<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
GEMSTAR INTERNATIONAL GROUP LIMITED
- --------------------------------------------------------------------------------
(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):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Ordinary Shares
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(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) 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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
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(4) Date Filed:
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Notes:
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
135 NORTH LOS ROBLES AVENUE, SUITE 800
PASADENA, CALIFORNIA 91101
November 20, 1998
Dear Member:
The Annual Meeting of Members (hereinafter, "shareholders") of Gemstar
International Group Limited, a British Virgin Islands corporation ("Gemstar"),
will be held at 7:00 a.m., California time, on December 21, 1998 at 2-29-18
Nishi-Ikebukuro, Toshima-ku, Tokyo 171, Japan.
At this meeting, the holders of Gemstar Ordinary Shares will be asked to
elect Thomas L.H. Lau, Henry C. Yuen and Perry A. Lerner (collectively, the
"Director Nominees") to a three-year term as Class III directors. Mr. Thomas
L.H. Lau is a co-founder of Gemstar and has served as a director of Gemstar
since April 1992, currently serving as the Chairman of the Board. Dr. Henry C.
Yuen is a co-founder of Gemstar and has served as the President and Chief
Executive Officer of Gemstar since 1994 and as a director of Gemstar since
April 1992. Mr. Lerner is Managing Director of Crown Capital Group, Inc., a
New York private investment company, and has served as a director of Gemstar
since July 1998.
At the meeting, you will also be asked to ratify the appointment of KPMG
Peat Marwick LLP as Gemstar's independent auditors for the fiscal year ending
March 31, 1999.
In the material accompanying this letter, you will find a Notice of the
Annual Meeting of Shareholders, a Proxy Statement, a proxy, a copy of the
Company's Annual Report on Form 10-K for the year ended March 31, 1998 and a
copy of Amendment No. 1 to the Company's Annual Report on Form 10-K/A for the
year ended March 31, 1998.
All shareholders are cordially invited to attend the meeting in person.
However, whether or not you plan to attend the meeting, please complete, sign,
date and return your proxy in the enclosed envelope. If you attend the
meeting, you may vote in person if you wish, even though you have previously
returned your proxy. It is important that your shares be represented and be
voted at the meeting.
Sincerely,
/s/ Henry C. Yuen
HENRY C. YUEN
President and Chief Executive Officer
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
135 NORTH LOS ROBLES AVENUE, SUITE 800
PASADENA, CALIFORNIA 91101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 21, 1998
The Annual Meeting of the members (hereinafter, "shareholders") of Gemstar
International Group Limited, a British Virgin Islands corporation (the
"Company" or "Gemstar"), will be held at 2-29-18 Nishi-Ikebukuro, Toshima-ku,
Tokyo 171 Japan on December 21, 1998 at 7:00 a.m. California, U.S.A. time.
At the meeting, shareholders will act on the following matters:
(1) To elect 3 directors for a three-year term to expire at the 2001
Annual Meeting;
(2) To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the fiscal year ending March 31, 1999; and
(3) To transact such other matters that may properly come before the
meeting or any postponements or adjournments thereof.
Your attention is directed to the accompanying Proxy Statement. Only
shareholders of record at the close of business on November 17, 1998 will be
entitled to notice of and to vote at the meeting and any adjournment thereof.
PLEASE PROMPTLY VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD. This
will ensure that your shares are voted in accordance with your wishes and that
a quorum will be present. You are invited to attend the meeting, and you may
vote in person even though you have returned your proxy card.
By Order of the Board of Directors,
/s/ Larry Goldberg
Larry Goldberg
Secretary
November 20, 1998
Pasadena, California
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD DATE, PLEASE INDICATE YOUR
VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD AND DATE, SIGN AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO
POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO AVOID THE ADDITIONAL
EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN
PROMPTLY MAILING IN YOUR PROXY CARD.
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
135 NORTH LOS ROBLES AVENUE, SUITE 800
PASADENA, CALIFORNIA 91101
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 21, 1998
GENERAL
PERSONS MAKING THE SOLICITATION
This proxy statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Gemstar International Group Limited (the
"Company" or "Gemstar") of proxies for use at an Annual Meeting of
Shareholders to be held at 2-29-18 Nishi-Ikebukuro, Toshima-ku, Tokyo 171
Japan on December 21, 1998 at 7:00 a.m. California, U.S.A. time and at any
adjournment thereof (the "Annual Meeting"). This proxy statement is first
being mailed to shareholders on or about November 20, 1998. You are requested
to sign, date and return the enclosed proxy card in order to ensure that your
shares are represented at the Annual Meeting.
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the shareholder
executing the proxy. If no direction is made, the shares represented by each
properly executed unrevoked proxy will be voted (i) "FOR" the proposal to
elect Thomas L.H. Lau, Henry C. Yuen and Perry A. Lerner to a three-year term
as Class III directors of Gemstar, and (ii) "FOR" the proposal to ratify the
appointment of KPMG Peat Marwick LLP as Gemstar's independent auditors. With
respect to any other matter that may come before the Annual Meeting or any
adjournment thereof, the proxy confers upon the proxy holders discretionary
authority to vote the proxy in accordance with their best judgment.
The expense of soliciting proxies will be borne by the Company. Proxies will
be solicited principally through the use of the mail, but directors, officers
and regular employees of the Company may solicit proxies personally or by
telephone or special letter without any additional compensation. The Company
also will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for any reasonable expenses in forwarding proxy materials to
beneficial owners.
REVOCABILITY OF PROXY
Any proxy given by a shareholder of the Company may be revoked by the
shareholder who executed it at any time before it is voted at the Annual
Meeting.
RECORD DATE
Only holders of record of the Company's ordinary shares, par value $0.01 per
share (the "Ordinary Shares"), at the close of business on November 17, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof. The outstanding voting securities of the
Company on that date consisted of 48,947,322 Ordinary Shares.
<PAGE>
ELECTION OF GEMSTAR CLASS III DIRECTORS
Gemstar's Amended and Restated Articles of Association, as amended, provide
that the Gemstar Board shall consist of at least three but not more than ten
persons. Currently there are ten directors. The directors are divided into
three classes, as nearly equal as possible, and each class has a staggered
three-year term. Currently, the terms of office of directors in Class I, Class
II and Class III end following the annual meetings of shareholders in 1999,
2000 and 1998, respectively. At the Gemstar Annual Meeting, shareholders will
be asked to elect three Class III directors to hold office until the 2001
Annual Meeting, subject to the provisions of Gemstar's Amended and Restated
Articles of Association, as amended.
The Gemstar Board has recommended three nominees for election as directors
of Gemstar. The accompanying proxy solicited by the Gemstar Board will be
voted for the election of the three nominees named below, unless the proxy
card is marked to withhold authority to vote. Each nominee is presently a
member of the Gemstar Board and, with the exception of Mr. Lerner, was
previously elected to the present term of office by the shareholders of
Gemstar.
The nominees for election are:
THOMAS L.H. LAU
HENRY C. YUEN
PERRY A. LERNER
If any of the nominees should become unavailable for election to the Gemstar
Board, the persons named in the proxy or their substitutes shall be entitled
to vote for a substitute to be designated by the Gemstar Board. The Gemstar
Board has no reason to believe that it will be necessary to designate a
substitute nominee.
REQUIRED VOTE
For the purpose of electing directors, each shareholder is entitled to one
vote for each director to be elected for each Ordinary Share owned. Gemstar's
Amended and Restated Articles of Association, as amended, provide that
directors shall be elected by a plurality vote of all votes cast, in present
or by proxy. Thus, the nominees receiving the highest number of votes, up to
the number of directors to be elected, will be elected. Abstentions and broker
non-votes will have no effect on the results, although they will be counted
for purposes of determining the presence of a quorum for the conduct of
business at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED ABOVE.
2
<PAGE>
DIRECTOR NOMINEES
The following table provides information regarding the nominees for election
as directors of the Company. The ages shown are as of November 1998.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------------ ------------------------------------- ----------
<C> <S> <C>
Thomas L. H. Lau (44).. Mr. Thomas L. H. Lau is a co-founder of April 1992
the Company and has served as a director
of the Company since April 1992 and
currently serves as the Chairman of the
Board of the Company. Since February
1998, Mr. Lau has served as an Executive
Director of The Kwong Sang Hong Limited,
a company engaged in property investment
and distribution and trading of
cosmetics. Since 1985, Mr. Lau has been
an Executive Director of Chinese Estates
Holdings Ltd., Hong Kong, a holding
company for various Hong Kong business
interests, including real estate and
securities. Since 1996, Mr. Lau has also
served as Deputy Chairman of Evergo China
Holdings Ltd., a company principally
engaged in property investment and
financing in the People's Republic of
China. Prior to that, Mr. Lau was
involved in a broad spectrum of business
activities, including manufacturing,
international trading, real estate
investment and development and securities
transactions. Mr. Lau holds a B.A.
(Business Administration) from the
University of Toronto and an M.B.A. from
the University of Windsor.
Henry C. Yuen (49)..... Dr. Henry C. Yuen is a co-founder of the April 1992
Company and has served as the Company's
Chief Executive Officer and President
since August 1994 and as a director of
the Company since April 1992. Dr. Yuen
has been the Chief Executive Officer and
President of Gemstar Development
Corporation ("GDC"), a wholly owned
subsidiary of the Company, since 1989.
Dr. Yuen invented the Company's VCR Plus+
system and co-founded Gemstar in 1989.
Prior to the founding of Gemstar, Dr.
Yuen was a research scientist and
Technical Fellow at TRW, Inc., and held
faculty positions at New York University
Courant Institute of Mathematical
Sciences and the California Institute of
Technology. Dr. Yuen was elected the 1996
National Entrepreneur of the Year and the
1996 Entrepreneur of the Year--Los
Angeles Region by the Entrepreneur of the
Year Institute, jointly sponsored by USA
Today, Ernst & Young and Nasdaq. Dr. Yuen
was also selected the 1990 Business Week
Entrepreneur of the Year. He was the
recipient of the 1991 Best Product of the
Year Award from the Electronic Institute
Association, and the 1991 Silver Anvil
Award from the Public Relations Society
of America. Dr. Yuen holds a B.S.
(Mathematics) from the University of
Wisconsin, a Ph.D. (Applied Mathematics)
from the California Institute of
Technology, and a J.D. from Loyola
University School of Law. Dr. Yuen has
over 70 published scientific papers, 25
issued patents, and over 100 pending
patents. Dr. Yuen is a member of the
State Bar of California.
Perry A. Lerner (55)... Mr. Perry A. Lerner has been a director July 1998
of the Company since July 1998 when he
was appointed to fill a vacancy on the
Board. Mr. Lerner is a Managing Director
of Crown Capital Group, Inc., a New York
City private investment company. From
1982 through 1996, Mr. Lerner was a
partner at the law firm of O'Melveny &
Myers LLP in Los Angeles and New York
City. He is a graduate of Claremont
McKenna College and Harvard Law School.
He also serves as a director of Imperial
Credit Industries, Inc. and Franchise
Mortgage Acceptance Corporation.
</TABLE>
3
<PAGE>
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE ANNUAL MEETING
The following table provides information regarding the directors of the
Company whose terms of office will continue after the Annual Meeting. The ages
shown are as of November 1998.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------------ ------------------------------------- --------
<C> <S> <C>
Elsie Ma Leung (51)..... Ms. Elsie Ma Leung has served as the April 1994
Company's Chief Financial Officer since
August 1994 and as a director of the
Company since April 1994. Ms. Leung has
been Chief Financial Officer of GDC
since January 1993. Ms. Leung founded a
public accounting firm, Leung, Kaufman
& Co., in 1983 and was its managing
partner until joining the Company. Ms.
Leung also served as Chief Financial
Officer of American Plant Growers, Inc.
from 1988 to 1993. Prior to 1983, Ms.
Leung performed audit duties at Kenneth
Leventhal & Company. Ms. Leung is a
licensed Certified Public Accountant.
Ms. Leung holds a B.A. (Accounting)
from California State University, Los
Angeles.
Larry Goldberg (51)..... Mr. Larry Goldberg has served the April 1994
Company as Secretary and Corporate
Counsel since August 1984 and as a
director of the Company since April
1994. For eight years prior to joining
the Company, Mr. Goldberg was a partner
in the law firm of Schneider, Goldberg
& Yuen, specializing in business law
and business litigation. Prior to
practicing law, Mr. Goldberg performed
audit duties with Price Waterhouse and
Kenneth Leventhal & Company. Mr.
Goldberg is admitted to practice law in
California. Mr. Goldberg holds a B.A.
(Economics) from UCLA and a J.D. from
Loyola University School of Law, Los
Angeles.
George F. Carrier (80).. Dr. George F. Carrier has served as a August 1994
director of the Company since August
1994. He served on the faculty of
Harvard University form 1952 until he
retired in 1988. While at Harvard, he
served as the Gordon McKay Professor of
Mechanical Engineering and T. Jefferson
Coolidge Professor of Applied
Mathematics. Since 1995, Dr. Carrier
has served as a private consultant to
TRW Inc.'s Aerospace and Automotive
Divisions and since 1992 has served as
a private consultant to the National
Science Foundation. Dr. Carrier holds a
B.S. (Mechanical Engineering) from
Cornell University and a Ph.D. (Applied
Mechanics) from Cornell University.
Teruyuki Toyama (68).... Mr. Teruyuki Toyama has served as a August 1994
director of the Company since August
1994. From 1993 to 1997, Mr. Toyama was
the President and Chief Executive
Officer of Overseas Courier Services
Co., Ltd. In 1997, he was appointed
Executive Advisor of that company and
in 1998 was appointed Honorary Advisor
Counsellor. Mr. Toyama worked for over
40 years in various capacities with
Asahi Shimbun Co., Ltd. ("Asahi
Shimbun"). From 1991 to 1993, he was
Senior Managing Director and Chief
Operating Officer of Asahi Shimbun.
From 1987 to 1991, he was Asahi
Shimbun's Managing Director in charge
of Advertising. Prior to 1987 he served
as Director of the Advertising Division
and as a member of the board of
directors. Mr. Toyama holds a degree in
Foreign Studies from Tokyo University.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------------ ------------------------------------- --------
<C> <S> <C>
Douglas B. Macrae (39).. Mr. Douglas B. Macrae has served as a
director of the Company since September
1997. Mr. Macrae founded VideoGuide Inc.,
a now wholly-owned subsidiary of the
Company, in September 1993 and has served
as its President and Chief Executive
officer since that time. Mr. Macrae
currently serves as Chairman of the Board
of GCC Technologies, Inc., a privately
held company that designs, licenses,
manufactures and sells consumer
electronics and computer products. From
1981 to 1993, Mr. Macrae served as Vice
President of Engineering of GCC
Technologies, Inc. From 1985 to 1991,
Mr. Macrae served as a director of Blyth
Holdings, a publicly held database
company. Since 1988, Mr. Macrae has served
on the Board of Trustees of the Pingry
School in Martinsville, New Jersey.
James E. Meyer (44)..... Mr. James E. Meyer has served as a
director of the Company since May 1997.
Mr. Meyer has served as Chief Operating
Officer for Thomson Consumer Electronics,
Inc. ("Thomson") since 1997. Mr. Meyer
served as Senior Vice President Product
Management for Thomson from 1992 to 1996.
From December 1996 to September 1997, Mr.
Meyer served as Executive Vice President,
Marketing & Sales-Americas for Thomson.
George Smith (49)....... Mr. George Smith has served as a director
of the Company since May 1997. Mr. Smith
has served as Senior Vice President and
Chief Financial Officer of Viacom, Inc.
since November 1987. Mr. Smith served as
Vice President and Controller of Viacom
from 1985 to 1987 and Vice President
Finance and Administration of Viacom
Broadcast Group from 1983 to 1985.
</TABLE>
CLASSIFIED BOARD OF DIRECTORS
The Board is divided into three classes: Class I, Class II, and Class III.
The Class I directors consist of Ms. Leung and Messrs. Goldberg, Macrae and
Smith; the Class II directors consist of Dr. Carrier and Messrs. Toyama and
Meyer; and the Class III directors consist of Dr. Yuen and Messrs. Lau and
Lerner. In July 1998, Ms. Leung, who was serving as a Class III director of
the Company, was appointed by the Board to serve as a Class I director to fill
a vacancy on the Board, and Mr. Lerner was appointed by the Board to serve as
a Class III director of the Company. Each director serves for a term ending
following the third annual meeting following the annual meeting at which such
director was elected. The terms of office of directors in Class I, Class II,
and Class III end following the annual meetings in 1999, 2000 and 1998,
respectively. The appointment of all officers is subject to the discretion of
the Board.
COMPENSATION OF DIRECTORS
The Company pays each director who is not an employee of the Company $25,000
per year for services as a director of the Company and $1,000 per Board or
committee meeting attended. All directors are reimbursed for their out-of-
pocket expenses incurred in connection with attendance at meetings of, and
other activities relating to service on, the Board or any committee of the
Board. In addition, directors who are not full-time employees of the Company
are eligible to participate in, and each such director has received awards
pursuant to, the Gemstar International Group Limited 1994 Stock Incentive
Plan, as amended (the "Stock Incentive Plan").
5
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The committees of the Board consist of an Executive Committee, an Audit
Committee and a Compensation Committee. During the fiscal year ended March 31,
1998, the Board of Directors held four meetings. All directors attended 75% or
more of the total meetings of the Board and committees of the Board on which
they served.
The Executive Committee of the Board consists of Dr. Yuen, Mr. Lau and Ms.
Elsie Ma Leung. The Executive Committee has authority to take any action other
than appointment of auditors, election and removal of directors and
appointment of officers, which can be taken only by the Board. During the
fiscal year ended March 31, 1998, the Executive Committee did not hold any
meetings.
The Audit Committee of the Board consists of Dr. George F. Carrier and
Messrs. Teruyuki Toyoma and Larry Goldberg. The Audit Committee recommends to
the Board the independent public auditors to be selected to audit the
Company's annual financial statements and approves any special assignments
given to such auditors. The Audit Committee also reviews the planned scope of
the annual audit and the independent auditors' letter of comments and
management's responses thereto, any major accounting changes made or
contemplated and the effectiveness and efficiency of the Company's internal
accounting staff. During the fiscal year ended March 31, 1998, the Audit
Committee did not hold any meetings.
The Compensation Committee of the Board consists of Dr. Carrier and Mr.
Toyama. The Compensation Committee establishes remuneration levels for
executive officers of the Company, reviews management organization and
development, reviews significant employee benefit programs and administers the
Company's Stock Incentive Plan. During the fiscal year ended March 31, 1998,
the Compensation Committee held six meetings.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Ordinary Shares as of November 10, 1998, for (i)
each person who beneficially owns more than 5% of the Ordinary Shares, (ii)
each of the directors and Named Executive Officers (as defined in the "Summary
of Executive Compensation" section below) and (iii) all current directors and
executive officers as a group. Except as otherwise indicated, beneficial
ownership includes voting and investment power with respect to the shares
shown.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY OF SHARES
NAME AND POSITION OWNED(1) OUTSTANDING
----------------- ------------ -----------
<S> <C> <C>
Thomas L. H. Lau(2).................................. 11,522,575 23.6%
Henry C. Yuen(3)..................................... 6,528,769 12.5
THOMSON multimedia S.A.(4)........................... 3,833,066 7.7
Elsie Ma Leung(5).................................... 865,349 1.7
Roy L. Mankovitz..................................... -- *
Larry Goldberg(6).................................... 228,175 *
Douglas Macrae(7).................................... 228,293 *
Brian Klosterman(8).................................. 130,515 *
George F. Carrier(9)................................. 22,000 *
Teruyuki Toyama(10).................................. 22,000 *
James E. Meyer(11)................................... 22,000 *
George Smith(12)..................................... 14,747 *
Perry A. Lerner...................................... -- *
All current directors and executive officers as a
group (10 persons)(13).............................. 19,453,908 36.3
</TABLE>
- --------
* Less than 1%
(1) Applicable percentage of ownership is based on 48,923,406 Ordinary Shares
outstanding as of November 10, 1998 together with applicable options or
warrants for such shareholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares subject to options held by
that person that are currently exercisable or that become exercisable
within 60 days following October 31, 1998 are deemed outstanding.
However, such shares are not deemed outstanding for purposes of computing
the percentage ownership of any other person. Unless otherwise indicated,
each of the shareholders named in this table has sole voting and
dispositive power with respect to the Ordinary Shares shown as
beneficially owned by such shareholder. The address for all directors and
officers of the Company is c/o Gemstar International Group Limited, 135
North Los Robles Avenue, Suite 800, Pasadena, California, 91101.
(2) Includes shares held by Dynamic Core Holdings Limited, of which Mr. Lau
is the sole shareholder.
(3) Includes 3,463,779 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
October 31, 1998.
(4) Reflects ownership as reported on a Schedule 13D/A by THOMSON multimedia
S.A., dated as of April 22, 1998, filed with the Securities and Exchange
Commission. Includes 606,200 Ordinary Shares subject to currently
exercisable warrants held by THOMSON multimedia S.A.
7
<PAGE>
(5) Includes 815,350 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
October 31, 1998.
(6) Includes 228,175 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
October 31, 1998.
(7) Includes 101,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
October 31, 1998.
(8) Includes 130,515 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
October 31, 1998.
(9) Includes 22,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
October 31, 1998.
(10) Includes 22,000 shares issuable upon exercisable upon exercise of options
that are currently exercisable or will become exercisable within 60 days
following October 31, 1998.
(11) Includes 16,062 shares issuable upon exercisable upon exercise of options
that are currently exercisable or will become exercisable within 60 days
following October 31, 1998.
(12) Includes 10,000 shares issuable upon exercisable upon exercise of options
that are currently exercisable or will become exercisable within 60 days
following October 31, 1998.
(13) Includes 4,678,366 shares issuable upon exercisable upon exercise of
options that are currently exercisable or will become exercisable within
60 days following October 31, 1998.
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid by the Company for fiscal years 1998, 1997 and 1996 to the
Company's principal executive officer and the five other most highly
compensated executive officers during the 1998 fiscal year (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(2)(3) AWARDS
-------------------------- ------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS UNDERLYING COMPENSATION
POSITIONS(1) YEAR ($) ($) OPTIONS(#) ($)(4)
------------------ ------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Thomas L. H. Lau........... 1998 $360,000 $ -- -- $ --
Chairman of the Board 1997 360,000 -- -- --
1996 270,000 -- 230,000 --
Henry C. Yuen.............. 1998 888,800 1,611,200 4,162,725 493,912
Chief Executive Officer
and President 1997 648,000 518,400 -- 495,681
1996 540,000 432,000 2,600,000 497,083
Elsie Ma Leung............. 1998 570,000 228,000 1,500,000 2,427
Chief Operating Officer
and Chief 1997 475,000 190,000 -- 4,076
Financial Officer 1996 326,875 130,750 410,000 --
Roy J. Mankovitz........... 1998 296,000 118,400 150,000 1,474
Asst. Secretary, Corporate
Counsel- 1997 423,000 169,200 -- 4,658
Intellectual Property 1996 352,500 141,000 372,500 --
Larry Goldberg............. 1998 388,800 155,520 300,000 2,248
Secretary and Corporate
Counsel 1997 324,000 129,600 -- 4,427
1996 270,000 108,000 372,500 --
Brian Klosterman(5)........ 1998 240,000 120,000 340,930 255
President, StarSight Tele-
cast, Inc.
</TABLE>
- --------
(1) All of the Named Executive Officers are or were employed in the indicted
positions with GDC, except Mr. Lau, who is employed by the Company and is
the Chairman of the Board, and Mr. Klosterman, who serves as President of
StarSight, a wholly owned subsidiary of the Company. Dr. Yuen also serves
as Chief Executive officer and President of the Company and Ms. Leung also
serves as Chief Financial Officer of the Company.
(2) No individual listed in the table received aggregate other compensation
exceeding $50,000 or 10% of the compensation reported in the table for
such individual.
(3) The salary paid to each of the Named Executive Officers represents each
such officer's adjusted base salary for each of the indicated fiscal
years, calculated pursuant to the applicable formula under such officer's
employment agreement with the Company, GDC or StarSight, as the case may
be. The bonuses paid to Dr. Yuen represent the aggregate amounts of Dr.
Yuen's merit bonus and annual incentive bonus, calculated pursuant to the
applicable formulae set forth in the Employment Agreement between GDC and
Dr. Yuen, dated April 1, 1994, as amended, and the New Yuen Agreement (as
defined). The bonuses paid to each of Messrs. Lau, Mankovitz and Goldberg
and Ms. Leung represent the amount of the annual incentive bonus paid to
each such officer for each of the indicated fiscal years, calculated
pursuant to the applicable formula in such officer's employment agreement
with GDC or the Company, as the case may be. The bonus paid to Mr.
Klosterman represents the amount of the annual performance bonus (or other
special bonus) paid to Mr. Klosterman pursuant to his employment agreement
with StarSight.
9
<PAGE>
(4) The Company, GDC or StarSight, as the case may be, provide the Named
Executive Officers with certain group life, health, medical and other non-
cash benefits generally available to all salaried employees and not
included in this column pursuant to the Securities and Exchange
Commission's rules. The amounts shown in this column include the
following:
(a) Matching contributions by the Company, GDC or StarSight, as the case
may be, under the Gemstar Employees 401(k) and Profit Sharing Plan,
which permit salaried employees to make tax-deferred contributions of a
portion of their base compensation pursuant to Section 401(k) of the
Code. Under such plan, prior to January 1, 1998, GDC or the Company
will match 100% of 3% of a participant's compensation up to $16,667
contributed as elective deferrals and 50% of 3% of a participant's
compensation in excess of $16,667 contributed as elective deferrals up
to applicable limits under the Code. Effective January 1, 1998, GDC's
matching contribution will be an amount equal to 100% of up to 2% of a
participant's compensation contributed, up to applicable limits under
the Code.
(b)Represents premiums paid for split dollar life insurance policies.
(5) Mr. Klosterman joined the Company following consummation of the Company's
acquisition of StarSight in May 1997.
SUMMARY OF OPTION GRANTS
The following table provides certain summary information concerning grants
of options to the Named Executive Officers of the Company during the 1998
fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- --------------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. H. Lau........ -- -- -- -- -- --
Henry C. Yuen........... 4,162,725 50.2% $22.00 01/06/08 57,594,138 145,954,855
Elsie Ma Leung.......... 300,000 3.6 15.38 05/08/07 2,901,720 7,353,528
1,200,000 14.5 30.00 03/30/08 22,640,207 57,374,729
Roy J. Mankovitz 150,000 1.8 15.38 05/08/07 1,450,860 3,676,764
Larry Goldberg.......... 150,000 1.8 15.38 05/08/07 1,450,860 3,676,764
150,000 1.8 30.00 03/30/08 2,830,026 7,171,841
Brian Klosterman........ 100,000 1.2 14.75 05/07/07 927,6270 2,350,770
150,000 1.8 30.00 03/30/08 2,830,026 7,171,841
</TABLE>
SUMMARY OF OPTIONS EXERCISED
The following table provide certain summary information concerning the
exercise of stock options by the Named Executive Officers during the 1998
fiscal year together with the fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN THE MONEY OPTIONS
END AT FISCAL YEAR-END(1)
SHARES ACQUIRED VALUE(1) ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. H. Lau........ -- -- 143,750 86,250 $ 2,601,875 $ 1,561,125
Henry C. Yuen........... 43,000 $ 488,050 3,389,545 3,330,180 52,942,060 26,651,440
Elsie Ma Leung.......... -- -- 815,350 1,094,650 10,423,217 1,383,783
Roy J. Mankovitz........ 175,000 1,971,434 300,175 47,325 5,076,859 691,892
Larry Goldberg.......... 247,000 2,371,485 228,175 197,325 3,772,659 691,892
Brian Klosterman........ -- -- 118,014 222,916 2,646,090 1,111,969
</TABLE>
- --------
(1) Market value of the securities underlying the options at exercise date or
year-end, as the case may be, minus the exercise or base price of "in-the-
money" options and transaction costs.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
To: The Board of Directors
As members of the Compensation Committee, it is our duty to administer the
Company's overall compensation program for its senior management. The
Compensation Committee also oversees the administration of the Gemstar
International Group Limited 1994 Stock Incentive Plan, as amended (the "Stock
Incentive Plan"). In addition, the Compensation Committee establishes the
compensation and evaluates the performance of the Chief Executive Officer. The
Compensation Committee is comprised entirely of non-employee directors.
The primary philosophy of the Company regarding compensation is to offer a
program which rewards each of the members of senior management commensurately
with the Company's overall financial performance and growth, including each
person's individual performance during the previous fiscal year. The Company's
compensation program for senior management is designed to attract and retain
individuals who are capable of leading the Company in achieving its business
objectives in an industry characterized by competitiveness, growth and change.
The Company believes a substantial portion of the annual compensation of
each member of senior management should relate to, and should be contingent
upon, the financial performance of the Company, as well as the individual
contribution of each particular person to the Company's financial performance.
As a result, a significant portion of the total compensation package consists
of variable, performance-based components, such as merit and annual incentive
bonuses and stock option awards, which can increase or decrease to reflect
changes in corporate and individual performance.
The Compensation Committee evaluates the total compensation for the
Company's Chief Executive Officer, Dr. Henry C. Yuen, and certain other
members of senior management in light of information collected by the
Compensation Committee regarding the financial performance of the Company. The
Compensation Committee considers various indicators of success on both a
corporate and individual level in determining the overall compensation package
for Dr. Yuen and other members of senior management. The Corporate indicators
of success include, among others, revenue, operating income and earnings per
share.
On January 7, 1998, the Compensation Committee approved, and recommended
that the Company's Board of Directors also approve, an Amended and Restated
Employment Agreement (the "New Yuen Agreement") with Dr. Yuen. The New Yuen
Agreement supersedes and replaces Dr. Yuen's former employment agreement with
GDC, and provides for Dr. Yuen's service to each of the Company and GDC as
Chief Executive Officer and President through October 31, 2002, subject to a
three-year renewal term and to earlier termination under certain
circumstances. On January 7, 1998, the Company's Board of Directors (with Dr.
Yuen abstaining from voting) also approved the New Yuen Agreement.
In approving the New Yuen Agreement, the Compensation Committee and the
Board of Directors took into account, among other things, (i) the Company's
substantial dependence upon Dr. Yuen's continued contributions and service to
the Company; (ii) Dr. Yuen's considerable business experience and
technological expertise; (iii) the increased challenge faced by the Company of
sustaining its growth into the coming decade; (iv) challenges associated with
rapidly evolving technology and increasing global competition in the
businesses in which the Company operates; and (v) the desirability of
obtaining Dr. Yuen's commitment to carry out the long-term future projects of
the Company beyond the term of Dr. Yuen's former employment agreement.
The New Yuen Agreement includes provisions (collectively, the "Performance-
Based Provisions") pursuant to which Dr. Yuen's annual base salary ("Base
Salary") is adjusted and his merit bonus, annual incentive bonus and annual
stock option grants are calculated. The Performance-Based Provisions of the
New Yuen Agreement were subject to shareholder approval to satisfy one of the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), in order to permit the Company to deduct payments in
excess of $1 million in any fiscal year. The Performance-Based Provisions of
the New Yuen Agreement were approved by the holders of the Company's Ordinary
Shares at a Special Meeting of Members of the Company held on March 12, 1998
(the "March Special Meeting").
11
<PAGE>
Under the New Yuen Agreement, Dr. Yuen's Base Salary initially is set at $1
million, effective as of October 1, 1997. The New Yuen Agreement provides for
annual adjustments to Dr. Yuen's Base Salary based on the growth of the
Company's consolidated revenues and consolidated net earnings. The New Yuen
Agreement also provides for the payment to Dr. Yuen of a merit bonus (the
"Merit Bonus"). The Merit Bonus is equal to a percentage of Dr. Yuen's then-
current Base Salary (reflecting any prior adjustments), equal to the
percentage increase, if any, in the Company's consolidated earnings before
interest, taxes, depreciation and amortization ("EBITDA") for its most
recently completed fiscal year from the Company's EBITDA for the comparable
period in the immediately preceding fiscal year. The New Yuen Agreement also
provides for the payment to Dr. Yuen of an additional bonus (the "Annual
Incentive Bonus"), the amount of which, if any, is tied to the annual rate of
growth of the Company's consolidated earnings per share. Under the New Yuen
Agreement, the aggregate dollar amount of Dr. Yuen's Base Salary (as
adjusted), Merit Bonus, and Annual Incentive Bonus for each compensation
period is subject to an annual limitation. The amount of the adjustment to Dr.
Yuen's Base Salary, and the amounts of the Merit Bonus and the Annual
Incentive Bonus payable to Dr. Yuen under the New Yuen Agreement for the
fiscal year ended on March 31, 1998, were dependent upon the Company's
financial performance for such year and on whether the Company's consolidated
revenues and consolidated earnings from operations for the fiscal quarter
ended March 31, 1998 exceeded the Company's consolidated revenues and
consolidated earnings from operations, respectively, for the fiscal quarter
ended March 31, 1997.
The Compensation Committee determines the cash compensation paid to the
other members of senior management in a similar manner as that of the Chief
Executive Officer. Each officer's overall cash compensation is based upon the
Company achieving certain financial objections, together with each officer
satisfying certain qualitative individual management objectives.
The Compensation Committee oversees the administration of the Stock
Incentive Plan, which provides the Company with the ability to periodically
reward key employees with options to purchase shares of the Company's Ordinary
Shares. These long-term incentives are designed to align the interests of key
employees with those of the shareholders of the Company. Stock option grants
provide an incentive that focuses the individual's attention on managing the
Company from the perspective of an owner, with an equity stake in the
business. The value of stock options is tied to the future performance of the
Company's Ordinary Shares and provides value to the recipient only when the
price of the Company's Ordinary Shares increases above the option exercise
price. Stock options reward management for long-term strategic planning
through the resulting enhancement of share price. The Company believes that a
compensation structure which includes the periodic granting of long-term
incentives such as stock options helps to attract and retain senior managers
with long-term management perspectives. During the 1998 fiscal year, the
Company granted stock options to various employees of the Company, including
Dr. Yuen. The New Yuen Agreement provided for the immediate grant to Dr. Yuen
of options to purchase 4,162,725 Ordinary Shares and annual grants of options
to purchase 832,545 Ordinary Shares. Holders of the Company's Ordinary Shares
approved these stock option grants to Dr. Yuen at the March Special Meeting.
The number of options granted to each employee of the Company was determined
in accordance with the relative position, seniority and contribution of each
such individual.
The Compensation Committee has considered the anticipated tax treatment to
the Company regarding the compensation and benefits paid to the executive
officers of the Company in light of the enactment of Section 162(m) of the
Code. Section 162(m) of the Code renders non-deductible to a publicly-held
corporation certain compensation in excess of $1 million paid in any year to
certain of its executive officers, unless the excess compensation is
"performance-based" (as defined) or is otherwise exempt from Section 162(m).
The basic philosophy of the Compensation Committee is to strive to provide the
executive officers of the Company with a compensation package which will
preserve the deductibility of such payments for the Company to the extent
reasonably practicable and to the extent consistent with its other
compensation objectives. However, certain types of compensation payments and
their deductibility (e.g., the spread and exercise of non-qualified options)
depend upon the timing of an executive officer's vesting or other factors
beyond the Compensation Committee's control, and may affect the deductibility
of certain compensation payments. While we believe that the options granted
and to be granted to Dr. Yuen will qualify for the "performance-based"
exception to Section 162(m), no
12
<PAGE>
assurance can be given as to the deductibility of any compensation paid under
the New Yuen Agreement to the extent that such compensation would, together
with any other nonexempt compensation paid to Dr. Yuen, exceed $1 million in
any year.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Dr. George F. Carrier (Chairman)
Mr. Teruyuki Toyama
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Dr. Carrier and Mr. Toyama,
neither of whom is an officer or employee of the Company or was previously an
officer or employee of the Company.
13
<PAGE>
PERFORMANCE GRAPH
The following graph below shows the Company's total return to shareholders
compared to the Nasdaq Composite Index and the Morgan Stanley High Technology
Index over the period from October 11, 1995 (the date the Company's Ordinary
Shares began trading on the Nasdaq National Market) to March 31, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM OCTOBER 11, 1995 TO MARCH 31,
1998(1)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
IPO 3/29/96 3/31/97 3/31/98
--- ------- ------- -------
<S> <C> <C> <C> <C>
Gemstar............................................. 100 181.8 89.1 218.2
Nasdaq.............................................. 100 110.0 122.0 183.3
Morgan Stanley High Tech............................ 100 102.0 114.2 174.7
</TABLE>
- --------
(1) Assumes that $100.00 was invested on October 11, 1995 in the Company's
Ordinary Shares at the closing sales price of $13.75 per share and at the
closing sale price for each index on that date and that all dividends were
reinvested. No cash dividends have been declared on the Company's Ordinary
Shares. Shareholder returns over the indicated period should not be
considered indicative of future shareholder returns.
EMPLOYMENT AGREEMENTS
Amended and Restated Employment Agreement with Dr. Yuen
In January 1998, the Company's Compensation Committee and Board approved the
New Yuen Agreement. The New Yuen Agreement supersedes and replaces Dr. Yuen's
former Employment Agreement with GDC, and provides for Dr. Yuen's service to
each of the Company and GDC as Chief Executive Officer and President through
October 31, 2002, subject to a three-year renewal term and to earlier
termination under certain circumstances. The New Yuen Agreement also provides
that Dr. Yuen will serve as a director of each of the Company, GDC and
StarSight.
14
<PAGE>
The New Yuen Agreement includes provisions (collectively, the "Performance-
Based Provisions") pursuant to which Dr. Yuen's annual base salary ("Base
Salary") is adjusted and his merit bonus, annual incentive bonus and annual
stock option grants are calculated. The Performance-Based Provisions of the
New Yuen Agreement were subject to shareholder approval to satisfy one of the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), in order to permit the Company to deduct payments in
excess of $1 million in any fiscal year. The Performance-Based Provisions of
the New Yuen Agreement were approved by the shareholders at a Special Meeting
of Members of the Company held on March 12, 1998 (the "March Special
meeting").
Under the New Yuen Agreement, Dr. Yuen's Base Salary initially is set at $1
million. The New Yuen Agreement provides for annual adjustments to Dr. Yuen's
Base Salary based on the growth of the Company's consolidated revenues and
consolidated net earnings, as similar to his former employment agreement. The
New Yuen Agreement also provides for the payment to Dr. Yuen of a merit bonus
(the "Merit Bonus") which is equal to a percentage of Dr. Yuen's then-current
Base Salary (reflecting any prior adjustments), equal to the percentage
increase, if any, in the Company's consolidated earnings before interest,
taxes, depreciation and amortization ("EBITDA") for its most recently
completed fiscal year from the Company's EBITDA for the comparable period in
the immediately preceding fiscal year, as similar to his former employment
agreement. The New Yuen Agreement also provides for the payment to Dr. Yuen of
an additional bonus (the "Annual Incentive Bonus"), the amount of which, if
any, is tied to the annual rate of growth of the Company's consolidated
earnings per share, as similar to his former employment agreement. Under the
New Yuen Agreement, the aggregate dollar amount of Dr. Yuen's Base Salary (as
adjusted), Merit Bonus, and Annual Incentive Bonus for each compensation
period is subject to an annual limitation. The amount of the adjustment to Dr.
Yuen's Base Salary, and the amount of the Merit Bonus and the Annual Incentive
Bonus payable to Dr. Yuen under the New Yuen Agreement for the fiscal year
ended on March 31, 1998, were dependent upon the Company's financial
performance for such year and on whether the Company's consolidated revenues
and consolidated earnings from operations for the fiscal quarter ended March
31, 1998 exceeded the Company's consolidated revenues and consolidated
earnings from operations, respectively, for the fiscal quarter ended March 31,
1997, as similar to his former employment agreement. The New Yuen Agreement
provided for the immediate grant to Dr. Yuen of options to purchase 4,162,725
Ordinary Shares and annual grants of options to purchase 832,545 Ordinary
Shares. The Company's shareholders approved these stock option grants to Dr.
Yuen at the March Special Meeting. Dr. Yuen is also entitled to $1,000 a month
automobile allowance and other benefits, including, health insurance and
participation in bonus and incentive and stock option compensation plans.
The New Yuen Agreement entitles Dr. Yuen to terminate the New Yuen Agreement
within 90 days following a change of control (as defined below), in which
event (1) he would be entitled to receive (a) a lump-sum payment equal to five
times his then-current Base Salary, (b) for a period of 60 months following
such termination, all other elements of his compensation provided under the
New Yuen Agreement, (2) all unvested options granted to him pursuant to the
New Yuen Agreement would immediately vest in full and would be exercisable for
their full term and all previously granted vested options to acquire Ordinary
Shares will remain fully exercisable for their full term. A "change of
control" is defined as the occurrence of any of the following: (i) the
acquisition (other than from the Company directly or from any Company
shareholder who was, as of the effective date of the New Yuen Agreement, a 25%
shareholder of the Company) by any person or entity of beneficial ownership of
25% or more of the Company's outstanding shares; (ii) the acquisition (other
than from GDC directly or from any GDC shareholder who was, as of the
effective date of the New Yuen Agreement, a 25% shareholder of GDC) by any
person or entity of beneficial ownership of 25% or more of GDC's outstanding
shares; (iii) during any period of two consecutive years, individuals who, at
the beginning of such period, constituted the board of directors of the
Company or GDC (together with any new directors whose election or appointment
to such board of directors or whose nomination for election by the
shareholders of the Company or GDC was approved by Dr. Yuen or by a vote of a
majority of the directors then still in office who are either directors at the
beginning of such period or whose election, appointment or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of the Company or GDC then in office; (iv)
approval by the board of directors or a majority of the shareholders of either
the
15
<PAGE>
Company or GDC of a merger, reorganization, combination or consolidation
whereby the shareholders of either the Company or GDC immediately prior to
such approval will not, immediately after consummation of such reorganization,
merger, combination or consolidation own more than 50% of the voting stock of
the surviving entity; or (v) a liquidation or dissolution of either the
Company or GDC or the sale of all or substantially all of the assets of either
the Company or GDC, unless the successor to the assets in any such
liquidation, dissolution or sale, is the Company or any of its subsidiaries.
Under the New Yuen Agreement, as similar to Dr. Yuen's former employment
agreement, all inventions, designs, improvements, patents, copyrights,
discoveries and other intellectual property which (i) are developed by Dr.
Yuen while performing his duties for GDC or using GDC's equipment or trade
secret information, (ii) are related at the time of conception to GDC's
business or actual or demonstrably anticipated research, or (iii) result from
any work performed by Dr. Yuen for GDC, are the property of GDC, if and only
to the extent GDC can show by clear and convincing evidence that such property
is GDC's property.
Employment Agreement with Ms. Leung
The Company and GDC entered into an Amended and Restated Employment
Agreement with Ms. Leung, dated as of March 31, 1998 (the "New Leung
Agreement"), which supersedes and replaces Ms. Leung's former employment
agreement. The New Leung Agreement provides for an initial term effective from
January 1, 1998 through December 31, 2003 and will be automatically renewed
for a three-year period unless either party gives written notice of
termination.
Under the New Leung Agreement, Ms. Leung will serve as Chief Financial
Officer of the Company and Chief Operating Officer and Chief Financial Officer
of GDC. Ms. Leung will also serve as a director of the Company, GDC and
StarSight. Ms. Leung receives a base salary of $700,000 per year, with annual
adjustments based upon the Company's consolidated revenues, as similar to her
former employment agreement. The New Leung Agreement also provides that Ms.
Leung may receive an annual incentive bonus based upon the Company's
consolidated earnings per share, as similar to her former employment
agreement. Under the New Leung Agreement, Ms. Leung received options to
purchase 1,200,000 Ordinary Shares, scheduled to vest ratably over the six-
year term of the New Leung Agreement over the term of the Agreement, of which
200,000 became exercisable upon the execution of the Agreement. Ms. Leung is
also entitled to a $750 per month automobile allowance and other benefits,
including health insurance and participation in bonus and incentive and stock
option compensation plans.
The New Leung Agreement provides Ms. Leung the right to terminate the New
Leung Agreement within 90 days following a change of control (defined
substantially as defined above with respect to the New Yuen Agreement), in
which event (1) she would be entitled to receive (a) a lump-sum payment equal
to five times her then-current base salary, (b) for a period of 60 months
following such termination, all other elements of her compensation provided
under the New Leung Agreement, (2) all unvested options granted to her under
the New Leung Agreement would immediately vest in full and would be
exercisable for their full term and all previously granted vested options to
acquire Ordinary Shares will remain fully exercisable for their full term.
All inventions, designs, improvements, patents, copyrights and discoveries
conceived by Ms. Leung during the term of the New Leung Agreement which are
competitive with or related to existing products or services of GDC shall be
assigned to GDC.
Other Agreements with the Other Executives
The Company has entered into an employment agreement with Mr. Lau and GDC
has entered into employment agreements with Messrs. Goldberg and Mankovitz,
all of which contain substantially similar provisions (hereinafter, these
employment agreements, as amended, are sometimes collectively referred to as
the "Other Agreement," and the Named Executive Officers who have entered into
these agreements are sometimes collectively referred to as the "Other
Executives"). The term of the employment agreements with Messrs. Lau,
Goldberg, and Mankovitz is from April 1, 1994 to March 31, 2001, and will be
automatically renewed for a one-year period unless either party gives written
notice of termination.
16
<PAGE>
Each of the Other Agreements provides for a base salary subject to an annual
adjustment based upon the Consumer Price Index and the Company's revenues and
net earnings. Each of the Other Executives is also entitled under his
employment agreement to an annual incentive bonus based upon the growth of the
Company.
The Other Agreements provide that, in the event the Company (or GDC, as
applicable) is involved in a merger or a sale of all or substantially all of
its assets to another entity, the Company (or GDC) will (or will cause a
successor to) provide for such adjustment to such executive officers'
compensation as may be necessary to preserve, as nearly as practicable, the
payment of his base salary and certain other benefits under such agreements.
The Other Executives are also entitled under their employment agreements to
such other benefits, including, without limitation, health insurance.
Each of the Other Agreements provides that termination of the Other
Executives (or termination of any compensation or benefits payable to the
Other Executives under the Other Employment Agreements) may be effected upon
the occurrence of certain specified events. In addition, the Other Agreements
(other than the Mankovitz employment agreements) provide that all inventions,
patents, copyrights and other intellectual property developed or conceived by
the Other Executives during the term of the Other Employment Agreements which
are competitive with any existing products or services of the Company or its
affiliates, are the property of the Company (or GDC, as the case may be).
Under the Mankovitz employment agreement, all inventions, patents, copyrights
and other intellectual property which (i) are developed during the term of the
agreement while the inventor was performing duties for the Company (or GDC) or
using the Company's (or GDC's) equipment or trade secret information, (ii) are
related at the time of completion to the Company's (or GDC's) business or
actual or demonstrably anticipated research, or (iii) resulted from any work
performed by the investor for the Company (or GDC), are the property of the
Company (or GDC) provided such entity can show by clear and convincing
evidence that such property is such entity's property. All other intellectual
property belongs to the Other Executives.
StarSight entered into an employment agreement with Mr. Klosterman, as of
December 23, 1996 (the "Klosterman Employment Agreement"), which provides for
Mr. Klosterman's services as President of StarSight through December 22, 1999,
unless the Klosterman Employment Agreement is otherwise terminated in
accordance with its terms (the "Employment Period"). In addition, the
Klosterman Employment Agreement provides for an automatic one-year renewal
unless either of the parties thereto notifies the other of the termination
thereof. Pursuant to the Klosterman Employment Agreement, Mr. Klosterman
receives a base salary of $240,000 per year and is eligible to receive an
annual performance bonus (or other special bonus) in no event less than 50% of
his current salary. Mr. Klosterman is also entitled to a $1,000 a month
automobile allowance and other benefits, including, without limitation, health
insurance.
If StarSight terminates Mr. Klosterman without Cause (as defined below)
during the Employment Period, then Mr. Klosterman is entitled to continue to
receive his salary from StarSight for the remainder of one Employment Period.
If he is terminated for Cause, StarSight shall have no further obligations to
pay any salary or other compensation to him. The Employment Period will also
terminate in the event of Mr. Klosterman's death or disability, and in each
such case, StarSight will be required to make certain limited payments. Mr.
Klosterman may be terminated for "Cause" if: (i) he has engaged in illegal or
other wrongful conduct substantially detrimental to the business or reputation
of StarSight or any affiliated company, or is charged with or convicted of a
felony; (ii) he refuses or fails to act in accordance with any reasonable
direction or order of the StarSight board of directors; provided that the
StarSight board of directors has given him written notice of such refusal or
failure and he fails to comply with such direction or order within thirty days
after the date of such notice; or (iii) he has engaged in any fraud,
embezzlement, misappropriation or similar conduct against StarSight.
In addition, the Klosterman Employment Agreement provides that Mr.
Klosterman will not (i) accept any other employment or (ii) engage in any
other business activity that is competitive with, or places him in a competing
position to that of, StarSight or any affiliated company. In addition, subject
to certain conditions, for a period of one year after the termination of the
Employment Period, Mr. Klosterman will not for himself or any third party,
directly or indirectly, including without limitation, (i) solicit or interfere
with any of StarSight's
17
<PAGE>
suppliers or customers; (ii) employ, solicit for employment, or recommend for
employment any person employed by StarSight, during the period of his
employment by StarSight and for one year thereafter; or (iii) engage in any
business activity that is competitive with StarSight; provided that in no
event shall Mr. Klosterman engage in such competitive activities during the
period which he continues to receive payments pursuant to the termination
provisions of the Klosterman Employment Agreement. The Klosterman Employment
Agreement also contains standard employee invention and intellectual property
confidentiality provisions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company continues to maintain a license agreement with Gemstar
Manufacturing Holding Limited, a former wholly owned subsidiary ("Holdings"),
that allows for the incorporation of the VCR Plus+ technology in the
manufacture and distribution of handsets. Pursuant to the license agreement,
Holdings pays the Company a per unit royalty fee based on unit shipments.
Royalty fees totaled $112,000 and $1,446,000 for the years ended March 31,
1996 and 1997, respectively. There were no royalty fees for the year ended
March 31, 1998.
The Company continues to maintain service relationships with certain
Holdings subsidiaries. Pursuant to the services agreements, the Holdings
subsidiaries provide marketing and promotion services for the Company in their
respective territories in connection with the Company's systems, maintain
relationships with licensees and maintain and promote and monitor the
publication of the Company's PlusCode Numbers (a proprietary one to eight
digit number that is entered into a VCR or television equipped with the
Company's VCR Plus+ system, enabling consumers to record a television
program). Service fees paid to these companies totaled $7,100,000, $8,300,000
and $8,178,000 for each of the years in the three-year period ended March 31,
1998. In the future, certain of the Company's current foreign subsidiaries may
enter into similar services agreements with the subsidiaries of Holdings to
promote and maintain the Company's systems overseas. Compensation under any
such agreement is expected to be calculated on a "costs plus" basis.
The Company has from time to time loaned money to various shareholders and
employees. Most of such loans were unsecured and generally bore interest at
the prime rate as in effect from time to time. At March 31, 1998, there was
one loan in the principal amount of $185,000 plus accrued interest outstanding
to Roy Mankovitz. The loan to Mr. Mankovitz bears interest at 8% per annum and
is secured by a second trust deed on Mr. Mankovitz's personal residence.
The Company believes that all current and any future transactions between
the Company and any affiliates are or will be on terms no less favorable to
the Company than could otherwise be obtained from unaffiliated third parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the United States Securities Exchange Act of 1934, as
amended, requires that the Company's directors and officers, and persons who
own more than 10% of a registered class of the Company's equity securities,
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission") and the National Association of
Securities Dealers, Inc. ("NASD"). Directors, officers, and beneficial owners
of more than 10% of the Company's Ordinary Shares are required by the
Commission to furnish the Company with copies of the reports they file.
Based solely on its review of the copies of such reports and written
representations from certain reporting persons that certain reports were not
required to be filed by such persons, the Company believes that all of its
directors, officers and greater than 10% beneficial owners complied with all
filing requirements applicable to them with respect to transactions during the
1998 fiscal year, except that a Form 3 for Mr. Klosterman was inadvertently
not filed on a timely basis following his appointment to the Company's Board
in September 1997. Mr. Klosterman's Form 3 was subsequently filed with the
Commission and the NASD.
18
<PAGE>
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K (the "Form 10-K") for the
year ended March 31, 1998 (without exhibits) and a copy of Amendment No. 1
("Amendment No. 1") to the Company's Annual Report on Form 10-K/A for the year
ended March 31, 1998 (without exhibits), each of which the Company has filed
with the Securities and Exchange Commission, accompanies this Proxy Statement.
Copies of exhibits to the Form 10-K and Amendment No. 1 are available, but a
reasonable fee per page will be charged to the requesting shareholder.
Shareholders may make requests in writing to the Company's Shareholders'
Communications Department, c/o Gemstar International Group Limited, 135 North
Los Robles Avenue, Suite 800, Pasadena, California 91101.
PROPOSALS OF SHAREHOLDERS
A shareholder proposal submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, for inclusion in the Company's proxy
statement and form of proxy for the 1999 Annual Meeting of Shareholders must
be received by the Company by July 23, 1999. Such a proposal must also comply
with the requirements as to form and substance established by the Securities
and Exchange Commission for such proposals. A shareholder otherwise desiring
to bring matters before an annual meeting of shareholders must, pursuant to
the Company's Amended and Restated Articles of Association, as amended (the
"Articles"), submit a proposal in writing that is received by the Secretary of
the Company at the principal executive offices of the Company not less than
sixty (60) nor more than ninety (90) days prior to such annual meeting. In the
event that less than seventy (70) days' notice or prior public disclosure of
the date of the annual meeting is given or made to the shareholders, the
Articles provide that notice by a shareholder of a shareholder proposal must
be received in writing by the Secretary of the Company on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made.
If any shareholder proposals are presented for action at the Annual Meeting,
but are not submitted within the time periods described above, it is the
intention of the persons named in the accompanying proxy to vote the shares to
which the proxy relates in accordance with their best judgment as determined
in their sole discretion.
APPROVAL OF INDEPENDENT PUBLIC AUDITORS
KPMG Peat Marwick LLP were the independent auditors for the Company for the
fiscal year ended March 31, 1998 and have reported on the Company's financial
statements included in the Annual Report of the Company on Form 10-K which
accompanies this Proxy Statement. The Company's independent auditors are
appointed by the Board. The Board has reappointed KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending March 31, 1999. In
the event that the shareholders do not approve KPMG Peat Marwick LLP as
independent auditors, the selection of independent auditors will be
reconsidered by the Board. A representative of KPMG Peat Marwick LLP will be
(i) available to participate by conference call at the Annual Meeting, (ii)
able to make a statement by conference call if he or she so desires, and (iii)
available to respond by conference call to appropriate questions.
REQUIRED VOTE
Approval of this proposal requires the affirmative vote of a majority of all
votes cast, in present or by proxy. Abstentions and broker non-votes will have
no effect on the results, although they will be counted for purposes of
determining the presence of a quorum for the conduct of business at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF KPMG PEAT MARWICK
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31,
1999.
19
<PAGE>
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board knows of
no other matters which will be acted upon at the Annual Meeting. If any other
matters are presented for action at the Annual Meeting or at any adjournment
thereof, it is the intention of the persons named in the accompanying proxy to
vote the shares to which the proxy relates in accordance wit their best
judgment as determined in their sole discretion.
By Order of the Board of Directors
/s/ Larry Goldberg
Larry Goldberg
Secretary
Pasadena, California
November 20, 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE.
20
<PAGE>
IMPORTANT NOTICE TO SHAREHOLDERS
--------------------------------
of Gemstar International Group Limited
The Annual Meeting of Shareholders will be held on
December 21, 1998 at 7:00 a.m. California, U.S.A. time
at 2-29-18 Nishi-Ikebukuro,
Toshima-ku,
Tokyo 171 Japan
- -------------------------------------------------------------------------------
GEMSTAR INTERNATIONAL GROUP LIMITED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ANNUAL MEETING, DECEMBER 21, 1998
The undersigned, a member (hereinafter, "shareholder") of GEMSTAR
INTERNATIONAL GROUP LIMITED, a British Virgin Islands corporation (the
"Company"), acknowledges receipt of a copy of the Notice of Annual Meeting of
Shareholders, the accompanying Proxy Statement, a copy of the Company's Annual
Report on Form 10-K for the year ended March 31, 1998 and a copy of Amendment
No. 1 to the Company's Annual Report of Form 10-K/A for the year ended March 31,
1998; and revoking any proxy previously given, hereby constitutes and appoints
Dale Araki, Kazuo Nagasaka and Larry Goldberg and each of them, his or her true
and lawful agents and proxies with full power of substitution in each, to vote
the shares of Ordinary Shares of the Company standing in the name of the
undersigned at the Annual Meeting of Shareholders of the Company to be held at
2-29-18 Nishi-Ikebukuro, Toshima-ku, Tokyo 171 Japan on December 21, 1998
at 7:00 a.m. California, U.S.A. time
(continued and to be signed on the other side)
<PAGE>
Dear Shareholder:
The Annual Meeting of the shareholders of Gemstar International Group
Limited (the "Company") will be held on Monday, December 21, 1998 at 7:00 a.m.
California, U.S.A. time at 2-29-18 Nishi-Ikebukuro, Toshima, ku, Tokyo 171
Japan.
The enclosed notice of the meeting and accompanying proxy statement cover
the formal business of the meeting.
Your continued interest in the Company is appreciated and we hope that you
will find it convenient to attend the meeting. However, whether or not you plan
to attend in person, please assure representation of your shares by marking,
signing and mailing in the accompanying proxy card.
Sincerely,
/s/ Larry Goldberg
Larry Goldberg
Secretary
. Please Detach and Mail in the Envelope Provided .
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
[X] Please mark your
votes as in this
example
The Board of Directors recommends vote FOR Items 1 and 2.
<S> <C> <C>
1. For a three-year term as a Class III member of the Company's Board of For all Withhold authority to
Directors: nominees vote for all nominees
[ ] [ ]
Nominees: Thomas L.H. Lau, Henry C. Yuen and Perry A. Lerner
(Authority to vote for any nominee named may be withheld by lining through that
nominee's name.)
2. Approval of KPMG Peat Marwick LLP as the Company's Independent auditors FOR AGAINST ABSTAIN
for the fiscal year ending March 31, 1999.
[ ] [ ] [ ]
</TABLE>
3. In their discretion, upon any other matters as may properly come before the
meeting or at any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREBY BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2. IF ANY NOMINEE BECOMES UNAVAILABLE FOR ANY REASON, THE
PERSONS NAMED AS PROXIES SHALL VOTE FOR THE ELECTION OF SUCH OTHER PERSON AS
THE BOARD OF DIRECTORS MAY PROPOSE TO REPLACE SUCH NOMINEE.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature of Shareholder ______________________________ Dated _________, 1998
Signature of Shareholder ______________________________ Dated _________, 1998
This Proxy must be signed exactly as your name appears hereon. Executors,
administrators, trustees, etc. should give full title, as such. If the
shareholder is a corporation, a duly authorized officer should sign on behalf of
the corporation and should indicate his or her title.
