DEFM14A 1 ddefm14a.htm DEFINITIVE MERGER PROXY STATEMENT Definitive Merger Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨

   Preliminary Proxy Statement    ¨    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

   Definitive Proxy Statement      

¨

   Definitive Additional Materials      

¨

   Soliciting Material Pursuant to §240.14a-12      

GETTY IMAGES, INC.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

¨ No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

Common stock, par value $0.01 per share (“Common Stock”).

 

 
  (2) Aggregate number of securities to which transaction applies:

59,644,904 shares of Common Stock outstanding; in-the-money stock options with respect to 1,180,477 shares of Common Stock; and restricted stock units with respect to 1,173,192 shares of Common Stock.

 

 
  (3) Calculated solely for the purpose of determining the filing fee. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

The maximum aggregate value was determined based upon the sum of (A) 59,644,904 shares of Common Stock multiplied by $34.00 per share; (B) in-the-money stock options with respect to 1,180,477 shares of Common Stock multiplied by $6.58 per share (which is the difference between $34.00 and the weighted average exercise price of $27.42 per share); and (C) restricted stock units with respect to 1,173,192 shares of Common Stock multiplied by $34.00 per share. In accordance with Exchange Act Rule 0-11(c), the filing fee was determined by multiplying 0.0000393 by the sum of the preceding sentence.

 

 
  (4) Proposed maximum aggregate value of transaction:

$2,075,577,636

 

 
  (5) Total fee paid:

$81,570

 

 

 

x Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount Previously Paid:

 

 
  (2) Form, Schedule or Registration Statement No.:

 

 
  (3) Filing Party:

 

 
  (4) Date Filed:

 

 


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LOGO

601 North 34th Street

Seattle, Washington 98103

Dear Stockholders:

We cordially invite you to attend the special meeting of stockholders of Getty Images, Inc., a Delaware corporation (the “Company”), at the headquarters of the Company at 601 North 34th Street, Seattle, Washington 98103 on June 20, 2008, at 9:00 a.m., local time.

At the special meeting, you will be asked to consider and vote upon a proposal to adopt an Agreement and Plan of Merger, dated as of February 24, 2008, which we refer to as the “merger agreement,” among the Company, Abe Investment, L.P., a Delaware limited partnership (“Parent”), and Abe Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Parent was formed by Hellman & Friedman Capital Partners VI, L.P. and its affiliated funds. Under the terms of the merger agreement, Merger Sub will be merged with and into the Company, which we refer to as the “merger,” with the Company continuing as the surviving corporation.

If the merger is completed, each share of Company common stock, other than as provided below, will be converted into the right to receive $34.00 in cash, without interest and less any applicable withholding taxes. We refer to this consideration per share of common stock to be paid in the merger as the “merger consideration.” The following shares of Company common stock will not be converted into the right to receive the merger consideration in connection with the merger: (a) shares held by any of the Company’s stockholders who are entitled to and who properly exercise appraisal rights under Delaware law and (b) shares held by Parent or any of its subsidiaries, including shares to be contributed to Parent immediately prior to the completion of the merger by Getty Investments L.L.C., Mark Getty, The October 1993 Trust, Cheyne Walk Trust and Ronald Family Trust B, which we collectively refer to as the “Rollover Stockholders.” The Rollover Stockholders own, in the aggregate, approximately 15.0% of the Company common stock. Mark Getty is the Company’s chairman of the board and co-founder and is chairman of the board of Getty Investments L.L.C. In addition, Jonathan Klein, who is the Company’s chief executive officer and co-founder and a member of the Company’s board of directors, is a director of Getty Investments L.L.C.

After careful consideration, the Company’s board of directors, by a unanimous vote of the directors (other than Mark Getty and Jonathan Klein, both of whom abstained from the vote), has approved and authorized in all respects the merger agreement and recommends that you vote “FOR” the adoption of the merger agreement. In considering the recommendation of the Company’s board of directors, you should be aware that some of the Company’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our stockholders generally.

The accompanying proxy statement provides you with detailed information about the proposed merger and the special meeting. We encourage you to read the entire proxy statement and the merger agreement carefully. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement. You may also obtain more information about the Company from documents we have filed with the Securities and Exchange Commission.

Your vote is very important. We cannot complete the merger unless (a) the holders of a majority of the outstanding shares of Company common stock entitled to vote at the special meeting vote to adopt the merger agreement, which vote we refer to as the “Company Stockholder Approval,” and (b) the holders of a majority of the number of shares of Company common stock present in person or by proxy and voting at the special meeting (other than the Rollover Stockholders and Jonathan Klein) vote to adopt the merger agreement, which vote we refer to as the “Special Stockholder Approval.” Please note that failing to vote has


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the same effect as a vote against the adoption of the merger agreement for purposes of the Company Stockholder Approval but has no effect for purposes of the Special Stockholder Approval.

Whether or not you plan to attend the special meeting, please complete, sign, date and return the enclosed proxy card in the postage-paid envelope or submit your proxy by telephone or internet prior to the special meeting. If your shares of common stock are held in “street name” by your broker, bank or other nominee, you should instruct your broker, bank or other nominee on how to vote your shares of common stock using the instructions provided by your broker, bank or other nominee. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy you previously submitted. However, if you hold your shares through a broker, bank or other nominee, you must provide a legal proxy issued from such nominee in order to vote your shares in person at the special meeting.

Our board of directors appreciates your continuing support of the Company and urges you to support the merger.

 

Sincerely,

  

LOGO

Mark H. Getty

Co-Founder and Chairman

  

LOGO

Jonathan D. Klein

Co-Founder and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

The proxy statement is dated May 22, 2008, and is first being mailed to stockholders on or about May 23, 2008.


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LOGO

601 North 34th Street Seattle, Washington 98103

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 20, 2008

 

 

Dear Stockholders:

Notice is hereby given that a special meeting of stockholders of Getty Images, Inc., a Delaware corporation (the “Company”), will be held on June 20, 2008, at 9:00 a.m., local time, at the headquarters of the Company at 601 North 34th Street, Seattle, Washington 98103 in order to:

 

  (1) consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of February 24, 2008, as it may be amended from time to time (the “merger agreement”), by and among the Company, Abe Investment, L.P., a Delaware limited partnership (“Parent”), and Abe Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), attached as Annex A to the accompanying proxy statement;

 

  (2) approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement; and

 

  (3) transact such other business that may properly come before the special meeting or any adjournment or postponement of the special meeting.

Only stockholders of record of our common stock at the close of business on May 20, 2008 are entitled to notice of and to vote at the special meeting. Only stockholders of record and their proxies are invited to attend the special meeting in person.

The adoption of the merger agreement requires the affirmative vote of (a) the holders of a majority of the outstanding shares of our common stock entitled to vote thereon at the special meeting (the “Company Stockholder Approval”) and (b) the holders of a majority of the number of shares of our common stock present in person or by proxy and voting at the special meeting (other than the Rollover Stockholders (as defined below) and Jonathan Klein) (the “Special Stockholder Approval”). The adjournment proposal requires, assuming a quorum is present with respect to the proposal, the affirmative vote of the holders of our common stock present in person or by proxy casting a majority of the votes entitled to be cast by all holders of common stock constituting such quorum. The “Rollover Stockholders” are comprised of Getty Investments L.L.C., Mark Getty (the Company’s chairman of the board and co-founder and a director of Getty Investments L.L.C.), The October 1993 Trust, Cheyne Walk Trust and Ronald Family Trust B. Mr. Getty is chairman of the board of Getty Investments L.L.C. and Mr. Getty and/or other Getty family members are beneficiaries of these trusts. Getty Investments L.L.C. and these three trusts owned, in the aggregate along with Mr. Getty, approximately 15.0% of the outstanding Company common stock as of the record date for the special meeting. Jonathan Klein is the Company’s chief executive officer and co-founder, one of the Company’s directors and a director of Getty Investments L.L.C.

Whether or not you plan to attend the special meeting, we urge you to submit a proxy for your shares by completing, signing, dating and returning the proxy card as promptly as possible in the postage-paid envelope or to submit your proxy by telephone or internet prior to the special meeting to ensure that your shares will be represented at the special meeting. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the adoption of the merger agreement and the


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proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. If you fail to return your proxy card or fail to submit your proxy by telephone or internet and do not vote in person at the special meeting, it will have the same effect as a vote against the adoption of the merger agreement for purposes of the Company Stockholder Approval but will have no effect for purposes of the Special Stockholder Approval or any vote regarding adjournment of the special meeting. If your shares of common stock are held in “street name” by your broker, bank or other nominee, you should instruct your broker, bank or other nominee on how to vote your shares of common stock using the instructions provided by your broker, bank or other nominee. Any stockholder attending the special meeting may vote in person by ballot even if he or she has already submitted a proxy by proxy card, telephone or internet. Such vote by ballot will revoke any proxy previously submitted. However, if you hold your shares through a bank or broker or other nominee, you must provide a legal proxy issued from such custodian in order to vote your shares in person at the special meeting.

Any stockholders of the Company who do not vote in favor of the adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares of our common stock if the merger contemplated by the merger agreement is completed, but only if they submit a written demand for appraisal of their shares before the taking of the vote on the merger agreement at the special meeting and they comply with all requirements of Delaware law for exercising appraisal rights, which are summarized in the accompanying proxy statement.

By Order of the Board of Directors,

LOGO

John Lapham

Senior Vice President,

General Counsel and Secretary

May 22, 2008

PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK CERTIFICATES.


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TABLE OF CONTENTS

 

SUMMARY TERM SHEET

   1
  The Parties to the Merger    1
  The Merger    1
  Merger Consideration    1
  When the Merger is Expected to be Completed    2
  Votes Required for Adoption of the Merger Agreement    2
  The Special Meeting    2
  Recommendation of Our Board of Directors    2
  Interests of the Company’s Directors and Executive Officers in the Merger    2
  Opinion of Our Financial Advisor    3
  Treatment of Stock Options and Restricted Stock Units    3
  Financing of the Merger    3
  Governmental and Regulatory Approvals    4
  Material United States Federal Income Tax Consequences    4
  Restrictions on Solicitations of Other Offers and Change in Recommendation    4
  Conditions to the Completion of the Merger    5
  Termination of the Merger Agreement    6
  Termination Fees and Expense Reimbursement    7
  Limitations on Remedies    7
  Appraisal Rights    7
  Market Price of the Company’s Common Stock    7

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

   8

SPECIAL FACTORS

   14
  Background of the Merger    14
  Reasons for the Merger; Recommendation of Our Board of Directors; Fairness of the Merger    35
  Opinion of Our Financial Advisor    40
  Purpose and Reasons for the Merger for the Rollover Stockholders    49
  Purpose and Reasons for the Merger for Jonathan Klein    49
  Purpose and Reasons for the Merger for Parent, Merger Sub and the H&F Filing Persons    49
  Position of the Rollover Stockholders as to the Fairness of the Merger    50
  Position of Jonathan Klein as to the Fairness of the Merger    52
  Position of Parent, Merger Sub and the H&F Filing Persons as to the Fairness of the Merger    55
  Plans for Getty Images After the Merger    58
  Effects of the Merger    58
  Effects on the Company if the Merger is Not Completed    61
  Financing of the Merger    61
           Equity Financing    61
           Debt Financing    62
  Material United States Federal Income Tax Consequences    64
  Limitation on Remedies; Limited Guarantee    65
  Interests of the Company’s Directors and Executive Officers in the Merger    66
           Arrangements with Mark Getty and Other Rollover Stockholders    66
           New Management Arrangements    69
           Treatment of Stock Options    70
           Treatment of Restricted Stock Units    71
           Severance Arrangements    72
           Employee Benefits    74
           Directors’ and Officers’ Insurance    74
  Certain Projections    74
  Governmental and Regulatory Approvals    76
  Provisions for Unaffiliated Stockholders    77


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  Estimated Fees and Expenses of the Merger    77
  Litigation Related to the Merger    77

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

   79

THE SPECIAL MEETING

   80
  Time, Place and Purpose of the Special Meeting    80
  Board Recommendation    80
  Record Date and Quorum    80
  Vote Required for Approval    81
  Proxies and Revocation    81
  Adjournments and Postponements    82
  Rights of Stockholders Who Object to the Merger    83
  Solicitation of Proxies    83
  Other Matters    83
  Questions and Additional Information    83

THE PARTIES TO THE MERGER

   84

THE MERGER AGREEMENT

   85
  The Merger    85
  Effective Time; Marketing Period    85
  Merger Consideration    86
  Payment Procedures    86
  Treatment of Stock Options and Restricted Stock Units    87
  Representations and Warranties    88
  Company Material Adverse Effect Definition    90
  Conduct of Business Prior to Closing    91
  Restrictions on Solicitations of Other Offers    93
  Termination in Connection with a Superior Proposal    95
  Agreement to Use Reasonable Best Efforts    97
  Financing    98
  Employee Matters    100
  Indemnification and Insurance    101
  Other Covenants    102
  Conditions to the Completion of the Merger    103
  Termination of the Merger Agreement    104
  Termination Fee    106
  Liability Cap and Limitation on Remedies    108
  Amendment    109
  Extension of Time; Waiver    109

APPRAISAL RIGHTS

   110

IMPORTANT INFORMATION REGARDING GETTY IMAGES

   114
  Directors and Executive Officers of Getty Images    114
  Historical Selected Financial Data    119
  Ratio of Earnings to Fixed Charges    120
  Book Value Per Share    120
  Transactions in Common Stock    121
  Ownership of Common Stock by Certain Beneficial Owners and Directors and Executive Officers    122
  Market Price of the Company Common Stock and Dividend Information    124
  Other Information    125

IMPORTANT INFORMATION REGARDING PARENT, MERGER SUB AND THE H&F FILING PERSONS

   126

IMPORTANT INFORMATION REGARDING THE ROLLOVER STOCKHOLDERS

   129

FUTURE STOCKHOLDER PROPOSALS

   131

 


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HOUSEHOLDING OF SPECIAL MEETING MATERIALS

   131

WHERE YOU CAN FIND MORE INFORMATION

   131

ANNEX A—AGREEMENT AND PLAN OF MERGER

  

ANNEX B—OPINION OF GOLDMAN, SACHS & CO.

  

ANNEX C—SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

  

ANNEX D—RECONCILIATION OF NON-GAAP MEASURES

  

ANNEX E—ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2007

  

ANNEX F—QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2008

  


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SUMMARY TERM SHEET

This Summary Term Sheet, together with the “Questions and Answers About the Merger and the Special Meeting,” summarizes the material information in this proxy statement. We encourage you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement. Each item in this Summary Term Sheet includes a page reference directing you to a more complete description of that topic. See “Where You Can Find More Information” beginning on page 131. In this proxy statement, the terms “Getty Images,” “Company,” “we,” “our” and “us” refer to Getty Images, Inc. and its subsidiaries, unless the context requires otherwise.

The Parties to the Merger (page 84)

Getty Images, Inc., a Delaware corporation, is a creator and distributor of still imagery, footage and multi-media products, as well as a provider of related services and other forms of premium digital content, including music. We serve business customers worldwide who turn to us to discover, license and manage images and other digital content. Our contributing artists and digital content help customers produce work that appears in newspapers, magazines, advertising campaigns, films, television programs, books and websites.

Abe Investment, L.P., which we refer to as “Parent,” was formed by Hellman & Friedman Capital Partners VI, L.P., which we refer to as “H&F Fund VI,” and its affiliated funds. Abe Acquisition Corp., which we refer to as “Merger Sub,” is a Delaware corporation and a wholly owned subsidiary of Parent. Both Parent and Merger Sub were formed solely for the purpose of entering into the merger agreement described below and consummating the transactions contemplated by the merger agreement.

The Merger (page 85)

You are being asked to adopt an Agreement and Plan of Merger, dated as of February 24, 2008 (as it may be amended from time to time), by and among Getty Images, Parent and Merger Sub, which agreement we refer to as the “merger agreement.” Pursuant to the merger agreement, Merger Sub will merge with and into Getty Images, which we refer to as the “merger,” and Getty Images will continue as the surviving corporation and a wholly owned subsidiary of Parent. Upon completion of the merger, Getty Images will cease to be a publicly traded company, and you will cease to have any rights in Getty Images as a stockholder.

Merger Consideration (page 86)

If the merger is completed, each share of our common stock, other than as provided below, will be converted into the right to receive $34.00 in cash, without interest and less any applicable withholding taxes. We refer to this consideration per share of common stock to be paid in the merger as the “merger consideration.” The following shares of our common stock will not be converted into the right to receive the merger consideration in connection with the merger: (a) shares held by any of our stockholders who are entitled to and who properly exercise appraisal rights under Delaware law and (b) shares held by Parent or any of its subsidiaries, including shares to be contributed to Parent immediately prior to the completion of the merger by Getty Investments L.L.C., Mark Getty (the Company’s chairman of the board and co-founder and a director of Getty Investments L.L.C.), The October 1993 Trust, Cheyne Walk Trust and Ronald Family Trust B, which we collectively refer to as the “Rollover Stockholders.” Mr. Getty is chairman of the board of Getty Investments and Mr. Getty and/or other Getty family members are beneficiaries of these trusts. In addition, Jonathan Klein (the Company’s chief executive officer and other co-founder and a member of the Company’s board of directors) is a director of Getty Investments. Getty Investments and these three trusts owned, in the aggregate along with Mr. Getty, approximately 15.0% of the Company common stock outstanding as of the record date for the special meeting.

 

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When the Merger is Expected to be Completed

We currently anticipate that the merger will be completed in the second quarter or early in the third quarter of 2008. However, there can be no assurances that the merger will be completed at all, or if completed, that it will be completed in the second quarter or early in the third quarter of 2008.

Votes Required for Adoption of the Merger Agreement (page 81)

The adoption of the merger agreement requires the affirmative vote of (a) the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting and (b) the holders of a majority of the number of shares of our common stock present in person or by proxy and voting at the special meeting (other than the Rollover Stockholders and Jonathan Klein).

The Special Meeting

See “Questions and Answers About the Merger and the Special Meeting” beginning on page 8 and “The Special Meeting” beginning on page 80.

Recommendation of Our Board of Directors (page 35)

Our board of directors unanimously (other than Mark Getty and Jonathan Klein, who both abstained from the vote) (a) approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the merger, (b) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are substantively and procedurally fair to and in the best interests of the Company and our unaffiliated stockholders (by which we mean, for purposes of this determination, our stockholders other than the Rollover Stockholders and Jonathan Klein) and (c) resolved to recommend that the stockholders of the Company adopt the merger agreement. For a discussion of the material factors considered by our board of directors in reaching its conclusions, see “Special Factors—Reasons for the Merger; Recommendation of Our Board of Directors; Fairness of the Merger.”

Our board of directors recommends that you vote “FOR” the proposal to adopt the merger agreement and “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.

Interests of the Company’s Directors and Executive Officers in the Merger (page 66)

In considering the recommendation of our board of directors, you should be aware that some of our directors and executive officers have interests in the merger that are different from, or in addition to, your interests as a stockholder and that may present actual or potential conflicts of interest. These interests include, among others:

 

   

accelerated vesting of stock options with exercise prices of less than $34.00 per share and restricted stock units;

 

   

the expected ownership of equity interests in Parent or its affiliates by Mark Getty, Jonathan Klein and certain of our other executive officers after completion of the merger;

 

   

the anticipated entry into new employment arrangements by certain of our executive officers in connection with the completion of the merger;

 

   

the anticipated establishment of an equity-based compensation plan and grants of equity awards to our executive officers and other key employees after completion of the merger; and

 

   

continued indemnification and directors’ and officers’ liability insurance applicable to the period prior to completion of the merger.

 

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Our board of directors was aware of these interests and considered them, among other matters, prior to making its determination to recommend the adoption of the merger agreement to our stockholders.

Opinion of Our Financial Advisor (page 40)

Goldman, Sachs & Co., which we refer to as “Goldman Sachs,” delivered its oral opinion, which was subsequently confirmed in writing, to our board of directors that, as of February 24, 2008, and based upon and subject to the factors and assumptions set forth in the Goldman Sachs opinion, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders.

The full text of the written opinion of Goldman Sachs, dated February 24, 2008, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of our board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any stockholder should vote with respect to the merger or any other matter.

Pursuant to an engagement letter between the Company and Goldman Sachs, we have agreed to pay Goldman Sachs a transaction fee equal to 0.725% of the aggregate consideration (which is expected to be equal to approximately $17.3 million), $3.0 million of which was payable upon the execution of the merger agreement and the remainder of which is payable upon completion of the merger, plus reasonable expenses.

Treatment of Stock Options and Restricted Stock Units (page 87)

Stock Options. Pursuant to the plans under which they were issued, all outstanding options exercisable for shares of our common stock that are unvested will vest and become exercisable upon the effective time of the merger. Under the merger agreement, we have agreed to take all action necessary such that, except as otherwise agreed to by Parent and the holder of an option, each outstanding option that represents the right to acquire our common stock under our equity incentive plans will be cancelled and terminated and converted at the effective time of the merger into the right to receive a cash payment for each share of our common stock issuable under such option equal to the excess, if any, of (a) the merger consideration over (b) the exercise price payable in respect of such share of our common stock issuable under such option, without interest and less any applicable withholding taxes, which we refer to as the “option consideration.” In order to provide for the cancellation and termination of all stock options under the merger agreement, we expect to make an offer to each option holder to cancel all of his or her grants of options in exchange for a cash payment with respect to each such grant equal to the greatest of (i) the aggregate option consideration with respect to such grant, (ii) $0.05 per share of our common stock issuable pursuant to such grant and (iii) $1,000, in each case without interest and less applicable withholding taxes. The offer will be made to each option holder, and the receipt of consideration by each option holder is contingent upon his or her acceptance of the offer in accordance with its terms. The completion of this offer will be conditioned upon and will occur simultaneously with the completion of the merger.

Restricted Stock Units. The merger agreement provides that, except as otherwise agreed to by Parent and the holder of a restricted stock unit, each outstanding restricted stock unit granted under our equity incentive plans (whether or not previously vested) will vest in full and be converted into the right to receive $34.00 in cash, without interest and less any applicable withholding tax.

Financing of the Merger (page 61)

Parent estimates that the aggregate amount of financing necessary to complete the merger, the refinancing of our existing indebtedness and the payment of related fees and expenses will be approximately $2.4 billion. This amount is expected to be funded by Parent and Merger Sub with a combination of the equity financing contemplated by the commitment letters described below, debt financing contemplated by the commitment letter

 

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described below and cash of the Company. The equity and debt financing are subject to the satisfaction of the conditions set forth in the commitment letters pursuant to which the financings will be provided.

Equity Financing. Parent has received an equity commitment letter from H&F Fund VI and certain of its affiliated funds, which we refer to collectively with H&F Fund VI as the “H&F Investors,” to purchase, or cause to be purchased, up to $941.3 million of equity of Parent. Parent also has received a commitment letter from the Rollover Stockholders to contribute to Parent an aggregate of 8,942,593 shares of our common stock (with an aggregate value of approximately $304.0 million, based on the merger consideration). In addition, a revocable grantor trust, of which Mr. Getty is the primary beneficiary, has agreed to exchange options it currently holds to acquire up to 446,350 shares of our common stock for options to acquire shares of common stock of an affiliate of Parent.

Debt Financing. Merger Sub has received a debt financing commitment letter that provides for up to $1.045 billion of debt financing from Barclays Bank PLC, General Electric Capital Corporation and The Royal Bank of Scotland PLC.

Governmental and Regulatory Approvals (page 76)

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the “HSR Act,” the merger may not be completed until the Company and Parent each file a notification and report form under the HSR Act with the Federal Trade Commission, or the “FTC,” and the Antitrust Division of the Department of Justice, or the “DOJ,” and the applicable waiting period has expired or been terminated. The Company and Parent filed the notification and report forms under the HSR Act with the FTC and the DOJ on March 7, 2008, and the FTC granted early termination of the waiting period on March 17, 2008.

The merger also requires the approval of the European Commission pursuant to Council Regulation No. 139/2004/EC of the European Community, and the contribution of shares of our common stock to Parent by Getty Investments, as described above, requires the approval of the German Federal Cartel Office under the German Act Against Restraints of Competition (GWB). Parent filed for European Commission approval on March 28, 2008, and the European Commission granted approval on May 6, 2008. The Company and Getty Investments filed for German Federal Cartel Office approval on March 7, 2008, and the German Federal Cartel Office granted approval on April 4, 2008.

Material United States Federal Income Tax Consequences (page 64)

For U.S. federal income tax purposes, your receipt of cash in exchange for your shares of Company common stock in the merger generally will result in your recognizing gain or loss measured by the difference, if any, between the cash you receive in the merger and your tax basis in your shares of Company common stock. You should consult your tax advisor for a complete analysis of the effect of the merger on your U.S. federal, state, local and/or foreign taxes.

Restrictions on Solicitations of Other Offers and Change in Recommendation (page 93)

The Company has agreed to cease and terminate any previous discussions or negotiations with respect to any “takeover proposal” (as defined in “The Merger Agreement—Restrictions on Solicitations of Other Offers”); provided, however, that we were generally permitted to do the following until 11:59 p.m., Pacific Daylight Savings Time, on April 4, 2008:

 

   

continue discussions or negotiations with a certain party with whom we had previously engaged in discussions prior to signing the merger agreement with respect to a potential takeover proposal, which party we refer to as the “excluded party;” and

 

   

furnish to the excluded party information with respect to the Company and its subsidiaries.

 

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With the exception of the excluded party (and only until 11:59 p.m., Pacific Daylight Savings Time, on April 4, 2008, with respect to the excluded party), we generally have agreed not to:

 

   

initiate, knowingly solicit or knowingly encourage (including by way of furnishing non-public information) any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to result in, a takeover proposal; or

 

   

engage in, continue or otherwise participate in any discussions or negotiations regarding a takeover proposal.

In addition, we have agreed not to grant any waiver, amendment or release under any standstill agreement after the date of the merger agreement without the prior written consent of Parent.

If our board of directors receives a written takeover proposal from any person that our board of directors determines constitutes or could reasonably be expected to result in a “superior proposal” (as defined in “The Merger Agreement—Restrictions on Solicitations of Other Offers”) and determines in good faith that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties, then we generally may, prior to the receipt of the Company Stockholder Approval and the Special Stockholder Approval:

 

   

furnish information with respect to the Company and our subsidiaries to the person making the takeover proposal; and

 

   

participate in discussions and negotiations with such person regarding a takeover proposal.

Our board of directors also may not (a) withdraw its recommendation that our stockholders adopt the merger agreement or (b) approve or recommend a takeover proposal to our stockholders, except our board may take such an action in certain circumstances after our board of directors has determined that a takeover proposal we receive constitutes a superior proposal and that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties or, other than in response to a takeover proposal, that a failure to take such action would be reasonably likely to be inconsistent with our board of directors’ fiduciary duties.

Conditions to the Completion of the Merger (page 103)

The completion of the merger is subject to, among other things, the following conditions:

 

   

the adoption of the merger agreement by the holders of our common stock pursuant to the two votes described above in this Summary Term Sheet;

 

   

the expiration or termination of the waiting period under the HSR Act, the receipt of the approval of European Union and German antitrust authorities as described above and the expiration of any other waiting periods and receipt of any other antitrust approvals described in “The Merger Agreement—Conditions to the Completion of the Merger;”

 

   

the absence of any governmental orders that have the effect of making the merger illegal or otherwise preventing the consummation of the merger;

 

   

each party’s respective representations and warranties in the merger agreement being true and correct as of the closing date in the manner described in “The Merger Agreement—Conditions to the Completion of the Merger;”

 

   

each party’s performance in all material respects of its obligations required to be performed under the merger agreement prior to the closing date of the merger; and

 

   

the Company having achieved “Consolidated EBITDA” (as defined in Exhibit C to the merger agreement) for the twelve month period ending March 31, 2008 (or, if the closing date of the merger occurs on or after September 2, 2008, for the twelve month period ending June 30, 2008) of not less than $300 million, subject to certain assumptions regarding our historical financial performance described in “The Merger Agreement—Conditions to the Completion of the Merger.”

 

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Termination of the Merger Agreement (page 104)

The Company and Parent may agree to terminate the merger agreement without completing the merger at any time, even after our stockholders have adopted the merger agreement. The merger agreement may also be terminated in certain other circumstances, including:

 

   

by either the Company or Parent:

 

   

if the merger has not been consummated on or before the “walk-away date” (which is August 15, 2008 or, if the “marketing period” (as defined in “The Merger Agreement—Effective Time; Marketing Period”) has not been completed on or prior to August 15, 2008, then the “walk-away date” will be extended to October 2, 2008), unless the failure to consummate the merger on or before the walk-away date is primarily the result of the failure of the terminating party to perform any of its obligations under the merger agreement;

 

   

if a final and non-appealable law, injunction, judgment or ruling prohibits the consummation of the merger, so long as the law, injunction, judgment or ruling is not the result of the failure of the terminating party to perform any of its obligations under the merger agreement;

 

   

if our stockholders do not vote to adopt the merger agreement at the special meeting or any adjournment or postponement of the special meeting; or

 

   

if the other party has materially breached or failed to perform any of its representations, warranties, covenants or agreements contained in the merger agreement such that the closing conditions to the merger agreement would not be satisfied, and which breach cannot be cured by the walk-away date or, if capable of being cured, has not been cured within thirty days after receipt by the breaching party of written notice from the terminating party stating its intention to terminate, so long as the terminating party is not then in material breach of any of its representations, warranties, covenants or agreements such that the closing conditions to the merger agreement would not be satisfied;

 

   

by Parent if (a) our board of directors changes, qualifies, withdraws or modifies its recommendation that our stockholders adopt the merger agreement, (b) our board of directors approves or recommends a takeover proposal to our stockholders, (c) our board of directors fails to recommend against acceptance of a tender offer or exchange offer for shares of our stock that constitutes a takeover proposal within ten business days after commencement of the offer, (d) we enter into a letter of intent, merger, acquisition or similar agreement with respect to any takeover proposal, (e) we fail to include in this proxy statement the recommendation of our board of directors to our stockholders that they adopt the merger agreement or (f) the Company or our board of directors publicly announces an intention to do any of the foregoing; and

 

   

by the Company:

 

   

if, in order to enter into a definitive agreement providing for the implementation of a transaction that is a superior proposal, we comply with the notice and other requirements described in “The Merger Agreement— Termination in Connection with a Superior Proposal” and we pay to Parent the termination fee described in “The Merger Agreement—Termination Fee;” or

 

   

if all conditions to the obligations of Parent and Merger Sub to effect the merger (other than those which, by their nature, are satisfied upon the closing of the merger) have been satisfied on the final day of the marketing period and Parent or Merger Sub has failed to consummate the merger (a) no later than two business days after the later of (i) the final day of the marketing period and (ii) the date on which we notify Parent that all conditions to our obligations to effect the merger have been satisfied or waived (other than conditions which are to be satisfied upon the closing of the merger) or (b) on the final day of the marketing period, under certain circumstances described in “The Merger Agreement—Termination of the Merger Agreement.”

 

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Termination Fees and Expense Reimbursement (page 106)

If the merger agreement is terminated under certain circumstances:

 

   

we will be obligated to pay Parent a termination fee of $31 million or $52 million, depending upon the timing of the termination;

 

   

we will be obligated to reimburse Parent for 50% of its out-of-pocket fees and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement, up to a total cap of $5 million; or

 

   

Parent will be obligated to pay us a termination fee of $78 million.

Limitations on Remedies (page 108)

In no event will we be entitled to monetary damages from Parent or Merger Sub in excess of $78 million, including any payment by Parent of the termination fee described above, if applicable, for all losses and damages suffered as a result of the failure of the merger to be consummated or for any breach or failure to perform by Parent and Merger Sub under the merger agreement or otherwise. In addition, we cannot seek specific performance to require Parent and Merger Sub to complete the merger. Our exclusive remedy for the failure of Parent and Merger Sub to complete the merger is the $78 million termination fee described above.

Concurrently with the execution of the merger agreement, H&F Fund VI entered into a limited guarantee in our favor pursuant to which it irrevocably guaranteed Parent’s obligation in respect of the termination fee payable by Parent described above, up to a maximum amount of $78 million. The limited guarantee is our sole recourse against H&F Fund VI and its affiliates for any damages we may incur in connection with the merger agreement and the transactions contemplated by the merger agreement.

Appraisal Rights (page 110)

Under Delaware law, holders of our common stock who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares of our common stock as determined by the Court of Chancery of the State of Delaware if the merger is completed, but only if they comply with all requirements of Delaware law for exercising appraisal rights (including Section 262 of the General Corporation Law of the State of Delaware, the text of which can be found in Annex C to this proxy statement), which are summarized in this proxy statement. This appraisal amount could be more than, the same as or less than the merger consideration. Any holder of our common stock intending to exercise appraisal rights must, among other things, submit a written demand for an appraisal to us prior to the vote on the adoption of the merger agreement at the special meeting and must not vote or otherwise submit a proxy in favor of adoption of the merger agreement. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights.

Market Price of the Company’s Common Stock (page 124)

The closing trading price of our common stock on the New York Stock Exchange on January 18, 2008, the last trading day prior to our public announcement that we were exploring strategic alternatives, was $21.94 per share. The merger consideration represents a premium of approximately 55% over the closing trading price on January 18, 2008. On May 21, 2008, which is the most recent practicable trading date prior to the date of this proxy statement, the closing trading price of our common stock was $33.28 per share.

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

The following questions and answers address briefly some questions you may have regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you as a stockholder of Getty Images. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.

The Merger and Related Transactions

 

Q: What is the proposed transaction?

 

A: The proposed transaction is the acquisition of the Company pursuant to the Agreement and Plan of Merger, dated as of February 24, 2008 (as it may be amended from time to time), among the Company, Parent and Merger Sub. Parent and Merger Sub were formed by H&F Fund VI and its affiliated funds. Under the terms of the merger agreement, if the merger agreement is adopted by the Company’s stockholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation. Upon consummation of the merger, the Company will become a wholly owned subsidiary of Parent. After the merger, shares of the Company’s common stock will not be publicly traded.

 

Q: What will I receive for my shares of Getty Images’ common stock in the merger?

 

A: Upon completion of the merger, you will receive $34.00 in cash, without interest and less any applicable withholding taxes, for each share of our common stock that you own. This does not apply to (a) shares held by any of our stockholders who are entitled to and who properly exercise appraisal rights under Delaware law and (b) shares held by Parent or any of its subsidiaries, including shares to be contributed to Parent immediately prior to the completion of the merger by the “Rollover Stockholders,” who are comprised of Getty Investments, Mark Getty (the Company’s chairman of the board and co-founder and chairman of the board of Getty Investments), The October 1993 Trust, Cheyne Walk Trust and Ronald Family Trust B. Mr. Getty is chairman of the board of Getty Investments and Mr. Getty and/or other Getty family members are beneficiaries of these trusts. In addition, Jonathan Klein (the Company’s chief executive officer and other co-founder and a member of the Company’s board of directors) is a director of Getty Investments. Getty Investments and these three trusts owned, in the aggregate along with Mr. Getty, approximately 15.0% of our common stock outstanding as of the record date for the special meeting. Upon consummation of the merger, you will not own shares in Getty Images or Parent.

See “Special Factors—Material United States Federal Income Tax Consequences” beginning on page 64 for a more detailed description of the U.S. tax consequences of the merger. You should consult your own tax advisor for a full understanding of how the merger will affect your federal, state, local and foreign taxes.

 

Q: How will the Company’s stock options be treated in the merger?

 

A:

Pursuant to the terms of the plans under which they were issued, all outstanding options exercisable for shares of our common stock that are unvested will vest and become exercisable upon the effective time of the merger. We have agreed to take all action necessary such that, except as otherwise agreed by Parent and the holder thereof, each option outstanding immediately prior to the effective time of the merger that represents the right to acquire shares of our common stock and was issued under one of our equity incentive plans, at the effective time of the merger, will be cancelled, terminated and converted into the right to receive the option consideration. In order to provide for the cancellation and termination of all stock options under the merger agreement, we expect to make an offer to each option holder to cancel all of his or her grants of options in exchange for a cash payment with respect to each such grant equal to the greatest of (i) the aggregate option consideration with respect to such grant, which is the excess, if any, of the merger

 

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consideration over the exercise price payable for each share of Company common stock issuable under such stock option multiplied by the total number of shares subject to such grant, (ii) $0.05 per share of our common stock issuable pursuant to such grant and (iii) $1,000, in each case without interest and less applicable withholding taxes. The offer will be made to each option holder, and the receipt of consideration by each option holder is contingent upon his or her acceptance of the offer in accordance with its terms. The completion of this offer will be conditioned upon and will occur simultaneously with the completion of the merger. See “Special Factors—Interests of the Company’s Officers and Directors in the Merger—Arrangements with Mark Getty and Other Rollover Stockholders” beginning on page 66 for information concerning the agreement of a revocable grantor trust related to Mark Getty to rollover and exchange its options for options to acquire shares of the common stock of an affiliate of Parent.

 

Q: How will the Company’s restricted stock units be treated in the merger?

 

A: Pursuant to the terms of the plans under which they were issued, each outstanding restricted stock unit in respect of a share of our common stock will fully vest at the effective time of the merger. We have agreed to take all action necessary such that, except as otherwise agreed by Parent and the holder thereof, each restricted stock unit outstanding immediately prior to the effective time of the merger that was issued under one of our equity incentive plans, immediately prior to the effective time of the merger, will be converted into the right to receive $34.00 in cash, without interest and less applicable withholding taxes.

 

Q: When do you expect the merger to be completed? What is the “marketing period?”

 

A: We are working toward completing the merger as quickly as possible, and we anticipate that it will be completed in the second quarter or early third quarter of 2008. In order to complete the merger, we must obtain the stockholder approvals described below and the other closing conditions under the merger agreement must be satisfied or waived. Neither we nor Parent and Merger Sub are obligated to complete the merger unless and until the closing conditions in the merger agreement have been satisfied or waived, which conditions are described in “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 103. In addition, Parent and Merger Sub are not obligated to complete the merger until the expiration of a thirty consecutive calendar day “marketing period” that they may use to complete their financing for the merger. The marketing period will begin to run after we have obtained the stockholder approvals described below and satisfied other specified conditions under the merger agreement. If the marketing period would not end on or before August 15, 2008, however, then the marketing period will commence no earlier than September 2, 2008. See “The Merger Agreement—Effective Time; Marketing Period” beginning on page 85 and “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 103.

 

Q: What effects will the proposed merger have on the Company?

 

A: Upon completion of the proposed merger, Getty Images will cease to be a publicly traded company and will be wholly owned by Parent. As a result, you will no longer have any interest in our future earnings or growth, if any. Following completion of the merger, the registration of our common stock and our reporting obligations with respect to our common stock under the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act,” are expected to be terminated. In addition, upon completion of the proposed merger, shares of Getty Images common stock will no longer be listed on the New York Stock Exchange or any other stock exchange or quotation system.

 

Q: What happens if the merger is not completed?

 

A:

If the merger agreement is not adopted by our stockholders, or if the merger is not completed for any other reason, our stockholders will not receive any payment for their shares pursuant to the merger agreement. Instead, Getty Images will remain as a public company and our common stock will continue to be registered under the Exchange Act and listed and traded on the New York Stock Exchange. Under specified circumstances, Getty Images may be required to pay Parent a termination fee or reimburse Parent for its

 

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out-of-pocket expenses or Parent may be required to pay Getty Images a termination fee, in each case, as described in “The Merger Agreement—Termination Fee” beginning on page 106.

The Special Meeting

 

Q: Where and when is the special meeting?

 

A: The special meeting will be held on June 20, 2008 at the headquarters of the Company at 601 North 34th Street, Seattle, Washington 98103 at 9:00 a.m., local time.

 

Q: What matters will be voted on at the special meeting?

 

A: You will be asked to consider and vote on the following proposals:

 

   

adoption of the merger agreement;

 

   

approval of any motion to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement; and

 

   

such other business that may properly come before the special meeting or any adjournment or postponement of the special meeting.

 

Q: Does our board of directors recommend that our stockholders vote “FOR” the adoption of the merger agreement?

 

A: Yes. After careful consideration, our board of directors, by a unanimous vote of the directors (other than Mark Getty and Jonathan Klein, both of whom abstained from the vote) recommends that you vote:

 

   

FOR” the adoption of the merger agreement; and

 

   

FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

You should read “Special Factors—Reasons for the Merger; Recommendation of our Board of Directors; Fairness of the Merger” beginning on page 35 for a discussion of the factors that our board of directors considered in deciding to recommend the adoption of the merger agreement. In addition, in considering the recommendation of our board of directors with respect to the merger agreement, you should be aware that some of the Company’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. See “Special Factors—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 66.

 

Q: How do the directors and executive officers of the Company intend to vote?

 

A: Mark Getty and the other Rollover Stockholders each have executed a voting agreement with Parent, pursuant to which they have agreed to vote all shares of our common stock owned by them (constituting approximately 15.0% of the shares of our common stock outstanding as of the record date for the special meeting) in favor of the adoption of the merger agreement. In addition, as of the record date for the special meeting, our other directors and executive officers had the right to vote, in the aggregate, an additional 406,779 shares of our common stock, which represented approximately 0.7% of the outstanding shares of our common stock. These directors and executive officers have informed us that they intend to vote all of their shares of common stock “FOR” the adoption of the merger agreement.

 

Q: Are all stockholders of the Company as of the record date entitled to vote at the special meeting?

 

A:

Yes. All stockholders who own our common stock at the close of business on May 20, 2008, which is the record date for the special meeting, will be entitled to vote (in person or by proxy) the shares of our

 

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common stock that they hold on that date at the special meeting, or any adjournments of the special meeting. However, votes of shares of our common stock held by the Rollover Stockholders and Jonathan Klein will be disregarded for purposes of the Special Stockholder Approval.

 

Q: What constitutes a quorum for the special meeting?

 

A: The presence at the special meeting in person or by proxy of the holders of a majority of all outstanding shares of our common stock entitled to vote at the special meeting as of the close of business on the record date will constitute a quorum for purposes of the special meeting.

 

Q: What information do I need to attend the special meeting?

 

A: Only stockholders and their proxies may attend the special meeting. As a result, you will need an admission ticket to attend the special meeting. If you are a record stockholder who received a paper copy of this proxy statement, an admission ticket is included with the mailing and is attached to the proxy card. If you hold your shares in “street name” through a broker, bank or other nominee or if you have received your proxy materials electronically, you may obtain an admission ticket in advance by sending a written request, along with proof of ownership, such as a bank or brokerage account statement, to us at Investor Relations, Getty Images, Inc., 601 North 34th Street, Seattle, Washington 98103, attn: Investor Relations. If you arrive at the special meeting without an admission ticket, we will admit you only if we are able to verify that you were an actual stockholder of Getty Images as of the record date for the special meeting.

 

Q: What vote of the Company’s stockholders is required to adopt the merger agreement?

 

A: The adoption of the merger agreement requires the affirmative vote of (a) the holders of a majority of the outstanding shares of our common stock entitled to vote on the adoption of the merger agreement at the special meeting, which we refer to as the “Company Stockholder Approval,” and (b) the holders of a majority of the number of shares of our common stock present in person or by proxy and voting at the special meeting (other than the Rollover Stockholders and Jonathan Klein), which we refer to as the “Special Stockholder Approval.” A failure to vote your shares of common stock, abstention from the vote or “broker non-vote” will have the same effect as voting “AGAINST” the adoption of the merger agreement for purposes of the Company Stockholder Approval but will have no effect for purposes of the Special Stockholder Approval. A “broker non-vote” occurs when a broker does not have discretion to vote on the matter and has not received instructions from the beneficial holder as to how such holder’s shares are to be voted on the matter.

 

Q: What vote of the Company’s stockholders is required to adjourn the special meeting for the purpose of soliciting additional proxies to adopt the merger agreement?

 

A: Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires, assuming a quorum is present with respect to the proposal, the affirmative vote of the holders of stock casting a majority of the votes entitled to be cast by all of the holders of the stock constituting such quorum. A failure to vote your shares of common stock or a broker non-vote will have no effect on the outcome of the vote to approve the proposal to adjourn the special meeting. An abstention will have the same effect as voting “AGAINST” any proposal to adjourn the special meeting. If a quorum is not present at the special meeting, the stockholders entitled to vote at the special meeting may adjourn the meeting until a quorum shall be present.

 

Q: How do I vote my shares without attending the special meeting?

 

A:

If you hold shares in your name as a stockholder of record, then you received this proxy statement and a proxy card from us. You may submit a proxy for your shares by internet, telephone or mail without attending the special meeting. To submit a proxy by internet or telephone twenty-four hours a day, seven

 

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days a week, follow the instructions on the proxy card. To submit a proxy by mail, complete, sign and date the proxy card and return it in the postage-paid envelope provided. Internet and telephone proxy facilities for stockholders of record will close at 11:59 p.m., Pacific Daylight Savings Time, on June 19, 2008. If you hold shares in “street name” through a broker, bank or other nominee, then you received this proxy statement from the nominee, along with the nominee’s voting instructions. You should instruct your broker, bank or other nominee on how to vote your shares of common stock using the voting instructions.

 

Q: How do I vote my shares in person at the special meeting?

 

A: If you hold shares in your name as a stockholder of record, you may vote those shares in person at the meeting by giving us a signed proxy card or ballot before voting is closed. If you would like to do that, please bring proof of identification with you to the special meeting. Even if you plan to attend the special meeting, we strongly encourage you to submit a proxy for your shares in advance as described above, so your vote will be counted if you later decide not to attend.

If you hold shares in “street name” through a broker, bank or other nominee, you may vote those shares in person at the meeting only if you obtain and bring with you a signed proxy from the necessary nominee giving you the right to vote the shares. To do this, you should contact your nominee.

 

Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A: Your broker will not vote your shares on your behalf unless you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct it to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting “AGAINST” the adoption of the merger agreement for purposes of the Company Stockholder Approval but will have no effect for purposes of the Special Stockholder Approval or the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

Q: Can I revoke or change my vote?

 

A: Yes. If you hold your shares through a broker, bank, or other nominee, you have the right to change or revoke your proxy at any time before the vote is taken at the special meeting by following the directions received from your broker, bank or other nominee to change those instructions. If you hold your shares in your name as a stockholder of record, you have the right to change or revoke your proxy at any time before the vote is taken at the special meeting by (a) delivering to our Corporate Secretary, at 601 North 34th Street, Seattle, Washington 98103, a signed written notice of revocation, bearing a date later than the date of the proxy, stating that the proxy is revoked, (b) attending the special meeting and voting in person (your attendance at the meeting will not, by itself, change or revoke your proxy—you must vote in person at the meeting to change or revoke a prior proxy), (c) submitting a later-dated proxy card or (d) submitting a proxy again at a later time by telephone or internet prior to the time at which the telephone and internet proxy facilities close by following the procedures applicable to those methods of submitting a proxy.

 

Q: What does it mean if I get more than one proxy card or vote instruction form?

 

A: If your shares are registered differently and are in more than one account, you may receive more than one proxy card or voting instruction form. Please complete, sign, date and return all of the proxy cards and voting instruction forms you receive regarding this special meeting (or submit your proxy for all shares by telephone or internet) to ensure that all of your shares are voted.

 

Q: Are appraisal rights available?

 

A:

Yes. As a holder of common stock of the Company, you are entitled to appraisal rights under Delaware law if (a) you do not vote in favor of adopting the merger agreement, (b) you deliver to us a written demand for

 

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appraisal prior to the vote at the special meeting and (c) you satisfy certain other conditions. See “Appraisal Rights” beginning on page 110.

 

Q: Will any proxy solicitors be used in connection with the special meeting?

 

A: Yes. To assist in the solicitation of proxies, the Company has engaged Innisfree M&A Incorporated.

 

Q: Who will count the votes cast at the special meeting?

 

A: A representative of our transfer agent, Bank of New York, will count the votes and act as an inspector of election. Questions regarding stock certificates or other matters pertaining to your shares may be directed to us at (206) 925-6057.

 

Q: Should I send in my stock certificates now?

 

A: No. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES WITH YOUR PROXY.

If you hold your shares in your name as a stockholder of record, then shortly after the merger is completed you will receive a letter of transmittal with instructions informing you how to send in your stock certificates to the paying agent in order to receive the merger consideration in respect of your shares of our common stock. You should use the letter of transmittal to exchange your stock certificates for the merger consideration which you are entitled to receive as a result of the merger. If you hold your shares in “street name” through a broker, bank or other nominee, then you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your “street name” shares in exchange for the merger consideration.

 

Q: Who can help answer my other questions?

 

A: If you have more questions about the merger, need assistance in submitting your proxy or voting your shares, or need additional copies of the proxy statement or the enclosed proxy card, you should contact Investor Relations in writing at Getty Images, Inc., 601 North 34th Street, Seattle, Washington 98103, attn: Investor Relations, or by telephone at (206) 925-6057. You may also contact the Company’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Brokers and dealers call: (212) 750-5834 (collect)

Stockholders and all others call toll free: (888) 750-5834

 

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SPECIAL FACTORS

Background of the Merger

Our board of directors and management regularly evaluate our business and operations, and in furtherance thereof periodically review and assess strategic alternatives available to enhance value to our stockholders. As part of this process, our board and management have regularly considered opportunities that could complement, enhance or expand our current business or products or that might otherwise offer growth opportunities for the Company. As a result, we have acquired a large number of smaller companies during the past several years. In addition, we have held discussions from time to time with certain third parties regarding potential strategic transactions.

As part of the Company’s continuing review of strategic alternatives and financial matters, at a meeting of our board of directors on June 6, 2007, our board authorized our senior management to provide certain information about the Company to Goldman Sachs to allow Goldman Sachs to prepare analyses regarding the Company and review potential strategic alternatives for the Company.

On June 21, 2007, at a meeting of our board of directors, our board authorized Goldman Sachs to perform a preliminary financial analysis of the Company and to assist the Company in reviewing potential strategic alternatives for the Company and to present such analysis to our board at a future meeting.

Our board of directors met on September 18, 2007. At this meeting, representatives of Weil, Gotshal & Manges LLP, which we refer to as “Weil Gotshal,” the Company’s outside legal advisors, made a presentation to our board related to our board’s fiduciary duties and other considerations in connection with our board’s evaluation of potential strategic alternatives.

Our board met again on September 19, 2007, during which meeting Goldman Sachs reviewed a preliminary financial analysis of the Company and discussed with our board the Company’s potential strategic alternatives, including maintaining the status quo, conducting a stock repurchase, undertaking a recapitalization or pursuing a sale of the Company. In connection with Goldman Sachs’ discussion related to a potential sale transaction, Goldman Sachs reviewed with our board a number of private equity sponsors that Goldman Sachs believed might be interested in pursuing a transaction with the Company, including, among others, Hellman & Friedman LLC, which we refer to as “H&F,” and three other private equity sponsors which we refer to as “Sponsor A,” “Sponsor B,” and “Sponsor C,” and a number of strategic parties, including, among others, two strategic parties which we refer to as “Strategic Party A” and “Strategic Party B,” that Goldman Sachs believed might be interested in pursuing a transaction with the Company. Our board discussed each of the alternatives and potentially interested private equity sponsors and strategic parties. After discussion with Goldman Sachs and Weil Gotshal and taking into account that our board had not yet determined which potential strategic alternative was in the best interests of our stockholders, our board authorized an exploratory process to gain additional insight into how third parties viewed the Company’s value. Our board believed this process would be helpful in connection with considering a number of potential strategic alternatives, including a potential sale of the Company, a repurchase by the Company of a portion of its outstanding shares and a potential leveraged recapitalization of the Company. Our board then authorized management, with the assistance of Goldman Sachs, to begin preparing materials related to the Company’s business and operations to present to our board and ultimately deliver to potential acquirors in connection with an exploratory process to determine general levels of interest in the Company and preliminary views on valuation. Our board discussed the potential business risks associated with sharing confidential information with strategic parties if they were included in the exploratory process, as well as the fact that strategic parties generally would require less time to conduct due diligence on the Company due to their broad familiarity with the digital media business. As a result of these discussions, our board determined that only selected private equity sponsors would be included in the exploratory process and that the board would revisit whether to include strategic parties if it became clearer that pursuing a sale of the Company was in the best interests of our stockholders.

 

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In addition, our board established the following procedures in connection with the proposed evaluation of strategic alternatives:

 

   

members of our management were prohibited from having any contact with any of the private equity sponsors or strategic parties involved in the process without representatives of Weil Gotshal or Goldman Sachs present;

 

   

members of our management were prohibited from discussing any employment or incentive compensation terms with any sponsor or strategic party until the end of the process if the board determined to pursue a sale transaction and then only with the prior consent of the members of our board who were not employees of the Company and who would not have interests in the transaction that differed from those of our stockholders generally (other than with respect to any options to acquire our common stock that they may hold), which directors consisted of James Bailey, Andrew Garb, Alan Spoon, Christopher Sporborg and Michael Stein, whom we refer to, collectively, as the “Independent Directors”;

 

   

Mark Getty, who is our chairman and co-founder, and Getty Investments, which has the right to purchase the “Getty Images” name and trademarks for nominal consideration in connection with a change of control of the Company, were prohibited from having any discussions with any sponsor or strategic party with respect to the “Getty Images” name and trademarks, equity participation in any potential transaction or any other matter relating to the Company until the end of the board’s strategic alternatives process and then only with the prior consent of the Independent Directors; and

 

   

the Independent Directors would meet regularly without the presence of Mark Getty and Jonathan Klein, who is our chief executive officer and co-founder and member of our board and a member of the board of Getty Investments, which meetings we refer to as “executive sessions.” During the process of evaluating strategic alternatives, the Independent Directors would make all material decisions, on behalf of our board, with regard to the strategic alternatives process, the parties who would be invited to participate in the process and the ultimate recommendation with respect to whether the Company should pursue any of the strategic alternatives being considered. As discussed below, at the November 28, 2007 executive session, the Independent Directors determined to modify the procedures described in this bullet point in connection with a decision to move consideration of strategic alternatives beyond the exploratory process.

During the remainder of September 2007 and the first half of October 2007, our management, with the assistance of Goldman Sachs, began preparing materials, including financial forecasts, related to the Company’s business and operations to present to our board and ultimately deliver to the potential acquirors.

On October 8, 2007, the Company received an unsolicited, written inquiry from one of the Company’s stockholders, which we refer to as “Stockholder A,” regarding an analysis of the Company prepared by Stockholder A and its advisors which Stockholder A desired to present to the Company. Stockholder A requested that the Company enter into a confidentiality agreement with it in order to obtain its analysis, but did not propose any valuation of the Company or potential transaction between Stockholder A and the Company.

Our board met on October 10, 2007, during which meeting Goldman Sachs provided an update on the exploratory process. Our board discussed approaching sponsors, including the initial information to be provided and the agenda for the meetings between the sponsors and the Company’s management. At the meeting, Mr. Getty expressed a desire for Getty Investments to receive the information related to the Company that would be provided to the sponsors in connection with the exploratory process so that Getty Investments would be able to make an informed decision in connection with any future discussions with sponsors related to the option Getty Investments holds with respect to the “Getty Images” name and trademarks and if any of the sponsors were to ask Getty Investments to roll over its equity interests in connection with a sale of the Company. The Independent Directors determined that it would not be appropriate at such time to provide Getty Investments with such

 

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information, but agreed and acknowledged that this issue would need to be revisited if our board decided to continue its review of a potential transaction beyond the exploratory process. In addition, the Independent Directors directed Goldman Sachs and the Company to approach H&F, Sponsor A, Sponsor B and Sponsor C to initiate discussions regarding the exploratory process. During the early stages of the exploratory process, the Independent Directors desired to limit the number of participants to reduce the risk of disclosure and to minimize distraction to the Company’s management. To that end, the Independent Directors selected H&F, Sponsor A, Sponsor B and Sponsor C based on their previous expressions of interest to Goldman Sachs, their investment experience in media or other businesses similar to the Company, the equity believed to be available in their funds and industry expertise within each such firm. The Independent Directors also determined not to include Stockholder A in the exploratory process. Based on information available to the Independent Directors regarding Stockholder A’s available capital and its investment strategy and current investments, the Independent Directors did not believe that Stockholder A had the equity necessary to purchase the Company or extensive experience purchasing publicly held companies. The Independent Directors directed management of the Company to refrain from disclosing to Stockholder A that the Company was engaged in an evaluation of strategic alternatives.

Between October 12, 2007 and October 16, 2007, Goldman Sachs contacted representatives of each of Sponsor A, Sponsor B, Sponsor C and H&F to invite them to participate in the exploratory process if they had sufficient interest. Goldman Sachs informed them of the procedures the board had established for the process, including the restrictions on contacting any members of the Company’s management, Mark Getty or Getty Investments, and that the exploratory process was part of the Company’s continuing review of strategic alternatives and no decision had been made with respect to any course of action. Each of H&F, Sponsor A, Sponsor B and Sponsor C indicated that it was interested in taking part in the exploratory process.

Between October 18, 2007 and October 22, 2007, the Company entered into confidentiality agreements with each of Sponsor A, Sponsor B, Sponsor C and H&F so that the Company could share certain non-public information in connection with the potential transaction and the sponsors could begin due diligence on the Company. The confidentiality agreements entered into between the Company and each of the sponsors were in substantially the same form and restricted the sponsors from (a) contacting any officer, director, employee or affiliate of the Company, including Mr. Getty and Getty Investments, and (b) entering into or establishing with any financing source any exclusive, lock-up or similar agreement, arrangement or understanding that could reasonably be expected to prevent such financing source from providing or seeking to provide financing to any third party in connection with a transaction related to the Company. Each such confidentiality agreement also contained customary standstill and non-solicitation provisions. In addition, in light of the significant concerns raised by members of our board regarding the confidentiality of the exploratory process, none of the confidentiality agreements permitted the sponsors, without the prior written consent of the Company, to engage any outside advisors, including legal and financial advisors, or financing sources in connection with their consideration of the transaction.

As part of the exploratory process, between October 23, 2007 and October 30, 2007, representatives of the Company and Goldman Sachs met with each of Sponsor A, Sponsor B, Sponsor C and H&F. During these meetings, representatives of the Company made substantially similar presentations about the Company, including its recent business results and financial performance, financial forecasts, existing financial condition, strategic plans and prospects.

During the initial stages of the exploratory process, certain Independent Directors, Goldman Sachs and Weil Gotshal discussed the advisability of adding to the exploratory process an additional sponsor, which we refer to as “Sponsor D,” that had previously, but informally, indicated interest to Goldman Sachs regarding a potential transaction with the Company. The Independent Directors determined to add Sponsor D to the exploratory process based on their view that Sponsor D had the equity necessary to independently purchase the Company and was familiar with our industry.

 

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Goldman Sachs contacted Sponsor D on October 31, 2007 to invite Sponsor D to participate in the exploratory process if it had sufficient interest. Goldman Sachs informed Sponsor D of the procedures the board had established for the process and that the exploratory process was part of the Company’s continuing review of strategic alternatives and no decision had been made with respect to any course of action. Sponsor D indicated that it was interested in taking part in the exploratory process.

On November 1, 2007, representatives of the Company and Goldman Sachs met with Sponsor D and representatives of the Company presented substantially the same information about the Company as had previously been provided to Sponsor A, Sponsor B, Sponsor C and H&F. The Company and Sponsor D entered into a confidentiality agreement, which was in substantially the same form as the confidentiality agreements executed by Sponsor A, Sponsor B, Sponsor C and H&F so that the Company could share certain non-public information in connection with the potential transaction and Sponsor D could begin due diligence on the Company.

During the month of November, representatives of the Company and Goldman Sachs conducted further meetings with Sponsor A, Sponsor B, Sponsor C, Sponsor D and H&F in connection with their due diligence reviews of the Company. During this period, representatives of the sponsors made periodic requests to Goldman Sachs with respect to engaging financing sources and Goldman Sachs reiterated that, due to confidentiality concerns, our board would not permit contacting financing sources during the exploratory process.

At a board meeting held on November 6, 2007, which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs, a representative of Goldman Sachs provided an update for our board on the exploratory process to date. Among other things, the representative of Goldman Sachs provided an overview of the meetings with the sponsors, each of which expressed interest in pursuing a transaction with the Company, and the primary diligence questions about the Company and its business that had arisen during the exploratory process to date. Following this initial discussion, our board determined to meet again during the week of November 26 to receive an updated report regarding the exploratory process and to allow the Independent Directors to decide at that time whether the Company’s review of strategic alternatives should proceed beyond the exploratory process. After the board meeting was adjourned, the Independent Directors convened an executive session, which meeting was attended by representatives of Weil Gotshal and Goldman Sachs. The Independent Directors then directed Goldman Sachs to prepare and deliver to each of H&F, Sponsor A, Sponsor B, Sponsor C and Sponsor D a letter requesting that it submit to Goldman Sachs by November 26, 2007 a preliminary indication of interest for a potential acquisition of the Company, including an indicative price per share.

On November 12, 2007, the Company entered into an engagement letter with Goldman Sachs confirming the arrangements under which Goldman Sachs was engaged by the Company as financial advisor in connection with its exploration of strategic alternatives.

On November 14, 2007, Goldman Sachs sent to H&F, Sponsor A, Sponsor B, Sponsor C and Sponsor D a letter regarding the next steps in the exploratory process and the request that each submit to Goldman Sachs preliminary indications of interest by November 26, 2007.

On November 18, 2007, Goldman Sachs told each of H&F, Sponsor A, Sponsor B, Sponsor C and Sponsor D that it should assume, for purposes of formulating its indication of interest, that it would be able to leverage the acquisition at five times (5x) the Company’s estimated calendar year 2007 earnings before interest, income tax, and depreciation and amortization expense, as adjusted for acquisitions and other non-recurring events, which we refer to as “CY2007E Adjusted EBITDA.” The leverage assumption for the indications of interest was arrived at by Goldman Sachs and the Independent Directors based on discussions with Goldman Sachs’ leveraged finance group, then current market conditions, longer term assumptions about market conditions and an understanding of the Company’s business. Goldman Sachs also provided illustrative cost of debt terms that the sponsors should assume for purposes of their indications of interest. Goldman Sachs indicated

 

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to the sponsors that they were being requested to use these assumptions only so that the board of directors would have an equal basis for comparing their indications of interest and that it did not constitute the amount of debt financing or terms for such financing that the sponsors would be expected to obtain in connection with any potential transaction. Goldman Sachs also indicated that it was not proposing to provide any financing for a potential transaction with the Company.

On November 26, 2007, each of H&F, Sponsor A, Sponsor B, Sponsor C and Sponsor D submitted a preliminary, non-binding, written indication of interest to acquire the Company in a 100% cash transaction, in each case based on the leverage level and cost of debt assumptions previously provided by Goldman Sachs. H&F proposed a price of between $37.00 and $40.00 per share, Sponsor A proposed a price of $45.00 per share, Sponsor B proposed a price of between $37.00 and $40.00 per share, Sponsor C proposed a price of $40.00 per share and Sponsor D proposed a price of between $38.00 and $40.00 per share.

On November 28, 2007, our board convened a meeting to review the status of the exploratory process and to review the indications of interest submitted by H&F, Sponsor A, Sponsor B, Sponsor C and Sponsor D, which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. Representatives of Goldman Sachs reported to our board that each of the sponsors participating in the exploratory process expressed a desire to move to the next phase of the process if our board decided to proceed with a potential sale of the Company. Representatives of Goldman Sachs then summarized the indications of interest submitted by each of the sponsors and discussed Goldman Sachs’ perceptions regarding the strengths and weaknesses of the respective indications of interest. A representative of Goldman Sachs then described potential next steps in the process and a potential timeline in the event that the Independent Directors decided to move beyond the exploratory process. Our board then discussed the merit of having Goldman Sachs contact certain of the sponsors at the lower end of the valuation range to determine whether they would be willing to increase the price set forth in their indications of interest. Our board also discussed the benefits and risks of involving one or more additional sponsors, as well as the benefits and risks of approaching potential strategic buyers, to discuss interest in the Company in the event the Independent Directors determined to move beyond the exploratory process. A representative of Goldman Sachs noted that Goldman Sachs’ views on the most likely strategic buyers to be interested in the Company, including Strategic Party A and Strategic Party B, remained the same as those discussed at the meeting of our board on September 19, 2007, and recommended that any contact with potential strategic buyers be deferred until later in the process when our board had additional information about the private equity sponsors’ level of interest and value indications and made a decision to pursue a sale of the Company. In addition, our board expressed a desire to delay contacting Strategic Party A and Strategic Party B until later in the process due to confidentiality concerns, competitive sensitivities and a desire by our board to maintain control of the process.

The board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. After extensive discussion, the Independent Directors determined not to include any strategic buyers in the process at that time due to confidentiality concerns and the potential distraction to our business if information regarding a potential sale became public, as well as the potential business risks associated with the sharing of confidential information with strategic parties in connection with any due diligence review of the Company, as well as the fact that strategic parties generally would require less time to conduct due diligence on the Company due to their broad familiarity with the digital media business. The Independent Directors also determined, however, that selected strategic buyers should be given the opportunity to participate in the process in the future if the Company were to continue its consideration of a potential sale transaction.

The representatives of Goldman Sachs left the meeting, and representatives of Weil Gotshal discussed the fiduciary duties of the Independent Directors in connection with the decision to move beyond the exploratory process. The Independent Directors and representatives of Weil Gotshal then discussed any potential or perceived conflicts the Independent Directors may have in connection with such a decision. They discussed that Mr. Garb had previously served as a director of Getty Investments and was counsel to a law firm (and previously a partner

 

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in that firm) that has provided services to certain Getty family trusts of which Mr. Getty is a beneficiary, for which the firm received less than $50,000 of revenue in 2007. They also discussed that Mr. Bailey’s investment consulting firm has provided services to certain Getty family trusts, for which the firm received less than 1.2% of its total revenue in 2007. Each of Messrs. Garb and Bailey indicated that he could evaluate strategic alternatives for the Company on an independent basis. After receiving advice from the representatives of Weil Gotshal and in light of the de minimis nature of the relationship between Messrs. Garb’s and Bailey’s respective firms and the trusts, the statements by each of Messrs. Garb and Bailey that he could evaluate strategic alternatives for the Company on an independent basis, and the experience of each of Messrs. Garb and Bailey as directors of the Company and its predecessor since 1996 and their resulting knowledge of the Company, the Independent Directors determined that it would be beneficial and in the best interests of the Company for Messrs. Garb and Bailey to continue to participate in deliberations of the Independent Directors regarding potential strategic alternatives but that, in order to avoid even the appearance of any conflict of interest, Messrs. Garb and Bailey would abstain from any decision-making related to the process going forward, and that Messrs. Spoon, Sporborg and Stein, whom we refer to as the “Voting Independent Directors,” would make all future decisions regarding the evaluation of the strategic alternatives process, the parties who would be invited to participate in the process and the ultimate recommendation with respect to whether the Company should pursue any of the strategic alternatives being considered, including maintaining the status quo, conducting a stock repurchase, undertaking a recapitalization, or pursuing a sale transaction. At the time the Voting Independent Directors were designated, our board and the Company believed (and continue to believe) that the shareholder derivative actions relating to the Company’s stock option grant practices, which are described in “Litigation Related to the Merger,” were without merit. Moreover, the shareholder derivative actions do not allege that either Mr. Spoon or Mr. Stein engaged in any wrongdoing. Although Mr. Sporborg is alleged to have participated in the granting and receipt of allegedly backdated stock options, his potential liability, if proven, would not be material relative to his overall financial condition. The Voting Independent Directors then determined that each of the Voting Independent Directors would be a point of contact for Goldman Sachs and Weil Gotshal going forward, unless they determined at a later date it was necessary or appropriate to appoint one of them as the lead director for the remainder of the process.

The Independent Directors then discussed potential disadvantages with continuing the consideration of a sale transaction, such as the continued deterioration of the credit markets, the resulting difficulty private equity sponsors potentially would face in financing a transaction with the Company and the potentially significant distraction to our business if information regarding a potential sale became public. The Independent Directors also discussed the advantages to the Company and the stockholders of proceeding beyond the exploratory process, including the possibility of achieving a substantial premium to the current share price for the stockholders. After discussing all of these considerations as well as maintaining the status quo, conducting a stock repurchase and undertaking a recapitalization, the Voting Independent Directors determined to continue the Company’s consideration of a sale transaction and the other strategic alternatives and to move beyond the exploratory process with respect to a sale transaction. The Voting Independent Directors also determined that it would now be appropriate for the Company to agree to Mr. Getty’s prior request that the Company provide Getty Investments with the same information related to the Company and its business and operations that had been provided to the sponsors involved in the exploratory process, subject to the execution of a confidentiality agreement between the Company and Getty Investments and subject to Getty Investments’ continuing to be prohibited from communicating with any potential acquirors involved in the strategic alternatives process.

On November 30, 2007, in response to an additional request by Stockholder A to share the results of an analysis regarding the Company’s business that had been prepared by Stockholder A and its advisors, the Company and Stockholder A entered into a confidentiality agreement, which agreement contained a standstill and non-solicit provision similar to that contained in the confidentiality agreements entered into with sponsors involved in the exploratory process. After the confidentiality agreement was executed, Stockholder A shared a copy of the analysis with the Company, which did not include any valuation of the Company. Stockholder A did not mention any interest in a possible transaction with the Company. Based on the prior determination of the

 

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Independent Directors, Stockholder A was not informed of the strategic alternatives process in which the Company was engaged.

Though the exploratory process had been kept confidential by the Company and its advisors, during the months of November and December, Goldman Sachs had received unsolicited inquiries from several additional private equity sponsors who expressed interest in evaluating a transaction with the Company, including inquiries from private equity sponsors that we refer to as “Sponsor E,” “Sponsor F” and “Sponsor G.” Following the November 28, 2007 board meeting and after subsequent discussions between representatives of Goldman Sachs and the sponsors and between representatives of Goldman Sachs and one of our Voting Independent Directors, such Voting Independent Director directed Goldman Sachs to eliminate Sponsor D from the process based on its perceived lack of enthusiasm about the Company relative to the other sponsors that had submitted proposals, and to invite Sponsor E, Sponsor F and Sponsor G to participate in the Company’s strategic alternatives process. While Sponsor D had submitted an indication of interest comparable to, and in some cases higher than, the other initial sponsors, Sponsor D did not exhibit the same level of preparation or knowledge of or interest in the Company’s business as the other sponsors.

On December 7, 2007, Goldman Sachs informed Sponsor D that it would no longer be included in the Company’s process of exploring strategic alternatives. On the same day, Goldman Sachs contacted each of Sponsors E, F and G to notify them that they were invited to participate in the process being undertaken by the Company. In each case, Goldman Sachs informed these sponsors of the procedures the board had established for the process and that the process was part of the Company’s continuing review of strategic alternatives and no decision had been made with respect to any course of action. Each of the sponsors accepted the invitation.

On December 10, 2007, the Company and each of Sponsor E, Sponsor F and Sponsor G entered into confidentiality agreements in substantially the same form as the confidentiality agreements signed by Sponsor A, Sponsor B, Sponsor C, Sponsor D and H&F so that the Company could share certain non-public information in connection with the potential transaction and Sponsor E, Sponsor F and Sponsor G could begin due diligence on the Company.

Beginning on December 10, 2007, the Company and a number of the sponsors participating in the process, including H&F, entered into a number of amendments to their respective confidentiality agreements pursuant to which such sponsors were permitted to engage certain advisors and potential financing sources, which were previously prohibited under their respective confidentiality agreements, to help them evaluate the Company and a potential transaction.

On December 12, 2007, Stockholder A indicated to Goldman Sachs that it was interested in a potential transaction with the Company and would be interested in participating in any process that might be ongoing. In light of the Independent Directors’ prior determination regarding Stockholder A, Goldman Sachs did not inform Stockholder A that the Company was engaged in a process of evaluating strategic alternatives, but indicated to Stockholder A that it would be contacted if it was later determined to involve Stockholder A in such a process.

On December 17, 2007, the Company and Getty Investments entered into a confidentiality agreement so that the Company could provide Getty Investments and certain of its advisors with information related to the Company and its business and operations during the strategic alternatives process, including the information that had previously been provided to the sponsors involved in the exploratory process. The confidentiality agreement contained a standstill provision similar to that contained in the other confidentiality agreements that had been entered into between the Company and the sponsors. Weil Gotshal advised representatives of Getty Investments that they would not be permitted to communicate with any potential acquirors in relation to Getty Investments’ rights with respect to the “Getty Images” name and trademarks or with respect to a rollover of its shares until later in the process, and then only if the Voting Independent Directors determined to pursue a sale of the Company.

 

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During the first half of the month of December 2007, the Company’s management continued to refine its projections and operating budget for 2008. Based on their analysis, Mr. Klein and other senior members of management determined that it was appropriate to amend the Company’s financial forecasts that had previously been provided to the sponsors to increase projected revenues and associated costs for 2008 to be consistent with the projections and 2008 operating budget, which also resulted in an increase in projected revenues and associated costs for 2009-2012. The revised financial forecasts, which we refer to in this proxy statement as the “Management Projections,” were made available to our board of directors and Goldman Sachs. In addition, portions of the Management Projections were also made available to H&F, Sponsor A, Sponsor B and Sponsor C on December 19, 2007 and were also made available to Sponsor E and Sponsor F after they submitted their initial indications of interest and were invited to continue to participate in the process, as discussed below. See “—Certain Projections.”

On December 21, 2007, Goldman Sachs requested that each of Sponsor E, Sponsor F and Sponsor G provide an indication of interest, including an indicative price per share. Goldman Sachs had previously requested that each of these sponsors assume the same level of debt financing (five times (5x) the CY2007E Adjusted EBITDA) and illustrative cost of debt terms for its indication of interest that H&F, Sponsor A, Sponsor B, Sponsor C and Sponsor D had been requested to use in connection with their initial indications of interest. Goldman Sachs had also indicated to the sponsors that they were being requested to use these assumptions only so that the board of directors would have an equal basis for comparing their indications of interest and that it did not constitute the amount of debt financing or terms for such financing that the sponsors would be expected to obtain in connection with any potential transaction. Goldman Sachs also indicated that it was not proposing to provide any financing for a potential transaction with the Company. Sponsor E orally proposed a price of between $36.00 and $40.00 per share, Sponsor F orally proposed a price of between $38.00 and $40.00 per share and Sponsor G orally proposed a price of between $35.00 and $38.00 per share.

On December 21, 2007, our board convened a telephonic meeting to review the status of the process and the indications of interest orally proposed by Sponsor E, Sponsor F and Sponsor G, which meeting was attended by representatives of Weil Gotshal and Goldman Sachs and portions of which were attended by management. A representative of Goldman Sachs provided our board with an overview of ongoing due diligence reviews being conducted by H&F, Sponsor A, Sponsor B and Sponsor C. The representative of Goldman Sachs then discussed whether the board desired that Goldman Sachs or another financial institution offer acquisition financing, which is often referred to as “stapled financing.” The representative of Goldman Sachs noted that due to the then current state of the credit markets, however, it would be difficult to finalize terms for stapled financing and that Goldman Sachs’ recommendation was to postpone any discussion of stapled financing availability and terms. From time to time during subsequent board meetings and executive sessions, the issue of stapled financing was discussed, but at no time did our board ever request that Goldman Sachs or any other financial institution provide, or seek internal authorization to provide, stapled financing; nor did Goldman Sachs or any other financial institution at any time offer to provide stapled financing. The representative of Goldman Sachs then discussed the three new sponsors that had been added to the process – Sponsor E, Sponsor F and Sponsor G – and summarized the oral indications of interest communicated to Goldman Sachs by each such sponsor. Our board and representatives of Goldman Sachs then discussed whether Goldman Sachs should contact potential strategic buyers with respect to a potential transaction.

The Independent Directors then met in executive session and discussed the prior removal of Sponsor D from the process and the prior admission of Sponsor E, Sponsor F and Sponsor G to the process. The Voting Independent Directors ratified the removal of Sponsor D and the admission of Sponsor E, Sponsor F and Sponsor G to the process and determined to eliminate Sponsor G from the process because its indication of interest contained the lowest valuation range relative to the other sponsors involved in the process and because of the perceived lack of enthusiasm of Sponsor G about the Company relative to the other sponsors that had submitted indications of interest. As was the case with Sponsor D, Sponsor G did not exhibit the same level of preparation or knowledge of or interest in the Company’s business as the other sponsors. The Voting Independent Directors then asked Goldman Sachs to request Sponsor E and Sponsor F to provide their indications of interest

 

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in written form. The Independent Directors then revisited whether Goldman Sachs should contact potential strategic buyers with respect to a potential transaction. In light of the potential business risks associated with the sharing of confidential information with strategic parties, as well as the fact that the strategic parties most likely to be interested in acquiring the Company generally would require less time to conduct due diligence on the Company due to their familiarity with the digital media business, the Voting Independent Directors determined not to contact potential strategic buyers at that point in the strategic alternatives process.

After the meeting on December 21, 2007, Goldman Sachs informed Sponsor G that it would no longer be included in the exploratory process. Goldman Sachs also requested that Sponsor E and Sponsor F submit written indications of interest. Later that day, Goldman Sachs received a preliminary written, non-binding indication of interest from Sponsor E, which contained a revised proposed price of between $39.00 and $41.00 per share.

On December 23, 2007, Goldman Sachs received a preliminary written, non-binding indication of interest from Sponsor F that reaffirmed its orally proposed price of between $38.00 and $40.00 per share.

During the month of January, the Company’s management and Goldman Sachs met with H&F and Sponsor A, Sponsor B, Sponsor C, Sponsor E and Sponsor F to discuss due diligence matters with respect to the Company. Also during this period, the Company’s management and Goldman Sachs met with potential financing sources for the various sponsors.

On January 8, 2008, a meeting of our board was convened, which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. During the meeting, a representative of Goldman Sachs provided our board with an update on the process. The representative also noted that it was becoming increasingly more difficult to obtain debt financing for acquisitions but that Goldman Sachs did not perceive any changes in the interest among the remaining private equity sponsors in continuing to pursue an acquisition of the Company. Goldman Sachs also discussed the possibility of delaying or terminating the process in light of market conditions.

The board of directors and representatives of Goldman Sachs then discussed the six remaining sponsors – H&F, Sponsor A, Sponsor B, Sponsor C, Sponsor E and Sponsor F – evaluating the Company. A representative of Goldman Sachs noted that all six sponsors had requested additional time to finalize their debt financing arrangements before being required to submit their bids. The representative of Goldman Sachs then discussed a potential timetable with regard to a request for bids from the sponsors regarding a potential transaction. Our board and representatives of Goldman Sachs then discussed the timing of when Goldman Sachs should contact potential strategic buyers, specifically Strategic Party A and Strategic Party B.

Our board, without Mark Getty present, then discussed the involvement of Getty Investments in the potential transaction and the issues surrounding Getty Investments’ contractual right to acquire the “Getty Images” name and trademarks upon a change of control. Our board then directed Goldman Sachs to follow up with the sponsors to determine whether the sponsors viewed the Company’s name as a critical component of the transaction, whether they would pursue a transaction with the Company with or without Getty Investments participating in such transaction, and, if Getty Investments were to participate in such a transaction, the general terms of such participation.

The Independent Directors then met in executive session along with representatives of Weil Gotshal and Goldman Sachs. The Voting Independent Directors determined that, as an initial step, the Company’s advisors should engage Getty Investments’ advisors in preliminary discussions to understand Getty Investments’ expectations, if any, with respect to a potential transaction. The Independent Directors then discussed the possibility of approaching Strategic Party A and Strategic Party B to determine their interest in a potential transaction. After discussion, the Voting Independent Directors directed Goldman Sachs to contact Strategic Party A and Strategic Party B during the week of January 14, 2008. The Independent Directors and Goldman Sachs then discussed the decline in, and volatility of, the Company’s stock price and the volatility and continued

 

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deterioration in the debt financing markets since the exploratory process commenced, and the possible impact of such volatility on the value of bids that might be received if the Voting Independent Directors were to authorize the sponsors to submit bids to acquire the Company. The Independent Directors and Goldman Sachs also discussed the possibility of delaying or terminating the process in light of the conditions in the debt financing markets. While the sponsors had requested additional time to finalize their debt financing arrangements, the Independent Directors were informed that all of the remaining sponsors were actively engaged with financing sources and, in some cases, were making progress on their financing commitments. While it was possible that conditions in the financing markets could improve if the process were delayed, because it was also possible that conditions could further deteriorate, a delay could jeopardize the momentum with the sponsors and make it difficult to restart the process. The Independent Directors were also informed that the sponsors and their advisors were continuing their due diligence and remained enthusiastic about the opportunity to acquire the Company. After this discussion, the Voting Independent Directors determined that continuing the process remained in the best interests of the Company’s stockholders.

Our board then reconvened, without representatives of Goldman Sachs present, and Weil Gotshal then discussed certain significant issues in connection with the preparation of a merger agreement if the Voting Independent Directors were to determine to request bids. The Voting Independent Directors determined that the agreement should include, among other things, (a) a “go shop” provision that would permit the Company to actively solicit alternative transactions for a limited period of time after the signing of the agreement (including providing for a lower termination fee in the event our board determined to terminate the agreement to enter into an alternative transaction with a party that made a proposal prior to the end of this limited period), (b) a termination fee payable by the acquiror if it failed to complete the transaction under certain circumstances and (c) the ability of the Company to seek specific performance. Our board then discussed Mr. Klein’s desire to obtain independent counsel for himself and for management of the Company generally.

The Independent Directors then met in executive session along with representatives of Weil Gotshal to discuss Mr. Klein’s request. The Voting Independent Directors concluded that representation of each of Mr. Klein and management by separate counsel at the Company’s expense was consistent with the best interests of the Company’s stockholders in that it would make the sales process more efficient and permit them to be well prepared to quickly address any issues with respect to management arrangements to the extent they arose later in the process, which were anticipated to be an important aspect of any potential sale transaction. As a result, the Voting Independent Directors authorized the Company to reimburse the fees and expenses of separate counsel representing each of Mr. Klein and management if a sale transaction was actually pursued. The Voting Independent Directors also authorized the Company to provide Mr. Klein’s counsel with certain requested materials regarding the process.

On January 10, 2008, members of management and representatives from Goldman Sachs met with representatives (excluding Mark Getty) of Getty Investments to discuss the business and operations of the Company.

Between January 10, 2008 and January 18, 2008, Goldman Sachs contacted H&F, Sponsor A, Sponsor B, Sponsor C, Sponsor E and Sponsor F to discuss their expectations with respect to Getty Investments, including whether they expected the Company would be permitted to continue to use the “Getty Images” name and trademarks after any potential transaction and whether a rollover by Getty Investments was a requirement for any sponsor. During the call between H&F and Goldman Sachs, H&F indicated that it expected the Company would be able to continue to use the “Getty Images” name and trademarks and that, in light of Mr. Getty’s significant knowledge with respect to the Company and the industry in which it operates, it would be willing to consider a rollover investment by Getty Investments but would also be prepared to acquire the Company without such a rollover. In addition, H&F indicated to Goldman Sachs that, prior to entering into any definitive agreement with the Company, H&F would need to be able to have conversations with Jonathan Klein regarding the terms of his employment and a continuing investment by him in the Company, although reaching a final agreement with him on these terms would not be required by H&F. The results of these conversations with H&F and the other

 

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sponsors, who had conveyed substantially similar views to Goldman Sachs regarding their expectations with respect to Getty Investments, were subsequently shared by Goldman Sachs with the Independent Directors but were not communicated to Getty Investments or Jonathan Klein.

On January 14, 2008, Goldman Sachs contacted each of Strategic Party A and Strategic Party B regarding a potential transaction with the Company.

On January 21, 2008, the New York Times published an article stating that the Company had put itself on the market and could sell for more than $1.5 billion. Later that day, our board convened a meeting, which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. A representative of Goldman Sachs stated that the remaining sponsors and their potential lenders had completed most of their due diligence and that the bid process letter and merger agreement prepared by Weil Gotshal and previously discussed with the Independent Directors were ready to be distributed to the sponsors. The representative of Goldman Sachs also reported that the remaining sponsors were continuing to have conversations with their potential lenders. The representative further noted that, with respect to those sponsors that had received indications from potential lenders regarding the amount of debt financing they potentially would be able to provide in connection with an acquisition of the Company, such sponsors had indicated that the available leverage would be less than the 5x CY2007E Adjusted EBITDA that the board had previously requested the sponsors assume for purposes of their indications of interest and that this lower level of debt financing could adversely impact the price the sponsors would propose to pay. A representative of Goldman Sachs then updated our board regarding conversations Goldman Sachs had with Strategic Party A and Strategic Party B. The representative stated that Strategic Party B indicated it was not interested in considering a transaction with the Company and Strategic Party A was continuing to discuss internally its interest in a possible transaction with the Company and would contact Goldman Sachs if it had interest in further evaluating the opportunity. A representative of Goldman Sachs then discussed potential next steps in light of the continued deterioration in the global financial markets and stated that the Company could either terminate the process, put the process on hold and delay the bid date or move forward with the process and request bids on or about February 4.

The board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. After extensive discussion, the Voting Independent Directors resolved to continue the process on the previously contemplated timeline and request the sponsors to deliver final bids on or about February 4, 2008. In light of the New York Times article, the Voting Independent Directors also authorized the Company to issue a press release announcing that the board was exploring strategic alternatives.

On January 22, 2008, the Company publicly confirmed that our board was exploring strategic alternatives to enhance stockholder value. The closing trading price of our common stock on January 18, 2008, the last trading date prior to the publication of the New York Times article, was $21.94, and the closing trading price on January 22, 2008, the first trading day after publication, was $24.75.

Later on January 22, 2008, Goldman Sachs sent letters to each of H&F, Sponsor A, Sponsor B, Sponsor C, Sponsor E and Sponsor F outlining the next stage of the process, which required the bidders to submit any comments in the form of a mark-up to an enclosed merger agreement and limited guarantee of the sponsor by January 30, 2008 and to submit a definitive proposal, including the exact price per share and financing commitments, by February 4, 2008.

Also on January 22, 2008, Goldman Sachs received inquiries from numerous financial parties and several strategic parties, including a strategic party, which we refer to as “Strategic Party C.”

On January 23, 2008, a representative of Strategic Party C contacted Mr. Getty to indicate its interest in pursuing a potential transaction with the Company. Mr. Getty informed Strategic Party C that it should contact Goldman Sachs to discuss any potential transaction involving the Company.

 

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On January 30, 2008, after discussions between Goldman Sachs and one of the Voting Independent Directors, such Voting Independent Director directed Goldman Sachs to contact Strategic Party C to invite it into the process. Goldman Sachs proceeded to have a number of conversations over the next several days with Strategic Party C regarding the signing of a confidentiality agreement with the Company.

Also on January 30, 2008, consistent with the bid instructions, H&F’s outside legal counsel, Simpson Thacher & Bartlett LLP, which we refer to as “Simpson Thacher,” delivered a mark-up of the merger agreement and limited guarantee reflecting H&F’s comments to the drafts distributed on January 22, 2008. None of the other sponsors submitted a mark-up of the merger agreement or limited guarantee on January 30, 2008 or any time thereafter.

On January 31, 2008, Goldman Sachs received an unsolicited, written, non-binding, preliminary indication of interest from a private equity sponsor, which we refer to as “Sponsor H,” to acquire the Company for $1.64 billion (which was equivalent to approximately $26.92 per share, based on the Company’s capitalization at the time). Sponsor H indicated that it had not conducted any due diligence and that it did not have financing with respect to its indication of interest.

On February 1, 2008, our board convened a meeting which was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. A representative of Goldman Sachs informed our board that each of Sponsor A and Sponsor F had notified Goldman Sachs that it was no longer interested in participating in the process due to its concerns about the growth prospects for certain areas of the Company’s business, the fact that it was unlikely to secure fully committed financing based on then current market conditions and its unwillingness to submit a bid at a level it would expect the Independent Directors to find attractive. The representative also stated that Goldman Sachs had received numerous inquiries from private equity sponsors, potential financing sources and strategic parties since the Company’s strategic alternatives process had been made public. The representative of Goldman Sachs also informed our board of the indication of interest it had received from Strategic Party C. At the request of our board, Mr. Klein then reviewed with our board and Goldman Sachs the Management Projections and developments that had occurred since their initial preparation by management. See “—Certain Projections.” While he indicated that management continued to have confidence in the Management Projections and did not believe there was any need to produce revised forecasts, management believed it would be appropriate for the Independent Directors, in connection with evaluating the strategic alternatives available to the Company, to consider additional risks related to achieving the Company’s forecasted results in the Management Projections that had arisen since their initial preparation. Our board then discussed whether Goldman Sachs should run sensitivity analyses on the Management Projections to reflect potential downward adjustments in some of the assumptions that had previously been used in preparing the Management Projections. Our board next discussed the unsolicited indication of interest for the Company from Sponsor H that was delivered to Goldman Sachs on January 31.

The board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. The Independent Directors then discussed the various parties that had contacted the Company and Goldman Sachs since the January 21, 2008 article in the New York Times and whether any of these parties should be invited to participate in the Company’s strategic alternatives process. With the assistance of Goldman Sachs, the Independent Directors considered the various parties in terms of a variety of attributes, including, among others, industry expertise, ability to finance an acquisition of the Company and readiness to enter into a transaction promptly. After further discussion, the Voting Independent Directors determined that, other than Strategic Party C, none of these new parties would be added to the strategic alternatives process. The Voting Independent Directors then authorized entering into a confidentiality agreement with Strategic Party C so that it could conduct due diligence on the Company. The Independent Directors and representatives of Goldman Sachs then discussed the potential preparation of sensitivity analyses with respect to the Management Projections. After this discussion, the Voting Independent Directors authorized Goldman Sachs to prepare a number of potential sensitivity analyses for discussion by the Independent Directors at their next

 

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meeting. The Independent Directors then discussed the proposal by Sponsor H, including the low indicated valuation of the Company, the lack of financing and our board’s lack of confidence in Sponsor H’s experience with businesses similar to the Company. The Voting Independent Directors then determined that Sponsor H would not be invited to participate in the Company’s strategic alternatives process.

During the Company’s strategic review process, Goldman Sachs and the Company were contacted by 36 other private equity firms and strategic buyers who inquired about a transaction involving the Company or the possibility of participating in the strategic review process. Each party was considered in terms of a variety of attributes, including, among others, industry expertise, ability to finance an acquisition of the Company and readiness to enter into a transaction promptly. None of the parties who contacted Goldman Sachs or the Company submitted a bona fide proposal or offer to purchase the Company or to engage in any other transaction with the Company.

On February 4, 2008, H&F submitted a bid to acquire all outstanding shares of the Company for $32.75 per share and included debt commitment letters from three lenders. Sponsor C submitted a bid to acquire all outstanding shares of the Company for $30.00 per share, although it did not deliver any commitment letters for debt financing. Sponsor C also delivered a memorandum discussing in general terms certain issues with respect to the merger agreement and sponsor limited guarantee that had previously been delivered to it, but did not include revised drafts of the agreements. Each of Sponsor B and Sponsor E informed Goldman Sachs that it would not be submitting a bid for the Company due to its concerns about the growth prospects for certain areas of the Company’s business, the fact that it was unlikely to secure fully committed financing based on then current market conditions and its unwillingness to submit a bid at a level it would expect the Independent Directors to find attractive.

On February 5, 2008, the Company and Strategic Party C entered into a confidentiality agreement so that the Company could share certain non-public information in connection with the potential transaction and Strategic Party C could begin due diligence on the Company. The confidentiality agreement signed by Strategic Party C was in substantially the same form as the confidentiality agreements signed by the sponsors that had previously signed confidentiality agreements.

Also on February 5, 2008, Goldman Sachs contacted H&F to discuss questions related to H&F’s offer, including the terms of its proposed debt and equity financing. H&F indicated to Goldman Sachs that H&F had experienced significant difficulties in obtaining debt commitment letters for its bid and that the lenders that had previously delivered commitment letters to H&F with its bid may be unwilling to deliver updated commitment letters in connection with any definitive agreement between H&F and the Company, if H&F and the Company were to enter into a definitive agreement, to the extent the credit markets continued to worsen.

Following receipt of the H&F bid and throughout the month of February until February 24, 2008, members of the Company’s management and representatives of Weil Gotshal and Goldman Sachs (at the direction of the Voting Independent Directors) and H&F and representatives of Simpson Thacher negotiated the terms of the merger agreement and ancillary documents, including the limited guarantee of certain of Parent’s payment obligations under the merger agreement provided by H&F Fund VI and the equity commitment letter of the H&F Investors. These negotiations covered various aspects of the transaction, including, among other things, the representations and warranties made by the parties, the definition of “Material Adverse Effect,” the restrictions on the conduct of the Company’s business between signing and closing, the conditions to completion of the merger, the provisions regarding termination, whether the Company would be subject to a “go shop” clause as originally proposed by the Company, the amount and triggers of the termination fees by the Company and Parent and the availability of specific performance and other remedies to the parties.

Our board met on February 7, 2008, which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. A representative of Goldman Sachs reviewed with our board the bids submitted by H&F and Sponsor C. A representative of

 

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Goldman Sachs noted that while neither Sponsor B nor Sponsor E submitted a bid, both sponsors indicated their possible willingness to participate in a syndicated equity group led by another sponsor if the opportunity became available. A representative of Goldman Sachs then further reviewed H&F’s bid, noting the premium it provided in relation to the current trading price for the Company’s common stock and the related debt and equity financing. The representative of Goldman Sachs noted that the amount of debt financing for H&F’s bid was three times (3x) CY2007E Adjusted EBITDA, which was significantly less than the amount of debt financing that H&F and the other sponsors had been directed to assume in connection with delivering their initial indications of interest in November and December 2007. A representative of Weil Gotshal then discussed the terms and conditions of the debt commitment letters provided by H&F, including a requirement that the Company deliver its 2007 audited financial statements and the requirement that the Company have adjusted EBITDA (as defined in the debt commitment letters) of between $314 million and $320 million on a trailing four-quarter basis. In response to questions from members of our board, a representative of Goldman Sachs, based in part on prior discussions with H&F and the other sponsors that were involved in the process, indicated that a number of factors may have contributed to the bid levels being lower than the preliminary expressions of interest submitted by the sponsors in late 2007, including (a) the continuing deterioration of the debt financing markets and the lower leverage ratios at which the financing sources were willing to provide acquisition financing for sponsors, (b) the rapidly deteriorating global economy and declining and volatile equity markets, (c) the fact that the Company’s business was in a transitional phase resulting in more uncertainty regarding the Company’s future, including growth patterns for certain of its new lines of business and a decline in its traditional line of business, (d) the Company’s actual results during 2007 falling short of management’s and Wall Street analysts’ forecasts for such results, (e) the fact that the Company’s complex business and range of licensing models created additional operating risks that made it difficult for potential acquirors to value and (f) a decline over time in the market valuation of the Company, as the Company’s stock price dropped from approximately $29 per share when potential acquirors were first contacted in October 2007 to less than $22 per share prior to the Company’s announcement that it was exploring strategic alternatives on January 22, 2008. A representative of Goldman Sachs stated that Goldman Sachs believed the most appropriate strategy for our board would be for Goldman Sachs to contact H&F and indicate that a substantially improved offer would be necessary in order for our board to consider a potential transaction with H&F. The representative also noted that Goldman Sachs believed H&F should be made aware that a strategic bidder had shown interest in potentially acquiring the Company. The representative also indicated that Goldman Sachs believed that the Company should continue to engage with Sponsor C as a potential alternative, notwithstanding the lack of financing and the lower bid submitted by Sponsor C and Sponsor C’s failure to submit a mark-up of the transaction agreements. A representative of Goldman Sachs then indicated that Strategic Party C had informed Goldman Sachs that a meeting with Mark Getty and Getty Investments would be necessary before Strategic Party C could be in a position to determine its interest in submitting a bid to acquire the Company.

The board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. Goldman Sachs reviewed preliminary potential sensitivity analyses on the Management Projections and the Independent Directors and representatives of Goldman Sachs then discussed these analyses and the additional guidance that Goldman Sachs would need from the Voting Independent Directors in connection with further refinements to the sensitivity analyses. The Independent Directors and representatives of Goldman Sachs then discussed the bids that had been received from H&F and Sponsor C. The Independent Directors then discussed the risks associated with the Company maintaining the status quo and not pursuing any transaction, including the rapidly deteriorating global economy, the fact that the Company was in a transitional phase due to address changing competitive dynamics as well as the shift in communication and advertising to the Internet, potential changes in foreign currency exchange rates that had been favorable to the Company’s recent financial performance and how these and the other factors that had been earlier identified by Goldman Sachs could impact the Company’s business and financial performance in future periods. They also discussed the risks to the Company if it were to halt the process and announce our board was ceasing its exploration of strategic alternatives, including a likely decline in the Company’s stock price and the resulting damage to employee morale. After this discussion, the Voting Independent Directors determined that both of the bids were unacceptable. The Voting Independent Directors then authorized Goldman Sachs to

 

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(a) inform H&F that its bid was unacceptable and that a substantially improved offer would be necessary, (b) continue discussions with Sponsor C to determine whether there was any possibility Sponsor C could substantially increase its offer and (c) continue discussions with Strategic Party C to determine the seriousness of its interest in the Company. In addition, in order to help H&F evaluate its ability to increase its offer price, the Voting Independent Directors also authorized Mark Getty and Getty Investments to discuss with H&F Getty Investments’ intentions with respect to the ongoing use of the “Getty Images” name and trademarks by the Company and its expectations with respect to a potential rollover of its existing ownership interest in the Company. The Voting Independent Directors also authorized Strategic Party C to meet with Getty Investments and Mark Getty to discuss a possible transaction involving the Company. Finally, the Voting Independent Directors determined that neither Mr. Klein nor Mr. Getty should be made aware of the valuation discussions among the Independent Directors and that they should be told only that the strategic alternatives process had not been terminated and that H&F would be informed that a substantially improved offer would be necessary for our board to consider a sale transaction.

Immediately following the February 7, 2008 meetings, Goldman Sachs informed H&F that a substantially improved offer price would be required in order to engage in further negotiations regarding a potential transaction. Goldman Sachs also indicated that the Voting Independent Directors had authorized Mark Getty and Getty Investments to discuss with H&F Getty Investments’ intentions with respect to the continued use of the “Getty Images” name and trademarks and its expectations with respect to a rollover. These matters were discussed on a conference call later in the day between representatives of H&F and Mark Getty and Allen & Company LLC, which we refer to as “Allen”, the financial advisor to Getty Investments. Representatives of Simpson Thacher, Weil Gotshal and Goldman Sachs also participated in the call. This call was the first time during the Company’s consideration of strategic alternatives that any potential acquiror of the Company had been allowed by the Voting Independent Directors to communicate with Mark Getty or Getty Investments. During the call, Mr. Getty indicated that, while the decision ultimately belonged to Getty Investments and not him individually, he believed that Getty Investments would not seek any monetary consideration for the Company’s continued use of the “Getty Images” name and trademarks if H&F would allow Getty Investments to roll over its current equity position in Getty Images and the parties could come to a mutually acceptable agreement on post-closing equityholder arrangements.

On the evening of February 7, 2008, H&F indicated to a representative of Goldman Sachs that H&F intended to submit a revised proposal of $34.00 per share, as compared to its initial proposal of $32.75 per share. The representative of Goldman Sachs informed H&F that this increase in price would likely be insufficient for our board to continue to engage in negotiations with H&F regarding a possible transaction. The representative also indicated to H&F that a potential strategic buyer continued to be involved in the process. H&F stated that $34.00 per share was its best and final offer and after the call delivered a revised bid letter to Goldman Sachs that reflected the $34.00 per share proposal. In addition, H&F reiterated to Goldman Sachs that time was of the essence in connection with our board’s consideration of its proposal in light of the continuing weakness in the debt financing market.

On February 8, 2008, our board convened a meeting, which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. A representative of Goldman Sachs began by providing an update on the transaction process and the conversations between H&F and representatives of Goldman Sachs on February 7 that resulted in a revised $34.00 per share offer. Members of our board then asked Mr. Getty questions about the potential involvement of Getty Investments in the transaction. Mr. Getty stated that he believed Getty Investments potentially would be interested in an equity rollover in connection with the transaction and that H&F seemed amenable to allowing Getty Investments to participate. Mr. Getty noted, however, that no commitment had been made by Getty Investments to roll over its equity and that any such commitment would depend upon reaching resolution on post-closing equityholder arrangements and other related matters. Mr. Getty stated that he had not had a detailed conversation with H&F regarding the ability of the Company to continue to use the “Getty Images” name and trademarks after any acquisition by H&F but that he told H&F that he believed that Getty Investments would not seek any monetary consideration for the Company’s continued use of the “Getty Images” name and trademarks if

 

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H&F would allow Getty Investments to roll over its current equity position in Getty Images and the parties could come to a mutually acceptable agreement on post-closing equityholder arrangements. Mr. Getty also stated that if a transaction was consummated with a strategic buyer, it would be less likely that Getty Investments would waive its contractual right to acquire the “Getty Images” name and trademarks for nominal consideration. Our board did not undertake a separate valuation of the “Getty Images” name and trademarks in connection with the strategic review process. A representative of Goldman Sachs stated that H&F’s offer was not contingent on an equity rollover by Getty Investments but that H&F had indicated to Goldman Sachs that it expected the Company to be able to continue using the Getty Images name and trademarks after any transaction without having to pay any licensing or other fees.

The full board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. The Independent Directors discussed the status of the strategic alternatives process and the negotiation with H&F and its representatives regarding open issues in the merger agreement. The Independent Directors then discussed whether this was the right time for a sale of the Company based on the $34.00 per share offer received from H&F as compared to various upside and downside scenarios in terms of delivering value to stockholders if the Company rejected H&F’s proposal and terminated the process. A representative of Goldman Sachs stated that, in light of the current state of the debt financing markets, he believed H&F would not be able to obtain any greater amount of debt financing than had been contemplated by its $34.00 per share offer.

On February 10, 2008, the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. A representative of Goldman Sachs reviewed with the Independent Directors the revised sensitivity analyses that had been prepared by Goldman Sachs based on the prior discussions of Goldman Sachs and the Independent Directors. The Independent Directors expressed the view that the sensitivity analyses were helpful because the Independent Directors believed the Management Projections were overly optimistic given the weak, and apparently weakening, economy and other uncertainties surrounding the Company’s business, including difficulties in forecasting the Company’s operations given multiple product lines, the increasingly competitive nature of the Company’s business resulting from a variety of imagery sources on the Internet, the introduction of new licensing models and the shift of communication and advertising to the Internet. Goldman Sachs then requested that at the next executive session the Voting Independent Directors provide guidance to Goldman Sachs regarding the specific sensitivities the Voting Independent Directors would like Goldman Sachs to focus on in its analysis of a potential transaction. A representative of Goldman Sachs then recommended that the Independent Directors authorize Goldman Sachs to inform H&F that our board was continuing to assess the $34.00 per share offer and that a further increase in price could influence our board’s decision on whether to approve the transaction. In addition, the representative of Goldman Sachs stated that Strategic Party C had been continuing its due diligence review of the Company but that its enthusiasm for a transaction with the Company was uncertain based on the relatively slow pace of Strategic Party C’s due diligence to date. The Voting Independent Directors then authorized Goldman Sachs and Weil Gotshal to discuss with H&F a potential increase in its price, as well as other open issues in the merger agreement and the related financing documentation.

After the February 10, 2008 meeting, Goldman Sachs informed H&F that our board continued to assess the $34.00 per share offer and an increase in price could influence our board’s decision on whether to approve the transaction. H&F indicated that it was unwilling to increase its offer price above $34.00 per share and reiterated that this was its best and final offer.

On February 11, 2008, the New York Times published an article speculating that the Company did not receive any offers significantly above its then market value of $1.6 billion and that the Company’s auction appeared to be in jeopardy. Having already issued a press release on January 22, 2008 confirming that our board was exploring strategic alternatives following news reports that the Company was for sale, our board’s view was not to issue another press release regarding the process until the process had been completed or terminated. On that same day, Goldman Sachs contacted Sponsor C to discuss its proposal. Sponsor C indicated to Goldman

 

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Sachs that it was unwilling to increase its offer price of $30.00 per share and that it had made no further progress with respect to obtaining committed debt financing.

Later in the day on February 11, 2008, the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. A representative of Goldman Sachs began by summarizing the call that Goldman Sachs had with H&F on February 10, 2008. The representative stated that, based on the call, it appeared that H&F would not be willing to increase its $34.00 per share offer price. A representative of Goldman Sachs stated that Goldman Sachs had called Strategic Party C, and that Strategic Party C requested a meeting with Mr. Klein and other members of management on February 14, 2008. The representative of Goldman Sachs also stated that Strategic Party C had not yet presented any substantive terms or valuation with respect to a potential transaction with the Company. The Independent Directors then discussed the H&F offer in detail and evaluated it in light of (a) the debt commitment letter and the conditions in the merger agreement, (b) the potential for a global or domestic recession and the impact it would have on the Company’s business, (c) the Company’s prospects, (d) the transitional nature of the Company’s business and the digital media industry in general, and (e) the possibility that the Company’s stock price would decline even further if the Company announced that it was unable to reach agreement with a buyer. The Voting Independent Directors instructed Goldman Sachs to request H&F to confirm whether the $34.00 offer was its best and final offer and to inform H&F that a substantially improved offer would increase the likelihood that the proposal would be approved by our board. The Voting Independent Directors also instructed Goldman Sachs to communicate to H&F the Company’s position regarding certain open issues in the draft merger agreement and the related debt financing documentation, including the inclusion of a minimum EBITDA condition, the ability of the Company to continue discussions with Strategic Party C after the signing of the agreement, the inclusion of a lower termination fee if our board of directors determined to terminate the transaction to accept a superior proposal within a limited period of time after the signing of a merger agreement with H&F and the remedies available to the Company. In addition, in light of the potential rollover investment by Getty Investments and H&F’s prior request to discuss with Jonathan Klein the terms of his employment and a continuing investment by him in the Company, the Voting Independent Directors also instructed Goldman Sachs to indicate to H&F that our board would be willing to enter into a definitive agreement with H&F only if it contained the Special Stockholder Approval.

After the meeting on February 11, 2008, Goldman Sachs contacted H&F to update it regarding the continued deliberations of our board and to outline the key open issues in the draft merger agreement, including the Special Stockholder Approval. H&F reiterated that it was unwilling to increase its $34.00 per share offer and was prepared to terminate discussions regarding a potential transaction if the Company was not willing to enter into a transaction at that price. Later on that day, H&F indicated to Goldman Sachs that it would be willing to discuss the issues in the merger agreement that Goldman Sachs had communicated to H&F but objected to the Special Stockholder Approval.

On February 12, 2008, Weil Gotshal, Goldman Sachs, H&F and Simpson Thacher participated in conference calls to discuss these open issues with respect to the draft merger agreement. Also on February 12, 2008, management of the Company, Goldman Sachs and H&F discussed the Company’s anticipated EBITDA for the first two quarters of 2008.

Later in the day on February 12, 2008, the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. A representative of Goldman Sachs reported that H&F was unwilling to increase its offer above the current offer and that our board should consider the offer of $34.00 per share to be H&F’s best and final offer. The representative of Goldman Sachs summarized the progress made with H&F on the material transaction terms and stated that H&F would be willing to exclude Strategic Party C from the non-solicitation provision in the draft merger agreement. The representative of Goldman Sachs also stated that H&F had objected to the Special Stockholder Approval. At the conclusion of the executive session, the Voting Independent Directors (a) authorized Weil Gotshal to continue to negotiate the terms of the merger agreement with Simpson Thacher, (b) authorized Mr. Getty and his advisors to meet with H&F to discuss details of a possible equity rollover at the same value per share as the consideration to be paid in the transaction

 

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proposed by H&F and the continued use of the “Getty Images” name and trademarks after a potential transaction with H&F, and (c) authorized Mr. Klein and his advisors to meet with H&F to discuss the general terms of his proposed employment and potential continuing equity investment in the Company.

Also on February 12, 2008, Stockholder A called Goldman Sachs and indicated that it was potentially interested in making an investment in the Company if the Company was not interested in entering into a sale transaction at this time, although no valuation or other terms were provided.

On February 13, 2008, our board convened a meeting which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. During the meeting, the board was apprised of the various developments at the executive session held on the previous day.

The board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. A representative of Goldman Sachs informed the Independent Directors that Stockholder A had expressed an interest in possibly making an investment in the Company if the Company was not interested in entering into a sale transaction at this time, but no valuation or other terms were provided by Stockholder A. A representative of Goldman Sachs then provided an update regarding the conversations Goldman Sachs and Weil Gotshal had with H&F and Simpson Thacher with respect to the terms of the merger agreement. A representative of Goldman Sachs then reviewed the sensitivity analyses with respect to the Management Projections. The representative of Goldman Sachs requested confirmation from the Voting Independent Directors as to which sensitivities, if any, to the Management Projections Goldman Sachs should focus on in connection with its financial analyses and any fairness opinion rendered by Goldman Sachs. The Independent Directors then discussed the range of sensitivities they believed should apply to the Management Projections. Based on their views regarding the state of the overall economy and the Company’s business and industry, the Voting Independent Directors stated that they believed the Company’s actual performance would not likely meet the Management Projections and that a downward adjustment to the assumptions of revenue growth rates and operating profit margins in the range of 2.5% to 5.0% should be applied to all periods in the Management Projections, with a central downward adjustment of 3.75% for all periods other than 2008, which should include a 2.5% downward adjustment to the revenue growth rate and a 1.6% downward adjustment to operating profit margin. The Voting Independent Directors believed that these central downward adjustments should be applied to all periods, and equally in all periods other than 2008, because of the transitional phase of the Company’s business and the digital media industry in general, the increasingly competitive nature of the Company’s business resulting from a variety of imagery sources on the Internet, the introduction of new licensing models and the shift of communication and advertising to the Internet, the difficulty of predicting the impact of the foregoing factors on the Company’s prospects, the resulting lack of visibility regarding specific levels of growth in future periods and the belief of the Voting Independent Directors that the challenges facing the Company’s business would not be temporary. We refer to these central downward adjustments as the “Central Sensitivity to Management Projections.” After further discussion, the Voting Independent Directors directed Goldman Sachs to focus on the Central Sensitivity to Management Projections in connection with Goldman Sachs’ financial analyses and any opinion rendered by Goldman Sachs. See “—Certain Projections.”

Beginning on February 13, 2008 and continuing through February 24, 2008, Mr. Getty, on behalf of Getty Investments, and Davis Polk & Wardwell, counsel to Getty Investments, discussed with representatives of H&F and Simpson Thacher the continued use by the Company of the “Getty Images” name and trademarks after any transaction with H&F, the terms of a potential rollover investment by Getty Investments and the other Rollover Stockholders and a voting agreement that would require the Rollover Stockholders to vote in favor of the transaction with H&F and to not solicit any takeover proposal. During this period, the parties exchanged drafts of term sheets and proposed transaction documents and periodically provided updates to Weil Gotshal regarding the status of discussions and the draft documents.

During the same period, Jonathan Klein and his counsel, Dechert LLP, and representatives of H&F and Simpson Thacher discussed the terms of Mr. Klein’s employment by the Company after a transaction with H&F, as well as a continuing investment by him in the Company. See “—Interests of the Company’s Directors and

 

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Executive Officers in the Merger—New Management Arrangements.” These discussions were the first time during the Company’s consideration of strategic alternatives that any potential acquiror of the Company had been allowed by the Voting Independent Directors to communicate with Jonathan Klein regarding his employment terms or any equity investment or compensation.

On February 14, 2008, the Company’s management and representatives of Goldman Sachs and Weil Gotshal met with Strategic Party C to discuss a potential transaction. In addition, the Company and Strategic Party C entered into an amendment to their confidentiality agreement pursuant to which Strategic Party C was permitted to engage in discussions with Mr. Getty and Getty Investments. That same day, representatives of Strategic Party C indicated their potential interest in a transaction at a meeting with representatives of Allen.

On February 15, 2008, the board of directors of Getty Investments convened to consider the proposed transaction with H&F and approved the transaction in principle. Resolutions confirming the transaction were approved by Getty Investments’ board of directors, with Mr. Getty and Mr. Klein abstaining from voting.

On February 16, 2008, Goldman Sachs, Weil Gotshal, H&F and Simpson Thacher participated in a conference call to discuss the Voting Independent Directors’ view on the Management Projections, noting that the Voting Independent Directors directed Goldman Sachs to focus on the Central Sensitivity to Management Projections in connection with Goldman Sachs’ financial analyses and any fairness opinion rendered by Goldman Sachs.

On February 17, 2008, Goldman Sachs and H&F discussed the status of the merger agreement, H&F’s debt financing and arrangements with Getty Investments and the Company’s management. H&F indicated to Goldman Sachs that, as a result of the continuing worsening of the credit markets, H&F was having difficulty maintaining the debt financing commitments that it had delivered with its bid on February 4, 2008 and that it was discussing financing with other potential lenders.

Also on February 17, 2008, representatives of Weil Gotshal and Simpson Thacher discussed certain open issues in the merger agreement, including the inclusion of the Special Stockholder Approval. In addition, the representatives of Weil Gotshal indicated that the draft voting agreement with the Rollover Stockholders would need to allow Getty Investments to discuss, in certain circumstances, use of the “Getty Images” name and trademarks by the Company with any party making a written takeover proposal that the Company would be permitted to discuss under the merger agreement. The representatives of Simpson Thacher indicated that H&F would be prepared to permit Getty Investments to engage in such discussions with Strategic Party C but not with any other parties.

On February 18, 2008, our board convened a meeting which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. A representative of Goldman Sachs apprised our board of the status of H&F’s financing. Mr. Getty apprised our board of Getty Investments’ negotiations with H&F, including the Rollover Stockholders’ willingness to agree to roll over their equity and to vote for the merger agreement and the willingness of Getty Investments to agree to waive its rights to acquire the “Getty Images” name and trademarks in connection with the proposed merger with an affiliate of H&F. Mr. Klein apprised our board that, although he expected to negotiate the key terms, he did not expect to enter into any definitive agreements concerning his employment or equity participation in the surviving company or its affiliates prior to the Company’s entry into the merger agreement with affiliates of H&F.

The board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. A representative of Goldman Sachs informed the Independent Directors that H&F was experiencing significant difficulty in arranging its debt financing since the submission of H&F’s bid on February 4, 2008 in light of the continued deterioration of the debt financing markets and that it was currently unclear which banks would be willing to provide committed financing. In addition, the Goldman Sachs representative stated that a representative of H&F had contacted Goldman Sachs

 

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about the possibility of Goldman Sachs participating in the bank group. The Goldman Sachs representative stated that Goldman Sachs would consider participating in the debt financing only if specifically requested by the Voting Independent Directors. The Voting Independent Directors indicated that they were not inclined to allow Goldman Sachs to participate in any debt financing in connection with H&F’s proposal but that they would consider revisiting the issue if H&F was otherwise unable to obtain sufficient fully committed debt financing. A representative of Goldman Sachs then discussed Goldman Sachs’ financial analyses of the proposed transaction between the Company and H&F.

On February 20, 2008, Goldman Sachs attempted to contact Strategic Party C for an update regarding its consideration of a potential transaction with the Company, but was unsuccessful. Also on that day, representatives of Simpson Thacher indicated to representatives of Weil Gotshal that H&F would be prepared to allow Getty Investments to discuss the “Getty Images” name and trademarks with other parties in certain circumstances as previously requested but was not prepared to accept the inclusion of the Special Stockholder Approval in the merger agreement.

On February 21, 2008, our board convened a telephonic meeting which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. Representatives of Goldman Sachs provided our board with an update regarding recent conversations Goldman Sachs had with H&F, including with respect to the status of H&F’s debt financing commitments.

The board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. Representatives of Goldman Sachs and Weil Gotshal summarized for the Independent Directors recent conversations with H&F and Simpson Thacher regarding outstanding issues in the merger agreement and related transaction documents. The representative of Weil Gotshal indicated that H&F was now willing to accept the Company’s request to allow Getty Investments to discuss, in certain circumstances, use of the “Getty Images” name and trademarks by the Company with any party making a written takeover proposal that the Company would be permitted to discuss under the merger agreement. A Goldman Sachs’ representative indicated that Goldman Sachs had reiterated to H&F that the Independent Directors were requiring that the Special Stockholder Approval condition be included in the merger agreement and that H&F had indicated it remained opposed to the condition. The Voting Independent Directors reconfirmed that they would not be willing to approve the proposed transaction without the Special Stockholder Approval condition. A representative of Goldman Sachs then informed the Independent Directors that although Strategic Party C continued to express interest in a potential transaction, the timing of any specific proposal from Strategic Party C regarding a transaction remained uncertain. The Independent Directors then discussed a request received by Goldman Sachs from Stockholder A that it be released from certain portions of the standstill provision contained in its confidentiality agreement with the Company, noting that Stockholder A had not received any confidential due diligence materials related to the Company. The Voting Independent Directors agreed to consider this only after Weil Gotshal contacted Stockholder A to obtain further clarification regarding its request for such release.

After the meeting on February 21, 2008, Goldman Sachs contacted a representative of Strategic Party C to urge it to complete its due diligence review of the Company as quickly as possible if it was still interested in a potential transaction with the Company.

On February 22, 2008, our board convened a telephonic meeting which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. A representative of Weil Gotshal discussed with our board the terms of a revised draft debt commitment letter received from H&F. The full board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. A representative of Weil Gotshal discussed with the Independent Directors certain outstanding issues related to the merger agreement, including the amount of minimum EBITDA that would be a closing condition in the merger agreement and the continuing refusal of H&F to accept the Special Stockholder Approval. The

 

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Voting Independent Directors determined they would not recommend entering into a definitive agreement with H&F unless it contained the Special Stockholder Approval and that they were disinclined to recommend the transaction if the minimum adjusted EBITDA condition for a rolling four-quarter period exceeded $300 million.

On the morning of February 24, 2008, our board convened a telephonic meeting, which meeting was attended by representatives of Weil Gotshal and portions of which were attended by management and representatives of Goldman Sachs. A representative of Weil Gotshal provided an update to our board regarding the status of H&F’s debt commitments, noting that the three financing sources in the revised debt commitment letter were offering to provide H&F with an aggregate amount of debt financing equal to three times (3x) CY2007E Adjusted EBITDA. The Weil Gotshal representative also indicated that H&F’s debt financing sources were willing to set the minimum adjusted EBITDA condition for a rolling four-quarter period at $300 million and that representatives of management, Weil Gotshal, Goldman Sachs and Simpson Thacher had finalized the definition of adjusted EBITDA for purposes of the minimum adjusted EBITDA condition set forth in the debt commitment letter and the merger agreement. The representative of Weil Gotshal also stated that H&F had not agreed to include the Special Voting Approval condition in the merger agreement but had indicated that it would be willing to consider the condition if the Company agreed to modifications to the merger agreement, including reimbursement of H&F’s out-of-pocket expenses if stockholder approval was not obtained and an increase in the termination fee that would be payable by the Company if it terminated the agreement under certain circumstances.

The board meeting was then adjourned and the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. A representative of Goldman Sachs reviewed for the Independent Directors the process to date, including the progress of Strategic Party C with its due diligence. The representative also noted that Goldman Sachs did not expect that Strategic Party C would be able to finalize its due diligence review in an expedited manner and that it had not yet provided any specific proposal or valuation with respect to a potential acquisition of the Company or other strategic transaction, nor was it prepared to indicate if or when it anticipated it would be in a position to do so. The Goldman Sachs representative also confirmed that Strategic Party A had not contacted Goldman Sachs to confirm any interest in the Company after its last communication with Goldman Sachs in mid-January 2008 when it indicated it would later contact Goldman Sachs if it had any interest in considering a transaction involving the Company. A representative of Weil Gotshal, without the Goldman Sachs representatives present, then led a discussion of fiduciary duties in connection with the Voting Independent Directors’ consideration of the proposed transaction. After extensive discussion, the Voting Independent Directors determined that they would continue to require that the Special Stockholder Approval condition be included in the merger agreement, but that they would be willing to agree to limited out-of-pocket expense reimbursement for H&F if the Company’s stockholders did not approve the transaction, but rejected any increase in the termination fee. The board meeting was then reconvened and a representative of Weil Gotshal summarized for the board the decision the Voting Independent Directors had made regarding the Special Stockholder Approval condition.

Following the morning meetings of our board and the Independent Directors on February 24, 2008, Goldman Sachs contacted H&F to inform it of the Voting Independent Directors’ decision regarding the Special Stockholder Approval condition and the termination fee increase requested by H&F. Following this discussion, H&F contacted Goldman Sachs to inform Goldman Sachs that it would agree to include the Special Stockholder Approval based on its expectation that the parties would sign the merger agreement later in the day on February 24, 2008.

In the afternoon of February 24, 2008, the Independent Directors met in executive session along with representatives of Weil Gotshal and Goldman Sachs. A representative of Goldman Sachs updated the Independent Directors regarding the conversations between Goldman Sachs and H&F earlier in the day. Representatives of Goldman Sachs also presented Goldman Sachs’ financial analysis of the transaction contemplated by the merger agreement to the Independent Directors. At the request of the Independent Directors, a representative of Goldman Sachs then delivered its oral opinion that, as of February 24, 2008 and based upon

 

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and subject to various factors and assumptions discussed by Goldman Sachs, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders. After discussion, and taking into account the fairness opinion delivered orally by Goldman Sachs and the other factors described in greater detail below under the heading titled “—Reasons for the Merger; Recommendation of Our Board of Directors; Fairness of the Merger,” the Voting Independent Directors then resolved to recommend to our board that it approve the merger agreement and related transactions.

Following the recommendation of the Voting Independent Directors, our full board was convened at a meeting, with representatives of Weil Gotshal and Goldman Sachs participating. The Voting Independent Directors informed our board that the Voting Independent Directors had voted to recommend the merger agreement and the transactions contemplated by the merger agreement to our full board. Representatives of Goldman Sachs presented its financial analysis of the transactions contemplated by the merger agreement to our board. Goldman Sachs delivered its oral opinion, which was subsequently confirmed in writing, to our board that, as of February 24, 2008 and based upon and subject to various factors and assumptions discussed by Goldman Sachs, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders. The full text of the written opinion of Goldman Sachs, dated February 24, 2008, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is attached as Annex B to this proxy statement. After considering the proposed terms of the merger agreement and the other transaction agreements and the various presentations of Weil Gotshal and Goldman Sachs, including the receipt of Goldman Sachs’ oral opinion, and taking into account the other factors described in greater detail below under the heading titled “—Reasons for the Merger; Recommendation of Our Board of Directors; Fairness of the Merger,” our board, other than Mr. Getty and Mr. Klein who abstained from voting, unanimously approved and declared advisable the merger agreement and the related transactions and resolved to recommend that the Company’s stockholders adopt the merger agreement. After additional discussion, our board, with Mr. Getty and Mr. Klein abstaining from voting, also resolved to release Stockholder A and Strategic Party C from portions of the standstill provisions in their respective confidentiality agreements so that they be permitted to make a non-public offer to our board to purchase the Company if they desired to do so.

Following the final meeting of our board on February 24, 2008, the Company sent letters to each of Stockholder A and Strategic Party C releasing them from certain provisions of their respective confidentiality agreements in order to permit them to make non-public offers to purchase the Company. In addition, following the final meeting of our board, the parties finalized the merger agreement and the related documents, including the documents described below under the heading titled “—Interests of the Company’s Directors and Executive Officers in the Merger—Arrangements with Mark Getty and Other Rollover Stockholders,” and the Company, Parent, Merger Sub, the H&F Investors and the Rollover Stockholders executed the merger agreement and the related documents.

On February 25, 2008, the parties issued a press release announcing the merger. Later in the day, Goldman Sachs contacted Strategic Party C to inform it that the merger agreement permits the Company to continue discussions and negotiations with Strategic Party C until April 4, 2008. The Company continued to provide Strategic Party C access to non-public information with respect to the Company from February 25 until April 4, 2008. During this period, Strategic Party C did not initiate discussions with, or make a proposal to, the Company regarding any transaction involving the Company and, accordingly, on April 4, 2008 the Company terminated Strategic Party C’s access to the Company’s information as required by the merger agreement.

Reasons for the Merger; Recommendation of Our Board of Directors; Fairness of the Merger

Our board of directors, acting with the advice and assistance of our management and legal and financial advisors, evaluated the proposed merger, including the terms and conditions of the merger agreement. At a meeting on February 24, 2008, our board of directors unanimously (other than Messrs. Getty and Klein who

 

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abstained from the vote) (a) approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the merger, (b) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are substantively and procedurally fair to and in the best interests of the Company and our unaffiliated stockholders (by which we mean, for purposes of this determination, our stockholders other than the Rollover Stockholders and Jonathan Klein) and (c) resolved to recommend that our stockholders adopt the merger agreement.

In the course of reaching its determination, our board of directors (other than Messrs. Getty and Klein who did not participate in the deliberations) considered the following substantive factors and potential benefits of the merger, each of which our board of directors believed supported its decision:

 

   

the current and historical market prices of our common stock, including the fact that the $34.00 per share merger consideration represented a premium of approximately 55% over the Company’s closing stock price of $21.94 on January 18, 2008, the last trading day prior to our public announcement that we were exploring strategic alternatives;

 

   

our historical results of operations, financial condition, assets, liabilities, business strategy and prospects and the changing nature of the industry in which we compete;

 

   

the possible alternatives to a sale, including maintaining the status quo, conducting a stock repurchase or undertaking a recapitalization, which alternatives our board of directors determined were less favorable to our stockholders than the merger given the potential risks, rewards and uncertainties associated with those alternatives;

 

   

the possibility that it could take a considerable period of time before the trading price of our shares would reach and sustain at least the merger consideration of $34.00 per share, as adjusted for present value;

 

   

the fact that, after our discussions with multiple private equity sponsors and strategic parties regarding a potential acquisition and after our public announcement confirming that our board was exploring strategic alternatives, which we made more than one month prior to entering into the merger agreement with Parent, Parent was the only party that proposed to acquire the Company with fully committed financing after completing due diligence;

 

   

the fact that the merger consideration is all cash, allowing the unaffiliated stockholders to immediately realize a certain and fair value for all shares of their Company common stock;

 

   

the fact that Parent and Merger Sub had obtained committed debt and equity financing for the transaction, the limited number and nature of the conditions to the debt and equity financing, the absence of a financing condition in the merger agreement, and the obligation of Parent to use its reasonable best efforts to obtain the debt financing and, if it fails to complete the merger under certain circumstances, to pay us a $78 million reverse termination fee;

 

   

the risk that, in light of the deteriorating condition of the debt markets, it could become more difficult for a potential acquiror to finance an acquisition of the Company in the future;

 

   

the reputation and proven experience of H&F in completing similar transactions;

 

   

the financial presentations of Goldman Sachs provided to our board of directors and the opinion of Goldman Sachs, dated February 24, 2008, to our board of directors that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders, as more fully described in “—Opinion of Our Financial Advisor” beginning on page 40;

 

   

the fact that, although the opinion received by our board of directors from Goldman Sachs spoke to the fairness of the merger consideration to be received by the holders of shares of the Company’s common stock other than the Rollover Stockholders, and not to the fairness of the merger consideration to be received by the unaffiliated stockholders, the consideration to be received by stockholders of the

 

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Company who are affiliates but not Rollover Stockholders is the same as the consideration to be received by unaffiliated stockholders;

 

   

the other terms of the merger agreement and the related agreements, including:

 

   

our ability to continue discussing a potential transaction with a certain strategic party until April 4, 2008, even in the absence of a takeover proposal from such party;

 

   

our ability, under certain circumstances, to provide information to, and participate in discussions or negotiations with, third parties that submit takeover proposals;

 

   

our ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a termination fee of $31 million during the period ending April 4, 2008 or $52 million after April 4, 2008 (equal to approximately 1.5% and 2.5% of the equity value of the transaction, respectively);

 

   

the view of our board of directors, after consulting with the Company’s legal and financial advisors, that the termination fee of either $31 million or $52 million to be paid by the Company if the merger agreement is terminated under certain circumstances is within the range reflected in similar transactions and should not impede other takeover proposals;

 

   

the fact that Parent is prohibited from retaining any financial advisor on an exclusive basis or entering into any agreement with any provider of debt or equity financing on an exclusive basis other than those to which the Company consents;

 

   

the ability of our board of directors, under certain circumstances, to change its recommendation that our stockholders vote in favor of the adoption of the merger agreement; and

 

   

the $78 million limited guarantee of H&F Fund VI in our favor with respect to the performance by Parent and Merger Sub of certain of their payment obligations under the merger agreement; and

 

   

the availability of appraisal rights to the unaffiliated stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their stock as determined by the Court of Chancery of the State of Delaware in lieu of receiving the merger consideration.

Our board of directors also considered a number of factors that are discussed below relating to the procedural safeguards that our board of directors believes were and are present to ensure the fairness of the merger. Our board of directors believes these factors support its decision and provide assurance of the procedural fairness of the merger to the unaffiliated stockholders:

 

   

the merger agreement requires the merger agreement to be adopted not only by the holders of a majority of the outstanding shares of our common stock, but also by the holders of a majority of the shares of our common stock present in person or by proxy and voting at the special meeting that are held by persons other than the Rollover Stockholders and Jonathan Klein;

 

   

other than Messrs. Getty and Klein, the members of our board of directors, which five other members we refer to as the “Independent Directors,” are not employees of the Company or any of its subsidiaries and have no financial interest in the merger that is different from that of the unaffiliated stockholders (other than the acceleration of options held by certain of the Independent Directors to acquire shares of Getty Images common stock);

 

   

although the Independent Directors did not retain an unaffiliated representative to act solely on behalf of unaffiliated stockholders for purposes of negotiating the terms of the merger agreement or preparing a report concerning the fairness of the merger, the Independent Directors met regularly, without the participation of Messrs. Getty and Klein, to discuss our strategic alternatives and were advised by Weil Gotshal and Goldman Sachs;

 

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the Voting Independent Directors made all material decisions relating to our strategic alternatives beginning on November 28, 2007, including recommending to our board of directors that the Company enter into the merger agreement;

 

   

the financial and other terms and conditions of the merger agreement were the product of arm’s-length negotiations between our board of directors and its advisors, on the one hand, and Parent and its advisors, on the other hand, without the participation of Messrs. Getty or Klein;

 

   

the ability of the Company to continue discussing a potential transaction with a certain strategic party until April 4, 2008, even in the absence of a proposal from such party;

 

   

our ability, under certain circumstances, to provide information to, or participate in discussions or negotiations with, third parties regarding other proposals;

 

   

the fact that Getty Investments has not entered into any exclusivity arrangements with Parent and Merger Sub and that in certain circumstances where we are able to engage in discussions or negotiations with third parties regarding a competing proposal, Getty Investments may, subject to the terms of its agreement with Parent, also engage in discussions or negotiations with respect to other proposals and a potential waiver or amendment of its restated option agreement with us, including waiving its right to call the trademarks for the “Getty Images” name, for a nominal fee, in connection with a change in control;

 

   

our ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a termination fee of $31 million during the period ending April 4, 2008 or $52 million after April 4, 2008 (equal to approximately 1.5% and 2.5% of the equity value of the transaction, respectively);

 

   

the opinion of Goldman Sachs, dated February 24, 2008, to our board of directors that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders, as more fully described in “—Opinion of Our Financial Advisor” beginning on page 40; and

 

   

the availability of appraisal rights to the unaffiliated stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their stock as determined by the Court of Chancery of the State of Delaware in lieu of receiving the merger consideration.

Our board of directors also considered the following risks and other potentially negative factors concerning the merger agreement and the merger:

 

   

the unaffiliated stockholders, unlike the Rollover Stockholders, will not participate in any future earnings or growth of our business and will not benefit from any appreciation in our value, including any appreciation in value that could be realized as a result of improvements to our operations;

 

   

the possibility that Parent will be unable to obtain financing for the merger and related transactions, including the debt financing proceeds contemplated by the commitment letter it received from its lenders;

 

   

the risks and costs to us if the merger does not close, including the diversion of management and employee attention, potential employee attrition and the potential effect on our business and our relationships with customers;

 

   

the requirement that we pay a termination fee of either $31 million or $52 million, depending on the timing and circumstances surrounding the termination of the merger agreement, if we enter into a definitive agreement related to a superior proposal or the merger agreement is terminated under certain other circumstances;

 

   

the requirement that we reimburse Parent for 50% of its out-of-pocket expenses, subject to a cap of $5 million, incurred in connection with the proposed merger if the merger agreement is terminated as a result of the failure to obtain stockholder approval;

 

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the fact that an all cash transaction would be taxable to the unaffiliated stockholders that are U.S. persons for U.S. federal income tax purposes;

 

   

the restrictions on the conduct of our business prior to the completion of the merger, requiring us to conduct our business only in the ordinary course, subject to specific limitations, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the merger;

 

   

our inability to seek specific performance to require Parent or Merger Sub to complete the merger and the fact that our sole remedy in connection with the merger agreement, even for a breach by Parent or Merger Sub that is deliberate or willful or for fraud, would be limited to $78 million that is payable in certain circumstances, which payment is guaranteed by H&F Fund VI;

 

   

the possibility that we might be unable to satisfy the minimum Consolidated EBITDA condition contained in both the merger agreement and the debt commitment letter, as described in “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 103 and “Special Factors—Financing of the Merger” beginning on page 61; and

 

   

the risk that, while the merger is expected to be completed, there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied, and as a result, it is possible that the merger may not be completed even if approved by our stockholders.

In addition, our board of directors was aware of and considered the interests that certain of our directors and executive officers have with respect to the merger that differ from, or are in addition to, their interests as stockholders of the Company, as described in “—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 66.

In the course of reaching its conclusion regarding the fairness of the merger to the unaffiliated stockholders and its decision to approve the merger, the board of directors considered analyses presented by Goldman Sachs related to the going concern value of Getty Images. These analyses included, among others, a future stock price analysis, a discounted cash flow analysis, a leveraged buyout analysis and a recapitalization analysis. These analyses are summarized below under “—Opinion of Our Financial Advisor.” Our board of directors expressly adopted the analysis and the opinion of Goldman Sachs, among other factors considered, in reaching its determination as to the fairness of the transactions contemplated by the merger agreement. In the course of reaching its decision, our board of directors did not consider the liquidation value of the Company’s assets because it considers the Company to be a viable going concern business where value is derived from cash flows generated from its continuing operations. In addition, our board of directors believed that the value of the Company’s assets that might be realized in a liquidation would be significantly less than its going concern value. Further, our board of directors did not consider the Company’s net book value, which is an accounting concept, as a factor because it believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs. The Company’s net book value per share as of December 31, 2007 was $23.97, which is substantially below the merger consideration, $34.00 per share in cash. In addition, our board of directors did not consider the prices paid by us for past purchases of our common stock because those purchases were made at then current market prices and no such purchases were made after November 2006. There are no material U.S. federal tax consequences to the Company in connection with the merger.

The foregoing discussion summarizes the material factors considered by our board of directors in its consideration of the merger. In view of the wide variety of factors considered by our board of directors, and the complexity of these matters, our board of directors did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual members of our board of directors may have assigned different weights to various factors. Our board of directors unanimously (other than Messrs. Getty and Klein, who abstained from the vote) approved the merger agreement and the transactions contemplated thereby and recommended the adoption of the merger agreement based upon the totality of the information presented to, and considered by, it.

 

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Our board of directors recommends that you vote “FOR” the adoption of the merger agreement and “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.

Opinion of Our Financial Advisor

Goldman Sachs delivered its oral opinion, which was subsequently confirmed in writing, to our board of directors that, as of February 24, 2008, and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders.

The full text of the written opinion of Goldman Sachs, dated February 24, 2008, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of our board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any stockholder should vote with respect to the merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

   

the merger agreement;

 

   

annual reports to stockholders and Annual Reports on Form 10-K and Form 10-K/A of the Company for the five years ended December 31, 2006;

 

   

unaudited financial statements of the Company for the year ended December 31, 2007;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company;

 

   

certain other communications from the Company to its stockholders;

 

   

certain publicly available research analyst reports for the Company; and

 

   

certain internal financial analyses and forecasts for the Company prepared by its management (the “Management Projections,” see “—Certain Projections”) and a range of sensitivities analyses to such forecasts, including a forecast within such range (the “Central Sensitivity to Management Projections,” see “—Certain Projections”), which the Independent Directors directed Goldman Sachs to focus on for the purposes of Goldman Sachs’ financial analyses and the opinion described above.

Goldman Sachs also held discussions with members of senior management of the Company and the Independent Directors regarding their assessment of the past and current business operations, financial condition and future prospects of the Company, including their views on the risks and uncertainties of achieving the Management Projections (see “—Certain Projections”). In addition, Goldman Sachs (a) reviewed the reported price and trading activity for the outstanding shares of Company common stock, (b) compared certain financial and stock market information for the Company with similar information for certain other companies, the securities of which are publicly traded, (c) reviewed the financial terms of certain recent business combinations in the media industry specifically, and in other industries generally, and (d) performed such other studies and analyses, and considered such other factors, as Goldman Sachs considered appropriate.

For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by it. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries, nor was any such evaluation or appraisal furnished to Goldman Sachs.

 

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Goldman Sachs’ opinion does not address any legal, regulatory, tax or accounting matters nor does it address the underlying business decision of the Company to engage in the merger or the relative merits of the merger as compared to any strategic alternatives that may be available to the Company. The opinion addresses only the fairness from a financial point of view to the holders of the outstanding shares of Company common stock (other than Rollover Stockholders), as of the date of the opinion, of the $34.00 per share in cash to be received by such stockholders pursuant to the merger agreement. Goldman Sachs does not express any view on, and its opinion does not address, any other term or aspect of the merger agreement or the merger or any other contractual arrangement the Company, Parent or any of their respective affiliates may enter into in connection with the merger, including, without limitation, (a) the terms of the Ancillary Agreements (as defined in the merger agreement), (b) the fairness of the merger to, or any consideration received in connection therewith by, Rollover Stockholders or the holders of any other class of securities, creditors, or other constituencies of the Company or Parent, or (c) the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company or Parent, or class of such persons, in connection with the merger, whether relative to the $34.00 per share in cash to be received by the stockholders (other than the Rollover Stockholders) pursuant to the merger agreement or otherwise. In addition, Goldman Sachs does not express any opinion as to the impact of the merger on the solvency or viability of the Company or Parent or the ability of the Company or Parent to pay its respective obligations when they come due. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions in effect on, and the information made available to it as of, the date of the opinion, and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion.

The following is a summary of the material financial analyses delivered by Goldman Sachs to our board of directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before February 24, 2008, and is not necessarily indicative of current market conditions.

Historical Stock Trading Analysis.

Goldman Sachs analyzed the merger consideration of $34.00 per share to be received by the holders of the outstanding shares of Company common stock (other than Rollover Stockholders) in relation to the closing price of outstanding shares on February 22, 2008 (the last trading day prior to the date of the merger agreement), the closing price of outstanding shares on January 18, 2008 (the last trading day prior to our public announcement that we were exploring strategic alternatives), and the average closing price for the:

 

   

ten trading day period ended February 22, 2008;

 

   

thirty day period ended February 22, 2008;

 

   

ninety day period ended February 22, 2008;

 

   

one hundred eighty day period ended February 22, 2008; and

 

   

three hundred sixty-five day period ended February 22, 2008.

This analysis indicated that the price per share to be paid to the stockholders pursuant to the merger agreement represented:

 

   

a premium of 39.1% based on the closing price of $24.45 per share on February 22, 2008;

 

   

a premium of 55.0% based on the closing price of $21.94 per share on January 18, 2008;

 

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a premium of 37.6% based on the average closing price of $24.70 per share for the ten trading day period ended February 22, 2008;

 

   

a premium of 34.3% based on the average closing price of $25.32 per share for the thirty day period ended February 22, 2008;

 

   

a premium of 26.8% based on the average closing price of $26.81 per share for the ninety day period ended February 22, 2008;

 

   

a premium of 20.7% based on the average closing price of $28.16 per share for the one hundred eighty day period ended February 22, 2008; and

 

   

a discount of 10.3% based on the average closing price of $37.89 per share for the three hundred sixty-five day period ended February 22, 2008.

Selected Company Analysis.

Goldman Sachs reviewed and compared certain financial information, ratios and public market multiples for the Company with corresponding financial information, ratios and public market multiples for selected publicly traded corporations, including: Jupitermedia Corporation, selected digital media software companies (Adobe Systems Incorporated and Avid Technology, Inc.), and selected marketing services companies (Harte-Hanks, Inc., The Interpublic Group of Companies, Inc., Omnicom Group Inc., and WPP Group plc) (collectively, the “Selected Companies”).

Although none of the Selected Companies is directly comparable to the Company, the Selected Companies included were chosen because they are publicly traded companies with equity market capitalization of more than $1 billion (excluding Jupitermedia Corporation) and with operations and long term earnings per share growth estimates (as estimated by Institutional Brokers’ Estimate System (“IBES”)) that for purposes of analysis may be considered similar to certain of the Company’s operations. Jupitermedia Corporation has product lines that are similar to certain of the product lines of the Company. The selected marketing services companies are related to or are in the advertising industry and are users of visual content. The selected digital media software companies are in the business of selling digital media products or technology used by creative professionals and users of visual content.

The multiples and ratios for the Company were calculated using (a) the $34.00 per share merger consideration to be paid to holders of the outstanding shares of Company common stock pursuant to the merger agreement and the closing price of $24.45 per share of Company common stock on February 22, 2008, (b) financial data obtained from Company public filings and Company management, (c) the Central Sensitivity to Management Projections (see “—Certain Projections”), which assumes for 2009 through 2012 a decrease of 3.75% in annual revenue growth rate and operating margin relative to the Management Projections, (d) the Management Projections (see “—Certain Projections”) and (e) IBES forecasts. The multiples and ratios for each of the Selected Companies were based on the closing prices of the companies’ shares on February 22, 2008, financial data obtained from those companies’ public filings and IBES forecasts. With respect to the Selected Companies, Goldman Sachs calculated the following and compared them to the results for the Company:

 

   

enterprise value (“EV”), which is the market value of common equity on a diluted basis (including outstanding stock options computed using the treasury method) plus debt less cash and cash equivalents, as a multiple of 2007 earnings before interest, taxes, depreciation and amortization (“EBITDA”); and

 

   

price as a multiple of calendar year 2007 earnings per share on a diluted basis (“EPS”), estimated calendar year 2008 EPS and estimated calendar year 2009 EPS.

 

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The results of these analyses are summarized as follows:

 

     EV/2007
EBITDA
   Price/Earnings
      2007    2008E    2009E

Company at $24.45 on February 22, 2008

           

Central Sensitivity to Management Projections

   5.0x    11.0x    11.9x    12.2x

Management Projections

   5.0x    11.0x    10.9x    9.6x

IBES

   5.0x    11.0x    12.0x    11.4x

Company at $34.00 Merger Consideration

           

Central Sensitivity to Management Projections

   6.6x    15.3x    16.6x    16.9x

Management Projections

   6.6x    15.3x    15.1x    13.3x

IBES

   6.6x    15.3x    16.7x    15.9x

Jupitermedia Corporation

   7.0x    50.8x    27.7x    17.9x

Digital Media Software Companies

           

Range

   11.9 - 14.3x    18.6 - 21.5x    18.9 - 28.6x    16.4 - 23.3x

Marketing Services Companies

           

Range

   7.2 - 9.9x    13.6 - 44.7x    12.0 - 16.8x    11.0 - 13.0x

Overall Mean1

   9.8x    25.5x    18.8x    15.2x

Overall Median1

   9.7x    18.6x    16.8x    13.0x

 

1

For Jupitermedia Corporation, selected digital media software companies and selected marketing services companies (does not include the Company).

Illustrative Present Value of Future Stock Price Analysis.

Goldman Sachs performed an illustrative analysis of the implied present value of the future price of each share, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s estimated future earnings and its assumed price to future earnings per share multiple. Goldman Sachs first calculated the implied per share values for (a) each of the fiscal years from 2008 to 2012 by applying price to earnings (“P/E”) multiples ranging from 10.0x to 16.0x to estimates of the EPS of the Company for fiscal years 2008 to 2012, based on (i) the Central Sensitivity to Management Projections and (ii) Management Projections, respectively (see “—Certain Projections”), and (b) each of the fiscal years 2008 and 2009 by applying P/E multiples ranging from 10.0x to 16.0x to estimates of the EPS of the Company for fiscal years 2008 and 2009 from IBES. Then, Goldman Sachs discounted the future values using an equity discount rate of 13.35%. The range of P/E multiples used by Goldman Sachs in this analysis was derived by Goldman Sachs utilizing its professional judgment and experience based on the average next twelve months (“NTM”) P/E multiples of the Company during the three hundred sixty-five day period ended February 22, 2008 (15.8x) and the one hundred eighty day period ended February 22, 2008 (13.1x), the NTM P/E multiple of the Company on January 18, 2008 (10.3x), the NTM P/E multiple of the Company on February 22, 2008 (12.0x) and NTM P/E multiples of the Selected Companies (16.8x). In Goldman Sachs’ judgment, based on a review of numerous factors, including, without limitation, significant differences between the businesses, sizes and capitalizations of the Company and the Selected Companies, the NTM P/E multiples of the Company were more relevant than the NTM P/E multiples of the Selected Companies for purposes of deriving the P/E multiple range. The equity discount rate of 13.35% used by Goldman Sachs in this analysis was derived by Goldman Sachs, utilizing its professional judgment and experience, based on a cost of equity analysis based on beta for the Company and certain other financial metrics. The following table presents the results of this analysis:

 

Forecasts

   Implied Present Value
of Future Stock Price
(per share)

Central Sensitivity to Management Projections

   $ 17.75 to $32.79

Management Projections

   $ 22.47 to $40.85

IBES

   $ 18.88 to $32.48

 

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Illustrative Discounted Cash Flow Analysis.

Goldman Sachs performed an illustrative discounted cash flow (“DCF”) analysis to determine a range of implied present values per share. Goldman Sachs first conducted the DCF analysis using the Central Sensitivity to Management Projections (see “—Certain Projections”) and assuming the mid-year convention discounting of cash flows. Goldman Sachs calculated indications of present values of unlevered free cash flows for the Company for calendar years 2008 through 2012 using discount rates ranging from 10.0% to 14.0%. Goldman Sachs calculated indications of values of perpetual unlevered free cash flows of the Company using two different methods: perpetuity growth and terminal value multiple. Under the perpetuity growth method, Goldman Sachs assumed terminal growth rates of 1.0% to 3.0% and then discounted the illustrative terminal values to calculate indications of implied present values, using discount rates ranging from 10.0% to 14.0%. Under the terminal value multiple method, Goldman Sachs assumed terminal multiples of 4.5x to 7.5x to estimated 2012 EBITDA and then discounted the illustrative terminal values to calculate indications of implied present values using discount rates ranging from 10.0% to 14.0%. Goldman Sachs then conducted the same DCF analysis, but using the Management Projections. The terminal growth rate range used by Goldman Sachs in this analysis was derived by Goldman Sachs utilizing its professional judgment and experience based on historical range of inflation rates, historical range of gross domestic product growth rates and implied last twelve months (“LTM”) EBITDA multiples relative to then current trading levels of the Company. The terminal EBITDA multiples range used by Goldman Sachs in this analysis was derived by Goldman Sachs utilizing its professional judgment and experience based on the average LTM EBITDA multiples of the Company during the three hundred sixty-five day period ended February 22, 2008 (7.1x) and the one hundred eighty day period ended February 22, 2008 (5.4x), the LTM EBITDA multiple of the Company on January 18, 2008 (4.2x), the LTM EBITDA multiple of the Company on February 22, 2008 (4.7x) and LTM EBITDA multiples of the Selected Companies (9.6x). In Goldman Sachs’ judgment, based on a review of numerous factors, including, without limitation, significant differences between the businesses, sizes and capitalizations of the Company and the Selected Companies, the LTM EBITDA multiples of the Company were more relevant than the LTM EBITDA multiples of the Selected Companies for purposes of deriving the terminal multiple range. The discount rate range used by Goldman Sachs in this analysis was derived by Goldman Sachs, utilizing its professional judgment and experience, based on a weighted average cost of capital analysis based on betas and certain other financial metrics for the Company and the Selected Companies (other than Jupitermedia Corporation) for which betas were available. In Goldman Sachs’ judgment, based on a review of numerous factors, including, without limitation, significant differences between the businesses, sizes and capitalizations of the Company and the Selected Companies, the weighted average cost of capital analysis for the Company was more relevant than the weighted average cost of capital analysis for the Selected Companies for purposes of deriving the discount rate range. The following table presents the results of this analysis:

 

Methodology (Forecasts)

   Implied Present Value
(per share)

Perpetuity Growth Method (Central Sensitivity to Management Projections)

   $ 26.84 to $45.58

Terminal Value Multiple Method (Central Sensitivity to Management Projections)

   $ 27.02 to $42.60

Perpetuity Growth Method (Management Projections)

   $ 33.37 to $57.54

Terminal Value Multiple Method (Management Projections)

   $ 32.93 to $52.34

Illustrative Leveraged Buyout Analysis.

Goldman Sachs performed an illustrative leveraged buyout (“LBO”) analysis using the Central Sensitivity to Management Projections (see “—Certain Projections”). In performing the illustrative leveraged buyout analysis, Goldman Sachs assumed hypothetical financial buyer purchase prices per share ranging from $30.00 to $38.00, with the merger consideration of $34.00 per share of common stock as the midpoint of such range, which reflect illustrative implied entry multiples (based on adjusted LTM EBITDA) ranging from 5.8x to 7.3x, assumed debt of $970 million and an exit in year five at exit LTM EBITDA multiples of 4.5x to 7.5x. Goldman Sachs then performed the same LBO analysis, but using the Management Projections (see “— Certain Projections”). In

 

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performing the illustrative LBO analysis, Goldman Sachs also assumed that after the acquisition, 5%, 10% or 15% of the equity, respectively, is allocated to employees. The LTM EBITDA exit multiples range used by Goldman Sachs in this analysis was derived by Goldman Sachs utilizing its professional judgment and experience based on the average LTM EBITDA multiples of the Company during the three hundred sixty-five day period ended February 22, 2008 (7.1x) and the one hundred eighty day period ended February 22, 2008 (5.4x), the LTM EBITDA multiple of the Company on January 18, 2008 (4.2x), the LTM EBITDA multiple of the Company on February 22, 2008 (4.7x) and LTM EBITDA multiples of the Selected Companies (9.6x). In Goldman Sachs’ judgment, based on a review of numerous factors, including, without limitation, significant differences between the businesses, sizes and capitalizations of the Company and the Selected Companies, the LTM EBITDA multiples of the Company were more relevant than the LTM EBITDA multiples of the Selected Companies for purposes of deriving the exit multiple range. The following table presents the results of this analysis:

 

     Illustrative internal rates of equity
returns to a hypothetical financial buyer

Assumed Equity Allocation to Employees

   Central Sensitivity
to Management
Projections
   Management
Projections

5%

   1.7% to 22.9%    8.7% to 30.3%

10%

   0.6% to 21.6%    7.6% to 28.9%

15%

   -0.5% to 20.2%    6.3% to 27.4%

Illustrative Recapitalization Analysis.

Goldman Sachs analyzed certain illustrative recapitalization transactions involving the Company and the theoretical value the Company’s stockholders could receive in such transactions. In the illustrative recapitalization analyses, Goldman Sachs assumed that the Company would incur either $630 million (Case 1) or $940 million (Case 2) of debt instead of the current debt level of $385 million. Goldman Sachs assumed that the debt in excess of $385 million would be used to buy back outstanding shares representing 14.7% of the Company’s market capitalization as of February 22, 2008 at a 15% premium to the closing market price on February 22, 2008 (Case 1) or 34.7% of the Company’s market capitalization as of February 22, 2008 at a 20% premium to the closing market price on February 22, 2008 (Case 2). Debt amounts assumed in Case 1 and Case 2, respectively, were derived by Goldman Sachs utilizing its professional judgment and experience based on a variety of factors such as credit market conditions, credit profile and financial and operational characteristics of the Company. The premiums to the closing market price on February 22, 2008 used in this analysis were derived by Goldman Sachs utilizing its professional judgment and experience based on a variety of factors such as the size of the buyback relative to the Company’s market capitalization, the pro forma financial impact of the share buyback on the estimated earnings per share, the pro forma impact on the earnings per share growth rates, and general assessment of stock buybacks executed by other publicly traded companies with characteristics that for purposes of analysis may be considered similar to certain of the Company’s characteristics. The theoretical post-recapitalization trading value of outstanding shares not purchased was based upon estimated NTM P/E multiples of 10.0x to 16.0x, estimates for the Company based on the Central Sensitivity to Management Projections and the Management Projections (see “—Certain Projections”), respectively, after giving effect to the incurrence of incremental debt, incremental interest expense, repurchase of outstanding shares and estimated future weighted average shares outstanding following the recapitalization. Goldman Sachs calculated the implied per share future equity values for outstanding shares for 2008 and 2010 and then discounted 2010 values back two years using a discount rate of 13.35%. The equity discount rate of 13.35% used by Goldman Sachs in this analysis was derived by Goldman Sachs, utilizing its professional judgment and experience, based on a cost of equity analysis based on beta for the Company and certain other financial metrics. The following table presents the results of this analysis:

 

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     Implied Present Value (per share)
     Central Sensitivity to
Management Projections
   Management Projections
     2008    2010    2008    2010

Case 1

   $ 21.21 to $33.94    $ 19.91 to $31.86    $ 23.48 to $37.57    $ 26.25 to $42.00

Case 2

   $ 22.00 to $35.19    $ 21.09 to $33.74    $ 24.62 to $39.39    $ 28.84 to $46.14

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to our board of directors as to the fairness from a financial point of view to the holders of the outstanding shares of Company common stock (other than Rollover Stockholders) of the $34.00 per share in cash to be received by such holders pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecasts.

The merger consideration was determined through arm’s-length negotiations between the Company and Parent and was approved by our board of directors. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or our board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

As described above, Goldman Sachs’ opinion to our board of directors was one of many factors taken into consideration by our board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B to this proxy statement.

Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of the Company, Parent, portfolio companies of investment funds sponsored by Hellman & Friedman LLC, which funds we refer to in this section as “H&F,” affiliates of Parent and any of their respective affiliates, or any currency or commodity that may be involved in the merger for their own account and for the accounts of their customers. Goldman Sachs also has provided certain investment banking and other financial services to the Company from time to time, including having acted as an agent in connection with an exchange offer for the Company’s 0.5% convertible subordinated debentures, Series B due 2023 (aggregate principal amount $265 million) in December 2004, and as an agent in connection with a consent solicitation for the Company’s 0.5% convertible subordinated debentures, Series B due

 

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2023 (aggregate principal amount $265 million) in January 2007. During the past two years, Goldman Sachs has received aggregate fees from the Company for investment banking and other financial services unrelated to the merger of approximately $950,000.

Goldman Sachs also has provided certain investment banking and other financial services to H&F and its affiliates and portfolio companies from time to time, including having acted as financial advisor to Texas Genco Holdings, Inc., a portfolio company of H&F, with respect to its sale to NRG Energy Inc. in September 2005; as lead manager with respect to a repricing of a second lien bank loan (aggregate principal amount $160 million) extended to Mitchell International, an affiliate of H&F (“Mitchell”), in October 2005; as financial advisor to a consortium that included H&F in connection with its acquisition of LPL Financial Services Corp., a portfolio company of H&F (“LPL Financial Services”), including acting as lead manager of a bank loan (aggregate principal amount $950 million) and the offering of 10.75% senior subordinated notes due 2015 (aggregate principal amount $330 million) in connection with the financing of such acquisition, in December 2005; as lead manager in connection with the issuance of cumulative preferred stock (aggregate principal amount $200 million) of Arch Capital Group Limited, an affiliate of H&F, in January 2006; as financial advisor to Hellman & Friedman Europe Limited, an affiliate of H&F, in connection with its acquisition of Gartmore Investment Management PLC, including acting as manager with respect to a bank loan (aggregate principal amount $585 million) extended in connection with the financing of such acquisition, in May 2006; as sole bookrunner of a term loan (aggregate principal amount $740 million) and a revolving credit facility (aggregate principal amount $100 million) provided to LPL Financial Services in December 2006; as financial advisor to H&F with respect to its sale of Mitchell in February 2007; and as joint manager with respect to a term loan (aggregate principal amount $660 million), a revolving credit facility (aggregate principal amount $100 million), a senior unsecured bridge loan (aggregate principal amount $330 million), and a senior subordinated bridge loan (aggregate principal amount $160 million) in connection with the financing of the acquisition of Catalina Marketing Corp. by H&F in October 2007.

Goldman Sachs also may provide investment banking and other financial services to the Company, H&F and their respective affiliates and portfolio companies in the future. In connection with the above-described services, Goldman Sachs has received, and may receive, compensation. Affiliates of Goldman Sachs have co-invested with H&F and its affiliates from time to time and may do so in the future.

Our board of directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement, dated November 12, 2007, the Company engaged Goldman Sachs to act as its financial advisor in connection with the contemplated merger. Pursuant to the terms of this engagement letter, the Company has agreed to pay Goldman Sachs a transaction fee equal to 0.725% of the aggregate consideration (which is expected to be equal to approximately $17.3 million), $3 million of which was payable upon execution of the merger agreement and the remainder of which is payable upon consummation of the merger. In addition, the Company has agreed to reimburse Goldman Sachs for its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities arising out of its engagement, including certain liabilities under the federal securities laws. Other than the Voting Independent Directors’ direction to Goldman Sachs to focus on the Central Sensitivity to Management Projections in connection with Goldman Sachs’s financial analyses and the opinion rendered by Goldman Sachs, Goldman Sachs did not receive from the Company any instructions or limitations in connection with its financial analyses or the opinion rendered by Goldman Sachs. Goldman Sachs has consented to the inclusion of its written opinion delivered to the board of directors, dated February 24, 2008, in this proxy statement.

A copy of Goldman Sachs’ written presentation to the board of directors on February 24, 2008 has been filed as an exhibit to the Schedule 13E–3 filed with the SEC in connection with the merger. The written presentation will be available for any interested Getty Images stockholder (or any representative of a stockholder who has been so designated in writing) to inspect and copy at our principal executive offices during regular business hours. Alternatively, you may inspect and copy the presentation at the office of, or obtain it by mail from, the SEC.

 

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In addition to the presentation made to our board of directors described above, Goldman Sachs also made written and oral presentations to our board of directors on February 18, 2008, February 11, 2008, February 10, 2008, February 7, 2008, December 21, 2007, November 28, 2007, November 6, 2007, October 10, 2007 and September 19, 2007. Copies of these other written presentations by Goldman Sachs to our board of directors have been attached as exhibits to the Schedule 13E–3 filed with the SEC in connection with the merger. These written presentations will be available for any interested Getty Images stockholder (or any representative of a stockholder who has been so designated in writing) to inspect and copy at our principal executive offices during regular business hours. Alternatively, you may inspect and copy the presentations at the office of, or obtain it by mail from, the SEC.

None of these other written and oral presentations by Goldman Sachs, alone or together, constitute an opinion of Goldman Sachs with respect to the consideration to be paid in the merger. Information contained in these other written and oral presentations is substantially similar to the information provided in Goldman Sachs’ written presentation to our board of directors on February 24, 2008, as described above. The September 19, 2007 materials contained valuation, LBO and recapitalization analyses, analysis at various prices, discussion of potentially interested financial sponsors and strategic buyers and an analysis of the pro forma financial impact of acquiring the Company on certain potential strategic buyers. The October 10, 2007 materials contained updated valuation and LBO analyses, updated analysis at various prices and initial process considerations, including discussion of potentially interested financial sponsors. The November 6, 2007 materials contained updated process considerations and a proposed timetable. The November 28, 2007 materials contained a discussion of indications of interest in the Company that had been received from various potential acquirers, updated valuation and LBO analyses, updated analysis at various prices, as well as an updated proposed timetable. The December 2007 materials contained an updated analysis of the pro forma financial impact of acquiring the Company on certain potential strategic buyers, as well as information relating to certain transactions involving stub equity deal structures. The February 7, 2008 materials contained updated valuation, LBO and recapitalization analyses and discussion of bids submitted by potential acquirers. Each of the two February 10, 2008 materials contained updated valuation analyses. The February 11, 2008 materials contained updated valuation analyses. The February 18, 2008 materials contained updated valuation, LBO and recapitalization analyses and a discussion of the terms of H&F’s proposal. These other written and oral presentations made by Goldman Sachs contained, among other things, the following types of financial analyses:

 

   

market performance;

 

   

analysis at various prices;

 

   

illustrative present value of future stock price analysis;

 

   

illustrative discounted cash flow analysis;

 

   

illustrative leveraged buyout analysis;

 

   

illustrative recapitalization analysis;

 

   

selected transactions analysis; and

 

   

selected companies analysis.

Not all of the other written and oral presentations contained all of the financial analyses listed above. The financial analyses in these other written and oral presentations were based on market, economic and other conditions as they existed as of the dates of the respective presentations as well as other information that was available at those times. Accordingly, the results of the financial analyses differed due to changes in those conditions. Among other things, multiples attributable to selected companies changed as those companies’ stock prices changed, and implied transaction multiples, average multiples over time, discounted cash flows analyses and leveraged buyout analyses changed as the Company’s financial results (as well as projections made by the Company’s management and board of directors, see “—Certain Projections”) changed. Finally, Goldman Sachs continued to refine various aspects of its financial analyses with respect to the Company over time.

 

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Purpose and Reasons for the Merger for the Rollover Stockholders

The Rollover Stockholders are making the statements in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

Concurrently with the Company’s entry into the merger agreement, the Rollover Stockholders entered into a rollover commitment letter with Parent pursuant to which all of the shares of Getty Images common stock held by the Rollover Stockholders will be transferred, contributed and delivered to Parent in exchange for newly issued limited partnership units of Parent issued at a per unit value equal to the merger consideration (and valuing the contributed shares at an amount per share equal to the merger consideration). See “—Interests of the Company’s Directors and Executive Officers in the Merger.” The Rollover Stockholders expect their transfer of shares of the Company’s common stock to be tax deferred for U.S. federal income tax purposes. For the Rollover Stockholders, the purpose of the merger is to enable the Rollover Stockholders to benefit from any future earnings and growth of Getty Images after its common stock ceases to be publicly traded. The Rollover Stockholders also believe that it is best for Getty Images to operate as a privately held entity in order to allow the Company to focus on its long-term growth and continuing improvements to its business absent the regulatory burden imposed upon public companies and the distractions caused by the public equity market’s valuation of the Company’s common stock.

Purpose and Reasons for the Merger for Jonathan Klein

Jonathan Klein is making the statements in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

Mr. Klein believes that it is best for Getty Images to operate as a privately held entity in order to allow the Company greater operational flexibility and to focus on its long-term growth and continuing improvements to its business absent the regulatory burden imposed upon public companies and the distractions caused by the public equity market’s valuation of the Company’s common stock. The merger will also enable Mr. Klein to benefit from any future earnings and growth of Getty Images, after its common stock ceases to be publicly traded, while at the same time providing him with an opportunity to receive cash for a portion of his existing investment in the Company. For U.S. federal income tax purposes, the receipt of cash in exchange for shares of the Company’s common stock held by Mr. Klein pursuant to the merger will be a taxable transaction. Mr. Klein supports proceeding with the merger at this time because he believes that the merger is more favorable to the unaffiliated stockholders of the Company than any other alternative reasonably available to the Company and its stockholders, including remaining as a standalone public company.

Purpose and Reasons for the Merger for Parent, Merger Sub and the H&F Filing Persons

Parent, Merger Sub, Abe GP LLC, H&F Fund VI, Hellman & Friedman Investors VI, L.P. and Hellman & Friedman LLC are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. Abe GP LLC is the general partner of Parent, Hellman & Friedman Investors VI, L.P. is the general partner of H&F Fund VI, and Hellman & Friedman LLC is the general partner of Hellman & Friedman Investors VI, L.P. We refer to Abe GP LLC, H&F Fund VI, Hellman & Friedman Investors VI, L.P. and Hellman & Friedman LLC, collectively, as the “H&F Filing Persons.”

If the merger is completed, Getty Images will become a subsidiary of Parent. For Parent and Merger Sub, the purpose of the merger is to effectuate the transactions contemplated by the merger agreement. For the H&F Filing Persons, the purpose of the merger is to allow H&F Fund VI to indirectly own equity interests in Getty Images and to bear the rewards and risks of such ownership after shares of Getty Images common stock cease to be publicly traded.

The H&F Filing Persons believe that it is best for Getty Images to operate as a privately held entity in order to allow Getty Images greater operational flexibility and to focus on its long-term growth and continuing

 

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improvements to its business without the constraints and distractions caused by the public equity market’s valuation of its common stock. Moreover, the H&F Filing Persons believe that Getty Images’ future business prospects can be improved through the active participation of Parent in the strategic direction of Getty Images. Although the H&F Filing Persons believe that there will be significant opportunities associated with H&F Fund VI’s investment in Getty Images, they realize that there are also substantial risks (including the risks and uncertainties relating to the prospects of Getty Images) and that such opportunities may not ever be fully realized.

The H&F Filing Persons believe that structuring the transaction as a merger transaction is preferable to other transaction structures because (a) it will enable Parent to acquire all of the outstanding shares of Getty Images at the same time, (b) it represents an opportunity for Getty Images’ unaffiliated stockholders to receive fair value for their shares of common stock and (c) it allows the Rollover Stockholders to maintain their investment in Getty Images.

Position of the Rollover Stockholders as to the Fairness of the Merger

The Rollover Stockholders are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

The views of the Rollover Stockholders as to the fairness of the merger should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to adopt the merger agreement. Mr. Getty (who did not participate in the deliberations of the Company’s board of directors) and the other Rollover Stockholders have interests in the merger different from, and in addition to, those of the other stockholders of Getty Images. These interests are described under “—Interests of the Company’s Directors and Executive Officers in the Merger—Arrangements with Mark Getty and Other Rollover Stockholders.”

The Rollover Stockholders are not a party to and did not participate in the negotiation of the merger agreement with the Company, Parent or Merger Sub or their respective representatives or advisors. Neither Mr. Getty nor any of the other Rollover Stockholders participated in the deliberations of the Company’s board of directors with respect to the substantive or procedural fairness of the merger to the unaffiliated stockholders, nor did they undertake any independent evaluation of the fairness of the merger or engage a financial advisor for such purpose. Nevertheless, the Rollover Stockholders believe that the proposed merger is substantively and procedurally fair to the unaffiliated stockholders on the basis of the factors discussed below.

The Rollover Stockholders believe that the proposed merger is substantively fair to the unaffiliated stockholders based on the following factors:

 

   

the current and historical market prices of the Company’s common stock, including the fact that the $34.00 per share merger consideration represented a premium of approximately 55% over the Company’s closing stock price of $21.94 on January 18, 2008, the last trading day prior to the Company’s public announcement that it was exploring strategic alternatives;

 

   

the fact that, after the Company’s discussions with multiple private equity sponsors and strategic parties regarding a potential acquisition and after the Company’s public announcement confirming that its board was exploring strategic alternatives, which was made more than one month prior to entering into the merger agreement with Parent, Parent was the only party that proposed to acquire the Company with fully committed financing after completing due diligence;

 

   

the fact that the merger consideration is all cash, allowing the unaffiliated stockholders to immediately realize a certain and fair value for all shares of their Company common stock;

 

   

notwithstanding the fact that the Goldman Sachs opinion was not delivered to Getty Investments or Mr. Getty (other than in his capacity as a director of the Company) and they are not entitled to rely on such opinion, the fact that the Company’s board of directors received an opinion from Goldman Sachs,

 

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dated February 24, 2008, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders;

 

   

the ability of the Company to continue discussing a potential transaction with a certain strategic party until April 4, 2008, even in the absence of a proposal from such party;

 

   

the Company’s ability, under certain circumstances, to provide information to, or participate in discussions or negotiations with, third parties regarding other proposals;

 

   

the Company’s ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a termination fee of $31 million during the period ending April 4, 2008 or $52 million after April 4, 2008 (equal to approximately 1.5% and 2.5% of the equity value of the transaction, respectively); and

 

   

the availability of appraisal rights to the unaffiliated stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their stock as determined by the Court of Chancery of the State of Delaware.

The Rollover Stockholders believe that the proposed merger is procedurally fair to the unaffiliated stockholders based on the following factors:

 

   

the merger agreement requires the merger agreement to be adopted not only by the holders of a majority of the outstanding shares of Company common stock, but also by the holders of a majority of the shares of the Company’s common stock present in person or by proxy and voting at the special meeting that are held by persons other than the Rollover Stockholders and Jonathan Klein;

 

   

the Independent Directors are not employees of the Company or any of its subsidiaries and have no financial interest in the merger that is different from that of the unaffiliated stockholders (other than the acceleration of options held by certain of the Independent Directors to acquire shares of Getty Images common stock);

 

   

although the Independent Directors did not retain an unaffiliated representative to act solely on behalf of the unaffiliated stockholders for purposes of negotiating the terms of the merger agreement or preparing a report concerning the fairness of the merger, the Independent Directors met regularly, without the participation of Messrs. Getty and Klein, to discuss the Company’s strategic alternatives and were advised by Weil Gotshal and Goldman Sachs;

 

   

the Voting Independent Directors made all material decisions relating to the Company’s strategic alternatives beginning on November 28, 2007, including recommending to the Company’s board of directors that the Company enter into the merger agreement;

 

   

the financial and other terms and conditions of the merger agreement were the product of arm’s-length negotiations between the Company’s board of directors and its advisors, on the one hand, and Parent and its advisors, on the other hand, without the participation of Messrs. Getty or Klein;

 

   

the ability of the Company to continue discussing a potential transaction with a certain strategic party until April 4, 2008, even in the absence of a proposal from such party;

 

   

the Company’s ability, under certain circumstances, to provide information to, or participate in discussions or negotiations with, third parties regarding other proposals;

 

   

the fact that Getty Investments has not entered into any exclusivity arrangements with Parent and Merger Sub and that in certain circumstances where the Company is able to engage in discussions or negotiations with third parties regarding a competing proposal, Getty Investments may, subject to the terms of its agreement with Parent, also engage in discussions or negotiations with respect to other proposals and a potential waiver or amendment of its restated option agreement with the Company,

 

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including waiving its right to call the trademarks for the “Getty Images” name, for a nominal fee, in connection with a change in control;

 

   

the Company’s ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a termination fee of $31 million during the period ending April 4, 2008 or $52 million after April 4, 2008;

 

   

notwithstanding the fact that the Goldman Sachs opinion was not delivered to Mr. Getty (other than in his capacity as a director of the Company) or the other Rollover Stockholders and they are not entitled to rely on such opinion, the fact that the Company’s board of directors received an opinion from Goldman Sachs, dated February 24, 2008, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders; and

 

   

the availability of appraisal rights to the unaffiliated stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their stock as determined by the Court of Chancery of the State of Delaware.

The Rollover Stockholders did not consider the Company’s net book value, which is an accounting concept, to be a factor in determining the substantive fairness of the transaction to the unaffiliated stockholders because they believed that net book value is not a material indicator of the value of Getty Images’ equity but rather an indicator of historical costs. The Rollover Stockholders also did not consider the liquidation value of Getty Images’ assets as indicative of Getty Images’ value primarily because of their belief that the liquidation value would be significantly lower than Getty Images’ value as an ongoing business and that, due to the fact that Getty Images is being sold as an ongoing business, its liquidation value is irrelevant to a determination as to whether the merger is fair to the unaffiliated stockholders. The Rollover Stockholders did not establish a pre-merger going concern value for Getty Images’ equity as a public company for the purposes of determining the fairness of the merger consideration to the unaffiliated stockholders because, following the merger, Getty Images will have a significantly different capital structure, which will result in different opportunities and risks for the business as a more highly leveraged privately-held entity. In addition, they did not consider the prices paid by the Company for past purchases of the Company’s common stock because those purchases were made at then current market prices and no such purchases were made after November 2006. In making their determination as to the substantive fairness of the proposed merger to the unaffiliated stockholders, the Rollover Stockholders were not aware of any firm offers during the prior two years by any person for the merger or consolidation of Getty Images with or into another company, the sale or transfer of all or any substantial part of Getty Images’ assets or a purchase of Getty Images’ securities that would enable the holder to exercise control of Getty Images, although there were proposals as described in “—Background of the Merger.”

The foregoing discussion of the information and factors considered and given weight by the Rollover Stockholders in connection with the fairness of the merger is not intended to be exhaustive but is believed to include all material factors considered by the Rollover Stockholders. The Rollover Stockholders did not find it practicable to assign, and did not assign or otherwise attach, relative weights to the individual factors in reaching their position as to the fairness of the merger. Rather, their fairness determinations were made after consideration of all of the foregoing factors as a whole. The Rollover Stockholders believe the foregoing factors provide a reasonable basis for their belief that the merger is substantively and procedurally fair to the unaffiliated stockholders.

Position of Jonathan Klein as to the Fairness of the Merger

Mr. Klein is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

 

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The views of Mr. Klein should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to adopt the merger agreement. Mr. Klein (who did not participate in the deliberations of the Company’s board of directors) has interests in the merger different from, and in addition to, those of the other stockholders of Getty Images. These interests are described under “—Interests of the Company’s Directors and Executive Officers in the Merger—New Management Arrangements.”

Mr. Klein is not a party to and did not participate in the negotiation of the merger agreement with the Company, Parent or Merger Sub, or their respective representatives or advisors. Mr. Klein did not participate in the deliberations of the Company’s board of directors with respect to the substantive or procedural fairness of the merger to the unaffiliated stockholders, nor did he undertake any independent evaluation of the fairness of the merger or engage a financial advisor for such purpose. Nevertheless, Mr. Klein believes that the proposed merger is substantively and procedurally fair to the unaffiliated stockholders on the basis of the factors discussed below.

Mr. Klein believes that the proposed merger is substantively fair to the unaffiliated stockholders based on the following factors:

 

   

the current and historical market prices of the Company’s common stock, including the fact that the $34.00 per share merger consideration represented a premium of approximately 55% over the Company’s closing stock price of $21.94 on January 18, 2008, the last trading day prior to the Company’s public announcement that it was exploring strategic alternatives;

 

   

the fact that, after the Company’s discussions with multiple private equity sponsors and strategic parties regarding a potential acquisition and after the Company’s public announcement confirming that its board was exploring strategic alternatives, which was made more than one month prior to entering into the merger agreement with Parent, Parent was the only party that proposed to acquire the Company with fully committed financing after completing due diligence;

 

   

the fact that the merger consideration is all cash, allowing the unaffiliated stockholders to immediately realize a certain and fair value for all shares of their Company common stock;

 

   

notwithstanding the fact that the Goldman Sachs opinion was not delivered to Mr. Klein (other than in his capacity as a director of the Company) and he is not entitled to rely on such opinion, the fact that the Company’s board of directors received an opinion from Goldman Sachs, dated February 24, 2008, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders;

 

   

the ability of the Company to continue discussing a potential transaction with a certain strategic party until April 4, 2008, even in the absence of a proposal from such party;

 

   

the Company’s ability, under certain circumstances, to provide information to, or participate in discussions or negotiations with, third parties regarding other proposals;

 

   

the Company’s ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a termination fee of $31 million during the period ending April 4, 2008 or $52 million after April 4, 2008 (equal to approximately 1.5% and 2.5% of the equity value of the transaction, respectively); and

 

   

the availability of appraisal rights to the unaffiliated stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their stock as determined by the Court of Chancery of the State of Delaware.

 

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Mr. Klein believes that the proposed merger is procedurally fair to the unaffiliated stockholders based on the following factors:

 

   

the merger agreement requires the merger agreement to be adopted not only by the holders of a majority of the outstanding shares of Company common stock, but also by the holders of a majority of the shares of the Company’s common stock present in person or by proxy and voting at the special meeting that are held by persons other than the Rollover Stockholders and Jonathan Klein;

 

   

the Independent Directors are not employees of the Company or any of its subsidiaries and have no financial interest in the merger that is different from that of the unaffiliated stockholders (other than the acceleration of options held by certain of the Independent Directors to acquire shares of Getty Images common stock);

 

   

although the Independent Directors did not retain an unaffiliated representative to act solely on behalf of the unaffiliated stockholders for purposes of negotiating the terms of the merger agreement or preparing a report concerning the fairness of the merger, the Independent Directors met regularly, without the participation of Messrs. Getty and Klein, to discuss the Company’s strategic alternatives and were advised by Weil Gotshal and Goldman Sachs;

 

   

the Voting Independent Directors made all material decisions relating to the Company’s strategic alternatives beginning on November 28, 2007, including recommending to the Company’s board of directors that the Company enter into the merger agreement;

 

   

the financial and other terms and conditions of the merger agreement were the product of arm’s-length negotiations between the Company’s board of directors and its advisors, on the one hand, and Parent and its advisors, on the other hand, without the participation of Messrs. Getty or Klein;

 

   

the ability of the Company to continue discussing a potential transaction with a certain strategic party until April 4, 2008, even in the absence of a proposal from such party;

 

   

the Company’s ability, under certain circumstances, to provide information to, or participate in discussions or negotiations with, third parties regarding other proposals;

 

   

the fact that Getty Investments has not entered into any exclusivity arrangements with Parent and Merger Sub and that in certain circumstances where the Company is able to engage in discussions or negotiations with third parties regarding a competing proposal, Getty Investments may, subject to the terms of its agreement with Parent, also engage in discussions or negotiations with respect to other proposals and a potential waiver or amendment of its restated option agreement with the Company, including waiving its right to call the trademarks for the “Getty Images” name, for a nominal fee, in connection with a change in control;

 

   

the Company’s ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a termination fee of $31 million during the period ending April 4, 2008 or $52 million after April 4, 2008;

 

   

notwithstanding the fact that the Goldman Sachs opinion was not delivered to Mr. Klein (other than in his capacity as a director of the Company) and he is not entitled to rely on such opinion, the fact that the Company’s board of directors received an opinion from Goldman Sachs, dated February 24, 2008, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders; and

 

   

the availability of appraisal rights to the unaffiliated stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their stock as determined by the Court of Chancery of the State of Delaware.

 

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Mr. Klein did not consider the Company’s net book value, which is an accounting concept, to be a factor in determining the substantive fairness of the transaction to the unaffiliated stockholders because he believed that net book value is not a material indicator of the value of Getty Images’ equity but rather an indicator of historical costs. Mr. Klein also did not consider the liquidation value of Getty Images’ assets as indicative of Getty Images’ value primarily because of his belief that the liquidation value would be significantly lower than Getty Images’ value as an ongoing business and that, due to the fact that Getty Images is being sold as an ongoing business, its liquidation value is irrelevant to a determination as to whether the merger is fair to the unaffiliated stockholders. Mr. Klein did not establish a pre-merger going concern value for Getty Images’ equity as a public company for the purposes of determining the fairness of the merger consideration to the unaffiliated stockholders because, following the merger, Getty Images will have a significantly different capital structure, which will result in different opportunities and risks for the business as a more highly leveraged privately-held entity. In addition, he did not consider the prices paid by the Company for past purchases of the Company’s common stock because those purchases were made at then current market prices and no such purchases were made after November 2006. In making his determination as to the substantive fairness of the proposed merger to the unaffiliated stockholders, Mr. Klein was not aware of any firm offers during the prior two years by any person for the merger or consolidation of Getty Images with or into another company, the sale or transfer of all or any substantial part of Getty Images’ assets or a purchase of Getty Images’ securities that would enable the holder to exercise control of Getty Images, although there were proposals as described in “—Background of the Merger.”

The foregoing discussion of the information and factors considered and given weight by Mr. Klein in connection with the fairness of the merger is not intended to be exhaustive but is believed to include all material factors considered by Mr. Klein. Mr. Klein did not find it practicable to assign, and did not assign or otherwise attach, relative weights to the individual factors in reaching their position as to the fairness of the merger. Rather, his fairness determination was made after consideration of all of the foregoing factors as a whole. Mr. Klein believes the foregoing factors provide a reasonable basis for his belief that the merger is substantively and procedurally fair to the unaffiliated stockholders.

Position of Parent, Merger Sub and the H&F Filing Persons as to the Fairness of the Merger

Parent, Merger Sub and the H&F Filing Persons are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of Parent, Merger Sub and the H&F Filing Persons should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to adopt the merger agreement.

Parent and Merger Sub attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the stockholders of Getty Images, and, accordingly, did not negotiate the merger agreement with a goal of obtaining terms that were fair to such stockholders. Neither Parent, Merger Sub nor the H&F Filing Persons believes that it has or had any fiduciary duty to Getty Images or its stockholders, including with respect to the merger and its terms.

None of Parent, Merger Sub or the H&F Filing Persons participated in the deliberation process of our board of directors, or in the conclusions of our board of directors, as to the substantive and procedural fairness of the merger to the unaffiliated stockholders of Getty Images, nor did they undertake any independent evaluation of the fairness of the merger or engage a financial advisor for such purpose. Nevertheless, they believe that the proposed merger is substantively and procedurally fair to the unaffiliated stockholders on the basis of the factors discussed below.

Parent, Merger Sub and the H&F Filing Persons believe that the proposed merger is substantively fair to the unaffiliated stockholders based on the following factors:

 

   

the current and historical market prices of the Company’s common stock, including the fact that the $34.00 per share merger consideration represented a premium of approximately 55% over the

 

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Company’s closing stock price of $21.94 on January 18, 2008, the last trading day prior to the Company’s public announcement that it was exploring strategic alternatives;

 

   

the fact that, after the Company’s discussions with multiple private equity sponsors and strategic parties regarding a potential acquisition and after the Company’s public announcement confirming that its board was exploring strategic alternatives, which was made more than one month prior to entering into the merger agreement with Parent, Parent was the only party that proposed to acquire the Company with fully committed financing after completing due diligence;

 

   

the fact that the merger consideration is all cash, allowing the unaffiliated stockholders to immediately realize a certain and fair value for all shares of their Company common stock;

 

   

notwithstanding the fact that the Goldman Sachs opinion was not delivered to Parent, Merger Sub or the H&F Filing Persons and they are not entitled to rely on such opinion, the fact that the Company’s board of directors received an opinion from Goldman Sachs, dated February 24, 2008, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders;

 

   

the ability of the Company to continue discussing a potential transaction with a certain strategic party until April 4, 2008, even in the absence of a proposal from such party;

 

   

the Company’s ability, under certain circumstances, to provide information to, or participate in discussions or negotiations with, third parties regarding other proposals;

 

   

the Company’s ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a termination fee of $31 million during the period ending April 4, 2008 or $52 million after April 4, 2008 (equal to approximately 1.5% and 2.5% of the equity value of the transaction, respectively); and

 

   

the availability of appraisal rights to the unaffiliated stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their stock as determined by the Court of Chancery of the State of Delaware.

Parent, Merger Sub and the H&F Filing Persons believe that the proposed merger is procedurally fair to the unaffiliated stockholders based on the following factors:

 

   

the merger agreement requires the merger agreement to be adopted not only by the holders of a majority of the outstanding shares of Company common stock, but also by the holders of a majority of the shares of the Company’s common stock present in person or by proxy and voting at the special meeting that are held by persons other than the Rollover Stockholders and Jonathan Klein;

 

   

the Independent Directors are not employees of the Company or any of its subsidiaries and have no financial interest in the merger that is different from that of the unaffiliated stockholders (other than the acceleration of options held by certain of the Independent Directors to acquire shares of Getty Images common stock);

 

   

although the Independent Directors did not retain an unaffiliated representative to act solely on behalf of the unaffiliated stockholders for purposes of negotiating the terms of the merger agreement or preparing a report concerning the fairness of the merger, the Independent Directors met regularly, without the participation of Messrs. Getty and Klein, to discuss the Company’s strategic alternatives and were advised by Weil Gotshal and Goldman Sachs;

 

   

the Voting Independent Directors made all material decisions relating to the Company’s strategic alternatives beginning on November 28, 2007, including recommending to the Company’s board of directors that the Company enter into the merger agreement;

 

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the financial and other terms and conditions of the merger agreement were the product of arm’s-length negotiations between the Company’s board of directors and its advisors, on the one hand, and Parent and its advisors, on the other hand, without the participation of Messrs. Getty or Klein;

 

   

the ability of the Company to continue discussing a potential transaction with a certain strategic party until April 4, 2008, even in the absence of a proposal from such party;

 

   

the Company’s ability, under certain circumstances, to provide information to, or participate in discussions or negotiations with, third parties regarding other proposals;

 

   

the fact that Getty Investments has not entered into any exclusivity arrangements with Parent and Merger Sub and that in certain circumstances where the Company is able to engage in discussions or negotiations with third parties regarding a competing proposal, Getty Investments may, subject to the terms of its agreement with Parent, also engage in discussions or negotiations with respect to other proposals and a potential waiver or amendment of its restated option agreement with the Company, including waiving its right to call the trademarks for the “Getty Images” name, for a nominal fee, in connection with a change in control;

 

   

the Company’s ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a termination fee of $31 million during the period ending April 4, 2008 or $52 million after April 4, 2008;

 

   

notwithstanding the fact that the Goldman Sachs opinion was not delivered to Parent, Merger Sub or the H&F Filing Persons and they are not entitled to rely on such opinion, the fact that the Company’s board of directors received an opinion from Goldman Sachs, dated February 24, 2008, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $34.00 per share in cash to be received by the holders of the outstanding shares of Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such stockholders; and

 

   

the availability of appraisal rights to the unaffiliated stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their stock as determined by the Court of Chancery of the State of Delaware.

Parent, Merger Sub and the H&F Filing Persons did not consider the Company’s net book value, which is an accounting concept, to be a factor in determining the substantive fairness of the transaction to the unaffiliated stockholders because they believed that net book value is not a material indicator of the value of Getty Images’ equity but rather an indicator of historical costs. Parent, Merger Sub and the H&F Filing Persons also did not consider the liquidation value of Getty Images’ assets as indicative of Getty Images’ value primarily because of their belief that the liquidation value would be significantly lower than Getty Images’ value as an ongoing business and that, due to the fact that Getty Images is being sold as an ongoing business, the liquidation value is irrelevant to a determination as to whether the merger is fair to the unaffiliated stockholders. Parent, Merger Sub and the H&F Filing Persons did not establish a pre-merger going concern value for Getty Images’ equity as a public company for the purposes of determining the fairness of the merger consideration to the unaffiliated stockholders because, following the merger, Getty Images will have a significantly different capital structure, which will result in different opportunities and risks for the business as a more highly leveraged private company. In addition, they did not consider the prices paid by the Company for past purchases of the Company’s common stock because those purchases were made at then current market prices and no such purchases were made after November 2006. In making their determination as to the substantive fairness of the merger to the unaffiliated stockholders, Parent, Merger Sub and the H&F Filing Persons were not aware of any firm offers during the prior two years by any person for the merger or consolidation of Getty Images with another company, the sale or transfer of all or substantially all of Getty Images’ assets or a purchase of Getty Images’ assets that would enable the holder to exercise control of Getty Images, although there were proposals as described in “—Background of the Merger.

The foregoing discussion of the information and factors considered and given weight by Parent, Merger Sub and the H&F Filing Persons in connection with the fairness of the merger is not intended to be exhaustive but is

 

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believed to include all material factors considered by Parent, Merger Sub and the H&F Filing Persons. Parent, Merger Sub and the H&F Filing Persons did not find it practicable to assign, and did not, assign or otherwise attach, relative weights to the individual factors in reaching their position as to the fairness of the merger. Rather, their fairness determinations were made after consideration of all of the foregoing factors as a whole. Parent, Merger Sub and the H&F Filing Persons believe the foregoing factors provide a reasonable basis for their belief that the merger is substantively and procedurally fair to the unaffiliated stockholders.

Plans for Getty Images After the Merger

It is expected that, upon consummation of the merger, the operations of Getty Images will be conducted substantially as they currently are being conducted, except that we will cease to have publicly traded equity securities and will instead be a wholly owned subsidiary of Parent. Parent has advised Getty Images that it does not have any current intentions, plans or proposals to cause us to engage in any of the following:

 

   

an extraordinary corporate transaction following consummation of the merger involving Getty Images’ corporate structure, business or management, such as a merger, reorganization or liquidation;

 

   

the relocation of any material operations or sale or transfer of a material amount of assets; or

 

   

any other material changes in its business.

We expect, however, that both before and following consummation of the merger, the management and/or board of directors of the surviving corporation will continue to assess our assets, corporate and capital structure, capitalization, operations, business, properties and personnel to determine what changes, if any, would be desirable following the merger to enhance the business and operations of the surviving corporation and may cause the surviving corporation to engage in the types of transactions set forth above if the management and/or board of directors of the surviving corporation decides that such transactions are in the best interest of the surviving corporation upon such review. The surviving corporation expressly reserves the right to make any changes it deems appropriate in light of such evaluation and review or in light of future developments.

Effects of the Merger

If the merger agreement is adopted by our stockholders and the other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into Getty Images with Getty Images continuing as the surviving corporation.

Upon the consummation of the merger, each share of our common stock will be cancelled and converted into the right to receive $34.00 in cash, without interest and less any applicable withholding taxes, other than (a) shares held by any stockholders who are entitled to and who properly exercise appraisal rights under Delaware law and (b) shares held by Parent or any of its subsidiaries, including shares to be contributed to Parent immediately prior to the completion of the merger by the Rollover Stockholders. Each share of Merger Sub will be converted into one newly issued share of common stock of the surviving corporation in the merger.

In connection with the consummation of the merger, except as otherwise agreed to by Parent and the holder of an option, each outstanding option to acquire our common stock granted under our equity incentive plans (whether or not then vested or exercisable), will be cancelled and terminated and converted at the effective time of the merger into the right to receive a cash payment for each share of our common stock issuable under such option equal to the excess, if any, of (a) the merger consideration over (b) the exercise price payable in respect of such share of our common stock issuable under such stock option, without interest and less any applicable withholding taxes. Also in connection with the consummation of the merger, except as otherwise agreed to by Parent and the holder of a restricted stock unit, each outstanding restricted stock unit granted under our equity

 

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incentive plans (whether or not previously vested) will vest in full and be converted into the right to receive a cash amount equal to the merger consideration, without interest and less applicable withholding taxes.

Following the merger, the entire equity in the surviving corporation will ultimately be owned by the H&F Investors, the Rollover Stockholders, Jonathan Klein and any additional investors the H&F Investors permit to invest in the transaction. If the merger is completed, the H&F Investors, the Rollover Stockholders, Jonathan Klein and any additional investors that the H&F Investors permit to invest in the transaction will be the sole beneficiaries of our future earnings and growth, if any, and will be entitled to vote on corporate matters affecting Getty Images following the merger. Similarly, the H&F Investors, the Rollover Stockholders, Jonathan Klein and any additional investors that the H&F Investors permit to invest in the transaction will also bear the risks of ongoing operations, including the risks of any decrease in our value after the merger and the operational and other risks related to the incurrence by the surviving corporation of significant additional debt as described below under “—Financing of the Merger.”

If the merger is completed, the unaffiliated stockholders of Getty Images will have no interest in Getty Images’ net book value or net earnings. The table below sets forth the direct and indirect interests in Getty Images’ net book value and net earnings of the Rollover Stockholders, the H&F Investors and Jonathan Klein prior to and immediately after the merger, based upon the net book value of Getty Images at March 31, 2008 and the net income of Getty Images for the fiscal year ended December 31, 2007. Following the merger, the entire interest in Getty Images’ net book value and net income that is not ultimately held by the Rollover Stockholders and Jonathan Klein will be held directly or indirectly by the H&F Investors and the additional investors that the H&F Investors permit to invest in the transaction.

 

Name   Ownership Prior to the Merger1     Ownership After the Merger2  
  Net Book Value     Earnings     Net Book Value     Earnings  
  $ in
Thousands
   %     $ in
Thousands
   %     $ in
Thousands
   %     $ in
Thousands
   %  

Mark Getty3

  $ 16,457    1.12 %   $ 1,411    1.12 %   $ 26,560    1.81 %   $ 2,277    1.81 %

Getty Investments4

    203,283    13.85 %     17,431    13.85 %     328,315    22.37 %     28,153    22.37 %

Jonathan Klein5

    7,123    0.49 %     611    0.49 %     14,389    0.98 %     1,234    0.98 %

H&F Investors6

    N/A    N/A       N/A    N/A       1,098,643    74.84 %     94,207    74.84 %

 

1

Based upon beneficial ownership as of May 20, 2008, excluding any options to acquire our common stock (whether or not exercisable) and any restricted stock units (whether or not vested), and the Company’s net book value at March 31, 2008 and net income for the fiscal year ended December 31, 2007.

 

2

Based upon the agreed upon and anticipated equity investments and the Company’s net book value at March 31, 2008 and net income for the fiscal year ended December 31, 2007, and without giving effect to any additional indebtedness to be incurred in connection with the merger. Excludes any options (whether or not exercisable) and any other equity incentives issued in connection with or after the merger as described in “—Interests of the Company’s Directors and Executive Officers in the Merger.”

 

3

Includes 15,500 shares held directly by Mr. Getty. Also includes shares beneficially owned or deemed to be owned beneficially by Mr. Getty as follows: 622,602 shares held by RBC Trustees (CI) Limited as Trustee of The October 1993 Trust; 24,377 shares held by Cheyne Walk Trust, to which Mr. Getty shares voting and investment power; and 7,313 shares held by Ronald Family Trust B, to which Mr. Getty shares voting and investment power. Cheyne Walk Trust and Ronald Family Trust B are members of Getty Investments. The number does not include 8,273,301 shares owned by Getty Investments. Mr. Getty is one of five directors of Getty Investments, and, therefore, may be deemed to share voting and investment power over the shares held by Getty Investments. The increase in Mr. Getty’s ownership percentage in the applicable columns under “Ownership After the Merger” results from the anticipated increased leverage of the Company following the completion of the merger. His ownership increase does not result from an additional investment by Mr. Getty or a different value being attributed to his shares of Company common stock.

 

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4

Getty Investments has sole dispositive and voting power over 8,273,301 shares. The increase in Getty Investments’ ownership percentage in the applicable columns under “Ownership After the Merger” results from the anticipated increased leverage of the Company following the completion of the merger. Its ownership increase does not result from an additional investment by Getty Investments or a different value being attributed to its shares of Company common stock.

 

5

Based upon an assumed investment of 70% of the estimated after-tax proceeds received by Mr. Klein in connection with the merger, although the amount and terms of Mr. Klein’s investment in Parent have not been finalized, and excludes any equity incentives issued in connection with or after the merger, each as described in “—Interests of the Company’s Directors and Executive Officers in the Merger.” Mr. Klein is one of five directors of Getty Investments, and, therefore, may be deemed to share voting and investment power over the shares held by Getty Investments. The increase in Mr. Klein’s ownership percentage in the applicable columns under “Ownership After the Merger” results from the anticipated increased leverage of the Company following the completion of the merger. His ownership increase does not result from an additional investment by Mr. Klein or a different value being attributed to his shares of Company common stock.

 

6

Based upon the full equity commitment contemplated by H&F Investors’ equity commitment letter, but without giving effect to the potential reduction in the amount of equity to be funded by the H&F Investors as described in “—Financing of the Merger—Equity Financing.”

In connection with the merger, certain of the Company’s management will receive benefits and be subject to obligations in connection with the merger that are different from, or in addition to, the benefits and obligations of our stockholders generally, as described in more detail under “—Interests of the Company’s Directors and Executive Officers in the Merger.” The incremental benefits are expected to include the right of certain executive officers and other key employees to make an equity investment in Parent or its affiliates and to participate in an equity incentive plan of an affiliate of the surviving corporation, in each case on terms that have not yet been finalized. A detriment to such executive officers and key employees is that their new equity interests would not be listed on a securities exchange and would be highly illiquid without an active public trading market for such equity interests. The equity interests are also expected to be subject to agreements restricting the ability of such holders to sell their equity interests. Additional incremental benefits to our executive officers may include, among others, continuing as executive officers of the surviving corporation and entry into new employment arrangements with the surviving corporation or its affiliates. Furthermore, it is contemplated that Mark Getty will be the chairman of the board of directors of Parent and Jonathan Klein will be the chief executive officer of Parent.

As one of the Rollover Stockholders, an incremental benefit to Mr. Getty will be the expected tax-free treatment with respect to the contribution of shares of Company common stock to Parent pursuant to the rollover commitment letter discussed under “—Interests of the Company’s Directors and Executive Officers in the Merger.”

Getty Images common stock is currently registered under the Exchange Act and is quoted on the New York Stock Exchange under the symbol “GYI.” As a result of the merger, Getty Images will be a privately held corporation, and there will be no public market for its common stock. After the merger, Getty Images’ common stock will cease to be quoted on the New York Stock Exchange, and price quotations with respect to sales of shares of common stock in the public market will no longer be available. In addition, registration of Getty Images’ common stock under the Exchange Act is expected to be terminated.

At the effective time of the merger, the directors of Merger Sub will become the directors of the surviving corporation and the current officers of Getty Images will become the officers of the surviving corporation. The certificate of incorporation and bylaws of Getty Images will be amended as a result of the merger to be the same as set forth in exhibits to the merger agreement and the certificate of incorporation and bylaws of Getty Images as so amended will be the certificate of incorporation and bylaws of the surviving corporation.

 

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Effects on the Company if the Merger is Not Completed

If the merger agreement is not adopted by our stockholders or if the merger is not completed for any other reason, our stockholders will not receive any payment for their shares of our common stock pursuant to the merger agreement. Instead, we will remain a public company and our common stock will continue to be registered under the Exchange Act and quoted on the New York Stock Exchange. In addition, if the merger is not completed, we expect that our management will operate our business in a manner similar to that in which it is being operated today and that our stockholders will continue to be subject to the same risks and opportunities to which they currently are subject, including, among other things, the nature of the industry on which Getty Images’ business largely depends, and general industry, economic, regulatory and market conditions.

If the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of our common stock. In the event the merger is not completed, our board of directors will continue to evaluate and review our business operations, prospects and capitalization, make such changes as are deemed appropriate and seek to identify acquisitions, joint ventures or strategic alternatives to enhance stockholder value. If the merger agreement is not adopted by our stockholders, or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely impacted.

If the merger agreement is terminated under certain circumstances, we will be obligated to pay Parent a termination fee of either $31 million or $52 million and/or reimburse 50% of Parent’s out-of-pocket fees and expenses, up to a cap of $5 million, in each case as a condition to, upon or following such termination. For a description of the circumstances triggering payment of the termination fee, see “The Merger Agreement—Termination Fee.”

Financing of the Merger

Parent estimates that the aggregate amount of financing necessary to complete the merger, the refinancing of our existing indebtedness and the payment of related fees and expenses in connection with the merger and the financing arrangements will be approximately $2.4 billion. This amount is expected to be funded by Parent and Merger Sub with a combination of the equity financing contemplated by the equity commitment letters and rollover commitment letter described below, debt financing contemplated by the debt commitment letter described below and cash of the Company. The equity and debt financing are subject to the satisfaction of the conditions set forth in the commitment letters pursuant to which the financings will be provided.

Equity Financing

Parent has received an equity commitment letter from the H&F Investors. Pursuant to this equity commitment letter, the H&F Investors have committed to purchase, or cause to be purchased, up to $941.3 million of equity of Parent in connection with the merger. The obligation to fund the commitments under the equity commitment letter is subject to the following conditions:

 

   

satisfaction or waiver by Parent of the conditions precedent to Parent’s and Merger Sub’s obligation to complete the merger;

 

   

the substantially simultaneous closing of the financing under the debt commitment letter described below; and

 

   

the substantially simultaneous contribution to Parent by the Rollover Stockholders of shares of Getty Images common stock pursuant to the rollover commitment letter described below.

Parent has also received an equity commitment letter from affiliates of Farallon Capital Management, L.L.C. (“Farallon”) pursuant to which letter such affiliates committed to purchase, or cause to be purchased, up to approximately $180.4 million of equity securities of Parent in connection with the merger. Thomas F. Steyer, the Senior Managing Member and Co-Managing Partner of Farallon, is a Managing Director and limited partner of

 

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the general partner of H&F Fund VI and a Managing Director and member of H&F. Brian M. Powers, the Chief Executive Officer of H&F, is an outside advisor to Farallon. An affiliate of H&F Fund VI owns a passive special limited partnership interest in one of the affiliates of Farallon that has provided the equity commitment to Parent. In addition, as described in “—Interests of the Company’s Directors and Executive Officers in the Merger,” Jonathan Klein and other executive officers and key employees of Getty Images may acquire equity interests in Parent in connection with the merger. Parent expects any equity financing received by Parent from the foregoing will reduce on a dollar-for-dollar basis the amount of equity financing to be provided by the H&F Investors.

The Rollover Stockholders have committed to contribute an aggregate of 8,942,593 shares of Getty Images’ common stock (with an aggregate value of approximately $304.0 million based on the merger consideration) to Parent immediately prior to the consummation of the merger in exchange for equity interests in Parent. The shares contributed will be cancelled in connection with the merger and will not be entitled to receive any merger consideration upon completion of the merger. The Rollover Stockholders, Parent and the H&F Investors have agreed to cooperate to structure the contribution of Getty Images’ common stock held by the Rollover Stockholders to Parent as a tax-free exchange to the extent permitted by law. The obligation to contribute the shares pursuant to the rollover commitment letter is subject to the following conditions:

 

   

satisfaction or waiver by Parent of the conditions precedent to Parent’s and Merger Sub’s obligation to complete the merger;

 

   

compliance by the H&F Investors, Parent and Merger Sub with certain provisions of the interim investors agreement; and

 

   

the substantially simultaneous funding by the H&F Investors of the amount of cash equity contemplated by the equity commitment letter described above.

In addition, pursuant to the interim investors agreement described in greater detail in “—Interests of the Company’s Directors and Executive Officers in the Merger,” a revocable grantor trust of which Mr. Getty is the primary beneficiary will roll over and exchange options it currently holds to acquire up to 446,350 shares of our common stock for options to acquire shares of the common stock of an affiliate of Parent.

Debt Financing

In connection with the execution and delivery of the merger agreement, Merger Sub has received a debt commitment letter for up to $1.045 billion of debt financing from Barclays Bank PLC, General Electric Capital Corporation and The Royal Bank of Scotland PLC consisting of (a) a senior secured term loan facility in an aggregate principal amount of up to $705 million with a term of seven years, (b) a senior secured delayed draw term loan facility in an aggregate principal amount of up to $265 million with a term of seven years and (c) a senior secured revolving credit facility in an aggregate principal amount of up to $75 million (a portion of which may be drawn at the closing of the merger) with a term of five years. Either Merger Sub or the Company will be the borrower under the senior secured facilities. The proceeds of borrowings under the senior secured facilities will be used (a) to finance, in part, the payment of the amounts payable under the merger agreement, the repayment of certain existing indebtedness of the Company and the payment of fees and expenses incurred in connection with the merger, (b) to provide ongoing working capital and (c) for other general corporate purposes of the Company and its subsidiaries.

The debt financing commitments are conditioned on the consummation of the merger in accordance with the merger agreement, as well as other customary conditions, including, but not limited to:

 

   

the negotiation, execution and delivery of definitive documentation;

 

   

the receipt by Merger Sub of cash equity contributions from the H&F Investors and other investors in an amount equal, when combined with the market value of the equity of existing stockholders of the Company rolled over in connection with the merger, to at least 50% of the total pro forma

 

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capitalization of the borrower under the senior secured facilities (after giving effect to the merger and the related incurrence of indebtedness);

 

   

the absence of any amendments to or waivers of the merger agreement to the extent material and adverse to the interests of the lenders, without the prior consent of the lenders;

 

   

the absence of a Company Material Adverse Effect (as defined in “The Merger Agreement—Company Material Adverse Effect Definition”);

 

   

the Company achieving Consolidated EBITDA (as defined in the debt commitment letter) for the twelve month period ending March 31, 2008 (or, if the closing date of the merger occurs on or after September 2, 2008, for the twelve month period ending June 30, 2008) of not less than $300 million (it being agreed that Consolidated EBITDA for the three month periods ended June 30, 2007, September 30, 2007 and December 31, 2007, respectively, shall be deemed to be $84,405,000, $73,705,000 and $79,311,000);

 

   

the repayment or refinancing of certain existing debt of the Company and its subsidiaries; and

 

   

delivery of customary legal opinions, closing certificates (including a solvency certificate) and insurance certificates.

If any portion of the debt financing becomes unavailable on the terms and conditions contemplated by the debt commitment letter, Parent will be required to use its reasonable best efforts to arrange or obtain alternative financing from alternative sources in an amount sufficient to consummate the merger on terms and conditions not materially less favorable to Parent than those set forth in the debt commitment letter. In the event that Parent and Merger Sub are required to do so, it may be difficult, or impossible, for Parent and Merger Sub to obtain alternative financing on such terms.

As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described above is not available as anticipated. The documentation governing the senior secured facilities has not been finalized and, accordingly, their actual terms may differ from those described in this proxy statement. Although there can be no assurance, Merger Sub believes that cash flow from operations should be sufficient to service the repayment obligations under the debt financing for the foreseeable future. Merger Sub believes, however, that it is reasonably likely that it will need to refinance all or a portion of the debt financing prior to maturity with the proceeds of future financing activities. Except as described herein, there is no plan or arrangement regarding the refinancing or repayment of the debt financings.

The loans under the senior secured facilities are expected to bear interest, at the borrower’s option, at (a) a rate equal to “Adjusted LIBOR” (the London interbank offered rate for dollars, adjusted for statutory reserve requirements) but in any event no less than 3.25% plus an applicable margin to be set initially at 4.50% or (b) the alternate base rate (a rate equal to the higher of (x) the prime commercial lending rate set forth on the British Banking Association Telerate Page 5 and (y) the federal funds effective rate plus 0.50%) plus an applicable margin to be set initially at 3.50%.

All obligations of the Company under the senior secured facilities are expected to be guaranteed on a senior secured basis by the direct holding company of the Company and by each of the Company’s existing and subsequently acquired or organized direct or indirect wholly-owned material U.S. subsidiaries (subject to certain exceptions, the “Guarantors”).

The obligations of the Company and the Guarantors under the senior secured facilities are expected to be secured, subject to permitted liens and other agreed upon exceptions, by a perfected first-priority security interest in substantially all of the present and after acquired assets of the Company and each Guarantor and by a first-priority lien on all of the capital stock of the Company and each direct, wholly owned subsidiary of the Company and each subsidiary Guarantor (limited, in the case of foreign subsidiaries, to 65% of the voting capital stock of such subsidiaries).

 

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The senior secured facilities are expected to contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, investments, sales of assets, mergers and consolidations, liens, transactions with affiliates and dividends and other distributions. The financial maintenance covenants will consist of a minimum consolidated interest coverage ratio and a maximum total leverage ratio to be agreed upon. The senior secured facilities are expected to also include customary events of default, including with respect to a change of control to be defined.

Material United States Federal Income Tax Consequences

The following is a summary of certain material U.S. federal income tax consequences of the merger that are relevant to beneficial holders of the Company’s common stock whose shares will be converted to cash in the merger and who will not own (actually or constructively) any shares of the Company’s common stock after the merger. The following discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to beneficial holders of the Company’s common stock. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code,” existing, proposed, and temporary regulations promulgated under the Code, and rulings, administrative pronouncements, and judicial decisions as in effect on the date of this proxy statement, changes to which could materially affect the tax consequences described below and could be made on a retroactive basis. The discussion applies only to beneficial holders of the Company’s common stock in whose hands the shares are capital assets within the meaning of Section 1221 of the Code and may not apply to beneficial holders who acquired their shares pursuant to the exercise of stock options or other compensation arrangements with the Company or who hold their shares as part of a hedge, straddle, conversion or other risk reduction transaction or who are subject to special tax treatment under the Code (such as dealers in securities or foreign currency, insurance companies, other financial institutions, regulated investment companies, tax-exempt entities, former citizens or long-term residents of the United States, S corporations, partnerships and investors in S corporations and partnerships, and taxpayers subject to the alternative minimum tax). In addition, this discussion does not consider the effect of any state, local, or foreign tax laws.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of the Company’s common stock that is, for U.S. federal income tax purposes, any of the following:

 

   

a citizen or individual resident of the United States;

 

   

a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created in or under the laws of the United States or of any state (including the District of Columbia);

 

   

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or a trust that has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.

For purposes of this discussion, the term “non-U.S. holder” means a beneficial owner of the Company’s common stock that is not a U.S. holder.

U.S. Holders

The receipt of cash in exchange for the Company’s common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder who receives cash in exchange for shares pursuant to the merger will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received and the U.S. holder’s adjusted tax basis in the shares surrendered for cash pursuant to the merger. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same price per share in a single transaction) surrendered for cash pursuant to the

 

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merger. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. holder’s holding period for such shares is more than one year at the time of consummation of the merger. The maximum federal income tax rate on net long-term capital gain recognized by individuals is 15% under current law. Deduction of capital losses may be subject to certain limitations.

Non-U.S. Holders

A non-U.S. holder generally will not be subject to U.S. federal income tax with respect to gain recognized pursuant to the merger unless one of the following applies:

 

   

The gain is effectively connected with a non-U.S. holder’s conduct of a trade or business within the United States and, if a tax treaty applies, the gain is attributable to a non-U.S. holder’s U.S. permanent establishment. In such case, the non-U.S. holder will, unless an applicable tax treaty provides otherwise, generally be taxed on its net gain derived from the merger at regular graduated U.S. federal income tax rates, and in the case of a foreign corporation, may also be subject to the branch profits tax; or

 

   

A non-U.S. holder who is an individual holds the Company’s common stock as a capital asset, is present in the United States for 183 or more days in the taxable year of the merger, and certain other conditions are met. In such a case, the non-U.S. holder will be subject to a flat 30% tax on the gain derived from the merger, which may be offset by certain U.S. capital losses.

Information Reporting and Backup Withholding

Cash payments made pursuant to the merger will be reported to the recipients and the Internal Revenue Service to the extent required by the Code and applicable U.S. Treasury Regulations. In addition, certain non-corporate beneficial owners may be subject to backup withholding at a 28% rate on cash payments received in connection with the merger. Backup withholding will not apply, however, to a beneficial owner who (a) furnishes a correct taxpayer identification number and certifies that he, she or it is not subject to backup withholding on the Form W-9 or successor form, (b) provides a certification of foreign status on Form W-8 or successor form or (c) is otherwise exempt from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.

The discussion set forth above is included for general information only. Each beneficial owner of shares of the Company’s common stock should consult his, her or its own tax advisor with respect to the specific tax consequences of the merger to him, her or it, including the application and effect of state, local and foreign tax laws.

Limitation on Remedies; Limited Guarantee

In no event will we be entitled to monetary damages from Parent and Merger Sub in excess of $78 million, including any payment by Parent of the termination fee described in the section of this proxy statement titled “The Merger Agreement—Termination Fee,” if applicable, for all losses and damages suffered as a result of the failure of the merger to be consummated or for any breach or failure to perform by Parent and Merger Sub under the merger agreement or otherwise. In addition, we cannot seek specific performance to require Parent and Merger Sub to complete the merger. Our exclusive remedy for the failure of Parent and Merger Sub to complete the merger is the $78 million termination fee described above.

Concurrently with the execution of the merger agreement, H&F Fund VI entered into a limited guarantee in our favor pursuant to which it irrevocably guaranteed Parent’s obligation in respect of the $78 million termination fee described above. The limited guarantee will terminate on the earliest of (a) the effective time of the merger, (b) payment in full of the reverse termination fee pursuant to the merger agreement, (c) termination

 

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of the merger agreement under circumstances where the termination fee becomes payable and (d) the first anniversary of any other termination of the merger agreement, except as to a claim for payment of the obligation thereunder presented by the Company to Parent, Merger Sub or H&F Fund VI on or prior to such first anniversary. However, if the Company or any of its affiliates assert a claim other than as permitted under the limited guarantee, including a claim or claims in excess of $78 million, the limited guarantee will immediately terminate and become null and void by its terms.

The limited guarantee is our sole recourse against H&F Fund VI and its affiliates for any damages we may incur in connection with the merger agreement and the transactions contemplated by the merger agreement.

Interests of the Company’s Directors and Executive Officers in the Merger

In considering the recommendation of our board of directors with respect to the merger agreement, you should be aware that some of the Company’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our stockholders generally, as more fully described below. Our board of directors was aware of these interests and considered them, among other matters, in reaching its decision to approve the merger agreement and recommend that the Company’s stockholders vote in favor of adopting the merger agreement. In addition, Mr. Getty and Mr. Klein were excluded from the deliberations of our board of directors regarding the merger agreement and the transactions contemplated by the merger agreement. See “—Background of the Merger” and “— Reasons for the Merger; Recommendation of Our Board of Directors; Fairness of the Merger” for a further discussion of these matters.

Arrangements with Mark Getty and Other Rollover Stockholders

Rollover Investment in Parent by the Rollover Stockholders

In connection with the execution of the merger agreement, the Rollover Stockholders entered into a rollover commitment letter with Parent pursuant to which the Rollover Stockholders agreed, upon the terms and subject to the conditions set forth in the letter, to transfer, deliver and contribute to Parent, immediately prior to the effective time of the merger, an aggregate of 8,942,593 shares of our common stock, representing all of the shares of our common stock held by them, in exchange for newly issued limited partnership units of Parent to be issued at a per unit value equal to $34.00 (and valuing the contributed shares of our common stock at an amount per share equal to $34.00, or approximately $304 million for all of the contributed shares). Of these shares, 8,273,301 shares are to be contributed by Getty Investments, 15,000 shares are to be contributed by Mark Getty (our chairman and co-founder) and a total of 654,292 shares are to be contributed by The October 1993 Trust, Cheyne Walk Trust and Ronald Family Trust B. Mr. Getty may be deemed to be the beneficial owner of the shares held by the three trusts referenced above. Mr. Getty and Jonathan Klein (our chief executive officer and co-founder and one of our directors) each serve as directors of Getty Investments. By virtue of this investment and the options rollover in the interim investors agreement described below, the Rollover Stockholders will have an opportunity to share in any future earnings and growth of Getty Images following the merger.

Interim Investors Agreement

The Rollover Stockholders and the Options Settlement, a revocable grantor trust of which Mr. Getty is the primary beneficiary, also entered into an interim investors agreement with Parent, Merger Sub and the H&F Investors, which governs certain aspects of their conduct in respect of the transactions contemplated by the merger agreement prior to the consummation of the merger.

 

   

Actions of Parent and Merger Sub. Subject to the exceptions described below and the other terms of the interim investors agreement, the H&F Investors may cause Parent and Merger Sub to take any actions and Parent and Merger Sub shall take only those actions approved by the H&F Investors in connection with

 

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the merger agreement and the related transactions and financings. The consent of the Rollover Stockholders is required, however, for Parent or Merger Sub to take any of the following actions:

 

   

any amendment or modification of the merger agreement that (a) would modify the merger consideration to be a non-cash form or (b) would add new parties to the merger agreement (subject to certain exceptions); or

 

   

obtain debt financing such that, immediately following the effective time of the merger, the ratio of Parent’s consolidated total debt to consolidated EBITDA for the twelve-month period ending March 31, 2008 is in excess of 6.0:1.

 

   

Options Rollover. In connection with the merger, the Options Settlement will roll over and exchange options it currently holds to acquire up to 446,350 shares of our common stock for options to acquire shares of the common stock of an affiliate of Parent.

 

   

Expenses. If the closing of the merger occurs, then Parent and Merger Sub will pay or reimburse, or cause to be paid or reimbursed, the fees and expenses incurred in connection with the merger agreement and related transactions and financings by the H&F Investors and the Rollover Stockholders. If the closing of the merger does not occur, the H&F Investors and the Rollover Stockholders will each pay their own fees and expenses, which, in the case of the H&F Investors, will include the fees and expenses of Parent and Merger Sub. If the termination fee or any Parent expenses or damages are payable by Getty Images under the merger agreement, the Rollover Stockholders will not have any right to receive any portion of such amounts. Without limiting any remedies of the H&F Investors, the Rollover Stockholders will have no liability to the Company with respect to any termination fee or company damages for which Parent may be liable under the merger agreement or the limited guarantee.

 

   

Unitholders Agreements. The interim investors agreement contemplates that the H&F Investors and the Rollover Stockholders will enter into one or more definitive agreements, including a limited partnership agreement, prior to the closing of the merger, which will contain certain terms relating to the governance and ownership of Parent equity interests after the merger, including board representation and other governance matters, transfer restrictions and registration rights.

Voting Agreement

In connection with the merger agreement, the Rollover Stockholders and the Options Settlement executed a voting agreement pursuant to which the signatories agreed, subject to certain conditions, to vote (a) all of their shares in favor of the adoption of the merger agreement and the transactions contemplated by the merger agreement and (b) against any takeover proposal and any action that could reasonably be expected to impede, interfere with, delay, postpone or adversely affect the merger or any of the transactions contemplated by the merger agreement or result in a breach in any material respect of any covenant, representation or warranty or other obligation or agreement of Getty Images under the merger agreement.

Each Rollover Stockholder has also agreed not to solicit any takeover proposals or offers, or to discuss, endorse or enter into any agreement with respect to any takeover proposal, provided that Getty Investments may engage in discussions or negotiations with respect to a takeover proposal and a potential waiver or amendment of the restated option agreement described below if certain conditions are met including the following:

 

   

the Rollover Stockholders have complied in all material respects with the no solicitation provisions of the voting agreement and the Company has complied in all material respects with the no solicitation provisions of the merger agreement;

 

   

if, prior to engaging in such discussions or negotiations, we receive a written “takeover proposal” (as defined in “The Merger Agreement—Restrictions on Solicitations of Other Offers”) after the date of the merger agreement and prior to obtaining stockholder approval of the merger agreement that our board

 

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of directors determines constitutes or could reasonably be expected to result in a superior proposal and authorizes us to engage in discussions or negotiations regarding such takeover proposal;

 

   

if, prior to engaging in such discussions or negotiations, our board of directors specifically requests in writing that Getty Investments engage in discussions or negotiations with the person making such takeover proposal and Getty Investments delivers a copy of such request to Parent;

 

   

such discussions or negotiations are conducted in the presence of our financial advisor or outside counsel (and, if requested by Getty Investments, the financial advisor and outside counsel of Getty Investments) and cease if we determine not to pursue such takeover proposal and notify Getty Investments in writing of such determination; and

 

   

any such waiver or amendment to the restated option agreement is on the same terms as the waiver and amendment to the restated option agreement with Parent as described below or on terms less favorable to the person making such takeover proposal than the amendment with Parent.

Each signatory has also agreed not to transfer, pledge, encumber, assign or dispose of any shares of our common stock, options or restricted stock units, except that one of the trusts may transfer some or all of its 622,602 shares of our common stock to Mr. Getty or a trust for the benefit of Mr. Getty, his spouse and/or his descendants for estate planning or similar purposes so long as the transferor retains sole control over the voting and disposition of such transferred shares and agrees in writing to be bound by the terms of the voting agreement.

As of the record date of the special meeting, the signatories to the voting agreement owned approximately 15.0% of the outstanding shares of our common stock. The voting agreement will terminate upon the occurrence of certain events, including if the merger agreement is terminated.

Waiver and Amendment relating to “Getty Images” Name and Trademarks

In connection with a change of control of the Company, which would include the completion of the merger, Getty Investments has the right to call for an assignment to it, for a nominal sum, of all of our rights to the “Getty Images” name and trademarks under a restated option agreement, dated February 9, 1998, among Getty Investments, us and Getty Communications Limited (f/k/a Getty Communications plc). In the event Getty Investments were to exercise its call right under the restated option agreement, we generally would be entitled to continue using the Getty Images name and trademarks for twelve months following the exercise of such call right. In connection with entering into the merger agreement, the parties to the restated option agreement and Parent entered into a waiver and amendment to the restated option agreement, effective as of the consummation of the merger, pursuant to which Getty Investments waived its right to call such name and trademarks in connection with the completion of the merger and agreed to certain amendments to the restated option agreement in connection with the completion of the merger, including the extension of the period during which we may continue to use the Getty Images name and trademarks following any future exercise of Getty Investments’ call right from twelve months to eighteen months.

Foreign Filings Agreement

We and Getty Investments executed a letter agreement, dated as of February 24, 2008, relating to certain antitrust filing requirements in Germany. We and Getty Investments agreed to use our reasonable best efforts to promptly take all actions necessary, proper or advisable to obtain any approvals required under the German Act Against Restraints of Competition in connection with the transactions described in this proxy statement. The German Federal Cartel Office granted approval on April 4, 2008. See “—Governmental and Regulatory Approvals.”

 

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Stockholders’ Agreement Amendment

Under the Stockholders’ Agreement dated as of February 9, 1998, as amended, by and among us and Getty Investments, Mark Getty, Jonathan Klein, RBC Trustees (CI) Limited, as Trustee of The October 1993 Trust (a trust affiliated with Mark Getty), Abacus Trust Company Limited, as Trustee of the JD Klein Family Settlement (a trust affiliated with Jonathan D. Klein), collectively referred to as the “Getty Group,” the Getty Group has the right to nominate one director to our board of directors and members of the Getty Group, along with us, have certain rights of first refusal with respect to the transfer of our shares by members of the Getty Group. In connection with the transactions described in this proxy statement, on February 24, 2008, we and members of the Getty Group executed the Fifth Amendment to the Stockholders’ Agreement, which provides that compliance by the Getty Group with provisions of the Stockholders’ Agreement restricting or conditioning the transfer of shares of our common stock, including rights of first refusal, are waived in connection with the transactions described in this proxy statement, including the contribution of shares to Parent. If the merger agreement is terminated, the Fifth Amendment to the Stockholders’ Agreement will be void and have no effect, and all provisions of the Stockholders’ Agreement will be restored to full force and effect.

Confidentiality Agreement

We and Getty Investments executed a letter agreement, dated as of December 17, 2007, as amended by letter agreements dated as of January 2, 2008, January 24, 2008 and February 24, 2008, pursuant to which Getty Investments agreed to certain confidentiality obligations and other restrictions. See “—Background of the Merger.”

The foregoing summaries of the rollover commitment letter, interim investors agreement, voting agreement, waiver and amendment to the restated option agreement, foreign filings agreement, stockholders’ agreement and confidentiality agreement are qualified in their entirety by reference to the copies of such agreements attached as exhibits to the Rule 13e-3 transaction statement on Schedule 13E-3 filed with the SEC in connection with the merger and incorporated into this proxy statement by reference.

New Management Arrangements

As of the date of this proxy statement, none of Getty Images’ executive officers have entered into any amendments or modifications to their existing employment agreements with Getty Images in connection with the merger, nor have they entered into any employment or other agreements with Parent or its affiliates. However, prior to execution of the merger agreement, Parent and Jonathan Klein engaged in discussions regarding the terms of his employment and equity incentives that would be implemented in connection with the completion of the merger. See “—Background of the Merger.”

Under the terms of a new employment agreement, which is expected to be entered into in connection with the completion of the merger and would supersede his existing employment agreement, Mr. Klein would continue to serve as the chief executive officer of Getty Images and would also serve on the board of directors of Parent. The agreement is expected to have a term of three years, which would renew for additional one-year periods absent notice by either party not to renew the agreement. It is expected that the agreement would provide Mr. Klein with the same base salary of $1,000,000 per year, subject to annual review for increases, as is currently provided to him by the Company, and the same annual target bonus opportunity of 90% of his base salary, as is currently provided to him by the Company. Mr. Klein would also continue to be provided with severance rights in the event he is terminated on account of his death or disability, terminated without cause or resigns for good reason. In these circumstances under his new agreement, Mr. Klein would be entitled to his accrued base salary and bonus, as well as (a) an aggregate severance payment equal to 24 months of his base salary plus the amount of his target bonus for the fiscal year of such termination, which payment would be made in equal installments over the 24-month period following such termination of employment, and (b) other benefit payments as would be provided under his current agreement. As is provided under Mr. Klein’s existing employment agreement, it is also expected that Mr. Klein’s new agreement would permit him to resign and collect his severance and other

 

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benefit payments in a lump sum during the six-month period following any future change of control after completion of the merger. His employment agreement is also expected to include customary confidentiality, non-competition and non-solicitation/hiring provisions.

Prior to the signing of the merger agreement, Parent also engaged in discussions with Mr. Klein regarding the anticipated structure of the equity incentives that would be made available to him and other executive officers and key employees of Getty Images in connection with the completion of the merger. Pursuant to these discussions, Mr. Klein, the other executive officers and certain key employees are expected to be eligible to receive, in the aggregate, options and/or other equity-based awards representing up to 13% of the fully diluted equity of the surviving corporation after the closing of the merger, with 4.5% (or up to 5.0% if agreed to by Parent and Mr. Klein) of the fully diluted equity expected to be allocated to Mr. Klein. Of the options and other equity-based awards that are expected to be granted in connection with the completion of the merger, it is currently anticipated that a portion will be subject to time-based vesting and the remainder will be subject to performance-based vesting. A condition to the receipt of grants of equity incentives will be the elimination of any change of control rights in the recipient’s existing employment agreement with Getty Images, including any severance rights that could arise as a result of the completion of the merger.

In addition to the options and other equity-based awards described above, Parent anticipates that Mr. Klein and other executive officers and key employees of Getty Images will be offered the opportunity to acquire equity interests of Parent at the same price as the H&F Investors. In particular, it is expected that Mr. Klein in connection with the merger will make a cash investment in Parent equal to at least 60% of the after-tax proceeds received by Mr. Klein for his shares of Getty Images common stock and his outstanding equity-based awards. Any equity interests held after the merger by Mr. Klein and the other executive officers and key employees of Getty Images are expected to be subject to the terms of equityholders agreements that will contain customary transfer restrictions, tag-along rights and drag-along rights, as well as repurchase rights that are applicable in specified circumstances.

After the signing of the merger agreement, Parent and Mr. Klein have had discussions regarding the potential terms of new employment agreements for our other executive officers. While we believe most of our other executive officers will enter into new employment agreements, these matters are subject to negotiations and no terms or conditions have been agreed to. It is currently expected that any such new agreements would be entered into in connection with the completion of the merger.

Treatment of Stock Options

As of May 20, 2008, there were approximately 2,024,297 shares of common stock of the Company issuable pursuant to stock options granted under our equity incentive plans to our executive officers and directors. The merger agreement provides that we will take all action necessary such that, except as otherwise agreed to by Parent and the holder of an option (including the interim investors agreement described above with respect to options held by a revocable grantor trust of which Mark Getty is the primary beneficiary), each outstanding option to acquire our common stock granted under our equity incentive plans, will be cancelled and converted at the effective time of the merger into the right to receive a cash payment for each share of our common stock then issuable under such option equal to the excess, if any, of (a) the merger consideration over (b) the exercise price payable in respect of such share of our common stock issuable under such stock option, without interest and less any applicable withholding taxes. In order to provide for the cancellation and termination of all stock options under the merger agreement, we expect to make an offer to each option holder to cancel all of his or her grants of options in exchange for a cash payment with respect to each such grant equal to the greatest of (i) the aggregate option consideration with respect to such grant, which is the excess, if any, of the merger consideration over the exercise price payable for each share of Company common stock issuable under such stock option multiplied by the total number of shares subject to such grant, (ii) $0.05 per share of our common stock issuable pursuant to such grant and (iii) $1,000, in each case without interest and less applicable withholding taxes. The offer will be made to each option holder, and the receipt of consideration by each option holder is contingent upon

 

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his or her acceptance of the offer in accordance with its terms. The completion of this offer will be conditioned upon and will occur simultaneously with the completion of the merger.

The following table sets forth, for each of our directors and executive officers holding stock options as of May 20, 2008, (a) the aggregate number of shares of the Company’s common stock subject to vested stock options, (b) the value of such vested stock options on a pre-tax basis, calculated by multiplying (i) the excess, if any, of the $34.00 merger consideration over the respective per share exercise prices of those stock options by (ii) the number of shares of the Company’s common stock subject to those stock options, (c) the aggregate number of unvested stock options that will vest as of the effective time of the merger, assuming the director or executive officer remains employed by the Company at that date, (d) the value of those unvested stock options on a pre-tax basis, calculated by multiplying (i) the excess, if any, of the $34.00 merger consideration over the respective per share exercise prices of those stock options by (ii) the number of shares of the Company’s common stock subject to those stock options, (e) the aggregate number of shares of the Company’s common stock subject to vested stock options and unvested stock options that will vest for such individual as of the effective time of the merger, assuming the director or executive officer remains employed by the Company at that date, and (f) the aggregate amount of consideration that we expect to offer for all such options pursuant to the offer described in the previous paragraph.

 

Name

   Vested Stock Options    Unvested Stock Options
that will Vest as a Result
of the Merger
   Aggregate Offer
Consideration for
All Stock Options
   Shares    Value    Shares    Value    Shares    Value

Executive Officers

                 

Jeffrey L. Beyle

   45,000    $ —      —      $ —      45,000    $ 2,250

Nicholas E. Evans-Lombe

   175,000      364,250    —        —      175,000      371,750

James C. Gurke

   56,600      —      —        —      56,600      3,250

Jonathan D. Klein

   928,500      2,144,745    150,000      —      1,078,500      2,174,745

John J. Lapham

   18,525      56,477    —        —      18,525      58,477

Bo T. Olofsson

   72,500      —      —        —      72,500      3,625

Michael D. Teaster

   18,072      —      3,334      —      21,406      3,000

Non-Employee Directors

                 

James N. Bailey

   28,333      151,661    —        —      28,333      154,661

Andrew S. Garb

   28,333      151,661    —        —      28,333      154,661

Mark H. Getty1

   446,350      2,266,903    —        —      446,350      2,266,903

Christopher H. Sporborg

   18,750      —      —        —      18,750      3,000

Michael A. Stein

   35,000      15,750    —        —      35,000      18,750

All Executive Officers and Directors holding stock options as a group (12 persons)

   1,870,963      5,151,445    153,334      —      2,024,297      5,215,070

 

1

Comprises the stock options for 446,350 shares of the Company’s common stock held by the Options Settlement, a revocable grantor trust of which Mr. Getty is the primary beneficiary. As described in “—Arrangements with Mark Getty and Other Rollover Stockholders,” the Options Settlement has agreed with Parent to roll over and exchange all of such options for options to acquire shares of the common stock of an affiliate of Parent. As a result, we do not expect the options held by the Options Settlement to be tendered in the offer we will be making.

Treatment of Restricted Stock Units

As of May 20, 2008, there were approximately 528,270 outstanding restricted stock units subject to vesting criteria that were held by our directors and executive officers. The merger agreement provides that, except as otherwise agreed to by Parent and the holder of a restricted stock unit, each outstanding restricted stock unit

 

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granted under our equity incentive plans (whether or not previously vested) will vest in full and be converted into the right to receive a cash amount equal to the merger consideration, without interest and less applicable withholding taxes.

The following table identifies, for each of our directors and executive officers holding restricted stock units, the aggregate number of shares of common stock of the Company underlying restricted stock units as of May 20, 2008, and the pre-tax value of such restricted stock units that will become fully vested in connection with the merger as calculated by multiplying $34.00 by the number of shares of common stock underlying such restricted stock units.

 

Name

   Aggregate Number of Shares Subject
to Unvested Restricted Stock Units
   Value of Unvested
Restricted Stock Units

Executive Officers

     

Jeffrey L. Beyle

   20,850    $ 708,900

Nicholas E. Evans-Lombe

   30,000      1,020,000

James C. Gurke

   20,850      708,900

Jonathan D. Klein

   333,000      11,322,000

John J. Lapham

   18,533      630,122

Bruce T. Livingstone

   23,558      800,972

Thomas Oberdorf

   30,000      1,020,000

Bo T. Olofsson

   21,500      731,000

Michael D. Teaster

   18,491      628,694

Non-employee Directors

     

James N. Bailey

   1,498      50,932

Andrew S. Garb

   1,498      50,932

Mark H. Getty

   1,498      50,932

Alan G. Spoon

   3,998      135,932

Christopher H. Sporborg

   1,498      50,932

Michael A. Stein

   1,498      50,932

All Executive Officers and Directors holding restricted stock units as a group (15 persons)

   528,270      17,961,180

Severance Arrangements

Each of the Company’s executive officers has entered into an agreement providing for certain severance benefits triggered in connection with a change of control of the Company, such as the merger. Other than as noted below, the employment agreements for each of our executive officers are substantially similar.

Several of our employment agreements for our executive officers contain a “single-trigger” change of control mechanism. A single-trigger mechanism requires only a change of control to activate the executive’s rights under the change of control provision. Those executives whose agreements contain the single-trigger mechanism can resign for any reason following a change of control and receive certain severance payments. Our current executive officers with such “single-trigger” provisions in their agreements are Jeffrey Beyle, Nicholas Evans-Lombe, James Gurke, Jonathan Klein, Thomas Oberdorf and Bo Olofsson. Mr. Olofsson has informed the Company that he intends to resign from the Company upon the closing of the merger.

Employment agreements for our executive officers hired or promoted in or after November 2006 contain a “double-trigger” change of control mechanism. A double-trigger mechanism is satisfied only when there is a change of control and a qualifying adverse event within twelve months of the change of control. If both elements of the double-trigger are satisfied, the executive can resign for Good Reason (as defined below) and receive certain severance payments related to the change of control. Our current executive officers with such “double-trigger” provisions in their agreements are John Lapham, Bruce Livingstone and Michael Teaster.

 

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Under the agreements, “Good Reason” generally means (a) an adverse material change in the executive’s duties, (b) our material breach of the executive’s employment agreement, (c) our failure to pay material compensation owed to the executive, (d) a significant relocation of the executive or (e) a material reduction in the executive’s base salary or target bonus. Additionally, the definition of Good Reason in Mr. Teaster’s employment agreement also includes Mr. Teaster’s voluntary resignation from employment with Getty Images for any reason prior to June 1, 2009. Mr. Klein’s employment agreement also contains certain other events constituting Good Reason, including an adverse and material change in his title or reporting responsibilities, reduction in his compensation, the failure to be nominated for reelection to our board of directors or his failure to be reelected to our board of directors.

In the event that an executive’s rights under the change of control provisions are triggered as described above and the executive resigns, such executive (other than Mr. Klein, whose terms differ and are discussed in further detail below) will be entitled to receive:

 

   

the executive’s salary and a prorated bonus as of the date of termination or resignation, including any unreimbursed business expenses;

 

   

a lump sum severance payment equal to two times the executive’s salary at the rate in effect immediately prior to the change of control; and

 

   

a bonus payment equal to one times the target amount that the executive would have been entitled to pursuant to the annual bonus plan.

In the event of a change of control, Mr. Klein will be entitled to receive the following if he resigns from the Company for any reason within six months following the change of control:

 

   

his salary earned as of the date of termination;

 

   

a lump sum payment in an amount equal to the sum of his base salary and the maximum target amount of his bonus as would otherwise have been paid for the remainder of the term of his employment agreement; and

 

   

within thirty days after the date of termination, a lump sum amount equal to the costs incurred by Getty Images for medical, dental, disability and life insurance benefits in the last six months of the calendar year immediately prior to the date of termination.

As discussed above, it is expected that Mr. Klein’s employment agreement will be replaced by a new employment agreement in connection with the merger and that, as a result, he would not be entitled to the single-trigger severance described above in connection with the merger.

The following table sets forth an estimate of the potential cash severance payments that would be payable as described above in the event the executive officer becomes entitled to such severance amount pursuant to his employment agreement following the merger (assuming, for illustrative purposes, that the executive officer’s employment is terminated on June 30, 2008, the base salaries remain at current levels, and in the case of each executive (other than Mr. Klein), the Company is on target to achieve or exceed its performance targets for fiscal year 2008). The table does not include amounts attributable to estimated costs of health and welfare benefits or relocation expenses to be received by the executive officer following a termination.

Although for illustrative purposes the table assumes that the executive officer’s employment is terminated on June 30, 2008, it is expected that Mr. Klein’s employment agreement will be replaced by a new employment agreement in connection with the merger and that, as a result, he would not be entitled to severance in connection with the merger. In addition, a condition to the receipt of equity grants by the other executive officers will be the elimination of the executive’s existing severance payment rights that could arise as a result of the completion of the merger. See “—New Management Arrangements.”

 

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Executive Officer

   Potential Cash
Severance Payment

Jeffrey L. Beyle

   $ 884,000

Nicholas E. Evans-Lombe

     1,141,250

James C. Gurke

     780,000

Jonathan D. Klein

     2,666,667

John J. Lapham

     676,000

Bruce T. Livingstone

     650,000

Thomas Oberdorf

     1,079,000

Bo T. Olofsson

     1,040,884

Michael D. Teaster

     702,000

Employee Benefits

The merger agreement provides that, to the extent that any of our active employees, including our executive officers, remain employed by the surviving corporation, they will be entitled to receive, for a period of one year from the consummation of the merger, unless their employment is severed during such period, annual base salary and base wages, cash incentive compensation opportunities and benefits (excluding equity-based compensation) that are no less favorable, in the aggregate, than such compensation provided to them immediately prior to the effective time of the merger. Parent and the surviving corporation are also required, under the terms of the merger agreement, for a period of one year from the consummation of the merger, to provide severance benefits to our employees, including our executive officers, at levels no less than and pursuant to the terms of our current severance plan consistent with past practice and taking into account such employee’s years of service with the Company. To the extent that our employees, including our executive officers, currently participate in the Company’s benefit plans, they will be immediately eligible to participate in any and all new benefit plans of the surviving corporation to the extent that such coverage replaces comparable coverage under a benefit plan in which such employee participated immediately prior to the effective time of the merger.

Directors’ and Officers’ Insurance

The merger agreement provides that for six years from the effective time of the merger, Parent must maintain in effect the Company’s current directors’ and officers’ liability insurance covering acts or omissions occurring at or prior to the effective time of the merger of those persons who are currently covered by the Company’s directors’ and officers’ liability insurance policy on terms and scope, and in amount, not less favorable than those of the policy in effect on February 24, 2008. In the alternative, Parent may substitute such policies, issued by reputable insurers, of at least the same coverage with respect to matters occurring prior to the effective time of the merger, including a “tail” policy. If the annual premiums for such insurance exceed 300% of the current rate, then Parent must provide a policy for the applicable individuals with the best coverage as then available at the annual premium of 300% of the aggregate annual premium for the plan in effect on February 24, 2008. However, such replacement or substitution of insurance policies must not result in gaps in coverage for such individuals. See “The Merger Agreement—Indemnification and Insurance.”

Certain Projections

Getty Images does not, as a matter of course, publicly disclose projections as to its future financial performance. During our consideration of strategic alternatives, as described in “—Background of the Merger,” Getty Images provided Goldman Sachs with financial forecasts of Getty Images’ operating performance for fiscal years 2008 through 2012 prepared by the management of Getty Images during the first half of December 2007, which we refer to as the “Management Projections.” In connection with its assessment of various strategic alternatives, including the merger, the Voting Independent Directors evaluated the Management Projections with the assistance of Goldman Sachs and the other Independent Directors and, after discussing them with management of Getty Images, determined that, in light of economic and industry uncertainties, certain sensitivities should be applied to the Management Projections, which we refer to as the “Sensitivities.” These Sensitivities, which were approved by the Voting

 

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Independent Directors on February 13, 2008, included downward adjustments to assumptions of revenue growth rates and operating profit margins in a range of 2.5% to 5.0%, with a central downward adjustment of 3.75%, applied to all periods in the Management Projections other than 2008, which included a 2.5% downward adjustment to the revenue growth rate and a 1.6% downward adjustment to operating profit margin. We refer to these central downward adjustments as the “Central Sensitivity to Management Projections.” The Management Projections, the Sensitivities and the Central Sensitivity to Management Projections were provided to Goldman Sachs for use in connection with its financial analysis, as summarized in “—Opinion of Our Financial Advisor.” The Voting Independent Directors directed Goldman Sachs to focus on the Central Sensitivity to Management Projections for the purposes of Goldman Sachs’ financial analyses and its fairness opinion. In connection with H&F’s due diligence review of Getty Images, Getty Images provided H&F and the financing sources of Parent and Merger Sub with portions of the Management Projections. In addition, the methodology with respect to the Sensitivities and the Central Sensitivity to Management Projections was discussed with H&F prior to our entering into the merger agreement with Parent and Merger Sub. The Management Projections, the Sensitivities and the Central Sensitivity to Management Projections are referred to collectively as the “Projections.” These projections were prepared on a basis consistent with the accounting principles used in our historical financial statements. See “—Background of the Merger.

The Projections were not prepared with a view to public disclosure and are included in this proxy statement only because such information was made available, in whole or in part, to the H&F Investors and their financing sources, in connection with their due diligence review of Getty Images, and to Goldman Sachs for use in connection with its financial analysis summarized above. The Projections were not prepared with a view to compliance with published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Furthermore, PricewaterhouseCoopers LLP has not examined, compiled or otherwise applied procedures to the Projections and, accordingly, assumes no responsibility for, and expresses no opinion on them. The Projections included in this proxy statement have been prepared by, and are the responsibility of, Getty Images’ management. The Management Projections were prepared solely for internal use of Getty Images in support of capital budgeting and other management decisions and are subjective in many respects.

In compiling the Management Projections, Getty Images’ management took into account historical performance, combined with estimates regarding revenues, operating income, EBITDA and capital spending. Although the Projections are presented with numerical specificity, the Management Projections reflect numerous assumptions and estimates as to future events made by Getty Images’ management that Getty Images’ management believed were reasonable at the time the Projections were prepared and the Sensitivities and Central Sensitivity to Management Projections reflect numerous assumptions and estimates as to future events made by the Voting Independent Directors, with the assistance of Goldman Sachs and after discussing them with our management, that the Voting Independent Directors believed were reasonable at the time the Sensitivities and Central Sensitivity to Management Projections were prepared. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. In addition, factors such as industry performance, the market for Getty Images’ existing and new products and services, the competitive environment, expectations regarding future acquisitions and general business, economic, regulatory, market and financial conditions, all of which are difficult to predict and beyond the control of Getty Images’ management and the Voting Independent Directors, may cause the Projections or the underlying assumptions not to be reflective of actual future results. In addition, these Projections do not take into account any circumstances or events occurring after the date that they were prepared and, accordingly, do not give effect to the merger or any changes to Getty Images’ operations or strategy that may be implemented after completion of the merger. As a result, there can be no assurance that the Projections will be realized, and actual results may be materially better or worse than those contained in the Projections. The inclusion of this information should not be regarded as an indication that H&F, Parent, Merger Sub, the financing sources of Parent and Merger Sub, Goldman Sachs or any other recipient of this information considered, or now considers, the Projections to be predictive of actual future results.

 

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Except to the extent required by applicable federal securities laws, we do not intend, and expressly disclaim any responsibility to, update or otherwise revise the Projections to reflect circumstances existing after the date when prepared or to reflect the occurrence of future events even in the event that any of the assumptions underlying the Projections are shown to be in error.

The Central Sensitivity to Management Projections and the Management Projections for fiscal years 2008 through 2012 included the following:

Central Sensitivity to Management Projections

 

     Fiscal Year ending December 31,
     2008E    2009E    2010E    2011E    2012E
     (in millions, except per share amounts)

Revenue

   $ 918.6    $ 950.6    $ 990.1    $ 1,022.1    $ 1,064.7

EBITDA—Adjusted

     323.5      321.1      340.9      360.6      388.8

EBIT—Adjusted

     202.2      204.9      237.3      258.5      290.5

Unlevered free cash flow

     184.3      182.6      194.7      206.7      222.7

Earnings per share

     2.05      2.01      2.44      2.71      3.10
Management Projections
     Fiscal Year ending December 31,
     2008E    2009E    2010E    2011E    2012E
     (in millions, except per share amounts)

Revenue

   $ 940.0    $ 1,008.0    $ 1,087.7    $ 1,163.6    $ 1,255.7

EBITDA—Adjusted

     343.0      371.3      405.1      440.1      488.1

EBIT—Adjusted

     221.8      255.1      301.4      337.9      389.7

Unlevered free cash flow

     196.0      213.4      235.0      256.7      285.4

Earnings per share

     2.25      2.55      3.15      3.60      4.22

Each of “EBITDA—Adjusted,” “EBIT—Adjusted” and “Unlevered free cash flow” are considered “non-GAAP financial measures” under applicable SEC guidelines. For a reconciliation of these measures included in the Management Projections to GAAP measures and certain related information, see Annex D to this proxy statement.

Governmental and Regulatory Approvals

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the “HSR Act,” the merger may not be completed until Getty Images and Parent each file a notification and report form under the HSR Act with the Federal Trade Commission, or the “FTC,” and the Antitrust Division of the Department of Justice, or the “DOJ,” and the applicable waiting period has expired or been terminated. Getty Images and Parent filed the notification and report forms under the HSR Act with the FTC and the DOJ on March 7, 2008. The FTC granted early termination of the HSR waiting period on March 17, 2008.

In addition, (a) the consummation of the merger is subject to the adoption of a decision by the European Commission pursuant to the Council Regulation (EC) No. 139/2004 declaring the merger compatible with the common market and (b) the contribution of shares of our common stock to Parent by Getty Investments, as described in “—Interests of the Company’s Directors and Executive Officers in the Merger,” is subject to the approval of the German Federal Cartel Office under the German Act Against Restraints of Competition. Parent filed for European Commission approval on March 28, 2008, and the European Commission granted approval on May 6, 2008. Getty Images and Getty Investments filed for German Federal Cartel Office approval on March 7, 2008, and the German Federal Cartel Office granted approval on April 4, 2008.

While Getty Images, based on a review of important information provided by Parent relating to the businesses in which it and its affiliates are engaged, believes that it will receive all requisite U.S. and foreign antitrust-related approvals and clearances for the merger, there can be no assurance that a challenge to the merger

 

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on antitrust grounds will not be made or, if a challenge is made, that it would not be successful. In addition, at any time before or after consummation of the merger, notwithstanding the early termination of the waiting period under the HSR Act, the Antitrust Division of the DOJ, the FTC or state or foreign antitrust and competition authorities could take such action under applicable antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the merger or seeking divestiture of substantial assets of Getty Images or Parent. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

Provisions for Unaffiliated Stockholders

No provision has been made to grant the unaffiliated stockholders access to the files of the Company, Parent, Merger Sub, the H&F Filing Persons, Getty Investments, Mark Getty, The October 1993 Trust, Cheyne Walk Trust, Ronald Family Trust B or Jonathan Klein or to obtain counsel or appraisal services at the expense of any of the foregoing.

Estimated Fees and Expenses of the Merger

We estimate that we will incur, and will be responsible for paying, transaction-related fees and expenses, consisting primarily of financial, legal, accounting and tax advisory fees, Securities and Exchange Commission filing fees and other related charges, totaling approximately $21,210,570. This amount includes the following estimated fees and expenses:

 

Description

   Amount to be Paid

SEC filing fee

   $ 81,570

Printing, proxy solicitation and mailing expenses

     250,000

Financial, legal, accounting and tax advisory fees

     20,704,000

Miscellaneous expenses

     175,000
      

Total

   $ 21,210,570

In addition, if the merger agreement is terminated under certain circumstances described under “The Merger Agreement—Termination Fee,” we have agreed to pay to Parent a termination fee of either $31 million or $52 million and/or to reimburse 50% of the out-of-pocket fees and expenses, subject to a cap of $5 million, incurred by Parent, or on behalf of Parent and its affiliates, in connection with merger agreement and the transactions contemplated by the merger agreement.

Litigation Related to the Merger

On February 25, 2008, a purported stockholder class action lawsuit on behalf of all stockholders of the Company, Devenport v. Getty Images, Inc., et al. (Case No. 08-2-06970-2 SEA), was filed in the Superior Court of the State of Washington, King County, against the Company and the members of our board of directors, which we refer to as the “Devenport Action.” The complaint alleges, among other things, that the price of $34.00 per share in cash for each share of our outstanding common stock is unfair and inadequate, and that members of our board of directors breached their fiduciary duties by entering into the merger agreement. Plaintiff seeks, among other things, an order from the court certifying the case as a class action, enjoining the merger and awarding plaintiff costs and expenses, including attorneys’ fees.

In addition, prior to the announcement of the merger, two derivative lawsuits had been filed in Washington state and federal court asserting claims related to the Company’s stock option grant practices. Both suits allege that the Company’s stock option grant practices resulted in the Company having to restate its financial results for fiscal year 1999 through the present to account for over $27 million in additional compensation expenses, resulting in damages to the Company. One of these lawsuits, Lopez v. Klein, et al. (Case No. 07-2-03958-9 SEA), is pending in the Superior Court of the State of Washington, King County, which we refer to as the “Lopez

 

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Action.” After the announcement of the merger, plaintiff in the Lopez Action filed a motion seeking to amend his complaint to add claims related to the merger (similar to the claims alleged in the Devenport Action). On March 21, 2008, the court in the Lopez Action granted plaintiff’s motion to amend. The Lopez Action and Devenport Action were consolidated by the court on April 1, 2008. Plaintiff in the Lopez Action filed an amended complaint on April 18, 2008, which includes a claim related to the merger, purportedly on behalf of all stockholders of the Company, against the members of our board of directors and a senior officer of the Company. The amended complaint alleges, among other things, that the price of $34.00 per share in cash for each share of our outstanding common stock is unfair and inadequate, that the merger is a result of a flawed process, that our preliminary proxy statement, filed with the SEC on March 27, 2008, omitted certain material information, and that members of our board of directors breached their fiduciary duties by entering into the merger agreement. Plaintiff seeks, among other things, an order from the court certifying the case as a class action, enjoining the merger and awarding plaintiff costs and expenses, including attorneys’ fees. There is currently a stay of all proceedings in the consolidated action pending the disposition of motions to dismiss a derivative lawsuit pending in federal court (described immediately below).

The other derivative lawsuit asserting claims related to the Company’s stock option grant practices, Edmonds v. Getty, et al. (Case No. C07-0317), is pending in the United States District Court for the Western District of Washington, which we refer to as the “Edmonds Action.” On August 3, 2007, the Company, a nominal defendant in the Edmonds Action, filed a motion to dismiss on the grounds that, prior to filing the complaint, plaintiff failed to make a litigation demand on our board (or explain why such a demand would have been futile). On December 5, 2007, the court denied the Company’s motion because the allegations in the complaint “create a reasonable doubt that, as of the time the complaint was filed, the Board could have properly exercised its independent and disinterested business judgment in responding to a demand.” The court noted, however, that Messrs. Spoon and Stein “were disinterested at the time the complaint was filed,” and the complaint does not allege any interest on their part. After the announcement of the merger, plaintiff in the Edmonds Action filed a motion seeking to amend his complaint to add claims related to the merger (similar to the claims alleged in the Devenport and Lopez Actions). The motion to amend the Edmonds Action has not yet been decided.

Should the merger be consummated, plaintiffs in the Lopez Action and the Edmonds Action may lose standing to assert derivative claims on behalf of the Company.

On May 21, 2008, the Company and the defendants in the Devenport, Lopez and Edmonds Actions entered into a memorandum of understanding with plaintiffs in the Devenport, Lopez and Edmonds Actions providing for the settlement and/or dismissal with prejudice of each of these actions, subject to customary conditions, including completion of appropriate settlement documentation, confirmatory discovery and all necessary court approvals. As contemplated by the memorandum of understanding, the Company has included certain additional disclosures in this proxy statement. While the Company believes that each of the actions is without merit, the Company has entered into the memorandum of understanding to avoid the risk of delaying the merger and to minimize the expense of defending the actions. The settlement and dismissals with prejudice, if completed and approved by the courts, will resolve all of the claims that were or could have been brought in the actions, including all claims relating to the merger and the Company’s stock option grant practices. In connection with the settlement and dismissals with prejudice, the Company has agreed to pay $900,000 to plaintiff’s counsel in the Edmonds Action for their fees and expenses, subject to court approval.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This proxy statement and the documents to which we refer you in this proxy statement include forward-looking statements based on estimates and assumptions. There are forward-looking statements throughout this proxy statement, including, without limitation, under the headings “Summary Term Sheet,” “Questions and Answers about the Merger and the Special Meeting,” “Special Factors,” “Special Factors—Opinion of Our Financial Advisor,” “Special Factors—Plans for Getty Images After the Merger,” “Special Factors—Effects of the Merger,” “Special Factors—Certain Projections,” “Special Factors—Governmental and Regulatory Approvals,” and “Special Factors—Litigation Related to the Merger,” and in statements containing words such as “believes,” “plans,” “estimates,” “anticipates,” “intends,” “continues,” “contemplates,” “expects,” “may,” “will,” “could,” “should” or “would” or other similar words or phrases. These statements are not guarantees of the underlying expected actions or our future performance and may involve risks and uncertainties that could cause our actual growth, results of operations, performance and prospects to materially differ from those expressed in, or implied by, these statements. In addition to other factors and matters contained or incorporated in this document, these statements are subject to risks, uncertainties, and other factors, including, among others:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

 

   

the outcome of any legal proceedings that have been or may be instituted against Getty Images and others relating to the merger agreement and related transactions or relating to other matters;

 

   

the inability to complete the merger due to the failure to obtain stockholder approval or the failure to satisfy other conditions to consummation of the merger;

 

   

the failure to obtain the necessary debt financing arrangements set forth in the debt commitment letter received in connection with the merger;

 

   

the failure of the merger to close for any other reason;

 

   

risks that the proposed transaction disrupts current plans and operations and the potential challenges for employee retention as a result of the merger;

 

   

business uncertainty and contractual restrictions during the pendency of the merger;

 

   

the diversion of management’s attention from ongoing business concerns;

 

   

the possible effect of the announcement of the merger on our customer and supplier relationships, operating results and business generally;

 

   

the amount of the costs, fees, expenses and charges related to the merger and the actual terms of certain financings that will be obtained for the merger;

 

   

the impact of the substantial indebtedness incurred to finance the consummation of the merger;

and other risks detailed in our current filings with the SEC, including our most recent filings on Forms 10-Q and 10-K. See “Where You Can Find More Information” beginning on page 131. Many of the factors that will determine our future results are beyond our ability to control or predict. We cannot guarantee any future results, levels of activity, performance or achievements. In light of the significant uncertainties inherent in the forward-looking statements, readers should not place undue reliance on forward-looking statements, which speak only as of the date on which the statements were made and it should not be assumed that the statements remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

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THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on June 20, 2008, starting at 9:00 a.m., local time, at the headquarters of the Company at 601 North 34th Street, Seattle, Washington 98103, or at any postponement or adjournment of the meeting. The purpose of the special meeting is for our stockholders to consider and vote upon the following proposals:

 

   

adoption of the merger agreement;

 

   

approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement; and

 

   

such other business that may properly come before the special meeting or any adjournment or postponement of the special meeting.

A copy of the merger agreement is attached as Annex A to this proxy statement. This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about May 23, 2008.

Board Recommendation

Our board of directors unanimously (other than Mark Getty and Jonathan Klein, both of whom abstained from the vote) (a) approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the merger, (b) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are substantively and procedurally fair to and in the best interests of the Company and our unaffiliated stockholders (by which we mean, for purposes of this determination, our stockholders other than the Rollover Stockholders and Jonathan Klein) and (c) resolved to recommend that the stockholders of the Company adopt the merger agreement. For a discussion of the material factors considered by our board of directors in reaching its conclusions, see “Special Factors—Reasons for the Merger; Recommendation of Our Board of Directors; Fairness of the Merger.”

Our board of directors recommends that you vote “FOR” the proposal to adopt the merger agreement and “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.

Record Date and Quorum

We have fixed the close of business on May 20, 2008 as the record date for the special meeting, and only holders of record of our common stock on the record date are entitled to vote at the special meeting. On May 20, 2008, there were 59,741,402 shares of our common stock entitled to be voted at the special meeting. Each share of common stock outstanding on the record date entitles its holder to one vote on all matters properly coming before the stockholders at the special meeting.

The presence at the special meeting in person or by proxy of the holders of a majority of all outstanding shares of our common stock entitled to vote at the special meeting as of the close of business on the record date will constitute a quorum for the purpose of considering the proposals at the special meeting. Shares of common stock represented at the special meeting but not voted, including shares of common stock for which we have received proxies indicating that the submitting stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence of a quorum for the transaction of all business. In the event that a quorum is not present, or if there are insufficient votes to adopt the merger agreement at the time of the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies.

 

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Vote Required for Approval

The adoption of the merger agreement requires the affirmative vote of:

 

   

the holders of a majority of the outstanding shares of our common stock entitled to vote on the adoption of the merger agreement at the special meeting, which vote we refer to as the “Company Stockholder Approval;” and

 

   

the holders of a majority of the number of shares of our common stock present in person or by proxy and voting at the special meeting (other than the Rollover Stockholders and Jonathan Klein), which vote we refer to as the “Special Stockholder Approval.”

For the proposal to adopt the merger agreement, you may vote FOR or AGAINST or ABSTAIN. Abstentions will not be counted as votes cast or shares voting on the proposal to adopt the merger agreement, but will count for the purpose of determining whether a quorum is present. If you abstain, it will have the same effect as a vote “AGAINST” the adoption of the merger agreement for purposes of the Company Stockholder Approval but will have no effect for purposes of the Special Stockholder Approval.

If your shares of common stock are held in “street name,” you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares voted. Under the rules of the New York Stock Exchange, brokers who hold shares in “street name” for customers have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are precluded from exercising their voting discretion with respect to approving non-routine matters such as the adoption of the merger agreement and, as a result, absent specific instructions from the beneficial owner of the shares, brokers are not empowered to vote those shares, referred to generally as “broker non-votes.” These “broker non-votes” will be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” the adoption of the merger agreement for purposes of the Company Stockholder Approval but will have no effect for purposes of the Special Stockholder Approval.

Approval of any proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires, assuming a quorum is present with respect to the proposal, the affirmative vote of the holders of stock casting a majority of the votes entitled to be cast by all of the holders of the stock constituting such quorum. A failure to vote your shares of common stock or a broker non-vote will have no effect on the outcome of any vote to adjourn the special meeting. An abstention will have the same effect as voting “AGAINST” any proposal to adjourn the special meeting.

If a quorum is not present at the special meeting, the stockholders entitled to vote at the meeting may adjourn the meeting until a quorum shall be present.

Mark Getty and the other Rollover Stockholders each have executed a voting agreement with Parent, pursuant to which they have agreed to vote all shares of our common stock owned by them (constituting approximately 15.0% of the shares of our common stock outstanding as of the record date for the special meeting) in favor of the adoption of the merger agreement in connection with the Company Stockholder Approval. See “Special Factors—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 66. In addition, as of the record date for the special meeting, our other directors and executive officers had the right to vote, in the aggregate, an additional 406,779 shares of our common stock, which represented approximately 0.7% of the outstanding shares of our common stock on the record date for the special meeting. These directors and executive officers have informed us that they intend to vote all of their shares of common stock “FOR” the adoption of the merger agreement.

Proxies and Revocation

If you submit a proxy by telephone or internet or by returning a signed proxy card by mail, your shares will be voted at the special meeting as you indicate on your proxy card or by such other method. If you sign your

 

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proxy card without indicating your vote, your shares will be voted “FOR” the adoption of the merger agreement, “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, and in accordance with the recommendations of our board of directors on any other matters properly brought before the stockholders at the special meeting for a vote.

Proxies received at any time before the special meeting, and not changed or revoked before being voted, will be voted at the special meeting. You have the right to change or revoke your proxy at any time before the vote is taken at the special meeting if you hold your shares through a broker, bank or other nominee, by following the directions received from your broker, bank or other nominee to change or revoke those instructions.

You have the right to change or revoke your proxy at any time before the vote is taken at the special meeting if you hold your shares in your name as a stockholder of record by:

 

   

delivering to our Corporate Secretary, at 601 North 34th Street, Seattle, Washington 98103, a signed written notice of revocation, bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

   

attending the special meeting and voting in person (your attendance at the meeting will not, by itself, change or revoke your proxy—you must vote in person at the meeting to change or revoke a prior proxy);

 

   

submitting a later-dated proxy card; or

 

   

submitting a proxy again at a later time by telephone or internet prior to the time at which the telephone and internet proxy facilities close by following the procedures applicable to those methods of submitting a proxy.

PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD. IF THE MERGER IS COMPLETED, A SEPARATE LETTER OF TRANSMITTAL WILL BE MAILED TO YOU IF YOU ARE A STOCKHOLDER OF RECORD THAT WILL ENABLE YOU TO RECEIVE THE MERGER CONSIDERATION IN EXCHANGE FOR YOUR GETTY IMAGES STOCK CERTIFICATES.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment may be made without notice, other than by an announcement made at the special meeting of the time, date and place of the adjourned meeting. Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires, assuming a quorum is present with respect to the proposal, the affirmative vote of the holders of stock casting a majority of the votes entitled to be cast by all of the holders of the stock constituting such quorum. If a quorum is not present at the special meeting, the stockholders entitled to vote at the meeting may adjourn the meeting until a quorum shall be present. Any signed proxies received by us in which no voting instructions are provided on this matter will be voted “FOR” an adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies. In addition, when any meeting is convened, the presiding officer, if directed by our board of directors, may adjourn the meeting if (a) no quorum is present for the transaction of business or (b) our board of directors determines that adjournment is necessary or appropriate to enable the stockholders to consider fully information which our board of directors determines has not been made sufficiently or timely available to stockholders or otherwise to exercise effectively their voting rights. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow our stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.

 

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Rights of Stockholders Who Object to the Merger

Stockholders are entitled to statutory appraisal rights under Delaware law in connection with the merger. This means that you are entitled to have the value of your shares of our common stock determined by the Court of Chancery of the State of Delaware, and to receive payment based on that valuation instead of receiving the merger consideration. The ultimate amount you would receive in an appraisal proceeding may be more than, the same as or less than the amount you would have received under the merger agreement.

To exercise your appraisal rights, you must submit a written demand for appraisal to us before the vote is taken on the merger agreement and you must NOT vote in favor of the adoption of the merger agreement. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights. See “Appraisal Rights” beginning on page 110 and the text of the Delaware appraisal rights statute, Section 262 of the General Corporation Law of the State of Delaware, which is reproduced in its entirety as Annex C to this proxy statement.

Solicitation of Proxies

This proxy solicitation is being made by us on behalf of our board of directors and will be paid for by the Company. In addition, we have engaged Innisfree M&A Incorporated, or “Innisfree,” to assist in the solicitation of proxies for the special meeting and we estimate that we will pay Innisfree a fee of $50,000 plus certain costs associated with telephone solicitations, if required. If the Company’s stockholders adopt the merger agreement at the special meeting, we will pay Innisfree an additional success fee of $25,000. We also have agreed to reimburse Innisfree for out-of-pocket expenses and to indemnify Innisfree against certain losses arising out of its proxy solicitation services. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional compensation for their efforts. We will also request brokers, banks and other nominees to forward proxy solicitation material to the beneficial owners of our shares of common stock that the brokers, banks and nominees hold of record. Upon request, we will reimburse them for their reasonable out-of-pocket expenses related to forwarding the material.

Other Matters

We do not know of any other business that will be presented at the meeting. Under our restated certificate of incorporation, business transacted at the special meeting is limited to the purposes stated in the notice of the special meeting, which is provided at the beginning of this proxy statement. If other matters do properly come before the special meeting, or at any adjournment or postponement of the special meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted in accordance with the recommendation of our board of directors.

Questions and Additional Information

If you have more questions about the merger, need assistance in submitting your proxy or voting your shares, or need additional copies of the proxy statement or the enclosed proxy card, you should contact us in writing at Getty Images, Inc., 601 North 34th Street, Seattle, Washington 98103, attn: Investor Relations, or by telephone at (206) 925-6057. You may also contact the Company’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Brokers and dealers call: (212) 750-5834 (collect)

Stockholders and all others call toll free: (888) 750-5834

 

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THE PARTIES TO THE MERGER

Getty Images, Inc.

601 North 34th Street

Seattle, Washington 98103

(206) 925-5000

Getty Images, Inc., a Delaware corporation, is a creator and distributor of still imagery, footage and multi-media products, as well as a provider of related services and other forms of premium digital content, including music. We serve business customers worldwide who turn to us to discover, license and manage images and other digital content. Our contributing artists and digital content help customers produce work that appears in newspapers, magazines, advertising campaigns, films, television programs, books and websites. In this proxy statement, the terms “Getty Images,” “Company,” “we,” “our” and “us” refer to Getty Images, Inc. and its subsidiaries, unless the context otherwise requires.

For more information about us, please visit our website at www.gettyimages.com. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference. See also “Where You Can Find More Information” beginning on page 131. Our common stock is publicly traded on the New York Stock Exchange under the symbol “GYI.”

Abe Investment, L.P. and Abe Acquisition Corp.

c/o Hellman & Friedman LLC

One Maritime Plaza, 12th Floor

San Francisco, California 94111

(415) 788-5111

Abe Investment, L.P., which we refer to as “Parent,” is a newly formed Delaware limited partnership that was formed by H&F Fund VI and its affiliated funds solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Parent has not engaged in any business except for activities incident to its formation and in connection with the transactions contemplated by the merger agreement.

H&F Fund VI is a private equity fund sponsored by Hellman & Friedman LLC, which is a leading private equity investment firm with offices in San Francisco, New York and London. The firm focuses on investing in superior business franchises and serving as a value-added partner to management in select industries including media and marketing services, financial services, professional services, information services, healthcare and energy. Since its founding in 1984, Hellman & Friedman LLC has raised and, through its affiliated funds, managed over $16 billion of committed capital.

Abe Acquisition Corp, which we refer to as “Merger Sub,” is a Delaware corporation and a wholly owned subsidiary of Parent. Merger Sub was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Merger Sub has not engaged in any business except for activities incident to its incorporation and in connection with the transactions contemplated by the merger agreement. Upon the consummation of the proposed merger, Merger Sub will cease to exist and Getty Images will continue as the surviving corporation and a wholly owned subsidiary of Parent.

 

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THE MERGER AGREEMENT

This section of the proxy statement describes the material provisions of the merger agreement, but does not purport to describe all of the terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. We urge you to read the full text of the merger agreement because it is the legal document that governs the merger.

The merger agreement has been included to provide you with information regarding its terms and is not intended to provide any other factual information about the Company, Parent, Merger Sub or their respective affiliates.

The Merger

Upon the terms and subject to the conditions set forth in the merger agreement, the merger will consist of Merger Sub, a wholly owned subsidiary of Parent, merging with and into Getty Images. After the merger, Getty Images will continue as the surviving corporation and as a wholly owned subsidiary of Parent. The surviving corporation will be a privately held corporation and our current stockholders, other than the Rollover Stockholders who will hold an indirect ownership interest in the surviving corporation, will cease to have any ownership interest in the surviving corporation or rights as our stockholders. Therefore, such current stockholders will not participate in any future earnings or growth of the surviving corporation and will not benefit from any appreciation in value of the surviving corporation.

Upon consummation of the merger, the directors of Merger Sub will be the initial directors of the surviving corporation, and the officers of Getty Images will be the initial officers of the surviving corporation. All directors and officers of the surviving corporation will hold their positions until their successors are duly elected or appointed and qualified or their earlier death, resignation or removal.

Getty Images or Parent may terminate the merger agreement prior to the consummation of the merger in some circumstances, whether before or after the adoption by our stockholders of the merger agreement. Additional details on termination of the merger agreement are described in “—Termination of the Merger Agreement” below.

Effective Time; Marketing Period

The merger will be effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware (or at such later time as is agreed upon by the parties to the merger agreement and specified in the certificate of merger). We expect to complete the merger as promptly as practicable after our stockholders adopt the merger agreement (assuming the prior satisfaction of the other closing conditions to the merger) and, if necessary, the expiration of the marketing period (defined below). Unless otherwise agreed by the parties to the merger agreement, the closing of the merger will occur no later than the later of two business days after the satisfaction or waiver of the conditions described in “—Conditions to the Completion of the Merger” below, and the date that is the earlier of (a) a date during the marketing period to be specified by Parent on no less than three business days’ notice to the Company and (b) the final day of the marketing period.

For purposes of the merger agreement, “marketing period” means the first period of thirty consecutive calendar days throughout which:

 

   

Parent has certain financial information required to be provided by the Company under the merger agreement in connection with Parent’s financing of the merger; and

 

   

the mutual closing conditions to complete the merger are satisfied and nothing has occurred and no conditions exist that would cause any of the conditions to the obligations of Parent and Merger Sub to complete the merger to fail to be satisfied during such period.

 

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If the marketing period has not been completed on or prior to August 15, 2008, the marketing period will commence no earlier than September 2, 2008. Also, the marketing period will not be deemed to have commenced if, prior to the completion of the marketing period, PricewaterhouseCoopers LLP has withdrawn its audit opinion with respect to any year end financial statements contained in any registration statements, reports and proxy statements filed or furnished by us with or to the SEC since January 1, 2007.

The purpose of the marketing period is to provide Parent with a reasonable and appropriate period of time during which it can market and place the permanent debt financing contemplated by the debt commitment letter for the purposes of financing the merger. As such, the marketing period will end on any earlier date on which the debt financing contemplated by the debt commitment letters is consummated. See “Special Factors—Financing of the Merger.

Merger Consideration

Except as noted below, each share of our common stock issued and outstanding immediately prior to the effective time of the merger will be automatically cancelled and converted at the effective time of the merger into the right to receive the merger consideration ($34.00 in cash, without interest and less any applicable withholding taxes). The following shares will not receive the merger consideration:

 

   

shares held in treasury by the Company, which shares will be cancelled without consideration;

 

   

shares owned by Parent or Merger Sub or any other subsidiary of Parent (including any such shares contributed to Parent by the Rollover Stockholders prior to the merger in exchange for equity interests of Parent, which contribution is described in “Special Factors—Interests of the Company’s Directors and Executive Officers in the Merger”), which shares will be cancelled without conversion or consideration;

 

   

shares held by any of our wholly owned subsidiaries, which shares will remain outstanding; and

 

   

shares held by holders who did not vote in favor of the merger (or consent thereto in writing) and who are entitled to demand and have properly demanded appraisal of such shares pursuant to, and who have complied in all respects with, the provisions of Section 262 of the DGCL, and which shares will be entitled to payment of the appraised value of such shares as may be determined to be due to such holders pursuant to Section 262 of the DGCL (unless and until such holder has failed to perfect or has effectively withdrawn or lost rights of appraisal under the DGCL).

At the effective time of the merger, each holder of a certificate formerly representing any shares of common stock or of book-entry shares (other than shares for which appraisal rights have been properly demanded, perfected and not withdrawn or lost under the DGCL) will no longer have any rights with respect to the shares, except for the right to receive the merger consideration upon surrender thereof. See “Appraisal Rights.”

Payment Procedures

Parent will designate a paying agent reasonably acceptable to the Company to receive the aggregate merger consideration for the benefit of the holders of shares of our common stock. At or prior to the effective time of the merger, Parent will deposit with the paying agent an amount in cash equal to the aggregate merger consideration.

At the effective time of the merger, we will close our stock transfer books. After that time, there will be no further transfer of shares of our common stock that were outstanding immediately prior to the effective time of the merger.

Promptly after the effective time of the merger, the surviving corporation in the merger will cause the paying agent to mail to each holder of record of our shares a letter of transmittal and instructions advising you how to exchange your certificates or book-entry shares for the merger consideration. The paying agent will pay you your merger consideration after you have (a) surrendered your certificates or book-entry shares to the paying agent and (b) provided to the paying agent your signed letter of transmittal and any other items specified by the

 

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letter of transmittal. Interest will not be paid or accrue in respect of the merger consideration. The paying agent will reduce the amount of any merger consideration paid to you by any applicable withholding taxes. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

If any cash deposited with the paying agent is not claimed within eighteen months following the effective time of the merger, such cash will be returned to the surviving corporation upon demand. Subject to any applicable unclaimed property laws, after that point, holders of our common stock will be entitled to look only to Parent and the surviving corporation as general creditors with respect to any merger consideration that may be payable upon surrender of any certificates or book-entry shares.

If the paying agent is to pay some or all of your merger consideration to a person other than you, as the registered owner of a stock certificate or book-entry shares, in the case of a stock certificate, you must have your certificate properly endorsed or otherwise in proper form for transfer, and you must pay any transfer or other taxes payable by reason of the transfer or establish to the surviving corporation’s reasonable satisfaction that the taxes have been paid or are not required to be paid.

If you have lost your certificate, or if it has been stolen or destroyed, you will be required to provide an affidavit to that fact. The letter of transmittal instructions will tell you what to do in these circumstances.

Treatment of Stock Options and Restricted Stock Units

The merger agreement provides, prior to the effective time of the merger, that the Company will take all action necessary such that:

 

   

except as otherwise agreed to by Parent and the holder (see “Special Factors—Interests of the Company’s Directors and Executive Officers in the Merger”), each outstanding stock option granted under our equity incentive plans that represents the right to acquire our common stock, whether or not then vested or exercisable, will, at the effective time of the merger, be cancelled and terminated and converted into the right to receive a cash payment, for each share of our common stock subject to such option, equal to the excess, if any, of (a) the merger consideration over (b) the option exercise price payable in respect of such share of our common stock issuable under such option, without interest and less any applicable withholding taxes; and

 

   

except as otherwise agreed to by Parent and the holder, each outstanding restricted stock unit granted under our equity incentive plans outstanding immediately prior to the effective time of the merger, will vest in full and be converted into the right to receive a cash payment in an amount equal to the merger consideration, without interest and less any applicable withholding taxes.

In order to provide for the cancellation and termination of all stock options under the merger agreement, we expect to make an offer to each option holder to cancel all of his or her grants of options in exchange for a cash payment with respect to each such grant equal to the greatest of (i) the aggregate option consideration with respect to such grant, which is the excess, if any, of the merger consideration over the exercise price payable for each share of Company common stock issuable under such stock option multiplied by the total number of shares subject to such grant, (ii) $0.05 per share of our common stock issuable pursuant to such grant and (iii) $1,000, in each case without interest and less applicable withholding taxes. The offer will be made to each option holder, and the receipt of consideration by each option holder is contingent upon his or her acceptance of the offer in accordance with its terms. The completion of this offer will be conditioned upon and will occur simultaneously with the completion of the merger.

For a further description on the vesting of the Company’s stock options and restricted stock units, see “Summary Term Sheet—Treatment of Stock Options and Restricted Stock Units.”

 

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Representations and Warranties

The merger agreement contains representations and warranties of the Company and of Parent and Merger Sub made to and solely for the benefit of each other. The assertions embodied in those representations and warranties are qualified by information contained in confidential disclosure schedules exchanged by the parties in connection with signing the merger agreement that modify, qualify and create exceptions to the representations and warranties contained in the merger agreement.

Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, because (a) they were made only as of the date of the merger agreement or a prior specified date, (b) in some cases they are subject to qualifications with respect to materiality and knowledge, (c) they are modified in important part by the underlying disclosure schedule and (d) in the case of the representations and warranties of the Company, are qualified by certain disclosure in the registration statements, reports and proxy statements filed or furnished by us with or to the SEC since January 1, 2007 and prior to the date of the merger agreement. The disclosure schedule contains information that has been included in the Company’s prior public disclosures, as well as non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.

The Company makes various representations and warranties in the merger agreement that are subject, in some cases, to exceptions and qualifications (including exceptions that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect). See “—Company Material Adverse Effect Definition” below. Our representations and warranties relate to, among other things:

 

   

due organization, good standing and qualification, and other corporate matters with respect to the Company and our subsidiaries;

 

   

our subsidiaries;

 

   

capitalization and certain related matters;

 

   

our corporate authority and authorization to enter into, and enforceability of, the merger agreement;

 

   

actions taken by our board of directors;

 

   

the absence of conflicts with, or defaults under, organizational documents, other contracts and applicable laws;

 

   

the required stockholder approvals to adopt the merger agreement and approve the transactions contemplated by the merger agreement;

 

   

required regulatory filings and consents and approvals of domestic and foreign governmental authorities;

 

   

documents filed with or furnished to the SEC and the accuracy of the information in those documents, including our financial statements;

 

   

the absence of certain undisclosed liabilities;

 

   

our internal controls over financial reporting and our disclosure controls and procedures;

 

   

the absence of off balance sheet contracts or arrangements;

 

   

the conduct of our business in the ordinary course of business consistent with past practice since September 30, 2007 and the absence of any event, change, occurrence or effect since September 30, 2007 that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

 

   

litigation, proceedings and government orders;

 

   

compliance with laws and compliance with, and adequacy of, permits;

 

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this proxy statement and the Rule 13e-3 transaction statement on Schedule 13E-3 not being misleading and the compliance of such documents as to form with the requirements of the Exchange Act;

 

   

tax matters;

 

   

employee benefit and labor matters;

 

   

environmental matters;

 

   

intellectual property;

 

   

inapplicability of state anti-takeover statutes and approval by our board of directors of the merger agreement and certain other agreements for purposes of Section 203 of the DGCL;

 

   

real property;

 

   

material contracts (including the enforceability thereof and compliance therewith);

 

   

the opinion of our financial advisor;

 

   

absence of brokers’ and finders’ fees;

 

   

transactions with affiliates; and

 

   

insurance matters.

The merger agreement also contains various representations and warranties made jointly and severally by Parent and Merger Sub that are subject, in some cases, to exceptions and qualifications including in a confidential disclosure schedule delivered to us by Parent in connection with the signing of the merger agreement. The representations and warranties of Parent and Merger Sub relate to, among other things:

 

   

their due organization and good standing;

 

   

their authority and authorization to enter into, and enforceability of, the merger agreement;

 

   

the absence of conflicts with, or defaults under, organizational documents, other contracts and applicable law;

 

   

required regulatory filings and consents and approvals of domestic and foreign governmental authorities;

 

   

Parent’s ownership of the outstanding stock of Merger Sub;

 

   

operations of Merger Sub;

 

   

delivery of copies of equity and debt commitment letters to the Company by Parent;

 

   

the sufficiency of financing to pay the aggregate merger consideration, aggregate Option Consideration (as defined in the merger agreement), aggregate RSU Consideration (as defined in the merger agreement) and other amounts required to be paid in connection with the consummation of the transactions contemplated by the merger agreement;

 

   

absence of exclusivity arrangements with financial advisors or potential providers of debt or equity financing;

 

   

enforceability of and absence of default of the guarantor under the limited guarantee;

 

   

the solvency of the surviving corporation in the merger;

 

   

information supplied in the proxy statement and the Rule 13e-3 transaction statement on Schedule 13E-3;

 

   

absence of contracts, other than certain agreements approved by our board of directors, with any member of the Company’s management, directors or stockholders and absence of actions that would cause anti-takeover statutes under the DGCL to be applicable to the merger or the merger agreement or the transactions contemplated thereby;

 

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approval required to adopt the merger agreement and approve the merger;

 

   

brokers’ and finders’ fees;

 

   

access to information; and

 

   

disclaimer of representations and warranties not contained in our representations and warranties in the merger agreement.

The representations and warranties of the parties will expire upon consummation of the merger.

Company Material Adverse Effect Definition

Many of our representations and warranties are qualified by a Company Material Adverse Effect standard. For the purpose of the merger agreement, “Company Material Adverse Effect” is defined to mean any change, event, occurrence or effect that is materially adverse to the business, results of operations or financial condition of the Company and our subsidiaries, taken as a whole; provided, however, that none of the following shall constitute, or be considered in determining whether there has occurred, and no change, event, occurrence or effect resulting from, attributable to or arising out of any of the following will constitute, a Company Material Adverse Effect:

 

  (a) changes generally affecting:

 

   

the industries in which the Company and our subsidiaries operate that do not adversely affect the Company and our subsidiaries, taken as a whole, in a materially disproportionate manner relative to other participants in the industries in which the Company and our subsidiaries operate; or

 

   

the economy or the credit, debt, financial or capital markets, in each case, in the United States or elsewhere in the world, including changes in interest or exchange rates that do not adversely affect the Company and our subsidiaries, taken as a whole, in a materially disproportionate manner relative to other participants in the industries in which the Company and our subsidiaries operate;

 

  (b) changes after the date of the merger agreement in law or the interpretation thereof or in generally accepted accounting principles or in accounting standards, or changes after the date of the merger agreement in general legal, regulatory or political conditions;

 

  (c) the negotiation, execution, announcement or performance of the merger agreement or the consummation of the transactions contemplated by the merger agreement, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, financing sources, employees, revenue and profitability (except that this exclusion will not apply with respect to the Company’s representations and warranties related to authority, enforceability of the merger agreement, noncontravention, required stockholder vote and governmental approvals);

 

  (d) acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism that do not adversely affect the Company and our subsidiaries, taken as a whole, in a materially disproportionate manner relative to other participants in the industries in which the Company and our subsidiaries operate;

 

  (e) earthquakes, hurricanes, tornados or other natural disasters that do not adversely affect the Company and our subsidiaries, taken as a whole, in a materially disproportionate manner relative to other participants in the industries in which the Company and our subsidiaries operate;

 

  (f) any action taken by the Company or our subsidiaries as expressly contemplated by the merger agreement (other than the obligation of the Company and our subsidiaries under the merger agreement to operate in the ordinary course of business consistent with past practice and to use commercially reasonable efforts to preserve intact our and their present business organizations and existing material business relationships) or with Parent’s written consent or at Parent’s written request;

 

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  (g) any decline in the market price or change in trading volume of our common stock; provided that any change, event, occurrence or effect underlying such decline, change or failure not otherwise excluded in the other exceptions (a) through (l) of the definition of Company Material Adverse Effect will be taken into account in determining whether a Company Material Adverse Effect has occurred;

 

  (h) the suspension of trading generally on the New York Stock Exchange or the Nasdaq Stock Market;

 

  (i) any failure to meet any internal or public projections, forecasts or estimates of revenue or earnings or the issuance of revised projections that are not as optimistic as those in existence on the date of the merger agreement; provided that any change, event, occurrence or effect underlying such decline, change or failure not otherwise excluded in the other exceptions (a) through (l) of the definition of Company Material Adverse Effect will be taken into account in determining whether a Company Material Adverse Effect has occurred;

 

  (j) any stockholder or derivative litigation arising from allegations of a breach of fiduciary duty or other violation of applicable law relating to the merger agreement or the transactions contemplated by the merger agreement;

 

  (k) the outcome of any litigation, claim or other proceeding described by the Company in the Company disclosure schedule to the merger agreement or disclosed in the documents filed with or furnished to the SEC since January 1, 2007 and prior to the date of the merger agreement; or

 

  (l) an increase in the cost or availability of the financing necessary for Parent and Merger Sub to consummate the transactions contemplated by the merger agreement.

Conduct of Business Prior to Closing

We have agreed in the merger agreement that, until the consummation of the merger or the termination of the merger agreement in accordance with its terms, except as expressly contemplated by the merger agreement or required by law or consented to in writing by Parent (which consent will not be unreasonably withheld, delayed or conditioned and which consent will be deemed to have been given if Parent does not object within seventy-two hours after a written request for such consent is delivered to Parent by the Company), the Company will, and will cause our subsidiaries to:

 

   

conduct our and their respective businesses in all material respects in the ordinary course of business consistent with past practice; and

 

   

use commercially reasonable efforts to preserve intact our and their present business organizations and to preserve their existing material business relationships.

We have also agreed in the merger agreement that, until the consummation of the merger or the termination of the merger agreement in accordance with its terms, subject to certain exceptions in the Company’s disclosure schedule, except as expressly contemplated by the merger agreement or required by law or consented to in writing by Parent (which consent will not be unreasonably withheld, delayed or conditioned and which consent will be deemed to have been given if Parent does not object within seventy-two hours after a written request for such consent is delivered to Parent by the Company), the Company will not, and will cause our subsidiaries not to:

 

   

authorize for issuance, issue, sell, grant or subject to any lien any shares of our or their stock or other ownership interests, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of our or their stock or other ownership interests, or any rights, warrants or options to purchase any shares of our or their stock or other ownership interests (except for issuances required upon the exercise or settlement of stock options or restricted stock units outstanding on the date of the merger agreement in accordance with the terms of the applicable equity incentive plan in effect on the date of the merger agreement);

 

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redeem, purchase or otherwise acquire any shares of our or their stock, or any rights, warrants or options to acquire any shares of our or their stock except in connection with withholding to satisfy tax obligations with respect to stock options and restricted stock units, or acquisitions in connection with the vesting or forfeiture of equity awards, or acquisitions in connection with the next exercise of stock options, in each case outstanding on the date of the merger agreement and in accordance with the terms of the applicable equity incentive plan in effect on the date of the merger agreement;

 

   

declare, set aside for payment or pay any dividend on, or make any other distribution in respect of, any shares of our or their stock or other ownership interests;

 

   

split, combine, subdivide or reclassify any shares of our or their stock or other ownership interests;

 

   

incur, issue, assume, guarantee or otherwise become liable for any indebtedness (excluding any letters of credit issued in the ordinary course of business consistent with past practice) or any debt securities, other than intercompany indebtedness and borrowings under the Company’s revolving credit facility, in an amount in excess of $10 million in the aggregate;

 

   

sell, lease, license, mortgage or otherwise subject to any lien (other than permitted liens) or otherwise dispose of any of our or their properties, rights or assets (including stock of subsidiaries) with a value or purchase price in the aggregate in excess of $2 million, except:

 

   

sales and licenses of products and services in the ordinary course of business consistent with past practice;

 

   

pursuant to contracts in force on the date of the merger agreement;

 

   

dispositions of obsolete or worthless assets; or

 

   

transfers among the Company and our wholly owned subsidiaries;

 

   

enter into or make any loans, advances or capital contributions to, or investments in, any person (other than advances to employees in the ordinary course of business consistent with past practice for business expenses in accordance with the Company’s existing policies);

 

   

make capital expenditures in excess of the amount per quarter budgeted in the Company’s current plan that was made available to Parent (except for up to $5 million in capital expenditures, individually or in the aggregate, in excess of such amount during any three consecutive month period);

 

   

make any acquisitions of any corporation, partnership, other business organization or any division thereof or equity interests therein or a substantial portion of the assets thereof for consideration in excess of $10 million in the aggregate;

 

   

make any acquisitions of any real property or, except in the ordinary course of business consistent with past practice, any other property, right or asset;

 

   

pay, discharge, settle or compromise any pending or threatened suit, action or claim which:

 

   

requires payment to or by the Company or any subsidiary (exclusive of attorney’s fees) in excess of $2.5 million in any single instance or in excess of $10 million in the aggregate;

 

   

is by securities holders of the Company or any other person and relates to the transactions contemplated by the merger agreement; or

 

   

imposes material restrictions on the operations of the Company or its subsidiaries;

 

   

increase in any material respect the compensation of any of its directors, officers, employees or consultants other than:

 

   

as required by law or the terms of Company plans in effect on the date of the merger agreement;

 

   

increases in salaries and wages of non-officer employees of the Company as part of annual merit increases made in the ordinary course of business consistent with past practice (provided that such

 

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increases do not result in more than a 4% annual increase for employee salaries and wages in the aggregate); and

 

   

payment of accrued or earned but unpaid bonuses;

 

   

grant any severance or termination pay to any present or former director, officer, employee or consultant, other than as required pursuant to the terms of Company plans in effect on the date of the merger agreement;

 

   

establish, adopt, enter into, amend or terminate any existing or new Company plan or any plan, agreement, program, policy, trust, fund or other arrangement that would be a Company plan if in existence on the date of the merger agreement;

 

   

make any material changes in financial or tax accounting methods, principles or practices (or change an annual accounting period), except as may be required under generally accepted accounting principles or by law;

 

   

amend our or their certificate of incorporation, bylaws or other organizational documents;

 

   

make or change any material tax election;

 

   

file any material amendment to any tax return with respect to any material amount of taxes;

 

   

settle or compromise any material tax liability;

 

   

agree to any extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of taxes;

 

   

enter into any material closing agreement with respect to any tax;

 

   

take any action to surrender any right to claim a material tax refund;

 

   

adopt a plan or agreement of complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of our subsidiaries;

 

   

modify, amend, terminate or waive any rights under certain material contracts existing on the date of the merger agreement in any material respect (other than in the ordinary course of business consistent with past practice);

 

   

enter into any new contract that (a) would be a material contract if entered into prior to the date of the merger agreement (other than in the ordinary course of business consistent with past practice), or (b) contains a change in control provision in favor of the other party thereto or would otherwise require a payment to or give rise to any rights to such other party in connection with the transactions contemplated by the merger agreement;

 

   

enter into any new line of business material to the Company and our subsidiaries, taken as a whole, other than as contemplated by the Company’s business plan prior to the date of the merger agreement; or

 

   

agree (in writing or otherwise) to take any of the foregoing actions.

Restrictions on Solicitations of Other Offers

We and our subsidiaries are required to (and are required to use our reasonable best efforts to cause our representatives to) cease and terminate any discussions or negotiations with any person conducted prior to entry into the merger agreement with respect to a “takeover proposal” (defined below); provided, however, that until 11:59 p.m., Pacific Daylight Savings Time, on April 4, 2008, we were permitted to:

 

   

continue discussions or negotiations with a certain party with whom we had previously engaged in discussions with respect to a proposal, which we refer to as the “excluded party,” and identified to Parent in writing; and

 

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furnish to the excluded party, pursuant to a confidentiality agreement permitted by the merger agreement, any information with respect to the Company and our subsidiaries, provided that any such information is provided to Parent as promptly as is reasonably practicable after its provision to the excluded party to the extent not previously made available to Parent.

See “Special Factors—Background of the Merger.”

With the exception of the excluded party (and only until 11:59 p.m., Pacific Daylight Savings Time, on April 4, 2008, in such case), we and our subsidiaries are required not to (and are required to use our reasonable best efforts to cause our representatives not to), directly or indirectly:

 

   

initiate, knowingly solicit or knowingly encourage (including by way of furnishing non-public information) any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to result in, a takeover proposal; or

 

   

engage in, continue or otherwise participate in any discussions or negotiations regarding a takeover proposal.

In addition, we have agreed not to grant after the date of the merger agreement any waiver, amendment or release under any standstill agreement without the prior written consent of Parent.

Notwithstanding the restrictions described above, prior to obtaining the stockholders approvals described below in “—Conditions to the Completion of the Merger,” which we refer to in this section of the proxy statement as the “stockholder approvals,” subject to our compliance in all material respects with the provisions of the merger agreement regarding the restrictions on our ability to solicit proposals or offers, the ability of our board of directors to change its recommendation and related provisions, if we receive a written takeover proposal, we and our representatives may contact the person making such proposal solely in order to:

 

   

clarify and understand the terms and conditions of any takeover proposal made by such person so as to determine whether such takeover proposal constitutes or could reasonably be expected to result in a superior proposal; and

 

   

notify such person of the provisions of the merger agreement.

Furthermore, subject to our compliance in all material respects with the provisions in the merger agreement regarding the restrictions on our ability to solicit proposals or offers, the ability of our board of directors to change its recommendation and related provisions, if our board of directors receives a written takeover proposal that it determines constitutes or could reasonably be expected to result in a superior proposal and determines in good faith (after consultation with our outside legal counsel) that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law, then, prior to obtaining the stockholder approvals, we may:

 

   

furnish pursuant to a confidentiality agreement permitted by the merger agreement any information with respect to the Company and our subsidiaries to the person making such takeover proposal, provided that any such information must be provided to Parent as promptly as is reasonably practicable after its provision to such person to the extent not previously made available to Parent; and

 

   

participate in discussions and negotiations with such person regarding a takeover proposal.

We are required to promptly (and in any event within twenty-four hours after receipt by, or notification to us or our financial advisor) notify Parent of the receipt (or notification) of any takeover proposal or any inquiries relating to a takeover proposal or any request for information from, or any negotiations sought to be initiated or continued with, either us or our representatives concerning a takeover proposal and provide Parent with certain information and documents with such notification. We are also required to keep Parent reasonably informed on a prompt basis of the status or developments regarding any takeover proposal, inquiry or request. We and our subsidiaries may not enter into any agreement that would prohibit us or them from providing such information to Parent.

 

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A “takeover proposal” means any proposal or offer from any person or group (as defined under Section 13(d) of the Exchange Act) (other than Parent and its subsidiaries) relating to, in a single transaction or series of related transactions, any:

 

   

acquisition of our assets or assets of our subsidiaries (including securities of our subsidiaries) equal to 20% or more of our consolidated assets or to which 20% or more of our revenues or earnings on a consolidated basis are attributable;

 

   

acquisition of 20% or more of our outstanding common stock;

 

   

tender offer or exchange offer that, if consummated, would result in any person or group beneficially owning 20% or more of our outstanding common stock; or

 

   

merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company.

A “superior proposal” means any written takeover proposal on terms which our board of directors determines in good faith, after consultation with our outside legal counsel and independent financial advisors, to be more favorable from a financial point of view to the holders of our common stock than the merger, taking into account all of the terms and conditions of such proposal (including the likelihood and timing of consummation of the proposal) and the merger agreement (including any changes to the terms of the merger agreement committed to by Parent to the Company in writing in response to such proposal or otherwise). For the purposes of the definition of “superior proposal,” the references to “20%” in the definition of “takeover proposal” are deemed to be references to “50%.”

Termination in Connection with a Superior Proposal

The merger agreement requires us to establish a record date for, duly call, give notice of, convene and hold a meeting of our stockholders to adopt the merger agreement as soon as practicable after this proxy statement is cleared for mailing to our stockholders by the SEC. Our board of directors has unanimously (other than certain interested directors who abstained from the vote) resolved to recommend that our stockholders adopt the merger agreement, subject to the ability of our board of directors to change, qualify, withdraw or modify (or publicly propose to change, qualify, withdraw or modify) its recommendation or approve or recommend (or publicly propose to approve or recommend) to our stockholders a takeover proposal in certain circumstances under the merger agreement as described below.

We have agreed that our board of directors (or a committee thereof) may not, except under certain circumstances set forth below:

 

   

change, qualify, withdraw or modify (or publicly propose to change, qualify, withdraw or modify) in a manner adverse to Parent our board of directors’ recommendation that our stockholders adopt the merger agreement;

 

   

approve or recommend (or publicly propose to approve or recommend) a takeover proposal to our stockholders; or

 

   

authorize the Company or our subsidiaries to enter into any letter of intent, merger, acquisition or similar agreement with respect to any takeover proposal (other than a confidentiality agreement permitted by the merger agreement).

Notwithstanding these restrictions but subject to our obligations to provide certain information to and to negotiate in good faith with Parent and to take certain actions in connection with superior proposals as described below, at any time prior to obtaining the stockholder approvals, our board of directors may change, qualify, withdraw or modify (or publicly propose to change, qualify, withdraw or modify) in a manner adverse to Parent its recommendation that our stockholders adopt the merger agreement or, in the case of the first

 

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bullet point below, approve or recommend (or publicly propose to approve or recommend) a takeover proposal to our stockholders:

 

   

if our board of directors receives a takeover proposal that has not been withdrawn and that it determines in good faith, after consultation with independent financial advisors and outside legal counsel, constitutes a superior proposal, and if our board of directors determines in good faith, after consultation with outside legal counsel, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law (provided that the Company may not enter into any letter of intent, merger, acquisition or similar agreement with respect to any takeover proposal unless we have complied with the provisions in the merger agreement regarding the restrictions on our ability to solicit proposals or offers, the ability of our board of directors to change its recommendation and related provisions of the merger agreement and we have terminated the merger agreement and concurrently therewith paid a termination fee, as described below, to Parent); or

 

   

other than in response to a takeover proposal, if our board of directors determines in good faith, after consultation with outside legal counsel, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law.

We and our board of directors may not change, qualify, withdraw or modify (or publicly propose to change, qualify, withdraw or modify) in a manner adverse to Parent our board of directors’ recommendation that our stockholders adopt the merger agreement or approve or recommend (or publicly propose to approve or recommend) a takeover proposal to our stockholders with respect to a superior proposal unless:

 

   

we have complied in all material respects with the provisions in the merger agreement regarding the restrictions on our ability to solicit proposals or offers, the ability of our board of directors to change its recommendation and related provisions;

 

   

we have provided Parent written notice that we intend to take such action and describing the material terms and conditions of the superior proposal that is the basis of such action and including a copy of the relevant proposed transaction agreements with the party making such superior proposal and other material documents;

 

   

during the three business day period following Parent’s receipt of such notice, we have negotiated, and have caused our financial and legal advisors to negotiate, in good faith with Parent and Merger Sub (to the extent they desire to negotiate) to make such adjustments in the terms and conditions of the merger agreement so that such superior proposal ceases to constitute a superior proposal and/or our board of directors no longer believes that failure to change, qualify, withdraw or modify its recommendation of the merger would be reasonably likely to be inconsistent with its fiduciary duties under applicable law; and

 

   

after such three business day period, our board of directors has determined in good faith, taking into account any changes to the terms of the merger agreement proposed by Parent to the Company, that the superior proposal giving rise to the notice continues to constitute a superior proposal and/or our board of directors no longer believes that failure to change, qualify, withdraw or modify its recommendation of the merger would be reasonably likely to be inconsistent with its fiduciary duties under applicable law.

Any amendment to the financial terms or any other material amendment of such superior proposal will require a new written notice and will require that we comply again with the foregoing requirements (provided that references to the three business day period will be deemed to be references to a forty-eight hour period).

In order to enter into an acquisition agreement with respect to a superior proposal, we must terminate the merger agreement in accordance with the terms of the merger agreement. See “—Termination of the Merger Agreement” and “—Termination Fee” below.

Notwithstanding these restrictions, subject to certain conditions, our board of directors may make certain disclosures contemplated by the securities laws or other applicable laws.

 

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Agreement to Use Reasonable Best Efforts

Subject to the terms and conditions set forth in the merger agreement, the Company, Parent and Merger Sub have agreed to cooperate with each other and to use their reasonable best efforts to:

 

   

promptly take, or cause to be taken, all actions, and do, or cause to be done, all things necessary, proper or advisable to cause the closing conditions to the merger to be satisfied as promptly as practicable and to consummate, in the most expeditious manner practicable, the transactions contemplated by the merger agreement, including preparing and filing promptly and fully all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents (including any required or recommended filings under applicable antitrust laws);

 

   

promptly obtain all approvals, consents, registrations, permits, authorizations and other confirmations from any governmental authority or third party necessary, proper or advisable to consummate the transactions contemplated by the merger agreement, provided that in obtaining consent or approval:

 

   

neither the Company nor any of our subsidiaries will pay or commit to pay any amount to any person or incur any liability or other obligation or materially modify any contract without the prior written consent of Parent (which consent will not be unreasonably withheld or delayed); and

 

   

neither Parent nor Merger Sub will be required to pay or commit to pay any amount or incur any liability or obligation;

 

   

cooperate in all respects with each other in connection with any filing or submission with a governmental authority in connection with the transactions contemplated by the merger agreement and any investigation or other inquiry by or before a governmental authority relating to the transactions contemplated by the merger agreement, including any proceedings initiated by a private party;

 

   

keep the other party informed in all material respects and on a reasonably timely basis of any material communication regarding the transactions contemplated by the merger agreement received by such party from, or given by such party to, the FTC, the Antitrust Division of the DOJ, the European Commission or any other governmental authority and of any material communication regarding the transactions contemplated by the merger agreement received or given in connection with any proceeding by a private party; and

 

   

resolve any objections asserted by a governmental authority with respect to the application of antitrust laws to the transactions contemplated by the merger agreement, including each party’s use of its reasonable best efforts to:

 

   

avoid the entry of, or to have vacated or terminated, any decree, decision, order or judgment that would restrain, prevent or delay the consummation of the transactions contemplated by the merger agreement on or before August 15, 2008 (or, if the marketing period has not been completed on or prior to August 15, 2008, by October 2, 2008), including by defending through litigation on the merits any claims asserted in any court by any person; and

 

   

avoid or eliminate every impediment under applicable antitrust laws that may be asserted by any governmental authority with respect to the transactions contemplated by the merger agreement so as to enable the consummation of the merger as soon as reasonably possible (and in any event no later than August 15, 2008, or, if the marketing period has not been completed on or prior to August 15, 2008, by October 2, 2008).

Each party also agreed to take the following actions with respect to the HSR Act:

 

   

make an appropriate filing of a notification and report form pursuant to the HSR Act, which was filed with the FTC and the DOJ on March 7, 2008;

 

   

supply as promptly as practicable any additional information and documentation requested pursuant to the HSR Act; and

 

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use its reasonable best efforts to take all other actions to cause the expiration or termination of the applicable waiting periods under the HSR Act (including any extensions thereof) as soon as practicable (the FTC granted early termination of the waiting period on March 17, 2008).

The Company agreed to take the following actions with the German Federal Cartel Office:

 

   

make an appropriate filing with the German Federal Cartel Office regarding the transactions contemplated by the merger agreement, which was filed on March 7, 2008;

 

   

supply as promptly as practicable any additional information and documentation requested by the German Federal Cartel Office; and

 

   

use our reasonable best efforts to take all other actions to obtain approval under the German Act Against Restraints of Competition as soon as practicable (the German Federal Cartel Office granted approval on April 4, 2008).

Parent agreed to file with the European Commission as promptly as reasonably practicable the Form CO, if any, required for the merger pursuant to Council Regulation No. 139/2004/EC of the European Community and we agreed to provide Parent as promptly as practicable with such assistance as Parent reasonably requests in connection therewith. Each party agreed to supply as promptly as practicable any additional information and documentary material, if any, that may be requested or required by the European Commission and to use its reasonable best efforts to take all other actions to obtain a decision from the European Commission declaring the merger compatible with the Common Market. Parent filed for European Commission approval on March 28, 2008, and the European Commission granted approval on May 6, 2008.

In addition, the Company and Parent agreed to use their respective reasonable best efforts to ensure that no state takeover statute or similar law is or becomes applicable to the transactions contemplated by the merger agreement and, if any state takeover statute or similar law becomes applicable to the transactions contemplated by the merger agreement, to take all action necessary to ensure that the transactions contemplated by the merger agreement may be consummated as promptly as practicable on the terms contemplated by the merger agreement and otherwise minimize the effect of such law on the transactions contemplated by the merger agreement.

Parent will take all such actions, including proposing, negotiating, committing to and effecting, by consent decree, hold separate order or otherwise, the sale, divestiture or disposition of Parent’s or its subsidiaries’ assets or businesses and to otherwise take or commit to take actions that limit Parent’s or its subsidiaries’ freedom of action with respect to, or its ability to retain, their respective businesses, product lines or assets as may be required to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order, or other decision or order under any applicable antitrust laws that would prevent or materially delay the consummation of the transactions contemplated by the merger agreement. We will take such of the foregoing actions as Parent may request, provided, however, that any such action is conditioned upon the consummation of the merger.

The Company will, in consultation with Parent, use our commercially reasonable efforts to comply with any information and consultation obligations that may arise regarding the transactions contemplated by the merger agreement by virtue of the existence of any works council or other employee representative body in any jurisdiction in which we or any of our subsidiaries operates.

Financing

In the merger agreement, Parent and Merger Sub have agreed to use their reasonable best efforts to obtain the debt and equity financing on the terms and conditions described in the debt commitment letter and the equity commitment letter, or on terms no less favorable to Parent or Merger Sub, and they will use their reasonable best efforts to:

 

   

maintain in effect the debt commitment letter and the equity commitment letter;

 

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negotiate definitive agreements with respect to the debt commitment letter on the terms and conditions contained in the debt commitment letter, or on terms no less favorable to Parent or Merger Sub than the terms and conditions in the debt commitment letter;

 

   

satisfy on a timely basis (taking into account the expected timing of the marketing period) all conditions applicable to them in the definitive debt financing agreements that are within their control;

 

   

upon satisfaction of such conditions, consummate the debt and equity financing at or prior to the closing of the merger;

 

   

comply with their obligations under the debt commitment letter and the equity commitment letter; and

 

   

enforce all of their rights under the debt commitment letter and the definitive agreements related thereto.

See “—Effective Time; Marketing Period,” above, for a discussion of the marketing period, and “Special Factors—Financing of the Merger,” for a discussion of the debt commitment letter and the equity commitment letter.

Parent is required to keep us informed on a reasonably current basis and in reasonable detail of the status of its efforts to arrange the debt and equity financing and provide to the Company, upon our request, copies of the definitive documents related to the debt financing and the equity financing.

If all conditions in the debt commitment letter have been satisfied, or upon funding will be satisfied, Parent and Merger Sub have agreed to use their reasonable best efforts to cause the persons providing the debt financing to fund the debt financing required to consummate the transactions contemplated by the merger agreement on the closing date (including by taking enforcement action to cause the persons providing the debt financing to fund such debt financing).

Parent and Merger Sub may not amend or modify, or waive any material provision or remedy under, the debt commitment letter or the equity commitment letter if such amendment, modification or waiver reduces the aggregate amount of the debt and equity financing or amends the conditions precedent to the debt or equity financing in a manner that would reasonably be expected to delay or prevent the closing of the merger or make the funding of the debt financing or equity financing less likely to occur; provided, however, Parent and Merger Sub may replace and amend the debt commitment letter to add lenders, lead arrangers, bookrunners, syndication agents or similar entities who had not executed the debt commitment letter as of the date of the merger agreement.

If any portion of the debt financing becomes unavailable on the terms and conditions contemplated by the debt commitment letter, Parent and Merger Sub must immediately notify us and use their reasonable best efforts to arrange and obtain alternative financing from alternative sources as promptly as practicable (taking into account the expected timing of the marketing period) in an amount sufficient to consummate the transactions contemplated by the merger agreement with terms and conditions no less favorable from the standpoint of Parent and Merger Sub than the terms and conditions set forth in the debt commitment letter.

Parent will give us prompt notice if any condition to the debt commitment letter or equity commitment letter is not likely to be satisfied, in each case, of which Parent or Merger Sub becomes aware or any termination of the debt commitment letter or equity commitment letter.

The obtaining of debt and equity financing, or any alternative financing, is not a condition to the closing of the merger.

We have agreed to, and have agreed to cause our subsidiaries to (and to use our reasonable best efforts to cause our representatives to) provide all cooperation reasonably requested by Parent in connection with the

 

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arrangement of the debt and equity financing and the transactions contemplated by the merger agreement, including:

 

   

furnishing Parent and Merger Sub and their financing sources as promptly as practicable with financial and other pertinent information concerning the Company and its subsidiaries as may be reasonably requested by Parent to consummate the debt and equity financings at the time they are to be consummated;

 

   

participating in meetings, presentations, road shows, due diligence sessions, drafting sessions and sessions with prospective lenders, investors and rating agencies;

 

   

assisting with the preparation of materials for rating agency presentations, offering documents, private placement memoranda, bank information memoranda, prospectuses and similar documents;

 

   

using reasonable best efforts to obtain accountant’s comfort letters, legal opinions, surveys and title insurance;

 

   

taking all corporate actions, subject to the occurrence of the closing of the merger, required to permit the consummation of the debt financing and equity financing and to permit the proceeds thereof to be made available to the surviving corporation after the consummation of the merger;

 

   

providing the Company’s unaudited consolidated monthly balance sheet, income statement and statement of cash flows to the extent that we customarily prepare such financial statements; and

 

   

executing and delivering pledge and security documents, other definitive financing documents or other certificates or documents (including a certificate of our chief financial officer with respect to solvency matters and consents of accountants for use of their reports in any materials relating to the debt financing) and otherwise reasonably facilitating the pledging of collateral.

The merger agreement limits our obligation to incur any fees or liabilities with respect to the debt or equity financing prior to the effective time of the merger.

Parent, Merger Sub and the H&F Investors are prohibited from retaining any financial advisor on an exclusive basis without our board of directors’ consent and from entering into any exclusivity, lock-up or similar agreement with any potential provider of debt or equity financing that could reasonably be expected to prevent such provider from providing or seeking to provide such financing to any third party in connection with a transaction relating to the Company or our subsidiaries, in connection with the merger and the other transactions contemplated by the merger agreement.

In connection with the debt financing, the Company has agreed to deliver to Parent a certificate executed by our chief financial officer setting forth Consolidated EBITDA (as defined in Exhibit C to the merger agreement) for (a) the three month period ending March 31, 2008, together with supporting calculations in reasonable detail, by the earlier of May 15, 2008 and five days following the date the Company files its Form 10-Q for the quarter ending March 31, 2008 with the SEC, which the Company delivered on May 14, 2008, and (b) if the closing date of the merger has not occurred on or prior to August 15, 2008, the three month period ending June 30, 2008, together with supporting calculations in reasonable detail, on August 18, 2008.

Employee Matters

For the one year period following the effective time of the merger, Parent will provide, or will cause to be provided, to each active employee (on the closing date of the merger) of the Company and our subsidiaries with (a) annual base salary and base wages, and cash target incentive compensation opportunities, in each case, that are no less favorable than such compensation provided to such employees immediately before the effective time of the merger and (b) employee benefits (excluding equity incentives) that are no less favorable in the aggregate

 

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than those provided to such employees immediately prior to the effective time of the merger under the Company’s employee benefit plans, provided such employee remains employed during that period. Parent will, or will cause the surviving corporation to, provide such employees whose employment terminates during this one year period with severance benefits at levels no less than those benefits under any Company plan and in accordance with certain service crediting criteria.

In general, Parent has agreed to recognize the service of employees with us prior to the merger as service with Parent and its subsidiaries in connection with any employee benefit plan maintained by Parent or its subsidiaries which is made available following the merger by Parent or its subsidiaries for purposes of any vesting, eligibility and level of severance and paid-time off benefits, except that an employee will not be entitled to a duplication of benefits with respect to the same period of time. In addition, each employee of the Company as of the closing date of the merger will be immediately eligible to participate, without any waiting time, in new employee benefit plans offered by Parent and its subsidiaries to the extent coverage under such new plan is replacing comparable coverage under an existing Company plan in which such employee participated prior to the merger.

The merger agreement provides that, for purposes of any new employee benefit plan providing medical, dental, pharmaceutical and/or vision benefits offered to employees of the Company as of the closing date of the merger, Parent will cause all pre-existing condition exclusions and actively-at-work requirements that were inapplicable or waived under a comparable plan offered by the Company, and in which such employee participated immediately prior to the merger, to be waived. In addition, such employees will receive credit under such new plan (for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements for the applicable plan year) for any eligible expenses incurred under the Company plans during the portion of the relevant plan year prior to such employee’s participation in such new plans.

The merger agreement provides that Parent will cause the surviving corporation in the merger to honor all of the obligations of the Company under the Company plans that are severance agreements, by written instrument delivered to the executive in accordance with the terms of such agreements.

Indemnification and Insurance

The merger agreement provides that from and after the effective time of the merger, Parent will, and will cause the Company and the surviving corporation to, do the following:

 

   

to the extent permitted under applicable law, indemnify and hold harmless each individual who was at or prior to the effective time of the merger an officer or director of the Company or any of our subsidiaries with respect to all claims, liabilities, losses, damages, judgments, fines, penalties, costs (including amounts paid in settlement or compromise) and expenses (including legal fees and expenses) in connection with any claim, suit, action, proceeding or investigation, based on or arising out of, in whole or in part, (a) such individual’s position as a director or officer of the Company or any of our subsidiaries or (b) acts or omissions by any such individual in his or her capacity as a director, officer or agent of the Company or any of our subsidiaries or taken at the request of the Company or any of our subsidiaries or taken at the request of the Company or any of our subsidiaries, in each case, at, or prior to, the effective time of the merger; and

 

   

assume all obligations of the Company and our subsidiaries to such individuals in respect of indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the consummation of the merger, as provided in the organizational documents of the Company and our subsidiaries and the indemnification agreements listed on the company disclosure schedule.

Under the terms of the merger agreement, Parent will, for a period of six years after the consummation of the merger, cause the certificate of incorporation and bylaws of the surviving corporation in the merger to contain provisions no less favorable to such individuals with respect to limitation of liabilities of directors and officers

 

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and indemnification as were contained in our restated certificate of incorporation and bylaws as of the date of the merger agreement. In addition, after the consummation of the merger Parent will, and will cause the Company and the surviving corporation in the merger to, pay any expenses (including fees and expenses of legal counsel) of any such individual as incurred to the fullest extent permitted under applicable law, provided that the person to whom expenses are advanced provides an undertaking to repay such advances to the extent required by applicable law.

Under the terms of the merger agreement, Parent will also, for a period of six years after the consummation of the merger, maintain the directors’ and officers’ liability insurance policies currently maintained by the Company to cover acts or omissions occurring at or prior to the effective time of the merger for those individuals who are covered by the Company’s current directors’ and officers’ liability insurance policy, on terms and scope with respect to such coverage, and in amount, not less favorable to such individuals as the Company’s policy in effect on the date of the merger agreement (or Parent may substitute therefor policies, issued by reputable insurers, of at least the same coverage with respect to matters occurring prior to the effective time of the merger, including a “tail” policy); provided, however, that if the aggregate annual premiums for such insurance exceeds 300% of the current aggregate annual premium, then Parent will provide or cause to be provided a policy for the applicable individuals with the best coverage as shall then be available at an annual premium of 300% of the current aggregate annual premium. Any replacement or substitution of insurance policies must not result in gaps of coverage.

Other Covenants

The merger agreement contains additional agreements between the Company and Parent relating to, among other things:

 

   

the filing of this proxy statement and the Rule 13e-3 transaction statement on Schedule 13E-3 with the SEC (and cooperation in response to any comments from the SEC with respect to either statement);

 

   

the special meeting of our stockholders, and the recommendation of our board of directors;

 

   

coordination of press releases and other public announcements or filings relating to the merger;

 

   

Parent’s access to our employees, agents, properties, books, contracts, records and other information between the date of the merger agreement and the closing (subject to all applicable legal or contractual obligations and restrictions);

 

   

notification of certain matters;

 

   

resignation of our directors;

 

   

termination of our senior indebtedness;

 

   

the expenditure of funds by Parent between the date of the merger agreement and the closing of the merger;

 

   

termination of certain agreements with Getty Investments and its affiliates;

 

   

Parent’s delisting and deregistration of our common stock;

 

   

the payment of fees and expenses; and

 

   

actions to cause the disposition of our equity securities held by each individual who is a director or officer of the Company pursuant to the transactions contemplated by the merger agreement to be exempt under Rule 16b-3 promulgated under the Exchange Act.

 

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Conditions to the Completion of the Merger

The obligations of the Company, Parent and Merger Sub to consummate the merger are subject to the satisfaction or, to the extent permissible under applicable law, waiver of the following conditions on or prior to the closing date of the merger:

 

   

the affirmative vote to adopt the merger agreement by both:

 

   

the holders of a majority of the outstanding shares of our common stock; and

 

   

the holders of a majority of the number of shares of our common stock present in person or by proxy and voting at the stockholders meeting other than the Rollover Stockholders and Jonathan Klein;

 

   

satisfaction of the following antitrust requirements:

 

   

expiration or termination of the requisite waiting period (and any extension thereof) applicable to the merger under the HSR Act;

 

   

receipt of all required approvals under the EC Merger Regulation;

 

   

receipt of all required approvals or a non-jurisdictional letter under the German Act Against Restraints of Competition; and

 

   

expiration or termination of the requisite waiting period (and any extension thereof) or receipt of approvals applicable to the merger under any other foreign antitrust laws (other than any expiration, termination or approval, the failure of which to occur or obtain individually or in the aggregate would not reasonably be expected to have a Company Material Adverse Effect, as defined in “—Company Material Adverse Effect Definition,” assuming consummation of the merger); and

 

   

no law or order that enjoins, restrains, prevents or prohibits or renders illegal the consummation of the merger will be in effect.

In addition to the conditions for all parties to the merger agreement, the obligations of Parent and Merger Sub to complete the merger are subject to the satisfaction or, to the extent permissible under applicable law, waiver of the following conditions at or prior to the closing date of the merger:

 

   

the representations and warranties made by the Company with regard to:

 

   

the absence of any event, change, occurrence or effect since September 30, 2007 that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, must be true and correct as of the closing date of the merger as if made on and as of the closing date (see “—Company Material Adverse Effect Definition” for the definition of Company Material Adverse Effect);

 

   

the capitalization of the Company, this proxy statement and Schedule 13E-3 not being misleading and the inapplicability of state anti-takeover statutes must be true and correct in all material respects as if made on and as of the closing date of the merger (except for those representations and warranties which address matters only as of an earlier date, which must have been true and correct as of such date); and

 

   

the representations and warranties other than those listed above made by the Company, disregarding all qualifications and exceptions relating to materiality or Company Material Adverse Effect, must be true and correct as of the closing date of the merger as if made on and as of the closing date (or, if given as of a specific date, at and as of such date), except where the failure to be true and correct would not have or would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

 

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the Company’s performance, in all material respects, of all obligations required to be performed by the Company in the merger agreement at or prior to the closing date;

 

   

the receipt of a certificate signed by an executive officer of the Company certifying that all of the conditions with respect to the representations and warranties and obligations of the Company under the merger agreement described above have been satisfied; and

 

   

the Company’s achieving a Consolidated EBITDA for the twelve month period ending March 31, 2008 (or, if the closing date of the merger occurs on or after September 2, 2008, for the twelve month period ending June 30, 2008) of not less than $300 million, where Consolidated EBITDA for the three month periods ended June 30, 2007, September 30, 2007 and December 31, 2007, respectively, shall be deemed to be $84,405,000, $73,705,000 and $79,311,000; based on the financial results of the Company for the quarter ended March 31, 2008, this condition has been satisfied if the closing date occurs prior to September 2, 2008.

In addition to the conditions for all parties to the merger agreement, the Company’s obligation to complete the merger is subject to the satisfaction or, to the extent permissible under applicable law, waiver of the following conditions at or prior to the closing date of the merger:

 

   

The representations and warranties made by Parent and Merger Sub in the merger agreement, disregarding all qualifications and exceptions relating to materiality, must be true and correct as of the closing date of the merger as if made on and as of the closing date (or, if given as of a specific date, at and as of such date), except where such failures to be so true and correct would not prevent consummation of the merger;

 

   

Parent’s and Merger Sub’s performance, in all material respects, of all obligations required to be performed by them in the merger agreement at or prior to the closing date of the merger; and

 

   

the receipt of a certificate signed by an executive officer of Parent certifying that all of the conditions with respect to the representations and warranties and obligations of Parent and Merger Sub under the merger agreement as described above have been satisfied.

Although the parties have the right to waive conditions to the merger (other than as required by law), we are not aware of any circumstance in which Parent, Merger Sub or the Company would waive any of the closing conditions described above. If, however, the Company waives any of the closing conditions described above, we do not anticipate re-soliciting our stockholders for approval unless such waiver would be material to our stockholders, in which case we would re-solicit the vote of our stockholders. The ability of Parent and Merger Sub to obtain financing to consummate the merger is not a closing condition.

Termination of the Merger Agreement

The merger agreement may be terminated at any time prior to the consummation of the merger, whether before or after stockholder approval has been obtained:

 

   

by mutual written consent of the Company and Parent, duly authorized by our board of directors and Parent’s general partner;

 

   

by either the Company or Parent:

 

   

if the merger has not been consummated on or before August 15, 2008 (or, if the marketing period has not been completed on or prior to August 15, 2008, by October 2, 2008), unless the failure of the merger to be consummated by such date was primarily due to the party seeking to terminate failing to perform any of its obligations under the merger agreement;

 

   

if there is in effect a final and non-appealable law, order, injunction, judgment, decree or ruling that enjoins, restrains, prevents or prohibits the consummation of the merger or making the consummation of the merger illegal, unless the issuance of such law, order, injunction, judgment,

 

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decree or ruling was primarily due to the party seeking to terminate failing to perform any of its obligations under the merger agreement; or

 

   

if the approvals of our stockholders described in “—Conditions to the Completion of the Merger” have not been obtained at the stockholders meeting convened therefor or any adjournment or postponement thereof upon a vote taken on the merger agreement;

 

   

by Parent:

 

   

if we have materially breached or failed to perform any of our representations, warranties, covenants or agreements contained in the merger agreement, which breach or failure would cause certain conditions to the obligation of Parent and Merger Sub to effect the merger set forth in “—Conditions to the Completion of the Merger” not to be satisfied and which cannot be cured by August 15, 2008 (or, if the marketing period has not been completed on or prior to August 15, 2008, by October 2, 2008) or, if capable of being cured, is not cured within thirty days after receipt of Parent’s written notice to us of its intention to terminate the merger agreement due to such breach or failure, except that Parent may not terminate the merger agreement due to such breach or failure by the Company if Parent is then in material breach of any representations, warranties, covenants or other agreements under the merger agreement that would result in certain conditions to the obligation of the Company to effect the merger set forth in “—Conditions to the Completion of the Merger” not to be satisfied;

 

   

if:

 

   

our board of directors changes, qualifies, withdraws or modifies (or publicly proposes to change, qualify, withdraw or modify) in a manner adverse to Parent our board of directors’ recommendation that our stockholders adopt the merger agreement;

 

   

our board of directors approves or recommends (or publicly proposes to approve or recommend) a takeover proposal to our stockholders;

 

   

a tender offer or exchange offer for shares of our stock that constitutes a takeover proposal is commenced prior to obtaining the stockholder approvals and our board of directors fails to recommend against acceptance of such tender offer or exchange offer by our stockholders (including, for these purposes, by taking no position with respect to the acceptance of such tender offer or exchange offer by our stockholders, which will constitute a failure to recommend against acceptance of such tender offer or exchange offer) within ten business days after commencement;

 

   

we enter into a letter of intent, merger, acquisition or similar agreement with respect to any takeover proposal (other than a confidentiality agreement permitted by the merger agreement);

 

   

we fail to include in this proxy statement our board of directors’ recommendation to our stockholders that they adopt the merger agreement; or

 

   

the Company or our board of directors publicly announces an intention to do any of the foregoing;

 

   

by the Company:

 

   

if Parent or Merger Sub has materially breached or failed to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, which breach or failure would cause certain conditions to our obligation to effect the merger set forth in “—Conditions to the Completion of the Merger” not to be satisfied and which cannot be cured by August 15, 2008 (or, if the marketing period has not been completed on or prior to August 15, 2008, by October 2, 2008) or, if capable of being cured, is not cured within thirty days after receipt of our written notice to Parent of our intention to terminate the merger agreement due to such breach or failure,

 

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except that we may not terminate the merger agreement due to such breach or failure if we are then in material breach of any representations, warranties, covenants or other agreements that would result in certain conditions to the obligations of Parent and Merger Sub to effect the merger set forth in “—Conditions to the Completion of the Merger” not to be satisfied;

 

   

prior to obtaining the stockholder approvals, in order to enter into a definitive agreement providing for the implementation of a transaction that is a superior proposal, if:

 

   

we comply with the notice and negotiation requirements described above in “— Termination in Connection with a Superior Proposal;” and

 

   

prior to or concurrently with such termination, we pay to Parent the termination fee as described below in “—Termination Fee;” or

 

   

if all of the conditions to the obligations of Parent and Merger Sub to effect the merger (other than conditions which are to be satisfied upon the closing of the merger) have been satisfied on the final day of the marketing period and Parent or Merger Sub has failed to consummate the merger no later than two business days after the later of (a) the final day of the marketing period and (b) the date on which we notify Parent that all conditions to our obligations to effect the merger have been satisfied or waived (other than conditions which are to be satisfied by actions taken at the closing of the merger but which conditions would be satisfied if such date were the closing date); provided, however, that

 

   

if the final day of the marketing period is August 15, 2008 (or, if the marketing period has not been completed on or prior to August 15, 2008, October 2, 2008), we may terminate the merger agreement on the final day of the marketing period if:

 

   

Parent or Merger Sub has failed to consummate the merger on such day;

 

   

the conditions to the obligations of Parent and Merger Sub to effect the merger have been satisfied on such day; and

 

   

we have delivered the notification to Parent that all conditions to our obligations to effect the merger have been satisfied or waived on or before such day.

Termination Fee

We will be obligated to pay Parent a termination fee of $31 million if we terminate the merger agreement before 11:59 p.m., Pacific Daylight Savings Time, on April 4, 2008 and prior to obtaining the stockholder approvals in order to enter into a definitive agreement providing for the implementation of a transaction that is a superior proposal, regardless of the identity of the person making such superior proposal and we comply with the requirements regarding changes of our board of directors’ recommendation and notice to and negotiation with Parent described above in “—Termination in Connection with a Superior Proposal.

Alternatively, we will be obligated to pay Parent a termination fee of $52 million if the merger agreement is terminated in any of the following circumstances:

 

   

if all of the following events occur:

 

   

a takeover proposal has been publicly disclosed or communicated to us after the date of the merger agreement; and

 

   

following such disclosure or communication, the merger agreement is terminated due to the merger not having been consummated on or before August 15, 2008 (or, if the marketing period has not been completed on or prior to August 15, 2008, by October 2, 2008), due to our stockholders not having adopted the merger agreement at our stockholders meeting or due to our breach or failure to perform our representations, warranties, covenants or agreements which

 

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breach or failure would cause certain conditions to the obligation of Parent and Merger Sub to effect the merger set forth in “—Conditions to the Completion of the Merger” not to be satisfied; and

 

   

prior to or within twelve months following the date the merger agreement is terminated, we enter into a definitive agreement with respect to any takeover proposal or any takeover proposal is consummated (in each case whether or not the takeover proposal was the same takeover proposal initially referred to) (for the purposes of this bullet, the references to “20%” in the definition of takeover proposal will be deemed to be references to “50%”);

 

   

if we terminate the merger agreement after 11:59 p.m., Pacific Daylight Savings Time, on April 4, 2008 but prior to obtaining the stockholder approvals of the merger agreement in order to enter into a definitive agreement providing for the implementation of a transaction that is a superior proposal and we comply with the requirements regarding changes to our board of directors’ recommendation and notice to and negotiation with Parent described above in “—Termination in Connection with a Superior Proposal;” or

 

   

if Parent terminates the merger agreement for any of the following reasons:

 

   

our board of directors changes, qualifies, withdraws or modifies (or publicly proposes to change, qualify, withdraw or modify) in a manner adverse to Parent our board of directors’ recommendation that our stockholders adopt the merger agreement;

 

   

our board of directors approves or recommends (or publicly proposes to approve or recommend) a takeover proposal to our stockholders;

 

   

a tender offer or exchange offer for shares of our stock that constitutes a takeover proposal is commenced prior to obtaining the Company stockholder approvals and our board of directors fails to recommend against acceptance of such tender offer or exchange offer by our stockholders (including, for these purposes, by taking no position with respect to the acceptance of such tender offer or exchange offer by our stockholders, which will constitute a failure to recommend against acceptance of such tender offer or exchange offer) within ten business days after commencement;

 

   

we enter into a letter of intent, merger, acquisition or similar agreement with respect to any takeover proposal (other than a confidentiality agreement permitted by the merger agreement);

 

   

we fail to include in this proxy statement our board of directors’ recommendation to our stockholders that they adopt the merger agreement; or

 

   

we or our board of directors publicly announces an intention to do any of the foregoing.

Also, we have agreed to pay 50% of the out-of-pocket fees and expenses incurred by Parent, or on behalf of Parent and its affiliates, in connection with the merger agreement and the transactions contemplated by the merger agreement, up to a total cap of $5 million of such payment, if the stockholder approvals to adopt the merger agreement have not been obtained at the stockholders meeting duly convened therefor or any adjournment or postponement thereof upon a vote taken on the merger agreement.

Parent will have to pay us a termination fee of $78 million if we terminate the merger agreement in any of the following circumstances:

 

   

Parent or Merger Sub has materially breached or failed to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, which breach or failure would cause certain conditions to our obligation to effect the merger set forth in “—Conditions to the Completion of the Merger” not to be satisfied and which cannot be cured by August 15, 2008 (or, if the marketing period has not been completed on or prior to August 15, 2008, by October 2, 2008) or, if capable of being cured, is not cured within thirty days after our receipt of our written notice to Parent of our intention to terminate the merger agreement due to such breach and we are not in material

 

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breach of any of our representations, warranties, covenants or other agreements under the merger agreement that would result in or cause certain conditions to the obligation of Parent and Merger Sub to effect the merger set forth in “—Conditions to the Completion of the Merger” not to be satisfied; or

 

   

if all of the conditions to the obligations of Parent and Merger Sub to effect the merger (other than conditions which are to be satisfied upon the closing of the merger) have been satisfied on the final day of the marketing period and Parent or Merger Sub has failed to consummate the merger no later than two business days after the later of (a) the final day of the marketing period and (b) the date on which we notify Parent that all conditions to our obligations to effect the merger have been satisfied or waived (other than conditions which are to be satisfied by actions taken at the closing of the merger but which conditions would be satisfied if such date were the closing date); provided, however, that:

 

   

if the final day of the marketing period is August 15, 2008 (or, if the marketing period has not been completed on or prior to August 15, 2008, October 2, 2008), we may terminate the merger agreement on the final day of the marketing period if:

 

   

Parent or Merger Sub has failed to consummate the merger on such day;

 

   

the conditions to the obligations of Parent and Merger Sub to effect the merger have been satisfied on such day; and

 

   

we have delivered the notification to Parent that all conditions to our obligations to effect the merger have been satisfied or waived on or before such day.

Concurrently with the execution of the merger agreement, H&F Fund VI executed a limited guarantee in favor of the Company in which it guarantees Parent’s obligations under the merger agreement to pay the termination fee if it becomes payable under the merger agreement or any company damages for which Parent may be liable as a result of any willful breach of the merger agreement or fraud, up to a cap of $78 million. Our right to receive the termination fee from Parent pursuant to the merger agreement or H&F Fund VI pursuant to the limited guarantee is our sole and exclusive remedy against Parent, Merger Sub, H&F Fund VI and their related parties, including their respective former, current or future directors, officers, employees, agents, general or limited partners, managers, members, stockholders, affiliates or assignees, for any loss or damage suffered as a result of the failure of the merger to be consummated or otherwise.

Liability Cap and Limitation on Remedies

Except in the case of willful breach or fraud, our right to receive payment of the termination fee from Parent, as described above in “—Termination Fee,” is our sole and exclusive remedy for any loss or damage suffered as a result of the failure of the merger to be consummated or for a breach or failure to perform under the merger agreement or otherwise. We cannot seek injunctions or seek to enforce specifically the terms of the merger agreement against Parent and Merger Sub to complete the merger or otherwise.

Except in the event of willful breach or fraud by the Company and without limiting the rights of Parent and its affiliates under the rollover commitment letter, the interim investors agreement, the voting agreement and the waiver and amendment to the restated option agreement, Parent’s right to receive payment of the termination fee from the Company and reimbursement for its out-of-pocket expenses and fees, as described above in “—Termination Fee,” are the sole and exclusive remedies of Parent and Merger Sub against the Company for any loss or damage suffered as a result of the failure of the merger to be consummated or for a breach or failure to perform under the merger agreement or otherwise. In addition, Parent and Merger Sub are entitled to seek injunctions to prevent breaches of the merger agreement and to seek to enforce specifically the terms of the merger agreement against the Company without bond or other security.

Without limiting Parent’s and Merger Sub’s right to seek injunctions or seek to enforce specifically the terms of the merger agreement, in the event of willful breach or fraud by Parent or Merger Sub or the Company,

 

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respectively, the non-breaching side is entitled to seek payment for any loss or damage suffered as a result of the failure of the merger to be consummated or for a breach or failure to perform under the merger agreement or otherwise, provided that the maximum aggregate liability of the breaching side (inclusive of any termination fee and reimbursement of expenses paid by the breaching party) will not exceed $78 million.

Amendment

At any time prior to the consummation of the merger, the merger agreement may be amended or supplemented by written agreement of Parent, Merger Sub and the Company, except that after receipt of the stockholder approvals to adopt the merger agreement, there will be no amendment that by law would require further approval by our stockholders without such approval having been obtained. All amendments to the merger agreement must be approved by the parties’ respective boards of directors, in the case of the Company and Merger Sub, and its general partner, in the case of Parent.

Extension of Time; Waiver

At any time prior to the closing of the merger, any party may, subject to applicable law:

 

   

waive any inaccuracies in the representations and warranties of any other party to the merger agreement;

 

   

extend the time for the performance of any of the obligations or acts of any other party to the merger agreement; or

 

   

waive compliance by the other party with any of the agreements contained in the merger agreement or, except as otherwise provided in the merger agreement, waive any of such party’s conditions;

provided, however, that no failure or delay by the Company, Parent or Merger Sub in exercising any right under the merger agreement will operate as a waiver of that right, and no single or partial exercise of any right under the merger agreement will preclude any other or further exercise of such right or the exercise of any other right under the merger agreement. Any agreement on the part of a party to the merger agreement to any such extension or waiver will be valid only if in writing and signed on behalf of such party.

 

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APPRAISAL RIGHTS

Under the DGCL, you have the right to dissent from the merger and to receive payment in cash for the fair value of your shares of common stock as determined by the Court of Chancery of the State of Delaware, which we refer to as the “Court of Chancery,” together with a fair rate of interest, if any, to be paid on the amount determined to be the fair value, in lieu of the consideration you would otherwise be entitled to receive pursuant to the merger agreement. These rights are known as appraisal rights. Stockholders electing to exercise appraisal rights must strictly comply with the provisions of Section 262 of the DGCL in order to perfect their rights. The following is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed by a stockholder in order to dissent from the merger and perfect appraisal rights.

This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex C to this proxy statement. Failure to precisely follow any of the statutory procedures set forth in Section 262 of the DGCL may result in a loss of your appraisal rights.

Where a merger agreement is to be submitted for adoption at a meeting of stockholders, Section 262 requires that stockholders be notified that appraisal rights will be available not less than twenty days before the stockholders’ meeting to vote on the adoption of the merger agreement. A copy of Section 262 must be included with such notice. This proxy statement constitutes our notice to our stockholders of the availability of appraisal rights in connection with the merger, and a copy of Section 262 is attached to this proxy statement as Annex C, in compliance with the requirements of Section 262. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 contained in Annex C to this proxy statement because failure to timely and properly comply with the requirements of Section 262 will result in the loss of your appraisal rights under the DGCL.

If you elect to demand appraisal of your shares, you must satisfy each of the following conditions:

 

   

You must deliver to us a written demand for appraisal of your shares before the vote on the adoption of the merger agreement is taken. This written demand for appraisal must be in addition to, and separate from, any proxy or vote abstaining from or voting against the adoption of the merger agreement. Voting against, abstaining from voting on, or failing to vote for the adoption of the merger agreement by itself does not constitute a demand for appraisal within the meaning of Section 262.

 

   

You must not vote in favor of the adoption of the merger agreement. A vote in favor of the adoption of the merger agreement will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously filed written demands for appraisal. A proxy which is signed but does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the merger agreement. Therefore, a stockholder who votes by proxy and who wishes to exercise appraisal rights must instruct the proxy to vote against the adoption of the merger agreement or to abstain from voting on the adoption of the merger agreement. If you fail to comply with either of these conditions and the merger is completed, you will be entitled to receive the cash payment for your shares of common stock as provided for in the merger agreement, but you will have no appraisal rights with respect to your shares of common stock.

All demands for appraisal should be addressed to Getty Images, Inc., 601 North 34th Street, Seattle, Washington 98103, Attention: Corporate Secretary, and must be delivered before the vote on the adoption of the merger agreement is taken at the special meeting, and should be executed by, or on behalf of, the record holder of the shares of common stock. The demand must reasonably inform us of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares.

To be effective, a demand for appraisal by a holder of common stock must be made by, or in the name of, such registered stockholder, fully and correctly, as the stockholder’s name appears on his or her stock

 

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certificate(s). Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to us. The beneficial holder must, in such cases, have the registered owner, such as a broker, bank or other nominee, submit the required demand in respect of those shares. If shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made by or for the fiduciary; and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a broker, who holds shares as a nominee for others, may exercise his or her right of appraisal with respect to the shares held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares held in the name of the record owner.

If you hold your shares of common stock in a brokerage account or in other nominee form and you wish to exercise appraisal rights, you should consult with your broker or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the broker or other nominee.

Within ten days after the effective time of the merger, the surviving corporation must give written notice to each stockholder who has properly filed a written demand for appraisal and who did not vote in favor of the adoption of the merger agreement of the date that the merger became effective.

At any time within sixty days after the effective time of the merger, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party has the right to withdraw his, her or its demand for appraisal and to accept the consideration offered pursuant to the merger agreement for his, her or its shares of common stock by delivering to the surviving corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand for appraisal made more than sixty days after the effective time of the merger will require written approval of the surviving corporation. No appraisal proceeding in the Court of Chancery will be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be conditioned upon such terms as the Court of Chancery deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the merger agreement within sixty days after the effective time of the merger. If the surviving corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s right to appraisal in accordance with the proviso in the immediately preceding sentence, if the Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration being offered pursuant to the merger agreement.

Within one hundred twenty days after the effective time of the merger, but not thereafter, either the surviving corporation or any stockholder who has complied with the requirements of, and is entitled to appraisal rights under, Section 262 may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. The surviving corporation is under no obligation to file such a petition. We have no present intention to file such a petition, and stockholders should not assume that the surviving corporation will file a petition. Accordingly, it is the obligation of the stockholders to initiate all necessary action to perfect their appraisal rights within the time prescribed by Section 262.

Within one hundred twenty days after the effective time of the merger, any stockholder who has complied with Section 262 will, upon written request to the surviving corporation, be entitled to receive a written statement setting forth the aggregate number of shares not voted in favor of the merger agreement and with respect to

 

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which demands for appraisal rights have been received and the aggregate number of holders of such shares. Such written statement will be mailed to the requesting stockholder within ten days after such written request is received by the surviving corporation or within ten days after expiration of the period for delivery of demands for appraisal, whichever is later. Notwithstanding the foregoing, a person who is the beneficial owner of shares of common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition or request from the surviving corporation the written statement described in this paragraph.

Upon the filing of a petition for appraisal by a stockholder, service of a copy of such petition will be made upon the surviving corporation. If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within twenty days after receiving service of a copy of the petition, to file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached by the surviving corporation. After notice to dissenting stockholders who demanded appraisal of their shares, the Court of Chancery is empowered to conduct a hearing upon the petition, and to determine those stockholders who have complied with Section 262 and who have become entitled to the appraisal rights provided thereby. The Court of Chancery may require the stockholders who have demanded appraisal for their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with that direction, the Court of Chancery may dismiss the proceedings as to that stockholder.

After the Court of Chancery determines the stockholders entitled to appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Court of Chancery shall determine the “fair value” of the shares of common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid on the amount determined to be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment.

In determining fair value, the Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.”

You should be aware that the fair value of your shares as determined under Section 262 could be more than, the same as, or less than the consideration that you are entitled to receive under the terms of the merger agreement. You should also be aware that investment banking opinions as to the fairness from a financial point of view of the consideration payable in a merger are not opinions as to fair value under Section 262.

Costs of the appraisal proceeding (which do not include attorneys’ fees and fees and expenses of experts) may be determined by the Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable in the circumstances. Upon the application of a stockholder, the Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares entitled to appraisal. Any stockholder who had demanded appraisal rights will not, after the effective time of the merger, be entitled to vote shares subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares, other than with respect to payment

 

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as of a record date prior to the effective time; however, if no petition for appraisal is filed within one hundred twenty days after the effective time of the merger, or if the stockholder delivers a written withdrawal of his, her or its demand for appraisal and an acceptance of the terms of the merger in accordance with Section 262, then the right of that stockholder to an appraisal will cease.

In view of the complexity of Section 262, stockholders who may wish to dissent from the merger and pursue appraisal rights should consult their legal advisors.

 

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IMPORTANT INFORMATION REGARDING GETTY IMAGES

Directors and Executive Officers of Getty Images

Set forth below for each of the directors and executive officers of Getty Images is his respective present principal occupation or employment, the name and principal business of the corporation or other organization in which such occupation or employment is conducted and the five-year employment history of each such director and executive officer. Except as otherwise noted, each person identified below is a citizen of the United States of America and can be reached c/o Getty Images, Inc., 601 North 34th Street, Seattle, Washington 98103.

During the last five years, none of Getty Images, our directors or our executive officers has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment or decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

Directors

Getty Images has a classified board of directors, consisting of Class I directors, Class II directors and Class III directors, the members of which serve staggered three-year terms. The full board of directors currently consists of seven directors—three in Class I and two in each of Class II and Class III. The terms of the Class II, Class III and Class I directors will terminate on the date of the annual meeting of stockholders in the years 2008, 2009 and 2010, respectively.

 

Name

   Age   

Business Experience

   Director
Since
   Term
Expires

James N. Bailey

(Class I)

   61    Mr. Bailey has been a director since February 1998 and served as a director of Getty Communications Limited, our predecessor, from September 1996 to February 1998. Mr. Bailey co-founded Cambridge Associates LLC, an investment consulting firm, in May 1973 and currently serves as its senior managing director and treasurer. He also is co-founder, treasurer and a director of The Plymouth Rock Company, SRB Corporation, Inc., Direct Response Corporation and Homeowners Direct Company, all four of which are insurance companies and insurance company affiliates. Additionally, Mr. Bailey serves as a director of Apartment Investment & Management Company (AIMCO), a multi-family dwelling real estate investment trust.    1998    2010

 

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Name

   Age   

Business Experience

   Director
Since
   Term
Expires

Andrew S. Garb

(Class I)

   65    Mr. Garb has been a director since February 1998 and served as a director of Getty Communications Limited, our predecessor, from May 1996 to February 1998. Mr. Garb also served as a director of Getty Investments from June 1996 until October 2003. Mr. Garb currently is of counsel to the law firm of Loeb & Loeb LLP, where he has practiced since 1968. Mr. Garb is also a Fellow of the American College of Trusts and Estates Counsel, a director of the Kane Educational and Research Foundation, treasurer and board member of Success Through the Arts Foundation, a board member of Crohn’s & Colitis Foundation of America, and trustee of the J. David Gladstone Institutes, a nonprofit medical research organization.    1998    2010

Alan G. Spoon

(Class I)

   56    Mr. Spoon has been a director since May 2006. Mr. Spoon has been a managing general partner of Polaris Ventures since 2000, where he focuses on investments in digital media, e-commerce and distance learning. Mr. Spoon has held senior leadership positions at the Washington Post Company, where he worked for 18 years, including president, chief operating officer, board member, chief financial officer, president of Newsweek, Head of Newspaper Marketing and Head of Corporate Business Development. Prior to his tenure at the Washington Post, Mr. Spoon was an officer at the Boston Consulting Group. Mr. Spoon also serves as a director of Danaher Corporation, IAC/InterActiveCorp and Tech Target and is a member of the Smithsonian Institution Board of Regents, the Massachusetts Institute of Technology Corporation and The Council on Foreign Relations.    2006    2010

Christopher H. Sporborg

(Class II)

   69    Mr. Sporborg has been a director since February 1998 and served as a director of Getty Communications Limited, our predecessor, from May 1996 to February 1998. Mr. Sporborg held various positions at Hambros Bank Limited from 1962 to 1998, including deputy chairman of Hambros PLC and Hambros Bank Limited, chairman and chief executive of Hambros Group Investments Ltd. and chairman of Hambros Insurance Services Group PLC. Mr. Sporborg founded and was chairman of the board of directors of Countrywide plc, a real estate agency and financial services company from 1987 until May 2007. He is the chairman of the board of directors of Chesnara plc, a life assurance company. Mr. Sporborg also served as a director of Lindsey Morden Group Inc., an insurance services company, until December 31, 2007. Mr. Sporborg is a citizen of the United Kingdom.    1998    2011

 

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Name

   Age   

Business Experience

   Director
Since
   Term
Expires

Mark H. Getty

(Class II)

   47    Mr. Getty is co-founder of Getty Images, and has been a director since February 1998, serving as our executive chairman from September 1998 to May 2004. In May 2004, Mr. Getty relinquished his role as an executive officer of Getty Images but remains as (non-executive) chairman of the board. Mr. Getty served as co-chairman of Getty Images from February 1998 to September 1998. He served as executive chairman of Getty Communications Limited, our predecessor, from April 1996 to February 1998. From March 1995 to April 1996, Mr. Getty served as the joint chairman of Getty Communications Limited. Mr. Getty also is the chairman of the board of directors of Getty Investments. Mr. Getty is a citizen of Ireland.    1998    2011

Jonathan D. Klein

(Class III)

   48    Mr. Klein is co-founder of Getty Images and has been our chief executive officer and a director since February 1998. Mr. Klein served as chief executive officer and as a director of Getty Communications Limited, our predecessor, from April 1996 to February 1998. From March 1995 to April 1996, Mr. Klein served as the joint chairman of Getty Communications Limited. Mr. Klein serves on the board of directors of Getty Investments and as a director of RealNetworks, Inc. a leading creator of digital media services and software. He also serves on the board of trustees of the Groton School, on the board of directors of Friends of the Global Fight Against Aids, Tuberculosis and Malaria, one of the leading organizations working to educate, engage and mobilize Americans on the fight to end the worldwide burden of these diseases by focusing its efforts on decision-makers in Washington, D.C., and on the advisory board of the Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria, the pre-eminent organization leading the business fight against HIV/AIDS and a mission to harness the power of the global business community to end the HIV/AIDS, tuberculosis and malaria epidemics. Mr. Klein is a citizen of the United Kingdom.    1998    2009

Michael A. Stein

(Class III)

   58    Mr. Stein has been a director since June 2002. Mr. Stein served as chief financial officer of ICOS Corporation, a biotechnology company, from January 2001 to January 2007. Prior to that, Mr. Stein was chief financial officer of Nordstrom, Inc., a leading fashion specialty retailer, from October 1998 to September 2000. Mr. Stein served as chief financial officer of Marriott International, Inc. from 1993 to 1998. Prior to joining Marriott in 1989, he spent eighteen years at Arthur Andersen as a partner in their Washington, D.C. office. Mr. Stein also serves on the boards of directors of Apartment Investment & Management Company, Nautilus, Inc. and Providence Health & Services.    2002    2009

 

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Executive Officers

Set forth below is certain information with respect to the current executive officers of Getty Images other than Mr. Klein, whose information is under “Directors” above.

 

Name

   Age   

Business Experience

Jeffrey L. Beyle

   46    Mr. Beyle has been our Senior Vice President, Business Development and Asia Pacific Sales since June 2007. Prior to this role, Mr. Beyle served as our Senior Vice President and General Counsel since November 2000. Mr. Beyle also served as head of Human Resources from 2002 to 2004.

Nicholas E. Evans-Lombe

   41    Mr. Evans-Lombe has been our Executive Vice President, Imagery, Products and Services since June 2007. Mr. Evans-Lombe previously served as Senior Vice President, Imagery and Services from August 2004 to May 2007, Senior Vice President, Editorial Customers from September 2003 to July 2004, Senior Vice President, Editorial from January 2002 to September 2003, Senior Vice President, Strategy and Corporate Development from February 1998 to January 2002, and Director of Strategy and Corporate Development of Getty Communications Limited, our predecessor, from February 1996 to February 1998. Mr. Evans-Lombe is a citizen of the United Kingdom.

James C. Gurke

   52    Mr. Gurke has been Senior Vice President, Human Resources and Facilities since August 2004. Since June 2007, Mr. Gurke has also served as our Interim Senior Vice President, Marketing. From December 2003 to June 2007 he also served as Chief of Staff, an advisory role to the Chief Executive Officer with no direct reports related to the position. Mr. Gurke previously served as Senior Vice President, Business Development from December 2003 to July 2004, Senior Vice President, New Revenues from May 2003 to December 2003, Vice President of New Revenues from August 2002 to May 2003, and Vice President, Sales and Marketing—Americas from January 1999 to August 2002.

John J. Lapham

   41    Mr. Lapham became our Senior Vice President, General Counsel in December 2007. Prior to this role, Mr. Lapham served as our Vice President Deputy General Counsel from December 2006, Vice President, Corporate Counsel from September 2001, and Corporate Counsel from June 2001.

Bruce T. Livingstone

   37    Mr. Livingstone became a Senior Vice President of Getty Images, in addition to his existing role as Chief Executive Officer iStockphoto, in May 2007 and moved to our headquarters in Seattle in December 2007. In August 2007, Mr. Livingstone was given additional responsibility for the Getty Images technology organization and added to his title Senior Vice President, Technology. He initially joined Getty Images in February 2006 as Chief Executive Officer of iStockphoto when Getty Images acquired iStockphoto Inc., a company Mr. Livingstone founded in 2000. Mr. Livingstone has started several other companies, including Evolvs Media Inc. and Paper Thin Walls Inc., the assets of each of which were also recently acquired by Getty Images. Mr. Livingstone is a citizen of Canada.

 

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Name

   Age   

Business Experience

Thomas Oberdorf

   50    Mr. Oberdorf joined Getty Images in June 2006 as Senior Vice President and Chief Financial Officer. Prior to joining Getty Images, Mr. Oberdorf was the Senior Vice President, Chief Financial Officer and Treasurer of CMGI, Inc., from 2002 to June 2006, and Senior Vice President and Chief Financial Officer— BeMusic Direct of Bertelsmann Music Group (BMG Music), from 1999 to 2001.

Bo T. Olofsson

   45    Mr. Olofsson has been Senior Vice President Global Sales since October 2005, and was Senior Vice President, EMEA, Asia Pacific and Emerging Markets from May 2003 until October 2005. Prior to joining Getty Images, Mr. Olofsson worked for Dell Computer in Europe from 1997 to May 2003, serving in a number of executive sales positions. Mr. Olofsson is a citizen of Sweden.

Michael D. Teaster

   41    Mr. Teaster is our Senior Vice President, Imagery, Products and Services effective in June 2007. Mr. Teaster previously served as Senior Vice President, Business Development, from November 2006 to May 2007, managing acquisition activity, overseeing the development and management of strategic partnerships, and pursuing new business opportunities including the creation of new products and services. From 2001 to 2004, he served as Vice President of Agent Development, overseeing the strategy and implementation of Getty Images’ Master Delegate network worldwide. In 2004, he was appointed Vice President of Image Partners before his role expanded to include business development in July 2005.

 

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Historical Selected Financial Data

The following table includes selected consolidated financial data for the last five years and the first quarter of 2008. The following selected consolidated financial data is qualified by reference to, and should be read in conjunction with, our consolidated financial statements and notes thereto in Annex E and Annex F to this proxy statement. Historical results are not necessarily indicative of results to be expected in the future.

 

    Years Ended December 31,     Quarter
Ended
March 31,
2008
    2003   2004   2005     20061     20072    
(In thousands, except per share
amounts and ratios)
                             

Consolidated Statement of Income Data

           

Revenue

  $ 522,810   $ 622,250   $ 733,176     $ 806,589     $ 857,591     $ 233,216

Income before income taxes

    86,035     173,862     230,101       204,676       201,634       43,748

Net Income

    69,165     106,412     149,361       130,428       125,871       23,864

Earnings per share

           

Basic

  $ 1.25   $ 1.80   $ 2.43