AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GETTY IMAGES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 7389 98-0177556
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
2101 FOURTH AVENUE, FIFTH FLOOR
SEATTLE, WASHINGTON 98121
(206) 695-3400
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
SUZANNE L. PAGE, ESQ.
GENERAL COUNSEL
GETTY IMAGES, INC.
2101 FOURTH AVENUE, FIFTH FLOOR
SEATTLE, WASHINGTON 98121
(206) 695-3400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With a Copy to:
Stephen M. Besen, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8574
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon
as practicable following the effective date.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED(1) UNIT(2) PRICE (2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common stock, $.01 par value, of
Getty Images, Inc. 1,561,010 $20.1875 $31,512,889 $8,760.59
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(1) In addition to the shares listed on the table, the amount to be
registered includes an indeterminable number of securities as may be
issuable upon exchange of the exchangeable non-voting shares of 3032097
Nova Scotia Limited, as this number is subject to adjustment from time
to time.
(2) Estimated for the sole purpose of computing the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8, MAY
DETERMINE.
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE WOULD NOT BE PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1999
1,561,010 SHARES
GETTY IMAGES, INC.
COMMON STOCK
Certain of our stockholders are offering the shares of common stock.
We will not receive any proceeds from the sale of the shares.
Each of the selling stockholders may sell the shares of common stock
from time to time on terms to be determined at the time of sale. To the extent
required, the specific shares to be sold and the terms of the offering with
respect to a particular sale will be set forth in an accompanying prospectus
supplement. We have paid substantially all of the costs of this offering,
estimated at $80,000.
The selling stockholders and any broker-dealers, agents or
underwriters that participate in the distribution of the common stock may be
deemed to be underwriters under the Securities Act of 1933, as amended. Any
commission received by them and any profit on the resale of the common stock
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
Our common stock is quoted on The Nasdaq National Market under the
symbol "GETY". On September 2, 1999, the reported last sale price for our common
stock was $19 3/8 per share.
See "Risk Factors", beginning on page 8, to read about factors you
should consider before buying shares of the common stock.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
COMMISSION HAS APPROVED OR DISAPPROVED OF ANYONE'S INVESTMENT IN THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
THE DATE OF THIS PROSPECTUS IS _________ __, 1999
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In this prospectus, references to "dollars" or "$" are to United
States dollars and references to "pounds sterling" or "L" are to United Kingdom
pounds sterling. This prospectus contains trademarks and registered trademarks
of Getty Images and other companies.
AVAILABLE INFORMATION
Getty Images is subject to the informational requirements of the
Securities Exchange Act of 1934 and files reports and other information with the
Securities and Exchange Commission. You may inspect and copy reports and other
information at the public reference facilities maintained by the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the SEC located at 7 World Trade Center, Room 1300, 13th Floor, New
York, NY 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511. You can also obtain copies of these materials by mail
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. These reports and other information
are also available at a website maintained by the SEC that contains reports,
proxy and information statements and other information that registrants file
electronically with the SEC. The address of this site is: http://www.sec.gov. In
addition, you may inspect and copy this material at the offices of the National
Association of Securities Dealers, Inc., 1935 K Street, N.W., Washington, D.C.
20006. Our common stock is quoted on The Nasdaq National Market under the symbol
"GETY".
We have filed with the SEC a Registration Statement on Form S-3,
under the Securities Act with respect to the offering of the securities. This
prospectus does not contain all of the information in the Registration
Statement. For further information about Getty Images, please see our
Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We have filed the following documents with the SEC and these
documents are incorporated by reference in this prospectus:
1. Our Registration Statement on Form 8-A filed with the SEC on
February 9, 1998;
2. Our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
3. Our Proxy Statement on Form 14-A filed with the SEC on April
5, 1999;
4. Our Quarterly Report on Form 10-Q for the three months ended
March 31, 1999;
5. Our amended Quarterly Report on Form 10-Q for the three months
ended March 31, 1999; and
6. Our Quarterly Report on Form 10-Q for the three months ended
June 30, 1999.
All documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of the filing of the Registration
Statement of which this prospectus forms a part and prior to the date of the
termination of this offering shall be deemed to be incorporated by reference
into this prospectus and be a part of it from the dates of filing of these
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference into this document shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus, or in any other document subsequently filed with
the SEC which also is or is deemed to be incorporated by reference, modifies or
supersedes that statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
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We will furnish without charge to each person, including any
beneficial owner, to whom this prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference, other than exhibits (unless an exhibit is specifically incorporated
in this prospectus by reference). You should direct requests to Getty Images,
Inc., 2101 Fourth Avenue, Fifth Floor, Seattle, Washington 98121, Attention:
Suzanne L. Page (telephone: (206) 695-3400).
No dealer, salesperson or other person has been authorized to give
any information or to make any representations not contained or incorporated by
reference in this prospectus, and, if given or made, that information or those
representations must not be relied upon as having been authorized by Getty
Images or the selling stockholders. this prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than those
specifically offered in this prospectus or an offer to sell, or a solicitation
of an offer to buy, to any person in any jurisdiction where that offer or
solicitation would be unlawful. Neither the delivery of this prospectus, nor any
sale made under this prospectus shall, under any circumstances, create any
implication that the information contained or incorporated by reference in this
prospectus is correct as of any time subsequent to their respective dates.
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TABLE OF CONTENTS
AVAILABLE INFORMATION.........................................4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............4
SUMMARY.......................................................6
RISK FACTORS..................................................8
USE OF PROCEEDS..............................................15
SELLING STOCKHOLDERS.........................................15
PLAN OF DISTRIBUTION.........................................16
LEGAL MATTERS................................................17
EXPERTS .....................................................17
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SUMMARY
You should read the following summary together with the more detailed
information about our company and our financial statements and the notes to
those statements included or incorporated elsewhere in this prospectus. In
addition, you should carefully consider the information set forth or referred to
under the heading "Risk Factors." Unless otherwise indicated or the context
otherwise requires, all references to "Getty Images" or "us" include Getty
Images, Inc. and its direct and indirect subsidiaries.
BUSINESS OF GETTY IMAGES
Getty Images (getty-images.com) is a leading global visual content
provider offering products and services over our Web sites and through a diverse
set of channels. We own or control content products across most major categories
of the visual content industry. Through our e-commerce enabled Web sites and
international network of wholly owned offices, agents and distributors, we are
able to provide our customers access to image and footage products.
Our 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; Tony Stone Images
(tonystone.com) and PhotoDisc (photodisc.com), leaders in contemporary stock
photography; and Art.com, Inc. (art.com), an on-line seller of framed and
unframed artwork and other art products.
We recently completed the acquisition of EyeWire Partners, Inc., one
of the largest providers of royalty-free photography, video, audio, typefaces,
software and other design resources to creative professionals and business
users. The acquisition of EyeWire, a successful e-commerce brand with an
entirely digital business (www.eyewire.com), supports and accelerates our
strategy of migrating the visual content industry from an analog to a digital
platform.
We have more than 30 million images and 15,000 hours of film footage,
worldwide. In terms of revenue, we believe we are the largest provider of stock
photography image products in the business-to-business market, both on the Web
and through all distribution channels combined.
Our 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. We
believe 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 our 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 our
existing and planned Web sites and potential alliances to develop the small
office/home office, or business user, and consumer markets.
Currently, we market and distribute our imagery products through a
diverse and broad set of channels. We have e-commerce enabled Web sites,
allsport.com, photodisc.com, and tonystone.com, for our highest
revenue generating brands. These Web sites allow our customers to shop for,
purchase and receive our image products anywhere, anytime, and also provide
value-added services to customers. In addition to our e-commerce properties, we
have an international network of wholly owned offices, including offices in
Seattle, London, Amsterdam, Barcelona, Brussels, Calgary, 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 54 countries, which provide local, market specific support and
services for both traditional and on-line customers as well as market
intelligence and branding. We also promote our products through print and CD-ROM
catalogs which are distributed widely to existing and potential customers and
through print and Web advertising.
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RECENT DEVELOPMENTS
On August 5, 1999, we acquired EyeWire Partners, Inc., an Alberta
corporation. In the transaction, EyeWire stockholders received an aggregate of
1,561,010 exchangeable shares of a newly formed Nova Scotia subsidiary of our
company. Each exchangeable share is exchangeable for one share of our common
stock. In addition, the 183,318 outstanding EyeWire employee stock options were
converted into options to acquire an aggregate of 292,324 shares of our common
stock.
OFFICE LOCATION
Our principal executive offices are located at 2101 Fourth Avenue,
Fifth Floor, Seattle, WA 98121, and our telephone number at that address is
(206) 695-3400.
THE OFFERING
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<S> <C>
Common stock offered by certain selling
stockholders....................................... Up to 1,561,010 shares(1)
Common stock outstanding............................ 35,586,579 shares(2)
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Use of proceeds..................................... We will not receive any proceeds from the issuance or resale of
the shares of common stock by the selling stockholders
Nasdaq National Market
Symbol.............................................. "GETY"
</TABLE>
(1) Shares of common stock being offered by certain persons, or their
assigns, who received shares of common stock in consideration for the
sale to us of businesses previously owned by such persons.
(2) Does not include 8,868,089 shares of common stock issuable upon
exercise of our outstanding stock options.
RISK FACTORS
See "Risk Factors" for a discussion of factors that you should
consider in evaluating an investment in our common stock.
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RISK FACTORS
You should carefully consider the risks described below before making
any investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties may impair our
business operations. If any of the following risks actually occur, our business,
financial condition and results of operations would likely suffer. In such case,
the trading price of our common stock could decline, and you might lose all or
part of your investment.
This prospectus and the documents incorporated by reference in this
prospectus contain forward-looking statements based on our current expectations,
assumptions, estimates and projections about our company and our industry. When
used in this prospectus and documents incorporated by reference, the words
"believes," "anticipates," "intends," "expects" and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in the forward looking
statements as a result of a number of factors, as more fully described in this
section and elsewhere in this prospectus and the documents incorporated by
reference.
OUR FUTURE GROWTH WILL DEPEND IN LARGE MEASURE UPON GROWTH IN DEMAND FOR VISUAL
CONTENT
Our 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
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 we operate or hope to operate, including the corporate, business user or
consumer markets, does not develop as we anticipate, the value of our business
or our results of operations or financial condition may be adversely affected.
WE MUST ADAPT TO RAPID TECHNOLOGICAL CHANGE IN OUR LINES OF BUSINESS
Our success will depend, in part, upon our 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 our customers
and prospective customers on a cost-effective and timely basis. In response to
technological changes, we have 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. We
believe that market demand for images is rapidly shifting towards an e-commerce
model, particularly in more developed markets. We will have to rely on third
parties for a portion of the hardware, software and software tools that we will
use in our businesses. These include tools that enable customers and potential
customers, through our Web sites, to access, search and license images and other
products and services, if developed by us. If our suppliers fail to upgrade or
support these systems, our business, financial condition or results of
operations could be adversely affected. We may not be able to successfully use
new software and other technologies effectively or adapt our third-party
technology and systems to customer requirements or emerging industry standards.
WE FACE SIGNIFICANT COMPETITION IN THE VISUAL CONTENT INDUSTRY
The visual content industry is very competitive. We compete with a
number of large and small visual content providers. Some of our competitors,
such as The Image Bank (TIB), Visual Communications Group (VCG) and Corbis, may
have access to greater financial, marketing and other resources than we do. We
also compete 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. We compete 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 we will be
able to compete successfully against current or future competitors or that
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competitive pressures we face will not have a material adverse effect on our
business, financial condition or results of operations.
IF WE ARE UNABLE TO INTEGRATE ACQUIRED COMPANIES AND MANAGE GROWTH AND
EXPANSION, OUR BUSINESS COULD BE ADVERSELY AFFECTED
Our company was formed by the acquisition of several companies that
previously had operated independently. We continue to seek and make acquisitions
including our recent acquisitions of Art.com and EyeWire. The process of
coordinating and integrating acquired companies 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. We expect this
process of integration will accelerate over time. If it does not, however, it
could have a material adverse effect on the combined operations of these
companies, at least in the near term. Additional acquisition-related factors
that will adversely affect our reported operating results and will cause
reported net income in future periods to be negative include:
- significant goodwill amortization charges
- one-time transaction costs and
- other related one-time reorganization charges.
Following the acquisitions of PhotoDisc and Allsport, we incurred non-recurring
integration and restructuring costs of $13.8 million during 1998 to integrate
these businesses. Further integration of our existing and future businesses may
result in similar or greater integration and restructuring costs.
In addition, our individual brands have grown rapidly in recent
years. Our ability to compete effectively and to manage future growth will
require us to monitor and upgrade our financial and management controls and to
re-orient management of acquired businesses to our operating philosophy. In
addition, we will need to develop and expand management information systems and
to recruit and train personnel. If we are unable to manage our recent and future
growth and expansion successfully, our financial condition and results of
operations could be adversely affected.
RECENT ACQUISITIONS HAVE CREATED GOODWILL WHICH MUST BE AMORTIZED AND CHARGED
AGAINST OUR EARNINGS
PhotoDisc and Allsport in February 1998 have generated approximately
$242 million in goodwill and $51 million of other intangibles. The acquisitions
of Art.com in May 1999 and EyeWire in August 1999 have generated approximately
$122 million and $32 million of goodwill, respectively. These acquisitions will
result in a substantial annual charge to be amortized against our earnings in
future periods. Our management considers that a period of twenty years with
respect to goodwill relating to PhotoDisc and Allsport, three years with respect
to goodwill relating to Art.com, and seven years with respect to goodwill
relating to EyeWire, are reasonable amortization periods and that other
intangibles should be amortized over one to three years. We could, however, be
required to write-down the unamortized value of such good will in the future at
an accelerated rate in the event that it suffers an impairment in value. Any
future acquisition we do could generate goodwill and other intangibles that
would result in similar charges to be amortized against our future earnings.
TWO GROUPS OF STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE OVER OUR BUSINESS
AND AFFAIRS AND MAY HAVE INTERESTS DIFFERENT TO YOURS
Two groups of stockholders 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 our directors and other corporate
actions that require stockholder approval. The first group, the Getty Group,
collectively owns approximately 24 percent of the outstanding shares of common
stock as of September 1, 1999 and is comprised of the following persons and
entities:
- Getty Investments L.L.C., a Delaware limited liability company
(or Getty Investments)
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- The October 1993 Trust (a trust established for the benefit of
Mr. Mark Getty and members of his immediate family)
- The JD Klein Family Settlement (a trust established for the
benefit of Mr. Jonathan Klein and members of his immediate
family)
- Mr. Mark Getty and
- Mr. Jonathan Klein.
The second group, the Torrance Group, collectively owns approximately
19 percent of the outstanding shares of common stock as of September 1, 1999 and
is comprised of the following persons and entities:
- PDI, L.L.C.
- Mr. Mark Torrance
- Ms. Wade Ballinger (Torrance) and
- certain of their family members.
Pursuant to the Shareholders' Agreement among our Company, the Getty Group and
the Torrance Group, none of the members of the Getty Group or the Torrance Group
may transfer their shares of common stock except pursuant to the terms of that
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
our company that increase their influence over our company.
In addition, each of these persons and entities listed below, who
collectively owned approximately 11 percent of the outstanding shares of common
stock as of September 1, 1999, acquired their shares of common stock in
connection with our acquisition of Art.com on May 4, 1999, and, since each
acquired their shares on the same date and in the same manner as the others,
they may have similar interests, relating to the ownership and disposition of
those shares, which may differ from yours:
- Mr. William A. Lederer
- SoftBank Technology Ventures IV, L.P. and SoftBank Technology
Advisors Fund, L.P.
- Benchmark Capital Partners II, L.P., Benchmark Founders' Fund
II, L.P.,
- Benchmark Founders' Fund II-A, L.P. and Benchmark Members'
Fund II, L.P.
- Sandler Capital IV Partners, L.P. and Sandler Capital IV Fte.
Partners, L.P.
- Minotaur Partners, L.P.
- Mr. Mitch Friedman
- Mr. Douglas Kahn
- First Portland Corporation and
- certain of their family members.
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Certain members of each group also have other rights and
relationships with us.
WE DEPEND SIGNIFICANTLY UPON CERTAIN KEY PERSONNEL
We believe that our performance depends, to a significant extent,
upon the services of our senior management and other key personnel, including,
in particular, Mr. Mark Getty, Executive Chairman, and Mr. Jonathan Klein, Chief
Executive Officer. The loss of the services of either of Messrs. Getty or Klein
could materially adversely affect our future prospects. Messrs. Getty and Klein
are each parties to an Employment Agreement with us or our subsidiaries for a
minimum period of three years, commencing as of February 9, 1998.
Our future success will also depend upon our 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 we 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 our business, financial condition or results of operations.
AS AN E-COMMERCE BUSINESS, WE FACE UNIQUE RISKS RELATED TO SYSTEMS FAILURE AND
OBSOLESCENCE
A key component of our strategy is the increased digitization of our
products and their delivery via the Internet. As a result, a substantial portion
of our revenues is and will continue to be dependent on customers' access to our
Web sites. We have experienced occasional system interruptions that make our Web
sites unavailable or prevent us from efficiently fulfilling orders, which may
reduce the volume of images licensed and the attractiveness of our products and
services. These interruptions will continue. We will need to add additional
software and hardware and upgrade our systems and network infrastructure to
accommodate increased traffic on our Web sites and increased sales volume.
Without these upgrades, we would face additional system interruptions, slower
response times, diminished customer service, impaired quality and speed of order
fulfillment, and delays in our financial reporting. We cannot accurately project
the rate or timing of any increases in traffic or sales volume on our Web sites
and, therefore, the integration and timing of these upgrades are uncertain.
We maintain substantially all of our computer and communications
hardware necessary for servicing our Web customers at a single facility in
Seattle, Washington. Our 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 us from providing services and accepting and
fulfilling customer orders.
Our future growth in sales and profitability will depend in part on
the effectiveness of our 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 our
existing Web sites and related proprietary technology obsolete. To succeed, we
must enhance Web site responsiveness, functionality and features, acquire and
license leading technologies, enhance our existing services, develop new
services and technology and respond to technological advances and emerging
industry standards and practices on a cost-effective and timely basis. There can
be no assurance that we will be able to adapt quickly enough to changing
customer requirements and industry standards.
CHANGES IN FOREIGN EXCHANGE RATES COULD ADVERSELY AFFECT THE RESULTS OF OUR
NON-U.S. BASED OPERATIONS
We publish our consolidated financial statements in U.S. dollars and
conduct a portion of our business in currencies other than U.S. dollars,
particularly the United Kingdom pound sterling, German mark, French franc and
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the Euro. As a result, we are 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 our consolidated financial
statements.
OUR RIGHT TO USE THE GETTY TRADEMARKS IS SUBJECT TO FORFEITURE
Through our subsidiaries, we own 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,
collectively, the Getty Trademarks. In the event that we become 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. After an assignment, we will have 12 months in which we
will be permitted to continue to use the Getty Trademarks. After that, we will
no longer be able to use them. Although our product brands currently are
Allsport, Energy Film Library, Liaison Agency, Hulton Getty, PhotoDisc, Art.com,
Tony Stone Images, and EyeWire, "Getty" is used as a corporate identity for some
of our subsidiaries and our company. Hulton Getty is also a Getty Trademark. We
plan to use "Getty" as a product or service brand in the future. The exercise by
Getty Investments of its right to cause an assignment of the Getty Trademarks
might have a material adverse effect on our business, financial condition or
results of operations. The existence of the right of Getty Investments to cause
an assignment of the Getty Trademarks may have a negative impact on the amount
of consideration that a potential acquirer would be willing to pay to acquire
our common stock.
WE WILL FACE SIGNIFICANT COMPETITION AND OTHER RISKS IN IMPLEMENTING OUR
STRATEGIC ALLIANCE AND ACQUISITION STRATEGY
Our strategy depends, in part, on our ability to drive customers to
our Web sites and to encourage and take advantage of the growth of new markets.
We believe that we are 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 we will be successful in negotiating such
alliances or acquisitions on favorable terms. We cannot be sure that any
alliances or acquisitions we enter will assist us in attaining our goals.
Acquisitions also involve a number of other risks that could
adversely affect our business, financial condition or results of operations.
These include the diversion of management's attention, the assimilation of the
operations and personnel of the acquired companies and the potential loss of key
employees. We cannot be sure that we will be able to identify any suitable
acquisition candidates or to make any acquisitions or that any acquisition we
make will not adversely affect our business, financial condition and results of
operations or that any acquisition will enhance our business.
OUR CURRENT AND POTENTIAL FUTURE DEBT COULD CREATE FUTURE FINANCING AND PLANNING
DIFFICULTIES
On May 20, 1998, we 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 our common stock at a conversion price of $28.51 per
share, subject to adjustments in certain circumstances. The notes are generally
unsecured subordinated obligations. We also borrow additional funds from time to
time and may incur substantial additional debt in the future. Indebtedness
could:
- 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 our flexibility in planning for, or reacting to, changes
in the business and competition and
12
<PAGE>
- make it more difficult to react in the event of an economic
downturn.
OUR STOCK PRICE HAS BEEN VOLATILE AND FUTURE SALES OF SUBSTANTIAL NUMBERS OF OUR
SHARES COULD HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR SHARES
There has been significant volatility in the market price of shares
of our common stock. Trading prices may continue to fluctuate in response to a
number of events and factors, such as:
- quarterly variations in operating results and announcements of
innovations
- new products, services and strategic developments by us or our
competitors
- business combinations and investments by us or our competitors
- changes in our 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 our shares to fall, which
may adversely affect our 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 our shares, regardless of
our 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. Some of our stockholders
have the right, pursuant to various registration rights agreements, to request
that we register their shares of common stock for resale under the Securities
Act. In addition, our employees hold a significant number of options to purchase
shares, many of which are presently exercisable. Many employees may exercise
their options and sell shares shortly after the options become exercisable,
particularly if they need to raise funds to pay for the exercise of options or
to satisfy tax liabilities that they may incur in connection with exercising
their options.
YEAR 2000 PROBLEMS WITH THE PRODUCTS OR SYSTEMS OF OUR CRITICAL SUPPLIERS OR
OTHER THIRD PARTIES COULD ADVERSELY AFFECT OUR BUSINESS
We have developed a plan to modify our information technology and
other systems to recognize the Year 2000 and have begun converting our critical
data processing and other systems. We have completed a review of our significant
suppliers and service providers to determine the extent to which our systems may
be vulnerable if those third parties fail to address and correct their own Year
2000 issues. We cannot guarantee that the systems of suppliers or other
companies on which we rely will be Year 2000 compliant. Their failure to convert
their systems could disrupt our systems. In addition, the computer systems
necessary to maintain the viability of the Internet or any of the Web sites that
direct consumers to our on-line stores may not be Year 2000 compliant. Finally,
computers used by our customers to access our on-line stores may not be Year
2000 compliant, delaying their purchases of our products. We are in the process
of developing a formal contingency plan. We cannot guarantee that our systems
will be Year 2000 compliant or that the Year 2000 problem will not adversely
affect our business, which includes limiting or precluding customer purchases.
13
<PAGE>
THE TRANSITION TO THE EURO WILL REQUIRE CHANGES IN OUR OPERATIONS AND SYSTEMS
A new European currency was implemented in January 1999 to replace
the separate currencies of eleven Western European countries. This is requiring
changes in our operations as we modify 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 our operations. We have
identified the issues involved and are developing and implementing solutions.
The cost of this effort is not expected to have a material effect on our
business or results of operations. We cannot be sure, however, that we will
forsee and correct all problems or that we can prevent material disruption of
our business.
PROVISIONS OF OUR CORPORATE DOCUMENTS AND DELAWARE LAW MAY MAKE IT MORE
DIFFICULT FOR US TO BE ACQUIRED
Our board of directors 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 these shares without any
further vote or action by our stockholders. This authority, together with
provisions of our amended and restated certificate of incorporation may have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of our company.
This effect could occur even if our stockholders consider such change in control
to be in their best interests. In addition, the concentration of beneficial
ownership of our common stock by the Getty Group and the Torrance Group and
provisions of Delaware law may have the effect of delaying, deterring or
preventing a hostile takeover of our company.
14
<PAGE>
USE OF PROCEEDS
We will not receive any of the net proceeds from the sale of the
shares of common stock offered hereby, all of which proceeds will be received by
the selling stockholders.
SELLING STOCKHOLDERS
In connection with our acquisition of EyeWire, pursuant to a
Combination Agreement dated August 5, 1999, the former stockholders of EyeWire
received an aggregate of 1,561,010 exchangeable non-voting shares of 3032097
Nova Scotia Limited, a wholly owned Nova Scotia subsidiary we formed to complete
the EyeWire acquisition. Each exchangeable share is exchangeable for one share
of our common stock. The former stockholders of EyeWire must exchange their
exchangeable shares into the shares of our common stock that will be sold
pursuant to this prospectus.
Under the terms of a Registration Rights Agreement, dated August 5,
1999, entered into in connection with our acquisition of EyeWire, we agreed to
file a registration statement under the Securities Act of 1933 to register the
sale of the shares of our common stock issuable to the former EyeWire
stockholders, and to keep this registration statement effective until the later
of the date which is one year after the date that all exchangeable shares
deposited in escrow pursuant to the Combination Agreement are eligible to be
released from escrow or eight years after the date this registration statement
is declared effective by the SEC. However, our obligation to keep this
registration statement effective will terminate when all of the common stock
covered by this registration statement has been sold pursuant to this
registration statement, transferred pursuant to Rule 144 under the Securities
Act or otherwise transferred in a manner that results in the delivery of new
securities not subject to transfer restrictions under the Securities Act.
Accordingly, 1,561,010 shares of our common stock covered by this prospectus are
being offered by the former EyeWire stockholders.
All of the selling stockholders except Richard M. Barno and John T.
Ramsay have agreed not to, without our consent, sell any exchangeable shares or
shares of our common stock prior to July 1, 2000 except that each may sell up to
one-half of their exchangeable shares or common stock commencing three business
days after the initial public release of our year end results and earnings for
the year ending December 31, 1999.
The following table sets forth certain information regarding the
selling stockholders.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK OFFERED FOR COMMON STOCK
STOCKHOLDER'S ACCOUNT BENEFICIALLY OWNED
AFTER THE OFFERING
-------------------------------------- ------------------ ---------------------
NAME OF BENEFICIAL OWNER NUMBER NUMBER PERCENTAGE(1)
- ------------------------------------------- -------------------------------------- ------------------ ---------------------
<S> <C> <C> <C>
Bradley E. Zumwalt 546,228 0 *
Tanya M. Zumwalt 512,565 0 *
Brock V. Bohonos 95,627 0 *
Blake I. Springer 87,979 0 *
John T. Ramsay 3,827 0 *
Richard M. Barno 103,640 0 *
Patti C. Acheson 71,911 0 *
Grant D. Hutchinson 38,250 4,240 *
15
<PAGE>
SHARES OF SHARES OF
COMMON STOCK OFFERED FOR COMMON STOCK
STOCKHOLDER'S ACCOUNT BENEFICIALLY OWNED
AFTER THE OFFERING
-------------------------------------- ------------------ ---------------------
NAME OF BENEFICIAL OWNER NUMBER NUMBER PERCENTAGE(1)
- ------------------------------------------- -------------------------------------- ------------------ ---------------------
Drina J. Lazar 33,661 0 *
Vivian C. Farris 33,661 0 *
Andrew J. Cicherski 33,661 0 *
--------- ----- ---
Total 1,561,010 4,240 *
========= ===== ===
</TABLE>
- -------------------------------
* Less than 1%.
(1) Based on the number of shares outstanding on September 2, 1999.
Other than as set forth above or as a result of the sales of shares
to us referred to above, none of the selling stockholders listed above has had
any material relationship with us within the past three years.
PLAN OF DISTRIBUTION
The selling stockholders may sell common stock from time to time to
purchasers directly in one or more transactions at a fixed price, which may be
changed, or at varying prices determined at the time of sale or at negotiated
prices. These prices will be determined by the holders of the securities or by
agreement between the holders and underwriters or dealers who may receive fees
of commissions in connection with the sale.
Any of the selling stockholders may from time to time offer shares of
common stock through underwriters, dealers or agents, who may receive
compensation in the form of underwriting discounts, commissions or concessions
from the selling stockholders and the purchasers of the shares for whom they may
act as agent. Each selling stockholder will be responsible for payment of
commissions, concessions and discounts of underwriters, dealers or agents. The
aggregate proceeds to the selling stockholders from the sale of the shares of
common stock offered by them hereby will be the purchase price of the shares
less discounts and commissions, if any. Each of the selling stockholders
reserves the right to accept and, together with their agents from time to time
to reject, in whole or in part, any proposed purchase of shares to be made
directly or through agents. We will not receive any of the proceeds from this
offering. Alternatively, the selling stockholders may sell the common stock from
time to time on any exchange on which the securities are listed on terms to be
determined at the times of the sales. The selling stockholders may also make
private sales directly or through a broker or brokers. Transactions through
broker-dealers may including block trades in which brokers or dealers will
attempt to sell the shares of common stock as agent but may position and resell
the block as principal to facilitate the transaction, or one or more
underwritten offerings on a firm commitment or best effort basis.
From time to time, the selling stockholders may transfer, pledge,
donate or assign shares of common stock to partners in the applicable selling
stockholder, lender or others, each of whom persons will be deemed to be a
"selling stockholder" for purposes of this prospectus. The number of selling
stockholders' shares beneficially owned by a selling stockholder who transfers,
pledges, donates or assigns shares of common stock will decrease as and when
they take such actions. The plan of distribution for selling stockholders'
shares sold under this prospectus will otherwise remain unchanged, except that
the transferees, pledgees, donees or other successors will be selling
stockholders.
16
<PAGE>
A selling stockholder may enter into hedging transactions with
broker-dealers, and the broker-dealers may engage in short sales of the shares
of common stock in the course of hedging the positions they assume with such
selling stockholder, including, without limitation, in connection with
distribution of the shares of common stock by such broker-dealers. In addition,
the selling stockholders may, from time to time, sell short the shares of common
stock, and in such instances, this prospectus may be delivered in connection
with short sales and the shares offered hereby may be used to cover short sales.
The selling stockholders may also enter into option or other transactions with
broker-dealers that involve the delivery of the shares of common stock to the
broker-dealers, who may then resell or otherwise transfer the shares. The
selling stockholders may also loan or pledge the shares to a broker-dealer and
the broker-dealer may sell the shares as loaned or upon a default may sell or
otherwise transfer the pledged shares.
The selling stockholders and any underwriters, dealers or agents that
participate in the distribution of the shares of common stock offered by this
prospectus may be deemed to be underwriters within the meaning of the Securities
Act of 1933, as amended, and any discounts, commissions or concessions received
by them and any provided pursuant to the sale of shares by them might be deemed
to be underwriting discounts and commissions under the Securities Act.
Any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus. There is no assurance that any selling
stockholder will sell any or all of the shares of common stock described in this
prospectus, and any selling stockholder may transfer, devise or gift securities
by other means not described in this prospectus.
To the extent required, the specific shares of common stock to be
sold, the names of the selling stockholders, the purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part.
We entered into a registration rights agreement in connection with
our acquisition of EyeWire pursuant to which we agreed to register the selling
stockholders' shares of our common stock under applicable federal and state
securities laws. The registration rights agreement provides for
cross-indemnification of the selling stockholders and Getty Images and their
respective directors, officers and controlling persons against liabilities in
connection with the offer and sale of the shares of our common stock, including
liabilities under the Securities Act, and requires them to contribute to
payments the parties may be required to make in respect thereof.
We will pay substantially all of the expenses incurred by the selling
stockholders and us incident to the offering and sale of the shares of common
stock under this prospectus, excluding any underwriting discounts or
commissions. See "Selling Stockholders."
LEGAL MATTERS
Suzanne L. Page, Esq., General Counsel to Getty Images, will pass
upon the validity of the shares of the common stock offered by this prospectus
EXPERTS
The consolidated balance sheets of Getty Images, Inc. and of its
predecessor Getty Communications plc, at December 31, 1998 and December 31,
1997, respectively, and the consolidated statements of operations and cash flows
of Getty Images, Inc. for the year ended December 31, 1998 and of Getty
Communications plc for the years ended December 31, 1997 and 1996, appearing in
our Annual Report on Form 10-K and incorporated by reference herein have been
audited by PricewaterhouseCoopers, independent accountants, as stated in their
report appearing therein given upon the authority of PricewaterhouseCoopers as
experts in accounting and auditing.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than commissions and discounts of
underwriters, dealers or agents and the fees and expenses of counsel to the
selling stockholders, are as follows:
SEC registration fee..................................... $8,760.59
Legal fees and expenses.................................. 25,000.00
Printing and engraving expenses.......................... 25,000.00
Accounting fees and expenses............................. 15,000.00
Miscellaneous............................................ 6,239.41
----------------
$ 80,000.00
================
All of the above expenses, other than the SEC registration fee, are
estimates.
Getty Images has paid substantially all of the expenses of the
issuance and distribution of the securities being registered, other than
commissions and discounts of underwriters, dealers or agents and the fees and
expenses of counsel to the selling stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except to the extent indicated below, there is no charter provision,
by-law, contract, arrangement or statute under which any controlling person,
director or officer of Getty Images is insured or indemnified in any manner
against any liability which he or she may incur in his or her capacity as such.
The Delaware General Corporation Law (the "DGCL") provides that a
corporation may, and in certain circumstances must, indemnify its directors,
officers, employees and agents for expenses, judgments or settlements actually
and reasonably incurred by them in connection with suits and other legal actions
or proceedings if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. In any such suit or action brought by or on
behalf of the corporation, such indemnification is limited to expenses incurred
in defense or settlement of the suit or action. The DGCL also permits a
corporation to adopt procedures for advancing expenses to directors, officers
and others without the need for a case-by-case determination of eligibility, so
long as, in the case of officers and directors, they undertake to repay the
amounts advanced if it is ultimately determined that the officer or director was
not entitled to be indemnified. The Certificate of Incorporation of Getty Images
(the "Certificate of Incorporation") and the Bylaws of Getty Images (the
"Bylaws") contain provisions for indemnification of directors and officers and
for the advancements of expenses to any director or officer to the fullest
extent of the law.
The DGCL permits corporations to purchase and maintain insurance for
directors and officers against liability for expenses, judgments or settlements,
whether or not the corporation would have the power to indemnify such persons
therefor. The Bylaws permit Getty Images to purchase such insurance.
Getty Images has also agreed by contract to indemnify the directors
and certain officers of Getty Images for certain liabilities incurred by such
persons by reason of the fact that such person is a director or officer,
provided that such person was acting in good faith.
II-1
<PAGE>
Getty Images has entered into registration rights agreements with
certain of the selling stockholders. Such agreements provide for indemnification
by such selling stockholders of Getty Images and its officers and directors, and
by Getty Images of such selling stockholders, for certain liabilities arising
under the Securities Act or otherwise.
II-2
<PAGE>
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
2.1* Combination Agreement, dated as of August 5, 1999, among Getty
Images, Inc., 3032097 Nova Scotia Limited, EyeWire Partners,
Inc. and each of the stockholders of EyeWire Partners, Inc.
4.1(1) Indenture, dated as of May 27, 1998, between Getty Images,
Inc. and The Bank of New York, as Trustee
4.2(1) Form of Note (included in Exhibit 4.1)
4.3(2) Certificate representing Common Stock
4.4(3) Amended and Restated Certificate of Incorporation of Getty
Images, Inc.
4.5(3) By-Laws of Getty Images, Inc.
4.6(1) Registration Rights Agreement, dated as of May 27, 1998, among
Getty Images, Inc. and BT Alex Brown Incorporated,
BankAmerica, Robertson Stephens, Donaldson, Lufkin & Jenrette
Securities Corporation and Hambrecht & Quist LLC
4.1* Registration Rights Agreement, dated as of August 5, 1999, by
and among Getty Images, Inc. and each of the former
stockholders of EyeWire Partners, Inc.
5.1** Opinion of Suzanne L. Page, Esq. regarding legality of
securities
23.1* Consent of PricewaterhouseCoopers, London, England
23.2** Consent of Suzanne L. Page (included in Exhibit 5.1)
24.1* Powers of Attorney (contained on page II-6)
- ---------------------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference from the Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
(2) Incorporated by reference from the Exhibits to the Form 8-A
Registration Statement No. 333-38777 of the Registrant.
(3) Incorporated by reference from the Exhibits to the Form S-4
Registration Statement No. 333-38777 of the Registrant.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the registration statement is on
Form S-3, Form S-8 or Form F-and the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or
furnished to the SEC by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration
Statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
II-4
<PAGE>
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Seattle, Washington, on the 2nd day of September, 1999.
GETTY IMAGES, INC.
By: /s/ MARK H. GETTY
----------------------------
Mark H. Getty
Executive Chairman
POWER OF ATTORNEY
We, the undersigned officers and directors of Getty Images, Inc., do
hereby severally constitute and appoint Mark Getty and Jonathan Klein and each
of them our true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, for him and his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement (including any post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby,
ratifying and confirming that each of said attorneys-in-fact and agents, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MARK H. GETTY Director September 2, 1999
- ------------------------------------------
Mark H. Getty
/s/ JONATHAN D. KLEIN Director September 2, 1999
- ------------------------------------------
Jonathan D. Klein
/s/ CHRISTOPHER S. SPORBURG Director September 2, 1999
- ------------------------------------------
Christopher S. Sporburg
/s/ MARK TORRANCE Director September 2, 1999
- ------------------------------------------
Mark Torrance
/s/ ANDREW GARB Director September 2, 1999
- ------------------------------------------
Andrew Garb
/s/ JAMES N. BAILEY Director September 2, 1999
- ------------------------------------------
James N. Bailey
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
2.1* Combination Agreement, dated as of August 5, 1999, among Getty
Images, Inc., 3032097 Nova Scotia Limited, EyeWire Partners,
Inc. and each of the stockholders of EyeWire Partners, Inc.
4.1(1) Indenture, dated as of May 27, 1998, between Getty Images,
Inc. and The Bank of New York, as Trustee
4.2(1) Form of Note (included in Exhibit 4.1)
4.3(2) Certificate representing Common Stock
4.4(3) Amended and Restated Certificate of Incorporation of Getty
Images, Inc.
4.5(3) By-Laws of Getty Images, Inc.
4.6(1) Registration Rights Agreement, dated as of May 27, 1998, among
Getty Images, Inc. and BT Alex Brown Incorporated,
BankAmerica, Robertson Stephens, Donaldson, Lufkin & Jenrette
Securities Corporation and Hambrecht & Quist LLC
4.1* Registration Rights Agreement, dated as of August 5, 1999, by
and among Getty Images, Inc. and each of the former
stockholders of EyeWire Partners, Inc.
5.1** Opinion of Suzanne L. Page, Esq. regarding legality of
securities
23.1* Consent of PricewaterhouseCoopers, London, England
23.2** Consent of Suzanne L. Page (included in Exhibit 5.1)
24.1* Powers of Attorney (contained on page II-6)
- ---------------------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference from the Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
(2) Incorporated by reference from the Exhibits to the Form 8-A
Registration Statement No. 333-38777 of the Registrant.
(3) Incorporated by reference from the Exhibits to the Form S-4
Registration Statement No. 333-38777 of the Registrant.
II-7
COMBINATION AGREEMENT
among
GETTY IMAGES, INC.,
and
3032097 NOVA SCOTIA LIMITED
and
EYEWIRE PARTNERS, INC.
and
each of the Stockholders of
EYEWIRE PARTNERS, INC.
listed on the signature pages hereto
Dated as of August 5, 1999
47920.0005
<PAGE>
COMBINATION AGREEMENT, dated as of August 5, 1999 (this "Agreement") among GETTY
IMAGES, INC., a Delaware corporation ("Getty"), 3032097 Nova Scotia Limited, a
Nova Scotia company limited by shares ("NSCO"), EyeWire Partners, Inc., an
Alberta corporation (the "Company"), and each of the stockholders of the Company
listed on the signature pages hereto (the "Stockholders").
RECITALS
--------
A. The parties hereto intend that, subject to the terms and conditions set forth
in this Agreement, Getty will acquire a controlling interest in the Company
pursuant to a statutory reorganization of capital and other transactions
(collectively, the "Combination") to be completed in accordance with this
Agreement.
B. The Stockholders, the Board of Directors of the Company, and the Boards of
Directors of Getty and NSCO have approved the Combination and the transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, Getty,
NSCO, the Company and the Stockholders hereby agree as follows:
ARTICLE I
THE COMBINATION
---------------
Section 1.01. Requisite Transactions. Subject to the conditions
contained in Article V, the parties hereto shall cause the following to occur as
a single integrated transaction commencing on August 5, 1999 (the "Closing
Date") in order to effect the Combination:
(a) The articles of incorporation of the Company shall be amended to
authorize a class of exchangeable non-voting shares (the "EyeWire Exchangeable
Shares") having the rights and conditions set forth in Exhibit 1.01(a) attached
hereto and change each issued and outstanding common share in the capital of the
Company (the "Common Shares") into that number of EyeWire Exchangeable Shares
which is equal to the Exchange Ratio (as calculated in Section 1.08).
(b) At the time the change referred to in paragraph (a) above is
effective (the "Effective Time"), the Stockholders shall cease to be holders of
Common Shares, shall have their names removed from the register of holders of
such shares and shall become holders of the number of fully paid EyeWire
Exchangeable Shares to which he or she is entitled as a result of the change
referred to in paragraph (a) and such Stockholders names shall be added to the
register of holders of EyeWire Exchangeable Shares accordingly.
(c) No fraction of an EyeWire Exchangeable Share shall be issued. In
the event that the Exchange Ratio would result in a Stockholder being entitled
to receive a fraction of an EyeWire Exchangeable Share, such Stockholder shall
receive the next lower whole number of EyeWire Exchangeable Shares where such
fraction is less than 0.5 and the next higher whole number of Exchangeable
Shares where the fraction is equal to or greater than 0.5.
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(d) The aggregate stated capital of the EyeWire Exchangeable Shares
shall be equal to the aggregate stated capital of the Common Shares immediately
prior to the Effective Time.
(e) Getty shall subscribe for one Common Share in exchange for the sum
of $1.00 which amount shall be added to the stated capital account maintained by
the Company for the Common Shares and Getty shall become a holder of one fully
paid non-assessable Common Share and Getty's name shall be added to the register
of holders of Common Shares accordingly.
(f) Getty shall issue to the trustee (the "Trustee") named in the
voting trust and exchange rights agreement attached hereto as Exhibit 1.05, one
share of Series A special voting preferred stock of Getty which Series A special
voting preferred stock shall have the rights and conditions set forth in Exhibit
1.01(f) attached hereto.
(g) Each issued and outstanding EyeWire Exchangeable Share shall be
transferred to NSCO by the Stockholder holding such share in exchange for one
exchangeable non-voting Share of NSCO (the "Exchangeable Shares") having the
rights and conditions set forth in Exhibit 1.01(g) attached hereto.
(h) Getty shall issue to the Trustee one share of Series B special
voting preferred stock of Getty which Series B special voting preferred stock
shall have the rights and conditions set forth in Exhibit 1.01(h) attached
hereto.
(i) The Company shall incorporate a Nova Scotia unlimited company
("NSULC") pursuant to the Companies Act (Nova Scotia) (the "NSCA") and shall
subscribe for 100 common shares of the NSULC for $0.01 per share.
(j) Getty shall cause the Company to be continued out of Alberta and
into Nova Scotia pursuant to Section 182 of the Business Corporations Act
(Alberta) (the "ABCA") and into Nova Scotia pursuant to Section 133 of the NSCA.
(k) The Company and NSULC shall be amalgamated (the "Amalgamation")
pursuant to Section 134 of the NSCA to form a Nova Scotia unlimited company
("NSULC2"). NSULC2 shall be authorized to issue 10,000 Common Shares ("NSULC2
Common Shares") and 5,000,000 exchangeable non-voting shares ("NSULC2
Exchangeable Shares") having the rights and conditions set forth in Exhibit
1.01(k) attached hereto.
(l) At the time of the Amalgamation each issued and outstanding common
share of the Company shall be converted into one NSULC2 Common Share, each
issued and outstanding EyeWire Exchangeable Share shall be converted into one
NSULC2 Exchangeable Share and each common share of NSULC shall be cancelled.
Section 1.02. Options. Immediately upon the completion of all of the
actions described in subsection 1.01, each of the then outstanding options to
purchase Common Shares (collectively, the "Company Options"), whether or not
exercisable and whether or not vested, shall without any further action on the
part of any holder thereof, be exchanged for an option (the
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"New Option") to purchase that number of shares of common stock, par value $0.01
per share, of Getty ("Getty Common Stock") determined by multiplying the number
of Common Shares issuable pursuant to such Company Option by the Exchange Ratio.
The New Option shall have an exercise price per share of Getty Common Stock
equal to $0.01 per share. If the foregoing calculation results in an exchanged
Company Option being exercisable for a fraction of a share of Getty Common
Stock, then the number of shares of Getty Common Stock subject to the New Option
shall be rounded up to the nearest whole number of shares. Each person receiving
New Options shall have 50% of such New Options vest on the third business day
after Getty's initial public release of its year end results and earnings for
the year ending December 31, 1999 and the remaining 50% of such New Options
shall vest on July 1, 2000. All other terms and conditions of the New Option
will be as described in the form of agreement for New Options, a copy of which
is attached hereto as Exhibit 1.02. Getty shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Getty Common
Stock for delivery upon exercise of New Options pursuant to the terms set forth
in this Article I. Getty shall file, prior to February 1, 2000, a registration
statement on Form S-8 (or any successor form) or another appropriate form
covering the shares of Getty Common Stock subject to the New Options and Getty
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements for so long as the New Options
remain outstanding.
Section 1.03. Other Effects of the Combination. Following the
completion of the transactions described in Section 1.01:
(a) The directors of the Company and NSCO will be Brad Zumwalt, Nairn
Nerland, Chris Roling and Jonathan Klein; and
(b) The officers of the Company and NSCO will be Brad Zumwalt, Nairn
Nerland, Chris Roling and Jonathan Klein.
Section 1.04. Registration Rights. Getty and the Stockholders shall
enter into a Registration Rights Agreement, in the form attached hereto as
Exhibit 1.04.
Section 1.05. Voting Trust and Exchange Rights Agreement. Getty, the
Company and the Stockholders shall enter into a Voting Trust and Exchange Rights
Agreement in the form attached hereto as Exhibit 1.05(a) and Getty, NSCO and the
Stockholders shall enter into a Voting Trust and Exchange Rights Agreement in
the form attached hereto as Exhibit 1.05(b).
Section 1.06. Support Agreement. Getty and NSCO shall enter into a
Support Agreement in the form attached hereto as Exhibit 1.06(a) and Getty and
the Company shall enter into a Support Agreement in the form attached hereto as
Exhibit 1.06(b).
Section 1.07. Currency. Unless otherwise specified all references in
this Agreement to "cash", "cent", "dollars", or "$" shall mean U.S. dollars.
Whenever required by the terms of this Agreement, Canadian dollars shall be
converted into U.S. dollars at the exchange rate therefor as reported by the
Wall Street Journal on the date which is two Business Days prior to the Closing
Date.
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Section 1.08. Calculation of Exchange Ratio. For the purposes of this
Agreement "Exchange Ratio" shall mean the quotient obtained when (i) the Share
Consideration (as defined in Section 1.09 hereof) is divided by (ii) the
Aggregate Fully-Diluted Company Shares. For the purposes of this Agreement,
"Aggregate Fully-Diluted Company Shares" shall mean the sum of all outstanding
Common Shares immediately prior to the Effective Time plus all of the Common
Shares issuable upon the exercise in full of all Company Options outstanding
immediately prior to the Effective Time.
Section 1.09. Share Consideration. The Share Consideration shall be
1,853,334 shares of Getty Common Stock.
Section 1.10. Escrow Arrangement. On the Closing Date that number of
Exchangeable Shares which is equal to the product obtained when 20% of the Share
Consideration is multiplied by the Exchange Ratio (the "Escrow Amount") shall be
deposited by the Stockholders with Montreal Trust Company of Canada as escrow
agent, pursuant to, and shall be held and disbursed in accordance with, an
escrow agreement substantially in the form attached hereto as Exhibit 1.10 (the
"Escrow Agreement"). Subject to the Escrow Agreement, the Escrow Amount may be
utilized by Getty to satisfy certain indemnification claims that may arise under
Article VI of this Agreement.
Section 1.11. Reorganization. The Parties intend that Combination
constitute for U.S. federal income tax purposes a tax-free reorganization under
Section 368 of the Code.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
--------------------------------------------------
Except as set forth in the Disclosure Schedule delivered by the Stockholders and
the Company to Getty and NSCO concurrently with the execution of this Agreement
(the "Company Disclosure Schedule"), each of the Stockholders hereby jointly and
severally represents and warrants, except with respect to representations and
warranties contained in Sections 2.04 and 2.06 which are made severally and not
jointly by each Stockholder, to Getty and to NSCO that:
Section 2.01. Organization and Qualification; Subsidiaries. The Company
and each corporation that is a subsidiary of the Company within the meaning of
the ABCA (the "Company Subsidiaries") is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. Except as set forth in Section 2.01 of the Company Disclosure
Schedule, each of the Company and the Company Subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that have not had, and could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. The
term "Company Material Adverse Effect" means any event, change or effect that is
materially adverse to the condition (financial or
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otherwise), properties, assets, liabilities, businesses, operations, results of
operations or prospects of the Company and the Company Subsidiaries taken as a
whole.
Section 2.02. Certificate of Incorporation and By-Laws. The
Stockholders have heretofore delivered to Getty a complete and correct copy of
the Certificate of Incorporation, Articles of Incorporation and the By-Laws or
other organizational documents of the Company and each Company Subsidiary. Such
Certificates of Incorporation, Articles of Incorporation, and By-Laws or other
organization documents are in full force and effect. Neither the Company nor any
Company Subsidiary is in violation of any of the provisions of its Certificate
of Incorporation, Articles of Incorporation, or By-Laws or other organizational
documents.
Section 2.03. Capitalization. The authorized capital stock of the
Company consists of an unlimited number of Common Shares. As of the date hereof,
(i) 978,917 Common Shares are issued and outstanding, all of which are validly
issued, fully paid and non-assessable and owned by the Stockholders with each
Stockholder owning that number of Common Shares as set forth opposite such
Stockholder's name in Section 2.03 of the Company Disclosure Schedule, (ii) no
Common Shares are held in the treasury of the Company or by the Company
Subsidiaries and (iii) 183,318 Common Shares are reserved for future issuance
pursuant to the Company Options. Except for the Company Options all of which are
held by the Persons described as optionees in Section 2.03 of the Company
Disclosure Schedule with each optionee holding that number of Company Options
(all of which are exercisable at a price of Cdn. $0.01 per Common Share) as set
forth opposite such optionee's name in Section 2.03 of the Company Disclosure
Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Company Subsidiary. All Common
Shares subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and non-assessable. There
are no outstanding contractual obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any Common Shares or any
capital stock of any Company Subsidiary. Section 2.03 of the Company Disclosure
Schedule sets forth the name of each Company Subsidiary, the jurisdiction in
which it is incorporated or organized, the jurisdictions if any, in which it is
qualified to do business, the number of shares of its authorized capital stock,
the number and class of shares thereof duly issued and outstanding, the names of
all stockholders or other equity owners and the number of shares of stock owned
by each stockholder or the amount of equity owned by each equity owner. Each
outstanding share of capital stock of each Company Subsidiary is duly
authorized, validly issued, fully paid and non-assessable and each such share
owned by the Company or another Company Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Company Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever
(collectively, "Liens"). There are no material outstanding contractual
obligations of the Company or any Company Subsidiary to provide funds to, or
make any investment (in the
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form of a loan, capital contribution or otherwise) in, any Company Subsidiary or
any other person.
Section 2.04. Authority Relative to This Agreement. The Stockholder has
all necessary power, authority and legal capacity to execute and deliver this
Agreement and each other document, instrument, agreement or certificate
contemplated by this Agreement (the "Stockholder Documents") and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. No action other than the execution and delivery
of this Agreement and the Stockholder Documents by each of the Stockholders is
necessary to authorize this Agreement and the Stockholder Documents or to
consummate the transactions contemplated hereby and thereby. This Agreement and
each of the Stockholder Documents have been duly and validly executed and
delivered by the Stockholder and, assuming the due authorization, execution and
delivery by Getty and NSCO, as required, constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against such Stockholder in
accordance with their respective terms.
Section 2.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the Stockholder Documents by each
of the Stockholders does not, and the performance of this Agreement and the
Stockholder Documents by each of the Stockholders will not, (i) conflict with or
violate the Certificate of Incorporation, Articles of Incorporation or By-laws
of the Company or any Company Subsidiary, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 2.05(b) have
been obtained and all filings and obligations described in Section 2.05(b) have
been made, conflict with or violate any United States, Canadian or foreign law,
statute, ordinance, rule, regulation, order, judgment or decree ("Law")
applicable to the Company or any Company Subsidiary or by which any property or
asset of the Company or any Company Subsidiary is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any property or asset of the Company or any Company
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clause (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that have not had, and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, and that could not reasonably be expected to prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
(b) The execution and delivery of this Agreement and the Stockholder
Documents by each of the Stockholders does not, and the performance of this
Agreement and the Stockholder Documents by each of the Stockholders will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any United States, Canadian or foreign governmental or
regulatory authority ("Governmental Entity"), except (i) for applicable
requirements, if any, of provincial securities or "blue sky" laws ("Blue Sky
Laws"), and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, has not
had, and could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, and could not reasonably be
expected
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to prevent or materially delay the consummation of the transactions contemplated
by this Agreement.
(c) The Company does not hold assets in the United States (other than
investment assets, voting or non-voting securities of another person and credit
or obligations extended in connection with a joint venture) having an aggregate
book value of U.S. $15,000,000 or more; and has not made aggregate sales in or
into the United States of U.S. $25,000,000 or more in its most recent fiscal
year.
Section 2.06. Ownership and Transfer of Shares. The Stockholder is the
registered and beneficial owner of the Common Shares indicated as being owned by
such Stockholder in Section 2.03 of the Company Disclosure Schedule hereto, free
and clear of any and all Liens. The Stockholder has the power, authority and
legal capacity to sell, transfer, assign and deliver its Common Shares and its
EyeWire Exchangeable Shares and to approve the Articles of Amendment filed
pursuant to paragraph 1.01 (a).
Section 2.07. Permits; Compliance. (a) Except as set forth in Section
2.07(a) of the Company Disclosure Schedule, each of the Company and the Company
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary or desirable for the
Company or any Company Subsidiary to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Company Permits"), and
as of the date of this Agreement, no suspension or cancellation of any Company
Permits is pending, or to the knowledge of the Company, threatened, except where
failure to be in such possession of the Company Permits, or such suspension or
cancellation of the Company Permits has not, and could not reasonably be
expected to have, a Company Material Adverse Effect.
(b) Neither the Company nor any Company Subsidiary is in conflict with,
or in default or violation of (i) any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any Company Subsidiary is a party or by which
the Company or any Company Subsidiary or any property or asset of the Company or
any Company Subsidiary is bound or affected or (ii) any Company Permits.
(c) The Company and the Company Subsidiaries are in compliance, in all
material respects, with all Laws applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected. Neither the Company nor any Company Subsidiary
has received any notice or other communication (whether oral or written)
regarding any actual, alleged, possible or potential violation of, or failure to
comply with, any Law applicable to the Company or any Company Subsidiary or by
which any property or asset of the Company or Company Subsidiary is bound or
affected.
Section 2.08. Financial Statements.
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(a) True and complete copies of the unaudited consolidated balance
sheet of the Company as of June 30, 1999 (the "Balance Sheet"), and the related
unaudited statements of income and cash flows for the fiscal period ended June
30, 1999 of the Company (which statements together with the Balance Sheet are
collectively referred to herein as the "Financial Statements"), are attached as
Section 2.08 of the Company Disclosure Schedule. The Financial Statements
(including, in each case, any notes thereto) were prepared in accordance with
Canadian generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto or as permitted by GAAP) and each present fairly, in all
material respects, the consolidated financial position of the Company and the
consolidated Company Subsidiaries as at the date thereof and for the period
indicated therein, except as otherwise noted therein (subject to normal and
recurring period-end adjustments which were not and are not expected,
individually or in the aggregate, to be material).
(b) There are no debts, liabilities or obligations of any kind, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable ("Liabilities") of the Company or any Company Subsidiary, other
than Liabilities (i) reflected or reserved against on the Financial Statements
or (ii) incurred the ordinary course of the business, consistent with the past
practice of the Company, since June 30, 1999. Reserves are reflected on the
Financial Statements and on the books of account and other financial records of
the Company against all Liabilities of the Company in amounts that have been
established on a basis consistent with the past practice of the Company and in
accordance with GAAP. There are no outstanding warranty claims against the
Company as of the Closing Date.
Section 2.09. Absence of Certain Developments.Except as expressly
contemplated by this Agreement or as set forth in Section 2.09 of the Company
Disclosure Schedule, since June 30, 1999.
(i) there has not been any Company Material Adverse Effect nor
has there occurred any event which is reasonably likely to result in a
Company Material Adverse Effect.
(ii) there has not been any damage, destruction or loss, whether
or not covered by insurance, with respect to the property and assets of
the Company or any Company Subsidiary having a replacement cost of more
than U.S.$10,000 for any single loss or U.S.$25,000 for all such
losses;
(iii) there has not been any grant of any stock option or right
to purchase shares of the stock of the Company or any Company
Subsidiary or any grant of any registration rights;
(iv) there has not been any declaration, setting aside or payment
of any dividend or other distribution in respect of any shares of
capital stock of the Company or any repurchase, redemption or other
acquisition by any Stockholder or the Company or any Company Subsidiary
of any outstanding shares of capital
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stock or other securities of, or other ownership interest in, the Company or any
Company Subsidiary;
(v) neither the Company nor any Company Subsidiary has awarded or
paid any bonuses to employees of the Company or any Company Subsidiary
except to the extent accrued on the Balance Sheet, or entered into any
employment, deferred compensation, severance or similar agreement (nor
amended any such agreement) or agreed to increase the compensation
payable or to become payable by it to any of the Company's or any
Subsidiary's directors, officers, employees, agents or representatives
or agreed to increase the coverage or benefits available under any
severance pay, termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus
or other incentive compensation, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with such
directors, officers, employees, agents or representatives (other than
normal increases in the ordinary course of business consistent with
past practice and that in the aggregate have not resulted in a material
increase in the benefits or compensation expense of the Company and the
Company Subsidiaries taken as a whole);
(vi) there has not been any change by the Company or any
Subsidiary in accounting or Tax reporting principles, methods or
policies;
(vii) neither the Company nor any Company Subsidiary has entered
into any transaction or contract or conducted its business other than
in the ordinary course consistent with past practice except as
contemplated in this Agreement;
(viii) neither the Company nor any Company Subsidiary has failed
to promptly pay and discharge current liabilities except where disputed
in good faith by appropriate proceedings;
(ix) neither the Company nor any Company Subsidiary has made any
loans, advances or capital contributions to, or investments in, any
Person or paid any fees or expenses to any Stockholder or any Affiliate
of any Stockholder;
(x) neither the Company nor any Company Subsidiary has mortgaged,
pledged or subjected to any Lien any of its assets, or acquired any
assets or sold, assigned, transferred, conveyed, leased or otherwise
disposed of any assets of the Company or any Company Subsidiary, except
for assets acquired or sold, assigned, transferred, conveyed, leased or
otherwise disposed of in the ordinary course of business consistent
with past practice;
(xi) neither the Company nor any Company Subsidiary has
discharged or satisfied any Lien, or paid any obligation or liability
(fixed or contingent), except in the ordinary course of business
consistent with past practice and which, in the aggregate, would not be
material to the Company and the Company Subsidiaries taken as a whole;
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(xii) neither the Company nor any Company Subsidiary has
cancelled or compromised any debt or claim or amended, canceled,
terminated, relinquished, waived or released any contract or right
except in the ordinary course of business consistent with past practice
and which, in the aggregate, would not be material to the Company and
the Company Subsidiaries taken as a whole;
(xiii) neither the Company nor any Company Subsidiary has made or
committed to make any capital expenditures or capital additions or
betterments in excess of U.S.$25,000 individually or U.S.$100,000 in
the aggregate;
(xiv) neither the Company nor any Company Subsidiary has
instituted or settled any material Legal Proceeding (as that term is
defined in Section 2.10 hereof); and
(xv) none of the Stockholders, the Company nor any Company
Subsidiary has agreed to do anything set forth in this Section 2.09.
Section 2.10. Absence of Litigation. Except as set forth in Section
2.10 of the Company Disclosure Schedule, there is no litigation, suit, claim,
action, proceeding or investigation of any kind (a "Legal Proceeding") pending
or, to the knowledge of the Company or a Stockholder, threatened against the
Company or any Company Subsidiary, or any property or asset of the Company or
any Company Subsidiary, before any United States, Canadian or foreign court,
arbitrator or Governmental Entity. Neither the Company nor any Company
Subsidiary nor any property or asset of the Company or any Company Subsidiary is
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the knowledge of the Company,
continuing investigation by, any Governmental Entity, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental Entity
or arbitrator having, individually or in the aggregate, a Company Material
Adverse Effect.
Section 2.11. Employee Benefit Plans.
(a) Section 2.11 of the Company Disclosure Schedule identifies each
retirement, pension, bonus, stock purchase, profit sharing, stock option,
deferred compensation, severance or termination pay, insurance, medical
hospital, dental, vision care, drug, sick leave, disability, salary
contributions, legal benefits, unemployment benefits, vacation, incentive or
other compensation plan or arrangement or other employee benefit that is
maintained or otherwise contributed to, or required to be contributed to, by the
Company and each Company Subsidiary for the benefit of their respective
employees or former employees (the "Employee Benefit Plans") and a true and
complete copy of each Employee Benefit Plan has been furnished to Getty. Each
Employee Benefit Plan has been maintained in compliance with its terms and with
the requirements prescribed any and all statutes, orders, rules and regulations
that are applicable to such Employee Benefit Plan. The Stockholders have
delivered to Getty the actuarial valuations, if any, prepared for each Employee
Benefit Plan during the past five years. Except as described in Section 2.11 of
the Company Disclosure Schedule:
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(i) all contributions to, and payments from, each Employee
Benefit Plan that may have been required to be made in accordance with
the terms of any such Employee Benefit Plan, or with the recommendation
of the actuary for such Employee Benefit Plan, and, where applicable,
the laws of the jurisdictions that govern such Employee Benefit Plan,
have been made in a timely manner
(ii) all material reports, returns and similar documents
(including applications for approval of contributions) with respect to
any Employee Benefit Plan required to be filed with any governmental
agency or distributed to any Employee Benefit Plan participant have
been duly filed on a timely basis or distributed;
(iii) to the knowledge of each Stockholder and the Company there
are no pending investigations by any governmental or regulatory agency
or authority involving or relating to an Employee Benefit Plan, no
threatened or pending claims (except for claims for benefits payable in
the normal operation of the Employee Benefit Plans), suits or
proceedings against any Employee Benefit Plan or asserting any rights
or claims to benefits under any Employee Benefit Plan that could give
rise to a liability nor, to the best knowledge of each Stockholder and
the Company, are there any facts that could give rise to any liability
in the event of such investigation, claim, suit or proceeding;
(iv) no notice has been received by any Stockholder or the
Company of any complaints or other proceedings of any kind involving
the Company or any Company Subsidiary or, to the best knowledge of each
Stockholder and the Company, any of the employees of the Company or any
Company Subsidiary before any pension board or committee relating to
any Employee Benefit Plan, the Company or any Company Subsidiary; and
(v) the assets of each Employee Benefit Plan are at least equal
to the liabilities of such Employee Benefit Plan based on the actuarial
assumptions utilized in the most recent valuation performed by the
actuary for such Employee Benefit Plan, and neither Getty, nor any of
its respective affiliates (other than the Company or a Company
Subsidiary) will incur any liability with respect to any Employee
Benefit Plan as a result of the transactions contemplated by this
Agreement.
(b) Section 2.11(b) of the Company Disclosure Schedule sets forth a
summary, in reasonable detail, of the Employee Benefit Plans that cover the
employees of the Company and each Company Subsidiary.
Section 2.12. Contracts.
(a) Section 2.12(a) of the Company Disclosure Schedule lists each of
the following contracts and agreements (whether written or oral) of the Company
and the Company Subsidiaries (such contracts and agreements being "Material
Contracts"):
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(i) each contract and agreement for the purchase or lease of
personal property having a value or consideration of U.S.$10,000 with
any supplier (excluding suppliers of Images) or for the furnishing of
services to the Company or a Company Subsidiary;
(ii) all broker, exclusive dealing or exclusivity, distributor,
dealer, manufacturer's representative, franchise, agency, sales
promotion, market research, marketing consulting and advertising
contracts and agreements to which the Company or a Company Subsidiary
is a party or any other contract that compensates any person based on
any sales by the Company or a Company Subsidiary;
(iii) all leases and subleases of real property;
(iv) all contracts and agreements relating to Indebtedness, other
than trade indebtedness, of the Company or any Company Subsidiary;
(v) all contracts and agreements with any Governmental Entity
other than standard form end-user licenses;
(vi) all contracts and agreements that limit or purport to limit
the ability of the Company or a Company Subsidiary to compete in any
line of business or with any person or in any geographic area or during
any period of time;
(vii) all contracts containing confidentiality requirements
(including all nondisclosure agreements, but excluding all contracts
containing confidentiality restrictions entered into in the ordinary
course of business which do not materially restrict the conduct of the
Company's business);
(viii) all contracts relating to trafficking arrangements, domain
name registration and customer list agreements;
(ix) all agreements relating to the license, purchase, right to
use or other supply of Images to the Company or the Company
Subsidiaries (as defined in Section 2.14);
(x) all contracts relating to employment, consulting, severance
or similar issues with any current or former employee, consultant or
agent of the Company or a Company Subsidiary; and
(xi) all other contracts and agreements, whether or not made in
the ordinary course of business, which are material to the Company or a
Company Subsidiary.
(b) Each Material Contract: (i) is valid and binding on the Company or
a Company Subsidiary and on the other parties thereto, and is in full force and
effect, subject to bankruptcy and equitable remedies qualifications, and (ii)
upon consummation of the
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transactions contemplated by this Agreement, shall, subject to bankruptcy and
equitable remedies qualifications, continue in full force and effect without
penalty or other adverse consequence. The Company is not in breach of, or
default under, any Material Contract and, to the knowledge of each Stockholder
and the Company, no other party to any Material Contract is in breach thereof or
default thereunder.
Section 2.13. Environmental Matters.
Except as has not and would not be reasonably expected to have a
Company Material Adverse Effect:
(a) The Company and each Company Subsidiary have all Environmental
Permits (as defined herein) that are required for the lawful operation of their
respective business, and all Environmental Permits possessed by the Company and
each Company Subsidiaries are listed in Section 2.13(a) of the Company
Disclosure Schedule. Each such Environmental Permit is valid, subsisting and in
good standing and the Company and each Company Subsidiary are not in default or
in breach of any such Environmental Permit and no proceeding is pending or
threatened and no grounds exist to revoke or limit any such Environmental
Permit. The Company and each Company Subsidiary (i) is in compliance with and
not in default under any applicable Environmental Law, and (ii) have never
received written notice of any violation by or claim under any Environmental
Law.
(b) There have been no Releases (as defined herein) by the Company or a
Company Subsidiary of any Hazardous Substances (i) into, on, around, from or
under any of the properties or assets owned or operated (or formerly owned or
operated) by the Company or a Company Subsidiary, or (ii) into, on, around, from
or under any other properties on or under which the Company or a Company
Subsidiary has performed services, in any case in such a way as to create any
material unpaid liability (including the costs of required remediation) or the
Company or a Company Subsidiary under any applicable Environmental Law.
(c) No property has been used at any time by the Company or a Company
Subsidiary as a "landfill" or as a treatment, storage or disposal facility for
any Hazardous Substance.
(d) Neither the Company nor any Company Subsidiary has received any
notice of, or has been prosecuted for, non-compliance with any Environmental
Law, nor has the Company or any Company Subsidiary settled any allegation of
non-compliance prior to prosecution. There are no notices, orders or directions
relating to environmental matters requiring, or notifying the Company or any
Company Subsidiary that it is or may be responsible for, any containment,
clean-up or remediation or corrective action of any work, repairs, construction
or capital expenditures to be made under any environmental Law with respect to
the business of the Company or any Company Subsidiary or any of the properties
or assets owned, operated or occupied (or formerly owned, operated or occupied)
by the Company or any Company Subsidiary.
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(e) There are no Hazardous Substances, located at, on or under any of
the properties or assets owned, operated or occupied (or formerly owned,
operated or occupied) by the Company or any Company Subsidiary except those
being used, stored and handled in compliance with Environmental Laws.
(f) The Stockholders have delivered, or caused to be delivered, to
Getty true and complete copies of all environmental audits, evaluations,
assessments, studies and tests relating to the business or the ownership or use
of the properties or assets of the Company and each Company Subsidiary which
are, or with reasonable effort could be, within the possession or control of any
Stockholder, the Company or any of the Company Subsidiaries.
(g) There is no asbestos or asbestos-containing material or PCBs
contained in any of the buildings or structures owned or leased by the Company
or a Company Subsidiary, except for asbestos or asbestos-containing material the
present form, amount and location of which does not create any unpaid material
liability (including the costs or required remediation) of the Company or the
Company Subsidiaries under any applicable Environmental Law (regardless of
whether subsequent occurrences could expose or change the form or location of,
or cause the Release of, such substances). No written claims have been made, and
no suits or proceedings are pending or threatened, by any employee against the
Company or a Company Subsidiary that are premised on exposure to asbestos or
asbestos-containing material or PCBs.
(h) No underground storage tanks, abandoned wells or landfills are or
have been located on any real property owned, operated or occupied by the
Company or a Company Subsidiary.
(i) For purposes of this Agreement, the capitalized terms defined below
shall have the meanings ascribed to them below.
(i) "Environment" means all air, surface water, groundwater,
drinking water or land, including land surface or subsurface.
(ii) "Environmental Laws" means any and all U.S., Canadian,
provincial, municipal or local laws, statutes, ordinances, by-laws and
regulations, and orders, directives and decisions rendered by, and
policies, instructions, guidelines and similar guidance of, any
ministry, department or administrative or regulatory agency relating to
the protection of the Environment, occupational health and safety or
the manufacture, processing, distribution, use, treatment, storage,
disposal, discharge, packaging, transport, handling, containment,
clean-up or other remediation or corrective action of any Hazardous
Substances.
(iii) "Environmental Permits" means all approvals, consents,
permits, licenses, registrations, certificates and other authorizations
required by any applicable Environmental Law relating to: (A) pollution
or the protection of the Environment, occupational health or safety,
including without limitation those relating to the emission, Release or
discharge of any Hazardous Substances into the Environment, (B) the
manufacture, processing, distribution, use, treatment, storage,
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disposal, generation, packaging, transport or handling of Hazardous
Substances, or (C) the containment, cleanup or other remediation of
Hazardous Substances from any real property.
(iv) "Hazardous Substance(s)" means, without limitation, any
flammable explosives, radioactive materials, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products
(including but not limited to waste petroleum and petroleum products),
methane, hazardous materials, hazardous wastes, pollutants,
contaminants chemicals and hazardous, industrial or toxic substances or
wastes.
(v) "Release" means any past or present spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of a Hazardous Substance into the
Environment.
Section 2.14. Intellectual Property.
(v) Section 2.14 of the Company Disclosure Schedule sets forth a true
and complete list of all (i) patents and patent applications, trademarks,
service marks, trademark and service mark registrations, and trademark and
service mark applications, registered copyrights and copyright applications, and
Internet domain names, in each case owned by the Company or a Company Subsidiary
and material to the business of the Company and the Company Subsidiaries
(together with unregistered copyrights and confidential and proprietary
information, including trade secrets and know-how, owned by the Company or a
Company Subsidiary and material to the business of the Company and the Company
Subsidiaries, "Owned Intellectual Property"), (ii) Software (as defined herein),
and (iii) licenses, sublicenses, and other agreements pertaining to Intellectual
Property, Software or Images (as defined herein) to which the Company or a
Company Subsidiary is a party, including agreements with major Internet service
providers and major Internet portals, in each case that are material to the
business of the Company and the Company Subsidiaries ("Licensed Intellectual
Property"). For purposes hereof, "Intellectual Property" means any and all of
the following, but excluding Images: (i) United States, Canadian, international,
and foreign patents, patent applications and statutory invention registrations,
(ii) trademarks, service marks, trade names, trade dress, slogans, logos, and
Internet domain names, including registrations and applications for registration
thereof, (iii) copyrights, including registrations and applications for
registration thereof and (iv) confidential and proprietary information,
including trade secrets and know-how. For purposes hereof, "Image" means a
reproduction of any artwork, photograph, illustration, font, video, clip art,
map art or any other type of image. For purposes hereof, "Software" means all
material computer software developed by or on behalf of the Company or any
Company Subsidiary, or used by the Company or any Company Subsidiary, including
all material computer software and databases operated or used by the Company on
its web sites or used by the Company in connection with processing customer
orders, storing customer information, storing Image related vendor information,
or storing and archiving Images. For purposes hereof, "Approved Images" means
Images used or held for use by the Company and the Company Subsidiaries in
connection with their business for which the Company or a Company Subsidiary has
the right to grant licenses or sublicenses to third parties. For purposes
hereof, "Unapproved Images" means Images used or held for use by
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the Company and the Company Subsidiaries in connection with their business which
are not Approved Images (the Approved Images and Unapproved Images collectively
being "Licensed Images").
(a) The use of the Owned Intellectual Property, Software, Licensed
Images, and Licensed Intellectual Property by the Company and the Company
Subsidiaries in the ordinary course of business does not infringe upon or
misappropriate the valid Intellectual Property rights of any third party. No
claim has been made that the use of the Owned Intellectual Property, Software,
Licensed Images, or Licensed Intellectual Property in the ordinary course of
business does or may infringe upon or misappropriate the Intellectual Property
rights of any third party.
(b) The Company or a Company Subsidiary is the owner of the entire and
unencumbered right, title and interest in and to each item of Owned Intellectual
Property, and the Company and the Company Subsidiaries are entitled to use,
license, sublicense, distribute, copy, display and create derivative works
regarding the Owned Intellectual Property without restriction. The Company and
the Company Subsidiaries are not exceeding their rights to use, license,
sublicense, distribute, copy, display and create derivative works regarding the
Software, Licensed Images, and Licensed Intellectual Property.
(c) The Owned Intellectual Property and the Licensed Intellectual
Property include all of the Intellectual Property and Software used in the
ordinary day-to-day conduct of the business of the Company and the Company
Subsidiaries, and there are no other items of Intellectual Property or Software
that are material to such ordinary day-to-day conduct of such business. Except
as set forth in Section 2.14(d) of the Company Disclosure Schedule, the Owned
Intellectual Property and any Intellectual Property licensed to the Company and
the Company Subsidiaries under the Licensed Intellectual Property, is
subsisting, valid and enforceable (subject to the application of bankruptcy,
insolvency, reorganization and other laws affecting the rights of creditors
generally and to the qualification that certain equitable remedies may be
granted only in the discretion of a court of competent jurisdiction) and has not
been adjudged invalid or unenforceable in whole or part.
(d) Except as set forth in Section 2.10 of the Company Disclosure
Schedule, no Legal Proceedings have been asserted, are pending, or threatened
against the Company or any Company Subsidiary (i) based upon or challenging or
seeking to deny or restrict the use, license, sublicense, distribution, display,
copying or creation of derivative works by the Company or any Company Subsidiary
of any of the Owned Intellectual Property or Licensed Intellectual Property,
(ii) alleging that any services provided by, processes used by, licensed by,
sublicensed by, distributed by, displayed by, copied by or creation of
derivative works by or products manufactured or sold by the Company or any
Company Subsidiary infringe upon or misappropriate any Intellectual Property
right of any third party, or (iii) alleging that any Intellectual Property
licensed under the Licensed Intellectual Property infringes upon any
Intellectual Property right of any third party or is being licensed or
sublicensed in conflict with the terms of any license or other agreement.
(e) Except as set forth in Section 2.10 of the Company Disclosure
Schedule, to the knowledge of the Company and each Stockholder no person is
engaging in any activity that
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infringes upon the Owned Intellectual Property or any Intellectual Property
licensed to the Company and the Company Subsidiaries under the Licensed
Intellectual Property. Neither the Company nor any Company Subsidiary has
granted any license or other right to any third party with respect to the Owned
Intellectual Property or Licensed Intellectual Property. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the Owned Intellectual Property.
(f) The Stockholders have delivered or made available to Getty correct
and complete copies of all the licenses and sublicenses of the Licensed
Intellectual Property including all amendments thereto, and all model releases,
waivers of moral rights, copyright applications, patent applications, trademark
applications and copyright assignments which are in the custody, or under the
control, of any Stockholder, the Company or a Company Subsidiary. With respect
to each such license and sublicense:
(i) such license or sublicense is valid and binding and in full
force and effect (subject to the application of bankruptcy, insolvency,
reorganization and other laws affecting the rights of creditors
generally and to the qualification that certain equitable remedies may
be granted only in the discretion of a court of competent jurisdiction)
and represents the entire agreement between the respective licensor and
licensee with respect to the subject matter of such license or
sublicense;
(ii) such license or sublicense will not cease to be valid and
binding and in full force and effect on terms identical to those
currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or
default under such license or sublicense or otherwise give the licensor
or sublicensor a right to terminate such license or sublicense;
(iii) (A) neither the Company nor any Company Subsidiary has
received any notice of termination or cancellation under such license
or sublicense, (B) neither the Company nor any Company Subsidiary has
received any notice of a breach or default under such license or
sublicense, which breach has not been cured, and (C) neither the
Company nor any Company Subsidiary has granted to any other third party
any rights, adverse or otherwise, under such license or sublicense that
would constitute a breach of such license or sublicense; and
(iv) neither the Company, any Company Subsidiary, nor, to the
knowledge of the Company and each Stockholder, any other party to such
license or sublicense is in breach or default in any material respect,
and, to the Company's and each Stockholder's knowledge, no event has
occurred that, with notice or lapse of time would constitute such a
breach or default or permit termination, modification or acceleration
under such license or sublicense.
(g) The Software is free of all viruses, worms, trojan horses and other
material known contaminants, and does not contain any bugs, errors, or problems
of a material nature that
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disrupt its operation or have an adverse impact on the operation of other
software programs or operating systems. The Company and the Company Subsidiaries
have obtained all approvals necessary for exporting the Software outside the
United States or Canada and importing the Software into any country in which the
Software is now sold or licensed for use, and all such export and import
approvals in the United States and Canada and throughout the world are valid,
current, outstanding and in full force and effect. No rights in the Software
have been transferred to any third party except to the customers of the Company
or the Company Subsidiaries to whom the Company or the Company Subsidiaries have
licensed such Software in the ordinary course of business. Third parties such as
the Company's CD Rom vendors, catalogue and brochure vendors, distributors,
direct mail vendors and internet service providers have been given the necessary
rights by the Company to perform the services contracted by the Company by those
third parties.
(h) The Company and the Company Subsidiaries have the right to use all
software development tools, library functions, compilers, and other third party
software that is material to the business of the Company and the Company
Subsidiaries, or that is required to operate or modify the Software.
(i) The Company and the Company Subsidiaries have taken reasonable
steps in accordance with normal industry practice to maintain the
confidentiality of their trade secrets and other confidential Intellectual
Property. To the best knowledge of the Company and each Stockholder: (i) there
has been no misappropriation of any material trade secrets or other material
confidential Intellectual Property of the Company or any Company Subsidiary by
any person, (ii) no employee, independent contractor or agent of the Company or
any Company Subsidiary has misappropriated any trade secrets of any other person
in the course of such performance as an employee, independent contractor or
agent and (iii) no employee, independent contractor or agent of the Company or
any Company Subsidiary is in default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of invention agreement or
similar agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.
Section 2.15. Images.
(a) Section 2.15 of the Company Disclosure Schedule sets forth (i) for
the categories of photography, clip art, fonts, illustrations and video, the
number of Images in each such category that are wholly-owned by the Company and
the number licensed by the Company, and (ii) the number of Images in each such
category for which the Company possesses fully executed model or property
releases in respect of each identifiable person or object contained in such
Image. The Company and the Company Subsidiaries validly own or lease all Images
used or held for use by the Company or the Company Subsidiaries in connection
with their business or material to the operation of the business of the Company
and the Company Subsidiaries as currently conducted. With respect to each Image
owned by the Company or a Company Subsidiary, the Company or Company Subsidiary,
as applicable, has the right to display, reproduce, distribute, sell, advertise,
bundle with other derivative works, create derivative works, license and
sublicense the use of such Image, without restriction.
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(b) Neither the Company nor any Company Subsidiary has granted any
license, sublicense or other right to any other person with respect to any
Unapproved Images. Neither the Company nor any Company Subsidiary has granted
any license, sublicense or other right to any other person with respect to any
Approved Image that would constitute a breach of any agreement or license
pertaining to such Approved Image.
(c) The display, sale, marketing, distribution, bundling with other
derivative works, creation of derivative works, copying and advertising of the
Licensed Images, and the licensing and sublicensing of Approved Images as done,
authorized or agreed to by the Company and the Company Subsidiaries does not
infringe upon the Intellectual Property right of any third party. The display,
sale, marketing, distribution, bundling with other derivative works, creation of
derivative works, copying and advertising of the Licensed Images, and the
licensing and sublicensing of Approved Images, as done, authorized or agreed to
by the Company and the Company Subsidiaries does not constitute a breach of any
agreement or license to which the Company or a Company Subsidiary is a party.
(d) To the knowledge of the Company, the Company Subsidiaries and the
Stockholders no claims have been made, asserted, are pending, or threatened,
against the Company or any Company Subsidiary (i) based upon or challenging or
seeking to deny or restrict the display, sale, marketing, distribution, bundling
with other derivative works, creation of derivative works, copying, advertising,
licensing or sublicensing by the Company or any Company Subsidiary of any of the
Licensed Images, or (ii) alleging that the sale, reproduction, distribution,
bundling with other derivative works, creation of derivative works, copying,
advertising, licensing or sublicensing of the Licensed Images does or may
infringe upon the Intellectual Property rights of any third party, and to the
knowledge of the Company, no such claims have been made, asserted, are pending,
or threatened against any third party licensor or licensee of Licensed Images.
(e) To the knowledge of each Stockholder and the Company, no person is
engaging in any activity that infringes upon the Licensed Images or upon the
rights of the Company or any Company Subsidiary therein. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of the right of the Company or a Company Subsidiary to sell,
reproduce, distribute or sublicense any of the Licensed Images.
(f) Except as set forth in Section 2.15(f) of the Company Disclosure
Schedule, each of the Company and the Company Subsidiaries has, prior to any
display, sale, reproduction, distribution or sublicensing of any Licensed Image,
obtained in writing all such releases and/or other third party consents or
authorizations required by law for such display, sale, reproduction,
distribution or sublicensing, copies of which are kept by the Company or any
such Company Subsidiary at its offices.
(g) With respect to each license or agreement by which the Company has
obtained the right to display, sell, reproduce, distribute, bundle with other
derivative works, create derivative works, market, copy, license or sublicense
the Licensed Images or by which the
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Company has granted to any third party the right to display, sell, reproduce, or
distribute any Licensed Images:
(i) such license or agreement is legal, valid, binding and
enforceable and in full force and effect and represents the entire
agreement between the parties thereto with respect to the subject
matter thereof;
(ii) such license or agreement will not cease to be legal, valid
binding and enforceable and in full force and effect on terms identical
to those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation
of the transactions contemplated by this Agreement constitute a breach
or default under such license or agreement, or otherwise give any party
thereto a right to terminate such license or agreement;
(iii) with respect to each such license or agreement, (A) neither
the Company nor any Company Subsidiary has received any notice of
termination or cancellation under such license or agreement, and no
party thereto has any right of termination or cancellation thereunder
except in accordance with its terms, (B) neither the Company nor any
Company Subsidiary has received any notice of a breach or default under
such license or agreement which breach or default has not been cured,
and (C) neither the Company nor any Company Subsidiary has granted to
any other person any rights, adverse or otherwise, under such license
or agreement; and
(iv) none of the Company, any Company Subsidiary nor, to the
knowledge of the Company, any other party to such license or agreement,
is in breach or default thereof in any material respect, and, to the
knowledge of the Company, no event has occurred that, with notice or
lapse of time would constitute such a breach or default or permit
termination, modification or acceleration under such license or
agreement.
(h) Neither the Company nor any Company Subsidiary has granted to any
Person the right to distribute or sell the Licensed Images.
(i) No third party has revoked the right of the Company or a Company
Subsidiary to display, reproduce, distribute, create derivative works, market,
license or sublicense the use of any Image owned or controlled by such third
party.
Section 2.16. Taxes.
(a) The Company, each Company Subsidiary and each affiliated
consolidated, combined or unitary group (within the meaning of Section 1504 of
the Code or comparable provisions of state, local or foreign Tax law) of which
the Company or any Company Subsidiary is or has been a member, (A) have timely
filed (or there has been timely filed on their behalf) all Tax Returns required
to be filed, and all such Tax Returns are true and correct in all material
respects, and (B) have paid all Taxes due and payable or claimed or asserted by
any taxing
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authority to be due, from or with respect to them, or have adequately provided
reserves and allowances for such Taxes on the Financial Statements in accordance
with GAAP and based on the assumptions and calculations set forth in Section
2.16(a) of the Company Disclosure Schedule. No extension of time in which to
file any Tax Return pertaining to the Company or a Company Subsidiary is in
effect. With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, the Company and each Company
Subsidiary have made due and sufficient current accruals for such Taxes in their
books and records in accordance with GAAP through the Closing Date and based on
the assumptions and calculations set forth in Section 2.16(a) of the Company
Disclosure Schedule and has set forth such accruals in Section 2.16(a) of the
Company Disclosure Schedule. The Company and each Company Subsidiary has made
(or there has been made on its behalf) all required current estimated Tax
payments sufficient to avoid any underpayment penalties.
(b) No audit report has been issued since the incorporation of the
Company and each Company Subsidiary (or otherwise with respect to any audit or
investigation in progress) relating to Taxes due from or with respect to the
Company or any Company Subsidiary, their respective incomes, assets or
operations nor is there any issued reassessment in respect of such Taxes which
remains outstanding. The Stockholders have previously delivered to Getty true
and complete copies of (A) any assessments and reassessments issued and received
by the Company or any Company Subsidiary which relate to the United States or
Canadian federal, provincial, state, local or foreign Taxes due from or with
respect to the Company and each Company Subsidiary; (B) the United States and
Canadian federal Tax Returns, and those state, provincial, local, and foreign
Tax Returns for any taxable period showing Taxes due in excess of $25,000, filed
by the Company and each Company Subsidiary (other than consolidated, combined or
unitary Tax Returns which include members other than the Company and Company
Subsidiaries); and the portions of all United States or Canadian federal, state,
local or foreign consolidated, combined or unitary Tax Returns for any taxable
period which relate to the Company or any Company Subsidiary showing Taxes due
in excess of $25,000, filed by any affiliated, consolidated, combined, or
unitary group of which the Company or any Company Subsidiary was then a member.
(c) No taxing authority has made a claim that the Company or any
Company Subsidiary is or may be subject to taxation in a jurisdiction where it
does not file Tax Returns.
(d) There are no outstanding waivers in writing or comparable consents
regarding the application of any statute of limitations in respect of, or
extending any period for the assessment, reassessment or collection of, Taxes of
the Company or any Company Subsidiary.
(e) All deficiencies asserted or assessments and reassessments made by
the Internal Revenue Service (the "IRS"), Revenue Canada or any other taxing
authority of the Tax Returns of, or covering or including the Company or any
Company Subsidiary, have been fully paid, and there are no other actions, suits,
investigations, audits or claims by any taxing authority in progress relating to
the Company or any Company Subsidiary. Neither the Company nor any Company
Subsidiary, or any of their respective shareholders, directors or officers have
received any notice from any taxing authority that it intends to conduct such an
audit or investigation. No issue has been raised by a United States or Canadian,
federal, provincial, state, local or foreign
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taxing authority in any current or prior examination which, by application of
the same principles, would reasonably be expected to result in a proposed
deficiency for any subsequent taxable period. Neither the Company nor any
Company Subsidiary is subject to any private letter ruling of the IRS, advance
income tax ruling of Revenue Canada, or comparable rulings of other taxing
authorities.
(f) There are no liens for Taxes upon the assets of the Company or any
Company Subsidiary, except for liens arising as a matter of law relating to
current Taxes not yet due.
(g) All Taxes that the Company or any Company Subsidiary has been or is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid over to the appropriate governmental entity or
accrued, reserved against and entered on the books and records, including the
Financial Statements, of the Company or the appropriate Company Subsidiary in
accordance with the GAAP.
(h) None of the Company or any Company Subsidiary, or any other Person
on their behalf has (A) agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code (or any predecessor provision) or any
similar provision of U.S. or Canadian or foreign, state, provincial or local law
by reason of a change in accounting methods initiated by the Company or any
Company Subsidiary, or has any knowledge that the IRS or any other taxing
authority has proposed any such adjustment or change in accounting methods; or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company or any Company Subsidiary, (B) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of U.S. or Canadian or foreign, state,
provincial or local law with respect to the Company or any Company Subsidiary,
(C) filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company
or any Company Subsidiary or (D) granted to any person any power of attorney
that is currently in force with respect to any Tax matter relating to the
Company or any Company Subsidiary.
(i) No property owned by the Company or any Company Subsidiary (A) is
"tax-exempt use property" within the meaning of Section 168(h)(1) of the Code,
(B) is subject to Section 168(g)(1)(A) of the Code or (C) is "limited use
property" as such term is used in Rev. Proc. 76-30.
(j) There is no contract, plan or arrangement involving the Company or
any Company Subsidiary and covering any person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by the Company or any Company Subsidiary by reason of Section 280G or
Section 162(m) of the Code.
(k) Neither the Company nor any Company Subsidiary is a party to, bound
by, or obligated under, any Tax Sharing Agreement.
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(l) Neither the Company nor any Company Subsidiary has participated in,
or cooperated with, an international boycott within the meaning of Section 999
of the Code.
(m) Neither the Company nor any Company Subsidiary is a "United States
real property holding corporation" within the meaning of Section 897 of the
Code.
(n) With respect to the Company and any Company Subsidiary organized or
doing business in Canada:
(i) Neither the Company nor any Company Subsidiary has, either
directly or indirectly, transferred property to or acquired property
from a person with whom it was not dealing at arm's length (as that
term is understood for purposes of the ITA) for consideration other
than consideration equal to the fair market value of the property at
the time of the disposition or acquisition thereof;
(ii) The same businesses (taking into account all relevant
factors including the types of products sold, property leased and
services rendered) in the course of which any non-capital losses were
realized and in the course of which any capital costs of depreciable
properties, expenditures giving rise to investment tax credit and
eligible capital expenditures (each within the meaning of the ITA) were
incurred by the Company or any Company Subsidiary have been carried on
by the Company or any Company Subsidiary continuously since the time
the losses were realized or cost or expenditures occurred and will be
carried on up to the Closing Date;
(iii) No circumstances exist which could reasonably be expected
to result in the application of section 160 of the ITA to the Company
or any Company Subsidiary if a person other than the Company or a
Company Subsidiary were to fail to pay any amount owing by it under the
ITA; and
(iv) Except as set forth in Section 2.16(n)(iv) of the Company
Disclosure Schedule, no circumstances exist or have existed which could
reasonably be expected to result or to have resulted in the application
of sections 17, 80, or 247 of the ITA to the Company or any Company
Subsidiary.
(o) For purposes of this Section 2.16 and Paragraph 6.04, any reference
to the Company or any Company Subsidiary shall be deemed to include any person
that merged with, amalgamated with or was liquidated into the Company or any
Company Subsidiary.
(p) As used in this Agreement, "Tax" (and, in the plural, "Taxes")
shall mean any U.S. or Canadian or foreign, federal, state, provincial or local
taxes, charges, fees, levies, imposts, duties and governmental fees or other
like assessments or charges of any kind whatsoever, including but not limited to
any income, net income, gross income, franchise, receipts, wind-fall profit,
severance, property, production, sales, use, license, excise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem, transfer,
stamp, estimated, transaction, title, capital, paid-up capital, profits,
occupation, premium, federal
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highway use, commercial rent, social security, workers' compensation,
unemployment, employer health, goods and services, value added, gains, input or
environmental tax, customs duties and Canada Pension Plan and Employment
Insurance contributions together with any interest or penalty, addition to tax
or additional amount imposed thereon, and includes any liability for the Taxes
of any other person (whether payable by reason of contract, assumption,
transferee liability, operation of law or otherwise); "Tax Return" shall mean
any return, report or statement required to be filed with respect to any Tax
(including any attachments thereto, and any amendment thereof) including, but
not limited to, any information return, claim for refund, remittance, amended
return or declaration of estimated Tax, and including, where permitted or
required, combined, unitary or consolidated returns for any group of entities
that includes the Company or any Company Subsidiary; "Tax Sharing Agreement"
shall mean any Tax allocation, indemnity, sharing or similar contract or
arrangement (whether or not written); "Code" shall mean the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder; and "ITA"
shall mean the Income Tax Act (Canada) as amended, and the regulations
promulgated thereunder.
Section 2.17. Assets. The Company and the Company Subsidiaries own,
lease or have the legal right to use all of the material properties and assets,
including, without limitation, real property and personal property (other than
Intellectual Property, which is covered by Section 2.14 hereof and other than
Images which are covered by Section 2.15 hereof), used or intended to be used in
the conduct of the business of the Company and the Company Subsidiaries or which
is otherwise owned, leased or used by the Company and the Company Subsidiaries
and, with respect to contract rights, is a party to and enjoys the right to the
benefits of all contracts, agreements and other arrangements used or intended to
be used by the Company and the Company Subsidiaries in or relating to the
conduct of the business of the Company and the Company Subsidiaries (all such
properties, assets and contract rights being the "Assets"). Except as set forth
in Section 2.17 of the Company Disclosure Schedule, the Company and the Company
Subsidiaries have good and marketable title to, or, in the case of leased or
subleased Assets, valid and subsisting leasehold interests in, all the Assets,
free and clear of all Liens.
Section 2.18. Certain Interests.
(a) None of the Stockholders nor any of their Affiliates nor any
officer or director of the Company or a Company Subsidiary or any immediate
relative or spouse (or immediate relative of such spouse) who resides with, or
is a dependent of, any such officer or director:
(i) has any direct or indirect financial interest in any
competitor, supplier or customer of the Company or a Company
Subsidiary, provided, however, that the ownership of securities
representing no more than 1% of the outstanding voting power of any
competitor, supplier or customer, and which are listed on any U.S. or
Canadian securities exchange or traded actively in the U.S. or Canadian
over-the-counter market, shall not be deemed to be a "financial
interest" as long as the person owning such securities has no other
connection or relationship with such competitor, supplier or customer;
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(ii) owns, directly or indirectly, in whole or in part, or has
any other interest in any tangible or intangible property which the
Company or a Company Subsidiary uses or has used in the conduct of its
business or otherwise (except for any such ownership or interest
resulting from the ownership of securities in a public company); or
(iii) has outstanding any Indebtedness to the Company or a
Company Subsidiary.
(b) Except for the payment of employee compensation, the advancement of
expenses or indemnification obligations, in each case in the ordinary course of
business, neither the Stockholders, the Company, any Company Subsidiary any
Affiliate of the Company or the Stockholders nor any officer or employee of any
of them is a party to any contract with the Company or any Company Subsidiary
and neither the Company nor any Company Subsidiary has any obligation of any
nature whatsoever to any Stockholder or any Affiliate thereof or to any officer
or director of the Company or a Company Subsidiary or any immediate relative or
spouse of any such officer or director.
Section 2.19. Insurance Policies. Section 2.19 of the Company
Disclosure Schedule sets forth a true and complete list and description
(including face amount of policy, name of insured, carrier, premium, expiration
date and whether it is a "claims made" or an "occurrence" policy) of all
insurance policies held by the Company and each Company Subsidiary. True and
complete copies of all such policies have been provided by the Stockholders to
Getty. All premiums due to the date hereof on such policies have been paid. All
pending claims, if any, made against the Company or a Company Subsidiary which
are covered by insurance are being defended by the appropriate insurance
companies and are described in Section 2.19 of the Company Disclosure Schedule.
Neither the Company nor a Company Subsidiary has failed to give any notice or
present any claim under any such policy in a timely fashion, except where such
failure would not prejudice the ability of the Company or a Company Subsidiary
to make a claim and result in a Company Material Adverse Effect. Such insurance
to the date hereof has (i) been maintained in full force and effect and (ii) not
been canceled or changed, except to extend the maturity dates thereof.
Section 2.20. Banks. Section 2.20 of the Company Disclosure Schedule
sets forth the name of each bank in which the Company or any Company Subsidiary
has an account, lockbox or safe deposit box, and the names of all persons
authorized to draw thereon or have access thereto. Stockholders have provided
Getty with letters from each such bank, dated not later than the day prior to
the date of this Agreement, which letters set forth the total amount of Cash
held by the Company and the Company Subsidiaries as of the dates of such
letters.
Section 2.21. Year 2000 Compliance. The Company and each Company
Subsidiary has (i) undertaken an assessment of those Company Systems that could
be adversely affected by a failure to be Year 2000 Compliant, (ii) developed a
plan and time line for rendering such systems Year 2000 Compliant, and (iii) to
date, implemented such plan in accordance with such timetable in all material
respects. Based on such review and assessment, the Company reasonably
anticipates that all Company Systems will be Year 2000 Compliant by December 31,
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1999. The Stockholders and the Company estimate that the total remaining cost of
rendering the Company Systems Year 2000 Compliant is $30,000. For purposes
hereof, "Company Systems" shall mean all computer, hardware, software, Software,
systems, and equipment (including embedded microcontrollers in non-computer
equipment) embedded within or required to operate the current products of the
Company and the Company Subsidiaries, and/or material to or necessary for the
Company and the Company Subsidiaries to carry on their businesses as currently
conducted. For purposes hereof, "Year 2000 Compliant" means that the Company
Systems provide uninterrupted millennium functionality in that the Company
Systems will record, store, process and present calendar dates falling on or
after January 1, 2000, in the same manner and with the same functionality as the
Company Systems record, store, process, and present calendar dates falling on or
before December 31, 1999.
Section 2.22. Investment.
(a) Except where the Stockholder is a "U.S. person" as defined in
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"), which definition includes, but is not limited to, an individual resident
in the United States, an estate or trust of which any executor or administrator
or trustee, respectively, is a U.S. person, and any partnership or corporation
organized or incorporated under the laws of the United States,
(i) the Exchangeable Shares are not being acquired, directly or
indirectly, for the account or benefit of a U.S. person or a person in
the United States and the Stockholder does not have any agreement or
understanding (either written or oral) with any U.S. person or person
in the United States respecting:
(A) the transfer or assignment of any rights or interest
in any of the Exchangeable Shares or the Getty Common
Stock issuable upon conversion of the Exchangeable
Shares;
(B) the division of profits, losses, fees, commissions or
any financial stake in connection with this Agreement
or the transactions contemplated hereby; or
(C) the voting of any Series A or Series B special voting
preferred stock of Getty or Getty Common Stock
issuable upon conversion of the Exchangeable Shares;
(ii) the Exchangeable Shares are not being acquired by a U.S.
person who purchased securities in a transaction that did not require
registration under the Securities Act;
(iii) no offers to issue Exchangeable Shares were made by any
person to the Stockholder while the Stockholder was in the United
States;
(iv) the Stockholder was outside the United States at the time of
execution and delivery of this Agreement; and
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(v) the Stockholder agrees to resell the Exchangeable Shares or
Getty Common Stock (A) in accordance with the provisions of Regulation
S, (B) pursuant to an effective registration statement under the
Securities Act, or (C) pursuant to an available exemption from the
registration requirements of the Securities Act, and will not engage in
hedging transactions with regard to such securities unless in
compliance with the Securities Act and the Stockholder understands that
Getty must refuse to register any transfer of Exchangeable Shares or
Getty Common Stock made in contravention with this subparagraph (v).
(b) Each Stockholder who is a "U.S. Person" as defined in Regulation S
under the Securities Act (i) understands that the shares of Getty Common Stock
to be acquired by such Stockholder pursuant to the terms of the Exchangeable
Shares have not been registered under the Securities Act, or under any state
securities laws, and are being exchanged in reliance upon U.S. federal and state
exemptions for transactions not involving a public offering, (ii) is acquiring
such shares solely for his own account for investment purposes, and not with a
view towards the distribution thereof, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters and, other than
Andrew Cicherski, qualifies as an "accredited investor" as defined in Regulation
D under the Securities Act, (iv) has received certain information concerning
Getty, including without limitation, Getty SEC Reports, and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding such shares, and (v) is able to bear
the economic risk and lack of liquidity inherent in holding such shares which
have not been registered under the Securities Act.
Section 2.23. Accounts Receivable. The accounts receivable shown on the
Financial Statements arose in the ordinary course of business and have been
collected or are collectible in the book amounts thereof, less an amount not in
excess of the allowance for doubtful accounts and returns provided for in such
Financial Statements. Allowances for doubtful accounts and returns are adequate
and have been prepared in accordance with the past practices of the Company and
the Company Subsidiaries. The accounts receivable of the Company and the Company
Subsidiaries arising after the date of the Financial Statements and prior to the
Effective Time arose in the ordinary course of business and have been collected
or are collectible in the book amounts thereof, less allowances for doubtful
accounts determined in accordance with the past practices of the Company and the
Company Subsidiaries. None of the accounts receivable are subject to any
material asserted claim of offset or recoupment, or counterclaim and each of the
Stockholders and the Company has no knowledge of any specific facts that would
be reasonably likely to give rise to any such claim. No material amount of
receivables are contingent upon the performance by the Company or a Company
Subsidiary of any obligation and no agreement for deduction or discount has been
made with respect to any material amount of accounts receivable.
Section 2.24. Employees and Consultants. A list of all of the employees
of the Company and the Company Subsidiaries and all of the independent
contractors retained by the Company and the Company Subsidiaries as of the
Effective Date is set forth in Section 2.24 of the Company Disclosure Schedule.
To the knowledge of the Company and each Stockholder, no employee of the Company
or a Company Subsidiary is a party to or otherwise bound by any
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agreement with or obligated to any other person or entity which in any respect
conflicts with any obligation, commitment or job responsibility of such employee
to the Company or a Company Subsidiary under any agreement to which he or she is
currently a party or otherwise. To the knowledge of the Stockholders and the
Company, no key employee, group of employees or key consultant has any plans to
terminate employment or other relationship with the Company or a Company
Subsidiary. Neither the Company nor any Company Subsidiary is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labour practices or other collective
bargaining disputes. Neither the Company nor any Stockholder has knowledge of
any organizational effort made or threatened, either currently or within the
past two years, by or on behalf of any labour union with respect to the
employees of the Company or a Company Subsidiary.
Section 2.25. Books and Records. The minute books and other similar
records of the Company and each Company Subsidiary contain true and complete
registers of the shareholders and records of all actions taken at any meetings
of shareholders, boards of directors or any committee thereof and all written
consents executed in lieu of the holding of any such meetings. The accounting
books and records of the Company and the Company Subsidiaries accurately reflect
in all material respects the assets, liabilities, business, financial conditions
and results of operations of the Company and the Company Subsidiaries and have
been maintained in accordance with good business and bookkeeping practices.
Section 2.26. Residence of Stockholders. Except for Richard M. Barno
and Andrew J. Cicherski, no Stockholder is a non-resident of Canada for the
purposes of section 116 of the ITA.
Section 2.27. No Misrepresentation. No representation or warranty of
any Stockholder contained in this Agreement or in the Stockholder Documents
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
Section 2.28. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement.
Section 2.29. Closing Cash Balance. Section 2.29 of the Company
Disclosure Schedule sets forth the Cash and Indebtedness. For purposes of the
foregoing:
(a) "Indebtedness" means the aggregate amount of
(i) all obligations for borrowed money or with respect to
deposits or advances of any kind (including the balance of unpaid
royalties pursuant to the Asset Transfer Agreement dated August 29,
1998 between EyeWire, Inc. (formerly Zumwalt, Inc.) and Adobe Systems
Incorporated,
(ii) all obligations evidenced by bonds, debentures, notes or
other similar instruments or upon which interest charges are
customarily paid,
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(iii) all other indebtedness upon which interest charges or
imputed interest charges are paid, and
(iv) all expenses incurred in connection with this Agreement and
the transactions contemplated hereby prior to the Closing Date.
of, or by, the Company on a consolidated basis; and
(b) "Cash" means the aggregate amount of all cash and cash equivalents
of the Company (as such terms are used in the Balance Sheet) on a consolidated
basis.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GETTY AND NSCO
------------------------------------------------
Except as set forth in Getty SEC Reports (as defined in Section 3.06), Getty and
NSCO hereby jointly represent and warrant to the Stockholders that:
Section 3.01. Organization and Qualification; Subsidiaries. Getty is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and NSCO is a company limited by
shares formed pursuant to the NSCA. Each of Getty and NSCO has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority have
not had, and could not reasonably be expected to have, individually or in the
aggregate, a Getty Material Adverse Effect (as defined below). Getty is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that have not had, and could not reasonably be expected to
have, individually or in the aggregate, a Getty Material Adverse Effect. The
term "Getty Material Adverse Effect" means any change in or effect on the
business of Getty that is materially adverse to the financial condition or
results of operations of Getty taken as a whole, except for any declines in the
price of Getty Common Stock.
Section 3.02. Certificate of Incorporation and By-Laws. Getty has
heretofore made available to the Company a complete and correct copy of the
Certificate of Incorporation and by-laws of Getty and the Certificate of
Incorporation, Memorandum of Association and Articles of Association of NSCO.
Such Certificates of Incorporation are in full force and effect. Getty and NSCO
are not in violation of any of the provisions of their respective Certificates
of Incorporation, By-Laws, Memorandum of Association or Articles of Association.
Section 3.03. Capitalization. The authorized capital stock of Getty
consists of (a) 75,000,000 shares of Getty Common Stock and (b) 5,000,000 shares
of preferred stock, par value U.S.$0.01 per share ("Getty Preferred Stock"). As
of August 4, 1999, with the exception of shares of Getty Common Stock held in
the treasury of Getty or by Getty Subsidiaries
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(i) 35,434,676 shares of Getty Common Stock are issued and outstanding, all of
which are validly issued, fully paid and non-assessable, and (ii) 8,769,488
shares are reserved for future issuance pursuant to stock options. As of the
date of this Agreement, no shares of Getty Preferred Stock were issued and
outstanding. Except for stock options granted pursuant to the stock option plans
of Getty (the "Getty Stock Option Plans"), the issuance of shares of Getty
Common Stock upon the conversion of the 4.75% Convertible Subordinated Notes due
2003 and the issuance of additional shares of Getty Common Stock in respect of
the contingent deferred payment in respect of Getty's acquisition of Art.com,
Inc., there are no options, warrants or other rights, agreements, arrangements
or commitments of any character relating to the issued or unissued capital stock
of Getty or any Getty Subsidiary or obligating Getty or any Getty Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in,
Getty or any Getty Subsidiary. All shares of Getty Common Stock subject to
issuance as aforesaid, pursuant to the conditions attached to the Exchangeable
Shares or pursuant to the New Options and the shares of Series A and Series B
special voting preferred stock to be issued by Getty pursuant to the Voting
Trust and Exchange Rights Agreements described in Section 1.05, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
non-assessable. There are no outstanding contractual obligations of Getty or any
Getty Subsidiary to repurchase, redeem or otherwise acquire any shares of Getty
Common Stock or any capital stock of any Getty Subsidiary. Each outstanding
share of capital stock of each Getty Subsidiary is duly authorized, validly
issued, fully paid and non-assessable and each such share owned by Getty or
another Getty Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Getty's or such other Getty Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever, except where failure to own such shares
free and clear would not, individually or in the aggregate, have a Getty
Material Adverse Effect
The authorized capital stock of NSCO consists of 10,000 common shares and
5,000,000 Exchangeable Shares of which all the issued common shares are held by
Getty and no Exchangeable Shares are issued and outstanding. Upon the allotment
and issuance of the Exchangeable Shares to the Stockholders as contemplated by
this Agreement, all such Exchangeable Shares shall be validly issued, fully-paid
and non-assessable shares of NSCO.
Section 3.04. Authority Relative to This Agreement. Getty has all
necessary corporate power and authority to execute and deliver this Agreement,
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each of
NSCO and Getty and the consummation by each of NSCO and Getty of the
transactions contemplated hereby by this Agreement have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Getty and NSCO are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Getty and, assuming the due authorization,
execution and delivery by the Stockholders and the Company, constitutes a legal,
valid and binding obligation of each of NSCO and Getty, enforceable against each
of NSCO and Getty in accordance with its terms.
Section 3.05. No Conflict; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by Getty and NSCO does
not, and the performance of this Agreement by Getty and NSCO will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws of Getty or
Memorandum or Articles of Association of NSCO, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 3.05(b) have
been obtained and all filings and obligations described in Section 3.05(b) have
been made, conflict with or violate any Law applicable to Getty or NSCO or by
which any property or asset of Getty or NSCO is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any property or asset of Getty or any Getty Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, except, with
respect to clause (ii) or (iii), for any such conflicts, violations, breaches,
defaults, or other occurrences that have not had, and could not reasonably be
expected to have, individually or in the aggregate, a Getty Material Adverse
Effect, and that could not reasonably be expected to prevent or materially delay
the consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by Getty and NSCO does
not, and the performance of this Agreement by Getty and NSCO will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) Blue Sky Laws, the
Securities Act, the Nasdaq, state takeover laws, (ii) the filing of a
notification with Industry Canada pursuant to section 12 of the Investment
Canada Act, (iii) filings required to be made and orders required to be obtained
pursuant to the ABCA and the NSCA in order to effect the continuance and
amalgamation described in paragraphs 1.01(i) through 1.01(l), and (iv) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, has not had, and could not reasonably be
expected to have, individually or in the aggregate, a Getty Material Adverse
Effect, and could not reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
Section 3.06. SEC Filings; Financial Statements.
(a) Getty has filed all forms, reports and documents required to be
filed by it with the United States Securities and Exchange Commission (the
"SEC") since January 1, 1998 through the date of this Agreement (collectively,
the "Getty SEC Reports"). As of the respective dates they were filed, (i) Getty
SEC Reports were prepared, in all material respects in accordance with the
requirements of the Securities Act, or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and (ii) none of Getty SEC
Reports contained, when filed with the SEC, any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. All of Getty's filings
with the SEC which were required under Section 13 of the Exchange Act since
January 1, 1998, when taken as a whole (collectively, the "Recent SEC Reports"),
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Recent SEC Reports or necessary in
order to make the statements in such Recent SEC Reports, in light
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of the circumstances under which they were made, not misleading. No Getty
Subsidiary is required to file any form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in Getty SEC Reports complied in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and each presented
fairly, in all material respects, the consolidated financial position of Getty
and the consolidated Getty Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to be material).
Section 3.07. Absence of Certain Changes or Events. Since January 1,
1998, except as contemplated by or as disclosed in this Agreement, or as
disclosed in any Getty SEC Report filed since January 1, 1998, Getty and Getty
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
any Getty Material Adverse Effect.
Section 3.08. Investment Purpose. Getty is acquiring the Common Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
Section 3.09. Business Continuity. Neither Getty nor NSCO has any plan
or intention either (a) except in accordance with this Agreement and the
agreements described in Sections 1.05 and 1.06, to directly or indirectly
reacquire any of its stock issued in the Combination; or (b) to directly or
indirectly sell or otherwise dispose of any of the assets of the Company, except
for (i) dispositions made in the ordinary course of business, (ii) transfers
described in Section 368(a)(2)(C) of the Code or (iii) asset dispositions
otherwise described in Treasury Regulation Section 1.368-1(d). Following the
Combination, Getty and NSCO intend that NSULC2 will continue the historic
business of the Company or use a significant portion of the Company's historic
business assets in a business.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
Section 4.01. Employee Benefits Matters. Getty shall provide the
Company's employees with health, welfare and other employee benefits that in the
aggregate are substantially equivalent to those currently provided to similarly
situated employees of Getty and no worse, in aggregate, than the benefits
currently provided to the Company's employees.
(a) To the extent that service is relevant for eligibility and vesting
(and, solely for purposes of calculating entitlement to vacation and sick days,
benefit accruals) under any
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retirement plan, employee benefit plan, program or arrangement established or
maintained by Getty or any of Getty Subsidiaries for the benefit of employees of
Getty, such plan, program or arrangement shall credit Company employees for
service on or prior to the Closing Date with the Company or any affiliate or
predecessor thereof. In addition, Getty shall waive limitations on benefits
relating to any pre-existing conditions to the same extent eligible for coverage
under a Company Benefit Plan and recognize, for purposes of annual deductible
and out-of-pocket limits under its medical and dental plans, deductible and
out-of-pocket expenses paid by the Company's employees.
(b) Getty shall grant stock options (the "Post-Closing Options") to
purchase an aggregate of 250,000 shares of Getty Common Stock under the terms of
Getty's 1998 Stock Incentive Plan, to such employees of the Company and in such
denominations as shall be determined by Mr. Brad Zumwalt and set forth on a
notice to be delivered to Getty on the Closing Date and reasonably approved by
Getty (provided that options to purchase no more than 100,000 shares of Getty
Common Stock shall be allotted to Mr. Zumwalt and provided that options to
purchase no more than 100,000 shares of Getty Common Stock, in aggregate, shall
be allotted to the Stockholders (other than Mr. Zumwalt) who are employees of
the Company). The Post-Closing Options shall have substantially identical terms
to stock options previously granted by Getty to its similarly situated
employees. The exercise price of the Post-Closing Options shall be the fair
market value of Getty's Common Stock as determined under the terms of Getty's
1998 Stock Incentive Plan. The Post-Closing Options shall become 25% vested on
the first anniversary of their date of grant, and will continue to vest over a
period of three years in equal monthly installments commencing on the first day
of the first calendar month following the first anniversary of their date of
grant.
Section 4.02. Employment and Lock-Up Agreements. (a) EyeWire Services,
Inc. shall enter into an employment agreement (the "Zumwalt Employment
Agreement") satisfactory to Brad Zumwalt and Getty, and (b) Getty shall enter
into Lock-Up Agreements (the "Lock-Up Agreements") with each of the senior
executives of the Company listed in Section 4.02(a) of the Company Disclosure
Schedule, the form of which agreement is attached hereto as Exhibit 4.02(b).
Section 4.03. Further Action; Consents; Filings. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable commercial efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement, (ii) obtain from Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Getty or the Company or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby and
(iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the transactions contemplated by
this Agreement required under (A) the Exchange Act and the Securities Act and
the rules and regulations thereunder and any other applicable federal or state
securities laws and (B) any other applicable Law. The parties hereto shall
cooperate with each other in connection with the
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making of all such filings, including by providing copies of all such documents
to the nonfiling party and its advisors prior to filing and, if requested, by
accepting all reasonable additions, deletions or changes suggested in connection
therewith.
Section 4.04. Headquarters. Except as otherwise required in order to
effect the transactions described in paragraphs 1.01(j) through 1.01(l), the
Company and its operations will remain based in Calgary for a period of at least
two years from the date of this Agreement unless otherwise agreed by Getty and
those Stockholders listed in Exhibit 4.04(a). Each of the employees of the
Company listed in Exhibit 4.04(b) shall not, as a condition of continued
employment with the Company or a subsidiary of the Company be required to
relocate such individual's current city of residence or business for a period of
two years from the date of this Agreement unless such individual consents to
relocation. Notwithstanding the foregoing, Getty, the Company and any
subsidiaries of the Company and Getty will be entitled to exploit areas of
synergy in the areas of back-office administration and data management, in the
development of international distribution and in leveraging group content and
marketing.
Section 4.05. Income Tax Elections. The parties agree that the
conversion of Common Shares to EyeWire Exchangeable Shares pursuant to Section
1.01(a) and transfer by each Stockholder of EyeWire Exchangeable Shares to NSCO
pursuant to Section 1.01(g) may be made pursuant to the provisions of section 85
of the ITA. Each Stockholder who wishes to make an election pursuant to section
85 of the ITA shall deliver a signed copy of the form prescribed for such
election, completed in accordance with the provisions of the ITA, to Getty
within 30 days of the Closing Date. Getty shall execute such form and return it
to the relevant Stockholder within 14 days of receipt. The parties agree that it
shall be the relevant Stockholder's sole responsibility to file the prescribed
forms pursuant to section 85 of the ITA in the time prescribed under subsection
85(6) of the ITA and any penalty assessed by Revenue Canada or a similar
provincial authority by virtue of a failure to file such election form in the
time prescribed under subsection 85(6) of the ITA will be borne by the
transferring Stockholder.
Section 4.06. Clearance Certificates. Getty shall retain possession of
all Exchangeable Shares otherwise deliverable pursuant to the terms hereof to
any Stockholder who is a non-resident of Canada for the purposes of section 116
of the ITA (a "Non-resident Stockholder") until the earlier of (i) the date such
Non-resident Stockholder delivers to Getty, certificates issued by Revenue
Canada pursuant to subsection 116(4) of the ITA in respect of the transactions
described in paragraphs 1.01(a) and 1.01(g) ("Clearance Certificates") and (ii)
September 30, 1999. The Clearance Certificates shall have certificate limits
which shall ensure that neither NSCO nor the Company shall have any liability
pursuant to subsection 116(5) of the ITA in respect of the relevant
transactions. If a Non-resident Stockholder does not deliver Clearance
Certificates to Getty by September 30, 1999, Getty shall remit such portion of
the retained Exchangeable Shares to Revenue Canada as is required to comply with
section 116(5) of the ITA and shall deliver any remaining Exchangeable Shares to
the relevant Non-resident Stockholder.
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ARTICLE V
CONDITIONS
----------
Section 5.01. Conditions to the Obligations of Getty and NSCO. The
obligations of Getty and NSCO to consummate the transactions contemplated by
this Agreement are subject to the satisfaction or waiver of the following
conditions:
(a) each of the representations and warranties of the Stockholders
contained in this Agreement shall be true and correct as of the Closing Date,
except that those representations and warranties which address matters only as
of a particular date shall be true and correct as of such date;
(b) the Stockholders shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date;
(c) Getty shall have received, each in form and substance reasonably
satisfactory to Getty, (i) all authorizations, consents, orders and approvals of
all Governmental Entities and officials and (ii) all third party consents and
estoppel certificates set forth in Section 5.01(c) of the Company Disclosure
Schedule;
(d) no Governmental Entity or court of competent jurisdiction located
or having jurisdiction in the United States or Canada shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, judgment,
decree, executive order or award (an "Order") which is then in effect and has
the effect of making illegal or otherwise prohibiting consummation of the
Combination.
(e) Getty shall have received the opinion of Macleod Dixon, Canadian
counsel to the Company, to the effect set forth in Exhibit 5.01(e);
(f) Getty shall have received the opinion of Dorsey Whitney, U.S.
counsel to the Company, to the effect set forth in Exhibit 5.01(f);
(g) the Stockholders shall have executed and delivered to Getty the
Registration Rights Agreement described in Section 1.04;
(h) Brad Zumwalt shall have executed and delivered to EyeWire Services,
Inc. the Zumwalt Employment Agreement;
(i) the Stockholders shall have executed and delivered to Getty the
Escrow Agreement;
(j) the executed Lock-Up Agreements shall have been delivered to Getty;
and
(k) the Cash shall equal or exceed $1,000,000.
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Section 5.02. Conditions to the Obligations of the Stockholders. The
obligations of the Stockholders to consummate the transactions contemplated by
this Agreement are subject to the satisfaction or waiver of the following
conditions:
(a) each of the representations and warranties of Getty and NSCO
contained in this Agreement shall be true and correct as of the Closing Date,
except that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date;
(b) Getty and NSCO shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date;
(c) no Governmental Entity or court of competent jurisdiction located
or having jurisdiction in the United States or Canada shall have enacted,
issued, promulgated, enforced or entered any Order which is then in effect and
has the effect of making illegal or otherwise prohibiting consummation of the
transactions contemplated by this Agreement;
(d) the Stockholders shall have received the opinion of Weil, Gotshal &
Manges, LLP, U.S. counsel to Getty, to the effect set forth in Exhibit 5.02(d)
hereto;
(e) the Stockholders shall have received the opinion of Blake, Cassels
& Graydon, Canadian counsel to Getty, to the effect set forth in Exhibit 5.02(e)
hereto;
(f) the Stockholders shall have received the opinion of Stewart
McKelvey Stirling Scales, Nova Scotia Counsel to Getty, to the effect set forth
in Exhibit 5.02(f) hereto;
(g) Getty shall have executed and delivered to Stockholders the
Registration Rights Agreement;
(h) EyeWire Services, Inc. and Getty shall have executed and delivered
to Brad Zumwalt the Zumwalt Employment Agreement; and
(i) Getty shall have executed and delivered to Stockholders the Escrow
Agreement.
ARTICLE VI
INDEMNIFICATION; TAXES; SURVIVAL
--------------------------------
Section 6.01. Indemnification.
(a) The Stockholders hereby agree to jointly and severally (except with
respect to any breach of the representation and warranty contained in Sections
2.04 and 2.06 as to which indemnification shall be several but not joint)
indemnify and hold Getty, NSCO, the Company, and their respective directors,
officers, employees, Affiliates, agents, successors and assigns (collectively,
the "Getty Indemnified Parties") harmless from and against:
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(i) any and all assessments, judgments, losses, liabilities,
obligations, damages, costs, penalties and expenses (including
attorneys' and other professionals' reasonable fees and disbursements)
(collectively, "Losses") caused by or resulting from the failure of any
representation or warranty of the Stockholders set forth in this
Agreement, or any representation or warranty contained in any
certificate or other document delivered by or on behalf of the
Stockholders pursuant to this Agreement, to be true and correct in all
respects as of the date made;
(ii) any and all Losses, caused by or resulting from the breach
of any covenant or other agreement on the part of the Stockholders
under this Agreement; and
(iii) any and all Losses caused or resulting from:
A) the fact that Eyewire, Inc. is qualified as a foreign
corporation in the State of Texas under the name
Zumwalt, Inc. as set forth in Section 2.01 of the
Company Disclosure Schedule;
B) the fact that Eyewire, Inc. is not in possession of a
Grande Prairie, Texas Business License as set forth
in Section 2.07(a) of the Company Disclosure
Schedule;
C) any Legal Proceeding set forth in Section 2.10 of the
Company Disclosure Schedule;
D) the business practices set forth in Section 2.14(d)
of the Company Disclosure Schedule; and
E) the failure of the Company or any Company Subsidiary
to obtain model releases as set forth in Section
2.15(f) of the Company Disclosure Schedule.
(b) Each of NSCO and Getty hereby agrees to jointly and severally
indemnify and hold the Stockholders and their respective Affiliates, agents,
successors and assigns, heirs, executors and legal representatives
(collectively, the "Stockholder Indemnified Parties") harmless from and against:
(i) any and all Losses based upon, attributable to or resulting
from the failure of any representation or warranty of Getty or NSCO set
forth in this Agreement, or any representation or warranty contained in
any certificate or other document delivered by or on behalf of Getty or
NSCO pursuant to this Agreement, to be true and correct as of the date
made; and
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(ii) any and all Losses based upon, attributable to or resulting
from the breach of any covenant or other agreement on the part of Getty
or NSCO under this Agreement.
(c) The obligations of the Stockholders pursuant to paragraph 6.01(a)
above shall be subject to the following limitations:
(i) The Getty Indemnified Parties shall not be entitled to
recover under paragraph 6.01(a) until the total amount which the Getty
Indemnified Parties would recover under paragraph 6.01(a), but for this
paragraph 6.01(c), exceeds $375,000 and then the Getty Indemnified
Parties shall be entitled to recover all of such amount (starting from
the first dollar);
(ii) The Getty Indemnified Parties shall not be entitled to
recover under paragraph 6.01(a):
(A) to the extent the aggregate claims under paragraph
6.01(a) of the Getty Indemnified Parties exceed the
value of the Escrow Amount, except for claims
relating to breaches of the representations contained
in Sections 2.06, for which there shall be no limit
to the remedies of a Getty Indemnified Party
hereunder, and for breaches of the representations
contained in Section 2.16, for which the aggregate
claims for which a Getty Indemnified Party may
receive indemnification (including any such claims
satisfied from the Escrow Amount) cannot exceed 10%
of the value of the Share Consideration as of the
Closing Date;
(B) to the extent the subject matter of the claim is
covered by insurance (including title insurance) held
by the Company, any Company Subsidiary, or Getty,
except to the extent that utilizing such coverage
will result in a premium increase to the Company or
any Company Subsidiary, in which case, such premium
increase shall be recoverable and to the extent that
the amount of the claim exceeds the insurance
proceeds received by the Company, any Company
Subsidiary or Getty in respect of such claim, in
which case, such excess shall be recoverable; or
(C) unless it has first used all commercially reasonable
efforts to diligently seek to enforce any rights to
indemnity or recovery from Persons not party to this
Agreement in respect of the Loss (provided, however,
that no Getty Indemnified Party shall be required to
institute court proceedings against any Person prior
to seeking recovery under paragraph 6.01(a)) and, if
such efforts fail, to provide
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the Stockholders with full rights of subrogation in
respect of any such rights upon request of the
Stockholders.
(iii) Each Stockholder shall be solely liable for indemnification
with respect to a breach of any of the representations and warranties
and covenants of such Stockholder in Section 2.04 and 2.06 and any
recovery from the Escrow Amount in respect of such indemnification
shall be limited to such Stockholders pro-rata portion of the Escrow
Amount. With respect to a claim, or a portion of a claim, for a breach
of a representation contained in Section 2.16 which is not satisfied
out of the Escrow Amount, the recovery by Getty from each Stockholder
in respect of such claim, or a portion of a claim, shall be limited to
that percentage of such claim which is equal to the percentage of the
issued Common Shares which were held by such Stockholder immediately
prior to the Effective Time.
(iv) The Getty Indemnified Parties shall not be entitled to
recover under paragraph 6.01(a) with respect to a breach of Section
2.16 to the extent the Tax matter for which a claim has been asserted
is reserved against on the books and records of the Company or any
Company Subsidiary as of the Closing Date, provided that such reserves
are in accordance with GAAP, have been maintained in the ordinary
course of business and are consistent with the reserves for Taxes in
both the Financial Statements and on the Company Disclosure Schedule
and with the assumptions set forth in Section 2.16(a) of the Company
Disclosure Schedule.
(v) The Getty Indemnified Parties shall not be entitled to
recover under paragraph 6.01(a) with respect to breaches of the
representations contained in Section 2.29 until the total amount which
the Getty Indemnified Parties would recover in respect of such breaches
under paragraph 6.01(a), but for this paragraph 6.01(c) exceeds $50,000
and then the Getty Indemnified Parties shall be entitled to recover all
of such amount (starting from the first dollar);
(vi) If without regard to this paragraph 6.01(c) a state of facts
would allow an Getty Indemnified Party to recover under both paragraph
6.01(a)(i) and paragraph 6.01(a)(ii), such Getty Indemnified Party may
recover only under one of paragraph 6.01(a)(i) or paragraph
6.01(a)(ii); and
(vii) There shall be no duplication of indemnity among the Getty
Indemnified Parties.
(d) The Stockholders hereby agree that if a Getty Indemnified Party is
required to pay Taxes on behalf of a Non-resident Stockholder pursuant to either
section 116(5) or section 116(5.3) of the ITA as a result of a transfer to a
Getty Indemnified Party of any portion of the Escrowed Property (as that term is
defined in the Escrow Agreement) pursuant to the terms of the Escrow Agreement,
such Non-resident Stockholder shall indemnify and hold such Getty Indemnified
Party harmless from and against such Taxes.
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Section 6.02. Indemnification Procedures.
(a) In the event that any Legal Proceedings shall be instituted or
threatened or that any claim or demand ("Claim") shall be asserted by any Person
in respect of which payment may be sought under Section 6.01 hereof, the
indemnified party shall reasonably and promptly cause written notice of the
assertion of any Claim of which it has knowledge which is covered by this
indemnity to be forwarded to the indemnifying party. The indemnifying party
shall have the right, at its sole option and expense, to be represented by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or otherwise deal with any Claim
which relates to any Losses indemnified against hereunder. If the indemnifying
party elects to defend against, negotiate, settle or otherwise deal with any
Claim which relates to any Losses indemnified against hereunder, it shall within
ten days (or sooner, if the nature of the Claim so requires) notify the
indemnified party of its intent to do so. If the indemnifying party elects not
to defend against, negotiate, settle or otherwise deal with any Claim which
relates to any Losses indemnified against hereunder, fails to notify the
indemnified party of its election as herein provided or contests its obligation
to indemnify the indemnified party for such Losses under this Agreement, the
indemnified party may defend against, negotiate, settle or otherwise deal with
such Claim. If the indemnifying party shall assume the defense of any Claim, the
indemnified party may participate, at his or its own expense, in the defense of
such Claim; provided, however, that such indemnified party shall be entitled to
participate in any such defense with separate counsel at the expense of the
indemnifying party if so requested by the indemnifying party to participate or
(ii) in the reasonable opinion of counsel to the indemnified party, a conflict
or potential conflict exists between the indemnified party and the indemnifying
party that would make such separate representation advisable; and provided,
further, that the indemnifying party shall not be required to pay for more than
one such counsel for all indemnified parties in connection with any Claim. The
parties hereto agree to cooperate fully with each other in connection with the
defense, negotiation or settlement of any such Claim.
(b) After any final judgment or award shall have been rendered by a
court, arbitration board or administrative agency of competent jurisdiction and
the expiration of the time in which to appeal therefrom, or a settlement shall
have been consummated, or the indemnified party and the indemnifying party shall
have arrived at a mutually binding agreement with respect to a Claim hereunder,
the indemnified party shall forward to the indemnifying party notice of any sums
due and owing by the indemnifying party pursuant to this Agreement with respect
to such matter and, subject to Sections 6.01 and 6.03, the indemnifying party
shall be required to pay all of the sums so due and owing to the indemnified
party by wire transfer of immediately available funds within 10 business days
after the date of such notice.
(c) The failure of the indemnified party to give reasonably prompt
notice of any Claim shall not release, waive or otherwise affect the
indemnifying party's obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual loss and prejudice as a result of
such failure.
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Section 6.03. Escrow. Pursuant to the terms of the Escrow Agreement, Getty
Indemnified Parties shall be entitled to be paid out of the Escrow Amount, all
amounts to which Getty Indemnified Parties are entitled pursuant to this Article
VI. Getty's sole recourse under this Article VI shall be limited to the Escrow
Amount (except for breaches of Sections 2.06 and 2.16 hereof, in which case
there shall be no limit to Getty's and NSCO's remedies except as otherwise
provided herein).
Section 6.04. Tax Matters .
(a) Preparation of Tax Returns.
(i) The Stockholders shall file or cause to be filed all U.S.,
Canadian, state, provincial, local and foreign Tax Returns required to
be filed on or prior to the Closing Date by, or with respect to, the
Company and each Company Subsidiary and each consolidated combined or
unitary group of which the Company or any Company Subsidiary is or were
a member or members and shall cause the Company or a Company Subsidiary
to pay any and all Taxes due with respect to such returns. All Tax
Returns described in this Section 6.04(a)(i) shall be prepared in a
manner consistent with prior practice unless a past practice has been
finally determined to be incorrect by the applicable taxing authority
or a contrary treatment is required by applicable Tax laws (or judicial
or administrative interpretations thereof). The Stockholders shall
cause the Company and the Company's Subsidiaries to provide Getty with
copies of such completed Tax Returns at least 10 days prior to the
filing date, and Getty shall be provided an opportunity to review such
Tax Returns and supporting work papers and Schedules prior to the
filing of such Tax Returns. The failure of Getty to propose any changes
to any such Tax Return within such 10 days shall be deemed to be an
indication of its approval thereof. The Stockholders and Getty shall
attempt in good faith mutually to resolve any disagreements regarding
such Tax Returns prior to the due date for filing thereof..
(ii) Getty shall prepare or cause to be prepared all US,
Canadian, foreign, provincial, state and local Tax Returns required to
be filed by the Company and the Company's Subsidiaries after the
Closing Date, whether relating to a period ending before, on or after
the Closing Date.
(b) Cooperation with Respect to Tax Returns. Getty and the Stockholders
agree to furnish or cause to be furnished to each other, and each at their own
expense, as promptly as practicable, such information (including access to books
and records) and assistance, including making employees available on a mutually
convenient basis to provide additional information and explanations of any
material provided, relating to the Company and each Company Subsidiary as is
reasonably necessary for the filing of any Tax Return, for the preparation for
any audit, and for the prosecution or defense of any claim, suit or proceeding
relating to any adjustment or proposed adjustment with respect to Taxes. Getty
and the Stockholders shall furnish one another with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period. In
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addition, Getty and the Stockholders shall (and shall cause their respective
affiliates to) timely sign and deliver such certificates or forms as may be
necessary or appropriate to establish an exemption from (or otherwise reduce),
or file Tax Returns or other reports with respect to, Taxes of the Company or a
Company Subsidiary. Getty or the Company shall retain in its possession, and
shall provide the Stockholders reasonable access to (including the right to make
copies of), such supporting books and records and any other materials that the
Stockholders may reasonably specify with respect to Tax matters relating to any
taxable period ending on or prior to the Closing Date until the expiry of all
appeal periods with respect to any assessments or reassessments of tax in
respect of such taxable period. After such time, Getty may dispose of such
material, provided that prior to such disposition Getty shall give the
Stockholders a reasonable opportunity to take possession of such materials.
Section 6.05. Survival of Representations and Warranties. Except as
otherwise provided herein, the parties hereto hereby agree that the
representations and warranties contained in this Agreement or in any
certificate, document or instrument delivered in connection herewith, shall
survive the execution and delivery of this Agreement, and the closing of the
transactions hereunder, regardless of any investigation made by the parties
hereto; provided, however, that any claims or actions with respect thereto
(other than claims for indemnification made in respect of the representations
and warranties contained in Section 2.06, which shall survive indefinitely, and
in Section 2.16 or Section 3.09 which shall survive until it is no longer
possible, in law or in fact, for a Getty Indemnified Party or a Stockholder
Indemnified Party who is a U.S. citizen or resident for U.S. federal income tax
purposes, as the case may be, to suffer or incur Losses as a result of such
breach and so long thereafter as such Getty Indemnified Party or a Stockholder
Indemnified Party who is a U.S. citizen or resident for U.S. federal income tax
purposes, as the case may be, may assert a claim with respect thereto) shall
terminate unless within twelve (12) months after the Closing Date written notice
of such claims is given to the Stockholders or Getty, as the case may be, or
such actions are commenced.
Section 6.06. Tax Reporting and Compliance. Getty shall, and shall
cause the Company, Company Subsidiaries, NSCO, NSULC, NSULC2 and Affiliates of
Getty, to and the Stockholders who are U.S. citizens or residents for U.S.
federal income tax purposes shall: (a) report the Combination as a
reorganization under Section 368(a)(1) of the Code on all applicable U.S.
federal, state and local Tax Returns; (b) keep records and file in connection
with their respective U.S. federal and state Tax Returns all such information as
may be required by Treasury Regulation Section 1.368-3 and otherwise comply with
all the reporting requirements of Section 368(a)(1) of the Code and the Treasury
Regulations promulgated thereunder; and (c) unless required to do so by law,
refrain from taking any position in connection with any Tax Return or Tax
liability that would be inconsistent with the qualification of the Combination
as a reorganization under Section 368(a)(1) of the Code.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
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Section 7.02. Waiver. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
Section 7.03. Expenses. All expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not any of the transactions contemplated
hereby is consummated.
Section 7.04. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by courier,
facsimile, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 7.04):
if to Getty:
Getty Images, Inc.
2101 Fourth Avenue, Fifth Floor
Seattle, Washington 98121
Facsimile No.: (206) 695-3447
Attention: Suzanne L. Page
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile No.: (212) 310-8007
Attention: Stephen M. Besen
if to the Stockholders:
EyeWire, Inc.
Suite 800, 833 - 4th Avenue S.W.
Calgary, Alberta T2P 3T5
Facsimile No.: (403) 261-4282
Attention: Brad Zumwalt
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with a copy to:
Macleod Dixon
Barristers and Solicitors
3700, 400 - 3rd Avenue S.W.
Calgary, Alberta T2P 4H2
Facsimile No.: (403) 264-5973
Attention: J. T. Ramsay, Q.C.
Section 7.05. Certain Definitions. For purposes of this Agreement, the
term:
(a) "Affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with such specified person;
(b) "business day" means any day on which banks are not required or
authorized to close in Seattle, Washington.
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(d) "knowledge" means, with respect to any matter in question, that the
Stockholders or the executive officers of the Company or the executive officers
of Getty or Getty Canada, as the case may be, have actual or constructive
knowledge of such matter;
(e) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government;
and
(f) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests, the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
Section 7.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties
44
<PAGE>
as closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
Section 7.07. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 7.08. Incorporation of Exhibits. The Company Disclosure
Schedule, Getty Disclosure Schedule and all Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
Section 7.09. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 7.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of Alberta without regard to the
conflicts of law provisions thereof.
Section 7.11. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 7.12. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 7.13. Entire Agreement. This Agreement (including the Exhibits,
the Company Disclosure Schedule and Getty Disclosure Schedule) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.
45
<PAGE>
IN WITNESS WHEREOF, Getty, NSCO, the Company and the Stockholders have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
GETTY IMAGES, INC. 3032097 NOVA SCOTIA LIMITED
By: By:
----------------------------------- ------------------------------
Name: Name:
Title: Title:
EYEWIRE PARTNERS, INC.
By:
-----------------------------------
Name:
Title:
Stockholders:
- --------------------------------------
BRADLEY E. ZUMWALT
- --------------------------------------
TANYA M. ZUMWALT
- --------------------------------------
BROCK V. BOHONOS
- --------------------------------------
BLAKE I. SPRINGER
- --------------------------------------
PATTI C. ACHESON
- --------------------------------------
GRANT D. HUTCHINSON
46
<PAGE>
- --------------------------------------
DRINA J. LAZAR
- --------------------------------------
ANDREW J. CICHERSKI
- --------------------------------------
VIVIAN C. FARRIS
- --------------------------------------
RICHARD M. BARNO
- --------------------------------------
JOHN T. RAMSAY
47
<PAGE>
ARTICLE I THE COMBINATION....................................................1
Section 1.01.Requisite Transactions................................1
Section 1.02.Options...............................................2
Section 1.03.Other Effects of the Combination......................3
Section 1.04.Registration Rights...................................3
Section 1.05.Voting Trust and Exchange Rights Agreement............3
Section 1.06.Support Agreement.....................................3
Section 1.07.Currency..............................................3
Section 1.08.Calculation of Exchange Ratio.........................4
Section 1.09.Share Consideration...................................4
Section 1.10.Escrow Arrangement....................................4
Section 1.11.Reorganization........................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS................4
Section 2.01.Organization and Qualification; Subsidiaries..........4
Section 2.02.Certificate of Incorporation and By-Laws..............5
Section 2.03.Capitalization........................................5
Section 2.04.Authority Relative to This Agreement..................6
Section 2.05.No Conflict; Required Filings and Consents............6
Section 2.06.Ownership and Transfer of Shares......................7
Section 2.07.Permits; Compliance...................................7
Section 2.08.Financial Statements..................................7
Section 2.09.Absence of Certain Developments.......................8
Section 2.10.Absence of Litigation................................10
Section 2.11.Employee Benefit Plans...............................10
Section 2.12.Contracts............................................11
Section 2.13.Environmental Matters................................13
Section 2.14.Intellectual Property................................15
Section 2.15.Images...............................................18
Section 2.16.Taxes................................................20
Section 2.17.Assets...............................................24
Section 2.18.Certain Interests....................................24
Section 2.19.Insurance Policies...................................25
Section 2.20.Banks................................................25
<PAGE>
Section 2.21.Year 2000 Compliance.................................25
Section 2.22.Investment...........................................26
Section 2.23.Accounts Receivable..................................27
Section 2.24.Employees and Consultants............................27
Section 2.25.Books and Records....................................28
Section 2.26.Residence of Stockholders............................28
Section 2.27.No Misrepresentation.................................28
Section 2.28.Brokers..............................................28
Section 2.29.Closing Cash Balance.................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF GETTY AND NSCO................29
Section 3.01.Organization and Qualification; Subsidiaries.........29
Section 3.02.Certificate of Incorporation and By-Laws.............29
Section 3.03.Capitalization.......................................29
Section 3.04.Authority Relative to This Agreement.................30
Section 3.05.No Conflict; Required Filings and Consents...........30
Section 3.06.SEC Filings; Financial Statements....................31
Section 3.07.Absence of Certain Changes or Events.................32
Section 3.08.Investment Purpose...................................32
Section 3.09.Business Continuity..................................32
ARTICLE IV ADDITIONAL AGREEMENTS............................................32
Section 4.01.Employee Benefits Matters............................32
Section 4.02.Employment and Lock-Up Agreements....................33
Section 4.03.Further Action; Consents; Filings....................33
Section 4.04.Headquarters.........................................34
Section 4.05.Income Tax Elections.................................34
ARTICLE V CONDITIONS.........................................................35
Section 5.01.Conditions to the Obligations of Getty and NSCO......35
Section 5.02.Conditions to the Obligations of the Stockholders....36
ARTICLE VI INDEMNIFICATION; TAXES; SURVIVAL.................................36
Section 6.01.Indemnification......................................36
Section 6.02.Indemnification Procedures...........................40
Section 6.03.Escrow...............................................41
2
<PAGE>
Section 6.04.Tax Matters..........................................41
Section 6.05.Survival of Representations and Warranties...........42
Section 6.06.Tax Reporting and Compliance.........................42
ARTICLE VII MISCELLANEOUS...................................................42
Section 7.01.Amendment............................................42
Section 7.02.Waiver...............................................43
Section 7.03.Expenses.............................................43
Section 7.04.Notices..............................................43
Section 7.05.Certain Definitions..................................44
Section 7.06.Severability.........................................44
Section 7.07.Assignment; Binding Effect; Benefit..................45
Section 7.08.Incorporation of Exhibits............................45
Section 7.09.Specific Performance.................................45
Section 7.10.Governing Law........................................45
Section 7.11.Headings.............................................45
Section 7.12.Counterparts.........................................45
Section 7.13.Entire Agreement.....................................45
3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of this 5th day of
August, 1999 (the "Agreement"), by and among Getty
Images, Inc., a Delaware Corporation (the "Company") and each of the
stockholders of EyeWire Partners, Inc., an Alberta corporation ("EyeWire"),
named on the signature pages hereto (herein referred to individually as a
"Holder" and collectively as the "Holders").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of
the Combination Agreement dated as of the date hereof between the Company,
3032097 Nova Scotia Limited, a Nova Scotia company limited by shares ("NSL"),
EyeWire and each of the Holders (the "Combination Agreement"), the Company shall
be issued common shares of EyeWire, and the Holders shall receive exchangeable
non-voting shares of NSL ("Exchangeable Shares") which may be exchanged for
shares of common stock, par value $.01 per share, of the Company ("Common
Stock"); and
WHEREAS, to induce the Holders to execute and deliver the
Combination Agreement, the Company has agreed to provide the Holders with
certain registration rights with respect to the Common Stock issuable upon
exchange of the Exchangeable Shares.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall
have the meanings:
(i) "COMMISSION" means the U.S. Securities and Exchange
Commission.
(ii) "EXCHANGE ACT" means the U.S. Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(iii) "PERSON" means any individual, partnership,
corporation, limited liability company, joint stock company,
association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
(iv) "PROSPECTUS" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration
<PAGE>
statement in reliance on Rule 430A under the Securities Act) included
in the Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration
Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus by
the Company under the Exchange Act and incorporated by reference
therein.
(v) "REGISTRABLE SECURITIES" means the Common Stock and
other securities of the Company issued or issuable in exchange for
Exchangeable Shares; provided, however, a share of Common Stock shall
cease to be a Registrable Security for purposes of this Agreement when
it no longer is a Restricted Security.
(vi) "REGISTRATION STATEMENT" means a registration
statement of the Company filed on an appropriate form under the
Securities Act providing for the registration of, and the sale on a
continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act, including the
Prospectus contained therein and forming a part thereof, any amendments
to such registration statement and supplements to such Prospectus, and
all exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(vii) "RESTRICTED SECURITY" means any share of Common Stock
except any such share that (i) has been registered pursuant to an
effective registration statement under the Securities Act and sold in a
manner contemplated by the Prospectus included in the Registration
Statement, (ii) has been transferred in compliance with the resale
provisions of Rule 144 under the Securities Act (or any successor
provision thereto) or is transferable by the holder thereof pursuant to
paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto), or (iii) otherwise has been transferred and a new
share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company.
(viii) "SECURITIES ACT" means the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder,
or any similar successor statute.
(b) All capitalized terms used and not defined herein have
the respective meaning assigned to them in the Combination Agreement.
2
<PAGE>
2. REGISTRATION; FILING AND EFFECTIVENESS OF REGISTRATION
STATEMENT.
(a) The Company shall prepare and file with the Commission,
within 30 days of the date hereof, a Registration Statement on Form S-3 (or if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3 such registration shall be on Form S-1 or another
appropriate Form in accordance herewith) relating to the offer and sale of the
Registrable Securities and shall use its reasonable best efforts to cause the
Commission to declare such Registration Statement effective under the Securities
Act as promptly as practicable, and shall use its reasonable best efforts to
keep such Registration Statement continuously effective under the Securities Act
until the date which is the later of one year after the date that all
Exchangeable Shares deposited in escrow pursuant to the Combination Agreement
are eligible to be released from escrow or eight years after the date that such
Registration Statement is declared effective by the Commission or such shorter
period that will terminate when all the Registrable Securities covered by the
Registration Statement have been sold pursuant thereto in accordance with the
plan of distribution provided in the Prospectus, transferred pursuant to Rule
144 under the Securities Act or otherwise transferred in a manner that results
in the delivery of new securities not subject to transfer restrictions under the
Securities Act. If a Registration Statement on Form S-3 is not available to
register the resale of Registrable Securities, then at such time as Richard M.
Barno or John T. Ramsay (the "Non-Employee Shareholders") provide notice to the
Company that they intend to exchange their Exchangeable Shares, the Company
shall prepare and file with the Commission, as promptly as practicable, a
Registration Statement on Form S-3 to register the resale of the shares of
Common Stock issued upon exchange of the Non-Employee Shareholders' Exchangeable
Shares and the Company shall use its reasonable best efforts to cause the
Commission to declare such Registration Statement effective and maintain its
effectiveness as set forth above.
(b) If a Registration Statement (other than on behalf of
the Non-Employee Shareholders) has not been declared effective prior to, or is
not available for use by Holders on, the date which is the third business day
after the Company's initial public release of its year end results and earnings
for the year ending December 31, 1999 (the "First Release Date") (unless such
unavailability is due to the Company exercising its rights under Section 3 or 4
hereof) for the resale of Registrable Securities, then any Holder other than a
Non-Employee Shareholder who exchanges Exchangeable Shares on or after such date
shall upon request be entitled to a loan from Getty (a "Tax Loan") in an amount
equal to the Canadian Federal and Provincial income tax paid by such Holder as a
result of the exchange of such Exchangeable Shares, provided, however, that the
amount of any such Loan shall be limited to the amount of tax actually paid with
respect to the exchange of not more than 50% of any such Holder's Exchangeable
Shares, and provided, further, that any such Loan shall not be required to be
made by Getty until the latest time that such tax becomes due and payable to the
appropriate Canadian taxing authorities without penalty or interest. In the
event that any Holders exchange Exchangeable Shares for shares of Common Stock
of the Company pursuant to this
3
<PAGE>
subsection, the Company shall prepare and file with the Commission, as promptly
as practicable, a Registration Statement on Form S-3 to register the resale of
such shares of Common Stock and shall use its reasonable best efforts to cause
the Commission to declare such Registration Statement effective under the
Securities Act as promptly as practicable, and shall use its reasonable best
efforts to keep such Registration Statement continuously effective under the
Securities Act until the date which is one year after the date that such
Registration Statement is declared effective by the Commission or such shorter
period that will terminate when all the Registrable Securities covered by the
Registration Statement have been sold pursuant thereto in accordance with the
plan of distribution provided in the Prospectus, transferred pursuant to Rule
144 under the Securities Act or otherwise transferred in a manner that results
in the delivery of new securities not subject to transfer restrictions under the
Securities Act.
Each Tax Loan shall be an interest-free, non-recourse loan
to the borrower, secured by all of the shares of Common Stock issued upon
exchange of such Exchangeable Shares and payable from the proceeds of any sale
of such shares of Common Stock. Each Tax Loan shall become due and payable at
the time of such sale but in any event not later than the earlier of (i) 14
months after the exchange and (ii) 60 days after a Registration Statement
registering the resale of such shares of Common Stock is declared effective by
the Commission (provided, however, that the due date for such loan in the case
of clause (ii) above shall be extended in the event of a suspension pursuant to
Sections 3 or 4 hereof which prevents trading during the 60 days after such
Registration Statement has been declared effective, by the number of days that
such suspension is in effect).
(c) If a Registration Statement (other than on behalf of
the Non-Employee Shareholders) has not been declared effective prior to, or is
not available for use by Holders on, July 1, 2000 (unless such unavailability is
due to the Company exercising its rights under Section 3 or 4 hereof) for the
resale of Registrable Securities, then any Holder other than a Non-Employee
Shareholder who exchanges Exchangeable Shares on or after such date shall upon
request be entitled to a Tax Loan in an amount equal to the Canadian Federal and
Provincial income tax paid by such Holder as a result of the exchange of such
Exchangeable Shares, provided, however, that the amount of any such Loan shall
not be required to be made by Getty until the latest time that such tax becomes
due and payable to the appropriate Canadian taxing authorities without penalty
or interest. In the event that any Holders effectuate an exchange of
Exchangeable Shares for shares of Common Stock of the Company pursuant to this
subsection, the Company shall prepare and file with the Commission, as promptly
as practicable, a Registration Statement on Form S-3 to register the resale of
such shares of Common Stock and shall use its reasonable best efforts to cause
the Commission to declare such Registration Statement effective under the
Securities Act as promptly as practicable, and shall use its reasonable best
efforts to keep such Registration Statement continuously effective under the
Securities Act until the date which is one year after the date that such
Registration Statement is declared effective by the Commission or such shorter
period that will terminate when all the Registrable Securities covered by the
Registration Statement have
4
<PAGE>
been sold pursuant thereto in accordance with the plan of distribution provided
in the Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act.
(d) If (but without any obligation to do so) at any time
prior to the First Release Date, the Company proposes to prepare and file with
the Commission a Registration Statement covering an underwritten offering of
Common Stock of the Company (other than in connection with a merger, acquisition
or pursuant to Form S-4, Form S-8 or successor forms), it will give written
notice (the "Notice") of its intention to do so at least twenty days prior to
the filing of such Registration Statement, to all Holders. Upon the written
request of any Holder made within ten days after receipt of the Notice, that the
Company include up to 50% of the requesting Holder's Registrable Securities in
the proposed Registration Statement, the Company shall, as to each such
requesting Holder, use its reasonable best efforts to effect the registration
under the Securities Act of the Registrable Securities which it has been so
requested to register (the "Piggyback Registration"), at the Company's sole cost
and expense (other than any commission, discounts or counsel fees payable by
such requesting Holder); provided, however, that if in the written opinion of
the Company's managing underwriter for such offering, the inclusion of all or a
portion of the Registrable Securities requested to be registered, when added to
the securities being registered by the Company, will exceed the maximum amount
of the Company's securities which can be marketed (i) at a price reasonably
related to their then current market value, or (ii) without otherwise materially
adversely affecting the offering, then the Company may exclude from such
offering all or a portion of the Registrable Securities which it has been
requested to register, such exclusion to be pro rata among the requesting
Holders. Without limiting the generality of the foregoing, the managing
underwriter may condition its consent to the inclusion of all or a portion of
the Registrable Securities requested to be registered upon the participation by
the holders of such Registrable Securities in the underwritten public offering
on the terms and conditions thereof.
Notwithstanding the provisions of this Section 2(d), the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 2(d) (irrespective of whether any written
request for inclusion of such securities shall have already been made) to elect
not to file any proposed Registration Statement, or to withdraw the same after
the filing but prior to the effective date thereof.
3. NOTICE OF PROPOSED SALE AND NOTICE OF SUSPENSION. Any
Holder proposing to sell Registrable Securities pursuant to a Registration
Statement must provide the Company with written notice of the proposed sale at
least 3 business days prior to the date of the contemplated sale. During the
term of this Agreement, including any time before or after receipt of this
notice, the Company shall immediately, by written notice to the Holder, suspend
all sales by Holders of Registrable Securities pursuant to such Registration
Statement for a period not to exceed sixty (60) days if the Company decides that
(i) a material event has or is likely to occur that has not been publicly
disclosed that, if disclosed, would have a material adverse effect on the
Company, or (ii) the sale of
5
<PAGE>
Registrable Securities would require the Company to accelerate public disclosure
of, any material financing, acquisition, disposition, corporate reorganization
or other material transaction involving the Company or its subsidiaries. The
Company agrees that in suspending the sale of any Registrable Securities
pursuant to this Section 3 or Section 4, it shall not discriminate between the
holders of Common Stock (or securities convertible into or exchangeable for
Common Stock) for which a Registration Statement relating to the resale of such
Common Stock is then effective. Each Holder agrees it shall not sell Registrable
Securities pursuant to a Registration Statement after receiving notice of a
suspension period, and the Company agrees that it shall not suspend the sale of
Registrable Securities by a Holder or Holders, pursuant to this Section 3 or
Section 4, for more than an aggregate of 120 days in any twelve (12) month
period. At the end of any such suspension period, the Company shall provide the
Holders with written notice of the termination of such suspension. The time
which any Registration Statement must remain effective pursuant to Section 2
shall be extended by the number of days during which a Holder or Holders are
prevented from selling Registrable Securities pursuant to this Section 3 or
Section 4.
4. OBLIGATIONS OF THE COMPANY. If and when the Company is
required by the provisions of this Agreement to use its reasonable best efforts
to effect the registration of the Registrable Securities, the Company shall:
(a) Prepare and file with the Commission such amendments
(including post-effective amendments) to any such Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement effective and in compliance with the provisions of the Securities Act
applicable thereto so as to permit the Prospectus forming part thereof to be
current and useable by the Holders for resales of the Registrable Securities
during the period such Registration Statement is in effect. Subject to Section
3, the Company shall, during the period such Registration Statement is in
effect, suspend the sale by the Holders of their Registrable Securities pursuant
to the Registration Statement for a reasonable period not to exceed sixty (60)
days upon (1) the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, in which case suspension shall
be limited to sales in such jurisdiction, (2) the occurrence of any event that
makes any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires any revisions to the Registration
Statement, Prospectus or other documents so that, in the case of the
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
prior to or contemporaneously with suspending such use, the Company shall
provide the Holders with written notice of such suspension, which notice need
not specify the nature of the event giving rise to such suspension. At the end
of any such suspension period, the Company shall provide the Holders with
written notice of the
6
<PAGE>
termination of such suspension. Each Holder agrees that it will not sell
Registrable Securities pursuant to a Registration Statement during any
suspension period.
(b) Furnish to each Holder whose Registrable Securities are
included in a Registration Statement and its legal counsel identified to the
Company such number of copies of the Prospectus (including any preliminary
Prospectus), and all amendments and supplements thereto as such Holder may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Holder.
(c) Use its reasonable best efforts to register or qualify
the Registrable Securities covered by a Registration Statement under such U.S.
securities or "blue sky" laws of such U.S. jurisdictions as Holders who hold a
majority-in-interest of the Registrable Securities being offered reasonably
request in order to facilitate the disposition of the Registrable Securities by
the Holders; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (1) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(c), (2) subject itself to general taxation in any such
jurisdiction, or (3) file a general consent to service of process in any such
jurisdiction.
(d) Use its reasonable best efforts to cause all the
Registrable Securities covered by a Registration Statement to be listed on the
principal national securities exchange, and included in an inter-dealer
quotation system of a registered national securities association, on or in which
securities of the same class or series issued by the Company are then listed or
included.
(e) Promptly notify the Holders (i) when a Prospectus or
any Prospectus supplement or post-effective amendment has been filed and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or any state
securities authority for amendments and supplements to a Registration Statement
and Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the issuance by any
state securities commission or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of the
Registrable Securities under state securities or "blue sky" laws or the
initiation of any proceedings for that purpose, (v) if, between the effective
date of a Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the Company
contained in any securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects,
and (vi) of the happening of any event which makes any statement made in a
Registration Statement or related Prospectus untrue or which requires the making
of any changes in such Registration Statement or Prospectus so that they will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Subject to Sections 3
7
<PAGE>
and 4, the Company shall promptly prepare and file with the Commission and
furnish a supplement or amendment to such Prospectus so that, as thereafter
deliverable to the purchasers of such Registerable Securities, such Prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) Promptly use its reasonable best efforts to prevent the
issuance of or, if issued, obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement, and if one is issued use its
reasonable best efforts to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement at the earliest possible moment.
(g) Permit counsel for the Holders to review a Registration
Statement and all amendments and supplements thereto for a reasonable period of
time prior to their filing with the Commission, and shall not file any document
in a form to which such counsel reasonably objects.
(h) Cooperate with the Holders in a reasonable manner to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be sold pursuant to
a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, and registered in such names as
the Holders may reasonably request.
5. OBLIGATIONS OF THE HOLDERS. In connection with the
registration of the Registrable Securities, the Holders shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Holder that such Holder shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request in order to assure
compliance with the Securities Act. At least fifteen (15) business days prior to
the first anticipated filing date of a Registration Statement, the Company shall
notify each Holder of the information the Company requires from each such Holder
(the "Requested Information"), if such Holder elects to have any of its
Registrable Securities included in such Registration Statement. If at least five
(5) business days prior to the anticipated filing date the Company has not
received the Requested Information from a Holder (a "Non-Responsive Holder"),
then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Holder and have no further
obligations to the Non-Responsive Holder.
(b) Each Holder by its acceptance of the Registrable
Securities agrees to cooperate fully with the Company and do all things
reasonably required by the
8
<PAGE>
Company in connection with the preparation and filing of a Registration
Statement hereunder, unless such Holder has notified the Company in writing of
its election to exclude all of its Registrable Securities from such Registration
Statement.
(c) Each Holder agrees that, to the extent limited thereby,
it will not effect sales of the Registrable Securities during any suspension
period as described in Section 3 or 4 hereof until such Holder receives notice
from the Company that the suspension period has ended and, if so directed by the
Company, such Holder shall promptly deliver to the Company or destroy (and
deliver to the Company a certificate of destruction) all copies in such Holder's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of notice of such suspension.
(d) The failure of any Holder to comply with the provisions
of this Section 5 shall not relieve the Company of its obligations to the other
Holders under this Agreement with respect to the registration of such other
Holders' Registrable Securities in accordance with the terms hereof, except
where the failure of any Holder to so comply will interfere with the ability of
the Company to timely perform its obligations hereunder to the other Holders.
6. EXPENSES OF REGISTRATION. All expenses, other than
underwriting discounts and commissions, if any, incurred in connection with
registrations, filings or qualifications pursuant to Section 4 shall be borne by
the Company; provided, that the Holders shall bear expenses and all underwriting
discounts and commissions applicable to their Registrable Securities. The
Company shall pay the fees of one United States and Canadian counsel designated
by the Holders of a majority of the Registrable Securities included in a
Registration Statement, up to a maximum of U.S.$10,000 in the aggregate for a
registration statement on Form S-3 and U.S.$20,000 in the aggregate for a
registration statement on Form S-1.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification by the Company. If the Registrable
Securities are registered under the Securities Act pursuant to Section 2 hereof,
the Company shall indemnify and hold harmless each Holder who sold Registrable
Securities pursuant to such registration its officers, directors, partners and
trustees, and each person who controls a Holder within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (each, a "Holder
Indemnitee") from and against any losses, claims, damages or liabilities to
which such Holder Indemnitee may become subject under the Securities Act,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
any amendment thereto or an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, not misleading, or (ii) an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus (as the same may have been
amended or supplemented) or an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
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statements therein, in the light of the circumstances under which they were
made, not misleading; and the Company hereby agrees to reimburse such Holder
Indemnitee for all reasonable legal and other expenses incurred by them in
connection with investigating or defending any such action or claim as and when
such expenses are incurred; provided, however, that the Company shall not be
liable to any such Holder Indemnitee in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon (i) an
untrue statement or alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in reliance upon and in
conformity with information furnished to the Company by such Holder Indemnitee
for use therein or (ii) the use by the Indemnified Holder of an outdated or
defective Prospectus after the Company has provided to such Holder Indemnitee an
updated Prospectus correcting the untrue statement or alleged untrue statement
or omission or alleged omission giving rise to such loss, claim, damage or
liability.
(b) Indemnification by the Holders. If any Registrable
Securities are registered under the Securities Act pursuant to Section 2 hereof,
each Holder agrees to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (x) an untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement or an omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (y) an untrue statement or alleged untrue statement of a material
fact contained in any Prospectus or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, in each case to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with information furnished to the Company by such Holder for use
therein, and (ii) reimburse the Company for any legal or other expenses incurred
by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred. No Holder shall be liable under this
Section 7 for any amount in excess of the net proceeds such Holder shall have
received from the sale of Registrable Securities.
(c) Notice of Claims, etc. Promptly after receipt by a
party seeking indemnification pursuant to this Section 7 (an "Indemnified
Party") of written notice of any investigation, claim, proceeding or other
action in respect of which indemnification is being sought (each, a "Claim"),
the Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 7 is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability that it otherwise may
have to the
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Indemnified Party, except to the extent that the Indemnifying Party is
materially prejudiced and forfeits substantive rights and defenses by reason of
such failure. In connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified Party shall have
the right to employ separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, costs and expenses, (y) representation of the Indemnified
Party by the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to the
Indemnified Party, potentially differing interests between such parties in the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim; provided, however, in no event shall the Indemnifying Party be
required to pay the fees and expenses of more than one separate firm for all
Indemnified Parties plus local counsel in each jurisdiction in which an action
shall be brought. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel (other than local counsel) shall
be borne exclusively by the Indemnified Party. The Indemnifying Party shall not,
without the prior written consent of the Indemnifying Party (which consent shall
not unreasonably be withheld or delayed), settle or compromise any Claim or
consent to the entry of any judgment that does not include an unconditional
release of the Indemnifying Party from all liabilities with respect to such
Claim or judgment.
(d) Contribution. If the indemnification provided for in
this Section 7 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein
because such indemnification is held by a court of competent jurisdiction to be
unenforceable, then each Indemnifying Party shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations, subject, however, to the
limitations on the liability of the Holders contained in subsection (b) above.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such Indemnifying Party or by
such Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto
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agree that it would not be just and equitable if contribution pursuant to this
Section 7(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 7(d). The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. RULE 144. The Company covenants to file all reports
required to make publicly available, and available to the Holders, at all times,
such information as is necessary to enable the Holders to make sales of
Registrable Securities pursuant to Rule 144 of the Commission under the
Securities Act, or any successor to such rule. Upon request of a Holder, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
9. ASSIGNMENT. The rights to have the Company register
Registrable Securities pursuant to this Agreement may be assigned by the Holders
to any permitted transferee of all or any portion of the Registrable Securities
of Holder only if: (a) the Holder agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or assignment,
the securities so transferred or assigned to the transferee or assignee
constitute Restricted Securities, and (d) at or before the time the Company
received the written notice contemplated by clause (b) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein. The Company shall take such steps as are
necessary to permit the transferee to use any effective Registration Statement
covering Registrable Securities received by such transferee or issuable upon
exchange of Exchangeable Shares by such transferee.
10. AMENDMENT AND WAIVER. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Holders who hold a majority-in-interest of
the Registrable Securities (including for this purpose, Exchangeable Shares
exchangeable for Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Holder and the
Company.
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11. MISCELLANEOUS.
(a) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities (including for this purpose, Exchangeable Shares
exchangeable for Registrable Securities). If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Except as may be otherwise provided herein, any notice
or other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
(1) if to the Company, to:
GETTY IMAGES, INC.
2101 Fourth Avenue - Suite 500
Seattle, WA 98121
Attention: Suzanne Page, Esq.
With a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen M. Besen, Esq.
(2) if to any Holder, at the most current address as such
Holder shall have provided in writing to the Company
in accordance with the provisions of this Section 11,
which address shall initially be the address set
forth next to such Holder's name on the signature
page to this Agreement.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Washington. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of Seattle or the state courts of the State of Washington
sitting in the City of Seattle in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.
(d) The remedies provided in this Agreement are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or
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<PAGE>
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provision,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(e) This Agreement and the Combination Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein. This Agreement and the Combination
Agreement supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(f) This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed and delivered as of the date first above written.
GETTY IMAGES, INC.
By: /s/
----------------------------------------
Name:
Title:
STOCKHOLDERS
_____________________________ Address: 931 Varsity Estates Green N.W.
Name: Bradley E. Zumwalt Calgary, Alberta
T3B 3X9
_____________________________ Address: 931 Varsity Estates Green N.W.
Name: Tanya M. Zumwalt Calgary, Alberta
T3B 3X9
_____________________________ Address: 516 Sunderland Avenue S.W.
Name: Brock V. Bolhonos Calgary, Alberta
T3C 2K4
_____________________________ Address: 2116 - 7th Avenue N.W.
Name: Blake I. Springer Calgary, Alberta
T2N 0Z6
_____________________________ Address: #2, 1039 - 1st Avenue, N.W.
Name: Patti C. Acheson Calgary, Alberta
TZN 0A8
_____________________________ Address: 248 Parkside Way S.E.
Name: Grant D. Hutchison Calgary, Alberta
T2J 3ZA
_____________________________ Address: 419 - 21st Avenue N.W.
Name: Drina J. Lazar Calgary, Alberta
T2M 1J6
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<PAGE>
_____________________________ Address: 1612 Boundbrook Lane
Name: Andrew J. Cicherski Irving, Texas
USA 75060
_____________________________ Address: 44 Diamond Court S.E.
Name: Vivian C. Farris Calgary, Alberta
T2J 7C8
_____________________________ Address: 120 Boylston Street
Name: Richard M. Barno Boston, Massachusetts
USA 02116
_____________________________ Address: 3700,400 - 3rd Avenue S.W.
Name: John T. Ramsay Calgary, Alberta
T2P 4H2
16
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Getty Images, Inc. on Form S-3 of our report dated March 31, 1999 on our audits
of the consolidated financial statements and financial statement schedules of
Getty Images, Inc. and subsidiaries and of its predecessor, Getty Communications
plc and subsidiaries, appearing in the Annual Report on Form 10-K of Getty
Images, Inc. We also consent to the reference to our firm under the caption
"Experts".
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
London
September 3, 1999
