<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER: 000-23747
------------------------------------
GETTY IMAGES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 98-0177556
(State or Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
</TABLE>
701 N. 34TH STREET,
SUITE 400,
SEATTLE,
WASHINGTON 98103
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(206) 268-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports) and (2) has been subject to such filing requirements of
the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $842 million as of March 1, 2000 based upon the
closing price of $57.625 on the Nasdaq National Market reported on such date.
Shares of Common Stock held by each executive officer and director and by each
person who beneficially owns more than 5 per cent of the Common Stock have been
excluded in that such persons may under certain circumstances be deemed to be
affiliates. This determination of executive officer and affiliate status is not
necessarily a conclusive determination for other purposes.
As of March 1, 2000, the number of shares of Common Stock outstanding was
46,279,977.
DOCUMENTS INCORPORATED BY REFERENCE: Information required by Part III of this
document is incorporated by reference to certain portions of the Company's
definitive Proxy Statement for its 2000 Annual Meeting of Stockholders (to be
filed).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
GETTY IMAGES, INC.
FORM 10-K
DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business.................................................... 3
Item 2. Property.................................................... 20
Item 3. Legal Proceedings........................................... 20
Item 4. Submission of Matters to a Vote of Security Holders......... 21
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 21
Item 6. Selected Consolidated Financial Data........................ 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 25
Item Quantitative and Qualitative Disclosures about Market
7A. Risk........................................................ 31
Item 8. Financial Statements and Supplementary Data................. 33
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 33
PART III
Item Directors and Executive Officers of the Registrant..........
10. 33
Item Executive Compensation......................................
11. 33
Item Security Ownership of Certain Beneficial Owners and
12. Management.................................................. 33
Item Certain Relationships and Related Transactions..............
13. 33
PART IV
Item Exhibits, Financial Statements Schedules and Reports on Form
14. 8-K......................................................... 33
</TABLE>
2
<PAGE> 3
ITEM 1. BUSINESS
This Annual Report on Form 10-K and the documents incorporated herein by
reference contain forward-looking statements based on current expectations,
estimates and projections about Getty Images, Inc.'s industry, management's
beliefs, and certain assumptions made by management. All statements, trends,
analyses and other information contained in this report relative to trends in
sales, gross margin, anticipated expense levels and liquidity and capital
resources, as well as other statements including, but not limited to, words such
as "anticipate," "believe," "plan," "estimate," "expect," "seek," "intend" and
other similar expressions, constitute forward-looking statements. These
forward-looking statements are not guarantees of future performance and are
subject to certain risks and uncertainties that are difficult to predict.
Accordingly, actual results may differ materially from those anticipated or
expressed in such statements. Potential risks and uncertainties include, among
others, those set forth herein under "Factors That May Affect the Business", as
well as "Management's Discussion and Analysis of Financial Conditions and
Results of Operations". Except as required by law, we undertake no obligation to
update any forward-looking statement, whether as a result of new information,
future events or otherwise. Readers, however, should carefully review the
factors set forth in other reports or documents that we file from time to time
with the Securities and Exchange Commission.
In this Annual Report, "Getty Images," "we," "us," and "our" refer to Getty
Images, Inc. and its consolidated subsidiaries, unless the context otherwise
dictates.
A. OVERVIEW
Getty Images is a leading provider of imagery to businesses and consumers
worldwide, distributing products digitally via 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; and The
Image Bank, a leading provider of visual content to the advertising, design,
publishing, corporate, broadcast and editorial markets. We work with an
estimated 3,950 photographers and an estimated 850 cinematographers and film
producers to create our content. We control an estimated 60 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 e-commerce technology to enhance our position as
a leader in the visual content industry.
B. BACKGROUND
Getty Communications plc (our predecessor company) commenced operations on March
14, 1995 with the acquisition of Tony Stone Images, one of the world's leading
providers of contemporary stock photography. In April 1996, we broadened our
visual content product offerings with the acquisitions of Hulton Deutsch
Collection Limited (now Hulton Getty), one of the world's largest commercially
available collections of archival photography and Fabulous Footage, a leading
North American provider of contemporary stock footage. In March 1997, we
acquired Liaison, a well established leader in the photojournalism market. In
July 1997, we acquired Energy Film Library, one of the leading international
providers of contemporary stock footage to the advertising, television, feature
film, corporate communications and multimedia markets.
In February 1998, we acquired PhotoDisc, Inc., a leading provider of
royalty-free imagery and one of the largest providers of imagery on the
Internet. Also in February 1998, we acquired Allsport Photographic plc, a
3
<PAGE> 4
leading provider of worldwide sports photography. We continued our global
expansion in March 1998 with the acquisition of Fototeca Stone, a leading stock
photography agent based in Barcelona, Spain and previously an exclusive agent
for Tony Stone Images. In May 1998, Allsport opened an office in Sydney,
Australia with the acquisition of images previously owned by Australian Picture
Library. In August 1998, we acquired Imageways, Inc., a noted archival footage
collection. In November 1998, we acquired Sporting Pix, a leading sports picture
agency based in Melbourne, Australia. These acquisitions significantly built our
base in Australia ahead of the 2000 Summer Olympic Games as Allsport has been
selected as the official photographer of the US Olympic Committee and the
International Olympic Committee marketing partners.
In May 1998, we issued $75 million of 4.75% convertible subordinated notes due
2003, the proceeds of which were applied partially to the repayment of $49
million of term debt due to Midland Bank plc.
In May 1999, we acquired Art.com, Inc., a leading provider of framed and
unframed art and art-related products on the Internet. In August 1999, we
acquired EyeWire Partners, Inc., a leading provider of royalty-free photography,
video, audio, typefaces, software and other design resources to creative
professionals and business users. Also in August 1999, we acquired Online USA,
Inc., an agency specializing in the sourcing and distribution of celebrity
imagery over the Internet. In October 1999, we acquired both American Royal Arts
Corporation, a leading provider of animation art, and Newsmakers L.L.C., a
premiere digital news agency covering current events, news and celebrity
photography.
In November 1999, we completed a public offering of 6.9 million shares of our
common stock at $39 per share for an aggregate of $259.7 million net of related
fees and expenses. At the same time we also raised $32.0 million from a
subscription by Getty Investments L.L.C., for 1.6 million shares -- the purchase
price of $20.26 per share being the average of the bid and the ask price of our
common stock for the ten trading day period ending on October 25, 1999. A
significant proportion of these funds were used to finance the acquisition of
The Image Bank in November 1999. The Image Bank is a leading provider of visual
content to the advertising, design, publishing, corporate, broadcast and
editorial markets.
C. BRANDED PRODUCTS AND SERVICES
We offer our customers an estimated 60 million still images, approximately
30,000 hours of film footage and related products through the Internet, CD ROM,
catalogs and our international distribution network of company-operated offices
in 23 cities and agents and distributors in 51 countries. Our visual content
brands are organized into four divisions to serve our major types of customers:
(1) Creative Professional, (2) Press and Editorial, (3) Business User and (4)
Consumer.
4
<PAGE> 5
The following chart sets forth information regarding the brands, imagery
products, marketing efforts and distribution capabilities for each of our four
divisions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
DIVISIONS CUSTOMERS BRANDS WEBSITE/URL IMAGERY PRODUCTS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CREATIVE Advertising, graphic Tony Stone Images www.tonystone.com Contemporary
PROFESSIONAL design, marketing and PhotoDisc www.photodisc.com stock
corporate The Image Bank www.theimagebank.com photography,
communications Energy Film Library www.energyfilm.com licensed and
royalty-free
illustrations,
and stock film
footage
- -----------------------------------------------------------------------------------------------------------------
PRESS AND EDITORIAL Newspapers, Allsport www.allsport.com Sports, news and
magazines, publishers Liaison Agency www.liaisonphoto.com features,
Newsmakers www.newsmakers.com celebrity and
Online USA www.onlineusa.com archival
Hulton Getty www.hultongetty.com photography
- -----------------------------------------------------------------------------------------------------------------
BUSINESS USER Design firms, in- EyeWire www.eyewire.com Royalty-free
house creative i/us www.ius.com imagery,
services departments software,
and business owners typefaces and
other design
resources
- -----------------------------------------------------------------------------------------------------------------
CONSUMER Individuals Art.com www.art.com Framed and
American Royal Arts www.americanroyalarts.com unframed art and
related products
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------- ---------------------------
DIVISIONS MARKETING
<S> <C>
CREATIVE Website, printed
PROFESSIONAL catalogs, direct mail,
CD ROM and
demonstration reels
- -------------------------------------------------
PRESS AND EDITORIAL Website, subscription
and customer service
- -------------------------------------------------
BUSINESS USER Website and catalogs
- -------------------------------------------------
CONSUMER Traditional and website
advertising, direct
marketing and
affiliates program
- -------------------------------------------------
</TABLE>
CREATIVE PROFESSIONAL DIVISION
Our Creative Professional division supplies images to professional image users,
such as advertising and design agencies, website designers and corporate
communications specialists. Our images cover a wide variety of contemporary
subjects including lifestyles, families, business, science, health and beauty,
sports, transportation and travel. These customers usually have an idea of the
message they are trying to convey and, consequently, are typically looking for a
specific conceptual image. Image quality and relevance are important factors in
the customer's decision. These customers need to access imagery as part of their
everyday working life. Their workflow is becoming increasingly digital, which we
believe will spur further demand for our images and services in this market.
Our Creative Professional division is comprised of four brands:
Tony Stone Images is a leading worldwide provider of contemporary stock
photography and is recognized as being fashionable and on the cutting edge of
stock photography. Tony Stone Images offers images for licensing on a per-use
basis and provides customers with the option to reserve the rights to an image
for a particular type of publication, for a specified period of time, in a
particular geographic area or in a specific industry. This rights-control system
is critical in allowing us to license the same image multiple times, thus
maximizing the return per image. Tony Stone Images offers images online at
www.tonystone.com.
PhotoDisc is a pioneer in the development and marketing of digital stock
photography, products and electronic delivery of images. Its products are
offered on a royalty-free basis, which allows customers to pay a one-time fee to
use an image on a perpetual, non-exclusive basis for almost any purpose.
PhotoDisc offers all of its images online at www.photodisc.com.
The Image Bank is a leading provider of contemporary and archival stock
photography, film footage and illustrations worldwide. It offers products in
both the royalty-free and licensed image markets through a worldwide network of
company-operated offices and franchisees.
Energy Film Library is an international provider of stock film footage to the
advertising, television, feature film, video corporate communications and new
media markets. Energy Film Library offers moving images online at
www.energyfilm.com.
5
<PAGE> 6
Image Creation and Editing
We continue systematically to select our most widely used images for
digitization. Tony Stone Images and PhotoDisc are fully e-commerce enabled and
are rapidly migrating their businesses to an entirely web-based model. All of
the digitized images of these brands are available for search, selection and
immediate download from their respective websites 24 hours a day, seven days a
week. The Image Bank and Energy Film Library maintain and license a growing
library of an estimated 30,000 hours of commercially desirable cinematography
covering a broad range of contemporary and archival subject matter.
We have creative teams in London, Los Angeles, Munich, Paris, Seattle and New
York that analyze customer requests and buying behavior and perform research in
key markets in order to target and source images. Our Creative Professional
division has an estimated 2,500 active contributing photographers, including
highly respected, internationally renowned professional photographers
representing a variety of styles, specialties and backgrounds. The Energy Film
Library offers a breadth of imagery and high resolution content, which is
cataloged on computer for quick access and retrieval in film, tape and digital
formats. Energy Film Library and The Image Bank represent imagery from an
estimated 850 cinematographers and film producers.
Marketing
We reach our creative professional customers through a diverse set of marketing
channels. We believe that these channels create brand awareness and, in many
cases, act as sales tools in the selection of image products for license. We
also serve our international markets by producing localized marketing materials
where appropriate.
Online Marketing. Our websites act as marketing tools as well as sales tools,
making the images of each collection available for research and selection
online. For example, we provide imagery to Amazon.com for its electronic
greeting cards, as well as content to support image searching at Alta Vista and
Ditto.com.
Printed Catalogs and Direct Mail. We use catalogs to market the contemporary
photography of Tony Stone Images, The Image Bank and PhotoDisc. We believe that
our catalog quality contributes to our strong reputation. These catalogs are
also used to promote our websites as well as our other product offerings.
CD ROM and Demonstration Reels. Several of our brands, including Tony Stone
Images, PhotoDisc and The Image Bank, produce CD ROM catalogs, which enable
customers to select from a wide range of images on-screen and, in some cases,
provide direct links to the corresponding website. Energy Film Library markets
our film footage through demonstration reels sent directly to our existing and
potential customers. These demonstration reels contain samples of available
footage.
Distribution
While we are focused on directing our creative professional customers to the
e-commerce environment, we continue to support and serve our customers who wish
to receive our branded content products through traditional analog means, which
involves the physical distribution of imagery on duplicate transparencies. In
many instances, we serve customers through a combination of e-commerce and more
traditional methods of customer service.
Digital Distribution. We are actively promoting digital distribution of imagery
and related products and services through the Internet. We believe this offers
our customers advantages in terms of convenience, speed and cost efficiency, and
enables us to achieve greater economies of scale. PhotoDisc has been an industry
leader for Internet delivery of imagery since 1995, and we have leveraged this
expertise to develop a successful e-commerce business for Tony Stone Images as
well as promoting the Creative Professional division through gettyone.com.
Traditional Analog Distribution. We also market images through our broad
international distribution network of company-operated offices and agents and
distributions in approximately 150 locations in 51 countries. We believe that
control of our outlets results in more focused marketing activities and better
brand maintenance. A direct sales force and key account management team targets
advertising, publishing and
6
<PAGE> 7
communications companies, as well as other high volume users of images. Our
direct sales force focuses on reaching image purchasers who are generally
responsible for large order purchases. In order to assist our customers in using
the images they license, our sales force includes technical support staff and
training personnel who provide assistance both before and after the sale. These
consultants have expertise in digital image applications, design tools and photo
manipulation methodologies. Customer service and technical support are based in
Seattle for Tony Stone Images and PhotoDisc, and Seattle and New York City for
The Image Bank.
PRESS AND EDITORIAL DIVISION
Our Press and Editorial division supplies images to a customer base of
professional image users who are involved in the publication of newspapers,
books and magazines, both online and in traditional media, as well as the
production of documentaries, and other editorial media. The imagery that is
provided by this division ranges from contemporary news, celebrity and feature
material, and sports imagery, to archival imagery covering major political,
social and sporting events since the beginning of photography in the early
nineteenth century. The customers specifically addressed by the Press and
Editorial division are looking for imagery that conveys information to
illustrate the story they are covering and often require the imagery to be
delivered rapidly after the event has occurred.
The Press and Editorial division has five brands:
Allsport is a leading agency providing sports photography worldwide, with an
archive of an estimated five million still images from sporting events around
the world dating from 1896, and includes visual content that is both specialist
and generalist, most of which is wholly owned by Allsport. Allsport is a
commissioned photographer for the International Olympic Committee and the U.S.
Olympic Committee marketing partners, Major League Baseball, Major League Soccer
and the WTA Tour. Allsport is also the official supplier of photography for
America's Cup 2000. Allsport adds an estimated 6,000 still images on average per
week to its portfolio and has approximately 45 contributing photographers.
Allsport offers images online at www.allsport.com.
Liaison Agency is a news and reportage agency that serves North America. Liaison
Agency receives material from an estimated 800 photographers worldwide and its
library contains photographs covering the major events, personalities and
entertainment of the last 30 years. Since 1986, images accepted by the agency
have been indexed using key words, creating one of the largest databases in the
industry. Liaison Agency offers images online at www.liaisonphoto.com.
Newsmakers is a New York-based online news photography service that provides
realtime news photography from around the world in digital format for use by
newspapers, magazines, websites and publishers. Newsmakers offers images online
at www.newsmakers.com.
Online USA is a Los Angeles-based agency specializing in the sourcing and
distribution of North American celebrity imagery over the Internet. The agency
was founded in 1994 as a purely digital business. Online USA offers images
online at www.onlineusa.com.
Hulton Getty is one of the largest privately owned collections of archival
photography in the world, consisting of an estimated 300 separate collections
totaling an estimated 18 million still images. The imagery has been collected
from all over the world and consists of significant events, people and places
from the nineteenth and twentieth centuries, and vintage prints by renowned
photographers such as Man Ray, Bill Brandt, Alfred Eisenstadt and Robert Capa.
Hulton Getty offers images online at www.hultongetty.com.
Image Creation and Editing
The ability to source imagery from events taking place as they occur and make
them immediately available to customers is critical to the success of the Press
and Editorial division. To this end, we have production hubs in New York, Los
Angeles, London and Sydney to which photographers can submit imagery at any
time. The Press and Editorial division employs approximately 50 staff
photographers and has contractual relationships with an estimated 1,000
additional photographers. In addition to topics that we believe will be of
interest
7
<PAGE> 8
perennially, we seek to identify upcoming events that will generate demand for
particular archival images. We also offer in-depth research services for more
extensive projects that our customers may have or imagery they may require
immediately.
We digitize thousands of images on average per week and make them available
through a proprietary online subscription service and over the Internet. By
using digital cameras, we are able to have some new images online within fifteen
minutes of creation from major events such as The World Series or The Academy
Awards. In addition, we continually review our existing analog collections and
select imagery for digitization, which we anticipate will be requested by
customers.
Marketing
The Press and Editorial division markets our branded imagery primarily through
printed catalogs and websites.
Allsport, Online USA, Liaison Agency and Newsmakers regularly provide a summary
of the latest breaking stories to their respective websites where customers can
see available imagery. These websites are currently being enhanced to offer a
unified digital source for the direct purchase and download of imagery. In
addition to these websites, we proactively approach our customers to inform them
of the stories that are available for purchase and seek to develop close
relationships between our customer service representatives and our customers. We
offer a subscription service to customers in the Press and Editorial division,
providing them with relevant material. Finally, Liaison Agency markets its
assignment photography business via a website which enables customers to view
the work of photographers and to contact the agency on-line to arrange
assignments.
Distribution
The Press and Editorial division distributes imagery by a variety of means. It
uses online distribution methods, including the Internet, an ISDN Point-to-Point
network, the Photo Stream satellite network maintained by the Associated Press,
and a number of other third-party provided digital transmission methods. In
addition, the division leverages our international network of offices and agents
to ensure prompt and convenient support service to the transmission systems and
to provide access to physical duplicate transparencies to customers that prefer
to receive imagery in this fashion.
BUSINESS USER DIVISION
Our Business User division supplies imagery to the business user and small
office/home office, or "SOHO," markets. EyeWire, one of the largest providers of
royalty-free imagery to business users and SOHO customers, is the key brand of
the Business User division. EyeWire also offers related content and services
which allow customers to produce professional quality work product incorporating
imagery, typefaces and other design elements. EyeWire's non-imagery products
include productivity-enhancing visual and audio content, online software tools
and design resources. i/us, a leading supplier of specialty graphics and
publishing tools, acquired in January 2000, is the other brand in our Business
User division. The extensive affiliate network and website traffic of i/us
provide broad access to the business user.
Image Creation and Other Products
EyeWire sources new imagery from third party vendors and produces its own
branded content through independent photographers and image suppliers. EyeWire
has relationships with third-party vendors, such as Adobe Systems, Digital
Vision and Pantone, to distribute products such as typefaces, software
applications, audio products and illustrations which are complementary to the
core image offering. The vendors typically provide new products to EyeWire as
they are released on the market. i/us has relationships with third party vendors
including Corel and MacroMedia who distribute software, plug-ins and images
through download from the i/us websites.
8
<PAGE> 9
Marketing
The Business User division's marketing efforts are focused on the award-winning
EyeWire catalog and the EyeWire and i/us websites.
EyeWire Catalog. Each month, EyeWire distributes an average of 750,000 sales
catalogs worldwide. EyeWire has distributed approximately 47 million of its
catalogs to date. The EyeWire catalog has won numerous awards and offers
products from many leading brands.
Online Marketing. EyeWire also offers its products through its website. EyeWire
adds an estimated average of 5,000 new pieces of content to the Internet each
month. EyeWire has strategic alliances with DemoRoom.com, Earthlink, ImageX.com,
Pantone Color Systems, Printonthenet.com, RealNetworks and ZDNet. These
alliances involve an exchange of service, cross-promotion and cross-marketing
activities focused on mutual business development. For example, in connection
with the Earthlink alliance, EyeWire, as Earthlink's featured image provider,
provides images to Earthlink for use by its customers in building personal
websites. i/us distributes a newsletter to its subscribers containing industry
news, tutorials and special product offers and also distributes a news bulletin
to its affiliates who can earn commissions on new products and services by
linking their websites to the i/us store.
Distribution
The Business User division delivers its content predominantly through the
Internet. EyeWire processes and distributes its catalog orders through a
centrally located fulfillment center.
CONSUMER DIVISION
The Consumer division consists of Art.com and American Royal Arts. Art.com is a
leading provider of framed and unframed art and art-related products on the
Internet. Art.com's monthly feature galleries and My Gallery, a personal gallery
that can be created, saved and shared, allow users to browse for appropriate
prints for their needs and budgets. American Royal Arts is a leading supplier of
animation art and also markets and sells a variety of collectibles, with an
emphasis on animation and fine art. American Royal Arts holds licenses to sell
certain animation art of Twentieth Century Fox Film Corporation and DreamWorks
and has been designated an independent dealer of animation of Walt Disney Art
Classics.
Art.com's website features proprietary technology that allows customers to
visualize an estimated one billion custom matting and framing combinations for
their selected print on-screen before purchasing. It offers consumer discounts
and special offers and a number of services including art-care tips with every
purchase, monthly feature galleries and My Gallery.
Image Creation and Selection
Art.com has an estimated 29,000 prints and posters, 2,000 fine art pieces and
450 gifts online, including images by artists such as Monet, van Gogh and
Picasso, and photographers such as Herb Ritts and Robert Mapplethorpe. This
imagery is secured from third-party owners and publishers of imagery. The
imagery that is created and owned by other Getty brands can be leveraged into
products offered through Art.com. For example, we have created a Hulton Getty
gallery on the Art.com website. American Royal Arts offers production and
limited edition art from many of the major animation studios. Production art is
based on the original archived drawings, cells and backgrounds used in the
creation of animated shorts and feature films, while limited edition art is
developed by recreating classic images of favorite characters and scenes from
these films. American Royal Arts also develops new products and images in
cooperation with the originating studio which are ultimately produced by a third
party manufacturer.
Marketing
Traditional Advertising. We launched an aggressive advertising campaign for
Art.com in September 1999 and plan to build the brand through outdoor
advertising, free postcard advertisements, radio advertisements and
advertisements in newspapers and magazines that target the art community. We
believe this ongoing
9
<PAGE> 10
advertising program will facilitate the growth of the brand, increase its name
recognition and direct new customers to its online store. In addition, we plan
to direct traffic to the Art.com website through new and existing marketing and
business development relationships designed to reach our targeted customers on a
regular basis. American Royal Arts markets its products through display
advertisements in national newspapers and magazines, direct mail campaigns and
telemarketing.
Online Advertising. We use online sales and marketing techniques to increase
Art.com brand recognition and direct traffic to its website. We purchase banner
advertising on search engine websites and Internet directories. In certain
cases, when a user searches for information relating to certain keywords (such
as "impressionism") as well as the names of artists, an Art.com link will
automatically be displayed. Art.com advertisements have appeared on Alta Vista,
AOL, coolsavings.com, iVillage, The New York Times, Women.com and Yahoo!, among
others. We have recently developed an online marketing campaign for American
Royal Arts which we intend to launch in the first quarter of 2000 which will
include the purchase of keywords, banner advertising and relationships with
strategic partners.
Direct Marketing. We believe the Internet provides additional opportunities for
direct marketing. We are exploring direct marketing opportunities such as
gallery customization to present each customer with a customized art assortment
based on that customer's historic purchasing patterns. Through Art.com, we make
customized offers such as an e-mail newsletter that includes purchase
recommendations based on demonstrated customer preferences or prior purchases.
Affiliates Program. We believe the affiliates program increases Art.com's
market presence by allowing affiliate websites to offer art to their customers
for which Art.com ultimately provides fulfillment. The affiliate embeds a
hyperlink to Art.com's website that automatically connects the customer to the
Art.com online store where the affiliate's customer may place an order. Under
these arrangements, we pay the affiliate a small percentage of the sales they
generate. The affiliates program currently has an estimated 17,000 participants,
including Encyclopedia Britannica, Flooz.com, Furniture.com and bizrate.com,
among others. We intend to implement an affiliates program for American Royal
Arts in the second quarter of 2000.
Distribution
Imagery is made available for search, selection and purchase on the Art.com
website, where customers can choose the format and style that they desire their
images to be delivered. Once the image has been selected, we fulfill the order
in our dedicated facility. We customize product configurations as specified by
the customer and generally ship within 24 hours. We are currently developing a
digital printing program at Art.com which we believe will enable a customer to
order digital prints of archive quality in specific sizes. We outsourced digital
printing in 1999, but we intend to make our digital printing capacity available
by the end of 2000. Once a customer selects a product from American Royal Arts,
the artwork is sent offsite for framing. Once framed, the piece is returned to
American Royal Arts for packaging and shipping.
D. OPERATIONS AND TECHNOLOGY
We have implemented a broad range of technology, systems and services for the
search, selection, purchase, and download of digital content. These systems span
multiple operational activities, including customer interaction, transaction
processing, order fulfillment, invoicing, and customer relationship management.
We use a set of software applications for:
- categorizing digital content and embedding appropriate keywords and
search data (metadata);
- searching large information databases (across languages and linguistic
context);
- presenting detailed information related to specific digital content
elements;
- managing the online e-commerce transactions for the purchase of digital
content;
- managing the invoice generation and accounts receivable from customers;
- facilitating the communications between internal staff and customers,
suppliers, and partners; and
- tracking a broad range of intellectual property rights and permissions.
10
<PAGE> 11
These services and systems use a combination of our proprietary technologies and
commercially available, licensed technologies. We focus our internal development
efforts on creating and enhancing the specialized, proprietary software that is
unique to our business. We intend to continue to investigate, qualify, and
develop technology and internal systems that support key areas of our business
to enhance the online and offline experience for our customers. In particular,
we are expending resources on creating a flexible infrastructure that will
facilitate the sale and distribution of third-party digital content through our
online e-commerce systems.
Our image search, image selection, licensing rights management, customer
interaction, order collection, fulfillment and back-end systems are proprietary.
Our online platform architecture is primarily based on Microsoft NT SiteServer.
These systems were designed to provide reliable e-commerce connectivity and
responsive online customer interaction. Our systems infrastructure is hosted
internally at multiple locations and externally at InterNAP. Both internal and
external hosting centers provide 24 hour monitoring, power generators and
multiple back-up systems.
E. COMPETITION
The visual content industry is highly competitive. We believe that the principal
competitive factors are name recognition, company reputation, the quality,
relevance and diversity of the images, the quality of contributing photographers
and cinematographers under contract with a company, effective use of developing
technology, customer service, pricing, accessibility of imagery, distribution
capability and speed of fulfillment. Our current or potential competitors
include:
- other large visual content providers such as Corbis Corporation, The
Stock Market and Index Stock Photography;
- specialized visual content companies that are well-established in their
local, content or product specific markets;
- consumer-oriented websites for art and related products; and
- commissioned photographers.
In addition to competitors and competitive factors applicable to the visual
content industry as a whole, our individual brands are subject to competitors
and competitive factors specific to each such brand.
F. INTELLECTUAL PROPERTY
Most of the images distributed by Tony Stone Images, PhotoDisc, Energy Film
Library, Liaison Agency, EyeWire, The Image Bank, Newsmakers and Online USA are
obtained from independent photographers and cinematographers on an exclusive
basis. Art.com obtains permission from its suppliers to display and sell
products on the Art.com website. American Royal Arts obtains most of its images
from film studios. Professional photographers and cinematographers prefer to
retain ownership of their work. As a result, copyright to an image remains with
the contributing photographer or cinematographer in most cases, while we obtain
the exclusive right to market the image on behalf of the photographer or
cinematographer for a period of time (generally a minimum of five to seven
years, which we believe to be the useful life of contemporary images). A
substantial portion of the images of Allsport and Hulton Getty, and certain
images of our other brands, are owned by us or are in the public domain.
11
<PAGE> 12
G. FACTORS THAT MAY AFFECT THE BUSINESS
IN ADDITION TO OTHER INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K, THE
FOLLOWING IMPORTANT FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING OUR
COMPANY BECAUSE SUCH FACTORS CURRENTLY HAVE A SIGNIFICANT IMPACT OR MAY HAVE A
SIGNIFICANT IMPACT ON OUR BUSINESS, PROSPECTS, FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE COMPANIES WE ACQUIRE, INCLUDING
VISUAL COMMUNICATIONS GROUP ("VGC") AND THE IMAGE BANK, OUR BUSINESS COULD BE
ADVERSELY AFFECTED.
As a result of the acquisition strategy we have implemented since our inception
in 1995, our senior management has focused significant attention on integrating
acquired businesses. Our future performance will largely depend on our ability
to integrate the operations of acquired companies, particularly VCG (acquired in
March 2000) and The Image Bank (acquired in November 1999). These acquisitions
create risks such as:
- disruption of our ongoing business;
- difficulty assimilating the operations, including financial and
accounting functions, sales and marketing procedures, technology and
other corporate administrative functions of the combined companies;
- diversion of attention of our senior management from existing operations
and other potential business opportunities;
- challenges associated with converting content from the analog format to
digital format, particularly The Image Bank's and VCG's core
collections;
- problems combining personnel of the acquired companies with our existing
personnel; and
- problems retaining key employees from the acquired companies.
We cannot guarantee that we will successfully integrate VCG or The Image Bank or
any other acquired companies with our business.
FAILURE TO MANAGE OUR GROWTH MAY ADVERSELY AFFECT OUR BUSINESS.
We have experienced and are currently experiencing significant growth. This
growth has placed, and the future growth we anticipate in our operations will
continue to place, a significant strain on our resources. As part of this
growth, we will have to implement new operational systems and procedures and
controls, expand, train and manage our employee base and maintain close
coordination among our technical, accounting, finance, marketing, sales and
editorial staffs. In addition, managing these aspects of our business must be
done in the context of geographically dispersed operations worldwide.
Several members of our senior management team joined us in 1999. These
individuals are currently becoming integrated with the other members of our
management team. We believe the successful integration of our management team is
critical to manage our operations effectively and support our growth.
WE MAY LOSE CUSTOMERS IF WE ARE UNABLE TO DETERMINE CURRENT OR FUTURE TRENDS AND
MAINTAIN UP-TO-DATE CONTENT OUR COLLECTIONS.
Our future performance depends on our ability to review and refresh our
collections based on current and future trends in order to provide our customers
with the most up-to-date content. Many of our customers are sensitive to the
latest trends and require new and fashionable content to meet their needs. If we
are unable to determine such trends and add new imagery, or fail to do so in a
timely manner, customers requiring such content may use another visual content
provider to obtain imagery.
12
<PAGE> 13
ACQUISITION-RELATED CHARGES AND RESTRUCTURING COSTS COULD HAVE AN ADVERSE IMPACT
ON OUR OPERATING RESULTS.
Our operating results and earnings in future periods may be adversely affected
as a result of acquisition-related charges, including:
- significant goodwill amortization charges;
- one-time transaction costs; and
- other related one-time reorganization charges.
For example, the acquisitions of PhotoDisc and Allsport in February 1998
generated $241.9 million of goodwill and $51.0 million of other intangibles and
the acquisitions of Art.com in May 1999, EyeWire in August 1999, American Royal
Arts in October 1999 and The Image Bank in November 1999 generated $343.7
million in goodwill. Goodwill of $176.4 million arising upon the acquisition of
The Image Bank is currently based upon an initial estimate of fair value of The
Image Bank's assets and liabilities. We are amortizing goodwill relating to
acquisitions over the following periods: twenty years for the PhotoDisc and
Allsport goodwill; three years for Art.com goodwill; seven years for EyeWire
goodwill; five years for American Royal Arts goodwill and ten years for The
Image Bank goodwill. We amortize other intangibles over one to four years. We
could be required to write-down the unamortized value of such goodwill in the
future at an accelerated rate in the event that it suffers an impairment in
value. Future acquisitions by us, if any, could generate goodwill and other
intangibles that would result in similar charges to be amortized against our
future earnings.
We incurred non-recurring integration and restructuring costs of $10.3 million
(net) during 1999 following the program to integrate all our businesses,
including the new acquisitions Art.com and EyeWire, into four divisions to serve
our four major customer segments. There can be no guarantee that further
integration of our existing and future businesses will not result in similar or
greater integration and restructuring costs, which will negatively affect our
future earnings.
WE EXPECT OUR QUARTERLY FINANCIAL RESULTS TO FLUCTUATE.
Historical trends and quarter-to-quarter comparisons of our operating results
are not good indicators of our future performance. It is possible that some
future quarterly results may be below the expectations of public market analysts
and investors. In this event, the trading prices of our subordinated notes and
our common stock may fall. Our revenues and operating results are expected to
vary from quarter-to-quarter due to a number of factors, including:
- demand for our products;
- our ability to continue to move customers to the digital distribution of
imagery;
- changes in sales mix, including sales of digital imagery, wholly-owned
imagery, geographic distribution and brand distribution;
- our ability to attract visitors to our websites and the frequency of
repeat purchases by our customers;
- shifts in the nature and amount of publicity about us, our competitors
or the visual content industry;
- changes in the growth rate of the Internet;
- our ability to enhance our technology to accommodate any future growth
in our operations or customers;
- changes in our pricing policies or the pricing policies of our
competitors;
- changes in government regulation; and
- costs related to potential acquisitions of technology or businesses.
13
<PAGE> 14
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST OUR EXISTING OR POTENTIAL
COMPETITORS.
The visual content industry is highly competitive. We compete directly with a
number of large and small visual content companies to provide imagery to
businesses and consumers.
We believe that the principal competitive factors in the visual content industry
are name recognition, company reputation, the quality, relevance and diversity
of the images, the quality of the contributing photographers and
cinematographers under contract with a company, effective use of developing
technology, customer service, pricing, accessibility of imagery, distribution
capability and speed of fulfillment.
Some of our existing and potential competitors may have significantly greater
financial, marketing and other resources or greater name recognition than we
have. Some of these competitors may be able to respond more quickly to new or
expanding technology and devote more resources to the development or promotion
of their services than we can. In addition, possible new entrants into the
visual content industry could increase if technological advances make archiving,
searching and digital delivery systems more affordable.
We cannot guarantee that we will be able to compete successfully against
existing or potential competitors.
WE MAY NOT BE ABLE TO ATTRACT CUSTOMERS TO OUR WEBSITES OR TAKE ADVANTAGE OF THE
GROWTH OF NEW MARKETS.
Our strategy depends largely on our ability to attract customers to our websites
and to encourage and take advantage of the growth of new markets. We will
continue to seek strategic alliances and acquisitions to drive customers to our
websites and create new markets, products and services. We believe that our
ability to attract customers, facilitate market acceptance of our imagery,
related products and services and our brands, and enhance our sales and
marketing capabilities depends on our ability to develop and maintain
Internet-related strategic alliances and acquisitions. The market for
Internet-related alliances and acquisitions is highly competitive and we cannot
guarantee that we will be successful in negotiating additional alliances or
acquisitions on favorable terms, if at all. We also cannot be sure that any such
alliances or acquisitions will assist us in attaining our goals.
THE SUCCESS OF OUR BUSINESS DEPENDS ON THE GROWTH IN DEMAND FOR THE DIGITAL
DOWNLOAD OF VISUAL CONTENT.
The success of our business depends on the continued and increasing acceptance
of the digital download method for purchasing visual content. The growth and
market acceptance of digital download is subject to a number of factors,
including:
- the availability of sufficient network bandwidth to enable purchasers to
rapidly download images;
- the number of relevant images available for purchase through digital
download as compared to those available through traditional methods;
- the level of consumer comfort with the process of downloading visual
content;
- the relative ease of the downloading process;
- concerns about the security of online transactions; and
- specific customer requirements that dictate the continued reliance on
analog imagery.
Our strategy is based in part on increasing acceptance of the Internet as a
method for distributing images. We may not overcome future technical challenges
associated with electronically delivering visual content reliably on a long-term
basis.
WE MAY NOT SUCCEED IN ESTABLISHING THE GETTYONE BRAND.
Historically, we have marketed each Getty brand as its own collection. We have
recently reorganized these brands into four customer divisions and have launched
the "gettyone" brand, which provides creative professional customers access to
our relevant imagery and services on one website. Successful positioning of the
gettyone brand will largely depend on the success of our advertising and
promotional activities and our ability to provide customers with high quality
products and strong customer service. We believe that a
14
<PAGE> 15
favorable customer reception of the gettyone brand is important to our future
success. If our brand enhancement strategy is unsuccessful, we may be unable to
realize potential benefits of gettyone.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR EXECUTIVE CHAIRMAN AND
CHIEF EXECUTIVE OFFICER.
Our future success depends, in part, on the continued service of Mr. Mark Getty,
our Executive Chairman, and Mr. Jonathan Klein, our Chief Executive Officer. Mr.
Getty and Mr. Klein are each party to an employment agreement with us for a
minimum period of three years, commencing in February 1998 and June 1999,
respectively. We do not have "key person" life insurance policies covering
either Mr. Getty or Mr. Klein.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO IDENTIFY, ATTRACT, RETAIN AND
MOTIVATE HIGHLY SKILLED EMPLOYEES.
Our future success will depend upon our ability to identify, attract, retain and
motivate highly skilled technical, managerial, new product development,
editorial, merchandising, marketing and customer service employees. Competition
for qualified personnel is intense in the visual content industry. We cannot
guarantee that we will be successful in our efforts to attract such personnel.
CONSUMERS OF ART MAY NOT USE ART.COM FOR PURCHASES.
We recently entered into the consumer market through our acquisition of Art.com.
We may not be able to convert a large number of customers from traditional
shopping methods to online shopping for art and related products. If we do not
attract and retain a high volume of online customers at a reasonable cost, we
may be unable to increase our consumer revenues or achieve profitability in our
consumer division.
WE MAY EXPERIENCE SYSTEM FAILURES AND SERVICE INTERRUPTIONS ON OUR WEBSITES THAT
COULD RESULT IN ADVERSE PUBLICITY, CUSTOMER DISSATISFACTION AND REVENUE LOSSES.
A key component of our growth strategy is the increased digitization of our
imagery and the distribution of such imagery and related products and services
over the Internet. As a result, our revenues are, and will continue to be,
dependent on the ability of our customers to access our websites. In the past,
we have experienced occasional system interruptions that make our websites
unavailable or prevent us from efficiently fulfilling orders. We cannot be sure
that we can prevent these interruptions in the future. System failures or
interruptions will inconvenience our users and may result in negative publicity
and reduce the volume of images we license online and the attractiveness of our
online products and services to our customers.
We will need to add software and hardware and upgrade our systems and network
infrastructure to accommodate increased traffic on our websites and increased
sales volume. Without these upgrades, we will face additional system
interruptions, slower response times, diminished customer service, impaired
quality and speed of order fulfillment and delays in our financial reporting. We
cannot accurately project the rate or timing of any increases in traffic or
sales volume on our websites and, therefore, the integration and timing of these
upgrades are uncertain.
The computer and communications hardware necessary to operate our corporate
group, and the Tony Stone Images and PhotoDisc e-commerce operations, is located
at a single facility in Seattle, Washington. Our other businesses have systems
in other locations worldwide. Any of these systems and operations could be
damaged or interrupted by fire, flood, power loss, telecommunications failure,
earthquake and similar events. In addition, computer viruses, physical or
electronic break-ins and similar disruptions could cause system interruptions or
delays that could temporarily prevent us from providing services and accepting
and fulfilling customer orders. We do not have full redundancy for all of our
computer and telecommunications facilities and do not maintain a back-up
facility.
15
<PAGE> 16
WE MAY NOT BE ABLE TO RESPOND TO RAPID TECHNOLOGICAL CHANGES RELATING TO THE
INTERNET.
To be successful, we must adapt to rapidly changing Internet technologies by
continually enhancing our products and services and introducing new services to
address the changing needs of our customers. We could incur substantial
development or acquisition costs if we are required to modify our services or
infrastructure to adapt to changes affecting companies providing services on the
Internet. If we are unsuccessful in adapting to these changes, or do not
sufficiently increase the features and functionality of our products and
services, our customers may ultimately switch to the product and service
offerings of our competitors. Our existing or potential competitors may develop
an improved method for distributing visual content through the Internet. If we
are unable to keep pace with the evolving technology of the Internet, the demand
for our imagery and related products and services may decrease.
CERTAIN OF OUR STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE OVER OUR BUSINESS
AND AFFAIRS AND MAY HAVE INTERESTS THAT ARE DIFFERENT THAN YOURS.
Some of our stockholders own substantial percentages of the outstanding shares
of our common stock.
The Getty Group collectively owned approximately 23.2% of the outstanding shares
of our common stock as of March 1, 2000, and is comprised of the following
persons and entities: Getty Investments L.L.C.; The October 1993 Trust; The JD
Klein Family Settlement; Mr. Mark Getty; and Mr. Jonathan Klein.
The Torrance Group collectively owned approximately 7.9% of the outstanding
shares of our common stock as of March 1, 2000, and is comprised of the
following persons and entities: PDI, L.L.C.; Mr. Mark Torrance; Ms. Wade
Ballinger (Torrance); and certain of their family members.
Pursuant to shareholders agreements among us, the Getty Group and the Torrance
Group, none of the members of the Getty Group or the Torrance Group may transfer
their shares of our common stock except in accordance with the terms of those
agreements.
Two other stockholders, Pilgrim Baxter & Associates Ltd. and Waddell & Reed
Investment Management Company, owned approximately 8.9% and 6.3%, respectively,
of the outstanding shares of our common stock as of March 1, 2000.
As a result of their share ownership, each of the Getty Group, the Torrance
Group, Pilgrim Baxter and Waddell & Reed has significant influence over all
matters requiring approval of our stockholders, including the election of
directors and the approval of mergers or other business combinations. The
substantial percentage of our stock held by each of the Getty Group, the
Torrance Group, Pilgrim Baxter and Waddell & Reed could also make us a less
attractive acquisition candidate or have the effect of delaying or preventing a
third party from acquiring control over us at a premium over the then-current
price of our common stock. In addition to ownership of common stock, certain
members of the Getty Group and the Torrance Group have management and/or
director roles within our company that increase their influence over us.
OUR RIGHT TO USE THE GETTY TRADEMARKS IS SUBJECT TO FORFEITURE IN THE EVENT WE
EXPERIENCE A CHANGE OF CONTROL.
We own trademarks and trademark applications through our subsidiaries regarding
the names Getty Images and Hulton Getty, and derivatives of those names,
including the name "Getty," and the related logo. We use "Getty" as a corporate
identity as do our subsidiaries and we may use "Getty" as a product or service
brand in the future. We refer to the above as the "Getty Trademarks." In the
event that a third party or parties not affiliated with the Getty family acquire
control of us, Getty Investments has the right to call for an assignment to it,
for a nominal sum, of all rights to the Getty Trademarks. In the event of an
assignment, we will have 12 months to continue to use the Getty Trademarks,
after which time we no longer would have the right to use the Getty Trademarks.
We cannot be sure that Getty Investments' right to cause such an assignment
would not have a negative impact on the amount of consideration that a potential
acquirer would be willing to pay to acquire our common stock.
16
<PAGE> 17
WE MAY NOT BE ABLE TO PREVENT THE MISUSE OF OUR IMAGERY AND WE MAY BE SUBJECT TO
INFRINGEMENT CLAIMS.
We rely on intellectual property laws and contractual restrictions to protect
our rights to our imagery. These afford us only limited protection. Unauthorized
parties have attempted, and may attempt, to improperly use our owned or licensed
imagery. We cannot guarantee that we will be able to prevent the unauthorized
use of our imagery or that we will be successful in ceasing such use once it is
detected.
We have been subject to a variety of third-party infringement claims in the past
and will likely be subject to similar claims in the future. We license a portion
of our visual content from photographers and cinematographers and cannot
guarantee that each photographer or cinematographer holds the rights or releases
it claims or that such rights and releases are adequate. As a result, we may be
subject to infringement claims by third parties.
OUR INDEBTEDNESS COULD REDUCE OUR FLEXIBILITY AND MAKE US MORE VULNERABLE TO
ECONOMIC DOWNTURNS.
Our level of indebtedness will pose substantial risks to our security holders,
including the risk that we may not be able to generate sufficient cash flow to
satisfy our obligations under our indebtedness or to meet our capital
requirements. A portion of our cash flow from operations will be dedicated to
the payment of principal and interest on our senior credit facility, our 4.75%
convertible subordinated notes due 2003 and our 5.0% convertible subordinated
notes due 2007, which were issued on March 13, 2000. Our ability to service our
indebtedness will depend on our future performance, which will be affected by
general economic conditions and financial, business and other factors, many of
which are beyond our control. Such indebtedness could have important
consequences to you, including the following:
- our ability to make principal and interest payments on the notes could
be negatively impacted;
- we may be unable to obtain necessary financing for working capital,
capital expenditures, debt service requirements and other purposes;
- our flexibility in planning for, or reacting to, changes in our business
and competition could be reduced; and
- we may be more vulnerable to economic downturns.
As explained in Item 1.I. -- Recent Developments, in March 2000 we induced the
early conversion of approximately $62.3 million of the $75 million convertible
subordinated notes due 2003.
FLUCTUATIONS IN FOREIGN EXCHANGE RATES COULD HAVE A NEGATIVE IMPACT ON THE
RESULTS OF OUR NON-U.S. BASED OPERATIONS.
We publish our consolidated financial statements in U.S. dollars and conduct a
portion of our business in currencies other than U.S. dollars, particularly
United Kingdom pounds sterling, Deutsche marks, French francs and the Euro. As a
result, we are exposed to changes in the value of currencies against the U.S.
dollar. Fluctuations in the values of currencies against the U.S. dollar could
affect the translation of the results of our non-U.S. based operations into U.S.
dollars for inclusion in our consolidated financial statements. We cannot
accurately predict the impact that future exchange rate fluctuations may have on
our results.
THE TRANSITION TO THE EURO WILL REQUIRE US TO MODIFY OUR EXISTING OPERATIONS AND
SYSTEMS.
The Euro was implemented in January 1999 to replace the separate currencies of
eleven Western European countries. In order to effectively handle transactions
in the new currency, we are modifying our systems and commercial arrangements.
Modifications are necessary in areas such as payroll, benefits and pension
systems, contracts with suppliers and customers and internal financial reporting
systems. Although a three-year transition period is expected during which
transactions may also be made in the old currency, we will use dual currency
processes for our operations during the transition period. We cannot be sure
that we will identify or successfully solve all problems associated with the
transition or that a material disruption of our business will not occur.
17
<PAGE> 18
WE MAY NOT BE ABLE TO SECURE ADDITIONAL FINANCING TO MEET OUR FUTURE CAPITAL
NEEDS.
We currently anticipate that our available cash resources, cash flow from
operations and borrowings under our senior credit facility will be sufficient to
meet our anticipated needs for working capital and capital expenditures for at
least the following 12 months. After this time, if we are unable to generate
sufficient cash flows from operations to meet our anticipated needs for working
capital and capital expenditures, we will need to raise additional funds to,
among other things, promote our products and services, develop new and enhanced
services, respond to competitive pressures or make acquisitions. We may be
unable to obtain any required additional financing on terms favorable to us, if
at all. If adequate funds are not available on acceptable terms, we may be
unable to promote our products and services successfully, develop or enhance
services, respond to competitive pressures or take advantage of acquisition
opportunities. If we raise additional funds through the issuance of equity
securities, our stockholders may experience dilution of their ownership
interest, and the newly-issued securities may have rights superior to those of
our common stock. If we raise additional funds by issuing new debt, the new debt
could be senior indebtedness and we may be subject to limitations on our
operations, including limitations on the payment of dividends.
CERTAIN PROVISIONS OF OUR CORPORATE DOCUMENTS AND DELAWARE CORPORATE LAW MAY
DETER A THIRD-PARTY FROM ACQUIRING OUR COMPANY.
Our board of directors has the authority, without stockholder approval, to issue
up to 5,000,000 shares of preferred stock and to fix the rights, preferences,
privileges and restrictions of such shares without any further vote or action by
our stockholders. This authority, together with certain provisions of our
amended and restated certificate of incorporation, may have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of our company. This could occur even if our
stockholders consider such change in control to be in their best interests. In
addition, the concentration of beneficial ownership of our common stock in the
Getty Group, the Torrance Group, Pilgrim Baxter and Waddell & Reed, along with
certain provisions of Delaware law, may have the effect of delaying, deterring
or preventing a takeover of our company.
RISKS RELATED TO INTERNET COMMERCE
IF THE USE OF THE INTERNET AND E-COMMERCE DOES NOT GROW AS ANTICIPATED, OUR
BUSINESS COULD BE SERIOUSLY HARMED.
Our growth strategy largely depends on the increased acceptance of the Internet
as a medium of commerce. Rapid growth in the use of the Internet is a recent
phenomenon. As a result, acceptance and use may not continue to develop at
historical rates and a broad base of our customers may not adopt or use the
Internet as a medium of commerce. Demand and market acceptance of our imagery
and related products over the Internet may not continue.
Our business could be harmed if:
- use of the Internet and other online services does not continue to
increase or increases more slowly than anticipated;
- the technology underlying the Internet and other online services does
not effectively support any expansion that may occur; and
- the Internet and other online services do not create a viable commercial
marketplace, inhibiting the development of e-commerce and reducing the
need for delivery of our products and services online.
AN INCREASE IN GOVERNMENT REGULATION OF THE INTERNET AND E-COMMERCE COULD HAVE A
NEGATIVE IMPACT ON OUR BUSINESS.
We are subject to a number of regulations applicable to businesses generally, as
well as laws and regulations directly applicable to e-commerce. Although
existing laws and regulations affecting e-commerce are minimal, state, federal
and foreign governments may adopt legislation regulating the Internet and
e-commerce in the near future. Any such legislation or regulation could impede
the growth of the Internet and decrease its
18
<PAGE> 19
acceptance as a communications and commerce medium. If a decline in the use of
the Internet occurs, businesses and consumers may decide in the future not to
use our online services.
New laws and regulations could potentially govern or restrict any of the
following issues:
- user privacy;
- pricing and taxation of goods and services over the Internet;
- website content;
- consumer protection; and
- characteristics and quality of products and services offered over the
Internet.
Future legislation could expose companies involved in the Internet or e-commerce
to potential liability.
ONLINE SECURITY RISKS AND CONCERNS MAY HARM OUR BUSINESS.
A significant barrier to e-commerce and online communications is the secure
transmission of confidential information over public networks. Advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments could result in compromises or breaches of our security
systems or those of other websites to protect proprietary information. If any
well-publicized compromises of security were to occur, it could have the effect
of substantially reducing the use of the Internet for commerce and
communications. Anyone who circumvents our security measures could
misappropriate proprietary information or cause interruptions in our services or
operations.
The Internet is a public network, and data is sent over it from many sources. In
the past, computer viruses, programs that disable or impair computers, have been
distributed and have rapidly spread over the Internet. Computer viruses could be
introduced into our systems or those of our customers, which could disrupt the
delivery of our imagery products and services or make them inaccessible to our
customers. We may be required to expend significant capital resources to protect
against the threat of security breaches or to alleviate problems caused by such
breaches. To the extent that our activities may involve the storage and
transmission of proprietary information, such as credit card numbers, security
breaches could expose us to a risk of loss or litigation and possible liability.
Our security measures may be inadequate to prevent security breaches and our
business could be harmed if we do not prevent them.
OUR STOCK PRICE HAS BEEN VOLATILE AND MAY DECLINE FOLLOWING THIS OFFERING.
The market price of our common stock has been volatile. For example, for January
1, 1999 through March 1, 2000, the market price for our common stock has ranged
from $16.25 to $57.625. Fluctuations in the trading price of our common stock
may continue 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.
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 e-commerce companies in
particular have experienced significant volatility that often has
19
<PAGE> 20
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.
H. EMPLOYEES
At March 1, 2000, we had 1,838 employees. Of these, 1,138 were located in North
America, 620 in Europe and 80 in the rest of the world. We believe that we have
satisfactory relations with our employees.
I. RECENT DEVELOPMENTS
On January 31, 2000, we purchased all of the capital stock of i/us Corporation
for $2.5 million. i/us is a provider of specialty graphics and publishing tools
to website developers, designers and graphic users.
On February 28, 2000, we announced that we had agreed to acquire VCG Holdings
LLC, Definitive Stock, Inc., Visual Communications Group Holdings Limited and
VCG Deutschland GmbH (collectively "VCG") for $220 million. The acquisition
completed on March 22, 2000. The acquisition was financed using the proceeds of
a $250 million 5.0% convertible subordinated note offering due 2007, which
closed on March 13, 2000. The net proceeds of this offering amounted to
approximately $240 million.
In March 2000 we induced the early conversion of approximately $62.3 million of
the 4.75% convertible subordinated notes due 2003 that were issued in May 1998
by offering a cash premium on the par amount of such converted notes. As a
result, we paid approximately $7.5 million in premiums and accrued interest, and
issued approximately 2.2 million shares of our Common Stock.
ITEM 2. PROPERTY
Our principal executive offices and worldwide headquarters are in Seattle,
Washington. We also have a significant presence in London, England. In Seattle,
we rent approximately 136,500 square feet pursuant to 4 leases. Leases covering
approximately 79,600 square feet, 22,000 square feet, 26,272 square feet and
8,600 square feet expire in May 2004, September 2004, March 2003 and December
2002, respectively. We also have surplus office space of 52,500 square feet
subleased until 2003. Furthermore, it is our intention to consolidate our leases
in New York by committing to an additional facility.
In London, we utilize approximately 70,000 square feet of office space pursuant
to six separate leases. The leases cover approximately 14,500 square feet,
23,200 square feet, 5,900 square feet, 20,000 square feet, 5,000 square feet and
1,000 square feet and will expire in 2015, 2010, 2009, 2008, 2001 and 2001,
respectively. In addition, we lease office space for our wholly-owned offices
throughout the world in key business centers. We also own one freehold property
of 10,000 square feet in London.
Our existing facilities are adequate and appropriate for our operations.
ITEM 3. LEGAL PROCEEDINGS
On November 29, 1999, Christopher Flora and Helen Korolyk filed a lawsuit in
U.S. District Court for the Northern District of Illinois against Art.com
alleging copyright infringement, misappropriation of trade secrets, breach of
contract, breach of fiduciary duties and tortious interference with prospective
business relationships and contractual relations. The plaintiffs are seeking
approximately $10.0 million in damages. We believe the claims are without merit
and have filed a motion to dismiss all of their claims. We intend to seek
indemnification from the prior stockholders of Art.com pursuant to our merger
agreement for any damages resulting from the claims made by the plaintiffs,
including costs of litigation.
On October 12, 1999, John and Linda Tamras filed a lawsuit in Superior Court of
the State of Arizona against The Image Bank and various other defendants
alleging invasion of privacy in connection with the unauthorized use and
publication of a photograph. We believe the claims are without merit and intend
to vigorously defend them. Under the terms of the purchase agreement we entered
into to acquire The Image Bank, Eastman Kodak Company, the prior sole
stockholder of The Image Bank, agreed to indemnify us from and against all of
the claims made by the plaintiffs.
20
<PAGE> 21
On October 8, 1999, Mary Swanson filed a lawsuit in Superior Court of the State
of Arizona against The Image Bank and Swanstock, Inc. The suit alleges breach of
contract, fraud, defamation and wage claims arising out of the stock purchase
agreement and accompanying employment agreement entered into when The Image Bank
purchased Swanstock from Ms. Swanson. We believe the claims are without merit
and have filed an answer that denied all of the allegations. Under the terms of
the purchase agreement we entered into to acquire The Image Bank, Eastman Kodak
Company, the prior sole stockholder of The Image Bank and Swanstock, agreed to
indemnify us from and against all of the claims made by Ms. Swanson.
On September 14, 1999, Chanelle Desautels filed a lawsuit in Supreme Court of
the State of New York against EyeWire and various other defendants alleging
unauthorized use and publication of a photograph of Ms. Desautels. The plaintiff
is seeking approximately $8.0 million in damages. We believe the claims are
without merit and intend to vigorously defend them. Pursuant to our combination
agreement with EyeWire, the prior stockholders of EyeWire agreed to indemnify us
from and against all of the claims made by the plaintiff in the event our losses
exceed $375,000, at which point we will be able to recover all of our losses. We
have notified the prior stockholders of EyeWire of this claim. We have also
notified Superstock, the original provider of the photograph, of this claim and
are seeking indemnification for failure to provide us with a valid model
release.
On June 4, 1999, Charles Mason filed a lawsuit in U.S. District Court for the
Southern District of New York against The Image Bank alleging breach of contract
for failing to return a number of transparencies after termination of an
exclusive agency agreement with Mr. Mason, a photographer. The plaintiff is
seeking approximately $2.8 million in damages. We believe the claims are without
merit and intend to vigorously defend them. Under the terms of the purchase
agreement we entered into to acquire The Image Bank, Eastman Kodak Company, the
prior sole stockholder of The Image Bank, agreed to indemnify us from and
against all of the claims made by Mr. Mason.
We have been, and may continue to be, subject to legal claims from time to time
in the ordinary course of our business, including those related to alleged
infringement of the trademarks and other intellectual property rights of third
parties, such as the failure to secure model releases. Presently, there are no
pending legal proceedings to which we are a party or to which any of our
property is subject which, either individually or in the aggregate, are expected
to have a material adverse effect on our consolidated financial position,
results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Our common stock is traded on the Nasdaq National Market under the symbol
"GETY." The following table sets forth, for each of the quarterly periods
indicated, the high and low sale prices of our common stock as reported on the
Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................... $27.250 $13.500
Second Quarter.............................................. 27.250 16.875
Third Quarter............................................... 27.625 13.875
Fourth Quarter.............................................. 18.125 8.625
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................... $25.125 $15.875
Second Quarter.............................................. 30.500 17.000
Third Quarter............................................... 26.625 16.250
Fourth Quarter.............................................. 56.125 18.125
</TABLE>
21
<PAGE> 22
On March 1, 2000, the closing market price of our common stock as reported on
the Nasdaq National Market was $57.625 per share. There were approximately 250
holders of record of our common stock as of March 1, 2000.
We have not paid or declared any dividends on our common stock since our
inception and anticipate that we will retain our future earnings to finance the
continuing development of our business. The payment of any future dividends will
be at the discretion of our board of directors and will depend upon, among other
things, future earnings, the success of our business activities, regulatory and
capital requirements, our general financial condition and general business
conditions. In addition, our senior credit facility restricts our ability to pay
future dividends. Our board of directors does not expect to declare cash
dividends on our common stock in the near future.
22
<PAGE> 23
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is qualified by reference to,
and should be read in conjunction with, our consolidated financial statements
and notes thereto included in Item 14(A) and the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Item 7. Historical results are not indicative of the results to be
expected in the future.
<TABLE>
<CAPTION>
GETTY COMMUNICATIONS PLC
(PREDECESSOR COMPANY) GETTY IMAGES, INC.
----------------------------- -----------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
----------------------------- -----------------------
1995(1) 1996 1997 1998(2) 1999
------- -------- -------- -------- ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales............................................... $63,021 $ 85,014 $100,797 $185,084 $247,840
Cost of sales....................................... 24,714 32,156 37,514 52,830 67,264
------- -------- -------- -------- --------
Gross profit........................................ 38,307 52,858 63,283 132,254 180,576
Selling, general and administrative expenses........ 27,655 37,250 43,936 96,904 145,578
Amortization of intangibles......................... 2,380 2,155 3,253 36,961 64,330
Depreciation........................................ 3,605 5,486 8,214 14,397 25,670
Non-recurring integration and restructuring costs... -- -- -- 13,755 10,325
------- -------- -------- -------- --------
Operating income/(loss)............................. 4,667 7,967 7,880 (29,763) (65,327)
Net interest (expense)/income....................... (1,468) (1,951) 1,187 (2,986) (4,585)
Net exchange gains/(losses)......................... 89 (306) (198) (124) 135
Other income........................................ -- -- -- -- 284
Legal settlement.................................... -- -- (974) -- --
------- -------- -------- -------- --------
Income/(loss) before income taxes................... 3,288 5,710 7,895 (32,873) (69,493)
Income taxes........................................ (2,017) (2,982) (3,873) (2,680) 1,660
Extraordinary items................................. -- -- -- (830) --
------- -------- -------- -------- --------
Net income/(loss)................................... $ 1,271 $ 2,728 $ 4,022 $(36,383) $(67,833)
======= ======== ======== ======== ========
Net income/(loss) per share(3)...................... $ .05 $ .10 $ .11 $ (1.25) $ (1.94)
------- -------- -------- -------- --------
Shares used in computing per share amount(3)........ 27,442 27,442 37,908 29,160 35,049
------- -------- -------- -------- --------
Net income per ADS(4)............................... $ .11 $ .20 $ .21 N/A N/A
------- -------- -------- -------- --------
OTHER OPERATING DATA:
EBITDA(5)........................................... $10,652 $ 15,608 $ 19,347 $ 35,350 $ 34,998
------- -------- -------- -------- --------
EBITDA per share.................................... $ .39 $ .57 $ .51 $ 1.21 $ 1.00
------- -------- -------- -------- --------
Ratio of earnings to fixed charges(6)............... 3.38 3.79 6.69 N/A N/A
Deficiency of earnings to fixed charges(7).......... -- -- -- 33,703 69,493
CASHFLOW DATA:
Net cash provided by/(used in):
Operating activities................................ $ 6,957 $ 13,502 $ 13,174 $ 7,222 $ 5,371
Investing activities................................ (24,689) (25,528) (35,447) (107,869) (247,212)
Financing activities................................ 19,030 66,311 (3,052) 85,003 330,067
Exchange differences................................ (18) 2,755 (4,380) 2,560 980
------- -------- -------- -------- --------
Net increase/(decrease) in cash and cash
equivalents....................................... $ 1,280 $ 57,040 $(29,705) $(13,084) $ 89,206
======= ======== ======== ======== ========
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 1,899 $ 58,939 $ 29,234 $ 16,150 $105,356
Total assets........................................ 71,024 163,504 171,638 462,863 939,569
Long-term debt, net of current maturities........... 8,704 17,910 14,657 72,354 101,802
Total stockholders' equity.......................... $27,012 $113,523 $119,539 $343,927 $745,691
======= ======== ======== ======== ========
</TABLE>
- ---------------
(1) Reflects the combination of the results of Tony Stone Images, the
predecessor 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.
23
<PAGE> 24
(2) Reflects the combination of the consolidated statement of operations of
Getty Communications plc, our predecessor company, for the period January 1,
1998 through February 9, 1998 and our consolidated statement of operations
for the period February 10, 1998 through December 31, 1998.
(3) Net income per share for the year ended December 31, 1995 has been computed
assuming the same number of shares outstanding as determined for Getty
Communications plc for the period March 14, 1995 through December 31, 1995.
(4) Net income per Getty Communications plc American Depository Shares ("ADS")
is calculated by adjusting net income per share data for the ratio of two
Getty Communications plc Class A Ordinary Shares per Getty Communications
plc ADS. Trading in Getty Communications plc ADSs terminated on February 9,
1998.
(5) EBITDA is defined as earnings before interest, taxes, net exchange
gains/(losses), amortization, depreciation, non-recurring integration and
restructuring costs, other income, legal settlement and extraordinary items.
Thus, EBITDA with respect to us comprises sales less cost of sales and
selling, general and administrative expenses. We believe that EBITDA
provides investors and analysts with a measure of operating income
unaffected by the financing and accounting effects of acquisitions and
assists in explaining trends in our operating performance. EBITDA should not
be considered as an alternative to operating income as an indicator of our
operating performance or to cash flows as a measure of our liquidity. EBITDA
may not be comparable to other similarly titled measures used by other
companies.
(6) Ratio of earnings to fixed charges means the ratio of net income (before
fixed charges and income taxes) to fixed charges, where fixed charges are
the aggregate of interest, amortization of the costs related to debt and an
allocation of rental charges to approximate equivalent interest.
(7) Deficiency of earnings available to cover 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.
24
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following should be read in conjunction with our consolidated financial
statements and the notes thereto, Item 6. "Selected Consolidated Financial
Data", and the other financial information contained elsewhere and incorporated
by reference in this Annual Report. In the following discussion, "we", "us" and
"our" refer to Getty Communications plc combined with Tony Stone Images Limited
for 1995, Getty Communications plc in 1996 and 1997, Getty Communications plc
combined with Getty Images, Inc. for 1998, and Getty Images, Inc. for 1999. All
financial data referred to in the following discussion has been prepared in
accordance with U.S. GAAP.
In addition to historical information, the discussion in this section may
contain certain forward-looking statements that involve risks and uncertainties.
The forward-looking statements relate to, among other things, operating results,
trends in sales, gross profit, operating expenses, effective tax rates,
anticipated expenses, liquidity and capital resources and the effect of foreign
currency hedging transactions. Our actual results could differ materially from
those anticipated by these forward-looking statements due to factors including,
but not limited to, those set forth under Item 1. Business -- G. "Factors That
May Affect The Business".
OVERVIEW
Founded in March 1995 as Getty Communications plc, Getty Images, Inc. is a
leading global visual content provider, offering imagery and related products
over the Internet and through a diverse set of distribution channels and media
including digital downloads, CD ROMs, demonstration reels and catalogs. We
estimate we control over 60 million still images and more than 30,000 hours of
film footage. We own or control visual content across major categories of the
industry. Through our e-commerce enabled websites and our international network
of company-operated offices, as well as agents, distributors and affiliates in
51 countries, we provide both businesses and consumers with effective access to
image and footage products.
Our visual content product brands are organized into the following divisions to
serve our four major types of customers:
Creative Professional Division ("gettyone"). Tony Stone Images and PhotoDisc,
leaders in licensed and royalty-free contemporary stock photography; The Image
Bank, a leading global provider of contemporary and archival stock photography
and film footage; and Energy Film Library, a leading provider of stock film
footage.
Press and Editorial Division ("gettysource"). Allsport, a leading global
provider of sports imagery; Liaison Agency, a leading North American news and
feature agency; Hulton Getty, one of the world's largest commercially available
collections of archival photography; Online USA, a leading provider of celebrity
news and event photography over the Internet; and Newsmakers, a provider of
digital images to the press and editorial market.
Business User Division ("gettyworks"). EyeWire, a leading provider of
royalty-free imagery, footage, audio, typefaces, illustration, clip art, and
other design products to business and small office/home office (SOHO) users; and
i/us, a provider of specialty graphics and publishing tools to website
developers, designers and graphics users.
Consumer Division. Art.com, a leading destination for framed and unframed art
and art-related supplies for consumers on the Internet; and American Royal Arts,
a leading provider of animation art.
Our sales are primarily derived from the marketing of image reproduction and
broadcasting rights to a range of business customers. Sales generally consist of
a large number of relatively small transactions involving the sale or licensing
of single images, video and film clips or CD ROM products containing between 100
and 300 images. We use a variety of distribution platforms, including digital
distribution via the Internet and CD ROMs as well as analog distribution of 35mm
film, video and analog transparencies. Price is generally determined by
resolution size and the extent of rights granted over the use of the image or
clip and can vary significantly across geographic markets and customer groups.
We also generate sales from subscription or bulk
25
<PAGE> 26
purchase deals where customers are provided access to imagery online. In the
case of our consumer business, we principally sell framed and unframed art
products to consumers over the Internet with payment typically being made using
a credit card.
Revenue arises from three principal types of sales:
Fixed license sales are recognized when a license agreement has been completed
with the customer for the use of the image, and the image has been made
available for use. Fixed license pricing terms do not call for additional fees
beyond the fixed license amount, and our customer is contractually obligated to
pay the fixed license amount upon agreement of the license terms and
availability of the image for use by the customer.
Royalty-free sales, or sales in which the user pays a one-time fee for unlimited
use, are recognized upon the shipment of the CD ROM or at the time images are
downloaded by the customer.
Consumer sales are recognized upon shipment of the product.
Circumstances in which sales are refunded are rare, and refunds are netted in
the recognition of revenue. Sales are recorded at invoiced amounts less sales
tax, if applicable. "E-commerce" sales are defined as those sales that are
transacted on the Internet.
Our cost of sales primarily consists of commission payments to contributing
photographers and cinematographers. These suppliers are under contract with us
and receive payments of up to 50% of sales depending on the type of product and
where and how the product is sold. We own a significant number of the images in
our collections and these images do not require commission payments. Cost of
sales also includes, to the extent applicable, handling and shipping costs for
duplicate transparencies, the cost of CD ROM production and costs associated
with framing and shipping art products. As a result, our gross margin is
impacted by the mix of sales conducted digitally on the Internet, sales of
wholly-owned imagery, geographic distribution of sales and brand sales mix.
Our selling, general and administrative expenses include salaries and related
staff costs, premises and utility costs, and sales and marketing costs.
We amortize goodwill and depreciate the cost of the investment in duplicate
transparencies, digital files, archival picture collections, computer systems
and other fixed assets over their expected useful lives. The acquisitions of
PhotoDisc and Allsport in February 1998 generated $241.9 million of goodwill and
$51.0 million of other intangibles and the acquisitions of Art.com in May 1999,
EyeWire in August 1999, American Royal Arts in October 1999 and The Image Bank
in November 1999 generated $343.7 million in goodwill. Goodwill of $176.4
million arising upon the acquisition of The Image Bank is currently based upon
an initial estimate of the fair value of The Image Bank's assets and
liabilities. These acquisitions will result in a substantial charge to be
amortized against our earnings in future periods. We are amortizing goodwill
relating to acquisitions over the following periods: twenty years for the
PhotoDisc and Allsport goodwill; three years for Art.com goodwill; seven years
for EyeWire goodwill; five years for American Royal Arts goodwill and ten years
for The Image Bank goodwill. We amortize other intangibles over one to four
years.
As a result of our various acquisitions and their financial and goodwill
accounting effects on net income, we believe that EBITDA provides stockholders,
investors and analysts with an appropriate measure of our operating performance.
We define EBITDA as earnings before interest, taxes, exchange gains/(losses),
depreciation, amortization, non-recurring integration and restructuring costs,
legal settlement and extraordinary items. EBITDA should not be considered as an
alternative to operating income as an indicator of our operating performance or
to cash flows as a measure of our liquidity.
Following the acquisitions of PhotoDisc and Allsport in February 1998, we
commenced and substantially completed a program to integrate our then existing
businesses. This resulted in integration and restructuring charges totaling
$13.8 million. The charges included restructuring costs, severance costs,
consulting and professional fees, systems and process integration costs, and
costs associated with contract renegotiations and terminations.
26
<PAGE> 27
During 1999, we approved, commenced, and substantially completed a program to
integrate all our businesses, including the new acquisitions Art.com and
EyeWire, into four divisions to serve our four major customer segments. This
resulted in integration and restructuring charges in 1999 totaling $10.3 million
(net). The charges included restructuring costs, severance costs, consulting and
professional fees, systems and process integration costs, content review costs
and costs associated with terminations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
GETTY COMMUNICATIONS PLC GETTY IMAGES, INC.
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------
1997 % OF SALES 1998 % OF SALES 1999 % OF SALES
--------- ----------- -------- ---------- -------- ----------
(IN THOUSANDS EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales......................... $100,797 100.0% $185,084 100.0% $247,840 100.0%
Gross profit.................. 63,283 62.8 132,254 71.5 180,576 72.9
Selling, general and
administrative expense...... (43,936) (43.6) (96,904) (52.4) (145,578) (58.7)
Amortization of intangibles
and depreciation............ (11,467) (11.4) (51,358) (27.7) (90,000) (36.3)
Non-recurring integration and
restructuring costs......... -- -- (13,755) (7.4) (10,325) (4.2)
Operating (loss)/income....... 7,880 7.8 (29,763) (16.1) (65,327) (26.4)
Other income.................. -- -- -- -- 284 0.1
Net interest
(expense)/income............ 1,187 1.2 (2,986) (1.6) (4,585) (1.8)
Net exchange gains/(losses)... (198) (0.2) (124) -- 135 0.1
Legal settlement.............. (974) (1.0) -- -- -- --
Income taxes.................. (3,873) (3.8) (2,680) (1.4) 1,660 0.7
Extraordinary items........... -- -- (830) (0.4) -- --
Net (loss)/income............. $ 4,022 4.0% $(36,383) (19.7)% $(67,833) (27.4)%
======== ===== ======== ===== ======== =====
OPERATING DATA:
EBITDA(1)..................... $ 19,347 19.2% $ 35,350 19.1% $ 34,998 14.1%
======== ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) "EBITDA" is defined as earnings before interest, taxes, net exchange
gains/(losses), amortization, depreciation, non-recurring integration and
restructuring costs, other income, legal settlement and extraordinary items.
EBITDA should not be considered as an alternative to operating income as an
indicator of our operating performance or to cash flows as a measure of our
liquidity.
SALES
Our total sales for 1997, 1998 and 1999 were $100.8 million, $185.1 million and
$247.8 million, respectively, representing increases of 83.6% in 1998 and 33.9%
in 1999 over the respective prior year. These increases were largely
attributable to the continued growth of our base businesses, acquisitions (we
acquired PhotoDisc and Allsport in February 1998, Art.com in May 1999, EyeWire
in August 1999 and The Image Bank in November 1999) and growth in e-commerce
sales.
We experienced an increase in the rate of demand for both analog and digital,
search, selection and fulfilment of imagery during 1999, particularly in North
America. E-commerce sales increased by 160.4% from $26.1 million, or 14.1% of
sales, in 1998, to $67.9 million, or 27.4% of sales in 1999 (28.4% of sales
excluding The Image Bank, an entirely analog business). These increases were
due, in part, to the inclusion of Allsport's and PhotoDisc's e-commerce sales
since their acquisition in February 1998, as well as the inclusion of Art.com's
and EyeWire's e-commerce sales since their acquisition in May and August 1999,
respectively. The launch of the Tony Stone website in the fourth quarter of 1998
contributed significantly to this e-commerce sales growth, particularly in North
America. In 1997, we had no e-commerce sales.
27
<PAGE> 28
GROSS PROFIT
Gross profit as a percentage of sales, or gross margin, increased sequentially
from 62.8% in 1997 to 71.5% in 1998 and to 72.9% in 1999. This result reflects
the increasing shift in sales mix to e-commerce with its lower cost of sales, as
well as continuing changes in our sales mix at the brand level and operating and
process improvements. Excluding Art.com, which we acquired in May 1999, our
gross margin in 1999 was 73.9%.
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $43.9 million, $96.9 million
and $145.6 million in 1997, 1998 and 1999, respectively, representing 43.6%,
52.4% and 58.7% of sales in each respective year. The principal factors
contributing to increases in the dollar amounts of selling, general and
administrative expenses during 1997, 1998 and 1999 were the inclusion of
acquisitions in our consolidated financial results (Allsport and PhotoDisc from
February 1998, Art.com from May 1999, EyeWire from August 1999 and The Image
Bank from November 1999), accelerated investment in advertising and marketing
costs associated with the new websites, increased investment in management and
new sales offices, and the development of new technology products and new
business systems, particularly those related to e-commerce.
We are committed to managing selling, general and administrative expenses as we
further integrate and consolidate our businesses, and implement new and
standardized business systems. As customers increasingly move towards digital
image search, retrieval and payment, we plan to streamline our support
operations. We are also consolidating our offices and other premises throughout
the world as part of the reorganization of our businesses into four divisions.
AMORTIZATION OF INTANGIBLES AND DEPRECIATION
Amortization of intangibles was $3.3 million in 1997, $37.0 million in 1998 and
$64.3 million in 1999. The increase in amortization arose from the inclusion of
amortization of goodwill relating to the acquisitions of PhotoDisc and Allsport
in February 1998, Art.com in May 1999, EyeWire in August 1999 and The Image Bank
in November 1999.
Depreciation increased from $8.2 million in 1997 to $14.4 million in 1998 and to
$25.7 million in 1999. The increase primarily arose from acquisitions together
with increased investment in capital expenditure related to the continued
development of our e-commerce strategy. We expect depreciation to continue to
increase as a result of this increased investment.
NON-RECURRING INTEGRATION AND RESTRUCTURING COSTS
Following the acquisitions of PhotoDisc and Allsport in February 1998, we
commenced and completed a program to integrate our then existing businesses.
This resulted in integration and restructuring charges totaling $13.8 million.
The charges included restructuring costs, severance costs, consulting and
professional fees, systems and process integration costs, and costs associated
with contract renegotiations and terminations.
Integration costs of $3.7 million were associated with the activities of teams
responsible for integrating our then existing businesses for the benefit of
future operations and included items such as consulting and professional fees,
systems and process integration costs and contract renegotiation and termination
costs. Restructuring costs, amounting to $10.1 million in 1998, were for
estimated exit costs associated with the closure of certain operating
facilities, including asset write-downs and termination costs. The largest
element of the asset write-downs consisted of systems assets, primarily hardware
and software, both of which had shortened useful lives as a result of the
restructuring plans. Termination costs arose in relation to property related
exit costs, termination of agents and photographer contracts and employee
terminations.
During 1999, we approved and commenced a program to integrate all of our
businesses, including the new acquisitions Art.com and EyeWire, into four
divisions to serve our four major customer segments. This resulted in
integration and restructuring charges in 1999 totaling $10.3 million net of
non-cash write-backs of
28
<PAGE> 29
provisions established as part of the 1998 program and not required following a
revision of the restructuring plan subsequent to the acquisition of The Image
Bank. The charges included restructuring costs, severance costs, consulting and
professional fees, systems and process integration costs, content review costs
and costs associated with terminations.
Integration costs of $4.9 million were associated with the activities of teams
responsible for integrating our businesses and included items such as consulting
and professional fees, systems and process integration costs and content review
costs. Content review costs arose from an assessment of the compatibility of our
images across our brands following the decision to integrate all our businesses
into four divisions.
Restructuring costs, amounting to $5.4 million (net) were for estimated exit
costs associated with the closure of 14 facilities, asset writedowns and
contract termination costs. The largest element of the asset writedowns
consisted of systems assets, primarily software which had shortened useful lives
as a result of the restructuring plans. Termination costs arose in relation to
property related exit costs and employee termination.
Further costs associated with the non-recurring integration program, which
management anticipates will not exceed $5.0 million, will be recognized as
incurred. It is anticipated that the non-recurring integration and restructuring
program will be substantially complete by September 30, 2000. Management expects
that the total cash costs will amount to approximately $12.8 million.
NET EXCHANGE LOSSES
Our operating results are affected by exchange rate fluctuations to the extent
that we have receivables or payables that are denominated in a currency other
than the local currency. Exchange gains or losses arising on the translation of
these balances into local currency or on the settlement of these transactions
are recognized in our income statement.
Our policy is to hedge a substantial majority of our contracted net receivables
and payables using a combination of foreign forward exchange contracts and
foreign currency term loans. Net exchange losses were $198,000 in 1997, $124,000
in 1998 and a net exchange gain of $135,000 in 1999.
LEGAL SETTLEMENT
We entered into a settlement agreement with Digital Stock Corporation over a
complaint filed in 1997. This resulted in a one time charge to 1997 earnings of
approximately $1.0 million (including legal expense).
INCOME TAXES
Our 1997 tax charge was $3.9 million compared with $2.7 million in 1998 and a
tax credit of $1.7 million in 1999. Excluding the effect of the amortization of
intangibles, which is largely non-tax deductible, we had an effective tax rate
of 34.7% in 1997, as compared to 38.0% in 1998 and 39.4% in 1999.
The changes in the effective rate of tax, excluding the impact of the
amortization of intangibles, are due to variations in the profit mix and tax
rates in the countries in which we operate and non-recurring integration and
restructuring costs which are not all fully tax deductible.
EXTRAORDINARY ITEMS
The repayment of the term debt due to Midland Bank plc from the proceeds of the
$75.0 million, 4.75% convertible subordinated notes resulted in an extraordinary
charge of $830,000 in 1998. This charge comprised the write-off of unamortized
loan arrangement costs net of the associated income tax benefit.
EBITDA
EBITDA for 1997, 1998 and 1999 was $19.3 million, $35.4 million and $35.0
million, respectively, representing an increase of 82.7% in 1998 and a decrease
of 1.0% in 1999 over the respective prior years. The growth in EBITDA in 1998
was primarily attributable to incremental EBITDA from our acquired businesses as
well as gross margin improvement in our business-to-business brands. Our EBITDA
in 1999, excluding
29
<PAGE> 30
Art.com, was positively impacted by our overall growth, including growth through
acquisitions, the growth in e-commerce sales, the increasing sales mix of
wholly-owned imagery, as well as operating efficiencies.
The slight decline in EBITDA in 1999 was primarily attributable to our
investment in Art.com as the Consumer Channel (consisting of Art.com and
American Royal Arts) recorded an $11.8 million EBITDA loss in 1999. Excluding
the EBITDA loss in the Consumer Channel, our business-to-business brands
generated EBITDA of $46.8 million, an increase of 32.3% over the prior year.
EBITDA as a percentage of sales decreased from 19.2% in 1997 to 19.1% in 1998
and 14.1% in 1999. Excluding the Consumer Channel, EBITDA as a percentage of
sales was 19.4% in 1999.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
GETTY COMMUNICATIONS PLC GETTY IMAGES, INC.
------------------------ ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
------------------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by/(used in):
Operating activities....................... $ 13,174 $ 7,222 $ 5,371
Investing activities....................... (35,447) (107,869) (247,212)
Financing activities....................... (3,052) 85,003 330,067
Exchange differences....................... (4,380) 2,560 980
--------- --------- --------
Net increase/(decrease) in cash and cash
equivalents.............................. $ (29,705) $ (13,084) $ 89,206
========= ========= ========
</TABLE>
Our cash resources increased by $89.2 million in 1999 compared to decreases of
$13.1 million in 1998 and $29.7 million in 1997.
Net cash provided by operating activities amounted to $5.4 million in 1999,
compared to $7.2 million in 1998 and $13.2 million in 1997. The decrease was
primarily due to increased spending on marketing and advertising, particularly
at Art.com, and the production of new contemporary stock photography catalogs.
The decrease in cash generated from operations from 1997 to 1998 was principally
a result of payments of non-recurring integration and restructuring costs.
Net cash used in investing activities was $247.2 million in 1999 as compared to
$107.9 million in 1998 and $35.4 million in 1997. The yearly cash flows
primarily reflect the business acquisitions made in each period, in addition to
increased investment in technology and related infrastructure. In November 1999,
we completed the acquisition of The Image Bank. This resulted in a net cash
outflow of $191.1 million. The acquisitions of other businesses in 1999 resulted
in net cash outflows of $2.9 million. During 1999, we invested $51.6 million in
fixed assets compared to $27.3 million in 1998 and $14.9 million in 1997.
Net cash provided by financing activities was $330.1 million in 1999 and $85.0
million in 1998, compared to a net outflow of $3.1 million in 1997. In April
1999, we finalized a $20.0 million short-term revolving credit facility, which
we obtained to fund additional working capital requirements and the acquisition
of Art.com. In October 1999, we converted this facility to a $100.0 million, 3
year senior credit facility and utilized a further $10.0 million of this for
working capital purposes. Also in 1999, we raised $8.7 million from the exercise
of share options, compared to $5.3 million in 1998.
The acquisitions of PhotoDisc and Allsport in February 1998 and other businesses
throughout the year ended December 31, 1998, resulted in a net cash outflow of
$80.6 million, including expenses. To fund this amount, in February 1998, we
raised a net additional $47.2 million of debt and Getty Investments L.L.C.
subscribed for 1,518,644 shares of our common stock, providing $28.0 million of
additional capital.
On May 20, 1998, we raised $75.0 million from the issuance of our convertible
subordinated notes due 2003. Of these proceeds, $49.0 million was applied to the
repayment of term debt and $3.3 million to debt issuance
30
<PAGE> 31
costs. Also, in the year ended December 31, 1998, we raised $5.3 million from
the exercise of options. At December 31, 1998, we had outstanding long term debt
of $75.0 million and cash of $16.2 million.
In November 1999, we completed a public offering of 6,900,000 shares of our
common stock at $39 per share for an aggregate of $259.7 million, net of related
fees of expenses. Also in November 1999, Getty Investments L.L.C. purchased
1,579,353 shares of our common stock for $32.0 million in cash, or approximately
$20.261 per share. The purchase price was established by using the average of
the bid and the ask price of our common stock on the Nasdaq National Market for
the ten trading day period ending on October 25, 1999.
As well as organic growth, we continue to seek opportunities to grow by
acquisition. Accordingly, we may be required, or we may elect, to raise
additional funds in addition to using cash from operating activities and
existing cash balances.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities". This new
standard requires companies to record derivatives on the balance sheet as assets
or liabilities, measured at fair value. Under SFAS No. 133, gains or losses
resulting from changes in the values of derivatives are to be reported in the
statement of operations or as a deferred item, depending on the use of the
derivatives and whether they qualify for hedge accounting. We are required to
adopt SFAS No. 133 in the first quarter of 2001. We have not yet evaluated
whether adoption of this new standard will have a significant impact on our
business.
YEAR 2000 IMPACT
We have not experienced any problems with our computer systems relating to such
systems being unable to recognize appropriate dates related to year 2000. We are
also not aware of any material problems with our customers or suppliers.
Accordingly, we do not anticipate incurring material expenses or experiencing
any material operational disruption as a result of any year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of risks, including changes in interest rates
affecting the return on investments and foreign currency fluctuations. In the
normal course of business, we employ established policies and procedures to
manage our exposure to fluctuations in interest rates and foreign currency
values.
INTEREST RATE RISK
Our exposure to market rate risk for changes in interest rates, relating
primarily to our debt instruments, the majority of which are fixed rate
borrowings, is shown in the table below.
<TABLE>
<CAPTION>
MATURITIES FAIR VALUE FAIR VALUE
----------------------------------------------- DECEMBER 31, DECEMBER 31,
DEBT 2000 2001 2002 2003 TOTAL 1999 1998
- ---- ------ ---- ------- ------- ------- ------------ ------------
(IN THOUSANDS EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed rate (USD).................. $75,000 $75,000 $135,469 $75,000
Average interest rate............. 4.75% 4.75% 4.75% 4.75%
Variable rate (USD)............... $30,000 $30,000 $ 29,118 --
Average interest rate............. 8.58% 8.58% 8.58%
Other borrowings.................. $3,242 $243 $ 3,485 $ 3,485 $ 724
Average interest rate............. -- 7.25% -- 0.5% --
</TABLE>
31
<PAGE> 32
FOREIGN CURRENCY RISK
We conduct our business primarily in the United States and the United Kingdom
and, therefore, our cashflows are primarily denominated in US dollars and pounds
sterling. We are exposed to foreign exchange risk related to foreign currency
denominated liabilities and cash. The introduction of the euro does not
significantly affect our foreign exchange exposure.
We normally enter into forward foreign currency exchange contracts to hedge our
contracted net receivables denominated in foreign currencies. Our functional
currency is the U.S. dollar. Forward foreign currency contracts typically have a
term of less than six months. There were no open forward foreign currency
exchange contracts at December 31, 1999.
The criteria used by us for designating a contract as a hedge include the
contract's effectiveness in risk reduction. Gains and losses on these contracts,
relating to the hedged risk, are recognized as incurred, reflecting the income
statement treatment of the hedged items.
If an underlying hedged transaction is terminated earlier than initially
anticipated, the offsetting gain or loss on the related forward foreign exchange
contract would be recognized in income in the same period. In addition, since we
enter into forward contracts only as hedges, any change in currency rates would
not result in any material gain or loss, as any gain or loss on the underlying
foreign currency denominated balances would be offset by the loss or gain on the
forward contract.
The following table sets out the open forward foreign exchange contracts at
December 31, 1998:
<TABLE>
<CAPTION>
MATURITIES FAIR VALUE
----------------------- U.S. DOLLAR
U.S. DOLLAR EQUIVALENT
CONTRACT TYPE 1999 EQUIVALENT DECEMBER 31, 1998
- ------------- -------- ----------- -----------------
(CURRENCY AND U.S. DOLLAR EQUIVALENTS IN
THOUSANDS EXCEPT AVERAGE CONTRACTUAL
EXCHANGE RATE WHICH IS TO THE NEAREST SECOND
DECIMAL POINT)
<S> <C> <C> <C>
Buy Pound Sterling/sell French Franc................ 6,400 $1,130 $(22)
Average contractual exchange rate
(French Franc/ Pound Sterling).................... 9.42
Buy Pound Sterling/sell Deutsche Mark............... 2,700 1,621 (7)
Average contractual exchange rate
(Deutsche Mark/Pound Sterling).................... 2.78
Buy Pound Sterling/sell Italian Lire................ 610,000 941 (23)
Average contractual exchange rate
(Italian Lire/Pound Sterling)..................... 2,792.39
Buy Pound Sterling/sell Japanese Yen................ 48,000 389 (39)
Average contractual exchange rate
(Japanese Yen/Pound Sterling)..................... 205.22
Buy Pound Sterling/sell Spanish Peseta.............. 51,000 $ 355 $ (7)
Average contractual exchange rate
(Spanish Peseta/Pound Sterling)................... 239.07
</TABLE>
There are further forward exchange contracts at December 31, 1998 that are
together considered immaterial. The U.S. dollar equivalent maturity value of
these contracts is $752,000. All foreign exchange risk contracts are foreign
currency forward exchange contracts between the indicated currency and the
United Kingdom Pound Sterling.
Forward foreign exchange contracts between United Kingdom Pound Sterling and
German Deutsche Mark, French Franc, Italian Lire, Japanese Yen and Spanish
Peseta account for 31%, 22%, 18%, 8% and 7%, respectively, of our total U.S.
dollar equivalents in forward foreign exchange contracts.
32
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(See Item 14(a))
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in our definitive proxy
statement to be filed with the Securities and Exchange Commission no later than
120 days after the end of the fiscal year covered by this Annual Report on Form
10-K and is incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in our definitive proxy
statement to be filed with the Securities and Exchange Commission no later than
120 days after the end of the fiscal year covered by this Annual Report on Form
10-K and is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in our definitive proxy
statement to be filed with the Securities and Exchange Commission no later than
120 days after the end of the fiscal year covered by this Annual Report on Form
10-K and is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in our definitive proxy
statement to be filed with the Securities and Exchange Commission no later than
120 days after the end of the fiscal year covered by this Annual Report on Form
10-K and is incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT
Financial Statement Schedules: Reference is made to the listing on page F-1 of
all financial statements filed as part of this report.
(B) REPORTS ON FORM 8-K
During the quarter ended December 31, 1999, a report on Form 8-K was filed on
December 7, 1999, reporting Items 2 and 7. During the quarter ended December 31,
1999, a report on Form 8-K/A was filed on October 13, 1999, reporting changes to
Items 5 and 7.
33
<PAGE> 34
(C) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
2.1 Merger Agreement, dated as of September 15, 1997, among
Getty Communications (USA), Inc., Getty Communications plc,
PhotoDisc, Inc. and Print Merger, Inc.(1)
2.2 Agreement and Plan of Merger, dated as of May 4, 1999, among
Getty Images, Inc., Merger Sub and Art.com(2)
2.3 Combination Agreement, dated as of August 5, 1999 among
Getty Images, Inc., 3032097 Nova Scotia Limited, EyeWire
Partners, Inc. and each of the stockholders of EyeWire
Partners, Inc.(3)
2.4 Stock Purchase Agreement, dated September 20, 1999, among
Eastman Kodak Company and Kodak S.A. and Getty Images,
Inc.(4)
2.5 Amendment No. 1 to the Stock Purchase Agreement among
Eastman Kodak Company and Kodak S.A. and Getty Images,
Inc.(5)
3.1 Amended and Restated Certificate of Incorporation of Getty
Images, Inc.(1)
3.2 Certificate of Amendment to the Certificate of Incorporation
of Getty Images, Inc.(6)
3.3 Bylaws of Getty Images, Inc.(1)
4.1 Indenture relating to the 4.75% Convertible Subordinated
Notes due 2003, dated as of May 27, 1998, between Getty
Images, Inc. and The Bank of New York, as Trustee(7)
10.1 Registration Rights Agreement, dated as of May 27, 1998,
among Getty Images, Inc. and BT Alex Brown Incorporated,
BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette
Securities Corporation and Hambrecht & Quist LLC(7)
10.2 Employment Agreement between Getty Communications plc and
Mark Getty(8)
10.3 Employment Agreement between Getty Images, Inc. and Sally
von Bargen (8)
10.4 Employment Agreement between Getty Images, Inc. and John
Hallberg(9)
10.5 Employment Agreement between Getty Images, Inc. and
Christopher J. Roling, dated July 1, 1999(10)
10.6 Employment Agreement between Getty Images, Inc. and Jonathan
D. Klein, dated June 1, 1999(10)
10.7* Employment Agreement between Getty Images, Inc. and Bud
Albers, dated October 11, 1999
10.8* Credit Agreement, dated October 25, 1999, among Getty
Images, Inc. and HSBC Investment Bank plc
10.9* Amendment to the Credit Agreement, dated December 3, 1999
10.10* Debenture, dated October 25, 1999, among the Chargors named
therein and HSBC Investment Bank plc
10.11* Pledge Agreement, dated October 29, 1999 among Getty Images,
Inc., Getty Communications Limited, Getty Images Limited,
Tony Stone Images/America, Inc., EyeWire Partners Company
and HSBC Investment Bank plc
10.12* Supplement to Pledge Agreement, dated December 17, 1999, by
Getty Images, Inc. in favor of HSBC Investment Bank plc
10.13 Lease dated October 18, 1995 between Allied Dunbar Assurance
plc and Tony Stone Associates Limited(11)
10.14 Lease dated March 11, 1993 between Bantry Investments
Limited and Tony Stone Associates Limited(11)
10.15 Counterpart Lease dated March 11, 1993 between Bantry
Investments Limited and Tony Stone Associates Limited(11)
10.16 Lease dated October 23, 1990 between Bantry Investments
Limited and Tony Stone Associates Limited(11)
10.17 Lease dated February 14, 1997 between Martin Selig and
PhotoDisc, Inc.(11)
10.18 Consent to Sublease dated April 11, 1999 among Bedford
Property Investors Inc., Adobe Systems Inc. and Getty
Images, Inc.(12)
10.19* Lease dated July 27, 1999 between Bedford Property
Investors, Inc. and Getty Images, Inc.
</TABLE>
34
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.20* Lease dated November 30, 1999 between the Quadrant
Corporation and Getty Images, Inc.
10.21 Stockholders' Transaction Agreement, dated as of September
15, 1997, among Getty Images, Inc., certain shareholders of
PhotoDisc, Inc. and Mark Torrance, as representative of the
shareholders(1)
10.22 Restated Option Agreement among Getty Images, Inc., Getty
Communications plc and Getty Investments L.L.C.(1)
10.23 Stockholders' Agreement among Getty Images, Inc. and certain
stockholders of Getty Images, Inc.(1)
10.24 Registration Rights Agreement among Getty Images, Inc., PDI,
L.L.C. and Mark Torrance(1)
10.25 Registration Rights Agreement among Getty Images, Inc. and
Getty Investments L.L.C.(1)
10.26 Restated Shareholders' Agreement among Getty Images, Inc.,
Getty Investments L.L.C. and the Investors named therein(1)
10.27 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Simon Thornley, Brian Wolske, Lawrence
Gould, Jonathan Klein and Mark Getty and Form of Amendment
among Getty Images, Inc., Getty Communications plc, Lawrence
Gould, Jonathan Klein and Mark Getty(1)
10.28 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Crediton Limited and October 1993 Trust
and Form of Amendment among Getty Images, Inc., Getty
Communications plc, Crediton Limited and October 1993
Trust(1)
10.29 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Hambro European Ventures Limited, Hambro
Group Investments Limited, RIT Capital Partners plc and Tony
Stone and Form of Amendment among Getty Images, Inc., Getty
Communications plc and The Schwartzberg Family L.P.(1)
10.30 Registration Rights Agreement dated July 25, 1997 between
Getty Communications plc and the Schwartzberg Family L.P.
and Form of Amendment among Getty Images, Inc., Getty
Communications plc and the Schwartzberg Family L.P.(1)
10.31 Form of Registration Rights Agreement between Getty Images,
Inc. and each of the individual stockholders of Art.com(2)
10.32 Registration Rights Agreement, dated as of August 5, 1999,
by and among Getty Images, Inc. and each of the former
stockholders of EyeWire Partners, Inc.(3)
10.33 Indemnity between Getty Images, Inc. and Getty Investments
L.L.C., dated January 1998(1)
10.34* Indemnity between Getty Images, Inc. and Getty Investments
L.L.C., dated November 22, 1999.
10.35 Form of Indemnity among Getty Images, Inc., Getty
Communications plc and each of Mark Getty, Mark Torrance,
Jonathan Klein, Lawrence Gould, Andrew Garb, Manny
Fernandez, Christopher Sporborg, Anthony Stone and James
Bailey(1)
21.1* Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers
24.1+ Powers of Attorney
27.1* Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith.
+ Included on signature page.
(1) Incorporated by reference from the Exhibits to the Form S-4 Registration
Statement No. 333-38777 of the Registrant.
(2) Incorporated by reference from the Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1999.
(3) Incorporated by reference from the Exhibits to the Form S-3 Registration
Statement of the Registrant, filed September 3, 1999.
(4) Incorporated by reference from the Exhibits to the Registrant's Form 8-K,
dated September, 27 1999.
35
<PAGE> 36
(5) Incorporated by reference from the Exhibits to the Registrant's Form 8-K,
dated December 7, 1999.
(6) Incorporated by reference from the Exhibits to the Registrant's Form 8-K,
dated November 10, 1998.
(7) Incorporated by reference from the Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998.
(8) Incorporated by reference from the Exhibit to the Registrant's Amendment
No. 1 to Annual Report on Form 10-K/A for the fiscal year ended December
31, 1997.
(9) Incorporated by reference from the Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.
(10) Incorporated by reference from the Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.
(11) Incorporated by reference from the Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.
(12) Incorporated by reference from the Exhibits to the Registrant's Quarterly
Report on Form 10-Q, for the period ended June 30, 1999.
36
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GETTY IMAGES, INC.
/s/ CHRISTOPHER J. ROLING
By:
--------------------------------------
Name: Christopher J. Roling
Title: Chief Financial Officer
MARCH 30, 2000
We, the undersigned directors and executive officers of the Registrant, hereby
severally constitute Jonathan Klein, Christopher Roling and Suzanne Page, and
each of them singly, our true and lawful attorneys with full power to them and
each of them to sign for us, and in our names in the capacities indicated below,
any and all amendments to the Annual Report on Form 10-K filed with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys to any and all amendments
to said Annual Report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on March 30, 2000, by the following persons on behalf of the
Registrant and in the capacities indicated below:
<TABLE>
<CAPTION>
SIGNATURE TITLE (CAPACITY)
--------- ----------------
<C> <S>
/s/ MARK H. GETTY Executive Chairman and Director
- ---------------------------------------------
Mark H. Getty
/s/ JONATHAN D. KLEIN Chief Executive Officer and Director
- --------------------------------------------- (Principal Executive Officer)
Jonathan D. Klein
/s/ MARK TORRANCE Non-Executive Vice Chairman and Director
- ---------------------------------------------
Mark Torrance
/s/ CHRISTOPHER J. ROLING Senior Vice President and Chief Financial
- --------------------------------------------- Officer
Christopher J. Roling (Principal Financial Officer and Principal
Accounting Officer)
/s/ ANDREW S. GARB Director
- ---------------------------------------------
Andrew S. Garb
/s/ JAMES N. BAILEY Director
- ---------------------------------------------
James N. Bailey
/s/ CHRISTOPHER H. SPORBORG Director
- ---------------------------------------------
Christopher H. Sporborg
</TABLE>
37
<PAGE> 38
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Statements of Operations....................... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Comprehensive Income............. F-6
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
FINANCIAL STATEMENT SCHEDULES (ITEM 14(A))
All other schedules have been omitted because the required information is
included in the financial statements or notes thereto or because they are not
required.
F-1
<PAGE> 39
GETTY IMAGES, INC.
AND
SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF GETTY IMAGES, INC.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, comprehensive income, stockholders'
equity and cash flows present fairly, in all material respects, the financial
position of Getty Images, Inc. and subsidiaries (the "Company") at December 31,
1999, and at December 31, 1998 and the results of the consolidated operations
and cash flows of the Company for the year ended December 31, 1999, and of the
Company and its predecessor, Getty Communications plc and subsidiaries for the
year ended December 31, 1998, and for Getty Communications plc and subsidiaries
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS
Chartered Accountants
London, England
March 30, 2000
F-2
<PAGE> 40
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
---------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales........................................ $247,840 $185,084 $100,797
Cost of sales................................ 67,264 52,830 37,514
-------- -------- --------
GROSS PROFIT................................. 180,576 132,254 63,283
-------- -------- --------
Selling, general and administrative
expenses................................... 145,578 96,904 43,936
Amortization of intangibles.................. 64,330 36,961 3,253
Depreciation................................. 25,670 14,397 8,214
Non-recurring integration and restructuring
costs...................................... 10,325 13,755 --
-------- -------- --------
245,903 162,017 55,403
-------- -------- --------
OPERATING (LOSS)/INCOME...................... (65,327) (29,763) 7,880
Net interest (expense)/income................ (4,585) (2,986) 1,187
Net exchange gains/(losses).................. 135 (124) (198)
Other income................................. 284 -- --
Legal settlement............................. -- -- (974)
-------- -------- --------
(LOSS)/INCOME BEFORE INCOME TAXES............ (69,493) (32,873) 7,895
Income taxes................................. 1,660 (2,680) (3,873)
-------- -------- --------
(Loss)/income before extraordinary items..... (67,833) (35,553) 4,022
Extraordinary items.......................... -- (830) --
-------- -------- --------
NET (LOSS)/INCOME............................ $(67,833) $(36,383) $ 4,022
======== ======== ========
BASIC (LOSS)/EARNINGS PER SHARE.............. $ (1.94) $ (1.22) $ 0.11
Extraordinary items.......................... -- (0.03) --
-------- -------- --------
NET (LOSS)/EARNINGS PER SHARE................ $ (1.94) $ (1.25) $ 0.11
======== ======== ========
Diluted earnings per share................... N/A N/A $ 0.10
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic(2)..................................... 35,049 29,160 37,908
======== ======== ========
Diluted(2)................................... N/A N/A 38,765
======== ======== ========
</TABLE>
- ---------------
(1) As explained in the "Explanatory Note" (Note 1), the 1998 consolidated
statement of operations reflects the combination of the consolidated
statement of operations of Getty Communications plc (the predecessor
company) for the period January 1, 1998 through February 9, 1998 and the
consolidated statement of operations of Getty Images, Inc. for the period
February 10, 1998 through December 31, 1998. The comparatives for 1997
reflect the share structure of Getty Communications plc (the predecessor
company).
(2) The difference between basic and diluted weighted average shares in 1997
results from the assumption that dilutive stock options outstanding were
exercised.
For pages F-3 to F-24, historic numbers are shown for Getty Communications plc,
the predecessor company of Getty Images, Inc.
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-3
<PAGE> 41
GETTY IMAGES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT AT
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $105,356 $ 16,150
Accounts receivable, net.................................... 64,742 32,967
Inventories, net............................................ 4,970 2,834
Deferred catalog costs...................................... 13,674 6,583
Prepaid expenses and other assets........................... 15,380 10,675
Deferred tax assets......................................... 4,953 2,010
-------- --------
TOTAL CURRENT ASSETS........................................ 209,075 71,219
Fixed assets, net........................................... 104,193 62,757
Intangible assets, net...................................... 608,016 325,861
Investments................................................. 2,338 --
Deferred tax assets......................................... 15,947 3,026
-------- --------
TOTAL ASSETS................................................ $939,569 $462,863
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................ 42,915 26,232
Accrued expenses............................................ 42,329 20,148
Income taxes payable........................................ 2,953 --
Current portion of long-term debt........................... 3,879 202
-------- --------
TOTAL CURRENT LIABILITIES................................... 92,076 46,582
Long-term debt.............................................. 101,802 72,354
-------- --------
TOTAL LIABILITIES........................................... 193,878 118,936
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 18)
STOCKHOLDERS' EQUITY
Common Stock................................................ 452 306
Shares of Common Stock: par value $0.01 per share,
75,000,000 authorized; 45,266,049 issued at December 31,
1999 and 30,574,792 issued at December 31, 1998.
Exchangeable preferred stock without par value: 5,000,000
authorized; 1,453,394 issued at December 31, 1999......... 15 --
Additional paid-in capital.................................. 841,320 368,267
Accumulated deficit......................................... (96,092) (28,259)
Cumulative translation adjustments.......................... (4) 3,613
-------- --------
TOTAL STOCKHOLDERS' EQUITY.................................. 745,691 343,927
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $939,569 $462,863
======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-4
<PAGE> 42
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
GETTY
COMMUNICATIONS PLC GETTY IMAGES, INC.
--------------------- ------------------------
NO. OF
NO. OF SHARES OF
NO. OF NO. OF SHARES OF EXCHANGEABLE
A ORD. B ORD. COMMON PREFERRED
SHARES SHARES STOCK STOCK EXCHANGEABLE ADDITIONAL RETAINED
L0.01 L0.01 $ 0.01 WITHOUT COMMON PREFERRED PAID-IN EARNINGS/
PAR VALUE PAR VALUE PAR VALUE PAR VALUE STOCK STOCK CAPITAL (DEFICIT)
--------- --------- --------- ------------ ------ ------------ ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996.... 23,943 13,445 -- -- $ 593 $ -- $101,464 $ 4,102
Issue of shares to sellers of
Liaison........................ 312 -- -- -- 5 -- 2,595 --
Issue of shares to sellers of
Energy......................... 618 -- -- -- 10 -- 3,990 --
Net income...................... -- -- -- -- -- -- -- 4,022
Translation adjustments......... -- -- -- -- -- -- -- --
------- ------- ------ ----- ------ ------ -------- --------
BALANCE AT DECEMBER 31, 1997.... 24,873 13,445 -- -- $ 608 $ -- $108,049 $ 8,124
Capital restructuring........... (24,873) (13,445) 19,159 -- (416) -- 416 --
Getty Investments
Subscription................... -- -- 1,519 -- 15 -- 27,985 --
Issue of shares to sellers of
PhotoDisc...................... -- -- 8,084 -- 81 -- 201,401 --
Issue of shares to sellers of
Allsport....................... -- -- 1,138 -- 11 -- 23,203 --
Issue of shares for other
acquisitions................... -- -- 52 -- 1 -- 983 --
Options exercised............... -- -- 623 -- 6 -- 6,230 --
Net loss........................ -- -- -- -- -- -- -- (36,383)
Translation adjustments......... -- -- -- -- -- -- -- --
------- ------- ------ ----- ------ ------ -------- --------
BALANCE AT DECEMBER 31, 1998.... -- -- 30,575 -- $ 306 $ -- $368,267 $(28,259)
Issue of shares to sellers of
Art.com........................ -- -- 4,252 -- 42 -- 121,572 --
Issue of shares of exchangeable
preferred stock to sellers of
EyeWire........................ -- -- -- 1,561 -- 16 32,418 --
Exchange of shares by former
EyeWire stockholders........... -- -- 108 (108) 1 (1) -- --
Issue of shares for other
acquisitions................... -- -- 576 -- 6 -- 11,594 --
Getty Investments
subscription................... -- -- 1,579 -- 16 -- 31,984 --
Secondary offering.............. -- -- 6,900 -- 69 -- 259,673 --
Options exercised............... -- -- 1,276 -- 12 -- 9,997 --
Tax benefit from employee stock
options........................ -- -- -- -- -- -- 4,475 --
Accelerated options (see note
5)............................. -- -- -- -- -- -- 1,340 --
Net loss........................ -- -- -- -- -- -- -- (67,833)
Translation adjustments......... -- -- -- -- -- -- -- --
------- ------- ------ ----- ------ ------ -------- --------
BALANCE AT DECEMBER 31, 1999.... -- -- 45,266 1,453 $ 452 $ 15 $841,320 $(96,092)
======= ======= ====== ===== ====== ====== ======== ========
<CAPTION>
CUMULATIVE
TRANSLATION
ADJUSTMENTS TOTAL
----------- --------
(IN THOUSANDS)
<S> <C> <C>
BALANCE AT DECEMBER 31, 1996.... $ 7,364 $113,523
Issue of shares to sellers of
Liaison........................ -- 2,600
Issue of shares to sellers of
Energy......................... -- 4,000
Net income...................... -- 4,022
Translation adjustments......... (4,606) (4,606)
------- --------
BALANCE AT DECEMBER 31, 1997.... $ 2,758 $119,539
Capital restructuring........... -- --
Getty Investments
Subscription................... -- 28,000
Issue of shares to sellers of
PhotoDisc...................... -- 201,482
Issue of shares to sellers of
Allsport....................... -- 23,214
Issue of shares for other
acquisitions................... -- 984
Options exercised............... -- 6,236
Net loss........................ -- (36,383)
Translation adjustments......... 855 855
------- --------
BALANCE AT DECEMBER 31, 1998.... $ 3,613 $343,927
Issue of shares to sellers of
Art.com........................ -- 121,614
Issue of shares of exchangeable
preferred stock to sellers of
EyeWire........................ -- 32,434
Exchange of shares by former
EyeWire stockholders........... -- --
Issue of shares for other
acquisitions................... -- 11,600
Getty Investments
subscription................... -- 32,000
Secondary offering.............. -- 259,742
Options exercised............... -- 10,009
Tax benefit from employee stock
options........................ -- 4,475
Accelerated options (see note
5)............................. -- 1,340
Net loss........................ -- (67,833)
Translation adjustments......... (3,617) (3,617)
------- --------
BALANCE AT DECEMBER 31, 1999.... $ (4) $745,691
======= ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-5
<PAGE> 43
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
---------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net (loss)/income............................ $(67,833) $(36,383) $ 4,022
Other comprehensive income, net of tax:
Foreign currency translation adjustments..... (3,617) 855 (4,606)
-------- -------- -------
Comprehensive loss........................... $(71,450) $(35,528) $ (584)
======== ======== =======
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-6
<PAGE> 44
GETTY IMAGES, INC.
AND
GETTY COMMUNICATIONS PLC (PREDECESSOR)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
--------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income................................. $ (67,833) $(36,383) $ 4,022
Adjustments to reconcile net (loss)/ income to net
cash flow from operating activities:
Depreciation and amortization..................... 90,000 51,358 11,467
Bad debt expense.................................. 729 412 536
Other items....................................... 1,056 4,291 113
CHANGE IN ASSETS AND LIABILITIES, NET OF EFFECTS
OF BUSINESS ACQUISITIONS:
Accounts receivable............................... (13,895) (2,359) (2,385)
Accounts payable.................................. 12,689 (2,690) 919
Accrued expenses.................................. 1,916 2,094 2,257
Inventory......................................... (459) (1,758) --
Other assets...................................... (18,832) (7,743) (3,755)
--------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 5,371 7,222 13,174
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired....... (193,956) (80,564) (20,546)
Purchase of investments........................... (1,688) -- --
Purchase of fixed assets.......................... (51,568) (27,305) (14,901)
--------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES............. (247,212) (107,869) (35,447)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of debt.................................. 30,000 123,168 --
Debt issue costs.................................. (1,061) -- --
Payments on principal balance of debt............. (452) (67,153) (3,052)
Proceeds from issuance of ordinary shares......... 309,790 33,306 --
Share issue costs................................. (8,210) (4,318) --
--------- -------- --------
NET CASH PROVIDED BY/(USED IN) FINANCING
ACTIVITIES...................................... 330,067 85,003 (3,052)
--------- -------- --------
Exchange rate differences arising from translation
of foreign currency balances.................... 980 2,560 (4,380)
Net (decrease)/increase in cash and cash
equivalents..................................... 89,206 (13,084) (29,705)
Cash and cash equivalents:
beginning of period............................. 16,150 29,234 58,939
--------- -------- --------
end of period................................... $ 105,356 $ 16,150 $ 29,234
========= ======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid..................................... $ 5,167 $ 2,314 $ 1,688
Income taxes paid................................. $ 7,780 $ 6,387 $ 769
========= ======== ========
</TABLE>
The consolidated statements of cash flows reflects the combination of the
consolidated statement of cash flows of Getty Communications plc (the
predecessor company) for the period January 1, 1998 through February 9, 1998 and
the consolidated statement of cash flows of Getty Images, Inc. for the period
February 10, 1998 through December 31, 1998. See "Explanatory Note" (Note 1).
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-7
<PAGE> 45
GETTY IMAGES, INC.
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
EXPLANATORY NOTE
On February 9, 1998, the entire issued share capital of Getty Communications plc
("Getty Communications") was acquired via a Scheme of Arrangement by Getty
Images, Inc. ("Getty Images"), a company incorporated in Delaware and whose
principal executive offices are located in Seattle, Washington. Under the Scheme
of Arrangement, each issued Getty Communications Class B Ordinary Share was
converted into one Getty Communications Class A Ordinary Share and each holder
of Getty Communications Class A Ordinary Shares was issued one share of Getty
Images Common Stock, par value $0.01 ("Common Stock") for every two Getty
Communications Class A Ordinary Shares held.
As a result of this transaction, Getty Images became the successor to Getty
Communications. Trading in Getty Communications American Depository Shares
("ADSs") on the Nasdaq National Market (NASDAQ:GETTY) terminated on February 9,
1998 and trading subsequently commenced in shares of Getty Images Common Stock
on the Nasdaq National Market (NASDAQ:GETY). Registration of the Getty
Communications Ordinary Shares and ADSs under the Securities Exchange Act of
1934, as amended, has been terminated.
ACTIVITIES
The principal business of Getty Images and its subsidiaries (the "Company") is
the marketing of reproduction rights to still and moving images. These rights
are marketed in many countries throughout the world through the Company's web
sites and through its international network of wholly-owned offices and agents.
BASIS OF PRESENTATION
The consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States, present the
consolidated financial statements of the Company and the consolidated financial
statements of its predecessor, Getty Communications and subsidiaries.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of Getty
Images and its subsidiaries. Companies acquired during a period are consolidated
from the date of acquisition, being the date that control passes. All material
intercompany amounts and transactions have been eliminated. The Company accounts
for acquisitions using the purchase method of accounting.
FOREIGN EXCHANGE
The Company records all transactions in the currency of the respective primary
economic environments in which it operates.
Assets and liabilities, including those of non-U.S. subsidiaries, are translated
into U.S. dollars at exchange rates as of the balance sheet date, and income and
expense items are translated at the average of the rates prevailing during the
period. Gains or losses from translating foreign currency financial statements
of non-U.S. subsidiaries are accumulated as a separate component of
stockholders' equity. All other gains or losses from translation are recognized
in the statement of operations.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements
F-8
<PAGE> 46
GETTY IMAGES, INC.
and the reported amounts of revenues and expenses during the reported period.
Accounting estimates have been employed in these financial statements to
determine reported amounts, including realizability of receivables and other
assets, useful lives of assets, income taxes and the fair value of financial
instruments. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers cash and demand bank deposits to be cash. Cash equivalents
consist of all deposits with an original maturity of three months or less.
REVENUE RECOGNITION
Revenue arises from three principal types of sales:
Fixed license sales are recognized when a license agreement has been completed
with the customer for the use of the image, and the image has been made
available for use. Fixed license pricing terms do not call for additional fees
beyond the fixed license amount, and the customer is contractually obligated to
pay the fixed license amount upon agreement of the license terms and
availability of the image for use by the customer.
Royalty-free sales, or sales in which the user pays a one-time fee for unlimited
use, are recognized upon the shipment of the CD ROM or at the time images are
downloaded by the customer.
Consumer sales are recognized upon shipment of the product.
Circumstances in which sales are refunded are rare, and refunds are netted in
the recognition of revenue. Sales are recorded at invoiced amounts less sales
tax, if applicable.
INVENTORIES
Inventories are valued at the lower of cost or market value. Cost is computed on
a first-in, first-out basis. Inventories consist of physical materials, such as
frames and packaging materials, and finished goods, such as CD-ROMs. Inventories
are reviewed periodically for obsolescence.
CATALOG COSTS
The Company produces both general catalogs, and specialist catalogs, that are
topical in nature and distributed over a longer period. Costs relating to the
production of catalogs are expensed over their estimated useful life, up to
three years from the date on which they are available for distribution to
customers.
FIXED ASSETS
Fixed assets are recorded at cost. The cost of acquired fixed assets includes
the purchase cost, together with any incidental expenses of acquisition. All
costs associated with the production of image duplicates are capitalized. The
cost of purchased software is capitalized and amortized from the implementation
date over its estimated useful economic life. The cost of internally developed
software is capitalized in accordance with Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", and amortized from the implementation date over its estimated
useful economic life. The value of fixed assets is reviewed annually for
impairments in value.
F-9
<PAGE> 47
GETTY IMAGES, INC.
Depreciation rates have been established to expense the cost of fixed assets,
less their estimated residual values, over their expected useful lives.
Depreciation is calculated at the following annual rates:
<TABLE>
<S> <C>
Archival picture collection................................ 2.5%
Fixtures, fittings, office and studio equipment............ 10 to 20%
Computer hardware.......................................... 33%
Computer software (including internally developed
software)................................................ 25 to 50%
Image duplicates and digitization.......................... 25 to 33%
Leasehold property improvements............................ over the term of the lease
</TABLE>
INTANGIBLE ASSETS
Goodwill and other intangibles are amortized on a straight-line basis over their
estimated lives of between 3 to 30 years. Goodwill represents the excess of
purchase price and related costs over the fair value of the net assets of
businesses acquired. The value of goodwill and other intangibles is reviewed
annually in relation to the operating performance and future undiscounted cash
flows of the underlying businesses, and a charge to the consolidated statement
of operations is made where a permanent diminution in value is identified.
Management believes that there has been no impairment in the value of goodwill
and other intangible assets as reflected in the Company's consolidated financial
statements as at December 31, 1999.
INVESTMENTS
Investments primarily consist of companies in which the Company has no
significant influence and are carried at cost. The Company monitors its
investments for impairment and makes appropriate reductions in carrying values
when necessary.
TAXES
Deferred tax assets and liabilities are provided for all temporary differences
between financial and tax reporting. As a matter of policy, deferred tax assets
are reduced by a valuation allowance if based on the weight of available
evidence it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Deferred tax assets and liabilities are classified
into a net current amount and a net non-current amount, based on the balance
sheet classification of the related asset or liability.
PENSIONS
The Company contributes to defined contribution pension schemes for certain
directors and employees. Contributions are recognized as an expense in the
period in which they are incurred.
LEASES
The Company leases various items of equipment and property through both
operating and capital lease agreements. Under capital leasing arrangements, the
present value of the future minimum lease payments payable over the lease term
is recorded as a fixed asset. The corresponding leasing commitments are shown as
amounts payable to the lessor. Depreciation of leased assets is charged to the
statement of operations over the shorter of the lease term or the useful lives
of equivalent owned assets.
Other leases are treated as operating leases. Annual rentals are charged to the
income statement on a straight-line basis over the term of the lease.
FINANCIAL INSTRUMENTS
Forward exchange contracts hedging firm commitments relating to trade and other
balances are recorded as hedges. Gains and losses arising on financial
instruments used for hedging purposes are deferred until settlement, at which
time they are recognised in the statement of operations in a manner consistent
with the hedged item. The Company does not issue or hold financial instruments
for trading purposes.
F-10
<PAGE> 48
GETTY IMAGES, INC.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities". The standard
requires that an entity recognize all derivatives as either assets or
liabilities and measure those instruments at fair value. The new rules will be
effective for fiscal years beginning after June 15, 2000. Management has not yet
evaluated whether adoption of the new standard will have a material impact on
the Company's results or financial position.
3. EARNINGS PER SHARE
Basic (loss)/earnings per share is computed on the basis of weighted average
number of shares in issue. Diluted earnings per share are not given for the year
ended December 31, 1999 and for the year ended December 31, 1998 due to the
losses incurred in those periods.
On August 5, 1999, the Company acquired all of the outstanding capital shares of
EyeWire Partners, Inc.. In the transaction, EyeWire stockholders received
1,561,000 exchangeable shares, without par value, in a newly formed Nova Scotia
subsidiary of the Company. Each exchangeable share is exchangeable for one share
of the Company's Common Stock. By December 31, 1999, 108,000 exchangeable shares
had been exchanged for shares of the Company's Common Stock. Once all the
remaining shares have been exchanged, an additional 1,453,000 additional shares
will be reflected in our earnings per share calculation. Had all the
exchangeable shares been exchanged for shares of the Company's Common Stock at
the date of acquisition, our basic loss per share for 1999 would have been
$1.90, based on 35,670,000 weighted average shares.
4. FOREIGN CURRENCY TRANSLATION
Unrealized net exchange gains of $2.7 million (1998: $Nil) arose on the
translation of certain intercompany foreign currency transactions deemed to be
of a long-term nature. These transactions are not planned to be settled in the
foreseeable future and are reported in the same manner as foreign currency
translation adjustments in stockholders' equity in accordance with SFAS 52
"Foreign Currency Translation".
5. NON-RECURRING INTEGRATION AND RESTRUCTURING COSTS
During the year ended December 31, 1999 the Company commenced and substantially
completed a program to integrate all its businesses, including the new
acquisitions Art.com and EyeWire, into four divisions to serve the Company's
four major customer segments. This resulted in integration and restructuring
charges in 1999 totaling $10.3 million net of provisions set up as part of the
1998 non-recurring charge that have now been released. The charges included
restructuring costs, severance costs, consulting and professional fees, systems
and process integration costs, content review costs and costs associated with
terminations.
Integration costs of $4.9 million were associated with the activities of teams
responsible for integrating the Company's businesses and included items such as
consulting and professional fees, retention payments, systems and process
integration costs and content review costs. Content review costs arose from an
assessment of the compatibility of the Company's images across its brands
following the decision to integrate all the Company's businesses into four
divisions. Integration costs were expensed as incurred.
Restructuring costs of $5.4 million, which are stated net of provisions set up
in 1998 that have now been released, were for estimated exit costs associated
with the closure of 14 facilities, asset write-downs and employee termination
costs. The largest element of the asset write-downs consisted of systems assets,
primarily software which had shortened useful lives as a result of the
restructuring plans. Termination costs arose in relation to property related
exit costs and employee terminations. Restructuring costs utilized comprised
$2.0 million of cash expenditure, $877,000 million of non-cash write-offs and
$1.3 million of accelerated stock option costs. Under the terms of the program,
it is anticipated that the majority of the provision at December 31, 1999 will
be used by September 30, 2000.
F-11
<PAGE> 49
GETTY IMAGES, INC.
Non-recurring integration and restructuring costs relating to the 1999 program
have been incurred as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
INTEGRATION COSTS
Consulting and professional fees............................ $ 630
Systems and process integration costs....................... 1,436
Contract renegotiation costs................................ 2,494
Content review costs........................................ 323
------
$4,883
======
</TABLE>
The charge for contract renegotiation costs of $2.5 million is shown net of
$457,000 of non-cash write-backs which relate to 1998. At December 31, 1999, the
Company had an accrual for integration expenses of $1.6 million, incurred but
not yet paid.
<TABLE>
<CAPTION>
PROVISION AT
1999 DECEMBER 31,
CHARGE UTILIZED 1999
------ -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
RESTRUCTURING COSTS
Property exit costs......................................... $1,760 $ (605) $1,155
Asset write downs........................................... 877 (877) --
Employee termination costs.................................. 3,991 (2,680) 1,311
Contract termination costs.................................. 466 - 466
------ ------- ------
7,094 $(4,162) $2,932
======= ======
Less: non-cash write-backs.................................. 1,652
------
$5,442
======
</TABLE>
The charge for employee termination costs of $4.0 million can be analysed as
follows:
<TABLE>
<CAPTION>
OPERATIONAL
MANAGEMENT STAFF TOTAL
---------- ----------- ------
<S> <C> <C> <C>
Employee termination costs (in thousands).................. $3,132 $859 $3,991
====== ==== ======
Number of employees........................................ 15 38 53
====== ==== ======
Number of employees terminated at December 31, 1999........ 14 23 37
====== ==== ======
</TABLE>
During the year ended December 31, 1998, the Company commenced and completed a
program to integrate its then existing businesses, following the acquisitions of
PhotoDisc and Allsport. This resulted in integration and restructuring charges
totaling $13.8 million being incurred in 1998.
Integration costs in 1998 amounted to $3.7 million and were associated with the
activities of teams responsible for integrating the Company's then existing
businesses for the benefit of future operations. These included items such as
consulting and professional fees, systems and process integration costs and
contract renegotiation costs. These costs were expensed as incurred.
Restructuring costs, which amounted to $10.1 million in 1998, were for estimated
exit costs associated with the closure of 10 facilities, asset write-downs,
employee termination costs and contract termination costs.
F-12
<PAGE> 50
GETTY IMAGES, INC.
The integration and restructuring provision relating to the 1998 program has
been utilized as follows:
<TABLE>
<CAPTION>
GETTY IMAGES, INC.
-------------------------------------------------
PROVISION AT PROVISION AT
DECEMBER 31, DECEMBER 31,
1998 UTILIZED RELEASED 1999
------------ -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEGRATION COSTS
Consulting and professional fees................. $ 150 $ (150) $ -- $ --
Systems and process integration costs............ 44 (44) -- --
Contract renegotiation costs..................... 457 -- (457) --
------ ------- ------- ------
651 (194) (457) --
------ ------- ------- ------
RESTRUCTURING COSTS
Property exit costs.............................. 1,215 (163) (1,052) --
Asset write downs................................ 450 (450) -- --
Employee termination costs....................... 428 (294) (134) --
Contract termination costs....................... 1,367 (901) (466) --
------ ------- ------- ------
3,460 (1,808) (1,652) --
------ ------- ------- ------
$4,111 $(2,002) $(2,109) $ --
====== ======= ======= ======
</TABLE>
Total amounts of the provision relating to the 1998 non-recurring integration
and restructuring program utilized in 1999 comprised $1.6 million of cash
expenditure and $450,000 of non-cash write-offs.
6. EXTRAORDINARY ITEMS
On May 22, 1998, the Company completed the issue of $75 million, 4.75%
convertible subordinated notes due 2003, the proceeds of which were applied
partially to the repayment of $49 million of term debt due to Midland Bank plc
(now HSBC Bank plc). The early payment of such debt resulted in an extraordinary
charge of $830,000 ($0.03 per share) net of an income tax benefit of $408,000.
7. ACCOUNTS RECEIVABLE
Accounts receivable comprises solely receivables from customers. Receivables are
stated net of provisions for doubtful accounts of $16.5 million and $4.8 million
at December 31, 1999 and 1998, respectively. The Company has a diverse customer
base and is not dependent on any one customer.
8. INVENTORIES
Inventories are stated net of a provision for obsolescence of $655,000 and
$100,000 at December 31, 1999 and 1998, respectively.
9. DEFERRED CATALOG COSTS
Deferred catalog costs were $13.7 million and $6.6 million at December 31, 1999
and 1998, respectively. Catalog costs expensed in the periods ended December 31,
1999, 1998 and 1997 were $6.7 million, $2.7 million and $1.5 million,
respectively.
F-13
<PAGE> 51
GETTY IMAGES, INC.
10. FIXED ASSETS
<TABLE>
<CAPTION>
GETTY IMAGES, INC.
----------------------------
AT AT
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Fixtures, fittings, office and studio equipment............. $ 17,622 $ 18,589
Computer hardware and software.............................. 65,577 27,573
Image duplicates and digitization........................... 55,497 34,977
Archival picture collection................................. 17,415 15,714
Leasehold property improvements............................. 8,051 4,450
Other fixed assets.......................................... 5,676 1,618
--------- --------
Total....................................................... 169,838 102,921
Less: accumulated depreciation.............................. 65,645 40,164
--------- --------
Fixed assets, net........................................... $ 104,193 $ 62,757
========= ========
</TABLE>
The net book value of fixed assets includes $1,735,000 and $1,601,000 in respect
of assets held under capital leases at December 31, 1999 and 1998, respectively.
The charge to income resulting from depreciation of assets held under capital
leases, the majority of which form part of "other fixed assets", is included
within depreciation expense in the consolidated statements of operations. The
accumulated depreciation of assets held under capital leases at December 31,
1999, was $1,424,000 (1998: $1,213,000).
The net book value of computer hardware and software includes $20.8 million and
$6.7 million of capitalised software costs at December 31, 1999, and December
31, 1998, respectively. The charge to income resulting from depreciation of
software costs was $4.6 million in 1999, $3.0 million in 1998 and $0.4 million
in 1997.
11. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
GETTY IMAGES, INC.
----------------------------
AT AT
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Cost........................................................ $719,039 $372,222
Less: accumulated amortization.............................. 111,023 46,361
-------- --------
$608,016 $325,861
======== ========
</TABLE>
Intangible assets consist primarily of goodwill arising upon the acquisition of
companies and other businesses. Additions to goodwill arose principally from the
acquisitions of Art.com and The Image Bank in the year ended December 31, 1999,
and PhotoDisc and Allsport in the year ended December 31, 1998. Additional
information on these acquisitions is set out in Note 22.
12. INVESTMENTS
At December 31, 1999, the Company's largest investment was its holding in Online
Music Company, an online provider of music.
13. SHORT-TERM BORROWINGS AND CREDIT FACILITIES.
At December 31, 1999, the Company had an unutilized credit facility of
approximately $3.2 million with HSBC Bank plc ("HSBC"). This facility is
unsecured. Interest on the facility is charged at a variable rate
F-14
<PAGE> 52
GETTY IMAGES, INC.
comprising the aggregate of a margin and HSBC's Base Rate. As of December 31,
1999, the margin was 1.0% and HSBC's Base Rate was 5.5%. The weighted average
rate for the year was approximately 6.0%.
14. LONG-TERM DEBT
<TABLE>
<CAPTION>
GETTY IMAGES, INC.
----------------------------
AT AT
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
4.75% Convertible subordinated notes due 2003............... $ 72,552 $71,832
Bank loans.................................................. 28,633 --
Other loans................................................. 3,485 34
Capital leases.............................................. 1,011 690
-------- -------
105,681 72,556
Less: current portion....................................... 3,879 202
-------- -------
Total long-term debt........................................ $101,802 $72,354
======== =======
</TABLE>
The amounts outstanding at December 31, 1999 are payable as follows:
<TABLE>
<CAPTION>
CONVERTIBLE
SUBORDINATED BANK OTHER CAPITAL
NOTES LOANS LOANS LEASES TOTAL
------------ ------- ------ ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
2000........................................ -- -- $3,242 $ 637 $ 3,879
2001........................................ -- -- 243 254 497
2002........................................ -- $28,633 -- 120 28,753
2003(1)..................................... $72,552 -- -- -- 72,552
------- ------- ------ ------ --------
Total....................................... $72,552 $28,633 $3,485 $1,011 $105,681
======= ======= ====== ====== ========
</TABLE>
- ---------------
(1) See note 23 for details of partial conversion in March 2000.
During the year ended December 31, 1999, the Company entered into a $100 million
senior credit facility with HSBC Investment Bank plc which expires in October
2002. At December 31, 1999, we had drawn down $30 million under this facility.
Issue costs of $1.4 million were incurred in obtaining the facility and have
been offset against the facility. These costs are being amortized over the term
of the facility. The proceeds of the senior credit facility are available for
general corporate purposes including, but without limitation, acquisitions and
working capital requirements.
Interest is charged 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 decreases, in increments of 0.25%, from 1.75% per annum to 1.00% per
annum as the ratio of our consolidated total debt, less any cash balances
("Total Borrowings"), to earnings before interest, taxes, net exchange
gains/(losses), depreciation, amortization, non-recurring integration and
restructuring costs, other income and extraordinary items ("EBITDA") decreases
from greater than or equal to 2.75 to less than 2.00.
All the Company's obligations under the senior credit facility, and the
obligations of the Company's subsidiaries which are a party to the credit
agreement, are unconditionally guaranteed by the Company. These obligations are
secured by (1) pledges of the shares of some of the Company's subsidiaries; (2)
a lien on all of the Company's assets and the assets of the Company's
subsidiaries which are a party to the credit agreement; and (3) a charge over
trademarks from two of the Company's subsidiaries.
F-15
<PAGE> 53
GETTY IMAGES, INC.
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.
On May 20, 1998, the Company completed the issue of $75 million convertible
subordinated notes due 2003 (the "Notes"). These Notes carry a coupon of 4.75
percent and are convertible into 2.6 million shares of Common Stock of the
Company at a conversion price of $28.51 per share, subject to adjustments in
certain circumstances. The Notes are general unsecured subordinated obligations
of the Company. The funds raised were principally used to repay $49 million of
term debt, and to fund further investment in digitization and e-commerce. Issue
costs of $3.6 million were incurred in obtaining the Notes and have been offset
against the Notes. These costs are being amortized over the term of the Notes.
INTEREST EXPENSE
The interest expense relating to short and long-term borrowings amounted to $5.5
million in 1999 (1998: $2.6 million).
15. SHARE OPTION PLANS
Under the Getty Images Plan, the Board has the discretion to grant stock options
("Options") underlying shares of Common Stock at fair market prices, based on
the average of the high and low prices of the Company's Common Stock on the date
of grant. The Options vest 25% on the first anniversary of the date of grant and
on a monthly pro rata basis over three years thereafter and have a term of ten
years.
Executive directors, officers, consultants and all employees of the Company are
eligible to participate in the Getty Images Plan under which a total of
10,000,000 shares may be issued. Options which lapse will cease to be counted
toward this limit. Options become exercisable when vested and remain exercisable
through the remainder of the option term except upon termination of employment,
in which case the Options will terminate 90 days after the termination date.
The following table presents activity under the Getty Images Plan in 1999 and
1998. While the number of options outstanding at December 31, 1998, remains
unchanged at 7.4 million, the number of options granted in 1998 has been
restated to correctly reflect option grants, option exercises and option lapses
in 1998.
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE
OUTSTANDING EXERCISE PRICE
-------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
At December 31, 1997........................................ 4,679 $ 7.22
Granted..................................................... 4,583 19.19
Exercised................................................... (1,294) 4.17
Lapsed...................................................... (559) 15.73
------
At December 31, 1998........................................ 7,409 14.57
Granted..................................................... 4,069 18.28
Exercised................................................... (1,294) 6.85
Lapsed...................................................... (659) 18.17
------
At December 31, 1999........................................ 9,525 $16.96
======
</TABLE>
F-16
<PAGE> 54
GETTY IMAGES, INC.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT DECEMBER 31, 1999 OPTIONS EXERCISABLE AT
---------------------------------------------------- DECEMBER 31, 1999
WEIGHTED AVERAGE ---------------------------------
NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
RANGE OF EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- ----------------------- -------------- ---------------- ---------------- -------------- ----------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
$ 0.01 to $ 5.00.................. 666 8.15 years $ 1.46 212 $ 1.59
$ 5.01 to $10.00.................. 1,406 6.63 years 9.74 1,147 9.87
$10.01 to $15.00.................. 702 8.71 years 14.22 215 14.14
$15.01 to $20.00.................. 3,190 8.88 years 17.87 653 16.33
$20.01 to $25.00.................. 3,026 8.11 years 21.28 1,427 20.92
$25.01 to $43.94.................. 535 9.40 years 28.95 17 26.11
----- -----
9,525 8.27 years $16.96 3,671 $15.17
===== =====
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 ("APB No. 25"),
Accounting for Stock Issued to Employees and related interpretations in
accounting for its stock option plans. In accordance with APB No. 25, no
compensation expense has been recognized for such plans. The pro forma effect on
the Company's net income and earnings per share, had compensation costs for the
Company's stock option plans been determined based upon the fair market value at
the date of grant for awards under these plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards ("FAS") No. 123,
Accounting for Stock-Based Compensation, is as follows: the net loss would have
increased by approximately $10.4 million to $78.3 million and the loss per share
would have increased by $0.29 to $2.23. The net loss for 1998 would have
increased by $6.3 million and net income for 1997 would have been reduced by
$2.2 million to a net loss of $42.7 million and net income of $1.8 million,
respectively. The loss per share would have increased by $0.22 to $1.47 in 1998
and earnings per share would have been reduced by $0.05 to $0.06 in 1997.
The weighted average fair value of Options granted during 1999 is as follows:
<TABLE>
<S> <C>
Options granted at a discount to market price............... $20.16
Options granted at market price............................. $11.61
Share awards................................................ $17.19
</TABLE>
The weighted average fair value has been calculated using a Black Scholes option
pricing model with the following assumptions: no dividends are paid, future
share price volatility of 75%, weighted average risk free rate of 5.70%, nil
forfeitures and expected life of 2 years for Options vesting 1 year after grant
date and 4 years for Options vesting on a monthly pro-rata basis thereafter.
16. INCOME TAXES
Income/(loss) before income taxes from continuing operations was taxed under the
following jurisdictions:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................................. $(77,766) $(41,872) $ (2,103)
Foreign.................................................. 8,273 8,999 9,998
-------- -------- --------
Total.................................................... $(69,493) $(32,873) $ 7,895
======== ======== ========
</TABLE>
Included within loss before income taxes for the domestic segment was goodwill
amortization of $64.3 million, $37.0 million and $3.3 million in 1999, 1998 and
1997, respectively.
F-17
<PAGE> 55
GETTY IMAGES, INC.
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
---------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax:
Federal...................................... $ 679 $ 876 $ 605
State........................................ 465 184 40
Non-US....................................... 8,585 3,321 2,780
-------- ------- ------
Total current tax............................ 9,729 4,381 3,425
Deferred tax:
Federal...................................... (11,254) (1,175) 190
Non-US....................................... (135) (526) 258
-------- ------- ------
Total deferred tax........................... (11,389) (1,701) 448
-------- ------- ------
Total tax provision.......................... $ (1,660) $ 2,680 $3,873
======== ======= ======
</TABLE>
The provisions differ from the amounts that would result by applying the United
States (United Kingdom in 1997) statutory rate to earnings before income taxes.
A reconciliation of the difference follows:
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
---------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes based on statutory rate......... $(24,323) $(11,795) $2,486
Amortization of intangibles.................. 22,516 12,936 1,024
Change in valuation allowance................ -- 187 --
State income taxes, net of US tax............ 465 184 40
Other -- net................................. (318) 1,168 323
-------- -------- ------
Total tax (credit)/provision................. $ (1,660) $ 2,680 $3,873
======== ======== ======
</TABLE>
F-18
<PAGE> 56
GETTY IMAGES, INC.
The components of deferred tax asset/(liability) are as follows:
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
---------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current deferred tax liabilities:
Short-term provisions........................ $(2,625) $ (907) $ --
------- ------ ------
Total net current deferred tax liabilities... $(2,625) $ (907) $ --
Current deferred tax assets:
Short-term provisions........................ $ 4,953 $2,010 $ 930
------- ------ ------
Total net current deferred tax assets........ $ 4,953 $2,010 $ 930
Non-current deferred tax assets:
Loss carry forwards.......................... 16,463 4,326 4,143
Depreciation................................. 444 (179) (661)
Foreign tax credits.......................... 555 -- --
Other........................................ 1,324 -- --
------- ------ ------
Total non-current deferred tax assets........ $18,786 $4,147 $3,482
Net deferred tax assets...................... 21,114 5,250 4,412
Deferred tax assets valuation allowance...... (214) (214) --
------- ------ ------
$20,900 $5,036 $4,412
======= ====== ======
</TABLE>
A deferred tax asset of $4,475,000 has been recorded for the portion of losses
created by stock option deductions allowed as a compensation expense.
The deferred tax assets in respect of loss carry forwards as at December 31,
1999 expire as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
2001........................................................ $ 113
2002........................................................ 443
2003........................................................ 302
2004........................................................ 315
Between 2005 and 2019....................................... 12,599
Indefinite.................................................. 2,691
-------
$16,463
=======
</TABLE>
17. DEFINED CONTRIBUTION PLANS
The costs recognized by the Company with respect to its defined contribution
plans are as follows:
<TABLE>
<CAPTION>
GETTY IMAGES, INC. GETTY COMMUNICATIONS PLC
---------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Europe....................................... $1,230 $ 634 $353
North America................................ 189 339 397
Rest of World................................ 66 -- --
------ ------ ----
$1,485 $ 973 $750
====== ====== ====
</TABLE>
F-19
<PAGE> 57
GETTY IMAGES, INC.
The Company runs two principal pension plans in the United Kingdom. Under the
terms of the schemes, all employees are entitled to join one of the plans after
six months' service with the Company. Under both schemes, the Company
contributes a fixed 5% of each participatory employee's salary to the plan. The
employees contribute a minimum of 2% of their salary under the first scheme and
5% under the second.
The Company's U.S. subsidiaries operate four separate 401(k) pension plans for
their employees. Under the terms of the first plan, employees over 18 years old
are immediately eligible to participate. The Company contributes 40% of up to 5%
of the employee's contribution. Under the terms of the second plan, employees
over 21 years old are immediately eligible to participate. The Company
contributes 40% of up to 5% of the employee's contributions. Under the terms of
the third plan, employees over 21 years old are eligible to participate after 6
months service (however, only at entry dates of January 1 and July 1). The
Company contributes 25% of up to 3% of the employee's contribution, and 50% over
3% of the employee's contribution up to 15%. Under the terms of the fourth plan,
all employees (except union employees and non-resident alien employees) are
eligible to participate after 3 months service (however, only at entry dates of
January 1, April 1, July 1 and October 1). The Company has no obligation to
contribute to this plan.
18. COMMITMENTS AND CONTINGENCIES
The Company leases various equipment and property under operating and capital
leases. Obligations under capital leases are collateralized by the respective
assets financed.
The Company's commitments under capital leases as at December 31, 1999, are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Minimum rental payments:
2000........................................................ $ 713
2001........................................................ 284
2002........................................................ 134
------
Total....................................................... 1,131
Less: imputed interest payments............................. 120
------
Present value of minimum lease payments..................... $1,011
======
</TABLE>
The Company's commitments under operating leases as at December 31, 1999, are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Minimum rental payments:
2000........................................................ $ 7,695
2001........................................................ 5,248
2002........................................................ 4,532
2003........................................................ 3,264
2004........................................................ 2,496
After 2004.................................................. 9,928
-------
Total....................................................... $33,163
=======
</TABLE>
Rent expense amounted to $10.0 million, $4.8 million and $3.1 million in the
year ended December 31, 1999, 1998, and 1997, respectively.
From time to time the Company is subject to various legal actions arising out of
the normal course of business including claims relating to trademark, patent or
copyright infringements or other items. Management believes the outcome of any
such actions and claims will not materially affect these consolidated financial
statements.
F-20
<PAGE> 58
GETTY IMAGES, INC.
19. FINANCIAL INSTRUMENTS
The Company operates internationally, giving rise to exposure to market risks
from changes in foreign exchange rates. The Company hedges only contracted net
receivables and payables using a variety of financial instruments. The Company
does not issue or hold financial instruments for trading purposes. The Company
had no outstanding off-balance sheet contracts as at December 31, 1999.
The Company is exposed to credit losses in the event of non-performance by
counterparties to financial instruments, but management considers this risk to
be minimal.
Disclosure of estimated fair value of financial instruments is based on the
requirements of Statements of Financial Accounting Standards No. 105, 107 and
119, and upon the assumptions or methods described below. Different estimates
may have been obtained had other assumptions or methods been applied. The
estimates are not necessarily indicative of amounts that would be realized in a
market exchange.
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLES, ACCOUNTS PAYABLES AND
SHORT-TERM BORROWINGS
The carrying amounts of these items approximate fair value. At December 31,
1999, $45 million was deposited in short-term, fixed rate money market
instruments, all of which have matured subsequent to December 31, 1999.
LONG-TERM DEBT
The fair value is the estimated net present value of future cash flows using
estimated current rates at which similar bank loans could be obtained for the
remaining maturities. As at December 31, 1999, the combined fair value of the
$75 million convertible subordinated notes due 2003 and bank loans was $164.6
million. The fair value of the convertible subordinated notes due 2003 has been
calculated by reference to the market price at December 31, 1999.
20. SUPPLEMENTAL DISCLOSURES ON CASH FLOWS
NON-CASH INVESTING ACTIVITIES
Fixed asset additions financed through capital leases amounted to $1,152,000,
$279,000 and $121,000 for the year ended December 31, 1999, 1998 and 1997,
respectively.
Further non-cash investing activities relating to acquisitions are detailed in
Note 22.
21. SEGMENT INFORMATION
As a provider of visual content, the Company operates one business segment.
Sales are reported in the geographic area where they originate.
Financial information by geographic areas is as follows, this information is
subject to the impact of translation differences and is therefore not a
reflection of the relative performance of individual areas:
F-21
<PAGE> 59
GETTY IMAGES, INC.
<TABLE>
<CAPTION>
EUROPE NORTH AMERICA REST OF WORLD TOTAL
------- ------------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
GETTY IMAGES, INC.
YEAR ENDED DECEMBER 31, 1999
Sales to customers............................. $93,886 $138,315 $15,639 $247,840
======= ======== ======= ========
GETTY IMAGES, INC.
YEAR ENDED DECEMBER 31, 1998
Sales to customers............................. $83,375 $ 91,610 $10,099 $185,084
======= ======== ======= ========
GETTY COMMUNICATIONS PLC
YEAR ENDED DECEMBER 31, 1997
Sales to customers............................. $37,505 $ 48,266 $15,026 $100,797
======= ======== ======= ========
</TABLE>
Due to the nature of the operations of the Company, sales are made to a diverse
client base and there is no reliance on a single customer or group of customers.
22. ACQUISITIONS
ART.COM
On May 4, 1999, Getty Images purchased the entire issued share capital of
Art.com., a leading provider of framed and unframed art and art-related products
on the Internet. The purchase consideration was $135.0 million.
<TABLE>
<CAPTION>
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Stock consideration -- shares of Common Stock (4,252,271 at
$27.21)................................................... $115,704
--------
Capital contribution to Art.com............................. 10,000
Transaction expenses........................................ 3,412
--------
Cash costs of the acquisition............................... 13,412
--------
Fair value of options over shares of Art.com Common Stock
converted to options over shares of Getty Images of Common
Stock..................................................... 5,910
--------
Total purchase price........................................ 135,026
Fair value of Art.com net assets acquired................... (13,104)
--------
Excess of purchase price over net assets acquired, allocated
to goodwill (amortized over 3 years)...................... $121,922
========
</TABLE>
F-22
<PAGE> 60
GETTY IMAGES, INC.
THE IMAGE BANK
On November 24, 1999, Getty Images purchased the entire issued share capital of
The Image Bank, a leading provider of visual content to the advertising design,
publishing, corporate, broadcast and editorial markets. The purchase
consideration was $193.3 million, including expenses. The Company is currently
in the process of assessing the fair value of The Image Bank's assets and
liabilities, particularly its intangible assets.
<TABLE>
<CAPTION>
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Cash consideration to holders of The Image Bank share
capital................................................... $173,167
Cash payment made to Eastman Kodak Company for a tax
election made for the Company's benefit................... 10,000
Transaction expenses........................................ 10,094
--------
Total purchase price........................................ 193,261
Estimated fair value of The Image Bank net assets
acquired.................................................. (16,851)
--------
Estimated excess of purchase price over net assets acquired,
initially allocated to goodwill (amortized over 10
years).................................................... $176,410
========
</TABLE>
PHOTODISC
On February 9, 1998, a wholly-owned subsidiary of Getty Images acquired
PhotoDisc. PhotoDisc develops and markets digital stock photography, products
and electronic delivery of images. The purchase consideration was $245.7
million, including expenses, which included the issue of 8,083,831 shares of
Common Stock, at a total market value of $171.8 million.
<TABLE>
<CAPTION>
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Cash consideration to holders of PhotoDisc Common Stock and
Series A Preferred Stock.................................. $ 34,076
Transaction expenses........................................ 10,155
--------
Cash costs of the acquisition............................... 44,231
Stock consideration -- shares of Common Stock (8,083,831 at
$21.25)................................................... 171,781
Fair value of options over shares of PhotoDisc Common Stock
converted to options over shares of Getty Images Common
Stock..................................................... 29,701
--------
Total purchase price........................................ 245,713
Fair value of PhotoDisc net assets acquired................. (3,366)
--------
Excess of purchase price over net assets acquired........... $242,347
========
Amount allocated to specific intangibles (amortized over 2
to 3 years)............................................... 46,387
Amount allocated to goodwill (amortized over 20 years)...... 195,960
--------
$242,347
========
</TABLE>
F-23
<PAGE> 61
GETTY IMAGES, INC.
ALLSPORT
On February 10, 1998, Getty Images purchased the entire issued share capital of
Allsport. Allsport is a world-wide sports photography company, providing images
to the sports journalism market and the broader market of advertisers and sports
promoters. The purchase consideration was $51.1 million, including expenses,
which included the issue of 1,137,916 shares of Common Stock at a total market
value of $24.2 million.
<TABLE>
<CAPTION>
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Cash consideration to holders of Allsport Ordinary Shares at
closing................................................... $26,998
Transaction expenses........................................ 900
-------
Cash costs of the acquisition............................... 27,898
Stock consideration -- shares of Common Stock (691,899 at
$21.25)(1)................................................ 14,703
Fair value of options over shares of Allsport Ordinary
Shares held by an Employee Benefit Trust, converted to
options over shares of Getty Images Common Stock(1)....... 8,511
-------
Total purchase price........................................ 51,112
Fair value of Allsport net assets acquired.................. (631)
-------
Excess of purchase price over net assets acquired........... $50,481
=======
Amount allocated to specific intangibles (amortized over 2
to 3 years)............................................... 4,571
Amount allocated to goodwill (amortized over 20 years)...... 45,910
-------
$50,481
=======
</TABLE>
- ---------------
(1) Of the stock consideration of 1,137,916 shares of Common Stock, 446,017 were
issued to an Employee Benefit Trust established on behalf of certain
employees of Allsport. Such shares of Common Stock have not been valued for
the purpose of calculating the stock consideration, but the underlying
options over Allsport Ordinary Shares, which converted into options over
shares of Getty Images Common Stock, have been valued by reference to the
Black Scholes Option pricing model.
OTHER ACQUISITIONS
During 1999, the Company also made the following acquisitions: EyeWire, a
provider of royalty-free photography, video, typefaces, software and other
design resources; Online USA, an agency specialising in the sourcing and
distribution of celebrity imagery over the Internet; American Royal Arts, a
leading provider of animation art; and Newsmakers, a digital news agency
covering events, news and celebrity photography.
<TABLE>
<CAPTION>
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Total purchase price........................................ $45,153
Fair value of net liabilities acquired...................... 2,647
-------
Excess of purchase price over net liabilities acquired...... $47,800
=======
</TABLE>
23. SUBSEQUENT EVENTS
On January 31, 2000, the Company purchased all of the capital stock of i/us
Corporation for $2.5 million. i/us is a provider of specialty graphics and
publishing tools to website developers, designers and graphic users.
On February 28, 2000, the Company announced that it had agreed to acquire VCG
Holdings LLC, Definitive Stock Inc., Visual Communications Group Holdings
Limited and VCG Deutschland GmbH (collectively "VCG") for $220 million. The
acquisition completed on March 22, 2000. The acquisition was financed using the
proceeds of a $250 million 5.0% convertible subordinated note offering due 2007,
which closed on March 13, 2000. The net proceeds of this offering amounted to
approximately $240 million.
F-24
<PAGE> 62
GETTY IMAGES, INC.
In March 2000 the Company induced the early conversion of approximately $62.3
million of the 4.75% subordinated convertible notes due 2003 that were issued in
May 1998 by offering a cash premium on the par amount of such converted notes.
As a result, the Company paid approximately $7.5 million in premiums and accrued
interest, and issued approximately 2.2 million shares of the Company's Common
Stock.
24. PRO FORMA INFORMATION RELATING TO ACQUISITIONS (UNAUDITED)
The following unaudited pro forma information shows the Company's results for
each of the three years ended December 31, 1999, as if the acquisitions of
Liaison and Energy had occurred on January 1, 1997, the acquisitions of
PhotoDisc and Allsport had occurred on January 1, 1998, and the acquisitions of
The Image Bank and Art.com had occurred on January 1, 1999. The pro forma
information includes adjustments related to the financing of the acquisitions,
the effect of amortizing goodwill and other intangible assets acquired, as well
as the related tax effects. The pro forma results of operations are unaudited,
have been prepared for comparative purposes only, and do not purport to indicate
the results of operations which would actually have occurred had the
combinations been in effect on the dates indicated or which may occur in the
future.
<TABLE>
<CAPTION>
UNAUDITED
---------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales..................................................... $ 316,304 $191,912 $105,592
Net (loss)/income......................................... (111,458) (36,616) 3,692
Net (loss)/earnings per share............................. $ (3.06) $ (1.26) $ 0.09
</TABLE>
F-25
<PAGE> 63
GETTY IMAGES, INC.
SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
1999 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- -------- -------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales........................................... $52,150 $ 54,957 $60,823 $79,910
Gross profit.................................... 38,309 40,193 44,377 57,697
Operating loss.................................. (5,245) (14,131) (25,578) (20,373)
Loss before income taxes........................ (6,447) (15,073) (26,058) (21,915)
Net loss(1)..................................... (7,882) (15,806) (24,367) (19,778)
Net loss per share(1)........................... (0.26) (0.47) (0.69) (0.49)
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
1998 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- -------- -------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales........................................... $37,931 $ 48,126 $48,975 $50,052
Gross profit.................................... 26,324 34,217 35,411 36,302
Operating loss.................................. (3,220) (14,311) (8,655) (3,577)
Loss before income taxes........................ (4,126) (14,783) (9,512) (4,452)
Net loss(1)..................................... (5,207) (14,901) (9,700) (6,575)
Net loss per share(1)........................... (0.21) (0.49) (0.32) (0.22)
</TABLE>
- ---------------
(1) Net loss and net loss per share include non-recurring charges of $9.2
million, $4.6 million, $7.4 million and $2.9 million in the three months
ended June 30, 1998, September 30, 1998, September 30, 1999 and December 31,
1999, respectively. Net loss and net loss per share also include $830,000
relating to extraordinary charges in the three months ended June 30, 1998.
F-26
<PAGE> 64
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
2.1 Merger Agreement, dated as of September 15, 1997, among
Getty Communications (USA), Inc., Getty Communications plc,
PhotoDisc, Inc. and Print Merger, Inc.(1)
2.2 Agreement and Plan of Merger, dated as of May 4, 1999, among
Getty Images, Inc., Merger Sub and Art.com(2)
2.3 Combination Agreement, dated as of August 5, 1999 among
Getty Images, Inc., 3032097 Nova Scotia Limited, EyeWire
Partners, Inc. and each of the stockholders of EyeWire
Partners, Inc.(3)
2.4 Stock Purchase Agreement, dated September 20, 1999, among
Eastman Kodak Company and Kodak S.A. and Getty Images,
Inc.(4)
2.5 Amendment No. 1 to the Stock Purchase Agreement among
Eastman Kodak Company and Kodak S.A. and Getty Images,
Inc.(5)
3.1 Amended and Restated Certificate of Incorporation of Getty
Images, Inc.(1)
3.2 Certificate of Amendment to the Certificate of Incorporation
of Getty Images, Inc.(6)
3.3 Bylaws of Getty Images, Inc.(1)
4.1 Indenture relating to the 4.75% Convertible Subordinated
Notes due 2003, dated as of May 27, 1998, between Getty
Images, Inc. and The Bank of New York, as Trustee(7)
10.1 Registration Rights Agreement, dated as of May 27, 1998,
among Getty Images, Inc. and BT Alex Brown Incorporated,
BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette
Securities Corporation and Hambrecht & Quist LLC(7)
10.2 Employment Agreement between Getty Communications plc and
Mark Getty(8)
10.3 Employment Agreement between Getty Images, Inc. and Sally
von Bargen (8)
10.4 Employment Agreement between Getty Images, Inc. and John
Hallberg(9)
10.5 Employment Agreement between Getty Images, Inc. and
Christopher J. Roling, dated July 1, 1999(10)
10.6 Employment Agreement between Getty Images, Inc. and Jonathan
D. Klein, dated June 1, 1999(10)
10.7* Employment Agreement between Getty Images, Inc. and Bud
Albers, dated October 11, 1999
10.8* Credit Agreement, dated October 25, 1999, among Getty
Images, Inc. and HSBC Investment Bank plc
10.9* Amendment to the Credit Agreement, dated December 3, 1999
10.10* Debenture, dated October 25, 1999, among the Chargors named
therein and HSBC Investment Bank plc
10.11* Pledge Agreement, dated October 29, 1999 among Getty Images,
Inc., Getty Communications Limited, Getty Images Limited,
Tony Stone Images/America, Inc., EyeWire Partners Company
and HSBC Investment Bank plc
10.12* Supplement to Pledge Agreement, dated December 17, 1999, by
Getty Images, Inc. in favor of HSBC Investment Bank plc
10.13 Lease dated October 18, 1995 between Allied Dunbar Assurance
plc and Tony Stone Associates Limited(11)
10.14 Lease dated March 11, 1993 between Bantry Investments
Limited and Tony Stone Associates Limited(11)
10.15 Counterpart Lease dated March 11, 1993 between Bantry
Investments Limited and Tony Stone Associates Limited(11)
10.16 Lease dated October 23, 1990 between Bantry Investments
Limited and Tony Stone Associates Limited(11)
10.17 Lease dated February 14, 1997 between Martin Selig and
PhotoDisc, Inc.(11)
10.18 Consent to Sublease dated April 11, 1999 among Bedford
Property Investors Inc., Adobe Systems Inc. and Getty
Images, Inc.(12)
10.19* Lease dated July 27, 1999 between Bedford Property
Investors, Inc. and Getty Images, Inc.
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.20* Lease dated November 30, 1999 between the Quadrant
Corporation and Getty Images, Inc.
10.21 Stockholders' Transaction Agreement, dated as of September
15, 1997, among Getty Images, Inc., certain shareholders of
PhotoDisc, Inc. and Mark Torrance, as representative of the
shareholders(1)
10.22 Restated Option Agreement among Getty Images, Inc., Getty
Communications plc and Getty Investments L.L.C.(1)
10.23 Stockholders' Agreement among Getty Images, Inc. and certain
stockholders of Getty Images, Inc.(1)
10.24 Registration Rights Agreement among Getty Images, Inc., PDI,
L.L.C. and Mark Torrance(1)
10.25 Registration Rights Agreement among Getty Images, Inc. and
Getty Investments L.L.C.(1)
10.26 Restated Shareholders' Agreement among Getty Images, Inc.,
Getty Investments L.L.C. and the Investors named therein(1)
10.27 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Simon Thornley, Brian Wolske, Lawrence
Gould, Jonathan Klein and Mark Getty and Form of Amendment
among Getty Images, Inc., Getty Communications plc, Lawrence
Gould, Jonathan Klein and Mark Getty(1)
10.28 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Crediton Limited and October 1993 Trust
and Form of Amendment among Getty Images, Inc., Getty
Communications plc, Crediton Limited and October 1993
Trust(1)
10.29 Registration Rights Agreement dated July 3, 1996 among Getty
Communications plc, Hambro European Ventures Limited, Hambro
Group Investments Limited, RIT Capital Partners plc and Tony
Stone and Form of Amendment among Getty Images, Inc., Getty
Communications plc and The Schwartzberg Family L.P.(1)
10.30 Registration Rights Agreement dated July 25, 1997 between
Getty Communications plc and the Schwartzberg Family L.P.
and Form of Amendment among Getty Images, Inc., Getty
Communications plc and the Schwartzberg Family L.P.(1)
10.31 Form of Registration Rights Agreement between Getty Images,
Inc. and each of the individual stockholders of Art.com(2)
10.32 Registration Rights Agreement, dated as of August 5, 1999,
by and among Getty Images, Inc. and each of the former
stockholders of EyeWire Partners, Inc.(3)
10.33 Indemnity between Getty Images, Inc. and Getty Investments
L.L.C., dated January 1998(1)
10.34* Indemnity between Getty Images, Inc. and Getty Investments
L.L.C., dated November 22, 1999.
10.35 Form of Indemnity among Getty Images, Inc., Getty
Communications plc and each of Mark Getty, Mark Torrance,
Jonathan Klein, Lawrence Gould, Andrew Garb, Manny
Fernandez, Christopher Sporborg, Anthony Stone and James
Bailey(1)
21.1* Subsidiaries of the Registrant
24.1+ Powers of Attorney
27.1* Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith.
+ Included on signature page.
(1) Incorporated by reference from the Exhibits to the Form S-4 Registration
Statement No. 333-38777 of the Registrant.
(2) Incorporated by reference from the Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1999.
(3) Incorporated by reference from the Exhibits to the Form S-3 Registration
Statement of the Registrant, filed September 3, 1999.
(4) Incorporated by reference from the Exhibits to the Registrant's Form 8-K,
dated September, 27 1999.
<PAGE> 66
(5) Incorporated by reference from the Exhibits to the Registrant's Form 8-K,
dated December 7, 1999.
(6) Incorporated by reference from the Exhibits to the Registrant's Form 8-K,
dated November 10, 1998.
(7) Incorporated by reference from the Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998.
(8) Incorporated by reference from the Exhibit to the Registrant's Amendment
No. 1 to Annual Report on Form 10-K/A for the fiscal year ended December
31, 1997.
(9) Incorporated by reference from the Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.
(10) Incorporated by reference from the Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.
(11) Incorporated by reference from the Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.
(12) Incorporated by reference from the Exhibits to the Registrant's Quarterly
Report on Form 10-Q, for the period ended June 30, 1999.
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of this 11th day of October, 1999, by and between
GETTY IMAGES, INC., a Delaware corporation (the "Company"), and A.D. "Bud"
Albers, an individual residing at 2251 Whitney Pointe Drive, Clarkson Valley, MO
63005-4515 (the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, both parties desire that the terms and conditions of the
Employee's employment with the Company be governed by the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) General. The Company hereby employs the Employee, effective as of
the date hereof (the "Effective Date"), and the Employee agrees upon the terms
and conditions herein set forth to serve, effective as of the Effective Date, as
Chief Technology Officer of the Company and shall perform all duties customarily
appurtenant to such position. In such capacity, the Employee shall report
directly to Jonathan Klein, Chief Executive Officer of the Company, or to such
other person designated by the Board of Directors of the Company. The Employee's
principal place of business shall be Seattle, Washington.
(b) Services and Duties. For so long as the Employee is employed by
the Company, the Employee shall devote his full business time to the performance
of his duties hereunder; shall faithfully serve the Company; shall in all
respects conform to and comply with the lawful and good faith directions and
instructions given to him by Jonathan Klein, or such other person designated by
the Board of Directors of the Company; and shall use his best efforts to promote
and serve the interests of the Company.
(c) No Other Employment. For so long as the Employee is employed by
the Company, he shall not, directly or indirectly, render services to any other
person or organization for which he receives compensation without the prior
approval of Jonathan Klein, or such other person designated by the Board of
Directors of the Company. No such approval will be required if the Employee
seeks to perform inconsequential services without direct compensation therefor
in connection with the management of personal investments or in connection with
the performance of charitable and civic activities, provided that such
activities do not contravene the provisions of Section 6 hereof.
2. TERM OF EMPLOYMENT. The term of the Employee's employment under
1
<PAGE> 2
this Agreement (the "Term") shall commence on the Effective Date and
continue until it is terminated by either party giving the other at least one
month written notice; provided, however, that in no event may a non-renewal
notice be given prior to September 1, 2000; and provided further, however, that,
in any event, the Term shall not extend beyond the last day of the month in
which the Employee attains age 65.
3. COMPENSATION AND OTHER BENEFITS. Subject to the provisions
of this Agreement, the Company shall pay and provide the following compensation
and other benefits to the Employee during the Term as compensation for all
services rendered hereunder and the covenants contained in Section 6 hereof:
(a) Salary. The Company shall pay to the Employee an annual
salary (the "Salary") at the initial rate of $220,000, payable to the Employee
in accordance with the normal payroll practices of the Company for its employees
as are in effect from time to time. The amount of the Employee's Salary shall be
reviewed annually by the Company on or about October 1st of each year during the
Term beginning in the 2000 calendar year. The Company shall pay to the Employee
a one time signing bonus of $22,000 to be paid at the time the Employee receives
his first paycheck from the Company.
(b) Annual Bonus. The Employee shall be eligible for 1999 and
each calendar year thereafter that begins during his employment to participate
in an annual incentive bonus program established by the Company, in accordance
with the policies of the Company, its subsidiaries and affiliates (hereinafter,
collectively the "Group") and subject to such terms and conditions as may be
approved annually by the Company. Under the terms of the annual incentive bonus
program, the Employee will be afforded the opportunity to earn up to 30% of his
Salary (the "Bonus") in effect for the applicable calendar year, subject to the
achievement of the performance targets established by the Company for that year,
to be paid on a pro-rata basis in the event that the Employee is employed for
less than a full calendar year (for purposes of determining the 1999 bonus, the
Employee shall be deemed to have commenced employment as of October 1, 1999).
(b) Relocation Expenses. The Company shall pay and/or
reimburse all reasonable temporary housing expenses and moving expenses as
outlined in the attached relocation agreement.
(c) Stock Options. Effective as of the Effective Date, the
Company shall grant the Employee an option (the "Option") to purchase 100,000
shares of the common stock of the Company pursuant to the terms the Company's
1998 Stock Option Plan (the "Option Plan"). The per share exercise price of the
Option shall equal the fair market value of a share of Common Stock on the
Effective Date, as determined in accordance with the terms of the Option Plan.
The Option shall vest and become exercisable as to 25% on October 1, 2000; the
remainder of the Option shall vest ratably on the first day of each month over
the following three years. Except as otherwise specified herein, the Option
shall be subject to the terms of
2
<PAGE> 3
the Option Plan and to such other terms and conditions as may be specified by
the Compensation Committee of the Company in the form of a standard option
agreement between the Company and the Employee.
(d) Expenses. The Company shall pay or reimburse the Employee
for all reasonable out-of-pocket expenses incurred by the Employee in connection
with his employment hereunder in accordance with Group. Such expenses shall be
paid upon the periodic submission of invoices and shall be paid reasonably
promptly after the date of such invoice. The reimbursement of expenses under
this Section 3(d) shall be subject to the Employee's providing the Company with
such documentation of the expenses as the Company may from time to time
reasonably request in accordance with the policies of the Group.
(e) 401k plan, Health and Fringe Benefits. During the Term,
the Employee shall be eligible to participate in the Company's 401k plan,
medical, disability and life insurance plans applicable to executives of the
Company in accordance with the terms of such plans as in effect from time to
time. The Employee shall also be provided with free parking at the place of
employment.
(f) Long-Term Incentive Program. During the Term, the Employee
shall participate in all long-term incentive plans and programs of the Group
that are applicable to its senior executives in accordance with their terms and
in a manner consistent with his position with the Company.
(g) Holidays. In addition to the usual public and bank
holidays, the Employee shall be entitled to twenty days' paid vacation annually,
which shall be taken at such times as are approved by the Company. The Employee
shall be permitted to carry forward any portion of his vacation time for up to
one year and, upon the expiration of such one-year period, the Employee shall be
paid in lieu of such vacation days.
4. TERMINATION OF EMPLOYMENT. Subject to the notice and
other provisions of this Section 4, the Company shall have the right to
terminate the Employee's employment hereunder, and he shall have the right to
resign, at any time for any reason or for no stated reason.
(a) Termination for Cause; Resignation Without Good Reason.
(i) If, prior to October 1, 2000, the Employee's employment is terminated by the
Company for Cause or if the Employee resigns from his employment hereunder other
than for Good Reason, he shall be entitled to payment of the pro rata portion of
his Salary and accrued Bonus (for purposes of this Agreement, "accrued Bonus"
shall be determined using the number of days in the applicable calendar year
that the Employee was employed by the Company and the applicable performance
criteria under the bonus plan, in each case through the date of termination or
resignation) through and including the date of termination or resignation, as
well as any unreimbursed expenses. Except to the extent required by the terms of
any applicable compensation or benefit plan or program or as otherwise required
by applicable law, the Employee shall have no rights under this Agreement or
otherwise to receive any other
3
<PAGE> 4
compensation or to participate in any other plan, program or arrangement after
such termination or resignation of employment with respect to the year of such
termination or resignation and later years.
(ii) In addition, the Employee shall be entitled to retain the
then-vested portion of his options to purchase shares of the Company's common
stock until such options expire in accordance with their terms.
(iii) Termination for "Cause" shall mean termination of the
Employee's employment with the Company because of (A) willful, material or
persistently repeated non-performance of the Employee's duties to the Company
(other than by reason of the incapacity of the Employee due to physical or
mental illness) after notice by the Board of such failure and the Employee's
non-performance and continued, willful, material or persistent repeated
non-performance after such notice, (B) the indictment of the Employee for a
felony offense, (C) fraud against the Group or any willful misconduct that
brings the reputation of the Group into serious disrepute or causes the Employee
to cease to be able to perform his duties, (D) any other material breach by the
Employee of any material term of this Agreement, (E) the Employee files for
personal bankruptcy under the United States Bankruptcy Code, or (F) the Employee
is unable to perform his duties, by reason of disability, for a period of six
(6) months or more.
(iv) Termination of the Employee's employment for Cause shall
be communicated by delivery to the Employee of a written notice from the Company
stating that the Employee has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by the Employee without Good Reason shall be the date specified in a
written notice of resignation from the Employee to the Company. The Employee
shall provide at least 30 days' advance written notice of resignation without
Good Reason.
(b) Involuntary Termination. (i) If, prior to October 1, 2000,
the Company terminates the Employee's employment for any reason other than Cause
or Employee resigns from his employment hereunder for Good Reason (collectively
hereinafter referred to as an "Involuntary Termination"), the Company shall pay
to the Employee his Salary and accrued Bonus up to and including the date of
such Involuntary Termination, as well as any unreimbursed expenses. In addition,
the Company shall continue to pay to the Employee as severance (the "Severance
Payments") in accordance with the Company's normal payroll practices, his
Salary, at the rate in effect immediately prior to such Involuntary Termination,
through and including October 1, 2000.
(ii) In addition, in the event of the Employee's Involuntary
Termination prior to October 1, 2000, all of the Employee's then-outstanding
options to purchase shares of the Company's common stock shall continue to vest
until October 1, 2000. The Employee shall be entitled to retain the vested
portion of his options as if he had remained an Employee until October 1, 2000.
4
<PAGE> 5
(iii) Resignation for "Good Reason" shall mean resignation by Employee
because of (A) an adverse and material change in the Employee's duties, titles
or reporting responsibilities, (B) a material breach by the Company of any term
of the Agreement, (C) a reduction in the Employee's Salary or bonus opportunity
or the failure of the Company to pay the Employee any material amount of
compensation when due, (D) the assignment to Employee of any material duties
that are inconsistent with those described in Section 1 of this Agreement
without the Employee's consent, or (E) the Company's requirement that Employee
perform a substantial portion of his duties outside the Seattle, Washington
metropolitan area, except for travel in furtherance of the Company's business.
The Company shall have 30 business days from the date of receipt of such notice
to effect a cure of the material breach described therein and, upon cure thereof
by the Company to the reasonable satisfaction of the Employee, such material
breach shall no longer constitute Good Reason for purposes of this Agreement.
(iv) The date of termination of employment without Cause shall be the
date specified in a written notice of termination to the Employee. The date of
resignation for Good Reason shall be the date specified in a written notice of
resignation from the Employee to the Company; provided, however, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(iv) above has expired without the Company having corrected, to the
reasonable satisfaction of the Employee, the event or events subject to cure.
(v) Anything in this Agreement to the contrary notwithstanding, no
amounts shall be payable under this Section 4(b) if the Employee's employment
with the Company ends, for any reason, on or after October 1, 2000.
5. LIMITATION ON PAYMENTS.
Notwithstanding anything herein to the contrary, if any of the payments
made hereunder would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), and
the net after-tax amount of the parachute payment is less than the net after-tax
amount if the aggregate payments to be made to the Employee were three times his
"base amount" (as defined in Section 280G(b)(3) of the Code), less $1.00, then
the aggregate of the amounts constituting the parachute payment shall be reduced
to an amount that will equal three times the base amount, less $1.00. The
determinations to be made with respect to this Section 5 shall be made by an
independent accounting firm of national standing (other than the Company's
regular auditors). The accounting firm shall be paid by the Company for its
services performed hereunder.
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) No Competing Employment. For so long as the Employee is employed
by the Company and for one (1) year thereafter (such period being referred to
hereinafter as the "Restricted Period"), the Employee shall not, without the
prior written consent of the Board, directly or indirectly, own an interest in,
manage, operate, join, control, lend money or render financial or other
assistance to or participate in or be connected with, as an officer,
5
<PAGE> 6
employee, partner, stockholder, consultant or otherwise, any individual,
partnership, firm, corporation or other business organization or entity that
competes with the Group by providing any goods or services provided or under
development by the Group at the effective date of the Employee's termination of
employment under this Agreement; provided, however, that this Section 6(a) shall
not proscribe the Employee's ownership, either directly or indirectly, of either
less than five percent of any class of securities which are listed on a national
securities exchange or quoted on the automated quotation system of the National
Association of Securities Dealers, Inc..
(b) No Interference. During the Restricted Period, the
Employee shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), intentionally solicit, endeavor to entice away from the Group
or otherwise interfere with the relationship of the Group with, any key person
or team who is employed by or otherwise engaged to perform services for the
Group or any key person or team or entity who is, or was within the then most
recent twelve-month period, a customer, client or supplier of the Group.
(c) Secrecy. The Employee recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder, he may acquire confidential information and
trade secrets concerning the operation of the Group, the use or disclosure of
which could cause the Group substantial losses and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, the Employee covenants and agrees with the Company that he will not
at any time, except in performance of the Employee's obligations to the Company
hereunder or with the prior written consent of the Board, directly or indirectly
disclose to any person any confidential information that he may learn or has
learned by reason of his association with the Group. The term "confidential
information" means any information not previously disclosed to the public or to
the trade by the Group with respect to the Company's, or any of its affiliates'
or subsidiaries', products, facilities and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential reports,
product price lists, customer lists, financial information (including the
revenues, costs or profits associated with any of the Group's products),
business plans, prospects or opportunities.
(d) Exclusive Property. The Employee confirms that all
confidential information is and shall remain the exclusive property of the
Group. All business records, papers and documents kept or made by the Employee
relating to the business of the Group shall be and remain the property of the
Group. Upon the termination of his employment with the Company or upon the
request of the Company at any time, the Employee shall promptly deliver to the
Company, and shall not without the consent of the Board retain copies of, any
written materials not previously made available to the public, or records and
documents made by the Employee or coming into his possession concerning the
business or affairs of the Group; provided, however, that subsequent to any such
termination, the Company shall provide the Employee with copies (the cost of
which shall be borne by the Employee) of any documents which are requested by
the Employee and which the Employee has determined in good faith are (i)
required to establish a defense to a claim that the Employee has not complied
6
<PAGE> 7
with his duties hereunder or (ii) necessary to the Employee in order to comply
with applicable law.
(e) Assignment of Developments. All "Developments" (as defined
below) that were or are at any time made, conceived or suggested by Employee,
whether acting alone or in conjunction with others, during Employee's employment
with the Group shall be the sole and absolute property of the Group, free of any
reserved or other rights of any kind on the part of Employee. During Employee's
employment and, if such Developments were made, conceived or suggested by
Employee during his employment with the Group, thereafter, Employee shall
promptly make full disclosure of any such Developments to the Group and, at the
Group's cost and expense, do all acts and things (including, among others, the
execution and delivery under oath of patent and copyright applications and
instruments of assignment) deemed by the Group to be necessary or desirable at
any time in order to effect the full assignment to the Group of Employee's right
and title, if any, to such Developments. For purposes of this Agreement, the
term "Developments" shall mean all data, discoveries, findings, reports,
designs, inventions, improvements, methods, practices, techniques, developments,
programs, concepts, and ideas, whether or not patentable, relating to the
activities of the Group of which Employee is as of the date of this Agreement
aware or of which Employee becomes aware at any time during the Term, excluding
any Development for which no equipment, supplies, facilities or confidential
information of the Group was used and which was developed entirely on Employee's
own time, unless (i) the Development relates directly to the business of the
Group, (ii) the Development relates to actual or demonstrably anticipated
research or development of the Group, or (iii) the Development results from any
work performed by Employee for the Group (the foregoing is agreed to satisfy the
written notice and other requirements of Section 49.44.140 of the Revised Code
of Washington).
(f) Injunctive Relief. Without intending to limit the remedies
available to the Company, the Employee acknowledges that a breach of any of the
covenants contained in this Section 6 may result in material irreparable injury
to the Group for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Employee from engaging in activities prohibited by this Section
6 or such other relief as may be required to specifically enforce any of the
covenants in this Section 6. Without intending to limit the remedies available
to the Employee, the Employee shall be entitled to seek specific performance of
the Company's obligations under this Agreement.
7. GENERAL PROVISIONS.
(a) Source of Payments. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides otherwise,
shall be paid in cash from the general funds of the Company, and no special or
separate fund shall be established, and no other segregation of assets made, to
assure payment. The Employee shall have no right, title or interest whatever in
or to any investments which the Company may make to aid
7
<PAGE> 8
the Company in meeting its obligations hereunder. To the extent that any person
acquires a right to receive payments from the Company hereunder, such right
shall be no greater than the right of an unsecured creditor of the Company;
provided, however, that this provision shall not be deemed to waive or abrogate
any preferential or other rights to payment accruing to the Employee under
applicable bankruptcy laws by virtue of the Employee's status as an employee of
the Company.
(b) No Other Severance Benefits. Except as specifically set forth in this
Agreement, the Employee covenants and agrees that he shall not be entitled to
any other form of severance benefits from the Company, including, without
limitation, benefits otherwise payable under any of the Company's regular
severance policies, in the event his employment hereunder ends for any reason
and, except with respect to obligations of the Company expressly provided for
herein, the Employee unconditionally releases the Company and its subsidiaries
and affiliates, and their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with his employment or the termination
thereof.
(c) Tax Withholding. Payments to the Employee of all compensation
contemplated under this Agreement shall be subject to all applicable tax
withholding.
(d) Notices. Any notice hereunder by either party to the other shall be
given in writing by personal delivery, or certified mail, return receipt
requested, or (if to the Company) by telex or facsimile, in any case delivered
to the applicable address set forth below:
(i) To the Company: Getty Images, Inc.
2101 Fourth Avenue
5th Floor
Seattle, Washington 98121
(ii) To the Employee: A.D. "Bud" Albers
2251 Whitney Pointe Drive
Clarkson Valley, MO 63005-4515
or to such other persons or other addresses as either party may specify to the
other in writing.
(e) Representation by the Employee. The Employee represents and warrants
that his entering into this Agreement does not, and that his performance under
this Agreement and consummation of the transactions contemplated hereby will
not, violate the provisions of any agreement or instrument to which the Employee
is a party, or any decree, judgment or order to which the Employee is subject,
and that this Agreement constitutes a valid and binding obligation of the
Employee in accordance with its terms. Breach of this representation
8
<PAGE> 9
will render all of the Company's obligations under this Agreement void ab
initio.
(f) Limited Waiver. The waiver by the Company or the Employee
of a violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(g) Assignment; Assumption of Agreement. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Employee in respect of any claim, debt,
obligation or similar process. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
(h) Amendment; Actions by the Company. This Agreement may not
be amended, modified or canceled except by written agreement of the Employee and
the Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; provided, however, that by resolution duly adopted in accordance with
this Section 7(h), the Board may delegate its responsibilities hereunder to one
or more of its members other than the Employee.
(i) Severability. If any term or provision hereof is
determined to be invalid or unenforceable in a final court or arbitration
proceeding, (i) the remaining terms and provisions hereof shall be unimpaired
and (ii) the invalid or unenforceable term or provision shall be deemed replaced
by a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
(j) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (determined
without regard to the choice of law provisions thereof).
(k) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby and supersedes all prior agreements and understandings of the
parties with respect to the subject matter hereof.
(l) Headings. The headings and captions of the sections of
this Agreement are included solely for convenience of reference and shall not
control the meaning or interpretation of any provisions of this Agreement.
(m) Counterparts. This Agreement may be executed by the
parties hereto in counterparts, each of which shall be deemed an original, but
both such counterparts shall
9
<PAGE> 10
together constitute one and the same document.
(n) Disciplinary and Grievance Procedures. For statutory
purposes, there is no formal disciplinary procedure in relation to the
Employee's employment. The Employee shall be expected to maintain the highest
standards of integrity and behavior. If the Employee has any grievance in
relation to his employment or is not satisfied with any disciplinary procedure
taken in relation to him, he may apply in writing within 14 days of that
decision to the Board, whose decision shall be final. The foregoing shall not be
construed, however, to limit the Employee's remedies at law or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first written above.
GETTY IMAGES, INC.
By:
Name:
Title:
EMPLOYEE
By: ____________________________________
A.D. "Bud" Albers
10
<PAGE> 1
EXHIBIT 10.8
THIS CREDIT AGREEMENT is dated 25th October, 1999 between:
(1) GETTY IMAGES, INC. a company incorporated under the laws of Delaware,
United States of America with its principal office at 701 N. 34th
Street, Suite 400, Seattle, Washington 98103, United States of America
(the "PARENT");
(2) THE COMPANIES listed in Part I of Schedule 1 as borrowers (in this
capacity together with the Parent each an "ORIGINAL BORROWER");
(3) THE COMPANIES listed in Part II of Schedule 1 as guarantors (in this
capacity each an "ORIGINAL GUARANTOR");
(4) HSBC INVESTMENT BANK plc as arranger (in this capacity the "ARRANGER");
(5) THE FINANCIAL INSTITUTIONS listed in Schedule 2 as Banks;
(6) HSBC INVESTMENT BANK plc as facility agent for the Banks (in this
capacity the "FACILITY AGENT");
(7) HSBC INVESTMENT BANK plc as security agent and trustee for the Banks
(in this capacity the "SECURITY AGENT"); and
(8) HSBC BANK plc as overdraft bank (in this capacity the
"OVERDRAFT BANK").
IT IS AGREED as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement terms defined above or in Clause 20 (Financial
Covenants) have the same meaning when used in this Agreement and:
"ACCOUNTING DATE" means each 31st March, 30th June, 30th September and
31st December, save as any such date may be adjusted with the agreement
of the Facility Agent to avoid an Accounting Date falling on a day
which is not a Business Day and/or to ensure that all Accounting Dates
fall on the same day of the week.
"ACCOUNTING PERIOD" in relation to any person means any period of
approximately one month, three months or one year for which Accounts of
such person are required to be prepared ending, in the case of each
three months and each one year period, on an Accounting Date.
"ACCOUNTS" means at any time the latest audited or unaudited, as the
case may be, monthly, quarterly, or annual consolidated accounts of the
Group and any other accounts (whether consolidated or unconsolidated)
of any member of the Group in each case delivered or required to be
delivered to the Facility Agent pursuant to this Agreement, as the
context requires.
<PAGE> 2
"ACQUIRED ASSETS" means the shares to be acquired by the Parent and/or
such directly or indirectly wholly owned subsidiary as the Parent may
designate and notify to the Facility Agent pursuant to the terms of the
Acquisition Agreements and all other rights, assets and liabilities
(tangible and intangible, present and future, actual and contingent),
acquired or assumed to be acquired by the Parent and/or such directly
or indirectly wholly owned subsidiary as the Parent may designate (and
notify to the Facility Agent) pursuant to the Acquisition Agreements.
"ACQUISITION" means the acquisition of any interest in the share
capital (or equivalent) or in the business or undertaking of any
company or other person other than the Parent (including, without
limitation, any partnership or joint venture).
"ACQUISITION AGREEMENTS" means the Stock Purchase Agreement and all
transfers and other instruments entered into pursuant thereto.
"ACQUISITION COSTS" means all fees, costs and expenses incurred by the
Parent and/or such directly or indirectly wholly owned subsidiary as
the Parent may designate and notify to the Facility Agent in connection
with the negotiation, preparation, execution, registration and
performance of the Acquisition Agreements.
"ADDITIONAL BORROWER" means a member of the Group which becomes a
Borrower in accordance with Clause 17.1 (Additional Borrowers).
"ADDITIONAL GUARANTOR" means a member of the Group which becomes a
Guarantor in accordance with Clause 17.2 (Additional Guarantors).
"ADVANCE" means the principal amount of each borrowing under this
Agreement from the Tranche A Commitments (a "TRANCHE A ADVANCE") or the
principle amount thereof outstanding from time to time.
"AFFILIATE" in relation to any person, means a Subsidiary or a Holding
Company of that person and any other Subsidiary of a Holding Company of
that person.
"AGENT" means the Facility Agent or the Security Agent, as the context
requires.
"AGENT'S SPOT RATE OF EXCHANGE" with respect to any Optional Currency
on any day, means the spot rate of exchange as determined by the
Facility Agent for the purchase of the appropriate amount of such
Optional Currency with Dollars in the London Foreign Exchange Market in
the ordinary course of business at or about 10.00 a.m. on the day in
question.
"ANNIVERSARY" means an anniversary of the Signing Date.
"APPLICABLE ACCOUNTING PRINCIPLES" means (i) in respect of any Accounts
or projections of the Parent or of the Group as a whole delivered under
this Agreement, the accounting principles and practices generally
accepted as at the date hereof in the United States of America, and
(ii) in respect of any other Accounts or projections, the accounting
principles and practices generally accepted as at the date hereof in
the country in which the company or Holding Company concerned is
incorporated.
<PAGE> 3
"APPLICABLE MARGIN" means at any time, the percentage rate per annum
determined at such time to be the applicable margin in accordance with
Clause 8.5 (Applicable Margin and commitment fee)
"AUDITORS" means PricewaterhouseCoopers or such other firm of
independent public accountants of international standing which is
agreed between the Parent and the Facility Agent, to audit the annual
Accounts of the Parent.
"AVAILABLE FACILITY AMOUNT" means the amount of the Total Commitment
less the aggregate amount of the Original Dollar Amounts of the then
outstanding Advances, at such time taking into account any Advances
scheduled to be made, repaid or prepaid assuming that the same occurs
when due.
"AVAILABILITY PERIOD" means the period from the date of this Agreement
to close of business in London on the Final Maturity Date (both dates
included).
"BANK" means each bank, trust, fund or other financial institution
whose name is set out in Schedule 2 or to which rights and/or
obligations under this Agreement are assigned or transferred pursuant
to Clause 28.2 (Transfers by Banks) or which assumes rights and
obligations pursuant to a Novation Certificate provided that upon (i)
termination in full of all the Commitments of any such bank, trust,
fund or financial institution (and for these purposes the Commitment of
any Bank which assigns, transfers or novates all of its rights and/or
obligations in accordance with clauses 28.2 (Transfers by Banks) and
28.3 (Procedure for Novation) shall be deemed to have been terminated
in full), and (ii) irrevocable payment in full of all amounts which may
be or become payable to such bank, trust, fund or financial institution
in any and all capacities under the Finance Documents, such bank,
trust, fund or financial institution shall not be regarded as being a
Bank for the purposes of determining whether any provision of any of
the Finance Documents requiring consultation with or the consent or
approval of or instructions from the Banks or the Majority Banks has
been complied with.
"BASE FINANCIAL STATEMENTS" means:
(a) the audited consolidated accounts dated as at and for the year
ended 31st December, 1998, and unaudited consolidated
management accounts for the period of 6 months to 30th June,
1999, of The Image Bank Inc. and its Subsidiaries; and
(b) the unaudited consolidated accounts dated as at and for the
year ending 31st December, 1998, and unaudited consolidated
management accounts for the period of 6 months to 30th June,
1999, for The Image Bank France S.A. and its Subsidiaries.
"BORROWER" means an Original Borrower and any Additional Borrower.
"BORROWER ACCESSION AGREEMENT" means a letter substantially in the form
of Part II of Schedule 5 with such amendments as the Facility Agent may
approve or reasonably require.
"BORROWINGS" means (calculated without any double counting) any
indebtedness (including any interest and other charges relating
thereto) in respect of:
(a) moneys borrowed or raised and debit balances at banks;
<PAGE> 4
(b) any debenture, bond, bill, note, loan stock or other security;
(c) any acceptance or documentary credit;
(d) receivables sold or discounted (otherwise than on a
non-recourse basis);
(e) the acquisition cost of any asset or service to the extent
payable before or after the time of acquisition or possession
by the party liable where the advance or deferred payment (i)
is arranged primarily as a method of raising finance or
financing the acquisition of that asset or (ii) is normal in
the trade concerned and the advance is paid more than 180 days
before, or the deferred payment is paid more than 180 days
after, the due date of acquisition or possession of such
asset;
(f) finance leases and hire purchase and other arrangements
treated as finance leases in accordance with the Applicable
Accounting Principles;
(g) currency or interest rate swap, cap, collar or hedging
arrangements or financial futures transactions;
(h) any other transaction having the commercial effect of a
borrowing (whether involving money or commodities); or
(i) any guarantee, indemnity, letter of credit or similar
assurance against financial loss of any person in respect of
any indebtedness falling within paragraphs (a) to (h)
inclusive and any legally binding agreement to maintain the
solvency of any person whether by investing in, lending to or
purchasing any assets of such person to the extent that the
same are treated as borrowings in accordance with Applicable
Accounting Principles,
provided that for the purposes of the calculation of Consolidated Total
Borrowings (as defined in Clause 20.1 (Financial Definitions)) items
falling within paragraph (g) shall be excluded, and for the purposes of
Clause 21.1(d) (Cross-default) items falling within paragraph (g) shall
only be included to the extent of the net amount owing to any
counterparty under any such transaction (to the extent that the
underlying contract provides for net payments).
"BUSINESS DAY" means a day (other than a Saturday or a Sunday) on which
banks and foreign exchange markets are open for business in London and:
(a) (i) if a payment or other transaction in Dollars is
required, in New York; or
(ii) if a payment or other transaction involving an
Optional Currency (other than euros) is required, in
the principal financial centre of the country of that
Optional Currency; or
(b) if a payment or other transaction involving euros is required,
a day on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer system (TARGET) is operating (or,
if such clearing system ceases to be operative, such other
<PAGE> 5
clearing system (if any) determined by the Facility Agent to
be a suitable replacement).
"CAPITAL EXPENDITURE" means any expenditure which is treated as capital
expenditure in the audited consolidated Accounts of the Group in
accordance with the Applicable Accounting Principles.
"CASH EQUIVALENT INVESTMENTS" means:
(a) debt securities (denominated in Dollars, Sterling or another
Optional Currency) issued or guaranteed by the government of
the country of the currency concerned having not more than 6
months to final maturity and which are not convertible into
any other form of security;
(b) debt securities (denominated in Dollars, Sterling or another
Optional Currency) which have not more than 60 days to final
maturity, are not convertible into any other form of security,
are rated at least P1 (Moody's Investors Services Inc.) or A-1
(Standard & Poor's Corporation) and are not issued or
guaranteed by any member of the Group; or
(c) such other securities (if any) as are approved as such in
writing by the Facility Agent.
"CHIEF EXECUTIVE OFFICER" means the chief executive officer of the
Parent from time to time.
"CHIEF FINANCIAL OFFICER" means the chief financial officer of the
Parent from time to time.
"CLOSING DATE" means the date on which the TIB Acquisition completes in
accordance with Section 2.5 of the Stock Purchase Agreement.
"COMMITMENT" means in relation to a Bank, its Tranche A Commitment as
reduced or increased from time to time pursuant to any Novation
Certificate or other transfer under Clause 28.2 (Transfers by Banks) to
which such Bank is party, and to the extent not otherwise cancelled,
reduced or terminated under this Agreement.
"DANGEROUS SUBSTANCE" means any radioactive emissions, noise and any
natural or artificial substance (in whatever form) the generation,
transportation, storage, treatment, use or disposal of which (whether
alone or in combination with any other substance) gives rise to a risk
of causing harm to man or any other living organism or damaging the
Environment or public health or welfare, including (without limitation)
any controlled, special, hazardous, toxic, radioactive or dangerous
waste.
"DEFAULT" means an Event of Default or an event which, with the giving
of notice, lapse of time or fulfilment of any other applicable
condition stated in any Finance Document or combination of the
foregoing would constitute an Event of Default, provided that any such
event which requires the satisfaction of a condition as to materiality
before it becomes an Event of Default shall not be a Default until that
condition is satisfied.
"DOLLARS" and "U.S.$" means the lawful currency for the time being of
the United States of America.
<PAGE> 6
"DOLLAR EQUIVALENT" in relation to all amounts expressed or denominated
in an Optional Currency, means the equivalent thereof in Dollars
converted at the Agent's Spot Rate of Exchange on the date of the
relevant calculation (and, if used in relation to an amount expressed
or denominated in Dollars, such amount).
"DRAWDOWN DATE" in relation to each Advance, means the date specified
as such in the relevant Request or on and after the making of such
Advance pursuant to such Request, the date on which it was made.
"EMU" means Economic and Monetary Union as contemplated by the Treaty.
"EMU LEGISLATION" means legislative measures of the European Council
for the introduction of, changeover to, or operation of, a single or
unified European currency.
"ENCUMBRANCE" means any mortgage, pledge, lien, charge, assignment for
the purpose of providing security, hypothecation, right in security,
security interest or trust arrangement for the purpose of providing
security, and any other security agreement or other arrangement having
the effect of providing security (including, without limitation, the
deposit of monies or property with a person with the primary intention
of affording such person a right of set-off or lien).
"ENVIRONMENT" means all, or any of, the following media, the air
(including, without limitation, the air within buildings and the air
within other natural or man-made structures above or below ground),
water (including, without limitation, ground and surface water) and
land (including, without limitation, surface and sub-surface soil).
"ENVIRONMENTAL CLAIM" means any claim by any person:
(a) in respect of any loss or liability suffered or incurred by
that person as a result of or in connection with any violation
of Environmental Law; or
(b) that arises as a result of or in connection with Environmental
Contamination and that could give rise to any remedy or
penalty (whether interim or final) that may be enforced or
assessed by private or public legal action or administrative
order or proceedings.
"ENVIRONMENTAL CONTAMINATION" means each of the following and their
consequences:
(a) any release, discharge, emission, leakage or spillage of any
Dangerous Substance at or from any site owned, occupied or
used by any member of the Group into any part of the
Environment; or
(b) any accident, fire, explosion or sudden event at any site
owned, occupied or used by any member of the Group which is
directly or indirectly caused by or attributable to any
Dangerous Substance; or
(c) any other pollution of the Environment.
"ENVIRONMENTAL LAW" means all laws (including, without limitation,
common law), regulations, directives, codes of practice, circulars,
guidance notices and the like having legal
<PAGE> 7
effect concerning the protection of human health, the Environment, the
conditions of the work place or the generation, transportation,
storage, treatment or disposal of Dangerous Substances.
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation,
consent or other approval required by any Environmental Law.
"ERISA" means the United States Employee Retirement Income Security Act
of 1974 as amended from time to time, or any successor statute thereto
and any regulations promulgated thereunder.
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of
ERISA), whether or not incorporated, which is under common control or
would be considered a single employer with any Obligor domiciled in the
United States within the meaning of Section 414(b), (c), (m) or (o) of
the IRC and regulations promulgated under those sections or within the
meaning of Section 4001(b) of ERISA.
"ERISA EVENT" means (i) a Reportable Event; (ii) the failure to meet
the minimum funding standard of Section 412 of the IRC with respect to
any Plan (whether or not waived in accordance with Section 412(d) of
the IRC) or the failure to make by its due date a required instalment
under Section 412(m) of the IRC with respect to any Plan or the failure
to make any required contribution to a Multiemployer Plan; (iii) the
provision by the administrator of any Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by any U.S. Obligor or any of their respective ERISA
Affiliates from any Plan with two or more contributing sponsors or the
termination of any such Plan resulting in material liability pursuant
to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of
proceedings to terminate any Plan, or the occurrence of any event or
condition which constitutes grounds under ERISA for the termination of,
or the appointment of a trustee to administer, any Plan; (vi) the
imposition of material liability on any U.S. Obligor or any of their
respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA;
(vii) the withdrawal of any U.S. Obligor or any of the respective ERISA
Affiliates in a complete or partial withdrawal (within the meaning of
Section 4203 and 4205 of ERISA) from any Multiemployer Plan if there is
any potential material liability therefor, or the receipt by any U.S.
Obligor or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganisation or insolvency pursuant
to Section 4241 or 4245 or ERISA, or that it intends to terminate or
has terminated under Section 4041A or 4042 of ERISA with respect to
which any US Obligor would have material liability; (viii) the
occurrence of an act or omission which could give rise to the
imposition on any U.S. Obligor or any of their respective ERISA
Affiliates of material fines, penalties, taxes or related charges under
Chapter 43 of the IRS or under Section 409, 502(c), (i) or (l), or 4071
of ERISA in respect of any Plan, (ix) the assertion of a material claim
(other than routine claims for benefits) against any Plan other than a
Multiemployer Plan or the assets thereof, or against any U.S. Obligor
or any of their respective ERISA Affiliates in connection with any
Plan; (x) receipt from the Internal Revenue Service of notice of the
failure of any Plan (or any other employee benefit plan intended to be
qualified under Section 401(a) of the IRC) to qualify under Section
401(a) of the IRC, or the failure of any trust forming part of any Plan
to qualify for exemption from taxation under Section 501(a) of the IRC;
or (xi) the imposition of a lien pursuant to Section 401(a)(29) or
412(n) of the IRC or pursuant to ERISA with respect to any Plan.
<PAGE> 8
"EURO" means the single currency introduced on 1st January, 1999 as
contemplated by the Treaty.
"EURO-DOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed
by the Board of Governors of the Federal Reserve System of the U.S.A.
(or any successor), for determining the maximum reserve requirement for
a member bank of the Federal Reserve System in New York City with
deposits exceeding five billion Dollars in respect of "Eurocurrency
liabilities" as specified in Regulation D (or in respect of any other
category of extensions of credit or other assets which includes loans
by a non-United States office of any bank to United States residents).
"EURO UNIT" means a unit of the euro as defined in EMU legislation.
"EVENT OF DEFAULT" means an event specified as such in Clause 21.1
(Events of Default).
"EXCLUDED INTELLECTUAL PROPERTY" means any trade names, trade marks and
service marks (whether registered or not and including all applications
for the same) which include the name or mark "GETTY", "GETTY
COMMUNICATIONS" or "GETTY IMAGES", or a design consisting of the letter
"G" in a circle and including any future trade names, trade marks and
service marks incorporating "GETTY", "GETTY COMMUNICATIONS" or "GETTY
IMAGES" or the aforementioned design.
"EXECUTIVE" means each of Jonathan Klein, Mark Getty and Christopher
Roling or their respective replacements from time to time.
"EXECUTIVE OFFICER" means either of the Chief Executive Officer, the
Executive Chairman or the Chief Financial Officer.
"EXISTING FACILITIES" the Existing Revolving Credit Facility and
Existing Overdraft Facility.
"EXISTING REVOLVING CREDIT FACILITY" means the U.S.$20 million
revolving Credit Facility made available by HSBC Bank plc to the Parent
pursuant to a loan agreement dated 12th April, 1999 (as amended on 23rd
August, 1999).
"EXISTING OVERDRAFT FACILITY" means the (pound)2 million overdraft and
forward foreign exchange contracts line of (pound)5 million facility
made available by HSBC Bank plc to, inter alios, Getty U.K. pursuant to
a facility letter dated 7th January, 1999.
"EXISTING OVERDRAFT FACILITY AGREEMENT" means the facility letter dated
7th January, 1999 pursuant to which the Existing Overdraft Facility was
made available to, inter alios, Getty UK.
"FACILITY" means the facility to draw Tranche A Advances referred to in
Clause 2.1 (Facilities).
"FACILITY OFFICE" in relation to any Bank, means the office specified
as such in Schedule 2 or in the Novation Certificate by which such Bank
becomes a party hereto or such other office
<PAGE> 9
notified by such Bank to the Facility Agent by not less than 5 Business
Days' notice as the office through which it will perform all or any of
its obligations under this Agreement.
"FEE LETTER" means the letter referred to in Clauses 23.1 (Arrangement
fee) and 23.3 (Agency fees).
"FINAL MATURITY DATE" means 25th October, 2002 being the date of the
third Anniversary.
"FINANCE DOCUMENTS" means this Agreement, the Fee Letter, the Novation
Certificates, the Borrower Accession Agreements, the Guarantor
Accession Agreements, the Security Documents, and any other document
designated as such by the Facility Agent, which term for the purposes
of the definition of "Security Documents" (including all references to
Finance Documents wheresoever used in the Security Documents) and
Clauses 1.2(iv) Constructions, 1.2(b) (Construction), 16 (Guarantee),
18.1(x) (Senior Indebtedness/Designated Senior Indebtedness), 19.12
(Third Party Guarantees), 19.20(c) (Environmental matters), 19.25
(Compliance with laws), 19.31 (UCC filings), 22 (the Agent and the
Arranger) and 37 (Senior Indebtedness/Designated Senior Indebtedness)
shall also include the Existing Overdraft Facility Agreement and any
Hedging Document. For the avoidance of doubt, the Facility Agent will
not designate the Existing Overdraft Facility Agreement or any Hedging
Document a "Finance Document" in any other context than as provided
herein, without the consent of the Obligors' Agent.
"FINANCE PARTY" means the Arranger, each Bank, the Facility Agent and
the Security Agent (together the "FINANCE PARTIES"), which term for the
purposes of Clauses 16 (Guarantee), 22 (The Agents and the Arranger)
and 24.2 (Enforcement Costs) shall include the Overdraft Bank and any
Hedging Bank
"FINANCIAL FORECASTS" means the document of the same title in the
agreed form.
"GETTY U.K." means Getty Communications Limited, a company incorporated
in England with registered number 3005770.
"GROUP" means the Parent and its Subsidiaries.
"GUARANTOR" means an Original Guarantor and any Additional Guarantor.
"GUARANTOR ACCESSION AGREEMENT" means a deed substantially in the form
of Part III of Schedule 5 with such amendments as the Facility Agent
may approve or reasonably require.
"HEDGING BANK" means any Bank in its capacity as the provider of
hedging facilities for the hedging of exposures arising pursuant to
this Agreement.
"HEDGING DOCUMENTS" means all currency swap, interest rate swap and/or
interest cap and/or other hedging agreements entered into or to be
entered into by any Obligor with a Hedging Bank for the hedging of
exposures arising pursuant to the terms of this Agreement, in each case
as, and including, any instrument pursuant to which the same are
novated, varied, supplemented or amended from time to time.
"HOLDING COMPANY" means an entity of which another person is a
Subsidiary.
<PAGE> 10
"INFORMATION MEMORANDUM" means the information memorandum to be
prepared by the Parent and delivered to the Arranger and the Banks in
connection with this Agreement and general syndication of the
Facilities.
"INTELLECTUAL PROPERTY RIGHTS" means all know-how, patents, trademarks,
service marks, designs, business names, topographical or similar
rights, copyrights and other intellectual property rights and any
interests (including by way of licence) in any of the foregoing (in
each case whether registered or not and including all applications for
the same) of any member of the Group.
"INTEREST" means:
(a) interest and amounts in the nature of interest accrued;
(b) prepayment penalties or premiums incurred in repaying or
prepaying any Borrowings;
(c) discount fees and acceptance fees payable or deducted in
respect of any Borrowings (including all fees payable in
connection with any letter of credit or guarantee); and
(d) any other costs, expenses and deductions of the like effect
(excluding the interest element of finance leases (unless and
until the amount of any such leases permitted by Clause
19.11(b) (Leases) is increased, with the consent of the
Majority Banks, above U.S.$3,000,000)) and any net payment
(or, if appropriate in the context, receipt) under any
interest rate hedging agreement or instrument taking into
account any premiums payable for the same and the interest
element of any net payment (plus or minus any accrued exchange
gains or losses) under any currency hedging instrument or
arrangement,
and "INTEREST" includes commitment and non-utilisation fees (including,
without limitation, those payable hereunder) but excludes agent's and
front-end, management, arrangement and participation fees with respect
to any Borrowings (including, without limitation, those payable
hereunder).
"IRC" means the United States Internal Revenue Code of 1986, as amended
from time to time, or any successor statute and any regulations
promulgated thereunder.
"LIBOR" in relation to any Advance or unpaid sum:
(a) the rate per annum of the offered quotation for deposits in
the currency of the relevant Advance or unpaid sum for a
period equal or comparable to the required period which
appears on Telerate Page 3750 or Telerate Page 3740 (as
appropriate) at or about 11.00 a.m. on the applicable Rate
Fixing Day; or
(b) if the rate cannot be determined under paragraph (a) above,
the rate, expressed as a percentage determined by the Facility
Agent to be the arithmetic mean (rounded upwards, if
necessary, to the nearest five decimal places) of the
respective rates notified to the Facility Agent by each of the
Reference Banks quoting (provided that at least two Reference
Banks are quoting) as the rate at which it is offering
deposits
<PAGE> 11
in the required currency and for the required period to prime
banks in the London interbank market at or about 11.00 a.m. on
the Rate Fixing Day for such period,
and, for the purposes of this definition:
(i) "REQUIRED PERIOD" means the Term of an Advance or such period
in respect of which LIBOR falls to be determined in relation
to any unpaid sum; and
(ii) "TELERATE PAGE 3750" means the display designated as Page
3750, and "TELERATE PAGE 3740" means the display designated as
Page 3740, in each case on the Telerate Service (or such other
pages as may replace page 3750 or Page 3740 on that service or
such other service as may be nominated by the British Bankers'
Association (including the Reuters Screen) as the information
vendor for the purposes of displaying British Bankers'
Association Interest Settlement Rates for deposits in the
currency concerned).
"MAJORITY BANKS" means, at any time, Banks the aggregate of whose
Commitments:
(a) represent by value at least 66 2/3 per cent. of the Total
Commitments; or
(b) if the Total Commitments have been reduced to zero,
represented by value at least 66 2/3 per cent. of the Total
Commitments immediately before the reduction.
"MANDATORY COST" means in relation to an Advance the cost (if any) of
compliance with the cash ratio deposit requirements of the Bank of
England and the amount (if any) of fees payable to the Financial
Services Authority during its term, determined in accordance with
Schedule 7.
"MATERIAL ADVERSE EFFECT" means any effect which is, or is reasonably
likely:
(a) to be materially adverse to (i) the ability of any Obligor to
perform its payment and other material obligations under any
of the Finance Documents, or (ii) the ability of the Parent to
comply with its obligations under Clause 20 (Financial
Covenants), or (iii) the business, assets or financial
condition of the Parent, or the Group taken as a whole; and/or
(b) to result in any of the Finance Documents not being legal,
valid and binding on, and enforceable substantially in
accordance with its terms against, any party to that Finance
Document and/or (in the case of Security Documents) not
providing to the Security Agent for itself and on behalf of
the Banks, perfected, enforceable security over the assets
purported to be covered by that Security Document, in a manner
and to an extent reasonably considered by the Majority Banks
to be materially adverse to their interests under the Finance
Documents.
"MATERIAL SUBSIDIARY" means:
(a) each Borrower (other than the Parent); and
(b) each member of the Group:
<PAGE> 12
(i) whose unconsolidated pre-tax profits in any annual
Accounting Period are equal to 5 per cent. of
Consolidated EBITDA (as defined in Clause 20.2
(Financial Covenants) of the Group; or
(ii) whose book value of gross assets is 5 per cent. or
more of the consolidated gross assets of the Group,
all as shown (in the case of any Subsidiary) in its most
recent quarterly and annual Accounts and (in the case of the
Group) in the most recent annual consolidated Accounts of the
Group. For the purposes of this definition:
(1) in the case of a company which itself has
Subsidiaries, the calculation shall be made by using
the actual consolidated pre-tax profits or gross
assets, as the case may be, of it and its
Subsidiaries and in accordance with the Applicable
Accounting Principles;
(2) each Subsidiary named in Schedule 8 or, if later, in
the latest annual list of Material Subsidiaries
provided by the Parent to the Facility Agent pursuant
to Clause 19.2(d)(i)(B) (Financial Information) shall
be deemed to be a Material Subsidiary until either
the next list of Material Subsidiaries is delivered
to the Agent or it is shown to the Facility Agent's
reasonable satisfaction not to be a Material
Subsidiary determined in accordance with the most
recent quarterly or annual statements referred to
above; and
(3) any member of the Group which is not a Material
Subsidiary and to which any Material Subsidiary
sells, transfers or otherwise disposes of any fixed
assets in any transaction or series of transactions
(related or not) which results in the transferee
company meeting the test referred to in (b)(ii) above
(calculated by reference to the last set of accounts
of the relevant transferee company referred to in
paragraph (b)(1) above but taking into account such
transfer) shall be deemed to be a Material Subsidiary
(and the Material Subsidiary which sells, transfers
or otherwise disposes of such assets shall be deemed
to continue to be a Material Subsidiary) unless and
until it is shown (in each such case) to the Facility
Agent's reasonable satisfaction not to be a Material
Subsidiary under paragraph (b) above.
"MATURITY DATE" means the last day of the Term of an Advance.
"MULTIEMPLOYER PLAN" means a Plan which is a multiemployer plan as
defined in section 3(37) or 4001(a)(3) of ERISA.
"NATIONAL CURRENCY UNIT" means the unit of currency (other than a euro
unit) of a Participating Member State.
"NON-EQUITY CONSIDERATION" means any consideration other than the issue
after the date of this Agreement of equity share capital of the Parent
or the cash proceeds of such an issue of equity share capital.
"NON-OBLIGOR" means each member of the Group which is not an Obligor.
<PAGE> 13
"NOVATION CERTIFICATE" has the meaning given to it in Clause 28.3
(Procedure for novation).
"OBLIGOR" means any Borrower and any Guarantor.
"OBLIGORS' AGENT" means the Parent appointed to act on behalf of each
Obligor pursuant to Clause 2.4 (Obligors' Agent).
"OPTIONAL CURRENCY" means Sterling, euros or other freely available
European currencies (excluding national currency units).
"ORIGINAL DOLLAR AMOUNT", in relation to any amount means:
(a) (if denominated in Dollars) the principal amount which is, or
is to be, outstanding or drawn; or
(b) (if denominated in an Optional Currency) the Dollar Equivalent
of the principal amount which is, or is to be, outstanding or
drawn calculated, in the case of an Advance, three Business
Days prior to the Drawdown Date for the making of that Advance
or, in the case of any other amount, three Business Days prior
to the date on which the calculation is made.
"PARTICIPATING MEMBER STATE" means a member state of the European
Communities that adopts, or has adopted the euro as its currency in
accordance with EMU legislation.
"PARTY" means a party to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED ENCUMBRANCES" means:
(a) Encumbrances constituted or evidenced by the Security
Documents;
(b) Encumbrances expressly permitted in writing by the Facility
Agent (acting on the instructions of the Majority Banks),
provided that the principal amount of the indebtedness secured
by such Encumbrances shall not at any time be increased beyond
the amount expressly so permitted;
(c) Encumbrances arising by operation of law in the ordinary
course of business and not as a result of any default or
omission on the part of any member of the Group;
(d) Encumbrances over goods and documents of title to goods
arising in the ordinary course of letter of credit
transactions entered into in the ordinary course of trade;
(e) Encumbrances over credit balances on bank accounts of members
of the Group created in order to facilitate the operation of
such bank accounts and other bank accounts of such members of
the Group with such banks on a net balance basis with credit
balances and debit balances on the various accounts being
netted off for interest purposes or Encumbrances over credit
balances on bank accounts pursuant to
<PAGE> 14
the standard terms and conditions of such bank of general
application to its corporate customers
(f) Encumbrances over assets acquired after the Signing Date and
existing at the date of acquisition but not created in
contemplation of their acquisition, provided that (A) any such
Encumbrances are disclosed in writing to the Banks prior to
acquisition of the relevant assets and (B) the principal
amount secured by any such Encumbrance shall not be increased
beyond the amount secured thereby at the date of such
acquisition and (C) such Encumbrances are released and
discharged within three months of the date of such
acquisition, unless the Majority Banks otherwise consent;
(g) Encumbrances in existence at the Signing Date in favour
of the Adobe Systems Inc created by Eyewire, Inc;
(h) Encumbrances arising pursuant to the terms of the Existing
Facilities provided that all such Encumbrances are discharged
as soon as practicable on or after the date on which all the
respective obligations under each of the Existing Facilities
are discharged;
(i) rights of set-off arising in the normal course of business;
and
(j) Encumbrances not otherwise permitted pursuant to paragraphs
(a)-(i) (inclusive) above together securing indebtedness in an
aggregate principal amount at any time outstanding not
exceeding U.S.$5,000,000 (or its equivalent in other
currencies).
"PLAN" means an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA which is subject to Title IV of ERISA, Section
302 of ERISA or Section 412 of the IRC.
"PRIMARY SYNDICATION PERIOD" means the period ending on the date the
Arranger notifies the Parent that general syndication of the Facilities
is completed.
"PROFORMA ACCOUNTS" means the form of monthly and quarterly
consolidated management Accounts of the Group in the format and with
the headings and level of information agreed by the Parent and the
Facility Agent from time to time (or if not so agreed as reasonably
required by the Facility Agent).
"PROSPECTUS" means the Form S-3 prospectus of the Parent, filed on 29th
September, 1999 in relation to the issue of certain shares of common
stock in the Parent to be quoted on the NASDAQ National Market to be
issued in relation to the TIB Acquisition.
"PURCHASE PRICE" means the consideration of US$183,000,000 less the
US$1,000,000 deposit (together with interest thereon) payable on the
Closing Date in respect of the purchase of the Acquisition Assets.
"QUALIFYING BANK" means a bank as defined in Section 840A of the Income
and Corporation Taxes Act 1988 which is within the charge to United
Kingdom corporation tax as regards interest payable or paid to it under
the Finance Documents and is beneficially entitled to such interest.
<PAGE> 15
"RATE FIXING DAY" means:
(a) the Drawdown Date for an Advance denominated in Sterling; or
(b) the second Business Day before the Drawdown Date for an
Advance denominated in a currency other than Sterling,
or such other day as the Facility Agent, after consultation with the
Parent and the Banks, may designate as market practice in the relevant
interbank market for leading banks to give quotations in the relevant
currency for delivery on the relevant Drawdown Date.
"RATIO PERIOD" has the meaning given to it in Clause 20.2 (Financial
Covenants).
"RECOGNISED BANK" in respect of Advances made available to any
Borrower, means a bank, fund, trust or other financial institution
which is:
(i) (in the case of a Borrower not resident in the United Kingdom
for tax purposes) for the time being lending through an
office, branch, Affiliate or agency in the jurisdiction of
incorporation of the relevant Borrower; or
(ii) (in the case of a Borrower resident in the United Kingdom
for tax purposes) a Qualifying Bank; or
(iii) (if such bank, fund, trust or other financial institution
complies with neither (i) nor (ii) above):
(A) at the time the bank, fund, trust or financial
institution becomes a Party, is incorporated in a
country with which the jurisdiction of incorporation
of such Borrower has an appropriate double taxation
treaty which provides at such time under its terms
for exemption from that jurisdiction's income Tax on
that jurisdiction's source interest for an entity
such as such bank, fund, trust or other financial
institution when acting through the office, branch,
Affiliate or agency through which it is acting; and
(B) prior to the first date after the date on which it
became a party to this Agreement on which any
interest on any of the Advances to such Borrower in
which it has a participation is payable, has made and
filed an appropriate application for exemption (as
contemplated by Clause 11.5 (Double tax treaty
filings)) under such treaty (or would have done so
but for any failure by such Borrower to comply with
its obligations under Clause 11.5 (Double tax treaty
filings)).
"REFERENCE BANKS" subject to Clause 28.4 (Reference Banks), means the
principal London offices of HSBC Bank plc, and any two such other Banks
as may be agreed between the Facility Agent and the Parent.
"REPORTABLE EVENT" shall have the meaning set forth in Section 4043(b)
of ERISA for which the PBGC has not waived the notice requirement of
Section 4043(a) of ERISA.
<PAGE> 16
"REQUEST" means a request made by the Obligors' Agent on behalf of a
Borrower for an Advance, substantially in the form of Schedule 4.
"REQUESTED AMOUNT" means the amount requested for drawing by a Borrower
in a duly completed Request.
"RESERVATIONS" means the qualifications set out in the legal opinions
listed or referred to in Schedule 3.
"RESERVE ASSET COSTS" means:
(a) in relation to any Advance or overdue amount for any period,
the Mandatory Cost applicable to that Advance or overdue
amount;
(b) without double counting in relation to any Advance or overdue
amount for any period denominated in Dollars to a U.S. Obligor
made available by a United States incorporated Bank or a
United States branch of a non-United States incorporated Bank,
the cost, if any, notified by that Bank to the Facility Agent
as the cost to it of complying with Regulation D attributable
to such Advance; and
(c) without double counting in relation to any Advance or overdue
amount for any period, the cost, if any, notified by any Bank
to the Facility Agent as the cost to it of complying with the
reserve asset and other regulatory requirements of the
European Central Bank in relation to that overdue amount or
Advance or any class of Advances of which that Advance forms
part,
but no Bank is entitled to receive an amount under more than one of the
above paragraphs in respect of the same Advance or overdue amount for
the same period unless there is a change in, or introduction of, any
relevant law or regulation after the Signing Date.
"ROLLOVER ADVANCE" means any Tranche A Advance requested under this
Agreement:
(a) in respect of which the Drawdown Date is the last day of the
Term in respect of any outstanding Advance;
(b) which is denominated in the same currency as such outstanding
Advance; and
(c) the amount of which is equal to or less than the amount of
such outstanding Advance.
"SECURITY DOCUMENTS" means the share charges and other security
documents identified in Schedule 6, together with such other security
documents as may be required to be entered into by any Obligor pursuant
to any of the Finance Documents.
"SHARES" means each and any of the shares in the capital of the Parent.
"SIGNING DATE" means the date of this Agreement.
"STERLING" and "(POUND)" means the lawful currency for the time being
of the United Kingdom.
<PAGE> 17
"STOCK PURCHASE AGREEMENT" means the stock purchase agreement dated
20th September, 1999 made between the Parent, Eastman Kodak Company and
Kodak S.A., providing, inter alia, for the purchase by the Parent
and/or such wholly-owned subsidiary as the Parent may designate and
notify to the Facility Agent of the entire issued share capital of The
Image Bank, Inc. and the Image Bank France S.A.
"STRUCTURE MEMORANDUM" means the memorandum and corporate chart in the
form delivered to the Facility Agent on or before the Signing Date.
"SUBORDINATED LOAN NOTES" means the US$75,000,000 4.75 per cent.
Convertible Subordinated Notes due June 2003 issued by the Parent on
20th May, 1998.
"SUBSIDIARY" in relation to any person, means any entity which is
controlled directly or indirectly by that person or of whose dividends
or distributions that person is entitled to receive more than 50 per
cent. and any entity (whether or not so controlled) treated as a
subsidiary in the latest Accounts of that person from time to time
(provided that such entity or that person's interest in such entity has
not been disposed of after the date of such Accounts in accordance with
the Finance Documents), and "CONTROL" for this purpose means the direct
or indirect ownership of the majority of the voting share capital of
such entity or the right or ability to direct management to comply with
the type of material restrictions and obligations contemplated in this
Agreement or to determine the composition of a majority of the board of
directors (or like board) of such entity, in each case whether by
virtue of ownership of share capital, contract or otherwise.
"TARGET GROUP" means The Image Bank, Inc and The Image Bank France S.A.
together with their respective Subsidiaries.
"TAXES" means all taxes, imposts, duties, levies, charges, deductions
and withholdings in the nature or on account of tax, together with all
interest thereon and penalties with respect thereto (and "TAX" shall be
construed accordingly).
"TERM" means the period selected by the Obligors' Agent in a Request
for which an Advance is to be outstanding.
"THE IMAGE BANK INC." means The Image Bank Inc., a corporation
incorporated under the laws of New York.
"THE IMAGE BANK FRANCE, S.A." means The Image Bank France S.A., a
corporation incorporated under the laws of France.
"TIB ACQUISITION" means the acquisition of the Acquired Assets by the
Parent and/or such directly or indirectly wholly owned Subsidiary as
the Parent may designate (and notify to the Facility Agent) pursuant to
the Acquisition Agreements.
"TOTAL COMMITMENTS" means the aggregate of all Banks' Tranche A
Commitments from time to time under the Facility.
"TRANCHE A" means the revolving credit facility referred to in Clause
2.1(a) (Facilities).
<PAGE> 18
"TRANCHE A COMMITMENT" means the amount appearing and designated as
such against the Bank's name in Column 1 of Schedule 2 or in the
Novation Certificate or other document by which it became a party to or
acquired rights under this Agreement, to the extent not transferred,
cancelled or reduced under or in accordance with this Agreement.
"TRANSACTION DOCUMENTS" means the Finance Documents and the Acquisition
Agreements.
"TREATY" means, the Treaty Establishing the European Community being
the Treaty of Rome of 25th March, 1957, as amended by the Single
European Act 1986 and the Maastricht Treaty (which was signed at
Maastricht on 7th February, 1992 and came into force on 1st November,
1993), as amended from time to time.
"TREATY COUNTRY" means each state described as a participating Member
State in any EMU legislation, whether in the first wave or
subsequently.
"U.K." or "UNITED KINGDOM" means the United Kingdom of Great Britain
and Northern Ireland.
"U.K. GROUP" means Getty U.K. and its Subsidiaries from time to time.
"U.S. BORROWER" means each Borrower incorporated in the United States
of America (or any of its states or territories or any political or
legal sub-division thereof).
"U.S. OBLIGOR" means each Obligor incorporated in the United States of
America (or any of its states or territories or any political or legal
sub-division thereof).
"U.S. CODE" means the United States Internal Revenue Code of 1986 as
amended.
"U.S. PERSON" means a person who is a citizen or resident of the United
States of America and any corporation or other entity created or
organised in or under the laws of the United States of America or any
political or legal sub-division thereof.
"UNITED STATES" means the United States of America.
1.2 CONSTRUCTION
(a) In this Agreement, unless the contrary intention appears, a reference
to:
(i) "ASSETS" includes properties, revenues and rights of every
description present, future and contingent;
an "AUTHORISATION" includes an authorisation, consent,
approval, resolution, licence, exemption, filing, registration
and notarisation;
a "MONTH" is a reference to a period starting on one day in a
calendar month and ending on the numerically corresponding day
in the next calendar month, except that, if such period starts
on the last day in a calendar month or there is no numerically
corresponding day in the month in which that period ends, that
period shall end on the last Business Day in such later
calendar month;
<PAGE> 19
a "REGULATION" includes any regulation, rule, order, official
directive, request or guideline (whether or not having the
force of law) of any governmental body, agency, department or
regulatory, self-regulatory or other authority or
organisation;
(ii) a provision of a law is a reference to that provision as
amended or re-enacted;
(iii) a Clause or a Schedule is, unless otherwise specified, a
reference to a clause of or a schedule to this Agreement;
(iv) a Finance Document or any other document is a reference to
that Finance Document or that other document as amended,
novated or supplemented from time to time (including, where
relevant by any Borrower Accession Agreement, Guarantor
Accession Agreement and/or Novation Certificate);
(v) a time of day is a reference to London time;
(vi) words importing the singular shall include the plural and vice
versa;
(vii) a document in an "AGREED FORM", is a reference to such
document either in a form previously agreed in writing by or
on behalf of the Parent and the Facility Agent or in form and
substance satisfactory to the Banks;
(viii) a Party or other person includes, unless otherwise provided in
this Agreement, such Party's or person's permitted successors,
assigns, transferees or substitutes; and
(ix) the "EQUIVALENT IN OTHER CURRENCIES" or like terms shall,
unless otherwise agreed or the context otherwise requires,
mean the Dollar Equivalent of the relevant amount in other
currencies.
(b) Unless the contrary intention appears, a term used in any other Finance
Document or in any notice given under or in connection with any Finance
Document has the same meaning in that Finance Document or notice as in
this Agreement.
(c) The index to and the headings in this Agreement are for
convenience only and are to be ignored in construing this Agreement.
2. THE FACILITIES
2.1 FACILITIES
Subject to the terms of this Agreement, the Banks agree to make
available, during the Availability Period a revolving credit facility
under which the Banks shall, when requested by the Obligors' Agent
pursuant to a Request, make to the Parent or any Additional Borrower,
Tranche A Advances in Dollars or an Optional Currency up to an
aggregate amount not exceeding the Tranche A Commitments.
2.2 OVERALL FACILITY LIMIT
(a) The aggregate Original Dollar Amount of all outstanding Advances
shall not exceed at any time the Total Commitments.
<PAGE> 20
(b) No Bank is obliged to participate in an Advance if it would cause the
Original Dollar Amount of its participations in the Advances to exceed
its Commitment.
2.3 NATURE OF A FINANCE PARTY'S RIGHTS AND OBLIGATIONS
(a) The obligations of a Finance Party under the Finance Documents are
several. Failure of a Finance Party to carry out those obligations does
not relieve any other Party of its obligations under the Finance
Documents. No Finance Party is responsible for the obligations of any
other Finance Party under the Finance Documents.
(b) The rights of a Finance Party under the Finance Documents are divided
rights. A Finance Party may, except as otherwise stated in the Finance
Documents, separately enforce those rights.
2.4 OBLIGORS' AGENT
(a) Each Obligor (other than the Parent) irrevocably authorises the Parent
to act on its behalf as its agent in relation to the Finance Documents
and irrevocably authorises (i) the Parent on its behalf to supply all
information concerning itself, its financial condition and otherwise to
the relevant persons contemplated under this Agreement and to give all
notices and instructions (including, in the case of a Borrower,
Requests) to execute on its behalf any Finance Document and to enter
into any agreement in connection with the Finance Documents
notwithstanding that the same may affect such Obligor, without further
reference to or the consent of such Obligor, and (ii) each Finance
Party to give any notice, demand or other communication to be given to
or served on such Obligor pursuant to the Finance Documents to the
Parent on its behalf, and, in each such case, such Obligor will be
bound thereby as though such Obligor itself had given such notice and
instructions, executed such agreement or received any such notice,
demand or other communications.
(b) Every act, omission, agreement, undertaking, settlement, waiver, notice
or other communication given or made by the Obligors' Agent under this
Agreement, or in connection with this Agreement (whether or not known
to any other Obligor and whether occurring before or after such other
Obligor became an Obligor under this Agreement) shall be binding for
all purposes on all other Obligors as if the other Obligors had
expressly made, given or concurred with the same. In the event of any
conflict between any notices or other communications of the Obligors'
Agent and any other Obligor, those of the Obligors' Agent shall
prevail.
2.5 CHANGE OF CURRENCY
(a) If more than one currency or currency unit are at the same time
recognised by the central bank of any country as the lawful currency of
that country, then:
(i) any reference in the Finance Documents to, and any obligations
arising under the Finance Documents in, the currency of that
country shall be translated into, or paid in, the currency or
currency unit of that country designated by the Facility
Agent; and
(ii) any translation from one currency or currency unit to another
shall be at the official rate of exchange recognised by the
central bank for the conversion of that currency or currency
unit into the other, rounded up or down by the Facility Agent
acting reasonably.
<PAGE> 21
(b) If a change in any currency of a country occurs, this Agreement will be
amended to the extent the Facility Agent, acting in good faith,
specifies to be necessary, to reflect the change in currency and to put
the Banks in the same position, so far as possible, that they would
have been in if no change in currency had occurred.
2.6 EXISTING OVERDRAFT FACILITY
(a) The Finance Parties acknowledge that the Overdraft Bank has
made available the Existing Overdraft Facility to certain
members of the Group consisting of:
(i) a sterling overdraft and/or bills for negotiation
and/or engagements of (pound)2,000,000 (on a net
basis); and
(ii) a forward foreign exchange contracts line of
(pound)5,000,000,
and the Overdraft Bank will be entitled to share in the
security pari passu with the Banks under the Security
Documents pro rata in respect of claims under the Existing
Overdraft Facility within those limits.
(b) Notwithstanding any other provision of any Finance Document
(including but not limited to the Security Documents);
(i) the Overdraft Bank will not have any right to require
the Security Trustee to enforce any security under
the Security Documents unless the Facility Agent has
served notice under Clause 21.2 (Acceleration) on any
Obligor;
(ii) the Overdraft Bank will be entitled to exercise any
rights it may have under the Existing Overdraft
Facility (in priority to the security constituted by
the Security Documents) to net-off credit balances of
members of the Group held by the Overdraft Bank
against outstandings under the Existing Overdraft
Facility without any obligation to account under the
Security Documents, Clause 31 (Pro-rata sharing) or
otherwise to any other Finance Party;
(iii) the Overdraft Bank is entitled to close out foreign
exchange contracts with any Obligor entered into
under paragraph (a)(ii) at any time and net off
payments due to be received under such contracts
against payments to be made in priority to the
security constituted by the Security Documents
without any obligation to account under the Security
Documents, Clause 31 (Pro-rata sharing) or otherwise
to any other Finance Party.
2.7 TRANCHE A COMMITMENT
(a) The Tranche A Commitment of HSBC Bank plc in its capacity as a
Bank as at the Signing Date will be US$50,000,000 (unless it
agrees in writing with the Parent to increase its Tranche A
Commitment up to a specified amount).
(b) If and to the extent other banks or financial institutions
(each a "NEW BANK") are willing to commit to participate in
Tranche A following syndication efforts by the Arranger then,
upon any Novation Certificate signed by a New Bank taking
effect in
<PAGE> 22
relation to Tranche A, the New Bank will be treated as having
taken a transfer from HSBC Bank plc of the Tranche A
Commitment specified in that Novation Certificate as though
HSBC Bank plc had increased its Tranche A Commitment by the
amount such New Bank is willing to so commit immediately prior
to the Novation Certificate taking effect.
(c) Commitment fee in respect of such undrawn part of the Tranche
A Commitment increased pursuant to this Clause 2.7 will accrue
under Clause 23.2 (Commitment Fee) in relation to:
(i) the Tranche A Commitment of any New Bank, with
effect on and after the effective date of the
relevant Novation Certificate; and
(ii) any Tranche A Commitment which HSBC Bank plc agrees
to as contemplated in paragraph (a) above, with
effect on and after the date it agrees in writing to
accept that increased Tranche A Commitment;
(d) Nothing in this Clause 2.7 will oblige HSBC Bank plc in its
capacity as a Bank to make any Advance under Tranche A which
would result in the principal amount outstanding under Tranche
A being in excess of US$50,000,000 at any time (except to the
extent it has agreed in writing to accept a Tranche A
Commitment in excess of such amount).
3. PURPOSE
(a) The proceeds of each Advance under Tranche A shall be applied in or
towards the general corporate purposes of the Group including, but
without limitation, Acquisitions (but not including the TIB
Acquisition) and working capital provided that US$20,000,000 may only
be borrowed to repay the Existing Revolving Credit Facility in the
amounts and on the dates set out in Schedule 9 (and the Facility Agent
is hereby irrevocably authorised to apply those borrowings in payment
direct to HSBC Bank plc to repay the Existing Revolving Credit Facility
accordingly).
(b) Without affecting the obligations of any Obligor in any way, no Finance
Party is bound to monitor or verify the application of the proceeds of
any Advance.
4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO DRAWDOWN
(a) Subject to paragraph (b) below, the obligations of each Finance Party
to the Obligors under this Agreement are subject to the conditions
precedent that the Facility Agent shall have received all of the
documents set out in Part I of Schedule 3 in form and substance
satisfactory to the Facility Agent (acting reasonably) and the
representations and warranties in Clause 18 (Representation and
Warranties) are correct as at the Signing Date.
(b) The Finance Parties shall not be obliged to participate in any Tranche
A Advance which would result in the principal amount outstanding under
Tranche A being in excess of US$50,000,000 until the date upon which
the Facility Agent has (i) received all of the documents set out in
Part 1A of Schedule 3 in form and substance satisfactory to the
Facility
<PAGE> 23
Agent (acting reasonably) and (ii) the Tranche A Commitments have been
increased pursuant to the terms of Clause 2.7 (Tranche A Commitment).
4.2 CONDITIONS PRECEDENT TO EACH ADVANCE
The obligations of the Finance Parties to participate in any Advance
are subject to the further conditions precedent that both at the date
of the Request for such Advance (if applicable) and at the Drawdown
Date for the relevant amount:
(a) except in the case of a Rollover Advance, the representations
and warranties in Clause 18 (Representations and warranties)
to be repeated on those dates are correct and will be correct
immediately after the Advance is made by reference to the
facts and circumstances then existing;
(b) except in the case of a Rollover Advance, no Default is
outstanding which has not been waived by the Facility Agent in
accordance with the terms hereof or might result from the
Advance; and
(c) the making of the relevant Advance would not cause Clause
2.2 (Overall facility limit) to be contravened.
5. DRAWDOWN
5.1 RECEIPT OF REQUESTS
A Borrower may draw an Advance if the Facility Agent receives from the
Obligors' Agent, not later than 11.00 a.m. three Business Days before
the proposed Drawdown Date, a Request complying with Clause 5.2
(Completion of Requests).
5.2 COMPLETION OF REQUESTS
Each Request for an Advance will not be regarded as having been duly
completed unless it is duly executed on behalf of the relevant Borrower
by the Obligors' Agent, dated and specifies:
(a) the name of the relevant Borrower;
(b) the Drawdown Date, being a Business Day falling before the
Final Maturity Date;
(c) the amount of the Advance being, an Original Dollar Amount of
not less than U.S.$750,000 (or equivalent) or the then
Available Facility Amount, provided always that no Requested
Amount may exceed the then Available Facility Amount;
(d) the duration of its Term which does not extend beyond the
Final Maturity Date and is for a period of one week, two,
three or four weeks during the Primary Syndication Period and
thereafter one month, two, three or six months (or such other
monthly period as agreed between the Obligors' Agent and the
Facility Agent acting on the instructions of the Majority
Banks);
(e) the currency of the Advance requested (being Dollars or an
Optional Currency in accordance with Clause 9 (Optional
Currencies)); and
<PAGE> 24
(f) payment instructions which comply with Clause 10 (Payments).
Each Request for an Advance must specify one Advance only, but the
Obligors' Agent may, on behalf of the relevant Borrower, subject to the
other terms of this Agreement, deliver more than one Request for
Advances on any one day.
5.3 AMOUNT OF EACH BANK'S PARTICIPATION IN ADVANCE
(a) The Facility Agent shall promptly notify each Bank of the details of
the requested Advance and the amount of its participation in the
Advance.
(b) The amount of a Bank's participation in any Advance will be the
proportion of the Advance which its Commitment bears to the Total
Commitments on the proposed Drawdown Date.
5.4 PAYMENT OF PROCEEDS
Subject to the terms of this Agreement, each Bank shall make its
participation in each Advance available to the Facility Agent for the
relevant Borrower on the relevant Drawdown Date.
6. REPAYMENT
6.1 REPAYMENT OF ADVANCES
(a) Each Borrower shall repay the full amount of each Advance made to it on
its Maturity Date to the Facility Agent for the Banks.
(b) No Advances may be outstanding after the Final Maturity Date.
6.2 NETTING
Without prejudice to each Borrower's obligations to repay the full
amount of each Advance made to it on the due date, on the date that any
Rollover Advance is made the amount to be repaid and the amount to be
drawn down by such Borrower shall be netted off against each other so
that the amount of cash which the relevant Borrower is actually
required to repay or, as the case may be, the amount of cash which the
Banks are actually required to advance to such Borrower, shall be the
net amount.
6.3 RE-BORROWING
Subject to the terms of this Agreement, any amount repaid under Clause
6.1(a) may be re-borrowed.
7. PREPAYMENT AND CANCELLATION
7.1 AUTOMATIC CANCELLATION
The Commitment of each Bank shall be automatically cancelled at close
of business in London on the Final Maturity Date.
<PAGE> 25
7.2 VOLUNTARY PREPAYMENT AND CANCELLATION
(a) The Obligors Agent may, by giving not less than 5 Business Days' prior
written notice (or such shorter period as the Majority Banks agree) to
the Facility Agent, cancel the unutilised portion of the Total
Commitments in whole or in part or prepay any Advance in whole or in
part (but, if in part, in a minimum Original Dollar Amount of
U.S.$750,000).
(b) Any cancellation in part shall reduce the Commitment of each Bank
pro rata.
7.3 ADDITIONAL RIGHT OF PREPAYMENT AND CANCELLATION
(a) If:
(i) any Borrower is required to pay to a Bank any additional
amount under Clause 11 (Taxes);
(ii) any Borrower is required to pay to a Bank any amount under
Clause 13 (Increased costs);
(iii) Clause 9.2 (Revocation of Currency) is applicable; or
(iv) Clause 12 (Market Disruption) is applicable.
then, without prejudice to the obligations of any Obligor under those
Clauses, the Obligors' Agent may, whilst the circumstances giving rise
to the requirement continue, serve a notice of prepayment and
cancellation on that Bank through the Facility Agent.
(b) On the date falling five Business Days after the date of service of the
notice:
(i) to the extent necessary to avoid such payments or
applicability of such Clauses, each Borrower shall prepay that
Bank's participation in all the Advances made by such Bank to
it; and
(ii) the Commitment of that Bank shall be cancelled accordingly.
7.4 MISCELLANEOUS PROVISIONS
(a) Any notice of prepayment and/or cancellation under this Agreement is
irrevocable. The Facility Agent shall notify the Banks promptly of
receipt of any such notice.
(b) All prepayments under this Agreement shall be made together with
accrued interest on the amount prepaid and, subject to Clause 25.2
(General Indemnities), without premium or penalty.
(c) No prepayment of any Advance or cancellation of any Commitment is
permitted except in accordance with the express terms of this
Agreement.
(d) No amount of the Total Commitments cancelled under this Agreement may
subsequently be reinstated.
<PAGE> 26
8. INTEREST
8.1 INTEREST RATE
The rate of interest applicable to each Advance for its Term is the
rate per annum determined by the Facility Agent to be the aggregate of:
(a) the Applicable Margin;
(b) LIBOR; and
(c) Reserve Asset Costs.
8.2 DUE DATES
Except as otherwise provided in this Agreement, accrued interest on
each Advance for each Term relative thereto shall be paid by the
relevant Borrower on its Maturity Date and also, in the case of an
Advance with a Term of longer than six months, on the dates falling at
six monthly intervals after its Drawdown Date.
8.3 DEFAULT INTEREST
(a) If an Obligor fails to pay any amount payable by it under this
Agreement when due, it shall forthwith on demand by the Facility Agent
from time to time pay interest on the overdue amount from the due date
up to the date of actual payment, as well after as before judgment, at
a rate (the "DEFAULT RATE") determined by the Facility Agent to be two
per cent. (2%) per annum above the higher of:
(i) the rate on the overdue amount under Clause 8.1 (Interest
rate) immediately before the due date (if of principal); and
(ii) the rate of interest which would have been payable if the
overdue amount had, during the period of non-payment,
constituted an Advance in the currency of the overdue amount
for successive Terms of such duration as the Facility Agent
may determine (each a "DESIGNATED PERIOD").
(b) The Default Rate will be determined on each Business Day or on the date
two Business Days prior to the commencement of or on the first day of
the relevant Designated Period, as the Facility Agent shall determine,
and default interest will be compounded at the end of each Designated
Period if not paid.
8.4 NOTIFICATION OF RATES OF INTEREST
(a) The Facility Agent shall promptly notify each relevant Party of the
determination of a rate of interest under this Agreement;
(b) Each determination of a rate of interest by the Facility Agent under
this Agreement shall, in the absence of manifest error, be conclusive
and binding on all Parties.
<PAGE> 27
8.5 APPLICABLE MARGIN AND COMMITMENT FEE
(a) The Applicable Margin will be 1.75 per cent. per annum for the
period from the Signing Date up to and including 30th June, 2000.
(b) After 30th June, 2000 the Applicable Margin will be determined and
adjusted in accordance with paragraph (c) below, to the percentage
rates per annum specified in Column 1 below set opposite the range into
which the Net Debt Ratio (as defined in paragraph (f) below) specified
in Column 2 below falls, as evidenced in any certificate delivered
under Clause 19.2(d) (Financial Information) (an "ADJUSTMENT
CERTIFICATE").
COLUMN 1 COLUMN 2
APPLICABLE NET DEBT RATIO
MARGIN % (RANGE)
1.75 2:75 or more
1.5 Less than 2:75, but not less
than 2.25
1.25 Less than 2.25, but not less
than 2.00
1.00 Less than 2.00
(c) Any adjustment to the Margin pursuant to paragraph (b) above shall not
apply to the Margin with respect to any Advance then outstanding but
shall only apply to Advances the Terms of which start after the date of
delivery of the applicable Adjustment Certificate.
(d) If, in respect of any relevant Accounting Period, an Adjustment
Certificate is not delivered in accordance with Clause 19.2(d)
(Financial Information), the Margin in relation to any future or
outstanding Advance will be 1.75 per cent. per annum on and with effect
from the latest date for delivery of such Adjustment Certificate under
such Clause 19.2(d) (Financial Information). No further adjustment to
the Margin shall be made under this Clause 8.5 until an Adjustment
Certificate is delivered in compliance with Clause 19.2(d) (Financial
Information) in respect of a succeeding Accounting Period.
(e) The commitment fee referred to in Clause 23.2 (Commitment fee) shall be
on each day the lower of 0.675 per cent. per annum or 50 per cent. of
the Margin which would be applicable to an Advance if such Advance were
drawn or rolled over on such day.
(f) In this Clause 8.5 "NET DEBT RATIO" means the ratio of average
Consolidated Total Borrowings to Consolidated EBITDA calculated in
accordance with, and for the periods specified in, Clause 20.2
(Financial Covenants).
(g) Notwithstanding the provisions of paragraphs (b) to (f) above, if an
Event of Default occurs, the Applicable Margin shall, with immediate
effect, be 1.75 per cent. per annum in respect of any future or
outstanding Advance and shall remain at such level for as long as an
Event of Default continues.
<PAGE> 28
9. OPTIONAL CURRENCIES
9.1 SELECTION
(a) The Obligors' Agent, on behalf of the relevant Borrower, shall select
the currency of an Advance in the relevant Request.
(b) The currency of each Advance must be Dollars or an Optional Currency.
(c) The Obligors' Agent, on behalf of the relevant Borrower may not choose
a currency if, as a result, the Advances would be denominated at any
time in more than three currencies.
(d) The Facility Agent shall notify each Bank of the currency and the
Original Dollar Amount of each Advance and the applicable Agent's Spot
Rate of Exchange promptly after they are ascertained.
9.2 REVOCATION OF CURRENCY
If, before 9am on any Rate Fixing Day the Facility Agent receives
notice from a Bank that:
(a) it is impracticable for the Bank to fund its participation in
the relevant Advance in the relevant Optional Currency during
its Term in the ordinary course of business in the London
interbank market; and/or
(b) the use of the proposed Optional Currency is reasonably
likely to contravene any applicable law or regulation,
the Facility Agent shall give notice to the Obligors' Agent and to the
Banks to that effect before 10am on that day. In this event:
(i) the Obligors' Agent and the Banks may agree that the drawdown
will not be made; or
(ii) in the absence of any such agreement that Bank's participation
in the relevant Advance (or, if more than one Bank is
similarly affected, those Banks' participations in the
relevant Advance) shall be treated as a separate Advance
denominated in Dollars during the relevant Term.
10. PAYMENTS
10.1 FUNDS
All payments by the Obligors or any of them or by the Banks or any of
them under the Finance Documents shall be made to the Facility Agent
for the account of the Party entitled. Payments under the Finance
Documents to the Facility Agent shall be made in freely transferable
funds for same day value on the due date at such times and in such
manner as the Facility Agent may specify to the Party concerned as
being customary at the time for the settlement of transactions in the
currency in which the amount concerned is denominated to the account of
the Facility Agent at such bank or office as the Facility Agent shall
designate by at least three Business Days' notice to the Party making
payment.
<PAGE> 29
10.2 DISTRIBUTION
(a) Each payment received by the Facility Agent under the Finance Documents
for another Party shall, subject to paragraphs (b) and (c) below, be
made available by the Facility Agent to that Party by payment (on the
date and in the currency and funds of receipt) to its account with such
bank in the principal financial centre of a country of the relevant
currency as it may notify to the Facility Agent for this purpose by not
less than 10 Business Days' prior notice.
(b) The Facility Agent may, subject to clause 10.6 (Partial payments),
apply any amount received by it for an Obligor in or towards payment of
any amount due from an Obligor under the Finance Documents or in or
towards the purchase of any amount of any currency to be so applied.
(c) Where a sum is to be paid under the Finance Documents to the Facility
Agent for the account of another Party, the Facility Agent is not
obliged to pay that sum to that Party until it has established that it
has actually received that sum. The Facility Agent may, at its sole
discretion, assume that the sum has been paid to it in accordance with
the relevant Finance Document and, in reliance on that assumption, make
available to that Party a corresponding amount. If the sum has not been
made available but the Facility Agent has paid a corresponding amount
to another Party, that Party shall forthwith on demand refund the
corresponding amount to the Facility Agent together with interest on
that amount from the date of payment to the date of receipt, calculated
at a rate determined by the Facility Agent to reflect its cost of
funds.
10.3 CURRENCY
(a) Interest shall be payable in the currency in which the relevant amount
in respect of which it has accrued was denominated during the period of
accrual.
(b) The principal of each Advance shall be repaid or prepaid in the
currency in which it is denominated.
(c) Any amount (other than of principal and/or interest) calculated on or
by reference to or payable in respect of another amount shall be
payable in the currency in which that other amount is denominated at
the time of payment.
(d) Amounts payable in respect of costs, expenses, Taxes and the like
are payable in the currency in which they are incurred.
10.4 SET-OFF AND COUNTERCLAIM
Save as otherwise permitted under Clause 6.2 (Netting), all payments to
be made by an Obligor under any Finance Document shall be made without
set-off or counterclaim.
10.5 NON-BUSINESS DAYS
(a) If a payment under the Finance Documents is due on a day which is not a
Business Day, the due date for that payment shall instead be the next
Business Day in the same calendar month (if there is one) or the
preceding Business Day (if there is not).
<PAGE> 30
(b) During any extension of the due date for payment of any principal under
this Agreement interest is payable on the principal at the rate payable
on the original due date.
10.6 PARTIAL PAYMENTS
(a) If the Facility Agent receives a payment insufficient to discharge all
the amounts then due and payable by the Obligors under the Finance
Documents, the Facility Agent shall apply that payment towards the
obligations of the Obligors in the following order:
(i) FIRST, in or towards payment pro rata of any unpaid costs,
fees and expenses of the Facility Agent or the Security Agent
under the Finance Documents;
(ii) SECONDLY, in or towards payment pro rata of any accrued fees
due but unpaid under Clause 23 (Fees);
(iii) THIRDLY, in or towards payment pro rata of any accrued
interest due but unpaid under this Agreement;
(iv) FOURTHLY, in or towards payment pro rata of any principal due
but unpaid under this Agreement; and
(v) FIFTHLY, in or towards payment pro rata of any other sum due
but unpaid under the Finance Documents.
(b) The Facility Agent shall, if so directed by the Majority Banks, vary
the order set out in sub-paragraphs (a)(iii) to (v) above.
(c) Paragraphs (a) and (b) above shall override any appropriation made by
an Obligor.
11. TAXES
11.1 GROSS-UP
All payments by an Obligor under the Finance Documents shall be made
without any deduction or withholding and free and clear of and without
deduction or withholding for or on account of any Taxes except to the
extent that the Obligor is required by law to make payment subject to
any Tax. Save as referred to in Clause 11.3 (Recognised Bank), if any
Tax or amounts in respect of Tax must be deducted, or any other
deductions must be made, from any amounts payable or paid by an
Obligor, or paid or payable by the Facility Agent to a Finance Party,
under the Finance Documents, the Obligor shall pay such additional
amounts as may be necessary to ensure that the relevant Finance Party
receives a net amount equal to the full amount which it would have
received had payment not been made subject to Tax or any other
withholding or deduction.
11.2 TAX RECEIPTS
All Taxes required by law to be deducted or withheld by an Obligor from
any amounts paid or payable under the Finance Documents shall be paid
by the relevant Obligor when due and the Obligor shall, within a month
of the payment being made, deliver to the Facility Agent for the
relevant Finance Party evidence satisfactory to that Finance Party
acting reasonably
<PAGE> 31
(including all relevant tax receipts) that the payment has been duly
remitted to the appropriate authority.
11.3 RECOGNISED BANK
(a) If, otherwise than as a result of the introduction of, change in, or
change in the interpretation, administration or application of or
expiry of, any law or regulation (including, without limitation, any
double tax treaty) or any practice or concession of any applicable Tax
authority occurring after the date of this Agreement, a Bank or the
Facility Agent is not or ceases to be a Recognised Bank, no Obligor
shall be liable to pay to that Bank or the Facility Agent under Clause
11.1 (Gross-up) any amount in respect of Taxes levied or imposed in
excess of the amount it would have been obliged to pay if that Bank or
the Facility Agent was a Recognised Bank.
(b) No Obligor is liable to pay to a Bank or the Facility Agent any amount
under Clause 11.1 (Gross-up) in respect of Taxes (not being withholding
taxes) imposed on the overall net income or gains of a Bank or the
Facility Agent by the jurisdiction in which such Bank or the Facility
Agent is organised or in which its principal office is located or on
the overall net income or gains of the Bank's Facility Office by the
jurisdiction in which that Facility Office is located.
(c) Each Bank and the Facility Agent confirms to each Borrower that it is a
Recognised Bank with respect to such Borrower at the time it becomes a
party to this Agreement and shall notify the Parent upon officers of
such Bank or the Facility Agent involved in administering this
Agreement becoming aware that it has ceased to be a Recognised Bank.
11.4 TAX SAVING
(a) If, following the imposition of any Tax on any payment by any Obligor
(or any corresponding payment by the Facility Agent to any Finance
Party under any Finance Document) in consequence of which such Obligor
pays an additional amount under Clause 11.1 (Gross-up), any Finance
Party shall as a result of such payment receive or be granted a credit
against or remission for or deduction or relief from or in respect of
any Tax payable by it which in such Finance Party's sole opinion
(acting in good faith) is both identifiable and quantifiable by it
without requiring such Finance Party or its professional advisers to
expend a material amount of time or incur a material cost in so
identifying or quantifying (any of the foregoing, to the extent so
identifiable and quantifiable, being referred to as a "SAVING"), such
Finance Party shall, to the extent that it can do so without prejudice
to the retention of the relevant saving and subject to such Obligor's
obligation to repay promptly on demand by the Finance Party the amount
to such Finance Party to the extent that the relevant saving is
subsequently disallowed or cancelled, reimburse such Obligor promptly
after receipt of such saving by such Finance Party with such amount as
such Finance Party shall in its sole opinion but in good faith have
concluded to be the amount or value of the relevant saving.
(b) Nothing contained in this Agreement shall interfere with the right of
any Finance Party to arrange its Tax and other affairs in whatever
manner it thinks fit. No Finance Party shall be required to disclose
any confidential information relating to the organisation of its
affairs.
<PAGE> 32
11.5 DOUBLE TAX TREATY FILINGS
Each Finance Party shall, and the Parent shall ensure that each
relevant Borrower (and if a payment falls or is likely to fall to be
made by it, each Guarantor), file all such forms, make all such
applications and take all such other action, (in each case in so far as
it may reasonably be able to file, make or take) pursuant to all
relevant treaties for the avoidance of double taxation in order that
payments by it under the Finance Documents to which such treaties apply
(or would apply were such filings, applications or other action made or
taken) may be made without (or, where complete avoidance is not
possible, with a reduced rate of) withholding tax. Each Finance Party
shall give to each relevant Obligor and each relevant Obligor shall
give to each Finance Party such assistance as the other may reasonably
require in connection with the completion and filing of such forms, the
making of such applications and the taking of such other duties as
aforesaid.
11.6 U.S. TAXATION - DELIVERY OF FORMS AND STATEMENTS
(a) Without prejudice to the generality of Clause 11.5 (Double tax treaty
filings), each Finance Party which is not a U.S. Person and which is
lending to a U.S. Borrower shall deliver (through the Facility Agent)
to the relevant U.S. Borrower on or before the Maturity Date of the
first Advance it makes to such U.S. Borrower, two copies of such duly
completed form or forms as may be required to indicate that such
Finance Party is entitled to receive payments under this Agreement
without deduction, withholding or payment by the U.S. Borrower of any
United States federal Taxes, including, without limitation, either:
(i) two copies of IRS Form 1001 of the Internal Revenue Service of
the United States of America or Form W-8BEN (Certificate of
Foreign Status of Beneficial Owner for United States Tax
Withholding) (relating to an applicable double revenue tax
treaty concluded by the United States of America); or
(ii) two copies of IRS Form 4224 of the Internal Revenue Service of
the United States of America or Form W-8ECI (Certificate of
Foreign Person's Claim for Exemption From Withholding On
Income Effectively Connected with the Conduct of a Trade or
Business in the United States) (relating to income effectively
connected with the conduct of a trade or business in the
United States of America).
Each such Finance Party, subject as otherwise provided in this Clause
11.6(d) below, shall deliver (through the Facility Agent) to each U.S.
Borrower additional duly completed copies of any of the above forms
and/or such additional or successor forms (including Form W-8BEN and
Form W-8ECI) as shall be adopted from time to time by the Internal
Revenue Service of the U.S.A. if it is notified by the U.S. Borrower or
the Internal Revenue Service of the U.S.A. that any previous such form
delivered by it pursuant to this Clause 11.6 has expired or that
Finance Party becomes aware that any such form shall have become
incomplete or inaccurate in any respect unless prior to that delivery
any event occurs which renders the relevant form inapplicable.
(b) Without prejudice to the generality of Clause 11.5 (Double tax treaty
filings), each Finance Party which is a U.S. Person shall deliver
(through the Facility Agent) to each U.S. Obligor a statement signed by
an authorised signatory of the Finance Party to the effect that it is a
U.S. Person and if necessary to avoid United States backup withholding,
a duly completed copy of
<PAGE> 33
Internal Revenue Service Form W-9 (or successor form) establishing that
such Finance Party is not subject to United States backup withholding.
(c) The Facility Agent shall have no responsibility or liability for and no
obligation to check the accuracy or appropriateness of any form or
statement delivered by any Finance Party pursuant to this Clause
11.6(a) or (b) respectively.
(d) If any Finance Party determines, as a result of any introduction of or
change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to
any U.S. Obligor any form or certificate that the Finance Party is
obliged to submit pursuant to Clause 11.6(a) or (b), or that such
Finance Party is required to withdraw or cancel any form or certificate
previously submitted, the Finance Party shall promptly notify the U.S.
Borrowers' Agent of that fact.
11.7 COLLECTING AGENTS RULES
Each Bank represents to the Facility Agent on the date it becomes a
Party as a Bank that, in relation to the Facility, it is:
(a) either:
(i) not resident in the United Kingdom for United Kingdom
tax purposes; or
(ii) a bank as defined in section 840A of the Income and
Corporation Taxes Act 1988 and resident in the United
Kingdom; and
(b) beneficially entitled to the principal and interest payable
by the Facility Agent to it under this Agreement,
(or, if it is not able to make those representations, will ensure that
it assigns, transfers or novates its rights in respect of each Advance
then made (or, if made later, when made) to an entity in respect of
which both representations are correct) and, if it is able to make
those representations on the date it becomes a Bank, shall forthwith
notify the Facility Agent if either representation ceases to be
correct.
12. MARKET DISRUPTION
(a) If, in relation to any Advance:
(i) if no or only one, Reference Bank supplies a rate on the Rate
Fixing Day for the purposes of determining LIBOR or the
Facility Agent otherwise determines that adequate and fair
means do not exist for ascertaining LIBOR; or
(ii) the Facility Agent receives notification from Banks whose
participations in an Advance exceed 50 per cent. (50%) by
value of that Advance that, in their opinion, by reason of
circumstances affecting the London Interbank Eurocurrency
Market:
(A) matching deposits will not be available to them in
the London Interbank Eurocurrency Market in the
ordinary course of business in amounts sufficient to
fund their participations in that Advance for the
relevant Term; or
<PAGE> 34
(B) the cost to them of such matching deposits in the
London Interbank Eurocurrency Market for that Term
would be in excess of LIBOR,
the Facility Agent shall promptly notify the Obligors' Agent and the
Banks of that fact and that this Clause 12 is in operation.
(b) After any notification under paragraph (a) above:
(i) no further Requests may be delivered and no Bank shall be
obliged to participate in the Advance to which such
notification relates, unless such Advance is already
outstanding, until the Facility Agent notifies the Obligors'
Agent that the event specified in the notification no longer
prevails;
(ii) if the Obligors' Agent so requires, within 5 Business Days of
receipt of any such notification, the Obligors' Agent and the
Facility Agent (on behalf of the Banks) shall, in good faith,
enter into negotiations for a period of not more than 30 days
with a view to agreeing a substitute basis (the "SUBSTITUTE
BASIS") for determining the rate of interest and/or funding
applicable to any future Advance;
(iii) any Substitute Basis agreed under sub-paragraph (ii) above
shall be, with the prior consent of all the Banks, binding on
all the Parties; and
(iv) until and unless a Substitute Basis is so agreed, each Bank's
participation in each outstanding Advance to which such
notification related shall bear interest during the current
Term relative thereto at the rate certified by such Bank to be
its cost of funds (from such source as it may reasonably
select) for such Term in relation to such Advance, plus the
Applicable Margin and Reserve Asset Costs.
(c) The Facility Agent, in consultation with the Obligors' Agent shall, on
a monthly basis, review whether or not the circumstances referred to in
Clause 12(a) above still prevail with a view to returning to the normal
interest provisions of this Agreement.
13. INCREASED COSTS
13.1 INCREASED COSTS
(a) Subject to Clause 13.2 (Exceptions), the Parent shall forthwith on
demand by a Finance Party pay to that Finance Party the amount of any
increased cost incurred by it (or any Holding Company of it) as a
result of any introduction of or change in or change in the
interpretation, administration or application of any law, directive or
official regulation (including any law or regulation relating to
taxation, change in currency of a country or reserve asset, special
deposit, cash ratio, liquidity or capital adequacy requirements or any
other form of banking or monetary control) whether or not having the
force of law but, if not, being a directive or official regulation with
which it is the practice of banks in the relevant jurisdiction to
comply or compliance by any Finance Party (or any Holding Company of
such Finance Party) with any such introduction or change.
(b) In this Agreement "INCREASED COST" means:
<PAGE> 35
(i) an additional cost incurred by a Finance Party (or any Holding
Company of it) as a result of it having entered into, or
performing, maintaining or funding its obligations under, any
Finance Document; or
(ii) that portion of an additional cost incurred by a Finance Party
(or any Holding Company of it) in making, funding or
maintaining all or any Advances comprised in a class of
Advances formed by or including the participations in the
Advances made or to be made under this Agreement which is
attributable to it making, funding or maintaining those
participations; or
(iii) a reduction in any amount payable to a Finance Party (or any
Holding Company of it) or the effective return to a Finance
Party (or any Holding Company of it) under any Finance
Document or on its (or such Holding Company's) capital; or
(iv) the amount of any payment made by a Finance Party (or any
Holding Company of it), or the amount of interest or other
return foregone by a Finance Party (or any Holding Company of
it), calculated by reference to any amount received or
receivable by a Finance Party from any other Party under this
Agreement.
(c) The relevant Finance Party shall notify the Parent as promptly as
reasonably practicable upon it becoming aware of circumstances giving
rise to the right of such Finance Party to receive payments as referred
to in this Clause 13.1, giving reasonable details of the likely
calculation of such increased cost and basis on which it is
attributable to the Facility, provided that such Finance Party shall
not be required to divulge information of a confidential nature with
respect to its business.
13.2 EXCEPTIONS
Clause 13.1 (Increased costs) does not apply to any increased cost:
(a) compensated for by the operation of Clause 11 (Taxes) (or
which would have been so compensated for but for the operation
of Clause 11.3(a) (Recognised Bank)), Clause 8.1(c) (Interest
rate) or Clause 13.3 (Regulation D Compensation); or
(b) attributable to any change in the rate of tax on the overall
net income or gains of a Bank imposed in the jurisdiction in
which its principal office is located or on the overall net
income or gains of the Bank's Facility Office by the
jurisdiction in which that Facility Office is located.
13.3 REGULATION D COMPENSATION
Unless such additional interest is paid in accordance with Clause
8.1(c) (Interest rate), any Bank which is required by Regulation D
issued by the Board of Governors of the Federal Reserve System of the
U.S.A. to maintain and does maintain any reserves against "EUROCURRENCY
LIABILITIES" (as defined in such Regulation) pursuant to such
Regulation may require any U.S. Obligor to pay, contemporaneously with
each payment of interest on any Advance (in respect of which the
Eurodollar Reserve Percentage applies) made to such U.S. Obligor for
any Term relative thereto, additional interest on the participation of
such Bank in that Advance at the rate per annum determined from the
formula (A)(i) LIBOR applicable to such Advance for that Term divided
by (ii) one MINUS the Euro-Dollar Reserve Percentage
<PAGE> 36
MINUS (B) LIBOR applicable to such Advance for that Term. Any Bank
requiring payment by any U.S. Obligor of such additional interest shall
notify such U.S. Obligor and the Facility Agent at least five Business
Days prior to the last day of each Term for each relevant Advance of
the amount due to be paid to it with respect to such Advance pursuant
to this Clause 13.3 (certifying in that notice that the amount claimed
does not exceed such part of the cost to such Bank of maintaining such
reserves as in the opinion of that Bank should fairly and reasonably be
apportioned to such Advance), which notice shall be final and binding
in the absence of manifest error. No Bank shall be required to disclose
in support of any claim hereunder any information reasonably regarded
by such Bank as being confidential.
14. ILLEGALITY
If it becomes (or any change in the interpretation, administration or
application of any law makes it apparent that it is) unlawful in any
applicable jurisdiction or contrary to any applicable official
regulation (if not having the force of law, being one with which it is
the practice of banks, trusts, funds or financial institutions in the
relevant jurisdiction to comply), for a Finance Party to give effect to
any of its obligations as contemplated by this Agreement or to fund or
maintain its participation in any Advance then:
(a) the Finance Party may notify the Obligors' Agent through the
Facility Agent accordingly; and
(b) (i) each Borrower shall forthwith or by such later
date as is immediately prior to the illegality taking
effect prepay that Finance Party's participation in
all such Advances made to it together with all other
amounts payable by it to that Finance Party under
this Agreement as shall be necessary to avoid any
such illegality or breach; and
(ii) to the extent necessary to avoid any such illegality
or breach such Finance Party's Commitment shall be
cancelled and the obligations of the Finance Party to
the Borrowers hereunder shall cease.
15. MITIGATION
15.1 MITIGATION
If Clauses 11 (Taxes), 13 (Increased Costs) or 14 (Illegality) operate
in relation to any Finance Party to the detriment of any Borrower:
(a) such Finance Party shall, upon the request of the Obligors'
Agent, enter into discussions with the Obligors' Agent with a
view to determining what mitigating action might be taken by
such Finance Party; and
(b) at the request of the Obligors' Agent, the Facility Agent and
the relevant Finance Party will enter into discussions with
the Obligors' Agent with a view to determining what mitigating
action might be taken by such Finance Party (including without
limitation identifying replacement bank(s) or other financial
institution(s) who may be willing to become party to this
Agreement in place of such Finance Party) or by the Facility
Agent with respect to the administration of this Agreement;
<PAGE> 37
PROVIDED THAT nothing in this Clause shall oblige any Finance Party to
incur any material costs or expenses or to take any action or refrain
from taking any action other than entering into such discussions in
good faith.
15.2 COSTS AND EXPENSES
Any costs and expenses reasonably incurred by any Finance Party
pursuant to this Clause 15 shall be paid by the Obligors' Agent within
five Business Days after receipt of a demand specifying the same in
reasonable detail.
16. GUARANTEE
16.1 GUARANTEE
Each Guarantor irrevocably, unconditionally, jointly and severally:
(a) as principal obligor, and not merely as surety, guarantees to
each Finance Party prompt performance by each other Obligor of
all its payment obligations under the Finance Documents;
(b) undertakes with each Finance Party that whenever a Borrower
does not pay any amount when due under or in connection with
any Finance Document, that Guarantor shall forthwith on demand
by the Facility Agent pay that amount as if that Guarantor
instead of the relevant Borrower were expressed to be the
principal obligor; and
(c) indemnifies each Finance Party on demand against any loss or
liability suffered by such Finance Party if any obligation
guaranteed by that Guarantor is or becomes unenforceable,
invalid or illegal.
16.2 CONTINUING GUARANTEE
This guarantee is a continuing guarantee and will extend to the
ultimate balance of all sums payable by the Obligors or any of them
under the Finance Documents, regardless of any intermediate payment or
discharge in whole or in part.
16.3 REINSTATEMENT
(a) Where any discharge (whether in respect of the obligations of any
Obligor or any security for those obligations or otherwise) is made in
whole or in part or any arrangement is made on the faith of any
payment, security or other disposition which is avoided or must be
restored on insolvency, liquidation or otherwise without limitation,
the liability of each Guarantor under this Clause 16 shall continue as
if the discharge or arrangement had not occurred.
(b) Each Finance Party may concede or compromise any claim that any
payment, security or other disposition is liable to avoidance or
restoration.
16.4 WAIVER OF DEFENCES
The obligations of each Guarantor under this Clause 16 will not be
affected by any act, circumstance, omission, matter or thing which, but
for this provision, would reduce, release or prejudice any of its
obligations under this Clause 16 or prejudice or diminish those
<PAGE> 38
obligations in whole or in part, including without limitation (whether
or not known to it or any other Party):
(a) any time, indulgence or waiver granted to, or composition
with, any Obligor or other person;
(b) the taking, variation, compromise, exchange, renewal or
release of, or refusal or neglect to perfect, take up or
enforce, any rights or remedies against, or security over
assets of, any Obligor or other person or any non-presentation
or non-observance of any formality or other requirement in
respect of any instrument or any failure to realise the full
value of any security;
(c) any legal limitation, disability, incapacity or lack of
powers, authority or legal personality of or dissolution or
change in the members or status of any Obligor or any other
person;
(d) any variation (however fundamental and whether or not
involving an increase in liability of any Obligor) or
replacement of a Finance Document or any other document or
security so that references to that Finance Document in this
Clause 16 shall include each variation or replacement;
(e) any unenforceability, illegality, invalidity or frustration of
any obligation of any person under any Finance Document or any
other document or security or any failure of any Obligor or
proposed Obligor to become bound by the terms of any Finance
Document;
(f) any postponement, discharge, reduction, non-provability or
other similar circumstance affecting any obligation of any
Obligor under a Finance Document resulting from any
insolvency, liquidation or dissolution proceedings or from any
law, regulation or order,
so that each such obligation shall, for the purposes of the Guarantor's
obligations under this Clause 16, remain in full force and be construed
as if there were no such act, circumstance, variation, omission, matter
or thing.
16.5 IMMEDIATE RECOURSE
Each Guarantor waives any right it may have of first requiring any
Finance Party (or any trustee or agent on its behalf) to proceed
against or enforce any other rights or security or claim payment from
or file any proof or claim in any insolvency proceedings of any person
before claiming from that Guarantor under this Clause 16.
16.6 APPROPRIATIONS
Until all amounts which may be or become payable by the Obligors under
or in connection with the Finance Documents have been irrevocably paid
in full, each Finance Party (or any trustee or agent on its behalf)
may:
(a) refrain from applying or enforcing any other moneys, security
or rights held or received by that Finance Party (or any
trustee or agent on its behalf) in respect of
<PAGE> 39
those amounts, or apply and enforce the same in such manner
and order as it sees fit (whether against those amounts or
otherwise) and no Guarantor shall be entitled to the benefit
of the same; and
(b) hold in an interest bearing suspense account any moneys
received from any Guarantor or on account of any Guarantor's
liability under this Clause 16.
16.7 NON-COMPETITION
Until all amounts which may be or become payable by the Obligors under
or in connection with the Finance Documents have been irrevocably paid
in full, no Guarantor shall, after a claim has been made or by virtue
of any payment or performance by it under this Clause 16:
(a) be subrogated to any rights, security or moneys held, received
or receivable by any Finance Party (or any trustee or agent on
its behalf) or be entitled to any right of contribution or
indemnity in respect of any payment made or moneys received on
account of that Guarantor's liability under this Clause 16
and, to the extent that any Guarantor is so subrogated or
entitled by law, that Guarantor (to the fullest extent
permitted by law) waives and agrees not to exercise or claim
those rights, security or money or that right of contribution
or indemnity;
(b) claim, rank, prove or vote as a creditor of any Obligor or its
estate in competition with any Finance Party (or any trustee
or agent on its behalf) unless otherwise required by the
Facility Agent or by law (in which case any proceeds of any
claim in respect of any rights, security or monies of any
Finance Party to which such Guarantor was subrogated will be
paid by such Guarantor to the Facility Agent to be applied in
accordance with the provisions of the Finance Documents); or
(c) receive, claim or have the benefit of any payment,
distribution or security from or on account of any Obligor, or
exercise any right of set-off as against any Obligor (and
without prejudice to the foregoing, each Guarantor shall
forthwith pay to the Facility Agent for the benefit of the
Finance Parties an amount equal to any amount so set off by
it).
Each Guarantor shall hold in trust for and forthwith pay or transfer to
the Facility Agent for the Finance Parties any payment or distribution
or benefit of security received by it contrary to this Clause 16.7.
16.8 ADDITIONAL SECURITY
This guarantee is in addition to and is not in any way prejudiced by
any other security now or hereafter held by any Finance Party.
16.9 LIMITATIONS
Notwithstanding any other provision of this Clause 16 the obligations
of each U.S. Obligor in its capacity as a Guarantor under this Clause
16 shall be limited to a maximum aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of
Title 11 of the United States Bankruptcy Code or any applicable
provisions of comparable state law (collectively,
<PAGE> 40
the "FRAUDULENT TRANSFER LAWS"), in each case after giving effect to
all other liabilities of such U.S. Obligor, contingent or otherwise,
that are relevant under the Fraudulent Transfer Laws (specifically
excluding, however, any liabilities of such U.S. Obligor in respect of
intercompany indebtedness to the Borrowers or Affiliates of the
Borrowers to the extent that such indebtedness would be discharged in
an amount equal to the amount paid by such U.S. Obligor hereunder) and
after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, contribution, reimbursement, indemnity or similar rights
of such U.S. Obligor pursuant to (i) applicable law or (ii) any
agreement providing for an equitable allocation among such U.S. Obligor
and other Affiliates of the Borrowers of obligations arising under
guarantees by such parties.
17. ADDITIONAL BORROWERS, GUARANTORS AND SECURITY
17.1 ADDITIONAL BORROWERS
(a) If any wholly-owned Subsidiary incorporated in the United States or the
United Kingdom of the Parent wishes to become a Borrower, it and the
Obligors' Agent (for itself and on behalf of the existing Borrowers and
Guarantors) shall first execute and deliver to the Facility Agent a
duly completed Guarantor Accession Agreement and then a Borrower
Accession Agreement.
(b) Delivery of a Borrower Accession Agreement, executed by the relevant
Subsidiary and the Obligors' Agent, constitutes confirmation by that
Subsidiary and the Obligors' Agent that the representations and
warranties set out in Clause 18 (Representations and Warranties) to be
made by them on the date of the Borrower Accession Agreement are
correct as if made by them with reference to the facts and
circumstances then existing.
(c) If all the Banks confirm to the Facility Agent their agreement to the
relevant Subsidiary becoming a Borrower (such agreement not to be
unreasonably withheld), the Facility Agent shall execute such Borrower
Accession Agreement for itself and on behalf of the other Finance
Parties.
(d) Subject to paragraph (e) below, upon execution of a Borrower Accession
Agreement by the relevant Subsidiary, the Obligors' Agent and the
Facility Agent, such Subsidiary shall become an Additional Borrower in
accordance with the terms of this Agreement but the Additional
Borrower's right to request Advances under this Agreement may be
limited in accordance with the terms of the Borrower Accession
Agreement.
(e) The obligations of the Finance Parties to such Additional Borrower with
respect to the making of an Advance to it under this Agreement, are
subject to the conditions precedent that the Facility Agent shall have
received in form and substance satisfactory to it (acting reasonably)
each of the documents listed in Schedule 3 Part II and such other
reports, opinions and other documents relating to such Additional
Borrower as the Facility Agent may reasonably require.
17.2 ADDITIONAL GUARANTORS
(a) In order to comply with Clause 17.1 (Additional Borrowers) and Clause
19.32 (Obligor cover) the Parent shall procure that sufficient
Subsidiaries accede as Guarantors to this
<PAGE> 41
Agreement by delivering duly executed and completed Guarantor Accession
Agreements to the Facility Agent.
(b) Delivery of a duly executed and completed Guarantor Accession Agreement
to the Facility Agent, will evidence the accession of the relevant
Subsidiary as an Additional Guarantor and will constitute confirmation
by that Subsidiary and the Parent that the representations and
warranties set out in Clause 18 (Representations and Warranties) to be
made by them on the date of the Guarantor Accession Agreement are
correct, as if made by them with reference to the facts and
circumstances then existing.
(c) The Parent shall procure that any Additional Guarantor shall also
deliver each of those documents listed in Part II Schedule 3 and such
other reports, opinions and documents relating to such Additional
Guarantors as the Facility Agent may reasonably require, together with
the Guarantor Accession Agreement, in each case, in form and substance
satisfactory to the Facility Agent.
17.3 SECURITY
(a) The Obligors shall procure that:
(i) the Security Documents specified in Schedule 6 are executed
and delivered to the Security Agent on the Signing Date; and
(ii) if a Subsidiary acquires any asset of material value or
material to the operation of the business of any member of the
Group, such that on the date of acquisition the Subsidiary
would be required to accede as a Guarantor and execute
security in favour of the Security Agent pursuant to Clause
19.32 (Obligor cover) of this Agreement (with reference to the
most recent monthly and consolidated Accounts) the member of
the Group acquiring such asset shall (if such asset is not, in
the opinion of the Security Agent, subject to a charge under
any existing Security Document) promptly execute and deliver
to the Security Agent and in any event within 30 days of such
entity becoming a member of the Group such further or
additional Security Documents in relation to such assets as
the Majority Banks may require in substantially the same terms
as the Security Documents charging similar assets entered into
on the Signing Date.
(b) The Obligors shall procure that any entity which becomes a member of
the Group after the Signing Date shall, if required by the Security
Agent and if necessary in order to comply with Clause 19.32 (Obligor
cover), promptly execute and deliver to the Security Agent and in any
event within 30 days of such entity becoming a member of the Group such
Security Documents in substantially the same terms as the Security
Documents entered into at the Signing Date subject to any provision of
law prohibiting such person from entering into such Security Documents.
(c) Where any such prohibition as is referred to above exists, the Obligors
shall use their reasonable endeavours lawfully to overcome the
prohibition.
(d) The Obligors shall at their own expense execute and do all such
assurances, acts and things (i) as the Security Agent may reasonably
require for perfecting or protecting the security intended to be
afforded by the Security Documents (and shall deliver to the Security
Agent
<PAGE> 42
such directors and shareholders resolutions, title documents and other
documents as the Security Agent may reasonably require) or (ii) as the
Security Agent may require for facilitating the realisation of all or
any part of the assets which are subject to the Security Documents and
the exercise of all powers, authorities and discretions vested in the
Security Agent or in any receiver of all or any part of those assets.
17.4 RELEASE OF GUARANTORS AND SECURITY
(a) Subject to paragraph (c) below, at the time of completion of any sale
or other disposal to a person or persons outside (and which will remain
outside) the Group of all of the shares in the capital of any Guarantor
(or of all of the shares in any other member of the Group such that any
Guarantor ceases as a result thereof to be a member of the Group) and
in such other circumstances (if any) as the Facility Agent (acting on
the instructions of the Majority Banks acting reasonably) may from time
to time agree in writing, such Guarantor shall be released from all
past, present and future liabilities (both actual and contingent and
including, without limitation, any liability to any other Guarantor by
way of contribution) hereunder and under the Security Documents to
which it is a party (other than liabilities which it has in its
capacity as a Borrower), and the security provided over its assets
under such Security Documents shall be released.
(b) Subject to paragraph (c) below, at the time of completion of any sale
or other disposal to a person or persons outside (and which will remain
outside) the Group of any assets owned by an Obligor over which
security has been created by the Security Documents to which that
Obligor is party, those assets shall be released from such security.
(c) The release of the guarantees and security referred to in paragraphs
(a) and (b) above shall only occur (save to the extent otherwise agreed
by the Facility Agent acting on the instructions of the Majority Banks)
if:
(i) either (1) such disposal by any member of the Group is
permitted by the provisions of this Agreement and will not
result directly or indirectly in any breach of any of the
terms of this Agreement, or (2) such disposal is being
effected at the request of the Majority Banks in circumstances
where any of the security created by the Security Documents
has become enforceable, or (3) such disposal is being effected
by enforcement of the Security Documents; and
(ii) any assets to be transferred to other members of the Group
before completion of such disposal shall have been so
transferred and (if so required by the Facility Agent acting
on the instructions of the Majority Banks) security over those
assets shall have been granted to the Security Agent on terms
equivalent to those in the existing Security Documents to its
satisfaction.
The Security Agent shall (at the expense of the relevant Obligor)
execute such documents effecting such release as shall be reasonably
required to achieve such release as aforesaid (and the Security Agent
shall execute such documents promptly upon (and only upon) it being
satisfied that the conditions in (i) and (ii) above are satisfied or
the Majority Banks have otherwise agreed).
(d) If any person which is a member of the Group shall cease to be such a
member in consequence of the enforcement of any of the Security
Documents or in consequence of a
<PAGE> 43
disposal of the shares therein or in any Holding Company of it effected
at the request of the Majority Banks in circumstances where any of the
security created by the Security Documents has become enforceable, any
claim which any Obligor may have against such person or any of its
Subsidiaries or which that person or any of its Subsidiaries may have
against any Obligor in or arising out of this Agreement or any of the
Security Documents (including, without limitation, any claim by way of
subrogation to the rights of the Agents and the Banks under the Finance
Documents and any claim by way of contribution or indemnity) shall be
released automatically and immediately upon such person ceasing to be a
member of the Group.
18. REPRESENTATIONS AND WARRANTIES
18.1 REPRESENTATIONS AND WARRANTIES
Each Obligor makes to each Finance Party the representations and
warranties set out in this Clause 18 (other than in respect of the
representations and warranties in Clauses 18.1(j) (Prospectus), 18.1(k)
(Financial Forecasts), 18.1(l) (Base Financial Statements), 18.1(v)
(Information Memorandum) and 18.1(w) (Structure Memorandum) which are
made by the Parent only).
(a) STATUS: It is, and each Subsidiary of it is, a limited
liability company or, in the case of a U.S. Person
corporation, duly incorporated or established and validly
existing under the laws of the jurisdiction of its
incorporation or establishment, with the power to own its
assets and carry on its business as it is being conducted, and
no administrator, receiver, liquidator or similar official has
been appointed with respect to it or any member of the Group
or with respect to the assets of any of them who has not been
released, discharged or resigned from such appointment and no
petition or proceeding for such an appointment is pending.
(b) POWERS AND AUTHORITY: It has the power to enter into and
perform, and has taken all necessary action to authorise the
entry into, performance and delivery by it of, the Finance
Documents to which it is or will be a party and the
transactions contemplated by those Finance Documents.
(c) LEGAL VALIDITY: Subject to the Reservations, each Finance
Document to which it is or will be a party constitutes, or
when executed in accordance with its terms will constitute,
its legal, valid and binding obligation and no limit on its
powers will be exceeded as a result of the borrowings, grant
of security or giving of guarantees contemplated by the
Finance Documents to which it is a party.
(d) NON-CONFLICT: The entry into and performance by it of, and the
transactions contemplated by, the Finance Documents do not and
will not:
(i) conflict with any law or judicial or official
regulation applicable to it; or
(ii) conflict with its constitutional documents; or
(iii) conflict in any material respect with any agreement
or document which is binding upon it, or any other
member of the Group or any of its assets or any
assets of any other member of the Group; or
<PAGE> 44
(iv) entitle any third party to terminate any
material contract with any member of the Group.
(e) NO DEFAULT:
(i) No Event of Default is outstanding which has not
been waived or is reasonably likely to result from
the making of any Advance; and
(ii) no other event is outstanding which constitutes (or,
with the giving of notice, lapse of time or the
making of any determination (other than a
determination as to materiality which is not
satisfied), will or any combination of the foregoing
is reasonably likely to constitute) a default under
any agreement or document which is binding on any
member of the Group or any asset of any member of the
Group, which event or default or any action which any
third party is entitled to take following any such
event or default would have a Material Adverse
Effect.
(f) AUTHORISATIONS: All authorisations required by it in
connection with the entry into, performance, validity and
enforceability of, and the transactions contemplated by, the
Finance Documents have been obtained or effected (as
appropriate) and are in full force and effect save for any
filings and registrations necessary in connection with the
Security Documents which can be effected by or on behalf of
the Security Agent (and without the need for any action by any
member of the Group) after the date hereof.
(g) ACCOUNTS:
(i) Its Accounts most recently delivered to the Facility
Agent (if audited) present a true and fair view of or
(if unaudited) fairly present its and (if
consolidated) its Subsidiaries consolidated financial
condition as at the date to which they were drawn up,
subject in the case of quarterly and monthly Accounts
to which, save as adjusted in accordance with Clause
19.5 (Audit and Accounting Dates), have been normal
year end adjustments.
(ii) Its audited accounts (whether consolidated or
unconsolidated) most recently delivered to the
Facility Agent:
(A) have been prepared in accordance with
Applicable Accounting Principles, which,
save as adjusted in accordance with Clause
19.5 (Audit and Accounting Dates) have been
consistently applied; and
(B) fairly represent the financial condition of
that Obligor and, where applicable, its
Subsidiaries as at the date to which they
were drawn up, and since such date there has
been no material adverse change in the
financial condition of that Obligor or,
where applicable, the consolidated financial
position of that Obligor and its
Subsidiaries.
(iii) All forecasts and projections delivered to the
Facility Agent pursuant to Clause 19.3 (Projections)
(other than those already contained in the
<PAGE> 45
Information Memorandum) were based on assumptions
considered to be fair and reasonable as at the date
of such delivery and were provided in good faith.
(h) LITIGATION AND LABOUR DISPUTES: No litigation, arbitration,
administrative or regulatory proceedings are current or, to
its knowledge, pending or threatened, which are reasonably
likely to be adversely determined to it and which would, if so
determined, have a Material Adverse Effect. No labour disputes
are current or, to its knowledge, threatened which would have
a Material Adverse Effect.
(i) TAX LIABILITIES: No claims are being or are reasonably likely
to be asserted against any member of the Group with respect to
Taxes which are reasonably likely to be determined adversely
to such member of the Group and which, if so adversely
determined, would have a Material Adverse Effect. It is not
overdue in the filing of any material Tax returns where such
later filing might result in any fine or penalty.
(j) PROSPECTUS:
(i) The Prospectus did not, at the time that it was
declared effective under the U.S. Securities Act of
1933, as amended, contain any untrue statement of a
material fact or omit to state any material fact
required to be stated therein or necessary in order
to make the statements therein, in light of the
circumstances under which they were made, not
misleading.
(ii) Nothing has occurred or come to light which renders
any of the material factual information, expressions
of opinion or intention, projections or conclusions
contained in the Prospectus inaccurate or misleading
(or in the case of expressions of opinion,
conclusions or projections, other than fair and
reasonable) in any material respect in the context of
the Acquired Assets, the Group and the transactions
contemplated hereby.
(k) FINANCIAL FORECASTS:
The forecasts and projections contained in the Financial
Forecasts are reasonable and are reasonably believed by the
Parent (which shall be deemed to have the belief of each of
the Executive Officers) to be attainable.
(l) BASE FINANCIAL STATEMENTS:
(i) So far as it is aware after due and careful enquiry
(the knowledge of each of the Executives being
imputed to each Obligor) the Base Financial
Statements have been prepared in accordance with the
Applicable Accounting Principles and fairly present
the consolidated financial position of the Target
Group, as at the date to which the same were prepared
and/or (as appropriate) the results of operations and
changes in financial position during the period for
which they were prepared, subject, in the case of
management Accounts, to normal year end adjustments,
and the Accounts referred to in paragraphs (a) and
(c) of the definition of Base Financial Statements in
Clause 1.1 do not consolidate or include the results
of any company, business or partnership whose
business at the Closing Date is not part of the
Acquired Assets.
<PAGE> 46
(ii) There has been no material adverse change in the
business, assets or financial condition of the
Acquired Assets (taken as a whole) since the date to
which the latest of the Base Financial Statements in
which its financial position and results of
operations are reflected were prepared.
(m) INTELLECTUAL PROPERTY RIGHTS:
(i) It and each of its Subsidiaries which is a Material
Subsidiary owns or has licensed to it all the
Intellectual Property Rights which are material in
the context of its (or such Material Subsidiaries')
business and which are required by it (or such
Material Subsidiary) in order for it to carry on its
business in all material respects as it is being
conducted and as contemplated in the Financial
Forecasts and as far as it is aware it does not (nor
do any of its Subsidiaries which is a Material
Subsidiary), in carrying on its business, infringe
any Intellectual Property Rights of any third party
in any material respect.
(ii) It and each of its Subsidiaries which is a Material
Subsidiary has taken all actions (including payment
of fees) required to maintain in full force and
effect any registered Intellectual Property Rights
owned by it which are material in the context of its
(or such Material Subsidiaries') business or which
are required by it (or such Material Subsidiary) in
order for it to carry on its business in all material
respects as it is being conducted and as contemplated
in the Financial Forecasts.
(iii) It and each of its Subsidiaries which is a Material
Subsidiary has the right to use all trade names and
has not entered into any agreements restricting the
use of such trade names.
(n) ENVIRONMENTAL MATTERS:
(i) It and its Subsidiaries have obtained all requisite
Environmental Licences required for the carrying on
of its business as currently conducted and have at
all times complied with (A) the terms and conditions
of such Environmental Licences and (B) all other
applicable Environmental Laws which, in each case, if
not obtained or complied with would have a Material
Adverse Effect or a material adverse effect on the
value (taken as a whole) of the real property charged
pursuant to the Security Documents. There are to its
knowledge no circumstances which may prevent or
interfere with such compliance in the future.
(ii) There is no Environmental Claim current or (to its
knowledge) pending or threatened, and there are no
past or present acts, omissions, events or
circumstances that would be reasonably likely to form
the basis of any Environmental Claim (including,
without limitation, any arising out of the
generation, storage, transport, disposal or release
of any Dangerous Substance), against any Obligor
which, if adversely determined, would have a Material
Adverse Effect.
<PAGE> 47
(o) PARI PASSU RANKING: Its obligations under the Finance
Documents rank and will rank at least pari passu with all its
other unsecured obligations.
(p) OWNERSHIP OF ASSETS:
Save to the extent disposed of without breaching the terms of
any of the Finance Documents, with effect from and after the
Signing Date, and as at the time this representation is given
or repeated, it and each of its Subsidiaries which is a
Material Subsidiary has good title to or valid leases or
licences of or is otherwise entitled to use and permit other
members of the Group to use all material assets necessary, in
the case of an Obligor, to conduct its business as conducted
by it at such time; and
(q) SECURITY DOCUMENTS: It is the beneficial owner of the property
which it purports to charge with full title guarantee free and
clear of any Encumbrances (other than Permitted Encumbrances)
pursuant to any of the Security Documents. The shares charged
by it pursuant to the Security Documents are all fully paid
and non-assessable and are not subject to any option to
purchase or similar rights.
(r) ERISA:
(i) No act, omission or transaction has occurred
which will result in the imposition on any U.S.
Obligor of:
(1) any penalty assessed pursuant to ERISA or
a tax imposed by section 4975 of the IRC;
(2) breach of fiduciary duty liability damages
under section 409 of ERISA,
which would in any such case have a Material Adverse
Effect.
(ii) No U.S. Obligor or ERISA Affiliate has maintained, or
had an obligation to contribute to, or has any
liability or potential liability with respect to any
Plan.
(iii) Payment has been made of all amounts which any U.S.
Obligor or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as
contributions to such Plan, except as could not
reasonably be expected to have a Material Adverse
Effect.
(iv) Each U.S. Obligor and each ERISA Affiliate are in
compliance in all material respects with the
presently applicable provisions of ERISA, the IRC,
and all other applicable laws and regulations with
respect to each Plan and with respect to each other
employee benefit plan as such term is defined in
Section 3(3) of ERISA except as could not reasonably
be expected to have a Material Adverse Effect.
(v) Neither any U.S. Obligor nor any ERISA Affiliate (nor
any trade or business that was an ERISA Affiliate)
has at any time contributed to or been obliged to
contribute to any Multiemployer Plan which, upon the
complete or partial
<PAGE> 48
withdrawal of the U.S. Obligor or any ERISA Affiliate
from such Plan, could result in the imposition of
complete or partial withdrawal liability which would
a Material Adverse Effect.
(vi) There are no actions, suits or claims pending (other
than routine claims for benefits) against any Plan or
the assets of any such Plan, except as could not
reasonably be expected to have a Material Adverse
Effect.
(vii) No ERISA Event has occurred or is reasonably expected
to occur.
(viii) Except to the extent required under Section 4980B of
the IRC, no employee benefit plan (as such term is
defined in Section 3(3) of ERISA) provides health or
welfare benefits beyond the last day of the calendar
month in which termination of employment occurs for
any retired or former employee of any U.S. Obligor or
any of their respective ERISA Affiliates.
(s) INVESTMENT COMPANY STATUS: Each U.S. Obligor is either (i) not
an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for an "investment
company" in each case within the meaning of the United States
Investment Company Act of 1940, as amended or (ii) is exempt
from all provisions of such Act, as amended.
(t) SOLVENCY OF U.S. OBLIGORS: At the date of this Agreement, each
U.S. Obligor is, and immediately after consummation of the
transactions contemplated to occur under this Agreement and
the other Finance Documents and after giving effect to all
obligations incurred and Encumbrances created by such U.S.
Obligor in connection herewith and therewith will be, Solvent.
No Obligor is entering into this Agreement or the transactions
contemplated hereby with actual intent to hinder, delay or
defraud either present or future creditors. As used in this
Agreement, "SOLVENT" means, with respect to any U.S. Obligor
on a particular date, that on such date (i) the fair value of
the assets of such U.S. Obligor is greater than the total
amount of liabilities, including, without limitation,
subordinated and contingent liabilities, of such U.S. Obligor,
(ii) the amount that will be required to pay the probable
liabilities of such U.S. Obligor on its debts as they become
absolute and matured will not be greater than the fair
saleable value of the property of such U.S. Obligor at such
time, (iii) such U.S. Obligor is able to realise upon its
assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal
course of business, (iv) such U.S. Obligor does not intend to,
and does not believe that it will, incur debts or liabilities
beyond such U.S. Obligor's ability to pay as such debts and
liabilities become absolute and mature, and (v) such U.S.
Obligor is not engaged in a business or a transaction, and is
not about to engage in a business or a transaction, for which
such U.S. Obligor's property would constitute unreasonably
small capital with which to conduct the businesses in which it
is engaged. In computing the amount of any contingent
liability at any time, it is intended that such liability will
be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount
that might reasonably be expected to become an actual or
matured liability and taking into account the value of rights
of contribution, reimbursement and subrogation which such U.S.
Obligor might reasonably be expected to realise in respect
thereof.
<PAGE> 49
(u) YEAR 2000: The Parent and its Subsidiaries (including after
completion of the TIB Acquisition, the Target Group) have
taken steps that are reasonable to ensure that the occurrence
of the year 2000 will not, or is not reasonably likely to,
have a Material Adverse Effect on it or its Subsidiaries'
information and business systems.
(v) INFORMATION MEMORANDUM:
(i) The factual information in relation to the Group in
the Information Memorandum is to the best of the
Parent's knowledge and belief true and accurate in
all material respects, opinions expressed about the
Group in the Information Memorandum were honestly
held and all projections in the Information
Memorandum were based on assumptions considered to be
reasonable as at the date of which the Information
Memorandum speaks and all such factual information,
opinions and assumptions were provided in good faith.
(ii) The Information Memorandum did not omit at its date
any information which made misleading in any material
respect any information in the Information
Memorandum.
(w) STRUCTURE MEMORANDUM: The Structure Memorandum contains
descriptions which in all material respects are true, complete
and correct of the corporate ownership structure of the Group
(including details of any minority shareholdings held by any
person who is not a member of the Group, details of all
partnership, joint ventures and co-operative agreements in
which any member of the Group has an interest and details of
any minority shareholding owned by any member of the Group)
showing each Subsidiary and all inter-company Borrowings (of a
type specified in paragraphs (a), (b) or (c) of the definition
of "Borrowings" in Clause 1.1) of more than U.S.$500,000 (or
its equivalent in other currencies) as they will be
immediately after the Signing Date.
(x) SENIOR INDEBTEDNESS/DESIGNATED SENIOR INDEBTEDNESS: The
Advances and all other monetary obligations of the Parent,
whether in its capacity as a Borrower, a Guarantor or
otherwise, under any of the Finance Documents constitute
"Senior Indebtedness" and "Designated Senior Indebtedness" as
defined in the indenture dated 27th May, 1998 made between the
Parent and The Bank of New York, as trustee, relating to the
Parent's 4.75% Convertible Subordinated Notes due 2003.
18.2 TIMES FOR MAKING REPRESENTATIONS AND WARRANTIES
The representations and warranties set out in Clause 18.1
(Representations and warranties) above:
(a) (i) (except in the case of Clauses 18.1(v) (Information
Memorandum) in the case of each Obligor which is a
Party on the Signing Date are made on that date and
on the first Drawdown Date; and
(ii) in the case of an Obligor which becomes a Party after
the Signing Date, will be deemed to be made by that
Obligor on the date it executes a Borrower Accession
Agreement or Guarantor Accession Agreement;
<PAGE> 50
(b) in the case of Clause 18.1(v) (Information Memorandum) will be
made on the date on which the Information Memorandum is
initialled for identification by the Arranger and together
with Clauses 18.1(j) (Prospectus), 18.1(k) (Financial
Forecasts), 18.1(l) (Base Financial Statements) and 18.1(w)
(Structure Memorandum) will also be made on the last day of
the Primary Syndication Period.
(c) with the exception of Clause 18.1(j) (Prospectus), 18.1(l)
(Base Financial Statements), 18.1(n)(i) (Environmental
matters), 18.1(r)(ii) (ERISA), 18.1(v) (Information
Memorandum) and 18.1(u) (Year 2000), are deemed to be repeated
by each Obligor on the date of each Request and each Drawdown
Date with reference to the facts and circumstances then
existing; and
(d) in the case of Clause 18.1(u) (Year 2000), is deemed to be
repeated by each Obligor on the date of each Request and each
Drawdown Date with reference to the facts and circumstances
then existing provided that the obligation to make this
representation will cease on 15th January, 2000.
19. UNDERTAKINGS
19.1 DURATION
The undertakings in this Clause 19 remain in force from the date of
this Agreement for so long as any amount is or may be outstanding under
this Agreement or any Commitment is in force.
19.2 FINANCIAL INFORMATION
The Parent shall supply to the Facility Agent in sufficient copies for
all the Banks:
(a) as soon as the same are available (and in any event within
120 days of the end of each of its financial years):
(i) the audited consolidated accounts of the Group for
that financial year; and
(ii) promptly upon request by the Facility Agent, the
audited accounts, if prepared, of each Obligor
(consolidated in the case of an Obligor with
Subsidiaries) for that financial year;
(b) as soon as available (and in any event within 45 days) after
the end of each consecutive three month period ending on an
Accounting Date, unaudited consolidated management accounts of
the Group for that three month period in a form and showing
the detailed information provided for in the Proforma Accounts
together with a written report by an Executive Officer
explaining any material variances against budget and the
Financial Forecasts for that period;
(c) as soon as available (and in any event within 45 days) after
the end of each calendar month the unaudited consolidated
management accounts of the Group for that month in a form and
showing the detailed information provided for in the Proforma
Accounts and with each set of monthly consolidated management
accounts, a written
<PAGE> 51
report of an Executive Officer explaining any material
variances against the budget and Financial Forecasts for that
period; and
(d) (i) together with the Accounts specified in paragraph (a)
above, (A) a certificate signed by the Auditors (I)
setting out in reasonable detail computations
establishing, as at the date of such accounts,
compliance or otherwise with Clause 20.2 (Financial
Covenants), and (II) stating that the Auditors did
not in the course of their audit discover any Event
of Default which they know to be an Event of Default
or, if they did, describing the same, and (B) a
certificate signed by an Executive Officer
identifying the Material Subsidiaries and those
companies required to provide guarantees and security
in order to comply with 19.32 (Obligor cover) on the
basis of such Accounts;
(ii) together with the Accounts specified in paragraph (a)
and (b) above ending on an Accounting Date other than
31st March and 30th September (before any
adjustment), a certificate signed by two directors of
the Parent (one of whom shall be the Chief Financial
Officer) (i) setting out in reasonable detail
computations establishing compliance with Clause 20.2
(Financial Covenants) and (ii) identifying the
Material Subsidiaries and those companies required to
provide guarantees and security in order to comply
with 19.32 (Obligor cover) as at the date to which
those Accounts were drawn-up; and
(iii) together with the Accounts specified in paragraph (b)
above ending on an Accounting Date other than 31st
March and 30th September (before any adjustment) a
certificate signed by two directors of the Parent
stating that as at the date of the certificate no
Default is outstanding or, if there is an outstanding
Default, providing details of the same and of any
proposed remedial action and stating that no Default
is expected to occur before the next Accounting Date.
19.3 PROJECTIONS
(a) The Parent shall furnish to the Facility Agent in sufficient copies for
each of the Banks as soon as available and in any event prior to the
fourteenth day before the commencement of each financial year, a budget
including a projected consolidated balance sheet, profit and loss
account, Capital Expenditure forecast and cash flow statement of the
Group for (or, in the case of a balance sheet, as at the end of) such
financial year together with details of the principal assumptions
underlying such projections all as approved by the Parent's board of
directors in a format consistent with the Proforma Accounts and
prepared in accordance with the Applicable Accounting Principles.
(b) At least once in every financial year the Executive Officers of the
Parent will give a presentation to the Banks, at a time and venue
agreed with the Facility Agent, about the ongoing business and
financial performance of the Group and about such other matters
relating to the ongoing business and financial performance of the Group
as any of the Banks may reasonably request.
<PAGE> 52
19.4 NOTIFICATIONS
The Parent shall furnish or procure that there shall be furnished to
the Facility Agent in sufficient copies for each of the Banks:
(a) promptly, documents despatched by the Parent to its
shareholders generally (or any class of them) in their
capacity as such and all documents relating to the financial
obligations of any Obligor despatched by or on behalf of any
Obligor to its creditors generally (in their capacity as
creditors);
(b) promptly upon being notified of the same, details of all
transfers of more than 5% of any class of shares in the
Parent's capital;
(c) on request from the Facility Agent (to be given not more often
than twice a year unless an Event of Default is then
outstanding or the Facility Agent has reasonable grounds for
believing that there is a Default), an up to date copy of the
shareholders' register of the Parent;
(d) as soon as the same are instituted or, to its knowledge,
threatened, details of any litigation (other than any which is
frivolous or vexatious), arbitration or administrative
proceedings involving any Group member which, if adversely
determined, would involve potential or alleged liability in
excess of U.S.$1,000,000 (or its equivalent in other
currencies);
(e) promptly, such further information regarding its financial
condition, business and assets and that of the Group and/or
any member thereof (including any requested amplification or
explanation of any item in any Accounts, forecast, projections
or other material provided by any Obligor hereunder) as the
Facility Agent or any Bank through the Facility Agent may
reasonably request from time to time, provided that where any
such information is subject to a confidentiality agreement
entered into between the relevant member of the Group in the
ordinary course of its business, it shall use its reasonable
endeavours to obtain, or shall procure that the relevant
member of the Group uses its reasonable endeavours to obtain,
consent to disclose such information but if such consent is
not forthcoming, this Clause 19.4(e) will not be breached by
the failure to deliver the information subject to the
confidentiality agreement;
(f) save as provided in (g) below, written details of any Default
forthwith upon becoming aware of the same, and of all remedial
steps being taken and proposed to be taken in respect of that
Default and, promptly after being requested by the Facility
Agent, a certificate to the Facility Agent signed by a
director of the Parent confirming that there is no outstanding
Default or, if there is, giving details of the same;
(g) written details of the occurrence of any of the events
referred to in Clause 21.1(k) (Analagous proceedings) promptly
upon becoming aware of the same together with, if requested by
the Facility Agent, calculations showing whether or not any
such event has resulted in an Event of Default; and
(h) promptly, and in any event within 14 days, after (i) it has
knowledge of the occurrence of any Reportable Event, a copy of
the materials that are filed with the
<PAGE> 53
PBGC, (ii) the U.S. Obligor or any ERISA Affiliate files with
participants, beneficiaries or the PBGC a notice of intent to
terminate any such Plan, a copy of any such notice, (iii) the
receipt of notice by the U.S. Obligor or any ERISA Affiliate
from the PBGC of the PBGC's intention to terminate any Plan or
to appoint a trustee to administer any such Plan, a copy of
such notice, (iv) the U.S. Obligor or any ERISA Affiliate
knows or has reason to know of any event or condition which
might constitute ground under the provisions of Section 4042
of ERISA for the termination of (or the appointment of a
trustee to administer) any Plan, an explanation of such event
or condition, (v) the receipt by the U.S. Obligor or any ERISA
Affiliate of an assessment of withdrawal liability under ERISA
from a Multiemployer Plan, a copy of such Assessment, (vi) the
U.S. Obligor or any ERISA Affiliate knows or has reason to
know of any condition which might cause any one of them to
incur a material liability under Section 4062, 4063, 4064, or
4069 of ERISA or Section 412(n) or 4971 of the Code, an
explanation of such event or condition, and (vii) the U.S.
Obligor or any ERISA Affiliate knows, or has reason to know,
that an application is to be, or has been, made to the
Secretary of the Treasury for a waiver of the minimum funding
standard under the provisions of Section 412 of the Code, a
copy of such application, and, in each case described in
sub-paragraphs (i) to (iii) (inclusive) and (iv) to (vi)
(inclusive) a statement signed by the chief financial officer
of the U.S. Obligor setting forth details as to such
Reportable Event, notice, event or condition and the action
which the U.S. Obligor or such ERISA Affiliate proposes to
take with respect thereto.
19.5 AUDIT AND ACCOUNTING DATES
The Parent will ensure that:
(a) each annual Accounting Period and each quarterly Accounting
Period, as the case may be, of the Group ends on an Accounting
Date;
(b) each of its annual Accounting Periods will end on 31st
December; and
(c) all Accounts are prepared in accordance with the Applicable
Accounting Principles or where any Accounts have been prepared
in any respect so as to depart materially from the Applicable
Accounting Principles the Parent shall provide to the Facility
Agent (in sufficient copies for the Banks) a written
explanation (and calculations in reasonable detail) prepared
or confirmed by the Auditors in the case of audited Accounts
of the effect of such departure on the financial covenants in
Clause 20 (Financial Covenants) and the definitions referred
to therein. The Facility Agent (acting on the instructions of
the Majority Banks) may, at the cost of the Parent, instruct
the Auditors to check any such calculations where the Facility
Agent has reasonable grounds for believing that they may be
inaccurate, save that where such calculations are determined
to be accurate, the costs will be for the account of the
Facility Agent. If the Majority Banks approve any such
departure it shall become part of the Applicable Accounting
Principles.
<PAGE> 54
19.6 NEGATIVE PLEDGE
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, create or permit to subsist any Encumbrance on the
whole or any part of its respective present or future business, assets
or undertaking except for Permitted Encumbrances.
19.7 TRANSACTIONS SIMILAR TO SECURITY
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will:
(a) sell, transfer or otherwise dispose of:
(i) any of its assets on terms whereby such asset is or
it is contemplated is likely to be leased to or
re-acquired or acquired by any member of the Group;
or
(ii) any of its receivables on recourse terms except for
the discounting of bills and notes in the ordinary
course of business where the resulting Borrowing is
permitted by Clause 19.10 (Borrowing); and
(b) except for assets acquired in the normal course of trading,
purchase any asset on terms providing for a retention of title
by the vendor or on conditional sale terms or on terms having
a like substantive effect to any of the foregoing.
19.8 DISPOSALS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, either in a single transaction or in a series of
transactions, sell, transfer, lease or otherwise dispose of:
(a) any shares in any member of the Group (other than (i) the
issue of stock of the Parent permitted to be issued pursuant
to Clause 19.18 (Share Capital) and (ii) the disposal of any
shares in a member of the Group which is not a Material
Subsidiary or an Obligor for cash consideration payable in
full at the time of disposal and on arm's length terms for
fair market value) or in any joint venture; or
(b) all or any part of its respective assets or undertaking (not
being shares in a member of the Group or in any joint
venture), other than:
(A) sales of trading assets or the expenditure of cash,
in each case in the ordinary course of trading on
arm's-length terms;
(B) disposals of obsolete or redundant plant and
equipment, or of real property not required for the
efficient operation of its business, on arm's length
terms and for fair market value;
(C) disposals of assets in exchange for or for investment
in other assets performing substantially the same
function which are comparable or superior as to type,
market value and quality;
(D) the lending of cash and the repayment of cash lent in
compliance with the terms of the Finance Documents;
<PAGE> 55
(E) disposals of Cash Equivalent Investments on arm's
length terms;
(F) disposals of assets or undertakings by (i) a
Non-Obligor to any Obligor, and/or (ii) an Obligor to
another Obligor, provided in the latter case that
where the transferor has granted security over any
such asset or undertaking pursuant to any of the
Security Documents the transferee must at the time of
transfer provide equivalent security (to the
reasonable satisfaction of the Security Agent) over
such assets to the Security Agent and the Banks;
(G) disposals of assets on arm's length terms not
otherwise permitted under this Clause 19.8 provided
that the aggregate fair market value of the assets
disposed of during any annual Accounting Period does
not exceed U.S.$5,000,000 (or its equivalent in other
currencies); and
(H) any other disposal with the prior written consent of
the Facility Agent (acting on the instruction of the
Majority Banks).
19.9 PARI PASSU RANKING
Each Obligor undertakes that its obligations under this Agreement rank
and will at all times rank at least pari passu in right and priority of
payment with all its other present and future unsecured and
unsubordinated obligations, other than obligations applicable generally
to companies which have priority by operation of law.
19.10 BORROWINGS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, incur any Borrowings falling within paragraphs (a),
(b), (c), (d) or (h) of the definition of "BORROWINGS" in Clause 1.1
(Definitions) other than:
(a) under the Finance Documents and Existing Facilities provided
that Borrowings arising pursuant to the Existing Revolving
Credit Facility are repaid in accordance with the repayment
schedule set out in Schedule 9 and the aggregate net debt
balance under the Existing Overdraft Facility does not exceed
(pound)2,000,000; or
(b) Borrowings in the form of loans permitted pursuant to Clause
19.16(b) (Loans out); or
(c) Borrowings under the Subordinated Loan Notes; or
(d) Borrowings created or subsisting with the prior written
consent of the Facility Agent (acting on the instructions of
the Majority Banks); or
(e) any other Borrowings (including without limitation the amount
of any increase in the net debt balance under the Existing
Overdraft Facility in excess of that permitted under paragraph
(a) above) not exceeding U.S.$10,000,000 (or the equivalent in
other currencies) in aggregate for the Group as a whole at any
one time outstanding;
<PAGE> 56
19.11 LEASES
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will enter into any leases of or in respect of vehicles,
machinery, plant or equipment (the "EQUIPMENT"):
(a) if such Equipment (not being computers used for accounting and
administrative purposes only or telecommunications equipment)
is of such importance to the business of the lessee that such
business would be materially and adversely affected were such
Equipment to be repossessed by the lessor; or
(b) if the capital value of such Equipment aggregated with the
capital value of all other Equipment leased under existing
leases entered into by all members of the Group is greater
than U.S.$3,000,000 or such other higher amount agreed to by
the Majority Banks (or its equivalent in other currencies).
19.12 THIRD PARTY GUARANTEES
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, incur or permit to be outstanding any guarantee,
indemnity or other assurance against loss on the part of any person of
a type referred to in paragraph (i) of the definition of "BORROWINGS"
in Clause 1.1 other than (a) under the Finance Documents, or (b) the
endorsement of negotiable instruments for the purpose and in the
ordinary course of carrying on the relevant entity's trade, or (c)
guarantees in favour of a bank to facilitate the operation of bank
accounts of members of the Group maintained with such bank on a net
balance basis, or (d) in respect of the Borrowings of the type referred
to in Clause 19.10 (Borrowing) of any other member of the Group which
are permitted under Clause 19.10 (Borrowing) where the maximum
aggregate exposure of the Obligors under any such guarantees,
indemnities or other assurances in respect of the Borrowings of
Non-Obligors does not exceed U.S.$2,000,000 (or its equivalent in other
currencies), or (e) guarantees of the Existing Revolving Credit
Facility granted by the PhotoDisc, Inc, Allsport Photographic Ltd,
Getty Images Limited, and Hulton Getty Picture Collection Limited,
provided that the proceeds of the first Tranche A Advance shall be used
to satisfy in full the obligations to which such guarantees relate on
or before 1st November, 1999.
19.13 OPTIONS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, enter into or permit to subsist any option or other
arrangement whereby any person has the right (whether or not
exercisable only on a contingency) to require any member of the Group
to purchase or otherwise acquire or sell or otherwise dispose of any
material property or any interest in any material property otherwise
than where any such arrangement is permitted by Clause 19.8 (Disposals)
or (Treasury Transactions) or arises with respect to capital stock of
the Parent under bona fide employee stock option or incentive
agreements entered into by the Parent on terms normal for such
arrangements.
19.14 TREASURY TRANSACTIONS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, enter into any interest rate or currency swap, cap,
ceiling, collar, floor or financial futures or commodity contract or
option or any similar treasury or hedging transaction, other than
transactions entered into for the hedging of actual or projected
exposures arising in the ordinary course of
<PAGE> 57
ordinary trading activities of members of the Group carried on in
compliance with the terms of the Finance Documents for periods of not
more than 12 months. For the avoidance of doubt, nothing in this Clause
19.14 shall prevent any Obligor, or any Subsidiary of any Obligor,
entering into transactions for the hedging of exposures arising
pursuant to the terms of any of the Finance Documents provided that the
counterpart of any such hedging is a Bank under the Facilities and the
terms of the hedging arrangements entered into are acceptable to the
Facility Agent (acting reasonably).
19.15 INVESTMENTS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, incorporate any company or enter into any merger or
consolidation with any business or person or acquire (by subscription
or otherwise) or invest in any business or company or any shares or
other securities (or any interest therein) other than:
(a) Cash Equivalent Investments; or
(b) members of the Group at the date of this Agreement which are
Obligors; or
(c) the incorporation by a member of the Group of a limited
liability company provided that (A) such company is
wholly-owned by a member (or members) of the Group and (B) the
Parent notifies the Facility Agent in writing at least one
month prior to any such incorporation; or
(d) the TIB Acquisition; or
(e) acquisitions permitted pursuant to Clause 19.33
(Acquisitions),
provided that the acquisition of the shares referred to in(d) and (e)
above shall be subject to compliance with Clause 17.3 (Security) and
19.32 (Obligor cover).
19.16 LOANS OUT
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, be the creditor in respect of any Borrowings, save
for:
(a) any Borrowings under paragraph (e) of the definition of
"BORROWINGS" in Clause 1.1 where trade credit is extended by
any member of the Group on normal commercial arm's length
terms and in the ordinary course of its business; or
(b) loans made by one member of the Group to another member of
the Group where:
(i) the loan is made by an Obligor to another Obligor; or
(ii) the loan is made by an Obligor to a Non-Obligor and
the recipient of the loan requires the funds to meet
its normal working capital requirements where the
aggregate amount of all such loans to all such
Non-Obligors at any time outstanding does not exceed
U.S.$7,500,000 (or its equivalent in other
currencies) and the aggregate amount lent (by all
members of the Group) at
<PAGE> 58
any time outstanding to any particular Non-Obligor
does not exceed U.S.$3,000,000 (or its equivalent in
other currencies); or
(iii) loans by a Non-Obligor to any member of the Group,
provided that, if requested by the Facility Agent, the Parent
will procure that in respect of any such loans or series of
loans between the same parties in an aggregate amount of
U.S.$1,000,000 (or its equivalent in other currencies) or more
security in favour of the Security Agent (in form and
substance reasonably satisfactory to the Security Agent) on
behalf of the Banks is granted over such loan(s); or
(c) loans made by any member of the Group to the employees of the
Group in an aggregate amount for the Group as a whole at any
time outstanding not exceeding U.S.$500,000 (or its equivalent
in other currencies); or
(d) counter-indemnity claims against another member of the Group
in respect of any guarantee or indemnity given by a member of
the Group issued to any person in respect of the obligations
or liabilities of such other member of the Group and which is
permitted pursuant to Clause 19.12 (Third party guarantees);
or
(e) Borrowings (not being loans to another member of the Group)
not otherwise permitted pursuant to paragraphs (a), (b), (c)
or (d) in an aggregate amount for the Group as a whole at any
time outstanding not exceeding U.S.$1,500,000 (or its
equivalent in other currencies).
19.17 DIVIDENDS
The Parent will not declare, make or pay any dividend (or interest on
any unpaid dividend), charge, fee or other distribution (whether in
cash or in kind) on or in respect of any of its Shares, or any other
shares in its capital or repay or distribute any share premium account,
until all amounts payable and all liabilities (actual or contingent)
pursuant to the Finance Documents have been repaid and or satisfied in
full.
19.18 SHARE CAPITAL
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will, (i) redeem, repurchase, defease, retire or repay any
of its share capital or capital stock, or resolve to do so, or (ii)
issue any shares or capital stock which by their terms are redeemable
prior to the date falling one year after the Final Maturity Date, or
(iii) issue any share capital to any person other than to another
member of the Group, save that the Parent may issue (A) capital stock
of a type substantially similar to any class of its stock in issue at
the Signing Date which is subscribed for in full in cash and in respect
of which no dividend or distribution is payable while any amount is
outstanding under the Finance Documents, (B) capital stock in
accordance with bona fide employee stock option agreements entered into
on terms normal for such arrangements and (C) capital stock issued for
the purpose of an Acquisition permitted pursuant to Clause 19.33
(Acquisitions) or in relation to the TIB Acquisition on the terms set
out in the Prospectus provided that such issue does not cause a breach
of Clause 21.1(m) (Control).
<PAGE> 59
19.19 INTELLECTUAL PROPERTY RIGHTS
Each Obligor will, and will procure that each of its Subsidiaries will:
(a) (other than in respect of Excluded Intellectual Property
Rights) make such registrations and pay such fees and other
amounts as are necessary to keep those registered Intellectual
Property Rights which are material to the business of such
Obligor or the Group taken as a whole and to record its
interest in those Intellectual Property Rights;
(b) take such steps as are necessary and commercially reasonable
(including, without limitation, the institution of legal
proceedings) to prevent third parties infringing those
Intellectual Property Rights referred to in paragraph (a)
above; and
(c) not assign, transfer or enter into licence arrangements in
respect of those rights save for (I) licence arrangements
entered into with members of the Group for so long as they
remain members of the Group, (II) licence arrangements entered
into on normal commercial terms and in the ordinary course of
its business, and (III) the arrangements in place at the date
hereof in respect of the Excluded Intellectual Property
Rights.
19.20 ENVIRONMENTAL MATTERS
Each Obligor will and will procure that each of its Subsidiaries will:
(a) obtain all requisite Environmental Licences and comply with
(A) the terms and conditions of all Environmental Licences
applicable to it, and (B) all other applicable Environmental
Law, where in any such case failure to obtain or comply would
have a Material Adverse Effect; and
(b) promptly upon receipt of the same, notify the Facility Agent
of any claim, notice or other communication served on it in
respect of any alleged breach of or corrective or remedial
obligation or liability under any Environmental Law which
would, if substantiated, have a Material Adverse Effect; and
(c) indemnify each Finance Party, each receiver appointed under
any Security Document and their respective officers,
employees, agents and delegates (together the "INDEMNIFIED
PARTIES") against any cost or expense suffered or incurred by
them (except if caused by their own negligence) which:
(i) arises by virtue of any actual or alleged breach of
any Environmental Law (whether by any Obligor, an
Indemnified Party or any other person); or
(ii) arises by virtue of the release or threatened release
of, or exposure to, any Dangerous Substance stored or
handled upon, transported from, or otherwise
associated with, the past or present facilities or
operations of any Obligor or Group member;
and which would not have arisen if the Finance Documents or
any of them had not been executed.
<PAGE> 60
19.21 INSURANCE
(a) Each Obligor will, and will procure that each of its Subsidiaries will,
insure and keep insured all its property and assets of an insurable
nature and which are customarily insured (either generally or by
companies carrying on a similar business) against loss or damage by
fire and other risks normally insured against by persons carrying on
the same class of business as that carried on by it.
(b) Without prejudice to paragraph (a) above, the Parent will, or will
procure that members of the Group will, effect and maintain insurance
against business interruption, loss of profits, product liability,
professional indemnity, pollution and public liability covering all
members of the Group.
(c) Each Obligor will, and will procure that each of its Subsidiaries will,
promptly pay all premiums and do all other things necessary to keep on
foot the insurances required to be taken out and maintained by it
pursuant to paragraphs (a) and (b) above and will procure that (except
for public liability, employers liability and professional indemnity
insurances) all of the insurance policies required to be taken out and
maintained by it pursuant to paragraphs (a) and (b) above shall contain
loss payee provisions reasonably acceptable to the Security Agent
noting the Security Agent's interest thereon and naming the Security
Agent as the payee.
(d) The Parent will promptly supply to the Facility Agent on request copies
of each insurance policy required to be taken out and maintained by any
member of the Group pursuant to this Clause 19.21 and the Obligors will
procure that the insurer in the case of each such policy undertakes to
the Facility Agent to notify the Facility Agent should any renewal fee
or other sum payable by any member of the Group not be paid when due.
19.22 CHANGE OF BUSINESS
No Obligor will, and each Obligor will procure that no member of the
Group will, make any substantial change in the nature of its respective
business as conducted at the Closing Date which would result in a
material change to the nature of the business carried on by the Group
as a whole.
19.23 INTER-COMPANY DEBT
Each Obligor will procure that, unless the borrower in respect of such
Borrowings has sufficient readily available cash to pay the sum due or
demanded, any member of the Group which is the creditor in respect of
any Borrowings by any other member of the Group shall take no action to
cause such Borrowings to become due or to be paid.
19.24 ARM'S-LENGTH TERMS
Unless otherwise expressly permitted by this Agreement, no Obligor
will, and each Obligor will procure that none of its Subsidiaries will,
enter into any material transaction with any person if it is otherwise
prohibited by this Agreement and, if not, only otherwise than on
arm's-length terms in the ordinary course of trade.
<PAGE> 61
19.25 COMPLIANCE WITH LAWS
Each Obligor will, and will procure that each of its Subsidiaries will,
comply in all material respects with all applicable laws and
regulations of any governmental authority, whether domestic or foreign
having jurisdiction over it or any of its assets, where failure to
comply with any such laws or regulations would have a Material Adverse
Effect and will obtain and promptly renew from time to time, and if so
requested promptly furnish certified copies to the Facility Agent of
all material authorisations which may be required under any applicable
law or regulation to enable each Obligor to perform its respective
obligations under the Finance Documents or required for the validity or
enforceability of such Finance Documents or of any security provided
for thereby.
19.26 ACCESS
Upon reasonable notice being given by the Facility Agent, each Obligor
will procure that any one or more representatives of the Facility Agent
and/or accountants or other professional advisers appointed by the
Facility Agent be allowed to have access during normal business hours
to the assets, books and records of such Obligor and its Subsidiaries
and to inspect the same, provided that is shall not be obliged to
disclose any information which would cause it to be in breach of any
undertaking or obligation of confidentiality owed to a third party and
where it has taken all reasonable steps to secure the release of any
such confidentiality undertaking or obligation.
19.27 PENSION SCHEMES AND TAX ALLOWANCES
The Parent will if requested by the Facility Agent deliver to the
Facility Agent at intervals of no more than 3 calendar years, and in
any event at such time as those reports are prepared in order to comply
with then current statutory or auditing requirements, actuarial reports
in relation to any and all defined benefit pension schemes for the time
being operated by members of the Group, and will ensure that all such
pension schemes (which, with respect to the Plans, shall only include
those Plans that are pension Plans) are fully funded based on
reasonable actuarial assumptions.
19.28 JOINT VENTURES
Each Obligor will not, and will procure that none of its Subsidiaries
will, enter into or acquire any interest in any joint venture,
partnership or similar arrangement with any person (not being another
member of the Group) without the prior written consent of the Majority
Banks, where the aggregate investment whether by acquisition of an
ownership interest therein, the making of loans to such entity, the
guaranteeing of the obligations of such entity, transferring assets to
such entity or assuming the liabilities of or in respect of it (the
aggregate of such investments being the "JOINT VENTURE Investment") of
members of the Group in all joint ventures, partnerships and similar
arrangements would as a result exceed U.S.$5,000,000.
19.29 ERISA
Each U.S. Obligor will not, and will procure that none of its ERISA
Affiliates will (a) fail to make payment when due of all amounts due as
a contribution to any Plan, or (b) engage in any transaction in
connection with which any U.S. Obligor could be subjected to either a
civil penalty assessed pursuant to ERISA, a tax imposed by section 4975
of the IRC or breach of fiduciary duty liability damages if, in any
such case, such penalty or tax or such liability, or
<PAGE> 62
the failure to make such payment, or the existence of that deficiency,
as the case may be, would, or is reasonably likely to, have a Material
Adverse Effect.
19.30 COMPLIANCE WITH MARGIN STOCK REGULATION
Each U.S. Obligor shall not, and shall procure that its Subsidiaries
shall not:
(a) (i) sell, carry, pledge or otherwise dispose of any
margin stock ("MARGIN STOCK") within the meaning of
Regulation U of the Board of Governors of the Federal
Reserve System of the United States, as in effect
from time to time ("REGULATION U"), now owned or
acquired after the date of this Agreement; or
(ii) incur any Borrowings directly or indirectly secured
(within the meaning of Regulation U) by any Margin
Stock;
if such transaction would cause any of the Advances or any
part thereof to be in violation of Regulation U, or Regulation
X of the Board of Governors of the Federal Reserve System of
the United States, as in effect from time to time ("REGULATION
X");
(b) use the proceeds of any Advance, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is
currently a Margin Stock or for any other purpose which might
constitute any of the Facility or Advances or this Agreement a
"purpose credit" within the meaning of Regulation U or
Regulation X. No Obligor and no agent acting on its behalf
will take or has taken any action which might cause this
Agreement or the Advances to violate Regulation U or
Regulation X or any other regulation of the Board of Governors
of the Federal Reserve System.
19.31 UCC FILINGS
Each U.S. Obligor at its own expense will make and renew promptly, and
in any event in the case of renewal before any UCC filing relating to
any Finance Document expires, all UCC filings relating to any Finance
Document reasonably required by the Facility Agent and will pay all
applicable fees.
19.32 OBLIGOR COVER
The Parent shall procure that:
(a) in relation to each Ratio Period, (as defined in Clause 20.3
(Periods)) the Obligors shall, in aggregate, account for at
least 80 per cent. of Consolidated EBITDA (as defined in
Clause 20.1 (Financial Definitions)) and have, in aggregate,
80 per cent. or more of the consolidated gross assets of the
Group; and
(b) on the Signing Date each Obligor as set out in Schedule 1 Part
II will execute a U.K. or U.S., as the case may be, general
security charge (in the agreed form) in favour of the Security
Agent.
<PAGE> 63
19.33 ACQUISITIONS
Save for the TIB Acquisition, the Parent will not, and will procure
that no member of the Group will make any Acquisition or series of
Acquisitions for Non-Equity Consideration (which shall include all
deferred consideration) except:
(i) the acquisition of any one or more of the franchises created
by the Target Group prior to the Signing Date provided that
the total consideration for such Acquisition or series of
Acquisitions does not exceed US$20,000,000 in aggregate during
the life of the Facility; or
(ii) an Acquisition or series of Acquisitions where the aggregate
consideration does not exceed US$15,000,000 in any one
financial year, provided that no Acquisition(s) will be made
of any business or company unless it carries on substantially
the same business as the Parent.
19.34 AMENDMENTS TO DOCUMENTS
No Obligor will, and each Obligor will procure that none of its
Subsidiaries will (i) amend, supplement, supersede or waive (A) any
term of the Transaction Documents or (B) (in the case of an Obligor or
a company over whose shares the Banks have a charge) its memorandum or
articles of association or other constitutional document without the
consent of the Majority Banks (not to be unreasonably delayed or
withheld), or (ii) enter into any agreements or arrangements with the
holders of any shares in the capital of the Parent, in any way which in
either such case would be likely materially and adversely to affect the
interests of the Banks under the Finance Documents (provided that if
any such undertaking would not be enforceable against any Obligor it
shall not be given by that Obligor).
20. FINANCIAL COVENANTS
20.1 FINANCIAL DEFINITIONS
(a) In this Agreement:
"BALANCE SHEET"
means, at any time, the latest published audited or unaudited
consolidated balance sheet of the Group.
"CONSOLIDATED EBIT" for any period means the profit of the Group for
such period:
(1) BEFORE TAKING INTO ACCOUNT all extraordinary items (whether
positive or negative) but AFTER TAKING INTO ACCOUNT all
exceptional items (whether positive or negative);
(2) BEFORE DEDUCTING advanced corporation tax, mainstream
corporation tax and their equivalents in any relevant
jurisdiction;
(3) BEFORE TAKING INTO ACCOUNT Interest accrued as an obligation
of or owed to any member of the Group, in each case whether or
not paid, deferred or capitalised during such period; and
<PAGE> 64
(4) AFTER DEDUCTING any gain over book value arising in favour of
the Group on the sale, lease or other disposal of any asset
(other than on the sale of trading stock) during such period
and any gain arising on revaluation of any asset during such
period, in each case to the extent that it would otherwise be
taken into account.
"CONSOLIDATED EBITDA" for any period means Consolidated EBIT for such
period before any amortisation or depreciation.
"CONSOLIDATED NET INTEREST PAYABLE" for any period means the Interest
accrued during such period as an obligation of any member or members of
the Group (whether or not paid or capitalised during or deferred for
payment after such period) and after taking into account Interest
receivable (net of Tax) by any member of the Group on any Borrowings
made available by such member of the Group which is not more than 90
days overdue, adjusted to take account of any amount constituting
Interest receivable by any members of the Group (after deducting all
Taxes applicable thereto) under interest rate and/or currency hedging
agreements or instruments under which all parties are in compliance
with their material obligations.
"CONSOLIDATED TOTAL BORROWINGS" means at any time the aggregate at that
time of the Borrowings of the members of the Group from sources
external to the Group (less any cash balances held by any member of the
Group that are freely convertible and transferable free of any
encumbrances (other than Permitted Encumbrances in respect of
Borrowings), all as determined (subject only as may be required in
order to reflect the express inclusion or exclusion of items as
specified herein and/or in the definition of Borrowings in Clause 1.1
(Definitions)) in accordance with the Applicable Accounting Principles
and, where the calculation is being made as at the end of any
Accounting Period for which a Balance Sheet of the Group has been or is
required to be delivered to the Facility Agent hereunder, determined
from that Balance Sheet.
20.2 FINANCIAL COVENANTS
The Parent shall procure that:
(a) CONSOLIDATED EBITDA TO CONSOLIDATED NET INTEREST PAYABLE:
Consolidated EBITDA for the Ratio Periods ending on the test
dates (each a "TEST DATE") specified in the table below, shall
not be less than Y times Consolidated Net Interest Payable for
such period, where Y has the value set opposite such Test
Date:
TEST DATE (BEFORE ANY ADJUSTMENT) Y
30th June, 2000 4.5
31st December, 2000 4.5
30th June, 2001 5.5
31st December, 2001 7
30th June, 2002 7
<PAGE> 65
(b) CONSOLIDATED TOTAL BORROWINGS TO CONSOLIDATED EBITDA:
The ratio of Consolidated Total Borrowings to Consolidated
EBITDA will not exceed 3.25:1 (applicable at all times but
tested semi-annually).
20.3 PERIODS
The first Test Date for the financial covenants specified in this
Clause 20 will be on the annual Accounting Period ending 30th June,
2000. Each subsequent test date will be on 31st December and 30th June
of each year until the Final Maturity Date. The financial covenants
will be calculated using data for the period (each a "RATIO PERIOD")
ending on each Test Date and beginning 12 months before the relevant
test date.
20.4 INFORMATION
All information required for calculation of the financial ratios and
testing of other covenants set out in this Clause 20 will be extracted
from figures appearing in the audited consolidated Accounts of the
Group for any financial year and the unaudited quarterly consolidated
management accounts of the Group as the case may be, delivered to the
Facility Agent under paragraph (a)(i) and (b) of Clause 19.2 (Financial
Information).
21. DEFAULT
21.1 EVENTS OF DEFAULT
Each of the events set out in this Clause 21.1 is an Event of Default
(whether or not caused by any reason whatsoever outside the control of
any Obligor or any other person):
(a) NON-PAYMENT: an Obligor does not pay on the due date any
amount payable by it under any Finance Document at the place
and in the funds and currency in which it is expressed to be
payable unless the Facility Agent is satisfied that the
failure to pay is due solely to technical or administrative
delays in the transmission of funds and the relevant amount is
paid in full within 3 Business Days of the due date; or
(b) BREACH OF OTHER OBLIGATIONS: an Obligor does not comply in any
material respect with any provision of:
(i) Clauses 19.6 (Negative Pledge), 19.7 (Transactions
similar to security), 19.8 (Disposals), 19.15
(Investments), 19.17 (Dividends), 19.18 (Share
Capital), 19.32 (Guarantor cover), 19.33
(Acquisitions) or 20.2 (Financial Covenants); or
(ii) any Finance Document (other than a provision referred
to in paragraphs (a) or (b)(i) above) and, if such
default is, in the reasonable opinion of the Facility
Agent, capable of remedy within such period, within
21 days after the earlier of the relevant Obligor
becoming aware of such default and receipt by the
relevant Obligor of written notice from the Facility
Agent requiring the failure to be remedied, such
Obligor shall have failed to cure such default
provided that such Obligor shall not have any such 21
day remedy period where, in the Facility Agent's
reasonable opinion, it may be materially
<PAGE> 66
prejudicial to the interests of the Banks under the
Finance Documents to wait to determine whether or not
such Obligor would remedy any such failure; or
(c) MISREPRESENTATION: a representation, warranty or statement
made or repeated by or on behalf of any Obligor, in any
Finance Document or in any certificate or statement delivered
by or on behalf of any Obligor under any Finance Document, is
incorrect in any respect which in the reasonable opinion of
the Facility Agent is material when made or deemed to be made
or repeated by reference to the facts and circumstances then
subsisting and, if the facts and circumstances causing such
misrepresentation are in the reasonable opinion of the
Facility Agent capable of remedy within such period, within 14
days after the earlier of the relevant Obligor becoming aware
of such misrepresentation and receipt by such Obligor of
written notice from the Facility Agent requiring the facts and
circumstances causing such misrepresentation to be remedied,
such Obligor shall have failed to remedy such facts and
circumstances; or
(d) CROSS-DEFAULT:
(i) any Borrowings of any members of the Group (taken
together) aggregating U.S.$1,000,000 (or its
equivalent in other currencies) or more at any one
time outstanding become (or become capable of being
declared (but only while it remains so capable of
being declared)) due and payable or due for
redemption before their normal maturity date or are
placed on demand in each such case by reason of the
occurrence of an event of default (howsoever
characterised) or any event having the same effect,
unless the obligation to pay such Borrowings is being
contested in good faith by the relevant member of the
Group by appropriate proceedings and an independent
legal opinion addressed to the relevant member of the
Group confirms that such member of the Group is
likely to be successful in such proceedings; or
(ii) any Borrowings of any members of the Group (taken
together) aggregating U.S.$1,000,000 (or its
equivalent in other currencies) or more are not paid
when due (whether falling due by demand, at scheduled
maturity or otherwise) or within any originally
applicable grace period provided for in the document
evidencing or constituting those Borrowings, unless
the obligation to pay such Borrowings is being
contested in good faith by the relevant member of the
Group by appropriate proceedings and an independent
legal opinion addressed to the relevant member of the
Group confirms that such member of the Group is
likely to be successful in such proceedings; or
(iii) if funds are outstanding in respect thereof, any
commitment for or underwriting of any facility for
Borrowings of any members of the Group (taken
together) aggregating U.S.$1,000,000 (or its
equivalent in other currencies) is cancelled or
suspended by the provider of that facility by reason
of the occurrence of an event of default (howsoever
characterised); or
(e) INVALIDITY:
(i) any of the Finance Documents ceases to be in full
force and effect in any material respect or, subject
to the Reservations, ceases to constitute the legal,
<PAGE> 67
valid and binding obligation of any Obligor party to
it or, in the case of any Security Document, subject
to the Reservations, fails to provide legal, valid
and enforceable security in favour of the Security
Agent and the Banks over the assets over which
security is intended to be given by that Security
Document, in each case in a manner and to an extent
reasonably considered by the Majority Banks to be
materially adverse to their interests under the
Finance Documents; or
(ii) it is unlawful for any Obligor to perform any of its
obligations under any of the Finance Documents; or
(iii) any Obligor alleges in writing that any Finance
Document is ineffective or invalid; or
(f) INSOLVENCY:
(i) any Obligor or any Material Subsidiary is, or is
deemed or declared for the purposes of any law to be,
unable to pay its debts as they fall due or to be
insolvent, or admits in writing its inability to pay
its debts as they fall due; or
(ii) any Obligor or any Material Subsidiary suspends
making payments on all or any class of its debts or
announces an intention to do so, or a moratorium is
declared in respect of any of its indebtedness; or
(iii) an Obligor or any Material Subsidiary by reason of
financial difficulties, begins negotiations with its
creditors generally with a view to the readjustment
or rescheduling of any of its indebtedness; or
(g) INSOLVENCY PROCEEDINGS:
(i) any step (including petition, proposal or convening a
meeting) is taken with a view to a composition,
assignment or arrangement with the creditors (or any
class of them) of any Obligor; or
(ii) a meeting of the board of directors or shareholders
of any Obligor or any Material Subsidiary is convened
for the purpose of considering any resolution for (or
to petition for) its winding-up or its administration
or any such resolution is passed; or
(iii) any person presents a petition for the winding-up or
for the administration of, any Obligor or any
Material Subsidiary (not being a frivolous or
vexatious petition); or
(iv) any order for the winding-up or administration of any
Obligor or any Material Subsidiary is made; or
(v) any other step (including petition, resolution,
proposal or convening a meeting) is taken with a view
to the rehabilitation, administration, custodianship,
liquidation, winding-up or dissolution of any Obligor
or any
<PAGE> 68
Material Subsidiary or any other insolvency
proceedings involving any such person,
provided that this Clause 21.1(g) shall not apply to:
(a) any such action relating to a solvent reconstruction,
amalgamation, reorganisation or merger of such
Obligor save where the Facility Agent (acting on the
instructions of the Majority Banks) believes that
such action will reasonably be expected to have an
adverse effect on the ability of that Obligor to
comply with its obligations under the Facility
Documents.
(b) any such action which is frivolous or vexatious and
which such Obligor is contesting in good faith on
reasonable grounds and in any event is discharged or
dismissed within 21 days or in respect of which the
Majority Banks are satisfied that the ability of that
Obligor to comply with its obligations under the
Finance Documents will not be materially and
adversely affected.
(h) APPOINTMENT OF RECEIVERS AND MANAGERS:
(i) any liquidator, trustee in bankruptcy, judicial
custodian, compulsory manager, receiver,
administrative receiver, administrator or the like is
appointed in respect of any Obligor or any Material
Subsidiary or any part of its assets; or
(ii) the directors of any Obligor or any Material
Subsidiary requests the appointment of a liquidator,
trustee in bankruptcy, judicial custodian, compulsory
manager, receiver, administrative receiver,
administrator or the like in respect of any Obligor
or Material Subsidiary or their respective assets; or
(iii) any other steps are taken to enforce any Encumbrance
over any part of the assets of any Obligor or any
Material Subsidiary, save where that Obligor or such
Material Subsidiary is, in good faith, contesting
such enforcement by appropriate proceedings and the
Majority Banks acting reasonably are satisfied that
the ability of any Obligor or any Material Subsidiary
to comply with its obligations under any Finance
Document will not be materially and adversely
affected; or
(i) CREDITORS' PROCESS: any attachment, sequestration, distress or
execution is made or ordered in respect of any assets of any
member or members of the Group having an aggregate value of
U.S.$ 1,500,000 (or its equivalent in other currencies), and
is not discharged within 7 days; or
(j) U.S. BANKRUPTCY: any Obligor or any Material Subsidiary shall
commence a voluntary case under the U.S. Bankruptcy Code, or
an involuntary case is commenced under the U.S. Bankruptcy
Code against such a member of the Group and the petition is
not controverted within 7 days and is not dismissed within 30
days, after commencement of the case, or a custodian,
receiver, trustee or similar officer is appointed for, or
takes charge of, all or substantially all of the property of
any Obligor or any Material Subsidiary; or
<PAGE> 69
(k) ANALOGOUS PROCEEDINGS:
(i) there occurs, in relation to any Non-Obligor which is
not a Material Subsidiary (or any of its assets) any
of the events referred to in Clauses 21.1 (Events of
Default) paragraphs (f) to (j) (inclusive) (or in any
jurisdiction to which such person or any of its
assets is subject, any event which, in the reasonable
opinion of the Majority Banks, is analogous to any of
those mentioned in Clauses 21.1 (Events of Default)
paragraphs (f) to (j) (inclusive)) (ignoring for
these purposes the requirement to be an Obligor
and/or a Material Subsidiary in any such Clause)
where:
(A) such event would have a Material Adverse
Effect; or
(B) the aggregate of the gross assets, pre-tax
profits or turnover (excluding value added
tax or sales tax) of all such persons in
respect of which any such events have
occurred in any twelve month period is 5% or
more of (I) the gross assets of the Group,
(II) Consolidated EBIT of the Group, or
(III) the aggregate consolidated sales of
the Group to third parties (excluding any
value added tax or sales tax) for such
period, in each case calculated in
accordance with the Applicable Accounting
Principles and by reference to the latest
audited or management accounts of the
relevant company and the latest quarterly or
audited consolidated Accounts of the Group
delivered pursuant to Clause 19.2 (Financial
Information); or
(ii) there occurs, in relation to any Obligor or a
Material Subsidiary, in any jurisdiction to which it
or any of its assets are subject, any event which, in
the opinion of the Majority Banks, is analogous to
any of those mentioned in Clauses 21.1 (Events of
Default) paragraphs (f) to (j) (inclusive); or
(l) OWNERSHIP OF THE OBLIGORS: any Obligor (other than the Parent)
is not or ceases to be a wholly-owned Subsidiary of the
Parent; or
(m) CONTROL: any single person, or group of persons acting in
concert (as defined in the City Code of Takeovers and
Mergers), acquires control (as defined in Section 416 of the
Income and Corporation Taxes Act 1988) of the Parent after the
date of this Agreement; or
(n) PROCEEDINGS: there shall occur any litigation, arbitration,
administrative, regulatory or other proceedings or enquiry
(including without limitation, any such by any monopoly,
anti-trust or competition authority or commission, or any
equivalent body in the European Commission or any division of
any thereof or authority deriving power from any thereof)
concerning or arising in consequence of any of the Transaction
Documents and/or the implementation of any matter or
transaction provided for in the Finance Documents and the same
has or is reasonably likely to have a Material Adverse Effect;
or
(o) AUDIT QUALIFICATION: the Auditors qualify their report on any
audited consolidated Accounts of the Group in a manner which,
in the reasonable opinion of the Majority
<PAGE> 70
Banks, is material in the context of the Finance Documents and
the transactions contemplated thereby; or
(p) ERISA: any U.S. Obligor or any Subsidiary of a U.S. Obligor or
any ERISA Affiliate has incurred or is likely to incur a
liability to or on account of a Plan under Section 409,
502(i), 502(1), 4041, 4042, 4062, 4063, 4064, 4068, 4069, 4201
or 4204 of ERISA or Section 4971 or 4975 of the Code, or any
U.S. Obligor or any Subsidiary has incurred or is likely to
incur liabilities pursuant to one or more employee welfare
benefit plans (as defined in Section 3(1) of ERISA) which
provide benefits to retired or terminated employees (other
than as required by Part 6 of Subtitle B of Title I of ERISA)
or employee pension benefit plans (as defined in Section 3(2)
of ERISA), and there shall result from any such event or
events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a
liability, which lien, security interest or liability (or the
enforcement thereof) is reasonably likely to have a Material
Adverse Effect; or
(q) MATERIAL ADVERSE CHANGE: any event or series of events occurs
which has, or is reasonably likely to have, a Material Adverse
Effect; or
(r) GETTY TRADEMARKS: the members of the Group shall cease for any
reason to be entitled to use the name Getty or any trademark
incorporating such name or the terms on which they are so
entitled shall be altered in any respect materially adverse to
the members of the Group.
(s) SUBORDINATED LOAN NOTES: if the principal of any Subordinated
Loan Note is repaid or redeemed out of Non-equity
Consideration prior to the Final Maturity Date.
21.2 ACCELERATION
On and at any time after the occurrence of an Event of Default which is
subsisting the Facility Agent may, and shall if so directed by the
Majority Banks, by notice to the Parent:
(a) declare that an Event of Default has occurred; and/or
(b) cancel the Total Commitments; and/or
(c) declare that all or part of the Advances to some or all of the
Borrowers be payable on demand, whereupon they shall
immediately become payable on demand by the Facility Agent
(and if any such demand is subsequently made those Advances,
together with accrued interest and all other amounts accrued
under this Agreement, shall be immediately due and payable);
and/or
(d) declare that all or part of the Advances to some or all of the
Borrowers, together with accrued interest, and all other
amounts accrued under this Agreement be immediately due and
payable, whereupon they shall become immediately due and
payable,
provided that no action or determination by any of the Finance Parties
shall be required in respect of any or all of the obligations and
liabilities (whether actual or contingent) of any Obligor upon or at
any time after the occurrence of an Event of Default specified in
Clause 21.1 (Events of Default) paragraphs (f) to (h) (inclusive) and
(j) to (k)(ii) (inclusive) in
<PAGE> 71
respect of the Parent or any U.S. Obligor which is a Material
Subsidiary and on the occurrence of any such Event of Default all of
the obligations and liabilities of the Obligors shall become
automatically and immediately due and payable and, provided further
that the Facility Agent (on the instructions of the Majority Banks) can
by notice to the Obligors rescind any such acceleration in whole or in
part.
22. THE AGENTS AND THE ARRANGER
22.1 APPOINTMENT AND DUTIES OF THE AGENTS
Each Finance Party irrevocably appoints each Agent to act as its agent
under and in connection with the Finance Documents, and irrevocably
authorises each Agent on its behalf (a) to execute on its behalf such
of the Finance Documents which are expressed by this Agreement to be
executed by such Agent on behalf of the Finance Parties, and (b) to
perform the duties and to exercise the rights, powers and discretions
that are specifically delegated to it under or in connection with the
Finance Documents, together with any other incidental rights, powers
and discretions. Each Agent shall have only those duties which are
expressly specified in this Agreement. Those duties are solely of a
mechanical and administrative nature.
22.2 ROLE OF THE ARRANGER
Except as otherwise provided in this Agreement, the Arranger has no
obligations of any kind to any other Party under or in connection with
any Finance Document.
22.3 RELATIONSHIP
The relationship between each Agent and the other Finance Parties is
that of agent and principal only. Nothing in this Agreement (other than
in relation to the Security Agent and the Security Documents)
constitutes any Agent as trustee or fiduciary for any other Party or
any other person and except where and to the extent otherwise stated in
this Agreement such Agent need not hold in trust any moneys paid to it
for a Party or be liable to account for interest on those moneys.
22.4 MAJORITY BANKS' DIRECTIONS
Each Agent will be fully protected if it acts in accordance with the
instructions of the Majority Banks in connection with the exercise of
any right, power or discretion or any matter not expressly provided for
in the Finance Documents. Any such instructions given by the Majority
Banks will be binding on all the Banks. In the absence of such
instructions each Agent may act as it considers to be in the best
interests of all the Banks.
22.5 DELEGATION
Each Agent may act under the Finance Documents through its personnel
and agents.
22.6 RESPONSIBILITY FOR DOCUMENTATION
Neither any Agent nor the Arranger is responsible to any other Party
for:
<PAGE> 72
(a) the execution, genuineness, validity, enforceability or
sufficiency of any Finance Document or any other document;
(b) the collectability of amounts payable under any Finance
Document; or
(c) the accuracy of any statements (whether written or oral)
made in or in connection with any Finance Document (or in
the Information Memorandum).
22.7 DEFAULT
(a) Neither Agent is obliged to monitor or enquire as to whether or not a
Default has occurred. Neither Agent will be deemed to have knowledge of
the occurrence of a Default. However, if an Agent receives notice from
a Party referring to this Agreement, describing the Default and stating
that the event is a Default, it shall promptly notify the Finance
Parties.
(b) Each Agent may require the receipt of security satisfactory to it,
whether by way of payment in advance or otherwise, against any
liability or loss which it may incur in taking any proceedings or
action arising out of or in connection with any Finance Document before
it commences these proceedings or takes that action.
22.8 EXONERATION
(a) Without limiting paragraph (b) below, no Agent will be liable to any
other Party for any action taken or not taken by it under or in
connection with any Finance Document, unless directly caused by its
gross negligence or wilful misconduct.
(b) No Party may take any proceedings against any officer, employee or
agent of any Agent in respect of any claim it might have against such
Agent or in respect of any act or omission of any kind (including gross
negligence or wilful misconduct) by that officer, employee or agent in
relation to any Finance Document.
22.9 RELIANCE
Each Agent may:
(a) rely on any notice or document believed by it to be genuine
and correct and to have been signed by, or with the authority
of, the proper person;
(b) rely on any statement made by a director or employee of any
person regarding any matters which may reasonably be assumed
to be within his knowledge or within his power to verify; and
(c) engage, pay for and rely on legal or other professional
advisers selected by it (including those in such Agent's
employment and those representing a Party other than such
Agent).
22.10 CREDIT APPROVAL AND APPRAISAL
Without affecting the responsibility of any Obligor for information
supplied by it or on its behalf in connection with any Finance
Document, each Bank confirms that it:
<PAGE> 73
(a) has made its own independent investigation and assessment of
the financial condition and affairs of each Obligor and its
related entities in connection with its participation in this
Agreement and has not relied exclusively on any information
provided to it by any Agent or the Arranger in connection with
any Finance Document; and
(b) will continue to make its own independent appraisal of the
creditworthiness of each Obligor and its related entities
while any amount is or may be outstanding under the Finance
Documents or any Commitment is in force.
22.11 INFORMATION
(a) The Facility Agent shall promptly forward to the person concerned the
original or a copy of any document which is delivered to the Facility
Agent by a Party for that person.
(b) Except where this Agreement specifically provides otherwise, the
Facility Agent is not obliged to review or check the accuracy or
completeness of any document it forwards to another Party.
(c) Except as provided above, neither any Agent nor the Arranger has any
duty:
(i) either initially or on a continuing basis to provide any
Finance Party with any credit or other information concerning
the financial condition or affairs of any Obligor or any
related entity of any Obligor whether coming into its
possession or that of any of its related entities before, on
or after the date of this Agreement; or
(ii) unless specifically requested to do so by a Bank in accordance
with this Agreement, to request any certificates or other
documents from any Obligor.
22.12 THE AGENTS AND THE ARRANGER INDIVIDUALLY
(a) If it is also a Bank, each Agent and the Arranger has the same rights
and powers under this Agreement as any other Bank and may exercise
those rights and powers as though it were not an Agent or the Arranger.
(b) Each Agent and the Arranger may:
(i) carry on any business with any Obligor or its related
entities;
(ii) act as agent or trustee for, or in relation to any
financing involving, any Obligor or its related entities;
and
(iii) retain any fees, profits or remuneration in connection with
its activities under this Agreement or in relation to any of
the foregoing.
22.13 INDEMNITIES
(a) Without limiting the liability of any Obligor under the Finance
Documents, each Bank shall forthwith on demand indemnify each Agent for
its proportion of any liability or loss incurred by such Agent in any
way relating to or arising out of its acting as the Facility Agent or
the Security Agent, as the case may be, except to the extent that the
liability or loss arises directly from such Agent's gross negligence or
wilful misconduct.
<PAGE> 74
(b) A Bank's proportion of the liability or loss set out in paragraph (a)
above is the proportion which its participation in the Advances (if
any) bears to all the Advances on the date of the demand. If, however,
there are no Advances outstanding on the date of demand, then the
proportion will be the proportion which its Commitment bears to the
Total Commitments at the date of demand or, if the Total Commitments
have been cancelled, bore to the Total Commitments immediately before
being cancelled.
(c) The Parent shall forthwith on demand reimburse each Bank for any
payment made by it under paragraph (a) above.
22.14 COMPLIANCE
(a) Each Agent may refrain from doing anything which might, in its opinion,
constitute a breach of any law or regulation or be otherwise actionable
at the suit of any person, and may do anything which, in its opinion,
is necessary or desirable to comply with any law or regulation of any
jurisdiction.
(b) Without limiting paragraph (a) above, neither Agent need disclose any
information relating to any Obligor or any of its related entities if
the disclosure might, in the opinion of such Agent, constitute a breach
of any law or regulation or any duty of secrecy or confidentiality or
be otherwise actionable at the suit of any person.
(c) In acting as Facility Agent and/or Security Agent for the Banks, the
Facility Agent's and Security Agent's agency division shall be treated
as a separate entity from any other of its divisions or departments
and, notwithstanding the foregoing provisions of this Clause 22, in the
event that Facility Agent or the Security Agent should act for any
member of the Group in any capacity in relation to any other matter,
any information given by such member of the Group to the Facility Agent
or the Security Agent in such other capacity may be treated as
confidential by the Facility Agent or the Security Agent (as the case
may be).
22.15 RESIGNATION
(a) Notwithstanding Clause 22.1 (Appointment and duties of the Agents),
each Agent may resign (after consultation with the Parent) by giving
notice to the Banks and the Parent and may be removed by the Majority
Banks giving notice to such Agent and the Parent. In that event the
Majority Banks, after consultation with the Parent, may appoint a
successor (a "REPLACEMENT") for such Agent which shall be a reputable
and experienced bank acting and incorporated or having a branch in
England.
(b) If the Majority Banks have not, within 30 days after any such notice,
so appointed a Replacement which shall have accepted such appointment,
the retiring Agent, after consultation with the Parent, shall have the
right to appoint a Replacement which shall be a reputable and
experienced bank incorporated or having a branch in England.
(c) The resignation of the retiring Agent and the appointment of any
Replacement shall, subject to Clause 22.15(d) (below), both become
effective upon the Replacement notifying all the parties hereto in
writing that it accepts such appointment, whereupon the Replacement
shall succeed to the position of the retiring Agent and the term
"AGENT", "FACILITY AGENT" or "SECURITY AGENT" in all of the Finance
Documents shall include such Replacement where
<PAGE> 75
appropriate. This Clause 22 shall continue to benefit a retiring Agent
in respect of any action taken or omitted by it hereunder while it was
an Agent.
(d) The resignation or removal of a retiring Security Agent shall not
become effective until the Facility Agent is satisfied that all things
required to be done in order that the Security Documents or
replacements therefor shall provide for legal, valid and enforceable
security in favour of the replacement Security Agent have been done.
The Obligors shall take such action as may be necessary in order that
the Security Documents or replacements therefor shall provide for
legal, valid and enforceable security in favour of any replacement
Security Agent.
(e) The retiring Agent shall make available to the Replacement such
documents and records as the Replacement may reasonably request for the
purpose of performing its function as the Facility Agent or Security
Agent as the case may be.
22.16 SECURITY AGENT AS TRUSTEE
(a) The Security Agent in its capacity as trustee or otherwise:
(i) shall not be liable for any failure, omission, or defect in
perfecting the security constituted by any Security Document
or any security created thereby;
(ii) may accept without enquiry such title as any Obligor may have
to the property over which security is intended to be created
by any Security Document.
(b) Save where the Security Agent holds a legal mortgage over, or over an
interest in, real property or shares, the Security Agent in its
capacity as trustee or otherwise shall not be under any obligation to
hold any title deeds, Security Documents or any other documents in
connection with the property charged by any Security Document or any
other such security in its own possession or to take any steps to
protect or preserve the same. The Security Agent may permit the
relevant Obligor to retain all such title deeds and other documents in
its possession.
(c) Save as otherwise provided in the Security Documents, all moneys which
under the trusts herein or therein contained are received by the
Security Agent in its capacity as trustee or otherwise may be invested
in the name of or under the control of the Security Agent in any
investment for the time being authorised by English law for the
investment by trustees of trust money or in any other investments which
may be selected by the Security Agent with the consent of the Majority
Banks. Additionally, the same may be placed on deposit in the name of
or under the control of the Security Agent at such bank or institution
(including any Agent) and upon such terms as the Security Agent may
think fit. Any and all such monies and all interest thereon shall be
paid over to the Facility Agent forthwith upon demand by the Facility
Agent.
(d) Each Finance Party authorises, empowers and directs the Security Agent
(by itself or by such person(s) as it may nominate) to execute and
enforce the Security Documents as trustee or as otherwise provided (and
whether or not expressly in the Finance Parties' names) on its behalf.
<PAGE> 76
22.17 BANKS
(a) Each Agent may treat each Bank as a Bank, entitled to payments under
this Agreement and as acting through its Facility Office(s) until it
has received not less than 5 Business Days' notice from such Bank to
the contrary prior to the relevant payment.
(b) Each Bank represents to the Facility Agent that, in the case of a Bank
which is a Bank on the date of this Agreement, on the date of this
Agreement and, in the case of a Bank which becomes a Bank after the
date of this Agreement, on the date it becomes a Bank it is:
(i) either:
(A) not resident in the United Kingdom for United Kingdom
tax purposes; or
(B) a "bank" as defined in section 840A of the Income and
Corporation Taxes Act 1988 and resident in the United
Kingdom for United Kingdom tax purposes; and
(ii) beneficially entitled to the principal and interest payable
by the Facility Agent to it under this Agreement,
and shall forthwith notify the Facility Agent if either representation
ceases to be correct.
22.18 CHINESE WALL
In acting as Facility Agent or Arranger, the agency and syndications
division of each of the Facility Agent and the Arranger shall be
treated as a separate entity from its other divisions and departments.
Any information acquired at any time by the Facility Agent or the
Arranger otherwise than in the capacity of Agent or Arranger through
its agency and syndications division (whether as financial advisor to
any member of the Group or otherwise) may be treated as confidential by
the Facility Agent or Arranger and shall not be deemed to be
information possessed by the Facility Agent or Arranger in their
capacity as such. Each Finance Party acknowledges that the Facility
Agent and the Arranger may, now or in the future, be in possession of,
or provided with, information relating to the Obligors which has not or
will not be provided to the other Finance Parties. Each Finance Party
agrees that, except as expressly provided in this Agreement, neither
the Agent nor the Arranger will be under any obligation to provide, or
under any liability for failure to provide, any such information to the
other Finance Parties.
23. FEES
23.1 ARRANGEMENT FEE
The Parent shall pay to the Facility Agent on behalf of the Arranger a
front-end fee on the date and in the amount agreed in the letter of
even date herewith from the Facility Agent on behalf of the Arranger to
the Parent and counter-signed by the Parent. The front-end fee shall be
distributed by the Arranger among the Banks in the proportions agreed
between the Arranger and the Banks.
<PAGE> 77
23.2 COMMITMENT FEE
(a) The Parent shall pay to the Facility Agent for each Bank a commitment
fee in the currency in which the relevant Commitments are denominated
computed at the rate per annum referred to in Clause 8.5 (Applicable
Margin and commitment fee) on the daily unutilised balance of the
aggregate of that Bank's undrawn and available Commitment from time to
time during the Availability Period.
(b) Accrued commitment fee is payable quarterly in arrear with the first
payment due three months after the Signing Date and thereafter until
the Final Maturity Date. Commitment fee will start to accrue from the
Signing Date. Accrued commitment fee is also payable to the Facility
Agent for the relevant Bank(s) on the cancelled amount of any such
Bank's Commitment at the time the cancellation takes effect.
23.3 AGENCY FEES
The Parent shall pay to the Facility Agent for its own account the
agency fees on the dates and in the amounts agreed in the letter of
even date herewith from the Facility Agent to the Parent and
counter-signed by the Parent.
23.4 VAT
Any fee referred to in this Clause 23 (Fees) is exclusive of any value
added tax or any other similar Tax which might be chargeable in
connection with that fee. If any value added tax or other similar Tax
is so chargeable, it shall be paid by the relevant Obligor at the same
time as it pays the relevant fee.
24. EXPENSES
24.1 INITIAL AND SPECIAL COSTS
The Parent shall promptly on demand pay or procure that the other
Borrowers pay the Agents and the Arranger the amount of all reasonable
costs and expenses (including legal fees and expenses) incurred by any
of them in connection with:
(a) the negotiation, preparation, printing and execution of this
Agreement and any other Finance Document (including any
executed after the date of this Agreement) and the syndication
of the Facilities;
(b) any amendment, supplement, waiver, consent or suspension of
rights (or any proposal for any of the foregoing) requested by
or on behalf of an Obligor or, in the case of Clause 2.5
(Change of currency), the Facility Agent and relating to a
Finance Document; and
(c) any other matter, not of an ordinary administrative nature,
arising out of or in connection with a Finance Document,
together in each case with any applicable value added tax or other
similar Taxes.
<PAGE> 78
24.2 ENFORCEMENT COSTS
The Parent shall promptly on demand pay or procure that the other
Borrowers pay to each Finance Party the amount of all costs and
expenses (including legal fees and expenses) incurred by it:
(a) in connection with the enforcement of, or the protection or
preservation of any rights under, any Finance Document; or
(b) (in the case of the Facility Agent or the Security Agent only)
in investigating any Default,
together in each case with any applicable value added tax or other
similar Taxes.
While any Event of Default is continuing, the Parent shall promptly on
demand pay each Agent for the cost of the management time charged by
such Agent in connection with any additional administration of the
Finance Documents arising in consequence of such Event of Default.
24.3 STAMP DUTIES
The Parent shall pay and promptly on demand indemnify each Finance
Party against any liability it incurs in respect of any stamp,
registration and similar Tax which is or becomes payable in connection
with the entry into, registration, performance or enforcement of any
Finance Document.
25. INDEMNITIES
25.1 CURRENCY INDEMNITY
(a) If any amount payable by any Obligor under or in connection with any
Finance Document is received by any Finance Party in a currency (the
"PAYMENT CURRENCY") other than that agreed to be payable under that
Finance Document (the "AGREED CURRENCY"), whether as a result of any
judgement or order or the enforcement of the same, the liquidation of
such Obligor or otherwise and the amount produced by converting the
Payment Currency so received into the Agreed Currency at market rates
prevailing at or about the time of receipt of the Payment Currency is
less than the amount of the Agreed Currency due under that Finance
Document, then the Obligors shall, as an independent and additional
obligation, indemnify each Finance Party for the deficiency and any
loss sustained as a result.
(b) The indemnities set out in paragraph (a) above shall constitute
separate and independent obligations of each of the Obligors from their
other obligations under the Finance Documents and shall apply
irrespective of any indulgence granted by any Finance Party. The
Obligors shall pay the reasonable costs of making any conversion from
the Payment Currency to the Agreed Currency.
(c) Each Obligor waives any right it may have in any jurisdiction to pay
any amount under this Agreement in a currency other than that in which
it is expressed to be payable under that Finance Document.
<PAGE> 79
25.2 GENERAL INDEMNITIES
The Parent shall promptly on demand indemnify each Finance Party
against any loss or liability which that Finance Party incurs as a
consequence of:
(a) the occurrence of any Default;
(b) the operation of Clause 25.1 (Change of currency), Clause 21.2
(Acceleration) or Clause 31 (Pro rata sharing);
(c) any payment of principal of or interest on an Advance or of an
overdue amount being received otherwise than on its Maturity
Date; or
(d) (other than by reason of default by a Finance Party) an
Advance not being made after a Request has been delivered for
that Advance,
including any loss of Margin or other loss or expense on account of
funds borrowed, contracted for or utilised to fund any amount payable
under any Finance Document, any amount repaid or prepaid or any Advance
(provided that the loss or liability recoverable by any Finance Party
under paragraphs (c) or (d) shall not exceed the amount which such
Finance Party could claim if it had funded such Advance or overdue
amount on a matched basis in the London Interbank Eurocurrency Market).
26. EVIDENCE AND CALCULATIONS
26.1 ACCOUNTS
Accounts maintained by a Finance Party in connection with this
Agreement are prima facie evidence of the matters to which they relate.
26.2 CERTIFICATES AND DETERMINATIONS
Any certification or determination by a Finance Party of a rate or
amount under this Agreement is, in the absence of manifest error, prima
facie evidence of the matters to which it relates.
26.3 CALCULATIONS
Interest (including any Reserve Asset Costs) and the fees payable under
Clause 23.2 (Commitment fee) accrue from day to day and are calculated
on the basis of the actual number of days elapsed and a year of 360
days or, in the case of interest payable on an amount denominated in
Sterling only, 365 days.
27. AMENDMENTS AND WAIVERS
27.1 PROCEDURE
(a) Subject to Clause 27.2 (Exceptions), if authorised by the Majority
Banks, the Facility Agent or (in the case of the Security Documents)
the Security Agent may waive or (with the consent of the Obligors'
Agent) amend or vary any term of the Finance Documents. Any such
waiver, amendment or variation so authorised and effected shall be
binding on all the Finance Parties
<PAGE> 80
and the Facility Agent (or Security Agent as the case may be) shall be
under no liability in respect of any such waiver, amendment or
variation. The Obligors' Agent and the other Obligors shall be entitled
to rely on any letter agreeing to any such waiver, amendment or
variation given by the Facility Agent or the Security Agent, as the
case may be, in their capacity as such, which the Obligors may take as
confirmation that the Facility Agent or the Security Agent, as the case
may be, has been duly authorised by the Majority Banks.
(b) The Facility Agent shall promptly notify the Obligors' Agent and the
other Finance Parties of any waiver, amendment or variation effected
under paragraph (a) above, and any such waiver, amendment or variation
shall be binding on all the Parties.
27.2 EXCEPTIONS
A waiver, amendment or variation which relates to:
(a) the definition of "MAJORITY BANKS" in Clause 1.1
(Definitions);
(b) an extension of the date for, or a decrease in an amount or
a change in the currency or waiver of, any payment under the
Finance Documents;
(c) a change in a Bank's Commitment (other than as expressly
contemplated by this Agreement) or an extension of the
Availability Period;
(d) the incorporation of Additional Borrowers and/or drawers or a
change in the Guarantors otherwise than in accordance with
Clauses 17.1 (Additional Borrowers) or 17.2 (Additional
Guarantors);
(e) a term of a Finance Document which expressly requires the
consent of each Bank;
(f) Clauses 6 (Repayment), 7 (Prepayment and Cancellation), 10.6
(Partial payments), 11 (Taxes), 36 (Governing Law) or this
Clause 27; or
(g) any material provision of any Security Document or any release
(not otherwise provided for in Clause 17.4 (Release of
Guarantors and security) or the relevant Security Document) of
any material asset charged by any of the Security Documents,
may not be effected without the consent of each Bank.
27.3 WAIVERS AND REMEDIES CUMULATIVE
The rights of each Finance Party under the Finance Documents:
(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of its rights under the
general law; and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver
of that right.
<PAGE> 81
28. CHANGES TO THE PARTIES
28.1 TRANSFERS BY OBLIGORS
No Obligor may assign, transfer, novate or dispose of any of, or any
interest in, its rights and/or obligations under this Agreement.
28.2 TRANSFERS BY BANKS
(a) A Bank (the "EXISTING BANK") may at any time with the prior consent of
the Parent (not to be unreasonably withheld and such consent to be
deemed given within 5 Business Days of an Existing Bank's request)
assign, transfer or novate any of its rights and/or obligations under
this Agreement to another bank, trust, fund or financial institution
(the "NEW BANK") which is a Recognised Bank provided always that no
consent from the Parent will be required during the Primary Syndication
Period.
(b) A transfer of obligations will be effective only if either:
(i) the obligations are novated in accordance with Clause 28.3
(Procedure for novation); or
(ii) the New Bank confirms to the Facility Agent and the Parent
that it undertakes to be bound by the terms of the Finance
Documents as a Bank in form and substance satisfactory to the
Facility Agent. On the transfer becoming effective in this
manner the Existing Bank shall be relieved of its obligations
under the Finance Documents to the extent that they are
transferred to the New Bank.
(c) Nothing in this Agreement restricts the ability of a Bank to
sub-participate or sub-contract an obligation if that Bank remains
liable under this Agreement for that obligation.
(d) On each occasion an Existing Bank assigns, transfers or novates any of
its rights and/or obligations under this Agreement, the New Bank shall,
on the date the assignment, transfer and/or novation takes effect, pay
to the Facility Agent an administration fee of (pound)1,000.
(e) Neither an Existing Bank nor any other Finance Party is responsible to
a New Bank for:
(i) the execution, genuineness, validity, enforceability or
sufficiency of any Finance Document or any other document;
(ii) the collectability of amounts payable under any Finance
Document or the financial condition of or the performance of
its obligations under the Finance Documents by any Obligor; or
(iii) the accuracy of any statements or information (whether written
or oral) made in or in connection with or supplied in
connection with any Finance Document.
(f) Each New Bank confirms to the Existing Bank and the other Finance
Parties that it:
(i) has made its own independent investigation and assessment of
the financial condition and affairs of each Obligor and its
related entities in connection with its participation in this
Agreement and has not relied exclusively on any information
provided to it by
<PAGE> 82
the Existing Bank or any other Finance Party in connection
with any Finance Document;
(ii) will continue to make its own independent appraisal of the
creditworthiness of each Obligor and its related entities
while any amount is or may be outstanding under this Agreement
or any Commitment is in force;
(iii) is a bank, trust, fund or financial institution whose ordinary
business includes participation in syndicated facilities of
this type; and
(iv) is a Recognised Bank with respect to each Borrower.
(g) Nothing in any Finance Document obliges an Existing Bank to:
(i) accept a re-transfer from a New Bank of any of the rights
and/or obligations assigned, transferred or novated under this
Clause 28.2 or Clause 28.3 (Procedure for novation); or
(ii) support any losses incurred by the New Bank by reason of the
non-performance by any Obligor of its obligations under this
Agreement or otherwise.
(h) Any reference in this Agreement to a Bank includes a New Bank, but
excludes a Bank if no amount is or may be owed to or by that Bank under
this Agreement and its Commitment has been cancelled or reduced to nil.
28.3 PROCEDURE FOR NOVATION
(a) A novation is effected if after prior consultation with the Parent:
(i) the Existing Bank and the New Bank deliver to the Facility
Agent a duly completed certificate executed by the Existing
Bank and the New Bank, substantially in the form of Part I of
Schedule 5 (a "NOVATION CERTIFICATE"); and
(ii) the Facility Agent executes it.
(b) Each Party (other than the Existing Bank and the New Bank) irrevocably
authorises the Facility Agent to execute any duly completed Novation
Certificate on its behalf.
(c) To the extent that they are expressed to be the subject of the novation
in the Novation Certificate:
(i) the Existing Bank and the other Parties (the "EXISTING
PARTIES") will be released from their obligations to each
other under the Finance Documents (the "DISCHARGED
OBLIGATIONS");
(ii) the New Bank and the existing Parties will assume obligations
towards each other under the Finance Documents which differ
from the discharged obligations only insofar as they are owed
to or assumed by the New Bank instead of the Existing Bank;
<PAGE> 83
(iii) the rights of the Existing Bank against the existing Parties
under the Finance Documents and vice versa (the "DISCHARGED
RIGHTS") will be cancelled; and
(iv) the New Bank and the existing Parties will acquire rights
against each other under the Finance Documents which differ
from the discharged rights only insofar as they are
exercisable by or against the New Bank instead of the Existing
Bank,
all on the date of execution of the Novation Certificate by the
Facility Agent or, if later, the date specified in the Novation
Certificate.
The discharged obligations shall not include any obligation under
Clauses 11 (Taxes) and 13 (Increased Costs) in respect of payments made
prior to the effective date of such Novation Certificate.
(d) Each Obligor and each Finance Party hereby agrees for the future that
in the event of an assignment or a transfer by any Existing Bank of all
or part of its rights and obligations under the Finance Documents to a
New Bank, the Existing Bank shall expressly preserve all of its rights
under any security or privilege in relation to the existing rights, so
that such security or privilege shall be automatically transferred to
the New Bank.
28.4 REFERENCE BANKS
If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of
which it is an Affiliate) ceases to be one of the Banks, the Facility
Agent shall (in consultation with the Parent) appoint another Bank or
an Affiliate of a Bank to replace that Reference Bank.
28.5 REGISTER
The Facility Agent shall keep a record of all the Parties and shall
supply any other Party (at that Party's expense) with a copy of the
record on request.
28.6 INCREASED COSTS
If any assignment, transfer or novation of or with respect to all or
any part of the rights and/or obligations of a Bank under this
Agreement pursuant to Clause 28.2 (Transfers by Banks) or 28.3
(Procedure for novation) is made which results (or would but for this
Clause result) at the time thereof in amounts becoming payable under
Clauses 11 (Taxes) or 13.1 (Increased costs), then the assignee,
transferee or New Bank shall be entitled to receive such amounts only
to the extent that the assignor, transferor or Existing Bank would have
been so entitled had there been no such assignment, transfer, or
novation.
29. DISCLOSURE OF INFORMATION
29.1 CONFIDENTIALITY
Each Finance Party hereby severally undertakes to each Obligor that it
will keep confidential and that it will not make use of for any
purposes (otherwise than for the purposes of the Finance Documents and
otherwise than in the context of an addition to its general experience,
knowledge or expertise), any of the Finance Documents or other
documents relating to this Agreement and all of the information
distributed on behalf of the Obligors or any of them during syndication
or contained in, received under or obtained in the course of
discussions
<PAGE> 84
relating to the Finance Documents other than any such document or
information which has become generally available to banks in the London
market through no breach by it of this Clause, provided that each
Finance Party shall be entitled to make disclosure of the same:
(i) to its auditors, accountants, legal counsel and tax advisers
and to any other professional advisers appointed to act in
connection with the administration of the Finance Documents or
the enforcement of, or realisation of any security provided
under, any of the Finance Documents;
(ii) to any other third party where the relevant Obligor has
previously agreed in writing that disclosure may be made to
that third party;
(iii) to its Affiliates to the extent required as part of such
Finance Party's credit control procedures;
(iv) to any banking or other regulatory or examining authorities
(whether governmental or otherwise) where such disclosure is
requested by them;
(v) pursuant to subpoena or other legal process, or in connection
with any action, suit or proceeding relating to any of the
Finance Documents;
(vi) pursuant to any law or regulation having the force of law; and
(vii) to any member of the Group.
The provisions of this Clause 29.1 shall supersede any undertakings
with respect to confidentiality previously given by any Finance Party
in favour of any Obligor.
29.2 SUB-PARTICIPANTS
Notwithstanding Clause 29.1 (Confidentiality), a Bank may disclose to
one of its Affiliates or any person with whom it is proposing to enter,
or has entered into, any kind of transfer, participation or other
agreement in relation to this Agreement:
(i) a copy of any Finance Document; and
(ii) any information which that Bank has acquired under or in
connection with any Finance Document,
provided that any such proposed transferee, participant or assignee has
agreed with the Parent to keep any such Finance Document or information
confidential.
29.3 PUBLICITY
The Parent and the Arranger shall agree the form of all press
announcements issued in respect of the Finance Documents and any
transaction contemplated thereby.
30. SET-OFF
Following the occurrence of an Event of Default, a Finance Party may
set off any obligation due and payable by an Obligor under the Finance
Documents (to the extent beneficially
<PAGE> 85
owned by that Finance Party) against any obligation (whether or not due
and payable) owed by that Finance Party to that Obligor, regardless of
the place of payment, booking branch or currency of either obligation.
If the obligations are in different currencies, the Finance Party may
convert either obligation, at the cost of such Obligor, at a market
rate of exchange in its usual course of business for the purpose of the
set-off. If either obligation is unliquidated or unascertained, the
Finance Party may set off in an amount estimated by it in good faith to
be the amount of that obligation.
31. PRO-RATA SHARING
31.1 REDISTRIBUTION
If any amount owing by an Obligor under this Agreement to a Finance
Party (the "RECOVERING FINANCE PARTY") is discharged by payment,
set-off or any other manner other than through the Facility Agent in
accordance with Clause 10 (Payments) (a "RECOVERY"), then:
(a) the recovering Finance Party shall, within 3 Business Days,
notify details of the recovery to the Facility Agent;
(b) the Facility Agent shall determine whether the recovery is in
excess of the amount which the recovering Finance Party would
have received had the recovery been received by the Facility
Agent and distributed in accordance with Clause 10 (Payments);
(c) subject to Clause 31.3 (Exception) the recovering Finance
Party shall, within 3 Business Days of demand by the Facility
Agent, pay to the Facility Agent an amount (the
"REDISTRIBUTION") equal to the excess;
(d) the Facility Agent shall treat the redistribution as if it
were a payment by the Obligor concerned under Clause 10
(Payments) and shall pay the redistribution to the Finance
Parties (other than the recovering Finance Party) in
accordance with Clause 10.6 (Partial payments); and
(e) after payment of the full redistribution, the recovering
Finance Party will be subrogated to the portion of the claims
paid under paragraph (d) above, and that Obligor will owe the
recovering Finance Party a debt which is equal to the
redistribution, immediately payable and of the type originally
discharged.
31.2 REVERSAL OF REDISTRIBUTION
If:
(a) a recovering Finance Party must subsequently return a
recovery, or an amount measured by reference to a recovery, to
an Obligor; and
(b) the recovering Finance Party has paid a redistribution in
relation to that recovery,
each Finance Party shall, within 3 Business Days of demand by the
recovering Finance Party through the Facility Agent, reimburse the
recovering Finance Party all or the appropriate portion of the
redistribution paid to that Finance Party. Thereupon the subrogation in
Clause 31.1(e) will operate in reverse to the extent of the
reimbursement.
<PAGE> 86
31.3 EXCEPTION
A recovering Finance Party need not pay a redistribution to the
Facility Agent (i) to the extent that it would not, after the payment,
have a valid claim against the Obligor concerned in the amount of the
redistribution pursuant to Clause 31.1 (Redistribution) paragraph (e)
or (ii) where the recovering Finance Party made the recovery as a
consequence of a judgment in any legal proceedings, to the extent that
any other Finance Party was given notice of such proceedings and, being
entitled to do so, did not join in such proceedings.
32. SEVERABILITY
If a provision of any Finance Document is or becomes illegal, invalid
or unenforceable in any jurisdiction, that shall not affect:
(a) the legality, validity or enforceability in that jurisdiction
of any other provision of the Finance Documents; or
(b) the legality, validity or enforceability in other
jurisdictions of that or any other provision of the Finance
Documents.
33. COUNTERPARTS
This Agreement may be executed in any number of counterparts, and this
has the same effect as if the signatures on the counterparts were on a
single copy of this Agreement.
34. NOTICES
34.1 GIVING OF NOTICES
All notices or other communications under or in connection with this
Agreement shall be given in writing or by facsimile. Any such notice
will be deemed to be given as follows:
(a) if in writing, when delivered;
(b) if by facsimile, when received.
However, a notice given in accordance with the above but received on a
non-working day or after business hours in the place of receipt will
only be deemed to be given on the next working day in that place. Any
notice given to the Facility Agent shall be confirmed in writing, but
non receipt of the written confirmation shall not invalidate such
notice or any action taken in reliance on the facsimile version
thereof.
34.2 ADDRESSES FOR NOTICES
The address and facsimile number of each Party for all notices under or
in connection with this Agreement are:
(a) as specified in Schedule 1 or 2, as the case may be, or in the
Novation Certificate, Borrower Accession Agreement or
Guarantor Accession Agreement by which such Party became a
party to this Agreement, as such Party's address for notices;
or
<PAGE> 87
(b) as otherwise notified by that Party for this purpose to the
Facility Agent (or in the case of the Facility Agent as
otherwise notified by the Facility Agent to the other Parties)
by not less than five Business Days' notice.
35. JURISDICTION
35.1 SUBMISSION
For the benefit of each Finance Party, each Obligor agrees that the
courts of England have jurisdiction to settle any disputes in
connection with any Finance Document and accordingly submits to the
jurisdiction of the English courts.
35.2 SERVICE OF PROCESS
Without prejudice to any other mode of service, each Obligor not
incorporated in England:
(a) irrevocably appoints Getty U.K. whose registered office is at
101 Bayham Street, London NW1 0AG as its agent for service of
process relating to any proceedings before the English courts
in connection with any Finance Document;
(b) agrees that failure by such process agent to notify the
Obligor of the process will not invalidate the proceedings
concerned; and
(c) consents to the service of process relating to any such
proceedings by prepaid posting of a copy of the process to its
address for the time being applying under Clause 34.2
(Addresses for notices).
Getty U.K. hereby irrevocably accepts such appointment by each other
Obligor.
35.3 FORUM CONVENIENCE AND ENFORCEMENT ABROAD
Each Obligor:
(a) waives objection to the English courts on grounds of
inconvenient forum or otherwise as regards proceedings in
connection with a Finance Document; and
(b) agrees that a judgment or order of an English court in
connection with a Finance Document is (subject to rights of
appeal before the English courts) conclusive and binding on it
and may be enforced against it in the courts of any other
jurisdiction.
35.4 NON-EXCLUSIVITY
Nothing in this Clause 35 limits the right of a Finance Party to bring
proceedings against an Obligor in connection with any Finance Document:
(a) in any other court of competent jurisdiction including in New
York City, New York, United States of America; or
(b) concurrently in more than one jurisdiction.
<PAGE> 88
35.5 WAIVER OF JURY TRIAL
Each Obligor waives, to the extent permitted by applicable law, trial
by jury in any litigation in any court with respect to, in connection
with, or arising out of this Agreement, or the validity, protection,
interpretation, collection or enforcement hereof; and the Obligors
hereby waive, to the extent permitted by applicable law, the right to
interpose any set off or counterclaim or cross-claim in connection with
any such litigation, irrespective of the nature of such set off,
counterclaim or cross-claim except to the extent that the failure so to
assert any such set off, counterclaim or cross-claim would permanently
preclude the prosecution of or recovery upon same. The Obligors agree
that this Clause 35.5 is a specific and material aspect of this
Agreement and acknowledge that the Banks would not make the Facilities
available if this Clause 35.5 were not part of this Agreement.
36. GOVERNING LAW
This Agreement is governed by English law.
37. SENIOR INDEBTEDNESS/DESIGNATED SENIOR INDEBTEDNESS
The Advances and all other monetary obligations of the Parent, whether
in its capacity as a Borrower, a Guarantor or otherwise, under any of
the Finance Documents constitute "Senior Indebtedness" and "Designated
Senior Indebtedness" as defined in the indenture dated 27th May, 1998
made between the Parent and The Bank of New York, as trustee, relating
to the Parent's 4.75% Convertible Subordinated Notes due 2003. In
addition, to the extent that any Obligor is now or may hereafter become
party to any indenture, note, loan agreement or other document which
contemplates or provides for the existence of "Senior Indebtedness" or
"Designated Senior Indebtedness" of such Obligor, the parties intend
that the Advances and all other monetary obligations of such Obligor,
whether in its capacity as a Borrower, a Guarantor or otherwise, under
any of the Finance Documents shall constitute "Senior Indebtedness" and
"Designated Senior Indebtedness" for purposes of such indenture, note,
loan agreement or other document.
This Agreement has been entered into on the date stated at the beginning of this
Agreement.
<PAGE> 89
SCHEDULE 1
VARIOUS PARTIES
PART I
ORIGINAL BORROWER
Getty Images, Inc.
Eyewire, Inc.
PhotoDisc, Inc.
Art.com, Inc.
Tony Stone Images/America Inc
Tony Stone Images/Chicago Inc.
Tony Stone Images/New York Inc.
Tony Stone Images/Los Angeles Inc.
Getty Communications Group Finance Limited
Getty Communications Limited
Getty Images Limited
ADDRESS FOR NOTICES FOR THE ORIGINAL BORROWER
101 Bayham Street
London
NW1 0AG
Attention: Cameron Anderson
Fax: 0171 267 6540
WITH A COPY TO THE OBLIGOR'S AGENT:
701 North 34th Street
Suite 400
Seattle
Washington 98103
Attention: Christopher Roling
Fax: 001 206 268 1202
<PAGE> 90
PART II
ORIGINAL GUARANTORS
Getty Images, Inc.
Eyewire,Inc
PhotoDisc, Inc.
Art.com, Inc.
Tony Stone Images/America, Inc.
Tony Stone Images/Chicago Inc.
Tony Stone Images/New York Inc.
Tony Stone Images/Los Angeles Inc.
3032097 Nova Scotia Limited
Getty Communications Limited
Getty Communications Group Finance Limited
Getty Images Limited
ADDRESS FOR NOTICES FOR EACH GUARANTOR REFERRED TO ABOVE:
101 Bayham Street
London
NW1 0AG
Attention: Cameron Anderson
Fax: 0171 267 6540
WITH A COPY TO THE OBLIGOR'S AGENT:
701 North 34th Street
Suite 400
Seattle
Washington 98103
Attention: Christopher Roling
Fax: 001 206 268 1202
<PAGE> 91
SCHEDULE 2
BANKS AND COMMITMENTS
COLUMN 1
BANKS AND NOTICE
DETAILS TRANCHE A
COMMITMENT
US$
HSBC Bank plc 50,000,000
------------------------
TOTAL 50,000,000
------------------------
Address for notices:
27/32 Poultry
London
EC2P 2BX
Attention: Graham Boyd
HSBC Bank plc
Media Telecoms & IT Team
Fax: 0171 260 4800
<PAGE> 92
SCHEDULE 3
PART I
CONDITIONS PRECEDENT DOCUMENTS TO FIRST TRANCHE A DRAWDOWN
1. A certified copy of the constitutional documents, including the
memorandum and articles of association, and certificates of
registration of each Obligor (or, for each U.S. Obligor and 3032097
Nova Scotia Limited, the certificate and articles of incorporation and
by-laws), as currently in force.
2. (a) A certified copy of a resolution of the board of directors (or
equivalent governing body authority) of each Obligor approving
the terms of, and the transactions contemplated by the Finance
Documents to which it is a party and resolving that it execute
each such Finance Document and authorising a named person or
persons to do so on behalf of such Obligor and, in the case of
a Borrower, to issue any Request;
(b) a specimen of the signature of each authorised signatory of
each Obligor authorised to bind that company by his signature,
pursuant to the board resolution referred to in paragraph (a)
above;
(c) a certificate of a director of each Obligor (or, for each U.S.
Borrower and 3032097 Nova Scotia Limited, by one of its
officers) (i) confirming that utilisation of that part of the
Facility available to it in full would not cause any borrowing
limit binding on it to be exceeded and (ii) certifying that
each copy document delivered by such Obligor under this Part 1
of Schedule 3 is correct, complete and in full force and
effect as at a date no earlier than the date of this
Agreement; and
(d) a certified copy of a resolution, passed by all the holders of
the issued or allotted shares in each non US Obligor,
approving the terms of, and the transactions contemplated by,
the Finance Documents to which such non US Obligor is to be a
party.
3. A copy (or originals) of the duly executed Finance Documents.
4. A copy of any other authorisation or consents or other document,
opinion or assurance which is necessary or desirable in connection with
the entry into and performance of, and the transactions contemplated
by, any Finance Document or for the validity and enforceability of any
Finance Document.
5. At least two originals of each of the Security Documents duly executed
by the relevant Obligor and each other party thereto, together with
share certificates, stock powers or share transfer forms (as
appropriate) executed in blank and title documents (if any) relating to
assets charged by the Security Documents which are contemplated to be
delivered to the Security Agent and copies of all notices required to
be despatched pursuant to the Security Documents.
6. A certified copy of the Financial Forecasts.
<PAGE> 93
7. Satisfactory results to all company searches and land priority/charge
searches relating to each Obligor (including in respect of leasehold
property copies of the relevant lease agreements).
8. Releases for all existing Encumbrances registered in respect of any
assets of any member of the Group, save Permitted Encumbrances.
9. Requests in relation to all Advances to be made at Signing Date.
10. A legal opinion of:
(a) Allen & Overy, English legal advisers to the Facility Agent,
addressed to the Finance Parties;
(b) Kirkland & Ellis, United States legal advisers to the Facility
Agent, addressed to the Finance Parties; and
(c) in-house U.S. legal counsel to the Group in relation to US law
addressed to the Finance Parties;
(d) Weil, Gotshal & Manges legal advisers to the Group, in
relation to US law addressed to the Finance Parties; and
(e) Stewart McKelvey Stirling Scales legal advisers to the Group
in relation to Canadian law addressed to the Finance Parties,
together with all such other legal opinions in relation to the US
Obligors or 3032097 Nova Scotia Limited as the Facility Agent may
reasonably require.
11. Evidence that all Borrowings not permitted pursuant to Clause 19.10
(Borrowing) have been repaid.
12. Written confirmation from Getty U.K. that it accepts the appointment as
process agent for each Obligor which is not incorporated in England and
any subsequent appointment made by any Additional Borrower or
Additional Guarantor.
13. A solvency statement of the chief financial officer of each U.S.
Obligor.
14. Structure Memorandum.
15. Payment of all fees payable under Clause 23 (fees) and expenses payable
under Clause 24.1(a) (Initial and Special Costs)
<PAGE> 94
PART 1A
FURTHER CONDITIONS PRECEDENT
1. A certified copy of the constitutional documents, including the by-laws
and certificate and articles of incorporation of The Image Bank Inc.
2. A certified copy of a resolution of the board of directors of the
Parent approving the terms of and the transactions contemplated by the
Acquisition Agreements to which it is a party.
3. A certified copy of a resolution of the board of directors of The Image
Bank, Inc approving the terms of and the transactions contemplated by
the Finance Documents to which it is a party and resolving that it
execute each such Finance Document and authorising a named person or
persons do so on its behalf.
4. A certificate signed by an authorised signatory of the Parent on its
behalf to the effect that:
(i) the Acquisition was completed on or about 22nd November,
1999;
(ii) completion of the Acquisition has not, in the opinion of the
executive directors of the Parent, materially and adversely
impacted on the ability of the enlarged Group to comply with
the financial covenants set out in Clause 20 (Financial
Covenants) until the Final Maturity Date; and
(iii) all regulatory approvals and authorisations necessary or
desirable in connection with the TIB Acquisition have been
obtained.
5. A copy of the following duly executed documents:
(a) the Acquisition Agreements and the press announcement in
connection with the TIB Acquisition; and
(b) the Prospectus.
6. Satisfactory results of all company searches and land priority/charge
searches relating to the Acquired Assets.
7. A certified copy of the Base Financial Statements.
8. A Guarantor Accession Agreement duly executed by The Image Bank, Inc.
9. At least two originals of each of the Security Documents duly executed
by The Image Bank, Inc. and each other party thereto, together with
such legal opinions as the Facility Agent may reasonably require, stock
powers executed in blank and title documents (if any) relating to
assets charged by the Security Documents which are contemplated to be
delivered to the Security Agent and copies of all notices required to
be despatched pursuant to the Security Documents.
<PAGE> 95
PART II
CONDITIONS PRECEDENT DOCUMENTS ON BORROWER OR GUARANTOR ACCESSION
Each of the documents referred to in Schedule 3 Part I paragraphs 1, 2, 4, 7, 10
and 15 relating to any Additional Borrower or Additional Guarantor.
<PAGE> 96
SCHEDULE 4
FORM OF REQUEST
To: HSBC Investment Bank plc as Facility Agent
Attention: [ ]
From: [BORROWER]
Date:[ ]
GETTY IMAGES, INC.
UP TO U.S.$100,000,000 REVOLVING CREDIT FACILITY AGREEMENT
DATED OCTOBER, 1999
(THE "CREDIT AGREEMENT")
Terms used in this Request and defined in the Credit Agreement have the same
meaning in this Request as in the Credit Agreement.
1. We wish to borrow an Advance as follows:
(a) Borrower: [ ]
(b) Drawdown Date: [ ]
(c) Original Dollar Amount/amount: [U.S.$ ]
(d) Currency: [Dollars/Sterling/euros/other]
(e) Term: [ ]
(f) Payment Instructions: [ ].
2. We confirm that each condition specified in Clause 4.3 (Conditions
Precedent to each Advance) is satisfied on the date of this Request.
Yours faithfully,
________________________
for and on behalf of
GETTY IMAGES, INC.
as Obligors' Agent
<PAGE> 97
SCHEDULE 5
FORMS OF ACCESSION DOCUMENTS
PART I
NOVATION CERTIFICATE
To: HSBC Investment Bank plc as Facility Agent
From: [THE EXISTING BANK] and [THE NEW BANK] Date: [ ]
GETTY IMAGES, INC.
UP TO U.S.$100,000,000 REVOLVING CREDIT FACILITY AGREEMENT
DATED OCTOBER, 1999
(THE "CREDIT AGREEMENT")
References to Clauses are to Clauses of the Credit Agreement.
We refer to Clause 28.3 (Procedure for novation).
1. We [ ] (the "EXISTING BANK") and [ ] (the "NEW BANK") agree to the
Existing Bank and the New Bank novating all the Existing Bank's rights
and obligations referred to in the Schedule in accordance with Clause
28.3.
2. From the date specified in paragraph 3 below, the New Bank becomes
party to the Credit Agreement as a Bank, with the rights and
obligations referred to in the Schedule.
3. The specified date for the purposes of Clause 28.3(c) is [date of
novation].
4. The Facility Office and address for notices of the New Bank for the
purposes of Clause 34.2 (Addresses for notices) are set out in the
Schedule.
5. The Existing Bank and the New Bank acknowledge and agree that Clauses
28.2 (Transfers by Banks) paragraphs (d), (e), (f) and (g) apply to
this Novation Certificate and the novation contemplated hereby as if
set out in full herein, mutatis mutandis.
6. It is expressly agreed that the security created or evidenced by the
Security Documents shall be preserved for the benefit of the New Bank
and each other Finance Party.
7. This Novation Certificate is governed by English law.
<PAGE> 98
THE SCHEDULE
RIGHTS AND OBLIGATIONS TO BE NOVATED
[Details of the rights and obligations of the Existing Bank to be novated].
[NEW BANK]
[Facility Office Address for notices]
[Existing Bank] [New Bank]
By: By:
Date: Date:
[ ]
as Facility Agent
By:
Date:
<PAGE> 99
PART II
BORROWER ACCESSION AGREEMENT
To: HSBC Investment Bank plc as Facility Agent
From: [PROPOSED BORROWER] and GETTY IMAGES, INC.
[Date]
GETTY IMAGES, INC. UP TO U.S.$100,000,000
REVOLVING CREDIT FACILITY AGREEMENT
DATED OCTOBER, 1999
(THE "CREDIT AGREEMENT")
Terms used herein which are defined in the Credit Agreement shall have the same
meaning herein as in the Credit Agreement.
We refer to Clause 17.1 (Additional Borrowers).
We, [Name of company] of [Registered Office] (Registered no. [ ] agree to become
party to and to be bound by the terms of the Credit Agreement as an Additional
Borrower in accordance with Clause 17.1 (Additional Borrowers).
The address for notices of the Additional Borrower for the purposes of Clause
34.2 (Addresses for notices) is:
[ ]
This Agreement is governed by English law.
[ADDITIONAL BORROWER]
By:
GETTY IMAGES, INC.
By:
[Facility Agent]
By:
<PAGE> 100
PART III
GUARANTOR ACCESSION AGREEMENT
To: HSBC Investment Bank plc as Facility Agent
From: [PROPOSED GUARANTOR]
Date: [ ]
GETTY IMAGES, INC. UP TO U.S.$100,000,000
REVOLVING CREDIT FACILITY AGREEMENT
DATED OCTOBER, 1999
(THE "CREDIT AGREEMENT")
Terms used herein which are defined in the Credit Agreement shall have the same
meaning herein as in the Credit Agreement.
We refer to Clause 17.2 (Additional Guarantors).
We, [name of company] of [Registered Office] (Registered no. [ ]) agree to
become party to and to be bound by the terms of the Credit Agreement as an
Additional Guarantor in accordance with Clause 17.2 (Additional Guarantors).
Our address for notices for the purposes of Clause 34.2 (Addresses for notices)
is:
[ ]
This Deed is governed by English law.
[EXECUTION AS A DEED
BY PROPOSED GUARANTOR]
GETTY IMAGES, INC.
By:
[Facility Agent]
By:
<PAGE> 101
SCHEDULE 6
SECURITY DOCUMENTS
1. Security over the shares of each of:
Art.Com, Inc
Photodisc, Inc.
Eyewire, Inc.
Tony Stone Images/America Inc.
Tony Stone Images/Los Angeles Inc.
Tony Stone Images/Chicago Inc.
Tony Stone Images/New York Inc.
Tony Stone Images/Seattle Inc.
Tri-Energy Productions Inc.
Liason Agency Inc
Getty Images Limited
Getty Communications Group Finance Limited
Allsport Photographic Ltd
Getty Communications Limited
3032097 Nova Scotia Limited
Hulton Getty Holdings Limited
2. Debenture or general business charge from:
Getty Images Inc
PhotoDisc, Inc
Art.Com, Inc.
Eyewire, Inc
Tony Stone Images/America Inc.
Tony Stone Images/Chicago Inc.
Tony Stone Images/New York Inc.
Tony Stone Images/Los Angeles Inc.
3032097 Nova Scotia Limited
Getty Communications Group Finance Limited
Getty Communications Limited
Getty Images Limited
3. Charge over trademarks (U.S. law) from:
Getty Communications Limited
Getty Images Limited
<PAGE> 102
SCHEDULE 7
CALCULATION OF THE MANDATORY COST
(a) For the purpose of the definition of Mandatory Cost, the Mandatory Cost
for an Advance for each of its Terms is the rate determined by the
Facility Agent to be equal to the arithmetic mean (rounded upward, if
necessary, to four decimal places/the nearest 1/16th of one per cent.)
of the respective rates notified by each of the Reference Banks to the
Facility Agent and calculated in accordance with the following
formulae:
in relation to an Advance denominated in Sterling:
BY + S(Y-Z) + F x 0.01 % per annum = Mandatory Cost
----------------------
100-(B + S)
in relation to any other Advance:
F x 0.01 % per annum = Mandatory Cost
--------
300
where on the day of application of the formula:
B is the percentage of the Reference Bank's eligible liabilities
(in excess of any stated minimum) which the Bank of England
requires the Reference Bank to hold on a non-interest-bearing
deposit account in accordance with its cash ratio
requirements;
Y is LIBOR at or about 11.00 a.m. on that day for the relevant
Interest Period;
S is the percentage of the Reference Bank's eligible liabilities
which the Bank of England requires the Reference Bank to place
as a special deposit;
Z is the interest rate per annum allowed by the Bank of England
on special deposits; and
F is the charge payable by the Reference Bank to the Financial
Services Authority under paragraph 2.02 or 2.03 (as
appropriate) of the Fees Regulations but where for this
purpose, the figure in paragraph 2.02b and 2.03b will be
deemed to be zero expressed in pounds per (pound)1 million of
the fee base of the Reference Bank.
(b) For the purposes of this Schedule 7:
(i) "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the
meanings given to them by the Bank of England at the time of
application of the formula by the Bank of England; and
(ii) "FEE BASE" has the meaning given to it in the Fees
Regulations;
(iii) "FEES REGULATIONS" means the Banking Supervision (Fees)
Regulations 1998 and/or any other regulations governing the
payment of fees for banking supervision.
<PAGE> 103
(c) In the application of the formula, B, Y, S and Z are included in the
formula as figures and not as percentages, e.g. if B = 0.5% and
Y = 15%, BY is calculated as 0.5 x 15.
(d) If a Reference Bank does not supply a rate to the Agent, the applicable
Mandatory Cost will be determined on the basis of the rate(s) supplied
by the remaining Reference Banks.
(e) (i) Each formula is applied on the first day of each Term.
(ii) Each rate calculated in accordance with the formula is, if
necessary, rounded upward to four decimal places/the nearest
1/16th of one per cent..
(f) If the Facility Agent determines that a change in circumstances has
rendered, or will render, the formulae inappropriate, the Facility
Agent (after consultation with the Banks) shall notify the Parent of
the manner in which the Mandatory Cost will subsequently be calculated.
The manner of calculation so notified by the Agent shall, in the
absence of manifest error, be binding on all the Parties.
<PAGE> 104
SCHEDULE 8
MATERIAL SUBSIDIARIES
Getty Images Inc
PhotoDisc, Inc
Tony Stone Images/America Inc.
Tony Stone Images/Chicago Inc.
Tony Stone Images/New York Inc.
Tony Stone Images/Los Angeles Inc.
3032097 Nova Scotia Limited
Eyewire, Inc
Art.Com, Inc.
Getty Communications Group Finance Limited
Getty Communications Limited
Getty Images Limited
Allsport (UK) Limited
<PAGE> 105
SCHEDULE 9
REPAYMENT OF EXISTING REVOLVING CREDIT FACILITY
AMOUNT TO BE REPAID ROLL-OVER DATE
US$
3,000,000 29.10.99
5,000,000 29.10.99
10,000,000 29.10.99
2,000,000 01.11.99
<PAGE> 106
SIGNATORIES
ORIGINAL BORROWER
GETTY IMAGES, INC.
As Original Borrower and Original Guarantor
By: Jonathan Klien
EYEWIRE, INC.
As Original Borrower and Original Guarantor
By: Bradley Zumwalt
PHOTODISC, INC.
As Original Borrower and Original Guarantor
By: Jonathan Klien
ART.COM, INC.
As Original Borrower and Original Guarantor
By: Jonathan Klien
TONY STONE IMAGES/AMERICA INC.
As Original Borrower and Original Guarantor
By: Jonathan Klien
TONY STONE IMAGES/CHICAGO, INC
As Original Borrower and Original Guarantor
By: Jonathan Klien
TONY STONE IMAGES/NEW YORK, INC
As Original Borrower and Original Guarantor
<PAGE> 107
By: Jonathan Klien
TONY STONE IMAGES/LOS ANGELES, INC
As Original Borrower and Original Guarantor
By: Jonathan Klien
GETTY COMMUNICATIONS LIMITED
As Original Borrower and Original Guarantor
By: Jonathan Klien
GETTY COMMUNICATIONS GROUP FINANCE LIMITED
As Original Borrower and Original Guarantor
By: Jonathan Klien
GETTY IMAGES LIMITED
As Original Borrower and Original Guarantor
By: Jonathan Klien
ORIGINAL GUARANTOR
3032097 NOVA SCOTIA LIMITED
As Original Guarantor
By: Jonathan Klien
ARRANGER
HSBC INVESTMENT BANK plc
<PAGE> 108
By: M.T. Nickell
ORIGINAL BANK
HSBC BANK plc
By: Graham Boyd
FACILITY AGENT
HSBC INVESTMENT BANK plc
By: M. T. Nickell
SECURITY AGENT
HSBC INVESTMENT BANK plc
By: M. T. Nickell
OVERDRAFT BANK
HSBC BANK plc
By: Graham Boyd
<PAGE> 109
CONFORMED COPY INCORPORATING ALL
AMENDMENTS AS AT 3RD DECEMBER, 1999
CREDIT AGREEMENT
DATED 25th October, 1999
Up to U.S.$100,000,000
REVOLVING CREDIT FACILITY
Between
GETTY IMAGES, INC.
and others as Borrowers
and/or Guarantors
HSBC INVESTMENT BANK plc
as Arranger
THE BANKS
HSBC INVESTMENT BANK plc
as Security Agent
HSBC INVESTMENT BANK plc
as Facility Agent
and
HSBC Bank plc
as Overdraft Bank
THIS IS DESIGNATED SENIOR INDEBTEDNESS FOR THE PURPOSES
OF THE 4.75% CONVERTIBLE SUBORDINATED NOTES DUE
2003 ISSUED BY GETTY IMAGES INC.
ALLEN & OVERY
London
BK:701106.1
<PAGE> 110
INDEX
<TABLE>
<CAPTION>
CLAUSE PAGE
<C> <C>
1. Interpretation.......................................................................................1
2. The Facilities......................................................................................19
3. Purpose.............................................................................................22
4. Conditions Precedent................................................................................22
5. Drawdown............................................................................................23
6. Repayment...........................................................................................24
7. Prepayment and Cancellation.........................................................................24
8. Interest............................................................................................26
9. Optional Currencies.................................................................................28
10. Payments............................................................................................28
11. Taxes...............................................................................................30
12. Market Disruption...................................................................................33
13. Increased Costs.....................................................................................34
14. Illegality..........................................................................................36
15. Mitigation..........................................................................................36
16. Guarantee...........................................................................................37
17. Additional Borrowers, Guarantors and Security.......................................................40
18. Representations and Warranties......................................................................43
19. Undertakings........................................................................................50
20. Financial Covenants.................................................................................63
21. Default.............................................................................................65
22. The Agents and The Arranger.........................................................................71
23. Fees................................................................................................76
24. Expenses............................................................................................78
25. Indemnities.........................................................................................78
26. Evidence and Calculations...........................................................................79
27. Amendments and Waivers..............................................................................79
28. Changes to the Parties..............................................................................81
29. Disclosure of Information...........................................................................83
30. Set-Off.............................................................................................84
31. Pro-Rata Sharing....................................................................................85
32. Severability........................................................................................86
33. Counterparts........................................................................................86
34. Notices.............................................................................................86
35. Jurisdiction........................................................................................87
36. Governing Law.......................................................................................88
37. Senior Indebtedness/Designated Senior Indebtedness..................................................88
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
SCHEDULES PAGE
<C> <C>
1. Various Parties.....................................................................................89
Part I - Original Borrower..........................................................................89
Part II - Original Guarantors.......................................................................90
2. Banks and Commitments...............................................................................91
3. Part I - Conditions Precedent Documents to Signing..................................................92
Part 1A - Further Conditions Precedent..............................................................94
Part II - Conditions Precedent Documents on Borrower or Guarantor Accession.........................95
4. Form of Request.....................................................................................96
5. Forms of Accession Documents........................................................................97
Part I - Novation Certificate.......................................................................97
Part II - Borrower Accession Agreement..............................................................99
Part III - Guarantor Accession Agreement...........................................................100
6. Security Documents.................................................................................101
7. Calculation of the Mandatory Cost..................................................................102
8. Material Subsidiaries..............................................................................104
9. Repayment of Existing Revolving Credit Facility....................................................105
SIGNATORIES.................................................................................................106
</TABLE>
<PAGE> 1
Exhibit 10.9
CONFORMED COPY
To: Getty Images, Inc.
in its capacity as Obligors' Agent
3rd December, 1999
Dear Sirs,
UP TO US$100,000,000 REVOLVING CREDIT FACILITY AGREEMENT DATED 25TH OCTOBER,
1999
This letter is supplemental to and amends a credit agreement dated 25th October,
1999 and made between the Parent, the Original Borrowers, the Original
Guarantors, the Arranger, the Banks, the Facility Agent, the Security Agent and
the Overdraft Bank (the "CREDIT AGREEMENT") pursuant to the terms of which the
Banks have agreed to make Advances to the Borrowers up to an aggregate maximum
principal amount of US$100,000,000 on the terms set out therein.
We agree that the Credit Agreement shall be amended in accordance with the
provisions set out below.
Terms defined in the Credit Agreement shall bear the same meaning when used in
this letter unless otherwise defined herein or the context requires otherwise.
1. AMENDMENTS
With effect from the Effective Date, the Credit Agreement shall be
amended as follows:
(a) for the avoidance of doubt, the parties listed on page 1 of
the Credit Agreement shall be amended to include "HSBC Bank
plc as overdraft bank (the "OVERDRAFT BANK")" at paragraph 8
and the definition of "Overdraft Bank" in Clause 1.1
(Definitions) shall be deleted.
(b) the following definition shall be included in Clause 1.1
(Definitions) as follows:
""EXISTING OVERDRAFT FACILITY AGREEMENT" means the facility
letter dated 7th January, 1999 pursuant to which the Existing
Overdraft Facility was made available to, inter alios, Getty
U.K.."
(c) the definitions of "Finance Party" and "Finance Documents" in
Clause 1.1 (Definitions) shall be amended to read as follows:
""FINANCE PARTY" means the Arranger, each Bank, the Facility
Agent and the Security Agent (together the "FINANCE PARTIES")
which term, for the purposes of
<PAGE> 2
Clauses 16 (Guarantee), 22 (The Agents and The Arranger) and
24.2 (Enforcement Costs) shall also include the Overdraft Bank
and any Hedging Bank."
""FINANCE DOCUMENTS" means this Agreement, the Fee Letter, the
Novation Certificates, the Borrower Accession Agreements, the
Guarantor Accession Agreements, the Security Documents and any
other document designated as such by the Facility Agent, which
term for the purposes of the definition of "Security
Documents" (including all references to Finance Documents
wheresoever used in the Security Documents) and Clauses
1.2(iv) Constructions, 1.2(b) (Construction), 16 (Guarantee),
18.1(x) (Senior Indebtedness/Designated Senior Indebtedness),
19.12 (Third Party Guarantees), 19.20(c) (Environmental
matters), 19.25 (Compliance with laws), 19.31 (UCC filings),
22 (the Agent and the Arranger) and 37 (Senior
Indebtedness/Designated Senior Indebtedness) shall also
include the Existing Overdraft Facility Agreement and any
Hedging Document. For the avoidance of doubt, the Facility
Agent will not designate the Existing Overdraft Facility
Agreement or any Hedging Document a "Finance Document" in any
other context than as provided herein without the consent of
the Obligors' Agent."
(d) the definitions of "DISCLOSURE LETTER" and "REPORTS" in Clause
1.1 (Definitions) shall be deemed deleted in their entirety
and all consequential amendments shall be deemed made.
(e) two additional definitions shall be included in Clause 1.1
(Definitions) and shall read as follows:
""HEDGING BANK" means any Bank in its capacity as the provider
of hedging facilities for the hedging of exposures arising
pursuant to the terms of this Agreement."
""HEDGING DOCUMENTS" means all currency swap, interest rate
swap and/or interest cap and/or other hedging agreements
entered into or to be entered into by any Obligor with a
Hedging Bank for the hedging of exposures arising pursuant to
the terms of this Agreement in each case as, and including,
any instrument pursuant to which the same are novated, varied,
supplemented or amended from time to time."
(f) Clause 1.2 (b) (Construction) shall be amended to read as
follows:
"(b) Unless the contrary intention appears, a term used in
any other Finance Document or in any notice given
under or in connection with any Finance Document has
the same meaning in that Finance Document or notice
as in this Agreement."
(g) Clause 2.7 (Tranche B Commitment) shall be amended to read as
follows:
"2.7 TRANCHE A COMMITMENT
(a) The Tranche A Commitment of HSBC Bank plc in its
capacity as a Bank as at the Signing Date will be
US$50,000,000 (unless it agrees in writing with the
Parent to increase its Tranche A Commitment up to a
specified amount).
<PAGE> 3
(b) If and to the extent other banks or financial
institutions (each a "NEW BANK") are willing to
commit to participate in Tranche A following
syndication efforts by the Arranger then, upon any
Novation Certificate signed by a New Bank taking
effect in relation to Tranche A, the New Bank will be
treated as having taken a transfer from HSBC Bank plc
of the Tranche A Commitment specified in that
Novation Certificate as though HSBC Bank plc had
increased its Tranche A Commitment by the amount such
New Bank is willing to so commit immediately prior to
the Novation Certificate taking effect.
(c) Commitment fee in respect of such undrawn part of the
Tranche A Commitment increased pursuant to this
Clause 2.7 will accrue under Clause 23.2 (Commitment
Fee) in relation to:
(i) the Tranche A Commitment of any New Bank,
with effect on and after the effective date
of the relevant Novation Certificate; and
(ii) any increased Tranche A Commitment which
HSBC Bank plc agrees to as contemplated in
paragraph (a) above, with effect on and
after the date it agrees in writing to
accept that increased Tranche A Commitment.
(d) Nothing in this Clause 2.7 will oblige HSBC Bank plc
in its capacity as a Bank to make any Advance under
Tranche A which would result in the principal amount
outstanding under Tranche A being in excess of
US$50,000,000 at any time (except to the extent it
has agreed in writing to accept a Tranche A
Commitment in excess of such amount)."
(h) All references to Tranche B in the Credit Agreement
shall be deemed deleted in their entirety so that:
(i) references to "Tranche B" in the definitions of
"Advance", "Commitment", "Facility", "Rollover
Advance" and "Total Commitments" in Clause 1.1
(Definitions) shall be deemed deleted; and
(ii) the definitions of "Tranche B", "Tranche B
Commitment" in Clause 1.1 (Definitions) and Clauses
2.1(b) (Facilities), 3(b) (Purpose), 4.2 (Conditions
precedent to Advances under Tranche B), 5.2(c)
(Completion of Requests), 19.32(c) (Obligor cover),
Column II of Schedule 2 (Tranche B Commitment), Part
II of Schedule 3 and paragraph 1(e) of Schedule 4
shall be deemed deleted in their entirety,
and all subsequent clauses and sub-clauses deemed renumbered
and cross referencing deemed amended accordingly.
(i) Clauses 4.1 (Conditions precedent to drawdown) will be amended
to read as follows:
"4.1 CONDITIONS PRECEDENT TO DRAWDOWN
(a) Subject to the provisions of paragraph (b) below, the
obligations of each Finance Party to the Obligors
under this Agreement are subject to the
<PAGE> 4
conditions precedent that the Facility Agent shall
have received all of the documents set out in Part I
of Schedule 3 in form and substance satisfactory to
the Facility Agent (acting reasonably) and the
representations and warranties in Clause 18
(Representations and Warranties) are correct as at
the Signing Date.
(b) The Finance Parties shall not be obliged to
participate in any Tranche A Advance which would
result in the principal amount outstanding under
Tranche A being in excess of US$50,000,000 until the
date upon which the Facility Agent has (i) received
all of the documents set out in Part IA of Schedule 3
in form and substance satisfactory to the Facility
Agent (acting reasonably) and (ii) the Tranche A
Commitments have been increased pursuant to the terms
of Clause 2.7 (Tranche A Commitments)."
(j) the definition of "Consolidated Total Borrowings" in Clause
20.1 (Financial Definitions) shall be amended so that it reads
as follows:
""CONSOLIDATED TOTAL BORROWINGS" means at any time the
aggregate at that time of the Borrowings of the members of the
Group from sources external to the Group (less any cash
balances held by any member of the Group that are freely
convertible and transferable free of any encumbrances other
than Permitted Encumbrances in respect of Borrowings) all as
determined (subject only as may be required in order to
reflect the express inclusion or exclusion of items as
specified herein and/or in the definition of Borrowings in
Clause 1.1 (Definitions) in accordance with the Applicable
Accounting Principles and, where the calculation is being made
as at the end of any Accounting Period for which a Balance
Sheet of the Group has been or is required to be delivered to
the Facility Agent hereunder, determined from that Balance
Sheet."
(k) for the purposes of Clause 17.3(a)(ii) (Security) only, the
term "Banks" shall be deemed deleted and replaced with
"Security Agent" and in respect of Clause 22.7(a) (Default)
and 22.11(c)(i) (Information) only the term "Bank" or "Banks"
shall be deemed deleted and replaced with "Finance Party" or
"Finance Parties" as appropriate.
(l) Schedule 3 Part 1A entitled "Further Conditions Precedent"
shall be inserted to read as follows:
"PART 1A
FURTHER CONDITIONS PRECEDENT
1. A certified copy of the constitutional documents, including the by-laws
and certificate and articles of incorporation of The Image Bank Inc.
2. A certified copy of a resolution of the board of directors of the
Parent approving the terms of and the transactions contemplated by the
Acquisition Agreements to which it is a party.
3. A certified copy of a resolution of the board of directors of The Image
Bank, Inc approving the terms of and the transactions contemplated by
the Finance Documents to which it is a party and resolving that it
execute each such Finance Document and authorising a named person or
persons do so on its behalf.
<PAGE> 5
4. A certificate signed by an authorised signatory of the Parent on its
behalf to the effect that:
(i) the Acquisition was completed on or about 22nd November,
1999;
(ii) completion of the Acquisition has not, in the opinion of the
executive directors of the Parent, materially and adversely
impacted on the ability of the enlarged Group to comply with
the financial covenants set out in Clause 20 (Financial
Covenants) until the Final Maturity Date; and
(iii) all regulatory approvals and authorisations necessary or
desirable in connection with the TIB Acquisition have been
obtained.
5. A certified copy of the following duly executed documents:
(a) the Acquisition Agreements and the press announcement in
connection with the TIB Acquisition; and
(b) the Prospectus.
6. Satisfactory results of all company searches and land priority/charge
searches relating to the Acquired Assets.
7. A certified copy of the Base Financial Statements.
8. A Guarantor Accession Agreement duly executed by The Image Bank, Inc.
9. At least two originals of each of the Security Documents duly executed
by The Image Bank, Inc. and each other party thereto, together with
such legal opinions as the Facility Agent may reasonably require, stock
powers executed in blank and title documents (if any) relating to
assets charged by the Security Documents which are contemplated to be
delivered to the Security Agent and copies of all notices required to
be despatched pursuant to the Security Documents."
2. EFFECTIVE DATE
The effective date for this letter shall be the date on which the
Facility Agent receives a copy of this letter duly countersigned by all
parties hereto (the "EFFECTIVE DATE").
3. REPRESENTATIONS AND WARRANTIES
The Obligors' Agent, on behalf of each Obligor, represents on the date
hereof to each Finance Party in the same terms set out in Clause 18
(Representations and Warranties) of the Credit Agreement (with the
exception of those representations and warranties referred to in Clause
18.2) and to any Hedging Bank and the Overdraft Bank in the same terms
as set out in Clause 18.1(a), (b), (c), (d), (f), (q) and (x) with
reference to the facts and circumstances now existing. Any reference to
Finance Documents in that Clause shall be construed so as to include
this letter and the Credit Agreement as amended by this letter.
<PAGE> 6
4. INTERPRETATION
Save as amended by this letter, each of the Finance Documents shall
remain in full force and effect. References in the Credit Agreement to
"this Agreement", "hereof", "hereunder" and expressions of similar
import shall be deemed to be references to the Credit Agreement as
amended by this letter. Reference in any Finance Document to the Credit
Agreement shall be construed as references to the Credit Agreement as
amended by this letter.
5. COUNTERPARTS
This letter may be executed in counterparts each of which, when taken
together, shall constitute one and the same agreement.
6. EXPENSES
The Obligors' Agent shall on demand (without double counting under
Clause 24.1(a) (Initial and special costs)) pay to the Facility Agent,
for the account of the relevant Finance Party, the amount of all
reasonable costs and expenses (together with value added tax or any
similar tax thereon) and including, without limitation, the fees and
expenses of the Facility Agent's legal advisers incurred in connection
with the negotiation, preparation, printing and execution of this
letter.
7. FINANCE DOCUMENT
This letter is designated by each party as a Finance Document.
8. MISCELLANEOUS
The provisions of Clauses 32 (Severability), 34 (Notices) and 35
(Jurisdiction) of the Credit Agreement shall be deemed to be
incorporated into this letter as if expressly set out herein (mutatis
mutandis).
9. LAW
This letter shall be governed by and shall be construed in accordance
with English law.
<PAGE> 7
Yours faithfully,
- ----------------------
For and on behalf of
HSBC INVESTMENT BANK plc
as Facility Agent
By: JOHN HAIRE
For and on behalf of
HSBC BANK plc
as Bank and Overdraft Bank
By: A.O. THOMAS
AGREED AND ACCEPTED BY:
SUZANNE PAGE
- ------------------------------
For and on behalf of
GETTY IMAGES, INC.
as Obligors' Agent
For itself and on behalf of the other Obligors set out below:
PhotoDisc, Inc
Art.com, Inc.
Eyewire, Inc.
Tony Stone Images/America, Inc.
Tony Stone Images/Chicago, Inc.
Tony Stone Images/New York, Inc.
Tony Stone Images/Los Angeles, Inc.
3032097 Nova Scotia Limited
Getty Communications Group Finance Limited
Getty Communications Limited
Getty Images Limited
<PAGE> 1
Exhibit 10.10
THIS DEBENTURE is dated 25th October, 1999 and is made BETWEEN:
(1) THE COMPANIES identified in Schedule 1 (together with the Company and
each company which becomes a party hereto by executing a Deed of
Accession, each a "CHARGOR" and together the "CHARGORS"); and
(2) HSBC INVESTMENT BANK plc of Thames Exchange, 10 Queen Street Place,
London EC4R 1BL (the "SECURITY AGENT") as agent and trustee for itself
and each of the Secured Lenders (as defined below).
WHEREAS:
(A) The Banks (as defined in the Credit Agreement referred to below) have
agreed to make available to the Borrowers (as defined in the Credit
Agreement) certain revolving credit facilities (the "FACILITIES") on
and subject to the terms of the Credit Agreement.
(B) It is a condition precedent to the Banks making the Facilities
available that the Chargors enter into this Debenture.
(C) It is intended by the parties hereto that this document shall take
effect as a deed notwithstanding the fact that a party may only execute
this document under hand.
NOW IT IS AGREED as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Debenture:
"ACCOUNT BANK" means each of the banks or financial institutions with
whom the Security Accounts are maintained from time to time pursuant to
Clause 11;
"COLLATERAL ACCOUNT" means each account maintained from time to time by
a Chargor at such branch of the Account Bank as the Security Agent may
from time to time approve being, at the date hereof, those accounts
with such Account Bank identified in a letter of even date herewith
from the Company for itself and as agent for the other Chargors to the
Security Agent and countersigned by the Security Agent for the purposes
of identification;
"CREDIT AGREEMENT" means the credit agreement of even date herewith
between the Original Borrower, the Original Guarantors, the Arranger,
the Facility Agent (each as defined therein) and the Security Agent,
together with each Accession Agreement and Novation Certificate
relating thereto and any and each other agreement or instrument
supplementing or amending it;
"DEED OF ACCESSION" means a deed substantially in the form of Schedule
7 hereto executed, or to be executed, by a Chargor;
"DISCHARGE DATE" means the date on which the Facility Agent confirms in
writing to the Security Agent that all the Secured Liabilities arising
pursuant to or in respect of any of the
<PAGE> 2
Finance Documents have been unconditionally and irrevocably paid and
discharged in full and all commitments cancelled and that it is
satisfied (acting reasonably) that no further Secured Liabilities in
respect of any of the Finance Documents are likely to arise in respect
thereof;
"EXCLUDED INTELLECTUAL PROPERTY" means any trade names, trade marks and
service marks (whether registered or not and including all applications
for the same) which include the name or mark "GETTY", "GETTY
COMMUNICATIONS" or "GETTY IMAGES", or a design consisting of the letter
"G" in a circle and including any future trade names, trade marks and
service marks incorporating "GETTY" or the aforementioned design or
device;
"FACILITY AGENT" means HSBC Investment Bank plc in its capacity as
facility agent under the Credit Agreement and its permitted successors
and assigns;
"FIXTURES" means, in relation to any freehold or leasehold property
charged by or pursuant to this security, all fixtures and fittings
(including trade fixtures and fittings) and fixed plant and machinery
from time to time thereon owned by any Chargor;
"GROUP SHARES" means all shares specified in Schedule 4 or in the
Schedule to any Deed of Accession, or, when used in relation to a
particular Chargor, such of those shares as are specified against its
name in Schedule 4 or as are specified in the Schedule to a Deed of
Accession to which it is party, together in each case with (to the
extent allowed by applicable law) all other stocks, shares, debentures,
bonds, warrants, coupons or other securities and investments now or in
the future owned by any or (when used in relation to a particular
Chargor) that Chargor from time to time;
"HEDGING BANK" means any Bank in its capacity as the provider of
hedging facilities in accordance with the terms of the Credit
Agreement;
"HEDGING DOCUMENTS" means all currency swap, interest rate swap and/or
interest cap and/or other hedging agreements entered into or to be
entered into by any Obligor with the Hedging Bank in accordance with
the terms of the Credit Agreement in each case as, and including, any
instrument pursuant to which the same are novated, varied, supplemented
or amended from time to time;
"INSURANCES" means all contracts and policies of insurance (including,
for the avoidance of doubt all cover notes) of whatever nature which
are from time to time taken out by or on behalf of any Chargor or (to
the extent of such interest) in which any Chargor has an interest;
"INTELLECTUAL PROPERTY RIGHTS" means all know-how, patents, trade
marks, service marks, designs, business names, topographical or similar
rights, copyrights and other intellectual property rights and any
interests (including by way of licence) in any of the foregoing (in
each case whether registered or not and including all applications for
the same) but excluding any Excluded Intellectual Property;
"INTRA-GROUP LOAN DOCUMENTS" means all inter-company funding agreements
between any two or more members of the Group (including without
prejudice to the generality of the foregoing, all documentation
relating to facilities to be made available to any French Subsidiary of
the Parent) and any and each other agreement or instrument
supplementing or amending any of such documents;
<PAGE> 3
"MORTGAGED PROPERTY" means the property (other than the Security
Shares) hereby legally mortgaged and any other freehold or leasehold
property the subject of this security;
"ORIGINAL PROPERTIES" means each of the freehold and leasehold
properties individually identified in Schedule 2;
"PLANNING ACTS" means the Town and Country Planning Act 1990, the
Planning (Listed Building and Conservation Areas) Act 1990, the
Planning (Hazardous Substances) Act 1990, the Planning (Consequential
Provisions) Act 1990, the Planning and Compensation Act 1991, the Town
& Country Planning (Scotland) Act 1972 to 1977, the Local Government
and Planning (Scotland) Act 1972 and any Act or Acts for the time being
in force amending or re-enacting the same and any orders, regulations
or permissions made, issued or granted under or by virtue of such Acts
or any of them;
"PREMISES" means all buildings and erections for the time being
comprised within the definition of "Security Assets";
"REALISATIONS ACCOUNT" means each account maintained from time to time
by or in the name of the Chargors or any of them for the purposes of
Clause 13.2 at such branch or branches of an Account Bank as the
Security Agent may from time to time approve;
"RECEIVER" means a receiver and manager or (if the Security Agent so
specifies in the relevant appointment) a receiver;
"RELATED RIGHTS" means, in relation to the Group Shares, all dividends
and other distributions paid or payable after the date hereof on all or
any of the Group Shares and all stocks, shares, securities (and the
dividends or interest thereon), rights, money or property accruing or
offered at any time by way of redemption, bonus, preference, option
rights or otherwise to or in respect of any of the Group Shares or in
substitution or exchange for any of the Group Shares;
"RELEVANT AGREEMENTS" means each agreement or instrument assigned or
purported to be assigned pursuant to Clause 4.3 and/or any Deed of
Accession together with any and each other agreement or instrument
supplementing or amending any such agreement or contract;
"SECURED LENDER" means each of the Facility Agent, the Security Agent,
the Arranger, the Banks, any Hedging Bank and the Overdraft Bank
parties to or having an interest under the Finance Documents from time
to time (together the "SECURED LENDERS");
"SECURED LIABILITIES" means all present and future obligations and
liabilities (whether actual or contingent and whether owed jointly or
severally or in any other capacity whatsoever) of each Obligor to the
Secured Lenders (or any of them) under each or any of the Finance
Documents, in each case together with all costs, charges and expenses
incurred by any Secured Lender in connection with the protection,
preservation or enforcement of its respective rights under the Finance
Documents or any other document evidencing or securing any such
liabilities.
"SECURITY ACCOUNTS" means the Collateral Accounts and the Realisations
Accounts;
<PAGE> 4
"SECURITY ASSETS" means all assets, rights and property of the Chargors
or any of them the subject of any security created hereby or pursuant
hereto including, for the avoidance of doubt each Chargor's rights to
or interests in any chose in action and the Security Shares and
excluding, again for the avoidance of doubt, the Excluded Intellectual
Property;
"SECURITY DOCUMENTS" means this Debenture, each Deed of Accession and
every other document entered into by the Company or any Subsidiary
thereof pursuant to this Debenture and/or Clause 19.3 of the Credit
Agreement and the Existing Overdraft Facility;
"SECURITY PERIOD" means the period beginning on the date hereof and
ending on the Discharge Date;
"SECURITY SHARES" means the Group Shares and the Related Rights and, in
the case of each Chargor, means such of the Group Shares as are held by
it at the relevant time, together with all Related Rights in respect
thereof; and
"SHARE MORTGAGES" means the mortgages and charges created or purported
to be created by Clause 4.2 hereof and/or by any Deed of Accession.
1.2 INTERPRETATION
(a) Save as expressly herein defined, capitalised terms defined in the
Credit Agreement shall have the same meaning when used herein. Terms
defined in the recitals to this Debenture have the same meaning when
used in the remainder of this Debenture.
(b) The provisions of Clause 1.2 of the Credit Agreement shall also apply
hereto as if expressly set out herein (mutatis mutandis) with each
reference to the Credit Agreement being deemed to be a reference to
this Debenture.
(c) The terms of the other Finance Documents and of any side letters
between the parties hereto in relation to the Finance Documents are
incorporated herein to the extent required for any purported
disposition of the Mortgaged Property contained herein to be a valid
disposition in accordance with Section 2(1) of the Law of Property
(Miscellaneous Provisions) Act 1989.
(d) If the Security Agent (on the basis of legal advice received by it for
this purpose) considers that an amount paid by any Obligor to any
Secured Lender under any Finance Document is likely to be capable of
being avoided or otherwise set aside on the liquidation or
administration of such Obligor or otherwise, then such amount shall not
be considered to have been irrevocably paid for the purposes of this
Debenture.
1.3 CERTIFICATES
A certificate of the Security Agent setting forth the amount of any
Secured Liability due from any Obligor shall be prima facie evidence of
such amount against the Chargors and such Obligor in the absence of
manifest error.
<PAGE> 5
2. COVENANT TO PAY
2.1 COVENANT
Each Chargor hereby, as primary obligor and not merely as surety,
covenants with the Security Agent (as agent and trustee as aforesaid)
that it will pay or discharge the Secured Liabilities on the due date
therefor in the manner provided in the relevant Finance Document. Any
amount not paid hereunder when due shall bear interest (as well after
as before judgment and payable on demand) at the Default Rate from time
to time from the due date until the date such amount is unconditionally
and irrevocably paid and discharged in full, save to the extent that
interest at such rate on such amount for such period is charged
pursuant to the relevant Finance Document or any other Security
Document.
2.2 RIGHT OF APPROPRIATION
Upon the occurrence of an Event of Default and at any time thereafter
while the same is continuing and not expressly waived by the Facility
Agent the Security Agent (acting on the instructions of the Majority
Banks save where the Security Agent reasonably considers that the delay
which would be entailed in obtaining such instructions would materially
prejudice the interests of the Secured Lender under the Finance
Documents) shall be entitled to appropriate moneys and/or assets to
Secured Liabilities in such manner or order as it sees fit (subject to
Clause 15) and any such appropriation shall override any appropriation
by any Obligor. This Clause 2.2 shall not, however, override the
principle that (subject to Clause 15) the Secured Lenders are to share
in recoveries on a pro rata basis.
3. COVENANT TO MAKE FACILITIES AVAILABLE
Each Secured Lender, by the Security Agent's execution of this
Debenture, hereby covenants with each Obligor to the intent that each
such covenant shall be binding on each Secured Lender severally in
accordance with Clause 2.3 of the Credit Agreement (or the equivalent
provision of any other Finance Document) (in each case as if the same
applied to this Clause 3, mutatis mutandis) that each Secured Lender
will, upon and subject to the terms of the Credit Agreement (or such
other Finance Document), make the Facilities (or such other facilities
as are provided for in such other Finance Document) available to the
Borrowers and the other borrowers (party to such Finance Document) on
and subject to the terms of such Finance Document (including, without
limitation but subject as aforesaid, advances and further advances or
other financial accommodation to the extent (if at all) that the making
thereof by such Secured Lender is provided for in such Finance
Document).
4. FIXED CHARGES; ASSIGNMENTS
4.1 FIXED CHARGES
Each Chargor as beneficial owner and with full title guarantee but
subject to any Encumbrances permitted pursuant to Clause 19.6 of the
Credit Agreement, as security for the payment, discharge and
performance of all the Secured Liabilities at any time owed or due to
the Secured Lenders (or any of them), charges in favour of the Security
Agent (as agent and trustee for the Secured Lenders):
(a) by way of a first legal mortgage all the property (if any) now
belonging to it and specified in Schedule 2 and/or in the
Schedule to the Deed of Accession by which it
<PAGE> 6
became party hereto (where relevant), together with all
buildings and Fixtures thereon, the proceeds of sale of all or
any part thereof and the benefit of any covenants for title
given or entered into by any predecessor in title and any
moneys paid or payable in respect of such covenants subject,
in the case of any leasehold properties, to any necessary
third party's consent to such mortgage being obtained;
(b) by way of first legal mortgage all estates or interests in any
freehold or leasehold property and any rights under any
licence or other agreement or document which gives any Chargor
a right to occupy or use property, (except any Security Assets
specified in paragraph (a) above) wheresoever situate now
belonging to it together with all buildings and Fixtures
thereon, the proceeds of sale of all or any part thereof and
the benefit of any covenants for title given or entered into
by any predecessor in title and any moneys paid or payable in
respect of such covenants subject, in the case of any
leasehold properties, to any necessary third party's consent
to such mortgage being obtained. For the avoidance of doubt on
such consent being obtained such leasehold property shall
automatically become subject to this charge and the relevant
Chargor shall promptly enter into a supplemental legal
mortgage in favour of the Security Agent, provide evidence as
to the power and authority to enter into such supplemental
legal mortgage and that it constitutes legally binding and
enforceable obligations of the relevant Chargor in each case
in such form as the Security Agent may reasonably require;
(c) by way of first fixed charge:
(i) (to the extent that the same are not the subject of a
mortgage under paragraphs (a) and/or (b) above) all
present and future estates or interests in any
freehold or leasehold property and any rights under
any licence or other agreement or document which
gives any Chargor a right to occupy or use property,
wheresoever situate now or hereafter belonging to it
together with all buildings and Fixtures thereon, the
proceeds of sale of all or any part thereof and the
benefit of any covenants for title given or entered
into by any predecessor in title and any moneys paid
or payable in respect of such covenants, subject, in
the case of any leasehold properties, to any
necessary third party's consent to such charge being
obtained;
(ii) all plant and machinery (to the extent not mortgaged
under paragraph (a) above), computers and vehicles
now or in the future owned by it and its interest in
any plant, machinery, computers or vehicles in its
possession other than any for the time being part of
such Chargor's stock in trade or work in progress;
(iii) all moneys (including interest) from time to time
standing to the credit of each of its present and
future accounts (including, without limitation, the
Security Accounts) with any bank, financial
institution or other person and the debts represented
thereby, provided that without prejudice to any other
provision of this Clause 4 any such monies paid out
of such accounts without breaching the terms of the
Finance Documents and not paid into another such
account in the name of a Chargor shall be released
from the fixed charge effected by this sub-paragraph
(iii) upon the proceeds being so paid out;
<PAGE> 7
(iv) (to the extent not effectively assigned under Clause
4.3) all benefits in respect of the Insurances and
all claims and returns of premiums in respect
thereof;
(v) all of its present and future book and other debts,
all other moneys due and owing to it or which may
become due and owing to it at any time in the future
and the benefit of all rights, securities and
guarantees of any nature whatsoever now or at any
time enjoyed or held by it in relation to any of the
foregoing including in each case the proceeds of the
same, provided that without prejudice to any other
provision of this Clause 4 (and in particular but
without limitation to sub-paragraph (iii) above) such
proceeds shall be released automatically from the
fixed charge effected by this sub-paragraph (v) upon
those proceeds being credited to any Security
Account;
(vi) (to the extent that the same do not fall within any
other sub-paragraph of this paragraph (c) and are not
effectively assigned under Clause 4.3) all of its
rights and benefits under each of the Relevant
Agreements, all bills of exchange and other
negotiable instruments held by it, and (subject to
any necessary third party's consent to such charge
being obtained) any distributorship or agreement for
the licensing of Intellectual Property Rights or
similar agreements entered into by it and any letters
of credit issued in its favour;
(vii) any beneficial interest, claim or entitlement of it
to any assets of any pension fund;
(viii) its present and future goodwill;
(ix) the benefit of all present and future licences,
permissions, consents and authorisations (statutory
or otherwise) held in connection with its business or
the use of any of the Security Assets specified in
paragraphs (a) and (b) and sub-paragraph (i) above
and the right to recover and receive all compensation
which may at any time become payable to it in respect
thereof;
(x) its present and future uncalled capital; and
(xi) all its present and future Intellectual Property
Rights (including, without limitation, those patents
and trade marks and designs, if any, specified in
Schedule 5 and/or the Schedule to the Deed of
Accession by which it became party hereto (where
relevant)) owned by it, subject to any necessary (as
at the date of this Debenture) third party's consent
to such charge being obtained. To the extent that any
such Intellectual Property Rights are not capable of
being charged (whether by reason of lack of any such
consent as aforesaid or otherwise) the charge thereof
purported to be effected by this Clause 4.1(c)(xi)
shall operate as an assignment of any and all
damages, compensation, remuneration, profit, rent or
income which any Chargor may derive therefrom or be
awarded or entitled to in respect thereof, as
continuing security for the payment, discharge and
performance of the Secured Liabilities.
<PAGE> 8
Provided that any property or assets situate in Scotland and
any property or assets the rights in and to which are governed
by the laws of Scotland shall be excluded from the mortgages
and charges created or effected by paragraphs (a) to (c)
inclusive above and provided further that the Excluded
Intellectual Property which are presently or may in the future
be owned or used by any of the Chargors shall be excluded from
the mortgages and charges created or effected by paragraphs
(a) to (c) inclusive above.
4.2 CHARGES ON SHARES
Each Chargor, as beneficial owner and with full title guarantee, hereby
as continuing security for the payment, discharge and performance of
all the Secured Liabilities at any time owed or due to the Secured
Lenders (or any of them):
(a) mortgages and charges and agrees to mortgage and charge to the
Security Agent (as agent and trustee for the Secured Lenders)
all Group Shares held now or in the future by it and/or any
nominee on its behalf, the same to be a security by way of a
first mortgage; and
(b) mortgages and charges and agrees to mortgage and charge to the
Security Agent (as agent and trustee for the Secured Lenders)
all the Related Rights accruing to all or any of the Group
Shares held now or in the future by it and/or any nominee on
its behalf, the same to be a security by way of a first
mortgage or charge.
PROVIDED THAT:
(i) whilst no Event of Default exists, all dividends and
other distributions paid or payable as referred to in
paragraph (b) above may be paid directly to the
relevant Chargor (in which case the Security Agent or
its nominee shall execute any necessary dividend
mandate) and, if paid directly to the Security Agent,
shall be paid promptly by it to the relevant Chargor;
and
(ii) subject to Clause 10.2, whilst no Event of Default
exists (including any Event of Default expressly
waived by the Facility Agent), all voting rights
attaching to the relevant Group Shares may be
exercised by the relevant Chargor or, where the
shares have been registered in the name of the
Security Agent or its nominee, as the relevant
Chargor may direct in writing, and the Security Agent
and any nominee of the Security Agent in whose name
such Group Shares are registered shall execute any
form of proxy or other document reasonably required
in order for the relevant Chargor to do so.
4.3 ASSIGNMENTS
(a) Each Chargor as beneficial owner and with full title guarantee but
subject to any Encumbrance permitted pursuant to the Credit Agreement,
as continuing security for the payment, discharge and performance of
all the Secured Liabilities at any time owed or due to the Secured
Lenders (or any of them), hereby assigns and agrees to assign to the
Security Agent (as agent and trustee for the Secured Lenders) all its
right, title and interest (if any) in and to:
<PAGE> 9
(i) the Insurances;
(ii) the Acquisition Agreements;
(iii) the Hedging Documents; and
(iv) the Intra-Group Loan Documents.
(b) Each Chargor shall forthwith give notice of each such assignment of its
right, title and interest (if any):
(i) in and to the Insurances, by sending a notice in the form of
Part I of Schedule 3 (with such amendments as the Security
Agent may agree) duly completed to each of the other parties
to the Insurances; and
(ii) in and to the other Relevant Agreements, by sending a notice
substantially in the form of Part III of Schedule 3 (with such
amendments as the parties may agree) to each of the other
parties thereto,
and the Company and each Chargor shall use its reasonable endeavours to
procure that within 14 days of the date hereof each such other party
delivers a letter of undertaking to the Security Agent in the form of
Part II of Schedule 3 (in the case of the Insurances) or in the form of
Part IV of Schedule 3 (in the case of each of the other Relevant
Agreements), in each case with such amendments as the Security Agent
may agree.
This Debenture constitutes notice in writing to each Chargor of any
charge or assignment of a debt owed by that Chargor to any other member
of the Group contained in this Debenture.
(c) To the extent that any such right, title and interest described in
paragraphs (a) and (b) of this Clause 4.3 is not assignable or capable
of assignment, the assignment thereof purported to be effected by
paragraph (a) shall operate as:
(i) in the case of the Insurances, an assignment of any and all
proceeds of the Insurances received by each Chargor; and
(ii) in the case of the other Relevant Agreements, an assignment of
any and all damages, compensation, remuneration, profit, rent
or income which any Chargor may derive therefrom or be awarded
or entitled to in respect thereof,
in each case as continuing security for the payment, discharge and
performance of all the Secured Liabilities at any time owed or due to
the Secured Lenders (or any of them).
(d) Whilst no Event of Default exists (i) the Security Agent shall permit
the relevant Chargor to exercise its rights (other than to receive
payment of money) under any Relevant Agreement to which it is party,
provided that the exercise of these rights in the manner proposed would
not result in a Default under the terms of the Finance Documents and
(ii) any payments received by the Security Agent under or in respect of
the Relevant Agreements by virtue of this Debenture shall be paid by
the Security Agent to the relevant Chargor save to the extent required
by the terms of the Credit Agreement to be applied against any of the
Secured Liabilities.
<PAGE> 10
4.4 MISCELLANEOUS
(a) The fact that no or incomplete details of properties are included or
inserted in Schedule 2 or in the Schedule to the Deed of Accession (if
any) by which any Chargor became party hereto shall not affect the
validity or enforceability of the charges created by this Debenture
(including, without limitation, the charges created by paragraphs (a),
(b) and (c)(i) of Clause 4.1 and the charge created by Clause 5.1).
(b) The omission from Schedule 5 or from the Schedule to the Deed of
Accession (if any) by which any Chargor became party hereto of details
of any Intellectual Property Rights owned or enjoyed by any Chargor
shall not affect the validity or enforceability of the security created
by this Debenture over such Intellectual Property Rights, provided, for
the avoidance of doubt, that (save as created by Clause 5) no security
is created by this Debenture over any Excluded Intellectual Property.
5. FLOATING CHARGES
5.1 CREATION OF FLOATING CHARGES
Each Chargor as beneficial owner and with full title guarantee subject
to any Encumbrance permitted under the Credit Agreement, as security
for the payment, discharge and performance of all the Secured
Liabilities, charges in favour of the Security Agent (as agent and
trustee for the Secured Lenders) by way of a first floating charge all
its undertaking and assets whatsoever and wheresoever both present and
future including, without limitation, any undertaking and assets
situated in Scotland (whether or not the same may be mortgaged or
charged by way of standard security)), subject always to all mortgages,
fixed charges and assignments created by or pursuant to Clause 4 or any
other provision of this Debenture.
5.2 RESTRICTIONS ON DEALING
Each Chargor undertakes to each Secured Lender that, save as expressly
permitted under the terms of this Debenture and the Credit Agreement,
it will not:
(a) create or permit to subsist any Encumbrance over all or any of
its assets, rights or property other than pursuant to this
Debenture or any other Security Document; or
(b) part with, lease, sell, transfer, assign or otherwise dispose
of or agree to part with, lease, sell, transfer, assign or
otherwise dispose of all or any part of its assets, rights or
property or any interest therein,
PROVIDED THAT if any Chargor gives notice to the Security Agent that
such Chargor is required to dispose of or release any Excluded
Intellectual Property Right, the Security Agent and each Secured Lender
shall forthwith, at the cost of the Chargors, execute and do all such
deeds, acts and things as may be necessary to release such Excluded
Intellectual Property Right from the security constituted hereby,
whether or not the security created hereby has become enforceable.
<PAGE> 11
5.3 CONVERSION OF FLOATING CHARGE
(a) The Security Agent may by notice to any Chargor convert the floating
charge hereby created into a specific charge as regards all or any of
such Chargor's assets, rights and property (except to the extent that
any such conversion is ineffective under Scots law in respect of any
such assets, rights and property situated in Scotland and except in
respect of the Excluded Intellectual Property) specified in the notice:
(i) if an Event of Default has occurred and is continuing and not
expressly waived by the Facility Agent; or
(ii) if the Security Agent in good faith considers such assets,
rights or property to be in reasonably forseeable danger of
being seized or sold under any form of distress, attachment,
execution or other legal process or to be otherwise in
jeopardy; or
(iii) if the Security Agent becomes aware or has reason to believe
that steps have been taken which would, in the reasonable
opinion of the Security Agent, be reasonably likely to lead to
the presentation of a petition to appoint an administrator in
relation to such Chargor (or such an administrator has been
appointed) or to wind up such Chargor or that any such
petition has been presented, which in the reasonable opinion
of the Security Agent is likely to result in the winding up of
such Chargor or the appointment of such an administrator; or
(iv) if such Chargor fails to comply, or takes or threatens to take
any action which in the reasonable opinion of the Security
Agent is likely to result in it failing to comply with its
obligations under Clause 5.2 of this Debenture.
(b) The floating charge hereby created shall (in addition to the
circumstances in which the same will occur under general law)
automatically be converted into a fixed charge over the assets, rights
and property of any Chargor (other than the Excluded Intellectual
Property) on the convening of any meeting of the members of such
Chargor to consider a resolution to wind such Chargor up (or not to
wind such Chargor up) provided that this Clause 5.3(b) shall not apply
to any Chargor's undertaking and assets situate in Scotland if, and to
the extent that, a Receiver would not be capable of exercising his
powers in Scotland pursuant to Section 72 of the Insolvency Act 1986 by
reason of such automatic conversion.
(c) The giving by the Security Agent of a notice pursuant to paragraph (a)
above in relation to any class of any Chargor's assets, rights and
property shall not be construed as a waiver or abandonment of the
Security Agent's rights to give other similar notices in respect of any
other class of assets or of any other of the rights of the Secured
Lenders (or any of them) hereunder or under any of the other Finance
Documents.
6. CONTINUING SECURITY, ETC.
6.1 CONTINUING SECURITY
The security constituted by this Debenture shall be continuing and will
extend to the ultimate balance of all sums payable by the Obligors
under the Finance Documents, regardless of any intermediate payment or
discharge in whole or in part.
<PAGE> 12
6.2 BREAKING OF ACCOUNTS
If for any reason the security constituted hereby ceases to be a
continuing security in respect of any Obligor (other than by way of
discharge of such security), the Secured Lenders (and each or any of
them) may open a new account with or continue any existing account with
such Obligor and the liability of each Chargor in respect of the
Secured Liabilities relating to such Obligor at the date of such
cessation shall remain regardless of any payments in or out of any such
account.
6.3 REINSTATEMENT
(a) Where any discharge (whether in respect of the obligations of any
Obligor or any security for those obligations or otherwise) is made in
whole or in part or any arrangement is made on the faith of any
payment, security or other disposition which is avoided or must be
restored on insolvency, liquidation or otherwise without limitation,
the liability of each Chargor under this Debenture shall continue as if
the discharge or arrangement had not occurred.
(b) The Security Agent (acting reasonably) may (having taken appropriate
legal advice) concede or compromise any claim that any payment,
security or other disposition is liable to avoidance or restoration.
6.4 WAIVER OF DEFENCES
(a) The liability of each Chargor hereunder will not be affected by any
act, omission, circumstance, matter or thing which but for this
provision would release or prejudice any of its obligations hereunder
or prejudice or diminish such obligations in whole or in part,
including without limitation and whether or not known to the Company,
any other Chargor, any Secured Lender or any other person whatsoever:
(i) any time, indulgence or waiver granted to, or composition
with, any Obligor or any other person; or
(ii) the taking, variation, compromise, exchange, renewal or
release of, or refusal or neglect to perfect or take up or
enforce any rights or remedies against, or any security over
assets of, any Obligor or any other person or any
non-presentment or non-observance of any formality or other
requirement in respect of any instruments or any failure to
realise the full value of any other security; or
(iii) any legal limitation, disability, incapacity or lack of
powers, authority or legal personality of or dissolution or
change in the members or status of or other circumstance
relating to, any Obligor or any other person; or
(iv) any variation (however fundamental and whether or not
involving any increase in the liability of any Obligor
thereunder) or replacement of a Finance Document or the
Acquisition Agreements or any other document or security so
that references to that Finance Document or the Acquisition
Agreements or other documents or security in this Debenture
shall include each such variation or replacement; or
(v) any unenforceability, illegality, invalidity or frustration of
any obligation of any Obligor or any other person under any
Finance Document or the Acquisition Agreements or any other
document or security, or any failure of any other Obligor or
<PAGE> 13
proposed Obligor to become bound by the terms of any Finance
Document or the Acquisition Agreements, in each case whether
through any want of power or authority or otherwise; or
(vi) any postponement, discharge, reduction, non-provability or
other similar circumstance affecting any obligation of any
Obligor under a Finance Document or the Acquisition Agreements
resulting from any insolvency, liquidation or dissolution
proceedings or from any law, regulation or order,
to the intent that each Chargor's obligations under this Debenture
shall remain in full force, and this Debenture be construed
accordingly, as if there were no such circumstance, act, variation,
limitation, omission, unenforceability, illegality, matter or thing.
No Secured Lender shall be concerned to see or investigate the powers
or authorities of any of the Chargors or their respective officers or
agents, and moneys obtained or Secured Liabilities incurred in
purported exercise of such powers or authorities or by any person
purporting to be an Obligor shall be deemed to form a part of the
Secured Liabilities, and "Secured Liabilities" shall be construed
accordingly.
(b) For the avoidance of doubt, each Chargor shall be bound by this
Debenture notwithstanding the fact that not all of the other members of
the Group may have executed this Debenture and/or any of the other
Security Documents required by the terms of the Finance Documents to be
entered into by it or that any such document which has been entered
into may be invalid, unenforceable or otherwise ineffective.
6.5 IMMEDIATE RECOURSE
Each Chargor waives any right it may have of first requiring any
Secured Lender to proceed against or enforce any other rights or
security before enforcing the security constituted hereby.
6.6 APPROPRIATIONS
Until all the Secured Liabilities have been unconditionally and
irrevocably paid and discharged in full, each Secured Lender may:
(a) refrain from applying or enforcing any other moneys, security
or rights held or received by it in respect of the Secured
Liabilities or apply and enforce the same in such manner and
order as it sees fit (whether against the Secured Liabilities
or otherwise) and no Chargor shall be entitled to the benefit
of the same; and
(b) hold in a suspense account any moneys received from any
Obligor or on account of any Obligor's liability in respect of
the Secured Liabilities. Amounts standing to the credit of any
such suspense account shall bear interest at a rate considered
by such Secured Lender (acting reasonably) to be a fair market
rate.
6.7 NON-COMPETITION
Until all the Secured Liabilities have been unconditionally and
irrevocably paid and discharged in full no Chargor shall by virtue of
any payment made, security realised or
<PAGE> 14
moneys received or recovered under any of the Finance Documents for or
on account of the liability of any other Obligor(s):
(a) be subrogated to any rights, security or moneys held, received
or receivable by any Secured Lender or be entitled to any
right of contribution or indemnity; or
(b) claim, rank, prove or vote as a creditor of any Obligor or its
estate in competition with any Secured Lender; or
(c) unless the Security Agent directs it to do so after an Event
of Default has occurred and is continuing, receive, claim or
have the benefit of any payment, distribution or security from
or on account of any Obligor, or exercise any right of set-off
as against any Obligor.
Each Chargor will hold in trust for and forthwith pay or transfer to
the Security Agent (acting as agent and trustee as aforesaid) any
payment or distribution or benefit of security received by it contrary
to the above. If any Chargor exercises any right of set-off contrary to
the above, it will forthwith pay an amount equal to the amount set off
to the Security Agent (acting as agent and trustee as aforesaid).
6.8 ADDITIONAL SECURITY
This Debenture is in addition to and is not in any way prejudiced by
any other security now or hereafter held by any Secured Lender.
6.9 SECURITY HELD BY CHARGOR
No Chargor will without the prior written consent of the Security Agent
hold any security from any other Obligor in respect of such Chargor's
liability hereunder. Each Chargor will hold any security held by it in
breach of this provision on trust for the Security Agent (as agent and
trustee as aforesaid).
7. REPRESENTATIONS AND WARRANTIES
7.1 TO WHOM MADE
Each Chargor makes the representations and warranties set out in the
balance of this Clause 7 to each Secured Lender.
7.2 MATTERS REPRESENTED
(a) THE MORTGAGED PROPERTY
(i) the Chargor named as owner in respect of each property in
Schedule 2 or in the Schedule to the Deed of Accession (if
any) by which it became party hereto is the legal and
beneficial owner of such property;
(ii) there subsists no material breach of any Planning Acts,
bye-laws or local authority or statutory requirements or
covenant which affects or is reasonably likely materially and
adversely to affect the value, saleability or use of the
Mortgaged Property;
<PAGE> 15
(iii) all covenants (whether affecting the freehold or leasehold
titles to the Mortgaged Property) have been properly performed
and observed and no Chargor has received notice of any
outstanding breach of covenant as regards the Mortgaged
Property which is reasonably likely to have a material adverse
effect on the value or saleability of, or any Chargor's right
to use, the Mortgaged Property;
(iv) the Mortgaged Property is free from Encumbrances or third
party rights of any kind whatever other than as created in
favour of the Security Agent hereunder and other Encumbrances
permitted under the Credit Agreement;
(v) there is no covenant, restriction, burden, stipulation or
outgoing (other than usual business outgoings) affecting the
Mortgaged Property which is of an onerous or unusual nature
(either generally or in the context of the present use of such
Mortgaged Property) or which conflicts with its present use or
adversely affects the value or saleability of the Mortgaged
Property in each case to a material extent;
(vi) the Mortgaged Property identified in Schedule 2 or in the
Schedule to the Deed of Accession (if any) by which any
Chargor became party hereto is served by drainage, water, and
electricity services, all of which are connected to the mains
by media located entirely on, in or under that Mortgaged
Property or by media elsewhere in respect of the use of which
the relevant Chargor and those deriving title under it to that
Mortgaged Property have a permanent legal easement free from
onerous or unusual conditions (either generally or in the
context of the present use of such Mortgaged Property) and the
passage and provision of those services is uninterrupted and
the Company and each of the other Chargors knows of no
imminent or likely material interruption of such passage or
provision, in each case where failure to be so connected or to
have such an easement would have a Material Adverse Effect
and/or would be reasonably likely to materially and adversely
affect the value, saleability or use of the Mortgaged
Property;
(vii) the means of access to and egress from the Mortgaged Property
are either direct to roads which have been adopted by the
local authority and are maintainable at public expense or
roads in respect of the use of which the relevant Chargor and
those deriving title under it to that Mortgaged Property have
a permanent legal easement free from onerous or unusual
conditions (either generally or in the context of the present
or intended use by any Chargor of such road), which roads
connect directly to roads which have been adopted by the local
authority and are maintainable at public expense;
(viii) there are no disputes regarding boundaries, easements
covenants or other matters relating to the Mortgaged Property
or its use which if adversely determined would have a Material
Adverse Effect and/or would be reasonably likely to materially
and adversely affect the value, saleability or use of the
Mortgaged Property;
(ix) nothing has arisen or been created or is subsisting which
would be an overriding interest over the Mortgaged Property
which would materially and adversely affect the security over
the Mortgaged Property enjoyed by the Secured Lenders or the
value, saleability or use of the Mortgaged Property or which
would have a Material Adverse Effect;
<PAGE> 16
(x) no facilities necessary for the enjoyment and use of the
Mortgaged Property and/or the carrying on of the business at
the Mortgaged Property (including, without limitation, access
to and egress from the Mortgaged Property) the lack of which
would have a Material Adverse Effect and/or would be
reasonably likely to materially and adversely affect the
value, saleability or use of the Mortgaged Property are
enjoyed on terms entitling any person to terminate or curtail
its or their use (in the absence of breach by any Chargor of
any such terms) or on terms which conflict with or materially
restrict its present use;
(xi) no Chargor has received notice of any adverse claims by any
person in respect of the ownership of the Mortgaged Property
or any interest therein which if adversely determined would
have a Material Adverse Effect and/or would be reasonably
likely materially and adversely to affect the value,
saleability or use of the Mortgaged Property, nor has any
acknowledgement been given to any person in respect thereof;
and
(xii) the Mortgaged Property is free from any tenancies or licences
to occupy, in each case which would have a Material Adverse
Effect and/or which would be reasonably likely to materially
and adversely affect the value, saleability or use of such
Mortgaged Property.
(b) SECURITY SHARES
(i) It is and will (save as otherwise permitted by the Credit
Agreement) remain the sole beneficial owner of the Security
Shares and save where the Security Shares have been registered
in the name of the Security Agent or its nominee pursuant
hereto, it and/or its nominee is and will (save as otherwise
permitted by the Credit Agreement) remain the absolute legal
owner of the Security Shares.
(ii) It has not transferred, assigned, pledged or in any way
encumbered the Security Shares other than pursuant to this
Debenture.
(iii) The Share Mortgages constitute first priority security
interests over the Security Shares and the Related Rights
which are not subject to any prior or pari passu Encumbrances.
(iv) The relevant Group Shares constitute, and until payment in
full of all Secured Liabilities will continue to constitute,
all of the outstanding issued shares of the company in which
the relevant Group Shares are held.
(v) It will not take any action whereby the rights attaching to
the Security Shares are altered or diluted.
(vi) The Group Shares are fully paid and non-assessable and neither
the Group Shares nor the Related Rights are subject to any
options to purchase or similar rights of any person.
(c) SECURITY
<PAGE> 17
Subject to the Reservations, this Debenture (i) constitutes its legally
binding obligations enforceable in accordance with its terms, (ii)
creates those Encumbrances it purports to create, and (iii) is not
liable to be avoided or otherwise set aside on its liquidation or
administration or otherwise.
7.3 TIMES FOR MAKING REPRESENTATIONS AND WARRANTIES
The representations and warranties set out in this Clause 7:
(a) will survive the execution of each Finance Document and the
making of each Utilisation under the Credit Agreement; and
(b) are made on the date hereof and are deemed to be repeated on
each date during the Security Period on which any of the
representations and warranties set out in Clause 18.1 of the
Credit Agreement are repeated, with reference to the facts and
circumstances then existing.
8. UNDERTAKINGS
8.1 DURATION AND WITH WHOM MADE
The undertakings in this Clause 8:
(a) shall remain in force throughout the Security Period; and
(b) are given by each Chargor to each Secured Lender.
8.2 GENERAL UNDERTAKINGS
COVENANT TO PERFORM. Each Chargor shall at all times comply with the
terms (express or implied) of this Debenture and of all contracts
relating to the Secured Liabilities.
8.3 UNDERTAKINGS RELATING SPECIFICALLY TO THE SECURITY ASSETS
(a) BOOK DEBTS AND RECEIPTS. Each Chargor will:
(i) get in and realise such Chargor's:
(A) securities to the extent held by way of temporary
investment,
(B) book and other debts and other moneys, and
(C) royalties, fees and income of like nature in relation
to the assets specified in Clause 4.1(c)(xi),
in each case in the ordinary course of its business and hold
the proceeds of such getting in and realisation (until payment
into the Collateral Account(s) in accordance with
sub-paragraph (ii) below) upon trust for the Security Agent
(as agent and trustee as aforesaid);
<PAGE> 18
(ii) save to the extent that the Security Agent otherwise agrees in
writing, pay the proceeds of such getting in and realisation
into a Collateral Account;
(iii) save to the extent that the Security Agent otherwise consents
in writing, not withdraw all or any moneys (including
interest) standing to the credit of any Collateral Account;
and
(iv) not assign or otherwise transfer and not create or permit to
exist any Encumbrance (other than an Encumbrance created
pursuant to the Security Documents or expressly permitted by
the terms of the Credit Agreement) over any of the property or
assets referred to in (i) above or over any Collateral Account
or any interest therein.
(b) DEPOSIT OF SECURITIES. Each Chargor shall forthwith deposit with the
Security Agent or as the Security Agent may direct all bearer
instruments, share certificates and other documents of title or
evidence of ownership in relation to such Group Shares as are owned by
it or in which it has or acquires an interest and their Related Rights
(if any) and shall execute and deliver to the Security Agent all such
share transfers and other documents as may be requested by the Security
Agent in order to enable the Security Agent or its nominees to be
registered as the owner or otherwise to obtain a legal title to the
same and, without limiting the generality of the foregoing, shall
deliver to the Security Agent on the date hereof executed (and, if
required to be stamped, pre-stamped) share transfers for all Group
Shares in favour of the Security Agent and/or its nominee(s) as
transferees or, if the Security Agent so directs, with the transferee
left blank and shall procure that all such share transfers are at the
request of the Security Agent forthwith registered by the relevant
company and that share certificates in the name of the Security Agent
and/or such nominee(s) in respect of all Group Shares are forthwith
delivered to the Security Agent. Each Chargor shall provide the
Security Agent with certified copies of all resolutions and
authorisations approving the execution of such transfer forms and
registration of such transfers as the Security Agent may reasonably
require.
(c) INTELLECTUAL PROPERTY RIGHTS. Each Chargor will promptly upon being
required to do so by the Security Agent, sign or procure the signature
of, and comply with all reasonable instructions of the Security Agent
in respect of, any document reasonably required to record the interest
of the Secured Lenders on any appropriate register.
8.4 MAINTENANCE OF PROPERTY
Each Chargor will, and will procure that each other Chargor will:
(a) REPAIR keep all material Premises in good and substantial
repair and condition and put and keep the Fixtures and all
material plant, machinery, computers, vehicles, implements and
other effects for the time being owned by it and which are in
or upon the Premises or elsewhere in a good state of repair
and in good working order and condition;
(b) INSURANCE at all times comply with its obligations as to
insurance set out in the Credit Agreement and in particular
(but without limitation) Clause 19.21 (Insurance) thereof;
<PAGE> 19
(c) COMPLIANCE WITH LEASES if due pay (if the lessee) the rents
reserved by and (in any event) perform and observe in all
material respects all the covenants, agreements and
stipulations on the part of such Chargor contained in any
lease, agreement for lease, licence or other document which
gives any Chargor a right to occupy or use any part of the
Mortgaged Property (together the "OCCUPATIONAL LEASES") and
not to do or suffer to be done any act or thing whereby any
Occupational Lease may become liable to forfeiture or
otherwise be determined prior to the expiration of its term;
(d) TAXES AND OUTGOINGS pay all Taxes, rates, duties, charges,
assessments and outgoings whatsoever (whether parliamentary,
parochial, local or of any other description) due and payable
by it within a reasonable time of the relevant due date in
accordance with the practice in the relevant jurisdiction and
prior to the accrual of any material fine or penalty or fine
for late payment (save to the extent that payment of the fine
is being contested in good faith and adequate reserves are
being maintained therefor) and save where non-payment will not
have a Material Adverse Effect;
(e) ACQUISITIONS AND LEGAL MORTGAGE notify the Security Agent in
writing forthwith upon the acquisition by such Chargor from
time to time of any freehold or leasehold property (including,
without limitation, by the exercise of such Chargor of any
option to acquire any freehold or leasehold property) or of
any agreement or option to acquire any freehold or leasehold
property or any licence or other right to occupy or use the
same and, on demand made to such Chargor by the Security Agent
and at the cost of such Chargor, execute and deliver to the
Security Agent a legal mortgage in favour of the Security
Agent (as agent and trustee as aforesaid) of any freehold and
leasehold properties which become vested in it after the date
hereof and all Fixtures thereon, the proceeds of sale of any
parts of these properties and the benefit of any covenants for
title given or entered into by a predecessor in title of the
Chargor and any moneys paid or payable in respect of those
covenants, to secure the payment or discharge of the Secured
Liabilities in such form (consistent with, and no more onerous
than, this Debenture) as the Security Agent may require. In
the case of any leasehold property in relation to which the
consent of the landlord in whom the reversion of that lease is
vested is required in order for such Chargor to perform any of
the foregoing obligations, such Chargor shall not be required
to perform that particular obligation unless and until it has
obtained the landlord's consent (which it shall use its
reasonable endeavours to do);
(f) USER use the Mortgaged Property only for such purpose or
purposes as may for the time being be authorised as the
permitted use or user thereof under or by virtue of the
Planning Acts and all title deeds relating to the Mortgaged
Property save where any failure to comply with this covenant
would not have a Material Adverse Effect;
(g) NOTICES within 14 days after the receipt by such Chargor of
any application, requirement, order or notice served or given
by any public or local or any other authority with respect to
the Security Assets (or any part thereof) which would have a
Material Adverse Effect, give written notice thereof to the
Security Agent and also (within seven days after demand)
produce the same or a copy thereof to the Security Agent and
inform it of the steps taken or proposed to be taken to comply
with, or dispute, any requirement thereby made or implicit
therein;
<PAGE> 20
(h) LEASES not without the previous consent in writing of the
Security Agent (not to be unreasonably withheld where the
Mortgaged Property is not required for its business) grant or
agree to grant (whether in exercise or independently of any
statutory power) any lease or tenancy of the Mortgaged
Property or any part thereof or accept a surrender of any
lease or tenancy or confer upon any person any contractual
licence or right to occupy the Mortgaged Property;
(i) H.M. LAND REGISTRY in respect of any freehold or leasehold
property which is hereafter acquired by such Chargor the title
to which is registered at H.M. Land Registry or the title to
which is required to be so registered, give such Registry
written notice of this Debenture and procure that notice of
these presents is duly noted in the Register to each such
title;
(j) DEPOSIT OF TITLE DEEDS deposit with (or arrange for the same
to be held by a person approved by the Security Agent to the
order of) the Security Agent all deeds and documents of title
relating to the Mortgaged Property and all Local Land Charges,
Land Charges and Land Registry Search Certificates and similar
documents received by or on behalf of such Chargor (and it is
hereby agreed that the Security Agent shall be entitled to
hold the same during the Security Period);
(k) ACCESS duly and punctually perform and observe all covenants
and stipulations restrictive or otherwise affecting all or any
part of the Mortgaged Property and all or any facilities
necessary for the enjoyment and use of the Mortgaged Property
and/or the carrying on of the business at the Mortgaged
Property, including without limitation access to and egress
from the Mortgaged Property, and indemnify the Security Agent
and each Secured Lender in respect of any breach thereof and
permit the Security Agent and any person nominated by it at
all reasonable times during normal business hours on
reasonable notice to enter upon the Mortgaged Property and
view the state of the same;
(l) INVESTIGATION OF TITLE grant the Security Agent or its lawyers
on request all such facilities within the power of such
Chargor to enable such lawyers (at the expense of such
Chargor) to carry out investigations of title to any property
(other than any of the Original Properties) which is or may be
subject to this security and enquiries into matters in
connection therewith as may be carried out by a prudent
mortgagee; and
(m) REPORT ON TITLE forthwith on demand by the Security Agent,
provide the Security Agent with a report as to the title of
such Chargor to any property which is or may be subject to
this security and related matters concerning the items which
may properly be sought to be covered by a prudent mortgagee in
a lawyer's report of this nature.
8.5 FURTHER NEGATIVE PLEDGE PROVISION
If any Chargor creates or permits to subsist any Encumbrance in breach
of the provisions of Clause 5.2(a) or Clause 8.3(a)(iv) of this
Debenture or Clause 19.6 of the Credit Agreement, then, to the extent
possible under applicable law, all the obligations of such Chargor
under each of the Finance Documents shall automatically and immediately
be secured upon the same assets equally and rateably with the other
obligations secured thereon.
<PAGE> 21
8.6 CONSENTS
Each Chargor will, and the Company will procure that each other Chargor
will, promptly after the date hereof provide the Security Agent with a
list of all those consents necessary to enable any of the property or
assets of such Chargor to be fully and effectively charged pursuant to
Clause 4.1 of this Debenture and/or the right, title and interest of
any Chargor in any of the Relevant Agreements to be assigned to the
Security Agent pursuant to Clause 4.3 of this Debenture. Each Chargor
will, and will procure that each other Chargor will, forthwith use all
reasonable endeavours to obtain any landlord's or other third party
consents (and will provide copies of any such consents to the Security
Agent) which are necessary to enable any of the property or assets of
such Chargor to be fully and effectively charged pursuant to Clause 4.1
of this Debenture or to enable any of the right, title and interest of
any Chargor in any of the Relevant Agreements to be fully and
effectively assigned to the Security Agent pursuant to Clause 4.3 of
this Debenture.
9. POWER TO REMEDY
In case of default by any Chargor in repairing or keeping in repair or
insuring the Mortgaged Property or any part thereof or in observing or
performing any of the covenants or stipulations affecting the same as
required by this Debenture, such Chargor will permit the Security Agent
or its agents and contractors to enter on the Mortgaged Property and to
comply with or object to any notice served on such Chargor in respect
of the Mortgaged Property and to effect such repairs or insurance or
generally do such things or pay all such costs, charges and expenses as
the Security Agent may (acting reasonably) consider reasonably
necessary or desirable to prevent or remedy any breach of covenant or
stipulation or to comply with or object to any notice. Each Chargor
will indemnify and keep the Security Agent indemnified against all
losses, costs, charges and expenses reasonably incurred in connection
with the exercise of the powers contained in this Clause 9.
10. SPECIAL PROVISIONS RELATING TO THE SECURITY SHARES
10.1 REGISTRATION ON TRANSFER
Each Chargor hereby authorises the Security Agent (at any time) to
arrange for the Security Shares to be delivered to any nominee for the
Security Agent or any purchaser or transferee (under the powers of
realisation herein conferred) or registered as the Security Agent may
(acting reasonably) feel appropriate to perfect the security thereover
and to transfer or cause the Security Shares to be transferred to and
registered in the name of any suitably qualified nominees of the
Security Agent (as agent and trustee, as aforesaid) and each Chargor
undertakes from time to time promptly to execute and sign all
transfers, contract notes, powers of attorney and other documents (and
promptly to register any such transfer of the Security Shares in the
shareholders' register of the company in which the Security Shares are
held) which the Security Agent may reasonably require for perfecting
its title to any of the Security Shares or for vesting the same in
itself or its nominee or in any purchasers or transferees (under the
powers of realisation herein conferred).
10.2 POWERS
The Security Agent and its nominee may at any time after an Event of
Default has occurred and has not been expressly waived by the Facility
Agent or in any other instance where the Security Agent is of the
reasonable opinion that it is necessary for the avoidance of an Event
<PAGE> 22
of Default or necessary for the protection of its material interests or
the material interests of some or all of the Secured Lenders under any
of the Finance Documents, exercise or refrain from exercising (in the
name of each Chargor, the registered holder or otherwise and without
any further consent or authority from any Chargor and irrespective of
any direction given by any Chargor) in respect of the Security Shares
any voting rights and any powers or rights under the terms thereof or
otherwise which may be exercised by the person or persons in whose name
or names the Security Shares are registered or who is the holder
thereof, including, without limitation, all the powers given to
trustees by Section 10(3) and (4) of the Trustee Act 1925 as amended by
Section 9 of the Trustee Investments Act 1961 in respect of securities
or property subject to a trust PROVIDED THAT in the absence of notice
from the Security Agent each Chargor may and shall continue to exercise
any and all voting rights with respect to the Group Shares subject
always to the terms hereof. No Chargor shall without the previous
consent in writing of the Security Agent exercise the voting rights
attached to any of the Group Shares in favour of resolutions having the
effect of changing the terms of the Group Shares (or any class of them)
or any Related Rights or prejudicing the security hereunder or
impairing the value of the Security Shares. Each Chargor hereby
irrevocably appoints the Security Agent or its nominees its proxy to
exercise all voting rights so long as the Group Shares remain
registered in the names of the Chargors.
10.3 CALLS
Each Chargor during the continuance of this security will make all
payments which may become due in respect of any of the Security Shares
and in the event of default in making any such payment the Security
Agent may if it thinks fit make such payment on behalf of each Chargor.
Any sums so paid by the Security Agent shall be repayable by the
relevant Chargor to the Security Agent on demand together with interest
at the Default Rate from the date of such payment by the Security
Agent, and pending such repayment shall constitute part of the Secured
Liabilities.
10.4 LIABILITY TO PERFORM
It is expressly agreed that, notwithstanding anything to the contrary
herein contained, each Chargor shall remain liable to observe and
perform all of the conditions and obligations assumed by it in respect
of the Security Shares and none of the Security Agent or the Secured
Lenders shall be under any obligation or liability by reason of or
arising out of the Share Mortgages. None of the Secured Lenders shall
be required in any manner to perform or fulfil any obligation of any
Chargor in respect of the Security Shares, or to make any payment, or
to receive any enquiry as to the nature or sufficiency of any payment
received by them, or to present or file any claim or take any other
action to collect or enforce the payment of any amount to which they
may have been or to which they may be entitled hereunder at any time or
times.
10.5 ENFORCEMENT
Upon the occurrence of an Event of Default and at any time thereafter
while an Event of Default is continuing, the Security Agent shall be
entitled to put into force and exercise immediately as and when it may
see fit any and every power possessed by the Security Agent by virtue
of the Share Mortgages or available to a secured creditor (so that
Sections 93 and 103 of the Law of Property Act 1925 shall not apply to
this security) and in particular (without limitation):
<PAGE> 23
(i) to sell all or any of the Security Shares in any manner
permitted by law upon such terms as the Security Agent shall
in its absolute discretion determine;
(ii) to collect, recover or compromise and give a good discharge
for any moneys payable to any Chargor in respect of the
Security Shares or in connection therewith; and
(iii) to act generally in relation to the Security Shares in such
manner as the Security Agent acting reasonably shall
determine.
For the avoidance of doubt, each Chargor agrees that the enforceability
of the Share Mortgages is not dependent on the performance or
non-performance by any Secured Lender of its respective obligations
under the Credit Agreement.
11. THE ACCOUNT BANKS
11.1 IDENTITY
(a) The Account Bank for each Chargor shall be HSBC Bank plc.
(b) The Account Bank for any Chargor may be changed to any other bank or
financial institution at any time with the agreement of the Company and
the Security Agent but, in each case, such change shall only become
effective upon the proposed new Account Bank agreeing with the Security
Agent and the Company, in a manner reasonably satisfactory to the
Security Agent, to fulfil the role of Account Bank hereunder.
11.2 NOTICE
(a) The Parent on behalf of all the Chargors will forthwith give notice to
the Account Bank for each Chargor (and forthwith on any change in the
identity of the Account Bank for any Chargor give notice to the new
Account Bank) of this Debenture in the form of Schedule 6 Part I and
use its reasonable endeavours to procure that the Account Bank or new
Account Bank (as the case may be) acknowledges such notice to the
Security Agent in the form of Schedule 6 Part II (provided that, by its
execution of this Debenture, each Chargor and HSBC Investment Bank plc
shall be deemed to have given such notice or acknowledgement, as the
case may be).
(b) Promptly upon confirmation that the notice referred to in 11.2(a) above
has been given, the Security Agent will deliver to the Account Bank a
notice substantially in the form set out in Schedule 6 Part III. The
Security Agent agrees that it will not send a further notice to the
Account Bank of the type referred to in Schedule 6 Part III until this
Debenture has become enforceable in accordance with Clause 10.5.
11.3 TRANSFER OF BALANCES
The amount (if any) standing to the credit of the Security Accounts
maintained with an old Account Bank shall be transferred to the
corresponding Security Accounts maintained with a new Account Bank
appointed pursuant to Clause 11.1 forthwith upon such appointment
taking effect. Each Chargor hereby irrevocably gives all authorisations
and instructions necessary for any such transfer to be made.
<PAGE> 24
11.4 FURTHER PERFECTION
Each Chargor shall do all such things as the Security Agent may
reasonably request in order to facilitate any change of Account Bank
pursuant to Clause 11.1 or any transfer of credit balances pursuant to
Clause 11.3 (including, without limitation, the execution of bank
mandate forms) and the Security Agent is hereby irrevocably constituted
the Company's and each other Chargor's attorney to do any such things
should the Company or such other Chargor fail to do so.
12. WHEN SECURITY BECOMES ENFORCEABLE
The security constituted hereby shall become immediately enforceable
upon the occurrence of an Event of Default and at any time thereafter
whilst the same is continuing and the power of sale and other powers
conferred by Section 101 of the Law of Property Act, 1925 as varied or
amended by this Debenture shall be immediately exerciseable upon the
occurrence of an Event of Default and at any time thereafter whilst the
same is continuing. After the security constituted hereby has become
enforceable, the Security Agent may in its absolute discretion enforce
all or any part of such security in such manner as it sees fit or as
the Majority Banks direct.
13. ENFORCEMENT OF SECURITY
13.1 GENERAL
For the purposes of all powers implied by statute the Secured
Liabilities shall be deemed to have become due and payable on the date
hereof and Section 103 of the Law of Property Act 1925 (restricting the
power of sale) and Section 93 of the same Act (restricting the right of
consolidation) shall not apply to this security. The statutory powers
of leasing conferred on the Security Agent shall be extended so as to
authorise the Security Agent to lease, make agreements for leases,
accept surrenders of leases and grant options as the Security Agent
shall think fit and without the need to comply with any of the
provisions of sections 99 and 100 of the Law of Property Act 1925.
13.2 CONTINGENCIES
(a) If the Security Agent enforces the security constituted by this
Debenture in accordance with the terms of this Debenture (whether by
the appointment of a Receiver or otherwise) at a time when no amounts
are due under the Finance Documents (but at a time when amounts may
become so due), the Security Agent (or such Receiver) may pay the
proceeds of any recoveries effected by it into such number of interest
bearing Realisations Accounts as it considers appropriate.
(b) The Security Agent (or such Receiver) may (subject to the payment of
any claims having priority to this security) withdraw amounts standing
to the credit of the Realisations Accounts to:
(i) meet all costs, charges and expenses incurred and payments
made by the Security Agent (or such Receiver) in the course of
such enforcement;
(ii) pay remuneration to the Receiver as and when the same becomes
due and payable; and
<PAGE> 25
(iii) meet amounts due and payable under the Finance Documents as
and when the same become due and payable;
in each case, together with interest thereon (as well after as before
judgment and payable on demand) at the Default Rate from the date the
same become due and payable until the date the same are unconditionally
and irrevocably paid and discharged in full (provided that like
interest payable under any of the Finance Documents should not be
double counted).
(c) No Chargor will be entitled to withdraw all or any moneys (including
interest) standing to the credit of any Realisations Account until the
expiry of the Security Period.
14. RECEIVER
14.1 APPOINTMENT OF RECEIVER
(a) At any time after this security becomes enforceable in accordance with
Clause 12 or if any Chargor so requests the Security Agent in writing
at any time, the Security Agent may without further notice appoint
under seal or in writing under its hand any one or more qualified
persons to be a Receiver of all or any part of the Security Assets in
like manner in every respect as if the Security Agent had become
entitled under the Law of Property Act 1925 to exercise the power of
sale thereby conferred.
(b) In this Clause "QUALIFIED PERSON" means a person who, under the
Insolvency Act 1986, is qualified to act as a receiver of the property
of any company with respect to which he is appointed or (as the case
may require) an administrative receiver of any such company.
14.2 POWERS OF RECEIVER
(a) Every Receiver appointed in accordance with Clause 14.1 shall have and
be entitled to exercise all of the powers set out in paragraph (b)
below in addition to those conferred by the Law of Property Act 1925 on
any receiver appointed thereunder. A Receiver who is an administrative
receiver of any Chargor shall have all the powers of an administrative
receiver under the Insolvency Act 1986. If at any time there is more
than one Receiver of all or any part of the Security Assets, each such
Receiver may (unless otherwise stated in any document appointing him)
exercise all of the powers conferred on a Receiver under this Debenture
individually and to the exclusion of each other Receiver.
(b) The powers referred to in the first sentence of paragraph (a) above
are:
(i) TAKE POSSESSION to take immediate possession of, get in and
collect the Security Assets or any part thereof;
(ii) CARRY ON BUSINESS to carry on the business of such Chargor as
he may think fit;
(iii) PROTECTION OF ASSETS to make and effect all repairs and
insurances and do all other acts which such Chargor might do
in the ordinary conduct of its business as well for the
protection as for the improvement of the Security Assets and
to commence and/or complete any building operations on the
Mortgaged Property and to apply for and maintain any planning
permissions, building regulation approvals and any other
<PAGE> 26
permissions, consents or licences, in each case as he may in
his absolute discretion think fit;
(iv) EMPLOYEES to appoint and discharge managers, officers, agents,
accountants, servants, workmen and others for the purposes
hereof upon such terms as to remuneration or otherwise as he
may think proper and to discharge any such persons appointed
by any such Chargor;
(v) BORROW MONEY for the purpose of exercising any of the powers,
authorities and discretions conferred on him by or pursuant to
this Debenture and/or of defraying any costs, charges, losses
or expenses (including his remuneration) which shall be
incurred by him in the exercise thereof or for any other
purpose, to raise and borrow money either unsecured or on the
security of the Security Assets or any part thereof either in
priority to the security constituted by this Debenture or
otherwise and generally on such terms and conditions as he may
think fit and no person lending such money shall be concerned
to enquire as to the propriety or purpose of the exercise of
such power or to see to the application of any money so raised
or borrowed;
(vi) SELL ASSETS to sell, exchange, convert into money and realise
all or any part of the Security Assets (including, without
limitation, to sell any of the Mortgaged Property) by public
auction or private contract and generally in such manner and
on such terms as he shall think proper. Without prejudice to
the generality of the foregoing he may do any of these things
for a consideration consisting of cash, debentures or other
obligations, shares, stock or other valuable consideration and
any such consideration may be payable in a lump sum or by
instalments spread over such period as he may think fit.
Fixtures, other than landlords' fixtures, may be severed and
sold separately from the property containing them without the
consent of such Chargor;
(vii) LEASES to let all or any part of the Security Assets for such
term and at such rent (with or without a premium) as he may
think proper and to accept a surrender of any lease or tenancy
thereof on such terms as he may think fit (including the
payment of money to a lessee or tenant on a surrender);
(viii) COMPROMISE to settle, adjust, refer to arbitration, compromise
and arrange any claims, accounts, disputes, questions and
demands with or by any person who is or claims to be a
creditor of such Chargor or relating in any way to the
Security Assets or any part thereof;
(ix) LEGAL ACTIONS to bring, prosecute, enforce, defend and abandon
all such actions, suits and proceedings in relation to the
Security Assets or any part thereof as may seem to him to be
expedient;
(x) RECEIPTS to give valid receipts for all moneys and execute all
assurances and things which may be proper or desirable for
realising the Security Assets;
(xi) SUBSIDIARIES to form a subsidiary or subsidiaries of such
Chargor and transfer to any such subsidiary all or any part of
the Security Assets; and
<PAGE> 27
(xii) GENERAL POWERS to do all such other acts and things as he may
consider desirable or necessary for realising the Security
Assets or any part thereof or incidental or conducive to any
of the matters, powers or authorities conferred on a Receiver
under or by virtue of this Debenture, to exercise in relation
to the Security Assets or any part thereof all such powers,
authorities and things as he would be capable of exercising if
he were the absolute beneficial owner of the same and to use
the name of such Chargor for all or any of such purposes.
14.3 REMOVAL AND REMUNERATION
The Security Agent may from time to time by writing under its hand
(subject to any requirement for an order of the court in the case of an
administrative receiver) remove any Receiver appointed by it and may,
whenever it may deem it expedient, appoint a new Receiver in the place
of any Receiver whose appointment may for any reason have terminated
and may from time to time fix the remuneration of any Receiver
appointed by it.
14.4 SECURITY AGENT MAY EXERCISE
To the fullest extent permitted by law, all or any of the powers,
authorities and discretions which are conferred by this Debenture
(either expressly or impliedly) upon a Receiver of the Security Assets
may be exercised after the security hereby created becomes enforceable
in accordance with Clause 12 by the Security Agent in relation to the
whole of such Security Assets or any part thereof without first
appointing a Receiver of such property or any part thereof or
notwithstanding the appointment of a Receiver of such property or any
part thereof.
15. APPLICATION OF PROCEEDS
Any moneys received by the Security Agent or by any Receiver appointed
by it pursuant to this Debenture and/or under the powers hereby
conferred shall, after the security hereby constituted shall have
become enforceable in accordance with Clause 12 but subject to the
payment of any claims having priority to this security and to the
Security Agent's and such Receiver's rights under Clauses 13.2 and
14.2, be applied by the Security Agent for the following purposes and,
unless otherwise determined by the Security Agent or such Receiver, in
the following order or priority (but without prejudice to the right of
the Security Agent or any Secured Lender to recover any shortfall from
any Chargor):
(a) in satisfaction of or provision for all costs, charges and
expenses incurred and payments made by the Security Agent or
any Receiver appointed hereunder and of all remuneration due
hereunder together with interest on the foregoing (as well
after as before judgment and payable on demand) at the Default
Rate from time to time from the date the same become due and
payable until the date the same are unconditionally and
irrevocably paid and discharged in full;
(b) in or towards payment of the Secured Liabilities or such part
of them as is then due and payable; and
(c) in payment of the surplus (if any) to any Chargor or other
person entitled thereto.
<PAGE> 28
16. NO LIABILITY AS MORTGAGEE IN POSSESSION
The Security Agent shall not nor shall any Receiver appointed as
aforesaid by reason of it or the Receiver entering into possession of
the Security Assets or any part thereof be liable to account as
mortgagee in possession or be liable for any loss on realisation or for
any default or omission for which a mortgagee in possession might be
liable. Every Receiver duly appointed by the Security Agent under the
powers in that behalf herein contained shall be deemed to be the agent
of the relevant Chargor for all purposes and shall as such agent for
all purposes be deemed to be in the same position as a Receiver duly
appointed by a mortgagee under the Law of Property Act 1925. The
relevant Chargor alone shall be responsible for his contracts,
engagements, acts, omissions, defaults and losses and for liabilities
incurred by him and neither the Security Agent nor any Secured Lender
shall incur any liability therefor (whether to the Company, any other
Chargor or to any other person whatsoever) by reason of the Security
Agent's making his appointment as such Receiver other than in the case
of wilful neglect or negligence on the part of a Receiver or the
Security Agent. Every such Receiver and the Security Agent shall be
entitled to all the rights, powers, privileges and immunities by the
Law of Property Act 1925 conferred on mortgagees and receivers when
such receivers have been duly appointed under the said Act but so that
Section 103 of the Law of Property Act 1925 shall not apply.
17. PROTECTION OF THIRD PARTIES
No purchaser, mortgagee or other person or company dealing with the
Security Agent or the Receiver or its or his agents shall be concerned
to enquire whether the Secured Liabilities have become payable or
whether any power which the Receiver is purporting to exercise has
become exercisable or whether any money remains due under this
Debenture or the Finance Documents or to see to the application of any
money paid to the Security Agent or to such Receiver.
18. TAXES
All payments by any Chargor under this Debenture to or for the account
of any Secured Lender shall be made without any set off, counterclaim,
withholding or other deductions and free and clear of and without
deduction or withholding for or on account of any Taxes (subject to the
exceptions in Clause 11 of the Credit Agreement). If any Tax or amounts
in respect of Tax must be deducted, or any other deductions must be
made, from any amounts payable or paid by such Chargor, or paid or
payable by the Security Agent to another Secured Lender, under this
Debenture, or any such payment shall otherwise be required to be made
subject to any Tax, such Chargor shall pay such additional amounts as
may be necessary to ensure that the relevant Secured Lender receives a
net amount equal to the full amount which it would have received had
payment not been made subject to Tax.
19. EXPENSES
19.1 UNDERTAKING TO PAY
All reasonable costs, charges and expenses incurred and all payments
made by the Security Agent or any Receiver appointed hereunder in the
lawful exercise of the powers hereby conferred whether or not
occasioned by any act, neglect or default of any Chargor shall carry
interest (as well after as before judgment) at the Default Rate from
time to time from the later of the date the same are incurred or become
payable until the date the same are
<PAGE> 29
unconditionally and irrevocably paid and discharged in full. The amount
of all such costs, charges, expenses and payments and all such interest
thereon and all remuneration payable hereunder shall be payable by the
Chargors on demand. All such costs, charges, expenses and payments
shall be paid and charged as between the Security Agent and the
Chargors or any of them on the basis of a full indemnity and not on the
basis of party and party or any other kind of taxation.
19.2 INDEMNITY
The Secured Lenders and every Receiver, attorney, manager, agent or
other person appointed by the Security Agent hereunder shall be
entitled to be indemnified out of the Security Assets in respect of all
liabilities and expenses properly incurred by them in the execution or
purported execution of any of the powers, authorities or discretions
vested in them pursuant hereto and against all actions, proceedings,
costs, claims and demands in respect of any matter or thing done or
omitted in any way relating to the Security Assets and the Secured
Lenders and any such Receiver may retain and pay all sums in respect of
the same out of any moneys received under the powers hereby conferred.
Notwithstanding the foregoing no Secured Lender or Receiver and no
person appointed by the Security Agent as aforesaid shall be entitled
to be indemnified in respect of any part of the foregoing which results
from such party's negligence or wilful misconduct.
20. DELEGATION BY SECURITY AGENT
The Security Agent or any Receiver appointed hereunder may at any time
and from time to time delegate by power of attorney or in any other
manner to any properly qualified person or persons all or any of the
powers, authorities and discretions which are for the time being
exercisable by the Security Agent or such Receiver under this Debenture
in relation to the Security Assets or any part thereof. Any such
delegation may be made upon such terms (including power to
sub-delegate) and subject to such regulations as the Security Agent or
such Receiver may think fit.
21. FURTHER ASSURANCES
21.1 GENERAL
Each Chargor shall at its own expense execute and do all such
assurances, acts and things as the Security Agent may reasonably
require for perfecting or protecting the security intended to be
created hereby over the Security Assets or any part thereof or for
facilitating (if and when this security becomes enforceable) the
realisation of the Security Assets or any part thereof and in the
exercise of all powers, authorities and discretions vested in the
Security Agent or any Receiver of the Security Assets or any part
thereof or in any such delegate or sub-delegate as aforesaid. To that
intent, each Chargor shall in particular execute all transfers,
conveyances, assignments and releases of such property whether to the
Security Agent or to its nominees and give all notices, orders and
directions and make all registrations which the Security Agent may
reasonably think expedient.
21.2 LEGAL CHARGE
Without prejudice to the generality of Clause 21.1, each Chargor will
forthwith at the request of the Security Agent execute a legal
mortgage, charge or assignment over all or any of the Security Assets
subject to or intended to be subject to any fixed security hereby
created in
<PAGE> 30
favour of the Security Agent (as agent and trustee as aforesaid) in
such form as the Security Agent may reasonably require but containing
terms no more onerous than those in this Debenture.
21.3 FURTHER SUBSIDIARIES
(a) Each Chargor hereby undertakes to ensure that each company which
becomes a Subsidiary (whether direct or indirect) of any Chargor after
the date hereof shall, forthwith upon being required to grant security
pursuant to Clause 17.3(a) of the Credit Agreement, execute a Deed of
Accession substantially in the form set out in Schedule 7 and such
company shall on the date on which such Deed of Accession is executed
by it become a party to this Debenture in the capacity of a Chargor and
this Debenture shall be read and construed for all purposes as if such
company had been an original party hereto as a Chargor (but for the
avoidance of doubt the security created by such company shall be
created on the date of the Deed of Accession). The Security Agent is
authorised to agree any amendments or change to the form or manner in
which any such member of the Group gives such a guarantee and security
(including acceptance of a limit on the liability of such member of the
Group) which is in the reasonable opinion of the Security Agent
necessary in order that such guarantee or security may lawfully be
given.
(b) The Company shall procure that all registrations or other steps
necessary to perfect or protect any security created pursuant to any
Deed of Accession is completed as soon as practicable after the date
thereof and in any event within any applicable time limit.
22. REDEMPTION OF PRIOR MORTGAGES
The Security Agent may, at any time after the security hereby
constituted has become enforceable, redeem any prior Encumbrance over
or against the Security Assets or any part thereof or procure the
transfer thereof to itself and may settle and pass the accounts of the
prior mortgagee, chargee or encumbrancer. Any accounts so settled and
passed shall be conclusive and binding on each Chargor. All principal
moneys, interest, costs, charges and expenses of and incidental to such
redemption and transfer shall be paid by the Chargors to the Security
Agent on demand.
23. POWER OF ATTORNEY
23.1 APPOINTMENT
Each Chargor hereby by way of security and in order more fully to
secure the performance of its obligations hereunder irrevocably
appoints the Security Agent and every Receiver of the Security Assets
or any part thereof appointed hereunder and every such delegate or
sub-delegate as aforesaid to be its attorney acting severally, and on
its behalf and in its name or otherwise, after the occurrence of an
Event of Default which is continuing and has not been expressly waived
by the Facility Agent, to execute and do all such assurances, acts and
things which such Chargor is required to do and fails to do under the
covenants and provisions contained in this Debenture (including,
without limitation, to make any demand upon or to give any notice or
receipt to any person owing moneys to such Chargor and to execute and
deliver any charges, legal mortgages, assignments or other security and
any transfers of securities) and generally in its name and on its
behalf to exercise all or any of the powers, authorities and
discretions conferred by or pursuant to this Debenture or by statute on
the Security Agent or any such Receiver, delegate or sub-delegate and
(without prejudice to the
<PAGE> 31
generality of the foregoing) to seal and deliver and otherwise perfect
any deed, assurance, agreement, instrument or act which it or he may
reasonably deem proper in or for the purpose of exercising any of such
powers, authorities and discretions.
23.2 RATIFICATION
Each Chargor hereby ratifies and confirms and agrees to ratify and
confirm whatever any such attorney as is mentioned in Clause 23.1 shall
do or purport to do in the exercise or purported exercise of all or any
of the powers, authorities and discretions referred to in such Clause.
24. NEW ACCOUNTS
If the Security Agent or any Secured Lender receives or is deemed to be
affected by notice whether actual or constructive of any subsequent
charge or other interest affecting any part of the Security Assets
and/or the proceeds of sale thereof, the Security Agent or such Secured
Lender (as the case may be) may open a new account or accounts with any
Obligor. If the Security Agent or such Secured Lender (as the case may
be) does not open a new account it shall nevertheless be treated as if
it had done so at the time when it received or was deemed to have
received notice and as from that time all payments made to the Security
Agent or such Secured Lender (as the case may be) shall be credited or
be treated as having been credited to the new account and shall not
operate to reduce the amount for which this Debenture is security.
25. STAMP TAXES
Each Chargor shall pay and, forthwith on demand, indemnify the Security
Agent and each Secured Lender against any liability it incurs in
respect of any stamp, registration and similar Tax which is or becomes
payable in connection with the entry into, performance or enforcement
of this Debenture.
26. ASSIGNMENTS, ETC.
26.1 THE SECURITY AGENT
The Security Agent may assign and transfer all of its respective rights
and obligations hereunder to a replacement Security Agent appointed in
accordance with the terms of the Credit Agreement. Upon such assignment
and transfer taking effect, the replacement Security Agent shall be and
be deemed to be acting as agent and trustee for each of the Secured
Lenders for the purposes of this Debenture in place of the old Security
Agent.
26.2 AGENCY PROVISIONS; CURRENCY INDEMNITY; PRO RATA SHARING
Each Chargor shall be bound by the terms of Clauses 24 (The Agents, and
the Arranger), 25.1 (Currency Indemnity) and 31.1 (Redistribution) of
the Credit Agreement.
26.3 ASSIGNMENTS AND TRANSFERS
Each Chargor shall be bound by the terms of Clause 28 (Changes to the
Parties) of the Credit Agreement and, accordingly, each Chargor, for
the purposes of any transfer pursuant to such Clause, hereby
irrevocably authorises the Security Agent to execute on its behalf (i)
<PAGE> 32
Novation Certificates (without any need for the prior consent of such
Chargor) in accordance with the provisions of the Credit Agreement, and
(ii) any other document required to perfect the security granted to the
Secured Lenders pursuant to the Finance Documents.
27. WAIVERS, REMEDIES CUMULATIVE
(a) The rights of the Security Agent and each Secured Lender under this
Debenture:
(i) may be exercised as often as necessary;
(ii) are cumulative and not exclusive of its rights under general
law; and
(iii) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver
of that right.
(b) The Security Agent may waive any breach by any Chargor of any of such
Chargor's obligations hereunder if so instructed by the Majority Banks.
28. SET-OFF
28.1 GENERAL
The Security Agent and each Secured Lender, after the occurrence of an
Event of Default which is continuing and has not been expressly waived
by the Facility Agent, may (but shall not be obliged to) set off any
obligation which is due and payable by any Chargor and unpaid (whether
under the Finance Documents or which has been assigned to the Security
Agent by any other Chargor hereunder) against any obligation (whether
or not matured) owed by the Security Agent or such Secured Lender (as
the case may be) to such Chargor, regardless of the place of payment,
booking branch or currency of either obligation. If the obligations are
in different currencies, the Security Agent or such Secured Lender (as
the case may be) may convert either obligation at a market rate of
exchange in its usual course of business for the purpose of the
set-off.
28.2 TIME DEPOSITS
Without prejudice to Clause 28.1, if any time deposit matures on any
account which any Chargor has with the Security Agent or any Secured
Lender at a time within the Security Period when:
(i) this security has become enforceable; and
(ii) no amount of the Secured Liabilities is due and payable,
such time deposit shall automatically be renewed for such further
maturity as the Security Agent or such Secured Lender in its absolute
discretion considers appropriate unless the Security Agent or such
Secured Lender otherwise agrees in writing.
<PAGE> 33
29. SEVERABILITY
29.1 GENERAL
If a provision of this Debenture is or becomes illegal, invalid or
unenforceable in any jurisdiction in respect of any Chargor, that shall
not affect:
(a) in respect of such Chargor the validity or enforceability in
that jurisdiction of any other provision of this Debenture;
(b) in respect of any other Chargor the validity or enforceability
in that jurisdiction of that or any other provision of this
Debenture; or
(c) in respect of any Chargor the validity or enforceability in
other jurisdictions of that or any other provision of this
Debenture.
29.2 DEEMED SEPARATE CHARGES
This Debenture shall, in relation to each Chargor, be read and
construed as if it were a separate Debenture relating to such Chargor
to the intent that if any Encumbrance created by any other Chargor in
this Debenture shall be invalid or liable to be set aside for any
reason, this shall not affect any Encumbrance created hereunder by such
first Chargor.
30. COUNTERPARTS
This Debenture may be executed in any number of counterparts and this
will have the same effect as if the signatures on the counterparts were
on a single copy of this Debenture.
31. NOTICES
31.1 GIVING OF NOTICES
All notices under, or in connection with, this Debenture shall be given
in writing or by fax. Any such notice is deemed to be given as follows:
(a) if in writing when delivered; and
(b) if by fax when received.
However, a notice given to a Chargor in accordance with the above but
received on a non-working day or after business hours in the place of
receipt is deemed to be given on the next working day in that place.
31.2 ADDRESSES FOR NOTICES
The address and facsimile number of the Chargors and the Security Agent
for all notices under, or in connection with, this Debenture are, in
the case of the Chargors, as set out in Schedule 1 (or the Deed of
Accession (if any) by which the relevant Chargor became party hereto)
and, in the case of the Security Agent, as set out in the Credit
Agreement.
<PAGE> 34
32. NOTICE OF ASSIGNMENT
GENERAL
To the extent that the Company or any other Chargor owes any obligation
to any other member of the Group and such obligation or the debt
constituted thereby is charged or assigned to the Security Agent and
the Secured Lenders pursuant to any other Security Document, this
Debenture constitutes notice in writing to the Company or such other
Chargor of such charge or assignment and its agreement not to exercise
any right of set-off or counterclaim in relation thereto.
33. REGISTRATION
33.1 H.M. LAND REGISTRY
In respect of the Mortgaged Property specified in Schedule 2 opposite
the name of any Chargor the title to which is registered at H.M. Land
Registry and in respect of any other registered title(s) against which
this Debenture may be noted:
(a) such Chargor hereby applies to the Chief Land Registrar for
restrictions in the following terms to be entered on the
Register of Title relating thereto:
(i) "Except under an order of the Registrar, no
disposition or dealing by the proprietor of the land
is to be registered without the consent of the
proprietor for the time being of the debenture dated
[ ] October, 1999 (the "Debenture") between amongst
others Getty Communications Limited, [the relevant
Chargor] and HSBC Investment Bank plc as agent and
trustee for itself and each of the Secured Lenders
each as defined therein; and
(ii) "The Banks under a credit agreement dated [ ]
October, 1999 between the Parent, the Original
Borrowers, the Original Guarantors, the Arranger, the
Original Bank, the Hedging Bank (each as defined
therein), HSBC Investment Bank plc as Facility Agent
and HSBC Investment Bank plc as Security Agent are
under an obligation (subject to the terms thereof) to
the Chargor to make further advances and the
Debenture secures those further advances"; and
(b) it is hereby certified that the security created hereby does
not contravene any of the provisions of the Memorandum or
Articles of Association of such Chargor.
34. COVENANT TO RELEASE
Upon the expiry of the Security Period (but not otherwise save as
provided for in Clause 17 (Additional Borrowers, Guarantors and
Security) of the Credit Agreement, the Security Agent and each Secured
Lender shall, at the request and cost of the Chargors, execute and do
all such deeds, acts and things as may be necessary to release the
Security Assets from the security constituted hereby.
<PAGE> 35
35. GOVERNING LAW AND JURISDICTION
35.1 GOVERNING LAW
This Debenture shall be governed by and construed in accordance with
English law.
35.2 JURISDICTION
For the benefit of the Security Agent and the Secured Lenders, each
Chargor agrees that the courts of England have jurisdiction to settle
any disputes in connection with this Debenture and accordingly submits
to the jurisdiction of the English courts. Nothing in this Clause 35.2
limits the right of the Security Agent or any Secured Lender to bring
proceedings against any Chargor in connection with this Debenture in
any other court of competent jurisdiction or concurrently in more than
one jurisdiction.
IN WITNESS whereof this Debenture has been duly executed as a deed and is
delivered on the date first above written.
<PAGE> 36
SCHEDULE 1
THE CHARGORS
Getty Communications Limited (company number 3005770)
Place of Incorporation: England
Registered Office: 101 Bayham Street
Camden Town
London NW1 0AG
Address for Notices: 101 Bayham Street
Camden Town
London NW1 0AG
Attention: Cameron Anderson
Fax: 0171 267 6540
Getty Images Limited (company number 948785 )
Place of Incorporation: England
Registered Office: 101 Bayham Street
Camden Town
London
NW1 0AG
Address for Notices: 101 Bayham Street
Camden Town
London
NW1 0AG
Attention: Cameron Anderson
Fax: 0171 267 6540
Getty Communications Group Finance Limited (company number 3162899)
Place of Incorporation: England
Registered Office: 101 Bayham Street
Camden Town
London
NW1 0AG
Address for Notices: 101 Bayham Street
Camden Town
London
NW1 0AG
Attention: Cameron Anderson
<PAGE> 37
Fax: 0171 267 6540
<PAGE> 38
SCHEDULE 2
REAL PROPERTY
PART I
FREEHOLD PROPERTY
None listed at the date hereof.
<PAGE> 39
SCHEDULE 2
REAL PROPERTY
PART II
LEASEHOLD PROPERTY
All that leasehold premises known as 101 Bayham Street, Camden, London, NW1
demised by the lease dated 18th October, 1995 made between Allied Dunbar
Assurance Plc to Tony Stone Associates Limited (now called Getty Images
Limited).
<PAGE> 40
SCHEDULE 3
PART I
NOTICE OF ASSIGNMENT
(FOR ATTACHMENT BY WAY OF ENDORSEMENT
TO THE INSURANCE POLICIES)
To: [Insurer]
We, Getty Communications Limited and the other Chargors, hereby give notice that
by a first priority Debenture dated [ ] October, 1999 (the "DEBENTURE") and made
by, inter alia, [ ] in favour of HSBC Investment Bank plc (the "SECURITY AGENT")
as agent and trustee for itself and the Secured Lenders referred to in the
Debenture there has been assigned by us to the Security Agent as first mortgagee
and assignee this policy and all our interest (including the benefit of all
money owing or to become owing to us and all interest thereon) under and in
respect of this policy.
We, Getty Communications Limited and the other Chargors, hereby authorise you to
issue a letter of undertaking, in the form attached, to the Security Agent and
to act on the instructions of the Security Agent in the manner provided in that
letter without any further reference to or authorisation from us.
For and on behalf of
Getty Communications Limited
By:
For itself and on behalf of the
other Chargor(s) set out below:
Getty Images Limited
Getty Communications Group Finance Limited
DATED this day of , 19
<PAGE> 41
PART II
[LETTER OF UNDERTAKING]
To: HSBC Investment Bank plc
as Security Agent for the Secured Lenders
(as defined in the Debenture
granted to it by, inter alias,
Getty Communications Limited and other Chargors
dated [ ] October, 1999
Dear Sirs,
LETTER OF UNDERTAKING
In accordance with an assignment made Getty Communications Limited, Getty Images
Limited, Getty Communications Group Finance Limited and (the "COMPANIES") and in
consideration of your agreeing to the Companies or any of them continuing the
insurance (the "INSURANCE") referred to in the Schedule to this letter we
undertake:
1. to note your interest as first priority mortgagee on the policies of
Insurance referred to in the Schedule;
2. to disclose to you without any reference to or further authority from
any of the Companies such information relating to the Insurance as you
may at any time reasonably request;
3. not to release any of the Insurance on request by any of the Companies
without your prior written consent;
4. to pay all claims payable under the policies of Insurance to you unless
you otherwise agree in writing.
This letter shall be governed by English law.
SCHEDULE
Yours faithfully,
- --------------------
for and on behalf of
[Insurer]
<PAGE> 42
PART III
FORM OF NOTICE IN RESPECT OF RELEVANT AGREEMENTS
To: [Relevant party]
[Date]
Dear Sirs,
We hereby give you notice that, by a first priority Debenture dated [ ] October,
1999 (the "DEBENTURE"), made by, amongst others, the companies listed below (the
"CHARGORS") in favour of HSBC Investment Bank plc (the "SECURITY AGENT") as
agent and trustee for itself and the Secured Lenders referred to in the
Debenture there has been assigned by the Chargors to the Security Agent as first
and subsequent priority mortgagee and assignee all the Chargors' rights, title
and interest in and to [insert details of Relevant Agreement] (the "AGREEMENT").
On behalf of the Chargors, we hereby irrevocably instruct and authorise you:
(a) to disclose to the Security Agent without any reference to or further
authority from the Chargors and without any enquiry by you as to the
justification for such disclosure, such information relating to the
Agreement as the Security Agent may at any time and from time to time
reasonably request;
(b) to hold all sums from time to time due and payable by you to us under
the Agreement to the order of the Security Agent;
(c) to pay or release all or any part of the sums from time to time due and
payable by you to the Chargors or any of them under the Agreement in
accordance with the written instructions given to you by the Security
Agent from time to time;
(d) to comply with the terms of any written notice or instructions in any
way relating to, or purporting to relate to, the Debenture, the sums
payable to the Chargors or any of them from time to time under the
Agreement or the debts represented thereby which you receive at any
time from the Security Agent without any reference to or further
authority from the Chargors or any of them and without any enquiry by
you as to the justification for or validity of such notice or
instruction; and
(e) to send copies of all notices and other information under the Agreement
to the Security Agent.
Please note that the Chargors are not permitted to receive from you, otherwise
than through the Security Agent, any amount in respect of or on account of the
sums payable to the Chargors from time to time under the Agreement without the
prior written consent of the Security Agent.
Please also note that these instructions are not to be revoked or amended
without the prior written consent of the Security Agent.
<PAGE> 43
This letter shall be governed by and construed in accordance with English law.
Please confirm your agreement to the above by sending the attached
acknowledgement to the Security Agent with a copy to ourselves thereby giving to
the Security Agent for the Secured Lenders the further undertakings therein set
out.
Yours faithfully,
............................................
For and on behalf of
[ ]
for itself and on behalf of
the following Chargors:
Getty Communications Limited
Getty Images Limited
Getty Communications Group Finance Limited
Enc.
c.c. HSBC Investment Bank plc
<PAGE> 44
PART IV
FORM OF ACKNOWLEDGEMENT OF [RELEVANT PARTY] TO THE SECURITY AGENT
To: HSBC Investment Bank plc
as Security Agent
Dear Sirs,
We confirm receipt from [ ] on behalf of certain Chargors (the "CHARGORS") of a
notice dated [ ] of a charge upon the terms of a Debenture dated [ ] October,
1999 over all of the Company's rights, title and interest in and to [insert
details of the Relevant Agreement] (the "AGREEMENT").
We confirm that:
(i) we accept the instructions and authorisations contained in that notice
and we undertake to act in accordance with and comply with the terms of
that notice;
(ii) we have not received notice of the interest of any third party in or to
the Agreement;
(iii) we shall not permit any sums to be paid to the Chargors or any of them
or any other persons under or pursuant to the Agreement without your
prior consent.
This letter shall be governed by and construed in accordance with English law.
Yours faithfully,
..................................
On behalf of
[Relevant party]
c.c. [relevant Chargor]
<PAGE> 45
SCHEDULE 4
GROUP SHARES
<TABLE>
<CAPTION>
CHARGOR NAME OF COMPANY IN WHICH SHARES NAME OF NOMINEE (IF ANY) BY WHOM
ARE HELD SHARES ARE HELD
<S> <C> <C>
Getty Communications Limited Getty Images Limited n/a
n/a
Getty Communications Limited Getty Communications Group n/a
Finance Limited
Getty Communications Limited Allsport Photographic Limited n/a
Getty Images Limited Hulton Getty Holdings Limited n/a
n/a
</TABLE>
<TABLE>
<CAPTION>
CHARGOR CLASS OF SHARES HELD NUMBER OF SHARES HELD
<S> <C> <C>
Getty Communications Limited Ordinary Shares of(pound)1 each 125,360
Getty Communications Limited "A" Ordinary Shares of(pound)1 each 30,000
Ordinary Shares of(pound)1 each 23,100,001
Getty Communications Limited Ordinary Shares of(pound)1 each 45,769
Ordinary Shares of(pound)0.01 each 1,930,643
Getty Images Limited Preferred Ordinary Shares of(pound)0.01 703,056
each
</TABLE>
<PAGE> 46
SCHEDULE 5
PART I
INTELLECTUAL PROPERTY RIGHTS
Mark: Allsport
Application No: 2154968
Status: [Pending]
Classes: 9, 16 & 41
Filing Date: 5th January, 1998
Proprietor: Getty Communications Limited
Mark: Energy Film Library
Application No: 2164695
Status: Registered
Classes: 9, 16 & 41
Registration Date: 8th January, 1999
Proprietor: Getty Communications Limited
Mark: Body Frame Device
Registration No: 1529597
Status: Registered
Classes: 41
Registration Date: 14th January, 1994
Proprietor: Getty Images Limited
Mark: Tony Stone
Registration No: 1529284
Status: Registered
Classes: 41
Registration Date: 23rd September, 1994
Proprietor: Getty Images Limited
Mark: Body Frame Device
Application No: EM256099
Status: [Pending]
Classes: 9, 16, 38 & 41
Filing Date: 9th May, 1996
Proprietor: Getty Images Limited
<PAGE> 47
Mark: Tony Stone
Application No: EM256131
Status: Registered
Classes: 9, 16, 38 & 41
Registration Date: 29th March, 1999
Proprietor: Getty Images Limited
Mark: Energy Film. Library
Application No: 2164759
Status: Registered
Classes: 9, 16 & 41
Registration Date: 27th November, 1998
Proprietor: Getty Communications Limited
Mark: Hulton
Application No: EM260323
Status: Registered
Classes: 9, 16, 38 & 41
Filing Date: 23rd October, 1998
Proprietor: Getty Communications Limited
Mark: Allsport
Application No: EM715193
Status: Advertised
Classes: 9, 16 & 41
Registration Date: 12th July, 1999
Proprietor: Getty Communications Limited
Mark: Energy Film-Library
Application No: EM811554
Status: Advertised
Classes: 9, 16 & 41
Publication Date: 15th March, 1999
Proprietor: Getty Communications Limited
Mark: Energy Film-Library
Application No: EM811547
Status: Advertised
Classes: 9, 16 & 41
Publication Date: 19th April, 1999
Proprietor: Getty Communications Limited
<PAGE> 48
SCHEDULE 5
PART II
SCHEDULE OF LICENCE AGREEMENTS
None listed at the date hereof.
<PAGE> 49
SCHEDULE 6
PART I
BANK ACCOUNT SET-OFF LETTER AND ACKNOWLEDGEMENT
To: [Account Bank]
Date: [ ]
Dear Sirs,
We hereby give you notice that by a first priority Debenture dated [ ] October,
1999 (the "DEBENTURE") made by us (the "COMPANY") and certain of our
subsidiaries listed at the end of this notice (together the "CHARGORS") in
favour of HSBC Investment Bank plc (the "AGENT") as agent and trustee for itself
and the Secured Lenders referred to in the Debenture there has been charged by
each Chargor to the Agent as first and subsequent priority chargee all the
Chargor's rights, title and interest in and to all sums of money which may now
or in the future be held with you for the account of such Chargor in any
accounts at any of your branches (the "ACCOUNTS"), together with all interest
from time to time earned thereon and the debts represented by such sums and
interest, as well as all book and other debts owed to such Chargor.
On behalf of ourselves and each of the other Chargors, we hereby irrevocably
authorise and instruct you:
(a) to disclose to the Agent without any reference to or further authority
from the Company or the relevant Chargor and without any enquiry by you
as to the justification of such disclosure, such information relating
to the Accounts and the sums therein as the Agent may at any time and
from time to time request;
(b) to hold all sums from time to time standing to the credit of the
Accounts to the order of the Agent;
(c) to pay or release all or any part of the sums from time to time
standing to the credit of the Accounts in accordance with the written
instructions of the Agent at any time or times;
(d) to comply with the terms of any written notice or instructions in any
way relating to, or purporting to relate to, the Debenture, the sums
standing to the credit of the Accounts from time to time or the debts
represented thereby which you receive at any time from the Agent
without any reference to or further authority from the Company or the
relevant Chargor and without any enquiry by you as to the justification
for or validity of such notice or instruction; and
(e) to pay all monies received by you for the account of any Chargor to
(and only to) the credit of the Account of such Chargor with you.
Please note that neither the Company nor any other Chargor is permitted to
withdraw any amount from any of the Accounts without the prior written consent
of the Agent.
<PAGE> 50
Please also note that these instructions are not to be revoked or varied without
the prior written consent of the Agent.
This letter is governed by English law.
Please confirm your agreement to the above by sending the attached
acknowledgement to the Agent with a copy to us, thereby giving to the Agent for
the Secured Lenders the further undertakings therein set out.
Yours faithfully,
.......................
On behalf of Getty Communications Limited
for itself and as agent for each of
the Chargors named below.
CHARGORS
Getty Images Limited
Getty Communications Group Finance Limited
cc: HSBC Investment Bank plc
<PAGE> 51
PART II
FORM OF ACKNOWLEDGEMENT
To: HSBC Investment Bank plc
Date: [ ]
Dear Sirs,
We confirm receipt from Getty Communications Limited (the "COMPANY") for itself
and on behalf of the Chargors named therein (together with the Company, the
"CHARGORS") of a notice dated [ ] October, 1999 relating to certain accounts
(the "ACCOUNTS") of the Company and the other Chargors with the Bank .
We confirm that:-
(a) we accept the instructions and authorisations contained in that notice
and we undertake to act in accordance with the terms of that notice;
(b) we have not received notice of the interest of any third party in the
Accounts;
(c) we have neither claimed or exercised nor will claim or exercise any
security interest, set-off, counter-claim or other rights in respect of
the Accounts, the sums therein or the debts represented thereby without
your prior written consent;
(d) we shall pay all monies received by us for the account of any Chargor
to (and only to) the credit of the Account in the name of that Chargor
specified in that notice unless otherwise consented to by you; and
(e) we shall not permit any amount to be withdrawn from any of the Accounts
without your prior written consent.
This letter is governed by English Law.
Yours faithfully,
..................
On behalf of [Bank]
cc: Getty Communications Limited
<PAGE> 52
PART III
FORM OF LETTER FOR OPERATION OF BANK ACCOUNTS
To: [Bank]
Date: [ ]
Dear Sirs,
We refer to:
(i) the Debenture dated [ ] October, 1999 given by Getty Communications
Limited (the "COMPANY") and the subsidiaries of the Company named
therein as Chargors (together with the Company, the "Chargors") in
favour of HSBC Investment Bank plc as agent and trustee for itself and
others;
(ii) the notice to you (the "NOTICE") from the Company concerning any and
all accounts (the "ACCOUNTS") of the Company and the other Chargors
with you at any of your branches outside Scotland; and
(iii) the acknowledgement issued by you in response to the Notice (the
"ACKNOWLEDGEMENT").
We confirm, as agent and trustee as aforesaid, that subject to our right to
withdraw such consent in whole or in part as indicated below, we consent in
relation to the Accounts to the following transactions being undertaken in
accordance with the terms of your mandate as far as those terms are not
inconsistent with this letter:
(a) you may make payments on the instructions of each Chargor and debit the
amounts involved to the Account(s) of that Chargor;
(b) you may debit to any Account(s) of any Chargor amounts due to you from
that Chargor; and
(c) in order to enable you to make available net overdraft facilities to
the Chargors you may set-off credit balances on any of the Accounts of
the Chargors against debit balances on any other Accounts of the
Chargors provided that all such Accounts are included in group netting
arrangements operated by you for the Chargors.
The above consents will remain in effect until you receive notice from us by
facsimile transmission or letter withdrawing the same (which we may do wholly or
in part), whereupon consent to the above mentioned transactions shall be
withdrawn to the extent stated in such notice. In the event that the consent
referred to at (c) above shall be withdrawn, you shall nevertheless be entitled
immediately to set-off debit balances and credit balances on the relevant
Accounts as described in (c) above as and to the extent existing immediately
prior to the receipt by you of notice from us withdrawing such consent.
<PAGE> 53
This letter shall be governed by English law.
Yours faithfully,
.....................
For and on behalf of
HSBC Investment Bank plc
cc: Getty Communications Limited
<PAGE> 54
SCHEDULE 7
FORM OF DEED OF ACCESSION
THIS DEED OF ACCESSION dated [ ], 199[ ] is made BETWEEN:
(1) [ ] (the "NEW CHARGOR"), a company incorporated in
England or Wales whose registered office is at
[ ];
(2) GETTY COMMUNICATIONS LIMITED (the "COMPANY") for itself and as
agent for and on behalf of each of the other Chargors named in the
Debenture referred to below; and
(3) HSBC INVESTMENT BANK PLC as the Security Agent.
WHEREAS
(A) The New Chargor is or will on the date hereof become a wholly-owned
Subsidiary of the Company.
(B) The Company has entered into a debenture dated [ ], 1999 (as
supplemented and amended by Deeds of Accession or otherwise from time
to time, the "DEBENTURE") between the Company, each of the companies
named therein as Chargors, and HSBC Investment Bank plc as agent and
trustee for certain Secured Lenders as identified therein.
(C) The New Chargor at the request of the Company and in consideration of
the Secured Lenders making or continuing to make facilities available
to the Company or any other member of the Group and after giving due
consideration to the terms and conditions of the Finance Documents and
the Debenture and satisfying itself that there are reasonable grounds
for believing that the entry into this Deed by it will be of benefit to
it, has decided in good faith and for the purpose of carrying on its
business to enter into this Deed and thereby become a Chargor under the
Debenture.
NOW THIS DEED WITNESSES as follows:
1. Terms defined in the Debenture shall have the same meaning in this
Deed.
2. The New Chargor hereby agrees:
(a) to become a party to and to be bound by the terms of the
Debenture as a Chargor with immediate effect and so that the
Debenture shall be read and construed for all purposes as if
such New Chargor had been an original party thereto in the
capacity of Chargor (but so that the security created
consequent on such accession shall be created on the date
hereof); and
(b) to be bound by all the covenants and agreements in the
Debenture which are expressed to be binding on a Chargor.
3. (a) In accordance with the foregoing, the New Chargor as
beneficial owner and with full title guarantee subject to the
Encumbrances permitted pursuant to the Credit
<PAGE> 55
Agreement now grants to the Security Agent as agent and
trustee for the Secured Lenders the assignments, charges,
mortgages and other security described in the Debenture as
being granted, created or made by Chargors thereunder in
favour of the Security Agent as agent and trustee for the
Secured Lenders and grants to the Security Agent as agent and
trustee for the Secured Lenders the floating charge as
described in Clause 5.1 of the Debenture, to the intent that
its assignments, charges, mortgages and other security shall
be effective and binding upon it and its property and assets
and shall not in any way be avoided, discharged or released or
otherwise adversely affected by any ineffectiveness or
invalidity of the Debenture or of any other party's execution
thereof or any other Deed of Accession, or by any avoidance,
invalidity, discharge or release of any assignment, charge or
mortgage contained in the Debenture or in any other Deed of
Accession.
(b) Without limiting the generality of the other provisions of
this Deed and the Debenture, pursuant to the terms hereof and
of the Debenture, the New Chargor as beneficial owner and with
full title guarantee subject to any Encumbrance permitted
pursuant to the Credit Agreement, as security for the payment,
discharge and performance of all Secured Liabilities, hereby
and by the Debenture in favour of the Security Agent (as agent
and trustee for itself and each of the Secured Lenders):
(i) charges by way of first legal mortgage all the
property (if any) now belonging to it brief
descriptions of which are specified in Schedule 2 of
the Debenture and/or the Schedule to this Deed;
(ii) subject to any necessary third party consents being
obtained, assigns and agrees to assign all of its
right, title and interest (if any) in and to each of
the contracts and agreements specified in Clause
4.3(a) of the Debenture and/or the Schedule to this
Deed; and
(iii) agrees that the New Chargor's estates and other
interests in certain specific Intellectual Property
Rights for the purposes of Clause 4.1(c)(xi) of the
Debenture and certain Group Shares for the purposes
of Clause 4.2 thereof, as such provisions apply in
relation to the New Chargor, as are specified in the
Schedule to this Deed and (in the case of Group
Shares, together with all Related Rights) are hereby
mortgaged or charged as provided in such provisions
and the other provisions of the Debenture.
4. The Company, for itself and as agent for and on behalf of all other
Chargors under the Debenture, hereby agrees to all matters provided for
herein.
5. The Debenture and this Deed shall be read as one to this extent and so
that references in the Debenture to "this Debenture", "herein", and
similar phrases shall be deemed to include this Deed and all references
in the Debenture to "Schedule 2", "Schedule 4" or "Schedule 5" (or any
part thereof) shall be deemed to include a reference to the Schedule to
this Deed (or relevant part thereof).
6. This Deed shall be governed by and construed in accordance with English
law.
IN WITNESS whereof this Deed of Accession has been executed as a deed on the
date first above written.
<PAGE> 56
SCHEDULE
Insert details of:
(1) Freehold and Leasehold property in which the New Chargor has an
interest;
(2) additional contracts etc., to which the New Chargor is a party and
which are to become Relevant Agreements;
(3) Intellectual Property Rights in which the New Chargor has an interest
but excluding any Excluded Intellectual Property (as defined in the
Debenture);
(4) Group Shares in which the New Chargor has an interest.
<PAGE> 57
SIGNATORIES
(to Deed of Accession)
THE NEW CHARGOR
(for a Company incorporated
in the United Kingdom)
Executed as a deed by )
)
) ........................................
acting by ) Director
and )
)
)
........................................
Director
THE COMPANY
(for itself and as agent for the
other Chargors party to the
Debenture herein referred to )
)
Executed as a deed by )
) .........................................
GETTY COMMUNICATIONS ) Director
LIMITED )
acting by )
and )
........................................
Director
THE SECURITY AGENT
HSBC INVESTMENT BANK PLC
By:
<PAGE> 58
SIGNATORIES
(to Debenture)
Executed as a deed by )
GETTY )
COMMUNICATIONS )
LIMITED )
acting by ) Mark Getty
and ) Jonathan Klien
Executed as a deed by )
GETTY IMAGES LIMITED )
acting by ) Mark Getty
and ) Jonathan Klien
Executed as a deed by )
GETTY COMMUNICATIONS )
GROUP FINANCE LIMITED )
acting by ) Mark Getty
and ) Jonathan Klien
THE SECURITY AGENT
HSBC INVESTMENT BANK plc
By: M. T. Nickell
<PAGE> 59
CONFORMED COPY
DEBENTURE
Dated 25th October, 1999
BETWEEN
THE CHARGORS
named herein
and
HSBC INVESTMENT BANK plc
as Security Agent
ALLEN & OVERY
London
<PAGE> 60
BK:680544.5
<PAGE> 61
INDEX
<TABLE>
<CAPTION>
CLAUSE PAGE
<C> <C>
1. Interpretation.......................................................................................1
2. CovenanttoPay........................................................................................5
3. Covenant to Make Facilities Available................................................................5
4. Fixed Charges; Assignments...........................................................................5
5. Floating Charges....................................................................................10
6. Continuing Security, etc............................................................................11
7. Representations and Warranties......................................................................14
8. Undertakings........................................................................................17
9. Power to Remedy.....................................................................................21
10. Special Provisions relating to the Security Shares..................................................21
11. The Account Banks...................................................................................23
12. When Security becomes Enforceable...................................................................24
13. Enforcement of Security.............................................................................24
14. Receiver............................................................................................25
15. Application of Proceeds.............................................................................27
16. No Liability as Mortgagee in Possession.............................................................28
17. Protection of Third Parties.........................................................................28
18. Taxes...............................................................................................28
19. Expenses............................................................................................28
20. Delegation by Security Agent........................................................................29
21. Further Assurances..................................................................................29
22. Redemption of Prior Mortgages.......................................................................30
23. Power of Attorney...................................................................................30
24. New Accounts........................................................................................31
25. Stamp Taxes.........................................................................................31
26. Assignments, etc....................................................................................31
27. Waivers, Remedies Cumulative........................................................................32
28. Set-off.............................................................................................32
29. Severability........................................................................................33
30. Counterparts........................................................................................33
31. Notices.............................................................................................33
32. Notice of Assignment................................................................................34
33. Registration........................................................................................34
34. Covenant to Release.................................................................................34
35. Governing Law and Jurisdiction......................................................................35
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
SCHEDULES
<C> <C>
1. The Chargors........................................................................................36
2. Part I - Freehold Property..........................................................................38
Part II - Leasehold Property........................................................................39
3. Part I - Notice of Assignment.......................................................................40
Part II - Letter of Undertaking.....................................................................41
Part III - Form of Notice in respect of Relevant Agreements.........................................42
Part IV - Form of Acknowledgement...................................................................44
4. Group Shares........................................................................................45
5. Part I - Intellectual Property Rights...............................................................46
Part II - Schedule of Licence Agreements............................................................48
6. Part I - Bank Account Set-off Letter and Acknowledgement............................................49
Part II - Form of Acknowledgement...................................................................51
Part III - Form of Letter for Operation of Bank Accounts............................................52
7. Form of Deed of Accession...........................................................................54
Signatories to Deed of Accession.............................................................................57
Signatories to Debenture.....................................................................................58
</TABLE>
<PAGE> 1
EXHIBIT 10.11
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of October 29, 1999, among GETTY
IMAGES, INC., a Delaware corporation (the "Parent"), GETTY COMMUNICATIONS
LIMITED, a company incorporated in England ("Getty Communications"), GETTY
IMAGES LIMITED, a company incorporated in England ("Getty Limited"), TONY STONE
IMAGES/AMERICA, INC., an Illinois corporation ("TSI/America"), and EYEWIRE
PARTNERS COMPANY, a Nova Scotia unlimited liability company ("EyeWire"), (each
of Parent, Getty Communications, Getty Limited, TSI/America and EyeWire being
herein called a "Pledgor" and collectively the "Pledgors") and HSBC INVESTMENT
BANK PLC, as security agent and trustee for itself and each of the Lenders (as
defined below) (in such capacity, together with its successors in such capacity,
the "Security Agent").
We refer to that certain Credit Agreement dated October 25,
1999, among Parent, as Original Borrower, certain parties (including without
limitation each Pledgor other than EyeWire) as guarantors, HSBC Investment Bank
plc as Arranger, Facility Agent and Security Agent, HSBC Bank plc as Overdraft
Bank and the Banks (such Credit Agreement, as the same may be amended, novated
or supplemented from time to time, being herein called the "Credit Agreement").
For purposes of this Agreement, the following definitions
shall apply (capitalized terms used in this Agreement but not defined herein
shall have the meanings given to such terms in the Credit Agreement):
(1) The terms "Beneficiary" and "Beneficiaries" shall mean
individually or collectively, as the context may indicate, the
Security Agent and the Lenders.
(2) The term "Lender" means each of the Facility Agent, the
Security Agent, the Arranger, the Overdraft Bank and the Banks
party to or having an interest under the Finance Documents
from time to time, including without limitation their
respective successors and assigns (together, the "Lenders").
(3) The term "Secured Liabilities" means (subject as otherwise
expressly stated herein) all present and future obligations
and liabilities (whether actual or contingent, as principal or
guarantor or other surety, and whether owed jointly or
severally or in any other capacity whatsoever) of each Obligor
to the Lenders (or any of them) under each or any of the
Finance Documents, in each case together with all costs,
charges and expenses incurred by any Lender in connection with
the protection, preservation or enforcement of its respective
rights under the Finance Documents or any other document
evidencing or securing any such liabilities. When used with
respect to any Pledgor (for example, references to a
particular Pledgor's Secured Liabilities, such term means all
obligations and liabilities of such Pledgor described in the
preceding sentence.
<PAGE> 2
(4) The term "Issuer" shall mean each corporation, partnership,
limited liability company or other issuer, person or entity
whose shares, ownership interests, notes, instruments or other
securities are from time to time included in, or required
under the Credit Agreement to be included in, the Collateral
(as herein defined).
(5) The term "US Pledgor" means a Pledgor which is incorporated in
the United States of America.
(6) The term "Guaranteed Liabilities" means, with respect to each
Grantor, the obligations and liabilities for which such
Grantor is liable in its capacity as a Guarantor under the
Credit Agreement ("Guaranteed Liabilities").
The principles of construction set forth in Clause 1.2 of the Credit Agreement
shall also apply with respect to this Agreement. When the context requires,
terms and provisions relating to the Collateral or any part thereof, when used
in relation to a Pledgor, shall refer to that Pledgor's Collateral or the
relevant part thereof. For the avoidance of doubt, the parties agree that this
Agreement is a "Security Document" as such term is defined in the Credit
Agreement.
The Credit Agreement provides for certain loans and other
credit facilities to be made available to the Borrowers subject to certain
conditions, one of those conditions being that the Pledgors shall have entered
into this Agreement. Each Pledgor is an Obligor under the Credit Agreement and
is a direct or indirect beneficiary of one or more of the loans and other credit
facilities to be provided by the Credit Agreement.
Accordingly, the Pledgors and the Security Agent, for itself
and for the benefit of each of the Beneficiaries, hereby agree as follows:
-2-
<PAGE> 3
Section 2. Pledge and Security Interest. For the benefit of the
Security Agent and the other Beneficiaries, each Pledgor hereby transfers,
hypothecates, pledges, sets over and delivers unto the Security Agent, and
grants to the Security Agent a security interest in, all right, title and
interest such Pledgor now has or hereafter acquires in (a) the shares of capital
stock and other ownership interests of the Pledged Companies set forth on
Schedule I and all shares of capital stock, partnership interests, membership
interests, other ownership interests and other securities and instruments of the
Pledged Companies (including without limitation options, warrants and
subscription rights with respect to any such ownership interests, and
instruments evidencing indebtedness of the Pledged Companies) now owned or
obtained in the future by such Pledgor and the certificates representing or
evidencing all such shares or other interests or securities (the "Pledged
Stock"), (b) all other property which may be delivered to and held by the
Security Agent pursuant to the terms hereof, (c) all payments of principal or
interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of, in exchange for or
upon the conversion of the securities, instruments, other ownership interests
and other items referred to in clause (a) or clause (b) above, (d) except as
provided in Section 5 below, all rights and privileges of such Pledgor with
respect to the securities and other property referred to in clauses (a), (b) and
(c) above, and (e) all proceeds of any of the foregoing (the items referred to
in clauses (a) through (e) being collectively called the "Collateral"). Upon
delivery to the Security Agent, (A) any share certificates, notes or other
securities or instruments now or hereafter included in the Collateral (the
"Pledged Securities") shall be duly endorsed to the Security Agent or
accompanied by stock powers duly executed in blank or other instruments of
transfer satisfactory to the Security Agent and by such other instruments and
documents as the Security Agent may reasonably request, and (B) all other
property comprising part of the Collateral shall be accompanied by proper
instruments of assignment duly executed by such Pledgor and such other
instruments or documents as the Security Agent may reasonably request
(including, without limitation, Uniform Commercial Code Financing Statements).
Each delivery of Pledged Securities shall be accompanied by a schedule
describing the securities theretofore and then being pledged hereunder, which
schedule shall be attached hereto as Schedule I and made a part hereof. Each
schedule so delivered, after approval by the Security Agent, shall supersede any
prior schedules so delivered. In addition, all such Pledged Stock shall be
accompanied by irrevocable written proxies satisfactory under applicable
corporate law of the jurisdiction of incorporation of the Issuer of such Pledged
Stock. The Pledgors agree promptly to deliver or cause to be delivered to the
Security Agent any and all Pledged Securities, and any and all certificates or
other instruments or documents representing the Collateral, including without
limitation all such items (whether now owned or hereafter acquired) which are
required to be pledged to the Security Agent at any time hereafter pursuant to
the Credit Agreement.
Section 3. Secured Liabilities. The pledges and security interests
granted hereunder secure the payment, discharge and performance of all the
Secured Liabilities. All of the Collateral secures all of the Secured
Liabilities. In the case of each US Pledgor, the amount of the Guaranteed
Liabilities of such US Pledgor secured hereby is limited as provided in Clause
16.9 of the Credit Agreement.
-3-
<PAGE> 4
Section 4. Representations, Warranties and Covenants. The Pledgors
hereby represent, warrant and covenant to and with the Security Agent and each
Beneficiary that:
(1) Each Pledgor has acquired the Pledged Stock pledged by it
hereunder for value and without notice of any adverse claim to
the Pledged Stock; the Pledged Stock includes all the
outstanding capital stock of the Issuer which is the issuer of
such Pledged Stock; and all the shares of the Pledged Stock
have been duly authorized and validly issued and are fully
paid and nonassessable.
(2) Except for the security interest granted hereunder, each
Pledgor (i) is and will at all times continue to be the direct
owner, beneficially and of record, of the Pledged Securities
pledged by it hereunder, (ii) holds and will so hold the same
free and clear of all Encumbrances and of all other rights or
options in favor of, or claims of, any other person, (iii)
will make no assignment, pledge, hypothecation or transfer of,
or create any security interest in, the Collateral, (iv) will
cause all securities included within the Collateral to be
certificated securities, and (v) will cause any and all
certificates, instruments or other documents representing or
evidencing Collateral to be forthwith deposited with the
Security Agent and pledged or assigned hereunder.
(3) By virtue of the execution and delivery by the Pledgors of
this Agreement, when the Pledged Securities are delivered to
the Security Agent in accordance with this Agreement, the
Security Agent will obtain a valid, legal and perfected first
priority lien upon and security interest in such Pledged
Securities as security for the repayment of the Secured
Liabilities, free and clear of all Encumbrances or other
adverse claims (other than the security interest created
hereby).
(4) The pledge and security interest effected hereby is effective
to vest in the Security Agent the rights in the Collateral
contemplated herein.
(5) The Pledgors will cause each Issuer not to issue any stock or
other equity securities unless such securities are issued in
accordance with the terms of the Finance Documents and are
concurrently pledged and delivered to the Security Agent
hereunder.
(6) This Agreement is the legal, valid and binding obligation of
each Pledgor and is enforceable against such Pledgor in
accordance with its terms.
(7) If any Pledgor shall become entitled to receive or shall
receive any stock certificate (including without limitation
any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase
or reduction of any capital or any certificate issued in
connection with any reorganization), option or rights in
respect of capital stock of any Issuer,
-4-
<PAGE> 5
whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or
otherwise in respect thereof, such Pledgor shall accept the
same as the agent of the Security Agent and the other
Beneficiaries, hold the same in trust for the Security Agent
and the Beneficiaries and deliver the same forthwith to the
Security Agent in the exact form received, duly indorsed by
such Pledgor to the Security Agent and accompanied by such
stock powers and proxies as provided in Section 1 above, to be
held by the Security Agent, subject to the terms hereof, as
additional Collateral for the Secured Liabilities. Any sums
paid upon or in respect of the Pledged Securities upon the
liquidation or dissolution of any Issuer shall be paid over to
the Security Agent to be held by it hereunder as additional
collateral security for the Secured Liabilities, and in case
any distribution of capital shall be made on or in respect of
the Pledged Securities or any property shall be distributed
upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property
so distributed shall, unless otherwise subject to a perfected
security interest in favor of the Security Agent, be delivered
to the Security Agent to be held by it hereunder as additional
collateral security for the Secured Liabilities. If any sums
of money or property so paid or distributed in respect of the
Pledged Securities shall be received by such Pledgor, such
Pledgor shall, until such money or property is paid or
delivered to the Security Agent, hold such money or property
in trust for the Beneficiaries, segregated from other funds of
such Pledgor, as additional collateral security for the
Secured Liabilities.
(8) Each Pledgor will not (i) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the
Pledged Securities or proceeds thereof (except pursuant to a
transaction, if any, expressly permitted by the Credit
Agreement), (ii) create, incur or permit to exist any
Encumbrance or option in favor of, or any claim of any person
with respect to, any of the Pledged Securities or proceeds
thereof, or any interest therein, except for the security
interests created by this Agreement or (iii) enter into any
agreement or undertaking restricting the right of such Pledgor
or the Security Agent to sell, assign or transfer any of the
Pledged Securities or proceeds thereof.
(9) In the case of each Pledgor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Securities issued by it and
will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Security Agent
promptly in writing of the occurrence of any of the events
described in Section 3(g) above with respect to the Pledged
Securities issued by it, and (iii) the terms of Section 5
hereof shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 5
with respect to the Pledged Securities issued by it.
-5-
<PAGE> 6
Section 5. Registration in Nominee Name; Denominations. Upon either (a)
the occurrence and during the continuance of an Event of Default or (b) the
reasonable good faith judgment of the Security Agent that the registration of
the Pledged Securities is necessary or desirable to maintain or perfect the
security interests created by this Agreement in the Pledged Securities or to
protect or exercise the rights or remedies of the Security Agent hereunder, the
Security Agent, on behalf of the Beneficiaries, shall have the right (in its
sole and absolute discretion) to register the Pledged Securities in its own name
or the name of its nominee. Each Pledgor will promptly give to the Security
Agent copies of any notices or other communications received by it with respect
to Pledged Securities registered in the name of such Pledgor. The Security Agent
shall at all times have the right to exchange the certificates representing
Pledged Securities for certificates of smaller or larger denominations for any
purposes consistent with this Agreement.
Section 6. Irrevocable Proxy; Voting Rights; Dividends and Interest;
etc.
(1) For so long as this Agreement and the pledge and security
interest created hereby remain in effect, and whether or not
the Collateral or any of the Pledged Securities has been
transferred into the name of the Security Agent or its
nominee, each Pledgor hereby grants to the Security Agent a
present, irrevocable proxy, coupled with an interest, and
hereby constitutes and appoints the Security Agent as
Pledgor's proxy with full power, in the same manner, to the
same extent and with the same effect as if the Pledgor were to
do the same, to exercise all voting, consenting, corporate and
other rights accruing to Pledgor as owner of the Collateral or
any part thereof, or arising out of or otherwise pertaining to
the Collateral, and whether at any meeting of shareholders of
any Issuer or in the absence of any such meeting or otherwise,
and any and all rights of conversion, exchange and
subscription and any other rights, privileges or options
pertaining to such Collateral as if it were the absolute owner
thereof (including, without limitation, the right to exchange
at its discretion any and all of the Pledged Securities upon
the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any
Issuer, or upon the exercise by any Pledgor or the Security
Agent of any right, privilege or option pertaining to such
Pledged Securities, and in connection therewith, the right to
deposit and deliver any and all of the Pledged Securities with
any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the
Security Agent may determine), all without liability except to
account for property actually received by it, but the Security
Agent shall have no duty to any Pledgor to exercise any such
right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing. As further
assurance of the proxy granted hereby, the Pledgor shall from
time to time execute and deliver to the Security Agent, all
such additional written proxies, powers of attorney, and other
instruments as the Security Agent shall request for the
purpose of enabling the Security Agent to exercise the voting
and other rights which it is entitled to exercise
-6-
<PAGE> 7
hereunder at any time. Each Pledgor hereby revokes any proxy
or proxies heretofore given by Pledgor to any person or
persons whatsoever and agrees not to give any other proxies in
derogation hereof until this Agreement is not longer in full
force and effect as hereinafter provided. NOTWITHSTANDING THE
PRECEDING PRESENT GRANT OF AN IRREVOCABLE PROXY, THE SECURITY
AGENT AGREES NOT TO EXERCISE SUCH PROXY (AND TO PERMIT EACH
PLEDGOR TO CONTINUE TO EXERCISE VOTING AND OTHER RIGHTS
COVERED BY SUCH PROXY AND PERTAINING TO THE PLEDGED SECURITIES
PLEDGED BY SUCH PLEDGOR ON AND SUBJECT TO THE CONDITIONS SET
FORTH IN THIS PARAGRAPH 5(a)(i)) UNTIL THE OCCURRENCE AND
CONTINUANCE OF AN EVENT OF DEFAULT. Except as provided in
subparagraphs (b) and (c) of this Section 5:
(i) Each Pledgor shall be entitled to
exercise any and all voting rights and other consensual rights
accruing to it as the owner of Pledged Securities for any
purpose consistent with the terms of this Pledge Agreement and
the other Finance Documents so long as such exercise of rights
could not reasonably be expected in the reasonable judgment of
the Security Agent to materially adversely affect the rights
and remedies of the Security Agent or any of the Beneficiaries
under this Pledge Agreement or any other Finance Document or
the ability of the Security Agent or any of the Beneficiaries
to exercise the same; provided, however, that the Pledgor
shall give the Security Agent at least 5 days written notice
of the manner in which it intends to exercise such right.
(ii) The Security Agent shall execute and
deliver to each Pledgor, or cause to be executed and delivered
to such Pledgor, all such proxies, powers of attorney, and
other instruments as such Pledgor may reasonably request for
the purpose of enabling such Pledgor to exercise the voting
rights which it is entitled to exercise pursuant to
subparagraph (i) above.
(iii) Each Pledgor shall be entitled to
receive and retain any and all cash dividends paid on the
Pledged Securities to the extent and only to the extent that
such cash dividends are permitted by, and otherwise paid in
accordance with, the terms and conditions of this Agreement,
the Finance Documents and applicable laws. All other payments,
dividends and distributions made on or in respect of Pledged
Securities, whether paid or payable in cash, securities or
other property, and whether resulting from a subdivision,
combination or reclassification of the outstanding capital
stock of the Issuer of any Pledged Securities or received in
exchange for or in redemption of Pledged Securities or any
part thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such Issuer
may be a party or otherwise, shall be and become part of the
Collateral and, if received by the Pledgors, shall not be
commingled by the
-7-
<PAGE> 8
Pledgors with any of their other funds or property but shall
be held separate and apart therefrom in trust for the benefit
of the Security Agent and shall be delivered to the Security
Agent in the same form as so received (with any necessary
endorsement).
(2) After the occurrence and during the continuance of an Event of
Default, all rights of the Pledgors to dividends which the
Pledgors are authorized to receive pursuant to paragraph
(a)(iii) of this Section 5 shall cease, and all such rights
shall thereupon become vested in the Security Agent, who shall
have the sole and exclusive right and authority to receive and
retain such dividend payments. All dividends which are
received by the Pledgors contrary to the provisions of this
Section 5(b) shall be received in trust for the benefit of the
Security Agent, shall be segregated from other property or
funds of the Pledgors and shall be immediately delivered to
the Security Agent in the same form as so received (with any
necessary endorsement). Any and all money and other property
paid over to or received by the Security Agent pursuant to the
provisions of this paragraph (b) shall be deposited by the
Security Agent in an account to be established by the Security
Agent upon receipt of such money or other property and such
money or other property and interest thereon shall be applied
in accordance with the provisions of Section 7 hereof.
(3) UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT, AND WHETHER OR NOT THE COLLATERAL SHALL HAVE BEEN
REGISTERED IN THE NAME OF THE SECURITY AGENT OR A NOMINEE OR
SHALL REMAIN REGISTERED IN THE NAME OF PLEDGOR, ALL RIGHTS OF
ANY PLEDGOR TO EXERCISE THE VOTING RIGHTS WHICH IT IS ENTITLED
TO EXERCISE PURSUANT TO PARAGRAPH (a)(i) OF THIS SECTION 5
SHALL CEASE, AND THE SECURITY AGENT MAY THEREUPON FULLY
EXERCISE, TO THE EXCLUSION OF ANY PLEDGOR, THE PROXY GRANTED
TO IT IN PARAGRAPH 5(a).
(4) Each Pledgor hereby authorizes and instructs each Issuer of
any Pledged Securities pledged by such Pledgor hereunder to
(i) comply with any instruction received by it from the
Security Agent in writing that (x) states that an Event of
Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other
or further instructions from such Pledgor, and each Pledgor
agrees that each Issuer shall be fully protected in so
complying, and (ii) unless otherwise expressly permitted
hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Security Agent.
Section 7. Remedies upon Default. After the occurrence and during the
continuance of an Event of Default, whether or not all of the Secured
Liabilities shall have become due and payable, in addition to its rights under
the Finance Documents:
-8-
<PAGE> 9
(1) The Security Agent shall have all of the rights and remedies
with respect to the Collateral of a secured party under the
Uniform Commercial Code as in effect in the State of New York
(the "NYUCC") (whether or not the NYUCC is in effect in
the jurisdiction where the rights and remedies are asserted
and whether or not the NYUCC applies to the affected
Collateral) and such additional rights and remedies to which a
secured party is entitled under the laws in effect in any
jurisdiction where any rights and remedies hereunder may be
asserted, including without limitation the right, to the
maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the
Collateral as if the Security Agent were the sole and absolute
owner thereof (and the Pledgors agree to take all such action
as may be appropriate to give effect to such right).
(2) The Security Agent in its discretion may, in its name or in
the name of the Pledgors or otherwise, demand, sue for,
collect or receive any money or property at any time payable
or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so.
(3) The Security Agent may sell, lease, assign, grant options with
respect to or otherwise dispose of all or part of the
Collateral, at such place or places as the Security Agent
deems best, and for cash or for credit or for future delivery
(without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of
intention to effect any such disposition or of the time or
place thereof (except such notice as is required above or by
applicable statute and cannot be waived), and the Security
Agent or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at
any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free
from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise) of the
Pledgors, any such demand, notice and right or equity being
hereby expressly waived and released. Each Pledgor agrees
that, to the extent notice of sale shall be required by law,
at least ten days' notice to such Pledgor of the time and
place of any public sale or the time after which such private
sale is to be made shall constitute reasonable notification;
however the Security Agent shall not be obligated to make a
sale of the Collateral regardless of notice of sale having
been given. The Security Agent may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made
at any time or place to which the sale may be so adjourned.
(4) The Pledgors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended from time
to time (the "Securities Act"), and applicable state
securities laws, the Security Agent may be
-9-
<PAGE> 10
compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account,
for investment and not with a view to the distribution or
resale thereof. The Pledgors acknowledge that any such private
sales may be at prices and on terms less favorable to the
Security Agent than those obtainable through a public sale
without such restrictions, and, notwithstanding such
circumstances, agree that any such private sale shall be
deemed to have been made in a commercially reasonable manner
and that the Security Agent shall have no obligation to engage
in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit
registration of such Collateral for public sale.
The Pledgors will bear all costs and expenses of carrying out
their obligations hereunder with respect to the foregoing. The Pledgors
acknowledge that there is no adequate remedy at law for failure by them to
comply with the foregoing provisions and that such failure would not be
adequately compensable in damages, and therefore agree that their agreements
with respect to the foregoing may be specifically enforced.
Section 8. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6 hereof, as well as any Collateral consisting of
cash, shall be applied by the Security Agent first to the payment of the costs
and expenses of any such sale, including reasonable fees and disbursements of
the Security Agent's agents and counsel, and of any judicial proceeding wherein
the same may be made, and of all expenses, liabilities and advances (to the
extent such advances are reasonably made for the protection of the Collateral or
the enforcement of the Security Agent's security interest in the Collateral)
made or incurred by the Security Agent, second, to meet amounts due and payable
under the Finance Documents as and when the same become payable, in each case,
together with interest thereon (as well after as before judgment and payable on
demand) at the rate determined in accordance with Clause 8.3 of the Credit
Agreement from the date the same become due and payable until the date the same
are unconditionally and irrevocably paid and discharged in full (provided that
like interest payable under any of the Finance Documents should not be double
counted) and third, to whomsoever may be lawfully entitled to receive any
surplus. Each Pledgor waives and agrees not to assert any rights or privileges
which it may acquire under Section 9-112 of the NYUCC. Each Pledgor shall remain
liable for any deficiency if the proceeds of sale or other disposition of the
Collateral are insufficient to pay its Secured Liabilities and the fees and
disbursements of any attorneys employed by the Security Agent or any Beneficiary
to collect such deficiency.
Section 9. Security Agent Appointed Attorney-in-Fact; Certain Other
Provisions Regarding Security Agent.
(1) Except as otherwise provided herein, the Pledgors hereby
appoint the Security Agent the attorney-in-fact of the
Pledgors for the purposes of carrying out the provisions of
this Agreement or taking any action or executing any
instrument which the Security Agent may reasonably deem
-10-
<PAGE> 11
necessary or advisable to accomplish the purposes hereof,
which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Security
Agent shall have the right, after the occurrence and during
the continuance of an Event of Default, with full power of
substitution either in the Security Agent's name or in the
name of the Pledgors, to ask for, demand, sue for, collect,
receive and give acquittance for any and all monies due or to
become due under or by virtue of any Collateral, to endorse
checks, drafts, orders and other instruments for the payment
of money payable to the Pledgors constituting Collateral or
any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or
defend any action, claim or proceeding with respect thereto,
and to sell, assign, endorse, pledge, transfer and make any
agreement respecting, or otherwise deal with, the same;
provided, however, that nothing herein contained shall be
construed as requiring or obligating the Security Agent to
make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Security Agent, or
to present or file any claim or notice, or to take any action
with respect to the Collateral or any part thereof or the
monies due or to become due in respect thereof or any property
covered thereby, and no action taken by the Security Agent or
omitted to be taken with respect to the Collateral or any part
thereof shall give rise to any defense, counterclaim or offset
in favor of any Pledgor or to any claim or action against the
Security Agent.
(2) If any Pledgor fails to perform any agreement contained
herein, the Security Agent may (but shall not be required to)
itself perform, or cause performance of, such agreement and
the expenses of the Security Agent incurred in connection
therewith shall be payable by the Pledgor under Section 12.
(3) Each Pledgor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this
Agreement is terminated and the security interests created
hereby are released.
(4) The Security Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the NYUCC or otherwise,
shall be to deal with it in the same manner as the Security
Agent deals with similar property for its own account. Neither
the Security Agent, any Beneficiary nor any of their
respective officers, directors, employees or agents shall be
liable for failure to demand, collect or realize upon any of
the Collateral or for any delay in doing so or shall be under
any obligation to sell or otherwise dispose of any Collateral
upon the request of any Pledgor or any other person or to take
any other action whatsoever with regard to the Collateral or
any part thereof. The powers conferred on the Security Agent
and the other Beneficiaries hereunder are solely to protect
the Security Agent's and the Beneficiaries' interests in the
-11-
<PAGE> 12
Collateral and shall not impose any duty upon the Security
Agent or any Beneficiary to exercise any such powers. The
Security Agent and the Beneficiaries shall be accountable only
for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their
officers, directors, employees or agents shall be responsible
to any Pledgor for any act or failure to act hereunder, except
for their own gross negligence or willful misconduct.
(5) Pursuant to Section 9-402 of the NYUCC and any other
applicable law, each Pledgor authorizes the Security Agent to
file or record financing statements and other filing or
recording documents or instruments with respect to the
Collateral without the signature of such Pledgor in such form
and in such offices as the Security Agent reasonably
determines appropriate to perfect the security interests
granted hereunder. A photographic or other reproduction of
this Agreement shall be sufficient as a financing statement or
other filing or recording document or instrument for filing or
recording in any jurisdiction.
(6) Each Pledgor acknowledges that the rights and responsibilities
of the Security Agent under this Agreement with respect to any
action taken by the Security Agent or the exercise or
non-exercise by the Security Agent of any option, voting
right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as
between the Security Agent and the Beneficiaries, be governed
by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them,
but, as between the Security Agent and the Pledgors, the
Security Agent shall be conclusively presumed to be acting as
agent for the Beneficiaries with full and valid authority so
to act or refrain from acting, and no Pledgor shall be under
any obligation, or entitlement, to make any inquiry respecting
such authority.
Section 10. No Waiver. No failure on the part of the Security Agent to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy by the Security Agent preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law. The Security Agent shall not be deemed to have waived any
rights hereunder or under any other agreement or instrument unless such waiver
shall be in writing and signed by such parties.
Section 11. Security Interest Absolute. The obligations of each Pledgor
under this Pledge Agreement are independent of the obligations under any of the
other Finance Documents, and a separate action or actions may be brought and
prosecuted against such Pledgor to enforce this Pledge Agreement. All rights of
the Security Agent hereunder, the grant of a security interest in the Collateral
and all obligations of the Pledgors hereunder shall be absolute and
unconditional irrespective of (a) any lack of
-12-
<PAGE> 13
validity or enforceability of any Finance Document, any agreement with respect
to any of the Secured Liabilities or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured Liabilities, or any other
amendment or waiver of or any consent to any departure from any Finance Document
or any other agreement or instrument, (c) any exchange, release, amendment or
waiver of, or consent to or departure from, any guaranty for all or any of the
Secured Liabilities, (d) any change, restructuring or termination of the
corporate structure or existence of any Pledgor or Issuer or (e) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgors or any of them in respect of the Secured Liabilities
or in respect of this Agreement.
Section 12. Further Assurances. The Pledgors agree to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Security Agent may at any time
reasonably request in connection with the administration and enforcement of this
Agreement, with respect to the Collateral or any part thereof or in order better
to assure and confirm unto the Security Agent its rights and remedies hereunder.
Section 13. Security Agent's Fees and Expenses; Indemnification.
(1) The Pledgors agree to pay upon demand to the Security Agent
the amount of any and all out-of-pocket expenses, including
the reasonable fees and expenses of its counsel (including
without limitation the allocated fees and expenses of in-house
counsel) and of any experts or agents, which the Security
Agent may reasonably incur in connection with (i) the
administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Security Agent
hereunder, or (iv) the failure by the Pledgors to perform or
observe any of the provisions hereof.
(2) Without limiting the foregoing, each Pledgor agrees to pay,
and to save the Security Agent and the Beneficiaries harmless
from, and to indemnify them against, any and all liabilities
with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions
contemplated by this Agreement. Any such amounts payable as
provided hereunder shall be additional Secured Liabilities
secured by this Agreement and the other Finance Documents to
which the Pledgors are party. Each Pledgor further agrees to
pay, and to save the Security Agent and the Beneficiaries
harmless from, and to indemnify them against, any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind
or nature whatsoever ("Indemnifies Liabilities") with respect
to the execution, delivery, enforcement, performance and
administration of this Agreement, or arising out of or
relating to the Security
-13-
<PAGE> 14
Agent's or any Beneficiary's relationship with any Pledgor
hereunder or under any other Finance Document (including
without limitation for all Environmental Claims); provided
that the Pledgors shall not have any obligation to any
Beneficiary hereunder with respect to any Indemnified
Liabilities to the extent such Indemnified Liabilities arise
from the gross negligence or willful misconduct of such
Beneficiary.
(3) The agreements in this Section 12 shall survive repayment of
the Secured Liabilities and all other amounts payable under
the Credit Agreement and the other Finance Documents.
Section 14. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, except that the Pledgors shall not be permitted to assign this
Agreement or any interest herein or in the Collateral or any part thereof, or
otherwise pledge, encumber or grant any option with respect to the Collateral or
any part thereof, or any cash or property held by the Security Agent as
Collateral under this Agreement, except as contemplated by this Agreement.
Section 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
Section 16. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN NEW
YORK CITY, NEW YORK, U.S.A. AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE
PLEDGORS ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR RESPECTIVE
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT. TO THE EXTENT PERMITTED BY LAW, EACH
PLEDGOR HEREBY AGREES THAT SERVICE UPON IT BY CERTIFIED MAIL SHALL CONSTITUTE
SUFFICIENT NOTICE AND SERVICE OF PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF THE SECURITY AGENT TO BRING PROCEEDINGS AGAINST ANY PLEDGOR IN THE COURTS OF
ANY OTHER JURISDICTION.
Section 17. Waiver of Jury Trial. THE PLEDGORS AND THE SECURITY AGENT
HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY
JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS AGREEMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT
-14-
<PAGE> 15
HEREOF; AND THE PLEDGORS HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE RIGHT TO INTERPOSE ANY SET OFF OR COUNTERCLAIM OR CROSS-CLAIM IN
CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF,
COUNTERCLAIM OR CROSS-CLAIM EXCEPT TO THE EXTENT THAT THE FAILURE SO TO ASSERT
ANY SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM WOULD PERMANENTLY PRECLUDE THE
PROSECUTION OF OR RECOVERY UPON SAME. Notwithstanding anything contained in this
Agreement to the contrary, no claim may be made by the Pledgors against the
Security Agent or any Beneficiary for any lost profits or any special, indirect
or consequential damages in respect of any breach or wrongful conduct (other
than willful misconduct or actual fraud) in connection with, arising out of or
in any way related to the transactions contemplated hereunder, or any act,
omission or event occurring in connection therewith; and the Pledgors hereby
waive, release and agree not to sue upon any such claim for any such damages.
THE PLEDGORS AGREE THAT THIS SECTION 16 IS A SPECIFIC AND MATERIAL ASPECT OF
THIS AGREEMENT AND ACKNOWLEDGE THAT THE SECURITY AGENT WOULD NOT EXTEND TO THE
PLEDGORS ANY AMOUNTS UNDER THE FINANCE DOCUMENTS IF THIS SECTION 16 WERE NOT
PART OF THIS AGREEMENT.
Section 18. Notices. All notices or other communications under or in
connection with this Agreement shall be given in writing or by facsimile in
accordance with the provisions of Clause 34 of the Credit Agreement, and any
such notice will be deemed to be given as provided in Clause 34 of the Credit
Agreement. The address, telex number and facsimile number of each party for all
notices under or in connection with this Agreement are: (i) as specified as such
party's address for notices in Schedule 1 or 2, as the case may be, of the
Credit Agreement or in such other document by which such party becomes a party
to this Agreement; or (ii) as otherwise notified by the Pledgors for this
purpose to the Facility Agent (or in the case of the Security Agent as otherwise
notified by the Facility Agent to the Pledgors) by not less than five Business
Days' notice.
Section 19. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, no party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable and the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal and unenforceable
provisions with valid provisions, the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
Section 20. Section Headings. The section and other headings used
herein are for convenience only and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.
Section 21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
-15-
<PAGE> 16
Section 22. Termination.
(1) At such time as all of the Secured Liabilities (other than any
indemnity and similar obligations which expressly survive
termination of this Agreement or the Credit Agreement and are
not then due and payable) have been paid irrevocably and in
full and all Commitments have terminated and no letters of
credit or engagements (if any) issued pursuant to any Finance
Document shall remain outstanding, this Agreement and all
obligations (other than those expressly stated to survive such
termination) of the Security Agent and each Pledgor shall
terminate, and the Collateral shall be released from the
pledge and security interests created hereby, all without
delivery of any instrument or performance of any act by any
party, and all rights to the Collateral shall revert to the
Pledgors. At the request and sole expense of any Pledgor
following any such termination, the Security Agent shall
deliver to such Pledgor any Collateral then held by the
Security Agent hereunder and shall execute and deliver to such
Pledgor, but without recourse to or warranty by the Security
Agent, such Uniform Commercial Code termination statements and
similar documents prepared by such Pledgor which such Pledgor
shall reasonably request to evidence the release of the
Collateral from the security constituted hereby.
(2) Notwithstanding anything to the contrary contained in this
Agreement, this Agreement shall remain in full force and
effect and continue to be effective should any petition be
filed by or against the Pledgors or any of them for
liquidation or reorganization, should any Pledgor become
insolvent or make an assignment for any benefit of creditors
or should a receiver or trustee be appointed for all or any
significant part of any Pledgor's assets, and shall continue
to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Liabilities,
or any part thereof, is, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Liabilities, whether as
a "voidable preference," "fraudulent conveyance" or otherwise,
all as though such payment, or any part thereof, had not been
made.
Section 23. Joint and Several Obligations; Waiver of Joinder. All
representations, warranties, covenants and undertakings by the Pledgors or any
of them hereunder shall be their joint and several obligations. Each Pledgor
hereby waives any requirement that any other Pledgor, Obligor or person be
joined in or made party to any action to enforce this Agreement or any right or
remedy hereunder.
Section 24. Acknowledgments. Each Pledgor acknowledges that: (a) it has
been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Finance Documents to which it is a party; (b) neither
the Security Agent, any other Agent nor any Beneficiary has any fiduciary
relationship with or duty to any Pledgor arising out of or in connection with
this Agreement of any of the other Finance Documents,
-16-
<PAGE> 17
and the relationship between the Pledgors, on the one hand, and the Security
Agent, each other Agent and the other Beneficiaries, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and (c)
no joint venture is created hereby or by the Finance Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Beneficiaries
or among the Grantors and the Beneficiaries.
Section 25. Additional Pledgors. Each person or entity that is
required to become a party to this Agreement pursuant to Clause 17 of the Credit
Agreement shall become a Pledgor for all purposes of this Agreement upon
execution and delivery by such person or entity of an Assumption Agreement in
the form of Annex 1 hereto.
* * * * *
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as a deed, or caused this Agreement to be duly executed as a deed, as
of the day and year first above written.
GETTY IMAGES, INC.
By: ________________________________
Name:
Title:
GETTY COMMUNICATIONS LIMITED
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
GETTY IMAGES LIMITED
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
TONY STONE IMAGES/AMERICA, INC.
By: ________________________________
Name:
Title:
EYEWIRE PARTNERS COMPANY
By: ________________________________
Name:
Title:
-18-
<PAGE> 19
HSBC INVESTMENT BANK PLC
By: ________________________________
Name:
Title:
-19-
<PAGE> 20
Annex 1
Form of Assumption Agreement
[Attached]
-20-
<PAGE> 1
EXHIBIT 10.12
SUPPLEMENT TO PLEDGE AGREEMENT
SUPPLEMENT TO PLEDGE AGREEMENT dated as of December __, 1999, made by
GETTY IMAGES, INC., a Delaware corporation (the "Pledgor"), in favor of HSBC
Investment Bank plc, as security agent and trustee for itself and each of the
Lenders (as defined in the Pledge Agreement referred to below)(in such capacity
together with its successors and assigns in such capacity, the "Security
Agent"). All capitalized terms not defined herein shall have the meaning
ascribed to them in the Pledge Agreement.
W I T N E S S E T H :
WHEREAS, the Pledgor, certain parties (including without limitation the
Pledgor) as borrowers, certain parties as guarantors, HSBC Investment Bank plc,
as Arranger, Facility Agent and Security Agent, HSBC Bank plc as Overdraft Bank
and the Banks have entered into that certain Credit Agreement, dated October 25,
1999 (as amended, novated or supplemented from time to time, the "Credit
Agreement");
WHEREAS, in connection with the Credit Agreement, the Pledgor and
certain of its subsidiaries have entered into the Pledge Agreement, dated as of
October 29, 1999 (as amended, supplemented or otherwise modified from time to
time, the "Agreement") in favor of the Security Agent for the benefit of itself
and the other Lenders;
WHEREAS, the Credit Agreement requires the Pledgor to update Schedule I
to the Pledge Agreement; and
WHEREAS, the Pledgor has agreed to execute and deliver this Supplement
to Pledge Agreement in order to update Schedule I to the Pledge Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Pledge Agreement. By executing and delivering this Supplement to
Pledge Agreement, the Pledgor hereby updates Schedule I to the Pledge Agreement
and the Pledgor, to secure the payment, discharge and performance of all of the
Secured Liabilities upon the terms contained in the Pledge Agreement, grants,
and is hereby deemed to grant, for the benefit of the Security Agent and the
other Beneficiaries, a security interest in the Pledged Stock and other
Collateral, which terms include and are deemed to include the shares of capital
stock and other ownership interests in respect of the additional pledged company
set forth in Annex 1-A. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in Schedule I to the Pledge Agreement. The
Pledgor hereby represents and warrants that each of the representations and
warranties contained in Section 3 of the Pledge Agreement is true and correct on
and as of the date hereof (after giving effect to this Supplement to Pledge
Agreement) as if made on and as of such date.
<PAGE> 2
2. GOVERNING LAW. THIS SUPPLEMENT TO PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
*****
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has caused this Supplement
to Pledge Agreement to be duly executed and delivered as of the date first above
written.
GETTY IMAGES, INC.
By: _____________________
Name:
Title:
Acknowledged and agreed to as of the date first above written:
HSBC INVESTMENT BANK PLC, as Security Agent
By: ________________________
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 10.19.
NET OFFICE LEASE
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. SALIENT LEASE TERMS.............................................................1
2. DEFINITIONS.....................................................................2
3. PREMISES........................................................................6
4. TERM............................................................................7
5. PRE-TERM POSSESSION.............................................................7
6. DELAY IN DELIVERY OF POSSESSION.................................................7
7. MINIMUM RENT....................................................................7
8. ADDITIONAL RENT.................................................................8
9. ACCORD AND SATISFACTION.........................................................9
10. SECURITY DEPOSIT................................................................9
11. USE............................................................................10
12. COMPLIANCE WITH LAWS AND REGULATIONS...........................................10
13. SERVICE AND EQUIPMENT..........................................................16
14. WASTE..........................................................................18
15. ALTERATIONS....................................................................18
16. PROPERTY INSURANCE.............................................................20
17. INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION..............................20
18. LIABILITY INSURANCE............................................................22
19. INSURANCE POLICY REQUIREMENTS..................................................22
20. LESSEE INSURANCE DEFAULT.......................................................23
21. FORFEITURE OF PROPERTY AND LESSOR'S LIEN.......................................23
22. MAINTENANCE AND REPAIRS........................................................23
23. DESTRUCTION....................................................................24
24. CONDEMNATION...................................................................25
25. ASSIGNMENT AND SUBLETTING......................................................26
26. ABANDONMENT....................................................................29
27. ENTRY BY LESSOR................................................................30
28. SIGNS..........................................................................30
29. DEFAULT........................................................................30
30. REMEDIES UPON DEFAULT..........................................................31
31. BANKRUPTCY.....................................................................33
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
32. SURRENDER OF LEASE............................................................34
33. LESSOR'S EXCULPATION..........................................................34
34. ATTORNEYS' FEES...............................................................34
35. NOTICES.......................................................................35
36. SUBORDINATION.................................................................35
37. ESTOPPEL CERTIFICATES.........................................................36
38. WAIVER........................................................................36
39. HOLDING OVER..................................................................36
40. SUCCESSORS AND ASSIGNS........................................................36
41. TIME..........................................................................36
42. EFFECT OF LESSOR'S CONVEYANCE.................................................37
43. COMMON AREAS..................................................................37
44. TRANSFER OF SECURITY..........................................................37
45. LATE CHARGES..................................................................37
46. CORPORATE AUTHORITY...........................................................37
47. MORTGAGEE PROTECTION..........................................................37
48. WAIVER OF STATUTES............................................................38
49. MISCELLANEOUS PROVISIONS......................................................40
</TABLE>
<PAGE> 3
NET OFFICE LEASE
THIS LEASE is dated for reference purposes only this as of the 27th day of
July, 1999.
1. SALIENT LEASE TERMS
1.1 RENT PAYMENT: BEDFORD PROPERTY INVESTORS, INC.
Lockbox #73048 - Adobe 2
P.O. Box 60000
San Francisco, CA 94169-3048
1.2 PARTIES AND NOTICE ADDRESS: Lessor:
BEDFORD PROPERTY INVESTORS, INC.
270 Lafayette Circle
Lafayette, CA 94549
Lessee:
GETTY IMAGES, INC.
2013 4th Avenue
Seattle, WA 98121
(If more than one party, then the
obligations hereunder shall be joint
and several.)
(Section 35.1)
1.3 PREMISES: (A) Name and Location of Complex:
Buildings 1, 2 and 3, East Campus,
Quadrant Lake Union Center
(B) Leased Premises: Northern
portion of 3rd floor, Plaza
Building (Building 2)
(C) Rentable square feet 7,061 RSF
(Section 3.2)
1.4 TERM: (A) Estimated Delivery Date:
October 1, 1999
(B) Term: approximately 60 months
(Sections 4.1, 4.3)
PAGE 3
<PAGE> 4
1.5 RENT: (A) Minimum Rent:
Commencement Date: - $11,062.00/mo.
for the first 36 months of the
initial Term; $12,063.00/mo. for
the last 24 months of the initial
Term
(B) Advance Rent:
n/a
(C) Parking and parking fees
17 Covered Parking Stalls available
on a 24 hour/day, 365 days/year
basis
$1360.00/mo. for the first 36 months
of the initial Term;
$1,482.40/mo. for the last 24 months
of the initial Term
(Section 7.2)
1.6 INITIAL SECURITY DEPOSIT: $-0-(Section 10.1)
1.7 USE: Premises used solely for general
business office and data center and
reasonably related or ancillary
uses
(Section 11.1)
1.8 INITIAL PRO RATA PERCENT: 5.19%
(Section 2.1(l))
(Section 16.3)
Initial Estimated Additional
Rent for Operating Costs: $6.30
/RSF/ year (for 1999)
1.9 DECLARATION OF RESTRICTIONS: Amended and Restated Declaration of
Covenants, Conditions and
Restrictions, recorded in King
County under No. 9802231707.
(Section 3.5)
1.10 CONTENTS: This Lease consists of:
Pages 1 through 56
Sections 1 through 49.21
Addenda: N/A
Exhibits:
A - Legal Description of Complex
B - Plan of the Complex
C - Floor Plan of the Leased
Premises
D - Construction Obligations
E - Acknowledgment of Commencement
F - Rules & Regulations
G - Excluded Costs
H - Adobe Spec Space Expansion
Option Provisions
PAGE 4
<PAGE> 5
2. DEFINITIONS
2.1 The terms defined in this Article 2 shall, for all purposes of this
Lease and all agreements supplemental hereto, have the meanings herein specified
unless expressly stated otherwise.
(a) "BUILDING" shall mean the structure which contains the Leased Premises,
as further defined in Exhibit D hereto.
(b) "BUILDING STANDARD WORK" shall mean the typical interior improvements
in the Building Shell (as defined in Exhibit D hereto) constructed or to be
constructed by Lessor, which are of the nature and quality required by
specifications developed for the Complex by Lessor's architect. The Lessee
Improvements (as defined in Exhibit D hereto) to be constructed pursuant to
Exhibit D, unless otherwise specified pursuant to the terms and conditions of
Exhibit D, shall be Building Standard Work.
(c) "COMMENCEMENT DATE" shall mean the earlier of the following dates:
(i) October 1, 1999; or
(ii) The date upon which the Lessee Improvements are Substantially
Complete, as defined in Exhibit D hereto.
(d) "COMMON AREAS" shall mean all areas and facilities outside the Leased
Premises within the exterior boundaries of the Complex of which the Leased
Premises form a part, that are provided and designated by Lessor from time to
time for the general use and convenience of Lessee and of other tenants of
Lessor having the common use of such areas, and their respective authorized
representatives and invitees. Common Areas include, without limitation,
corridors, stairways, elevator shafts, janitor rooms, driveways, parking areas,
and landscaped areas all as generally described on Exhibit B attached hereto.
Exhibit B is tentative and Lessor reserves the right to make alterations thereto
from time to time.
(e) "COMPLEX" is Buildings 1, 2 and 3, East Campus, together with the
parcels in common ownership therewith, and contiguous thereto, which property is
described with particularity in Exhibit A attached hereto and made a part hereof
by reference.
(f) "LEASE YEAR" means any calendar year, or portion thereof, following the
commencement hereof, the whole or any part of which period is included within
the Term.
(g) "LEASED PREMISES" shall mean the portion of space leased to Lessee
hereunder.
(h) "LINES" shall mean communications, computer, audio and video, security
PAGE 5
<PAGE> 6
and electrical (other than electrical wiring terminating at or connected to
Building standard electrical outlets), cables, wires, lines, duct work, sensors,
switching equipment, control boxes and related improvements at the Complex,
Building or the Leased Premises.
(i) "MAJOR VERTICAL PENETRATIONS" shall mean stairs, elevator shafts,
flues, pipe shafts, vertical ducts, and the like, and their enclosing walls,
which serve more than one floor of the Building, but shall not include stairs,
dumbwaiters, lifts, and the like, exclusively serving a tenant occupying offices
on more than one floor.
(j) "OCCUPIED FLOOR AREA" means that portion of the Rentable Area of the
Complex which is leased and occupied.
(k) "OPERATING COSTS" means the total amounts paid or payable, whether by
Lessor or others on behalf of Lessor, in connection with the ownership,
maintenance, repair, replacement and operations of the Complex (including,
without limitation, all areas and facilities within the exterior boundaries of
the Complex) as determined by standard accounting procedures. Operating Costs
shall include, but not be limited to, the aggregate of the amount paid for all
fuel used in heating and air conditioning of the Building; the amount paid or
payable for all electricity furnished by Lessor to the Complex (other than
electricity furnished to and paid for by other lessees by reason of their
extraordinary consumption of electricity); the cost of periodic relamping and
reballasting of lighting fixtures; the amount paid or payable for all hot and
cold water (other than that chargeable to individual tenants by reason of their
extraordinary consumption of water); the amount paid or payable for all labor
and/or wages and other payments, including the cost to Lessor of workers'
compensation and disability insurance, payroll taxes, welfare and fringe
benefits made to janitors, caretakers, and other employees, contractors and
subcontractors of Lessor (including wages of the Building manager) involved in
the operation, maintenance and repair of the Complex; painting of exterior walls
of the buildings in the Complex; managerial and administrative expenses; the
total charges of any independent contractors employed in the repair, care,
operation, maintenance, and cleaning of the Complex; the amount paid or payable
for all supplies occasioned by everyday wear and tear; the costs of climate
control, window and exterior wall cleaning, telephone and utility costs; the
cost of accounting services necessary to compute the rents and charges payable
by tenants of the Complex and to keep the books and records for the Complex;
fees for legal, accounting, inspection and consulting services; the cost of
operating, repairing and maintaining the Building elevators and the utility
systems, including Lines, of the Complex; the cost of porters, guards and other
protection services; the cost of establishing and maintaining the Building's
directory board; payments for general maintenance and repairs to the plant and
equipment supplying climate control; the cost of supplying all services pursuant
to Article 13 hereof to the extent such services are not paid by individual
tenants; amortization of the costs, including repair and replacement, of all
maintenance and cleaning equipment and master utility meters and of the costs
incurred for repairing or replacing all other fixtures, equipment and facilities
serving or comprising the Complex which by their nature require periodic or
substantial repair or replacement, and which are not charged fully in the year
in which they are incurred, at rates on the various items determined from time
to time by Lessor in accordance with sound accounting principles; the net cost
and expenses for liability and property insurance for which Lessor is
responsible hereunder
PAGE 6
<PAGE> 7
or which Lessor or its lenders deems necessary in connection with the operation
of the Complex (including, without limitation, self-insurance and the payment of
deductible amounts under insurance policies); community association dues or
assessments and property owners' association dues and assessments which may be
imposed upon Lessor by virtue of any recorded instrument affecting title to the
Complex including, the Declaration of Covenants, Conditions, Restrictions and/or
Easements referred to in Section 1.9, as amended from time to time; and costs of
complying with all governmental regulations, rules, laws, ordinances and codes.
In addition, Operating Costs shall include any Real Estate Taxes as defined in
Paragraph 2.1(o) hereof, and an administrative/management fee payable to Lessor
in the amount of Four Percent (4.00%) of the gross revenues received by Lessor
from the Complex. Operating Costs shall also include, without limitation, the
repair and replacement, resurfacing and repaving of any paved areas, curbs,
gutters or other surfaces or areas within the Complex, the repair and
replacement of any equipment or facilities located within or serving the
Complex, and the cost of any capital repairs, replacements or improvements made
by Lessor to the Complex ("CAPITAL COSTS"). However, certain Capital Costs (the
"RESTRICTED CAPITAL COSTS") shall be includable in Operating Costs each year
only to the extent of that fraction allocable to the year in question calculated
by amortizing such Restricted Capital Costs over the reasonably useful life of
the improvement resulting therefrom, as determined by Lessor, with interest on
the unamortized balance at the higher of (i) ten percent (10%) per annum; or
(ii) the interest rate as may have been paid by Lessor for the funds borrowed
for the purpose of performing the work for which the Restricted Capital Costs
have been expended, but in no event to exceed the highest rate permissible by
law. The Restricted Capital Costs subject to such amortization procedure are the
following: (x) those costs for capital improvements to the Complex of a type
which do not normally recur more frequently than every five (5) years in the
normal course of operation and maintenance of facilities such as the Complex
(specifically excluding painting of all or a portion of the Complex); (y) costs
incurred for the purpose of reducing other operating expenses or utility costs,
and (z) expenditures by Lessor that are required by governmental law, ordinance,
regulation or mandate, including, without limitation, any Environmental Laws (as
such term is defined in Article 12), which were not applicable to the Complex at
the time of the original construction. Operating Costs shall not include legal
or accounting expenses incurred expressly for negotiating a lease with a
particular tenant, or as a result of a default of a specific tenant, which
negotiation or default does not affect the operation of the Complex. Operating
Costs also expressly exclude those cost items identified in Exhibit G attached
hereto.
(l) "PRO RATA PERCENT" shall be that fraction (converted to a percentage)
the numerator of which is the Rentable Area of the Leased Premises and the
denominator of which is the Rentable Area of the Complex. Lessee's Pro Rata
Percent as of the commencement of the Term hereof is specified in Section 1.8.
Said Pro Rata Percent shall be recalculated as may be required effective as at
the commencement of any period to which the calculation is applicable in this
Lease. Notwithstanding the preceding provisions of this Section 2.1(l), Lessee's
Pro Rata Percent as to certain expenses may be calculated differently to yield a
higher percentage share for Lessee as to certain expenses in the event Lessor
permits other tenants in the Complex to directly incur such expenses rather than
have Lessor incur the expense in common for the Complex (such as, by way of
illustration, wherein a tenant performs its own janitorial services). In such
case Lessee's Pro Rata Percent of the applicable expense shall be calculated as
having as its
PAGE 7
<PAGE> 8
denominator the Rentable Area of the Complex less the Rentable Area of tenants
who have incurred such expense directly. Furthermore, in the event Lessee
consumes extraordinary amounts of any provided utility or other service as
determined in Lessor's good faith judgment, Lessee's Pro Rata Percent for such
utility or service may, at Lessor's election, be based on usage as opposed to
Rentable Area of the Complex, that is, Lessee's Pro Rata Percent of such a
utility or service would be calculated as having as its denominator the total
usage of such utility or service in the Complex (or Building as the case may
be), and having as its numerator Lessee's usage of such utility or service, as
determined by Lessor in its sole good faith judgment. In any case in which
Lessee, with Lessor's consent, incurs such expenses directly, Lessee's Pro Rata
Percent will be calculated specially so that expenses of the same character
which are incurred by Lessor for the benefit of other tenants in the Complex
shall not be prorated to Lessee. If repairs are required for systems exclusively
serving the Leased Premises (whether within or outside of said Leased Premises),
Lessee shall pay one hundred percent (100%) of such repair costs. Nothing herein
shall imply that Lessor will permit Lessee or any other tenant of the Complex to
incur any Operating Costs directly. Any such permission shall be in the sole
discretion of the Lessor, which Lessor may grant or withhold in its arbitrary
judgment. If, in Lessor's reasonable determination, certain Operating Costs vary
in direct relationship to occupancy of the Building, Lessee's Pro-Rata Percent
may be calculated using, as the denominator, the Rentable Area of the complex
occupied by tenants.
(m) [ Intentionally Omitted.]
(n) "REAL ESTATE TAXES" or "TAXES" shall mean and include all general and
special taxes, assessments, fees of every kind and nature, duties and levies,
charged and levied upon or assessed by any governmental authority against the
Complex including the land, the Building, any other improvements situated on the
land other than the Building, the various estates in the land and the Building,
any Lessee Improvements, fixtures, installations, additions and equipment,
whether owned by Lessor or Lessee; except that it shall exclude any taxes of the
kind covered by Section 8.1 hereof to the extent Lessor is reimbursed therefor
by any tenant in the Building. Real Estate Taxes shall also include the
reasonable cost to Lessor of contesting the amount, validity, or the
applicability of any Taxes mentioned in this Section. Further included in the
definition of Taxes herein shall be general and special assessments, license
fees, commercial rental tax, levy or tax (other than inheritance or estate
taxes) imposed by any authority having the direct or indirect power to tax, as
against any legal or equitable interest of Lessor in the Leased Premises or in
the Complex or on the act of entering into this Lease or, as against Lessor's
right to rent or other income therefrom, or as against Lessor's business of
leasing the Leased Premises or the Complex; any tax, fee, or charge with respect
to the possession, leasing, transfer of interest, operation, management,
maintenance, alteration, repair, use, or occupancy by Lessee, of the Leased
Premises or any portion thereof or the Complex; or any tax imposed in
substitution, partially or totally, for any tax previously included within the
definition of Taxes herein, or any additional tax related to the Complex, the
Building or the land they are situated on, the nature of which may or may not
have been previously included within the definition of Taxes. Further, if at any
time during the Term of this Lease the method of taxation or assessment of real
estate or the income therefrom prevailing at the time of execution hereof shall
be, or has been, altered so as to cause the whole or any part of the Taxes now
or hereafter levied, assessed or imposed on
PAGE 8
<PAGE> 9
real estate to be levied, assessed or imposed upon Lessor, wholly or partially,
as a capital levy, business tax, fee, permit or other charge, or on or measured
by the Rents received therefrom, then such new or altered taxes, regardless of
their nature, which are attributable to the land, the Building, the Complex or
to other improvements on the land shall be deemed to be included within the term
Real Estate Taxes for purposes of this Section, whether in substitution for, or
in addition to any other Real Estate Taxes, save and except that such shall not
be deemed to include any enhancement of said tax attributable to other income of
Lessor. With respect to any general or special assessments which may be levied
upon or against the Leased Premises, the Complex, or the underlying realty, or
which may be evidenced by improvement or other bonds, and may be paid in annual
or semi-annual installments, only the amount of such installment, prorated for
any partial year, and statutory interest shall be included within the
computation of Taxes for which Lessee is responsible hereunder.
(o) "RENT," "RENT" or "RENTAL" means Minimum Rent and all other sums
required to be paid by Lessee pursuant to the terms of this Lease.
(p) "RENTABLE AREA." The number of rentable square feet listed in paragraph
1.3(c).
(q) "STRUCTURAL" as herein used shall mean any portion of the Leased
Premises or Complex which provides bearing support to any other integral member
of the Complex such as, by limitation, the roof structure (trusses, joists,
beams), posts, load bearing walls, foundations, girders, floor joists, footings,
and other load bearing members constructed by Lessor.
(r) "LESSEE IMPROVEMENTS" shall mean the aggregate of the Building Standard
Work and the Building nonstandard work, as further defined in the work letter
agreement which is attached hereto as Exhibit D.
(s) "TERM" shall mean the term of the Lease as specified in
Article 4 hereof, including any partial month at the commencement of the Term.
(t) [Intentionally omitted.]
(u) [Intentionally omitted.]
3. PREMISES
3.1 DEMISING CLAUSE. Lessor hereby leases to Lessee, and Lessee hires from
Lessor a portion of the Complex as hereinafter defined.
3.2 DESCRIPTION. The Complex, as defined in Section 2.1(e), is described
generally in Section 1.3(A) hereof. The premises leased herein are described in
Section 1.3(B) and are delineated on Exhibit C which is attached hereto and made
a part hereof by reference, consisting of the approximate amount of square
footage as specified in Section 1.3(C) hereof (the "LEASED PREMISES.") The term
"BUILDING" shall refer to the Building in which the Leased Premises are
PAGE 9
<PAGE> 10
located. Lessee acknowledges that Lessor may change the shape, size, location,
number and extent of the improvements to any portion of the Complex without
consent of Lessee and without affecting Lessee's obligations hereunder provided
that such change in the Complex does not unreasonably interfere with the access
to or use of the Premises by the Lessee, its employees, agents, or invitees.
Lessor reserves the area beneath and above the Building as well as the exterior
thereof together with the right to install, maintain, use, repair and replace
pipes, ducts, conduits, wires, and structural elements leading through the
Leased Premises serving other parts of the Complex, so long as such items are
concealed by walls, flooring or ceilings. Such reservation in no way affects the
maintenance obligations imposed herein, nor shall such reservation alter the
parties' responsibilities and obligations set forth in this Lease regarding
Hazardous Materials (as defined in Section 12.3(a) below).
3.3 COVENANTS, CONDITIONS AND RESTRICTIONS. The parties agree that this
Lease is subject to the effect of (a) any covenants, conditions, restrictions,
easements, mortgages or deeds of trust, ground leases, rights of way of record,
and any other matters or documents of record; (b) any zoning laws of the city,
county and state where the Complex is situated; and (c) general and special
taxes not delinquent. Lessee agrees that as to its leasehold estate, Lessee and
all persons in possession or holding under Lessee will conform to and will not
violate the terms of any covenants, conditions or restrictions of record which
may now or hereafter encumber the property (hereinafter the "RESTRICTIONS").
This Lease is subordinate to the restrictions and any amendments or
modifications thereto.
3.4 DECLARATION OF RESTRICTIONS. The Leased Premises are subject to a
Declaration of Restrictions as referenced in Section 1.9 hereof.
4. TERM
4.1 COMMENCEMENT DATE. The Term of this Lease shall commence on the date
specified in Section 1.4(A) hereof and shall be for the term specified in
Section 1.4(B) hereof, plus any partial month at the commencement of the Term.
4.2 ACKNOWLEDGMENT OF COMMENCEMENT. After delivery of the Leased Premises
to Lessee, Lessee shall execute a written acknowledgment of the date of
commencement in the form attached hereto as Exhibit E, and by this reference it
shall be incorporated herein.
4.3 RENEWAL OPTIONS.
(a) Lessee shall have in the following order four (4) successive renewal
options to extend the Term of this Lease (each a "Renewal Option" and plurally
the "Renewal Options"):
First Renewal Option to extend the term of the Lease by five (5)
years;
Second Renewal Option to extend the term of the Lease to July 15, 2010
(approximately, a one-year extension);
PAGE 10
<PAGE> 11
Third Renewal Option to extend the term of the Lease by five (5)
years; and
Fourth Renewal Options to extend the term of the Lease by five (5)
years.
The second through fourth Renewal Options may only be exercised if the prior
Renewal Option was timely exercised. Each of the Renewal Options may be
exercised by Lessee only by written notice of exercise to Lessor given no later
than nine (9) months prior to the expiration of the then-effective Term.
(b) Upon such exercise, the parties shall be obligated under all the terms
and conditions of this Lease through the extended Term, except that Monthly Base
Rent during the extension of the Term shall be equal to the higher of (i) the
Monthly Base Rent in the final month of the then-effective Term or (ii) the Fair
Market Monthly Rent for the Premises as of 90 days after Lessee's notice of
exercise and the Monthly Parking Fees shall be equal to the higher of (i) the
Monthly Parking Fees in the final month of the then-effective Term or (ii) the
Fair Market Monthly Parking Fees as of 90 days after Lessee's notice of
exercise. Upon determination of the Fair Market Minimum Rent and Fair Market
Parking Fees as described in Subsection 4.3(c) below, the parties shall execute
an amendment to the Lease memorializing the Minimum Rent and Parking Fees for
the applicable Renewal Option term.
(c) As used herein, the "Fair Market Minimum Rent" shall mean the
prevailing fair market monthly rent for comparable space located within five (5)
miles of the Business Park. As used herein, the "Fair Market Parking Fees" shall
mean the prevailing fair market parking fees for comparable parking located
within five (5) miles of the Business Park. The Fair Market Minimum Rent and the
Fair Market Parking Fees shall be determined in accordance with the following
procedure:
(i) Within 30 days of Lessee's notice of exercise, Lessee shall deliver to
Lessor its written good faith estimate of the Fair Market Minimum Rent and Fair
Market Parking Fees ("Lessee's Estimate") and Lessor shall deliver to Lessee its
written good faith estimate of the Fair Market Minimum Rent and Fair Market
Parking Fees ("Lessor's Estimate").
(ii) If Lessor's Estimate and Lessee's Estimate differ, Lessor and Lessee
shall negotiate in good faith for up to ninety (90) days in an effort to agree
upon the Fair Market Minimum Rent and Fair Market Parking Fees.
(iii) If Lessor and Lessee are unable to agree upon the Fair Market Minimum
Rent and/or the Fair Market Parking Fees within 90 days after the delivery of
the later of Lessor's Estimate or Lessee's Estimate, then within ten (10) days
after expiration of such ninety (90) day period, the parties shall either (a)
select one mutually acceptable appraiser, or (b) each party shall designate an
appraiser, and within ten (10) days thereafter the two appraisers shall
designate a third appraiser mutually acceptable to them. All appraisers under
this appraisal provision shall be independent certified professional appraisers
with at least five years' experience appraising office properties within a
five-mile radius of the Business Park. If there
PAGE 11
<PAGE> 12
are three appraisers, each party shall pay for the cost of its designated
appraiser and 50% of the cost of the third appraiser. If there is only one
appraiser, each party shall pay 50% of the cost of such appraiser.
(iv) Within twenty (20) days of the designation of the one or three
appraisers, each party shall present to the appraiser(s) in writing its
justifications and supporting documentation for the estimates it previously
delivered to the other party pursuant to subparagraph (iii) above.
(v) Within twenty days after delivery of written materials, the parties and
the appraiser(s) shall have a meeting, at which Lessor and Lessee shall each be
entitled to make up to a one-half hour presentation and at which the
appraiser(s) shall have an opportunity to ask questions of Lessor and Lessee.
(vi) Within five (5) days after such meeting, each appraiser shall make and
deliver to Lessor and Lessee a written finding as to which of the Lessor's
Estimate and Lessee's Estimate of Fair Market Minimum Rent best approximates the
Fair Market Minimum Rent, and as to which of the Lessor's Estimate and Lessee's
Estimate of Fair Market Parking Fees best approximates the Fair Market Parking
Fees. The written finding shall include a brief explanation of what factors
ultimately determined the appraiser's finding.
(vii) The Fair Market Minimum Rent and the Fair Market Parking Fees set
forth in Lessor's Estimate or Lessee's Estimate found to be the best
approximation by the one sole appraiser or by at least two out of the three
appraisers shall conclusively constitute Fair Market Minimum Rent and the Fair
Market Parking Fees for the applicable extension term for purposes of this
Lease.
(d) Lessee may not exercise any of its Renewal Options at any time in which
it is in default under this Lease. If Lessee becomes in default under this Lease
after exercise of a Renewal Option, but before the commencement of the extended
Term, Lessor may, in addition to its other remedies under this Lease, elect to
terminate such extension by notice in writing to Lessee, whereupon the Term
shall expire without any such extension.
4.4 LESSOR'S EARLY TERMINATION RIGHT. Lessor may terminate the Term in the
event Adobe System, Inc. ("Adobe") exercises any of its options under Sections
28.3, 28.4 and 28.5 of its lease with Lessor to expand its premises into the
Leased Premises, provided that (a) Lessor gives Lessee notice of Adobe's
exercise of one of its options no later than thirty (30) days after Adobe
exercises such option, and (b) the termination shall first become effective one
month prior to the outside date by which Lessor must deliver the space to Adobe
under its lease with Adobe. Copies of the above-referenced provisions from the
Adobe Lease are attached as Exhibit H hereto.
5. PRE-TERM POSSESSION
5.1 CONDITIONS OF ENTRY. Lessor shall make the Leased Premises available
for
PAGE 12
<PAGE> 13
Lessee's construction of the Lessee Improvements on the following dates (the
"Construction Delivery Dates"):
(a) With respect to all portions of the Leased Premises not currently
occupied by Bedford Property Investors, Inc. (Bedford") or The Quadrant
Corporation ("Quadrant"), on the day of mutual execution of this Lease;
(b) With respect to that portion of the Leased Premises currently occupied
by Quadrant no later than seven (7) days after mutual execution of this Lease;
after may be prior to Substantial Completion of the Lessee Improvements in the
Leased Premises by Lessor; and
(c) With respect to that portion of the Leased Premises currently occupied
by Bedford no later than five (5) days after the earlier of (i) the date on
which the Bedford Build Out (as defined in Exhibit D hereto) is Substantially
Complete, or (ii) the date on which Lessee relocates Bedford, at Lessee's sole
cost and expense, to temporary substitute premises acceptable to Bedford.
Lessee may upon the Construction Delivery Date enter the applicable
portions of the Leased Premises for such purposes at its own risk, to construct
the Lessee Improvements and to install fixtures, supplies, inventory and other
property, all in accordance with the requirements of Exhibit D hereto.
During the course of any pre-term possession, whether such pre-term
possession arises because of an obligation of construction on the part of
Lessee, or otherwise, all terms and conditions of this Lease, except for rent
and commencement, shall apply, particularly with reference to indemnity by
Lessee of Lessor under Article 17 herein for all occurrences within or about the
Leased Premises.
6. DELAY IN DELIVERY OF POSSESSION OR COMPLETION OF LESSEE IMPROVEMENTS
6.1 DELAY.
(a) Possession. If Lessor, for any reason whatsoever, cannot deliver
possession of the Leased Premises to Lessee by the Construction Delivery Dates
set forth in Section 5.1, this Lease shall not be void or voidable, nor shall
Lessor be liable for any loss or damage resulting therefrom, but in that event,
there shall be an extension of the Estimated Delivery Date and the Commencement
Date with respect to that portion of the Premises that Lessor failed to deliver
by the applicable Construction Delivery Date, which extension shall correspond
on a day for day basis with the number of days that Lessor was delayed in
delivering possession of the applicable portion of the Leased Premises to
Lessee. In the event Lessor cannot deliver possession of the Leased Premises to
Lessee within three (3) months beyond the latest Construction Delivery Date,
then Lessor or Lessee may elect to terminate this Lease. In the event the Leased
Premises are not delivered within one (1) year from the date of execution, this
Lease shall automatically terminate.
PAGE 13
<PAGE> 14
(b) Completion of Lessee Improvements. If by reason of strike, labor
troubles, any rule order, or regulation of any governmental agency, or any cause
beyond Lessee's reasonable control (a "Force Majure Event"), Lessee cannot
substantially complete the Lessee Improvements on or before October 1, 1999,
then this Lease shall not be void or voidable and Lessor shall have no right to
terminate this Lease, but in that event the Commencement Date shall be extended
by the time period of the Force Majure Event and such reasonable additional
time, not to exceed sixty (60) days, as is required for Lessee to substantially
complete the Lessee Improvements as provided in Exhibit D hereto. In no event
shall Lessee be liable to Lessor for any loss or damage resulting from any delay
as a result of such Force Majure Event.
(c) Vacation of Quadrant Leasing Office. The parties acknowledge that
Quadrant occupies a small portion of the Leased Premises as a leasing office.
Lessor agrees to cause Quadrant to vacate the leasing office and remove all of
its trace fixtures and personal property within seven (7) days after mutual
execution of this Lease.
7. MINIMUM RENT
7.1 PAYMENT. Lessee shall pay to Lessor at the address specified in Section
1.1, or at such other place as Lessor may otherwise designate, as "MINIMUM RENT"
for the Leased Premises the amount specified in Section 1.5(A) hereof, payable
in advance on the first day of each month during the Term. If the Term commences
on other than the first day of a calendar month, the rent for the first partial
month shall be prorated accordingly.
All payments of Minimum Rent (including sums defined as rent in Section
2.1(o)) shall be in lawful money of the United States, and payable without
deduction, setoff, offset, counterclaim, recoupment, notice or demand.
7.2 ADVANCE RENT. The amount specified in Section 1.5(B) hereof is paid
herewith to Lessor upon execution of this Lease as advance rent, receipt of
which is hereby acknowledged, provided, however, that such amount shall be held
by Lessor as a "SECURITY DEPOSIT" pursuant to Section 10.1 hereof until it is
applied by Lessor to the first Minimum Rent due hereunder.
8. ADDITIONAL RENT
8.1 PERSONAL PROPERTY, GROSS RECEIPTS, LEASING TAXES. This Section 8.1 is
intended to deal with impositions or taxes directly attributed to Lessee or this
transaction, as distinct from Real Property Taxes attributable to the Complex
which are to be allocated among various tenants and others and which are
included in Operating Costs. In addition to the Minimum Rent and additional
charges to be paid by Lessee hereunder, Lessee shall reimburse Lessor upon
demand for any and all taxes required to be paid by Lessor (excluding state,
local or federal personal and corporate income taxes measured by the income of
Lessor from all sources, and estate and inheritance taxes) whether or not now
customary or within the contemplation of the parties hereto:
PAGE 14
<PAGE> 15
(a) Upon, measured by, or reasonably attributable to the cost or value of
Lessee's equipment, furniture, fixtures and other personal property located in
the Leased Premises or by the cost or value of any Lessee Improvements made in
or to the Leased Premises by or for Lessee, other than Building Standard Work,
regardless of whether title to such improvements shall be in Lessee or Lessor;
(b) Upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Lessee of the Leased
Premises or any portion thereof to the extent such taxes are not included as
Real Estate Taxes as defined in Section 2.1(n);
(c) Upon this transaction or any document to which Lessee is a party
creating or transferring an interest or an estate in the Leased Premises; and
(d) In connection with any testing, investigation, abatement, remediation,
removal, transportation and/or disposal of any Hazardous Materials by Lessee,
its employees, agents representatives, contractors, invitees, subtenants and/or
assigns (or by Lessor, pursuant to any provision of this Lease granting to
Lessor the right to do any of the foregoing on behalf of Lessee and to bill
Lessee therefor).
For purposes of this Section 8.1, the term "taxes" shall include, but not
be limited to, any fees, charges, fines, penalties and costs (including, without
limitation, permit, approval or licensing fees, charges or costs).
In the event that it shall not be lawful for Lessee so to reimburse Lessor
for any Real Property Taxes or any other taxes specified in this Section 8.1,
the Minimum Rent payable to Lessor under this Lease shall be increased to net
Lessor (i.e., after payment of the Real Property Taxes or other taxes for which
Lessor may not receive reimbursement from Lessee) the amount of Minimum Rent
plus reimbursement for Real Property Taxes or other taxes which would have been
receivable by Lessor if such Real Property Taxes or other taxes had been
reimbursed to Lessor by Lessee as contemplated herein. All Real Property Taxes
or other taxes payable by Lessee under this Section shall be deemed to be, and
shall be paid as, additional Rent.
8.2 OPERATING COSTS.
(a) Lessee shall pay to Lessor, as additional rent, its Pro Rata Percent of
the Operating Costs for the Complex for any Lease Year, calculated on the basis
of the greater of (i) actual Operating Costs; or (ii) as if the Complex were at
least ninety-five percent ( 95%) occupied and operational for the whole of such
Lease Year.
(b) If any Lease Year of less than twelve (12) months is included within
the Term, the amount payable by Lessee for such period shall be prorated on a
per diem basis (utilizing a three hundred sixty [360] day year).
8.3 METHOD OF PAYMENT. Any additional Rent payable by Lessee under Sections
8.1
PAGE 15
<PAGE> 16
and 8.2 hereof shall be paid as follows, unless otherwise provided:
(a) During the Term, Lessee shall pay to Lessor monthly, in advance with
its payment of Minimum Rent, one-twelfth (1/12) of the amount of such additional
Rent as reasonably estimated by Lessor in advance, in good faith, to be due from
Lessee.
(b) Annually, as soon as is reasonably possible after the expiration of
each Lease Year, Lessor shall prepare in good faith and deliver to Lessee a
comparative statement, which statement shall be conclusive between the parties
hereto, setting forth (1) the Operating Costs for such Lease Year, and (2) the
amount of additional Rent owed by Lessee as determined in accordance with the
provisions of this Article 8.
(c) If the aggregate amount of such estimated additional Rent payments made
by Lessee in any Lease Year should be less than the additional Rent due for such
year, then Lessee shall pay to Lessor as additional Rent upon demand the amount
of such deficiency. If the aggregate amount of such additional Rent payments
made by Lessee in any Lease Year of the Term should be greater than the
additional Rent due for such year, then should Lessee not be otherwise in
default hereunder, the amount of such excess will be applied by Lessor to the
next succeeding installments of such additional Rent due hereunder; and if there
is any such excess for the last year of the Term, the amount thereof will be
refunded by Lessor to Lessee, provided Lessee is not otherwise in default under
the terms of this Lease.
(d) Lessor shall keep for at least one (1) years after the expiration of
each calendar year, true and accurate books of account and records for Operating
Costs, which books and records shall be maintained in accordance with generally
accepted accounting principles. Lessee and Lessee's representatives, upon at
least thirty (30) days' notice and during normal business hours, but not more
than once per year, shall have the right to examine at Lessor's main accounting
office and, at Lessee's expense, make copies of Lessor's books and records
pertaining to Operating Costs.
(e) If Lessee audits or inspects Lessor's books of account and/or records,
and determines that Lessor's estimate of Operating Costs exceeds the actual
Operating Costs by five percent (5%) or more, then Lessor shall promptly pay to
Lessee the cost of such audit or inspection.
9. ACCORD AND SATISFACTION
9.1 ACCEPTANCE OF PAYMENT. No payment by Lessee or receipt by Lessor of a
lesser amount of Minimum Rent or any other sum due hereunder as additional Rent
or any other payment shall be deemed to be other than on account of the earliest
due Rent or payment, nor shall any endorsement or statement on any check or any
letter accompanying any such check or payment be deemed an accord and
satisfaction, and Lessor may accept such check or payment without prejudice to
Lessor's right to recover the balance of such Rent or payment or pursue any
other remedy available in this Lease, at law or in equity. Lessor may accept any
partial payment from Lessee without invalidation of any contractual notice
required to be given herein (to the
PAGE 16
<PAGE> 17
extent such contractual notice is required) and without invalidation of any
notice required to be given pursuant to any applicable statute or other law of
the State of Washington.
10. SECURITY DEPOSIT
[Intentionally omitted.]
11. USE
11.1 PERMITTED USE. The Leased Premises may be used and occupied only for
the purposes specified in Section 1.7 hereof, and for no other purpose or
purposes without Lessor's prior consent, which consent will not be unreasonably
withheld, conditioned or delayed so long as the change in use does not have a
material adverse affect on occupancy densities or foot traffic within the Leased
Premises. Without limiting other bases for reasonably withholding consent,
Lessor shall be deemed to be reasonably withholding its consent if Lessor
disapproves of a change in use on the basis that the proposed changed use of the
Premises falls outside the normal scope of uses found within other Class A
office buildings in Seattle, Washington (e.g., a twenty-four hour per day
telephone soliciting service or a tattoo parlor) or would otherwise be
objectionable to most owners of Class A Office buildings in Seattle, Washington
(e.g., office space for an adult entertainment company). Notwithstanding the
foregoing sentences in this Section 11.1, Lessor agrees that Lessee may as part
of permitted uses in the Premises operate a twenty-hour customer service call
center, provided such use is only an ancillary and incidental part of its
primary permitted use of the Premises. Lessee shall promptly comply with all
laws, ordinances, orders and regulations affecting the Leased Premises, their
cleanliness, safety, occupation and use.
11.2 SAFES, HEAVY EQUIPMENT. Lessee shall not place a load upon any floor
of the Leased Premises which exceeds fifty (50) pounds per square foot live
load. Lessor reserves the right to prescribe the weight and position of all
safes and heavy installations which Lessee wishes to place in the Leased
Premises so as properly to distribute the weight thereof, or to require plans
prepared by a qualified structural engineer at Lessee's sole cost and expense
for such heavy objects. Notwithstanding the foregoing, Lessor shall have no
liability for any damage caused by the installation of such heavy equipment or
safes.
11.3 MACHINERY. Business machines and mechanical equipment belonging to
Lessee which cause noise and/or vibration that may be transmitted to the
structure of the Building or to any other leased space to such a degree as to be
objectionable to Lessor or to other tenants in the Complex shall be placed and
maintained by the party possessing the machines or equipment, at such party's
expense, in settings of cork, rubber or spring type noise and/or vibration
eliminators, and Lessee shall take such other measures as needed to eliminate
vibration and/or noise. If the noise or vibrations cannot be eliminated, Lessee
must remove such equipment within ten (10) days following written notice from
Lessor.
11.4 HAZARDOUS ACTIVITIES. Lessee shall not engage in any activities or
permit to be kept, used, or sold in or about the Leased Premises any article,
which may be prohibited by the
PAGE 17
<PAGE> 18
standard form of fire insurance policies. Lessee shall, at its sole cost and
expense, comply with any and all requirements pertaining to the Leased Premises,
its occupation and/or use, of any insurance organization or company, necessary
for the maintenance of reasonable fire and public liability insurance covering
the Building, the Complex and appurtenances.
11.5 ACCESS/SECURITY. Lessee and its employees shall have access to the
Leased Premises 24 hours per day, 365 days per week. At Lessee's election,
Lessee may install its own security system in the Premises and the cost of such
security system (including, without limitation, all installment and other
related or one-time costs associated with such installation) shall be included
in the Lessee Improvement Costs and shall be deducted from the Lessee
Improvement Allowance. Any such security installation shall be deemed an
alterations and shall be subject to all of the requirement of Section 15. Lessee
shall also ensure that any such security system shall not deny Lessor access to
the Leased Premises.
12. COMPLIANCE WITH LAWS AND REGULATIONS
12.1 LESSEE'S OBLIGATIONS. Lessee, shall, at its sole cost and expense,
comply with all of the requirements of all municipal, state and federal
authorities now in force, or which may hereafter be in force, pertaining to the
Leased Premises, and shall faithfully observe in the use of the Leased Premises
all municipal ordinances and state and federal statutes and regulations now in
force or which may hereafter be in force, including, without limitation, the
Environmental Laws (as hereinafter defined), and the Americans with Disabilities
Act, 42 U.S.C. ss.ss. 12101-12213 (and any rules, regulations, restrictions,
guidelines, requirements or publications promulgated or published pursuant
thereto, collectively herein referred to as the "ADA"), whether or not any of
the foregoing were foreseeable or unforeseeable at the time of the execution of
this Lease. The judgment of any court of competent jurisdiction, or the
admission of Lessee in any action or proceeding against Lessee, whether Lessor
be a party thereto or not, that any such requirement, ordinance, statute or
regulation pertaining to the Leased Premises has been violated, shall be
conclusive of that fact as between Lessor and Lessee. Within five (5) days after
receipt of notice or knowledge of any violation or alleged violation of any
Environmental Law(s) and/or the ADA pertaining to the Complex, any governmental
or regulatory proceedings, investigations, sanctions and/or actions threatened
or commenced with respect to any such violation or alleged violation, and any
claim made or commenced with respect to such violation or alleged violation,
Lessee shall notify Lessor thereof and provide Lessor with copies of any written
notices or information in Lessee's possession.
12.2 CONDITION OF LEASED PREMISES. Subject to Lessor's work, if any, as
referred to in Exhibit D to this Lease, Lessee hereby accepts the Leased
Premises in the condition existing as of the date of occupancy, subject to all
applicable zoning, municipal, county and state laws, ordinances, rules,
regulations, orders, restrictions of record, and requirements in effect during
the Term or any part of the Term hereof regulating the Leased Premises, and
without representation, warranty or covenant by Lessor, express or implied, as
to the condition, habitability or safety of the Leased Premises, the suitability
or fitness thereof for Lessee's intended purposes, or any other matter.
PAGE 18
<PAGE> 19
12.3 HAZARDOUS MATERIALS.
(a) Hazardous Materials Defined. As used herein, the term "HAZARDOUS
MATERIALS" shall mean any wastes, materials or substances (whether in the form
of liquids, solids or gases, and whether or not air-borne), which are or are
deemed to be pollutants or contaminants, or which are or are deemed to be
hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or
injurious, or which present a risk, to public health or to the environment, or
which are or may become regulated by or under the authority of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq.; the Hazardous Materials Transportation Act, 39 U.S.C.
Section 1801, et seq.; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the Federal Clean
Water Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section
7401 et seq.; or under any other applicable local, Washington State or federal
laws, judgments, ordinances, orders, rules, regulations, codes or other
governmental restrictions, guidelines or requirements, any amendments or
successor(s) thereto, replacements thereof or publications promulgated pursuant
thereto (collectively "ENVIRONMENTAL LAWS"), including, without limitation, any
waste, material or substance which is:
(i) defined as a "hazardous substance" or "pollutant or contaminant"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.ss.9601 et seq.;
(ii) listed as an "extremely hazardous substance," "hazardous chemical," or
"toxic chemical" pursuant to the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C.ss.11001 et seq.;
(iii) listed as a "hazardous substance" in the United States Department of
Transportation Table, 49 C.F.R. 172.101 and amendments thereto, or by the
Environmental Protection Agency (or any successor agency) in 40 C.F.R. Part 302
and amendments thereto;
(iv) defined, listed or designated by regulations promulgated pursuant to
any Environmental Law; or
(v) any of the following: pesticide; flammable explosive; petroleum,
including crude oil or any fraction thereof; asbestos or asbestos-containing
material; polychlorinated biphenyl; radioactive material; or urea formaldehyde.
In addition to the foregoing, the term Environmental Laws shall be deemed
to include, without limitation, local, state and federal laws, judgments,
ordinances, orders, rules, regulations, codes and other governmental
restrictions, guidelines and requirements, any amendments and successors
thereto, replacements thereof and publications promulgated pursuant thereto,
which deal with or otherwise in any manner relate to, air or water quality, air
emissions, soil or ground conditions or other environmental matters of any kind.
(b) Use, etc. of Hazardous Materials. Lessee agrees that, except for the
use
PAGE 19
<PAGE> 20
and storage of the generator and generator tank installed by Lessee pursuant to
Section 49.20 hereof and in compliance with all applicable governmental rules
and regulations and except for the use and storage, in compliance with all
applicable governmental rules and regulations, of those Hazardous Materials
normally used in the operation of office space for a business of the type
described in Section 1.7 hereof (for example, cleaning solvents and supplies,
and toner and other office machine supplies) and then only in such reasonable
quantities as are appropriate for such use, during the Term, there shall be no
use, presence, disposal, storage, generation, leakage, treatment, manufacture,
import, handling, processing, release or threatened release of Hazardous
Materials on, from or under the Leased Premises by Lessee, its employees,
agents, representatives, contractors, invitees, subtenants and/or assigns
(hereinafter collectively, "LESSEE'S PARTIES"). The use, presence, disposal,
storage, generation, leakage, treatment, manufacture, import, handling,
processing, release or threatened release of Hazardous Materials by Lessee's
Parties, whether permitted by this Section 12.b(3) or not, are sometimes
hereinafter individually or collectively referred to as "HAZARDOUS USE." Except
for the generator tank contemplated under Section 49.20, Lessee shall not be
entitled to install any tanks under, on or about the Leased Premises for the
storage of Hazardous Materials without the express written consent of Lessor,
which may be given or withheld in Lessor's sole arbitrary judgment.
(c) Hazardous Materials Report; When Required. In the event that Lessor
agrees in writing that Lessee or Lessee's Parties may make some Hazardous Use of
the Leased Premises, Lessee shall submit to Lessor a written report with respect
to Hazardous Materials ("REPORT") in the form prescribed in subparagraph (d)
below on the following dates:
(i) Within ten (10) days after the Commencement Date,
(ii) Within ten (10) days after each anniversary of the Commencement Date
during the Term,
(iii) At any time within ten (10) days after written request by Lessor, and
(iv) At any time when there has been or is planned any condition which
constitutes or would constitute a change in the information submitted in the
most recent Report, including any notice of violation as referred to in
subparagraph (d)(vii) below.
(d) Hazardous Materials Report; Contents. The Report shall contain, without
limitation, the following information:
(i) Whether on the date of the Report and (if applicable) during the period
since the last Report there has been any Hazardous Use on, from or under the
Leased Premises.
(ii) If there was such Hazardous Use, the exact identity of the Hazardous
Materials, the dates upon which such materials were brought upon the Leased
Premises, the dates upon which the Hazardous Materials were removed therefrom,
and the
PAGE 20
<PAGE> 21
quantity, location, use and purpose thereof.
(iii) If there was such Hazardous Use, any governmental permits maintained
by Lessee with respect to such Hazardous Materials, the issuing agency, original
date of issue, renewal dates (if any) and expiration date. Copies of any such
permits and applications therefor shall be attached.
(iv) If there was such Hazardous Use, any governmental reporting or
inspection requirements with respect to such Hazardous Materials, the
governmental agency to which reports are made and/or which conducts inspections,
and the dates of all such reports and/or inspections (if applicable) since the
last Report. Copies of any such Reports shall be attached.
(v) If there was such Hazardous Use, identification of any operation or
business plan prepared for any government agency with respect to any Hazardous
Use.
(vi) Any liability insurance carried by Lessee with respect to Hazardous
Materials, the insurer, policy number, date of issue, coverage amounts, and date
of expiration. Copies of any such policies or certificates of coverage shall be
attached.
(vii) Any notices of violation of Environmental Laws, written or oral,
received by Lessee from any governmental agency since the last Report, the date,
name of agency, and description of violation. Copies of any such written notices
shall be attached.
(viii) Any knowledge, information or communication which Lessee has
acquired or received relating to (x) any enforcement, cleanup, removal or other
governmental or regulatory action threatened or commenced against Lessee or with
respect to the Leased Premises pursuant to any Environmental Laws; (y) any claim
made or threatened by any person or entity against Lessee or the Leased Premises
on account of any alleged loss or injury claimed to result from any alleged
Hazardous Use on or about the Leased Premises or Complex; or (z) any report,
notice or complaint made to or filed with any governmental agency concerning any
Hazardous Use on or about the Leased Premises or Complex. The Report shall be
accompanied by copies of any such claim, report, complaint, notice, warning or
other communication that is in the possession of or is available to Lessee.
(ix) Such other pertinent information or documents as are reasonably
requested by Lessor in writing.
(e) Release of Hazardous Materials: Notification and Clean Up. If at any
time during the Term Lessee knows or believes that any release of any Hazardous
Materials by Lessee's Parties has come or will come to be located upon, about or
beneath the Leased Premises or the Complex, then Lessee shall immediately,
either prior to the release or following the discovery thereof by Lessee, give
verbal and follow-up written notice of that condition to Lessor. Lessee
covenants to investigate, clean up and otherwise remediate any release of
Hazardous Materials caused solely by Lessee's Parties at Lessee's cost and
expense; such investigation,
PAGE 21
<PAGE> 22
clean up and remediation shall be performed only after Lessee has obtained
Lessor's written consent, which shall not be unreasonably withheld, conditioned
or delayed; provided, however, that Lessee shall be entitled to respond
immediately to an emergency without first obtaining Lessor's written consent.
All clean up and remediation shall be done in compliance with Environmental Laws
and to the reasonable satisfaction of Lessor. Notwithstanding the foregoing,
whether or not such work is prompted by the foregoing notice from Lessee or is
undertaken by Lessor for any other reason whatsoever, Lessor shall have the
right, but not the obligation, in Lessor's sole and absolute discretion,
exercisable by prior written notice to Lessee , to undertake within or outside
the Leased Premises all or any portion of any investigation, clean up or
remediation with respect to Hazardous Materials brought onto, used, or released
on, under or around the Leased Premises or the Complex by Lessee's Parties (or,
once having undertaken any of such work, to cease same, in which case Lessee
shall perform the work), all at Lessee's cost and expense, which shall be paid
by Lessee as additional Rent within ten (10) days after receipt of written
request therefor by Lessor (and which Lessor may require to be paid prior to
commencement of any work by Lessor). No such work by Lessor shall create any
liability on the part of Lessor to Lessee or any other party in connection with
such Hazardous Materials or constitute an admission by Lessor of any
responsibility with respect to such Hazardous Materials. It is the express
intention of the parties hereto that Lessee shall be liable under this Section
12.3(e) for any and all conditions covered hereby which were caused or created
solely (i) by any of Lessee's Parties, or (ii) by any Hazardous Materials
brought onto the Leased Premises or the Complex by or for the benefit of
Lessee's Parties (collectively "TENANT CAUSED Contamination"). Lessee shall not
enter into any settlement agreement, consent decree or other compromise with
respect to any claims relating to any Hazardous Materials in any way connected
to the Leased Premises or the Complex without first (i) notifying Lessor of
Lessee's intention to do so and affording Lessor the opportunity to participate
in any such proceedings, and (ii) obtaining Lessor's prior written consent;
Provided, however, that, other than the obligations assumed by Lessee in this
Section 12 regarding Hazardous Materials, Lessor shall pay for all costs and
expenses, including, without limitation, attorney fees and costs, (together,
"Lessor's Costs") arising in whole or in part from or in any way related to, any
investigation, study, report, clean up or remediation of any Hazardous Material
which is during the Term introduced onto the Complex by Lessor or its agents,
contractors or employees ("LANDLORD CAUSED CONTAMINATION") Notwithstanding any
other provision of this Lease, Lessor's Costs shall not be included in Operating
Costs as defined in Section 2.1(k) hereof.
(f) Pre-Existing Hazardous Materials. As used herein, "PRE-EXISTING
HAZARDOUS MATERIALS" shall mean Hazardous Materials from any source that are as
of the date hereof located on, about, or beneath or are migrating from, onto or
under any part of the Complex (including, without limitation, groundwater).
Lessor represents and warrant to Lessee that, to Lessor's actual knowledge, as
of the date hereof, there are no Pre-Existing Hazardous Materials except those,
if any, disclosed in that certain Revised Independent Remedial Action Interim
Report - Adobe Development dated March 30, 1998 (Project No. 41289-001.001)
issued by EMCON, a copy of which report has been provided to Lessee.
(g) Inspection and Testing by Lessor. Lessor shall have the right at all
times during the Term, on not less than 24 hours prior notice to Lessee (which
notice may be by
PAGE 22
<PAGE> 23
telephone) to (i) inspect the Leased Premises, as well as Lessee's books and
records related to Hazardous Materials, and to (ii) conduct tests and
investigations to determine whether Lessee is in compliance with the provisions
of this Section. Except in case of emergency, Lessor shall give reasonable
notice to Lessee before conducting any inspections, tests, or investigations.
The cost of all such inspections, tests and investigations shall be borne by
Lessee, if such tests reveal a violation of the provisions of this Article 12 by
any of Lessee's Parties. Neither any action nor inaction on the part of Lessor
pursuant to this Section 12.3(g) shall be deemed in any way to release Lessee
from, or in any way modify or alter, Lessee's responsibilities, obligations,
and/or liabilities incurred pursuant to Section 12.3 hereof.
12.4 MUTUAL ENVIRONMENTAL INDEMNITIES.
(a) Lessee Indemnity of Lessor. Lessee shall indemnify, hold harmless, and,
at Lessor's option (with such attorneys as Lessor may approve in advance and in
writing), defend Lessor (and Lessor's officers, directors, shareholders,
trustees, partners, employees, contractors, agents and mortgagees or other lien
holders), from and against any and all claims, demands, expenses, actions,
judgments, damages (whether consequential, direct or indirect, known or unknown,
foreseen or unforeseen), penalties, fines, liabilities, losses of every kind and
nature, including, without limitation, property damage, (including, the
diminution in value of Lessor's interest in the Leased Premises or the Complex,
and damages for the loss or restriction on use of any space or amenity within
the Leased Premises or the Complex, damages arising from any adverse impact on
marketing space in the Complex), sums paid in settlement of claims and any costs
and expenses associated with injury, illness or death to or of any person,
suits, administrative proceedings, costs and fees, including, but not limited
to, attorneys' and consultants' fees and expenses, and the costs of cleanup,
remediation, removal and restoration (all of the foregoing being hereinafter
sometimes collectively referred to as "LOSSES"), arising out of or in connection
with a Tenant Caused Contamination, Lessee's breach of the provisions of this
Article 12; or any Hazardous Use on, about or from the Leased Premises or the
Complex. Lessee warrants that it is leasing the Leased Premises "as-is,
where-is," and that it has thoroughly inspected the Leased Premises prior to
execution of this Lease. Notwithstanding anything to the contrary herein, Lessee
shall have no liability or responsibility to Lessor under this Lease or
otherwise for any Pre-Existing Hazardous Materials.
(b) Lessor Indemnity of Lessee. Lessor shall indemnify, hold harmless, and,
at Lessee's option (with such attorneys as Lessee may approve in advance and in
writing), defend Lessee (and Lessee's officers, directors, shareholders,
trustees, partners, employees, contractors, agents and mortgagees or other lien
holders), from and against any and all claims, demands, expenses, actions,
judgments, damages (whether consequential, direct or indirect, known or unknown,
foreseen or unforeseen), penalties, fines, liabilities, losses of every kind and
nature, including, without limitation, property damage, (including, damages for
the loss or restriction on use of any space or amenity within the Leased
Premises or the Complex), sums paid in settlement of claims and any costs and
expenses associated with injury, illness or death to or of any person, suits,
administrative proceedings, costs and fees, including, but not limited to,
attorneys' and consultants' fees and expenses, and the costs of cleanup,
remediation, removal and restoration arising out of or in connection with a
Landlord Caused Contamination or Lessor's
PAGE 23
<PAGE> 24
breach of the provisions or warranties of this Article 12. Notwithstanding
anything to the contrary herein, Lessor shall have no liability or
responsibility to Lessee under this Lease or otherwise for any Hazardous
Materials that first appear on the Premises or the Complex during the Term due
to the actions or omissions of other tenants within the Building or Complex or
to the actions or omissions of other third parties (except Landlord's agents or
contractors).
12.5 RELEASE AND ASSUMPTION OF RISK.
(a) Lessee, for itself, and its officers, directors, shareholders,
partners, agents, contractors, attorneys, brokers, servants, employees,
sublessees, lessees, invitees, concessionaires, licensees and representatives
(hereinafter referred to as "RELEASORS"), hereby waives, releases, acquits and
forever discharges Lessor and its officers, directors, trustees, shareholders,
partners, agents, contractors, attorneys, brokers, servants, employees, lessees,
invitees, licensees and representatives (hereinafter referred to as "RELEASEES")
of and from any and all Losses, which are in any way connected with, based upon,
related to or arising out of (i) any Hazardous Materials on or about the Leased
Premises or the Complex, (ii) any violation by or relating to the Leased
Premises or the Complex (or the ownership, use, condition, occupancy or
operation thereof), or by the Releasors or any other persons or entities, of any
Environmental Laws affecting the Leased Premises or the Complex, or (iii) any
investigation, inquiry, order, hearing, action or other proceeding by or before
any governmental agency or any court in connection with any of the matters
referred to in clauses (i) or (ii) above (collectively, the "RELEASED MATTERS"),
except to the extent otherwise provided in Section 12.4,. Releasors hereby
expressly assume any and all risk of Losses based on or arising out of or
pertaining to the Released Matters except to the extent otherwise provided in
Section 12.4.
(b) Lessee agrees, represents and warrants that the Released Matters are
not limited to matters which are known, disclosed or foreseeable, and Lessee
realizes and acknowledges that factual matters now unknown to it may have given,
or may hereinafter give, rise to Losses which are presently unknown,
unanticipated and unsuspected. Lessee further agrees, represents and warrants
that the provisions of this Section 12.5 have been negotiated and agreed upon in
light of that realization and that Lessee nevertheless hereby intends to
release, discharge and acquit the Releasees from any such unknown Losses which
are in any way related to this Lease or the Complex.
13. SERVICE AND EQUIPMENT
13.1 CLIMATE CONTROL, Lessor, as part of Operating Costs, shall provide
climate control to the Leased Premises from 7:00 a.m. to 6:00 p.m. (the "CLIMATE
CONTROL HOURS") on weekdays and -Saturdays (Sundays and holidays excepted) to
maintain a temperature adequate for comfortable occupancy, provided that Lessor
shall have no responsibility or liability for failure to supply climate control
service when making repairs, alterations or improvements or when prevented from
so doing by strikes or any other cause beyond Lessor's reasonable control. Any
climate control furnished for periods not within the Climate Control Hours
pursuant to Lessee's request shall be at Lessee's sole cost and expense in
accordance with rate schedules promulgated by Lessor from time to time. The
current estimated charge for climate control
PAGE 24
<PAGE> 25
service is $50 per hour, but Lessee shall not be required to pay more than the
actual third-party costs for such extra service, together with a reasonable
charge to Lessor for maintenance and administration costs related to such
service. Lessee acknowledges that Lessor has installed in the Building a system
for the purpose of climate control. Any use of the Leased Premises not in
accordance with the design standards or any arrangement of partitioning which
interferes with the normal operation of such system may require changes or
alterations in the system or ducts through which the climate control system
operates. Any changes or alterations so occasioned, if such changes can be
accommodated by Lessor's equipment, shall be made by Lessee at its cost and
expense but only with the written consent of Lessor first had and obtained, and
in accordance with drawings and specifications and by a contractor first
approved in writing by Lessor. If installation of partitions, equipment or
fixtures by Lessee necessitates the re-balancing of the climate control
equipment in the Leased Premises, the same will be performed by Lessor at
Lessee's expense. Lessee acknowledges that up to one (1) year may be required
after Lessee has fully occupied the Leased Premises in order to adjust and
balance the climate control systems. Any charges to be paid by Lessee hereunder
shall be due within ten (10) days of receipt of an invoice from Lessor,
13.2 ELEVATOR SERVICE. Lessor, as part of Operating Costs, shall provide
elevator service (which may be with or without operator at Lessor's option)
during all hours provided that Lessee, its employees, and all other persons
using such services shall do so at their own risk.
13.3 CLEANING PUBLIC AREAS. Lessor, as part of Operating Costs, shall
promptly maintain and keep clean the street level lobbies, sidewalks, truck
dock, public corridors and other public portions of the Building.
13.4 REFUSE DISPOSAL. Lessee shall pay Lessor, within ten (10) days of
being billed therefor, for the removal from the Leased Premises and the Building
of such refuse and rubbish of Lessee as shall exceed that ordinarily accumulated
daily in the routine of business office occupancy.
13.5 JANITORIAL SERVICE. Lessor, as part of Operating Costs, shall
provide cleaning and janitorial service in and about the Complex and Leased
Premises from time to time on weekdays (Saturdays, Sundays and holidays
excepted) in accordance with standards in first-class office buildings in the
city in which the Building is located.
To the extent that Lessee shall require special or more frequent cleaning
and/or janitorial service (hereinafter referred to as "SPECIAL CLEANING
SERVICE") Lessor may, upon reasonable advance notice from Lessee, elect to
furnish such Special Cleaning Service and Lessee agrees to pay Lessor, within
ten (10) days of being billed therefor, Lessor's charge for providing such
additional service.
Special Cleaning Service shall include but shall not be limited to the
following:
(a) The cleaning and maintenance of Lessee eating facilities, including the
removal of refuse and garbage therefrom.
PAGE 25
<PAGE> 26
(b) The cleaning and maintenance of Lessee computer centers, including
peripheral areas, and removal of waste paper therefrom.
(c) The cleaning and maintenance of special equipment areas, kitchen areas,
private toilets and locker rooms, medical centers and large scale duplicating
rooms.
(d) The cleaning and maintenance in areas of special security such as
storage units.
(e) The provision of consumable supplies for private toilet rooms.
13.6 INTERRUPTIONS. Lessor does not warrant that any of the services
referred to above or any other services and/or utilities which Lessor may supply
or are supplied will be free from interruption and/or the need for maintenance
and repairs or replacement. Lessee acknowledges that any one or more such
services may be suspended or reduced by reason of repair, alterations or
improvements necessary to be made, by strikes or accidents, by any cause beyond
the reasonable control of Lessor, by orders or regulations of any federal,
state, county or municipal authority, or by any other cause of action unless
such interruption is the result of the gross negligence or willful misconduct of
Lessor or Lessor's agents, employees, or invitees.
Any such interruption or suspension of services shall not be deemed an
eviction or disturbance of Lessee's use and possession of the Leased Premises or
any part thereof, nor render Lessor liable to Lessee for damages by abatement of
Rent or otherwise, nor relieve Lessee of performance of Lessee's obligations
under this Lease.
14. WASTE
14.1 WASTE OR NUISANCE. Lessee shall not commit, or suffer to be committed,
any waste upon the Leased Premises, or any nuisance, or other act or thing which
may disturb the quiet enjoyment of any other tenant or occupant of the Complex
in which the Leased Premises are located.
15. ALTERATIONS
15.1 CONSENT OF LESSOR; OWNERSHIP. Other than non-structural alterations
not costing more than $25,000.00 in any consecutive twelve (12) month period,
Lessee shall not make, or suffer to be made, any alterations to the Leased
Premises, the Building, or the Complex, and/or Lines, systems and facilities
therein, or any part thereof, without the written consent of Lessor first had
and obtained, which consent will not be unreasonably withheld, conditioned or
delayed. When Lessor consents to such alterations, it shall, if so requested by
Lessee, also notify Lessee if Lessor will require Lessee to remove such
improvement at the expiration or earlier termination of this Lease. Any
additions to or alterations of the Leased Premises (except trade fixtures)
shall, immediately upon being made, constitute a part of the realty and Lessor's
property, and shall, at the expiration or earlier termination of this Lease,
remain upon the Leased Premises without compensation to Lessee, unless Lessor
notified Lessee at the time the item was installed that
PAGE 26
<PAGE> 27
such item was to be removed prior to Lease expiration or termination, as
provided in Section 15.4, below. Except as otherwise provided in this Lease,
Lessee shall have the right to remove its trade fixtures placed upon the Leased
Premises, provided that Lessee restores the Leased Premises as indicated below.
Any and all reasonable costs incurred by Lessor, whether in complying with laws,
governmental requirements or otherwise, as a result of any "alterations" (as
hereinafter defined), or as a result of request by Lessee for increased Lines or
other utility capacity above that presently existing (or, in the event the
Building is to be constructed or substantially altered by Lessor prior to the
delivery date, above that which is planned by Lessor for the Building) shall be
paid by Lessee within ten (10) days after demand therefor by Lessor.
15.2 REQUIREMENTS. Any alterations, additions or installations performed by
Lessee in the Leased Premises or Building (hereinafter collectively
"alterations") shall be subject to strict conformity with the following
requirements:
(a) All alterations shall be at the sole cost and expense of Lessee;
(b) Prior to commencement of any work of alteration, Lessee shall submit
detailed plans and specifications, including working drawings (hereinafter
referred to as "PLANS"), of the proposed alterations, which shall be subject to
the consent of Lessor in accordance with the terms of Section 15.1 above;
(c) [Intentionally Omitted.]
(d) No alterations shall be commenced without Lessee having previously
obtained all appropriate permits and approvals required by and of governmental
agencies;
(e) All alterations shall be performed in a skillful and workmanlike
manner, consistent with the best practices and standards of the construction
industry, and pursued with diligence in accordance with the Plans previously
approved by Lessor and in full accord with all applicable laws and ordinances.
All material, equipment, and articles incorporated in the alterations are to be
new, and/or of recent manufacture and of the most suitable grade for the purpose
intended;
(f) Lessee must obtain the prior written approval from Lessor in accordance
with the terms of Section 15.1 above for Lessee's contractor before the
commencement of the work. Lessor may require that Lessee use subcontractors
designated by Lessor as to specified portions of the work. Lessee's contractor
shall maintain all of the insurance reasonably required by Lessor, including,
without limitation, commercial general liability, workers' compensation,
builder's risk and course of construction insurance. The limits of such
insurance shall, at a minimum, be the same as those specified in Article 18;
(g) As a condition of approval of the alterations, Lessor may require
performance and labor and materialmen's payment bonds issued by a surety
approved by Lessor, in a sum equal to the cost of the alterations guarantying
the completion of the alterations free and clear of all liens and other charges
in accordance with the Plans. Such bonds shall name Lessor
PAGE 27
<PAGE> 28
as beneficiary;
(h) The alterations must be performed in a manner such that they will not
interfere with the quiet enjoyment of the other lessees in the Complex;
(i) Lessor shall have the right to condition any approval of the
alterations upon (i) submission by Lessee of a Report with respect to Hazardous
Materials, and/or (ii) the performance by Lessee at Lessee's cost and expense of
such investigation, clean-up and remediation with respect to Hazardous Materials
as Lessor may request, in Lessor's sole and absolute discretion; provided,
however, that Lessor shall have the right, but not the obligation, to undertake
all or any portion of such investigation, clean-up or remediation at Lessee's
cost and expense in accordance with the provisions of Section 12.3(e) above.
Lessee acknowledges and agrees that Lessor shall have the right, in its sole and
absolute discretion, to disapprove the making of any such alterations based upon
the results of any investigation with respect to Hazardous Materials.
15.3 LIENS. Lessee shall keep the Leased Premises and the Complex in which
the Leased Premises are situated free from any liens arising out of any work
performed, materials furnished or obligations incurred by Lessee. In the event a
mechanic's or other lien is filed against the Leased Premises or the Complex of
which the Leased Premises form a part as a result of a claim arising through
Lessee and such lien is not removed within ten (10) business days after Lessee
receives written notice of such lien, Lessor may demand that Lessee furnish to
Lessor a surety bond satisfactory to Lessor in an amount equal to at least one
hundred fifty percent (150%) of the amount of the contested lien claim or
demand, indemnifying Lessor against liability for the same and holding the
Leased Premises free from the effect of such lien or claim. Such bond must be
posted within ten (10) days following notice from Lessor. In the alternative,
Lessee may bond around such lien in accordance to RCW 60.04.161. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in any action to foreclose such lien if Lessor shall decide it is
to its best interest to do so. Lessor may pay the claim prior to the enforcement
thereof, in which event Lessee shall reimburse Lessor in full, including
attorneys' fees, for any such expense, as additional rent, with the next due
rental.
15.4 RESTORATION. Lessee shall return the Leased Premises to Lessor at the
expiration or earlier termination of the Term of this Lease in good and sanitary
order, condition and repair, free of rubble and debris, broom clean, reasonable
wear and tear excepted. However, Lessee shall ascertain from Lessor at least
thirty (30) days prior to the expiration or earlier termination of the Term of
this Lease, whether Lessor desires the Leased Premises, or any part thereof,
restored to its condition prior to the making of permitted alterations, and if
Lessor shall so desire, then Lessee shall forthwith restore said Leased Premises
or the designated portions thereof as the case may be, to its original
condition, entirely at its own expense, excepting normal wear and tear. All
damage to the Leased Premises caused by the removal of such trade fixtures and
other personal property that Lessee is permitted to remove under the terms of
this Lease and/or such restoration shall be repaired by Lessee at its sole cost
and expense prior to termination.
16. PROPERTY INSURANCE
PAGE 28
<PAGE> 29
16.1 USE OF PREMISES. No use shall be made or permitted to be made on the
Leased Premises, nor acts done, which will increase the existing rate of
insurance upon the Building in which the Leased Premises are located or upon any
other building or improvement in the Complex or cause the cancellation of any
insurance policy covering the Building or any other building or improvement in
the Complex, or any part thereof, nor shall Lessee sell, or permit to be kept,
used or sold, in or about the Leased Premises or the Complex, any article which
may be prohibited by the standard form of "All Risk" fire insurance policies.
Lessee shall, at its sole cost and expense, comply with any and all requirements
of any insurance organization or company, pertaining to the Leased Premises,
necessary for the maintenance of reasonable property damage and commercial
general liability insurance, covering the Leased Premises, the Building, or the
Complex.
16.2 INCREASE IN PREMIUMS. Lessee agrees to pay to Lessor directly, as
additional Rent and not as part of Operating Costs, any increase in premiums on
policies which may be carried by Lessor on the Leased Premises, the Building or
the Complex, or any blanket policies which include the Building or Complex,
covering damage thereto and loss of Rent caused by fire and other perils,
resulting solely from the nature of Lessee's occupancy or any act or omission of
Lessee. All payments of additional Rent by Lessee to Lessor pursuant to this
Section 16.2 shall be made within ten (10) days after receipt by Lessee of
Lessor's billing therefor. Lessee shall also pay its Pro Rata Percent of all
premiums for insurance carried by Lessor on the Leased Premises, the Building
and the Complex as part of Operating Costs.
16.3 PERSONAL PROPERTY INSURANCE. Lessee shall maintain in full force and
effect on all of its fixtures, furniture, equipment and other business personal
property in the Leased Premises a policy or policies providing protection
against any peril included within the classification "All Risk" to the extent of
at least ninety percent (90%) of their replacement cost, or that percentage of
the replacement cost required to negate the effect of a coinsurance provision,
whichever is greater. No such policy shall have a deductible in an amount
greater than Five Thousand Dollars ($5,000), as such amount may be adjusted from
time to time by Lessee in accordance with standards then prevailing in the
market for commercial tenants occupying similar space. Lessee shall also insure
in the same manner the physical value of all its leasehold improvements and
alterations in the Leased Premises. During the Term, the proceeds from any such
policy or policies of insurance shall be used for the repair or replacement of
the fixtures, equipment, and leasehold improvements so insured. Lessor shall
have no interest in said insurance, and will sign all documents necessary or
proper in connection with the settlement of any claim or loss by Lessee. Lessee
shall also maintain business interruption insurance and insurance for all plate
glass upon the Leased Premises. All insurance specified in this Section 16.3 to
be maintained by Lessee shall be maintained by Lessee at its sole cost.
16.4 RENT LOSS/BUSINESS INTERRUPTION INSURANCE. Lessee shall carry Business
Interruption or loss of income insurance covering those risks referred to in
Articles 16 and 18 hereof, in an amount equal to all gross income of Lessee
generated from its operations in the Leased Premises for a period of twelve (12)
months at the then current rate of gross income earning.
PAGE 29
<PAGE> 30
17. INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION
17.1 INTENT AND PURPOSE. This Article 17 is written and agreed to in
respect of the intent of the parties to assign the risk of loss, whether
resulting from negligence of the parties or otherwise, to the party who is
obligated hereunder to cover the risk of such loss with insurance. Thus, the
indemnity and waiver of claims provisions of this Lease have as their object, so
long as such object is not in violation of public policy, the assignment of risk
for a particular casualty to the party carrying the insurance for such risk,
without respect to the causation thereof.
17.2 WAIVER OF SUBROGATION. Lessor and Lessee release each other, and their
respective authorized representatives, from any claims for (i) damage to the
Leased Premises and the Building and other improvements in which the Leased
Premises are located, and to the furniture, fixtures, and other business
personal property, Lessee's improvements and alterations of either Lessor or
Lessee, in or on the Leased Premises and the Building and other improvements in
which the Leased Premises are located, and (ii) for loss of business or income
of either Lessor or Lessee, that are caused by or result from risks insured or
required under the terms of this Lease to be insured against under any property
insurance policies carried or to be carried by either of the parties.
17.3 FORM OF POLICY. Each party shall cause each such property insurance
policy obtained by it to provide that the insurance company waives all rights of
recovery by way of subrogation against either party in connection with any
damage covered by such policy. Neither party shall be liable to the other for
any damage caused by any peril included within the classification "All Risk"
which is insured against under any property insurance policy carried under the
terms of this Lease.
17.4 INDEMNITY. Lessee, as a material part of the consideration to be
rendered to Lessor, shall indemnify, defend, protect and hold harmless Lessor
against all actions, claims, demands, damages, liabilities, losses, penalties,
or expenses of any kind which may be brought or imposed upon Lessor or which
Lessor may pay or incur by reason of injury to person or property or business,
from whatever cause, all or in any way connected with the acts and omissions of
Lessee, and the condition or use by Lessee of the Leased Premises, or the
improvements or personal property therein or thereon, including without
limitation any liability or injury to the person or property or business of
Lessee, its agents, officers, employees or invitees. Lessee agrees to indemnify,
defend and protect Lessor and hold it harmless from any and all liability, loss,
cost or obligation on account of, or arising out of, any such injury or loss
however occurring, including breach of the provisions of this Lease and the
negligence of the parties hereto. Notwithstanding the foregoing, nothing
contained herein shall obligate Lessee to indemnify Lessor against Lessor's sole
or gross negligence or willful acts.
17.5 DEFENSE OF CLAIMS. In the event any action, suit or proceeding is
brought against Lessor by reason of any occurrence covered by Section 17.4,
above, Lessee, upon Lessor's request, will at Lessee's expense resist and defend
such action, suit or proceeding, or cause the same to be resisted and defended
by counsel designated either by Lessee or by the insurer whose
PAGE 30
<PAGE> 31
policy covers the occurrence and in either case reasonably approved by Lessor.
The obligations of Lessee under this Section arising by reason of any occurrence
taking place during the Term shall survive any termination of this Lease.
17.6 WAIVER OF CLAIMS. Lessee, as a material part of the consideration to
be rendered to Lessor, hereby waives all claims against Lessor for damages or
injury, as described below, from any cause arising at any time, including the
negligence of the parties hereto:
(a) damages to goods, wares, merchandise and loss of business or income in,
upon or about the Leased Premises and injury to Lessee, its agents, employees,
invitees or third persons, in, upon or about the Leased Premises; and
(b) (notwithstanding anything to the contrary contained in this Lease,
including, without limitation, the definition of Operating Costs in Section
2.1(k), which includes "policing") damages to goods, wares, merchandise and loss
of business, in, upon or about the Leased Premises or the Complex, and injury to
Lessee, its agents, employees, invitees or third persons in, upon or about the
Leased Premises or the Complex, where such damage or injury results from
Lessor's failure to police or provide security for the Complex or Lessor's
negligence in connection therewith.
Notwithstanding the foregoing, in no event shall Lessee be deemed to have
waived any claims as against Lessor where such claims are based upon, or arise
out of, the gross negligence or willful misconduct of Lessor.
Lessee expressly acknowledges and agrees that the provisions of Section
12.6(b) above apply fully with respect to the matters waived pursuant to this
Section 17.6, and, for such purpose, the term Released Matters, as used in
Section 12.5(b), shall be deemed to include the matters waived pursuant to this
Section 17.6.
17.7 REFERENCES. Wherever in this Article the term Lessor or Lessee is used
and such party is to receive the benefit of a provision contained in this
Article, such term shall refer not only to that party but also to its officers,
directors, shareholders, employees, contractors, partners, agents and mortgagees
or other lien holders.
18. LIABILITY INSURANCE
18.1 LESSEE'S INSURANCE. Lessee shall, at Lessee's expense, obtain and keep
in force during the Term, a commercial general liability insurance policy
insuring Lessee against the risks of, bodily injury and property damage,
personal injury, contractual liability, completed operations, products
liability, host liquor liability, owned and non-owned automobile liability
arising out of the ownership, use, occupancy or maintenance of the Leased
Premises and all areas appurtenant thereto. Such insurance shall be a combined
single limit policy in an amount not less than ONE MILLION DOLLARS
($1,000,000.00) per occurrence with a TWO MILLION DOLLAR ($2,000,000.00) annual
aggregate; and an umbrella policy of THREE MILLION DOLLARS ($3,000,000.00) any
one occurrence. Lessor and any lender or other party in interest
PAGE 31
<PAGE> 32
designated by Lessor shall be named as additional insured(s). The policy shall
contain cross liability endorsements and shall insure performance by Lessee of
the indemnity provisions of this Lease; shall be primary, not contributing with,
and not in excess of coverage which Lessor may carry; shall state that Lessor is
entitled to recovery for the negligence of Lessee even though Lessor is named as
an additional insured; shall provide for severability of interest; shall provide
that an act or omission of one of the insured or additional insureds which would
void or otherwise reduce coverage shall not void or reduce coverages as to the
other insured or additional insured; and shall afford coverage after the Term
(by separate policy or extension if necessary) for all claims based on acts,
omissions, injury or damage which occurred or arose (or the onset of which
occurred or arose) in whole or in part during the Term. The limits of said
insurance shall not limit any liability of Lessee hereunder. Not more frequently
than every three (3) years, if, in the reasonable opinion of Lessor, the amount
of liability insurance required hereunder is not adequate, Lessee shall promptly
increase said insurance coverage as required by Lessor.
18.2 WORKERS' COMPENSATION INSURANCE. Lessee shall carry Workers'
Compensation insurance as required by law, including an employers' liability
endorsement.
19. INSURANCE POLICY REQUIREMENTS
19.1 GENERAL REQUIREMENTS. All insurance policies required to be carried by
Lessee (except Lessee's business personal property insurance) hereunder shall
conform to the following requirements:
(a) The insurer in each case shall carry a designation in "Best's Insurance
Reports" as issued from time to time throughout the Term as follows:
Policyholders' rating of A; financial rating of not less than VII;
(b) The insurer shall be qualified to do business in the state in which the
Leased Premises are located;
(c) The policy shall be in a form and include such endorsements as are
reasonably acceptable to Lessor;
(d) Certificates of insurance shall be delivered to Lessor at commencement
of the Term and certificates of renewal at least thirty (30) days prior to the
expiration of each policy;
(e) Each policy shall require that Lessor be notified in writing by the
insurer at least thirty (30) days prior to any cancellation or expiration of
such policy, or any reduction in the amounts of insurance carried.
20. LESSEE INSURANCE DEFAULT
20.1 RIGHTS OF LESSOR. In the event that Lessee fails to obtain any
insurance required of it under the terms of this Lease, Lessor may, at its
option, but is not obligated to, obtain such
PAGE 32
<PAGE> 33
insurance on behalf of Lessee and bill Lessee, as additional rent, for the cost
thereof. Payment shall be due within ten (10) days of receipt of the billing
therefor by Lessee.
21. FORFEITURE OF PROPERTY AND LESSOR'S LIEN
21.1 REMOVAL OF PERSONAL PROPERTY. Lessee agrees that as of the date of
termination of this Lease or repossession of the Leased Premises by Lessor, by
way of default or otherwise, it shall remove all personal property to which it
has the right to ownership pursuant to the terms of this Lease. Any and all such
property of Lessee not removed within five (5) business days of such date shall,
at the option of Lessor, irrevocably become the sole property of Lessor. Lessee
waives all rights to notice and all common law and statutory claims and causes
of action which it may have against Lessor subsequent to such date as regards
the storage, destruction, damage, loss of use and ownership of the personal
property affected by the terms of this Article. Lessee acknowledges Lessor's
need to relet the Leased Premises upon termination of this Lease or repossession
of the Leased Premises and understands that the forfeitures and waivers provided
herein are necessary to aid said reletting, and to prevent Lessor incurring a
loss for inability to deliver the Leased Premises to a prospective lessee.
21.2 LESSOR'S LIEN. Lessee hereby grants to Lessor a lien upon and security
interest in all fixtures, chattels and personal property of every kind now or
hereafter to be placed or installed in or on the Leased Premises and agrees that
in the event of any default on the part of Lessee, Lessor shall have all the
rights and remedies afforded the secured party by the chapter on "DEFAULT" of
Division 9 of the Uniform Commercial Code of the state in which the Leased
Premises are located and may, in connection therewith, also (a) enter on the
Leased Premises to assemble and take possession of the collateral, (b) require
Lessee to assemble the collateral and make its possession available to Lessor at
the Leased Premises, and (c) enter the Leased Premises, render the collateral,
if equipment, unusable and dispose of it in a manner provided by the Uniform
Commercial Code of the state in which the Leased Premises are located. Lessee
hereby designates Lessor as his attorney-in-fact for purposes of executing such
documents as may be necessary to perfect the lien and security interest granted
hereunder.
22. MAINTENANCE AND REPAIRS
22.1 LESSOR'S OBLIGATIONS. Subject to the other provisions of this Lease
imposing obligations in this respect upon Lessee, Lessor shall repair, replace
and maintain the external and Structural parts of the Complex which do not
comprise a part of the Leased Premises and are not leased to others, janitor and
equipment closets and shafts within the Leased Premises designated by Lessor for
use by it in connection with the operation and maintenance of the Complex, and
all Common Areas. Lessor shall perform such repairs, replacements and
maintenance with reasonable dispatch, in a good and workmanlike manner; but
Lessor shall not be liable for any damages, direct, indirect or consequential,
or for damages for personal discomfort, illness or inconvenience of Lessee by
reason of failure of equipment, Lines, facilities or systems or reasonable
delays in the performance of such repairs, replacements and maintenance, unless
caused by the deliberate act or omission of Lessor, its servants, agents, or
employees. The cost for such repairs, maintenance and replacement shall be
included in Operating Costs in
PAGE 33
<PAGE> 34
accordance with Section 2.1(k) hereof.
22.2 NEGLIGENCE OF LESSEE. If the Building, the elevators, boilers,
engines, pipes or apparatus used for the purpose of climate control of the
Building or operating the elevators, or if the water pipes, drainage pipes,
electric lighting or other equipment, Lines, systems and/or facilities of the
Building or the Complex, or the roof or the outside walls of the Building, fall
into a state of disrepair or become damaged or destroyed through the negligence,
carelessness or misuse of Lessee, its agents, employees or anyone permitted by
it to be in the Complex, or through it in any way, the cost of the necessary
repairs, replacements or alterations shall be borne by Lessee who shall pay the
same to Lessor as additional charges forthwith on demand.
22.3 LESSEE'S OBLIGATIONS. Lessee shall maintain and repair the interior
portions of the Leased Premises, including without limiting the generality of
the foregoing, all interior partitions and walls, fixtures; all Lessee
Improvements and alterations in the Leased Premises; all electrical and
telephone outlets and conduits not concealed by floors, walls or ceilings; all
fixtures and shelving; and all special mechanical and electrical equipment
(which equipment is not a normal part of the Leased Premises) installed by or
for Lessee; reasonable wear and tear, damage with respect to which Lessor has an
obligation to repair as provided in Section 22.1 and Section 23.2 hereof only
excepted. Lessee must obtain the prior written approval from Lessor for Lessee's
contractor before the commencement of the repair, which approval shall not be
unreasonably withheld, conditioned or delayed. Lessor may require that Lessee
use a specific contractor for certain types of repairs. Lessor may enter and
view the state of repair and Lessee will repair in a good and workmanlike manner
according to prior notice in writing. Notwithstanding the foregoing, Lessee
shall not make any repairs to the equipment, Lines, facilities or systems of the
Building or Complex which are outside of the Leased Premises or which do not
exclusively serve the Leased Premises.
22.4 CLEANING. Lessee agrees at the end of each business day to leave the
Leased Premises in a reasonably clean condition for the purpose of the
performance of Lessor's cleaning services referred to herein. Lessee shall
maintain the appearance of the Leased Premises in a manner consistent with the
character, use and appearance of the Complex.
22.5 WAIVER. Lessee waives all rights it may have under law to make repairs
at Lessor's expense.
23. DESTRUCTION
23.1 RIGHTS OF TERMINATION. In the event the Leased Premises suffers (a) an
"uninsured property loss" (as hereinafter defined) or (b) a property loss which
cannot be repaired within one hundred ninety five (195) days from the date of
destruction under the laws and regulations of state, federal, county or
municipal authorities, or other authorities with jurisdiction, Lessor may
terminate this Lease as at the date of the damage upon written notice to Lessee
following the property loss. In the event of a property loss to the Leased
Premises which cannot be repaired within one hundred ninety-five (195) days of
the occurrence thereof, Lessee shall have the right to terminate the Lease by
written notice to Lessor within twenty (20) days
PAGE 34
<PAGE> 35
following notice from Lessor that the time for restoration shall exceed one
hundred ninety-five (195) days. For purposes of this Lease, the term "uninsured
property loss" shall mean any loss arising from a peril not covered by the
standard form of "All Risk" property insurance policy.
23.2 REPAIRS. In the event of a property loss which may be repaired within
one hundred ninety-five (195) days from the date of the damage, or, in the
alternative, in the event the parties do not elect to terminate this Lease under
the terms of Section 23.1 above, then this Lease shall continue in full force
and effect and Lessor shall promptly undertake to make such repairs to
reconstitute the Leased Premises to as near the condition as existed prior to
the property loss as practicable. Such partial destruction shall in no way annul
or void this Lease except that Lessee shall be entitled to a proportionate
reduction of Minimum Rent and additional Rent following the property loss and
until the time the Leased Premises are restored. Such reduction shall be an
amount which reflects the degree of interference with Lessee's business. So long
as Lessee conducts its business in the Leased Premises, there shall be no
abatement until the parties agree on the amount thereof. If the parties cannot
agree within forty-five (45) days of the property loss, the matter shall be
submitted to arbitration under the rules of the American Arbitration
Association. Upon the resolution of the dispute, the settlement shall be
retroactive and Lessor shall within ten (10) days thereafter refund to Lessee
any sums due in respect of the reduced rental from the date of the property
loss. Lessor's obligations to restore shall in no way include any construction
originally performed by Lessee or subsequently undertaken by Lessee, but shall
include solely that property constructed by Lessor prior to commencement of the
Term, including without limitation, any Lessee Improvements.
23.3 REPAIR COSTS. The cost of any repairs to be made by Lessor pursuant to
Section 23.2 of this Lease shall be paid by Lessor utilizing available insurance
proceeds, and Lessor shall have no obligation to restore the Leased Premises or
the Complex to the extent that the cost of such repairs or restoration is not
covered by insurance proceeds actually received by Lessor in connection with
such damage or destruction.
23.4 WAIVER. Lessee hereby waives all statutory or common law rights of
termination in respect to any partial destruction or property loss which Lessor
is obligated to repair or may elect to repair under the terms of this Article.
Further, in event of a property loss occurring during the last two (2) years of
the original Term hereof or of any extension, Lessor need not undertake any
repairs and may cancel this Lease unless Lessee has the right under the terms of
this Lease to extend the Term for an additional period of at least five (5)
years and does so within thirty (30) days of the date of the property loss.
23.5 LESSOR'S ELECTION. In the event that the Complex or Building in which
the Leased Premises are situated be destroyed to the extent of not less than
thirty-three and one-third percent (33-1/3%) of the replacement cost thereof,
Lessor may elect to terminate this Lease, whether the Leased Premises be injured
or not, in the same manner as in Section 23.1 above. At all events, a total
destruction of the Complex of which the Leased Premises form a part, or the
Leased Premises itself, shall terminate this Lease.
24. CONDEMNATION
PAGE 35
<PAGE> 36
24.1 DEFINITIONS.
(a) "CONDEMNATION" means (i) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a condemnor and/or (ii) a
voluntary sale or transfer by Lessor to any condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(b) "DATE OF TAKING" means the date the condemnor has the right to
possession of the property being condemned.
(c) "AWARD" means all compensation, sums or anything of value awarded, paid
or received on a total or partial condemnation.
(d) "CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
24.2 TOTAL TAKING. If the Leased Premises are totally taken by
condemnation, this Lease shall terminate on the date of taking.
24.3 PARTIAL TAKING; COMMON AREAS.
(a) If any portion of the Leased Premises is taken by condemnation, this
Lease shall remain in effect, except that Lessee can elect to terminate this
Lease if twenty percent ( 20%) or more of the total number of square feet in the
Leased Premises is taken.
(b) If any part of the Common Areas of the Complex is taken by
condemnation, this Lease shall remain in full force and effect so long as there
is no material interference with the access to or parking for the Leased
Premises, except that if thirty percent (30%) or more of the Common Areas is
taken by condemnation, either party shall have the election to terminate this
Lease pursuant to this Section.
(c) If fifty percent (50%) or more of the Building in which the Leased
Premises are located is taken, Lessor shall have the election to terminate this
Lease in the manner prescribed herein.
24.4 TERMINATION OR ABATEMENT. If either party elects to terminate this
Lease under the provisions of Section 24.3 (such party is hereinafter referred
to as the "TERMINATING PARTY"), it must terminate by giving notice to the other
party (the "NONTERMINATING PARTY") within thirty (30) days after the nature and
extent of the taking have been finally determined (the "DECISION PERIOD"). The
Terminating Party shall notify the Nonterminating Party of the date of
termination, which date shall not be earlier than sixty (60) days after the
Terminating Party has notified the Nonterminating Party of its election to
terminate nor later than the date of taking. If Notice of Termination is not
given within the Decision Period, the Lease shall continue in full force and
effect except that Minimum Rent and additional Rent shall be reduced by
subtracting
PAGE 36
<PAGE> 37
therefrom an amount calculated by multiplying the Minimum Rent and additional
Rent in effect prior to the taking by a fraction, the numerator of which is the
number of square feet taken from the Leased Premises and the denominator of
which is the number of square feet in the Leased Premises prior to the taking.
24.5 RESTORATION. If there is a partial taking of the Leased Premises and
this Lease remains in full force and effect pursuant to this Article, Lessor, at
its cost, shall promptly accomplish all necessary restoration so that the Leased
Premises is returned as near as practical to its condition immediately prior to
the date of the taking, but in no event shall Lessor be obligated to expend more
for such restoration than the extent of funds actually paid to Lessor by the
condemnor.
24.6 AWARD. Any award arising from the condemnation or the settlement
thereof shall belong to and be paid to Lessor, except that Lessee shall receive
from the award compensation for the following if specified in the award by the
condemning authority, so long as it does not reduce Lessor's award in respect of
the real property: Lessee's trade fixtures, tangible personal property, loss of
business and relocation expenses. At all events, Lessor shall be solely entitled
to all award in respect of the real property, including the bonus value of the
leasehold. Lessee shall not be entitled to any award until Lessor has received
the above sum in full.
25. ASSIGNMENT AND SUBLETTING
25.1 LEASE IS PERSONAL. The purpose of this Lease is to transfer possession
of the Leased Premises to Lessee for Lessee's personal use in return for certain
benefits, including rent, to be transferred to the Lessor. Lessee's right to
assign or sublet as stated in this Article is subsidiary and incidental to the
underlying purpose of this Lease. Lessee acknowledges and agrees that it has
entered into this Lease in order to acquire the Leased Premises for its own
personal use and not for the purpose of obtaining the right to convey the
leasehold to others.
25.2 "TRANSFER OF THE LEASED PREMISES" DEFINED. The terms "TRANSFER OF THE
LEASED PREMISES" or "TRANSFER" as used herein shall include any assignment of
all or any part of this Lease (including assignment by operation of law),
subletting of all or any part of the Leased Premises or transfer of possession,
or granting of the right of possession or contingent right of possession of all
or any portion of the Leased Premises including, without limitation, license,
concession, mortgage, devise, hypothecation, agency, franchise or management
agreement, or suffering any other person (the agents and servants of Lessee
excepted) to occupy or use the Leased Premises or any portion thereof. If Lessee
is a corporation which is not deemed a public corporation, or is an
unincorporated association or partnership, or Lessee consists of more than one
party, the transfer, assignment or hypothecation of any stock or interest in
such corporation, association, partnership or ownership interest, in the
aggregate in excess of fifty percent (50%), shall be deemed a Transfer of the
Leased Premises.
25.3 TRANSFER UPON CONSENT. Lessee shall have the right to permit or suffer
a Transfer of the Leased Premises or any interest therein, or any part thereof,
or any right or privilege appurtenant thereto, but only upon the prior written
consent of Lessor, which shall not
PAGE 37
<PAGE> 38
be unreasonably withheld, conditioned or delayed, and a consent to one Transfer
of the Leased Premises shall not be deemed to be a consent to any subsequent
Transfer of the Leased Premises. Any Transfer of the Leased Premises without
such consent shall (i) be voidable, and (ii) terminate this Lease, in either
case, at the option of Lessor.
25.4 WHEN CONSENT GRANTED.
(a) The consent of Lessor to a Transfer may not be unreasonably withheld,
conditioned or delayed, provided that it is agreed to be reasonable for Lessor
to consider any of the following reasons, which list is not exclusive, in
electing to consent or to deny consent:
(i) Financial strength of the proposed transferee (other than a subtenant)
is not at least equal to that of Lessee at the time of execution of this Lease;
(ii) A proposed transferee whose occupation of the Leased Premises would
cause a diminution in the reputation of the Complex or the other businesses
located therein;
(iii) A proposed transferee whose impact on the common facilities or the
other occupants of the Complex would be disadvantageous;
(iv) A proposed transferee whose use presents a risk of violation of
Article 12;
(v) A proposed transferee whose occupancy will require a variation in the
terms of this Lease (for example, a variation in the use clause) or which
otherwise adversely affects any interest of Lessor, unless otherwise agreed by
Lessor;
(vi) A proposed transferee who is or is likely to be, or whose business is
or is likely to be, subject to compliance with additional laws or other
governmental requirements beyond those to which Lessee or Lessee's business is
subject; or
(vii) That the validity of the Transfer is conditioned on the conformity of
the Lessee and transferee with all provisions of this Lease at the time of
Transfer, including, without limitation, the requirement that there be no
uncured notices of default under the terms of this Lease.
(b) Notwithstanding the foregoing, Lessee shall have the right, without the
consent of Lessor, but upon prior written notice to Lessor, to assign this Lease
to a company incorporated or to be incorporated by Lessee, provided that Lessee
owns or beneficially controls all the issued and outstanding shares of capital
stock of the company; further provided, however, that in the event that at any
time following such assignment, Lessee wishes to sell, mortgage, devise,
hypothecate or in any other manner whatsoever transfer any portion of the
ownership or beneficial control of the issued and outstanding shares in the
capital stock of such company, such transaction shall be deemed to constitute a
Transfer and shall be subject to all of the provisions of
PAGE 38
<PAGE> 39
this Article 25 with respect to a Transfer of the Premises including, by
specific reference, the provisions of Section 25.8. Notwithstanding anything to
the contrary contained in this Lease, Lessor consents to an assignment of this
Lease, or a subletting of all or part of the Leased Premises to (i) the parent
of Lessee or a wholly owned subsidiary of Lessee or of such parent, (ii) any
entity into which or with which Lessee may be merged or consolidated, provided
that the net worth of the resulting entity is at least equal to the greater of
(A) the net worth of Lessee on the date hereof, or (B) the net worth of Lessee
immediately prior to such merger or consolidation, or (iii) any entity to which
Lessee sells all or substantially all of its assets, provided that such entity
expressly assumes all of Lessee's obligations hereunder and provided that the
net worth of the entity which acquires Lessee's assets is at least equal to the
greater of (A) the net worth of Lessee on the date hereof or (B) the net worth
of Lessee immediately prior to such transaction.
25.5 PROCEDURE FOR OBTAINING CONSENT.
(a) Lessor need not commence its review of any proposed Transfer, or
respond to any request by Lessee with respect to such, unless and until it has
received from Lessee reasonably adequate descriptive information concerning the
transferee, the business to be conducted by the transferee, the transferee's
financial capacity, and such other information as may reasonably be required in
order to form a prudent judgment as to the acceptability of the proposed
Transfer, including, without limitation, the following:
(i) The past two years' Federal Income Tax returns of the proposed
transferee (or in the alternative the past two years' annual Balance Sheets and
Profit and Loss statements, certified correct by a Certified Public Accountant);
(ii) Banking references of the proposed transferee;
(iii) A copy of the instrument by which Lessee proposes to effectuate the
Transfer.
(b) Lessee shall reimburse Lessor as additional Rent for Lessor's
reasonable costs and attorneys' fees incurred in conjunction with the processing
and documentation of any proposed Transfer of the Leased Premises, whether or
not consent is granted, in an amount not to exceed $500.
25.6 RECAPTURE. [INTENTIONALLY OMITTED]
25.7 REASONABLE RESTRICTION. The restrictions on Transfer described in this
Article 25 are acknowledged by Lessee to be reasonable for all purposes.
25.8 EFFECT OF TRANSFER. If Lessor consents to a Transfer, the following
conditions shall apply:
(a) Each and every covenant, condition or obligation imposed upon Lessee by
this Lease and each and every right, remedy or benefit afforded Lessor by this
Lease shall not be
PAGE 39
<PAGE> 40
impaired or diminished as a result of such Transfer.
(b) Lessee shall pay to Lessor on a monthly basis, fifty percent (50%) of
the excess of any sums of money, or other economic consideration received by
Lessee from the Transferee in such month (whether or not for a period longer
than one month), including higher rent, bonuses, key money, or the like over the
aggregate, of (i) the reasonable expenses actually paid by Lessee to unrelated
third parties for brokerage commissions, tenant improvements to the Leased
Premises, or design fees incurred as a direct consequence of the Transfer, and,
(ii) the total sums which Lessee pays Lessor under this Lease in such month, or
the prorated portion thereof if the portion of the Leased Premises transferred
is less than the entire Leased Premises. The amount so derived shall be paid
with Lessee's payment of Minimum Rent.
(c) No Transfer, whether or not consent of Lessor is required hereunder,
shall relieve Lessee of its primary obligation to pay the Rent and to perform
all other obligations to be performed by Lessee hereunder. The acceptance of
Rent by Lessor from any person shall not be deemed to be a waiver by Lessor of
any provision of this Lease or to be a consent to any Transfer of the Leased
Premises.
(d) If Lessor consents to a sublease, such sublease shall not extend beyond
the expiration of the Term.
(e) No Transfer shall be valid and no transferee shall take possession of
the Leased Premises or any part thereof unless, within ten (10) days after the
execution of the documentary evidence thereof, Lessee shall deliver to Lessor a
duly executed duplicate original of the Transfer instrument in form reasonably
satisfactory to Lessor which provides that (i) the transferee assumes Lessee's
obligations for the payment of Rent and for the full and faithful observance and
performance of the covenants, terms and conditions contained herein, (ii) such
transferee will, at Lessor's election, attorn directly to Lessor in the event
Lessee's Lease is terminated for any reason on the terms set forth in the
instrument of transfer and (iii) such instrument of Transfer contains such other
assurances as Lessor reasonably deems necessary.
26. [INTENTIONALLY OMITTED]
27. ENTRY BY LESSOR
27.1 RIGHTS OF LESSOR. Lessee shall permit Lessor and Lessor's agents to
enter the Leased Premises at all reasonable times on not less than 24 hours
prior notice to Lessee, which notice may be by telephone for the purpose of
inspecting the same or for the purpose of maintaining the Building and the
Lines, systems and facilities therein, or for the purpose of making repairs,
replacements, alterations or additions to any portion of the Building and the
Lines, systems and facilities therein, including the erection and maintenance of
such scaffolding, canopies, fences and props as may be required, or for the
purpose of posting notices of non-responsibility for alterations, additions or
repairs, or for the purpose of placing upon the Building any usual or ordinary
"for sale" signs, or for the purpose of showing the Building or the Leased
Premises to any potential purchasers, lenders or tenants, without any rebate of
Rent and
PAGE 40
<PAGE> 41
without any liability to Lessee for any loss of occupation or quiet enjoyment of
the Leased Premises thereby occasioned, and shall permit Lessor, at any time
within ninety (90) days prior to the expiration of this Lease, to place upon the
Leased Premises any usual or ordinary "to let" or "to lease" signs. This Section
in no way affects the maintenance obligations of the parties hereto.
28. SIGNS
28.1 APPROVAL, INSTALLATION AND MAINTENANCE. Lessee shall not place on the
Leased Premises or the Complex any exterior signs or advertisements, nor any
interior signs or advertisements that are visible from the exterior of the
Leased Premises, without Lessor's prior written consent, which Lessor reserves
the right to withhold for any aesthetic reason in its sole good faith judgment.
The cost of installation and regular maintenance of any such signs approved by
Lessor shall be at the sole expense of Lessee. At the termination of this Lease,
or any extension thereof, Lessee shall remove all its signs, and all damage
caused by such removal shall be repaired at Lessee's expense. Lessor shall
provide Building standard directory signage to Lessee at Lessee's expense.
Subject to the approval of Lessor and all governmental approvals, Lessee shall
have the right to place a sign on the upper exterior of the Building, which sign
must be removed by Lessee at the expiration of this Lease and all damage
repaired.
29. DEFAULT
29.1 DEFINITION. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Lessee:
(a) Any failure by Lessee to pay the Rent or to make any other payment
required to be made by Lessee hereunder within three (3) business days after
written notice from Lessor that such amount is overdue (which notice shall be in
lieu of any other statutory notice required with respect to payment defaults);
(b) Any failure by Lessee to provide executed documents as and when
required under the provisions of Section 36.2 and/or Section 37.1;
(c) A failure by Lessee to observe and perform any other provision of this
Lease to be observed or performed by Lessee, where such failure continues for
thirty (30) days after written notice thereof by Lessor to Lessee; provided,
however, that if the nature of the default is such that the same cannot
reasonably be cured within the thirty (30) day period allowed, Lessee shall not
be deemed to be in default if Lessee shall, within such thirty (30) day period,
commence to cure and thereafter diligently prosecute the same to completion;
(d) Any of (1) the appointment of a receiver (except a receiver appointed
at the instance or request of Lessor) to take possession of all or substantially
all of the assets of Lessee, or (2) a general assignment by Lessee for the
benefit of creditors, or (3) any action taken or suffered by Lessee under any
insolvency or bankruptcy act shall constitute a breach of this Lease by Lessee,
except that Lessee shall have ninety (90) business days to cure any such breach
PAGE 41
<PAGE> 42
before the same shall be deemed a default hereunder. In such event, Lessor may,
at its option, declare this Lease terminated and forfeited by Lessee, and Lessor
shall be entitled to immediate possession of the Leased Premises. Upon such
notice of termination, this Lease shall terminate immediately and automatically
by its own limitation.
(e) If Lessee violates the same term or condition of this Lease on two
occasions during any 12-month period and on each occasion Landlord provided
written notice of such violation, then regardless of whether Lessee cured such
violations within the applicable cure periods, Lessor shall, to the extent
allowed by law, have the right to exercise all remedies for the third and any
subsequent violations of the same term or condition during the next 12 months
without being required to first provide Lessee with notice of default or an
opportunity to cure.
30. REMEDIES UPON DEFAULT
30.1 TERMINATION AND DAMAGES. In the event of any default by Lessee, then
in addition to any other remedies available to Lessor herein or at law or in
equity, Lessor shall have the immediate option to terminate this Lease and all
rights of Lessee hereunder by giving written notice of such intention to
terminate. In the event that Lessor shall elect to so terminate this Lease, then
Lessor may recover from Lessee:
(a) The worth at the time of award of any unpaid rent which had been earned
at the time of such termination; plus
(b) The worth at the time of award of the amount by which the unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss Lessee proves could have been reasonably avoided;
plus
(c) The worth at the time of award of the amount by which the unpaid rent
for the balance of the Term after the time of award exceeds the amount of such
rental loss that Lessee proves could be reasonably avoided; plus
(d) Any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of events would be likely to result
therefrom; and
(e) At Lessor's election, such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by the applicable law in the
state in which the Leased Premises are located.
30.2 DEFINITION. As used in Subsections 30.1(a) and (b) above, the "worth
at the time of award" is computed by allowing interest at the rate of ten
percent (10%) per annum. As used in Subsection 30.1(c) above, the "worth at the
time of award" is computed by discounting such amount at the discount rate of
the Federal Reserve Bank for the region in which the Complex is located at the
time of award plus one percent (1%).
PAGE 42
<PAGE> 43
30.3 PERSONAL PROPERTY.
(a) In the event of any default by Lessee, Lessor shall also have the
right, with or without terminating this Lease, to reenter the Leased Premises
and remove all persons and property from the Leased Premises; such property may
be removed and stored in a public warehouse or elsewhere at the cost of and for
the account of Lessee.
30.4 RECOVERY OF RENT; RELETTING.
(a) Lessor may continue Lease in effect after Lessee's breach and
abandonment and recover rent as it becomes due. In the event of the abandonment
of the Leased Premises by Lessee, or in the event that Lessor shall elect to
reenter as provided in Section 30.3 above, or shall take possession of the
Leased Premises pursuant to legal proceeding or pursuant to any notice provided
by law, then if Lessor does not elect to terminate this Lease as provided in
Section 30.1 above, this Lease shall continue in effect for so long as Lessor
does not terminate Lessee's right to possession, and Lessor may enforce all its
rights and remedies under this Lease, including, without limitation, Lessor's
right from, time to time, without terminating this Lease, to either recover all
Rental as it becomes due or relet the Leased Premises or any part thereof for
such term or terms and at such rental or rentals and upon such other terms and
conditions as Lessor, in its sole discretion, may deem advisable, with the right
to make alterations and repairs to the Leased Premises. Acts of maintenance or
preservation or efforts to relet the Leased Premises or the appointment of a
receiver upon initiation of Lessor or other legal proceeding granting Lessor or
its agent possession to protect Lessor's interest under this Lease shall not
constitute a termination of Lessee's right to possession.
(b) In the event that Lessor shall elect to so relet, then rentals received
by Lessor from such reletting shall be applied: first, to the payment of any
indebtedness other than Rent due hereunder from Lessee to Lessor; second, to the
payment of any cost of such reletting; third, to the payment of the cost of any
alterations and repairs to the Leased Premises ; fourth, to the payment of Rent
due and unpaid hereunder; and the residue, if any, shall be held by Lessor and
applied in payment of future Rent as the same may become due and payable
hereunder. Should that portion of such rentals received from such reletting
during any month, which is applied by the payment of Rent hereunder, be less
than the Rent payable during that month by Lessee hereunder, then Lessee shall
pay such deficiency to Lessor immediately upon demand therefor by Lessor. Such
deficiency shall be calculated and paid monthly. Lessee shall also pay to
Lessor, as soon as ascertained, any costs and expenses incurred by Lessor in
such reletting or in making such alterations and repairs not covered by the
rentals received from such reletting.
(c) No reentry or taking possession of the Leased Premises or any other
action under this Section shall be construed as an election to terminate this
Lease unless a written notice of such intention be given to Lessee or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Lessor because of any
default by Lessee, Lessor may at any time after such reletting elect to
terminate this Lease for any such default.
PAGE 43
<PAGE> 44
30.5 NO WAIVER. Efforts by Lessor to mitigate the damages caused by
Lessee's default in this Lease shall not constitute a waiver of Lessor's right
to recover damages hereunder.
30.6 CURING DEFAULTS. Should Lessee fail to repair, maintain, keep clean,
and/or service the Leased Premises, or any part or contents thereof at any time
or times, or perform any other obligations imposed by this Lease, then after
having given Lessee reasonable notice of the failure or failures and a
reasonable opportunity which in no case shall exceed thirty (30) days, to remedy
the failure (provided, however, that if the nature of the failure or default is
such that the same cannot reasonably be cured within the thirty (30) day period
allowed, Lessee shall not be deemed to be in default and Lessor shall not
exercise its rights under this Section 30.6 if Lessee shall, within such thirty
(30) day period, commence to cure and thereafter diligently prosecute the same
to completion), Lessor may enter upon the Leased Premises and perform or
contract for the performance of the repair, maintenance, or other Lessee
obligation, and Lessee shall pay Lessor for all direct and indirect costs
incurred in connection therewith within ten (10) days of receiving a bill
therefor from Lessor.
30.7 CUMULATIVE REMEDIES. The various rights, options, election powers, and
remedies of Lessor contained in this Article and elsewhere in this Lease shall
be construed as cumulative and no one of them exclusive of any others or of any
legal or equitable remedy which Lessor might otherwise have in the event of
breach or default, and the exercise of one right or remedy by Lessor shall not
in any way impair its right to any other right or remedy.
31. BANKRUPTCY
31.1 BANKRUPTCY EVENTS. If at any time during the Term there shall be filed
by or against Lessee in any court pursuant to any statute either of the United
States or of any state a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of Lessee's property, or if a receiver or trustee takes possession of
any of the assets of Lessee, or if the leasehold interest herein passes to a
receiver, or if Lessee makes an assignment for the benefit of creditors or
petitions for or enters into an arrangement (any of which are referred to herein
as "a bankruptcy event"), then the following provisions shall apply:
(a) At all events any receiver or trustee in bankruptcy or Lessee as debtor
in possession ("debtor") shall either expressly assume or reject this Lease
within sixty (60) days following the entry of an Order for Relief.
(b) In the event of an assumption of the Lease by a debtor, receiver or
trustee, such debtor, receiver or trustee shall immediately after such
assumption (1) cure any default or provide adequate assurances that defaults
will be promptly cured; and (2) compensate Lessor for actual pecuniary loss or
provide adequate assurances that compensation will be made for actual pecuniary
loss; and (3) provide adequate assurance of future performance.
For the purposes of this Section 31.1(b), adequate assurance of future
performance of all obligations under this Lease shall include, but is not
limited to:
PAGE 44
<PAGE> 45
(i) Written assurance that rent and any other consideration due under the
Lease shall first be paid before any other of Lessee's costs of operation of its
business in the Leased Premises are paid;
(ii) Written agreement that assumption of this Lease will not cause a
breach of any provision hereof including, but not limited to, any provision
relating to use or exclusivity in this or any other Lease, or agreement relating
to the Leased Premises, or if such a breach is caused, the debtor, receiver or
trustee will indemnify Lessor against such loss (including costs of suit and
attorneys' fees), occasioned by such breach;
(c) Where a default exists under the Lease, the party assuming the Lease
may not require Lessor to provide services or supplies incidental to the Lease
before its assumption by such trustee or debtor, unless Lessor is compensated
under the terms of the Lease for such services and supplies provided before the
assumption of such Lease.
(d) The debtor, receiver, or trustee may only assign this Lease in
accordance with the terms of Article 25 and if adequate assurance of future
performance by the assignee is provided, whether or not there has been a default
under the Lease. For the purpose hereof, adequate assurance of future
performance means written agreement that assignment of this Lease will not cause
a breach of any provision hereof including, but not limited to, any provision
relating to use or exclusivity in this or any other Lease or agreement relating
to the Leased Premises, and that if such a breach is caused, the debtor,
receiver or trustee will indemnify Lessor against such loss (including costs of
suit and attorney's fees), occasioned by such breach. Any consideration paid by
any assignee in excess of the rental reserved in the Lease shall be the sole
property of, and paid to, Lessor. Upon assignment by the debtor or trustee, the
obligations of the Lease shall be deemed to have been assumed and the assignee
shall execute an assumption agreement on request of Lessor.
(e) Lessor shall be entitled to the fair market value for the Leased
Premises and the services provided by Lessor (but in no event less than the
rental reserved in the Lease) subsequent to the commencement of a bankruptcy
event.
(f) Lessor specifically reserves any and all remedies available to Lessor
in Article 30 hereof or at law or in equity in respect of a bankruptcy event by
Lessee to the extent such remedies are permitted by law.
32. SURRENDER OF LEASE
32.1 NO MERGER. The voluntary or other surrender of this Lease by Lessee,
or a mutual cancellation thereof, shall not work as a merger, and shall, at the
option of Lessor, terminate all or any existing subleases or subtenancies, or
may, at the option of Lessor, operate as an assignment to it of any or all such
subleases or subtenancies.
33. LESSOR'S EXCULPATION
PAGE 45
<PAGE> 46
33.1 LIMITED LIABILITY. In the event of default, breach, or violation by
Lessor (which term includes Lessor's partners, co-venturers, co-tenants,
officers, directors, trustees, employees, agents, or representatives) of any of
Lessor's obligations under this Lease, Lessor's liability to Lessee shall be
limited to its ownership interest in the Complex or the proceeds of a public
sale of such interest pursuant to foreclosure of a judgment against Lessor.
33.2 NO RECOURSE. Lessor (as defined in Section 33.1) shall not be
personally liable for any deficiency beyond its interest in the Complex. All
personal liability of all trustees, their employees, agents or representatives,
is expressly waived by Lessee.
34. ATTORNEYS' FEES
34.1 ACTIONS, PROCEEDINGS, ETC. Lessee hereby agrees to pay, as additional
rent, all attorneys' fees and disbursements, and all other court costs or
expenses of legal proceedings or other legal services which Lessor may incur or
pay out by reason of, or in connection with:
(a) Any action or proceeding brought by Lessor wherein Lessor obtains a
final judgment or award against Lessee (including arbitration) on account of any
default by Lessee in the observance or performance of any obligation under this
Lease including, but not limited to, matters involving payment of Rent and
additional Rent, alterations or other Lessee's work and subletting or
assignment; and
(b) Any action or proceeding brought by Lessee against Lessor (or any
officer, partner, or employee of Lessor) in which Lessee fails to secure a final
judgment against Lessor;
(c) Any other appearance by Lessor (or any officer, partner, or employee of
Lessor) as a witness or otherwise in any action or proceeding whatsoever
involving or affecting Lessee or this Lease (but in this event the attorneys'
fees payable by Lessee shall not exceed $500);
(d) Any assignment, sublease, or leasehold mortgage proposed or granted by
Lessee (whether or not permitted under this Lease), and all negotiations with
respect thereto; and
(e) Any alteration of the Leased Premises by Lessee, and all negotiations
with respect thereto (but in this event the attorneys' fees payable by Lessee
shall not exceed $500).
In any action or proceeding referred to in Section 34.1, Lessee shall be
entitled to recover its reasonable attorneys' fees and costs if Lessee is the
prevailing party against Lessor.
34.2 SURVIVAL. Lessee's obligations under this Section shall survive the
expiration or any other termination of this Lease. This Section is intended to
supplement (and not to limit) other provisions of this Lease pertaining to
indemnities and/or attorneys' fees.
35. NOTICES
PAGE 46
<PAGE> 47
35.1 WRITING. All notices, demands and requests required or permitted to be
given or made under any provision of this Lease shall be in writing and shall be
given or made by (i) personal service, or (ii) by mailing same by registered or
certified mail, return receipt requested, postage prepaid, or (iii) by reputable
courier which provides written evidence of delivery, addressed to the respective
party at the address set forth in Section 1.2 of this Lease or at such other
address as the party may from time to time designate, by a written notice sent
to the other in the manner aforesaid.
35.2 EFFECTIVE DATE. Any such notice, demand or request ("notice") given by
registered or certified mail shall be deemed given or made upon receipt or
refusal to receive. Any notice given by personal delivery to the party at its
address as aforesaid shall be deemed given on the day on which delivery is made.
Notice given by a reputable courier service which provides written evidence of
delivery shall be deemed given upon receipt or refusal to receive.
35.3 AUTHORIZATION TO RECEIVE. Each person and/or entity whose signature is
affixed to this Lease as Lessee or as guarantor of Lessee's obligations
("obligor") designates such other obligor its agent for the purpose of receiving
any notice pertaining to this Lease or service of process in the event of any
litigation or dispute arising from any obligation imposed by this Lease.
36. SUBORDINATION
36.1 PRIORITY OF ENCUMBRANCES. This Lease, at Lessor's option, shall be
subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation for security now or hereafter placed upon the real property of
which the Leased Premises are a part and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the Leased Premises shall not be disturbed
if Lessee is not in default and so long as Lessee shall pay the rent and observe
and perform all the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground lessor
shall elect to have this Lease prior to the lien of its mortgage, deed of trust
or ground lease, and shall give written notice thereof to Lessee, this Lease
shall be deemed prior to such mortgage, deed of trust or ground lease, whether
this Lease is dated prior or subsequent to the date of said mortgage, deed of
trust or ground lease or the date of recording thereof. Lessor shall use
diligent, reasonable and good faith efforts to obtain the execution of a
subordination, non-disturbance and attornment agreement in form and substance
reasonably acceptable to Lessee from the lender that, as of the date of this
Lease, has a mortgage or deed of trust placed upon the real property of which
the Leased Premises are a part.
36.2 EXECUTION OF DOCUMENTS. Lessee agrees to execute any documents
required to effectuate such subordination or to make this Lease prior to the
lien of any mortgage, deed of trust or ground lease, as the case may be, and
failing to do so within fifteen (15) business days after written demand, does
hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to do so. It is
understood by all parties
PAGE 47
<PAGE> 48
that Lessee's failure to execute the subordination documents referred to above
may cause Lessor serious financial damage by causing the failure of a financing
or sale transaction.
36.3 ATTORNMENT. Lessee shall attorn to any purchaser at any foreclosure
sale, or to any grantee or transferee designated in any deed given in lieu of
foreclosure.
37. ESTOPPEL CERTIFICATES
37.1 EXECUTION BY LESSEE. Within fifteen (15) business days of request
therefor by Lessor, Lessee shall execute a written statement acknowledging the
commencement and termination dates of this Lease, that it is in full force and
effect, has not been modified (or if it has, stating such modifications) and
providing any other pertinent information as Lessor or its agent might
reasonably request. Failure to comply with this Article shall be a material
breach of this Lease by Lessee giving Lessor all rights and remedies under
Article 30 hereof, as well as a right to damages caused by the loss of a loan or
sale which may result from such failure by Lessee.
37.2 FINANCING, SALE OR TRANSFER. If Lessor desires to finance, refinance,
sell, ground lease or otherwise transfer the Leased Premises, or any part
thereof, or the Building, Lessee hereby agrees, within fifteen (15) days of
request therefor by Lessor, to deliver to any lender or to any prospective
buyer, ground lessor or other transferee designated by Lessor such true and
accurate current financial statements of Lessee, any guarantor of this Lease and
Lessee's parent company, if any, as may be reasonably required by such party. .
All such financial statements shall be received by Lessor in confidence and
shall be used only for the purposes herein set forth.
38. WAIVER
38.1 EFFECT OF WAIVER. The waiver by Lessor of any breach of any Lease
provision shall not be deemed to be a waiver of such Lease provision or any
subsequent breach of the same or any other term, covenant or condition therein
contained. The subsequent acceptance of rent hereunder by Lessor shall not be
deemed to be a waiver of any preceding breach by Lessee of any provision of this
Lease, other than the failure of Lessee to pay the particular rental so
accepted, regardless of Lessor's knowledge of such preceding breach at the time
of acceptance of such rent.
39. HOLDING OVER
39.1 MONTH-TO-MONTH TENANCY ON ACCEPTANCE. If Lessee should remain in
possession of the Leased Premises after the expiration of the Term and without
executing a new Lease, then, upon acceptance of Rent by Lessor, such holding
over shall be construed as a tenancy from month-to-month, subject to all the
conditions, provisions and obligations of this Lease as existed during the last
month of the Term hereof, so far as applicable to a month to month tenancy,
except that the Minimum Rent shall be equal to one hundred and fifty percent
(150%) of the Minimum Rent payable immediately prior to the expiration or
earlier termination of the Lease.
PAGE 48
<PAGE> 49
40. SUCCESSORS AND ASSIGNS
40.1 BINDING EFFECT. The covenants and conditions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all of the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.
41. TIME
41.1 TIME OF THE ESSENCE. Time is of the essence of this Lease with respect
to each and every article, section and subsection hereof.
42. EFFECT OF LESSOR'S CONVEYANCE
42.1 RELEASE OF LESSOR. If, during the Term, Lessor shall sell its interest
in the Building or Complex of which the Leased Premises form a part, or the
Leased Premises, then from and after the effective date of the sale or
conveyance, provided that the transferee of Lessor assumes all of the Lessor's
obligations hereunder from and after the date of such sale or conveyance, Lessor
shall be released and discharged from any and all obligations and
responsibilities under this Lease, except those already accrued.
43. COMMON AREAS
43.1 Lessor shall, in Lessor's sole discretion, maintain the Common Areas
(subject to reimbursement of Operating Costs pursuant to Article 8 hereof),
establish and enforce reasonable rules and regulations concerning such areas,
and, after not less than five (5) business days prior notice to Lessee, (a)
close any of the Common Areas to whatever extent required in the opinion of
Lessor's counsel to prevent a dedication of any of the Common Areas or the
accrual of any rights of any person or of the public to the Common Areas, (b)
close temporarily any of the Common Areas for maintenance purposes, and (c) make
changes to the Common Areas including, without limitation, changes in the
location of driveways, corridors, entrances, exits, vehicular parking spaces,
parking area, the designation of areas for the exclusive use of others, the
direction of the flow of traffic or construction of additional buildings
thereupon, provided that such changes in the Common Area do not unreasonably
interfere with the access to or use of the Premises by Lessee, its employees,
agents, or invitees. Lessor may provide security for the Common Areas but is not
obligated to do so.
44. TRANSFER OF SECURITY
44.1 TRANSFER TO PURCHASER. If any security be given by Lessee to secure
the faithful performance of all or any of the covenants of this Lease on the
part of Lessee, Lessor may transfer and/or deliver the security, as such, to the
purchaser of the reversion, in the event that the reversion be sold, and
thereupon Lessor shall be discharged from any further liability in reference
thereto.
PAGE 49
<PAGE> 50
45. LATE CHARGES
45.1 LATE PAYMENT BY LESSEE. Lessee acknowledges that late payment by
Lessee to Lessor of rent or any other payment due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult and impractical to fix. Such costs include, without
limitation, processing and accounting charges, and late charges that may be
imposed on Lessor by the terms of any encumbrance and note secured by any
encumbrance covering the Leased Premises. Therefore, if any installment of rent,
or any other payment due hereunder from Lessee is not received by Lessor when
such amount is due, Lessee shall pay to Lessor an additional sum of ten percent
(10%) of such rent or other charge as a late charge. Notwithstanding the
foregoing sentence, Lessor agrees to forebear from assessing the late charge one
time each calendar year during the Term, which forbearance shall apply with
respect to the first overdue payment from Lessee in any calendar year during the
Term and which forbearance shall only apply as long as Lessee makes the overdue
payment to Lessor within ten (10) business days after receiving written notice
from Lessor of such overdue payment. The parties agree that this late charge
represents a fair and reasonable estimate of the cost that Lessor will incur by
reason of late payment by Lessee. Acceptance of any late charge shall not
constitute a waiver of Lessee default with respect to the overdue amount, or
prevent Lessor from exercising any other rights or remedies available to Lessor.
46. CORPORATE AUTHORITY
46.1 AUTHORIZATION TO EXECUTE. If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. Further, Lessee shall, within thirty (30) days after Lessor's
request, deliver to Lessor either a copy of a resolution or other commercially
reasonable evidence of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
47. MORTGAGEE PROTECTION
47.1 NOTICE AND RIGHT TO CURE DEFAULT. Lessee agrees to give any
mortgagee(s) and/or trust deed holders, by registered mail, a copy of any notice
of default served upon Lessor, provided that prior to such notice Lessee has
been notified, in writing (by way of Notice of Assignment of Rents and Leases,
or otherwise), of the address of such mortgagees and/or trust deed holders.
Lessee further agrees that if Lessor shall have failed to cure such default
within the time provided for in this Lease, then the mortgagees and/or trust
deed holders shall have an additional thirty (30) days within which to cure such
default or, if such default cannot be cured within that time, then such
additional time as may be necessary if, within such thirty (30) days, any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure), in
which event this Lease shall not be terminated
PAGE 50
<PAGE> 51
while such remedies are being so diligently pursued.
48. WAIVER OF STATUTES
48.1 WAIVER BY LESSEE. In this Lease, numerous provisions have been
negotiated by the parties, some of which provisions are covered by statute.
Whenever a provision of this Lease and a provision of any statute or other law
cover the same matter, the provisions of this Lease shall control. This waiver
applies to future statutes enacted in addition to or in substitution for the
statutes specified herein.
49. MISCELLANEOUS PROVISIONS
49.1 CAPTIONS. The captions of this Lease are for convenience only and are
not a part of this Lease and do not in any way limit or amplify the terms and
provisions of this Lease.
49.2 NUMBER AND GENDER. Whenever the singular number is used in this Lease
and when required by the context, the same shall include the plural, the plural
shall include the singular, and the masculine gender shall include the feminine
and neuter genders, and the word "person" shall include corporation, firm or
association. If there be more than one Lessee, the obligations imposed under
this Lease upon Lessee shall be joint and several.
49.3 MODIFICATIONS. This instrument contains all of the agreements,
conditions and representations made between the parties to this Lease and may
not be modified orally or in any other manner than by an agreement in writing
signed by all of the parties to this Lease.
49.4 PAYMENTS. Except as otherwise expressly stated, each payment required
to be made by Lessee shall be in addition to and not in substitution for other
payments to be made by Lessee.
49.5 SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
49.6 NO OFFER. The preparation and submission of a draft of this Lease by
either party to the other shall not constitute an offer, nor shall either party
be bound to any terms of this Lease or the entirety of the Lease itself until
both parties have fully executed a final document and an original signature
document has been received by both parties. Until such time as described in the
previous sentence, either party is free to terminate negotiations with no
obligation to the other.
49.7 DISPUTED SUMS. Under the terms of this Lease numerous charges are
and may be due from Lessee to Lessor including, without limitation, Operating
Costs which include Real Property Taxes, insurance reimbursement and other items
of a similar nature including, at Lessor's option, advances made by Lessor in
respect of Lessee's default. In the event that at any time during the Term there
is a bona fide dispute between the parties as to the amount due for any of such
charges claimed by Lessor to be due, the amount demanded by Lessor shall be paid
PAGE 51
<PAGE> 52
by Lessee until the resolution of the dispute between the parties or by
litigation. Failure by Lessee to pay the disputed sums until resolution shall
constitute a default under the terms of the Lease.
49.8 LESSEE'S REMEDIES. Notwithstanding anything to the contrary contained
in this Lease, if any provision of this Lease expressly or impliedly obligates
Lessor not to unreasonably withhold, condition or delay its consent or approval,
an action for declaratory judgment or specific performance will be Lessee's sole
right and remedy in any dispute as to whether Lessor has breached such
obligation.
49.9 LIGHT, AIR AND VIEW. No diminution of light, air, or view by any
structure which may hereafter be erected (whether or not by Lessor) shall
entitle Lessee to any reduction of Rent, result in any liability of Lessor to
Lessee, or in any other way affect this Lease or Lessee's obligations hereunder.
49.10 PUBLIC TRANSPORTATION. Lessee shall comply with all requirements of
any local transportation management ordinance.
49.11 RULES AND REGULATIONS. Lessee agrees to comply with all reasonable
rules and regulations adopted and promulgated by Lessor and applicable to all
tenants in the Complex for the lawful, orderly, clean, safe, aesthetic, quiet,
and beneficial use, operation, maintenance, management, and enjoyment of the
Complex. Lessor shall have no liability for violation by any other tenant in the
Complex of any rules or regulations, nor shall such violation or waiver thereof
excuse Lessee from compliance. The initial rules and regulations concerning the
Complex are attached hereto as Exhibit F. Lessor reserves the right to make
additional reasonable rules affecting the Complex throughout the Term hereof.
All delivery and dispatch of supplies, fixtures, equipment and furniture shall
be by means and during hours established by Lessor. Lessee shall not at any time
park its trucks or other delivery vehicles in the Common Areas, except in such
parts thereof as from time to time designated by Lessor.
49.12 JOINT AND SEVERAL LIABILITY. Should Lessee consist of more than one
person or entity, they shall be jointly and severally liable on this Lease.
49.13 SURVIVAL OF OBLIGATIONS. All obligations of Lessee which may accrue
or arise during the Term or as a result of any act or omission of Lessee during
said Term shall, to the extent they have not been fully performed, satisfied or
discharged, survive the expiration or termination of this Lease.
49.14 REAL ESTATE BROKERS. Lessee is represented by Colliers International
("Lessee's Broker") in connection with this Lease transaction and Lessee's
Broker shall be paid a commission by Lessor pursuant to a separate agreement.
Lessor and Lessee each represents and warrants to the other party that it has
not authorized or employed, or acted by implication to authorize or employ, any
real estate broker or salesman (other than Lessee's Broker) to act for it in
connection with this Lease. Lessor and Lessee shall each indemnify, defend and
hold the other party harmless from and against any and all claims by any real
estate broker or salesman
PAGE 52
<PAGE> 53
whom the indemnifying party authorized or employed, or acted by implication to
authorize or employ, to act for the indemnifying party in connection with this
Lease.
49.15 NONLIABILITY OF LESSOR FOR APPROVALS. Except as may otherwise be
expressly stated by a provision of this Lease, and only to the extent so stated,
the consent or approval, whether express or implied, or the act, failure to act
or failure to object, by Lessor in connection with any plan, specification,
drawing, proposal, request, act, omission, notice or communication
(collectively, "act") by or for, or prepared by or for, Lessee, shall not create
any responsibility or liability on the part of Lessor, and shall not constitute
a representation by Lessor, with respect to the completeness, sufficiency,
efficacy, propriety, quality or legality of such act.
49.16 INTEREST ON PAST DUE AMOUNTS. If any sum due Lessor from Lessee is
not received by Lessor within five (5) calendar days after the date such sum is
due and payable, such sum shall bear interest from the due date until paid by
Lessee at the rate of two percent (2%) above the Prime Rate (as herein defined),
not to exceed the maximum rate of interest allowed by law in the state where the
Leased Premises are located, and such interest shall be deemed to be additional
rent. "Prime Rate" means the highest rate charged by Bank of America NT&SA, San
Francisco Main Office, on short-term unsecured loans to its most creditworthy
corporate borrowers.
49.17 CONVERSION TO A LIMITED LIABILITY ENTITY.
(a) No Conversion Without Consent. Anything to the contrary in this Lease
notwithstanding, if Lessee is currently a partnership (either general or
limited), joint venture, cotenancy, joint tenancy or an individual, Lessee may
not convert (the "CONVERSION") the Lessee entity or person into any type of
entity which possesses the characteristic of limited liability such as, by way
of example only, a corporation, a limited liability company, limited liability
partnership or limited liability limited partnership (singularly and
collectively, "LIMITED ENTITY"), without the consent of Lessor, which consent,
subject to fulfillment of the conditions below, shall not be unreasonably
withheld.
(b) Conditions to Lessor's Consent. The following are conditions precedent
to Lessor's obligation to act reasonably with respect to a Conversion to a
Limited Entity:
(i) The Limited Entity assumes all of Lessee's business and assets as of
the effective date of the Conversion;
(ii) As of the effective date of the Conversion, the Limited Entity shall
have a net worth ("NET WORTH"), which is not less than the greater of (i)
Lessee's Net Worth on the date of execution of the Lease or (ii) Lessee's Net
Worth as of the date Lessee requests Lessor's consent to the Conversion;
(iii) Lessee has not been in default under any of the terms, covenants or
conditions of this Lease during the term of the Lease;
PAGE 53
<PAGE> 54
(iv) Lessee delivers to Lessor an agreement, in form and substance
satisfactory to Lessor and executed by each partner of Lessee, wherein each
partner of Lessee agrees to remain personally liable for all of the terms,
covenants and conditions of the Lease that are to be observed and performed by
the Limited Entity; and
(v) Lessee shall reimburse Lessor within ten (10) days following Lessor's
written demand therefor for any and all reasonable costs and expenses that may
be incurred by Lessor in connection with the Conversion including, without
limitation, reasonable attorney's fees.
(c) Nothing in this Section 49.17 shall modify or reduce the obligations of
Lessee to perform under this Lease.
49.18 ARBITRATION. Any controversy or claim arising out of or relating to
this Lease or any agreements or instruments relating hereto or delivered in
connection herewith, including but not limited to a claim based on or arising
from an alleged tort will, at the request of any party, be determined by
arbitration in accordance with the Federal Arbitration Act (9 U.S.C. ss. 1, et
seq.) under the rules of the American Arbitration Association, provided that the
arbitrator(s) will be chosen from and the arbitration process will be
administered by Judicial Dispute Resolution, LLC or, if such entity is not in
existence, a similar organization mutually agreed to by Lessor and Lessee.
Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or in pursuit of a provisional or ancillary remedy does not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration. No controversy or claim will be
submitted to arbitration without the consent of all parties if, at the time of
the proposed submission, such controversy or claim involves a necessary third
party who is not subject to this arbitration provision or has not otherwise
agreed to participate in and be bound by the arbitration. Notwithstanding any of
the foregoing to the contrary, Lessor shall not be prevented by any pending or
contemplated arbitration from availing itself of its statutory unlawful detainer
or ejectment remedies.
49.19 SATELLITE DISHES/ANTENNAE. Lessor understands, acknowledges and
agrees that Lessee' s use of the Premises includes Lessee's use of the roof or
other exterior portions of the Building for the installation, operation and
maintenance of satellite dishes, antennae and equipment related thereto and the
provision of cabling and utilities thereto for Lessee's own use (collectively
the antennae, equipment and cabling are referred to as the "Antennae"). The
installation of the Antennae shall occur in strict accordance with the plans and
specifications relating thereto, which shall have been mutually determined by
Lessor and Lessee, each acting reasonably and in good faith, and in accordance
with the requirements of the Building's structural engineer in order to insure
that the structural integrity of the roof and structure of the Building are
fully preserved, which may include, designing the Antennae and mounting brackets
and connections to withstand a 100 mph wind exposure, and installing a back-up
tether, to prevent possible damage caused by the Antennae to other improvements.
Lessee shall, at Lessee's sole cost and expense, install and maintain the
Antennae in a first class, safe and workmanlike manner, in conformance with
sound construction practices, and in accordance with
PAGE 54
<PAGE> 55
all applicable laws, rules, regulations and conditions of any governmental
approvals and under the CC&R's, including Architectural Control Committee
approval. Lessee shall obtain all necessary governmental permits, and approvals,
at Lessee's expense, for the installation, operation and maintenance of the
Antennae and shall keep the same in full force and effect. Lessee shall not
damage the Building or reduce the structural or design integrity of the Building
as a result of the installation, operation and maintenance of Antennae. Lessee
shall indemnify and hold harmless Lessor from any and all damages, costs,
liabilities, claims of damage, loss, and costs arising from any actual or
alleged injury to any person or from any actual or alleged loss or damage to
property caused by, resulting from, or arising out of the installation,
operation, or maintenance of the Antennae. Should the Building or any
improvements located thereon be damaged or destroyed by the installation,
operation of maintenance of the Antennae, Lessee shall immediately repair such
damage or destruction and restore the Building to as good a condition as existed
immediately prior to said damage or destruction, and shall compensate Lessor for
any and all other damages, including, but not limited to, the loss of income or
business occurring as a result of such damage or destruction. Lessor reserves
the right to use the roof of the Building and the Building for any and all
purposes not inconsistent with the rights granted to Lessee herein, and further
reserves the right to grant any other tenant or third party a license or
easement for use of the roof of the Building. Unless Lessor otherwise requests
in writing, upon expiration or the sooner termination of the Lease, Lessee
shall, at its sole cost and expense, remove the Antennae and repair any damage
caused by such removal. Lessee acknowledges and agrees that the rights granted
to Lessee under this Section 49.19 are intended solely for Lessee's own use and
Lessee shall in no event grant third parties any right or permission to use the
Antennae, the roof or other exterior portions of the Building.
49.20 BACK UP POWER GENERATOR. Lessor understands, acknowledges and agrees
that Tenant' s use of the Premises includes the right by Lessee to install,
maintain a back-up power generator, associated fuel storage tank and cabling
(collectively, the "Generator Equipment") on or about the Leased Premises at a
location subject to Lessor's approval, which shall not be unreasonably withheld,
conditioned or delayed , at no additional charge, but subject to all terms and
conditions of this Lease. The installation of the Generator Equipment shall
occur in strict accordance with the plans and specifications relating thereto,
which shall have been mutually determined by Lessor and Lessee, each acting
reasonably and in good faith, and in accordance with the requirements of the
Building's structural and/or electrical engineer in order to insure that the
integrity of the roof, structure and electrical systems of the Building are
fully preserved. Lessee shall, at Lessee's sole cost and expense, install and
maintain the Generator Equipment in a first class, safe and workmanlike manner,
in conformance with sound construction practices, and in accordance with all
applicable laws, rules, regulations and conditions of any governmental approvals
and under the CC&R's, including Architectural Control Committee approval. Lessee
shall obtain all necessary governmental permits, and approvals, at Lessee's
expense, for the installation, operation and maintenance of the Generator
Equipment and shall keep the same in full force and effect. Lessee shall not
damage the Building or reduce the structural, electrical or design integrity of
the Building as a result of the installation, operation and maintenance of
Generator Equipment. Lessee shall indemnify and hold harmless Lessor from any
and all damages, costs, liabilities, claims of damage, loss, and costs arising
from any actual or alleged injury to any person or from any actual or alleged
loss or damage to
PAGE 55
<PAGE> 56
property caused by, resulting from, or arising out of the installation,
operation, or maintenance of the Generator Equipment. Should the Building or any
improvements located thereon be damaged or destroyed by the installation,
operation of maintenance of the Generator Equipment, Lessee shall immediately
repair such damage or destruction and restore the Building to as good a
condition as existed immediately prior to said damage or destruction, and shall
compensate Lessor for any and all other damages, including, but not limited to,
the loss of income or business occurring as a result of such damage or
destruction. Unless Lessor otherwise requests in writing, upon expiration or the
sooner termination of the Lease, Lessee shall, at its sole cost and expense,
remove the Generator Equipment and repair any damage caused by such removal.
49.21 RIGHT OF FIRST OFFER TO LEASE.
(a) Definition of ROFO Space. As used herein, "ROFO Space" shall mean any
unoccupied space on the third floor of the Building available for lease.
(b) Right of First Offer. During the Term and subject and subordinate to
any right of Adobe or any other tenants in the Building to the ROFO Space,
Lessor grants Lessee a one-time right of first offer to lease any portion of the
ROFO Space in accordance with the terms set forth in this Section 49.21.
(c) Notification of Availability. Before Lessor markets any ROFO Space as
available for lease, Lessor shall provide written notice to Lessee that such
ROFO Space is available for lease (the "ROFO Notice"). The ROFO Notice shall set
forth all of the material business terms that Lessor intends to disclose in its
marketing materials for the ROFO Space, and, at a minimum, shall include the
following information:
(i) Location, size, specifications and estimated date of
availability of ROFO Space;
(ii) Minimum size of premises that Lessor is willing to lease in
the ROFO Space;
(iii) Minimum term for a ROFO Lease;
(iv) The base rent that Lessor will be seeking for such ROFO
Space; and
(v) Maximum amount for tenant improvements that Lessor is
willing to fund as a landlord's allowance.
(d) Exercise of ROFO. If Lessee desires to lease the ROFO Space, Lessee
shall so notify Lessor in writing within ten (10) business days after delivery
of the ROFO Notice of its interest in leasing the ROFO Space (the "ROFO Exercise
Notice"). The ROFO Exercise Notice shall also specify the following items with
respect to the desired ROFO Lease:
(i) Desired size and location of the ROFO Premises, which size
must equal or exceed the minimum specified in the ROFO
Notice above,
PAGE 56
<PAGE> 57
and which location must not render other leasable space
within the ROFO Building either unusable or unmarketable
under commercially-reasonable standards;
(ii) Desired term for ROFO Lease, which term must equal or exceed
the minimum term specified in the ROFO Notice above; and
(iii) Desired amount of amount for tenant improvements that
Lessee desires Lessor to fund as a landlord's allowance,
which amount may not exceed the maximum amount specified in
the ROFO Notice.
If Lessee does not timely deliver a ROFO Exercise Notice in accordance with this
Section 49.21(d), Lessor shall be free to lease the ROFO Space that was
identified in the ROFO Notice, free and clear of the ROFO and the ROFO shall be
deemed terminated with respect to all ROFO Space.
(e) Negotiation of ROFO Lease. For the fifteen (15) business days following
Lessee's delivery of the ROFO Exercise Notice, Lessor and Lessee shall in good
faith negotiate all of the material terms of a ROFO Lease for the ROFO Premises
(the "ROFO Lease Terms"), which agreed upon ROFO Lease Terms shall be reflected
in an "Approved Term Sheet" executed by both parties. If after the fifteen (15)
business day period has elapsed, the parties have not been able to agree in
writing as to all of the ROFO Lease Terms, either party thereafter upon two (2)
business days written notice to the other party may terminate all further
negotiations for the ROFO Lease ( a "Negotiation Termination Notice"). Upon
either party's delivery of a Negotiation Termination Notice in accordance with
this Section 49.21(e), Lessor shall be free to lease the ROFO Space that was
identified in the ROFO Notice, free and clear of the ROFO and the ROFO shall be
deemed terminated with respect to all ROFO Space.
(f) Execution of ROFO Lease. Upon the parties' execution of the Approved
Term Sheet, Lessee shall be absolutely and unconditionally bound to lease the
ROFO Premises from Lessor and Lessor shall be absolutely and unconditionally
bound to lease the ROFO Premises to Lessee in accordance with this Section 49.21
and subject to the ROFO Lease Terms set forth in the Approved Term Sheet..
Lessor shall submit to Lessee a draft written lease that complies with the
requirements of this Agreement ("Draft ROFO Lease") no later than fifteen (15)
business days after the parties execute the Approved Term Sheet. The Draft ROFO
Lease shall be prepared using this Lease as a form, but suitably modified to
incorporate the ROFO Lease Terms and to address other differences between the
premises subject to the Initial Lease and the ROFO Premises. Within fifteen (15)
business days after submission by Lessor to Lessee of the Draft ROFO Lease,
Lessor and Lessee shall execute a ROFO Lease reflecting Lessor's obligations to
lease the ROFO Premises to Lessee, and Lessee's obligation to lease the ROFO
Premises from Lessor. If Lessee fails to execute the ROFO Lease within the time
period provided in this Section 49.21(f), then Lessor shall have the right to
terminate Lessee's rights under this Section 49.21with respect to the ROFO Space
that was identified in the ROFO Notice, in which case Lessor shall be free to
lease the applicable ROFO Space free and clear of the ROFO and the ROFO shall be
deemed terminated with respect to all ROFO Space. In such case,
PAGE 57
<PAGE> 58
Lessor shall also have the right to declare Lessee in default under this Lease.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the
day and year first written above.
LESSOR: LESSEE:
BEDFORD PROPERTY INVESTORS, INC., GETTY IMAGES, INC.
a Maryland corporation a Delaware corporation
By: By:
Its: Its:
FOR OFFICE USE ONLY:
PREPARED BY:
REVIEWED BY:
APPROVED BY:
PAGE 58
<PAGE> 1
EXHIBIT 10.20.
LEASE
THE QUADRANT CORPORATION, LANDLORD
GETTY IMAGES, INC., TENANT
DATED NOVEMBER 30, 1999
<PAGE> 2
LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. BASIC LEASE TERMS .............................................................................................
2. PREMISES ......................................................................................................
3. TERM ..........................................................................................................
3.1 Commence ................................................................................................
3.2 Expire ..................................................................................................
4. TENANT IMPROVEMENTS; EARLY POSSESSION; DELAYED DELIVERY OF POSSESSION ........................................
4.1 Tenant Improvements .....................................................................................
4.2 Early Occupancy .........................................................................................
4.3 Landlord Delay ..........................................................................................
4.4 Tenant Delay ............................................................................................
5. RENT ..........................................................................................................
5.1 Rent ....................................................................................................
5.2 Manner of Payment .......................................................................................
5.3 Rent Commencement .......................................................................................
6. PREPAID RENT AND SECURITY DEPOSIT .............................................................................
6.1 Deposit .................................................................................................
6.2 Use of Deposit to Cure ..................................................................................
6.3 Return of Security Deposit ..............................................................................
6.4 Treatment as Security Deposit ...........................................................................
6.5 Landlord's Obligation Regarding Deposit .................................................................
7. USE OF PREMISES ...............................................................................................
7.1 Use .....................................................................................................
7.2 Prohibited Uses .........................................................................................
7.3 No Nuisance .............................................................................................
7.4 Telecommunications Providers ............................................................................
8. ADDITIONAL RENT FOR OPERATING EXPENSES ........................................................................
8.1 Tenant Payment ..........................................................................................
8.2 Tenant's Share ..........................................................................................
8.3 Definitions .............................................................................................
8.4 Determination of Operating Expenses .....................................................................
8.5 Reconciliation ..........................................................................................
8.6 Upon Lease Termination ..................................................................................
8.7 Landlord Rights .........................................................................................
9. MAINTENANCE AND REPAIR RESPONSIBILITY .........................................................................
9.1 Maintenance Obligations .................................................................................
9.2 No Obligation For Alteration ............................................................................
9.3 Tenant Waiver ...........................................................................................
10. COMMON AREAS ..................................................................................................
10.1 Use of Common Areas .....................................................................................
10.2 Definition of Common Areas ..............................................................................
11. UTILITIES AND SERVICES ........................................................................................
11.1 Furnishing of Utilities and Services ....................................................................
11.2 Additional Services .....................................................................................
11.3 After Hours .............................................................................................
11.4 Separate Meters .........................................................................................
11.5 Failure .................................................................................................
12. LIMITS ON LANDLORD'S LIABILITY ................................................................................
12.1 Circumstances Beyond Control ............................................................................
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
12.2 Unreasonable Period of Failure ...........................................................................
12.3 Tenant Caused ............................................................................................
12.4 No Abatement of Rent .....................................................................................
12.5 No Interference ..........................................................................................
13. ALTERATIONS AND ADDITIONS BY TENANT; LIENS AND INSOLVENCY ......................................................
13.1 Alterations and Additions by Tenant ......................................................................
13.2 Liens and Insolvency .....................................................................................
14. INSURANCE; INDEMNITY ...........................................................................................
14.1 Tenant Waiver ............................................................................................
14.2 Indemnity ................................................................................................
14.3 Landlord's Responsibility ................................................................................
14.4 Tenant's Insurance .......................................................................................
14.5 Policies .................................................................................................
14.6 Landlord's Insurance .....................................................................................
14.7 Proceeds .................................................................................................
14.8 Waiver of Subrogation ....................................................................................
14.9 Notification of Accidents ................................................................................
15. DESTRUCTION ....................................................................................................
15.1 Election to Restore ......................................................................................
15.2 Rent Abatement ...........................................................................................
15.3 Repairs to Tenant Installations ..........................................................................
15.4 No Compensation ..........................................................................................
16. CONDEMNATION ...................................................................................................
16.1 Termination of Lease .....................................................................................
16.2 Election of Termination ..................................................................................
16.3 Reduction of Rent ........................................................................................
16.4 Award ....................................................................................................
16.5 Landlord Authority .......................................................................................
17. ASSIGNMENT AND SUBLETTING ......................................................................................
17.1 Landlord Consent Required ................................................................................
17.2 Deemed Assignment ........................................................................................
17.3 Recapture ................................................................................................
17.4 Additional Requirements ..................................................................................
17.5 Assignment with Bankruptcy ...............................................................................
17.6 Sale .....................................................................................................
17.7 Binding ..................................................................................................
18. DEFAULT ........................................................................................................
18.1 Definition of Default ....................................................................................
18.2 Tenant Notification ......................................................................................
18.3 Landlord Default .........................................................................................
18.4 Rental Concession ........................................................................................
19. REMEDIES IN DEFAULT ............................................................................................
19.1 Landlord Remedies ........................................................................................
19.2 Tenant Payment of Costs ..................................................................................
19.3 Termination ..............................................................................................
19.4 No Termination ...........................................................................................
19.5 Landlord Election to Make Tenant Advances ................................................................
20. ACCESS .........................................................................................................
21. SURRENDER OF PREMISES; HOLD-OVER TENANCY .......................................................................
21.1 Surrender of Premises ....................................................................................
21.2 Hold-Over Tenancy ........................................................................................
22. COMPLIANCE WITH LAW ............................................................................................
23. RULES AND REGULATIONS ..........................................................................................
24. PARKING ........................................................................................................
25. ESTOPPEL CERTIFICATES ..........................................................................................
26. SUBORDINATION ..................................................................................................
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
27. REMOVAL OF PROPERTY ..........................................................................................
28. PERSONAL PROPERTY TAXES ......................................................................................
29. NOTICES ......................................................................................................
30. CONDITION OF PREMISES ........................................................................................
31. HAZARDOUS SUBSTANCES .........................................................................................
31.1 Tenant Obligations .....................................................................................
31.2 Tenant Indemnity .......................................................................................
31.3 Landlord Inspection ....................................................................................
31.4 Survival ...............................................................................................
32. SIGNS ........................................................................................................
33. GENERAL PROVISIONS ...........................................................................................
33.1 Attorneys' Fees ........................................................................................
33.2 Governing Law; Venue ...................................................................................
33.3 Cumulative Remedies ....................................................................................
33.4 Exhibits; Addenda ......................................................................................
33.5 Interpretation .........................................................................................
33.6 Joint Obligation .......................................................................................
33.7 Keys ...................................................................................................
33.8 Late Charges; Interest .................................................................................
33.9 Light, Air, and View ...................................................................................
33.10 Measurements ...........................................................................................
33.11 Name ...................................................................................................
33.12 Prior Agreements; Amendments ...........................................................................
33.13 Recordation ............................................................................................
33.14 Liability ..............................................................................................
33.15 Severability ...........................................................................................
33.16 Time ...................................................................................................
33.17 Waiver .................................................................................................
33.18 No Waste ...............................................................................................
33.19 Force Majeure ..........................................................................................
33.20 Quiet Enjoyment ........................................................................................
34. AUTHORITY OF PARTIES .........................................................................................
35. FINANCIAL STATEMENTS .........................................................................................
36. COMMISSIONS ..................................................................................................
</TABLE>
EXHIBITS TO THIS LEASE:
<TABLE>
<S> <C>
Exhibit A-1 Premises
Exhibit A-2 Legal Description of Property
Exhibit A-3 Legal Description of Business Park
Exhibit B-1 Work Letter for Waterside Building
Exhibit B-2 Work Letter for Park View Building
Exhibit C Exclusivity Agreement
Exhibit D Operating Cost Exclusions
Exhibit E Allocation of Non-Metered Operating Expenses Between Office and Retail Spaces for Park View Building
Exhibit F Form of Non-Disturbance and Attornment Agreement for Waterside and Park View Buildings
Exhibit F-2 Form of Non-Disturbance and Attornment Agreement for Plaza Building
Exhibit G Janitorial Schedule
Exhibit H 24 Hour/7 Day Areas
Exhibit I Form of Memorandum of Lease
Exhibit J List of Environmental Reports
</TABLE>
iii
<PAGE> 5
LEASE
LEASE, dated November 30, 1999, is made by and between THE QUADRANT
CORPORATION, a Washington corporation ("Landlord"), and GETTY IMAGES, INC., a
Delaware corporation ("Tenant").
1. Basic Lease Terms. This section sets forth certain basic terms of this
Lease for reference purposes. This Section is to be read in conjunction with
the other provisions of this Lease; provided, however, to the extent of any
inconsistency between this Section and the other provisions of this Lease, this
Section shall control.
<TABLE>
<S> <C> <C> <C>
LEASED PREMISES TERM
(See Section 2) (See Section 3)
Business Park Quadrant Lake Union Target Commencement Date September 1, 2001
Center Rent Commencement Date 45 Days after the
Commencement Date
Building Names Park View Building and (See Section 5.3)
Waterside Building Target Expiration Date August 31, 2013
Length of Term 144 Months
Addresses determined Not yet issued; to be Renewal Options Two 5-Year Extensions
(See Section 1A.3)
Rentable Sq. Ft. 116,440 RSF
(See Section 1A.4) (Park View Building)
62,332 RSF
(Waterside Building)
RENT; PREPAID RENT;
SECURITY DEPOSIT
(See Sections 1A.4, 5 and 6) PERMITTED USE (See Section 7)
Base Monthly Rent (Park View Building) General Office Use, Production Shipping,
Mos. 1-48: $230,454/Mo. NNN 24-Hour Per Day/7-Day Per Week Call and
($23.75/RSF/Year NNN) Support Center, Photography Studio, Storage
Mos. 49-96: $258,594/Mo. NNN and other similar types of uses reasonably
($26.65/RSF/Year NNN) related to Tenant's current day-to-day business
Mos. 97-144: $290,130/Mo. NNN operations as of the date of this Lease.
($29.90/RSF/Year NNN)
OPERATING EXPENSES (Section 8)
Base Monthly Rent (Waterside Building) Tenant's Share 100% of Waterside Building
Mos. 1-48: $125,963/Mo. NNN 100% of Office Space in
($24.25/RSF/Year NNN) Park View Building
Mos. 49-96: $141,026/Mo. NNN
($27.15/RSF/Year NNN) Additional Rent $65,498
Mos. 97-144: $157,908/Mo. NNN (Park View Building)
($30.40/RSF/Year NNN) $35,062
(Waterside Building)
Prepaid Rent -- none (Based on estimate of
$6.75/RSF/Year for 2001)
Security Deposit see Sections 6 and 1A.19
PARKING (See Sections 1A.10 and 24)
267 Stalls (Park V)
</TABLE>
<PAGE> 1
EXHIBIT 10.34.
GETTY INVESTMENTS INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT is made as of November 22, 1999
BETWEEN:
(1) GETTY IMAGES, INC., a Delaware corporation whose registered office is at
701 North 34th Street, Suite 400, Seattle, Washington 98103 ("Getty
Images"); and
(2) THOSE PERSONS whose names and addresses are set out in Exhibit A hereto
(the "Investors").
NOW THE PARTIES HEREBY AGREE as follows:
1. Definitions
a. In this Agreement:
"Action" means any actual or threatened legal action, claim,
proceeding or investigation.
"Affiliate" means, with respect to any specified Person, the
directors, officers, trustees, managers and partners of such Person,
and any other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, such specified Person.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two
or more Persons, means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of
the affairs or management of a Person, whether through the ownership
of voting securities, as trustee or executor, by contract or
otherwise. Control shall be conclusively presumed when any Person
directly or indirectly owns 50% or more of the voting securities of
another Person.
"Disclosure Documents" means any preliminary prospectus, prospectus,
registration statement, circular and any amendment or supplement
thereto, filed, distributed or used at any time in connection with the
Offering (and including any exhibits to the foregoing documents).
"Investors" means those persons listed in Exhibit A hereto, together
with their respective Affiliates, agents and representatives.
"Offering" means the offering, issuance and sale of the common stock,
par value
<PAGE> 2
2
$0.01 per share, of Getty Images pursuant to a Registration Statement
on Form S-3, as amended (Registration No. 333-88009), and a related
Registration Statement on Form S-3 to register additional shares of
common stock pursuant to Rule 462(b) of the Securities Act of 1933, as
amended (Registration No. 333-91097).
"Person" means an individual, corporation, general or limited
partnership, limited or unlimited liability company, trust,
association, unincorporated organization, government or any authority,
agency or body thereof, or other entity and any legal personal
representative, successor and lawful assignee of any of them.
b. In this Agreement, a reference to:
(1) a "subsidiary" means any and all corporations, partnerships,
joint ventures, associations and other entities controlled by
Getty Images directly or indirectly through one or more
intermediaries;
(2) a statutory provision includes a reference to the statutory
provision as modified or re-enacted or both from time to time
whether before or after the date of this Agreement and any
subordinate legislation made under the statutory provision
whether before or after the date of this Agreement;
(3) a clause or schedule, unless the context otherwise requires, is a
reference to a clause of or schedule to this Agreement; and
(4) a document is a reference to that document as from time to time
supplemented or varied.
c. The headings in this Agreement do not affect its interpretation.
2. Indemnity
a. Getty Images hereby undertakes that it will indemnify and hold
harmless each Investor against any losses, claims, damages or
liabilities to which such Investor may become subject, arising
directly or indirectly out of the Disclosure Documents and Getty
Images will reimburse each Investor for any legal or other expenses
reasonably incurred by such Investor in connection with investigating
or defending any Action in respect thereof as such expenses are
incurred, provided that, Getty Images shall have no liability under
this Clause to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in any of the
Disclosure Documents in reliance upon and in conformity with, in the
case of each Investor, information provided by such Investor.
<PAGE> 3
3
b. Promptly after receipt by any Investor of notice of the commencement
of any Action or any written notice of any threat of any Action, it
shall, if a claim in respect thereof is to be made against Getty
Images under this Clause, notify Getty Images and the other Investors
in writing of the commencement thereof; but the omission so to notify
Getty Images shall not relieve Getty Images from any liability which
it may have to such Investor. If any such Action shall be brought
against any Investor and it shall notify Getty Images of the
commencement thereof, Getty Images shall, subject to its agreeing to
indemnify the Investors against all judgments and other liabilities
resulting from such Action (and so far as permitted by any insurance
policy of such Investors), be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof, with
counsel satisfactory to such Investor (which shall not, except with
the consent of such Investor, be counsel to Getty Images), and, after
notice from Getty Images to such Investor of its election so as to
assume the defense thereof, Getty Images shall not be liable to such
Investor under this Clause for any legal expenses of other counsel or
any other expenses, in each case subsequently incurred by such
Investor, in connection with the defense thereof other than reasonable
costs of investigation. Getty Images shall not, without the written
consent of the relevant Investor effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any
Action in respect of which indemnification or contribution may be
sought hereunder (whether or not such Investor is an actual or
potential party to such Action) unless such settlement, compromise or
judgment (i) includes a full and unconditional release of such
Investor from all liability arising out of such Action, and (ii) does
not include a statement as to or an admission of fault, culpability or
a failure to act, by or on behalf of any Investor. In the event that
Getty Images wishes to assume the defense of any Action but is not
permitted by the insurance policy of the relevant Investor to do so,
such Investor shall use all reasonable endeavors to procure that its
insurers and their legal advisers shall consult and cooperate with
Getty Images in respect of such defense and (except insofar as such
Investor shall certify to Getty Images that the requirement to obtain
the written consent of Getty Images as referred to below would
invalidate the relevant insurance policy, in which case such
requirement shall not apply) shall not settle, compromise or consent
to the entry of any judgment with respect to such Action without the
written consent of Getty Images, such consent not to be unreasonably
withheld or delayed.
c. If the indemnification provided for in this Clause 2 is unavailable to
or insufficient to hold harmless any Investor under the foregoing
provisions of this Clause in respect of any losses, claims, damages or
liabilities (or Actions in respect thereof) referred to therein, then
Getty Images shall contribute to the amount paid or payable by the
relevant Investor as a result of such losses, claims, damages or
liabilities (or Actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by that Investor
on the one
<PAGE> 4
4
hand and Getty Images on the other from the Offering. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the relevant Investor failed to give
the notice required under sub-Clause b. above, then Getty Images shall
contribute to such amount paid or payable by such Investor in such
proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of such Investor on the one hand
and Getty Images on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities (or Actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by
the Investors in the aggregate on the one hand and Getty Images on the
other shall be deemed to be in the proportion 99 percent, to Getty
Images and 1 percent, to the Investors. The relative fault shall be
determined by reference to, among other things, whether the claim
relates to information supplied by Getty Images or the Investors and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
relevant Investors agree with Getty Images that it would not be just
and equitable if contributions pursuant to this sub-Clause c. were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to above in this sub-Clause c. The amount paid or payable by the
relevant Investor as a result of the losses, claims, damages or
liabilities (or Actions in respect thereof) referred to above in this
sub-Clause c. shall be deemed to include any legal or other expenses
reasonably incurred by it in connection with investigating or
defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act of 1933) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
d. If any taxing authority brings into charge to taxation any sum payable
under the indemnity contained in this Clause 2, the amount so payable
shall be grossed up by such amount as will ensure that after deduction
of the tax so chargeable (after giving credit for any tax relief
available to the indemnified party) there shall remain a sum equal to
the amount that would otherwise have been payable under this Clause.
e. The obligations of Getty Images under this Clause 2 shall be in
addition to any liability which Getty Images may otherwise have.
3. Survival of Obligations
The indemnities, agreements, representations, warranties and other
statements of Getty Images contained in this Agreement or made by or on
behalf of it pursuant to this Agreement shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of Getty Investments, and shall
<PAGE> 5
5
survive the completion of the Offering.
4. Assignment and Further Assurance
a. This Agreement shall be binding upon, and the benefit of this
Agreement shall inure solely to the Investors and Getty Images and
their respective successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No
purchaser of any shares from any Investor shall be deemed a successor
or assign by reason merely of such purchase.
b. Getty Images shall, if requested by any of the Investors, procure that
any of its subsidiaries nominated by any of the Investors shall enter
into an agreement with the Investors on similar terms to this
Agreement, save that any such subsidiary shall be the party giving the
indemnification thereunder in place of Getty Images.
5. Time of the Essence
Time shall be of the essence of this Agreement.
6. Choice of Law
a. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
b. To the fullest extent permitted by law, any controversy or claim
arising out of or relating to this Agreement, or the breach thereof,
shall be settled by mandatory, final and binding arbitration in New
York City, New York, USA under the auspices of and in accordance with
the rules, then pertaining, of the American Arbitration Association,
to the extent not inconsistent with the Delaware Uniform Arbitration
Act and judgment upon the award rendered may be entered in any court
having jurisdiction thereof. Nothing in this paragraph 6.b. shall
limit any right that any Person may otherwise have to seek to obtain
preliminary judgment upon the award rendered may be entered in any
court having jurisdiction thereof. Nothing in this paragraph 6.b.
shall limit any right that any Person may otherwise have to seek to
obtain preliminary injunctive relief in order to preserve the status
quo pending the disposition of any such arbitration proceeding.
c. In the event of any dispute, claim, arbitration or litigation with
regard to this Agreement, the prevailing party shall be entitled to
receive from the non-prevailing party, and the non-prevailing party
shall promptly pay, all reasonable fees and expenses of counsel for
the prevailing party incurred in connection with such dispute, claim,
arbitration or litigation.
<PAGE> 6
6
7. Severability
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
8. No Personal Liability of Trustees
The parties hereto agree that with respect to the Cheyne Walk Trust, the
Ronald Family Trust A, the Ronald Family Trust B and the Gordon P. Getty
Family Trust, the respective trustees thereof have executed this Agreement
solely in their representative capacities as trustees and not individually,
and that any liability arising from this Agreement shall be satisfied
solely from the assets of the trust of which such person is trustee, and
not from such person individually.
9. Counterparts
This Agreement may be executed by the parties hereto in counterparts, each
of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.
<PAGE> 7
7
IN WITNESS WHEREOF the parties have caused this Agreement to be signed by their
duly authorized representatives as of the day and year first mentioned above.
The Trustees of the Cheyne Walk Trust
By: ______________________________
Name:
Title:
The Trustees of the Ronald Family Trust A
By: ______________________________
Name:
Title:
The Trustees of the Ronald Family Trust B
By: ______________________________
Name:
Title:
Transon Limited
By: ______________________________
Name:
Title:
The Trustees of the Gordon P. Getty Family Trust
By: ______________________________
Name:
Title:
<PAGE> 8
8
Getty Investments L.L.C.
By: ______________________________
Name:
Title:
Getty Images, Inc.
By: ______________________________
Name:
Title:
<PAGE> 9
EXHIBIT A
Name Notice Address
- ---- --------------
Trustees of the Cheyne Walk Trust Attn: Jan D. Moehl
1325 Airmotive Way, Suite 262
Reno, Nevada 89502
Trustees of the Ronald Family Trust A Attn: Thomas E. Woodhouse
1325 Airmotive Way, Suite 264
Reno, Nevada 89502
Trustees of the Ronald Family Trust B Attn: Jan D. Moehl
1325 Airmotive Way, Suite 262
Reno, Nevada 89502
Transon Limited c/o Macfarlanes
10 Norwich Street
London EC4A 1BD
England
Trustees of the Gordon P. Getty Attn: Thomas E. Woodhouse
Family Trust 1325 Airmotive Way, Suite 264
Reno, Nevada 89502
Getty Investments L.L.C. Attn: Jan D. Moehl
1325 Airmotive Way, Suite 262
Reno, Nevada 89502
<PAGE> 1
Exhibit 21.1
Subsidiary State or Country Name under Which
of Incorporation Subsidiary
Does Business
(if any)
- -------------------------------------------------------------------------------
Allsport Australia Pty Limited Australia
Allsport Photographic Limited England and Wales
Allsport (UK) Limited England and Wales
Allsport Photography USA Inc. California
American Royal Arts Corp. Delaware
Artcast Corporation Washington
Art.com, Inc. Delaware
EyeWire, Inc. Delaware
Fabulous Footage, Inc. Massachusetts
Fotogram Stone S.a.r.l. France
Fototeca Stone S.L. Spain
Gamma-Liaison Inc. New York
Gettyone.com, Inc. Washington
Getty Communications Group
Finance Limited England and Wales
Getty Communications Limited England and Wales
Getty Images Australia Pty Limited Australia
Getty Images BvbA Belgium
Getty Images Denmark ApS Denmark
Getty Images do Brasil Limitada Brazil
Getty Images Holland BV Holland
Getty Images Hong Kong Limited Hong Kong
Getty Images Limited England and Wales
Getty Images South America Limited England and Wales
Getty Images South America LLC Delaware
Getty Images Sweden AB Sweden
Hulton Getty Holdings Limited England and Wales
Hulton Getty Picture Collection Ltd. England and Wales
ImageWays, Inc. New York
Liaison Agency, Inc. New York
Liaison International Inc. New York
Newsmakers L.L.C. D.C.
Online USA, Inc. California
PhotoDisc Australia Pty Limited Australia
PhotoDisc Deutschland GmbH Germany
PhotoDisc Europe Limited England and Wales
PhotoDisc France S.a.r.l. France
PhotoDisc, Inc. Washington
PhotoDisc International, Inc. Barbados
PhotoDisc Japan Kabushiki Kaisha Japan
PhotoDisc Scandinavia AB Sweden
The Image Bank, Inc. New York
The Image Bank France, S.A. France
<PAGE> 2
Subsidiary State or Country Name under Which
of Incorporation Subsidiary
Does Business
(if any)
- -------------------------------------------------------------------------------
tonystone.com ltd. Bermuda
Tony Stone Associates Limited England and Wales
Tony Stone Associates GmbH Germany
Tony Stone GmbH Austria
Tony Stone Images/America, Inc. Illinois
Tony Stone Images/Canada, Inc. Ontario
Tony Stone Images/Chicago, Inc. Illinois
Tony Stone Images/Los Angeles, Inc. California
Tony Stone Images/New York, Inc. New York
Tony Stone Images/Seattle, Inc. Washington
TriEnergy Productions California Energy Film
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Getty
Images, Inc. Form 10-K for the year ended December 31, 1999 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 105,356
<SECURITIES> 0
<RECEIVABLES> 81,202
<ALLOWANCES> 16,460
<INVENTORY> 4,970
<CURRENT-ASSETS> 209,075
<PP&E> 104,193
<DEPRECIATION> 65,645
<TOTAL-ASSETS> 939,569
<CURRENT-LIABILITIES> 92,076
<BONDS> 101,802
0
15
<COMMON> 452
<OTHER-SE> 745,224
<TOTAL-LIABILITY-AND-EQUITY> 939,569
<SALES> 247,840
<TOTAL-REVENUES> 247,840
<CGS> 67,264
<TOTAL-COSTS> 145,578
<OTHER-EXPENSES> 101,374
<LOSS-PROVISION> (1,049)
<INTEREST-EXPENSE> 4,585
<INCOME-PRETAX> (69,493)
<INCOME-TAX> 1,660
<INCOME-CONTINUING> (67,833)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,833)
<EPS-BASIC> (1.94)
<EPS-DILUTED> 0
</TABLE>
