweden AB Sweden
Hulton Getty Holdings Limited England and Wales
Hulton Getty Picture Collection Ltd. England and Wales
ImageWays, Inc. New York
Liaison Agency Inc. New York
Liaison International Inc. New York
PhotoDisc Australia Pty Limited Australia
PhotoDisc Deutschland GmbH Germany
PhotoDisc Europe Limited England and Wales
PhotoDisc France S.a.r.l. France
PhotoDisc, Inc. Washington
PhotoDisc International, Inc. Barbados
PhotoDisc Japan Kabushiki Kaisha Japan
PhotoDisc Scandinavia AB Sweden
tonystone.com ltd. Bermuda
Tony Stone Associates Limited England and Wales
Tony Stone Associates GmbH Germany
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Tony Stone GmbH Austria
Tony Stone Images/America, Inc. Illinois
Tony Stone Images/Canada, Inc. Ontario
Tony Stone Images/Chicago, Inc. Illinois
Tony Stone Images/Los Angeles, Inc. California
Tony Stone Images/New York, Inc. New York
Tony Stone Images/Seattle, Inc. Washington
TriEnergy Productions California
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
(No. 333-46325) on Form S-8 of Getty Images, Inc. and the registration statement
(No. 333-61823) on Form S-3 of Getty Images, Inc. of our report dated March 31,
1999 of our audits of the consolidated financial statements and financial
statement schedules of Getty Images, Inc. and subsidiaries and of Getty
Communications plc and subsidiaries (predecessor company) as of December 31,
1998 and 1997 and for each of the three years ended December 31, 1998, which
report is included in the Annual Report on Form 10-K of Getty Images, Inc. for
the year ended December 31, 1998.
PricewaterhouseCoopers
Chartered Accountants
London
March 31, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31ST, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 16,150
<SECURITIES> 0
<RECEIVABLES> 37,767
<ALLOWANCES> 4,800
<INVENTORY> 2,834
<CURRENT-ASSETS> 69,209
<PP&E> 111,170
<DEPRECIATION> 48,413
<TOTAL-ASSETS> 462,863
<CURRENT-LIABILITIES> 46,582
<BONDS> 0
0
0
<COMMON> 306
<OTHER-SE> 343,621
<TOTAL-LIABILITY-AND-EQUITY> 462,863
<SALES> 185,084
<TOTAL-REVENUES> 185,084
<CGS> 52,830
<TOTAL-COSTS> 96,904
<OTHER-EXPENSES> 65,113
<LOSS-PROVISION> 1,300
<INTEREST-EXPENSE> 2,986
<INCOME-PRETAX> (32,873)
<INCOME-TAX> 2,680
<INCOME-CONTINUING> (35,553)
<DISCONTINUED> 0
<EXTRAORDINARY> 830
<CHANGES> 0
<NET-INCOME> (36,383)
<EPS-PRIMARY> (1.25)
<EPS-DILUTED> 0
</TABLE>
