COMBINATION AGREEMENT
among
GETTY IMAGES, INC.,
and
3032097 NOVA SCOTIA LIMITED
and
EYEWIRE PARTNERS, INC.
and
each of the Stockholders of
EYEWIRE PARTNERS, INC.
listed on the signature pages hereto
Dated as of August 5, 1999
47920.0005
COMBINATION AGREEMENT, dated as of August 5, 1999 (this "Agreement") among GETTY
IMAGES, INC., a Delaware corporation ("Getty"), 3032097 Nova Scotia Limited, a
Nova Scotia company limited by shares ("NSCO"), EyeWire Partners, Inc., an
Alberta corporation (the "Company"), and each of the stockholders of the Company
listed on the signature pages hereto (the "Stockholders").
RECITALS
--------
A. The parties hereto intend that, subject to the terms and conditions set forth
in this Agreement, Getty will acquire a controlling interest in the Company
pursuant to a statutory reorganization of capital and other transactions
(collectively, the "Combination") to be completed in accordance with this
Agreement.
B. The Stockholders, the Board of Directors of the Company, and the Boards of
Directors of Getty and NSCO have approved the Combination and the transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, Getty,
NSCO, the Company and the Stockholders hereby agree as follows:
ARTICLE I
THE COMBINATION
---------------
Section 1.01. Requisite Transactions. Subject to the conditions
contained in Article V, the parties hereto shall cause the following to occur as
a single integrated transaction commencing on August 5, 1999 (the "Closing
Date") in order to effect the Combination:
(a) The articles of incorporation of the Company shall be amended to
authorize a class of exchangeable non-voting shares (the "EyeWire Exchangeable
Shares") having the rights and conditions set forth in Exhibit 1.01(a) attached
hereto and change each issued and outstanding common share in the capital of the
Company (the "Common Shares") into that number of EyeWire Exchangeable Shares
which is equal to the Exchange Ratio (as calculated in Section 1.08).
(b) At the time the change referred to in paragraph (a) above is
effective (the "Effective Time"), the Stockholders shall cease to be holders of
Common Shares, shall have their names removed from the register of holders of
such shares and shall become holders of the number of fully paid EyeWire
Exchangeable Shares to which he or she is entitled as a result of the change
referred to in paragraph (a) and such Stockholders names shall be added to the
register of holders of EyeWire Exchangeable Shares accordingly.
(c) No fraction of an EyeWire Exchangeable Share shall be issued. In
the event that the Exchange Ratio would result in a Stockholder being entitled
to receive a fraction of an EyeWire Exchangeable Share, such Stockholder shall
receive the next lower whole number of EyeWire Exchangeable Shares where such
fraction is less than 0.5 and the next higher whole number of Exchangeable
Shares where the fraction is equal to or greater than 0.5.
(d) The aggregate stated capital of the EyeWire Exchangeable Shares
shall be equal to the aggregate stated capital of the Common Shares immediately
prior to the Effective Time.
(e) Getty shall subscribe for one Common Share in exchange for the sum
of $1.00 which amount shall be added to the stated capital account maintained by
the Company for the Common Shares and Getty shall become a holder of one fully
paid non-assessable Common Share and Getty's name shall be added to the register
of holders of Common Shares accordingly.
(f) Getty shall issue to the trustee (the "Trustee") named in the
voting trust and exchange rights agreement attached hereto as Exhibit 1.05, one
share of Series A special voting preferred stock of Getty which Series A special
voting preferred stock shall have the rights and conditions set forth in Exhibit
1.01(f) attached hereto.
(g) Each issued and outstanding EyeWire Exchangeable Share shall be
transferred to NSCO by the Stockholder holding such share in exchange for one
exchangeable non-voting Share of NSCO (the "Exchangeable Shares") having the
rights and conditions set forth in Exhibit 1.01(g) attached hereto.
(h) Getty shall issue to the Trustee one share of Series B special
voting preferred stock of Getty which Series B special voting preferred stock
shall have the rights and conditions set forth in Exhibit 1.01(h) attached
hereto.
(i) The Company shall incorporate a Nova Scotia unlimited company
("NSULC") pursuant to the Companies Act (Nova Scotia) (the "NSCA") and shall
subscribe for 100 common shares of the NSULC for $0.01 per share.
(j) Getty shall cause the Company to be continued out of Alberta and
into Nova Scotia pursuant to Section 182 of the Business Corporations Act
(Alberta) (the "ABCA") and into Nova Scotia pursuant to Section 133 of the NSCA.
(k) The Company and NSULC shall be amalgamated (the "Amalgamation")
pursuant to Section 134 of the NSCA to form a Nova Scotia unlimited company
("NSULC2"). NSULC2 shall be authorized to issue 10,000 Common Shares ("NSULC2
Common Shares") and 5,000,000 exchangeable non-voting shares ("NSULC2
Exchangeable Shares") having the rights and conditions set forth in Exhibit
1.01(k) attached hereto.
(l) At the time of the Amalgamation each issued and outstanding common
share of the Company shall be converted into one NSULC2 Common Share, each
issued and outstanding EyeWire Exchangeable Share shall be converted into one
NSULC2 Exchangeable Share and each common share of NSULC shall be cancelled.
Section 1.02. Options. Immediately upon the completion of all of the
actions described in subsection 1.01, each of the then outstanding options to
purchase Common Shares (collectively, the "Company Options"), whether or not
exercisable and whether or not vested, shall without any further action on the
part of any holder thereof, be exchanged for an option (the
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"New Option") to purchase that number of shares of common stock, par value $0.01
per share, of Getty ("Getty Common Stock") determined by multiplying the number
of Common Shares issuable pursuant to such Company Option by the Exchange Ratio.
The New Option shall have an exercise price per share of Getty Common Stock
equal to $0.01 per share. If the foregoing calculation results in an exchanged
Company Option being exercisable for a fraction of a share of Getty Common
Stock, then the number of shares of Getty Common Stock subject to the New Option
shall be rounded up to the nearest whole number of shares. Each person receiving
New Options shall have 50% of such New Options vest on the third business day
after Getty's initial public release of its year end results and earnings for
the year ending December 31, 1999 and the remaining 50% of such New Options
shall vest on July 1, 2000. All other terms and conditions of the New Option
will be as described in the form of agreement for New Options, a copy of which
is attached hereto as Exhibit 1.02. Getty shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Getty Common
Stock for delivery upon exercise of New Options pursuant to the terms set forth
in this Article I. Getty shall file, prior to February 1, 2000, a registration
statement on Form S-8 (or any successor form) or another appropriate form
covering the shares of Getty Common Stock subject to the New Options and Getty
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements for so long as the New Options
remain outstanding.
Section 1.03. Other Effects of the Combination. Following the
completion of the transactions described in Section 1.01:
(a) The directors of the Company and NSCO will be Xxxx Xxxxxxx, Xxxxx
Xxxxxxx, Xxxxx Xxxxxx and Xxxxxxxx Xxxxx; and
(b) The officers of the Company and NSCO will be Xxxx Xxxxxxx, Xxxxx
Xxxxxxx, Xxxxx Xxxxxx and Xxxxxxxx Xxxxx.
Section 1.04. Registration Rights. Getty and the Stockholders shall
enter into a Registration Rights Agreement, in the form attached hereto as
Exhibit 1.04.
Section 1.05. Voting Trust and Exchange Rights Agreement. Getty, the
Company and the Stockholders shall enter into a Voting Trust and Exchange Rights
Agreement in the form attached hereto as Exhibit 1.05(a) and Getty, NSCO and the
Stockholders shall enter into a Voting Trust and Exchange Rights Agreement in
the form attached hereto as Exhibit 1.05(b).
Section 1.06. Support Agreement. Getty and NSCO shall enter into a
Support Agreement in the form attached hereto as Exhibit 1.06(a) and Getty and
the Company shall enter into a Support Agreement in the form attached hereto as
Exhibit 1.06(b).
Section 1.07. Currency. Unless otherwise specified all references in
this Agreement to "cash", "cent", "dollars", or "$" shall mean U.S. dollars.
Whenever required by the terms of this Agreement, Canadian dollars shall be
converted into U.S. dollars at the exchange rate therefor as reported by the
Wall Street Journal on the date which is two Business Days prior to the Closing
Date.
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Section 1.08. Calculation of Exchange Ratio. For the purposes of this
Agreement "Exchange Ratio" shall mean the quotient obtained when (i) the Share
Consideration (as defined in Section 1.09 hereof) is divided by (ii) the
Aggregate Fully-Diluted Company Shares. For the purposes of this Agreement,
"Aggregate Fully-Diluted Company Shares" shall mean the sum of all outstanding
Common Shares immediately prior to the Effective Time plus all of the Common
Shares issuable upon the exercise in full of all Company Options outstanding
immediately prior to the Effective Time.
Section 1.09. Share Consideration. The Share Consideration shall be
1,853,334 shares of Getty Common Stock.
Section 1.10. Escrow Arrangement. On the Closing Date that number of
Exchangeable Shares which is equal to the product obtained when 20% of the Share
Consideration is multiplied by the Exchange Ratio (the "Escrow Amount") shall be
deposited by the Stockholders with Montreal Trust Company of Canada as escrow
agent, pursuant to, and shall be held and disbursed in accordance with, an
escrow agreement substantially in the form attached hereto as Exhibit 1.10 (the
"Escrow Agreement"). Subject to the Escrow Agreement, the Escrow Amount may be
utilized by Getty to satisfy certain indemnification claims that may arise under
Article VI of this Agreement.
Section 1.11. Reorganization. The Parties intend that Combination
constitute for U.S. federal income tax purposes a tax-free reorganization under
Section 368 of the Code.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
--------------------------------------------------
Except as set forth in the Disclosure Schedule delivered by the Stockholders and
the Company to Getty and NSCO concurrently with the execution of this Agreement
(the "Company Disclosure Schedule"), each of the Stockholders hereby jointly and
severally represents and warrants, except with respect to representations and
warranties contained in Sections 2.04 and 2.06 which are made severally and not
jointly by each Stockholder, to Getty and to NSCO that:
Section 2.01. Organization and Qualification; Subsidiaries. The Company
and each corporation that is a subsidiary of the Company within the meaning of
the ABCA (the "Company Subsidiaries") is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. Except as set forth in Section 2.01 of the Company Disclosure
Schedule, each of the Company and the Company Subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that have not had, and could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. The
term "Company Material Adverse Effect" means any event, change or effect that is
materially adverse to the condition (financial or
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otherwise), properties, assets, liabilities, businesses, operations, results of
operations or prospects of the Company and the Company Subsidiaries taken as a
whole.
Section 2.02. Certificate of Incorporation and By-Laws. The
Stockholders have heretofore delivered to Getty a complete and correct copy of
the Certificate of Incorporation, Articles of Incorporation and the By-Laws or
other organizational documents of the Company and each Company Subsidiary. Such
Certificates of Incorporation, Articles of Incorporation, and By-Laws or other
organization documents are in full force and effect. Neither the Company nor any
Company Subsidiary is in violation of any of the provisions of its Certificate
of Incorporation, Articles of Incorporation, or By-Laws or other organizational
documents.
Section 2.03. Capitalization. The authorized capital stock of the
Company consists of an unlimited number of Common Shares. As of the date hereof,
(i) 978,917 Common Shares are issued and outstanding, all of which are validly
issued, fully paid and non-assessable and owned by the Stockholders with each
Stockholder owning that number of Common Shares as set forth opposite such
Stockholder's name in Section 2.03 of the Company Disclosure Schedule, (ii) no
Common Shares are held in the treasury of the Company or by the Company
Subsidiaries and (iii) 183,318 Common Shares are reserved for future issuance
pursuant to the Company Options. Except for the Company Options all of which are
held by the Persons described as optionees in Section 2.03 of the Company
Disclosure Schedule with each optionee holding that number of Company Options
(all of which are exercisable at a price of Cdn. $0.01 per Common Share) as set
forth opposite such optionee's name in Section 2.03 of the Company Disclosure
Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Company Subsidiary. All Common
Shares subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and non-assessable. There
are no outstanding contractual obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any Common Shares or any
capital stock of any Company Subsidiary. Section 2.03 of the Company Disclosure
Schedule sets forth the name of each Company Subsidiary, the jurisdiction in
which it is incorporated or organized, the jurisdictions if any, in which it is
qualified to do business, the number of shares of its authorized capital stock,
the number and class of shares thereof duly issued and outstanding, the names of
all stockholders or other equity owners and the number of shares of stock owned
by each stockholder or the amount of equity owned by each equity owner. Each
outstanding share of capital stock of each Company Subsidiary is duly
authorized, validly issued, fully paid and non-assessable and each such share
owned by the Company or another Company Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Company Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever
(collectively, "Liens"). There are no material outstanding contractual
obligations of the Company or any Company Subsidiary to provide funds to, or
make any investment (in the
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form of a loan, capital contribution or otherwise) in, any Company Subsidiary or
any other person.
Section 2.04. Authority Relative to This Agreement. The Stockholder has
all necessary power, authority and legal capacity to execute and deliver this
Agreement and each other document, instrument, agreement or certificate
contemplated by this Agreement (the "Stockholder Documents") and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. No action other than the execution and delivery
of this Agreement and the Stockholder Documents by each of the Stockholders is
necessary to authorize this Agreement and the Stockholder Documents or to
consummate the transactions contemplated hereby and thereby. This Agreement and
each of the Stockholder Documents have been duly and validly executed and
delivered by the Stockholder and, assuming the due authorization, execution and
delivery by Getty and NSCO, as required, constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against such Stockholder in
accordance with their respective terms.
Section 2.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the Stockholder Documents by each
of the Stockholders does not, and the performance of this Agreement and the
Stockholder Documents by each of the Stockholders will not, (i) conflict with or
violate the Certificate of Incorporation, Articles of Incorporation or By-laws
of the Company or any Company Subsidiary, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 2.05(b) have
been obtained and all filings and obligations described in Section 2.05(b) have
been made, conflict with or violate any United States, Canadian or foreign law,
statute, ordinance, rule, regulation, order, judgment or decree ("Law")
applicable to the Company or any Company Subsidiary or by which any property or
asset of the Company or any Company Subsidiary is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any property or asset of the Company or any Company
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clause (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that have not had, and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, and that could not reasonably be expected to prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
(b) The execution and delivery of this Agreement and the Stockholder
Documents by each of the Stockholders does not, and the performance of this
Agreement and the Stockholder Documents by each of the Stockholders will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any United States, Canadian or foreign governmental or
regulatory authority ("Governmental Entity"), except (i) for applicable
requirements, if any, of provincial securities or "blue sky" laws ("Blue Sky
Laws"), and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, has not
had, and could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, and could not reasonably be
expected
6
to prevent or materially delay the consummation of the transactions contemplated
by this Agreement.
(c) The Company does not hold assets in the United States (other than
investment assets, voting or non-voting securities of another person and credit
or obligations extended in connection with a joint venture) having an aggregate
book value of U.S. $15,000,000 or more; and has not made aggregate sales in or
into the United States of U.S. $25,000,000 or more in its most recent fiscal
year.
Section 2.06. Ownership and Transfer of Shares. The Stockholder is the
registered and beneficial owner of the Common Shares indicated as being owned by
such Stockholder in Section 2.03 of the Company Disclosure Schedule hereto, free
and clear of any and all Liens. The Stockholder has the power, authority and
legal capacity to sell, transfer, assign and deliver its Common Shares and its
EyeWire Exchangeable Shares and to approve the Articles of Amendment filed
pursuant to paragraph 1.01 (a).
Section 2.07. Permits; Compliance. (a) Except as set forth in Section
2.07(a) of the Company Disclosure Schedule, each of the Company and the Company
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary or desirable for the
Company or any Company Subsidiary to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Company Permits"), and
as of the date of this Agreement, no suspension or cancellation of any Company
Permits is pending, or to the knowledge of the Company, threatened, except where
failure to be in such possession of the Company Permits, or such suspension or
cancellation of the Company Permits has not, and could not reasonably be
expected to have, a Company Material Adverse Effect.
(b) Neither the Company nor any Company Subsidiary is in conflict with,
or in default or violation of (i) any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any Company Subsidiary is a party or by which
the Company or any Company Subsidiary or any property or asset of the Company or
any Company Subsidiary is bound or affected or (ii) any Company Permits.
(c) The Company and the Company Subsidiaries are in compliance, in all
material respects, with all Laws applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected. Neither the Company nor any Company Subsidiary
has received any notice or other communication (whether oral or written)
regarding any actual, alleged, possible or potential violation of, or failure to
comply with, any Law applicable to the Company or any Company Subsidiary or by
which any property or asset of the Company or Company Subsidiary is bound or
affected.
Section 2.08. Financial Statements.
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(a) True and complete copies of the unaudited consolidated balance
sheet of the Company as of June 30, 1999 (the "Balance Sheet"), and the related
unaudited statements of income and cash flows for the fiscal period ended June
30, 1999 of the Company (which statements together with the Balance Sheet are
collectively referred to herein as the "Financial Statements"), are attached as
Section 2.08 of the Company Disclosure Schedule. The Financial Statements
(including, in each case, any notes thereto) were prepared in accordance with
Canadian generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto or as permitted by GAAP) and each present fairly, in all
material respects, the consolidated financial position of the Company and the
consolidated Company Subsidiaries as at the date thereof and for the period
indicated therein, except as otherwise noted therein (subject to normal and
recurring period-end adjustments which were not and are not expected,
individually or in the aggregate, to be material).
(b) There are no debts, liabilities or obligations of any kind, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable ("Liabilities") of the Company or any Company Subsidiary, other
than Liabilities (i) reflected or reserved against on the Financial Statements
or (ii) incurred the ordinary course of the business, consistent with the past
practice of the Company, since June 30, 1999. Reserves are reflected on the
Financial Statements and on the books of account and other financial records of
the Company against all Liabilities of the Company in amounts that have been
established on a basis consistent with the past practice of the Company and in
accordance with GAAP. There are no outstanding warranty claims against the
Company as of the Closing Date.
Section 2.09. Absence of Certain Developments.Except as expressly
contemplated by this Agreement or as set forth in Section 2.09 of the Company
Disclosure Schedule, since June 30, 1999.
(i) there has not been any Company Material Adverse Effect nor
has there occurred any event which is reasonably likely to result in a
Company Material Adverse Effect.
(ii) there has not been any damage, destruction or loss, whether
or not covered by insurance, with respect to the property and assets of
the Company or any Company Subsidiary having a replacement cost of more
than U.S.$10,000 for any single loss or U.S.$25,000 for all such
losses;
(iii) there has not been any grant of any stock option or right
to purchase shares of the stock of the Company or any Company
Subsidiary or any grant of any registration rights;
(iv) there has not been any declaration, setting aside or payment
of any dividend or other distribution in respect of any shares of
capital stock of the Company or any repurchase, redemption or other
acquisition by any Stockholder or the Company or any Company Subsidiary
of any outstanding shares of capital
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stock or other securities of, or other ownership interest in, the Company or any
Company Subsidiary;
(v) neither the Company nor any Company Subsidiary has awarded or
paid any bonuses to employees of the Company or any Company Subsidiary
except to the extent accrued on the Balance Sheet, or entered into any
employment, deferred compensation, severance or similar agreement (nor
amended any such agreement) or agreed to increase the compensation
payable or to become payable by it to any of the Company's or any
Subsidiary's directors, officers, employees, agents or representatives
or agreed to increase the coverage or benefits available under any
severance pay, termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus
or other incentive compensation, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with such
directors, officers, employees, agents or representatives (other than
normal increases in the ordinary course of business consistent with
past practice and that in the aggregate have not resulted in a material
increase in the benefits or compensation expense of the Company and the
Company Subsidiaries taken as a whole);
(vi) there has not been any change by the Company or any
Subsidiary in accounting or Tax reporting principles, methods or
policies;
(vii) neither the Company nor any Company Subsidiary has entered
into any transaction or contract or conducted its business other than
in the ordinary course consistent with past practice except as
contemplated in this Agreement;
(viii) neither the Company nor any Company Subsidiary has failed
to promptly pay and discharge current liabilities except where disputed
in good faith by appropriate proceedings;
(ix) neither the Company nor any Company Subsidiary has made any
loans, advances or capital contributions to, or investments in, any
Person or paid any fees or expenses to any Stockholder or any Affiliate
of any Stockholder;
(x) neither the Company nor any Company Subsidiary has mortgaged,
pledged or subjected to any Lien any of its assets, or acquired any
assets or sold, assigned, transferred, conveyed, leased or otherwise
disposed of any assets of the Company or any Company Subsidiary, except
for assets acquired or sold, assigned, transferred, conveyed, leased or
otherwise disposed of in the ordinary course of business consistent
with past practice;
(xi) neither the Company nor any Company Subsidiary has
discharged or satisfied any Lien, or paid any obligation or liability
(fixed or contingent), except in the ordinary course of business
consistent with past practice and which, in the aggregate, would not be
material to the Company and the Company Subsidiaries taken as a whole;
9
(xii) neither the Company nor any Company Subsidiary has
cancelled or compromised any debt or claim or amended, canceled,
terminated, relinquished, waived or released any contract or right
except in the ordinary course of business consistent with past practice
and which, in the aggregate, would not be material to the Company and
the Company Subsidiaries taken as a whole;
(xiii) neither the Company nor any Company Subsidiary has made or
committed to make any capital expenditures or capital additions or
betterments in excess of U.S.$25,000 individually or U.S.$100,000 in
the aggregate;
(xiv) neither the Company nor any Company Subsidiary has
instituted or settled any material Legal Proceeding (as that term is
defined in Section 2.10 hereof); and
(xv) none of the Stockholders, the Company nor any Company
Subsidiary has agreed to do anything set forth in this Section 2.09.
Section 2.10. Absence of Litigation. Except as set forth in Section
2.10 of the Company Disclosure Schedule, there is no litigation, suit, claim,
action, proceeding or investigation of any kind (a "Legal Proceeding") pending
or, to the knowledge of the Company or a Stockholder, threatened against the
Company or any Company Subsidiary, or any property or asset of the Company or
any Company Subsidiary, before any United States, Canadian or foreign court,
arbitrator or Governmental Entity. Neither the Company nor any Company
Subsidiary nor any property or asset of the Company or any Company Subsidiary is
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the knowledge of the Company,
continuing investigation by, any Governmental Entity, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental Entity
or arbitrator having, individually or in the aggregate, a Company Material
Adverse Effect.
Section 2.11. Employee Benefit Plans.
(a) Section 2.11 of the Company Disclosure Schedule identifies each
retirement, pension, bonus, stock purchase, profit sharing, stock option,
deferred compensation, severance or termination pay, insurance, medical
hospital, dental, vision care, drug, sick leave, disability, salary
contributions, legal benefits, unemployment benefits, vacation, incentive or
other compensation plan or arrangement or other employee benefit that is
maintained or otherwise contributed to, or required to be contributed to, by the
Company and each Company Subsidiary for the benefit of their respective
employees or former employees (the "Employee Benefit Plans") and a true and
complete copy of each Employee Benefit Plan has been furnished to Getty. Each
Employee Benefit Plan has been maintained in compliance with its terms and with
the requirements prescribed any and all statutes, orders, rules and regulations
that are applicable to such Employee Benefit Plan. The Stockholders have
delivered to Getty the actuarial valuations, if any, prepared for each Employee
Benefit Plan during the past five years. Except as described in Section 2.11 of
the Company Disclosure Schedule:
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(i) all contributions to, and payments from, each Employee
Benefit Plan that may have been required to be made in accordance with
the terms of any such Employee Benefit Plan, or with the recommendation
of the actuary for such Employee Benefit Plan, and, where applicable,
the laws of the jurisdictions that govern such Employee Benefit Plan,
have been made in a timely manner
(ii) all material reports, returns and similar documents
(including applications for approval of contributions) with respect to
any Employee Benefit Plan required to be filed with any governmental
agency or distributed to any Employee Benefit Plan participant have
been duly filed on a timely basis or distributed;
(iii) to the knowledge of each Stockholder and the Company there
are no pending investigations by any governmental or regulatory agency
or authority involving or relating to an Employee Benefit Plan, no
threatened or pending claims (except for claims for benefits payable in
the normal operation of the Employee Benefit Plans), suits or
proceedings against any Employee Benefit Plan or asserting any rights
or claims to benefits under any Employee Benefit Plan that could give
rise to a liability nor, to the best knowledge of each Stockholder and
the Company, are there any facts that could give rise to any liability
in the event of such investigation, claim, suit or proceeding;
(iv) no notice has been received by any Stockholder or the
Company of any complaints or other proceedings of any kind involving
the Company or any Company Subsidiary or, to the best knowledge of each
Stockholder and the Company, any of the employees of the Company or any
Company Subsidiary before any pension board or committee relating to
any Employee Benefit Plan, the Company or any Company Subsidiary; and
(v) the assets of each Employee Benefit Plan are at least equal
to the liabilities of such Employee Benefit Plan based on the actuarial
assumptions utilized in the most recent valuation performed by the
actuary for such Employee Benefit Plan, and neither Getty, nor any of
its respective affiliates (other than the Company or a Company
Subsidiary) will incur any liability with respect to any Employee
Benefit Plan as a result of the transactions contemplated by this
Agreement.
(b) Section 2.11(b) of the Company Disclosure Schedule sets forth a
summary, in reasonable detail, of the Employee Benefit Plans that cover the
employees of the Company and each Company Subsidiary.
Section 2.12. Contracts.
(a) Section 2.12(a) of the Company Disclosure Schedule lists each of
the following contracts and agreements (whether written or oral) of the Company
and the Company Subsidiaries (such contracts and agreements being "Material
Contracts"):
11
(i) each contract and agreement for the purchase or lease of
personal property having a value or consideration of U.S.$10,000 with
any supplier (excluding suppliers of Images) or for the furnishing of
services to the Company or a Company Subsidiary;
(ii) all broker, exclusive dealing or exclusivity, distributor,
dealer, manufacturer's representative, franchise, agency, sales
promotion, market research, marketing consulting and advertising
contracts and agreements to which the Company or a Company Subsidiary
is a party or any other contract that compensates any person based on
any sales by the Company or a Company Subsidiary;
(iii) all leases and subleases of real property;
(iv) all contracts and agreements relating to Indebtedness, other
than trade indebtedness, of the Company or any Company Subsidiary;
(v) all contracts and agreements with any Governmental Entity
other than standard form end-user licenses;
(vi) all contracts and agreements that limit or purport to limit
the ability of the Company or a Company Subsidiary to compete in any
line of business or with any person or in any geographic area or during
any period of time;
(vii) all contracts containing confidentiality requirements
(including all nondisclosure agreements, but excluding all contracts
containing confidentiality restrictions entered into in the ordinary
course of business which do not materially restrict the conduct of the
Company's business);
(viii) all contracts relating to trafficking arrangements, domain
name registration and customer list agreements;
(ix) all agreements relating to the license, purchase, right to
use or other supply of Images to the Company or the Company
Subsidiaries (as defined in Section 2.14);
(x) all contracts relating to employment, consulting, severance
or similar issues with any current or former employee, consultant or
agent of the Company or a Company Subsidiary; and
(xi) all other contracts and agreements, whether or not made in
the ordinary course of business, which are material to the Company or a
Company Subsidiary.
(b) Each Material Contract: (i) is valid and binding on the Company or
a Company Subsidiary and on the other parties thereto, and is in full force and
effect, subject to bankruptcy and equitable remedies qualifications, and (ii)
upon consummation of the
12
transactions contemplated by this Agreement, shall, subject to bankruptcy and
equitable remedies qualifications, continue in full force and effect without
penalty or other adverse consequence. The Company is not in breach of, or
default under, any Material Contract and, to the knowledge of each Stockholder
and the Company, no other party to any Material Contract is in breach thereof or
default thereunder.
Section 2.13. Environmental Matters.
Except as has not and would not be reasonably expected to have a
Company Material Adverse Effect:
(a) The Company and each Company Subsidiary have all Environmental
Permits (as defined herein) that are required for the lawful operation of their
respective business, and all Environmental Permits possessed by the Company and
each Company Subsidiaries are listed in Section 2.13(a) of the Company
Disclosure Schedule. Each such Environmental Permit is valid, subsisting and in
good standing and the Company and each Company Subsidiary are not in default or
in breach of any such Environmental Permit and no proceeding is pending or
threatened and no grounds exist to revoke or limit any such Environmental
Permit. The Company and each Company Subsidiary (i) is in compliance with and
not in default under any applicable Environmental Law, and (ii) have never
received written notice of any violation by or claim under any Environmental
Law.
(b) There have been no Releases (as defined herein) by the Company or a
Company Subsidiary of any Hazardous Substances (i) into, on, around, from or
under any of the properties or assets owned or operated (or formerly owned or
operated) by the Company or a Company Subsidiary, or (ii) into, on, around, from
or under any other properties on or under which the Company or a Company
Subsidiary has performed services, in any case in such a way as to create any
material unpaid liability (including the costs of required remediation) or the
Company or a Company Subsidiary under any applicable Environmental Law.
(c) No property has been used at any time by the Company or a Company
Subsidiary as a "landfill" or as a treatment, storage or disposal facility for
any Hazardous Substance.
(d) Neither the Company nor any Company Subsidiary has received any
notice of, or has been prosecuted for, non-compliance with any Environmental
Law, nor has the Company or any Company Subsidiary settled any allegation of
non-compliance prior to prosecution. There are no notices, orders or directions
relating to environmental matters requiring, or notifying the Company or any
Company Subsidiary that it is or may be responsible for, any containment,
clean-up or remediation or corrective action of any work, repairs, construction
or capital expenditures to be made under any environmental Law with respect to
the business of the Company or any Company Subsidiary or any of the properties
or assets owned, operated or occupied (or formerly owned, operated or occupied)
by the Company or any Company Subsidiary.
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(e) There are no Hazardous Substances, located at, on or under any of
the properties or assets owned, operated or occupied (or formerly owned,
operated or occupied) by the Company or any Company Subsidiary except those
being used, stored and handled in compliance with Environmental Laws.
(f) The Stockholders have delivered, or caused to be delivered, to
Getty true and complete copies of all environmental audits, evaluations,
assessments, studies and tests relating to the business or the ownership or use
of the properties or assets of the Company and each Company Subsidiary which
are, or with reasonable effort could be, within the possession or control of any
Stockholder, the Company or any of the Company Subsidiaries.
(g) There is no asbestos or asbestos-containing material or PCBs
contained in any of the buildings or structures owned or leased by the Company
or a Company Subsidiary, except for asbestos or asbestos-containing material the
present form, amount and location of which does not create any unpaid material
liability (including the costs or required remediation) of the Company or the
Company Subsidiaries under any applicable Environmental Law (regardless of
whether subsequent occurrences could expose or change the form or location of,
or cause the Release of, such substances). No written claims have been made, and
no suits or proceedings are pending or threatened, by any employee against the
Company or a Company Subsidiary that are premised on exposure to asbestos or
asbestos-containing material or PCBs.
(h) No underground storage tanks, abandoned xxxxx or landfills are or
have been located on any real property owned, operated or occupied by the
Company or a Company Subsidiary.
(i) For purposes of this Agreement, the capitalized terms defined below
shall have the meanings ascribed to them below.
(i) "Environment" means all air, surface water, groundwater,
drinking water or land, including land surface or subsurface.
(ii) "Environmental Laws" means any and all U.S., Canadian,
provincial, municipal or local laws, statutes, ordinances, by-laws and
regulations, and orders, directives and decisions rendered by, and
policies, instructions, guidelines and similar guidance of, any
ministry, department or administrative or regulatory agency relating to
the protection of the Environment, occupational health and safety or
the manufacture, processing, distribution, use, treatment, storage,
disposal, discharge, packaging, transport, handling, containment,
clean-up or other remediation or corrective action of any Hazardous
Substances.
(iii) "Environmental Permits" means all approvals, consents,
permits, licenses, registrations, certificates and other authorizations
required by any applicable Environmental Law relating to: (A) pollution
or the protection of the Environment, occupational health or safety,
including without limitation those relating to the emission, Release or
discharge of any Hazardous Substances into the Environment, (B) the
manufacture, processing, distribution, use, treatment, storage,
14
disposal, generation, packaging, transport or handling of Hazardous
Substances, or (C) the containment, cleanup or other remediation of
Hazardous Substances from any real property.
(iv) "Hazardous Substance(s)" means, without limitation, any
flammable explosives, radioactive materials, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products
(including but not limited to waste petroleum and petroleum products),
methane, hazardous materials, hazardous wastes, pollutants,
contaminants chemicals and hazardous, industrial or toxic substances or
wastes.
(v) "Release" means any past or present spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of a Hazardous Substance into the
Environment.
Section 2.14. Intellectual Property.
(v) Section 2.14 of the Company Disclosure Schedule sets forth a true
and complete list of all (i) patents and patent applications, trademarks,
service marks, trademark and service xxxx registrations, and trademark and
service xxxx applications, registered copyrights and copyright applications, and
Internet domain names, in each case owned by the Company or a Company Subsidiary
and material to the business of the Company and the Company Subsidiaries
(together with unregistered copyrights and confidential and proprietary
information, including trade secrets and know-how, owned by the Company or a
Company Subsidiary and material to the business of the Company and the Company
Subsidiaries, "Owned Intellectual Property"), (ii) Software (as defined herein),
and (iii) licenses, sublicenses, and other agreements pertaining to Intellectual
Property, Software or Images (as defined herein) to which the Company or a
Company Subsidiary is a party, including agreements with major Internet service
providers and major Internet portals, in each case that are material to the
business of the Company and the Company Subsidiaries ("Licensed Intellectual
Property"). For purposes hereof, "Intellectual Property" means any and all of
the following, but excluding Images: (i) United States, Canadian, international,
and foreign patents, patent applications and statutory invention registrations,
(ii) trademarks, service marks, trade names, trade dress, slogans, logos, and
Internet domain names, including registrations and applications for registration
thereof, (iii) copyrights, including registrations and applications for
registration thereof and (iv) confidential and proprietary information,
including trade secrets and know-how. For purposes hereof, "Image" means a
reproduction of any artwork, photograph, illustration, font, video, clip art,
map art or any other type of image. For purposes hereof, "Software" means all
material computer software developed by or on behalf of the Company or any
Company Subsidiary, or used by the Company or any Company Subsidiary, including
all material computer software and databases operated or used by the Company on
its web sites or used by the Company in connection with processing customer
orders, storing customer information, storing Image related vendor information,
or storing and archiving Images. For purposes hereof, "Approved Images" means
Images used or held for use by the Company and the Company Subsidiaries in
connection with their business for which the Company or a Company Subsidiary has
the right to grant licenses or sublicenses to third parties. For purposes
hereof, "Unapproved Images" means Images used or held for use by
15
the Company and the Company Subsidiaries in connection with their business which
are not Approved Images (the Approved Images and Unapproved Images collectively
being "Licensed Images").
(a) The use of the Owned Intellectual Property, Software, Licensed
Images, and Licensed Intellectual Property by the Company and the Company
Subsidiaries in the ordinary course of business does not infringe upon or
misappropriate the valid Intellectual Property rights of any third party. No
claim has been made that the use of the Owned Intellectual Property, Software,
Licensed Images, or Licensed Intellectual Property in the ordinary course of
business does or may infringe upon or misappropriate the Intellectual Property
rights of any third party.
(b) The Company or a Company Subsidiary is the owner of the entire and
unencumbered right, title and interest in and to each item of Owned Intellectual
Property, and the Company and the Company Subsidiaries are entitled to use,
license, sublicense, distribute, copy, display and create derivative works
regarding the Owned Intellectual Property without restriction. The Company and
the Company Subsidiaries are not exceeding their rights to use, license,
sublicense, distribute, copy, display and create derivative works regarding the
Software, Licensed Images, and Licensed Intellectual Property.
(c) The Owned Intellectual Property and the Licensed Intellectual
Property include all of the Intellectual Property and Software used in the
ordinary day-to-day conduct of the business of the Company and the Company
Subsidiaries, and there are no other items of Intellectual Property or Software
that are material to such ordinary day-to-day conduct of such business. Except
as set forth in Section 2.14(d) of the Company Disclosure Schedule, the Owned
Intellectual Property and any Intellectual Property licensed to the Company and
the Company Subsidiaries under the Licensed Intellectual Property, is
subsisting, valid and enforceable (subject to the application of bankruptcy,
insolvency, reorganization and other laws affecting the rights of creditors
generally and to the qualification that certain equitable remedies may be
granted only in the discretion of a court of competent jurisdiction) and has not
been adjudged invalid or unenforceable in whole or part.
(d) Except as set forth in Section 2.10 of the Company Disclosure
Schedule, no Legal Proceedings have been asserted, are pending, or threatened
against the Company or any Company Subsidiary (i) based upon or challenging or
seeking to deny or restrict the use, license, sublicense, distribution, display,
copying or creation of derivative works by the Company or any Company Subsidiary
of any of the Owned Intellectual Property or Licensed Intellectual Property,
(ii) alleging that any services provided by, processes used by, licensed by,
sublicensed by, distributed by, displayed by, copied by or creation of
derivative works by or products manufactured or sold by the Company or any
Company Subsidiary infringe upon or misappropriate any Intellectual Property
right of any third party, or (iii) alleging that any Intellectual Property
licensed under the Licensed Intellectual Property infringes upon any
Intellectual Property right of any third party or is being licensed or
sublicensed in conflict with the terms of any license or other agreement.
(e) Except as set forth in Section 2.10 of the Company Disclosure
Schedule, to the knowledge of the Company and each Stockholder no person is
engaging in any activity that
16
infringes upon the Owned Intellectual Property or any Intellectual Property
licensed to the Company and the Company Subsidiaries under the Licensed
Intellectual Property. Neither the Company nor any Company Subsidiary has
granted any license or other right to any third party with respect to the Owned
Intellectual Property or Licensed Intellectual Property. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the Owned Intellectual Property.
(f) The Stockholders have delivered or made available to Getty correct
and complete copies of all the licenses and sublicenses of the Licensed
Intellectual Property including all amendments thereto, and all model releases,
waivers of moral rights, copyright applications, patent applications, trademark
applications and copyright assignments which are in the custody, or under the
control, of any Stockholder, the Company or a Company Subsidiary. With respect
to each such license and sublicense:
(i) such license or sublicense is valid and binding and in full
force and effect (subject to the application of bankruptcy, insolvency,
reorganization and other laws affecting the rights of creditors
generally and to the qualification that certain equitable remedies may
be granted only in the discretion of a court of competent jurisdiction)
and represents the entire agreement between the respective licensor and
licensee with respect to the subject matter of such license or
sublicense;
(ii) such license or sublicense will not cease to be valid and
binding and in full force and effect on terms identical to those
currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or
default under such license or sublicense or otherwise give the licensor
or sublicensor a right to terminate such license or sublicense;
(iii) (A) neither the Company nor any Company Subsidiary has
received any notice of termination or cancellation under such license
or sublicense, (B) neither the Company nor any Company Subsidiary has
received any notice of a breach or default under such license or
sublicense, which breach has not been cured, and (C) neither the
Company nor any Company Subsidiary has granted to any other third party
any rights, adverse or otherwise, under such license or sublicense that
would constitute a breach of such license or sublicense; and
(iv) neither the Company, any Company Subsidiary, nor, to the
knowledge of the Company and each Stockholder, any other party to such
license or sublicense is in breach or default in any material respect,
and, to the Company's and each Stockholder's knowledge, no event has
occurred that, with notice or lapse of time would constitute such a
breach or default or permit termination, modification or acceleration
under such license or sublicense.
(g) The Software is free of all viruses, worms, trojan horses and other
material known contaminants, and does not contain any bugs, errors, or problems
of a material nature that
17
disrupt its operation or have an adverse impact on the operation of other
software programs or operating systems. The Company and the Company Subsidiaries
have obtained all approvals necessary for exporting the Software outside the
United States or Canada and importing the Software into any country in which the
Software is now sold or licensed for use, and all such export and import
approvals in the United States and Canada and throughout the world are valid,
current, outstanding and in full force and effect. No rights in the Software
have been transferred to any third party except to the customers of the Company
or the Company Subsidiaries to whom the Company or the Company Subsidiaries have
licensed such Software in the ordinary course of business. Third parties such as
the Company's CD Rom vendors, catalogue and brochure vendors, distributors,
direct mail vendors and internet service providers have been given the necessary
rights by the Company to perform the services contracted by the Company by those
third parties.
(h) The Company and the Company Subsidiaries have the right to use all
software development tools, library functions, compilers, and other third party
software that is material to the business of the Company and the Company
Subsidiaries, or that is required to operate or modify the Software.
(i) The Company and the Company Subsidiaries have taken reasonable
steps in accordance with normal industry practice to maintain the
confidentiality of their trade secrets and other confidential Intellectual
Property. To the best knowledge of the Company and each Stockholder: (i) there
has been no misappropriation of any material trade secrets or other material
confidential Intellectual Property of the Company or any Company Subsidiary by
any person, (ii) no employee, independent contractor or agent of the Company or
any Company Subsidiary has misappropriated any trade secrets of any other person
in the course of such performance as an employee, independent contractor or
agent and (iii) no employee, independent contractor or agent of the Company or
any Company Subsidiary is in default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of invention agreement or
similar agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.
Section 2.15. Images.
(a) Section 2.15 of the Company Disclosure Schedule sets forth (i) for
the categories of photography, clip art, fonts, illustrations and video, the
number of Images in each such category that are wholly-owned by the Company and
the number licensed by the Company, and (ii) the number of Images in each such
category for which the Company possesses fully executed model or property
releases in respect of each identifiable person or object contained in such
Image. The Company and the Company Subsidiaries validly own or lease all Images
used or held for use by the Company or the Company Subsidiaries in connection
with their business or material to the operation of the business of the Company
and the Company Subsidiaries as currently conducted. With respect to each Image
owned by the Company or a Company Subsidiary, the Company or Company Subsidiary,
as applicable, has the right to display, reproduce, distribute, sell, advertise,
bundle with other derivative works, create derivative works, license and
sublicense the use of such Image, without restriction.
18
(b) Neither the Company nor any Company Subsidiary has granted any
license, sublicense or other right to any other person with respect to any
Unapproved Images. Neither the Company nor any Company Subsidiary has granted
any license, sublicense or other right to any other person with respect to any
Approved Image that would constitute a breach of any agreement or license
pertaining to such Approved Image.
(c) The display, sale, marketing, distribution, bundling with other
derivative works, creation of derivative works, copying and advertising of the
Licensed Images, and the licensing and sublicensing of Approved Images as done,
authorized or agreed to by the Company and the Company Subsidiaries does not
infringe upon the Intellectual Property right of any third party. The display,
sale, marketing, distribution, bundling with other derivative works, creation of
derivative works, copying and advertising of the Licensed Images, and the
licensing and sublicensing of Approved Images, as done, authorized or agreed to
by the Company and the Company Subsidiaries does not constitute a breach of any
agreement or license to which the Company or a Company Subsidiary is a party.
(d) To the knowledge of the Company, the Company Subsidiaries and the
Stockholders no claims have been made, asserted, are pending, or threatened,
against the Company or any Company Subsidiary (i) based upon or challenging or
seeking to deny or restrict the display, sale, marketing, distribution, bundling
with other derivative works, creation of derivative works, copying, advertising,
licensing or sublicensing by the Company or any Company Subsidiary of any of the
Licensed Images, or (ii) alleging that the sale, reproduction, distribution,
bundling with other derivative works, creation of derivative works, copying,
advertising, licensing or sublicensing of the Licensed Images does or may
infringe upon the Intellectual Property rights of any third party, and to the
knowledge of the Company, no such claims have been made, asserted, are pending,
or threatened against any third party licensor or licensee of Licensed Images.
(e) To the knowledge of each Stockholder and the Company, no person is
engaging in any activity that infringes upon the Licensed Images or upon the
rights of the Company or any Company Subsidiary therein. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of the right of the Company or a Company Subsidiary to sell,
reproduce, distribute or sublicense any of the Licensed Images.
(f) Except as set forth in Section 2.15(f) of the Company Disclosure
Schedule, each of the Company and the Company Subsidiaries has, prior to any
display, sale, reproduction, distribution or sublicensing of any Licensed Image,
obtained in writing all such releases and/or other third party consents or
authorizations required by law for such display, sale, reproduction,
distribution or sublicensing, copies of which are kept by the Company or any
such Company Subsidiary at its offices.
(g) With respect to each license or agreement by which the Company has
obtained the right to display, sell, reproduce, distribute, bundle with other
derivative works, create derivative works, market, copy, license or sublicense
the Licensed Images or by which the
19
Company has granted to any third party the right to display, sell, reproduce, or
distribute any Licensed Images:
(i) such license or agreement is legal, valid, binding and
enforceable and in full force and effect and represents the entire
agreement between the parties thereto with respect to the subject
matter thereof;
(ii) such license or agreement will not cease to be legal, valid
binding and enforceable and in full force and effect on terms identical
to those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation
of the transactions contemplated by this Agreement constitute a breach
or default under such license or agreement, or otherwise give any party
thereto a right to terminate such license or agreement;
(iii) with respect to each such license or agreement, (A) neither
the Company nor any Company Subsidiary has received any notice of
termination or cancellation under such license or agreement, and no
party thereto has any right of termination or cancellation thereunder
except in accordance with its terms, (B) neither the Company nor any
Company Subsidiary has received any notice of a breach or default under
such license or agreement which breach or default has not been cured,
and (C) neither the Company nor any Company Subsidiary has granted to
any other person any rights, adverse or otherwise, under such license
or agreement; and
(iv) none of the Company, any Company Subsidiary nor, to the
knowledge of the Company, any other party to such license or agreement,
is in breach or default thereof in any material respect, and, to the
knowledge of the Company, no event has occurred that, with notice or
lapse of time would constitute such a breach or default or permit
termination, modification or acceleration under such license or
agreement.
(h) Neither the Company nor any Company Subsidiary has granted to any
Person the right to distribute or sell the Licensed Images.
(i) No third party has revoked the right of the Company or a Company
Subsidiary to display, reproduce, distribute, create derivative works, market,
license or sublicense the use of any Image owned or controlled by such third
party.
Section 2.16. Taxes.
(a) The Company, each Company Subsidiary and each affiliated
consolidated, combined or unitary group (within the meaning of Section 1504 of
the Code or comparable provisions of state, local or foreign Tax law) of which
the Company or any Company Subsidiary is or has been a member, (A) have timely
filed (or there has been timely filed on their behalf) all Tax Returns required
to be filed, and all such Tax Returns are true and correct in all material
respects, and (B) have paid all Taxes due and payable or claimed or asserted by
any taxing
20
authority to be due, from or with respect to them, or have adequately provided
reserves and allowances for such Taxes on the Financial Statements in accordance
with GAAP and based on the assumptions and calculations set forth in Section
2.16(a) of the Company Disclosure Schedule. No extension of time in which to
file any Tax Return pertaining to the Company or a Company Subsidiary is in
effect. With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, the Company and each Company
Subsidiary have made due and sufficient current accruals for such Taxes in their
books and records in accordance with GAAP through the Closing Date and based on
the assumptions and calculations set forth in Section 2.16(a) of the Company
Disclosure Schedule and has set forth such accruals in Section 2.16(a) of the
Company Disclosure Schedule. The Company and each Company Subsidiary has made
(or there has been made on its behalf) all required current estimated Tax
payments sufficient to avoid any underpayment penalties.
(b) No audit report has been issued since the incorporation of the
Company and each Company Subsidiary (or otherwise with respect to any audit or
investigation in progress) relating to Taxes due from or with respect to the
Company or any Company Subsidiary, their respective incomes, assets or
operations nor is there any issued reassessment in respect of such Taxes which
remains outstanding. The Stockholders have previously delivered to Getty true
and complete copies of (A) any assessments and reassessments issued and received
by the Company or any Company Subsidiary which relate to the United States or
Canadian federal, provincial, state, local or foreign Taxes due from or with
respect to the Company and each Company Subsidiary; (B) the United States and
Canadian federal Tax Returns, and those state, provincial, local, and foreign
Tax Returns for any taxable period showing Taxes due in excess of $25,000, filed
by the Company and each Company Subsidiary (other than consolidated, combined or
unitary Tax Returns which include members other than the Company and Company
Subsidiaries); and the portions of all United States or Canadian federal, state,
local or foreign consolidated, combined or unitary Tax Returns for any taxable
period which relate to the Company or any Company Subsidiary showing Taxes due
in excess of $25,000, filed by any affiliated, consolidated, combined, or
unitary group of which the Company or any Company Subsidiary was then a member.
(c) No taxing authority has made a claim that the Company or any
Company Subsidiary is or may be subject to taxation in a jurisdiction where it
does not file Tax Returns.
(d) There are no outstanding waivers in writing or comparable consents
regarding the application of any statute of limitations in respect of, or
extending any period for the assessment, reassessment or collection of, Taxes of
the Company or any Company Subsidiary.
(e) All deficiencies asserted or assessments and reassessments made by
the Internal Revenue Service (the "IRS"), Revenue Canada or any other taxing
authority of the Tax Returns of, or covering or including the Company or any
Company Subsidiary, have been fully paid, and there are no other actions, suits,
investigations, audits or claims by any taxing authority in progress relating to
the Company or any Company Subsidiary. Neither the Company nor any Company
Subsidiary, or any of their respective shareholders, directors or officers have
received any notice from any taxing authority that it intends to conduct such an
audit or investigation. No issue has been raised by a United States or Canadian,
federal, provincial, state, local or foreign
21
taxing authority in any current or prior examination which, by application of
the same principles, would reasonably be expected to result in a proposed
deficiency for any subsequent taxable period. Neither the Company nor any
Company Subsidiary is subject to any private letter ruling of the IRS, advance
income tax ruling of Revenue Canada, or comparable rulings of other taxing
authorities.
(f) There are no liens for Taxes upon the assets of the Company or any
Company Subsidiary, except for liens arising as a matter of law relating to
current Taxes not yet due.
(g) All Taxes that the Company or any Company Subsidiary has been or is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid over to the appropriate governmental entity or
accrued, reserved against and entered on the books and records, including the
Financial Statements, of the Company or the appropriate Company Subsidiary in
accordance with the GAAP.
(h) None of the Company or any Company Subsidiary, or any other Person
on their behalf has (A) agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code (or any predecessor provision) or any
similar provision of U.S. or Canadian or foreign, state, provincial or local law
by reason of a change in accounting methods initiated by the Company or any
Company Subsidiary, or has any knowledge that the IRS or any other taxing
authority has proposed any such adjustment or change in accounting methods; or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company or any Company Subsidiary, (B) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of U.S. or Canadian or foreign, state,
provincial or local law with respect to the Company or any Company Subsidiary,
(C) filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company
or any Company Subsidiary or (D) granted to any person any power of attorney
that is currently in force with respect to any Tax matter relating to the
Company or any Company Subsidiary.
(i) No property owned by the Company or any Company Subsidiary (A) is
"tax-exempt use property" within the meaning of Section 168(h)(1) of the Code,
(B) is subject to Section 168(g)(1)(A) of the Code or (C) is "limited use
property" as such term is used in Rev. Proc. 76-30.
(j) There is no contract, plan or arrangement involving the Company or
any Company Subsidiary and covering any person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by the Company or any Company Subsidiary by reason of Section 280G or
Section 162(m) of the Code.
(k) Neither the Company nor any Company Subsidiary is a party to, bound
by, or obligated under, any Tax Sharing Agreement.
22
(l) Neither the Company nor any Company Subsidiary has participated in,
or cooperated with, an international boycott within the meaning of Section 999
of the Code.
(m) Neither the Company nor any Company Subsidiary is a "United States
real property holding corporation" within the meaning of Section 897 of the
Code.
(n) With respect to the Company and any Company Subsidiary organized or
doing business in Canada:
(i) Neither the Company nor any Company Subsidiary has, either
directly or indirectly, transferred property to or acquired property
from a person with whom it was not dealing at arm's length (as that
term is understood for purposes of the ITA) for consideration other
than consideration equal to the fair market value of the property at
the time of the disposition or acquisition thereof;
(ii) The same businesses (taking into account all relevant
factors including the types of products sold, property leased and
services rendered) in the course of which any non-capital losses were
realized and in the course of which any capital costs of depreciable
properties, expenditures giving rise to investment tax credit and
eligible capital expenditures (each within the meaning of the ITA) were
incurred by the Company or any Company Subsidiary have been carried on
by the Company or any Company Subsidiary continuously since the time
the losses were realized or cost or expenditures occurred and will be
carried on up to the Closing Date;
(iii) No circumstances exist which could reasonably be expected
to result in the application of section 160 of the ITA to the Company
or any Company Subsidiary if a person other than the Company or a
Company Subsidiary were to fail to pay any amount owing by it under the
ITA; and
(iv) Except as set forth in Section 2.16(n)(iv) of the Company
Disclosure Schedule, no circumstances exist or have existed which could
reasonably be expected to result or to have resulted in the application
of sections 17, 80, or 247 of the ITA to the Company or any Company
Subsidiary.
(o) For purposes of this Section 2.16 and Paragraph 6.04, any reference
to the Company or any Company Subsidiary shall be deemed to include any person
that merged with, amalgamated with or was liquidated into the Company or any
Company Subsidiary.
(p) As used in this Agreement, "Tax" (and, in the plural, "Taxes")
shall mean any U.S. or Canadian or foreign, federal, state, provincial or local
taxes, charges, fees, levies, imposts, duties and governmental fees or other
like assessments or charges of any kind whatsoever, including but not limited to
any income, net income, gross income, franchise, receipts, wind-fall profit,
severance, property, production, sales, use, license, excise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem, transfer,
stamp, estimated, transaction, title, capital, paid-up capital, profits,
occupation, premium, federal
23
highway use, commercial rent, social security, workers' compensation,
unemployment, employer health, goods and services, value added, gains, input or
environmental tax, customs duties and Canada Pension Plan and Employment
Insurance contributions together with any interest or penalty, addition to tax
or additional amount imposed thereon, and includes any liability for the Taxes
of any other person (whether payable by reason of contract, assumption,
transferee liability, operation of law or otherwise); "Tax Return" shall mean
any return, report or statement required to be filed with respect to any Tax
(including any attachments thereto, and any amendment thereof) including, but
not limited to, any information return, claim for refund, remittance, amended
return or declaration of estimated Tax, and including, where permitted or
required, combined, unitary or consolidated returns for any group of entities
that includes the Company or any Company Subsidiary; "Tax Sharing Agreement"
shall mean any Tax allocation, indemnity, sharing or similar contract or
arrangement (whether or not written); "Code" shall mean the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder; and "ITA"
shall mean the Income Tax Act (Canada) as amended, and the regulations
promulgated thereunder.
Section 2.17. Assets. The Company and the Company Subsidiaries own,
lease or have the legal right to use all of the material properties and assets,
including, without limitation, real property and personal property (other than
Intellectual Property, which is covered by Section 2.14 hereof and other than
Images which are covered by Section 2.15 hereof), used or intended to be used in
the conduct of the business of the Company and the Company Subsidiaries or which
is otherwise owned, leased or used by the Company and the Company Subsidiaries
and, with respect to contract rights, is a party to and enjoys the right to the
benefits of all contracts, agreements and other arrangements used or intended to
be used by the Company and the Company Subsidiaries in or relating to the
conduct of the business of the Company and the Company Subsidiaries (all such
properties, assets and contract rights being the "Assets"). Except as set forth
in Section 2.17 of the Company Disclosure Schedule, the Company and the Company
Subsidiaries have good and marketable title to, or, in the case of leased or
subleased Assets, valid and subsisting leasehold interests in, all the Assets,
free and clear of all Liens.
Section 2.18. Certain Interests.
(a) None of the Stockholders nor any of their Affiliates nor any
officer or director of the Company or a Company Subsidiary or any immediate
relative or spouse (or immediate relative of such spouse) who resides with, or
is a dependent of, any such officer or director:
(i) has any direct or indirect financial interest in any
competitor, supplier or customer of the Company or a Company
Subsidiary, provided, however, that the ownership of securities
representing no more than 1% of the outstanding voting power of any
competitor, supplier or customer, and which are listed on any U.S. or
Canadian securities exchange or traded actively in the U.S. or Canadian
over-the-counter market, shall not be deemed to be a "financial
interest" as long as the person owning such securities has no other
connection or relationship with such competitor, supplier or customer;
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(ii) owns, directly or indirectly, in whole or in part, or has
any other interest in any tangible or intangible property which the
Company or a Company Subsidiary uses or has used in the conduct of its
business or otherwise (except for any such ownership or interest
resulting from the ownership of securities in a public company); or
(iii) has outstanding any Indebtedness to the Company or a
Company Subsidiary.
(b) Except for the payment of employee compensation, the advancement of
expenses or indemnification obligations, in each case in the ordinary course of
business, neither the Stockholders, the Company, any Company Subsidiary any
Affiliate of the Company or the Stockholders nor any officer or employee of any
of them is a party to any contract with the Company or any Company Subsidiary
and neither the Company nor any Company Subsidiary has any obligation of any
nature whatsoever to any Stockholder or any Affiliate thereof or to any officer
or director of the Company or a Company Subsidiary or any immediate relative or
spouse of any such officer or director.
Section 2.19. Insurance Policies. Section 2.19 of the Company
Disclosure Schedule sets forth a true and complete list and description
(including face amount of policy, name of insured, carrier, premium, expiration
date and whether it is a "claims made" or an "occurrence" policy) of all
insurance policies held by the Company and each Company Subsidiary. True and
complete copies of all such policies have been provided by the Stockholders to
Getty. All premiums due to the date hereof on such policies have been paid. All
pending claims, if any, made against the Company or a Company Subsidiary which
are covered by insurance are being defended by the appropriate insurance
companies and are described in Section 2.19 of the Company Disclosure Schedule.
Neither the Company nor a Company Subsidiary has failed to give any notice or
present any claim under any such policy in a timely fashion, except where such
failure would not prejudice the ability of the Company or a Company Subsidiary
to make a claim and result in a Company Material Adverse Effect. Such insurance
to the date hereof has (i) been maintained in full force and effect and (ii) not
been canceled or changed, except to extend the maturity dates thereof.
Section 2.20. Banks. Section 2.20 of the Company Disclosure Schedule
sets forth the name of each bank in which the Company or any Company Subsidiary
has an account, lockbox or safe deposit box, and the names of all persons
authorized to draw thereon or have access thereto. Stockholders have provided
Getty with letters from each such bank, dated not later than the day prior to
the date of this Agreement, which letters set forth the total amount of Cash
held by the Company and the Company Subsidiaries as of the dates of such
letters.
Section 2.21. Year 2000 Compliance. The Company and each Company
Subsidiary has (i) undertaken an assessment of those Company Systems that could
be adversely affected by a failure to be Year 2000 Compliant, (ii) developed a
plan and time line for rendering such systems Year 2000 Compliant, and (iii) to
date, implemented such plan in accordance with such timetable in all material
respects. Based on such review and assessment, the Company reasonably
anticipates that all Company Systems will be Year 2000 Compliant by December 31,
25
1999. The Stockholders and the Company estimate that the total remaining cost of
rendering the Company Systems Year 2000 Compliant is $30,000. For purposes
hereof, "Company Systems" shall mean all computer, hardware, software, Software,
systems, and equipment (including embedded microcontrollers in non-computer
equipment) embedded within or required to operate the current products of the
Company and the Company Subsidiaries, and/or material to or necessary for the
Company and the Company Subsidiaries to carry on their businesses as currently
conducted. For purposes hereof, "Year 2000 Compliant" means that the Company
Systems provide uninterrupted millennium functionality in that the Company
Systems will record, store, process and present calendar dates falling on or
after January 1, 2000, in the same manner and with the same functionality as the
Company Systems record, store, process, and present calendar dates falling on or
before December 31, 1999.
Section 2.22. Investment.
(a) Except where the Stockholder is a "U.S. person" as defined in
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"), which definition includes, but is not limited to, an individual resident
in the United States, an estate or trust of which any executor or administrator
or trustee, respectively, is a U.S. person, and any partnership or corporation
organized or incorporated under the laws of the United States,
(i) the Exchangeable Shares are not being acquired, directly or
indirectly, for the account or benefit of a U.S. person or a person in
the United States and the Stockholder does not have any agreement or
understanding (either written or oral) with any U.S. person or person
in the United States respecting:
(A) the transfer or assignment of any rights or interest
in any of the Exchangeable Shares or the Getty Common
Stock issuable upon conversion of the Exchangeable
Shares;
(B) the division of profits, losses, fees, commissions or
any financial stake in connection with this Agreement
or the transactions contemplated hereby; or
(C) the voting of any Series A or Series B special voting
preferred stock of Getty or Getty Common Stock
issuable upon conversion of the Exchangeable Shares;
(ii) the Exchangeable Shares are not being acquired by a U.S.
person who purchased securities in a transaction that did not require
registration under the Securities Act;
(iii) no offers to issue Exchangeable Shares were made by any
person to the Stockholder while the Stockholder was in the United
States;
(iv) the Stockholder was outside the United States at the time of
execution and delivery of this Agreement; and
26
(v) the Stockholder agrees to resell the Exchangeable Shares or
Getty Common Stock (A) in accordance with the provisions of Regulation
S, (B) pursuant to an effective registration statement under the
Securities Act, or (C) pursuant to an available exemption from the
registration requirements of the Securities Act, and will not engage in
hedging transactions with regard to such securities unless in
compliance with the Securities Act and the Stockholder understands that
Getty must refuse to register any transfer of Exchangeable Shares or
Getty Common Stock made in contravention with this subparagraph (v).
(b) Each Stockholder who is a "U.S. Person" as defined in Regulation S
under the Securities Act (i) understands that the shares of Getty Common Stock
to be acquired by such Stockholder pursuant to the terms of the Exchangeable
Shares have not been registered under the Securities Act, or under any state
securities laws, and are being exchanged in reliance upon U.S. federal and state
exemptions for transactions not involving a public offering, (ii) is acquiring
such shares solely for his own account for investment purposes, and not with a
view towards the distribution thereof, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters and, other than
Xxxxxx Xxxxxxxxx, qualifies as an "accredited investor" as defined in Regulation
D under the Securities Act, (iv) has received certain information concerning
Getty, including without limitation, Getty SEC Reports, and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding such shares, and (v) is able to bear
the economic risk and lack of liquidity inherent in holding such shares which
have not been registered under the Securities Act.
Section 2.23. Accounts Receivable. The accounts receivable shown on the
Financial Statements arose in the ordinary course of business and have been
collected or are collectible in the book amounts thereof, less an amount not in
excess of the allowance for doubtful accounts and returns provided for in such
Financial Statements. Allowances for doubtful accounts and returns are adequate
and have been prepared in accordance with the past practices of the Company and
the Company Subsidiaries. The accounts receivable of the Company and the Company
Subsidiaries arising after the date of the Financial Statements and prior to the
Effective Time arose in the ordinary course of business and have been collected
or are collectible in the book amounts thereof, less allowances for doubtful
accounts determined in accordance with the past practices of the Company and the
Company Subsidiaries. None of the accounts receivable are subject to any
material asserted claim of offset or recoupment, or counterclaim and each of the
Stockholders and the Company has no knowledge of any specific facts that would
be reasonably likely to give rise to any such claim. No material amount of
receivables are contingent upon the performance by the Company or a Company
Subsidiary of any obligation and no agreement for deduction or discount has been
made with respect to any material amount of accounts receivable.
Section 2.24. Employees and Consultants. A list of all of the employees
of the Company and the Company Subsidiaries and all of the independent
contractors retained by the Company and the Company Subsidiaries as of the
Effective Date is set forth in Section 2.24 of the Company Disclosure Schedule.
To the knowledge of the Company and each Stockholder, no employee of the Company
or a Company Subsidiary is a party to or otherwise bound by any
27
agreement with or obligated to any other person or entity which in any respect
conflicts with any obligation, commitment or job responsibility of such employee
to the Company or a Company Subsidiary under any agreement to which he or she is
currently a party or otherwise. To the knowledge of the Stockholders and the
Company, no key employee, group of employees or key consultant has any plans to
terminate employment or other relationship with the Company or a Company
Subsidiary. Neither the Company nor any Company Subsidiary is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labour practices or other collective
bargaining disputes. Neither the Company nor any Stockholder has knowledge of
any organizational effort made or threatened, either currently or within the
past two years, by or on behalf of any labour union with respect to the
employees of the Company or a Company Subsidiary.
Section 2.25. Books and Records. The minute books and other similar
records of the Company and each Company Subsidiary contain true and complete
registers of the shareholders and records of all actions taken at any meetings
of shareholders, boards of directors or any committee thereof and all written
consents executed in lieu of the holding of any such meetings. The accounting
books and records of the Company and the Company Subsidiaries accurately reflect
in all material respects the assets, liabilities, business, financial conditions
and results of operations of the Company and the Company Subsidiaries and have
been maintained in accordance with good business and bookkeeping practices.
Section 2.26. Residence of Stockholders. Except for Xxxxxxx X. Xxxxx
and Xxxxxx X. Xxxxxxxxx, no Stockholder is a non-resident of Canada for the
purposes of section 116 of the ITA.
Section 2.27. No Misrepresentation. No representation or warranty of
any Stockholder contained in this Agreement or in the Stockholder Documents
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
Section 2.28. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement.
Section 2.29. Closing Cash Balance. Section 2.29 of the Company
Disclosure Schedule sets forth the Cash and Indebtedness. For purposes of the
foregoing:
(a) "Indebtedness" means the aggregate amount of
(i) all obligations for borrowed money or with respect to
deposits or advances of any kind (including the balance of unpaid
royalties pursuant to the Asset Transfer Agreement dated August 29,
1998 between EyeWire, Inc. (formerly Xxxxxxx, Inc.) and Adobe Systems
Incorporated,
(ii) all obligations evidenced by bonds, debentures, notes or
other similar instruments or upon which interest charges are
customarily paid,
28
(iii) all other indebtedness upon which interest charges or
imputed interest charges are paid, and
(iv) all expenses incurred in connection with this Agreement and
the transactions contemplated hereby prior to the Closing Date.
of, or by, the Company on a consolidated basis; and
(b) "Cash" means the aggregate amount of all cash and cash equivalents
of the Company (as such terms are used in the Balance Sheet) on a consolidated
basis.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GETTY AND NSCO
------------------------------------------------
Except as set forth in Getty SEC Reports (as defined in Section 3.06), Getty and
NSCO hereby jointly represent and warrant to the Stockholders that:
Section 3.01. Organization and Qualification; Subsidiaries. Getty is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and NSCO is a company limited by
shares formed pursuant to the NSCA. Each of Getty and NSCO has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority have
not had, and could not reasonably be expected to have, individually or in the
aggregate, a Getty Material Adverse Effect (as defined below). Getty is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that have not had, and could not reasonably be expected to
have, individually or in the aggregate, a Getty Material Adverse Effect. The
term "Getty Material Adverse Effect" means any change in or effect on the
business of Getty that is materially adverse to the financial condition or
results of operations of Getty taken as a whole, except for any declines in the
price of Getty Common Stock.
Section 3.02. Certificate of Incorporation and By-Laws. Getty has
heretofore made available to the Company a complete and correct copy of the
Certificate of Incorporation and by-laws of Getty and the Certificate of
Incorporation, Memorandum of Association and Articles of Association of NSCO.
Such Certificates of Incorporation are in full force and effect. Getty and NSCO
are not in violation of any of the provisions of their respective Certificates
of Incorporation, By-Laws, Memorandum of Association or Articles of Association.
Section 3.03. Capitalization. The authorized capital stock of Getty
consists of (a) 75,000,000 shares of Getty Common Stock and (b) 5,000,000 shares
of preferred stock, par value U.S.$0.01 per share ("Getty Preferred Stock"). As
of August 4, 1999, with the exception of shares of Getty Common Stock held in
the treasury of Getty or by Getty Subsidiaries
29
(i) 35,434,676 shares of Getty Common Stock are issued and outstanding, all of
which are validly issued, fully paid and non-assessable, and (ii) 8,769,488
shares are reserved for future issuance pursuant to stock options. As of the
date of this Agreement, no shares of Getty Preferred Stock were issued and
outstanding. Except for stock options granted pursuant to the stock option plans
of Getty (the "Getty Stock Option Plans"), the issuance of shares of Getty
Common Stock upon the conversion of the 4.75% Convertible Subordinated Notes due
2003 and the issuance of additional shares of Getty Common Stock in respect of
the contingent deferred payment in respect of Getty's acquisition of Xxx.xxx,
Inc., there are no options, warrants or other rights, agreements, arrangements
or commitments of any character relating to the issued or unissued capital stock
of Getty or any Getty Subsidiary or obligating Getty or any Getty Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in,
Getty or any Getty Subsidiary. All shares of Getty Common Stock subject to
issuance as aforesaid, pursuant to the conditions attached to the Exchangeable
Shares or pursuant to the New Options and the shares of Series A and Series B
special voting preferred stock to be issued by Getty pursuant to the Voting
Trust and Exchange Rights Agreements described in Section 1.05, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
non-assessable. There are no outstanding contractual obligations of Getty or any
Getty Subsidiary to repurchase, redeem or otherwise acquire any shares of Getty
Common Stock or any capital stock of any Getty Subsidiary. Each outstanding
share of capital stock of each Getty Subsidiary is duly authorized, validly
issued, fully paid and non-assessable and each such share owned by Getty or
another Getty Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Getty's or such other Getty Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever, except where failure to own such shares
free and clear would not, individually or in the aggregate, have a Getty
Material Adverse Effect
The authorized capital stock of NSCO consists of 10,000 common shares and
5,000,000 Exchangeable Shares of which all the issued common shares are held by
Getty and no Exchangeable Shares are issued and outstanding. Upon the allotment
and issuance of the Exchangeable Shares to the Stockholders as contemplated by
this Agreement, all such Exchangeable Shares shall be validly issued, fully-paid
and non-assessable shares of NSCO.
Section 3.04. Authority Relative to This Agreement. Getty has all
necessary corporate power and authority to execute and deliver this Agreement,
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each of
NSCO and Getty and the consummation by each of NSCO and Getty of the
transactions contemplated hereby by this Agreement have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Getty and NSCO are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Getty and, assuming the due authorization,
execution and delivery by the Stockholders and the Company, constitutes a legal,
valid and binding obligation of each of NSCO and Getty, enforceable against each
of NSCO and Getty in accordance with its terms.
Section 3.05. No Conflict; Required Filings and Consents.
30
(a) The execution and delivery of this Agreement by Getty and NSCO does
not, and the performance of this Agreement by Getty and NSCO will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws of Getty or
Memorandum or Articles of Association of NSCO, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 3.05(b) have
been obtained and all filings and obligations described in Section 3.05(b) have
been made, conflict with or violate any Law applicable to Getty or NSCO or by
which any property or asset of Getty or NSCO is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any property or asset of Getty or any Getty Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, except, with
respect to clause (ii) or (iii), for any such conflicts, violations, breaches,
defaults, or other occurrences that have not had, and could not reasonably be
expected to have, individually or in the aggregate, a Getty Material Adverse
Effect, and that could not reasonably be expected to prevent or materially delay
the consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by Getty and NSCO does
not, and the performance of this Agreement by Getty and NSCO will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) Blue Sky Laws, the
Securities Act, the Nasdaq, state takeover laws, (ii) the filing of a
notification with Industry Canada pursuant to section 12 of the Investment
Canada Act, (iii) filings required to be made and orders required to be obtained
pursuant to the ABCA and the NSCA in order to effect the continuance and
amalgamation described in paragraphs 1.01(i) through 1.01(l), and (iv) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, has not had, and could not reasonably be
expected to have, individually or in the aggregate, a Getty Material Adverse
Effect, and could not reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
Section 3.06. SEC Filings; Financial Statements.
(a) Getty has filed all forms, reports and documents required to be
filed by it with the United States Securities and Exchange Commission (the
"SEC") since January 1, 1998 through the date of this Agreement (collectively,
the "Getty SEC Reports"). As of the respective dates they were filed, (i) Getty
SEC Reports were prepared, in all material respects in accordance with the
requirements of the Securities Act, or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and (ii) none of Getty SEC
Reports contained, when filed with the SEC, any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. All of Getty's filings
with the SEC which were required under Section 13 of the Exchange Act since
January 1, 1998, when taken as a whole (collectively, the "Recent SEC Reports"),
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Recent SEC Reports or necessary in
order to make the statements in such Recent SEC Reports, in light
31
of the circumstances under which they were made, not misleading. No Getty
Subsidiary is required to file any form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in Getty SEC Reports complied in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and each presented
fairly, in all material respects, the consolidated financial position of Getty
and the consolidated Getty Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to be material).
Section 3.07. Absence of Certain Changes or Events. Since January 1,
1998, except as contemplated by or as disclosed in this Agreement, or as
disclosed in any Getty SEC Report filed since January 1, 1998, Getty and Getty
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
any Getty Material Adverse Effect.
Section 3.08. Investment Purpose. Getty is acquiring the Common Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
Section 3.09. Business Continuity. Neither Getty nor NSCO has any plan
or intention either (a) except in accordance with this Agreement and the
agreements described in Sections 1.05 and 1.06, to directly or indirectly
reacquire any of its stock issued in the Combination; or (b) to directly or
indirectly sell or otherwise dispose of any of the assets of the Company, except
for (i) dispositions made in the ordinary course of business, (ii) transfers
described in Section 368(a)(2)(C) of the Code or (iii) asset dispositions
otherwise described in Treasury Regulation Section 1.368-1(d). Following the
Combination, Getty and NSCO intend that NSULC2 will continue the historic
business of the Company or use a significant portion of the Company's historic
business assets in a business.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
Section 4.01. Employee Benefits Matters. Getty shall provide the
Company's employees with health, welfare and other employee benefits that in the
aggregate are substantially equivalent to those currently provided to similarly
situated employees of Getty and no worse, in aggregate, than the benefits
currently provided to the Company's employees.
(a) To the extent that service is relevant for eligibility and vesting
(and, solely for purposes of calculating entitlement to vacation and sick days,
benefit accruals) under any
32
retirement plan, employee benefit plan, program or arrangement established or
maintained by Getty or any of Getty Subsidiaries for the benefit of employees of
Getty, such plan, program or arrangement shall credit Company employees for
service on or prior to the Closing Date with the Company or any affiliate or
predecessor thereof. In addition, Getty shall waive limitations on benefits
relating to any pre-existing conditions to the same extent eligible for coverage
under a Company Benefit Plan and recognize, for purposes of annual deductible
and out-of-pocket limits under its medical and dental plans, deductible and
out-of-pocket expenses paid by the Company's employees.
(b) Getty shall grant stock options (the "Post-Closing Options") to
purchase an aggregate of 250,000 shares of Getty Common Stock under the terms of
Getty's 1998 Stock Incentive Plan, to such employees of the Company and in such
denominations as shall be determined by Xx. Xxxx Xxxxxxx and set forth on a
notice to be delivered to Getty on the Closing Date and reasonably approved by
Getty (provided that options to purchase no more than 100,000 shares of Getty
Common Stock shall be allotted to Xx. Xxxxxxx and provided that options to
purchase no more than 100,000 shares of Getty Common Stock, in aggregate, shall
be allotted to the Stockholders (other than Xx. Xxxxxxx) who are employees of
the Company). The Post-Closing Options shall have substantially identical terms
to stock options previously granted by Getty to its similarly situated
employees. The exercise price of the Post-Closing Options shall be the fair
market value of Getty's Common Stock as determined under the terms of Getty's
1998 Stock Incentive Plan. The Post-Closing Options shall become 25% vested on
the first anniversary of their date of grant, and will continue to vest over a
period of three years in equal monthly installments commencing on the first day
of the first calendar month following the first anniversary of their date of
grant.
Section 4.02. Employment and Lock-Up Agreements. (a) EyeWire Services,
Inc. shall enter into an employment agreement (the "Xxxxxxx Employment
Agreement") satisfactory to Xxxx Xxxxxxx and Getty, and (b) Getty shall enter
into Lock-Up Agreements (the "Lock-Up Agreements") with each of the senior
executives of the Company listed in Section 4.02(a) of the Company Disclosure
Schedule, the form of which agreement is attached hereto as Exhibit 4.02(b).
Section 4.03. Further Action; Consents; Filings. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable commercial efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement, (ii) obtain from Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Getty or the Company or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby and
(iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the transactions contemplated by
this Agreement required under (A) the Exchange Act and the Securities Act and
the rules and regulations thereunder and any other applicable federal or state
securities laws and (B) any other applicable Law. The parties hereto shall
cooperate with each other in connection with the
33
making of all such filings, including by providing copies of all such documents
to the nonfiling party and its advisors prior to filing and, if requested, by
accepting all reasonable additions, deletions or changes suggested in connection
therewith.
Section 4.04. Headquarters. Except as otherwise required in order to
effect the transactions described in paragraphs 1.01(j) through 1.01(l), the
Company and its operations will remain based in Calgary for a period of at least
two years from the date of this Agreement unless otherwise agreed by Getty and
those Stockholders listed in Exhibit 4.04(a). Each of the employees of the
Company listed in Exhibit 4.04(b) shall not, as a condition of continued
employment with the Company or a subsidiary of the Company be required to
relocate such individual's current city of residence or business for a period of
two years from the date of this Agreement unless such individual consents to
relocation. Notwithstanding the foregoing, Getty, the Company and any
subsidiaries of the Company and Getty will be entitled to exploit areas of
synergy in the areas of back-office administration and data management, in the
development of international distribution and in leveraging group content and
marketing.
Section 4.05. Income Tax Elections. The parties agree that the
conversion of Common Shares to EyeWire Exchangeable Shares pursuant to Section
1.01(a) and transfer by each Stockholder of EyeWire Exchangeable Shares to NSCO
pursuant to Section 1.01(g) may be made pursuant to the provisions of section 85
of the ITA. Each Stockholder who wishes to make an election pursuant to section
85 of the ITA shall deliver a signed copy of the form prescribed for such
election, completed in accordance with the provisions of the ITA, to Getty
within 30 days of the Closing Date. Getty shall execute such form and return it
to the relevant Stockholder within 14 days of receipt. The parties agree that it
shall be the relevant Stockholder's sole responsibility to file the prescribed
forms pursuant to section 85 of the ITA in the time prescribed under subsection
85(6) of the ITA and any penalty assessed by Revenue Canada or a similar
provincial authority by virtue of a failure to file such election form in the
time prescribed under subsection 85(6) of the ITA will be borne by the
transferring Stockholder.
Section 4.06. Clearance Certificates. Getty shall retain possession of
all Exchangeable Shares otherwise deliverable pursuant to the terms hereof to
any Stockholder who is a non-resident of Canada for the purposes of section 116
of the ITA (a "Non-resident Stockholder") until the earlier of (i) the date such
Non-resident Stockholder delivers to Getty, certificates issued by Revenue
Canada pursuant to subsection 116(4) of the ITA in respect of the transactions
described in paragraphs 1.01(a) and 1.01(g) ("Clearance Certificates") and (ii)
September 30, 1999. The Clearance Certificates shall have certificate limits
which shall ensure that neither NSCO nor the Company shall have any liability
pursuant to subsection 116(5) of the ITA in respect of the relevant
transactions. If a Non-resident Stockholder does not deliver Clearance
Certificates to Getty by September 30, 1999, Getty shall remit such portion of
the retained Exchangeable Shares to Revenue Canada as is required to comply with
section 116(5) of the ITA and shall deliver any remaining Exchangeable Shares to
the relevant Non-resident Stockholder.
34
ARTICLE V
CONDITIONS
----------
Section 5.01. Conditions to the Obligations of Getty and NSCO. The
obligations of Getty and NSCO to consummate the transactions contemplated by
this Agreement are subject to the satisfaction or waiver of the following
conditions:
(a) each of the representations and warranties of the Stockholders
contained in this Agreement shall be true and correct as of the Closing Date,
except that those representations and warranties which address matters only as
of a particular date shall be true and correct as of such date;
(b) the Stockholders shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date;
(c) Getty shall have received, each in form and substance reasonably
satisfactory to Getty, (i) all authorizations, consents, orders and approvals of
all Governmental Entities and officials and (ii) all third party consents and
estoppel certificates set forth in Section 5.01(c) of the Company Disclosure
Schedule;
(d) no Governmental Entity or court of competent jurisdiction located
or having jurisdiction in the United States or Canada shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, judgment,
decree, executive order or award (an "Order") which is then in effect and has
the effect of making illegal or otherwise prohibiting consummation of the
Combination.
(e) Getty shall have received the opinion of Xxxxxxx Xxxxx, Canadian
counsel to the Company, to the effect set forth in Exhibit 5.01(e);
(f) Getty shall have received the opinion of Xxxxxx Xxxxxxx, U.S.
counsel to the Company, to the effect set forth in Exhibit 5.01(f);
(g) the Stockholders shall have executed and delivered to Getty the
Registration Rights Agreement described in Section 1.04;
(h) Xxxx Xxxxxxx shall have executed and delivered to EyeWire Services,
Inc. the Xxxxxxx Employment Agreement;
(i) the Stockholders shall have executed and delivered to Getty the
Escrow Agreement;
(j) the executed Lock-Up Agreements shall have been delivered to Getty;
and
(k) the Cash shall equal or exceed $1,000,000.
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Section 5.02. Conditions to the Obligations of the Stockholders. The
obligations of the Stockholders to consummate the transactions contemplated by
this Agreement are subject to the satisfaction or waiver of the following
conditions:
(a) each of the representations and warranties of Getty and NSCO
contained in this Agreement shall be true and correct as of the Closing Date,
except that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date;
(b) Getty and NSCO shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date;
(c) no Governmental Entity or court of competent jurisdiction located
or having jurisdiction in the United States or Canada shall have enacted,
issued, promulgated, enforced or entered any Order which is then in effect and
has the effect of making illegal or otherwise prohibiting consummation of the
transactions contemplated by this Agreement;
(d) the Stockholders shall have received the opinion of Weil, Gotshal &
Xxxxxx, LLP, U.S. counsel to Getty, to the effect set forth in Exhibit 5.02(d)
hereto;
(e) the Stockholders shall have received the opinion of Blake, Xxxxxxx
& Xxxxxxx, Canadian counsel to Getty, to the effect set forth in Exhibit 5.02(e)
hereto;
(f) the Stockholders shall have received the opinion of Xxxxxxx
XxXxxxxx Stirling Scales, Nova Scotia Counsel to Getty, to the effect set forth
in Exhibit 5.02(f) hereto;
(g) Getty shall have executed and delivered to Stockholders the
Registration Rights Agreement;
(h) EyeWire Services, Inc. and Getty shall have executed and delivered
to Xxxx Xxxxxxx the Xxxxxxx Employment Agreement; and
(i) Getty shall have executed and delivered to Stockholders the Escrow
Agreement.
ARTICLE VI
INDEMNIFICATION; TAXES; SURVIVAL
--------------------------------
Section 6.01. Indemnification.
(a) The Stockholders hereby agree to jointly and severally (except with
respect to any breach of the representation and warranty contained in Sections
2.04 and 2.06 as to which indemnification shall be several but not joint)
indemnify and hold Getty, NSCO, the Company, and their respective directors,
officers, employees, Affiliates, agents, successors and assigns (collectively,
the "Getty Indemnified Parties") harmless from and against:
36
(i) any and all assessments, judgments, losses, liabilities,
obligations, damages, costs, penalties and expenses (including
attorneys' and other professionals' reasonable fees and disbursements)
(collectively, "Losses") caused by or resulting from the failure of any
representation or warranty of the Stockholders set forth in this
Agreement, or any representation or warranty contained in any
certificate or other document delivered by or on behalf of the
Stockholders pursuant to this Agreement, to be true and correct in all
respects as of the date made;
(ii) any and all Losses, caused by or resulting from the breach
of any covenant or other agreement on the part of the Stockholders
under this Agreement; and
(iii) any and all Losses caused or resulting from:
A) the fact that Eyewire, Inc. is qualified as a foreign
corporation in the State of Texas under the name
Xxxxxxx, Inc. as set forth in Section 2.01 of the
Company Disclosure Schedule;
B) the fact that Eyewire, Inc. is not in possession of a
Grande Prairie, Texas Business License as set forth
in Section 2.07(a) of the Company Disclosure
Schedule;
C) any Legal Proceeding set forth in Section 2.10 of the
Company Disclosure Schedule;
D) the business practices set forth in Section 2.14(d)
of the Company Disclosure Schedule; and
E) the failure of the Company or any Company Subsidiary
to obtain model releases as set forth in Section
2.15(f) of the Company Disclosure Schedule.
(b) Each of NSCO and Getty hereby agrees to jointly and severally
indemnify and hold the Stockholders and their respective Affiliates, agents,
successors and assigns, heirs, executors and legal representatives
(collectively, the "Stockholder Indemnified Parties") harmless from and against:
(i) any and all Losses based upon, attributable to or resulting
from the failure of any representation or warranty of Getty or NSCO set
forth in this Agreement, or any representation or warranty contained in
any certificate or other document delivered by or on behalf of Getty or
NSCO pursuant to this Agreement, to be true and correct as of the date
made; and
37
(ii) any and all Losses based upon, attributable to or resulting
from the breach of any covenant or other agreement on the part of Getty
or NSCO under this Agreement.
(c) The obligations of the Stockholders pursuant to paragraph 6.01(a)
above shall be subject to the following limitations:
(i) The Getty Indemnified Parties shall not be entitled to
recover under paragraph 6.01(a) until the total amount which the Getty
Indemnified Parties would recover under paragraph 6.01(a), but for this
paragraph 6.01(c), exceeds $375,000 and then the Getty Indemnified
Parties shall be entitled to recover all of such amount (starting from
the first dollar);
(ii) The Getty Indemnified Parties shall not be entitled to
recover under paragraph 6.01(a):
(A) to the extent the aggregate claims under paragraph
6.01(a) of the Getty Indemnified Parties exceed the
value of the Escrow Amount, except for claims
relating to breaches of the representations contained
in Sections 2.06, for which there shall be no limit
to the remedies of a Getty Indemnified Party
hereunder, and for breaches of the representations
contained in Section 2.16, for which the aggregate
claims for which a Getty Indemnified Party may
receive indemnification (including any such claims
satisfied from the Escrow Amount) cannot exceed 10%
of the value of the Share Consideration as of the
Closing Date;
(B) to the extent the subject matter of the claim is
covered by insurance (including title insurance) held
by the Company, any Company Subsidiary, or Getty,
except to the extent that utilizing such coverage
will result in a premium increase to the Company or
any Company Subsidiary, in which case, such premium
increase shall be recoverable and to the extent that
the amount of the claim exceeds the insurance
proceeds received by the Company, any Company
Subsidiary or Getty in respect of such claim, in
which case, such excess shall be recoverable; or
(C) unless it has first used all commercially reasonable
efforts to diligently seek to enforce any rights to
indemnity or recovery from Persons not party to this
Agreement in respect of the Loss (provided, however,
that no Getty Indemnified Party shall be required to
institute court proceedings against any Person prior
to seeking recovery under paragraph 6.01(a)) and, if
such efforts fail, to provide
38
the Stockholders with full rights of subrogation in
respect of any such rights upon request of the
Stockholders.
(iii) Each Stockholder shall be solely liable for indemnification
with respect to a breach of any of the representations and warranties
and covenants of such Stockholder in Section 2.04 and 2.06 and any
recovery from the Escrow Amount in respect of such indemnification
shall be limited to such Stockholders pro-rata portion of the Escrow
Amount. With respect to a claim, or a portion of a claim, for a breach
of a representation contained in Section 2.16 which is not satisfied
out of the Escrow Amount, the recovery by Getty from each Stockholder
in respect of such claim, or a portion of a claim, shall be limited to
that percentage of such claim which is equal to the percentage of the
issued Common Shares which were held by such Stockholder immediately
prior to the Effective Time.
(iv) The Getty Indemnified Parties shall not be entitled to
recover under paragraph 6.01(a) with respect to a breach of Section
2.16 to the extent the Tax matter for which a claim has been asserted
is reserved against on the books and records of the Company or any
Company Subsidiary as of the Closing Date, provided that such reserves
are in accordance with GAAP, have been maintained in the ordinary
course of business and are consistent with the reserves for Taxes in
both the Financial Statements and on the Company Disclosure Schedule
and with the assumptions set forth in Section 2.16(a) of the Company
Disclosure Schedule.
(v) The Getty Indemnified Parties shall not be entitled to
recover under paragraph 6.01(a) with respect to breaches of the
representations contained in Section 2.29 until the total amount which
the Getty Indemnified Parties would recover in respect of such breaches
under paragraph 6.01(a), but for this paragraph 6.01(c) exceeds $50,000
and then the Getty Indemnified Parties shall be entitled to recover all
of such amount (starting from the first dollar);
(vi) If without regard to this paragraph 6.01(c) a state of facts
would allow an Getty Indemnified Party to recover under both paragraph
6.01(a)(i) and paragraph 6.01(a)(ii), such Getty Indemnified Party may
recover only under one of paragraph 6.01(a)(i) or paragraph
6.01(a)(ii); and
(vii) There shall be no duplication of indemnity among the Getty
Indemnified Parties.
(d) The Stockholders hereby agree that if a Getty Indemnified Party is
required to pay Taxes on behalf of a Non-resident Stockholder pursuant to either
section 116(5) or section 116(5.3) of the ITA as a result of a transfer to a
Getty Indemnified Party of any portion of the Escrowed Property (as that term is
defined in the Escrow Agreement) pursuant to the terms of the Escrow Agreement,
such Non-resident Stockholder shall indemnify and hold such Getty Indemnified
Party harmless from and against such Taxes.
39
Section 6.02. Indemnification Procedures.
(a) In the event that any Legal Proceedings shall be instituted or
threatened or that any claim or demand ("Claim") shall be asserted by any Person
in respect of which payment may be sought under Section 6.01 hereof, the
indemnified party shall reasonably and promptly cause written notice of the
assertion of any Claim of which it has knowledge which is covered by this
indemnity to be forwarded to the indemnifying party. The indemnifying party
shall have the right, at its sole option and expense, to be represented by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or otherwise deal with any Claim
which relates to any Losses indemnified against hereunder. If the indemnifying
party elects to defend against, negotiate, settle or otherwise deal with any
Claim which relates to any Losses indemnified against hereunder, it shall within
ten days (or sooner, if the nature of the Claim so requires) notify the
indemnified party of its intent to do so. If the indemnifying party elects not
to defend against, negotiate, settle or otherwise deal with any Claim which
relates to any Losses indemnified against hereunder, fails to notify the
indemnified party of its election as herein provided or contests its obligation
to indemnify the indemnified party for such Losses under this Agreement, the
indemnified party may defend against, negotiate, settle or otherwise deal with
such Claim. If the indemnifying party shall assume the defense of any Claim, the
indemnified party may participate, at his or its own expense, in the defense of
such Claim; provided, however, that such indemnified party shall be entitled to
participate in any such defense with separate counsel at the expense of the
indemnifying party if so requested by the indemnifying party to participate or
(ii) in the reasonable opinion of counsel to the indemnified party, a conflict
or potential conflict exists between the indemnified party and the indemnifying
party that would make such separate representation advisable; and provided,
further, that the indemnifying party shall not be required to pay for more than
one such counsel for all indemnified parties in connection with any Claim. The
parties hereto agree to cooperate fully with each other in connection with the
defense, negotiation or settlement of any such Claim.
(b) After any final judgment or award shall have been rendered by a
court, arbitration board or administrative agency of competent jurisdiction and
the expiration of the time in which to appeal therefrom, or a settlement shall
have been consummated, or the indemnified party and the indemnifying party shall
have arrived at a mutually binding agreement with respect to a Claim hereunder,
the indemnified party shall forward to the indemnifying party notice of any sums
due and owing by the indemnifying party pursuant to this Agreement with respect
to such matter and, subject to Sections 6.01 and 6.03, the indemnifying party
shall be required to pay all of the sums so due and owing to the indemnified
party by wire transfer of immediately available funds within 10 business days
after the date of such notice.
(c) The failure of the indemnified party to give reasonably prompt
notice of any Claim shall not release, waive or otherwise affect the
indemnifying party's obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual loss and prejudice as a result of
such failure.
40
Section 6.03. Escrow. Pursuant to the terms of the Escrow Agreement, Getty
Indemnified Parties shall be entitled to be paid out of the Escrow Amount, all
amounts to which Getty Indemnified Parties are entitled pursuant to this Article
VI. Getty's sole recourse under this Article VI shall be limited to the Escrow
Amount (except for breaches of Sections 2.06 and 2.16 hereof, in which case
there shall be no limit to Getty's and NSCO's remedies except as otherwise
provided herein).
Section 6.04. Tax Matters .
(a) Preparation of Tax Returns.
(i) The Stockholders shall file or cause to be filed all U.S.,
Canadian, state, provincial, local and foreign Tax Returns required to
be filed on or prior to the Closing Date by, or with respect to, the
Company and each Company Subsidiary and each consolidated combined or
unitary group of which the Company or any Company Subsidiary is or were
a member or members and shall cause the Company or a Company Subsidiary
to pay any and all Taxes due with respect to such returns. All Tax
Returns described in this Section 6.04(a)(i) shall be prepared in a
manner consistent with prior practice unless a past practice has been
finally determined to be incorrect by the applicable taxing authority
or a contrary treatment is required by applicable Tax laws (or judicial
or administrative interpretations thereof). The Stockholders shall
cause the Company and the Company's Subsidiaries to provide Getty with
copies of such completed Tax Returns at least 10 days prior to the
filing date, and Getty shall be provided an opportunity to review such
Tax Returns and supporting work papers and Schedules prior to the
filing of such Tax Returns. The failure of Getty to propose any changes
to any such Tax Return within such 10 days shall be deemed to be an
indication of its approval thereof. The Stockholders and Getty shall
attempt in good faith mutually to resolve any disagreements regarding
such Tax Returns prior to the due date for filing thereof..
(ii) Getty shall prepare or cause to be prepared all US,
Canadian, foreign, provincial, state and local Tax Returns required to
be filed by the Company and the Company's Subsidiaries after the
Closing Date, whether relating to a period ending before, on or after
the Closing Date.
(b) Cooperation with Respect to Tax Returns. Getty and the Stockholders
agree to furnish or cause to be furnished to each other, and each at their own
expense, as promptly as practicable, such information (including access to books
and records) and assistance, including making employees available on a mutually
convenient basis to provide additional information and explanations of any
material provided, relating to the Company and each Company Subsidiary as is
reasonably necessary for the filing of any Tax Return, for the preparation for
any audit, and for the prosecution or defense of any claim, suit or proceeding
relating to any adjustment or proposed adjustment with respect to Taxes. Getty
and the Stockholders shall furnish one another with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period. In
41
addition, Getty and the Stockholders shall (and shall cause their respective
affiliates to) timely sign and deliver such certificates or forms as may be
necessary or appropriate to establish an exemption from (or otherwise reduce),
or file Tax Returns or other reports with respect to, Taxes of the Company or a
Company Subsidiary. Getty or the Company shall retain in its possession, and
shall provide the Stockholders reasonable access to (including the right to make
copies of), such supporting books and records and any other materials that the
Stockholders may reasonably specify with respect to Tax matters relating to any
taxable period ending on or prior to the Closing Date until the expiry of all
appeal periods with respect to any assessments or reassessments of tax in
respect of such taxable period. After such time, Getty may dispose of such
material, provided that prior to such disposition Getty shall give the
Stockholders a reasonable opportunity to take possession of such materials.
Section 6.05. Survival of Representations and Warranties. Except as
otherwise provided herein, the parties hereto hereby agree that the
representations and warranties contained in this Agreement or in any
certificate, document or instrument delivered in connection herewith, shall
survive the execution and delivery of this Agreement, and the closing of the
transactions hereunder, regardless of any investigation made by the parties
hereto; provided, however, that any claims or actions with respect thereto
(other than claims for indemnification made in respect of the representations
and warranties contained in Section 2.06, which shall survive indefinitely, and
in Section 2.16 or Section 3.09 which shall survive until it is no longer
possible, in law or in fact, for a Getty Indemnified Party or a Stockholder
Indemnified Party who is a U.S. citizen or resident for U.S. federal income tax
purposes, as the case may be, to suffer or incur Losses as a result of such
breach and so long thereafter as such Getty Indemnified Party or a Stockholder
Indemnified Party who is a U.S. citizen or resident for U.S. federal income tax
purposes, as the case may be, may assert a claim with respect thereto) shall
terminate unless within twelve (12) months after the Closing Date written notice
of such claims is given to the Stockholders or Getty, as the case may be, or
such actions are commenced.
Section 6.06. Tax Reporting and Compliance. Getty shall, and shall
cause the Company, Company Subsidiaries, NSCO, NSULC, NSULC2 and Affiliates of
Getty, to and the Stockholders who are U.S. citizens or residents for U.S.
federal income tax purposes shall: (a) report the Combination as a
reorganization under Section 368(a)(1) of the Code on all applicable U.S.
federal, state and local Tax Returns; (b) keep records and file in connection
with their respective U.S. federal and state Tax Returns all such information as
may be required by Treasury Regulation Section 1.368-3 and otherwise comply with
all the reporting requirements of Section 368(a)(1) of the Code and the Treasury
Regulations promulgated thereunder; and (c) unless required to do so by law,
refrain from taking any position in connection with any Tax Return or Tax
liability that would be inconsistent with the qualification of the Combination
as a reorganization under Section 368(a)(1) of the Code.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
42
Section 7.02. Waiver. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
Section 7.03. Expenses. All expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not any of the transactions contemplated
hereby is consummated.
Section 7.04. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by courier,
facsimile, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 7.04):
if to Getty:
Getty Images, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Page
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
if to the Stockholders:
EyeWire, Inc.
Xxxxx 000, 000 - 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx X0X 0X0
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxx
43
with a copy to:
Xxxxxxx Xxxxx
Barristers and Solicitors
0000, 000 - 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx X0X 0X0
Facsimile No.: (000) 000-0000
Attention: X. X. Xxxxxx, Q.C.
Section 7.05. Certain Definitions. For purposes of this Agreement, the
term:
(a) "Affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with such specified person;
(b) "business day" means any day on which banks are not required or
authorized to close in Seattle, Washington.
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(d) "knowledge" means, with respect to any matter in question, that the
Stockholders or the executive officers of the Company or the executive officers
of Getty or Getty Canada, as the case may be, have actual or constructive
knowledge of such matter;
(e) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government;
and
(f) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests, the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
Section 7.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties
44
as closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
Section 7.07. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 7.08. Incorporation of Exhibits. The Company Disclosure
Schedule, Getty Disclosure Schedule and all Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
Section 7.09. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 7.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of Alberta without regard to the
conflicts of law provisions thereof.
Section 7.11. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 7.12. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 7.13. Entire Agreement. This Agreement (including the Exhibits,
the Company Disclosure Schedule and Getty Disclosure Schedule) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.
45
IN WITNESS WHEREOF, Getty, NSCO, the Company and the Stockholders have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
GETTY IMAGES, INC. 3032097 NOVA SCOTIA LIMITED
By: By:
----------------------------------- ------------------------------
Name: Name:
Title: Title:
EYEWIRE PARTNERS, INC.
By:
-----------------------------------
Name:
Title:
Stockholders:
--------------------------------------
XXXXXXX X. XXXXXXX
--------------------------------------
XXXXX X. XXXXXXX
--------------------------------------
XXXXX X. XXXXXXX
--------------------------------------
XXXXX X. XXXXXXXX
--------------------------------------
XXXXX X. XXXXXXX
--------------------------------------
XXXXX X. XXXXXXXXXX
46
--------------------------------------
XXXXX X. XXXXX
--------------------------------------
XXXXXX X. XXXXXXXXX
--------------------------------------
XXXXXX X. XXXXXX
--------------------------------------
XXXXXXX X. XXXXX
--------------------------------------
XXXX X. XXXXXX
47
ARTICLE I THE COMBINATION....................................................1
Section 1.01.Requisite Transactions................................1
Section 1.02.Options...............................................2
Section 1.03.Other Effects of the Combination......................3
Section 1.04.Registration Rights...................................3
Section 0.00.Xxxxxx Trust and Exchange Rights Agreement............3
Section 0.00.Xxxxxxx Agreement.....................................3
Section 1.07.Currency..............................................3
Section 1.08.Calculation of Exchange Ratio.........................4
Section 1.09.Share Consideration...................................4
Section 1.10.Escrow Arrangement....................................4
Section 1.11.Reorganization........................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS................4
Section 2.01.Organization and Qualification; Subsidiaries..........4
Section 2.02.Certificate of Incorporation and By-Laws..............5
Section 2.03.Capitalization........................................5
Section 2.04.Authority Relative to This Agreement..................6
Section 0.00.Xx Conflict; Required Filings and Consents............6
Section 2.06.Ownership and Transfer of Shares......................7
Section 2.07.Permits; Compliance...................................7
Section 0.00.Xxxxxxxxx Statements..................................7
Section 2.09.Absence of Certain Developments.......................8
Section 2.10.Absence of Litigation................................10
Section 2.11.Employee Benefit Plans...............................10
Section 2.12.Contracts............................................11
Section 2.13.Environmental Matters................................13
Section 2.14.Intellectual Property................................15
Section 2.15.Images...............................................18
Section 2.16.Taxes................................................20
Section 2.17.Assets...............................................24
Section 2.18.Certain Interests....................................24
Section 0.00.Xxxxxxxxx Policies...................................25
Section 2.20.Banks................................................25
Section 2.21.Year 2000 Compliance.................................25
Section 2.22.Investment...........................................26
Section 2.23.Accounts Receivable..................................27
Section 2.24.Employees and Consultants............................27
Section 2.25.Books and Records....................................28
Section 2.26.Residence of Stockholders............................28
Section 0.00.Xx Misrepresentation.................................28
Section 2.28.Brokers..............................................28
Section 2.29.Closing Cash Balance.................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF GETTY AND NSCO................29
Section 3.01.Organization and Qualification; Subsidiaries.........29
Section 3.02.Certificate of Incorporation and By-Laws.............29
Section 3.03.Capitalization.......................................29
Section 3.04.Authority Relative to This Agreement.................30
Section 0.00.Xx Conflict; Required Filings and Consents...........30
Section 3.06.SEC Filings; Financial Statements....................31
Section 3.07.Absence of Certain Changes or Events.................32
Section 3.08.Investment Purpose...................................32
Section 0.00.Xxxxxxxx Continuity..................................32
ARTICLE IV ADDITIONAL AGREEMENTS............................................32
Section 4.01.Employee Benefits Matters............................32
Section 4.02.Employment and Lock-Up Agreements....................33
Section 4.03.Further Action; Consents; Filings....................33
Section 4.04.Headquarters.........................................34
Section 4.05.Income Tax Elections.................................34
ARTICLE V CONDITIONS.........................................................35
Section 5.01.Conditions to the Obligations of Getty and NSCO......35
Section 5.02.Conditions to the Obligations of the Stockholders....36
ARTICLE VI INDEMNIFICATION; TAXES; SURVIVAL.................................36
Section 6.01.Indemnification......................................36
Section 6.02.Indemnification Procedures...........................40
Section 6.03.Escrow...............................................41
2
Section 0.00.Xxx Matters..........................................41
Section 6.05.Survival of Representations and Warranties...........42
Section 0.00.Xxx Reporting and Compliance.........................42
ARTICLE VII MISCELLANEOUS...................................................42
Section 7.01.Amendment............................................42
Section 7.02.Waiver...............................................43
Section 7.03.Expenses.............................................43
Section 7.04.Notices..............................................43
Section 7.05.Certain Definitions..................................44
Section 7.06.Severability.........................................44
Section 7.07.Assignment; Binding Effect; Benefit..................45
Section 7.08.Incorporation of Exhibits............................45
Section 7.09.Specific Performance.................................45
Section 7.10.Governing Law........................................45
Section 7.11.Headings.............................................45
Section 7.12.Counterparts.........................................45
Section 7.13.Entire Agreement.....................................45
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