<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 2000
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)
<TABLE>
<S> <C> <C>
DELAWARE 7389 98-0177556
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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701 N. 34TH STREET, SUITE 400, SEATTLE, WASHINGTON 98103
(206) 268-2000
(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.
701 N. 34TH STREET, SUITE 400, SEATTLE, WASHINGTON 98103
(206) 268-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
CRAIG W. ADAS, ESQ.
WEIL, GOTSHAL & MANGES LLP
2882 SAND HILL ROAD, SUITE 280, MENLO PARK, CALIFORNIA 94025
(650) 926-6200
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of this registration statement.
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. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE REGISTRATION FEE
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5% Convertible Subordinated
Notes due 2007.............. $250,000,000 100% $250,000,000 $66,000
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Common Stock, par value $0.01
per share................... (1) (1) (1) (2)
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</TABLE>
(1) Includes 4,092,992 shares of common stock to be issued upon conversion of
the notes at a conversion price of $61.08 per share of common stock.
Pursuant to Rule 416 under the Securities Act, such number of shares of
common stock registered hereby shall include an indeterminate number of
shares of common stock that may be issued in connection with any stock
split, stock dividend, recapitalization or similar event.
(2) Pursuant to Rule 457(i) under the Securities Act, there is no additional
filing fee with respect to the shares of common stock issuable upon
conversion of the notes because no additional consideration will be received
in connection with the exercise of the conversion privilege.
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(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 9, 2000
$250,000,000
[GETTY IMAGES LOGO]
5% Convertible Subordinated Notes Due 2007 and
the Common Stock Issuable Upon Conversion of the Notes
-------------------------
On March 13, 2000, Getty Images, Inc. issued and sold $250,000,000
aggregate principal amount of 5% convertible subordinated notes due 2007 in a
private placement. The initial purchasers of the notes subsequently transferred
the notes to various other holders in transactions exempt from the registration
requirements of the Securities Act of 1933. In connection with our private
placement, we agreed to register the notes and the common stock into which the
notes are convertible to facilitate secondary trading by the holders, to whom we
refer as the selling securityholders in this prospectus. This prospectus is part
of a registration statement that fulfills our registration obligation. All
securities offered by this prospectus are offered by the selling
securityholders.
The notes were issued under, and are subject to the provisions of, an
indenture. The notes are convertible by holders prior to maturity into common
stock at an initial conversion price of $61.08 per share, subject to adjustment
if particular events affecting our common stock occur. We will pay interest on
the notes at a rate of 5% per year on March 15 and September 15 of each year,
beginning on September 15, 2000. The notes will mature on March 15, 2007, unless
earlier converted or redeemed. The notes are not secured and are subordinated to
all of our present and future senior indebtedness and are effectively
subordinated to all debt and other liabilities of our subsidiaries.
We may redeem all or a portion of the notes on or after March 20, 2003. In
addition, the holders may require us to repurchase the notes upon a fundamental
change prior to March 15, 2007.
The notes are currently eligible for trading on the Private Offerings,
Resales and Trading through Automated Linkages, or PORTAL, Market.
Our common stock is traded on the Nasdaq National Market under the symbol
"GETY." On June 5, 2000, the reported last sales price of our common stock on
the Nasdaq National Market was $42.000 per share.
-------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is dated , 2000
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Summary..................................................... 1
Risk Factors................................................ 4
Special Note Regarding Forward-Looking Statements........... 6
Use of Proceeds............................................. 7
Ratio of Earnings to Fixed Charges.......................... 7
Description of Notes........................................ 8
Description of Indebtedness................................. 21
Description of Capital Stock................................ 24
United States Federal Income Tax Considerations............. 28
Selling Securityholders..................................... 35
Plan of Distribution........................................ 37
Documents Incorporated by Reference......................... 39
Where You Can Find More Information......................... 40
Legal Matters............................................... 40
Independent Accountants..................................... 40
</TABLE>
-------------------------
Our principal executive offices are located at 701 N. 34th Street, Suite
400, Seattle, Washington 98103, and our telephone number is (206) 268-2000. Our
primary website can be found at www.gettyimages.com. The contents of our
websites are not part of this prospectus.
In this prospectus, "Getty Images," "we," "us," and "our" refer to Getty
Images, Inc. and its consolidated subsidiaries, unless the context otherwise
dictates, and references to "dollars" or "$" are to United States dollars and
references to "pounds sterling" or "L" are to United Kingdom pounds sterling.
Getty Images, Getty, the Getty logo, gettyone, Energy Film Library, PhotoDisc,
Allsport, OnLine USA, Tony Stone Images, EyeWire, Hulton, Art.com, Liaison, The
Image Bank, Swanstock, Artville, American Royal Arts, Newsmakers and Visual
Communications Group are used in this prospectus or the documents incorporated
by reference into this prospectus and are our trademarks. We also refer to
trademarks of others in this prospectus and the documents incorporated by
reference into this prospectus. Getty Images, Inc. is not affiliated with the J.
Paul Getty Museum.
i
<PAGE> 4
SUMMARY
This summary highlights some information from this prospectus, and it may
not contain all of the information that is important to you. It is qualified in
its entirety by the more detailed information and consolidated financial data,
including the notes to the consolidated financial data, included in or
incorporated by reference into this prospectus. You should read the full text
of, and consider carefully the more specific details contained in, this
prospectus before investing in the notes or the common stock underlying the
notes. In addition, you should carefully consider the information set forth or
referred to under the heading "Risk Factors."
Getty Images is a leading provider of imagery to businesses and consumers
worldwide, distributing products digitally through the Internet and on CD ROMs,
as well as in analog form. We are pioneering a solution to aggregate and
distribute visual content. Since 1995 we have brought many of the visual content
industry's leading brands under one source by acquiring brands such as Tony
Stone Images, a leading worldwide provider of contemporary stock photography;
PhotoDisc, a pioneer in the development and marketing of digital stock
photography, which uses the royalty-free licensing model and electronic delivery
of images; Allsport, a leading worldwide sports photography provider; EyeWire, a
leading provider of royalty-free imagery and visual content-related products and
services to the business user market; Art.com, a leading provider of framed and
unframed art and art-related products to consumers on the Internet; The Image
Bank, a leading provider of visual content to the advertising, design,
publishing, corporate, broadcast and editorial markets; and Visual
Communications Group, a leading provider of stock photography. We work with over
4,800 photographers and an estimated 750 film makers and film producers to
create our content. We recorded sales of $247.8 million in 1999 and $104.8
million for the three months ended March 31, 2000. We control an estimated 70
million still images and an estimated 30,000 hours of film footage.
We provide our high quality, relevant imagery to creative professionals at
advertising agencies, graphic design firms and corporations; press and editorial
customers involved in newspaper, magazine, book, CD ROM and online publishing;
business users and small office/home office users; and consumers. By aggregating
the content of our various leading brands on the Internet and partnering with
third party providers, we offer a comprehensive and user friendly solution for
our customers' imagery and related product needs. We seek to leverage our
internally-developed search and electronic commerce technology to enhance our
position as a leader in the visual content industry.
Visual content is everywhere and is used by businesses and consumers alike
to enlighten, inspire, entertain and communicate messages. Imagery is a dynamic
and forceful communication tool, allowing users to capture thoughts or ideas in
a simple way. Imagery has no language barriers and can often convey universal
messages. Business users typically integrate imagery into various media, such as
advertisements, billboards, direct mail, magazines, newspapers, brochures,
packaging, motion pictures, television programming and commercials and websites.
Consumers, forming a distinct market segment, have traditionally purchased
images for decoration or pleasure in the home or office and are increasingly
using images on the Internet.
The visual content industry supplies imagery to a varied and growing
customer base. The industry has historically been highly fragmented, with a few
international providers, a number of regional providers and a large number of
small businesses that specialize in a particular content type or geographic
area. We believe that the demand for visual content has grown consistently in
recent years. We believe this growth can be attributed in part to technological
improvements which have made imagery more accessible and the proliferation of
both print and television media. Recently, industry growth has been accelerated
by the use of still images and film footage on the Internet.
The visual content industry involves the creation, acquisition, storage,
distribution and end-use of still images and film footage. Traditionally, images
have been captured and distributed in analog form.
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This method required a lengthy process for the provider and was relatively
inefficient for the customer. Digital image technology captures images in a form
that can be stored, electronically manipulated and quickly retrieved from a
computer. While visual content providers continue to create and distribute
imagery in analog format, they are increasingly using digital technology. The
migration toward digital technology provides various benefits to both customers
and content providers. For the customer, the digital image acquisition process
is dramatically more efficient. For providers, digitization provides an
opportunity to achieve economies of scale by consolidating a widely fragmented
industry, thereby leveraging an increased offering of images over a wide range
of business and consumer customers.
We offer a hassle-free comprehensive solution, high quality, relevant
content and around-the-clock service to our customers. We seek to be the leading
provider in the visual content industry. Key elements of our strategy include
promoting online distribution, creating vertical portals for our key customer
segments, increasing our penetration of the consumer marketplace, maintaining
our technological expertise, leveraging strategic alliances and continuing to
pursue acquisitions.
2
<PAGE> 6
THE OFFERING
SECURITIES OFFERED.............. $250,000,000 principal amount of 5%
convertible subordinated notes due 2007.
INTEREST........................ 5% per year. We will pay interest on March 15
and September 15 of each year, beginning
September 15, 2000.
MATURITY........................ March 15, 2007.
CONVERSION...................... You may convert each note into common stock
at any time on or before March 15, 2007 at a
conversion price of $61.08 per share, subject
to adjustment if particular events affecting
our common stock occur.
SUBORDINATION................... The notes are subordinated to all of our
existing and future senior indebtedness and
are effectively subordinated to all debt and
other liabilities of our subsidiaries. As of
March 31, 2000, we had approximately $30.0
million of senior indebtedness outstanding
and current liabilities of $116.0 million.
The notes will rank equal in right of payment
to our existing 4.75% convertible
subordinated notes due 2003. Neither we nor
our subsidiaries are prohibited from
incurring debt, including senior
indebtedness, under the indenture governing
the notes.
OPTIONAL REDEMPTION............. We may redeem any of the notes on or after
March 20, 2003, by giving you at least 30
days' notice. We may redeem the notes either
in whole or in part at the redemption prices
set forth in this prospectus, together with
accrued and unpaid interest.
FUNDAMENTAL CHANGE.............. If a fundamental change, as described under
"Description of Notes -- Redemption at Option
of the Holder," occurs on or before March 15,
2007, you may require us to purchase all or
part of your notes at a redemption price
equal to 100% of the outstanding principal
amount of the notes being redeemed, plus
accrued and unpaid interest.
USE OF PROCEEDS................. We will not receive any of the proceeds from
the sale by any selling securityholder of the
notes or the underlying common stock offered
by this prospectus.
NASDAQ NATIONAL MARKET SYMBOL... "GETY"
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RISK FACTORS
Before you invest in the notes or shares of common stock underlying the
notes, you should be aware of various risks, including those described below.
You should carefully consider these risks, together with all of the other
information included or incorporated by reference in this prospectus, including
the risk factors contained in our annual report on form 10-K for the year ended
December 31, 1999, before you decide whether to purchase any of these
securities. The risks described below are not the only risks we face. If any of
the following risks occur, our business, financial condition and results of
operations could suffer. As a result, the trading price of the notes and the
common stock could decline, and you may lose all or part of your investment.
RISKS RELATED TO THE NOTES AND COMMON STOCK
THE NOTES ARE SUBORDINATED TO ALL OF OUR EXISTING AND FUTURE SENIOR
INDEBTEDNESS.
The notes are unsecured and subordinated in right of payment to all of our
existing and future senior indebtedness, including all indebtedness incurred
under our senior credit facility. In the event of our bankruptcy, liquidation or
reorganization or upon acceleration of the notes due to an event of default
under the indenture and in some other events, our assets will be available to
pay obligations on the notes only after all of our senior indebtedness has been
paid. As a result, there may not be sufficient assets remaining to pay amounts
due on any or all of the outstanding notes. Neither we nor our subsidiaries are
prohibited from incurring debt, including senior indebtedness, under the
indenture. If we or our subsidiaries were to incur additional debt or
liabilities, our ability to pay our obligations on the notes could be negatively
impacted. As of March 31, 2000, we had approximately $30.0 million of senior
indebtedness outstanding under our senior credit facility. In addition, at March
31, 2000 there was approximately $70.0 million available to be drawn by us as
senior indebtedness under our senior credit facility. We may from time to time
incur additional debt, including senior indebtedness.
WE CONDUCT A SUBSTANTIAL PORTION OF OUR OPERATIONS THROUGH OUR
SUBSIDIARIES, WHICH MAY AFFECT OUR ABILITY TO MAKE PAYMENTS ON THE NOTES.
We conduct a substantial portion of our operations through our
subsidiaries. As a result, our cash flow and our ability to service our debt,
including the notes, is dependent upon the earnings of our subsidiaries. In
addition, we are dependent on the distribution of earnings, loans or other
payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the notes or to provide us with
funds for our payment obligations, whether by dividends, distributions, loans or
other payments. In addition, any payment of dividends, distributions, loans or
advances by our subsidiaries to us could be subject to statutory or contractual
restrictions. Payments to us by our subsidiaries will also be contingent upon
our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
notes to participate in those assets, will be effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors. In addition,
even if we were a creditor of any of our subsidiaries, our rights as a creditor
would be subordinate to any security interest in the assets of our subsidiaries
and any indebtedness of our subsidiaries senior to that held by us. As of March
31, 2000, our subsidiaries had approximately $116.0 million of current
liabilities. These subsidiaries may incur additional debt and liabilities in the
future.
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<PAGE> 8
WE MAY BE UNABLE TO REDEEM THE NOTES UPON A FUNDAMENTAL CHANGE.
Upon a fundamental change, you may require us to redeem all or a portion of
your notes. If a fundamental change was to occur, we may not have enough funds
to pay the redemption price for all tendered notes. In addition, in particular
situations, a fundamental change would result in an event of default under our
senior credit facility. Any future credit agreements or other agreements
relating to our indebtedness may contain similar provisions, or expressly
prohibit the repurchase of the notes upon a fundamental change or may provide
that a fundamental change constitutes an event of default under that agreement.
If a fundamental change occurs at a time when we are prohibited from purchasing
or redeeming notes, we could seek the consent of our lenders to redeem the notes
or could attempt to refinance the indebtedness under the notes. If we do not
obtain a consent, we cannot purchase or redeem the notes. Our failure to redeem
tendered notes would constitute an event of default under the indenture, which
might constitute a default under the terms of our other indebtedness. In such
circumstances, or if a fundamental change would constitute an event of default
under our senior indebtedness, the subordination provisions of the indenture
would restrict payments to the holders of notes. The term "fundamental change"
is limited to specified transactions and may not include other events that might
adversely affect our financial condition. Our obligation to offer to redeem the
notes upon a fundamental change would not necessarily afford you protection in
the event of a highly leveraged transaction, reorganization, merger or similar
transaction involving Getty.
NO ACTIVE TRADING MARKET EXISTS FOR THE NOTES AND ONE MAY NOT DEVELOP.
The initial purchasers in the original private placement have advised us
that they intend to make a market in the notes. However, the initial purchasers
are not obligated to make a market and may discontinue this market making
activity at any time without notice. In addition, market making activity by the
initial purchasers will be subject to the limits imposed by the Securities Act
of 1933 and the Securities Exchange Act of 1934. As a result, we cannot assure
you that any market for the notes will develop or, if one does develop, that it
will be maintained. If an active market for the notes fails to develop or be
sustained, the trading price of the notes could decline.
OUR STOCK PRICE MAY CONTINUE TO EXPERIENCE LARGE FLUCTUATIONS WHICH MAY
SIGNIFICANTLY AFFECT THE TRADING PRICE OF THE NOTES.
The market price of our common stock has been volatile. For example, from
January 1, 2000 through June 5, 2000, the market price per share for our common
stock has ranged from $64.375 to $25.063. Fluctuations in the trading price of
our common stock will affect the trading price of the notes. Trading prices may
continue to fluctuate in response to a number of events and factors, including
the following:
- 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;
- variations in our revenues, expenses or profitability;
- changes in financial estimates and recommendations by securities
analysts;
- failure to meet the expectations of public market analysts;
- performance by other visual content companies; and
- news reports relating to trends in the visual content, Internet or other
product or service industries.
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<PAGE> 9
Any of these events may cause the price of our shares to fall. In addition,
the stock market in general and the market prices for electronic 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 market price of our
shares, regardless of our operating performance.
IF ANY RATING AGENCY LOWERS ITS RATING OF OUR INDEBTEDNESS, THE MARKET
PRICE OF THE NOTES AND OUR COMMON STOCK COULD DECLINE.
If any rating agency that rates any of our indebtedness, including the
notes, lowers its rating or places us on its watchlist for possible downgrading,
the market price of the notes and our common stock could decline.
FUTURE SALES OF OUR STOCK BY EXISTING STOCKHOLDERS COULD NEGATIVELY IMPACT
OUR STOCK PRICE.
Sales, or the possibility of sales, of substantial numbers of shares of our
common stock in the public market could negatively affect prevailing market
prices of shares of our common stock, potentially resulting in losses to
investors. Some of our stockholders have the right, under 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 their options
become exercisable, particularly if they need to raise funds to pay for the
exercise of their options or to satisfy tax liabilities that they may incur in
connection with exercising their options.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Throughout this prospectus and the information incorporated herein by
reference, we make "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking
statements include the words "may," "will," "estimate," "intend," "continue,"
"pro forma," "expect" or "anticipate" or other similar words. The
forward-looking statements contained in this prospectus are generally located in
sections entitled "Summary," "Risk Factors," "Description of Notes" and "Plan of
Distribution," but may be found in other sections as well. These forward-looking
statements generally relate to our plans and objectives for future operations
and are based on management's reasonable estimates of future results or trends.
Although we believe that our plans and objectives reflected in or suggested by
these forward-looking statements are reasonable, we may not achieve our plans or
objectives and cannot guarantee future results, levels of activity, performance
or achievements. Actual results may differ materially from projected results due
to risks and uncertainties, including those described in the "Risk Factors"
section of this prospectus and those detailed from time to time in our SEC
filings.
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USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling
securityholder of the notes or the underlying common stock.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges and the deficiency of earnings to
fixed charges, as applicable, for each of the periods indicated is as follows:
<TABLE>
<CAPTION>
GETTY
COMMUNICATIONS PLC
(PREDECESSOR COMPANY) GETTY IMAGES, INC.
----------------------- -------------------------------------
YEAR ENDED YEAR ENDED THREE MONTHS
DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
----------------------- ----------------- ----------------
1995 1996 1997 1998 1999 1999 2000
----- ----- ----- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges................. 3.38x 3.79x 6.69x -- -- -- --
Deficiency of earnings to
fixed charges........... -- -- -- $33,703 $69,493 $6,447 $33,471
</TABLE>
These computations include us and our consolidated subsidiaries. Ratio of
earnings to fixed charges means the ratio of net income, before fixed charges
and income taxes, to fixed charges, where fixed charges are the aggregate of
interest, amortization of the costs related to debt and an allocation of rental
charges to approximate equivalent interest. Deficiency of earnings to fixed
charges means the deficiency of income, before fixed charges and income taxes,
to fixed charges, where fixed charges are the aggregate of interest,
amortization of the costs related to debt and an allocation of rental charges to
approximate equivalent interest.
The ratio of earnings to fixed charges for 1995 reflects the combination of
the results of Tony Stone Images, the predecessor in interest of Getty
Communications plc and Getty Images, for the period from January 1 through March
13, 1995 with the results of Getty Communications plc for the period from March
14, through December 31, 1995. Due to the nature of this combination, the
presentation of combined results for the two periods in 1995 does not conform
with U.S. GAAP.
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DESCRIPTION OF NOTES
We issued the notes under an indenture dated as of March 13, 2000, between
Getty Images and The Bank of New York, as trustee. You may request a copy of the
indenture from the trustee.
The following description is a summary of the material provisions of the
notes and the indenture. It does not purport to be complete. This summary is
subject to and is qualified by reference to all the provisions of the indenture,
including the definitions of certain terms used in the indenture. Wherever
particular provisions or defined terms of the indenture or form of note are
referred to, these provisions or defined terms are incorporated in this
prospectus by reference.
As used in this "Description of Notes" section, references to "Getty,"
"we," "our" or "us" refer solely to Getty Images, Inc. and not its subsidiaries.
GENERAL
We issued $250.0 million of notes in a private placement on March 13, 2000.
The notes are our general unsecured obligations. Our payment obligations under
the notes are subordinated to our senior indebtedness as described under
"-- Subordination of Notes." The notes are convertible into common stock as
described under "-- Conversion of Notes." The notes were issued only in
denominations of $1,000 and multiples of $1,000. The notes will mature on March
15, 2007 unless earlier converted, redeemed at our option or redeemed at your
option upon a fundamental change.
We are not subject to any financial covenants under the indenture. In
addition, we are not restricted under the indenture from paying dividends,
incurring debt, including senior indebtedness, or issuing or repurchasing our
securities.
You are not afforded protection in the event of a highly leveraged
transaction or a change in control of Getty under the indenture except to the
extent described below under "-- Redemption at Option of the Holder."
We will pay interest on the notes at a rate of 5% per year. We will pay
interest on March 15 and September 15 of each year, beginning September 15,
2000, to record holders at the close of business on the preceding March 1 and
September 1, as the case may be, except:
- interest payable upon redemption will be paid to the person to whom
principal is payable, unless the redemption date is an interest payment
date; and
- as set forth in the next sentence.
In case you convert your note into common stock during the period after any
record date but prior to the next interest payment date either:
- we will not be required to pay interest on the interest payment date if
the note has been called for redemption on a redemption date that occurs
during this period;
- we will not be required to pay interest on the interest payment date if
the note is to be redeemed in connection with a fundamental change on a
repurchase date that occurs during this period; or
- if otherwise, any note not called for redemption that is submitted for
conversion during this period must also be accompanied by an amount equal
to the interest due on the interest payment date on the converted
principal amount, unless at the time of conversion there is a default in
the payment of interest on the notes. See "-- Conversion of Notes."
We will maintain an office in the Borough of Manhattan, the City of New
York for the payment of interest, which shall initially be an office or agency
of the trustee.
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We may pay interest either:
- by check mailed to your address as it appears in the note register,
provided that if you are a holder with an aggregate principal amount in
excess of $2.0 million, you shall be paid, at your written election, by
wire transfer in immediately available funds; or
- by transfer to an account maintained by you in the United States.
However, payments to The Depository Trust Company, New York, New York,
which we refer to as DTC, will be made by wire transfer of immediately available
funds to the account of DTC or its nominee. Interest will be computed on the
basis of a 360-day year composed of twelve 30-day months.
FORM, DENOMINATION AND REGISTRATION
The notes were issued in fully registered form, without interest coupons,
in denominations of $1,000 principal amount and integral multiples of $1,000.
GLOBAL NOTE, BOOK-ENTRY FORM
Notes held by qualified institutional buyers are evidenced by a global note
which was deposited with the trustee as custodian for DTC and registered in the
name of Cede & Co., as nominee of DTC. Except as set forth below, a global note
may be transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
The global note will not be registered in the name of any person, or
exchanged for notes that are registered in the name of any person, other than
DTC or its nominee unless either of the following occurs:
- DTC notifies us that it is unwilling, unable or no longer qualified to
continue acting as the depositary for the global note; or
- an Event of Default with respect to the notes represented by the global
note has occurred and is continuing.
In those circumstances, DTC will determine in whose names any securities
issued in exchange for the global note will be registered.
DTC or its nominee will be considered the sole owner and holder of the
global note for all purposes, and as a result:
- you cannot get notes registered in your name if they are represented by
the global note;
- you cannot receive physical certificated notes in exchange for your
beneficial interest in the global note;
- you will not be considered to be the owner or holder of the global note
or any note it represents for any purpose; and
- all payments on the global note will be made to DTC or its nominee.
The laws of some jurisdictions require that particular kinds of purchasers
(for example, some insurance companies) can only own securities in definitive
certificated form. These laws may limit your ability to transfer your beneficial
interests in the global note to these types of purchasers.
If a qualified institutional buyer is a participant in DTC, it may hold its
interest in the global note directly through DTC or indirectly through
organizations that are participants. Qualified institutional buyers who are not
participants may beneficially own interests in the global note held by DTC only
through participants in DTC or various banks, brokers, dealers, trust companies
and other
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<PAGE> 13
parties that clear through or maintain a custodial relationship with a
participant. The only place where the ownership of beneficial interests in the
global security note will appear and the only way the transfer of those
interests can be made will be on the records kept by DTC for their participants'
interests and the records kept by those participants for interests of persons
held by participants on their behalf.
We will pay interest on and the redemption price of a global note to Cede &
Co., as the registered owner of the global note, by wire transfer of immediately
available funds on each interest payment date or the redemption or repurchase
date, as the case may be. Neither we, the trustee nor any paying agent will be
responsible or liable for:
- the records relating to, or payments made on account of, beneficial
ownership interests in a global note; or
- maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We have been informed that DTC's practice is to credit participants'
accounts on that payment date with payments in amounts proportionate to their
respective beneficial interests in the principal amount represented by a global
note as shown on the records of DTC, unless DTC has reason to believe that it
will not receive payment on that payment date. Payments by participants to
owners of beneficial interests in the principal amount represented by a global
note held through participants will be the responsibility of the participants,
as is now the case with securities held for the accounts of customers registered
in "street name."
We will send any redemption notices to Cede & Co. We understand that if
less than all of the notes are being redeemed, DTC's practice is to determine by
lot the amount of the holdings of each participant to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the notes.
Under its usual procedures, DTC mails an omnibus proxy to the issuer as soon as
possible after a record date is established. The omnibus proxy assigns Cede &
Co.'s consenting or voting rights to those participants to whose accounts to
which notes are credited on the record date are identified in a listing attached
to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge the
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of the interest, may be affected by the lack
of a physical certificate evidencing its interest.
Neither Getty, the trustee, registrar, paying agent nor conversion agent
will have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised us that it will take any
action permitted to be taken by a holder of notes, including the presentation of
notes for exchange, only at the direction of one or more participants to whose
account with DTC interests in the global note are credited, and only in respect
of the principal amount of the notes represented by the global note as to which
the participant or participants has or have given such direction.
DTC has advised us that it is a:
- limited purpose trust company organized under the laws of the State of
New York;
- member of the Federal Reserve System;
- "clearing corporation" within the meaning of the Uniform Commercial Code;
and
- "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act.
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<PAGE> 14
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants.
Participants include securities brokers, dealers, banks, trust companies and
clearing corporations and other organizations. Some of the participants or their
representatives, together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of
interests in a global note among participants. However, DTC is under no
obligation to perform or continue to perform these procedures, and may
discontinue these procedures at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
us within 90 days, we will issue notes in certificated form in exchange for the
global note.
CONVERSION OF NOTES
You may convert your note, in whole or in part, into common stock through
the final maturity date of the notes, subject to prior redemption of the notes.
If we call notes for redemption, you may convert the notes only until the close
of business on the business day prior to the redemption date unless we fail to
pay the redemption price. If you have submitted your notes for redemption upon a
fundamental change, you may convert your notes only if you withdraw your
conversion election. You may convert your notes in part so long as this part is
$1,000 principal amount or an integral multiple of $1,000. If any notes not
called for redemption are converted after a record date for any interest payment
date and prior to the next interest payment date, the notes must be accompanied
by an amount equal to the interest payable on the interest payment date on the
converted principal amount unless a default exists at the time of conversion.
The initial conversion price for the notes is $61.08 per share of common
stock, subject to adjustment as described below. We will not issue fractional
shares of common stock upon conversion of notes. Instead, we will pay cash equal
to the market price of the fractional share of common stock on the business day
prior to the conversion date. Except as described below, you will not receive
any accrued interest or dividends upon conversion.
To convert your note into common stock you must:
- complete and manually sign the conversion notice on the back of the note
or facsimile of the conversion notice and deliver this notice to the
conversion agent;
- surrender the note to the conversion agent;
- if required, furnish appropriate endorsements and transfer documents;
- if required, pay all transfer or similar taxes; and
- if required, pay funds equal to interest payable on the next interest
payment date.
The date you comply with these requirements is the conversion date under
the indenture. We will adjust the conversion price if the following events
occur:
(1) we issue common stock as a dividend or distribution on our common
stock;
(2) we issue to all holders of common stock certain rights or warrants
to purchase our common stock;
(3) we subdivide or combine our common stock;
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<PAGE> 15
(4) we distribute, to all holders of common stock, any capital stock,
evidences of indebtedness or assets, including securities but excluding:
- rights or warrants listed in (2) above;
- dividends or distributions listed in (1) above; and
- cash distributions listed in (5) below;
(5) we distribute cash, excluding any quarterly cash dividend on our
common stock to the extent that the aggregate cash dividend per share of
common stock in any quarter does not exceed the greater of:
- the amount per share of common stock of the next preceding quarterly
cash dividend on the common stock to the extent that the preceding
quarterly dividend did not require an adjustment of the conversion
price pursuant to this clause (5), as adjusted to reflect subdivisions
or combinations of the common stock, and
- 3.75% of the average of the last reported sale price of the common
stock during the ten trading days immediately prior to the declaration
date of the dividend, and excluding any dividend or distribution in
connection with the liquidation, dissolution or winding up of Getty.
If an adjustment is required to be made under this clause (5) as a result
of a distribution that is a quarterly dividend, the adjustment would be
based upon the amount by which the distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant to this clause
(5). If an adjustment is required to be made under this clause (5) as a
result of a distribution that is not a quarterly dividend, the adjustment
would be based upon the full amount of the distribution;
(6) we or one of our subsidiaries makes a payment in respect of a
tender offer or exchange offer for our common stock to the extent that the
cash and value of any other consideration included in the payment per share
of common stock exceeds the current market price per share of common stock
on the trading day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer; and
(7) someone other than us or one of our subsidiaries makes a payment
in respect of a tender offer or exchange offer in which, as of the closing
date of the offer, our board of directors is not recommending rejection of
the offer. The adjustment referred to in this clause (7) will only be made
if:
- the tender offer or exchange offer is for an amount that increases
the offeror's ownership of common stock to more than 25% of the
total shares of common stock outstanding, and
- the cash and value of any other consideration included in the
payment per share of common stock exceeds the current market price
per share of common stock on the business day next succeeding the
last date on which tenders or exchanges may be made pursuant to the
tender or exchange offer.
However, the adjustment referred to in this clause (7) will generally not
be made if as of the closing of the offer, the offering documents disclose
a plan or an intention to cause us to engage in a consolidation or merger
of Getty or a sale of all or substantially all of our assets.
In the event that Getty implements a rights agreement, such rights
agreement will provide that upon conversion of the notes into common stock, the
holders will receive, in addition to the common stock, the rights under the
rights agreement, whether or not the rights have separated from the common stock
at the time of conversion, subject to certain limited customary exceptions.
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<PAGE> 16
In the event of:
- any reclassification of our common stock;
- a consolidation, merger or combination involving Getty; or
- a sale or conveyance to another person of the property and assets of
Getty as an entirety or substantially as an entirety,
in which holders of common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, holders of
notes will generally be entitled thereafter to convert their notes into the same
type of consideration received by holders of common stock immediately prior to
one of these types of events.
You may in particular situations be deemed to have received a distribution
subject to U.S. federal income tax as a dividend in the event of any taxable
distribution to holders of common stock or in other situations requiring a
conversion price adjustment. See "United States Federal Income Tax
Considerations."
We may from time to time reduce the conversion price for a period of at
least 20 days if our board of directors has made a determination that this
reduction would be in our best interests. Any such determination by our board
will be conclusive. We would give holders at least 15 days' notice of any
reduction in the conversion price. In addition, we may reduce the conversion
price if our board of directors deems it advisable to avoid or diminish any
income tax to holders of common stock resulting from any stock or rights
distribution. See "United States Federal Income Tax Considerations."
We will not be required to make an adjustment in the conversion price
unless the adjustment would require a change of at least 1% in the conversion
price. However, we will carry forward any adjustments that are less than one
percent of the conversion price. Except as described above in this section, we
will not adjust the conversion price for any issuance of our common stock or
convertible or exchangeable securities or rights to purchase our common stock or
convertible or exchangeable securities.
OPTIONAL REDEMPTION BY GETTY
The notes are not entitled to any sinking fund. At any time on or after
March 20, 2003, we may redeem the notes in whole or in part at the following
prices expressed as a percentage of the principal amount:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------ ----------------
<S> <C>
Beginning on March 20, 2003 and ending on March 14, 2004.... 102.857%
Beginning on March 15, 2004 and ending on March 14, 2005.... 102.143%
Beginning on March 15, 2005 and ending on March 14, 2006.... 101.429%
Beginning on March 15, 2006 and ending on March 14, 2007.... 100.714%
</TABLE>
and 100% at March 15, 2007. In each case, we will pay interest to, but
excluding, the redemption date. If the redemption date is an interest payment
date, interest shall be paid to the record holder on the relevant record date.
We are required to give notice of redemption by mail to holders not more than 60
but not less than 30 days prior to the redemption date.
If less than all of the outstanding notes are to be redeemed, the trustee
shall select the notes to be redeemed in principal amounts of $1,000 or integral
multiples of $1,000 by lot, pro rata or by another method the trustee considers
fair and appropriate. If a portion of your notes is selected for partial
redemption and you convert a portion of your notes, the converted portion shall
be deemed to be of the portion selected for redemption.
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<PAGE> 17
We may not redeem the notes if we have failed to pay any interest or
premium on the notes and such failure to pay is continuing. We will issue a
press release if we redeem the notes.
REDEMPTION AT OPTION OF THE HOLDER
If a fundamental change occurs prior to March 15, 2007, you may require us
to redeem your notes, in whole or in part, on a repurchase date that is 30 days
after the date of our notice of the fundamental change. The notes will be
redeemable in multiples of $1,000 principal amount.
We shall redeem the notes at a price equal to 100% of the principal amount
to be redeemed, plus accrued interest to, but excluding, the repurchase date. If
the repurchase date is an interest payment date, we will pay interest to the
record holder on the relevant record date.
We will mail to all record holders a notice of the fundamental change
within 10 days after the occurrence of the fundamental change. We are also
required to deliver to the trustee a copy of the fundamental change notice. If
you elect to redeem your notes, you must deliver to us or our designated agent,
on or before the 30th day after the date of our fundamental change notice, your
redemption notice and any notes to be redeemed, duly endorsed for transfer. We
will promptly pay the redemption price for notes surrendered for redemption
following the repurchase date.
A "fundamental change" is any transaction or event in connection with which
all or substantially all of our common stock shall be exchanged for, converted
into, acquired for or constitute solely the right to receive, consideration,
whether by means of an exchange offer, liquidation, tender offer, consolidation,
merger, combination, reclassification, recapitalization or otherwise, which is
not all or substantially all common stock listed on, or that will be listed on
or immediately after the transaction or event on:
- a United States national securities exchange, or
- approved for quotation on the Nasdaq National Market or any similar
United States system of automated dissemination of quotations of
securities prices.
We will comply with any applicable provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act in the event of a fundamental change.
These fundamental change redemption rights could discourage a third party
from acquiring us. However, this fundamental change redemption feature is not
the result of management's knowledge of any specific effort to obtain control of
Getty by means of a merger, tender offer or solicitation, or part of a plan by
management to adopt a series of anti-takeover provisions. The term "fundamental
change" is limited to certain specified transactions and may not include other
events that might adversely affect our financial condition. Our obligation to
offer to redeem the notes upon a fundamental change would not necessarily afford
you protection in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving Getty.
We may be unable to redeem the notes in the event of a fundamental change.
If a fundamental change were to occur, we may not have enough funds to pay the
redemption price for all tendered notes. In addition, in certain situations, a
fundamental change could result in an event of default under our existing credit
facility. Our existing credit facility also prohibits redemptions of the notes.
Any future credit agreements or other agreements relating to our indebtedness
may contain similar provisions, or expressly prohibit the repurchase of the
notes upon a fundamental change or may provide that a fundamental change
constitutes an event of default under that agreement. If a fundamental change
occurs at a time when we are prohibited from purchasing or redeeming notes, we
could seek the consent of our lenders to redeem the notes or could attempt to
refinance this debt. If we do not obtain a consent, we could not purchase or
redeem the notes. Our failure to redeem tendered notes would constitute an event
of default under the indenture, which might constitute a
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<PAGE> 18
default under the terms of our other indebtedness. In such circumstances, or if
a fundamental change would constitute an event of default under our senior
indebtedness, the subordination provisions of the indenture would restrict
payments to the holders of notes.
SUBORDINATION OF NOTES
Payment on the notes is, to the extent provided in the indenture,
subordinated in right of payment to the prior payment in full of all of our
senior indebtedness. The notes also are effectively subordinated to all debt and
other liabilities, including trade payables and lease obligations, if any, of
our subsidiaries.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization, the payment of the principal of, or premium, if
any, interest, and liquidated damages, if any, on the notes will be subordinated
in right of payment to the prior payment in full of all senior indebtedness in
cash or other payment satisfactory to the holders of senior indebtedness. In the
event of any acceleration of the notes because of an event of default, the
holders of any outstanding senior indebtedness would be entitled to payment in
full of all senior indebtedness in cash or other payment satisfactory to the
holders of senior indebtedness before the holders of the notes are entitled to
receive any payment or distribution. We are required under the indenture to
promptly notify holders of senior indebtedness, including HSBC Investment Bank
plc, as agent under the credit agreement, if payment of the notes is accelerated
because of an event of default.
We may not make any payment on the notes if:
- a default in the payment of designated senior indebtedness occurs and is
continuing beyond any applicable period of grace (called a "payment
default"); or
- a default other than a payment default on any designated senior
indebtedness occurs and is continuing that permits holders of designated
senior indebtedness to accelerate its maturity, or in the case of a
lease, a default occurs and is continuing that permits the lessor to
either terminate the lease or require us to make an irrevocable offer to
terminate the lease following an event of default under the lease, and
the trustee receives a notice of such default (called a "payment blockage
notice") from us or any other person permitted to give such notice under
the indenture (called a "non-payment default").
We may resume payments and distributions on the notes:
- in case of a payment default, upon the date on which such default is
cured or waived or ceases to exist; and
- in case of a non-payment default, the earlier of the date on which such
nonpayment default is cured or waived or ceases to exist or 179 days
after the date on which the payment blockage notice is received, if the
maturity of the designated senior indebtedness has not been accelerated,
or in the case of any lease, 179 days after notice is received if we have
not received notice that the lessor under such lease has exercised its
right to terminate the lease or require us to make an irrevocable offer
to terminate the lease following an event of default under the lease.
No new period of payment blockage may be commenced pursuant to a payment
blockage notice unless 365 days have elapsed since the initial effectiveness of
the immediately prior payment blockage notice. No non-payment default that
existed or was continuing on the date of delivery of any payment blockage notice
shall be the basis for any later payment blockage notice.
If the trustee or any holder of the notes receives any payment or
distribution of our assets in contravention of the subordination provisions on
the notes before all senior indebtedness is paid in full in cash or other
payment satisfactory to holders of senior indebtedness, then such payment or
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<PAGE> 19
distribution will be held in trust for the benefit of holders of senior
indebtedness or their representatives to the extent necessary to make payment in
full in cash or payment satisfactory to the holders of senior indebtedness of
all unpaid senior indebtedness.
In the event of our bankruptcy, dissolution or reorganization, holders of
senior indebtedness may receive more, ratably, and holders of the notes may
receive less, ratably, than our other creditors. This subordination will not
prevent the occurrence of any event of default under the indenture.
The notes are exclusively obligations of Getty. A substantial portion of
our operations are conducted through our subsidiaries. As a result, our cash
flow and our ability to service our debt, including the notes, is dependent upon
the earnings of our subsidiaries. In addition, we are dependent on the
distribution of earnings, loans or other payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the notes or to provide us with
funds for our payment obligations, whether by dividends, distributions, loans or
other payments. In addition, any payment of dividends, distributions, loans or
advances by our subsidiaries to us could be subject to statutory or contractual
restrictions. Payments to us by our subsidiaries will also be contingent upon
our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders to
participate in those assets, will be effectively subordinated to the claims of
that subsidiary's creditors, including trade creditors. In addition, even if we
were a creditor to any of our subsidiaries, our rights as a creditor would be
subordinate to any security interest in the assets of our subsidiaries and any
indebtedness of our subsidiaries senior to that held by us.
As of March 31, 2000, we had approximately $30.0 million of senior
indebtedness outstanding and $116.0 million of current liabilities. Neither we
nor our subsidiaries are prohibited from incurring debt, including senior
indebtedness, under the indenture. We may from time to time incur additional
debt, including senior indebtedness. Our subsidiaries may also from time to time
incur other additional debt and liabilities.
The notes are equal in right of priority of payment, to our 4.75%
convertible subordinated notes due 2003.
We are obligated to pay reasonable compensation to the trustee and to
indemnify the trustee against certain losses, liabilities or expenses incurred
by the trustee in connection with its duties relating to the notes. The
trustee's claims for these payments will generally be senior to those of
noteholders in respect of all funds collected or held by the trustee.
DEFINITIONS
"credit agreement" means the credit agreement, dated as of October 25,
1999, as amended on December 3, 1999, and as further amended on February 25,
2000, among Getty, some of its subsidiaries, HSBC Investment Bank plc, as
arranger, facility agent and security agent, the financial institutions named
therein, and HSBC Bank plc, as overdraft bank.
"designated senior indebtedness" means senior indebtedness under the credit
agreement and our obligations under any other particular senior indebtedness
that expressly provides that such senior indebtedness shall be "designated
senior indebtedness" for purposes of the indenture, subject to the following
limitations:
- the instrument or agreement may place limitations and conditions on the
right of senior indebtedness to exercise the rights of designated senior
indebtedness; and
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<PAGE> 20
- while the credit agreement shall be outstanding, designated senior
indebtedness shall not include any senior indebtedness other than senior
indebtedness incurred in connection with the credit agreement and senior
indebtedness incurred in connection with the indebtedness described in
clauses (3) and (4) of the definition of indebtedness.
"indebtedness" means:
(1) all indebtedness, obligations and other liabilities for borrowed
money, including overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances
from banks, or evidenced by bonds, debentures, notes or similar
instruments, other than any account payable or other accrued current
liability or obligation incurred in the ordinary course of business in
connection with the obtaining of materials or services;
(2) obligations with respect to letters of credit, bank guarantees or
bankers' acceptances;
(3) obligations in respect of leases required in conformity with
generally accepted accounting principles to be accounted for as capitalized
lease obligations on our balance sheet;
(4) all obligations and other liabilities under any lease or related
document in connection with the lease of real property which provides that
we are contractually obligated to purchase or cause a third party to
purchase the leased property and thereby guarantee a minimum residual value
of the leased property to the lessor and our obligations under the lease or
related document to purchase or to cause a third party to purchase the
leased property;
(5) all obligations with respect to an interest rate or other swap,
cap or collar agreement or foreign currency hedge, exchange or purchase
agreement;
(6) all direct or indirect guaranties, our obligations or liabilities
to purchase, acquire or otherwise assure a creditor against loss in respect
of, indebtedness, obligations or liabilities of others of the type
described in (1) through (5) above;
(7) any obligations described in (1) through (5) above secured by any
mortgage, pledge, lien or other encumbrance existing on property which is
owned or held by us; and
(8) any amendments or modifications to (1) through (7) above.
"senior indebtedness" means the principal, premium, if any, interest,
including any interest accruing after bankruptcy and rent or termination payment
on or other amounts due on our current or future indebtedness, whether created,
incurred, assumed, guaranteed or in effect guaranteed by us, including any
deferrals, renewals, extensions, refundings, amendments, modifications or
supplements to the above. However, senior indebtedness does not include:
- indebtedness that expressly provides that it shall not be senior in right
of payment to the notes or expressly provides that it is on the same
basis or junior to the notes;
- our indebtedness to any of our majority-owned subsidiaries;
- our 4.75% convertible subordinated notes due 2003; and
- the notes.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following will be events of default under the indenture:
- we fail to pay principal or premium, if any, upon redemption or otherwise
on the notes, whether or not the payment is prohibited by subordination
provisions;
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<PAGE> 21
- we fail to pay any interest and liquidated damages, if any, on the notes,
whether or not the payment is prohibited by subordination provisions of
the indenture;
- we fail to perform or observe any of the covenants in the indenture for
60 days after notice of breach of any such covenant; or
- certain events involving bankruptcy, insolvency or reorganization of
Getty.
The trustee may withhold notice to the holders of the notes of any default,
except defaults in payment of principal, premium, interest or liquidated
damages, if any, on the notes. However, the trustee must consider it to be in
the interest of the holders of the notes to withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal, premium, and accrued interest and liquidated damages, if any, on the
outstanding notes to be immediately due and payable. In case of certain events
of bankruptcy or insolvency involving Getty, the principal, premium and accrued
interest and liquidated damages, if any, on the notes will automatically become
due and payable. However, if we cure all defaults, except the nonpayment of
principal, premium, interest or liquidated damages, if any, that became due as a
result of the acceleration, and meet certain other conditions, with certain
exceptions, this declaration may be cancelled and the holder of a majority of
the principal amount of outstanding notes may waive these past defaults.
Payments of principal, premium, or interest on the notes that are not made when
due will accrue interest at the annual rate of 5% from the required payment
date.
The holders of a majority of outstanding notes will have the right to
direct the time, method and place of any proceedings for any remedy available to
the trustee, subject to limitations specified in the indenture.
No holder of the notes may pursue any remedy under the indenture, except in
the case of a default in the payment of principal, premium or interest on the
notes, unless:
- the holder has given the trustee written notice of an event of default;
- the holders of at least 25% in principal amount of outstanding notes make
a written request to the trustee, and offer indemnity reasonably
satisfactory to the trustee, to pursue the remedy;
- the trustee does not receive an inconsistent direction from the holders
of a majority in principal amount of the notes; and
- the trustee fails to comply with the request within 60 days after
receipt.
MODIFICATION OF THE INDENTURE
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each outstanding
note if it would:
- extend the fixed maturity of any note;
- reduce the rate or extend the time for payment of interest of any note;
- reduce the principal amount or premium of any note;
- reduce any amount payable upon redemption of any note;
- adversely change our obligation to redeem any note upon a fundamental
change;
- impair the right of a holder to institute suit for payment on any note;
- change the currency in which any note is payable;
- impair the right of a holder to convert any note;
- adversely modify the subordination provisions of the indenture; or
- reduce the percentage of notes required for consent to any modification
of the indenture.
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We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
REGISTRATION RIGHTS
In connection with the original private placement of the notes on March 13,
2000, we entered into a registration rights agreement with the initial
purchasers. Under the registration rights agreement, we are required to use our
reasonable efforts to cause the shelf registration statement to become effective
within 180 days of the closing date to keep the shelf registration statement
effective until the earlier of:
- all of the registrable securities have been sold pursuant to the shelf
registration statement; or
- the expiration of the holding period under Rule 144(k) under the
Securities Act, or any successor provision, subject to certain permitted
exceptions.
When we use the term "registrable securities" in this section, we are
referring to the notes and the common stock issuable upon conversion of the
notes until the earliest of:
- the effective registration under the Securities Act and resale of the
securities in accordance with the registration statement;
- the expiration of the holding period under Rule 144(k) under the
Securities Act; and
- the sale to the public pursuant to Rule 144 under the Securities Act, or
any similar provision then in force, but not Rule 144A.
We may suspend the use of this prospectus under certain circumstances
relating to pending corporate developments, public filings with the SEC and
similar events. Any suspension period shall not:
- exceed 30 days in any three-month period; or
- an aggregate of 90 days for all periods in any 12-month period.
However, we will be permitted to suspend the use of this prospectus not to
exceed 60 days in any 3-month period under certain circumstances relating to
possible acquisitions, financings, recapitalizations, business combinations or
similar transactions.
Under the registration rights agreement, we are required to pay
predetermined liquidated damages:
- on the notes at an annual rate equal to 0.5% of the principal amount of
the notes, and
- on the common stock at an annual rate equal to 0.5% of the conversion
price,
if the shelf registration statement is not timely filed or made effective or if
this prospectus is unavailable for periods in excess of those permitted above.
A holder who elects to sell registrable securities pursuant to the shelf
registration statement will be required to:
- be named as a selling stockholder in the related prospectus;
- deliver a prospectus to purchasers; and
- be subject to the provisions of the registration rights agreement,
including indemnification provisions.
Under the registration rights agreement we will:
- pay all expenses of the shelf registration statement;
- provide each registered holder copies of the prospectus;
- notify holders when the shelf registration statement has become
effective; and
- take other actions as are required to permit unrestricted resales of the
registrable securities.
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A holder interested in selling its registrable securities pursuant to the
shelf registration statement must properly complete and deliver a notice and
questionnaire. We have mailed a form of notice and questionnaire to the holders
of the notes. In order for a holder to sell its registrable securities, the
holder must complete and deliver the notice and questionnaire to us prior to the
intended distribution. Holders should complete and deliver the notice and
questionnaire prior to the effectiveness of the shelf registration statement so
that they may be named as a selling stockholder in the prospectus at the time of
effectiveness.
In the event we receive a properly completed notice and questionnaire after
the shelf registration statement has been declared effective, we will, within
five business days, file any amendments to the shelf registration statement or
supplements to the related prospectus as are necessary to permit the holder to
deliver the prospectus to purchasers of registrable securities, subject to our
right to suspend the use of the prospectus. We will pay liquidated damages to
the holder if we fail to make the filing in the time required or, if such filing
is a post-effective amendment to the shelf registration statement required to be
declared effective under the Securities Act, if such amendment is not declared
effective within 45 days of the filing. If holders do not complete and deliver a
notice and questionnaire or provide the other information we may request, the
holders will not be named as a selling stockholders in the prospectus and will
not be permitted to sell the registrable securities pursuant to the shelf
registration statement.
RULE 144A INFORMATION REQUIREMENT
We will furnish to the holders or beneficial holders of the notes or the
underlying common stock and prospective purchasers, upon their request, the
information required under Rule 144A(d)(4) under the Securities Act until such
time as such securities are no longer "restricted securities" within the meaning
of Rule 144 under the Securities Act, assuming these securities have not been
owned by an affiliate of Getty.
TAXATION OF NOTES
See "United States Federal Income Tax Considerations" for a discussion of
the material federal income tax aspects which will apply to holders of notes.
INFORMATION CONCERNING THE TRUSTEE
We have appointed The Bank of New York, the trustee under the indenture, as
paying agent, conversion agent, note registrar and custodian for the notes. The
trustee or its affiliates may provide banking and other services to us in the
ordinary course of their business. The address of the trustee is 101 Barclay
Street, New York, New York 10286 and its phone number is (212) 815-5763.
The indenture contains certain limitations on the rights of the trustee, as
long as it or any of its affiliates remains our creditor, to obtain payment of
claims in certain cases or to realize on certain property received on any claim
as security or otherwise. The trustee and its affiliates will be permitted to
engage in other transactions with us. However, if the trustee or any affiliate
continues to have any conflicting interest and a default occurs with respect to
the notes, the trustee must eliminate such conflict or resign.
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DESCRIPTION OF INDEBTEDNESS
SENIOR CREDIT FACILITY
General
On October 25, 1999, we, together with some of our subsidiaries, entered
into a $100.0 million credit agreement, which was subsequently amended pursuant
to the terms of amendment letters dated December 3, 1999 and February 25, 2000,
with HSBC Investment Bank plc as arranger, facility agent and security agent,
the financial institutions listed in the credit agreement and HSBC Bank plc as
overdraft bank, pursuant to the terms of which the banks agreed to make
available to us and some of our subsidiaries a senior credit facility of up to
$100.0 million. The senior credit facility was originally divided into a
committed facility of $50.0 million and an uncommitted facility of $50.0
million, however, as a result of syndication efforts after the signing date,
further financial institutions agreed to commit to participate in the senior
credit facility and it is now, subject to the satisfaction of particular
conditions precedent, a committed facility of $100.0 million. The conditions
precedent still outstanding are all within our control and we expect to satisfy
them prior to the date upon which we need to borrow more than $50.0 million.
The proceeds of the senior credit facility are available for our general
corporate purposes including acquisitions and working capital requirements. The
first revolving advances under the senior credit facility were used by us to
repay all amounts then outstanding under our prior $20.0 million credit
facility, which has now been cancelled.
Advances under the senior credit facility may be requested in dollars,
pounds sterling, euros or other freely available European currencies, excluding
national currency units, and bear interest at a rate equal to LIBOR plus
associated costs plus a margin. The margin is 1.75% per annum up to and
including June 30, 2000 and thereafter may decrease, in increments of 0.25%,
from 1.75% per annum to 1.00% per annum if the ratio of our consolidated total
debt, less any cash balances ("Total Borrowings"), to consolidated profits
before accrued interest, tax, amortization and depreciation (as defined in the
credit agreement, "EBITDA") decreases from greater than or equal to 2.75 to less
than 2.00. Notwithstanding the foregoing, if an event of default occurs under
the senior credit facility the margin shall be 1.75% per annum and shall remain
at such level for as long as an event of default continues.
Repayment and Prepayment
Each advance under the senior credit facility must be repaid on the last
day of its term, which may be one, two, three or six months or another period as
may be agreed with the facility agent. No advance may be outstanding after
October 25, 2002. In addition, we may prepay advances outstanding under the
senior credit facility at any time without penalty.
Security
All of our obligations, and the obligations of our subsidiaries party to
the credit agreement, under the senior credit facility are unconditionally
guaranteed by us and those subsidiaries, except that our obligations and the
obligations of those subsidiaries incorporated in the United States are limited
so as not to render the obligations subject to avoidance as a fraudulent
transfer or conveyance. These obligations are secured by (1) pledges of the
shares of some of our subsidiaries; (2) a lien on all of our assets and the
assets of our subsidiaries party to the credit agreement; and (3) a charge over
particular intellectual property from our subsidiaries. This security is also
shared by HSBC Bank plc in its capacity as the provider of particular overdraft
facilities to some of our subsidiaries and by any bank participating in the
senior credit facility in its capacity as the provider of hedging facilities for
the hedging of exposures arising pursuant to the credit agreement.
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In addition, the credit agreement contains an undertaking by us that we and
our subsidiaries party to the credit agreement and the security arrangements
shall, in aggregate, account for at least 80% of EBITDA and have, in aggregate,
80% or more of the consolidated gross assets of the group as a whole. If any
entity subsequently becomes one of our subsidiaries, the credit agreement
contains an obligation to ensure that such entity becomes a guarantor and
provides appropriate security, if necessary, in order to ensure compliance with
these tests as calculated on the basis of the newly enlarged group as a whole.
Covenants and Undertakings
The credit agreement contains two financial covenants based on the ratio of
EBITDA to consolidated net interest payable and the ratio of Total Borrowings to
EBITDA. The credit agreement also contains various other undertakings which,
among other things, restrict certain encumbrances, disposals, borrowings,
leasing of equipment, guarantees, granting of options, swaps and hedging
arrangements, investments, making of loans, paying dividends, altering share
capital, changes of business, material transactions other than on arms'-length
terms, joint ventures, changes to constitutional documents and acquisitions.
The limitation on acquisitions prohibits us and any of our subsidiaries
from making acquisitions for non-equity consideration except for (1) the
acquisition of any one or more of the licensees created by The Image Bank prior
to the date of the signing of the credit agreement provided that the total
consideration therefor does not exceed $20.0 million in aggregate during the
life of the senior credit facility; and (2) any other acquisition of a business
that carries on substantially the same business as us provided that the
aggregate consideration therefor does not exceed $15.0 million in any one
financial year.
Borrowing under the senior credit facility is subject to, among other
things, compliance with the financial covenants and undertakings set forth in
the credit agreement, and failure to comply with those covenants could result in
all amounts outstanding under the senior credit facility becoming immediately
due and payable.
Events of Default
The senior credit facility contains various events of default including,
among others, non-payment of amounts due under the senior credit facility,
breach of covenants or undertakings, misrepresentation, cross-default of certain
other indebtedness, certain events of insolvency or bankruptcy, material
litigation, change of control of us or any subsidiary party to the credit
agreement and repayment of any principal on either our 4.75% convertible
subordinated notes due 2003 or the notes, in each case, out of non-equity
consideration. The senior credit facility also contains events of default
relating to the legality or repudiation of the senior credit facility
documentation, certain material audit qualifications, ERISA events, the loss of
the right to use the name "Getty" and the occurrence of an event or series of
events which has, or is reasonably likely to have, a material adverse effect on
us. A change of control of our company will occur if any person, or persons
acting in concert, acquires control of our company which broadly means having,
or being entitled to acquire, a majority of our issued share capital or voting
power, a majority of our whole income on distribution of such income to our
participators or rights to a majority of our assets in the event we are wound-up
or in other circumstances.
Upon the occurrence of an event of default, the banks may terminate the
ability to borrow under the senior credit facility, require that all amounts
outstanding under the senior credit facility be repaid immediately and/or
enforce the security given in respect of the senior credit facility.
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Senior Indebtedness/Designated Senior Indebtedness
The credit agreement states that all of our monetary obligations under each
of the senior credit facility documents constitute "Senior Indebtedness" and
"Designated Senior Indebtedness" as defined in the indenture relating to the
4.75% convertible subordinated notes due 2003. In addition, if we or any
subsidiary party to the credit agreement becomes a party to any indenture, note,
loan agreement or other document which contemplates or provides for the
existence of "Senior Indebtedness" or "Designated Senior Indebtedness,"
including the notes, all of our monetary obligations and the obligations of that
subsidiary under each of the senior credit facility documents shall constitute
"Senior Indebtedness" and "Designated Senior Indebtedness" for the purposes of
such indenture, note, loan agreement or other document.
4.75% CONVERTIBLE SUBORDINATED NOTES DUE 2003
In May 1998, we issued $75.0 million of 4.75% convertible subordinated
notes due 2003, which are convertible into shares of our common stock at a
conversion price of $28.5075 per share, subject to adjustments in particular
circumstances. In March 2000, we induced the voluntary conversion of our 4.75%
convertible subordinated notes due 2003. Holders of $62.3 million principal
amount of the notes converted their notes into 2,187,034 shares of our common
stock. Currently, $12.7 million of our 4.75% convertible subordinated notes due
2003 remain outstanding and are convertible into 445,496 shares of our common
stock.
The outstanding 4.75% convertible subordinated notes due 2003 are
convertible into common stock at any time, unless previously redeemed or
repurchased. The 4.75% convertible subordinated notes due 2003 will mature on
June 1, 2003, unless previously redeemed or repurchased. The 4.75% convertible
subordinated notes due 2003 are not redeemable prior to June 1, 2001. On or
after June 1, 2001, at our option, the 4.75% convertible subordinated notes due
2003 are redeemable on at least 20 days' notice, in whole or in part, with
accrued and unpaid interest and applicable premium.
The 4.75% convertible subordinated notes due 2003 are unsecured and
subordinated in right of payment to all of our existing and future senior
indebtedness, including the senior credit facility. The 4.75% convertible
subordinated notes due 2003 will rank equal in right of payment with the notes.
In the event of a change of control, each holder of the 4.75% convertible
subordinated notes due 2003 has the right to require us to repurchase all or any
portion of the holder's 4.75% convertible subordinated notes due 2003 at 100% of
the principal amount thereof, plus accrued and unpaid interest. These rights may
have the effect of delaying, deferring or preventing a change in control of our
company.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 75,000,000 shares of common stock,
par value $0.01 per share, and 5,000,000 shares of preferred stock, par value
$0.01 per share. As of June 5, 2000, there were 49,074,858 shares of our common
stock outstanding. One share of our preferred stock has been designated as
Series A special voting preferred stock and is outstanding and one share of our
preferred stock has been designated as Series B special voting stock and is
outstanding. No other shares of preferred stock are currently outstanding.
The following is a summary description of our capital stock. Our bylaws and
our amended and restated certificate of incorporation, provide further
information about our capital stock.
COMMON STOCK
Each holder of our common stock is entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, each holder of our common stock
is entitled to receive dividends, if any, as may be declared from time to time
by the board of directors out of funds legally available. In the event of our
liquidation, dissolution or winding up, each holder of our common stock is
entitled to share ratably in all assets remaining after payment of liabilities,
subject to the rights of the holders of any class of preferred stock then
outstanding. The holders of our common stock have no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to our common stock. All outstanding shares of our common
stock are fully paid and nonassessable.
PREFERRED STOCK
Our board of directors has the authority to issue preferred stock in one or
more classes or series and to fix the rights, preferences, privileges and
related restrictions, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any class or series or the
designation of the class or series, without the approval of our stockholders.
The authority of our board of directors to issue preferred stock without
approval of our stockholders may have the effect of delaying, deferring or
preventing a change in control of our company and may adversely affect the
voting and other rights of the holders of our common stock. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of our common stock, including the loss of voting
control to others.
We have issued one share of our Series A special voting preferred stock and
one share of our Series B special voting preferred stock, which we collectively
refer to as "special voting stock." The holder of the special voting stock is
not entitled to receive dividends or to participate in the proceeds of any
liquidation, and the certificates of designation governing the special voting
stock provide no rights or preferences other than the voting rights described
below. The special voting stock is held by Montreal Trust Company of Canada, as
trustee, under two voting trust and exchange rights agreements. Under these
agreements, Montreal Trust is obligated to vote the Series A special voting
stock and the Series B special voting stock in accordance with the instructions
received from the holders of the exchangeable non-voting shares of EyeWire
Partners, Inc. and 3032097 Nova Scotia Limited, respectively.
The holder of the special voting stock is entitled to vote with the holders
of common stock as a single class on all matters submitted to a vote of our
stockholders, except as otherwise provided by law. The voting rights of the
holder of the special voting stock are identical to those of the holders of
common stock in all respects, except that the holder of the special voting stock
is entitled to a number of votes equal to the number of shares of our common
stock issuable upon the exchange of
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(a) in the case of the Series A special voting stock, the outstanding
exchangeable non-voting shares of EyeWire Partners, and (b) in the case of the
Series B special voting stock, the outstanding exchangeable non-voting shares of
3032097 Nova Scotia Limited, in each case excluding exchangeable non-voting
shares which are owned by us, any of our subsidiaries and any person directly or
indirectly controlled by or under common control with us. All of the
exchangeable non-voting shares of EyeWire Partners are held by one of our
controlled subsidiaries and, therefore, the Series A special voting stock is not
currently entitled to exercise voting rights.
EXCHANGEABLE NON-VOTING SHARES IN 3032097 NOVA SCOTIA LIMITED
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 subsidiary we formed to complete the EyeWire acquisition. Each
exchangeable non-voting share is exchangeable for one share of our common stock.
We have an effective shelf registration statement in place with respect to the
resale of the common stock by such former EyeWire stockholders. The former
stockholders of EyeWire must exchange their exchangeable non-voting shares into
the shares of our common stock before they can sell shares under the shelf
registration statement. As of June 5, 2000, 796,770 exchangeable non-voting
shares have been exchanged for shares of our common stock.
REGISTRATION RIGHTS
The holders of approximately 22,390,000 shares of common stock, or their
permitted transferees, are entitled to certain rights with respect to the
registration of such shares under the Securities Act. Under the terms of the
agreements between us and the holders of these registrable securities, if we
propose to register any of our securities under the Securities Act, either for
our own account or for the account of other security holders exercising
registration rights, these holders are entitled to notice of the registration
and are entitled to include their shares of common stock therein. Additionally,
certain of these holders have demand registration rights with respect to their
shares of common stock, and we are required to use our reasonable best efforts
to effect the registration if such holders exercise those rights. All of these
registration rights are subject to conditions and limitations, including the
right of the lead underwriters of an offering to limit the number of shares
included in the registration.
We are required to pay most of the costs incurred in connection with any
registration of these shares, excluding underwriting discounts and commissions
and any stamp or transfer tax or duty. The registration rights described above
could result in substantial future expenses and adversely affect any future
equity or debt offering.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW, OUR CERTIFICATE OF
INCORPORATION AND OUR BYLAWS
Section 203 of the Delaware General Corporation Law
We are a Delaware corporation subject to the provisions of Section 203 of
the Delaware General Corporation Law. Section 203 generally provides that a
stockholder acquiring more than 15%, but less than 85%, of the outstanding
voting stock of a corporation subject to Section 203 may not engage in a
"business combination," as defined in Section 203, with the corporation for a
period of three years from the date on which that stockholder became an
"interested stockholder," as defined in Section 203, unless:
- prior to such date the board of directors of the corporation approved
either the business combination or the transaction in which the
stockholder became an interested stockholder; or
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- the business combination is approved by the board of directors of the
corporation and authorized by the holders of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to a stockholder. In general, an "interested
stockholder" is a person who, together with its affiliates, owns, or within
three years prior to the determination of the interested stockholder status, did
own, 15% or more of the voting stock of the corporation. Section 203 could
prohibit or delay a merger or other takeover or change of control transaction
with respect to our company and, accordingly, may discourage actions that could
result in a premium over the market price for the shares held by our
stockholders.
Issuance of Preferred Stock
Our board of directors is authorized to issue 5,000,000 shares of preferred
stock and determine the powers, preferences and special rights of any unissued
series of preferred stock, including voting rights, dividend rights, terms of
redemption, conversion rights and the designation of any such series, without
the approval of our stockholders. As a result, our board of directors could
issue preferred stock quickly and easily, which could adversely affect the
rights of holders of our common stock. Our board of directors could issue the
preferred stock with terms calculated to delay or prevent a change in control or
make removal of management more difficult.
Classification of our Board of Directors
Our amended and restated certificate of incorporation provides that our
board of directors shall consist of up to ten directors and be divided into
three classes. The directors in each class will serve three-year terms, with one
class being elected each year by our stockholders. The term of the Class I
directors (two directors) will expire at the annual meeting of our stockholders
to be held in 2001; the term of the Class II directors (two directors) will
expire at the annual meeting of our stockholders to be held in 2002; and the
term of the Class III directors (two directors) will expire at the annual
meeting of our stockholders to be held in 2003. At each annual meeting of our
stockholders, the successors to directors whose terms will then expire will be
elected to serve for a three-year term. Because this system of electing and
removing directors generally makes it more difficult for stockholders to replace
a majority of the board of directors, it may discourage a third party from
making a tender offer or otherwise attempting to gain control of our company and
may maintain the incumbency of the board of directors.
Stockholder Action; Special Meetings of Stockholders
Our bylaws provide that our stockholders may not take action by written
consent, and can only take action at a duly called annual or special meeting of
our stockholders. Our bylaws further provide that, unless otherwise prescribed
by statute or by our amended and restated certificate of incorporation, special
meetings of our stockholders may only be called by the Chairman of the Board,
the President or the Secretary of our company, at the written request of at
least two-thirds of the entire board of directors or the record holders of at
least a majority of the outstanding shares of our common stock. These provisions
could discourage potential acquisition proposals and could delay or prevent a
change in control. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of our board of directors and in the
policies formulated by the board of directors and to discourage certain types of
transactions that may involve an actual or threatened change of control. These
provisions are designed to reduce our vulnerability to an unsolicited
acquisition proposal and to discourage certain tactics that may be used in proxy
contests. Such provisions could have the effect of discouraging others from
making tender offers for our shares.
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LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our amended and restated certificate of incorporation provides that, except
to the extent prohibited by Delaware law, our directors shall not be personally
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty as a director. Under Delaware law, the directors have a fiduciary
duty to us that is not eliminated by this provision of our amended and restated
certificate of incorporation and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of nonmonetary relief will remain
available. In addition, each director will continue to be subject to liability
under Delaware law for breach of the director's duty of loyalty to us for acts
or omissions which are found by a court of competent jurisdiction to be not in
good faith or that involve intentional misconduct, or knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
prohibited by Delaware law. This provision also does not affect the directors'
responsibilities under any other law, such as the federal securities law.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director:
- for any breach of the director's duty of loyalty to the corporation or
its stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- arising under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
Delaware law provides further that the indemnification permitted by that
law shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under a corporation's bylaws, an agreement, a vote of
stockholders or otherwise. Our amended and restated certificate of incorporation
eliminates the personal liability of directors to the fullest extent permitted
by Section 102(b)(7) of the Delaware General Corporation Law and provides that
we may fully indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was an employee, director or officer of our company or is
or was serving at our request as an employee, director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding.
We have entered into indemnification agreements to indemnify our directors
and certain officers, in addition to the indemnification provided in our bylaws
and amended and restated certificate of incorporation. We believe that these
provisions and agreements are necessary to attract and retain qualified
directors and officers. Our bylaws and amended and restated certificate of
incorporation also permit us to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions, regardless of whether Delaware law would permit indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is The Bank of New
York. Its address is 101 Barclay Street, New York, New York 10286 and its
telephone number is (212) 815-8188.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes the material Federal income tax
aspects of the acquisition, ownership and disposition of the notes and the
common stock into which the notes may be converted. This summary is for general
information only and does not consider all aspects of Federal income tax that
may be relevant to the acquisition, ownership and disposition of the notes or
common stock by a prospective investor in light of the investor's personal
circumstances. This discussion also does not address the Federal income tax
consequences of ownership of notes or common stock not held as capital assets
within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), or the Federal income tax consequences to investors
subject to special treatment under the Federal income tax laws, such as dealers
in securities or foreign currency, tax-exempt entities, banks, thrifts,
insurance companies or other financial institutions or financial services
entities, persons that hold the notes or common stock as part of a "straddle,"
or "hedge" against currency risk or a "conversion transaction," or persons that
have a "functional currency" other than the U.S. dollar. Except as specifically
provided, this discussion does not address the effect of Federal estate and gift
tax laws nor any applicable state, local or foreign tax laws. Moreover, this
discussion does not address the Federal income tax consequences to persons who
hold notes or common stock through a partnership or similar pass-through entity,
or are former U.S. citizens or long-term residents who may be subject to special
rules.
This discussion is based upon the Code, existing and proposed regulations
under the Code, and current administrative rulings and court decisions. All of
the foregoing is subject to change, possibly on a retroactive basis, and any
change could affect the continuing validity of this discussion.
PERSONS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS, AS WELL AS THE
LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO THEIR PARTICULAR
SITUATIONS.
U.S. HOLDERS
The following discussion is limited to the Federal income tax consequences
relevant to a holder or beneficial owner of a note or common stock that is (1) a
citizen or resident, as defined under the Code, of the United States, (2) a
corporation organized under the laws of the United States or any political
subdivision thereof or therein, (3) an estate, the income of which is subject to
Federal income tax regardless of its source, or (4) a trust if a U.S. court is
able to exercise primary supervision over the administration of the trust and
one or more U.S. persons have the authority to control all substantial decisions
of the trust (each a "U.S. Holder"). Federal income tax consequences relevant to
a holder other than a U.S. Holder are discussed separately below.
Interest
Interest on notes will be taxable to a U.S. Holder as ordinary interest
income either at the time it accrues or is received, depending upon the U.S.
Holder's method of accounting for Federal income tax purposes.
Market Discount
Generally, the market discount rules discussed below will not apply to a
U.S. Holder who acquired a note when it was originally issued. These rules would
apply, however, to any original U.S. Holder whose tax basis in the note is less
than such note's "issue price", meaning the amount of cash paid in respect of
the notes.
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<PAGE> 32
Gain recognized on the disposition, including a redemption, by a subsequent
purchaser of a note that has accrued market discount will be treated as ordinary
income, and not capital gain, to the extent of the accrued market discount,
provided that the amount of market discount exceeds a statutorily defined de
minimis amount. "Market discount" is defined as the excess, if any, of the
stated redemption price at maturity over the tax basis of the debt obligation in
the hands of the holder immediately after its acquisition.
Under the de minimis exception, there is no market discount if the excess
of the stated redemption price at maturity of the obligation over the holder's
tax basis in the obligation is less than 0.25% of the stated redemption price at
maturity multiplied by the number of complete years after the acquisition date
to the note's date of maturity. Unless a holder elects otherwise, the accrued
market discount would be the amount calculated by multiplying the market
discount by a fraction, the numerator of which is the number of days the
obligation has been held by the holder and the denominator of which is the
number of days after the holder's acquisition of the obligation up to and
including its maturity date.
If a U.S. Holder of a note acquired at market discount disposes of the note
in any transaction other than a sale, exchange or involuntary conversion, even
though otherwise non-taxable, like a gift, such U.S. Holder will be deemed to
have realized an amount equal to the fair market value of the note and would be
required to recognize as ordinary income any accrued market discount to the
extent of the deemed gain. A U.S. Holder of a note acquired at a market discount
also may be required to defer the deduction of all or a portion of the interest
on any indebtedness incurred or maintained to carry the note until it is
disposed of in a taxable transaction.
A U.S. Holder of a note acquired at market discount may elect to include
the market discount in income as it accrues. This election would apply to all
market discount obligations acquired by the electing U.S. Holder on or after the
first day of the first taxable year to which the election applies. The election
may be revoked only with the consent of the Service. If a U.S. Holder of a note
so elects to include market discount in income currently, the rules requiring
ordinary income recognition resulting from sales and certain other disposition
transactions and deferral of interest deductions would not apply.
Bond Premium
If a U.S. Holder purchases a note at a "cost" that is in excess of the
amount payable on maturity, which will be determined by reference to an earlier
call date if the call price would reduce the amount of the premium, then the
excess would be considered "bond premium." For this purpose, cost will equal the
amount the U.S. Holder paid in respect of the note reduced by the value of the
conversion option, the value to be determined under any reasonable method.
A U.S. Holder who acquires a note with bond premium may elect under Section
171 of the Code to amortize such bond premium on a constant interest basis over
the period from the acquisition date to the maturity date of such note, or, in
certain circumstances, until an earlier call date, and, except as future
Treasury Regulations may otherwise provide, reduce the amount of interest
included in income in respect of the note by that amount. A U.S. Holder who
elects to amortize bond premium must reduce his adjusted basis in the note by
the amount of the allowable amortization. An election to amortize bond premium
would apply to all amortizable bond premium on all taxable bonds held at or
acquired after the beginning of the U.S. Holder's taxable year as to which the
election is made, and may be revoked only with the consent of the Service.
If an election to amortize bond premium is not made, a U.S. Holder must
include the full amount of each interest payment in income in accordance with
its regular method of accounting and
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<PAGE> 33
will generally receive a tax benefit from the bond premium only upon computing
its gain or loss upon the sale or other disposition or payment of the principal
amount of the note.
Tax Basis
A U.S. Holder's initial tax basis in a note will be equal to the purchase
price paid by such U.S. Holder for the note. The initial basis will be increased
or decreased to account for certain adjustments, including bond premium and, if
applicable, any adjustment with respect to the conversion price. See "U.S.
Holders -- Bond Premium."
Sale or Redemption
Unless a nonrecognition provision applies, the sale, exchange, redemption,
including pursuant to an offer by us, or other disposition of a note will be a
taxable event for Federal income tax purposes. In that event, a U.S. Holder will
recognize gain or loss equal to the difference between (1) the amount of cash
plus the fair market value of any property received upon the sale, exchange,
redemption or other taxable disposition, other than in respect of accrued and
unpaid interest thereon, and (2) the U.S. Holder's adjusted tax basis therein,
other than any tax basis attributable to accrued and unpaid interest. Subject to
the discussion above under the caption "-- Market Discount," the gain or loss
should be capital gain or loss and will be long-term capital gain or loss if the
note had been held by the U.S. Holder for more than one year at the time of such
sale, exchange, redemption or other disposition.
Conversion of Note into Common Stock
No gain or loss will be recognized for Federal income tax purposes on
conversion of notes solely into shares of common stock, except with respect to
any cash received in lieu of a fractional share or any accrued interest not
previously included in income. To the extent the conversion is not treated as
resulting in the payment of interest, the tax basis for the shares of common
stock, and the holding period of the shares of common stock will include the
holding period of the notes converted. Any accrued market discount not
previously included in income as of the date of the conversion of the notes and
not recognized upon the conversion, e.g., as a result of the receipt of cash in
lieu of a fractional interest in a note, should carry over to the common stock
received on conversion and be treated as ordinary income upon the subsequent
disposition of the common stock.
Adjustment of Conversion Price
Section 305 of the Code treats as a distribution taxable as a dividend, to
the extent of the issuing corporation's current or accumulated earnings and
profits, certain actual or constructive distributions of stock with respect to
stock or convertible securities. Under Treasury Regulations, an adjustment in
the conversion price, or the failure to make such an adjustment, may, under
particular circumstances, be treated as a constructive dividend. U.S. Holders
would be required to include their allocable share of such constructive dividend
in gross income but would not receive any cash related thereto. Generally, a
U.S. Holder's tax basis in a note will be increased by the amount of any
constructive dividend.
Backup Withholding
A U.S. Holder of notes or common stock may be subject to "backup
withholding" at a rate of 31% with respect to particular "reportable payments,"
including interest payments, dividend payments and, under certain circumstances,
principal payments on the Notes or proceeds from the disposition of common
stock. These backup withholding rules apply if the U.S. Holder, among other
things, (1) fails to furnish a social security number or other taxpayer
identification number (TIN) certified
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<PAGE> 34
under penalties of perjury within a reasonable time after the request therefor,
(2) furnishes an incorrect TIN, (3) fails to report properly interest or
dividends, or (4) under particular circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN furnished is the
correct number and that the holder is not subject to backup withholding. A U.S.
Holder who does not provide us with its correct TIN also may be subject to
penalties imposed by the Service. Any amount withheld from a payment to a U.S.
Holder under the backup withholding rules is creditable against the U.S.
Holder's Federal income tax liability, provided the required information is
furnished to the Service. Backup withholding will not apply, however, with
respect to payments made to some holders, including corporations and tax-exempt
organizations, provided their exemption from backup withholding is properly
established.
We will report to the U.S. Holders of notes and common stock and to the
Service the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to those payments.
NON-U.S. HOLDERS
The following discussion is limited to the Federal income tax consequences
relevant to a holder of a note that is not a U.S. Holder as defined above
("Non-U.S. Holder").
For purposes of withholding tax on interest and dividends discussed below,
a non-resident alien or other nonresident fiduciary of an estate or trust will
be considered a Non-U.S. Holder. The Service has indicated, however, that it may
revise these rules with respect to trusts. For purposes of the following
discussion, interest, dividends and gain on the sale, exchange or other
disposition of a note or common stock will be considered to be "U.S. trade or
business income" if such income or gain is (1) effectively connected with the
conduct of a U.S. trade or business or (2) in the case of a treaty resident,
attributable to a permanent establishment, or, in the case of an individual, a
fixed base, in the United States.
Interest
Generally, any interest paid to a Non-U.S. Holder of a note that is not
U.S. trade or business income will not be subject to U.S. tax if the interest
qualifies as "portfolio interest." Generally, interest on the notes will qualify
as portfolio interest if (1) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total voting power of all our voting stock
and is not a "controlled foreign corporation" with respect to which we would be
considered a "related person" within the meaning of the Code, and (2) the
beneficial owner, under penalty of perjury, certifies that the beneficial owner
is not a United States person and the certificate provides the beneficial
owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest that do not
qualify for the portfolio interest exception and that are not U.S. trade or
business income will be subject to Federal income tax at the rate of 30%, unless
a U.S. income tax treaty applies to reduce or eliminate withholding. U.S. trade
or business income will be taxed at regular U.S. rates rather than the 30% gross
rate. In the case of a Non-U.S. Holder that is a corporation, U.S. trade or
business income may also be subject to the branch profits tax, which is
generally imposed on a foreign corporation on the actual or deemed repatriation
from the United States of earnings and profits attributable to United States
trade or business income, at a 30% rate. The branch profits tax may not apply
(or may apply at a reduced rate) if a recipient is a qualified resident of
particular countries with which the United States has an income tax treaty. To
claim the benefit of a tax treaty or to claim exemption from withholding because
the income is U.S. trade or business income, the Non-U.S. Holder must provide
the appropriate Form W-8 (e.g., W-8BEN, W-8ECI or such successor forms as the
Service designates), properly executed, prior to the payment of interest. These
forms must be periodically
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<PAGE> 35
updated. A Non-U.S. Holder who is claiming the benefits of a treaty may be
required to obtain a U.S. taxpayer identification number and to provide
documentary evidence issued by foreign governmental authorities to prove
residence in the foreign country. Special procedures are provided in the
Treasury Regulations for payments through qualified intermediaries.
Dividends
In general, dividends paid, or deemed paid as a result of the adjustment of
the conversion price of the notes, as described above under the heading "-- U.S.
Holders -- Adjustment of Conversion Price," to a Non-U.S. Holder of common stock
will be subject to withholding of Federal income tax at a 30% rate unless the
rate is reduced by an applicable income tax treaty. Dividends that are connected
with such holder's conduct of a trade or business in the United States or, U.S.
trade or business income, are generally subject to Federal income tax at regular
rates, but generally are not subject to the 30% withholding tax if the Non-U.S.
Holder files the appropriate form with the payor, as discussed above. Any U.S.
trade or business income received by a Non-U.S. Holder that is a corporation may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate or a lower rate as may be applicable under an income tax
treaty.
Dividends paid to a Non-U.S. Holder prior to January 1, 2001 will be
eligible for a tax treaty rate if paid to an address in the foreign country of
the applicable tax treaty, absent knowledge to the contrary as to the
eligibility of the payee. Under Treasury Regulations generally effective after
December 31, 2000, a Non-U.S. Holder of common stock who wishes to claim the
benefit of an applicable treaty rate would be required to satisfy applicable
certification and other requirements, which would include the requirement that
the Non-U.S. Holder file a form which contains the holder's name and address and
an official statement by the competent authority in the foreign country, as
designated in the applicable tax treaty, attesting to the holder's status as a
resident thereof.
A Non-U.S. Holder of common stock that is eligible for a reduced rate of
U.S. withholding tax under an income treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for a refund with the
Service.
Conversion
A Non-U.S. Holder generally will not be subject to Federal income tax on
the conversion of notes into common stock, except with respect to cash, if any,
received in lieu of a fractional share or interest not previously included in
income. Cash in lieu of a fractional share may give rise to gain that would be
subject to the rules described below for the sale of notes. Cash treated as
issued for accrued interest would be treated as interest under the rules
described above.
Sale, Exchange or Redemption of Notes or Common Stock
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange or
redemption of a note or common stock generally will not be subject to Federal
income tax, unless (1) the gain is U.S. trade or business income, (2) subject to
exceptions, the Non-U.S. Holder is an individual who holds the note or common
stock as a capital asset and is present in the United States for 183 days or
more in the taxable year of the disposition, and (3) in the case of the
disposition of the Notes or common stock, we have been or become a U.S. real
property holding company. We do not believe we are currently a "U.S. real
property holding company" for Federal income tax purposes. So long as our common
stock is readily traded on an established securities market, as we expect it to
be, Non-U.S. Holders who never beneficially owned more than 5% of the total
value of our common stock, including by reason of owning notes, will not be
subject to Federal income tax on any gain realized on the sale, exchange
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<PAGE> 36
or disposition of notes or common stock solely because we are or have been a
"U.S. real property holding company."
Federal Estate Tax
Notes held or treated as held by an individual who is not a citizen or
resident of the United States (for Federal estate tax purposes) at the time of
his or her death will not be subject to Federal estate tax provided that the
individual does not actually or constructively own 10% or more of the total
voting power of all our voting stock and income on the notes was not U.S. trade
or business income. Common stock owned or treated as owned by an individual who
is not a citizen or resident of the United States for Federal estate tax
purposes will be included in such individual's estate for Federal estate tax
purposes unless an applicable tax treaty otherwise applies.
Information Reporting and Backup Withholding
We must report annually to the Service and to each Non-U.S. Holder any
interest or dividend that is subject to withholding, or that is exempt from U.S.
withholding tax pursuant to a tax treaty, or interest that is exempt from U.S.
tax under the portfolio interest exception. Copies of these information returns
may also be made available under the provisions of a specific treaty or
agreement to the tax authorities of the country in which the Non-U.S. Holder
resides. We must also report any dividends paid to a Non-U.S. Holder.
U.S. Treasury Regulations provide that backup withholding and information
reporting will not apply to payments of principal on the notes we will make to a
Non-U.S. Holder, if the Holder certifies as to his non-U.S. status under
penalties of perjury or otherwise establishes an exemption, provided that
neither we nor the holder's paying agent has actual knowledge that the holder is
a United States person or that the conditions of any other exemption are not, in
fact, satisfied.
The payment of the proceeds from the disposition of notes or common stock
to or through the United States office of any broker, U.S. or foreign, will be
subject to information reporting and possible backup withholding unless the
owner certifies to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of the proceeds from the
disposition of a note or common stock to or through a non-U.S. office of a
non-U.S. broker that is not a U.S. related person will not be subject to
information reporting or back-up withholding. For this purpose, a "U.S. related
person" is a person who maintains one or more enumerated relationships with the
United States. In the case of the payment of proceeds from the disposition of
notes or common stock to or through a non-U.S. office of a broker that is either
a U.S. person or a U.S. related person, the Treasury Regulations require
information reporting on the payment unless the broker has documentary evidence
in its files that the owner is a Non-U.S. Holder and the broker has no knowledge
to the contrary. Backup withholding will not apply to payments made through
foreign offices of a broker that is not a U.S. person or a U.S. related person,
absent actual knowledge that the payee is a U.S. person.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against the Non-U.S.
Holder's Federal income tax liability, provided that the requisite procedures
are followed.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
EACH INVESTOR SHOULD CONSULT HIS OWN TAX ADVISER AS TO PARTICULAR TAX
CONSEQUENCES TO HIM OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND THE
COMMON STOCK,
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<PAGE> 37
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.
CORPORATE TAX CONSIDERATIONS
Under Section 279 of the Code, interest deductions on convertible
debentures, the proceeds of which are used to make acquisitions of stock or
assets, are subject to disallowance if the issuing corporation (in some cases,
together with the target corporation) fails to meet certain earnings or
debt/equity thresholds. For purposes of making these determinations, certain
debt issues sold at different times during the taxable year must be aggregated.
Although the proceeds of the notes will be used at least in part to make an
acquisition described in Section 279, based upon preliminary analysis, we
believe that we will not violate the thresholds set forth in Section 279 and,
accordingly, that interest deductions on the notes will not be disallowed.
However, there can be no assurance that, based upon all of the facts, including
events that take place between the date of issuance of the notes and the end of
the current taxable year, interest deductions on the notes may not be disallowed
in whole or in part.
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<PAGE> 38
SELLING SECURITYHOLDERS
We originally issued the notes in a private placement on March 13, 2000.
Selling securityholders may offer and sell the notes and the underlying common
stock pursuant to this prospectus.
The following table contains information as of June 5, 2000 with respect to
the selling securityholders and the principal amount of the notes beneficially
owned by each selling securityholder and the underlying common stock that may be
offered using this prospectus:
We prepared this table based on information supplied to us by the selling
securityholders named in the table. The selling securityholders named in the
above table may have sold or transferred, in transactions exempt from the
registration requirements of the Securities Act, some or all of their notes
since the date on which the information in the above table is presented.
Information about the selling securityholders will change from time to time and
will be updated in prospectus supplements.
Because the selling securityholders may sell some or all of their notes or
underlying common stock from time to time, we cannot estimate the amount of the
notes or underlying common stock that will be held by the selling
securityholders upon the termination of any offering. See "Plan of
Distribution."
<TABLE>
<CAPTION>
NUMBER OF
PRINCIPAL AMOUNT SHARES OF
OF NOTES COMMON STOCK PERCENTAGE OF
BENEFICIALLY OWNED PERCENTAGE OF THAT MAY BE COMMON STOCK
NAME AND OFFERED NOTES OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ------------------ ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
Allstate Insurance Company........ $3,000,000 1.2% 16,371 *
Argent Classic Convertible
Arbitrage Fund (Bermuda)........ 2,500,000 1.0 40,929 *
Bear, Stearns & Co., Inc.......... 2,000,000 * 32,743 *
Black Diamond Offshore, Ltd....... 356,000 * 5,828 *
Castle Convertible Fund, Inc...... 500,000 * 8,185 *
Chrysler Corporation Master
Retirement Trust................ 4,330,000 1.7 70,890 *
Delta Air Lines Master Trust...... 1,600,000 * 26,195 *
Double Black Diamond Offshore,
LDC............................. 1,144,000 * 18,729 *
Highbridge International LLC...... 3,000,000 1.2 49,115 *
IBM Retirement Plan............... 300,000 * 4,911 *
Jefferies & Company............... 1,980,000 * 32,416 *
KD Offshore C.V................... 500,000 * 8,185 *
Kellner, DiLeo & Co............... 500,000 * 8,185 *
Liberty View Funds, L.P........... 2,000,000 * 32,743 *
Lipper Convertibles, L.P.......... 5,000,000 * 81,859 *
Lyxor Master Fund................. 1,000,000 * 16,371 *
Morgan Stanley & Co. ............. 15,000,000 6.0 245,579 *
Motion Picture Industry Health
Plan --
Active Member Fund.............. 495,000 * 8,104 *
Motion Picture Industry Health
Plan --
Retiree Member Fund............. 245,000 * 4,011 *
OCM Convertible Trust............. 2,440,000 * 39,947 *
Partner Reinsurance Company
Ltd............................. 885,000 * 14,489 *
San Diego County Employee's
Retirement Association.......... 200,000 * 3,274 *
State Employees' Retirement Fund
of the State of Delaware........ 2,195,000 * 35,936 *
State of Connecticut Combined
Investment Funds................ 5,215,000 2.1 85,379 *
TQA Master Fund, Ltd.............. 1,500,000 * 24,557 *
TQA Master Plus Fund, Ltd......... 500,000 * 8,185 *
</TABLE>
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<PAGE> 39
<TABLE>
<CAPTION>
NUMBER OF
PRINCIPAL AMOUNT SHARES OF
OF NOTES COMMON STOCK PERCENTAGE OF
BENEFICIALLY OWNED PERCENTAGE OF THAT MAY BE COMMON STOCK
NAME AND OFFERED NOTES OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ------------------ ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
Vanguard Convertible Securities
Fund, Inc....................... 4,595,000 1.8 75,229 *
White River Securities, LLC....... 2,000,000 * 32,743 *
Any other holder of notes or
future transferee from any
holder(3)(4).................... 64,980,000 26.0 1,063,850 2.1
</TABLE>
-------------------------
* Less than 1%
(1) Assumes conversion of all of the holder's notes at a conversion price of
$61.08 per share of common stock and a cash payment in lieu of any
fractional interest. However, the conversion price is subject to adjustment
if particular events affecting our common stock occur. As a result, the
amount of common stock issuable upon conversion of the notes my increase or
decrease in the future.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 49,074,858
shares of common stock outstanding as of June 5, 2000. In calculating these
amounts, we treated as outstanding the number of shares of common stock
issuable upon conversion of all of that particular holder's notes. However,
we did not assume the conversion of any other holder's notes.
(3) Information about other selling securityholders will be set forth in
prospectus supplements, if required.
(4) Assumes that any other holders of notes, or any future transferees,
pledgees, donees or successors of or from any other holders of notes, do not
beneficially own any common stock other than the common stock issuable upon
conversion of the notes at the initial conversion price.
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<PAGE> 40
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the notes and the
underlying common stock offered by this prospectus. The notes and the underlying
common stock may be sold from time to time to purchasers:
- directly by the selling securityholders; and
- through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from
the selling securityholders or the purchasers of the notes and the
underlying common stock.
The selling securityholders and any broker-dealers or agents who
participate in the distribution of the notes and the underlying common stock may
be deemed to be "underwriters." As a result, any profits on the sale of the
notes and underlying common stock by selling securityholders and any discounts,
commissions or concessions received by a broker-dealers or agents might be
deemed to be underwriting discounts and commissions under the Securities Act. If
the selling securityholders were deemed to be underwriters, the selling
securityholders may be subject to certain statutory liabilities of, including,
but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
If the notes and underlying common stock are sold through underwriters or
broker-dealers, the selling securityholders will be responsible for underwriting
discounts or commissions or agent's commissions.
The notes and underlying common stock may be sold in one or more
transactions at:
- fixed prices;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which the
notes and underlying common stock may be listed or quoted at the time of
the sale, including the Nasdaq National Market in the case of the common
stock;
- in the over-the-counter market;
- in transactions otherwise than on those exchanges or services or in the
over-the-counter market; or
- through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the notes and underlying common stock or
otherwise, the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
notes and underlying common stock in the course of hedging their positions. The
selling securityholders may also sell the notes and underlying common stock
short and deliver notes and underlying common stock to close out short
positions, or loan or pledge notes and underlying common stock to broker-dealers
that in turn may sell the notes and underlying common stock.
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<PAGE> 41
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the underlying common
stock by the selling securityholders. Selling securityholders may sell any or
all of the notes and the underlying common stock offered by them pursuant to
this prospectus. In addition, we cannot assure you that any such selling
securityholder will not transfer, devise or gift the notes and the underlying
common stock by other means not described in this prospectus.
Our common stock trades on the Nasdaq National Market under the symbol
"GETY." We do not intend to apply for listing of the notes on any securities
exchange or for quotation through the Nasdaq National Market. Accordingly, no
assurance can be given as to the development of liquidity or any trading market
for the notes. See "Risk Factors." No active trading market exists for the notes
and one may not develop.
We cannot be sure that any selling securityholder will sell any or all of
the notes or underlying common stock covered by this prospectus that qualify for
sale pursuant to this prospectus. In addition, any notes or underlying common
stock covered by this prospectus that qualify for sale pursuant to Rule 144 or
Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather
than pursuant to this prospectus.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the notes and the underlying common stock by the
selling securityholders and any other such person. In addition, Regulation M of
the Exchange Act may restrict the ability of any person engaged in the
distribution of the notes and the underlying common stock to engage in
market-making activities with respect to the particular notes and the underlying
common stock being distributed for a period of up to five business days prior to
the commencement of such distribution. This may affect the marketability of the
notes and the underlying common stock and the ability of any person or entity to
engage in market-making activities with respect to the notes and the underlying
common stock.
In connection with the registration rights agreement, we and the selling
securityholders will be indemnified by the other against certain liabilities,
including certain liabilities under the Securities Act or will be entitled to
contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the notes and underlying common stock to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
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<PAGE> 42
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference into this prospectus other
information we have filed with the SEC. This means that we can disclose
important information by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus.
Information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made by us with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until our offering is complete:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999;
- Our Definitive Proxy Statement on Schedule 14A filed on April 7, 2000;
- Our Quarterly Report on Form 10-Q for the three months ended March 31,
2000;
- Our Current Report on Form 8-K filed on March 2, 2000; and
- Our Current Report on Form 8-K/A filed on June 1, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Getty Images, Inc.
701 N. 34th Street, Suite 400
Seattle, Washington 98103
(206) 268-2000
Attn: Suzanne L. Page, General Counsel
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to make
representations or provide you with different information. If information is
given or representations are made, you may not rely on that information or the
representations as having been authorized by us. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume the information incorporated by reference or provided in this prospectus
is accurate as of any date other than the date on the front of this prospectus.
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<PAGE> 43
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act and in
accordance therewith file reports and other information with the SEC. The
reports and other information that we file with the SEC can be inspected and
copied 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. Copies of such material can also be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates, or by calling the SEC at 1-800-SEC-0330. Such 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 such site is:
http://www.sec.gov. In addition, such material may be inspected and copied 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 notes and common stock offered by this
prospectus. This prospectus does not contain all of the information set forth in
the registration statement. We have omitted parts of the registration statement
as permitted by the rules and regulations of the SEC. Statements contained in or
incorporated by reference into this prospectus as to the contents of any
contract or other document are not necessarily complete. You should refer to a
copy of each contract or document filed as an exhibit to the registration
statement or incorporated by reference into this prospectus for complete
information. Copies of the registration statement, including exhibits and
information incorporated by reference into this prospectus, may be inspected
without charge at the SEC's public reference facilities or website.
LEGAL MATTERS
The validity of the issuance of the securities offered by this prospectus
will be passed upon for Getty Images, Inc. by Weil, Gotshal & Manges LLP, Menlo
Park, California.
INDEPENDENT ACCOUNTANTS
The financial statements incorporated in this registration statement by
reference to the Annual Report on Form 10-K of Getty Images, Inc. for the year
ended December 31, 1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The consolidated financial statements of Visual Communications Group B.V.
for the year ended December 31, 1999 incorporated in this registration statement
by reference to the Current Report on Form 8-K/A of Getty Images, Inc. dated
June 1, 2000 have been so incorporated in reliance on the report of
PricewaterhouseCoopers, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The consolidated financial statements of VCG Deutschland GmbH for the year
ended December 31, 1999 incorporated in this registration statement by reference
to the Current Report on Form 8-K/A of Getty Images, Inc. dated June 1, 2000
have been so incorporated in reliance on the report of PricewaterhouseCoopers
Gesellschaft mit beschrankter Haftung, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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<PAGE> 44
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The aggregate estimated (other than the registration fee) expenses to be
paid by the Registrant in connection with this offering are as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $66,000
Legal fees and expenses..................................... 30,000
Printing and engraving expenses.............................
Accounting fees and expenses................................
Miscellaneous...............................................
$
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except to the extent indicated below, there is no charger provision,
by-law, contract, arrangement or statute under which any controlling person,
director or officer of the Registrant 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 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
Amended and Restated Certificate of Incorporation of the Registrant (the
"Certificate of Incorporation") and the Bylaws of the Registrant (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 the Registrant to purchase such insurance. The
Registrant has director and officer insurance in place for its directors and
officers.
The Registrant has also agreed by contract to indemnify the directors and
certain officers of the Registrant 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.
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<PAGE> 45
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of Getty
Images.(1)
3.2 Certificate of Amendment to Certificate of Incorporation of
Getty Images.(2)
3.3 Certificate of Designations of Series A Special Voting
Preferred Stock.(3)
3.4 Certificate of Designations of Series B Special Voting
Preferred Stock.(3)
3.5 Bylaws of Getty Images.(2)
4.1 Indenture, dated March 13, 2000, by and between Getty Images
and The Bank of New York.(4)
4.2 Registration Rights Agreement, dated as of March 13, 2000,
by and among Getty Images and the Initial Purchasers named
therein.(4)
4.3 Form of Note (included in Exhibit 4.1).
5.1 Opinion of Weil, Gotshal & Manges LLP.**
12.1 Computation of Ratio of Earnings to Fixed Charges.**
23.1 Consent of PricewaterhouseCoopers, Independent Accountants.*
23.2 Consent of PricewaterhouseCoopers, Independent Accountants.*
23.3 Consent of PricewaterhouseCoopers Gesellschaft mit
beschrankter Haftung, Independent Accountants.*
23.4 Consent of Weil, Gotshal & Manges LLP (to be included in
Exhibit 5.1).
24.1 Powers of Attorney (included on the signature pages hereto).
25.1 Form T-1 Statement of Eligibility of Trustee for Indenture
under the Trust Indenture Act of 1939.*
</TABLE>
-------------------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-4 (File No. 333-38777).
(2) Incorporated by reference to exhibits filed with the Registrant's Current
Report on Form 8-K, filed on November 10, 1998.
(3) Incorporated by reference to exhibits filed with the Registrant's Current
Report on Form 8-K, filed on March 2, 2000.
(4) Incorporated by reference to exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the three months ended March 31, 2000.
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:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) 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 Commission may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than
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<PAGE> 46
a 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(c) 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 clauses (a) and (b) do not apply if the
information required to be included in a post-effective amendment by
such clauses is contained in periodic reports filed with or furnished to
the Securities and Exchange Commission by the Registrant pursuant to
Section 13 or Section 15(D) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed 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.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this 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 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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
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<PAGE> 47
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 9th day of June 2000.
GETTY IMAGES, INC.
By: /s/ JONATHAN D. KLEIN
------------------------------------
Jonathan D. Klein
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jonathan D. Klein and Steve Cristallo,
and each of them his attorney-in-fact, with the power of substitution, for him
in any and all capacities, to sign any amendment or post-effective amendment to
this Registration on Form S-3 or abbreviated registration statement with respect
thereto and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or his substitute or
substitutes, may 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
--------- ----- ----
<C> <C> <S>
/s/ MARK H. GETTY Executive Chairman and June 9, 2000
----------------------------------------------------- Director
Mark H. Getty
/s/ JONATHAN D. KLEIN Chief Executive Officer and June 9, 2000
----------------------------------------------------- Director
Jonathan D. Klein
/s/ STEVE CRISTALLO Vice President, Finance and June 9, 2000
----------------------------------------------------- Acting Chief Financial Officer
Steve Cristallo
/s/ MARK TORRANCE Non-Executive Vice Chairman June 9, 2000
----------------------------------------------------- and Director
Mark Torrance
/s/ ANDREW GARB Director June 9, 2000
-----------------------------------------------------
Andrew Garb
/s/ JAMES N. BAILEY Director June 9, 2000
-----------------------------------------------------
James N. Bailey
/s/ CHRISTOPHER S. SPORBORG Director June 9, 2000
-----------------------------------------------------
Christopher S. Sporborg
</TABLE>
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